G.R. No.

L-19190 November 29, 1922

THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellee, vs. VENANCIO
CONCEPCION, defendant-appellant.
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 special authorization limited the discretional power of the local
manager of the Aparri branch 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 to Puno y Concepcion, S. en
C., the only security required consisting of six demand notes. This Puno y
Concepcion, S. en C., in reality is a copartnership capitalized at P100,000 wherein,
Venancio Concepcions wife owns half of the copartnership. Venancio Concepcion
was found guilty by the CFI for violation of Section 354 of Act 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 nor to agents of the
branch banks."
ISSUES:
1

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

2 Whether or not the granting of a credit of P300,000 to the copartnership

was a loan or a discount.
LOAN. 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, 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.
3 Whether or not the granting of a credit of P300,000 to the copartnershop
was an indirect loan within the meaning of Section 35 of Act 2747.
YES. 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.

UNITED STATES, vs. IGPUARA

Facts: The defendant Jose igpuara was entrusted with the amount of P2,498 by
Montilla and Veraguth. Without the consent of Montilla and Veraguth however,
Igpuara used the said amount for his own ends. Thus, igpuara was charged and
convicted with estafa, for having swindled Juana Montilla and Eugenio Veraguth out
of P2,498 which he had taken as deposit from the former to be at the his disposal.
Igpuara was sentenced to pay Juana Montilla P2,498 . The instrument for the
deposit reads:

We hold at the disposal of Eugenio Veraguth the sum of two thousand four
hundred and ninety-eight pesos (P2,498), the balance from Juana Montilla's sugar.
Iloilo, June 26, 1911, Jose Igpuara, for Ramirez and Co
Igpuara contended that the amount was not deposit for there was no certificate of
deposit, there was no transfer or delivery of the P2,498 and what transpired was a
loan. If assuming that it was deposit, this is negotiable.
Issues: Whether or not it is necessary that there be transfer or delivery in order
to constitute a deposit.

Held: No.
A deposit is constituted from the time a person receives a thing belonging
to another with the obligation of keeping and returning it. (Art. 1758, Civil
Code.)
His contention is without merit because firstly, the defendant drew up a document
declaring that they remained in his possession. With the understanding that he
would, for it has no other purpose.
The certificate of deposit in question is not negotiable because only instruments
payable to order are negotiable. Hence, this instrument not being to order but to
bearer, it is not negotiable.
As for the argument that the depositary may use or dispose oft he things
deposited, the depositor's consent is required thus, the rights and obligations of
the depositary and of the depositor shall cease and the rules and provisions
applicable to commercial loans, commission, or contract which took the place of the
deposit shall be observed. Igpuara however has shown no authorization whatsoever
or the consent of the depositary for using or disposing of the P2,498.
That there was not demand on the same or the next day after the certificate was
signed, does not operate against the depositor, or signify anything except the
intention not to press it. Failure to claim at once or delay for sometime in
demanding restitution of the things deposited, which was immediately due, does
not imply such permission to use the thing deposited as would convert the deposit
into a loan.

Judgment appealed from is affirmed

Case # 2
Topic: Concept of Credit
REPUBLIC OF THE PHILIPPINES vs.
PHILIPPINE NATIONAL BANK, ET AL., defendants,
THE FIRST NATIONAL CITY BANK OF NEW YORK, defendant-appellee.
Facts:
The Republic of the Philippines filed on September 25, 1957 before the
Court of First Instance of Manila a complaint for escheat of certain
unclaimed bank deposits balances under the provisions of Act No. 3936
against several banks, among them the First National City Bank of New York.
It is alleged that pursuant to Section 2 of said Act defendant banks
forwarded to the Treasurer of the Philippines a statement under oath of
their respective managing officials of all the credits and deposits held by
them in favor of persons known to be dead or who have not made further
deposits or withdrawals during the period of 10 years or more.
Wherefore, it is prayed that said credits and deposits be escheated to the
Republic of the Philippines by ordering defendant banks to deposit them to
its credit with the Treasurer of the Philippines.

In its answer the First National City Bank of New York claims that it has
inadvertently included in said report certain items amounting to P18,589.89
which, properly speaking, are not credits or deposits within the
contemplation of Act No. 3936. Hence, it prayed that said items be not
included in the claim of plaintiff.

Topic Issue: What is the concept of credit?

Decision:

The term "credit" in its usual meaning is a sum credited on the books of a
company to a person who appears to be entitled to it.
It presupposes a creditor-debtor relationship, and may be said to imply
ability, by reason of property or estates, to make a promised payment
It is the correlative to debt or indebtedness, and that which is due to any
person, a distinguished from that which he owes
The same is true with the term "deposits" in banks where the relationship
created between the depositor and the bank is that of creditor and debtor

Main Case Issue: : Do demand draft and telegraphic orders come within the
meaning of the term "credits" or "deposits" employed in the law?
Decision:
A demand draft is very different from a cashier's or manager's cheek,
contrary to appellant's pretense, for it has been held that the latter is a
primary obligation of the bank which issues it and constitutes its written
promise to pay upon demand.
A cashier's check issued by a bank, however, is not an ordinary draft. The
latter is a bill of exchange payable demand. It is an order upon a third party
purporting to drawn upon a deposit of funds.
A cashier's check issued on request of a depositor is the substantial
equivalent of a certified check and the deposit represented by the check
passes to the credit of the checkholder, who is thereafter a depositor to
that amount
A cashier's check, being merely a bill of exchange drawn by a bank on itself,
and accepted in advance by the act of issuance, is not subject to
countermand by the payee after indorsement, and has the same legal
effects as a certificate deposit or a certified check
A demand draft is not therefore of the same category as a cashier's check
which should come within the purview of the law.

For telegraphic transfer payment, the drawer bank was already paid the
value of the telegraphic transfer payment order. In the particular cases
under consideration it appears in the books of the defendant bank that the
amounts represented by the telegraphic payment orders appear in the names
of the respective payees. If the latter choose to demand payment of their
telegraphic transfers at the time the same was (were) received by the

defendant bank, there could be no question that this bank would have to pay
them.

Telegraphic transfer payment orders should be escheated in favor of the

Republic of the Philippines.