G.R. No. 164051 ; October 3, 2012
PHILIPPINE NATIONAL BANK, Petitioner, vs. LILIAN S. SORIANO, Respondent.

FACTS

Petitioner Philippine National Bank (PNB) extended a Floor Stock Line credit facility to Lisam Enterprises, Inc. (LISAM), a corporation where respondent Lilian S. Soriano served as Chairman, President, and authorized signatory. LISAM, through Soriano, executed fifty-two (52) Trust Receipts (TRs) for various availments totaling ₱29,645,944.55. The TRs stipulated that the motor vehicles were received in trust, with the obligation to hold them as PNB’s property and to remit the proceeds from their sale. An inventory revealed only four units remained unsold, and despite demands, Soriano failed to account for and remit the proceeds from the sold vehicles. Consequently, PNB filed a criminal complaint for Estafa under the Trust Receipts Law against Soriano.
Soriano countered that the obligation was purely civil, arguing that the credit line secured by the TRs had been restructured and converted into an Omnibus Line as part of a comprehensive debt restructuring agreement approved by PNB’s Board of Directors. She asserted this novation extinguished the original trust receipt obligations. The Department of Justice (DOJ) dismissed the complaint, a ruling affirmed by the Court of Appeals, prompting PNB’s petition to the Supreme Court.

ISSUE

Whether the Court of Appeals committed grave abuse of discretion in affirming the DOJ’s dismissal of the criminal complaint for Estafa under the Trust Receipts Law based on the alleged novation of the obligation.

RULING

The Supreme Court denied the petition, upholding the rulings of the DOJ and the Court of Appeals. The legal logic centers on the principle of novation and its effect on criminal liability. Novation, a mode of extinguishing an obligation under the Civil Code, does not automatically extinguish criminal liability arising from the same act. A criminal offense is a violation of public law and is prosecuted for the State, not merely as a debt to a private party. However, an exception exists when novation transforms the legal nature of the act itself, converting what was criminal into a purely civil obligation.
In this case, the Court found that the subsequent restructuring and conversion of the credit facility into an Omnibus Line, as evidenced by PNB’s own board approval, constituted a novation. This agreement effectively replaced the original trust receipt transactions with a new set of loan agreements. Consequently, the failure to remit proceeds under the TRs was subsumed into a failure to pay a simple loan under the new Omnibus Line. The act was thereby stripped of its criminal character as a violation of a trust receipt agreement. Since the act constitutive of the crime—the breach of the trust receipt terms—was extinguished by novation, no criminal liability for Estafa under the Trust Receipts Law could arise. The Court concluded that the DOJ and the Court of Appeals correctly found no probable cause, and their decisions were not tainted with grave abuse of discretion.