The Supreme Court, in Salazar v. People, held that an individual entrusted with funds who remits those funds abroad without proper accounting commits estafa, even if the initial agreement was a contract of sale. This ruling clarifies that misappropriation, not ownership, determines liability when trust is breached. The Court affirmed the conviction, emphasizing that even temporary disruptions of property rights constitute misappropriation, thereby upholding the principle that entrusted funds must be used for their intended purpose, and any deviation constitutes a breach of trust punishable under Article 315 of the Revised Penal Code.

From Textile Advances to Transferred Funds: When Does a Sale Turn to Estafa?

Jorge Salazar, Vice President and Treasurer of Uni-Group Inc., was charged with estafa for misappropriating funds advanced by Skiva International Inc. for the manufacture of jeans. Skiva, through its agent Olivier Philippines, advanced US$41,300.00 to Aurora/Uni-Group. The funds were intended to cover the cost of textiles and labor for manufacturing 700 dozens of stretch twill jeans. Salazar, upon receiving the funds, withdrew the amounts but allegedly failed to fully account for them, leading to the criminal charge. This case examines the circumstances under which a transaction initially framed as a sale can give rise to a charge of estafa when entrusted funds are misappropriated.

The core of the legal issue revolves around whether Salazar’s actions constituted estafa under Article 315, paragraph 1(b) of the Revised Penal Code. This provision addresses situations where money or property is received in trust, on commission, for administration, or under any obligation involving the duty to deliver or return the same. The essential elements of estafa under this article are: (a) receipt of money, goods, or property in trust; (b) misappropriation or conversion of such property; (c) prejudice to another as a result; and (d) demand made by the offended party to the offender, as the Supreme Court reiterated, citing established jurisprudence:

“that money, goods or other personal property is 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; b) that there be misappropriation or conversion of such money or property by the offender; or denial on his part of such receipt; c) that such misappropriation or conversion or denial is to the prejudice of another; and d) there is demand made by the offended party to the offender.”

The trial court and the Court of Appeals both found Salazar guilty, prompting him to appeal to the Supreme Court. He argued that the transaction was a sale, not a trust arrangement, and that Skiva, not Aurora/Uni-Group, was named as the injured party, creating a disconnect since he had no obligation to Skiva. Additionally, he contended that no direct demand was made upon him by Skiva to return the funds. The Supreme Court had to determine whether the elements of estafa were sufficiently established despite these arguments.

The Court acknowledged that the initial contract was indeed a sale, transferring ownership of the US$41,300.00 to Aurora/Uni-Group upon remittance by Skiva. However, it emphasized that Salazar, as an employee aware of the specific purpose of the remittance, had a fiduciary duty to account for the funds to Aurora/Uni-Group. The facts showed that the funds were remitted to a joint account controlled by Salazar, and he subsequently withdrew significant amounts.

Salazar claimed he used part of the funds to purchase 3,000 meters of Litton fabrics and returned the balance to Aurora. However, the Court noted his inability to provide concrete evidence of these transactions. He could not recall specific amounts, dates, or methods of payment, undermining his defense. The Court gave credence only to the purchase of the Litton fabrics because the prosecution independently verified it. The Court thus focused on Salazar’s actions following the withdrawal of funds, specifically the remittance of those funds abroad.

The Supreme Court highlighted that Salazar’s act of remitting the funds abroad constituted a conversion or misappropriation, regardless of whether it was a temporary disturbance of property rights. The Court reasoned that the terms “convert” and “misappropriate” imply 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. This position is supported by legal precedence. According to the Supreme Court, referencing previous decisions:

The words “convert” and “misappropriate” as used in Article 315 paragraph 1 (b) of the Revised Penal Code, connote an act of using or disposing of another’s property as if it were one’s own, or of devoting it to a purpose or use different from that agreed upon. To “misappropriate” a thing of value 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 dismissed Salazar’s argument that Skiva was not the prejudiced party, clarifying that in estafa, the immediate victim of the fraud need not be the owner of the misappropriated goods. Citing First Producers Holdings Corporation v. Co, the Court noted that Article 315 of the Revised Penal Code uses the word “another,” indicating that the loss should fall upon someone other than the perpetrator. This ruling emphasizes that the focus is on who suffered the loss due to the misappropriation, not necessarily who owned the funds originally.

Addressing the issue of demand, the Court held that the demand made upon Aurora/Uni-Group was sufficient, as requiring a separate demand on Salazar would be superfluous. It recognized that Skiva/Olivier acted appropriately in demanding from Aurora/Uni-Group, as it was the entity responsible for delivering the jeans. Moreover, the Court cited jurisprudence stating that demand is not always a prerequisite for estafa, especially when there is evidence of misappropriation. The Court referenced United States v. Ramirez, where it was declared:

“The consummation of the crime of estafa … does not depend on the fact that a request for the return of the money is first made and refused in order that the author of the crime should comply with the obligation to return the sum misapplied. The appropriation or conversion of money received to the prejudice of the owner thereof are the sole essential facts which constitute the crime of estafa, and thereupon the author thereof incurs the penalty imposed by the Penal Code.”

Finally, the Court addressed Salazar’s claim that Skiva lacked the authority to institute the action. It clarified that the complaint filed with the fiscal for preliminary investigation could be filed by any competent person, regardless of whether they were the direct “offended party.” The Court explained that while a complaint filed in court must be filed by the offended party, this requirement does not apply to complaints filed with the fiscal prior to judicial action.

The Supreme Court thus affirmed the lower courts’ decisions, holding Salazar guilty beyond reasonable doubt of estafa under Article 315, paragraph 1(b) of the Revised Penal Code. The decision underscores the importance of fulfilling fiduciary duties and the consequences of misappropriating funds entrusted for a specific purpose. It serves as a reminder that even in commercial transactions, individuals handling funds on behalf of a company or organization must act with utmost integrity and transparency.

FAQs

What was the key issue in this case?	The key issue was whether Jorge Salazar committed estafa by misappropriating funds advanced by Skiva International Inc. for the manufacture of jeans, despite the initial transaction being a contract of sale.
What are the elements of estafa under Article 315, paragraph 1(b) of the Revised Penal Code?	The elements are: (1) receipt of money or property in trust; (2) misappropriation or conversion of the property; (3) prejudice to another; and (4) demand made by the offended party.
Did the Supreme Court consider the initial transaction between Skiva and Aurora/Uni-Group as a sale?	Yes, the Supreme Court acknowledged that the initial transaction was a sale, which transferred ownership of the funds to Aurora/Uni-Group upon remittance by Skiva.
Why was Salazar still found guilty of estafa even if the transaction was a sale?	Salazar was found guilty because, as an employee aware of the funds’ purpose, he had a fiduciary duty to account for them to Aurora/Uni-Group, and his act of remitting the funds abroad constituted misappropriation.
Was it necessary for Skiva to directly demand the return of funds from Salazar for him to be convicted of estafa?	No, the Supreme Court held that the demand made upon Aurora/Uni-Group was sufficient, and a separate demand on Salazar was not necessary, especially given the evidence of misappropriation.
Can someone be found guilty of estafa even if they are not the owner of the misappropriated funds?	Yes, the Supreme Court clarified that in estafa, the person prejudiced need not be the owner of the funds. The focus is on who suffered the loss due to the misappropriation.
What was the significance of Salazar remitting the funds abroad?	The act of remitting the funds abroad was considered by the Court as an act of conversion or misappropriation, as it constituted an unauthorized disposition of the property contrary to the purpose for which it was intended.
Was Skiva authorized to file the complaint against Salazar?	Yes, the Supreme Court clarified that for purposes of preliminary investigation, a complaint can be filed by any competent person, regardless of whether they are the direct “offended party.”

This case highlights the critical importance of trust and accountability in financial transactions. It serves as a stern warning against the misappropriation of funds, reinforcing the legal principle that individuals entrusted with assets must act with transparency and in accordance with their fiduciary duties.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Jorge Salazar v. People, G.R. No. 149472, October 15, 2002