PEOPLE vs. CONCEPCION, 44 Phil. 126 (Credit Transaction Case Digest)

PEOPLE vs. CONCEPCION, 44 Phil. 126

FACTS: 

1. Venancio Concepcion, President of the PNB and a member of the Board thereof is a partner of "Puno y Concepcion, S. en C.” 
2. It authorized an extension of credit [300K] in favor of "Puno y Concepcion, S. en C.” to the manager of the Aparri branch, PNB. 
3. Defendant Conception was found guilty of violating Sec. 35 of Act No. 2747 which provides that the National Bank shall not, directly or indirectly, grant loans to any of the members of the Board of Directors of the bank or to agents of the branch banks. 
1. wife of the defendant, WHO IS A PARTNER, held one-half of the capital of this partnership
2. 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.
4. As a defense, defendant’s counsel argued that the documents of record only prove a concession of a credit, and “not a loan” within the meaning of section 35 of Act No. 2747.

ISSUE: 

Whether  the granting of credit to the co-partnership was considered as a loan within the meaning of Sec. 35 of Act No. 2747.

HELD:  YES. 

1. 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.
2. 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. 
3. The concession of a "credit" necessarily involves the granting of "loans" up to the limit of the amount fixed in the “credit,”
4. GUILTY OF VIOLATION OF THE CRIME CHARGED IN THE INFORMATION
1. 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.

WAS IT A LOAN OR DISCOUNT? IT WAS A LOAN

1. 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.
2. 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.