Dear PAO,

Can a complaint for estafa prosper against my brother for failing to return a motorcycle that was initially lent to him but was later sold to him by the owner? My brother borrowed the motorcycle of his friend last year to use for work when there was no public transport available due to the lockdowns. They agreed that he would return it to him on January 2022. Incidentally, the owner borrowed money from my brother for the former’s hospitalization. They also agreed to just use the money that he gave as payment for the motorcycle and they eventually signed a contract for its sale. My brother was able to register the motorcycle under his name. Unfortunately, his friend passed away two months ago, and now his family has been demanding for the return of the motorcycle.

Dear Roland,

Article 315 of the Revised Penal Code of the Philippines, as amended by Republic Act 10951, states that a crime of estafa can be committed by a person who, with unfaithfulness or abuse of confidence, misappropriates or converts goods received by him to the prejudice of another by not returning the same after demand has been made. To be precise, the law provides:

“ART. 315. Swindling (estafa).— Any person who shall defraud another by any of the means mentioned hereinbelow x x x

“1. With unfaithfulness or abuse of confidence, namely:x x x

“(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.x x x”

In the situation that you have presented, we submit that a complaint for estafa may not prosper against your brother if he can establish that there was indeed a subsequent valid contract of sale between him and the owner of the motorcycle. This is because, by reason of such contract, the original owner has already divested the ownership of said vehicle in favor of your brother. While it is true that your brother had the initial obligation to return the motorcycle on January 2022, such obligation was extinguished by the subsequent sale of said vehicle. There was, in effect, a novation of their agreement which is recognized under our New Civil Code:

“Art. 1292. In order that an obligation may be extinguished by another which substitute the same, it is imperative that it be so declared in unequivocal terms, or that the old and the new obligations be on every point incompatible with each other.”

It was also explained in the case of Rex Sorongon v. People of the Philippines (GR 230669, June 16, 2021, Ponente: Associate Justice

Alfredo Benjamin Caguioa):

“Nevertheless, in cases involving the type of Estafa under Article 315, paragraph 1 (b), where there is an underlying contractual relationship or bilateral agreement between the parties which they can modify or alter, the Court has consistently acknowledged at the same time the possible effects of novation. The Court held that in these cases, novation may serve to either prevent the rise of criminal liability, or to cast doubt on the true nature of the original basic transaction, whether or not it was such that the breach of the obligation would not give rise to penal responsibility, as when money loaned is made to appear as a deposit, or other similar disguise is resorted to. The prevention of the rise of criminal liability happens when there is novation before an Information is filed in court. x x x

“In particular, there is no longer any duty or obligation on the part of petitioner to deliver or return the cement mixer to Nelly or to any other person for that matter because the ownership thereof had already been transferred to petitioner by Nelly’s waiver and renunciation in his favor. It follows, too, that there is no longer any prejudice caused to another.”

We hope that we were able to answer your queries. This advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.