BLOCK A 2023|CREDIT TRANSACTIONS| ATTY.

CJ TAN
People v. Concepcion, 44 Phil 126 (1922)

RECIT-READY DIGEST:

PETITIONER/S: The People Of The Philippine Islands

RESPONDENT/S: Venancio Concepcion

FACTS:
● Venancio Concepcion, president of PNB, authorized the extension of credit in favor of Puno y
Concepcion, S. en C. in the amount of 300,000 pesos.
● This Puno y Concepcion, S. en C., in reality is a co-partnership wherein, Venancio Concepcion’s wife owns
half of the co-partnership.
● Section 35 of Act No. 2747 prohibits the Nat’l Bank from granting loans directly or indirectly to any of the
members of the board of directors of the bank nor to agents of the branch banks.
● Venancio Concepcion, as President of the Philippine National Bank and as member of the board of directors
of this bank, was charged with a violation of section 35 of Act No. 2747.
● Concepcion argues that the documents don’t prove that the authority to make a loan was given but rather it
showed the concession of a credit.

MAIN ISSUE:
● Whether or not the granting of a credit of P300,000 to the copartnership was a “loan” within the meaning of
Section 35 of Act No. 2747 - YES

RULING:
● The concession of a “credit” necessarily involves the granting of “loans” up to the limit of the amount
fixed in the “credit”. 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. 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.

FACTS:
● Venancio Concepcion, President of the Philippine National Bank, sent telegrams and a confirmation letter to the
manager of the Aparri branch of PNB, authorizing an extension of credit in favour of Puno y Concepcion, S. en C.
in the amount of P300,000.00.
● This Puno y Concepcion, S. en C., in reality is a co-partnership capitalized at P100,000 wherein, Venancio
Concepcion’s wife owns half of the co-partnership.
● Section 35 of Act No. 2747 states that: "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." (prohibition on indirect
loans)
● 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.
● Concepcion argues that the documents don’t prove that the authority to make a loan was given but rather it showed
the concession of a credit.
 BLOCK A 2023|CREDIT TRANSACTIONS| ATTY. CJ TAN
MAIN ISSUE :
● Whether or not the granting of a credit of P300,000 to the copartnership was a “loan” within the meaning of
Section 35 of Act No. 2747 - YES

RULING:
● The concession of a “credit” necessarily involves the granting of “loans” up to the limit of the amount fixed in the
“credit.” 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. 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.

MINOR ISSUE 1: (still important)

● Whether or not the granting of a credit of P300,000 to the co-partnership was a “loan” and not a “discount” - YES

RULING:

● The demand notes signed by the firm “Puno y Concepcion, S. en C.” were mere evidence 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.

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. The law covers loans and not discounts.

MINOR ISSUE 2:
● Whether or not the granting of a credit of P300,000 to the co-partnership was an “indirect loan” within the meaning
of Section 35 of Act 2747 - YES

RULING:

● It was the intention of the Legislature to prohibit exactly what has happened. In this instance, the defendant was
tempted to mingle his personal and family affairs with his official duties by permitting the loan P300,000 to a
partnership of no established reputation and without asking for collateral security.
● Various provisions of the Civil Code 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.

RULE:
● Section 35 of Act No. 2747 : "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."

● Art. 1933: By the contract of loan, one of the parties delivers to another, either something not consumable so that
the latter may use the same for a certain time and return it, in which case the contract is called a commodatum; or
 BLOCK A 2023|CREDIT TRANSACTIONS| ATTY. CJ TAN
money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be
paid, in which case the contract is simply called a loan or mutuum.

Commodatum is essentially gratuitous.

Simple loan may be gratuitous or with a stipulation to pay interest.

DOCTRINES
1. The concession of a "credit" necessarily involves the granting of "loans" up to the limit of the amount fixed in
the "credit."

2. 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. 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. 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. The law covers loans and not discounts.