G.R. No. L-60033 April 4, 1984 On December 23,1981, private respondent David filed I.S. No.
On December 23,1981, private respondent David filed I.S. No. 81-31938 in the Office of
TEOFISTO GUINGONA, JR., ANTONIO I. MARTIN, and TERESITA SANTOS, petitioners,
vs.
THE CITY FISCAL OF MANILA, HON. JOSE B. FLAMINIANO, ASST. CITY FISCAL FELIZARDO
N. LOTA and CLEMENT DAVID, respondents.
MAKASIAR, Actg. C.J.:
SUMMARY: Private respondent Clement David, together with his sister, made several investments
with the National Savings and Loan Association (NSLA) in the total amount of ₱1,159,078.14 in
several time deposits and savings deposits.
On March 1987, the NSLA was placed under receivership by the CB. David got information that only
P305,821.92 of those investments were entered in the records of NSLA; that, therefore, the
respondents misappropriated the balance of the investments.
It was admitted by Guingona and Martin that they voluntarily assumed the obligation of the bank in
favor of David by executing promissory notes in favor of the latter.
David later filed a complaint for estafa with the City Fiscal of Manila against the private respondents.
The private respondents argued that the city fiscal had no jurisdiction over the case, considering that
the claim of David was purely civil and that there was no estafa in this case.
Issue: whether or not the private respondents can be held liable for estafa
Held: No. The SC explained the concept of deposits and how they are considered simple loans. The
Court cited Art. 1980 of the NCC, which provides that fixed, savings, and current deposits of-money in
banks and similar institutions shall be governed by the provisions concerning simple loan.
The Court also cited the cases of Central Bank of the Philippines vs. Morfe and Serrano vs. Central
Bank of the Philippines which respectively provide that (1) fixed, savings, and current deposits of
money in banks and similar institutions are hat true deposits. are considered simple loans and, as
such, are not preferred credits and (2) all kinds of bank deposits, whether fixed, savings, or current
are to be treated as loans and are to be covered by the law on loans.
Thus, the SC explained that 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.
In order that a person can be convicted under [Estafa], it must be proven that he has the obligation to
deliver or return the some 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.
FACTS: On March 31, 1982, by virtue of a court resolution issued by this Court on the same date, a temporary restraining order
was duly issued ordering the respondents, their officers, agents, representatives and/or person or persons acting upon their
(respondents') orders or in their place or stead to refrain from proceeding with the preliminary investigation in Case No. 8131938
of the Office of the City Fiscal of Manila (pp. 47-48, rec.). On January 24, 1983, private respondent Clement David filed a motion to lift
restraining order which was denied in the resolution of this Court dated May 18, 1983.
As can be gleaned from the above, the instant petition seeks to prohibit public respondents from
proceeding with the preliminary investigation of I.S. No. 81-31938, in which petitioners were
charged by private respondent Clement David, with estafa and violation of Central Bank
Circular No. 364 and related regulations regarding foreign exchange transactions principally, on the
ground of lack of jurisdiction in that the allegations of the charged, as well as the testimony of
private respondent's principal witness and the evidence through said witness, showed that
petitioners' obligation is civil in nature.
For purposes of brevity, We hereby adopt the antecedent facts narrated by the Solicitor General
in its Comment dated June 28,1982, as follows:
the City Fiscal of Manila, which case was assigned to respondent Lota for preliminary
investigation (Petition, p. 8).
In I.S. No. 81-31938, David charged petitioners (together with one Robert Marshall and
the following directors of the Nation Savings and Loan Association, Inc., namely Homero
Gonzales, Juan Merino, Flavio Macasaet, Victor Gomez, Jr., Perfecto Manalac, Jaime V.
Paz, Paulino B. Dionisio, and one John Doe) with estafa and violation of Central Bank
Circular No. 364 and related Central Bank regulations on foreign exchange transactions,
allegedly committed as follows (Petition, Annex "A"):
"From March 20, 1979 to March, 1981, David invested with the Nation
Savings and Loan Association, (hereinafter called NSLA) the sum of
P1,145,546.20 on nine deposits, P13,531.94 on savings account deposits (jointly
with his sister, Denise Kuhne), US$10,000.00 on time deposit, US$15,000.00
under a receipt and guarantee of payment and US$50,000.00 under a receipt
dated June 8, 1980 (au jointly with Denise Kuhne), that David was induced into
making the aforestated investments by Robert Marshall an Australian
national who was allegedly a close associate of petitioner Guingona Jr.,
then NSLA President, petitioner Martin, then NSLA Executive Vice-President of
NSLA and petitioner Santos, then NSLA General Manager; that on March 21,
1981 NSLA was placed under receivership by the Central Bank, so that
David filed claims therewith for his investments and those of his sister; that on
July 22, 1981 David received a report from the Central Bank that only
P305,821.92 of those investments were entered in the records of NSLA;
that, therefore, the respondents in I.S. No. 81-31938 misappropriated the
balance of the investments, at the same time violating Central Bank Circular
No. 364 and related Central Bank regulations on foreign exchange transactions;
that after demands, petitioner Guingona Jr. paid only P200,000.00, thereby
reducing the amounts misappropriated to P959,078.14 and US$75,000.00."
Petitioners, Martin and Santos, filed a joint counter-affidavit (Petition, Annex' B') in
which they stated the following.
"That Martin became President of NSLA in March 1978 (after the resignation of
Guingona, Jr.) and served as such until October 30, 1980, while Santos was
General Manager up to November 1980; that because NSLA was urgently in
need of funds and at David's insistence, his investments were treated as
special- accounts with interest above the legal rate, and recorded in
separate confidential documents only a portion of which were to be
reported because he did not want the Australian government to tax his total
earnings (nor) to know his total investments; that all transactions with David
were recorded except the sum of US$15,000.00 which was a personal loan of
Santos; that David's check for US$50,000.00 was cleared through Guingona,
Jr.'s dollar account because NSLA did not have one, that a draft of
US$30,000.00 was placed in the name of one Paz Roces because of a pending
transaction with her; that the Philippine Deposit Insurance Corporation had
already reimbursed David within the legal limits; that majority of the stockholders
of NSLA had filed Special Proceedings No. 82-1695 in the Court of First Instance
to contest its (NSLA's) closure; that after NSLA was placed under receivership,
Martin executed a promissory note in David's favor and caused the transfer to
him of a nine and on behalf (9 1/2) carat diamond ring with a net value of
P510,000.00; and, that the liabilities of NSLA to David were civil in nature."
Petitioner, Guingona, Jr., in his counter-affidavit (Petition, Annex' C') stated the
following:
"That he had no hand whatsoever in the transactions between David and
NSLA since he (Guingona Jr.) had resigned as NSLA president in March
1978, or prior to those transactions; that he assumed a portion of the liabilities
of NSLA to David because of the latter's insistence that he placed his
investments with NSLA because of his faith in Guingona, Jr.; that in a Promissory
 Note dated June 17, 1981 (Petition, Annex "D") he (Guingona, Jr.) bound himself
to pay David the sums of P668.307.01 and US$37,500.00 in stated installments;
that he (Guingona, Jr.) secured payment of those amounts with second
mortgages over two (2) parcels of land under a deed of Second Real Estate
Mortgage (Petition, Annex "E") in which it was provided that the mortgage over
one (1) parcel shall be cancelled upon payment of one-half of the obligation to
David; that he (Guingona, Jr.) paid P200,000.00 and tendered another
P300,000.00 which David refused to accept, hence, he (Guingona, Jr.) filed Civil
Case No. Q-33865 in the Court of First Instance of Rizal at Quezon City, to effect
the release of the mortgage over one (1) of the two parcels of land conveyed to
David under second mortgages."
At the inception of the preliminary investigation before respondent Lota, petitioners
moved to dismiss the charges against them for lack of jurisdiction because David's
claims allegedly comprised a purely civil obligation which was itself novated. Fiscal
Lota denied the motion to dismiss (Petition, p. 8).
But, after the presentation of David's principal witness, petitioners filed the instant petition
because: (a) the production of the Promisory Notes, Banker's Acceptance, Certificates of
Time Deposits and Savings Account allegedly showed that the transactions between David
and NSLA were simple loans, i.e., civil obligations on the part of NSLA which were novated
when Guingona, Jr. and Martin assumed them; and (b) David's principal witness allegedly
testified that the duplicate originals of the aforesaid instruments of indebtedness were all on
file with NSLA, contrary to David's claim that some of his investments were not record
(Petition, pp. 8-9).
Petitioners alleged that they did not exhaust available administrative remedies because to
do so would be futile (Petition, p. 9) [pp. 153-157, rec.].
ISSUE: WON the public respondent City fiscal and Assistant City Fiscal acted without jurisdiction
when they investigated the estafa charge and the CB Circ. No. 364 charge (YES)
RULING: WHEREFORE, THE PETITION IS HEREBY GRANTED; THE TEMPORARY
RESTRAINING ORDER PREVIOUSLY ISSUED IS MADE PERMANENT. COSTS AGAINST THE
PRIVATE RESPONDENT. SO ORDERED.
RATIO:
CHARGES ARE PURELY CIVIL IN NATURE, NOT CRIMINAL
There is merit in the contention of the petitioners that their liability is civil in nature and therefore,
public respondents have no jurisdiction over the charge of estafa.
A casual perusal of the December 23, 1981 affidavit complaint filed in the Office of the City Fiscal
of Manila by private respondent David against petitioners Teopisto Guingona, Jr., Antonio I. Martin
and Teresita G. Santos, together with one Robert Marshall and the other directors of the Nation
Savings and Loan Association, will show that from March 20, 1979 to March, 1981, private
respondent David, together with his sister, Denise Kuhne, invested with the Nation Savings and
Loan Association the sum of P1,145,546.20 on time deposits covered by Bankers Acceptances
and Certificates of Time Deposits and the sum of P13,531.94 on savings account deposits
covered by passbook nos. 6-632 and 29-742, or a total of P1,159,078.14 (pp. 15-16, roc.). It appears
further that private respondent David, together with his sister, made investments in the aforesaid bank
in the amount of US$75,000.00 (p. 17, rec.).
Moreover, the records reveal that when the aforesaid bank was placed under receivership on
March 21, 1981, petitioners Guingona and Martin, upon the request of private respondent David,
assumed the obligation of the bank to private respondent David by executing on June 17, 1981
a joint promissory note in favor of private respondent acknowledging an indebtedness of
Pl,336,614.02 and US$75,000.00 (p. 80, rec.). This promissory note was based on the statement of
account as of June 30, 1981 prepared by the private respondent (p. 81, rec.). The amount of
indebtedness assumed appears to be bigger than the original claim because of the added interest
and the inclusion of other deposits of private respondent's sister in the amount of P116,613.20.
Thereafter, or on July 17, 1981, petitioners Guingona and Martin agreed to divide the said
indebtedness, and petitioner Guingona executed another promissory note antedated to June
17, 1981 whereby he personally acknowledged an indebtedness of P668,307.01 (1/2 of
P1,336,614.02) and US$37,500.00 (1/2 of US$75,000.00) in favor of private respondent (p. 25, rec.).
The aforesaid promissory notes were executed as a result of deposits made by Clement David and
Denise Kuhne with the Nation Savings and Loan Association.
Furthermore, the various pleadings and documents filed by private respondent David, before this
Court indisputably show that he has indeed invested his money on time and savings deposits with the
Nation Savings and Loan Association.
It must be pointed out that when private respondent David invested his money on nine time and
savings deposits with the aforesaid bank, the contract that was perfected was a contract of
simple loan or mutuum and not a contract of deposit. Thus, Article 1980 of the New Civil Code
provides that:
Article 1980. Fixed, savings, and current deposits of-money in banks and similar institutions
shall be governed by the provisions concerning simple loan.
In the case of Central Bank of the Philippines vs. Morfe (63 SCRA 114,119 [1975], We said:
It should be noted that fixed, savings, and current deposits of money in banks and
similar institutions are hat true deposits. are considered simple loans and, as such, are
not preferred credits (Art. 1980 Civil Code; In re Liquidation of Mercantile Batik of China Tan Tiong Tick vs.
American Apothecaries Co., 66 Phil 414; Pacific Coast Biscuit Co. vs. Chinese Grocers Association 65 Phil. 375; Fletcher
American National Bank vs. Ang Chong UM 66 PWL 385; Pacific Commercial Co. vs. American Apothecaries Co., 65
PhiL 429; Gopoco Grocery vs. Pacific Coast Biscuit CO.,65 Phil. 443)."
This Court also declared in the recent case of Serrano vs. Central Bank of the Philippines (96
SCRA 102 [1980]) that:
Bank deposits are in the nature of irregular deposits. They are really loans because
they earn interest. All kinds of bank deposits, whether fixed, savings, or current are to be
treated as loans and are to be covered by the law on loans (Art. 1980 Civil Code Gullas
vs. Phil. National Bank, 62 Phil. 519). Current and saving deposits, are loans to a bank
because it can use the same. The petitioner here in making time deposits that earn
interests will respondent Overseas Bank of Manila was in reality a creditor of the
respondent Bank and not a depositor. The respondent Bank was in turn a debtor of
petitioner. Failure of the respondent Bank to honor the time deposit is failure to pay its
obligation as a debtor and not a breach of trust arising from a depositary's failure to return
the subject matter of the deposit (Emphasis supplied).
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.
BANKS NOT LIABLE FOR ESTAFA
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 [Estafa], it must be proven that he has
the obligation to deliver or return the some 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).
RECEIVERSHIP PREVENTED THE ESTAFA CHARGE
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:
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:
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.
Petitioners herein were likewise charged with violation of Section 3 of Central Bank Circular No. 364
and other related regulations regarding foreign exchange transactions by accepting foreign currency
deposit in the amount of US$75,000.00 without authority from the Central Bank. They contend
however, that the US dollars intended by respondent David for deposit were all converted into
Philippine currency before acceptance and deposit into Nation Savings and Loan Association.
Petitioners' contention is worthy of behelf for the following reasons:
1. It appears from the records that when respondent David was about to make a deposit of bank draft
issued in his name in the amount of US$50,000.00 with the Nation Savings and Loan Association, the
same had to be cleared first and converted into Philippine currency. Accordingly, the bank draft was
endorsed by respondent David to petitioner Guingona, who in turn deposited it to his dollar account
with the Security Bank and Trust Company. Petitioner Guingona merely accommodated the request
of the Nation Savings and loan Association in order to clear the bank draft through his dollar account
because the bank did not have a dollar account. Immediately after the bank draft was cleared,
petitioner Guingona authorized Nation Savings and Loan Association to withdraw the same in order
to be utilized by the bank for its operations.
2. It is safe to assume that the U.S. dollars were converted first into Philippine pesos before they were
accepted and deposited in Nation Savings and Loan Association, because the bank is presumed to
have followed the ordinary course of the business which is to accept deposits in Philippine currency
only, and that the transaction was regular and fair, in the absence of a clear and convincing evidence
to the contrary (see paragraphs p and q, Sec. 5, Rule 131, Rules of Court).
3. Respondent David has not denied the aforesaid contention of herein petitioners despite the fact
that it was raised. in petitioners' reply filed on May 7, 1982 to private respondent's comment and in
the July 27, 1982 reply to public respondents' comment and reiterated in petitioners' memorandum
filed on October 30, 1982, thereby adding more support to the conclusion that the US$75,000.00
were really converted into Philippine currency before they were accepted and deposited into Nation
Savings and Loan Association. Considering that this might adversely affect his case, respondent
David should have promptly denied petitioners' allegation.
In conclusion, considering that the liability of the petitioners is purely civil in nature and that there is
no clear showing that they engaged in foreign exchange transactions, We hold that the public
respondents acted without jurisdiction when they investigated the charges against the petitioners.
Consequently, public respondents should be restrained from further proceeding with the criminal case
for to allow the case to continue, even if the petitioners could have appealed to the Ministry of Justice,
would work great injustice to petitioners and would render meaningless the proper administration of
justice.
While as a rule, the prosecution in a criminal offense cannot be the subject of prohibition and
injunction, this court has recognized the resort to the extraordinary writs of prohibition and injunction
in extreme cases, thus:

On the issue of whether a writ of injunction can restrain the proceedings in Criminal Case
No. 3140, the general rule is that "ordinarily, criminal prosecution may not be blocked by
court prohibition or injunction." Exceptions, however, are allowed in the following instances:

"1. for the orderly administration of justice;

"2. to prevent the use of the strong arm of the law in an oppressive and vindictive
manner;

"3. to avoid multiplicity of actions;

"4. to afford adequate protection to constitutional rights;

"5. in proper cases, because the statute relied upon is unconstitutional or was
held invalid" ( Primicias vs. Municipality of Urdaneta, Pangasinan, 93 SCRA 462,
469-470 [1979]; citing Ramos vs. Torres, 25 SCRA 557 [1968]; and Hernandez
vs. Albano, 19 SCRA 95, 96 [1967]).

Likewise, in Lopez vs. The City Judge, et al. ( 18 SCRA 616, 621-622 [1966]), We held that:

The writs of certiorari and prohibition, as extraordinary legal remedies, are in the ultimate
analysis, intended to annul void proceedings; to prevent the unlawful and oppressive
exercise of legal authority and to provide for a fair and orderly administration of justice.
Thus, in Yu Kong Eng vs. Trinidad, 47 Phil. 385, We took cognizance of a petition for
certiorari and prohibition although the accused in the case could have appealed in due time
from the order complained of, our action in the premises being based on the public welfare
policy the advancement of public policy. In Dimayuga vs. Fajardo, 43 Phil. 304, We also
admitted a petition to restrain the prosecution of certain chiropractors although, if convicted,
they could have appealed. We gave due course to their petition for the orderly
administration of justice and to avoid possible oppression by the strong arm of the law. And
in Arevalo vs. Nepomuceno, 63 Phil. 627, the petition for certiorari challenging the trial
court's action admitting an amended information was sustained despite the availability of
appeal at the proper time.