LEGAL OPINION

August 1, 2022

FOR: Apothecary Oils Incorporated

SUBJECT: Arguments available for the prosecution of case of

estafa by misappropriation as defined and penalized by the
Revised Penal Code filed by Mirshali C. Adil, Shekinah S.
Benitez, Ryan Jay L. Fargas, and Amier Fiegedhar A.
Mohammad.

CLIENTS QUERY: What arguments can I bring to prosecute Philipp

Montojo for a criminal case of estafa by misappropriation wherein he failed
to deliver the products agreed by the parties in the contract?

In relation to this query, the following antecedent facts were narrated by the
client:

1. Apothecary Oils Incorporated, has been in the business of importing

locally-sourced essential oils. Among the locally-sourced essential
oils that they import are lavender oil, tea tree oil, sunflower oil, and
eucalyptus oil. Among the products they offer is the virgin coconut oil
which is a hit to foreign customers particularly  in United States and
Canada.

2. Apothecary had usual suppliers from Luzon and Visayas. However,

with the goal of expanding their market,  they wanted a supplier from
Mindanao for representation. In search for a supplier, they were
referred to Philipp Montojo, who is engaged in the Copra business for
20 years but has been engaged in the business of sourcing out coconut
products including virgin coconut oil. Hence, Apothecary Oils
Incorporated, the client therein, communicated with Philipp Montojo
as he had familiarity with the coconut business in the region.

3. After series of meetings, the Philipp Montojo was the hired supplier
for Apothecary Oils Incorporated. After negotiations, the parties have
agreed to the following terms: Philipp Montojo will deliver around
500 drums of virgin coconut oil at the price of PHP 10,000.00 per
drum within a six-month period, starting on the day of the perfection
of the contract. An initial payment of 50% of the total contract price
of PHP 5,000,000.00 will be initially paid by Apothecary in favor of
Philipp. The initial payment was for the purpose of securing raw
materials and initial labor for the products. Initial payment of PHP
2,500.000.00 was paid by Apothecary to Philipp at the perfection of
the contract on January 2, 2022.

4. In the contract of the parties, deliveries were expected to be made on

July 2, 2022. However, the agreed six-month period for the deliveries
had passed, but no deliveries were made by Philipp Montojo. This
 caused Apothecary to cancel the contract and institute a criminal case
against Philipp Montojo.
Based on the foregoing, we can raise as defense self-defense as defined by
the Revised Penal Code and in support of such defense, we raise the
following arguments:

5. Philipp defrauded the other by unfaithfulness and abuse of confidence

6. Philipp Montojo breached their contract by failing to deliver the

products in the agreed terms

7. Philipp deliberately denied Apothecary the receipt of agreed product

when he foresee no income.

8. Duties and responsibilities of the supplier as agreed upon in the

contract were not fulfilled.

9. Philipp Montojo failed to communicate and relay the problem to

Apothecary Oils (third element); Philipp was negligent when he
denied Apothecary relevant update about the product

The arguments are highlighted and discussed as follows:

I
Philipp defrauded the other by unfaithfulness and abuse of confidence

10. Apothecary Oils Incorporated is suing Philipp Montojo for estafa by

misappropriation. Apothecary Oils wanted a supplier from Mindanao.
Hence, it communicated with Philipp Montojo. After a negotiation,
both parties have come to an agreement and made a contract. In the
given contract the duties of both parties were laid down. For
Apothecary, an initial payment of Php2,500,00 or 50% of the total
contract price Php5,000,000 will be made in order for Philipp to
securing raw materials needed and initial labor for the product. For
Philipp Montojo, he will deliver 500 drums of virgin coconut oil
within six-month period. On January 2, 2022, an initial payment of
50% was made by Apothecary in fulfillment of the contract.

11. After six months, Apothecary cancelled the contract since Philipp was
not able to deliver any products and filed a criminal case alleging that
there was misappropriation of funds there were supposedly for the raw
materials.
 
12. Under the Revised Penal Code the elements of Estafa are set down:
(1) the offender's receipt of money, goods, or other personal property
in trust, or on commission, or for administration, or under any other
obligation involving the duty to deliver, or to return, the same; (2)
misappropriation or conversion by the offender of the money or
property received, or denial of receipt of the money or property; (3)
the misappropriation, conversion or denial is to the prejudice of
another; and (4) demand by the offended party that the offender return
the money or property received.
 
 13. Article 315 Section 1(B), defined unfaithfulness or abuse of
confidence as:
 
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;
 
14. In the case of Pamintuan v. People of the Philippines G.R. No.
111426, the Court explained the essence of the aforesaid crime:
 
The essence of this kind of Estafa is the appropriation or
conversion of money or property received to the prejudice of
the entity to whom a return should be made. The words
"convert" and "misappropriate" connote the act of using or
disposing of another's property as if it were one's own, or of
devoting it to a purpose or use different from that agreed upon.
To misappropriate for one's own use includes not only
conversion to one's personal advantage, but also every attempt
to dispose of the property of another without right. In proving
the element of conversion or misappropriation, a legal
presumption of misappropriation arises when the accused fails
to deliver the proceeds of the sale or to return the items to be
sold and fails to give an account of their whereabouts.
 
15. In this case, after a thorough review in the records provided by
Apothecary, the elements of Estafa as defined by the afore-cited
provision of the Revised Penal Code, are present considering that: (1)
Apothecary paid 50% of the total contracted price of Php5,000,000 to
Philipp Montojo for the purpose of securing raw materials needed of
the product; (2) Philipp was required to deliver the product within six-
month period; (3) Philipp failed to deliver the product to Apothecary
within the six-month period; (4) Apothecary cancelled the contract
after Philipp not fulfilling his duty as a supplier of virgin coconut oil.
 
16. Philipp Montojo and Apothecary Oils Incorporated had a negotiation
before coming up to an agreement and created a contract. Both parties
agreed with the terms stated in the contract as it was decided by them.
With that, Apothecary trusted Philipp that it will comply with its duty
and obligations to the former to supply them with the product that
they demanded of him.
 
17. Contracting parties’ obligations are state in case of Roxas v. De
Zuzuarregui, Jr. G.R. No. 152072:
 
It is basic that a contract is the law between the parties.
Obligations arising from contracts have the force of law
between the contracting parties and should be complied with in
good faith. Unless the stipulations in a contract are contrary to
 law, morals, good customs, public order or public policy, the
same are binding as between the parties.
 
18. The contract was created and agreed upon by both parties. Hence, the
contract was designed in favor of both parties. Apothecary fulfilled its
duty or obligations as cited in the contract by paying Philipp the 50%
of the total contracted price in order Philipp to secure raw materials
and start its production. Allegedly, Philipp used the money to procure
raw materials. Without delivering the product to Apothecary, Philipp
breaches the contract and being unfaithful to terms agreed upon would
constitute Estafa by misappropriation.

II
Philipp Montojo breached contract by failing to deliver 500 drums of
virgin coconut oil within the agreed terms with Apothecary Oil
Incorporated.

19.Philipp Montojo breached contract with Apothecary Oils

Incorporated, He was supposed to deliver within a six months period
around 500 drums of virgin coconut oil and this was because of
Philipp’s supposed income return was affected by the sudden changes
in policies in coconut production and was predicted not achievable.

20.In this case, it caused Philipp to delay the delivery of the products to
Apothecary Oils Incorporated despite the fact that he already used the
money paid in advance by Apothecary Incorporated to procure raw
materials and initial labor for the products but no deliveries of virgin
coconut oils were made.

21.Apothecary cancels the contract and institutes a criminal case against

Philip; they alleged that there was misappropriation of funds that were
supposedly used for the raw materials and that Philip should be
criminally liable for Estafa through misappropriation under Article
315, Paragraph 1 (b) of the Revised Penal Code for the failure to
deliver the items that were agreed upon in the contract with
Apothecary Inc.

22.In the case of People vs. Legaspi, GR No. 225753, the Supreme Court
made the following ruling:

Criminal fraud resulting to damage capable of pecuniary

estimation is punished under Article 315 of the RPC. In
particular, Estafa through misappropriation is defined and
penalized under Article 315, paragraph 1(b) of the RPC, as
amended by Republic Act No. 10951,26 which provides:
Section 85. Article 315 of the same Act, as amended by
Republic Act No. 4885, Presidential Decree No. 1689, and
Presidential Decree No. 818, is hereby further amended to read
as follows:
 ART. 315. Swindling (Estafa). - Any person who shall defraud
another by any of the means mentioned herein below shall be
punished by:
1st. The penalty of prision correccional in its maximum period
to prision mayor in its minimum period, if the amount of the
fraud is over Two million four hundred thousand pesos
(P2,400,000) but does not exceed Four million four hundred
thousand pesos (P4,400,000), and if such amount exceeds the
latter sum, the penalty provided in this paragraph shall be
imposed in its maximum period, adding one year for each
additional Two million pesos (P2,000,000); but the total penalty
which may be imposed shall not exceed twenty years. In such
cases, and in connection with the accessory penalties which
may be imposed and for the purpose of the other provisions of
this Code, the penalty shall be termed prision mayor or
reclusion temporal, as the case may be.

The elements of Estafa through misappropriation under Article

315, paragraph 1(b) are: (a) the offender's receipt of money,
goods, or other personal property in trust, or on commission, or
for administration, or under any other obligation involving the
duty to deliver, or to return, the same; (b) misappropriation or
conversion by the offender of the money or property received,
or denial of receipt of the money or property; (c) the
misappropriation, conversion or denial is to the prejudice of
another; and (d) demand by the offended party that the offender
return the money or property received. To secure conviction of
Philipp, it behooves upon the State to prove the existence of all
the essential elements of the offense charged beyond reasonable
doubt. Anything less than all the elements of the offense
charged negates a finding of guilt.

For one, Article 315, paragraph 1(b) requires proof of receipt by

the offender of the money, goods, or other personal property 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. In other words, mere receipt of the money,
goods, or personal property does not satisfy the first element, it
must be demonstrated that the character of such receipt must
either be in trust, on commission or for administration or that
the accused has the obligation to deliver or return the same
money, goods or personal property received.28 It is therefore
essential to prove that the accused acquired both material or
physical possession and juridical possession of the thing
received.

23.Here, To establish the first element of Estafa under Article 315,

paragraph 1(b) first element (a), the offender's receipt of money,
goods, or other personal property in trust, or on commission, or for
administration, or under any other obligation involving the duty to
deliver, or to return, the same.
24.In this case, Philipp’s failure to deliver the virgin coconut oil within
the six month period as stated in the contract and despite 50%
payment for the procuring of the raw materials and initial labor paid
by Apothecary Oils Incorporated in advance establishes the first
element of Estafa under Article 315, Paragraph 1(b) first element (a).

25.The essence of this kind of Estafa is the appropriation or conversion

of money or property received to the prejudice of the entity to whom a
return should be made. The words convert and misappropriate connote
the act of using or disposing of another's property as if it were one's
own, or of devoting it to a purpose or use different from that agreed
upon. To misappropriate for one's own use includes not only
conversion to one's personal advantage, but also every attempt to
dispose of the property of another without right. In proving the
element of conversion or misappropriation, a legal presumption of
misappropriation arises when the accused fails to deliver the proceeds
of the sale or to return the items to be sold and fails to give an account
of their whereabouts. (People vs. Gamaro, GR No. 211917)

26.There is, therefore, no ambiguity in the Information. The factual

allegations therein sufficiently inform Philipp Montojo of the acts
constituting their purported offense and satisfactorily allege the
elements of Estafa by misappropriation. Philipp Montojo is fully
apprised of the charge against him and for him to suitably prepare his
defense.

27.In the case of People vs. Legaspi, GR No. 225753, the Supreme Court
explained:

From a legal point of view, and in a very real sense, it is of no

concern to the accused what is the technical name of the crime
of which he stands charged. It in no way aids him in a defense
on the merits. Whatever its purpose may be, its result is to
enable the accused to vex the court and embarrass the
administration of justice by setting up the technical defense that
the crime set forth in the body of the information and proved in
the trial is not the crime characterized by the fiscal in the
caption of the information. That to which his attention should
be directed, and in which he, above all things else, should be
most interested, are the facts alleged. The real question is
not did he commit a crime given in the law some technical
and specific name, but did he perform the acts alleged in the
body of the information in the manner therein set forth. If
he did, it is of no consequence to him, either as a matter of
procedure or of substantive right, how the law denominates the
crime which those acts constitute. If he did, it is of no
consequence to him, either as a matter of procedure or of
substantive right, how the law denominates the crime which
those acts constitute. The designation of the crime by name in
the caption of the information from the facts alleged in the body
of that pleading is a conclusion of law made by the fiscal. In the
designation of the crime the accused never has a real interest
until the trial has ended. For his full and complete defense he
 need not know the name of the crime at all. It is of no
consequence whatever for the protection of his substantial
rights... If he performed the acts alleged, in the manner,
stated, the law determines what the name of the crime is
and fixes the penalty therefore. It is the province of the
court alone to say what the crime is or what it is named.

28.From the testimony and evidence the first element of Estafa through
misappropriation is present as shown by the following instance;
Philipp Montojo received a 50% payment from Apothecary Oil
Incorporated and uses it to procure raw materials and initial labor as
stated in the contract and within the six month period failed to deliver
the said products. It further shows that Apothecary Oils Incorporated
wanted to cancel the said contract and file a criminal complaint on
him.

29.Even assuming that Philipp failed delivery was an act of good faith, it
still constitute unfaithfulness or abuse of confidence to Apothecary
Incorporated, and still Philipp would be held liable for Estafa through
misappropriation because as what stated in the contract with the
payment of 50% in advance for the procurement of raw materials and
initial labor for the products, Philipp was obliged and has the
responsibility to deliver the promised results in time and will not
breach the contract as agreed. Generally, demand for the return of the
thing delivered in trust is necessary before an accused is convicted of
Estafa. However, if there is an agreed period for the accused to return
the thing received in trust and the accused fails to return it within the
agreed period, demand is unnecessary. Failure to return the thing
within the agreed period consummates the crime of Estafa, i.e, the
misappropriation of the thing received in trust.

30.Therefore, when a felony has two or more elements and one of them is
not proved by the prosecution during the trial, there is no crime. In the
prosecution for Estafa, if the element of deceit or abuse of confidence
is not proved, there is no crime. There is only civil liability. Thus, the
acts of Philipp Montojo towards Apothecary Oils Incorporated present
abuse of confidence under Art. 315 1(b): 1. That the money, goods or
other personal property be 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.

III
Philipp deliberately denied Apothecary the receipt of agreed product
when he foresaw no income despite signed agreement

31. Apothecary Oils Incorporated and Philipp Montojo, the parties in the
contract, agreed to the terms in the contract where it is stated that
deliveries must be made  within the six-month period, and that the
agreed price for the Virgin Coconut Oil is PHP 10,000.00 per drum. 

32. However, Philipp Montojo failed and denied to deliver the products
after the six-month period. The denial of Philipp prejudice Apothecary
Oils Incorporated’s business in delivering essential oils to its
 customers, satisfying the element of Estafa through misappropriation
under Article 315, paragraph 1(b)(c):

(c) the misappropriation, conversion or denial is to the prejudice of

another; 

33. The strongest evidence against Philipp Montojo is the agreement

between the parties, manifested through the signed contract, where the
terms of the agreement were clearly stated and agreed upon. No
mention of the perceived income of the supplier, Philipp Montojo,
was ever indicated in the contract. Philipp claims that the absence of
the perceived income was the cause of the delay, however, it is not a
legitimate reason to deprive and deny Apothecary Oils Incorporated
the receipt of the agreed product. 

34. In United States v. Sotelo, Manuel Araneta (Araneta) delivered to

Vicente Sotelo (Sotelo) pieces of jewelry for the latter to sell for a
price not less than ₱180.00 or to return the jewelry within one hour
from delivery if unsold. Sotelo failed to return the pieces of jewelry
within one hour from their delivery. Without demanding for the return
of the jewelry, Araneta filed against Sotelo a complaint for estafa
within the hour after Sotelo failed to return the jewelry.

35. The court convicted Sotelo of estafa because "[he] did not return [the
pieces of jewelry] within the [agreed period] nor at any other time."

36. In this case, Philipp Montojo did not deliver the products within the
agreed period, nor at any other time. When Montojo failed to deliver
the products on July 2, 2022, he was already presumed to have
misappropriated the payment Apothecary deposited to Philipp
Montojo. There would be no more need to present any act to prove the
misappropriation.
IV
Philipp Montojo failed to fulfill his duties and responsibilities as agreed
upon   in the contract.

37. Philipp Montojo failed to fulfill his duties and responsibilities as a

supplier in the contract which cause damage to Apothecary Oils Inc.
by misappropriation and as the aggrieved party, has the right to
demand for the return of the 50% initial payment to compensate them
for the damage cause by Philipp’s non-fulfillment of contract. As
provided for in Article 315 1(b), the following are elements of estafa
by misappropriation:
a. the offender receives the money, goods or other personal
property in trust, or on commission, or for administration, or
under any other obligation involving the duty to deliver, or to
return, the same;
b. the offender misappropriates or converts such money or
property or denies receiving such money or property;
c. the misappropriation or conversion or denial is to prejudice of
another; and
d. the offended party demands that the offender return the money
or property.
38.Philip Montojo as a party in the contract is bind by the duties and
responsibilities stipulated therein. Philipp’s failure to deliver the
agreed upon products is a clear violation of the contract and such
violation is prejudicial to Apothecary Oils Incorporated. Philipp’s
duty was to deliver 500 drums of virgin coconut oil. Which he
failed to do.  In the case of People v. Coson, G.R No. 218830,
September 14, 2017

“The essence of this kind of estafa is the appropriation

or conversion of money or property received to the
prejudice of the entity to whom a return should be
made….xxx… In proving the element of
misappropriation, a legal presumption of
misappropriation arises when he accused fails to deliver
the proceeds of the sale or return the items to be sold
and fails to return their whereabouts.”

39.In this case, Apothecary, having confidence with Philipp that he

will deliver the products, has made an initial payment of 50% of
the 5,000,000.00 of the total contract price for raw materials and
labor.
 
40.We can conclude here that the first element of estafa by
misappropriation can be appreciated. Philipp has received money
from Apothecary, and despite receiving the money he did not
fulfill his duty to deliver. As quoted above from the case of  People
v. Coson, “The essence of this kind of estafa is the appropriation
or conversion of money or property received to the prejudice of the
entity to whom a return should be made...” The initial payment
constitutes property or money receipt from Apothecary.
Furthermore,  “the accused fails to deliver the proceeds sale or
return the item...” Philipp failed to deliver agreed product which is
the Virgin Coconut Oil. Philipp’s failure to deliver despite receipt
of the money for raw materials and labor is prejudicial to
Apothecary. They paid with the confidence that Philipp will
deliver and that they will gain profit and representation in
Mindanao through this engagement with Philipp. But instead they
loss 2, 500,000.00 which is the 50% initial payment and no Virgin
Coconut Oil was received.

41.Philipp misappropriated the funds, despite converting it to the raw

materials and labor, the fact that he did not convert the raw
materials into Virgin Coconut Oil, constitutes misappropriation. As
stipulated in the case of People v. Perez, G.R No. L-43548, June
29, 1981:

“It is the fraudulent misapplication, appropriation, or

conversion of the property which constitutes the crime of
estafa.”

42.The above quoted provisions from the case of People v. Perez in

relation to the of Philipp, he converted the money to raw materials
but still failed to deliver. Incan be concluded from Philipp’s
 intentional non-delivery constitutes fraud. Additionally in the case
of People v. Legaspi G.R No. 225753, October 15, 2018:

“According to the CA, all elements of estafa through

conversion or misappropriation are present: (1) money
in the amount of P9,500,000.00 was received by Legaspi
as evidenced by an acknowledgment receipt issued by
the latter;[21] (2) there is a legal presumption of
conversion or misappropriation when petitioners failed
to issue to private complainant the stock certificate
evidencing the 2,000 shares which he purchased and
when petitioners failed to return the amount of
P9,500,000.00;[22] (3) private complainant was
prejudiced by petitioners' misappropriation;[23] and (4)
there was demand for the return of private
complainant's investment.”

43.Giving emphasis to item number two (2) above, there is a legal

presumption of conversion or misappropriation in the case of
Philipp, since he intentionally did not deliver despite having the
raw materials already, but he did not produce any documentary
evidence or receipt to serve as proof of his purchase of the raw
materials, or evidence or even inform Apothecary of his concerns
about his income. In this case, regardless of Philipp’s realization he
should have inform or request for an extension with Apothecary or
still deliver to honor the contract of the parties. Apothecary,
through filing this case and cancelling the contract, is demanding
for Philip to return the payment since the intended product was not
produced or delivered by Philip and that Philipp’s actions
ultimately caused damage to Apothecary.

44.In summary, Apothecary was prejudiced by Philipp’s

misappropriation when he failed to deliver the product after 6
months. Apothecary has incurred damage due when they paid
Philipp the 50%, but he did not fulfill his obligations as the
supplier in this case. Additionally, Philipp did not make any
manifestation or proof that he actually converted the money
entrusted to him. He did not make any communication with
Apothecary to bring up his concerns. Apothecary by filing this
case is demanding that Philipp return the investments or the money
they paid, since Apothecary did not received the Virgin Coconut
Oil which they paid for.

RECOMMENDATIONS:

45.Apothecary shall be compensated for the damage due to Philipp’s

misappropriation. The defense may raise that no misappropriation
was committed by Philipp since he procured for the raw materials
and labor, but the prosecution would like to specify that the raw
materials are not the intended deliverables of Philipp. The contract
between the Parties clearly states that Philipp should deliver Virgin
Coconut Oil within the period of 6 months in order for Apothecary
Oils Incorporated to meet the needs of their customers. Philipp
having received the initial payment should have delivered the
agreed upon products as a party to the contract. Hence, the
prosecution believes that there is probable cause that Phlipp
Montojo is guilty of Estafa by misappropriation. 

In the name of Virgin Coconut Oil for a healthier

body,

Mirshali C. Adil

Shekinah S. Benitez

Ryan Jay L. Fargas

Amier Fiegedhar A. Mohammad