PABLITO MURAO and NELIO HUERTAZUELA, 

petitioners,.
vs.
PEOPLE OF THE PHILIPPINES, respondent.
G.R. No. 141485 (June 30, 2005)

Facts:

Petitioner Murao is the sole owner of Lorna Murao Industrial Commercial

Enterprises (LMICE), a company engaged in the business of selling and refilling fire
extinguishers with branches in Palawan, Naga, Legaspi, Mindoro, etc. Petitioner Nelio
Huertazuela is the Branch Manager of LMICE, Puerto Princesa City, Palawan.

Murao and private complainant, Federico entered into a Dealership Agreement

for the marketing, distribution, and refilling of fire extinguishers within Puerto Princesa
City. According to the dealership agreement, Federico, as a dealer for LMICE, could
obtain fire extinguishers from LMICE at a 50% discount, provided that he sets up his
own sales force, acquires and issues his own sales invoice, and posts a bond with
LMICE as security for the credit line extended to him by LMICE. Failing to comply with
the conditions, Federico was still allowed to act as a part-time sales agent for LMICE
entitled to a percentage commission from the sales of fire extinguishers.

The amount of Federico's commission as sales agent for LMICE was under
contention. Federico claimed that he was entitled to commission equivalent to 50% of
the gross sales he had made on behalf of LMICE, while LMICE maintained that he
should receive only 30% of the net sales because it is a company policy that part-time
sales agents were entitled to a commission of only 25% of the net sales but since
Federico helped in establishing LMICE's branch in Puerto Princesa, he was to receive
the same commission as the full-time sales agent which was 30%.

Federico’s 1st transaction: 2 fire extinguishers sold to Landbank of the

Philippines (LBP), Puerto Princesa branch for the price of ₱7,200.00. A check was issued
pay to the order of LMICE c/o Federico for the amount of ₱5,936.40 after deducting
from the original sales price the 15% discount granted by Federico and the 3%
withholding tax. Federico encashed the check at LB and remitted only around ₱2,436.40
to LMICE, while he kept around ₱3,500.00 for himself as his commission from the sale.

Petitioners alleged that it was contrary to their standard operating procedure of LMICE
that Federico was named payee of the check on behalf of LMICE and that he is not
authorized to encash the said check. Despite irregularities, LMICE forgave him because
he promised to make-up for his misdeeds in the next transaction.

Federico’s 2nd transaction: with City Government of Puerto Princesa for the
refill of 202 fire extinguishers. The City Government requested to split the transaction
into two purchase orders and shall be paid separately. LMICE refilled and delivered all
202 fire extinguishers (154 units first, 43 second and remaining 5 units last).

The core issue here is limited to the first purchase order only dated January 3, 1994 for
the refill of 99 fire extinguishers for a total cost of ₱309,000.00. The City Government
issued a check to LMICE in the amount of ₱300,572.73.

Federico went to see Huertazuela to demand his commission in the amount of

₱154,500.00 from the payment of the City Government. Huertazuela refused to pay
Federico since they could not agree on the proper amount. Federico filed a complaint
for estafa against LMICE, then an information was filed in RTC, convicting Murao
and Huertazuela for Estafa. CA affirmed the RTC judgment with modification.

RTC: Found them liable in the following provision of RPC.

ART. 315. Swindling (estafa). – Any person who shall defraud another by any of the
means mentioned herein below . . .

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

All the foregoing elements are present in this case. The aborted testimony of Mrs.
Norma Dacuan, Cashier III of the Treasurer’s Office of the City of Puerto Princesa
established the fact that indeed, on June 16, 1994, co-accused Nelio Huertazuela took
delivery of Check No. 611437 with face value of ₱300,572.73, representing payment for
the refill of 99 cylinders of fire extinguishers. Although the relationship between
complaining witness Chito Federico and LMIC is not fiduciary in nature, still the clause
"any other obligation involving the duty to make delivery of or to return" personal
property is broad enough to include a "civil obligation.

CA affirmed the RTC judgment with modification.

ISSUE:

WON petitioners are liable for Estafa.

SC:
NO, petitioners are not liable for Estafa.

Two essential elements of Estafa are missing. First, that money or goods be
received by the offender in trust or on commission and second, there be
misappropriation or conversion of such money by offender.

The findings of the RTC and the Court of Appeals that petitioners committed estafa
rest on the erroneous belief that private complainant Federico, due to his right to
commission, already owned 50% of the amount paid by the City Government of Puerto
Princesa to LMICE by virtue of Check No. 611437, so that the collection and deposit of
the said check by petitioners under the account of LMICE constituted misappropriation
or conversion of private complainant Federico’s commission.

Federico's right to a commission does not make him a joint owner of the money paid
to LMICE but merely establishes the relation of agent and principal. As a sales agent,
Federico entered into negotiations with prospective clients for and on behalf of his
principal, LMICE.

All profits made and any advantage gained by an agent in the execution
of his agency should belong to the principal. Payments made by the clients for
the fire extinguishers pertained to LMICE. When Huertazuela picked up the check and
deposited under the account of LMICE, he was merely collecting what rightfully
belonged to LMICE. Federico may claim commission based on his right to just
compensation under his agency contract with LMICE, but not as the automatic owner of
the 50% portion of the said payment. Since LMICE is the lawful owner of the entire
proceeds of the check payment, then Huertazuela did not receive the same in trust or
on commission to return the same to Federico. There was no fiduciary relationship
between Federico and Huertazuela so he could not have committed estafa. The
obligation of LMICE to pay Federico his commission does not arise from any duty to
return the money to its supposed owner but rather to give just compensation to its
agent for his services.

No estafa was committed, so there's no criminal liability. Only civil liability for
Federico's commission (whether it be 30% or 50%) which is a violation of the agency
contract and thus subject of a separate and independent civil action.
 FABIOLA SEVERINO, plaintiff-appellee,
vs.
GUILLERMO SEVERINO, defendant-appellant.
FELICITAS VILLANUEVA, intervenor-appellee.
G.R. No. L-18058 ( January 16, 1923)

Agent: Defendant Guillermo Severino

Principal: Melecio Severino

Facts:

Melecio Severino owned 428 hectares of land in Silay, Occidental Negros.

During Melecio’s lifetime, his brother, Guillermo worked to administer the land for
Melecio’s behalf. When Melecio died in 1915, Guillermo continued to occupy the said
land. In 1916, a parcel survey was made of the lands in the municipality of Silay,
including the land here in question, and cadastral proceedings were instituted for the
registration of the land titles within the surveyed area. In the cadastral proceedings,
Roque Hofileña, as lawyer for Guillermo, filed answers in his behalf, claiming the lots
mentioned as the property of his client. No opposition was presented in the
proceedings, therefore, the court decreed the title in Guillermo’s favor in 1917.

It may be further observed that at the time of the cadastral proceedings, Fabiola
was a minor; that Guillermo did not appear personally in the proceedings and did not
there testify; that the only testimony in support of his claim was that of his attorney
Hofileña, who swore that he knew the land and that he also knew that Guillermo
Severino inherited the land from his father and that he, by himself, and through his
predecessors in interest, had possessed the land for thirty years.

Thus, this action brought by Fabiola, alleged natural daughter and sole heir of
Melecio to compel Guillermo to convey to her four parcels of land described in the
complaint, or in default thereof to pay her the sum of P800,000 in damages for
wrongfully causing said land to be registered in his own name. Felicitas Villanueva, in
her capacity as administratrix of the estate of Melecio Severino, has filed a complaint in
intervention claiming the same relief as Fabiola, except in so far as she prays that the
conveyance be made, or damages paid, to the estate.

Lower Court: recognized Fabiola as the natural child of Melecio; ordered Guillermo to
convey the 428-hectare land to the administratrix of the estate (Villanueva). The court
did not allow Guillermo to present evidence to the effect that the land was owned in
common by all heirs of Ramon Severino (father of the Severino brothers), and not by
Melencio alone. The court also said that Guillermo was already stopped from denying
Melencio’s title (in the Ratio, there was a previous case Montelibano vs Severino
wherein Guillermo himself admitted that he was Melencio’s mere agent and that the
land was Melencio’s)

ISSUE: W/N Guillermo employed fraud in procuring title to the land - YES

Guillermo’s Contention: Since the present action is with regard to the alleged fraud on
his part in registering the land in his name, he should have been allowed to present
evidence (See LC ruling above). Also, more than a year having elapsed since the entry
of the final decree adjudicating the land to the defendant, therefore, said decree cannot
now be re-opened. Under Section 38 of the Land Registration Act, he has an
indefeasible title to the land and that the question of ownership of the land being thus
judicially settled, the question as to the previous relations between the parties cannot
now be inquired into.

SC:

“This is not an action under Section 38 of the LRA to reopen or set aside a decree; it is
an action in personam against an agent to compel him to return, or
retransfer, to the heirs or the estate of its principal, the property committed
to his custody as such agent, to execute the necessary documents thereof, to
pay damages.”

Proof of Agency

Guillermo’s testimony in the case of Montelibano v. Severino (which forms a part of the
evidence in the present case) is, in fact, conclusive in this respect. He there stated
under oath that from the year 1902 up to the time the testimony was given, in the year
1913, he had been continuously in charge and occupation of the land as the encargado
or administrator of Melecio Severino; that he had always known the land as the
property of Melecio Severino; and that the possession of the latter had been peaceful,
continuous, and exclusive. In his answer filed in the same case, the same defendant,
through his attorney, disclaimed all personal interest in the land and averred that it was
wholly the property of this brother Melecio.

Neither is it disputed that the possession enjoyed by the defendant at the time of
obtaining his decree was of the same character as that held during the lifetime of his
brother, except in so far as shortly before the trial of the cadastral case the defendant
had secured from his brothers and sisters a relinquishment in his favor of such rights as
they might have in the land.

Agent-Principal Relationship is Fiduciary

It is an elementary and very old rule that in regard to property forming the subject-
matter of the agency, an agent is estopped from acquiring or asserting a title adverse
to that of the principal. His position is analogous to that of a trustee and he cannot
consistently, with the principles of good faith, be allowed to create in himself an interest
in opposition to that of his principal or cestui que trust. The Court then cited several US
cases to this effect.

An agent is not only estopped from denying his principal’s title to the property, but he is
also disabled from acquiring interests therein adverse to those of his principal during
the term of the agency.

Guillermo’s 2nd Contention: His title has become res adjudicate through the decree of
registration and cannot now be disturbed.

SC: The decree of registration did not extinguish the principal’s personal
right of action

The decree of registration determined the legal title to the land as of the date of the
decree; as to that there is no question. That, under section 38 of the LRA, this decree
became conclusive after one year from the date of the entry is not disputed and no one
attempts to disturb the decree of the proceedings upon which it is based; the plaintiff in
intervention merely contends that in equity the legal title so acquired inured to the
benefit of the estate of Melecio Severino, Guillermo’s principal and cestui que trust and
asks that this superior equitable right be made effective by compelling Guillermo as the
holder of the legal title, to transfer it to the estate.

Before the issuance of the decree of registration it was the undoubted duty of the
defendant to restore the property committed to his custody to his principal, or to the
latter’s estate, and that the principal had a right of action in personam to enforce
the performance of this duty and to compel the defendant to execute the necessary
conveyance to that effect. The only question remaining for consideration is, therefore,
whether the decree of registration extinguished this personal right of action.

Turning to our own Land Registration Act, we find no indication there of an intention to
cut off, through the issuance of a decree of registration, equitable rights or remedies
such as those here in question. On the contrary, section 70 of the Act provides:

"Registered lands and ownership therein, shall in all respects be subject to the
same burdens and incidents attached by law to unregistered land. Nothing
contained in this Act shall in any way be construed to relieve registered land or
the owners thereof from any rights incident to the relation of husband and wife,
or from liability to attachment on mesne process or levy on execution, or from
liability to any lien of any description established by law on land and the
buildings thereon, or the interest of the owner in such land or buildings, or to
 change the laws of descent, or the rights of partition between copartners, joint
tenants and other cotenants, or the right to take the same by eminent domain,
or to relieve such land from liability to be appropriated in any lawful manner for
the payment of debts, or to change or affect in any other way any other rights
or liabilities created by law and applicable to unregistered land, except as
otherwise expressly provided in this Act or in the amendments hereof."

Section 102 of the Act, after providing for actions for damages in which the
Insular Treasurer, as the Custodian of the Assurance Fund is a party, contains
the following proviso:

"Provided, however, That nothing in this Act shall be construed to deprive the
plaintiff of any action which he may have against any person for such loss or
damage or deprivation of land or of any estate or interest therein without
joining the Treasurer of the Philippine Archipelago as a defendant therein."

That an action such as the present one is covered by this proviso can hardly admit of
doubt. In Cabanos v. Register of Deeds of Laguna and Obinana (40 Phil., 620), it was
held that, while a purchaser of land under a pacto de retro cannot institute a real action
for the recovery thereof where the vendor under said sale has caused such lands to be
registered in his name without said vendee’s consent, yet he may have his personal
action based on the contract of sale to compel the execution of an unconditional deed
for the said lands when the period for repurchase has passed.

Torrens titles being based on judicial decrees there is, of course, a strong presumption
in favor of their regularity or validity, and in order to maintain an action such as the
present the proof as to the fiduciary relation of the parties and of the breach of trust
must be clear and convincing. Such proof is, as we have seen, not lacking in this case.

But once the relation and the breach of trust on the part of the fiduciary is thus
established, there is no reason, neither practical nor legal, why he should not be
compelled to make such reparation as may lie within his power for the injury caused by
his wrong, and as long as the land stands registered in the name of the party who is
guilty of the breach of trust and no rights of innocent third parties are adversely
affected, there can be no reason why such reparation should not, in the proper case,
take the form of a conveyance or transfer of the title to the cestui que trust. No reasons
of public policy demand that a person guilty of fraud or breach of trust be permitted to
use his certificate of title as a shield against the consequences of his own wrong.