Indeed, the long-standing general rule is that criminal liability for Estafa is not

affected by payment, indemnification, reimbursement of or compromise as to the

amounts misappropriated, or by the novation of the contract. This is because Estafa
is a public offense which must be prosecuted and punished by the State on its own
motion even though complete reparation should have been made of the damage
suffered by the offended party.40 Since it is committed against the State, the
private offended party may not waive or extinguish the criminal liability that the
law imposes for the commission of the crime.

Nevertheless, in cases involving the type of Estafa under Article 315, paragraph 1
(b), where there is an underlying contractual relationship or bilateral agreement
between the parties which they can modify or alter,42 the Court has consistently
acknowledged at the same time the possible effects of novation. The Court held
that in these cases, novation may serve to either prevent the rise of criminal
liability, or to cast doubt on the true nature of the original basic transaction,
whether or not it was such that the breach of the obligation would not give rise to
penal responsibility, as when money loaned is made to appear as a deposit, or other
similar disguise is resorted to.43 The prevention of the rise of criminal liability
happens when there is novation before an Information is filed in court. As the
Court first held in People v. Nery44 (Nery):

The novation theory may perhaps apply prior to the filing of the criminal
information in court by the state prosecutors because up to that time the original
trust relation may be converted by the parties into an ordinary creditor-debtor
situation, thereby placing the complainant in estoppel to insist on the original trust.
But after the justice authorities have taken cognizance of the crime and instituted
action in court, the offended party may no longer divest the prosecution of its
power to exact the criminal liability, as distinguished from the civil. The crime
being an offense against the state, only the latter can renounce it (People vs.
Gervacio, 54 Off. Gaz. 2898; People vs. Velasco, 42 Phil. 76; U.S. vs. Montañes, 8
Phil. 620).45

In Nery, the complainant entrusted diamond rings to the accused to be sold by her
on commission. The accused, however, neither turned over any proceeds of the
sale of the items nor returned them. During the pendency of the case before the
trial court, the accused executed a deed in favor of the complainant. The deed
contained the promise of accused to pay her debt and committing that in the event
that she failed to comply with the said compromise, the case filed against her by
the private complainant would push through. When the accused later raised the
defense of novation, therefore, the Court rejected the same on the ground that the
purported novation occurred after the criminal case had already been instituted and
while it was already pending trial.

In order that a person can be convicted under the above-quoted provision, it must
be proven that he has the obligation to deliver or return the same money, goods or
personal property that he received Petitioners had no such obligation to return the
same money, i.e., the bills or coins, which they received from private respondents.
This is so because as clearly as stated in criminal complaints, the related civil
complaints and the supporting sworn statements, the sums of money that
petitioners received were loans.

Hence, the relationship between the private respondent and the Nation Savings and
Loan Association is that of creditor and debtor; consequently, the ownership of the
amount deposited was transmitted to the Bank upon the perfection of the contract
and it can make use of the amount deposited for its banking operations, such as to
pay interests on deposits and to pay withdrawals. While the Bank has the
obligation to return the amount deposited, it has, however, no obligation to return
or deliver the same money that was deposited. And, the failure of the Bank to
return the amount deposited will not constitute estafa through misappropriation
punishable under Article 315, par. l(b) of the Revised Penal Code, but it will only
give rise to civil liability over which the public respondents have no- jurisdiction.

WE have already laid down the rule that:

In order that a person can be convicted under the above-quoted

provision, it must be proven that he has the obligation to deliver
or return the same money, goods or personal property that he
received Petitioners had no such obligation to return the same money,
i.e., the bills or coins, which they received from private respondents.
This is so because as clearly as stated in criminal complaints, the
related civil complaints and the supporting sworn statements, the sums
of money that petitioners received were loans.

The nature of simple loan is defined in Articles 1933 and 1953 of the
Civil Code.
 "Art. 1933. — By the contract of loan, one of the parties
delivers to another, either something not consumable so
that the latter may use the same for a certain time- and
return it, in which case the contract is called a
commodatum; or money or other consumable thing,
upon the condition that the same amount of the same
kind and quality shall he paid in which case the contract
is simply called a loan or mutuum.

"Commodatum is essentially gratuitous.

"Simple loan may be gratuitous or with a stipulation to

pay interest.

"In commodatum the bailor retains the ownership of

the thing loaned while in simple loan, ownership passes
to the borrower.

"Art. 1953. — A person who receives a loan of money or

any other fungible thing acquires the ownership thereof,
and is bound to pay to the creditor an equal amount of the
same kind and quality."

It can be readily noted from the above-quoted provisions that in

simple loan (mutuum), as contrasted to commodatum the borrower
acquires ownership of the money, goods or personal property
borrowed Being the owner, the borrower can dispose of the thing
borrowed (Article 248, Civil Code) and his act will not be considered
misappropriation thereof' (Yam vs. Malik, 94 SCRA 30, 34 [1979];
Emphasis supplied).

But even granting that the failure of the bank to pay the time and savings deposits
of private respondent David would constitute a violation of paragraph 1(b) of
Article 315 of the Revised Penal Code, nevertheless any incipient criminal liability
was deemed avoided, because when the aforesaid bank was placed under
receivership by the Central Bank, petitioners Guingona and Martin assumed the
obligation of the bank to private respondent David, thereby resulting in the
novation of the original contractual obligation arising from deposit into a contract
of loan and converting the original trust relation between the bank and private
respondent David into an ordinary debtor-creditor relation between the petitioners
and private respondent. Consequently, the failure of the bank or petitioners
Guingona and Martin to pay the deposits of private respondent would not
constitute a breach of trust but would merely be a failure to pay the obligation as a
debtor.

Moreover, while it is true that novation does not extinguish criminal liability, it
may however, prevent the rise of criminal liability as long as it occurs prior to the
filing of the criminal information in court. Thus, in Gonzales vs. Serrano ( 25
SCRA 64, 69 [1968]) We held that:têñ.£îhqwâ£

As pointed out in People vs. Nery, novation prior to the filing of the
criminal information — as in the case at bar — may convert the
relation between the parties into an ordinary creditor-debtor relation,
and place the complainant in estoppel to insist on the original
transaction or "cast doubt on the true nature" thereof.

Again, in the latest case of Ong vs. Court of Appeals (L-58476, 124 SCRA 578,
580-581 [1983] ), this Court reiterated the ruling in People vs. Nery ( 10 SCRA
244 [1964] ), declaring that:têñ.£îhqwâ£

The novation theory may perhaps apply prior to the filling of the
criminal information in court by the state prosecutors because up to
that time the original trust relation may be converted by the parties
into an ordinary creditor-debtor situation, thereby placing the
complainant in estoppel to insist on the original trust. But after the
justice authorities have taken cognizance of the crime and instituted
action in court, the offended party may no longer divest the
prosecution of its power to exact the criminal liability, as
distinguished from the civil. The crime being an offense against the
state, only the latter can renounce it (People vs. Gervacio, 54 Off.
Gaz. 2898; People vs. Velasco, 42 Phil. 76; U.S. vs. Montanes, 8 Phil.
620).

It may be observed in this regard that novation is not one of the means
recognized by the Penal Code whereby criminal liability can be
extinguished; hence, the role of novation may only be to either
prevent the rise of criminal habihty or to cast doubt on the true nature
of the original basic transaction, whether or not it was such that its
breach would not give rise to penal responsibility, as when money
loaned is made to appear as a deposit, or other similar disguise is
 resorted to (cf. Abeto vs. People, 90 Phil. 581; U.S. vs. Villareal, 27
Phil. 481).

In the case at bar, there is no dispute that petitioners Guingona and Martin
executed a promissory note on June 17, 1981 assuming the obligation of the bank
to private respondent David; while the criminal complaint for estafa was filed on
December 23, 1981 with the Office of the City Fiscal. Hence, it is clear that
novation occurred long before the filing of the criminal complaint with the Office
of the City Fiscal.

Consequently, as aforestated, any incipient criminal liability would be avoided but

there will still be a civil liability on the part of petitioners Guingona and Martin to
pay the assumed obligation.

Further, during the private complainant’s testimony before the court a quo,
she never failed to state that the only consideration for lending the subject money
to the petitioner was their friendship. The private complainant bestowed her trust
on the petitioner because of the said friendship. Indeed, the money was given to the
petitioner by the private complainant without any interest at all. Thus, there exists
a fiduciary relationship between the petitioner and the private complainant
which is an essential element of estafa by misappropriation or conversion.

That Ramon and the other accused were relatives of Atty. Debuque and
incorporators and officers of ILC, standing alone, would not suffice to warrant the
finding of implied conspiracy absent the commission of an act in furtherance of a
joint purpose or community of interest with Atty. Debuque. Being incorporators
and officers of a corporation does not automatically connote conspiracy. ([ G.R.
No. 191718, May 10, 2021 ]

RAMON H. DEBUQUE, PETITIONER, VS. MATT C. NILSON,

RESPONDENT.

The law is explicit that it covers defraudations or misappropriation of funds

solicited by corporations from the general public. IBL is such corporation. The
operative phrase is "funds of corporations should come from the general public."
IBL is apparently engaged in the real estate business. Its funds come from buyers
of the properties it sells. (DELIA L. BELITA, SALVADOR ILARDE, JR.,
GENEVIEVE BELITA, MA. CHERYL DAVA, BRAULIO LEDESMA, JR.,
FLORENCE B. OLSEN, KATHY GERMENTIL, ROSITA ESTUART,
ARDELIZA LIM, ELSA RAFANAN, ERLINDA V. GAERLAN, PERLA
FERNANDEZ, DELBEN "NOY" BELITA and JOSEPH AVACILLA, vs.
ANTONIO S. SY, ROBERTO CARONAN, WILFREDO CIRIACO, NORMA S.
WONG, SONIA C. BENERO, MARIA L. PINEDA and CRISTINA V.
CARAMOL,  June 29, 2016, G.R. No. 191087)

However, the third element of the crime is patently lacking. The funds fraudulently
solicited by the corporation must come from the general public. In the present case,
no evidence was presented to show that aside from Dy, the petitioners, through
State Resources, also sought investments from other people. Dy had no co-
complainants alleging that they were also deceived to entrust their money to State
Resources. The general public element was not complied with. Thus, no syndicated
estafa allegedly took place, only simple estafa by means of deceit. (MA. GRACIA
HAO and DANNY HAO, Petitioners, vs. PEOPLE OF THE
PHILIPPINES, Respondents, G.R. No. 183345, September 17, 2014)