JOSE A. SADDUL, JR., PETITIONER, VS. THE HON. COURT OF APPEALS AND THE PEOPLE OF THE PHILIPPINES, RESPONDENTS.

Before the Court is the Second Motion for Reconsideration filed
by the petitioner, Jose A. Saddul, Jr., praying that we set aside our resolution of April
16, 1990 denying his petition for review of the decision promulgated on
September 1, 1989 by the Court of Appeals in CA-G.R. CR No. 06234,
entitled:  “The People of the Philippines,
Plaintiff-Appellee vs. Jose A. Saddul, Jr.,
Accused-Appellant” which affirmed on appeal the judgment of the Regional
Trial Court of Manila, finding him guilty of estafa
under Article 315, par. 1(b) of the Revised Penal Code.  After deliberating on the motion for
reconsideration and the respondents’ comments, the Court resolved to grant the
motion and set aside its resolution of April
16, 1990.

In 1973, the petitioner became a vice-president and director of
Amalgamated Motors (Phils.) Inc. (AMPI for brevity)
(p. 5, tsn, February 15, 1988).  AMPI was then a wholly-owned subsidiary of
British Leyland (p. 31, tsn, November 9, 1989).  It was the sole distributor in the
Philippines of British and Japanese heavy equipment, trucks, farm implements,
spare parts, and other automotive products and
machines manufactured by Leyland International, Land Rover Ltd. (LAND ROVER for
brevity), Avelyn Barfourd,
Mitsubishi, and Furokawa (p. 7, tsn,
February 15, 1988; p. 6, tsn, November 9, 1987).

Since 1980, Felimon R. Cuevas had been
a dealer of AMPI for government sales. 
In 1981, he bought into the company and became its majority stockholder
and president (p. 5, tsn, February 15, 1988).  Upon Cuevas’ ascendancy in the corporation, Saddul was made a director as well as Executive
Vice-President and General Manager.  As
such, he was in charge of the operations of the company and was
“delegated” to make sales
of some units and spare parts (p. 7, tsn, November 9,
1989).  As distributor not only of
British but also Japanese automotive products, AMPI carried an inventory of
some P15 to P20 million worth of spare parts of the companies it represented in
the Philippines (p. 37, tsn, November 9, 1987).

In 1985, LAND ROVER supplied P1.5 million worth of spare parts to
the Armed Forces of the Philippines (AFP) through AMPI, but the merchandise
were returned to AMPI because they were not the correct items needed by the AFP
(p. 27, tsn, February 15, 1988).  The parts were kept by AMPI pending disposal
instructions from LAND ROVER.

On March 4, 1985,
Erwin Lyndsay, LAND ROVER’s
area manager for Southeast Asia, sent the following
letter to Saddul, Executive Vice-President and
General Manager of AMPI, regarding the spare parts rejected by the AFP:

“Dear Joe:

“Further to my
letter dated 27 February 1985,
we have now given consideration to the matter of disposal of the Land Rover
parts wrongly supplied to A.F.P. and currently held by Ampi
on our behalf, pending disposal instructions from us.

“As agreed in
principle during our meeting, we now authorize
you to undertake the disposal of the
parts at the best possible
prices available from your local market.

“We would expect
you to detail to us all sales made from this stock in terms of part number,
quantity sold and price obtained.

“We agree
that a sum amounting to 20% of
the sale value be retained by Amalgamated
Motors as a handling in a charge
and that the balance is placed into
a separate client account which will be available to LRPE or any other
party authorized by LRPE.

“I trust that these
arrangements meet with your approval and will satisfactorily solve the problem
of the AFP parts disposal.

“If you have any
problems with the above arrangements or need any further authorizations at this
stage, please do not hesitate to contact me.

“Yours sincerely,

“(SGD)

“ERWIN LYNDSAY

Area Manager?
South East Asia” (Underscoring ours: 
Exh. I or F, pp. 126, 141 RTC Record.)

Saddul sold some of the spare parts
(worth P143,085.00) to Rover Motor Parts (a different entity from LAND ROVER)
whose president was Jose P. Garcia.  The
sales were evidenced by AMPI Sales Invoices (Exhs. A,
A-1 to A-8) and summarized in the Statement of Accounts dated June 9, 1986 (Exh.
B) sent by AMPI to Rover Motor Parts. 
Payments were made by the buyer to Saddul.  AMPI’s 20% handling
commission on the sale amounted to P28,617.

Pursuant to LAND ROVER’S directive that the sale value of these
spare parts be “placed into a separate client account which will be
available to LRPE or any other party authorized by LRPE” (Exh. 1 or F), Saddul did not
deposit the proceeds of the sales in AMPI’s account
hut held them in trust for LAND ROVER.  Saddul testified thus:

“ATTY. ROBLES:

“Q:   Is there any reason why you have not remitted
to Amalgamated Motors Philippines this 20% handling charge?

“A:   The reason is this transaction covered a lot
of spare parts and the P143,085.00 was only a part of the entire shipment so
that there is still an amount due to Land Rover Ltd.  I was requested by Land Rover Ltd. to hold on
to the 20% until a proper account of the other side could be made and proceeds
of items which I do not know, only they would know, how much is owing
Amalgamated Motors Philippines, Inc.” (p. 10, tsn,
February 15, 1988.)

“ATTY. CALIMA:

“Q:   So, in other words, the instructions were
given to you before you sold to Rover Motor Parts?

“A:   Generally, the instruction was to sell it for
Land Rover and which I did,
sir.  Subsequently, when sales proceeds
were received, I asked them what will I do
with the money and they said, keep the money until I can give you the necessary
authority to open an account for Land Rover.

“Q:  My question to you is when did you receive
the instruction from Land Rover?  After
the sale or before the sale was effected to Rover Motor Parts?

“A:   Instructions for what?

“Q:  To withhold the proceeds and not to remit the proceeds?

“A:   The instruction to hold, it is after the
sale, sir.” (p. 23­-24, tsn, February 15, 1988.)

“ATTY. CALIMA:

“Q:  And inspite (sic)
of the fact that Amalgamated
Motors Philippines, Inc. can retain 20% handling charge you were still
instructed not to remit the 20% to Amalgamated Motors?

 “xxx                     xxx
                  xxx

“J. SADDUL JR.:

“A:   Yes, sir. 
I was told pending full accounting of the entire volume of the
transaction.  As soon as the entire
transaction is worked out through the accounting process then we will know whether Land Rover will owe Mr. Cuevas
or Mr. Cuevas will owe Land Rover.

“Q:  But again Mr. Witness, you will agree to this
portion referring to the handling charge, it is not qualified by proper
accounting?

“A:   No, it is not, sir.  In the letter, it is not.” (p. 28, tsn, February 15, 1988.)

Saddul was “terminated” by
AMPI in the early part of 1986 for cause or causes that Cuevas did not
disclose, but, according to Edgar Guilatco, a
prosecution witness, Saddul “left the
company” (pp. 6-7, tsn, January 6, 1988).  He thereupon formed his own outfit which he
named “Multipart Motors International, Inc.”
What appears in the record is that on May 30, 1986, Lyndsay wrote a
letter to Saddul enclosing “a note which
effectively authorizes you to act as our distributor” (Exh.
5).

This appointment, although not yet official, must have leaked to,
and deeply wounded AMPI’s President Felimon Cuevas.  It
was presumably the reason why in a letter of the same date, May 30, 1986,
through counsel Atty. Benjamin G. Calima, AMPI
demanded from Saddul an accounting of the spare parts
supposedly worth P575,053.50 sold by
him to Rover Motor Parts “during the time when you were still connected
with the company” (Exh. E).

On November 10, 1986,
Lyndsay wrote a letter to Cuevas requesting for a
statement on AMPI’s inventory of British Leyland
spare parts, indicating:

“1.  Opening stock by part number.

“2.  Sales made by part number and price obtained.

“3. 
Net proceeds credited to client account.

“4. 
Present stock holding by part number.” (p. 127, Exh.
G, RTC Record.)

Cuevas replied by telex that some of those spare parts had been
sold by Saddul who did not turn over the proceeds to
AMPI, and that he (Cuevas) filed a criminal case against Saddul
“to recover the money so I can remit immediately” (Exh. H).

On March 26, 1987,
Lyndsay sent a reply-telex requesting information as
to “which items have been sold and at what price and which items remain in
stock” and sought “a reconciliation of this stock” (Exh. I).

On June 3, 1987,
based on Cuevas’ complaint, an information for estafa
in the amount of P143,085.00 (I.S. No. 86-20607) was filed against Saddul in the Regional Trial Court of Manila:

“That in or about and during the period comprised between
February 12, 1985 and September 10, 1985, inclusive, in the City of Manila,
Philippines, the said accused did then and there wilfully,
unlawfully and feloniously defraud AMALGAMATED MOTORS (PHILS.), INC., a
corporation duly organized and existing under the laws of the Republic of the
Philippines with business address at Leyland House, 21st corner Railroad Sts.,
Port Area, this City, in the following manner, to wit:  the said accused, being then the Executive
Vice-President and General Manager of said Amalgamated Motors (Phils.), Inc., having been authorized by
Land Rover Parts & Equipment Ltd.,
England, to undertake disposal of rejected
spare parts and engines at the best
possible prices available in the local
market, which rejected spare parts and engines were then held by
Amalgamated Motors (Phils.), Inc. in behalf of the
Land Rover Parts & Equipment Ltd. pending disposal and instructions from
the latter company,  actually disposed
and offered the said parts and engines for sale to a certain Jose P. Garcia and
obtained from the latter the sum of P143,085.00 as purchase price of the same,
and the said accused, once in possession of the said sum of P143,085.00, far from
complying with his obligation to turn over the
proceeds of the sale to said Amalgamated
Motors Phils., Inc.,
failed and refused, and still fails and refuses to do so notwithstanding
demands made upon him, and instead, with intent to defraud, he wilfully, unlawfully and feloniously, misappropriated,
misapplied and converted the same to his own personal use and benefit, to the
damage and prejudice of said AMALGAMATED MOTORS (PHILS.) INC. in the aforesaid
total amount of P143,085.00, Philippine currency.” (Emphasis supplied; p.
1, RTC Record).

On August 6, 1987,
Lyndsay wrote Cuevas requesting that all British
Leyland parts in the possession of AMPI be delivered to Saddul’s
Multipart Motors Philippines, Inc. “who is our new parts distributor for
the Philippines.”
He further advised Cuevas that “in view of the change in distributorship
to Multipart Motors, we will not hold you (AMPI) liable” for the proceeds
(P143,085.00) of the spare parts sold by Saddul to
Rover Motor Parts.  The letter reads as
follows:

“6 August 1987

“Amalgamated
Motors (Phils.) Inc.

Railroad Street
Corner 21st Street

Port Area

Manila

Philippines

Attention Col.
Felimon R. Cuevas

Dear Sirs,

“We have been
advised that Security Bank and Trust Co. have obtained a Writ of Attachment
over your properties and assets.  We
further understand that the parts supplied in error to Philippine Armed Forces
and returned to Amalgamated Motors for safe keeping have been included under
the Attachment.  We therefore request that you inform the bank and the Court
that these parts do not form part of your properties and assets and should in
consequence, be released from the Attachment.

“We should also be
pleased if you would transfer these parts to:

“Multipart Motors
Philippines Inc. who is our new parts distributor for the Philippines.

“We would take this
opportunity to raise the matter
of the parts and major units which were already disposed of
before the granting of the Writ of Attachment.

“We have
been advised by Mr. Jose A. Saddul that he is holding
proceeds of sale, amounting to Pesos 143,084.00,
of some of the subject parts in line with instructions
contained in our letter dated 4 March 1985.  We believe that you are aware of this
arrangement.  Please note that in view
of the change in distributorship to
Multipart Motors, we will not hold you liable
for this amount, but will accept accounts from Mr. Saddul covering the parts he has sold.  As agreed, we will provide Amalgamated Motors
with a handling charge amounting to 20% of the proceeds and sale of these
parts.

“With regard
to the balance of parts held by
you, we shall be grateful if you will provide
to us an account detailing sales made.  Upon receipt we will
settle your handling charges at 20% of
sales as agreed.

“We look forward to
hearing from you.

“Yours sincerely,

(SGD)

ERWIN LYNDSAY

Regional Manager

Export Sales”
(Underscoring supplied; Exh. 2, pp. 142-143, RTC
Record)

Despite the advice from Land Rover, AMPI prosecuted the criminal
case against Saddul. 
On August 29, 1988,
the trial court rendered a decision finding him guilty of estafa
with unfaithfulness or abuse of confidence (Art. 315, subpar.
1-b, Rev. Penal Code).  The dispositive part of the decision reads as follows:

“WHEREFORE, the Court finds the
accused Jose A. Saddul, Jr. guilty beyond reasonable
doubt of the crime of estafa, defined and penalized
under Article 315, par. 1(b) of the Revised Penal Code, involving the amount of
P28,617.00 and in the absence of any modifying circumstance, hereby sentences
him to suffer an indeterminate penalty ranging from six (6) months and one (1)
day of prision correccional,
as minimum, to eight (8) years of prision mayor,
as maximum, to indemnify the offended party, Amalgamated Motors (Phils.), Inc., in the amount of P28,617.00 without
subsidiary imprisonment in case of insolvency, and to pay the costs.” (p.
26, Rollo.)

Saddul appealed to the Court of Appeals
(CA-G.R. CR No. 06234.) On September 1,
1989, the Court of Appeals affirmed the trial court’s
decision.  Hence, this petition for
review.

The Court has carefully considered the petition for review on certiorari
and its annexes, as well as the comments of the public respondent, including
the original records which the Court caused to be elevated for
examination.  We find merit in the
petition for review.

One of the ways of committing the crime of estafa
with unfaithfulness or abuse of confidence is:

“(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.” (Art. 315, par. 1 subpar.
b, Rev. Penal Code.)

The appropriation or conversion of money or property received, to
the prejudice of the owner thereof, is the essence of estafa
through misappropriation (Ramirez, 9 Phil. 67). 
The words “convert” and “misappropriate” connote an
act of using or disposing of another’s property as if it were one’s own, or of
devoting it to a purpose or use different from that agreed upon.  To misappropriate to one’s own use includes,
not only conversion to one’s personal advantage, but also every attempt to
dispose of the property of another without right.  (Webber vs. Court of Appeals, 57 OG 2937;
People vs. Panes 37 Phil. 118.)

Conversion is an unauthorized assumption and exercise of the
right of ownership over goods or personal chattels belonging to another,
resulting in the alteration of their condition or the exclusion of the owner’s
rights.  It takes place when a person
actually appropriates the property of another to his own benefit, use, and
enjoyment (Trinidad vs. Court of Appeals, 53 OG 731
citing Bouvier’s Law Dictionary).

The elements of the crime of embezzlement or estafa
with abuse of confidence are:

(a)   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;

(b)   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;

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

(d)   that there be demand for the return of the
property.  (p. 247, Vol. III, 1988 Ed.,
Revised Penal Code by R.C. Aquino)

The first element of the crime does not exist in this case
because Saddul did not receive the Leyland Automotive
spare parts from Cuevas or AMPI in trust, on commission, for administration, or
under a duty to make delivery of, or return the same.  Saddul received the
Leyland spare parts from the AFP in trust for LAND ROVER which authorized him to sell them (“we now authorize
you to undertake the disposal of the parts at the best possible prices
available from your local market” – Exh. 1 or F, p. 126, RTC Record).

Since Saddul did not convert or divert
the property (he sold them in accordance with the authority given to him by
Land Rover) nor did he deny that he received them, the second element of the
crime was also not present.

SadduI’s failure to deliver the
proceeds of the sale of the spare parts to AMPI or Cuevas did not constitute a
conversion or diversion to the injury of the latter who, not being the owner of
the property, incurred no loss and suffered ho injury on account of Saddul’s retention of the
said proceeds while awaiting Land Rover’s instructions regarding the special
account where he should deposit them.  Saddul simply complied with the directive in Land Rover’s letter of March 4, 1985 that the proceeds be “placed into a separate
client account which will be available to LRPE or any other party authorized by
LRPE” (Exh.1 or F).  Implicit in
this directive was an injunction not to deliver the proceeds to AMPI.  The third element of the crime charged is absent.

The fourth and final element of demand for the return of the
property is also lacking.  AMPI or Cuevas
made no demand for the return of the spare parts sold by Saddul
because Cuevas knew that those spare parts were to be sold for the account of
Land Rover.

While it is true that under Lyndsay’s
letter of March 4, 1985 (Exh. 1 or F) AMPI was
entitled to a handling commission of 20% of the sale value of the spare parts
(equivalent to P28,617.00) which Saddul failed to
deliver to AMPI, Saddul explained that he
subsequently received instructions from Land Rover to hold the 20% commission
until AMPI shall have given an accounting of the remaining Leyland spare parts
(worth P1.2 million) still held by AMPI. 
(pp. 10, 23-28, tsn, February 15, 1988.)

That testimony of Saddul was not controverted by the complainant.  On the contrary, it was confirmed by Lyndsay’s letter dated August 6, 1987 to AMPI or Cuevas (Exh. 2) asking for an accounting of “balance of the
parts held by you x x x
upon receipt (of which)* we will
settle your handling charges at 20% of sales as agreed.”

By obeying the instructions of Land Rover to withhold payment of AMPI’s 20% handling charge (P28,617.00) Saddul
did not become liable for embezzlement to AMPI fork he did not receive that sum
from AMPI.  It was part of the price he
received from Rover Motor Parts, the buyer of the spare parts.

“Where the accused did not receive
the money from the complainant for safekeeping or on commission or for
administration and in trust, he is not criminally liable for failure to return
the money.” (Jose Barredo vs. Court of Appeals,
54 OG 1037).

AMPI’s recourse, in order to recover
its 20% handling charge, is to file a civil action to collect that amount from
its erstwhile principal, Land Rover, not this criminal action for estafa against Saddul.

WHEREFORE, the petitioner’s motion for reconsideration of
the resolution dated April 16, 1990
is granted.  The decision dated September 1, 1989, of the Court of
Appeals in CA-G.R. No. 06234 is hereby reversed and set aside.  The petitioner is acquitted of the crime
charged, with costs de oficio.

SO ORDERED.

Narvasa, (Chairman), Cruz, Gancayco, and Medialdea, JJ., concur.z

* Words in parenthesis supplied.