Case Summary (G.R. No. 19190)
Parties
Petitioner/Plaintiff: The People of the Philippine Islands
Respondent/Defendant: Venancio Concepcion, President of the Philippine National Bank
Key Dates
– May 17, 1918: Memorandum order limiting local loan authority
– April 10 to May 7, 1919: Authorization of credit extension
– July 17, 1919: Full payment of notes and interest
– January 30, 1921: Repeal of sections 35 and 49 of Act No. 2747 by Act No. 2938
– November 29, 1922: Decision date
Applicable Law
Act No. 2747 (effective February 20, 1918)
• Section 35: Prohibition on direct or indirect loans by the National Bank to its directors or branch agents
• Section 49: Penal sanction for violation, up to ₱10,000 fine, up to five years’ imprisonment, or both
Act No. 2938 (repealing sections 35 and 49 effective January 30, 1921)
I. Nature of “Credit” vs. “Loan”
Although the documents referred to a “credit” rather than a “loan,” the court treated the extension of credit as encompassing loans up to the authorized amount. A lender’s concession of credit necessarily entails the right to make loans within the approved limit.
II. Loans Distinguished from Discounts
Counsel contended that the prohibition applied only to loans, not discounts. The court explained that discounts are merely a form of loan—interest deducted in advance and typically involving two-party (“double-name”) paper. The demand notes in question featured interest paid at maturity and single-party paper, rendering them loans rather than discounts.
III. Indirect Loans under Section 35
Section 35 forbids not only direct but also indirect loans to directors. Because Concepcion’s wife held half the partnership’s capital under the conjugal‐partnership regime of the Civil Code, a loan to that partnership was effectively an indirect loan to him. The statute deliberately barred even indirect benefits to prevent conflicts of interest.
IV. Effect of Repeal on Criminal Prosecution
Despite the repeal of sections 35 and 49 by Act No. 2938 before prosecution, established precedent holds that repeal of a penal provision does not deprive courts of jurisdiction over offenses committed while the law was in force. Prior rulings confirmed that repeal does not void prosecutions pending at the time of repeal.
V. Penal Sanction and Director Liability
Although section 35’s prohibition is framed as a corporate duty, section 49 imposes personal liability on individuals. When a corporate prohibition exists, each director is individually bound. Concepcion was thus personally punishable under the combined effect of sections 35 and 49.
VI. Good Faith and Public Policy
Co
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Facts
- Between April 10 and May 7, 1919, Venancio Concepcion, as President of the Philippine National Bank, transmitted telegrams and a confirming letter authorizing the Aparri branch manager to extend credit of ₱300,000 to the firm “Puno y Concepcion, S. en C.”
- A memorandum order dated May 17, 1918, by President Concepcion limited the branch manager’s discretionary power to grant loans or discount negotiable paper to ₱5,000 (extendable to ₱10,000 in special cases).
- The only security for the ₱300,000 credit consisted of six demand notes; all notes with interest were fully paid by July 17, 1919.
- “Puno y Concepcion, S. en C.” was a copartnership capitalized at ₱100,000, with the following contributions: Anacleto Concepcion (₱5,000), Clara Vda. de Concepcion (₱5,000), Miguel S. Concepcion (₱20,000), Clemente Puno (₱20,000), and Rosario San Agustin (₱50,000). Miguel S. Concepcion served as the firm’s administrator.
Procedural History
- The Court of First Instance of Cagayan charged Venancio Concepcion under section 35 of Act No. 2747 for granting loans to a bank director.
- Judge Enrique V. Filamor found him guilty, sentencing him to one year and six months’ imprisonment, a ₱3,000 fine (with subsidiary imprisonment for insolvency), and costs.
- The defense assigned ten errors; the Attorney-General filed a comprehensive brief in response.
Statutory Provisions
- Section 35, Act No. 2747 (effective February 20, 1918): “The National Bank shall not, directly or indirectly, grant loans to any of the members of the board of directors of the bank nor to agents of the branch banks.”
- Section 49, Act No. 2747: Penalty for any person violating the Act—fine up to ₱10,000, imprisonment up to five years, or both.
- Both sections were in force at the time of the 1919 transactions but were repealed by Act No. 2938 on January 30, 1921.
Issues Presented
- I. Whether the ₱300,000 “credit” constituted a “loan” under section 35.
- II. Whether the transac