Murao vs. People

A principal's refusal to pay a sales agent his commission does not constitute estafa under Article 315(1)(b) of the Revised Penal Code where the payment from the client was made directly to the principal and deposited into the principal's own account, because the agent's right to commission does not make him a joint owner of the proceeds and the principal cannot misappropriate its own property.

Pablito Murao was the sole owner of Lorna Murao Industrial Commercial Enterprises (LMICE), a business engaged in selling and refilling fire extinguishers with branches across several provinces. Nelio Huertazuela was the Branch Manager of LMICE in Puerto Princesa City, Palawan. Chito Federico entered into a Dealership Agreement with LMICE on 01 September 1994 for the marketing, distribution, and refilling of fire extinguishers within Puerto Princesa City, but failing to comply with the conditions of that agreement, he was instead allowed to act as a part-time sales agent for LMICE under an oral arrangement, entitled to a percentage commission from sales.

Pablito Murao was the sole proprietor of Lorna Murao Industrial Commercial Enterprises (LMICE), a company engaged in selling and refilling fire extinguishers with branches in Palawan, Naga, Legaspi, Mindoro, Aurora, Quezon, Isabela, and Laguna. Nelio Huertazuela served as Branch Manager of LMICE in Puerto Princesa City, Palawan. On 01 September 1994, Murao and Chito Federico entered into a Dealership Agreement for the marketing, distribution, and refilling of fire extinguishers within Puerto Princesa City. Under the agreement, Federico could obtain fire extinguishers at a 50% discount, provided he set up his own sales force, issued his own sales invoices, and posted a bond as security for the credit line. Federico failed to comply with these conditions but was nonetheless allowed to act as a part-time sales agent for LMICE, entitled to a percentage commission from sales.

The amount of Federico's commission was disputed from the outset. Federico claimed entitlement to 50% of gross sales, while petitioners maintained he should receive only 30% of net sales, contending that company policy limited part-time agents to 25% of net sales but that Federico was given the full-time rate of 30% for assisting in establishing the Puerto Princesa branch. Federico's first transaction involved two fire extinguishers sold to Landbank for ₱7,200.00; Landbank issued a check for ₱5,936.40 payable to "L.M. Industrial Comm'l. Enterprises c/o Chito Federico." Federico encashed the check, kept ₱3,500.00 as his commission, and remitted only ₱2,436.40 to LMICE. Petitioners considered this irregular—Federico was not authorized to be named payee or to encash the check—but forgave him after he promised to make up for it in the next transaction.

Federico subsequently facilitated a transaction with the City Government of Puerto Princesa for the refill of 202 fire extinguishers. Because of the cost, the transaction was split into two purchase orders. LMICE refilled and delivered all 202 units between 06 and 13 January 1994. The present case concerns only the first purchase order, Purchase Order No. GSO-856, dated 03 January 1994, covering 99 fire extinguishers at a total cost of ₱309,000.00. On 16 June 1994, the City Government issued Check No. 611437 to LMICE in the amount of ₱300,572.73, net of withholding tax. That same day, Huertazuela claimed the check and deposited it into LMICE's current account with PCIBank.

The following day, 17 June 1994, Federico went to the LMICE branch office to demand ₱154,500.00 as his commission from the payment, but Huertazuela refused because they could not agree on the proper amount. Also on 17 June 1994, Federico filed an Affidavit-Complaint for estafa against petitioners. The City Prosecution Office found a prima facie case and recommended filing an Information, which charged petitioners with having received ₱309,000.00 as payment for the 99 refilled fire extinguishers and with misappropriating and converting ₱154,500.00 — Federico's alleged 50% commission — for their own personal use despite repeated demands. The RTC found all elements of estafa present and convicted petitioners as co-principals. The Court of Appeals affirmed with modification, reducing the penalty and deleting the attorney's fees award. Petitioners then elevated the case to the Supreme Court.

• Civil, Not Criminal Liability: Petitioners argued that the Court of Appeals gravely erred in ruling they were liable for estafa under Article 315(1)(b) of the Revised Penal Code, when the undisputed facts clearly showed that any liability arising from the non-payment of commission was civil in nature.
• No Evidence for 50% Commission: Petitioners maintained that the Court of Appeals erred in upholding Federico's claim that he was entitled to a 50% commission without any evidence to support such a claim, and that company policy entitled part-time sales agents to only 25% of net sales, with Federico receiving 30% of net sales as a concession for helping establish the Puerto Princesa branch.

• Elements of Estafa: Whether the essential elements of estafa by misappropriation or conversion under Article 315(1)(b) of the Revised Penal Code — specifically, receipt of money in trust or on commission and misappropriation or conversion thereof — are present in this case.
• Nature of Liability: Whether petitioners' refusal to pay Federico's commission constitutes criminal estafa or merely gives rise to civil liability arising from the agency contract.
• Amount of Commission: Whether Federico is entitled to a 50% commission of gross sales as he claimed.

• Elements of Estafa: No. Two essential elements were absent: receipt of money in trust or on commission, and misappropriation or conversion. The payment check was issued to LMICE as sole payee and deposited into LMICE's own account; the money belonged to the principal, not to the agent.
• Nature of Liability: Civil, not criminal. The obligation to pay commission arises from the duty of a principal to compensate its agent under the civil contract of agency, not from any criminal act of misappropriation or conversion. The civil liability must be pursued in a separate civil action.
• Amount of Commission: Not determined. The Court was precluded from adjudicating the civil liability for commission because it arises from a violation of the agency contract, not from a criminal act, and should be the subject of a separate and independent civil action.

• Elements of Estafa: The Court found that the lower courts' conviction rested on the erroneous belief that Federico, by virtue of his right to commission, already owned 50% of the payment made by the City Government to LMICE. However, a right to commission does not make an agent a joint owner of the money paid to the principal; it merely establishes the relation of agent and principal. An agency existed between LMICE and Federico under Article 1868 of the Civil Code, as Federico negotiated sales on behalf of LMICE. All profits and advantages gained by an agent in the execution of agency belong to the principal. Check No. 611437 named LMICE as the lone payee, and when Huertazuela deposited it into LMICE's account, he was collecting what rightfully belonged to LMICE. Since LMICE was the lawful owner of the entire proceeds, petitioners did not receive the money in trust, on commission, or under any obligation to deliver or return it to Federico. No fiduciary relationship existed between petitioners and Federico, which is an essential element of estafa by misappropriation or conversion. The RTC's reliance on Manahan vs. Court of Appeals was misplaced because that case involved a lease of a dump truck — a contract of bailment where juridical possession was transferred to the lessee, who had a duty to return the same thing. In contrast, the present case involves an agency contract where the principal directly received payment from the client; no transfer of juridical possession was involved, and LMICE had nothing to deliver or return to Federico.

• Nature of Liability: The Court further held that petitioners did not convert or misappropriate the proceeds because the money belonged to LMICE and was not "another's property." Citing the definition from Saddul vs. Court of Appeals, the words "convert" and "misappropriate" connote using or disposing of another's property as if it were one's own; one cannot fraudulently appropriate money that is one's own. Although petitioners' refusal to pay the commission caused prejudice to Federico, said act does not constitute estafa under Article 315(1)(b). Petitioners themselves admitted civil liability for the commission, but the Court was precluded from awarding it because the civil liability arises from a violation of the agency contract, not from a criminal act. Under Article 31 of the Civil Code, a civil action based on an obligation not arising from the act complained of as a felony may proceed independently of the criminal proceedings.

• Amount of Commission: Because the civil liability for commission arises from the agency contract and not from the criminal act charged, the Court declined to determine whether Federico was entitled to 50% of gross sales or 30% of net sales. That determination properly belongs to a separate and independent civil action.

• Essential Elements of Estafa under Article 315(1)(b) — The crime of estafa by misappropriation or conversion requires four elements: (1) that money, goods, or other personal property be received by the offender in trust, or on commission, or for administration, or under any other obligation involving the duty to make delivery of or to return the same; (2) that there be misappropriation or conversion of such money or property by the offender, or denial on his part of such receipt; (3) that such misappropriation or conversion or denial is to the prejudice of another; and (4) that there is demand made by the offended party to the offender. A fiduciary relationship between the complainant and the accused is essential; without it, the accused could not have committed estafa.

• Agency Does Not Confer Co-Ownership of Proceeds — An agent's right to commission does not make him a joint owner of the money paid to the principal by the client; it merely establishes the relation of agent and principal. All profits made and advantages gained by an agent in the execution of his agency belong to the principal. The obligation of the principal to pay the agent's commission arises from the duty to give just compensation for services rendered, not from any duty to deliver or return money to its supposed owner.

• Distinction Between Bailment and Agency for Estafa Purposes — The phrase "or any other obligation involving the duty to make delivery of, or to return the same" in Article 315(1)(b) refers to contracts of bailment — such as lease of personal property, deposit, and commodatum — wherein juridical possession of the thing was transferred to the lessee, depositary, or borrower, who is obligated to return the same thing. An agency contract where the principal directly receives payment from the client does not involve such a transfer of juridical possession, and thus the principal's retention of the proceeds does not constitute estafa.

• Civil Liability Independent of Criminal Action — Under Article 31 of the Civil Code, when a civil action is based on an obligation not arising from the act or omission complained of as a felony, such civil action may proceed independently of the criminal proceedings and regardless of the result of the latter. A court in a criminal action cannot impose civil liability arising from a civil contract, which should be the subject of a separate and independent civil action.

• "his right to a commission does not make private complainant Federico a joint owner of the money paid to LMICE by the City Government of Puerto Princesa, but merely establishes the relation of agent and principal." — This passage articulates the core ratio decidendi: the agent's commission right creates an agency relationship, not co-ownership of proceeds, and therefore the principal's collection of its own payment cannot constitute estafa.

• "Since the money was already with its owner, LMICE, it could not be said that the same had been converted or misappropriated for one could not very well fraudulently appropriate to himself money that is his own." — This passage defines the limits of "conversion" and "misappropriation" under Article 315(1)(b): the act presupposes disposing of another's property, not one's own.

• "The obligation of LMICE to pay private complainant Federico his commission does not arise from any duty to deliver or return the money to its supposed owner, but rather from the duty of a principal to give just compensation to its agent for the services rendered by the latter." — This passage distinguishes the civil obligation arising from agency from the criminal obligation contemplated by estafa, clarifying that the principal's duty to compensate the agent is civil, not penal.

• Manahan, Jr. vs. Court of Appeals, G.R. No. 111656, March 20, 1996, 255 SCRA 202 — Distinguished. The RTC relied on this case to support the proposition that even absent a fiduciary relationship, a civil obligation to return property suffices for estafa. The Supreme Court distinguished it because Manahan involved a lease of a dump truck — a bailment contract where juridical possession was transferred — unlike the present agency relationship where the principal directly received payment.
• Saddul vs. Court of Appeals, 192 SCRA 277 — Followed. The Court adopted the definition that "convert" and "misappropriate" in estafa under Article 315(1)(b) connote using or disposing of another's property as if it were one's own, or devoting it to a purpose different from that agreed upon.
• Yong Chan Kim vs. People, G.R. No. 84719, January 25, 1991, 193 SCRA 344 — Followed. Cited for the proposition that a fiduciary relationship between complainant and accused is an essential element of estafa by misappropriation or conversion.
• United States vs. Reyes, 36 Phil 791 (1917) — Followed. Cited for the principle that an agent's right to commission does not make him a joint owner of the money paid to the principal.
• Yam vs. Malik, G.R. No. L-50550-52, October 31, 1979, 94 SCRA 30 — Followed. Cited for the principle that one cannot fraudulently appropriate money that is one's own.

• Article 315(1)(b), Revised Penal Code — Defines estafa by misappropriating or converting, to the prejudice of another, money, goods, or any other personal property received by the offender in trust or on commission, or for administration, or under any other obligation involving the duty to make delivery of or to return the same. The Court found two of the four essential elements absent and acquitted petitioners.
• Article 1868, Civil Code — Defines agency as a special contract whereby a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. The Court applied this provision to characterize the relationship between LMICE and Federico as one of principal and agent.
• Article 1869, Civil Code — Recognizes that an agency may be contracted orally. The Court noted that the agreement allowing Federico to act as sales agent was based on an oral agreement, which is valid under this provision.
• Article 1875, Civil Code — Provides that agency is presumed to be for a compensation, unless there is proof to the contrary. The Court cited this to support Federico's right to commission, while clarifying that this right does not confer ownership over the proceeds.
• Article 31, Civil Code — Provides that when a civil action is based on an obligation not arising from the act or omission complained of as a felony, such civil action may proceed independently of the criminal proceedings and regardless of the result of the latter. The Court applied this provision to explain why the civil liability for commission must be pursued in a separate civil action.

Puno (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concurred.