Diongzon vs. Court of Appeals

Novation does not extinguish criminal liability once incurred under B.P. Blg. 22; it may only prevent the rise of criminal liability if it occurs prior to the filing of the criminal information in court, and subsidiary imprisonment may be imposed in case of insolvency to pay a fine for violation of a special law even without an express statutory provision to that effect.

Nilo B. Diongzon was employed as a sales supervisor of Filipro, Inc. (now Nestle Philippines, Inc.), a position that vested him with authority to allow the withdrawal of Filipro products from its warehouse for delivery to dealers or customers, to receive payments therefor, and to remit the same to Filipro through its depository bank in Bacolod City. The case involves charges under B.P. Blg. 22, the Bouncing Checks Law, which penalizes the issuance of checks without sufficient funds or credit with the drawee bank. The statutory framework presumes the drawer's knowledge of insufficient funds when a check is dishonored and is not redeemed within five banking days from notice of dishonor.

Nilo B. Diongzon was a sales supervisor of Filipro, Inc. (now Nestle Philippines, Inc.) in Bacolod City. His position authorized him to allow the withdrawal of Filipro products from its warehouse for delivery to dealers or customers, to receive payment therefor, and to remit the same to Filipro through its depository bank. When Filipro's accounting department discovered that certain delivery orders signed by Diongzon bore unusually large and abnormal quantities, Area Sales Manager Anacleto Palisoc was authorized to investigate. Palisoc went to Bacolod City and contacted the dealers supposedly listed in the delivery orders — Queensland, Queendies, and Cokins — all of whom denied having received the goods in question.

Thereafter, Diongzon approached Rene Garibay, a sales representative, and offered his assistance in collecting payments for the outstanding delivery orders. The following day, Diongzon presented three checks to Garibay in payment of the items listed in the invoices allegedly issued to Queensland, Queendies, and Cokins: ABC Check No. 540295881-E postdated September 15, 1981 for ₱36,874.00; ABC Check No. 540295880-E postdated September 16, 1981 for ₱130,597.75; and ABC Check No. 540295899-E postdated October 3, 1981 for ₱130,647.75 — totaling ₱298,119.75. The three checks were deposited with Security Bank and Trust Company (Bacolod Branch), Filipro's depository bank, but upon presentment to the drawee bank, Allied Banking Corporation (Bacolod Branch), all were dishonored. The first two were dishonored because the drawer's signatures thereon differed from the specimen signatures on file with the bank; the third was dishonored for insufficiency of funds.

When confronted, Diongzon acknowledged responsibility and promised to settle the matter. He admitted having issued the three checks under his account with Allied Banking Corporation. He explained that he had resorted to "credit riding," a practice whereby other dealers were allowed to use the existing credit line of authorized dealers to obtain Filipro goods without cash payments, claiming this was unofficially tolerated by the company to meet sales targets. He stated that goods intended for one dealer were actually delivered to another, and that he issued his checks for the payment of the dealers' accounts with the understanding that he would hold the checks while awaiting their payments. During trial, Diongzon initially denied that the signatures on the first two checks were his and argued that the checks were not issued "on account" or "for value" as required by B.P. Blg. 22. He later admitted issuing the third check to replace the second, which he insisted he had not issued.

The trial court found Diongzon guilty of violating B.P. Blg. 22, rejecting his conflicting claims. On appeal, the Court of Appeals affirmed the conviction, holding that novation is not a mode of extinguishing criminal liability and that criminal liability, once incurred, cannot be compromised. It modified the dispositive portion, however, by removing the imposition of subsidiary imprisonment on the ground that B.P. Blg. 22, being a special law, contains no provision therefor.

• Novation: Petitioner argued that because of the incompatibility between the last check (Exh. C) and the partial payment he made together with a written undertaking to pay the balance, there was a novation of his original obligation such that any incipient criminal liability under the former obligation was avoided. He claimed the new agreement took effect prior to the filing of the information on December 15, 1981, and therefore no criminal liability could have arisen under B.P. Blg. 22.
• Duplicity of Offenses: On appeal before the Court of Appeals, petitioner claimed that the information charged more than one offense.
• Replacement as Novation: Petitioner contended that the issuance of the third check as replacement for the second check constituted novation that extinguished his obligation.

• Novation: Whether novation — through partial payment, a written undertaking to pay, or replacement of one check with another — extinguished petitioner's criminal liability under B.P. Blg. 22.
• Subsidiary Imprisonment: Whether subsidiary imprisonment may be imposed in case of insolvency for violation of B.P. Blg. 22, notwithstanding the absence of an express provision therefor in the special law.

• Novation: No. Novation does not extinguish criminal liability once incurred; it may only prevent the rise of criminal liability if effected prior to the filing of the criminal information, and in this case no novation actually occurred because the requisite of extinguishment of the old obligation was not satisfied.
• Subsidiary Imprisonment: Yes. Subsidiary imprisonment may be imposed in case of insolvency to pay the fine for violation of special laws even without an express statutory provision, as the Court has consistently done in prior cases involving B.P. Blg. 22 and other special laws.

• Novation: The requisites of novation are: (1) a previous valid obligation; (2) agreement of all parties to the new contract; (3) extinguishment of the old contract; and (4) validity of the new one. The third requisite — extinguishment of the old contract — was not proven. Petitioner had an existing obligation to pay the value of the goods for which the check was issued. When the check was dishonored and a new agreement was reached to pay in cash, the change was merely in the mode of payment, not in any object or principal condition of the contract. As Tolentino states, neither acceptance of partial payment nor change of place or manner of payment involves novation, for novation cannot be presumed but must be expressly intended. Moreover, even assuming novation occurred, it does not extinguish criminal liability but may only prevent its rise, and only if it occurs prior to the filing of the criminal information. The supposed new agreement never took effect because petitioner never complied with his undertaking — the balance was never paid. Under the doctrine in Llamado vs. Court of Appeals, the novation theory does not apply where the offer to pay, accepted by the creditor, turns out to be merely an empty promise. The gravamen of the offense under B.P. Blg. 22 is the issuance of worthless checks; petitioner admitted issuing the check, which was dishonored for insufficient funds, and his failure to pay within five banking days from notice of dishonor did not rebut the presumption of knowledge of insufficient funds.

• Subsidiary Imprisonment: The Court of Appeals erred in declining to impose subsidiary imprisonment on the ground that B.P. Blg. 22 contains no provision therefor. The Court has, on several occasions, imposed subsidiary imprisonment in case of insolvency to pay fines for violations of special laws notwithstanding the absence of such a provision, as in People vs. Moreno and Copiaco vs. Luzon Brokerage (Revised Motor Vehicles Act), and People vs. Abedes and Zanoria vs. Court of Appeals (Dangerous Drugs Act). In Llamado vs. Court of Appeals, subsidiary imprisonment was imposed on a petitioner convicted of violating B.P. Blg. 22. Accordingly, subsidiary imprisonment was imposed in case of insolvency to pay the fine of ₱80,647.75.

• Novation in Criminal Law — Novation does not extinguish criminal liability once incurred; it may only prevent the rise of criminal liability if it occurs prior to the filing of the criminal information in court. The Court applied this doctrine to reject petitioner's claim that his written undertaking and partial payment novated his obligation and extinguished his liability under B.P. Blg. 22.

• Requisites of Novation — For novation to take place, the following must concur: (1) a previous valid obligation; (2) agreement of all parties to the new contract; (3) extinguishment of the old contract; and (4) validity of the new one. Novation cannot be presumed but must be expressly intended by the parties. Neither acceptance of partial payment nor change in the manner of payment constitutes novation. The Court found that the third requisite was absent because the change was merely in the mode of payment, not in the object or principal conditions of the obligation.

• Gravamen of B.P. Blg. 22 — The gravamen of the offense of violating B.P. Blg. 22 is the issuance of worthless checks. The drawer is presumed to have knowledge of insufficient funds, and failure to pay the value of the check within five banking days from notice of dishonor does not rebut this presumption.

• Subsidiary Imprisonment for Special Laws — Subsidiary imprisonment in case of insolvency to pay a fine may be imposed for violations of special laws even in the absence of an express statutory provision authorizing it, consistent with the Court's established jurisprudence.

• "Nor is novation a mode of extinguishing criminal liability. As held by this Court, novation 'may prevent the rise of criminal liability as long as it occurs prior to the filing of the criminal information in court.'" — This passage articulates the controlling doctrine on the relationship between novation and criminal liability, distinguishing prevention from extinguishment.

• "Indeed, the gravamen of the offense of violating B.P. Blg. 22 is the issuance of worthless checks." — This defines the essential character of the offense under the Bouncing Checks Law, anchoring the Court's rejection of the novation defense.

• "For novation cannot be presumed but must be expressly intended by the parties." — This states the fundamental principle that novation requires clear intent, not mere inference from changed circumstances such as partial payment or altered payment terms.

• Llamado vs. Court of Appeals, 337 Phil. 153 (1997) — Controlling precedent on the inapplicability of the novation theory where the debtor's promise to pay turns out to be an empty promise. Also cited as authority for imposing subsidiary imprisonment in B.P. Blg. 22 convictions.

• Reyes vs. CA, 332 Phil. 40 (1996) — Cited for the four requisites of novation.

• Guingona, Jr. vs. City Fiscal of Manila, 128 SCRA 577 — Cited for the proposition that novation may prevent the rise of criminal liability if it occurs prior to the filing of the criminal information.

• People vs. Moreno, 60 Phil. 712 (1934) and Copiaco vs. Luzon Brokerage, 66 Phil. 184 (1938) — Cited as authority for imposing subsidiary imprisonment under special laws (Revised Motor Vehicles Act) despite the absence of an express provision.

• People vs. Abedes, 268 SCRA 619 (1997) and Zanoria vs. Court of Appeals, 347 Phil. 538 (1997) — Cited as further authority for subsidiary imprisonment under special laws (Dangerous Drugs Act).

• B.P. Blg. 22 (Bouncing Checks Law) — The statute penalizing the issuance of checks without sufficient funds or credit with the drawee bank. The Court applied its provisions to affirm petitioner's conviction, emphasizing that the gravamen of the offense is the issuance of worthless checks and that the drawer is presumed to have knowledge of insufficient funds when the check is dishonored and not redeemed within five banking days from notice of dishonor.

Bellosillo (Chairman), Quisumbing, Buena, and De Leon, Jr., JJ., concurred.