G.R. No.

164051               October 3, 2012

PHILIPPINE NATIONAL BANK, Petitioner,

vs.
LILIAN S. SORIANO, Respondent.

DECISION

PEREZ, J.:

We arc urged in this petition for review on certiorari to reverse and set aside
the Decision of the Court of Appeals in C A-G.R. SP No. 76243 1 finding no grave
abuse of discretion in the ruling of the Secretary of the Department of Justice (
DOJ) which, in turn, dismissed the criminal complaint for Estafa, i.e.,  violation
of Section 13 of Presidential Decree No. 1 15 (Trust Receipts Law), in relation
to Article 315, paragraph (b) of the Revised Penal Code, filed by petitioner
Philippine National Bank (PNB) against respondent Lilian S. Soriano (Soriano). 2

First, the ostensibly simple facts as found by the Court of Appeals and adopted
by PNB in its petition and memorandum:

On March 20, 1997, [PNB] extended a credit facility in the form of [a] Floor
Stock Line (FSL) in the increased amount of Thirty Million Pesos (₱30 Million) to
Lisam Enterprises, Inc. [LISAM], a family-owned and controlled corporation
that maintains Current Account No. 445830099-8 with petitioner PNB.

x x x. Soriano is the chairman and president of LISAM, she is also the

authorized signatory in all LISAM’s Transactions with [PNB].

On various dates, LISAM made several availments of the FSL in the total
amount of Twenty Nine Million Six Hundred Forty Five Thousand Nine Hundred
Forty Four Pesos and Fifty Five Centavos (₱ 29,645,944.55), the proceeds of
which were credited to its current account with [PNB]. For each availment,
LISAM through [Soriano], executed 52 Trust Receipts (TRs). In addition to the
promissory notes, showing its receipt of the items in trust with the duty to
turn-over the proceeds of the sale thereof to [PNB].

Sometime on January 21-22, 1998, [PNB’s] authorized personnel conducted an

actual physical inventory of LISAM’s motor vehicles and motorcycles and found
that only four (4) units covered by the TRs amounting to One Hundred Forty
Thousand Eight Hundred Pesos (₱158,100.00) (sic) remained unsold.

Out of the Twenty Nine Million Six Hundred Forty Four Thousand Nine Hundred
Forty Four Pesos and Fifty Five Centavos (₱29,644,944.55) as the outstanding
principal balance [of] the total availments on the line covered by TRs, [LISAM]
should have remitted to [PNB], Twenty Nine Million Four Hundred Eighty Seven
Thousand Eight Hundred Forty Four Pesos and Fifty Five Centavos
(₱29,487,844.55). Despite several formal demands, respondent Soriano failed
and refused to turn over the said [amount to] the prejudice of [PNB]. 3
Given the terms of the TRs which read, in pertinent part:

RECEIVED in Trust from the [PNB], Naga Branch, Naga City, Philippines, the
motor vehicles ("Motor Vehicles") specified and described in the Invoice/s
issued by HONDA PHILIPPINES, INC. (HPI) to Lisam Enterprises, Inc., (the
"Trustee") hereto attached as Annex "A" hereof, and in consideration thereof,
the trustee hereby agrees to hold the Motor Vehicles in storage as the property
of PNB, with the liberty to sell the same for cash for the Trustee’s account and
to deliver the proceeds thereof to PNB to be applied against its acceptance on
the Trustee’s account. Under the terms of the Invoices and (sic) the Trustee
further agrees to hold the said vehicles and proceeds of the sale thereof in
Trust for the payment of said acceptance and of any [of] its other indebtedness
to PNB.

xxxx

For the purpose of effectively carrying out all the terms and conditions of the
Trust herein created and to insure that the Trustee will comply strictly and
faithfully with all undertakings hereunder, the Trustee hereby agrees and
consents to allow and permit PNB or its representatives to inspect all of the
Trustee’s books, especially those pertaining to its disposition of the Motor
Vehicles and/or the proceeds of the sale hereof, at any time and whenever
PNB, at its discretion, may find it necessary to do so.

The Trustee’s failure to account to PNB for the Motor Vehicles received in Trust
and/or for the proceeds of the sale thereof within thirty (30) days from
demand made by PNB shall constitute prima facie  evidence that the Trustee
has converted or misappropriated said vehicles and/or proceeds thereof for its
benefit to the detriment and prejudice of PNB.4

and Soriano’s failure to account for the proceeds of the sale of the motor
vehicles, PNB, as previously adverted to, filed a complaint-affidavit before the
Office of the City Prosecutor of Naga City charging Soriano with fifty two (52)
counts of violation of the Trust Receipts Law, in relation to Article 315,
paragraph 1(b) of the Revised Penal Code.

In refutation, Soriano filed a counter-affidavit asserting that:

1. The obligation of [LISAM] which I represent, and consequently[,] my

obligation, if any, is purely civil in nature. All of the alleged trust receipt
agreements were availments made by the corporation [LISAM] on the PNB
credit facility known as "Floor Stock Line" (FSL), which is just one of the
several credit facilities granted to [LISAM] by PNB. When my husband Leandro
A. Soriano, Jr. was still alive, [LISAM] submitted proposals to PNB for the
restructuring of all of [LISAM’s] credit facilities. After exchanges of several
letters and telephone calls, Mr. Josefino Gamboa, Senior Vice President of PNB
on 12 May 1998 wrote [LISAM] informing PNB’s lack of objection to [LISAM’s]
proposal of restructuring all its obligations. x x x.
2. On September 22, 1998 Mr. Avengoza sent a letter to [LISAM], complete
with attached copy of PNB Board’s minutes of meeting, with the happy
information that the Board of Directors of PNB has approved the conversion of
[LISAM’s] existing credit facilities at PNB, which includes the FSL on which the
Trust receipts are availments, to [an] Omnibus Line (OL) available by way of
Revolving Credit Line (RCL), Discounting Line Against Post-Dated Checks
(DLAPC), and Domestic Bills Purchased Line (DBPL) and with a "Full waiver of
penalty charges on RCL, FSL (which is the Floor Stock Line on which the trust
receipts are availments) and Time Loan. x x x.

3. The [FSL] and the availments thereon allegedly secured by Trust Receipts,
therefore, was (sic) already converted into[,] and included in[,] an Omnibus
Line (OL) of ₱106 million on September 22, 1998, which was actually a
Revolving Credit Line (RCL)[.]5

PNB filed a reply-affidavit maintaining Soriano’s criminal liability under the TRs:

2. x x x. While it is true that said restructuring was approved, the same was
never implemented because [LISAM] failed to comply with the conditions of
approval stated in B/R No. 6, such as the payment of the interest and other
charges and the submission of the title of the 283 sq. m. of vacant residential
lot, x x x Tandang Sora, Quezon City, as among the common conditions stated
in paragraph V, of B/R 6. The nonimplementation of the approved restructuring
of the account of [LISAM] has the effect of reverting the account to its original
status prior to the said approval. Consequently, her claim that her liability for
violation of the Trust Receipt Agreement is purely civil does not hold water. 6

In a Resolution,7 the City Prosecutor of Naga City found, thus:

WHEREFORE, the undersigned finds prima facie  evidence that respondent

LILIAN SORIANO is probably guilty of violation of [the] Trust Receipt Law, in
relation to Article 315 par. 1 (b) of the Revised Penal Code, let therefore 52
counts of ESTAFA be filed against the respondent.8

Consequently, on 1 August 2001, the same office filed Informations against

Soriano for fifty two (52) counts of Estafa (violation of the Trust Receipts Law),
docketed as Criminal Case Nos. 2001-0641 to 2001-0693, which were raffled
to the Regional Trial Court (RTC), Branch 21, Naga City.

Meanwhile, PNB filed a petition for review of the Naga City Prosecutor’s
Resolution before the Secretary of the DOJ.

In January 2002, the RTC ordered the dismissal of one of the criminal cases
against Soriano, docketed as Criminal Case No. 2001-0671. In March of the
same year, Soriano was arraigned in, and pled not guilty to, the rest of the
criminal cases. Thereafter, on 16 October 2002, the RTC issued an Order
resetting the continuation of the pre-trial on 27 November 2002.
On the other litigation front, the DOJ, in a Resolution 9 dated 25 June 2002,
reversed and set aside the earlier resolution of the Naga City Prosecutor:

WHEREFORE, the questioned resolution is REVERSED and SET ASIDE and

the City Prosecutor of Naga City is hereby directed to move, with leave of
court, for the withdrawal of the informations for estafa against Lilian S. Soriano
in Criminal Case Nos. 2001-0641 to 0693 and to report the action taken
thereon within ten (10) days from receipt thereof. 10

On various dates the RTC, through Pairing Judge Novelita Villegas Llaguno,
issued the following Orders:

1. 27 November 200211

When this case was called for continuation of pre-trial, [Soriano’s] counsel
appeared. However, Prosecutor Edgar Imperial failed to appear.

Records show that a copy of the Resolution from the Department of Justice
promulgated on October 28, 2002 was received by this Court, (sic) denying the
Motion for Reconsideration of the Resolution No. 320, series of 2002 reversing
that of the City Prosecutor of Naga City and at the same time directing the
latter to move with leave of court for the withdrawal of the informations for
Estafa against Lilian Soriano.

Accordingly, the prosecution is hereby given fifteen (15) days from receipt
hereof within which to comply with the directive of the Department of Justice.

2. 21 February 200312

Finding the Motion to Withdraw Informations filed by Pros. Edgar Imperial duly
approved by the City Prosecutor of Naga City to be meritorious the same is
hereby granted. As prayed for, the Informations in Crim. Cases Nos. RTC 2001-
0641 to 2001-0693 entitled, People of the Philippines vs. Lilian S. Soriano,
consisting of fifty-two (52) cases except for Crim. Case No. RTC 2001-0671
which had been previously dismissed, are hereby ordered WITHDRAWN.

3. 15 July 200313

The prosecution of the criminal cases herein filed being under the control of the
City Prosecutor, the withdrawal of the said cases by the Prosecution leaves this
Court without authority to re-instate, revive or refile the same.

Wherefore, the Motion for Reconsideration filed by the private complainant is

hereby DENIED.

With the denial of its Motion for Reconsideration of the 25 June 2002
Resolution of the Secretary of the DOJ, PNB filed a petition for certiorari  before
the Court of Appeals alleging that:
A. THE SECRETARY OF THE DOJ COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO WANT OR EXCESS OF JURISDICTION IN REVERSING AND
SETTING ASIDE THE RESOLUTON OF THE CITY PROSECUTOR OF NAGA CITY
FINDING A PRIMA FACIE CASE AGAINST PRIVATE RESPONDENT [SORIANO],
FOR THE SAME HAS NO LEGAL BASES AND IS NOT IN ACCORD WITH THE
JURISPRUDENTIAL RULINGS ON THE MATTER.14

As stated at the outset, the appellate court did not find grave abuse of
discretion in the questioned resolution of the DOJ, and dismissed PNB’s petition
for certiorari.

Hence, this appeal by certiorari.

Before anything else, we note that respondent Soriano, despite several

opportunities to do so, failed to file a Memorandum as required in our
Resolution dated 16 January 2008. Thus, on 8 July 2009, we resolved to
dispense with the filing of Soriano’s Memorandum.

In its Memorandum, PNB posits the following issues:

I. Whether or not the Court of Appeals gravely erred in concurring with the
finding of the DOJ that the approval by PNB of [LISAM’s] restructuring proposal
of its account with PNB had changed the status of [LISAM’s] obligations
secured by Trust Receipts to one of an ordinary loan, non-payment of which
does not give rise to a criminal liability.

II. Whether or not the Court of Appeals gravely erred in concluding and
concurring with the June 25, 2002 Resolution of the DOJ directing the
withdrawal of the Information for Estafa against the accused in Criminal Case
Nos. 2001-0641 up to 0693 considering the well-established rule that once
jurisdiction is vested in court, it is retained up to the end of the litigation.

III. Whether or not the reinstatement of the 51 counts (Criminal Case No.
2001-0671 was already dismissed) of criminal cases for estafa against Soriano
would violate her constitutional right against double jeopardy. 15

Winnowed from the foregoing, we find that the basic question is whether the
Court of Appeals gravely erred in affirming the DOJ’s ruling that the
restructuring of LISAM’s loan secured by trust receipts extinguished Soriano’s
criminal liability therefor.

It has not escaped us that PNB’s second and third issues delve into the three
(3) Orders of the RTC which are not the subject of the petition before us. To
clarify, the instant petition assails the Decision of the appellate court in CA-
G.R. SP No. 76243 which, essentially, affirmed the ruling of the DOJ in I.S.
Nos. 2000-1123, 2000-1133 and 2000-1184. As previously narrated, the DOJ
Resolution became the basis of the RTC’s Orders granting the withdrawal of the
Informations against Soriano. From these RTC Orders, the remedy of PNB was
to file a petition for certiorari  before the Court of Appeals alleging grave abuse
of discretion in the issuance thereof.

However, for clarity and to obviate confusion, we shall first dispose of the
peripheral issues raised by PNB:

1. Whether the withdrawal of Criminal Cases Nos. 2001-0641 to 2001-0693

against Soriano as directed by the DOJ violates the well-established rule that
once the trial court acquires jurisdiction over a case, it is retained until
termination of litigation.

2. Whether the reinstatement of Criminal Cases Nos. 2001-0641 to 2001-0693

violate the constitutional provision against double jeopardy.

We rule in the negative.

Precisely, the withdrawal of Criminal Cases Nos. 2001-0641 to 2001-0693 was

ordered by the RTC. In particular, the Secretary of the DOJ directed City
Prosecutor of Naga City to move, with leave of court, for the withdrawal of
the Informations for estafa  against Soriano. Significantly, the trial court gave
the prosecution fifteen (15) days within which to comply with the DOJ’s
directive, and thereupon, readily granted the motion. Indeed, the withdrawal of
the criminal cases did not occur, nay, could not have occurred, without the trial
court’s imprimatur. As such, the DOJ’s directive for the withdrawal of the
criminal cases against Soriano did not divest nor oust the trial court of its
jurisdiction.

Regrettably, a perusal of the RTC’s Orders reveals that the trial court relied
solely on the Resolution of the DOJ Secretary and his determination that the
Informations for estafa  against Soriano ought to be withdrawn. The trial court
abdicated its judicial power and refused to perform a positive duty enjoined by
law. On one occasion, we have declared that while the recommendation of the
prosecutor or the ruling of the Secretary of Justice is persuasive, it is not
binding on courts.16 We shall return to this point shortly.

In the same vein, the reinstatement of the criminal cases against Soriano will
not violate her constitutional right against double jeopardy.

Section 7,17 Rule 117 of the Rules of Court provides for the requisites for double
jeopardy to set in: (1) a first jeopardy attached prior to the second; (2) the
first jeopardy has been validly terminated; and (3) a second jeopardy is for the
same offense as in the first. A first jeopardy attaches only (a) after a valid
indictment; (b) before a competent court; (c) after arraignment; (d) when a
valid plea has been entered; and (e) when the accused has been acquitted
or convicted, or the case dismissed or otherwise terminated without
his express consent.18

In the present case, the withdrawal of the criminal cases did not include a
categorical dismissal thereof by the RTC. Double jeopardy had not set in
because Soriano was not acquitted nor was there a valid and legal dismissal or
termination of the fifty one (51) cases against her. It stands to reason
therefore that the fifth requisite which requires conviction or acquittal of the
accused, or the dismissal of the case without the approval of the accused, was
not met.

On both issues, the recent case of Cerezo v. People,19 is enlightening.

In Cerezo,  the trial court simply followed the prosecution’s lead on how to
proceed with the libel case against the three accused. The prosecution twice
changed their mind on whether there was probable cause to indict the accused
for libel. On both occasions, the trial court granted the prosecutor’s motions.
Ultimately, the DOJ Secretary directed the prosecutor to re-file the Information
against the accused which the trial court forthwith reinstated. Ruling on the
same issues raised by PNB in this case, we emphasized, thus:

x x x. In thus resolving a motion to dismiss a case or to withdraw an

Information, the trial court should not rely solely and merely on the findings of
the public prosecutor or the Secretary of Justice. It is the court’s bounden duty
to assess independently the merits of the motion, and this assessment must be
embodied in a written order disposing of the motion. x x x.

In this case, it is obvious from the March 17, 2004 Order of the RTC,
dismissing the criminal case, that the RTC judge failed to make his own
determination of whether or not there was a prima facie case to hold
respondents for trial. He failed to make an independent evaluation or
assessment of the merits of the case. The RTC judge blindly relied on the
manifestation and recommendation of the prosecutor when he should have
been more circumspect and judicious in resolving the Motion to Dismiss and
Withdraw Information especially so when the prosecution appeared to be
uncertain, undecided, and irresolute on whether to indict respondents.

The same holds true with respect to the October 24, 2006 Order, which
reinstated the case. The RTC judge failed to make a separate evaluation and
merely awaited the resolution of the DOJ Secretary. This is evident from the
general tenor of the Order and highlighted in the following portion thereof:

As discussed during the hearing of the Motion for Reconsideration, the Court
will resolve it depending on the outcome of the Petition for Review. Considering
the findings of the Department of Justice reversing the resolution of the City
Prosecutor, the Court gives favorable action to the Motion for Reconsideration.

By relying solely on the manifestation of the public prosecutor and the

resolution of the DOJ Secretary, the trial court abdicated its judicial power and
refused to perform a positive duty enjoined by law. The said Orders were thus
stained with grave abuse of discretion and violated the complainant’s right to
due process. They were void, had no legal standing, and produced no effect
whatsoever.

xxxx
It is beyond cavil that double jeopardy did not set in. Double jeopardy exists
when the following requisites are present: (1) a first jeopardy attached prior to
the second; (2) the first jeopardy has been validly terminated; and (3) a
second jeopardy is for the same offense as in the first. A first jeopardy
attaches only (a) after a valid indictment; (b) before a competent court; (c)
after arraignment; (d) when a valid plea has been entered; and (e) when the
accused has been acquitted or convicted, or the case dismissed or
otherwise terminated without his express consent.

Since we have held that the March 17, 2004 Order granting the motion to
dismiss was committed with grave abuse of discretion, then respondents were
not acquitted nor was there a valid and legal dismissal or termination of the
case. Ergo, the fifth requisite which requires the conviction and acquittal of the
accused, or the dismissal of the case without the approval of the accused, was
not met. Thus, double jeopardy has not set in.20 (Emphasis supplied)

We now come to the crux of the matter: whether the restructuring of LISAM’s
loan account extinguished Soriano’s criminal liability.

PNB admits that although it had approved LISAM’s restructuring proposal, the
actual restructuring of LISAM’s account consisting of several credit lines was
never reduced into writing. PNB argues that the stipulations therein such as the
provisions on the schedule of payment of the principal obligation, interests, and
penalties, must be in writing to be valid and binding between the parties. PNB
further postulates that assuming the restructuring was reduced into writing,
LISAM failed to comply with the conditions precedent for its effectivity,
specifically, the payment of interest and other charges, and the submission of
the titles to the real properties in Tandang Sora, Quezon City. On the whole,
PNB is adamant that the events concerning the restructuring of LISAM’s loan
did not affect the TR security, thus, Soriano’s criminal liability thereunder
subsists.

On the other hand, the appellate court agreed with the ruling of the DOJ
Secretary that the approval of LISAM’s restructuring proposal, even if not
reduced into writing, changed the status of LISAM’s loan from being secured
with Trust Receipts (TR’s) to one of an ordinary loan, non-payment of which
does not give rise to criminal liability. The Court of Appeals declared that there
was no breach of trust constitutive of estafa  through misappropriation or
conversion where the relationship between the parties is simply that of creditor
and debtor, not as entruster and entrustee.

We cannot subscribe to the appellate court’s reasoning. The DOJ Secretary’s

and the Court of Appeals holding that, the supposed restructuring novated the
loan agreement between the parties is myopic.

To begin with, the purported restructuring of the loan agreement did not
constitute novation.
Novation is one of the modes of extinguishment of obligations; 21 it is a single
juridical act with a diptych function. The substitution or change of the
obligation by a subsequent one extinguishes the first, resulting in the creation
of a new obligation in lieu of the old.22 It is not a complete obliteration of the
obligor-obligee relationship, but operates as a relative extinction of the original
obligation.

Article 1292 of the Civil Code which provides:

Art. 1292. In order that an obligation may be extinguished by another which

substitutes the same, it is imperative that it be so declared in unequivocal
terms, or that the old and the new obligations be on every point incompatible
with each other.

contemplates two kinds of novation: express or implied. The extinguishment of

the old obligation by the new one is a necessary element of novation, which
may be effected either expressly or impliedly.

In order for novation to take place, the concurrence of the following requisites
is indispensable:

(1) There must be a previous valid obligation;

(2) There must be an agreement of the parties concerned to a new contract;

(3) There must be the extinguishment of the old contract; and

(4) There must be the validity of the new contract. 23

Novation is never presumed, and the animus novandi, whether totally or

partially, must appear by express agreement of the parties, or by their acts
that are too clear and unmistakable. The contracting parties must
incontrovertibly disclose that their object in executing the new contract is to
extinguish the old one. Upon the other hand, no specific form is required for an
implied novation, and all that is prescribed by law would be an incompatibility
between the two contracts.24 Nonetheless, both kinds of novation must still be
clearly proven.25

In this case, without a written contract stating in unequivocal terms that the
parties were novating the original loan agreement, thus undoubtedly
eliminating an express novation, we look to whether there is an incompatibility
between the Floor Stock Line secured by TR’s and the subsequent restructured
Omnibus Line which was supposedly approved by PNB.

Soriano is confident with her assertion that PNB’s approval of her proposal to
restructure LISAM’s loan novated the loan agreement secured by TR’s. Soriano
relies on the following:

1. x x x. All the alleged trust receipt agreements were availments made by

[LISAM] on the PNB credit facility known as "Floor Stock Line," (FSL) which is
just one of the several credit facilities granted to [LISAM] by PNB. When my
husband Leandro A. Soriano, Jr. was still alive, [LISAM] submitted proposals to
PNB for the restructuring of all of [LISAM’s] credit facilities. After exchanges of
several letters and telephone calls, Mr. Josefino Gamboa, Senior Vice President
of PNB on 12 May 1998 wrote [LISAM] informing PNB’s lack of objection to
[LISAM’s] proposal of restructuring all its obligations. x x x.

2. On September 22, 1998, Mr. Avengoza sent a letter to [LISAM], complete

with attached copy of PNB’s Board’s minutes of meeting, with the happy
information that the Board of Directors of PNB has approved the conversion of
[LISAM’s] existing credit facilities at PNB, which includes the FSL on which the
trust receipts are availments, to [an] Omnibus Line (OL) available by way of
Revolving Credit Line (RCL), Discounting Line Against Post-Dated Checks
(DLAPC), and Domestic Bills Purchased Line (DBPL) and with a "Full waiver of
penalty charges on RCL, FSL (which is the Floor Stock Line on which the trust
receipts are availments) and Time Loan. x x x.26

Soriano’s reliance thereon is misplaced. The approval of LISAM’s restructuring

proposal is not the bone of contention in this case. The pith of the issue lies in
whether, assuming a restructuring was effected, it extinguished the criminal
liability on the loan obligation secured by trust receipts, by extinguishing the
entruster-entrustee relationship and substituting it with that of an ordinary
creditor-debtor relationship. Stated differently, we examine whether the Floor
Stock Line is incompatible with the purported restructured Omnibus Line.

The test of incompatibility is whether the two obligations can stand together,
each one having its independent existence. If they cannot, they are
incompatible and the latter obligation novates the first. Corollarily, changes
that breed incompatibility must be essential in nature and not merely
accidental. The incompatibility must take place in any of the essential elements
of the obligation, such as its object, cause or principal conditions thereof;
otherwise, the change would be merely modificatory in nature and insufficient
to extinguish the original obligation.27

We have scoured the records and found no incompatibility between the Floor
Stock Line and the purported restructured Omnibus Line. While the
restructuring was approved in principle, the effectivity thereof was subject to
conditions precedent such as the payment of interest and other charges, and
the submission of the titles to the real properties in Tandang Sora, Quezon
City. These conditions precedent imposed on the restructured Omnibus Line
were never refuted by Soriano who, oddly enough, failed to file a
Memorandum. To our mind, Soriano’s bare assertion that the restructuring was
approved by PNB cannot equate to a finding of an implied novation which
extinguished Soriano’s obligation as entrustee under the TR’s.

Moreover, as asserted by Soriano in her counter-affidavit, the waiver pertains

to penalty charges on the Floor Stock Line. There is no showing that the waiver
extinguished Soriano’s obligation to "sell the [merchandise] for cash for
[LISAM’s] account and to deliver the proceeds thereof to PNB to be applied
against its acceptance on [LISAM’s] account." Soriano further agreed to hold
the "vehicles and proceeds of the sale thereof in Trust for the payment of said
acceptance and of any of its other indebtedness to PNB." Well-settled is the
rule that, with respect to obligations to pay a sum of money, the obligation is
not novated by an instrument that expressly recognizes the old, changes only
the terms of payment, adds other obligations not incompatible with the old
ones, or the new contract merely supplements the old one. 28 Besides, novation
does not extinguish criminal liability.29 It stands to reason therefore, that
Soriano’s criminal liability under the TR’s subsists considering that the civil
obligations under the Floor Stock Line secured by TR’s were not extinguished
by the purported restructured Omnibus Line.

In Transpacific Battery Corporation v. Security Bank and Trust Company,30 we

held that the restructuring of a loan agreement secured by a TR does not per
se  novate or extinguish the criminal liability incurred thereunder:

x x x Neither is there an implied novation since the restructuring agreement is

not incompatible with the trust receipt transactions.

Indeed, the restructuring agreement recognizes the obligation due under the
trust receipts when it required "payment of all interest and other charges prior
to restructuring." With respect to Michael, there was even a proviso under the
agreement that the amount due is subject to "the joint and solidary liability of
Spouses Miguel and Mary Say and Michael Go Say." While the names of
Melchor and Josephine do not appear on the restructuring agreement, it cannot
be presumed that they have been relieved from the obligation. The old
obligation continues to subsist subject to the modifications agreed upon by the
parties.

The circumstance that motivated the parties to enter into a restructuring

agreement was the failure of petitioners to account for the goods received in
trust and/or deliver the proceeds thereof. To remedy the situation, the parties
executed an agreement to restructure Transpacific's obligations.

The Bank only extended the repayment term of the trust receipts from 90 days
to one year with monthly installment at 5% per annum over prime rate or 30%
per annum whichever is higher. Furthermore, the interest rates were flexible in
that they are subject to review every amortization due. Whether the terms
appeared to be more onerous or not is immaterial.1âwphi1 Courts are not
authorized to extricate parties from the necessary consequences of their acts.
The parties will not be relieved from their obligations as there was absolutely
no intention by the parties to supersede or abrogate the trust receipt
transactions. The intention of the new agreement was precisely to revive the
old obligation after the original period expired and the loan remained unpaid.
Well-settled is the rule that, with respect to obligations to pay a sum of money,
the obligation is not novated by an instrument that expressly recognizes the
old, changes only the terms of payment, adds other obligations not
incompatible with the old ones, or the new contract merely supplements the
old one.31
Based on all the foregoing, we find grave error in the Court of Appeals
dismissal of PNB’s petition for certiorari. Certainly, while the determination of
probable cause to indict a respondent for a crime lies with the prosecutor, the
discretion must not be exercised in a whimsical or despotic manner tantamount
to grave abuse of discretion.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals

in CA-G.R. SP No. 76243 finding no grave abuse of discretion on the part of the
Secretary of Justice is REVERSED and SET ASIDE.

The Resolution of the Secretary of Justice dated 25 June 2002, directing the
City Prosecutor of Naga City to move for the withdrawal of the Informations
for estafa  in relation to the Trust Receipts Law against respondent Lilian S.
Soriano, and his 29 October 2002 Resolution, denying petitioner's Motion for
Reconsideration, are ANNULLED and SET ASIDE for having been issued with
grave abuse of discretion; and the Resolution or the Naga City Prosecutor's
Office dated 19 March 2001, finding probable cause against herein respondent,
is REINSTATED. Consequently, the Orders of the Regional Trial Court, Branch
21 of Naga City in Criminal Cases Nos. 2001-0641 to 2001-0693, except
Criminal Case No. 2001-0671, dated 27 November 2002, 21 February 2003
and 15 July 2003 are SET ASIDE and its Order of 16 October 2002 resetting
the continuation or the pre-trial is REINSTATED. The RTC is further ordered to
conduct the pretrial with dispatch.

SO ORDERED.