Republic of the Philippines private respondent's principal witness and the evidence through said witness,

SUPREME COURT showed that petitioners' obligation is civil in nature.

Manila
For purposes of brevity, We hereby adopt the antecedent facts narrated by the
SECOND DIVISION Solicitor General in its Comment dated June 28,1982, as follows: têñ.£îhqw â£

G.R. No. L-60033 April 4, 1984 On December 23,1981, private respondent David filed I.S. No.
81-31938 in the Office of the City Fiscal of Manila, which case
TEOFISTO GUINGONA, JR., ANTONIO I. MARTIN, and TERESITA was assigned to respondent Lota for preliminary investigation
SANTOS, petitioners, (Petition, p. 8).
vs.
THE CITY FISCAL OF MANILA, HON. JOSE B. FLAMINIANO, ASST. CITY In I.S. No. 81-31938, David charged petitioners (together with one
FISCAL FELIZARDO N. LOTA and CLEMENT DAVID, respondents. 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
MAKASIAR, Actg. C.J.: ñé+.£ªwph! 1
and violation of Central Bank Circular No. 364 and related Central
Bank regulations on foreign exchange transactions, allegedly
committed as follows (Petition, Annex "A"):
This is a petition for prohibition and injunction with a prayer for the immediate
têñ.£îhqw â£

issuance of restraining order and/or writ of preliminary injunction filed by

petitioners on March 26, 1982. "From March 20, 1979 to March, 1981, David
invested with the Nation Savings and Loan
Association, (hereinafter called NSLA) the sum of
On March 31, 1982, by virtue of a court resolution issued by this Court on the
P1,145,546.20 on nine deposits, P13,531.94 on
same date, a temporary restraining order was duly issued ordering the
savings account deposits (jointly with his sister,
respondents, their officers, agents, representatives and/or person or persons
Denise Kuhne), US$10,000.00 on time deposit,
acting upon their (respondents') orders or in their place or stead to refrain from
US$15,000.00 under a receipt and guarantee of
proceeding with the preliminary investigation in Case No. 8131938 of the Office
payment and US$50,000.00 under a receipt dated
of the City Fiscal of Manila (pp. 47-48, rec.). On January 24, 1983, private
June 8, 1980 (au jointly with Denise Kuhne), that
respondent Clement David filed a motion to lift restraining order which was
David was induced into making the aforestated
denied in the resolution of this Court dated May 18, 1983.
investments by Robert Marshall an Australian
national who was allegedly a close associate of
As can be gleaned from the above, the instant petition seeks to prohibit public petitioner Guingona Jr., then NSLA President,
respondents from proceeding with the preliminary investigation of I.S. No. 81- petitioner Martin, then NSLA Executive Vice-
31938, in which petitioners were charged by private respondent Clement David, President of NSLA and petitioner Santos, then
with estafa and violation of Central Bank Circular No. 364 and related regulations NSLA General Manager; that on March 21, 1981
regarding foreign exchange transactions principally, on the ground of lack of N LA was placed under receivership by the
jurisdiction in that the allegations of the charged, as well as the testimony of Central Bank, so that David filed claims therewith

Page 1 of 7
 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.têñ.£îhqw â£
"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, an 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:têñ.£îhqw â£
"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 o; 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
Page 2 of 7
 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.].
As correctly pointed out by the Solicitor General, the sole issue for resolution is
whether public respondents acted without jurisdiction when they investigated the
charges (estafa and violation of CB Circular No. 364 and related regulations
regarding foreign exchange transactions) subject matter of I.S. No. 81-31938.
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. 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: têñ.£îhqw â£
Page 3 of 7
 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:têñ.£îhqw â£
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:têñ.£îhqw â£
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. 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: têñ.£îhqwâ£
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 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.têñ.£îhqw â£
"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.
Page 4 of 7
 "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.£îhqw â£
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).
Page 5 of 7
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: têñ.£îhqw â£
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: têñ.£îhqw â£
"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;
Page 6 of 7
 "3. to avoid multiplicity of actions; SO ORDERED. 1äw phï1.ñët

"4. to afford adequate protection to constitutional Concepcion, Jr., Guerrero, De Castro and Escolin, JJ., concur.
rights;
Abad Santos, J., concur in the result.
"5. in proper cases, because the statute relied
upon is unconstitutional or was held invalid" ( Aquino, J., took no part.
Primicias vs. Municipality of Urdaneta,
Pangasinan, 93 SCRA 462, 469-470 [1979]; citing
Ramos vs. Torres, 25 SCRA 557 [1968]; and T
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:têñ.£îhqwâ£

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.

WHEREFORE, THE PETITION IS HEREBY GRANTED; THE TEMPORARY

RESTRAINING ORDER PREVIOUSLY ISSUED IS MADE PERMANENT.
COSTS AGAINST THE PRIVATE RESPONDENT.

Page 7 of 7