I.SHORT TITLE: Ong vs.

Court of Appeals

II. FULL TITLE: Fernando Ong, petitioner vs. The Court of Appeals, and Judge P. Purisima,
respondents. – G.R. No. L-58476
September 2, 1983, J. Relova

III. TOPIC: Trust Receipts Law – Obligation and Liability of the Entrustee – Novation

IV. STATEMENT OF FACTS:

Petitioner was charged by the Assistant Fiscal for the crime of estafa. The information alleged
that the petitioner obtained and received from Tramat Mercantile several units of machineries for
a total value of P133,550 in trust for the purpose of displaying and selling the machineries for
cash. The petitioner was alleged to have the obligation to turn over the proceeds from the sale to
Tramat or if not sold within 90 days or upon demand, to return the said machineries. Petitioner
allegedly failed to turn over the proceeds of the sale or to return the machineries.

After the estafa case was filed, Tramat Mercantile filed a complaint for sum of money against the
petitioner. However, the parties in the civil case entered into a compromise agreement to settle
their dispute.

V. STATEMENT OF THE CASE:

The petitioner moved to dismiss the estafa case against him on the ground of novation.

The trial court denied the motion to dismiss the estafa case for lack of merit.

Thereafter, petitioner filed a petition for certiorari with the Court of Appeals. The appellate court
dismissed the petition on the ground that novation does not extinguish criminal liability if the
crime of estafa had already been consummated. In this case, estafa was already completed and
already filed long before the compromise agreement was entered upon.

Hence, the petitioner filed a petition for certiorari, mandamus, prohibition and for a writ of
preliminary injunction with a prayer that the decision of the Court of Appeals be reversed and set
aside; and that the respondent judge of the trial court be prohibited permanently from further
proceeding in said criminal case and to command him to dismiss the said case after due hearing
of this petition.

VI. ISSUE:
Whether or not the compromise agreement in the civil case novated the
contract in the trust receipts on which the information in the criminal case
was based.
VII. RULING:

NO.

The petitioner contends that the criminal case must be dismissed because the transaction they
entered into converted the criminal violation to a civil obligation by virtue of the compromise
agreement they entered into as settlement in the civil case.

The Court in People vs Nery has already established that:

The novation theory may perhaps apply 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. 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 criminal liability, as
distinguished from the civil. The crime being an offense against the state, only the latter
can renounce it.

Furthermore, novation is not one of the means to extinguish criminal liability under the Revised
Penal Code. The role of novation may only be either to prevent the rise of criminal liability 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 the money loaned is made to appear
as a deposit, or other similar disguise is resorted to.

VIII. DISPOSITIVE PORTION:

ACCORDINGLY, the petition is DISMISSED for lack of merit.