PABLITO MURAO AND NELIO HUERTAZUELA, PETITIONERS, VS. PEOPLE OF THE PHILIPPINES, RESPONDENT.

Murao versus People of the Philippines

The Case

This is a criminal case for estafa by misappropriation or conversion under Article 315, paragraph 1, subparagraph b of the Revised Penal Code. Pablito Murao, sole owner of a fire extinguisher business, and Nelio Huertazuela, its branch manager in Puerto Princesa City, were accused of defrauding their sales agent, Chito Federico, by refusing to turn over his claimed commission from a government sale. The case matters because the Supreme Court draws a bright line between a civil obligation to pay a commission and the criminal offense of estafa, and because it clarifies who owns the proceeds of a sale negotiated by an agent.

Procedural History

The City Prosecution Office of Puerto Princesa City found a prima facie case for estafa and recommended the filing of an information against both petitioners. The case was raffled to Branch 52 of the Regional Trial Court of Puerto Princesa City, Palawan. After trial, the trial court rendered judgment finding both petitioners guilty beyond reasonable doubt as co-principals of estafa under Article 315, paragraph 1, subparagraph b, sentencing each to an indeterminate penalty and ordering them to pay Federico his commission of 154,500 pesos plus attorney's fees.

Petitioners appealed to the Court of Appeals, which affirmed the conviction but modified the penalty and deleted the award of attorney's fees. The Court of Appeals denied their motion for reconsideration. Petitioners then filed a petition for review on certiorari before the Supreme Court.

Facts

Pablito Murao owned Lorna Murao Industrial Commercial Enterprises, a business engaged in selling and refilling fire extinguishers, with Nelio Huertazuela as branch manager in Puerto Princesa City. In September 1994, Murao and Chito Federico entered into a dealership agreement, but Federico failed to comply with its conditions. He was nonetheless allowed to act as a part-time sales agent on commission. The parties disagreed on the rate: Federico claimed 50 percent of gross sales, while petitioners maintained he was entitled to 30 percent of net sales.

Federico facilitated a transaction with the City Government of Puerto Princesa for the refill of 202 fire extinguishers, split into two purchase orders. The case concerns the first purchase order, for the refill of 99 fire extinguishers worth 309,000 pesos. On 16 June 1994, the City Government issued a check for 300,572.73 pesos, net of withholding tax, naming the business as payee. Huertazuela claimed the check and deposited it in the business's current account with PCIBank.

The next day, Federico demanded 154,500 pesos as his commission. Huertazuela refused because they could not agree on the amount. Federico filed a complaint for estafa, and an information was filed against both petitioners.

Issues

• Whether or not the petitioners are liable for estafa under Article 315, paragraph 1, subparagraph b of the Revised Penal Code, or whether their liability is merely civil in nature.
• Whether or not the private complainant is entitled to a 50 percent commission on the gross sales.

Applicable Provisions

Article 315, paragraph 1, subparagraph b of the Revised Penal Code defines the offense charged:

Any person who shall defraud another by any of the means mentioned hereinbelow . . . 1. With unfaithfulness or abuse of confidence, namely: . . . (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 Court uses this provision to test whether the money collected was received in trust or under a duty to return it to Federico.

Article 1868 of the Civil Code defines the relationship that the Court finds existed between the business and Federico:

Agency is a special contract whereby a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter.

This provision establishes that Federico was an agent, so that the proceeds of the sale belonged to the principal and not to him.

Ruling

On the first issue, the Court ruled in favor of the petitioners and acquitted them. Two essential elements of estafa were absent: that the offender received the money in trust, on commission, for administration, or under an obligation to deliver or return it; and that he misappropriated or converted it. Federico's right to a commission did not make him a joint owner of the payment. It merely established the relation of agent and principal. As a sales agent, Federico negotiated for and on behalf of the business, and the purchase orders, invoices, and receipts were all in its name. All profits made by an agent belong to the principal. Since the check named the business as the lone payee, Huertazuela, in collecting and depositing it, was merely collecting what rightfully belonged to the business. The Court held that one cannot fraudulently appropriate to himself money that is his own.

The Court also distinguished the Manahan case relied upon by the trial court. The phrase "or any other obligation involving the duty to make delivery of, or to return the same" refers to contracts of bailment, such as lease of personal property, deposit, and commodatum, where juridical possession is transferred and the recipient must return the same thing. Here, no transfer of juridical possession took place, and the business had nothing to deliver or return to Federico. His right to commission arose from the duty of a principal to give just compensation to its agent, not from a duty to return money.

On the second issue, the Court found it unnecessary to fix the rate of commission. Although the petitioners admitted a civil liability, that liability arose from a violation of the agency contract, not from a criminal act. The Court held it improper to impose, in a criminal action, a civil liability arising from a civil contract, which should be the subject of a separate and independent civil action.

Doctrine

A fiduciary relationship between the complainant and the accused is an essential element of estafa by misappropriation or conversion. Without it, the crime cannot be committed. A sales agent's right to a commission does not make him a co-owner of the proceeds of the sale; it merely establishes the relation of agent and principal, and the proceeds belong to the principal. The obligation of a principal to pay its agent's commission arises from the agency contract, not from a duty to deliver or return money, and its breach gives rise only to civil liability, enforceable in a separate civil action.

Disposition

The Court reversed and set aside the decision of the Court of Appeals, acquitted the petitioners, and ordered the release and return of their cash bonds.

Remember This

Memorize this line: a commission is a civil obligation of the principal, not property held in trust, so its nonpayment is not estafa. Examiners use this case to test the fiduciary element of estafa and the distinction between a criminal act and a mere breach of an agency contract.