Case : F10 - PNB vs. BERNARDO BAGAMASPAD and BIENVENIDO M.

M. Issue(s): Whether or not the two defendants Bagamaspad and Ferrer acting as
FERRER, Agent and Assistant Agent of the Cotabato Agency, in granting new crop loans
after November 13, 1946, violated the instructions of the Bank, and that
furthermore, in granting said crop loans, they acted negligently and did not
Facts : Because of the Pacific War and by reason of the destruction and
exercise the care and precaution required of them in order to prevent the
loss of animals of labor, farm implements, and damage to or abandonment of
release of crop loans to persons who were neither qualified borrowers nor
farm lands, after liberation there was acute shortage of foodstuff. President
entitled to the assistance being rendered by the Government and the Bank, all
Roxas in order to foment and encourage food production, instructed the plaintiff
contrary to the rules and regulations issued by the Bank.
Philippine National Bank to extend special facilities to farmers in the form of
crop loans in order to enable them to rehabilitate their farms. In pursuance of
said instructions and to cooperate with the Administration, the plaintiff Bank Ruling : The trial court based the civil liability of the appellants herein on the
passed the corresponding resolution authorizing the granting of ten-month provisions of Arts. 1718 and 1719 of the Civil Code, defining and enumerating
special crop loans to bona fide food producers, land-owners or their tenants, the duties and obligations of an agent and his liability for failure to comply with
under certain conditions. Delfin Buencamino, one of the Vice-President of the such duties, and Art. 259 of the Code of Commerce which provides that an
Bank and head of the Branches and Agencies Department of said institution, agent must observe the provisions of law and regulations with respect to
was entrusted with the supervision of the granting of these loans. Juan Tueres, business transactions entrusted to him otherwise he shall be responsible for the
one of the Assistant Managers of said Department drafted the corresponding consequences resulting from their breach or omissions; and also Art. 1902 of
rules and regulations regarding the granting of said specials crops loans. After the Civil Code which provides for the liability of one for his tortious act, that is to
approval by Buencamino, these rules and regulations were embodied in a say, any act or omission which causes damage to another by his fault or
circular letter, a copy of which was personally delivered to defendant Ferrer. negligence. Appellants while agreeing with the meaning and scope of the legal
These rules and regulations were later amplified by another circular letter. provisions cited, nevertheless insist that those provisions are not applicable to
Besides circularizing its branches and agencies with these rules and them inasmuch as they are not guilty of any violation of instructions or
regulations, on June 14, 1946, the Bank held in Manila a conference in of all its regulations of the plaintiff Bank; and that neither are they guilty of negligence of
manager and Agents. Defendant Ferrer, Assistant Agent of the Cotabato carelessness as found by the trial court. A careful study and consideration of
Agency attended the conference in representation of said Agency. He arrived the record, however, convinces us and we agree with the trial court that the
late but Tueres explained to him what had been discussed during the defendants-appellants have not only violated instructions of the plaintiff Bank,
conference, emphasizing to him the necessity of exercising diligence and care including things which said Bank wanted done or not done, all of which were
in the granting of the crop loans to see to it that they are granted only to bona fully understood by them, but they (appellants) also violated standing
fide planters, land-owners or tenants, as well as repeating to him the advice of regulations regarding the granting of loans; and, what is more, thru their
Vicente Carmona, President of the bank, that the Managers and Agents of the carelessness, laxity and negligence, they allowed loans to be granted to
Bank should not allow themselves to be fooled. persons who were not entitled to receive loans.

As pointed out by Counsel for appellee, ordinarily, a principal who collects either
The Cotabato Agency under the management of the two defendants began
judicially or extrajudicially a loan made by an agent without authority, thereby
granting these special crop loans in July, 1946, and by March of the following
ratifies the said act of the agent. In the present case, however, in filing suits
year, 1947, said Agency had granted to over 5,000 borrowers, loans in the total
against some of the borrowers to collect at least part of the unauthorized loans,
amount of a little over eight and half million pesos.
there was no intention on the part of the plaintiff Bank to ratify the acts of
appellants. Neither did the plaintiff receive any substantial benefit by its act of
In their brief the appellant contend that the trial court erred in finding and filing these suits if we consider the fact that the collections so far made, form a
holding that extending new special crop loans after November 26, 1946, small or insignificant portion of the entire principal and interest. And, we fail to
amounting to P726,680, as they as Agent and Assistant Agent, respectively, of see any iniquity in this act of the plaintiff in suing some of the borrowers to
the of the Cotabato Agency, did so at their own risk and in violation of the collect what it could at the same time holding the appellants liable for the
instructions received from the Manila office; also that the court erred in holding balance, because the plaintiff Bank is not trying to enrich itself at the expense of
that they (appellants) acted with extreme laxity, negligence and carelessness in the defendants but is merely trying to diminish as much as possible the loss to
granting said new special crops loans. On the first assigned error appellants itself and automatically decrease the financial liability of appellants. Considering
maintain that outside of the telegram, which they claim to have received only on the large amount for which appellants are found liable, it is a matter of serious
December 7, 1946, there was no instruction by the central office stopping the doubt if they are in a position to pay it. Moreover, whatever amount is collected
granting of new special crop loans. by the plaintiff Bank from borrowers, serves to diminish the financial liability of
the appellants, in the same way that the original claim of P704,903.18, at the
very instance of plaintiff was reduced to P699,803.57. In other words, the act of
Appellants not only granted new special crop loans after they were given to the plaintiff Bank in the matter, far from being iniquitous, is really beneficial to
understand by the central office that they should no longer grant said loans and the appellants.
before appellants received instructions as to what they should do in that regard,
but they also violated the express instructions of the Bank to the effect that
funds received from the Zamboanga Agency should be utilized only to pay
second installments on special crop loans.

The evidence shows that in violation of these instructions and regulations, the
defendants released large loans aggregating P348,768.22 to about 103
borrowers who were neither landowners or tenants but only public land sales
applicants that is to say, persons who have merely filed applications to buy
public lands.

Appellants in their over-enthusiasm and seemingly inordinate desire to grant as