The United States vs. Eusebio Clarin
### Facts:
Pedro Larin delivered P172 to Pedro Tarug, intending to start a business with Tarug, Eusebio Clarin, and Carlos de Guzman in trading mangoes. The agreement was that the profits from the business would be shared equally between Larin and the three men.
Tarug, Clarin, and Guzman engaged in the mango trading business and earned P203. However, they failed to deliver Larin’s share of the profits or provide an account of the capital. Larin, believing he had been defrauded, pressed charges against the trio for estafa.
The provincial fiscal filed charges solely against Eusebio Clarin, accusing him of appropriating Larin’s P172 and his share of the profits amounting to P15.50. Tarug and Guzman appeared as witnesses, acknowledging their involvement in the business and the facts presented.
The Court of First Instance of Pampanga convicted Clarin of estafa, sentencing him to six months of arresto mayor along with accessory penalties. Clarin was also ordered to return P172 and P30.50 as Larin’s share of the profits or face subsidiary imprisonment in case of insolvency.
Clarin appealed the decision, raising the issue before the Philippine Supreme Court.
### Issues:
1. Whether the act of failing to return the capital and share of profits to Pedro Larin constitutes estafa under No. 5 of Article 535 of the Penal Code.
2. Whether the proper legal remedy for Larin is a criminal action of estafa or a civil action arising from the partnership contract.
### Court’s Decision:
**Issue 1: Estafa under Penal Code**
– The Supreme Court ruled that the actions of Clarin did not constitute estafa under No. 5 of Article 535 of the Penal Code. The Court clarified that estafa involves the misappropriation of money received under a deposit, commission, or similar obligations. However, money received for a partnership does not fall under this category because it is invested in the business, where risks and benefits are shared among partners.
**Issue 2: Proper Legal Remedy**
– The Court determined that the appropriate remedy for Larin is not the criminal action for estafa but a civil action based on the partnership contract. Since Larin participated in the risks and benefits of a partnership, he should seek a liquidation of the partnership and levy on its assets for the return of his capital and share of profits.
The Supreme Court acquitted Eusebio Clarin and dismissed the complaint for estafa without prejudice to Larin’s right to institute a civil action.
### Doctrine:
1. **Partnership and Misappropriation of Funds:** Money invested in a partnership is subject to the business risks and benefits. Failure to return such money does not constitute estafa but may give rise to a civil action for the recovery of the capital and profits after the liquidation of the partnership assets.
2. **No. 5 of Article 535, Penal Code:** Misapplication of money under estafa covers money received under deposits, commissions, or other unilateral contracts, not partnerships.
### Class Notes:
– **Elements of Partnership:** As per Article 1665 of the Civil Code, a partnership is formed when two or more persons agree to contribute money, property, or industry to a common fund intending to divide profits among themselves.
– **Estafa:** No. 5 of Article 535 of the Penal Code specifies that estafa involves the appropriation or misapplication of money received under a duty to return it, such as in deposits or commissions.
– **Civil vs. Criminal Actions:** Misapplications involving partnership funds should be addressed through civil litigation, seeking liquidation and division of partnership assets, not through criminal estafa charges.
### Historical Background:
The case reflects the principles governing partnership agreements and the scope of criminal liability under Philippine law during the early 20th century under U.S. sovereignty. Historically, the decision illustrates the judicial distinction between civil obligations arising from business ventures and criminal misappropriation, ensuring that business disputes are resolved within the appropriate legal framework.
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