Guingona, Jr. vs. City Fiscal of Manila

Bank deposits are simple loans (mutuum) governed by Article 1980 of the Civil Code; the bank acquires ownership of the deposited money, and its failure to return the amount does not constitute estafa through misappropriation under Article 315(1)(b) of the Revised Penal Code but gives rise only to civil liability. Further, novation of the obligation before the filing of a criminal complaint may prevent the rise of criminal liability by converting the relation into an ordinary creditor-debtor situation, casting doubt on the true nature of the original transaction and placing the complainant in estoppel to insist on the original trust.

Private respondent Clement David, together with his sister Denise Kuhne, made various investments with Nation Savings and Loan Association (NSLA) from March 20, 1979 to March 1981, totaling P1,145,546.20 in time deposits, P13,531.94 in savings deposits, and US$75,000.00. Petitioners were officers of NSLA: Teofisto Guingona, Jr. was President until March 1978, Antonio I. Martin was President from March 1978 to October 30, 1980, and Teresita Santos was General Manager until November 1980. On March 21, 1981, NSLA was placed under receivership by the Central Bank. David filed claims and learned that only P305,821.92 was recorded in the bank’s books. After demands, Guingona paid P200,000.00. Guingona and Martin later executed promissory notes assuming the bank’s liability. David then filed a criminal complaint charging petitioners with estafa and violation of Central Bank foreign exchange regulations.

• Nature of the Charges: Private respondent Clement David filed a complaint-affidavit charging petitioners Guingona, Martin, Santos, and other NSLA directors with estafa and violation of Central Bank Circular No. 364. The complaint alleged that from March 20, 1979 to March 1981, David invested P1,145,546.20 in time deposits, P13,531.94 in savings deposits (joint with his sister), US$10,000.00 on time deposit, US$15,000.00 under a receipt, and US$50,000.00 under another receipt (joint with sister), all with NSLA. The investments were induced by Robert Marshall, an associate of Guingona. After NSLA was placed under receivership on March 21, 1981, David learned from the Central Bank that only P305,821.92 was recorded; he alleged the balance was misappropriated. Guingona paid P200,000.00, leaving P959,078.14 and US$75,000.00 unaccounted for.

• Petitioners’ Counter-Affidavits: Martin and Santos stated that Martin became president in March 1978 and served until October 1980, and Santos was general manager until November 1980. Due to NSLA’s urgent need for funds and at David’s insistence, his investments were treated as special accounts with interest above legal rate, recorded in separate confidential documents — only a portion was reported because David wanted to avoid Australian taxation and to conceal his total investments. All transactions were recorded except a US$15,000.00 personal loan from Santos. The US$50,000.00 check was cleared through Guingona’s dollar account because NSLA had none; a US$30,000.00 draft was placed in the name of Paz Roces for a pending transaction. The Philippine Deposit Insurance Corporation had already reimbursed David within legal limits. After receivership, Martin executed a promissory note in David’s favor and transferred a diamond ring worth P510,000.00. Petitioners contended that the liabilities were civil in nature. Guingona stated he had no hand in the transactions, having resigned as president in March 1978. He assumed part of the bank’s liability only because David insisted he invested based on faith in Guingona. On June 17, 1981, Guingona executed a promissory note for P668,307.01 and US$37,500.00, secured by second mortgages on two parcels of land, and had paid P200,000.00 and tendered P300,000.00 which David refused; Guingona then filed a civil case to release one mortgage.

• Investigation and Evidence Presented: At the preliminary investigation, fiscal Lota denied the motion to dismiss. After the presentation of David’s principal witness, petitioners claimed that the promissory notes, banker’s acceptances, certificates of time deposits, and savings passbooks showed the transactions were simple loans, that the obligations were novated when Guingona and Martin assumed them, and that the witness testified duplicate originals of the instruments were on file with NSLA, contradicting David’s claim of unrecorded investments.

• Petition for Prohibition: Petitioners filed the instant petition alleging that the public respondents acted without jurisdiction because the charges involved purely civil obligations, and that exhaustion of administrative remedies would be futile.

• Civil Nature of Liability: Petitioners argued that the transactions were simple loans (mutuum), so the bank acquired ownership of the money; its failure to return the deposits gave rise only to civil liability for collection of a debt, not criminal estafa under Article 315(1)(b) of the Revised Penal Code, which requires an obligation to return the very same money or property received.
• Novation: Petitioners maintained that Guingona and Martin’s execution of promissory notes assuming the bank’s obligation to David novated the original contract and converted any trust relation into an ordinary debtor-creditor relation, thereby preventing criminal liability from attaching, especially since the assumption occurred before the filing of the criminal complaint.
• No Foreign Exchange Violation: Petitioners contended that the US dollars intended for deposit were actually converted into Philippine pesos before acceptance and deposit into NSLA, thus there was no unauthorized foreign currency transaction in violation of Central Bank Circular No. 364.

• Estafa and CB Violation: Private respondent David charged that petitioners, as officers and directors of NSLA, misappropriated the balance of his investments and accepted foreign currency deposits without Central Bank authority, in violation of Article 315(1)(b) and Central Bank Circular No. 364.
• Jurisdiction of the Fiscal: Respondent fiscal asserted jurisdiction to conduct the preliminary investigation, as the complaint alleged facts constituting estafa and a violation of central bank regulations, which on their face warranted criminal prosecution.

• Estafa/Civil Liability: Whether the failure of NSLA to return the amounts invested by David constituted estafa under Article 315(1)(b) of the Revised Penal Code, or merely a civil liability arising from a simple loan.
• Novation: Whether the execution of promissory notes by petitioners Guingona and Martin assuming the bank’s obligation before the filing of the criminal complaint novated the original obligation and prevented the rise of criminal liability.
• Violation of CB Circular No. 364: Whether petitioners violated Central Bank Circular No. 364 by accepting US$75,000.00 in foreign currency deposits without authority.
• Propriety of Prohibition: Whether prohibition and injunction were proper remedies to restrain the preliminary investigation despite the availability of appeal to the Ministry of Justice.

• Estafa/Civil Liability: Bank deposits, whether fixed, savings, or current, are governed by the provisions on simple loan (mutuum) under Article 1980 of the Civil Code. The depositor is a creditor of the bank, and the bank acquires ownership of the money deposited. The bank’s obligation is to pay an equal amount of the same kind and quality, not to return the identical money. Thus, failure to pay the deposits does not constitute estafa through misappropriation under Article 315(1)(b), which requires an obligation to return the very same money, goods, or personal property received. The relationship between David and NSLA was that of creditor and debtor; consequently, only civil liability arose from non-payment. The public respondents therefore acted without jurisdiction over the estafa charge.

• Novation: Even if the bank’s failure to pay could hypothetically constitute estafa, any incipient criminal liability was avoided because petitioners Guingona and Martin executed a promissory note on June 17, 1981 assuming the bank’s obligation, before the criminal complaint was filed on December 23, 1981. This novation converted the original trust relation into an ordinary debtor-creditor relation and placed the complainant in estoppel to insist on the original transaction. Under prevailing doctrine (People v. Nery, Ong v. Court of Appeals), novation prior to the filing of the criminal information may prevent the rise of criminal liability by casting doubt on the true nature of the original transaction, even though novation is not a mode of extinguishing criminal liability under the Revised Penal Code.

• Violation of CB Circular No. 364: The charge was unfounded. The records showed that the US$50,000.00 bank draft was endorsed by David to Guingona, deposited in Guingona’s dollar account merely for clearing because NSLA had no dollar account, and then withdrawn for the bank’s use after conversion to pesos. The presumption of regularity and fair dealing under Rule 131, Section 5(p) and (q) of the Rules of Court supported the conclusion that the dollars were converted to Philippine currency before acceptance and deposit. David’s failure to deny petitioners’ contention on this point further supported this finding. Accordingly, no violation of foreign exchange regulations was established.

• Propriety of Prohibition: Although criminal prosecutions are generally not subject to prohibition or injunction, the Supreme Court may grant such writs in extreme cases to serve the orderly administration of justice, prevent the oppressive use of legal authority, and avoid multiplicity of actions. The petition was proper because continuing the preliminary investigation for a purely civil liability would work great injustice and render meaningless the proper administration of justice.

• Nature of Bank Deposits as Simple Loan — Under Article 1980 of the Civil Code, fixed, savings, and current deposits of money in banks and similar institutions are governed by the provisions on simple loan (mutuum). The relationship is that of creditor and debtor; the bank acquires ownership of the money and has the obligation to pay an equal amount of the same kind and quality. Failure to return the deposit gives rise only to civil liability for collection of a sum of money, not estafa under Article 315(1)(b) of the Revised Penal Code, which requires an obligation to deliver or return the identical money or property received.

• Effect of Novation Before Filing of Criminal Information — While novation does not extinguish criminal liability, it may prevent the rise of criminal liability if it occurs prior to the filing of the criminal information in court. Novation converts the relation between the parties into an ordinary creditor-debtor situation and places the complainant in estoppel to insist on the original transaction. It may cast doubt on the true nature of the original basic transaction, such that its breach would not give rise to penal responsibility.

• Prohibition Against Criminal Prosecution in Exceptional Cases — Although criminal prosecution may not ordinarily be blocked by prohibition or injunction, exceptions are recognized: for the orderly administration of justice; to prevent the use of the strong arm of the law in an oppressive and vindictive manner; to avoid multiplicity of actions; to afford adequate protection to constitutional rights; and where the statute relied upon is unconstitutional or invalid.

• "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). … 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." (citing Serrano vs. Central Bank)
• "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." (Yam vs. Malik)
• "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." (Gonzales vs. Serrano)
• "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." (Ong vs. Court of Appeals)

• Central Bank of the Philippines vs. Morfe, 63 SCRA 114 (1975) — Followed: Reiterated that fixed, savings, and current deposits are not true deposits but simple loans, and are not preferred credits.
• Serrano vs. Central Bank of the Philippines, 96 SCRA 102 (1980) — Followed: Held that bank deposits are loans, and failure to honor them is mere failure to pay as debtor, not breach of trust.
• Yam vs. Malik, 94 SCRA 30 (1979) — Followed: Established that in simple loan, ownership passes to the borrower, and the act of disposing of the thing borrowed is not misappropriation.
• Gonzales vs. Serrano, 25 SCRA 64 (1968) — Followed: Novation prior to filing of criminal information converts relation into ordinary debtor-creditor relation, preventing criminal liability.
• Ong vs. Court of Appeals, 124 SCRA 578 (1983) — Followed: Reiterated the rule on novation before filing of criminal information.
• People vs. Nery, 10 SCRA 244 (1964) — Cited as authority on the novation theory.

• Article 1980, Civil Code — Fixed, savings, and current deposits of money in banks and similar institutions are governed by the provisions concerning simple loan. Applied to hold that David’s bank deposits were simple loans, so the bank’s non-payment created only civil, not criminal, liability.
• Article 1933, Civil Code — Defines simple loan (mutuum) as a contract where one party delivers money or other consumable thing upon the condition that the same amount of the same kind and quality shall be paid; ownership passes to the borrower. Applied to establish that NSLA acquired ownership of the deposited funds.
• Article 315(1)(b), Revised Penal Code — Estafa through misappropriation or conversion requires an obligation to deliver or return the very same money, goods, or personal property received. Held inapplicable because the bank’s obligation was to pay an equivalent amount, not the identical money.
• Rule 131, Section 5(p) and (q), Rules of Court — Presumptions that the ordinary course of business has been followed and that a transaction is fair and regular. Applied to presume that US dollars were converted to pesos before deposit, absent clear evidence to the contrary.

Concepcion, Jr., Guerrero, De Castro, and Escolin, JJ., concur. Abad Santos, J., concur in the result. Aquino, J., took no part.