THIRD DIVISION

[G.R. No. 114398. October 24, 1997]

CARMEN LIWANAG, petitioner, vs. THE HON. COURT OF APPEALS
and THE PEOPLE OF THE PHILIPPINES, represented by the
Solicitor General,respondents.
D E C I S I O N
ROMERO, J .:
Petitioner was charged with the crime of estafa before the Regional Trial
Court (RTC), Branch 93, Quezon City, in an information which reads as
follows:
That on or between the month of May 19, 1988 and August, 1988 in Quezon City,
Philippines and within the jurisdiction of this Honorable Court, the said accused, with
intent of gain, with unfaithfulness, and abuse of confidence, did then and there,
willfully, unlawfully and feloniously defraud one ISIDORA ROSALES, in the
following manner, to wit: on the date and in the place aforementioned, said
accused received in trust from the offended party cash money amounting
to P536,650.00, Philippine Currency, with the express obligation involving the duty to
act as complainants agent in purchasing local cigarettes (Philip Morris and Marlboro
cigarettes), to resell them to several stores, to give her commission corresponding to
40% of the profits; and to return the aforesaid amount of offended party, but said
accused, far from complying her aforesaid obligation, and once in possession thereof,
misapplied, misappropriated and converted the same to her personal use and benefit,
despite repeated demands made upon her, accused failed and refused and still fails and
refuses to deliver and/or return the same to the damage and prejudice of the said
ISIDORA ROSALES, in the aforementioned amount and in such other amount as
may be awarded under the provision of the Civil Code.
CONTRARY TO LAW.
The antecedent facts are as follows:
Petitioner Carmen Liwanag (Liwanag) and a certain Thelma Tabligan went
to the house of complainant Isidora Rosales (Rosales) and asked her to join
them in the business of buying and selling cigarettes. Convinced of the
feasibility of the venture, Rosales readily agreed. Under their agreement,
Rosales would give the money needed to buy the cigarettes while Liwanag
and Tabligan would act as her agents, with a corresponding 40% commission
to her if the goods are sold; otherwise the money would be returned to
Rosales. Consequently, Rosales gave several cash advances to Liwanag
and Tabligan amounting to P633,650.00.
During the first two months, Liwanag and Tabligan made periodic visits to
Rosales to report on the progress of the transactions. The visits, however,
suddenly stopped, and all efforts by Rosales to obtain information regarding
their business proved futile.
Alarmed by this development and believing that the amounts she
advanced were being misappropriated, Rosales filed a case of estafa against
Liwanag.
After trial on the merits, the trial court rendered a decision dated January
9, 1991, finding Liwanag guilty as charged. The dispositive portion of the
decision reads thus:
WHEREFORE, the Court holds, that the prosecution has established the guilt of the
accused, beyond reasonable doubt, and therefore, imposes upon the accused, Carmen
Liwanag, an Indeterminate Penalty of SIX (6) YEARS, EIGHT (8) MONTHS AND
TWENTY ONE (21) DAYS OF PRISION CORRECCIONAL TO FOURTEEN (14)
YEARS AND EIGHT (8) MONTHS OF PRISION MAYOR AS MAXIMUM, AND
TO PAY THE COSTS.
The accused is likewise ordered to reimburse the private complainant the sum
of P526,650.00, without subsidiary imprisonment, in case of insolvency.
SO ORDERED.
Said decision was affirmed with modification by the Court of Appeals in a
decision dated November 29, 1993, the decretal portion of which reads:
WHEREFORE, in view of the foregoing, the judgment appealed from is hereby
affirmed with the correction of the nomenclature of the penalty which should be:
SIX (6) YEARS, EIGHT (8) MONTHS and TWENTY ONE (21) DAYS of prision
mayor, as minimum, to FOURTEEN (14) YEARS and EIGHT (8) MONTHS
of reclusion temporal, as maximum. In all other respects, the decision is
AFFIRMED.
SO ORDERED.
Her motion for reconsideration having been denied in the resolution of
March 16, 1994, Liwanag filed the instant petition, submitting the following
assignment of errors:
1. RESPONDENT APPELLATE COURT GRAVELY ERRED IN AFFIRMING
THE CONVICTION OF THE ACCUSED-PETITIONER FOR THE CRIME OF
ESTAFA, WHEN CLEARLY THE CONTRACT THAT EXIST (sic) BETWEEN
THE ACCUSED-PETITIONER AND COMPLAINANT IS EITHER THAT OF A
SIMPLE LOAN OR THAT OF A PARTNERSHIP OR JOINT VENTURE HENCE
THE NON RETURN OF THE MONEY OF THE COMPLAINANT IS PURELY
CIVIL IN NATURE AND NOT CRIMINAL.
2. RESPONDENT APPELLATE COURT GRAVELY ERRED IN NOT
ACQUITTING THE ACCUSED-PETITIONER ON GROUNDS OF REASONABLE
DOUBT BY APPLYING THE EQUIPOISE RULE.
Liwanag advances the theory that the intention of the parties was to enter
into a contract of partnership, wherein Rosales would contribute the funds
while she would buy and sell the cigarettes, and later divide the profits
between them.
[1]
She also argues that the transaction can also be interpreted
as a simple loan, with Rosales lending to her the amount stated on an
installment basis.
[2]

The Court of Appeals correctly rejected these pretenses.
While factual findings of the Court of Appeals are conclusive on the parties
and not reviewable by the Supreme Court, and carry more weight when these
affirm the factual findings of the trial court,
[3]
we deem it more expedient to
resolve the instant petition on its merits.
Estafa is a crime committed by a person who defrauds another causing
him to suffer damages, by means of unfaithfulness or abuse of confidence, or
of false pretenses of fraudulent acts.
[4]

From the foregoing, the elements of estafa are present, as follows: (1) that
the accused defrauded another by abuse of confidence or deceit; and (2) that
damage or prejudice capable of pecuniary estimation is caused to the
offended party or third party,
[5]
and it is essential that there be a fiduciary
relation between them either in the form of a trust, commission or
administration.
[6]

The receipt signed by Liwanag states thus:
May 19, 1988 Quezon City
Received from Mrs. Isidora P. Rosales the sum of FIVE HUNDRED TWENTY SIX
THOUSAND AND SIX HUNDRED FIFTY PESOS (P526,650.00) Philippine
Currency, to purchase cigarrets (sic) (Philip & Marlboro) to be sold to customers. In
the event the said cigarrets (sic) are not sold, the proceeds of the sale or the said
products (shall) be returned to said Mrs. Isidora P. Rosales the said amount
of P526,650.00 or the said items on or before August 30, 1988.
(SGD & Thumbedmarked) (sic)
CARMEN LIWANAG
26 H. Kaliraya St.
Quezon City
Signed in the presence of:
(Sgd) Illegible (Sgd) Doming Z. Baligad
The language of the receipt could not be any clearer. It indicates that the
money delivered to Liwanag was for a specific purpose, that is, for the
purchase of cigarettes, and in the event the cigarettes cannot be sold, the
money must be returned to Rosales.
Thus, even assuming that a contract of partnership was indeed entered
into by and between the parties, we have ruled that when money or property
have been received by a partner for a specific purpose (such as that obtaining
in the instant case) and he later misappropriated it, such partner is guilty of
estafa.
[7]

Neither can the transaction be considered a loan, since in a contract of
loan once the money is received by the debtor, ownership over the same is
transferred.
[8]
Being the owner, the borrower can dispose of it for whatever
purpose he may deem proper.
In the instant petition, however, it is evident that Liwanag could not
dispose of the money as she pleased because it was only delivered to her for
a single purpose, namely, for the purchase of cigarettes, and if this was not
possible then to return the money to Rosales. Since in this case there was no
transfer of ownership of the money delivered, Liwanag is liable for conversion
under Art. 315, par. 1(b) of the Revised Penal Code.
WHEREFORE, in view of the foregoing, the appealed decision of the
Court of Appeals dated November 29, 1993, is AFFIRMED. Costs against
petitioner.
SO ORDERED.
Melo, Francisco, and Panganiban, JJ., concur.
Narvasa, C.J., (Chairman), on leave.
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-48349 December 29, 1986
FRANCISCO HERRERA, plaintiff-appellant,
vs.
PETROPHIL CORPORATION, defendant-appellee.
Paterno R. Canlas Law Offices for plaintiff-appellant.

CRUZ, J .:
This is an appeal by the plaintiff-appellant from a decision rendered by the then Court of First
Instance of Rizal on a pure question of law.
1

The judgment appealed from was rendered on the pleadings, the parties having agreed during the
pretrial conference on the factual antecedents.
The facts are as follows: On December 5, 1969, the plaintiff-appellant and ESSO Standard Eastern.
Inc., (later substituted by Petrophil Corporation) entered into a "Lease Agreement" whereby the
former leased to the latter a portion of his property for a period of twenty (20) years from said date,
subject inter alia to the following conditions:
3. Rental: The LESSEE shall pay the LESSOR a rental of Pl.40 sqm. per month on 400 sqm.
and are to be expropriated later on (sic) or P560 per month and Fl.40 per sqm. per month on
1,693 sqm. or P2,370.21 per month or a total of P2,930.20 per month 2,093 sqm. more or
less, payable yearly in advance within the 1st twenty days of each year; provided, a financial
aid in the sum of P15,000 to clear the leased premises of existing improvements thereon is
paid in this manner; P10,000 upon execution of this lease and P5,000 upon delivery of
leased premises free and clear of improvements thereon within 30 days from the date of
execution of this agreement. The portion on the side of the leased premises with an area of
365 sqrm. more or less, will be occupied by LESSEE without rental during the lifetime of this
lease. PROVIDED FINALLY, that the Lessor is paid 8 years advance rental based on
P2,930.70 per month discounted at 12% interest per annum or a total net amount of
P130,288.47 before registration of lease. Leased premises shall be delivered within 30 days
after 1st partial payment of financial aid.
2

On December 31, 1969, pursuant to the said contract, the defendant-appellee paid to the plaintfff-
appellant advance rentals for the first eight years, subtracting therefrom the amount of P101,010.73,
the amount it computed as constituting the interest or discount for the first eight years, in the total
sum P180,288.47. On August 20, 1970, the defendant-appellee, explaining that there had been a
mistake in computation, paid to the appellant the additional sum of P2,182.70, thereby reducing the
deducted amount to only P98,828.03.
3

On October 14, 1974, the plaintiff-appellant sued the defendant-appellee for the sum of P98,828.03,
with interest, claiming this had been illegally deducted from him in violation of the Usury Law.
4
He
also prayed for moral damages and attorney's fees. In its answer, the defendant-appellee admitted the
factual allegations of the complaint but argued that the amount deducted was not usurious interest but a
given to it for paying the rentals in advance for eight years.
5
Judgment on the pleadings was rendered for
the defendant.
6

Plaintiff-appellant now prays for a reversal of that judgment, insisting that the lower court erred in the
computation of the interest collected out of the rentals paid for the first eight years; that such interest
was excessive and violative of the Usury Law; and that he had neither agreed to nor accepted the
defendant-appellant's computation of the total amount to be deducted for the eight years advance
rentals.
7

The thrust of the plaintiff-appellant's position is set forth in paragraph 6 of his complaint, which read:
6. The interest collected by defendant out of the rentals for the first eight years was
excessive and beyond that allowable by law, because the total interest on the said amount is
only P33,755.90 at P4,219.4880 per yearly rental; and considering that the interest should be
computed excluding the first year rental because at the time the amount of P281, 199.20 was
paid it was already due under the lease contract hence no interest should be collected from
the rental for the first year, the amount of P29,536.42 only as the total interest should have
been deducted by defendant from the sum of P281,299.20.
The defendant maintains that the correct amount of the discount is P98,828.03 and that the same is
not excessive and above that allowed by law.
As its title plainly indicates, the contract between the parties is one of lease and not of loan. It is
clearly denominated a "LEASE AGREEMENT." Nowhere in the contract is there any showing that
the parties intended a loan rather than a lease. The provision for the payment of rentals in advance
cannot be construed as a repayment of a loan because there was no grant or forbearance of money
as to constitute an indebtedness on the part of the lessor. On the contrary, the defendant-appellee
was discharging its obligation in advance by paying the eight years rentals, and it was for this
advance payment that it was getting a rebate or discount.
The provision for a discount is not unusual in lease contracts. As to its validity, it is settled that the
parties may establish such stipulations, clauses, terms and condition as they may want to include;
and as long as such agreements are not contrary to law, morals, good customs, public policy or
public order, they shall have the force of law between them.
8

There is no usury in this case because no money was given by the defendant-appellee to the
plaintiff-appellant, nor did it allow him to use its money already in his possession.
9
There was neither
loan nor forbearance but a mere discount which the plaintiff-appellant allowed the defendant-appellee to
deduct from the total payments because they were being made in advance for eight years. The discount
was in effect a reduction of the rentals which the lessor had the right to determine, and any reduction
thereof, by any amount, would not contravene the Usury Law.
The difference between a discount and a loan or forbearance is that the former does not have to be
repaid. The loan or forbearance is subject to repayment and is therefore governed by the laws on
usury.
10

To constitute usury, "there must be loan or forbearance; the loan must be of money or something
circulating as money; it must be repayable absolutely and in all events; and something must be
exacted for the use of the money in excess of and in addition to interest allowed by law."
11

It has been held that the elements of usury are (1) a loan, express or implied; (2) an understanding
between the parties that the money lent shall or may be returned; that for such loan a greater rate or
interest that is allowed by law shall be paid, or agreed to be paid, as the case may be; and (4) a
corrupt intent to take more than the legal rate for the use of money loaned. Unless these four things
concur in every transaction, it is safe to affirm that no case of usury can be declared.
12

Concerning the computation of the deductible discount, the trial court declared:
As above-quoted, the 'Lease Agreement' expressly provides that the lessee (defendant)
shag pay the lessor (plaintiff) eight (8) years in advance rentals based on P2,930.20 per
month discounted at 12% interest per annum. Thus, the total rental for one-year period is
P35,162.40 (P2,930.20 multiplied by 12 months) and that the interest therefrom is
P4,219.4880 (P35,162.40 multiplied by 12%). So, therefore, the total interest for the first
eight (8) years should be only P33,755.90 (P4,129.4880 multiplied by eight (8) years and not
P98,828.03 as the defendant claimed it to be.
The afore-quoted manner of computation made by plaintiff is patently erroneous. It is most
seriously misleading. He just computed the annual discount to be at P4,129.4880 and then
simply multiplied it by eight (8) years. He did not take into consideration the naked fact that
the rentals due on the eight year were paid in advance by seven (7) years, the rentals due on
the seventh year were paid in advance by six (6) years, those due on the sixth year by five
(5) years, those due on the fifth year by four (4) years, those due on the fourth year by three
(3) years, those due on the third year by two (2) years, and those due on the second year by
one (1) year, so much so that the total number of years by which the annual rental of
P4,129.4880 was paid in advance is twenty-eight (28), resulting in a total amount of
P118,145.44 (P4,129.48 multiplied by 28 years) as the discount. However, defendant was
most fair to plaintiff. It did not simply multiply the annual rental discount by 28 years. It
computed the total discount with the principal diminishing month to month as shown by
Annex 'A' of its memorandum. This is why the total discount amount to only P 8,828.03.
The allegation of plaintiff that defendant made the computation in a compounded manner is
erroneous. Also after making its own computations and after examining closely defendant's
Annex 'A' of its memorandum, the court finds that defendant did not charge 12% discount on
the rentals due for the first year so much so that the computation conforms with the provision
of the Lease Agreement to the effect that the rentals shall be 'payable yearly in advance
within the 1st 20 days of each year. '
We do not agree. The above computation appears to be too much technical mumbo-jumbo and
could not have been the intention of the parties to the transaction. Had it been so, then it should
have been clearly stipulated in the contract. Contracts should be interpreted according to their literal
meaning and should not be interpreted beyond their obvious intendment.
13

The plaintfff-appellant simply understood that for every year of advance payment there would be a
deduction of 12% and this amount would be the same for each of the eight years. There is no
showing that the intricate computation applied by the trial court was explained to him by the
defendant-appellee or that he knowingly accepted it.
The lower court, following the defendant-appellee's formula, declared that the plaintiff-appellant had
actually agreed to a 12% reduction for advance rentals for all of twenty eight years. That is absurd. It
is not normal for a person to agree to a reduction corresponding to twenty eight years advance
rentals when all he is receiving in advance rentals is for only eight years.
The deduction shall be for only eight years because that was plainly what the parties intended at the
time they signed the lease agreement. "Simplistic" it may be, as the Solicitor General describes it,
but that is how the lessor understood the arrangement. In fact, the Court will reject his subsequent
modification that the interest should be limited to only seven years because the first year rental was
not being paid in advance. The agreement was for auniform deduction for the advance rentals for
each of the eight years, and neither of the parties can deviate from it now.
On the annual rental of P35,168.40, the deducted 12% discount was P4,220.21; and for eight years,
the total rental was P281,347.20 from which was deducted the total discount of P33,761.68, leaving
a difference of P247,585.52. Subtracting from this amount, the sum of P182,471.17 already paid will
leave a balance of P65,114.35 still due the plaintiff-appellant.
The above computation is based on the more reasonable interpretation of the contract as a
whole rather on the single stipulation invoked by the respondent for the flat reduction of
P130,288.47.
WHEREFORE, the decision of the trial court is hereby modified, and the defendant-appellee
Petrophil Corporation is ordered to pay plaintiff-appellant the amount of Sixty Five Thousand One
Hundred Fourteen pesos and Thirty-Five Centavos (P65,114.35), with interest at the legal rate until
fully paid, plus Ten Thousand Pesos (P10,000.00) as attorney's fees. Costs against the defendant-
appellee.
SO ORDERED.
Yap (Chairman), Narvasa, Melencio-Herrera and Feliciano, JJ., concur.