People v. Concepcion
REITERATIONFacts
The Antecedents: Venancio Concepcion, President of the Philippine National Bank, authorized an extension of credit of P300,000 in favor of "Puno y Concepcion, S. en C." between April 10, 1919, and May 7, 1919. This authorization exceeded the P5,000 to P10,000 limit set for the local manager. The credit was secured only by six demand notes, which were paid by July 17, 1919. The partnership "Puno y Concepcion, S. en C." had a capital of P100,000, with Rosario San Agustin, wife of Venancio Concepcion, contributing P50,000. Miguel S. Concepcion was the administrator. Procedural History: Venancio Concepcion was charged in the Court of First Instance of Cagayan with a violation of section 35 of Act No. 2747. He was found guilty and sentenced to imprisonment, a fine, and costs. The Petition: The defendant appealed the decision, assigning ten errors, arguing that the transaction was a credit and not a loan, or if it was a loan, it was a discount, not prohibited by law. He also argued that it was not an indirect loan, that the repeal of the law prior to judgment removed the basis for prosecution, that the prohibition was without penal sanction, and that his good faith and the repayment of the loan constituted a legal defense.
Issue(s)
Whether the granting of a credit of P300,000 to the copartnership "Puno y Concepcion, S. en C." by Venancio Concepcion, President of the Philippine National Bank, constituted a "loan" within the meaning of section 35 of Act No. 2747. Whether the transaction was a "loan" or a "discount" under the law. Whether the granting of the credit was an "indirect loan" within the meaning of section 35 of Act No. 2747. Whether Venancio Concepcion could be convicted for violating section 35 of Act No. 2747 in relation to section 49 of the same Act, when these portions were repealed by Act No. 2938 prior to the information and judgment. Whether the granting of the credit was a violation of section 35 of Act No. 2747, penalized by the law. Whether the alleged good faith of Venancio Concepcion constituted a legal defense.
Ruling
The Supreme Court affirmed the judgment of the trial court, finding Venancio Concepcion guilty beyond reasonable doubt of the crime charged. The penalty imposed was affirmed as falling within the legal limits.
Ratio Decidendi
On the issue of whether the granting of credit constituted a "loan" within the meaning of section 35 of Act No. 2747: The Court held that the concession of a "credit" necessarily involves the granting of "loans" up to the limit of the amount fixed in the "credit." While the exhibits spoke of "credito" (credit) and not "prestamo" (loan), the ability to borrow money (credit) inherently implies the possibility of taking out loans. Therefore, the authorization of a credit of P300,000 was considered within the ambit of "loans" as contemplated by the statute. On the issue of whether the transaction was a "loan" or a "discount": The Court distinguished between a loan and a discount, noting that while a discount is a mode of loaning money, it has specific characteristics such as interest deducted in advance and being on double-name paper. The demand notes in this case did not have interest deducted in advance, and they were single-name paper, thus not qualifying as discount paper but as mere evidences of indebtedness. Consequently, the transaction was classified as a loan. On the issue of whether the granting of the credit was an "indirect loan" within the meaning of section 35 of Act No. 2747: The Court ruled that a loan to a partnership where the wife of a bank director is a member constitutes an indirect loan to such director. The purpose of the Legislature in prohibiting indirect loans was to erect a wall of safety against temptation for directors, recognizing that personal interest can clash with fidelity to duty. Given the conjugal partnership provisions in the Civil Code, a loan to a partnership of which the director's wife is a member is an indirect loan to the director, especially when the director is tempted to mingle personal and family affairs with official duties. On the issue of whether Venancio Concepcion could be convicted after the repeal of the statute: The Court held that the repeal of Act No. 2747 by Act No. 2938 did not deprive the courts of jurisdiction to try, convict, and sentence offenders charged with violations of the old law. This principle has been consistently upheld in previous cases, establishing that repealing statutes do not divest courts of jurisdiction over offenses committed under the prior law. On the issue of whether the prohibition was without penal sanction: The Court clarified that when a corporation is forbidden to do an act, the prohibition extends to its board of directors and each director individually. Section 49 of Act No. 2747 provided punishment for any person violating its provisions, and since the prohibition in section 35 extended to directors, the act of granting the loan was punishable. On the issue of whether the good faith of Venancio Concepcion constituted a legal defense: The Court held that criminal intent is not necessarily material under the statute violated; the doing of the inhibited act, which is prohibited on account of public policy and public interest, constitutes the crime. The argument that the rulings of the Insular Auditor misled the defendant or that no loss was suffered by the bank were deemed not conclusive defenses. The law will not allow private profit from a trust, and honest intent is not a defense when a prohibited act is committed.
Main Doctrine
A loan granted to a partnership where the wife of a bank director is a member constitutes an indirect loan to such director, violating provisions prohibiting such transactions due to public policy and public interest, regardless of good faith or absence of financial loss to the bank.