Novation theory

Dear Atty. Maan,

My mother entrusted diamond rings to her friend to be sold by her on commission. Her friend, however, neither turned over any proceeds of the sale of the items nor returned them. While we were preparing to file a case of estafa against her, she executed a deed that contained the promise to pay her debt, committing that, in the event she failed to comply with the said compromise, we would proceed with filing a case against her. Does the settlement absolve her from her criminal liability?

Elaine

Dear Elaine,

In the case of Sorongon v. People, G.R. 230669, (16 June 2021) the Supreme Court ruled:

 "Following jurisprudence on the effect of novation and compromise in Estafa cases under Article 315, paragraph 1 (b), the amicable settlement between the parties in this case had effectively prevented the incipient criminal liability of petitioner.

Indeed, the long-standing general rule is that criminal liability for Estafa is not affected by payment, indemnification, reimbursement of or compromise as to the amounts misappropriated, or by the novation of the contract. This is because Estafa is a public offense which must be prosecuted and punished by the State on its own motion even though complete reparation should have been made of the damage suffered by the offended party.  Since it is committed against the State, the private offended party may not waive or extinguish the criminal liability that the law imposes for the commission of the crime.

Nevertheless, in cases involving the type of Estafa under Article 315, paragraph 1 (b), where there is an underlying contractual relationship or bilateral agreement between the parties which they can modify or alter, the Court has consistently acknowledged at the same time the possible effects of novation. The Court held that in these cases, novation may serve to either 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 the breach of the obligation 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."

From the foregoing, the deed executed by your mother's friend which would effectively constitute novation or the substitution of an obligation by a subsequent one that extinguishes the first, either by changing the object or the principal conditions, or by substituting the person of the debtor, does not extinguish criminal liability but may only prevent its rise.

Hope this helps.

Atty. Mary Antonnette M. Baudi