Chee Kiong Yap v.

Malik
FACTS:
 This is a petition for certiorari, prohibition, and mandamus with preliminary injunction.
 Petitioners alleged that respondent Municipal Judge Nabdar J. Malik of Jolo, Sulu, acted without
jurisdiction, in excess of jurisdiction and with grave abuse of discretion when:
1. (a)he held in the preliminary investigation of the charges of estafa filed by respondents
Rosalinda Amin, Tan Chu Kao and Augusto Sajor against petitioners that there was a prima
facie case against the latter;
2. (b)he issued warrants of arrest against petitioners after making the above determination;
and
3. (c)he undertook to conduct trial on the merits of the charges which were docketed in his
court as Criminal Cases No. M-111, M-183 and M-208.  Criminal Case No. M-111.
 Rosalinda M. Amin charges petitioners Yam Chee Kiong and Yam Yap Kieng with estafa through
misappropriation of the amount of P50,000.00.
 But the complaint states on its face that said petitioners received the amount from respondent
Rosalinda M. Amin “as a loan.”
 Criminal Case No. M-183, Respondent Tan Chu Kao charges petitioners Yam Chee Kiong, Jose
Y.C. Yam, Ampang Mah, and Anita Yam, alias Yong Tay, with estafa through misappropriation of
the amount of P30,000.00. Likewise, the complaint states on its face that the P30,000.00 was “a
simple loan.
 In Criminal Case No. M-208, respondent Augusto Sajor charges petitioners Jose Y.C. Yam, Anita
Yam alias Yong Tai Mah, Chee Kiong Yam and Richard Yam, with estafa through
misappropriation of the amount of P20,000.00.
 In a sworn statement dated September 29, 1976, submitted to respondent judge to support the
complaint, respondent Augusto Sajor states that the amount was a “loan.”

ISSUE: WON Respondents may be held liable of Estafa through Misappropriation for non-
payment of debts

RULING: NO.
 We agree with the petitioners that the facts alleged in the three criminal complaints do not
constitute estafa through misappropriation.
 Estafa through misappropriation is committed according to Article 315, paragraph 1,
subparagraph (b), of the Revised Penal Code as follows:
Art. 315. Swindling (Estafa). - Any person who shall defraud another by any of the
means mentioned herein below shall be punished by:
xxx xxx xxx 
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.

 “Art. 1953.—A person who receives a loan of money or any other fungible thing acquires
the ownership thereof, and is bound to pay to the creditor an equal amount of the same
kind and quality.”
 It can be readily noted from the above-quoted provisions that in simple loan (mutuum), as
contrasted to commodatum, the borrower acquires ownership of the money, goods or personal
 property borrowed. Being the owner, the borrower can dispose of the thing borrowed (Article
248, Civil Code) and his act will not be considered misappropriation thereof.
 In U.S. vs. Ibañ ez, 19 Phil. 559, 560 (1911), this Court held that it is not estafa for a person to
refuse to pay his debt or to deny its existence.
 “We are of the opinion and so decide that when the relation is purely that of debtor and
creditor, the debtor cannot be held liable for the crime of estafa, under said article, by merely
refusing to pay or by denying the indebtedness.”
 In the case at bar, Petitioners had no such obligation to return the same money, i.e., the bills or
coins, which they received from private respondents. This is so because as clearly stated in
criminal complaints, the related civil complaints and the supporting sworn statements, the
sums of money that petitioners received were loans.

Naguiat vs CA and Queaño

FACTS:

 Queañ o applied with Naguiat a loan for P200,000, which the latter granted.
 Naguiat indorsed to Queañ o an Associated bank Check No. 090990 for the amount of P95,000
and issued also her own Filmanbank Check to the order of Queañ o for the amount of P95,000.
 The proceeds of these checks were to constitute the loan granted by Naguiat to Queañ o.
 To secure the loan, Queañ o executed a Deed of Real Estate Mortgage in favor of Naguiat, and
surrendered the owner’s duplicates of titles of the mortgaged properties.
 The deed was notarized and Queañ o issued to Naguiat a promissory note for the amount of
P200,000. Queañ o also issued a post-dated check amounting to P200,000 payable to the order
of Naguait.
 The check was dishonoured for insufficiency of funds. Demand was sent to Queañ o.
 Shortly thereafter, Queao and Ruebenfeldt met with Naguiat. At the meeting, Queao told Naguiat
that she did not receive the proceeds of the loan, adding that the checks were retained by
Ruebenfeldt, who purportedly was Naguiats agent.
 Naguiat applied for the extrajudicial foreclosure of the mortgage with the Sheriff of Rizal
Province, who then scheduled the foreclosure sale.
 3 days before the scheduled sale, Queao filed the case before the Pasay City RTC, seeking the
annulment of the mortgage deed. The trial court eventually stopped the auction sale.
 RTC: rendered judgment, declaring the Deed of Real Estate Mortgage null and void, and
ordering Naguiat to return to Queao the owners duplicates of her titles to the mortgaged lots.
 Naguiat appealed the decision before the Court of Appeals, making no less than eleven
assignments of error. CA promulgated the decision now assailed before us that affirmed in
toto the RTC decision.

ISSUE
Whether or not the issuance of check resulted in the perfection of the loan contract. (NO)

HELD
 The Court held in the negative.
 There was no evidence was submitted by Naguiat that the checks she issued or endorsed were
actually encashed or deposited.
 The mere issuance of the checks did not result in the perfection of the contract of loan.
 For the Civil Code provides that the delivery of bills of exchange and mercantile documents
such as checks shall produce the effect of payment only when they have been cashed. It is
 only after the checks have produced the effect of payment that the contract of loan may be
deemed perfected. Art. 1934 of the Civil Code provides:
- An accepted promise to deliver something by way of commodatum or simple loan is
binding upon the parties, but the commodatum or simple loan itself shall not be
perfected until the delivery of the object of the contract.
 A loan contract is a real contract, not consensual, and, as such, is perfected only upon the
delivery of the object of the contract.
 The objects of the contract are the loan proceeds which Queao would enjoy only upon the
encashment of the checks signed or indorsed by Naguiat.
 If indeed the checks were encashed or deposited, Naguiat would have certainly presented the
corresponding documentary evidence, such as the returned checks and the pertinent bank
records. Since Naguiat presented no such proof, it follows that the checks were not encashed or
credited to Queaos account.

The existence of an agency relationship between Naguiat and Ruebenfeldt is supported by ample
evidence. Naguiat instructed Ruebenfeldt to withhold from Queao the checks she issued or indorsed
to Queao, pending delivery by the latter of additional collateral. Ruebenfeldt served as agent of
Naguiat on the loan application of Queaos friend, Marilou Farralese, and it was in connection with
that transaction that Queao came to know Naguiat. It was also Ruebenfeldt who accompanied
Queao in her meeting with Naguiat and on that occasion, on her own and without Queao asking for
it, Reubenfeldt actually drew a check for the sum of P220,000.00 payable to Naguiat, to cover for
Queaos alleged liability to Naguiat under the loan agreement.

The Court of Appeals recognized the existence of an agency by estoppel citing Article 1873 of the
Civil Code. Apparently, it considered that at the very least, as a consequence of the interaction
between Naguiat and Ruebenfeldt, Queao got the impression that Ruebenfeldt was the agent of
Naguiat, but Naguiat did nothing to correct Queaos impression. In that situation, the rule is clear.
One who clothes another with apparent authority as his agent, and holds him out to the public as
such, cannot be permitted to deny the authority of such person to act as his agent, to the prejudice
of innocent third parties dealing with such person in good faith, and in the honest belief that he is
what he appears to be. CA is correct in invoking the said rule on agency by estoppel.

More fundamentally, whatever was the true relationship between Naguiat and Ruebenfeldt is
irrelevant in the face of the fact that the checks issued or indorsed to Queao were never encashed or
deposited to her account of Naguiat.