A Comprehensive Guide to the Misappropriation of Entrusted Money under Philippine Law
Key statutes:
• Revised Penal Code (RPC) — Art. 315 ¶1(b) estafa by misappropriation or conversion (private offenders)
• Revised Penal Code — Art. 217 malversation (public officers or those in a quasi‑public capacity)
• Presidential Decree 115 — Trust Receipts Law (makes failure to turn over proceeds or goods estafa)
• R.A. 10951 (2017) — modernizes the penalty ladder in Art. 315
• Civil Code — Arts. 19, 20, 21 & 1170‑1177 (civil liability and damages)
1. Conceptual Framework
| Situation | Possible crime | Core fiduciary element |
|---|---|---|
| Private individual receives money, property, or any personalty in trust, on commission, for administration, or under any obligation to deliver/return and converts or misappropriates it | Estafa (Art. 315 ¶1(b) RPC) | A juridical relation of trust or confidence, even if created only by informal agreement |
| Public officer, or private individual charged with the custody of public funds, diverts them | Malversation (Art. 217 RPC) | Official custody of public funds |
| Person given goods or proceeds under a trust receipt fails to turn over the same | Estafa via PD 115 | Implied trust created by trust receipt |
| Corporation’s directors/officers divert corporate funds | Estafa or Sec. 155, R.A. 11232 (corporate code) | Fiduciary duties of directors/trustees |
Misappropriation means “to take something for one’s own benefit, or for a purpose different from that agreed upon.” Conversion may be by affirmative act (spending, pledging, selling) or by a mere refusal to account or return despite demand.
2. Elements of Estafa by Misappropriation (Art. 315 ¶1(b))
- Receipt of money, goods, or other personal property
- The receipt is in trust, on commission, for administration, or under an obligation to deliver/return the same (or an equivalent) to the owner/other person
- Misappropriation, conversion, or denial of receipt (or an act that prevents restitution)
- Prejudice to another capable of pecuniary estimation
Demand is not an element but is best evidence of conversion. Jurisprudence (e.g., Balatbat v. Court of Appeals, G.R. 86485, June 27 1990) treats failure to account upon demand as circumstantial proof of misappropriation.
3. Penalties (after R.A. 10951, effective 24 Sept 2017)
| Amount or value of money/property | Penalty (principal) | Duration* |
|---|---|---|
| ≤ ₱5,000 | Arresto Mayor (medium & max) | 2 m‑6 m to 6 m‑1 d |
| ₱5,001 – ₱20,000 | Prisión Correccional (minimum) | 6 m‑1 d – 2 y‑4 m |
| ₱20,001 – ₱40,000 | Prisión Correccional (minimum & medium) | 6 m‑1 d – 4 y‑2 m |
| ₱40,001 – ₱1,200,000 | Prisión Correccional (maximum) to Prisión Mayor (minimum) | 4 y‑2 m – 8 y |
| ₱1,200,001 – ₱2,400,000 | Prisión Mayor (medium) | 8 y‑1 d – 10 y |
| ₱2,400,001 – ₱4,400,000 | Prisión Mayor (maximum) | 10 y‑1 d – 12 y |
| ₱4,400,001 – ₱8,800,000 | Reclusión Temporal (minimum) | 12 y‑1 d – 14 y‑8 m |
| ₱8,800,001 – ₱10,000,000 | Reclusión Temporal (medium) | 14 y‑8 m‑1 d – 17 y‑4 m |
| > ₱10,000,000 | Reclusión Temporal (maximum) | 17 y‑4 m‑1 d – 20 y plus increment of 1 y for every additional ₱10 M (max 20 y)** |
*Durations reflect the divisible periods under Article 76.
**The RPC caps imprisonment at 20 years for indivisible maximum penalties.
Accessory & Civil Liabilities
- Perpetual or temporary absolute disqualification (Arts. 33, 42) if the penalty reaches prisión mayor or higher.
- Restitution, reparation, or indemnification (Arts. 104‑107). Return of the money does not extinguish criminal liability but may mitigate penalty (Art. 13 ¶10, voluntary surrender/restitution).
4. Qualified & Related Offenses
| Variant | Statute | Key distinctions |
|---|---|---|
| Qualified theft | Art. 310 RPC | Offender is domestic servant or abuse of confidence (e.g., bank teller stealing deposits); penalties 2 degrees higher than simple theft |
| Malversation | Art. 217 RPC | Public funds; demand is elemental; penalty tied to amount + perpetual disqualification |
| Syndicated estafa | P.D. 1689 | > 5 offenders OR a syndicate; involves estafa or swindling; reclusión temporal to reclusión perpetua regardless of amount |
| Access Device & Credit Card Fraud | R.A. 8484 | Unauthorized use of credit facilities; may coexist with estafa when entrusted cards/funds are diverted |
| B.P. 22 (Bouncing Checks Law) | Batas Pambansa 22 | Not estafa; no fiduciary relation required; focus on issuance of worthless check |
5. Procedural Highlights
- Venue: Where the element of conversion or demand and non‑compliance occurred.
- Prescription:
- Based on the afflictive/correctional classification after R.A. 10951.
- If penalty is prisión mayor → crime prescribes in 15 years.
- If only prisión correccional → 10 years (Art. 90 RPC).
- Bail: Always bailable, but amount increases with the gravity of the charge.
- Arraignment to Promulgation: Accused may offer restitution; court may consider plea‑bargaining to theft or lower value if restitution is made.
- Corporate Officers: The responsible officer doctrine allows prosecution of signatories who actually received or controlled the funds.
6. Defenses & Mitigating Circumstances
| Defense | Typical Argument | Caveat |
|---|---|---|
| No fiduciary relation | Money was a loan or investment, hence ownership transferred | Courts examine the real intent; mere use of the words “borrow” or “loan” will not prevail over evidence of entrustment |
| Novation | Parties later converted the obligation into a loan | Novation that occurs after misappropriation does not erase criminal liability (Art. 317 RPC) |
| Good‑faith use | Funds used for purpose beneficial to owner | Must prove express or implied authority |
| Accounting in ordinary course | Delay was due to bookkeeping issues, not intent to defraud | Requires contemporaneous records, emails, vouchers |
| Restitution & Plea to Lesser Offense | May reduce penalty one degree or entitle accused to probation | Discretionary on the court |
7. Illustrative Jurisprudence
| Case | G.R. No. & Date | Doctrinal Point |
|---|---|---|
| Falguera v. People | G.R. 194247, Feb 15 2022 | Payment after demand but before filing still civilly relevant yet does not bar prosecution |
| Villacorta v. People | G.R. 192155, Mar 27 2013 | Conversion may consist of mere failure to liquidate cash advance by a corporate officer |
| People v. Go | G.R. 168539, Sept 13 2010 | Trust receipts violator commits estafa even if the contract is civil in form |
| Tubb v. People | G.R. 209655, Jan 14 2015 | Demand letter held sufficient even if not personally received, as long as accused is aware or refuses receipt |
| People v. Gallardo | G.R. 194107, Nov 29 2017 | For malversation, even temporary use of public funds constitutes misappropriation |
8. Intersection with Civil Remedies
- Independent civil action for damages under Arts. 19‑21 Civil Code (abuse of rights), or quasi‑delict under Art. 2176.
- Attachment may issue in estafa for recovery of property under Rule 127.
- Corporate derivative suits when officers divert corporate funds (Sec. 155, R.A. 11232).
9. Compliance & Risk Management Checklist (for businesses)
- Segregate funds held in trust; use separate accounts or escrow.
- Dual‑control & signatory rules for withdrawals.
- Periodic, documented liquidations of cash advances and trust receipts.
- Written authority for any utilization of entrusted funds outside the original mandate.
- Whistle‑blower channels to detect early diversion.
- Employee fidelity bonds to cover losses and deter misconduct.
10. Practical Take‑Aways
Misappropriation of entrusted money is a confidence crime: the moment money is received in trust, legal ownership remains with the entruster. Diverting it—even silently—is penalized irrespective of subsequent reimbursement. The gravity of the penalty now hinges on the current value of the loss under R.A. 10951, with ₱10 million as the tipping point into long‑term reclusión temporal plus incremental years.
Always document fiduciary relationships and keep meticulous records; in Philippine criminal law, documentation is your first line of defense.
Disclaimer: This article is for educational purposes and is not legal advice. For specific transactions or criminal charges, consult a Philippine‑licensed lawyer.