Khitri vs. People

In prosecutions for estafa with abuse of confidence under Article 315(1)(b) of the Revised Penal Code, the prosecution must prove beyond reasonable doubt the existence of malicious intent (dolus malus) to convert or misappropriate funds received in trust to the prejudice of another; mere failure to strictly comply with the terms of a joint venture agreement, without proof of personal appropriation or deviation from the agreed purpose for personal benefit, constitutes at most a breach of contract giving rise to civil liability only, not criminal culpability.

Spouses Hiroshi and Belen Fukami, engaged in exporting garments to Japan, had been sourcing women's wear from petitioners Rosalinda and Fernando Khitri since 1988. In 1989 or 1990, the parties entered into a verbal joint venture agreement for manufacturing and exporting women's clothing, requiring the construction of a factory on petitioners' lot in Cainta, Rizal. The private complainants contributed P400,000.00 for construction costs, while petitioners contributed the use of their land. Disputes arose when the private complainants discovered that petitioners had constructed a two-door studio-type apartment rather than the contemplated two-storey factory building, prompting demands for the return of the investment and the subsequent filing of a criminal complaint for estafa.

• The Joint Venture Agreement: Sometime in 1989 or 1990, petitioners and private complainants entered into a verbal agreement to form a joint venture for manufacturing and exporting women's garments. The agreement required petitioners to contribute the use of one-half of their lot located at Monte Vista Park Subdivision, Cainta, Rizal, for the construction of a factory building, while private complainants would contribute P400,000.00 for construction costs. The parties disputed the nature of the structure agreed upon: private complainants claimed they approved a plan for a two-storey factory building based on a rough sketch shown to them, while petitioners maintained that the agreement was for a two-unit studio-type apartment, one-half of which would serve as the factory and the other half as Rosalinda's residence.
• Transfer of Funds: On January 25, 1991, private complainants deposited the P400,000.00 contribution in a joint account opened in Boston Bank, San Juan City, under the names of Belen Fukami and Rosalinda Khitri. Belen issued four checks, each for P100,000.00, from her residence in Las Piñas City. Petitioners' messenger picked up these checks from the private complainants' residence, and the amounts were subsequently withdrawn from the joint account.
• Construction and Discovery: Petitioners caused the construction of a two-door studio-type apartment on the Cainta lot. Upon inspection, Belen discovered that the structure was not the agreed two-storey factory but a residential duplex, and she photographed the premises. The private complainants attempted to contact petitioners by telephone but were unable to reach them, allegedly because petitioners changed their numbers.
• Demand and Response: Through counsel, private complainants sent demand letters dated December 13, 1999 and January 25, 2000, received by petitioners on December 28, 1999 and January 5, 2000, respectively, demanding the return of the P400,000.00. Petitioners offered one apartment unit to the private complainants, with the cost of the lot to be paid separately, which offer was rejected.
• Defense Evidence: Petitioners testified that Hiroshi Fukami had initially proposed the joint venture and had accepted the building as constructed by delivering five sewing machines for installation in the apartment units, which he later pulled out after two weeks for repairs. They presented a construction plan entitled "Construction of Two-Unit Studio-type Apartments" prepared for Rosalinda P. Subido. They denied any intent to defraud, asserting that the structure was suitable for garment manufacturing and that they had never avoided communication with the private complainants.

• Territorial Jurisdiction: Petitioners maintained that the RTC of Las Piñas City lacked jurisdiction because the alleged criminal acts occurred in Quezon City (where negotiations took place), San Juan City (where the joint account was opened and withdrawals made), and Cainta, Rizal (where the construction occurred), not in Las Piñas City.
• Absence of Criminal Intent: Petitioners argued that no criminal intent to defraud existed because the money was actually used for construction on their lot as agreed, and the resulting structure, though different from what private complainants expected, was capable of serving as a garments factory. They contended that Hiroshi Fukami had accepted the building by delivering sewing machines, and that at worst, any liability was merely civil in nature for breach of contract, not criminal.
• Lack of Conspiracy: Petitioners asserted that no conspiracy was established between them, pointing out that the funds were deposited in a joint account held by Belen and Rosalinda, and that there was no evidence of a common design to misappropriate the funds.

• Territorial Jurisdiction: The Office of the Solicitor General countered that the RTC of Las Piñas City properly exercised jurisdiction because the delivery of the checks by private complainants and their acceptance by petitioners' authorized representative in Las Piñas City created the fiduciary relationship there, following the doctrine in Tan v. People that such delivery marks the creation of the trust relation.
• Presence of All Elements: Respondent argued that all elements of estafa under Article 315(1)(b) were present: petitioners received money in trust for a specific purpose (factory construction), they misappropriated or converted the funds by constructing a different structure for residential use, and they denied the return of the money despite demands, causing prejudice to the private complainants.
• Existence of Conspiracy: Respondent maintained that conspiracy was sufficiently established by the Information's allegation of conspiracy and the coordinated actions of petitioners in receiving the funds, constructing the building, and refusing to return the money.

• Territorial Jurisdiction: Whether the Regional Trial Court of Las Piñas City had territorial jurisdiction over the crime of estafa charged.
• Sufficiency of Evidence: Whether the evidence submitted was sufficient to establish the guilt of petitioners beyond reasonable doubt for estafa with abuse of confidence under Article 315, paragraph 1(b) of the RPC.
• Conspiracy: Whether conspiracy existed between petitioners in committing the alleged crime.

• Territorial Jurisdiction: The RTC of Las Piñas City properly exercised territorial jurisdiction. Although the joint account was opened in San Juan City and the construction occurred in Cainta, Rizal, the delivery of the four checks by Belen Fukami from her residence in Las Piñas City and their acceptance by petitioners' messenger constituted the receipt of money in trust that created the fiduciary relation in Las Piñas City, pursuant to the ruling in Tan v. People that such delivery signifies not merely the transfer of money but the creation of the trust obligation.
• Sufficiency of Evidence: The prosecution failed to prove the elements of misappropriation or conversion and prejudice beyond reasonable doubt. The funds were used to construct a building on petitioners' lot, albeit a two-door studio-type apartment rather than the contemplated two-storey factory. Because the structure was devoted to the agreed purpose of operating a garments factory (as evidenced by the delivery of sewing machines by Hiroshi Fukami), and the money was not diverted to petitioners' personal use or benefit, the element of conversion was not established. Furthermore, estafa being a mala in se offense, the prosecution failed to prove the requisite malicious intent (dolus malus) to defraud; the deviation from the agreed plan constituted at most a breach of contract giving rise to civil, not criminal, liability. Accordingly, the conviction was reversed and petitioners acquitted.
• Reimbursement: While criminal liability was extinguished by reasonable doubt, petitioners were directed to reimburse private complainants the amount of P400,000.00 with legal interest of six percent per annum from the finality of the decision until full payment to prevent unjust enrichment, it being undisputed that they received the amount.
• Conspiracy: The Court deemed it unnecessary to discuss conspiracy in view of the failure of the prosecution to establish the existence of all elements of the crime charged.

• Elements of Estafa under Article 315(1)(b): The crime of estafa with abuse of confidence requires the following elements: (1) receipt of money, goods, or other personal property in trust, on commission, for administration, or under any other obligation involving the duty to make delivery of or to return the same; (2) misappropriation or conversion of such money or property by the offender, or denial of such receipt; (3) prejudice to the offended party; and (4) demand by the offended party to the offender. The Court applied these elements and found the second and third elements unproven.
• Meaning of Conversion and Misappropriation: "Convert" and "misappropriate" connote the act of using or disposing of another's property as if it were one's own, or devoting it to a purpose or use different from that agreed upon. To misappropriate for one's own use includes not only conversion to one's personal advantage but also every attempt to dispose of the property of another without right. The Court held that constructing a building different from the agreed specifications but still serving the contractual purpose does not constitute conversion to personal use.
• Mala in Se and Criminal Intent (Dolus Malus): Estafa is a mala in se offense requiring proof of criminal intent. The maxim actus non facit reum, nisi mens sit rea applies—a crime is not committed if the mind of the person performing the act is innocent. Intentional felony requires the existence of dolus malus, meaning the act must be done willfully, maliciously, with deliberate evil intent, and with malice aforethought. The Court emphasized that malicious intent must be proven beyond reasonable doubt and cannot be inferred merely from the failure to comply strictly with contractual terms.
• Jurisdiction in Estafa Cases: In estafa cases involving receipt of money in trust, territorial jurisdiction is determined by the place where the fiduciary relation was created, which is where the money was delivered and accepted, not necessarily where the account was opened or where the misappropriation occurred.

• "The delivery by the private complainant of the check and its acceptance by [the accused] signified not merely the transfer to the accused of the money belonging to private complainant, [but] it also marked the creation of a fiduciary relation between the parties." — Cited from Tan v. People to establish that jurisdiction lies where the trust relationship was created through delivery and acceptance of the checks.
• "Not to be overlooked is that this felony falls under the category of mala in se offenses that require the attendance of criminal intent. Evil intent must unite with an unlawful act for it to be a felony. Actus non facit reum, nisi mens sit rea." — Emphasizing the necessity of proving malicious intent for estafa convictions.
• "Where the inculpatory facts and circumstances are susceptible of two or more interpretations, one of which is consistent with the innocence of the accused while the other may be compatible with the finding of guilt, the Court must acquit the accused because the evidence does not fulfill the test of moral certainty required for conviction." — Stating the rule for resolving doubts in favor of the accused when evidence is susceptible to multiple interpretations.

• Tan v. People, 542 Phil. 188 (2007) — Controlling precedent establishing that the delivery and acceptance of checks creates the fiduciary relation for purposes of determining territorial jurisdiction in estafa cases; followed by the Court in affirming jurisdiction of the RTC of Las Piñas City.
• Jandusay v. People, 711 Phil. 305 (2013) — Cited for the enumeration of the elements of estafa under Article 315(1)(b) of the RPC; applied to determine that the prosecution failed to prove misappropriation and prejudice.
• Pamintuan v. People, 635 Phil. 514 (2010) — Cited for the definition of "convert" and "misappropriate" as acts of using or disposing of another's property as if it were one's own; applied to distinguish between breach of contract and criminal conversion.
• Aricheta v. People, 560 Phil. 170 (2007) — Cited for the doctrine that where evidence is susceptible of two interpretations, one consistent with innocence and the other with guilt, acquittal is required; applied to justify the acquittal based on reasonable doubt.

• Article 315, paragraph 1(b), Revised Penal Code — Defines estafa with abuse of confidence committed by misappropriating or converting money received in trust to the prejudice of another; the provision under which petitioners were charged and which the Court interpreted to require proof of malicious intent and actual conversion.
• Section 13, Article VIII, 1987 Constitution — Cited in the certification portion regarding the Court's internal deliberative process; not substantively applied to the merits.

Presbitero J. Velasco, Jr. (Chairperson), Diosdado M. Peralta, Jose Portugal Perez, and Jose Catral Mendoza (Designated Additional Member).