I.

Introduction

REPUBLIC ACT No. 3765

AN ACT TO REQUIRE THE DISCLOSURE OF FINANCE CHARGES IN CONNECTION WITH EXTENSIONS OF

CREDIT.

Section 1. This Act shall be known as the "Truth in Lending Act."

Section 2. Declaration of Policy. It is hereby declared to be the policy of the State to protect its citizens
from a lack of awareness of the true cost of credit to the user by assuring a full disclosure of such cost
with a view of preventing the uninformed use of credit to the detriment of the national economy.

Section 3. As used in this Act, the term

(1) "Board" means the Monetary Board of the Central Bank of the Philippines.

(2) "Credit" means any loan, mortgage, deed of trust, advance, or discount; any conditional sales
contract; any contract to sell, or sale or contract of sale of property or services, either for present or
future delivery, under which part or all of the price is payable subsequent to the making of such sale or
contract; any rental-purchase contract; any contract or arrangement for the hire, bailment, or leasing of
property; any option, demand, lien, pledge, or other claim against, or for the delivery of, property or
money; any purchase, or other acquisition of, or any credit upon the security of, any obligation of claim
arising out of any of the foregoing; and any transaction or series of transactions having a similar purpose
or effect.

(3) "Finance charge" includes interest, fees, service charges, discounts, and such other charges incident
to the extension of credit as the Board may be regulation prescribe.

(4) "Creditor" means any person engaged in the business of extending credit (including any person who
as a regular business practice make loans or sells or rents property or services on a time, credit, or
installment basis, either as principal or as agent) who requires as an incident to the extension of credit,
the payment of a finance charge.

(5) "Person" means any individual, corporation, partnership, association, or other organized group of
persons, or the legal successor or representative of the foregoing, and includes the Philippine
Government or any agency thereof, or any other government, or of any of its political subdivisions, or
any agency of the foregoing.

Section 4. Any creditor shall furnish to each person to whom credit is extended, prior to the
consummation of the transaction, a clear statement in writing setting forth, to the extent applicable and
in accordance with rules and regulations prescribed by the Board, the following information:

(1) the cash price or delivered price of the property or service to be acquired;

(2) the amounts, if any, to be credited as down payment and/or trade-in;

(3) the difference between the amounts set forth under clauses (1) and (2);

(4) the charges, individually itemized, which are paid or to be paid by such person in connection with the
transaction but which are not incident to the extension of credit;

(5) the total amount to be financed;

(6) the finance charge expressed in terms of pesos and centavos; and

(7) the percentage that the finance bears to the total amount to be financed expressed as a simple
annual rate on the outstanding unpaid balance of the obligation.

Section 5. The Board shall prescribe such rules and regulations as may be necessary or proper in carrying
out the provisions of this Act. Any rule or regulation prescribed hereunder may contain such
classifications and differentiations as in the judgment of the Board are necessary or proper to effectuate
the purposes of this Act or to prevent circumvention or evasion, or to facilitate the enforcement of this
Act, or any rule or regulation issued thereunder.

Section 6. (a) Any creditor who in connection with any credit transaction fails to disclose to any person
any information in violation of this Act or any regulation issued thereunder shall be liable to such person
in the amount of P100 or in an amount equal to twice the finance charged required by such creditor in
connection with such transaction, whichever is the greater, except that such liability shall not exceed
P2,000 on any credit transaction. Action to recover such penalty may be brought by such person within
one year from the date of the occurrence of the violation, in any court of competent jurisdiction. In any
action under this subsection in which any person is entitled to a recovery, the creditor shall be liable for
reasonable attorney's fees and court costs as determined by the court.

(b) Except as specified in subsection (a) of this section, nothing contained in this Act or any regulation
contained in this Act or any regulation thereunder shall affect the validity or enforceability of any
contract or transactions.

(c) Any person who willfully violates any provision of this Act or any regulation issued thereunder shall
be fined by not less than P1,00 or more than P5,000 or imprisonment for not less than 6 months, nor
more than one year or both.

(d) No punishment or penalty provided by this Act shall apply to the Philippine Government or any
agency or any political subdivision thereof.

(e) A final judgment hereafter rendered in any criminal proceeding under this Act to the effect that a
defendant has willfully violated this Act shall be prima facie evidence against such defendant in an
action or proceeding brought by any other party against such defendant under this Act as to all matters
respecting which said judgment would be an estoppel as between the parties thereto.

Section 7. This Act shall become effective upon approval.

Approved: June 22, 1963

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

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.

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
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 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  person violating 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.

Judgment is affirmed, with the costs of this instance against the appellant. So ordered.

Araullo, C. J., Johnson, Street, Avanceña, Villamor, Ostrand, Johns, and Romualdez, JJ., concur.