Go v. BSP G.R. No. 178429, October 23, 2009

 

Under Section 83, RA 337, the following elements must be present to constitute a violation of its first paragraph:

1. the offender is a director or officer of any banking institution;

2. the offender, either directly or indirectly, for himself or as representative or agent of another, performs any of the following acts:

a. he borrows any of the deposits or funds of such bank; or

b. he becomes a guarantor, indorser, or surety for loans from such bank to others, or

c. he becomes in any manner an obligor for money borrowed from bank or loaned by it;

3. the offender has performed any of such acts without the written approval of the majority of the directors of the bank, excluding the offender, as the director concerned.

A simple reading of the above elements easily rejects Go’s contention that the law penalizes a bank director or officer only either for borrowing the bank’s deposits or funds or for guarantying loans by the bank, but not for acting in both capacities. The essence of the crime is becoming an obligor of the bank without securing the necessary written approval of the majority of the bank’s directors.

The second element merely lists down the various modes of committing the offense. The third mode, by declaring that "[no director or officer of any banking institution shall xxx] in any manner be an obligor for money borrowed from the bank or loaned by it," in fact serves a catch-all phrase that covers any situation when a director or officer of the bank becomes its obligor. The prohibition is directed against a bank director or officer who becomes in any manner an obligor for money borrowed from or loaned by the bank without the written approval of the majority of the bank’s board of directors. To make a distinction between the act of borrowing and guarantying is therefore unnecessary because in either situation, the director or officer concerned becomes an obligor of the bank against whom the obligation is juridically demandable.

The language of the law is broad enough to encompass either act of borrowing or guaranteeing, or both. While the first paragraph of Section 83 is penal in nature, and by principle should be strictly construed in favor of the accused, the Court is unwilling to adopt a liberal construction that would defeat the legislature’s intent in enacting the statute. The objective of the law should allow for a reasonable flexibility in its construction. Section 83 of RA 337, as well as other banking laws adopting the same prohibition, was enacted to ensure that loans by banks and similar financial institutions to their own directors, officers, and stockholders are above board.

 Banks were not created for the benefit of their directors and officers; they cannot use the assets of the bank for their own benefit, except as may be permitted by law. Congress has thus deemed it essential to impose restrictions on borrowings by bank directors and officers in order to protect the public, especially the depositors. Hence, when the law prohibits directors and officers of banking institutions from becoming in any manner an obligor of the bank (unless with the approval of the board), the terms of the prohibition shall be the standards to be applied to directors’ transactions such as those involved in the present case.