Commission agent commits estafa if he uses money without loan contract

THE UNITED STATES, plaintiff-appellee, vs. JOSE M. IGPUARA, defendant-appellant. (G.R. No. L-7593. March 27, 1913)

The defendant therein is charged with the crime of estafa, for having swindled Juana Montilla and Eugenio Veraguth out of P2,498 Philippine currency, which he had take on deposit from the former to be at the latter's disposal. The document setting forth the obligation reads:

We hold at the disposal of Eugenio Veraguth the sum of two thousand four hundred and ninety-eight pesos (P2,498), the balance from Juana Montilla's sugar. — Iloilo, June 26, 1911, — Jose Igpuara, for Ramirez and Co.

The Court of First Instance of Iloilo sentenced the defendant to two years of presidio correccional, to pay Juana Montilla P2,498 Philippine currency, and in case of insolvency to subsidiary imprisonment at P2.50 per day, not to exceed one-third of the principal penalty, and the costs.

The defendant appealed, alleging as errors: (1) Holding that the document executed by him was a certificate of deposit; (2) holding the existence of a deposit, without precedent transfer or delivery of the P2,498; and (3) classifying the facts in the case as the crime of estafa.

A deposit is constituted from the time a person receives a thing belonging to another with the obligation of keeping and returning it. (Art. 1758, Civil Code.)

That the defendant received P2,498 is a fact proven. The defendant drew up a document declaring that they remained in his possession, which he could not have said had he not received them. They remained in his possession, surely in no other sense than to take care of them, for they remained has no other purpose. They remained in the defendant's possession at the disposal of Veraguth; but on August 23 of the same year Veraguth demanded for him through a notarial instrument restitution of them, and to date he has not restored them.

The appellant says: "Juana Montilla's agent voluntarily accepted the sum of P2,498 in an instrument payable on demand, and as no attempt was made to cash it until August 23, 1911, he could indorse and negotiate it like any other commercial instrument. There is no doubt that if Veraguth accepted the receipt for P2,498 it was because at that time he agreed with the defendant to consider the operation of sale on commission closed, leaving the collection of said sum until later, which sum remained as a loan payable upon presentation of the receipt." (Brief, 3 and 4.)

Then, after averring the true facts: (1) that a sales commission was precedent; (2) that this commission was settled with a balance of P2,498 in favor of the principal, Juana Montilla; and (3) that this balance remained in the possession of the defendant, who drew up an instrument payable on demand, he has drawn two conclusions, both erroneous: One, that the instrument drawn up in the form of a deposit certificate could be indorsed or negotiated like any other commercial instrument; and the other, that the sum of P2,498 remained in defendant's possession as a loan.

It is erroneous to assert that the certificate of deposit in question is negotiable like any other commercial instrument: First, because every commercial instrument is not negotiable; and second, because only instruments payable to order are negotiable. Hence, this instrument not being to order but to bearer, it is not negotiable.

It is also erroneous to assert that sum of money set forth in said certificate is, according to it, in the defendant's possession as a loan. In a loan the lender transmits to the borrower the use of the thing lent, while in a deposit the use of the thing is not transmitted, but merely possession for its custody or safe-keeping.

In order that the depositary may use or dispose oft he things deposited, the depositor's consent is required, and then:

The rights and obligations of the depositary and of the depositor shall cease, and the rules and provisions applicable to commercial loans, commission, or contract which took the place of the deposit shall be observed. (Art. 309, Code of Commerce.)

The defendant has shown no authorization whatsoever or the consent of the depositary for using or disposing of the P2,498, which the certificate acknowledges, or any contract entered into with the depositor to convert the deposit into a loan, commission, or other contract.
That demand was not made for restitution of the sum deposited, which could have been claimed on the same or the next day after the certificate was signed, does not operate against the depositor, or signify anything except the intention not to press it. Failure to claim at once or delay for sometime in demanding restitution of the things deposited, which was immediately due, does not imply such permission to use the thing deposited as would convert the deposit into a loan.

Article 408 of the Code of Commerce of 1829, previous to the one now in force, provided:

The depositary of an amount of money cannot use the amount, and if he makes use of it, he shall be responsible for all damages that may accrue and shall respond to the depositor for the legal interest on the amount.

Whereupon the commentators say:

In this case the deposit becomes in fact a loan, as a just punishment imposed upon him who abuses the sacred nature of a deposit and as a means of preventing the desire of gain from leading him into speculations that may be disastrous to the depositor, who is much better secured while the deposit exists when he only has a personal action for recovery.

According to article 548, No. 5, of the Penal Code, those who to the prejudice of another appropriate or abstract for their own use money, goods, or other personal property which they may have received as a deposit, on commission, or for administration, or for any other purpose which produces the obligation of delivering it or returning it, and deny having received it, shall suffer the penalty of the preceding article," which punishes such act as the crime of estafa. The corresponding article of the Penal Code of the Philippines in 535, No. 5.

In a decision of an appeal, September 28, 1895, the principle was laid down that: "Since he commits the crime of estafa under article 548 of the Penal Code of Spain who to another's detriment appropriates to himself or abstracts money or goods received on commission for delivery, the court rightly applied this article to the appellant, who, to the manifest detriment of the owner or owners of the securities, since he has not restored them, willfully and wrongfully disposed of them by appropriating them to himself or at least diverting them from the purpose to which he was charged to devote them."

It is unquestionable that in no sense did the P2,498 which he willfully and wrongfully disposed of to the detriments of his principal, Juana Montilla, and of the depositor, Eugenio Veraguth, belong to the defendant.

Likewise erroneous is the construction apparently at tempted to be given to two decisions of this Supreme Court (U. S. vs. Dominguez, 2 Phil. Rep., 580, and U. S. vs. Morales and Morco, 15 Phil. Rep., 236) as implying that what constitutes estafa is not the disposal of money deposited, but denial of having received same. In the first of said cases there was no evidence that the defendant had appropriated the grain deposited in his possession.

On the contrary, it is entirely probable that, after the departure of the defendant from Libmanan on September 20, 1898, two days after the uprising of the civil guard in Nueva Caceres, the rice was seized by the revolutionalists and appropriated to their own uses.

In this connection it was held that failure to return the thing deposited was not sufficient, but that it was necessary to prove that the depositary had appropriated it to himself or diverted the deposit to his own or another's benefit. He was accused or refusing to restore, and it was held that the code does not penalize refusal to restore but denial of having received. So much for the crime of omission; now with reference to the crime of commission, it was not held in that decision that appropriation or diversion of the thing deposited would not constitute the crime of estafa.

In the second of said decisions, the accused "kept none of the proceeds of the sales. Those, such as they were, he turned over to the owner;" and there being no proof of the appropriation, the agent could not be found guilty of the crime of estafa.

Being in accord and the merits of the case, the judgment appealed from is affirmed, with costs.

Citing the case above, De Leon and De Leon, Jr. (2010) wrote the following. "Where the balance of a commission account remains in the possession of the agent at the principal’s disposal, the same acquires at once the character of a deposit which the former must return or restore to the latter at any time it is demanded. The agent undoubtedly commits the crime of estafa if he appropriates or diverts it to his own use. It could only become his as a loan, if so expressly agreed by its owner who would then be obligated not to demand it until the expiration of the legal or stipulated period."
The discussion above is based on an outline by De Leon and De Leon, Jr. (2010). Their books are available in fine bookstores nationwide. SOURCE: De Leon and De Leon, Jr. (2010). Comments and Cases on CREDIT TRANSACTIONS. 11th edition. ISBN 978-971-23-5535-6. Rex Books Store.