G.R. No. 164538 ; August 9, 2010
Metropolitan Bank and Trust Company, Petitioner, vs. Rogelio Reynado and Jose C. Adrandea, Respondents.

FACTS

Petitioner Metropolitan Bank and Trust Company charged its employees, respondents Reynado and Adrandea, with estafa under Article 315(1)(b) of the Revised Penal Code. The complaint alleged that respondents, as members of the branch credit committee, conspired with a client, Universal Converter Philippines, Inc., to facilitate massive withdrawals against uncleared regional checks, which were later dishonored, causing substantial loss to the bank. Subsequently, the bank entered into a Debt Settlement Agreement with Universal, wherein the client acknowledged its debt and agreed to pay via installments. Based on this agreement, the investigating prosecutor dismissed the complaint, reasoning that the civil novation prevented the incipience of criminal liability. The Department of Justice affirmed this dismissal. The Court of Appeals likewise sustained the dismissal, citing jurisprudence that novation occurring prior to the filing of the information in court can prevent criminal liability from arising, and since the principal debtor (Universal) could not be held criminally liable, the alleged conspirators (respondents) could not be liable either.

ISSUE

Whether the execution of a Debt Settlement Agreement between the offended party and the principal debtor, prior to the filing of a criminal information, extinguishes or prevents the criminal liability for estafa of the debtor’s alleged co-conspirators.

RULING

No. The Supreme Court reversed the Court of Appeals and directed the filing of the appropriate information for estafa against the respondents. The Court clarified the established doctrine that novation of a contract, or a compromise settlement, does not extinguish criminal liability for estafa, as the crime is a public offense prosecuted by the State. While novation may prevent criminal liability from arising if it occurs before the filing of a criminal complaint and transforms the legal relation between the parties such that no crime was committed, this principle is inapplicable to estafa by misappropriation or conversion. In such cases, the crime is consummated at the moment of misappropriation or conversion. The subsequent settlement is merely a mode of restitution that does not undo the criminal act. The Court further held that the alleged conspiracy between the client and the respondents does not make their criminal liability dependent on that of the principal debtor. Each conspirator is individually liable for the crime. The prosecutor and the DOJ committed grave abuse of discretion in dismissing the complaint based on the civil settlement, as the evidence presented during preliminary investigation, if uncontradicted, warranted the prosecution of the respondents.