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ELSA B. REYES, petitioner, vs. COURT OF APPEALS, Secretary of Justice, AFP w/c were dishonored.

Eurotrust made a partial payment of
AFP-Mutual Benefit Association, Inc. (AFP-MBAI) and Graciela Eleazar, P35,151,637.72. However, balance still remains unpaid.
respondents [1996] ⇒ Reyes’ defense: novation since there was a substitution of debtor (Eleazar
substituted her as the debtor). She claims that the unreturned treasury
⇒ Reyes is the president of Eurotrust Capital Corp., a domestic corp. engaged notes amounting to P73M was satisfied upon her payment of P30M. The
in credit financing while Eleazar is the president of BE Ritz Mansion remaining P43M was paid when Eurotrust assigned its participation
International Corp. (BERMIC), a domestic enterprise engaged in real estate certificates to AFP-MBAI.
development. AFP-MBAI is the welfare-services provider of the AFP. ⇒ DOJ & CA: contract of loan between Reyes & Eleazar was novated when
⇒ Reyes’ affidavit: Eurotrust extended to BERMIC P216,053,126.80 to finance latter agreed to settle Bermic’s obligations directly w/AFP & DECS. In effect,
its construction of the latter’s Ritz Cond. & Gold Business Park. Loan was there was a substitution of creditor.
w/o collateral but w/higher interest rates than those allowed by banks.
BERMIC issued 21 postdated checks to cover the payment of the loan. Issues & Ratio:
However, said checks were dishonored by drawee bank, RCBC due to 1. WON there was novation (WRT Eleazar & Reyes’ agreement). – NO.
Eleazar’s stop payment order. Despite demands, she still failed to make ⇒ Among the 4 requisites for novation, only a is present.
good the dishonored checks. Thus, Reyes filed complaints for violation of a. previous valid obligation
BP 22 & estafa under Art. 315, par. 2(d). b. agreement of the parties concerned to a new contract
⇒ Eleazar’s counter-aff: loan amounted to P190,336,388.86. Bermic issued c. extinguishments of the old contract
several postdated checks to cover payments of principal & interest. d. validity of the new contract
⇒ Reyes was investigated by the Senate Blue Ribbon Committee re her ⇒ Rule: Novation by substitution of creditor requires an agreement among the
involvement in a large scale scam amounting to millions of pesos belonging 3 parties concerned – the original creditor, the debtor & the new creditor.
to Instructional Material Corp (IMC), an agency under DECS. CC Art. 1301 provides that conventional subrogation of the a 3rd person
⇒ AFP-MBAI, w/c invested funds w/Eurotrust by buying from it government requires the consent of the original parties & of the 3rd person. Thus, there
securities, likewise conducted an investigation after learning that Reyes is no novation if no new contract was executed by the parties.
borrowed the gov’t securities AFP purchased from Eurotrust but she failed ⇒ In this case, the letters w/c formalized Eleazar & Reyes’ agreement that the
to return them and that the amounts paid by AFP to Eurotrust for those former will settle her obligations directly w/DECS & AFP did not show that
securities were lent by Reyes to Bermic & others. AFP agreed/consented to substitute for the petitioner as the new creditor of
⇒ Upon learning that the money loaned to her company belonged to AFP- Eleazar in the contract of loan. It merely gave Eleazar the authority to
MBAI, Eleazar met w/Eurotrust representatives. They agreed that she will directly settle her obligations w/the 2 creditors.
directly settle her obligations w/the real owners of the fund, AFP & DECS. ⇒ Novation is never presumed. There must be an express intention to novate
This was formalized into 2 letters. Bermic made payments to AFP & DECS. (animus novandi). CC Art. 1300 provides that the conventional subrogation
Bermic paid AFP P31,711.11 and a check of P1M. Eleazar learned that must be clearly established in order that it may take effect. In this case, the
despite their agreement w/Eurtotrust, Reyes still continued to collect on the fact that AFP received Eleazar’s payments does not ipso facto result in
postdated checks issued by Bermic. Thus, Eleazar had the payment novation.
stopped w/c resulted to the dishonor of the checks issued by Bermic.
⇒ Sec. Of Justice affirmed the decision of the Office of the Provincial 2. WON there was novation (WRT AFP & Reyes regarding the unreturned
Prosecutor of Rizal w/c dismissed the cases filed by Reyes against Eleazar. treasury notes) – NO.
Ratio: when Eleazar assumed Reyes’ obligation to AFP-MBAI, it constituted
a novation, extinguishing any criminal liability on the part of Eleazar. It had ⇒ CC Art. 1293: Novation w/c substitutes debtor may be done w/o or against
the effect of canceling the checks & rendering w/o effect the subsequent the will of the original debtor but not w/o the consent of the creditor. In this
dishonor of the already cancelled checks. case, there was no proof that AFP intended to release Reyes from her
⇒ AFP-MBAI filed a separate complaint for estafa & BP 22 against Reyes. obligation to pay under the contract of sale of securities. The consent of the
AFP purchased securities from Eurotrust amounting to P120M. Latter creditor to a novation by change of debtor is indispensable to a valid
delivered to the former treasury notes amounting to P73M. However, latter novation and such is absent in this case. AFP’s receipt of Eleazar’s
fraudulently borrowed the treasury notes for purposes of verification w/the payments did not constitute novation, at most it only created a juridical
Central Bank and despite former’s demands, latter still failed to return the relation of co-debtorship/suretyship. It is necessary that the old debtor be
treasury notes. Instead, Eurotrust delivered 21 postdated checks in favor of released expressly from the old obligation & the 3rd person/new debtor
assumes his place.
⇒ Some principles:
a. novatio: to make new
b. novatio non praesumitur – novation is never presumed
c. debitum pro debito – extinguishing the old obligation for the new one