LCP

SUBJECT: Obligations and Contracts

TOPIC: Extinguishment of Obligation

SYCIP vs. COURT OF APPEALS

G.R. No. L-38711, January 31, 1985

FACTS
>> Dill - (owner of Stocks), Biochemical Research Laboratory, In
>> Sycip - Broker (Accused)
>> Lapuz (Victim), People

 1961, Jose Lapuz received 2,000 shares of stocks of Republic Flour Mills, Inc., in the name of Dwight Dill
who left for Honolulu. Lapuz "was supposed to sell the shares at present market value out of which he’d
get commission." According to Lapuz, accused Sycip told him that he had connections in the Stock
Exchange so he could sell at a good price. Lapuz made it clear that the shares did not belong to him, and
were only entrusted to him for sale. Lapuz then gave the shares to Sycip.
 Then, Lapuz received a letter from Sycip that 1,758 shares have been sold for P29k, but transaction could
not be concluded until they received the Power of Attorney executed by Dill authorizing the transfer of
the certificate.
 Lapuz was able to secure POA of Dill, and gave it to Sycip. The POA authorized the sale of 1,758 shares
only; the difference of 242 shares were given back to Biochemical Research Laboratory, Inc. (ELAM: Dr Dill
is owner/officer of Biochemical?) o Of the 1,758 shares of stock, Sycip sold 758 shares out of the 1,758
shares for wc Lapuz issued a receipt. On same day, Lapuz turned over the sum of P9,981.40 in payment of
758 shares of P14/share. (ELAM: Issue is with the 500 out of the remaining 1000 shares)

 Sycip then wrote Lapuz informing him that although the deal (for the 1,000 shares) has been closed,
actual delivery has been withheld pending receipt of payment. So, Sycip returned the shares enclosing
Certificate No. 955 for 500 shares, Certificate No. 952 for 50 shares in name of Felix Gonzales, and
photostat (photocopy) of Certificate No. 953 for 208 shares, which had been sold to TransOceanic Factors
and Company, for which a check would be issued "within the next few days." He promised to deliver the
242 shares as soon as he would have received them from one Vicente Chua. "
(ELAM: 500 + 50 +208 + 242 = 1000)
 The next day, Lapuz wrote Sycip authorizing him to sell the 1,000 shares.

 Sycip then wrote Lapuz confirming that 500 shares out of 1,000 shares have been sold, and that pending
receipt of payment Sycip is enclosing draft to cover the value of 500 shares. Sycip sold and paid for the
other 500 shares of stock, which Lapuz issued a receipt.

 The draft for P8,000 wc is full value of 500 shares was dishonored by Bank for lack of funds. Lapuz then
"discovered from bookkeeper that Sycip pocketed the money already, so he started hunting for Sycip.

 Lapuz found Sycip, who gave the former a check for P5,000. This was also dishonored by Bank.

 Lapuz filed estafa case against Sycip CFI Manila: convicted Sycip of estafa
 CA: affirmed CFI ruling
 Sycip elevated case to SC thru petition for review on certiorari; avers that CA erred
(1) in denying petitioner of a hearing, as provided under Section 9, Rule 124, Rules of Court;
(2) in not upholding due process of law (Sections 1 and 17), Article IV, Bill of Rights, Constitution;
(3) in refusing to uphold the provisions on compensation, Articles 1278 and 1279, Civil Code;
(4) in not dismissing the complaint, even granting arguendo, that compensation does not apply;
(5) in not ruling that a consummated contract (Deed of Sale, Exhibit '10') is not covered by the Statute of Frauds
and that its decision is not in accordance with Section 4, Rule 51, Rules of Court; and,
(6) in ignoring People vs. Benitez, in its applicability to offenses under Article 315, paragraph 1 (b) of the Penal
Code.

ISSUES AND RULINGS

WON compensation can be applied i.e. since Lapuz still owed Sycip an amount more than 5k, Sycip’s obligation
to turn over proceeds from sale of the shares is extinguished. - NO

Sycip averred:
In his 3rd and 4th assigned errors, respondent CA erred in not applying the provisions on compensation under Art
1278 and 1279 of Civil Code, despite evidence showing that Lapuz still owed Sycip an amount of more than
P5,000.00, and in not dismissing the appeal considering that the latter is not legally the aggrieved party. Court

OBLIGATIONS & CONTRACTS 1

Sycip vs. CA by Leah Villaflores
 LCP

ruled (with Lapuz): Contention is untenable. Compensation cannot take place in this case since the evidence shows
that Lapuz is only an agent of Albert Smith and/or Dr. Dwight Dill. Compensation takes place only when two
persons in their own right are creditors and debtors of each other, and that each one of the obligors is bound
principally and is at the same time a principal creditor of the other. Moreover, as correctly pointed out by trial
court, Lapuz did not consent to the off-setting of his obligation with Sycips's obligation to pay for the 500 shares.

Sycip averred:
For the 5th assigned error, the deed of sale was a consummated contract and, therefore, not covered by Statute of
Frauds. It must be pointed out that the issue on whether or not the alleged contract of sale is covered by the
Statute of Frauds has not been raised in the trial court or with CA. It therefore, cannot now be raised for the first
time. Court ruled (with Lapuz)

Sycip averred:
With respect to the 6th assigned error that CA erred in affirming the CFI decision convicting him of estafa; that in
People vs. Benitez, Court ruled that to secure conviction, it is essential that the following elements be present:
(a) existence of fraud;
(b) failure to return goods on demand;
(c) failure to give any reason or explanation to the foregoing. Sycip claims that nowhere in the decision
points to his malice or intent to commit fraud, or, that he failed to return the shares on any formal demand made
by Lapuz to him.

Court ruled (with Lapuz):

Malice or intent to commit fraud is indicated in the decision quoted that is Sycip "received from Lapuz the 500
shares in question for sale, and that although the same had been sold, Sycip failed to turn over the proceeds to
Lapuz." The abuse of confidence in misappropriating the funds or property after they have come to the hands of
the offender may be said to be a fraud upon the person injured thereby (U.S. vs. Pascual).

Sycip having informed Lapuz that 500 shares have been sold, Lapuz cannot be expected to demand for return of
500 shares. His demand was for payment of shares when the draft was dishonored by the bank. Also, the delivery
of a worthless check of P5,000 by Sycip is a circumstance indicating intent to commit fraud.

Sycip’s His explanation of his inability to return the 500 shares of stock is not satisfactory. If it is true that he gave
the 500 shares of stock to his creditor, Tony Lim, he is nonetheless liable for estafa, he having received the 500
shares of stock to be sold on commission. By giving the shares to his creditor, he thereby committed estafa by
conversion. Indeed, Lapuz demanded from Sycip P5,000.00 with a notice that in the event Sycip would fail to pay,
Lapuz would file estafa case.

Therefore, CA did not commit error.

OBLIGATIONS & CONTRACTS 2

Sycip vs. CA by Leah Villaflores