In a significant decision, the Supreme Court acquitted Jose Paulo Legaspi and Victor Daganas of estafa, reversing the lower courts’ conviction. The Court clarified that for estafa to exist, the accused must have received money in trust or with an obligation to return it, a critical element missing in this case involving a failed stock investment. This ruling underscores the importance of proving a fiduciary relationship in estafa cases and protects entrepreneurs from criminal liability in unsuccessful business ventures.

From Business Deal to Criminal Charge: Examining the Boundaries of Estafa

The case revolves around a business deal gone sour. Fung Hing Kit invested P9.5 million in iGen-Portal, a company where Legaspi and Daganas were involved. When the investment didn’t yield the expected returns, Kit accused Legaspi and Daganas of estafa, claiming they misappropriated his funds. The Regional Trial Court (RTC) found them guilty, a decision affirmed by the Court of Appeals (CA). However, the Supreme Court took a different view, focusing on the critical elements needed to prove estafa.

At the heart of the matter is Article 315, paragraph 1(b) of the Revised Penal Code (RPC), which defines and penalizes estafa through misappropriation. The provision states:

ART. 315. Swindling (estafa). – Any person who shall defraud another by any of the means mentioned hereinbelow shall be punished by:

1. With unfaithfulness or abuse of confidence, namely: x x x x

(b) 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, even though such obligation be totally or partially guaranteed by a bond; or by denying having received such money, goods, or other property[.]

The Supreme Court emphasized that the elements of estafa through misappropriation must be proven beyond reasonable doubt. These elements are: (a) the offender’s receipt of money in trust, or under an obligation to deliver or return it; (b) misappropriation or conversion of the money; (c) prejudice to another; and (d) demand for the return of the money. The Court found that the prosecution failed to establish the first two elements.

To establish the element of trust or obligation to return, the CA relied on an acknowledgment receipt issued by Legaspi. However, the Supreme Court clarified that mere receipt of money is not enough. The money must be received in trust, on commission, for administration, or under an obligation to deliver or return it.

The Court noted that the Information itself stated that Kit “invested” his money in iGen-Portal. This implies a purchase of stocks, not a fiduciary relationship where Legaspi and Daganas had an obligation to return the money. Moreover, the money was deposited into iGen-Portal’s account, a corporation distinct from Legaspi and Daganas.

Furthermore, the evidence showed that Kit initially wanted the stocks in his name but, due to foreign ownership restrictions, agreed to have them issued to Balisi, his domestic helper. This transaction was documented by a Deed of Sale of Shares of Stock between Legaspi and Balisi, with a stock certificate issued in Balisi’s name. This undermines the claim that Legaspi and Daganas abused Kit’s confidence.

As the Court said, “private complainant first demanded for the issuance or transfer of the stock certificate in his name and when said demand was not forthcoming, he demanded for the return of his investment and when that remained unsatisfied, only then did he file the complaint a quo for estafa. Private complainant’s demand for the issuance of a stock certificate in his name in return for his investment negates the claim that petitioners received the money with the obligation to return the same.” The attempt to convert an investment into a loan only came after the stock transfer was not feasible.

Regarding the element of misappropriation, the CA presumed it because Legaspi and Daganas failed to issue stock certificates in Kit’s name. The Supreme Court rejected this presumption. To misappropriate means to use another’s property as if it were one’s own or to devote it to a different purpose. There was no evidence that Legaspi and Daganas used Kit’s money for their own benefit.

The Court further explained that under the Corporation Code, shares of stock are personal property transferable by delivery of the certificate, and the transfer must be recorded in the corporation’s books. Only then does the corporation have an obligation to recognize the transferee as a stockholder. Since Kit agreed to have Balisi purchase the stocks, he could not demand a stock certificate in his name. The Supreme Court cited the case of Spouses Pascual v. Ramos:

All men are presumed to be sane and normal and subject to be moved by substantially the same motives. When of age and sane, they must take care of themselves. In their relations with others in the business of life, wits, sense, intelligence, training, ability and judgment meet and clash and contest, sometimes with gain and advantage to all, sometimes to a few only, with loss and injury to others. In these contests men must depend upon themselves — upon their own abilities, talents, training, sense, acumen, judgment. The fact that one may be worsted by another, of itself, furnishes no cause of complaint.

The absence of both the elements of trust and misappropriation led the Supreme Court to acquit Legaspi and Daganas. The Court acknowledged that Kit lost money due to a failed investment, but that does not automatically make the other parties criminally liable.

FAQs

What was the key issue in this case?	The key issue was whether the elements of estafa through misappropriation, particularly the element of trust or obligation to return the money, were proven beyond reasonable doubt.
What is estafa through misappropriation?	Estafa through misappropriation involves using money or property received in trust or with an obligation to return it, for one’s own benefit or a different purpose than agreed upon, causing prejudice to the owner.
What is the main element that the prosecution failed to prove?	The prosecution failed to prove that Legaspi and Daganas received the money in trust or with an obligation to return it to Kit; instead, the money was an investment in iGen-Portal.
Why was the element of ‘trust’ not established?	The element of trust was not established because the money was given as payment for shares of stock, not under a fiduciary agreement or obligation to return the funds.
What did the Court say about foreign ownership restrictions?	The Court noted that the scheme to have Balisi purchase the stocks, while potentially violating other laws, negated the claim that Legaspi and Daganas abused Kit’s confidence since Kit agreed to this arrangement.
What happens if some elements of estafa are not proven?	If any of the essential elements of estafa are not proven beyond reasonable doubt, the accused cannot be convicted of the crime.
What was the significance of iGen-Portal in this case?	The fact that the money was deposited into iGen-Portal’s account, a separate legal entity, was significant because it showed that the money was not received by Legaspi and Daganas in their personal capacities.
Did the Court find any wrongdoing on the part of Legaspi and Daganas?	The Court did not find evidence that Legaspi and Daganas misused or misappropriated the funds for their own benefit, leading to their acquittal.

This case serves as a reminder of the importance of clearly defining the terms of business transactions and the need to prove all elements of a crime beyond reasonable doubt. While investments can be risky, the failure of a business venture does not automatically equate to criminal liability for its organizers.

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: JOSE PAULO LEGASPI Y NAVERA v. PEOPLE, G.R. No. 225799, October 15, 2018