G.R. No.

L-19190 November 29, 1922
THE PEOPLE OF THE PHILIPPINE
ISLANDS, plaintiff-appellee,
vs.
VENANCIO CONCEPCION, defendant-appellant.
Recaredo Ma. Calvo for appellant.
Attorney-General Villa-Real for appellee.
loans to any of the members of the board of directors
of the bank nor to agents of the branch banks."
Section 49 of the same Act provides: "Any person
who shall violate any of the provisions of this Act shall
be punished by a fine not to exceed ten thousand
pesos, or by imprisonment not to exceed five years,
or by both such fine and imprisonment." These two
sections were in effect in 1919 when the alleged
unlawful acts took place, but were repealed by Act
No. 2938, approved on January 30, 1921.

Counsel for the defense assign ten errors as having

MALCOLM, J.:
By telegrams and a letter of confirmation to the
manager of the Aparri branch of the Philippine
National Bank, Venancio Concepcion, President of
the Philippine National Bank, between April 10, 1919,
and May 7, 1919, authorized an extension of credit in
favor of "Puno y Concepcion, S. en C." in the amount
of P300,000. This special authorization was essential
in view of the memorandum order of President
Concepcion dated May 17, 1918, limiting the
discretional power of the local manager at Aparri,
Cagayan, to grant loans and discount negotiable
documents to P5,000, which, in certain cases, could
be increased to P10,000. Pursuant to this
authorization, credit aggregating P300,000, was
granted the firm of "Puno y Concepcion, S. en C.," the
only security required consisting of six demand notes.
The notes, together with the interest, were taken up
and paid by July 17, 1919.
"Puno y Concepcion, S. en C." was a copartnership
capitalized at P100,000. Anacleto Concepcion
contributed P5,000; Clara Vda. de Concepcion,
P5,000; Miguel S. Concepcion, P20,000; Clemente
Puno, P20,000; and Rosario San Agustin, "casada
con Gral. Venancio Concepcion," P50,000. Member
Miguel S. Concepcion was the administrator of the
company.
On the facts recounted, Venancio Concepcion, as
President of the Philippine National Bank and as
member of the board of directors of this bank, was
charged in the Court of First Instance of Cagayan with
a violation of section 35 of Act No. 2747. He was
found guilty by the Honorable Enrique V. Filamor,
Judge of First Instance, and was sentenced to
imprisonment for one year and six months, to pay a
fine of P3,000, with subsidiary imprisonment in case
of insolvency, and the costs.
Section 35 of Act No. 2747, effective on February 20,
1918, just mentioned, to which reference must
hereafter repeatedly be made, reads as follows: "The
National Bank shall not, directly or indirectly, grant
been committed by the trial court. These errors they
have argued adroitly and exhaustively in their printed
brief, and again in oral argument. Attorney-General
Villa-Real, in an exceptionally accurate and
comprehensive brief, answers the proposition of
appellant one by one.
The question presented are reduced to their simplest
elements in the opinion which follows:
I. Was 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, a "loan" within the meaning of section
35 of Act No. 2747?
Counsel argue that the documents of record do not
prove that authority to make a loan was given, but
only show the concession of a credit. In this statement
of fact, counsel is correct, for the exhibits in question
speak of a "credito" (credit) and not of a " prestamo"
(loan).
The "credit" of an individual means his ability to
borrow money by virtue of the confidence or trust
reposed by a lender that he will pay what he may
promise. (Donnell vs. Jones [1848], 13 Ala., 490;
Bouvier's Law Dictionary.) A "loan" means the
delivery by one party and the receipt by the other
party of a given sum of money, upon an agreement,
express or implied, to repay the sum loaned, with or
without interest. (Payne vs. Gardiner [1864], 29 N. Y.,
146, 167.) The concession of a "credit" necessarily
involves the granting of "loans" up to the limit of the
amount fixed in the "credit,"
II. Was 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, a "loan" or a "discount"?
Counsel argue that while section 35 of Act No. 2747
prohibits the granting of a "loan," it does not prohibit
what is commonly known as a "discount."
In a letter dated August 7, 1916, H. Parker Willis, then
President of the National Bank, inquired of the Insular
Auditor whether section 37 of Act No. 2612 was
intended to apply to discounts as well as to loans. The
ruling of the Acting Insular Auditor, dated August 11,
1916, was to the effect that said section referred to
loans alone, and placed no restriction upon discount
transactions. It becomes material, therefore, to
discover the distinction between a "loan" and a
"discount," and to ascertain if the instant transaction
comes under the first or the latter denomination.
Discounts are favored by bankers because of their
liquid nature, growing, as they do, out of an actual,
live, transaction. But in its last analysis, to discount a
paper is only a mode of loaning money, with,
however, these distinctions: (1) In a discount, interest
is deducted in advance, while in a loan, interest is
taken at the expiration of a credit; (2) a discount is
always on double-name paper; a loan is generally on
single-name paper.
Conceding, without deciding, that, as ruled by the
Insular Auditor, the law covers loans and not
discounts, yet the conclusion is inevitable that the
demand notes signed by the firm "Puno y
Concepcion, S. en C." were not discount paper but
were mere evidences of indebtedness, because (1)
interest was not deducted from the face of the notes,
but was paid when the notes fell due; and (2) they
were single-name and not double-name paper.
The facts of the instant case having relation to this
phase of the argument are not essentially different
from the facts in the Binalbagan Estate case. Just as
there it was declared that the operations constituted a
loan and not a discount, so should we here lay down
the same ruling.
III. Was 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, an "indirect loan" within the meaning
of section 35 of Act No. 2747?
Counsel argue that a loan to the partnership "Puno y
Concepcion, S. en C." was not an "indirect loan." In
this connection, it should be recalled that the wife of
the defendant held one-half of the capital of this
partnership.
In the interpretation and construction of statutes, the
primary rule is to ascertain and give effect to the
intention of the Legislature. In this instance, the
purpose of the Legislature is plainly to erect a wall of
safety against temptation for a director of the bank.
The prohibition against indirect loans is a recognition
of the familiar maxim that no man may serve two
masters — that where personal interest clashes with
fidelity to duty the latter almost always suffers. If,
therefore, it is shown that the husband is financially
interested in the success or failure of his wife's
business venture, a loan to partnership of which the
wife of a director is a member, falls within the
prohibition.
Various provisions of the Civil serve to establish the
familiar relationship called a conjugal partnership.
(Articles 1315, 1393, 1401, 1407, 1408, and 1412 can
be specially noted.) A loan, therefore, to a partnership
of which the wife of a director of a bank is a member,
is an indirect loan to such director.
That it was the intention of the Legislature to prohibit
exactly such an occurrence is shown by the
acknowledged fact that in this instance the defendant
was tempted to mingle his personal and family affairs
with his official duties, and to permit the loan
P300,000 to a partnership of no established
reputation and without asking for collateral security.
In the case of Lester and Wife vs. Howard Bank
([1870], 33 Md., 558; 3 Am. Rep., 211), the Supreme
Court of Maryland said:
What then was the purpose of the law when it
declared that no director or officer should
borrow of the bank, and "if any director," etc.,
"shall be convicted," etc., "of directly or
indirectly violating this section he shall be
punished by fine and imprisonment?" We say
to protect the stockholders, depositors and
creditors of the bank, against the temptation to
which the directors and officers might be
exposed, and the power which as such they
must necessarily possess in the control and
management of the bank, and the legislature
unwilling to rely upon the implied
understanding that in assuming this relation
they would not acquire any interest hostile or
adverse to the most exact and faithful
discharge of duty, declared in express terms
that they should not borrow, etc., of the bank.
In the case of People vs. Knapp ([1912], 206 N. Y.,
373), relied upon in the Binalbagan Estate decision, it
was said:
We are of opinion the statute forbade the loan
to his copartnership firm as well as to himself
directly. The loan was made indirectly to him
through his firm.
IV. Could Venancio Concepcion, President of the
Philippine National Bank, be convicted of a violation
of section 35 of Act No. 2747 in relation with section
49 of the same Act, when these portions of Act No.
2747 were repealed by Act No. 2938, prior to the
finding of the information and the rendition of the
judgment?
As noted along toward the beginning of this opinion,
section 49 of Act No. 2747, in relation to section 35 of
the same Act, provides a punishment for any person
who shall violate any of the provisions of the Act. It is
contended, however, by the appellant, that the repeal
of these sections of Act No. 2747 by Act No. 2938 has
served to take away the basis for criminal
prosecution.
This same question has been previously submitted
and has received an answer adverse to such
contention in the cases of United Stated vs.
Cuna ([1908], 12 Phil., 241); People vs.
Concepcion ([1922], 43 Phil., 653); and Ong Chang
Wing and Kwong Fok vs. United States ([1910], 218
U. S., 272; 40 Phil., 1046). In other words, it has been
the holding, and it must again be the holding, that
where an Act of the Legislature which penalizes an
offense, such repeals a former Act which penalized
the same offense, such repeal does not have the
effect of thereafter depriving the courts of jurisdiction
to try, convict, and sentenced offenders charged with
violations of the old law.
V. Was 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, in violation of section 35 of Act No.
2747, penalized by this law?
Counsel argue that since the prohibition contained in
section 35 of Act No. 2747 is on the bank, and since
section 49 of said Act provides a punishment not on
the bank when it violates any provisions of the law,
but on a personviolating any provisions of the same,
and imposing imprisonment as a part of the penalty,
the prohibition contained in said section 35 is without
penal sanction. lawph!l.net
The answer is that when the corporation itself is
forbidden to do an act, the prohibition extends to the
board of directors, and to each director separately
and individually. (People vs. Concepcion, supra.)
VI. Does the alleged good faith of Venancio
Concepcion, President of the Philippine National
Bank, in extending the credit of P300,000 to the
copartnership "Puno y Concepcion, S. en C."
constitute a legal defense?
Counsel argue that if defendant committed the acts of
which he was convicted, it was because he was
misled by rulings coming from the Insular Auditor. It is
furthermore stated that since the loans made to the
copartnership "Puno y Concepcion, S. en C." have
been paid, no loss has been suffered by the
Philippine National Bank.
Neither argument, even if conceded to be true, is
conclusive. Under the statute which the defendant
has violated, criminal intent is not necessarily
material. The doing of the inhibited act, inhibited on
account of public policy and public interest,
constitutes the crime. And, in this instance, as
previously demonstrated, the acts of the President of
the Philippine National Bank do not fall within the
purview of the rulings of the Insular Auditor, even
conceding that such rulings have controlling effect.
Morse, in his work, Banks and Banking, section 125,
says:
It is fraud for directors to secure by means of
their trust, and advantage not common to the
other stockholders. The law will not allow
private profit from a trust, and will not listen to
any proof of honest intent.
JUDGMENT
On a review of the evidence of record, with reference
to the decision of the trial court, and the errors
assigned by the appellant, and with reference to
previous decisions of this court on the same subject,
we are irresistibly led to the conclusion that no
reversible error was committed in the trial of this case,
and that the defendant has been proved guilty beyond
a reasonable doubt of the crime charged in the
information. The penalty imposed by the trial judge
falls within the limits of the punitive provisions of the
law.
G.R. No. L-4150 February 10, 1910
FELIX DE LOS SANTOS, plaintiff-appelle,
vs.
AGUSTINA JARRA, administratrix of the estate of
Magdaleno Jimenea, deceased, defendant-
appellant.
Matias Hilado, for appellant.
Jose Felix Martinez, for appellee.
TORRES, J.:
On the 1st of September, 1906, Felix de los Santos
brought suit against Agustina Jarra, the administratrix
of the estate of Magdaleno Jimenea, alleging that in
the latter part of 1901 Jimenea borrowed and
obtained from the plaintiff ten first-class carabaos, to
be used at the animal-power mill of his hacienda
during the season of 1901-2, without recompense or
remuneration whatever for the use thereof, under the
sole condition that they should be returned to the
owner as soon as the work at the mill was terminated;
that Magdaleno Jimenea, however, did not return the
carabaos, notwithstanding the fact that the plaintiff
claimed their return after the work at the mill was
finished; that Magdaleno Jimenea died on the 28th of
October, 1904, and the defendant herein was
appointed by the Court of First Instance of Occidental
Negros administratrix of his estate and she took over
the administration of the same and is still performing
her duties as such administratrix; that the plaintiff
presented his claim to the commissioners of the
estate of Jimenea, within the legal term, for the return
of the said ten carabaos, but the said commissioners
rejected his claim as appears in their report; therefore,
the plaintiff prayed that judgment be entered against
the defendant as administratrix of the estate of the
deceased, ordering her to return the ten first-class
carabaos loaned to the late Jimenea, or their present
value, and to pay the costs.
The defendant was duly summoned, and on the 25th
of September, 1906, she demurred in writing to the
complaint on the ground that it was vague; but on the
2d of October of the same year, in answer to the
complaint, she said that it was true that the late
Magdaleno Jimenea asked the plaintiff to loan him ten
carabaos, but that he only obtained three second-
class animals, which were afterwards transferred by
sale by the plaintiff to the said Jimenea; that she
denied the allegations contained in paragraph 3 of the
complaint; for all of which she asked the court to
absolve her of the complaint with the cost against the
plaintiff.
By a writing dated the 11th of December, 1906,
Attorney Jose Felix Martinez notified the defendant
and her counsel, Matias Hilado, that he had made an
agreement with the plaintiff to the effect that the latter
would not compromise the controversy without his
consent, and that as fees for his professional services
he was to receive one half of the amount allowed in
the judgment if the same were entered in favor of the
plaintiff.
The case came up for trial, evidence was adduced by
both parties, and either exhibits were made of record.
On the 10th of January, 1907, the court below entered
judgment sentencing Agustina Jarra, as administratrix
of the estate of Magdaleno Jimenea, to return to the
plaintiff, Felix de los Santos, the remaining six second
and third class carabaos, or the value thereof at the
rate of P120 each, or a total of P720 with the costs.
Counsel for the defendant excepted to the foregoing
judgment, and, by a writing dated January 19, moved
for anew trial on the ground that the findings of fact
were openly and manifestly contrary to the weight of
the evidence. The motion was overruled, the
defendant duly excepted, and in due course
submitted the corresponding bill of exceptions, which
was approved and submitted to this court.
The defendant has admitted that Magdaleno Jimenea
asked the plaintiff for the loan of ten carabaos which
are now claimed by the latter, as shown by two letters
addressed by the said Jimenea to Felix de los Santos;
but in her answer the said defendant alleged that the
late Jimenea only obtained three second-class
carabaos, which were subsequently sold to him by the
owner, Santos; therefore, in order to decide this
litigation it is indispensable that proof be forthcoming
that Jimenea only received three carabaos from his
son-in-law Santos, and that they were sold by the
latter to him.
The record discloses that it has been fully proven
from the testimony of a sufficient number of witnesses
that the plaintiff, Santos, sent in charge of various
persons the ten carabaos requested by his father-in-
law, Magdaleno Jimenea, in the two letters produced
at the trial by the plaintiff, and that Jimenea received
them in the presence of some of said persons, one
being a brother of said Jimenea, who saw the animals
arrive at the hacienda where it was proposed to
employ them. Four died of rinderpest, and it is for this
reason that the judgment appealed from only deals
with six surviving carabaos.
The alleged purchase of three carabaos by Jimenea
from his son-in-law Santos is not evidenced by any
trustworthy documents such as those of transfer, nor
were the declarations of the witnesses presented by
the defendant affirming it satisfactory; for said reason
it can not be considered that Jimenea only received
three carabaos on loan from his son-in-law, and that
he afterwards kept them definitely by virtue of the
purchase.
By the laws in force the transfer of large cattle was
and is still made by means of official documents
issued by the local authorities; these documents
constitute the title of ownership of the carabao or
horse so acquired. Furthermore, not only should the
purchaser be provided with a new certificate or
credential, a document which has not been produced
in evidence by the defendant, nor has the loss of the
same been shown in the case, but the old documents
ought to be on file in the municipality, or they should
have been delivered to the new purchaser, and in the
case at bar neither did the defendant present the old
credential on which should be stated the name of the
previous owner of each of the three carabaos said to
have been sold by the plaintiff.
From the foregoing it may be logically inferred that the
carabaos loaned or given on commodatum to the now
deceased Magdaleno Jimenea were ten in number;
that they, or at any rate the six surviving ones, have
not been returned to the owner thereof, Felix de los
Santos, and that it is not true that the latter sold to the
former three carabaos that the purchaser was already
using; therefore, as the said six carabaos were not
the property of the deceased nor of any of his
descendants, it is the duty of the administratrix of the
estate to return them or indemnify the owner for their
value.
The Civil Code, in dealing with loans in general, from
which generic denomination the specific one of
commodatum is derived, establishes prescriptions in
relation to the last-mentioned contract by the following
articles:
ART. 1740. By the contract of loan, one of the
parties delivers to the other, either anything
not perishable, in order that the latter may use
it during a certain period and return it to the
former, in which case it is called
commodatum, or money or any other
perishable thing, under the condition to return
an equal amount of the same kind and quality,
in which case it is merely called a loan.
Commodatum is essentially gratuitous.
A simple loan may be gratuitous, or made
under a stipulation to pay interest.
ART. 1741. The bailee acquires retains the
ownership of the thing loaned. The bailee
acquires the use thereof, but not its fruits; if
any compensation is involved, to be paid by
the person requiring the use, the agreement
ceases to be a commodatum.
ART. 1742. The obligations and rights which
arise from the commodatum pass to the heirs
of both contracting parties, unless the loan
has been in consideration for the person of
the bailee, in which case his heirs shall not
have the right to continue using the thing
loaned.
The carabaos delivered to be used not being returned
by the defendant upon demand, there is no doubt that
she is under obligation to indemnify the owner thereof
by paying him their value.
Article 1101 of said code reads:
Those who in fulfilling their obligations are
guilty of fraud, negligence, or delay, and those
who in any manner whatsoever act in
contravention of the stipulations of the same,
shall be subjected to indemnify for the losses
and damages caused thereby.
The obligation of the bailee or of his successors to
return either the thing loaned or its value, is sustained
by the supreme tribunal of Sapin. In its decision of
March 21, 1895, it sets out with precision the legal
doctrine touching commodatum as follows:
Although it is true that in a contract of
commodatum the bailor retains the ownership
of the thing loaned, and at the expiration of
the period, or after the use for which it was
loaned has been accomplished, it is the
imperative duty of the bailee to return the
thing itself to its owner, or to pay him
damages if through the fault of the bailee the
thing should have been lost or injured, it is
clear that where public securities are involved,
the trial court, in deferring to the claim of the
bailor that the amount loaned be returned him
by the bailee in bonds of the same class as
those which constituted the contract, thereby
properly applies law 9 of title 11 of partida 5.
With regard to the third assignment of error, based on
the fact that the plaintiff Santos had not appealed
from the decision of the commissioners rejecting his
claim for the recovery of his carabaos, it is sufficient
to estate that we are not dealing with a claim for the
payment of a certain sum, the collection of a debt
from the estate, or payment for losses and damages
(sec. 119, Code of Civil Procedure), but with the
exclusion from the inventory of the property of the late
Jimenea, or from his capital, of six carabaos which did
not belong to him, and which formed no part of the
inheritance.

The demand for the exclusion of the said carabaos

belonging to a third party and which did not form part
of the property of the deceased, must be the subject
of a direct decision of the court in an ordinary action,
wherein the right of the third party to the property
which he seeks to have excluded from the inheritance
and the right of the deceased has been discussed,
and rendered in view of the result of the evidence
adduced by the administrator of the estate and of the
claimant, since it is so provided by the second part of
section 699 and by section 703 of the Code of Civil
Procedure; the refusal of the commissioners before
whom the plaintiff unnecessarily appeared can not
affect nor reduce the unquestionable right of
ownership of the latter, inasmuch as there is no law
nor principle of justice authorizing the successors of
the late Jimenea to enrich themselves at the cost and
to the prejudice of Felix de los Santos.

For the reasons above set forth, by which the errors

assigned to the judgment appealed from have been
refuted, and considering that the same is in
accordance with the law and the merits of the case, it
is our opinion that it should be affirmed and we do
hereby affirm it with the costs against the appellant.
So ordered.