G.R. No. L-3407; June 29, 1951
PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs. BERNARDO BAGAMASPAD and BIENVENIDO M. FERRER, defendants-appellants.

FACTS

The Philippine National Bank (PNB) filed a suit against its former Cotabato Agency Agent, Bernardo Bagamaspad, and Assistant Agent, Bienvenido M. Ferrer, to collect the sum of P699,803.57. This amount represented the uncollected balance of special crop loans disbursed by the defendants in 1946 and 1947. The Bank alleged these loans were released without authority, carelessly, and to manifestly insolvent, unqualified, or fictitious borrowers, contrary to Bank rules and regulations. The special crop loan program was initiated under presidential instruction to encourage food production post-liberation. The Bank issued specific rules and regulations, circulated via letters and explained in a conference attended by Ferrer, emphasizing diligence and that loans be granted only to bona fide planters. The Cotabato Agency, under the defendants, granted over P8.5 million in loans to more than 5,000 borrowers. The Bank’s claim is based on the defendants violating instructions by granting new loans after November 13, 1946, and acting negligently. Key correspondence shows that on November 13, 1946, the central office (via Delfin Buencamino) reminded the Agency of the need for field inspections before releasing second installments and questioned the purpose of new loans given the planting season. In a letter dated November 18, 1946, Bagamaspad explicitly asked if they could still entertain new applicants, indicating his understanding that authority was in doubt. Without waiting for a reply, Ferrer secured additional funds from the Zamboanga Agency. A telegram from the central office dated November 28, 1946, expressly instructed the Cotabato Agency to discontinue granting new crop loans, which defendants claim to have received on December 7, 1946. The trial court ruled in favor of PNB, holding the defendants jointly and severally liable.

ISSUE

1. Whether the defendants violated instructions from the central office by granting new special crop loans after November 26, 1946.
2. Whether the defendants acted with extreme laxity, negligence, and carelessness in granting the new special crop loans.
3. Whether the action by PNB is premature, requiring it to first exhaust remedies against the borrowers or write off the loans as bad debts.

RULING

The Supreme Court affirmed the trial court’s decision.
1. On the violation of instructions: The Court found that while there was no explicit order to stop new loans before the November 28 telegram, the central office’s intent was clear from its earlier letter of November 13, 1946. This was understood by the defendants, as evidenced by Bagamaspad’s own letter of November 18 asking for clarification on whether they could still entertain new applicants. The defendants proceeded to grant new loans without waiting for a definitive reply, acting at their own risk. The subsequent telegram of November 28, 1946, was a confirmation of the earlier implied instruction.
2. On negligence and carelessness: The Court upheld the trial court’s finding that the defendants acted with extreme laxity. They failed to conduct the required field inspections, granted loans based on mere affidavits without proper verification, and disbursed funds to individuals who were not bona fide farmers, including a minor, a blind person, and individuals with no land or planting activity. This constituted a clear breach of their duty to exercise due diligence.
3. On the prematurity of the action: The Court held the action was not premature. Citing Corsicana National Bank vs. Johnson, it ruled that PNB’s cause of action accrued and the injury was complete when the unauthorized loans were released. The Bank is not obliged to first exhaust remedies against the borrowers or await the liquidation of their estates; the liability of the erring officials is direct. Any recovery from borrowers would merely diminish the damages owed by the defendants.
The defendants were ordered to pay PNB jointly and severally the sum of P699,803.57 with legal interest from the filing of the complaint, plus costs.