The Supreme Court, in Velayo v. People, affirmed the conviction of Maria Lina S. Velayo for estafa, emphasizing that when an individual personally volunteers to remit taxes on behalf of another, receives funds for that specific purpose, and then misappropriates those funds, a trust relationship is established, making them liable for estafa. This ruling clarifies the responsibilities of individuals who handle funds for specific obligations, reinforcing the principle that misappropriation of such funds constitutes a breach of trust punishable under Article 315 of the Revised Penal Code.

Volunteering Trust: Can a Promise to Pay Taxes Lead to Criminal Liability?

This case revolves around the sale of two properties by Alorasan Realty Development Corporation (ARDC) to WJA Holdings, Inc. (WJA). Velayo, acting as ARDC’s representative, volunteered to remit the capital gains and documentary stamp taxes to the Bureau of Internal Revenue (BIR), assuring WJA that she could facilitate the process and potentially reduce the tax liability. Consequently, WJA entrusted her with the funds, foregoing their right to withhold the taxes themselves. However, Velayo failed to remit the taxes for one of the properties and did not return the funds despite repeated demands from WJA, leading to the filing of estafa charges against her.

The central legal question is whether Velayo, by volunteering to remit taxes and receiving funds for that purpose, established a fiduciary relationship with WJA, such that her failure to remit the taxes constituted estafa. Velayo argued that she was merely acting on behalf of ARDC, that she had no juridical possession of the funds, and that it was WJA’s responsibility to remit the taxes in the first place.

The Supreme Court disagreed with Velayo’s arguments, emphasizing the critical distinction between mere physical possession and juridical possession. The Court referenced the case of Chua-Burce v. Court of Appeals, where a bank cash custodian was not found liable for estafa because her possession of the bank’s funds was deemed merely physical, not juridical. However, the Supreme Court distinguished Velayo’s situation from that of the cash custodian, noting that Velayo had juridical possession because WJA entrusted the funds to her based on her personal representation that she would remit the taxes to the BIR on their behalf.

Building on this principle, the Court emphasized that Velayo’s actions created a trust relationship with WJA. Her assurance that she would handle the tax remittance, coupled with her receipt of the funds for that specific purpose, established an obligation to deliver those funds to the BIR. The fact that the funds were deposited in ARDC’s account did not negate Velayo’s personal obligation to WJA, as the agreement was between Velayo and WJA, not between ARDC and WJA. Therefore, Velayo’s failure to remit the taxes and her subsequent misappropriation of the funds constituted a breach of trust, satisfying the elements of estafa under Article 315(1)(b) of the Revised Penal Code.

The Court outlined the elements of estafa through conversion or misappropriation under Art. 315 (1) (b) of the Revised Penal Code:

(1) that personal property is received in trust, on commission, for administration or under any other circumstance involving the duty to make delivery of or to return the same, even though the obligation is guaranteed by a bond;

(2) that there is conversion or diversion of such property by the person who has so received it or a denial on his part that he received it;

(3) that such conversion, diversion or denial is to the injury of another; and

(4) that there be demand for the return of the property.

The Supreme Court found that all these elements were present in Velayo’s case. She received the funds from WJA with the specific instruction to remit them to the BIR. She then failed to fulfill this obligation and did not return the funds, causing financial prejudice to WJA. Despite repeated demands, Velayo failed to account for the funds, further evidencing her misappropriation.

The Court underscored the importance of good faith and honesty in financial transactions, particularly when one party entrusts funds to another for a specific purpose. Velayo’s actions demonstrated a clear abuse of the trust placed in her by WJA, leading to her rightful conviction for estafa. The case serves as a reminder that individuals who volunteer to handle financial obligations on behalf of others must act with utmost integrity and diligence.

Moreover, the Court addressed Velayo’s argument that the contract to sell stipulated that WJA was responsible for withholding and remitting the taxes. The Court clarified that Velayo’s personal undertaking to remit the taxes superseded the contractual provision. Her voluntary offer to handle the tax remittance, coupled with WJA’s reliance on her expertise, created a separate agreement that bound Velayo personally. This highlights the principle that subsequent agreements can modify or supersede prior contractual obligations, especially when there is clear evidence of mutual intent and reliance.

Furthermore, the Court contrasted Velayo’s situation with cases involving bank tellers or cash custodians, who merely have physical possession of funds. Unlike those employees, Velayo had the authority and discretion to manage the funds, making her actions indicative of juridical possession. The Court emphasized that Velayo was not a mere conduit for the funds but an active participant who assumed personal responsibility for their proper disposition.

The Supreme Court’s decision reinforces the principle that individuals cannot escape criminal liability by hiding behind corporate veils or contractual provisions when their personal actions constitute a breach of trust and result in financial harm to others. Velayo’s conviction serves as a deterrent against similar fraudulent schemes and underscores the importance of accountability in financial dealings.

FAQs

What was the key issue in this case?	The key issue was whether Velayo’s act of volunteering to remit taxes, receiving funds for that purpose, and then failing to do so constituted estafa under Article 315(1)(b) of the Revised Penal Code. The Court examined whether Velayo had juridical possession of the funds and whether a trust relationship existed between her and WJA.
What is juridical possession?	Juridical possession refers to a type of possession where the transferee has a right over the thing transferred, which they can assert even against the owner. This contrasts with mere physical possession, where the individual simply has control over the property without any ownership rights.
Why was Velayo convicted of estafa?	Velayo was convicted because she personally volunteered to remit taxes on behalf of WJA, received funds for that specific purpose, and then misappropriated those funds. This created a trust relationship, and her failure to remit the taxes constituted a breach of that trust, satisfying the elements of estafa.
How did the Court distinguish this case from Chua-Burce v. Court of Appeals?	The Court distinguished this case by noting that Velayo, unlike the cash custodian in Chua-Burce, had juridical possession of the funds due to her personal undertaking to remit the taxes and WJA’s reliance on her expertise. Velayo was not a mere conduit but an active participant who assumed personal responsibility for the funds.
What is the significance of a “trust relationship” in this case?	The “trust relationship” is significant because it established a fiduciary duty on Velayo’s part to use the funds entrusted to her for the specific purpose of remitting taxes. Her failure to do so constituted a breach of that trust, which is a key element of estafa under Article 315(1)(b) of the Revised Penal Code.
Did the contract to sell absolve Velayo of responsibility?	No, the contract to sell did not absolve Velayo of responsibility. Although the contract initially stipulated that WJA was responsible for withholding and remitting the taxes, Velayo’s subsequent personal undertaking to handle the tax remittance superseded this contractual provision.
What evidence supported Velayo’s conviction?	The evidence supporting Velayo’s conviction included testimonies from Sayson, Abuid, Paderanga, and Pabilonia, as well as returned checks and acknowledgment receipts signed by Velayo. These pieces of evidence demonstrated that Velayo received the funds with the specific instruction to remit them to the BIR.
What are the elements of estafa under Article 315(1)(b) of the Revised Penal Code?	The elements of estafa under Article 315(1)(b) are: (1) that personal property is received in trust, on commission, for administration, or under any other circumstance involving the duty to make delivery of or to return the same; (2) that there is conversion or diversion of such property or a denial of receipt; (3) that such conversion, diversion, or denial is to the injury of another; and (4) that there be a demand for the return of the property.

This case highlights the importance of clear agreements and accountability in financial transactions. Individuals who volunteer to handle funds on behalf of others must act with utmost integrity, as their actions can have significant legal consequences. The Supreme Court’s decision underscores the principle that breach of trust, especially when it involves misappropriation of funds, will be met with legal sanctions.

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: Velayo v. People, G.R. No. 204025, November 26, 2014