Serona vs. Court of Appeals

An agent who, without an express prohibition from the principal, entrusts property to a sub-agent for the same purpose for which it was received does not commit estafa through misappropriation or conversion under Article 315(1)(b) of the Revised Penal Code. In the absence of evidence that the agent derived personal benefit or conspired with the sub-agent to prejudice the principal, the abuse of confidence essential to estafa is not present; the agent is accountable only civilly for the acts of the substitute under Article 1892 of the Civil Code.

Private complainant Leonida Quilatan delivered pieces of jewelry worth P567,750.00 to petitioner Virgie Serona between July and September 1992, under an oral agreement that Serona would sell the items on commission. The terms required Serona to remit the proceeds or return the jewelry within 30 days. When Serona failed to settle her account, Quilatan demanded that she execute an acknowledgment receipt dated September 24, 1992, which recited the same terms and the total value of the jewelry. Serona had, earlier and without Quilatan’s knowledge, passed the jewelry to Marichu Labrador under an identical commission arrangement. Labrador sold the pieces to a person who disappeared without payment, causing Serona’s default. A formal demand letter was sent; Quilatan then filed a criminal complaint for estafa.

The Commission Agreement: Between July and September 1992, Leonida Quilatan delivered various pieces of jewelry to petitioner Virgie Serona for sale on commission. The oral agreement obliged Serona to remit the proceeds if sold, or to return the items if unsold, both within 30 days. After Serona failed to pay, Quilatan required her to execute an acknowledgment receipt on September 24, 1992, which recited the total value of P567,750.00 and the same conditions.

The Entrustment to Labrador: Unbeknownst to Quilatan, Serona had earlier entrusted the jewelry to Marichu Labrador under the same terms—Labrador would sell on commission or return the unsold pieces. Labrador identified an acknowledgment receipt dated July 5, 1992, reflecting items worth P441,035.00. She sold the jewelry to a third person who absconded without paying. Labrador’s default caused Serona’s inability to pay Quilatan.

Demand and Criminal Complaint: Quilatan sent a formal letter of demand and subsequently executed a complaint affidavit against Serona. An information for estafa under Article 315(1)(b) of the Revised Penal Code was filed, alleging that Serona received the jewelry in trust and, with unfaithfulness and abuse of confidence, misappropriated and converted the same to her own personal use and failed to account despite demands.

Trial and Lower Court Findings: At trial, Quilatan testified that Serona had remitted P100,000.00 and returned jewelry worth P43,000.00, leaving an unpaid balance of P424,750.00. Serona admitted receiving the jewelry and failing to pay, but presented evidence that she had passed the items to Labrador, who in turn failed to pay her. The trial court convicted Serona of estafa, treating her act of giving the jewelry to Labrador as conversion and a breach of trust. The Court of Appeals affirmed the conviction but modified the penalty, increasing the maximum term to twenty years of reclusión temporal, holding that the act of entrusting the property to another constituted disposal “as if it were hers.”

• No Abuse of Confidence: Petitioner argued that entrusting the jewelry to a sub-agent for sale on commission did not violate her undertaking with Quilatan because no prohibition against such act was ever imposed, either orally or in the acknowledgment receipt. Consequently, the element of abuse of confidence was absent.

• No Misappropriation or Conversion: Petitioner maintained that she did not derive any personal benefit from the loss of the jewelry and that the items were delivered to Labrador for the same purpose—sale on commission—agreed upon with the principal. The failure to return the jewelry or its proceeds resulted solely from Labrador’s faithlessness, not from any criminal intent on her part.

• Conversion and Breach of Trust: Respondent People of the Philippines, sustaining the lower courts’ findings, contended that petitioner disposed of the jewelry as if it were her own by passing it to another person without the principal’s authorization. This act constituted conversion and a clear breach of the trust reposed in her.

• Misappropriation by Unauthorized Disposition: Respondent argued that petitioner’s failure to return the jewelry or remit the proceeds after demand, coupled with the entrustment to a third party, established misappropriation under Article 315(1)(b), irrespective of whether she personally profited.

• Abuse of Confidence: Whether the Court of Appeals erred in concluding that petitioner abused the confidence reposed in her by entrusting the subject jewelry to a sub-agent for sale on commission.

• Misappropriation or Conversion: Whether the Court of Appeals erred in holding that petitioner’s failure to return the jewelry to the private complainant constituted misappropriation or conversion under Article 315(1)(b) of the Revised Penal Code.

• Abuse of Confidence: The delivery of the jewelry to a sub-agent did not constitute an abuse of confidence. Article 1892 of the Civil Code permits an agent to appoint a substitute in the absence of an express prohibition from the principal. Neither the acknowledgment receipt nor any prior oral understanding forbade petitioner from entrusting the items to another for the same purpose. Hence, the act was legally sanctioned and could not be characterized as a breach of the trust inherent in estafa.

• Misappropriation or Conversion: The second element of estafa under Article 315(1)(b)—misappropriation or conversion—was not established. To “convert” or “misappropriate” means to use or dispose of another’s property as one’s own, or to devote it to a purpose different from that agreed upon. Here, the jewelry was passed to Labrador for the very same end: sale on commission. No personal benefit was traced to petitioner, and there was no evidence of conspiracy between her and Labrador. The situation fell squarely within the doctrine of People v. Nepomuceno, where an agent who in good faith entrusts property to a sub-agent for the identical purpose, without prohibition, cannot be held criminally liable for estafa when the sub-agent defaults. The lower courts’ reliance on People v. Flores and U.S. v. Panes was misplaced, as those cases involved an express prohibition against sub-delegation or a sub-entrustment made after demand for return. Acquittal was therefore warranted.

• Elements of Estafa under Article 315(1)(b), Revised Penal Code — The offense requires: (1) receipt of money, goods, or personal property in trust or on commission, or under an obligation to return or deliver; (2) misappropriation or conversion of such property, or denial of receipt; (3) prejudice to another; and (4) demand by the offended party. The Court found the second element absent.

• Definition of Conversion and Misappropriation — The terms “convert” and “misappropriate” connote an 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. Entrusting property to a sub-agent for the same purpose agreed upon with the principal does not constitute conversion.

• Rule on Sub-Agency and Criminal Liability for Estafa — Where an agent entrusts property received on commission to a sub-agent in good faith, for the same purpose, and without any express prohibition from the principal, the agent cannot be held guilty of estafa by misappropriation or conversion if the sub-agent fails to account. Profit or gain must be obtained personally by the accused through her own acts; mere negligence in permitting another to take advantage does not constitute estafa under Article 315(1)(b). The abuse of confidence essential to the offense is absent.

• Civil Liability upon Acquittal — An accused acquitted of estafa may still be held civilly liable where the facts established so warrant. Under Article 1892 of the Civil Code, an agent who appoints a sub-agent without express authority, though not prohibited, is responsible for the acts of the substitute. Civil liability arising from the offense is deemed instituted with the criminal action pursuant to Rule 111, Section 1(a) of the Rules of Court.

• “Where, as in the present case, the agents to whom personal property was entrusted for sale, conclusively proves the inability to return the same is solely due to malfeasance of a subagent to whom the first agent had actually entrusted the property in good faith, and for the same purpose for which it was received; there being no prohibition to do so and the chattel being delivered to the subagent before the owner demands its return or before such return becomes due, we hold that the first agent can not be held guilty of estafa by either misappropriation or conversion. The abuse of confidence that is characteristic of this offense is missing under the circumstances.” — from People v. Nepomuceno, quoted with approval. This encapsulation of the rule directly controlled the acquittal.

• “In cases of estafa the profit or gain must be obtained by the accused personally, through his own acts, and his mere negligence in permitting another to take advantage or benefit from the entrusted chattel cannot constitute estafa under Article 315, paragraph 1-b, of the Revised Penal Code; unless of course the evidence should disclose that the agent acted in conspiracy or connivance with the one who carried out the actual misappropriation, then the accused would be answerable for the acts of his co-conspirators.” — from Lim v. Court of Appeals, quoting People v. Trinidad. This clarifies the mens rea requirement.

• People v. Nepomuceno, CA 46 O.G. 6128 (1949) — Followed. The Supreme Court applied the rule that an agent who in good faith passes entrusted property to a sub-agent for the same purpose, without prohibition, is not guilty of estafa when the sub-agent defaults.

• Lim v. Court of Appeals, 271 SCRA 12 (1997) — Followed. Reiterated the principle that estafa under Article 315(1)(b) requires the accused to have personally obtained profit or gain, absent which acquittal is proper.

• People v. Flores, 47 O.G. 6210 (1949) — Distinguished. The accused therein received a ring under the express condition that she would return it the following day if unsold and without authority to retain or give it to a sub-agent, circumstances not present here.

• U.S. v. Panes, 37 Phil. 116 (1917) — Distinguished. The accused passed the jewelry to a sub-agent after demand for its return had already been made, unlike petitioner who did so before demand.

• People v. Trinidad, CA 53 O.G. 731 (1956) — Cited. Supported the doctrine that an agent is not criminally liable for the independent faithlessness of a sub-agent in the absence of conspiracy.

• Article 315(1)(b), Revised Penal Code — Defines estafa through misappropriation or conversion of property received in trust or on commission. The provision’s elements were used as the framework for analysis; the second element was found lacking.

• Article 1892, Civil Code — Permits an agent to appoint a substitute if the principal has not prohibited it, but makes the agent responsible for the acts of the substitute when not given the power to appoint one. Applied to hold that petitioner’s act was not prohibited and to anchor her civil liability.

• Rule 111, Section 1(a), Revised Rules of Criminal Procedure — The civil action for recovery of civil liability arising from the offense is deemed instituted with the criminal action. This allowed the Court to impose civil liability despite acquittal.

Davide, Jr. (Chairman), Vitug, Carpio, and Azcuna, JJ., concurred. No separate opinions were filed.

N/A — The decision was unanimous; no dissenting opinions were registered.