G.R. No. 111656 - Manahan, Jr. vs. Court of Appeals

On May 10, 1976, petitioner Manuel L. Manahan, Jr. (lessee) and IFC Leasing and Acceptance Corporation (IFC as lessor) entered into an Equipment Lease Agreement (Contract No. LC-2644) for an Isuzu dump truck (Motor No. E120-206525; Serial No. TMK47E-1732972).
The lease was for a period of thirty-six (36) months starting in May 1976, with a monthly rental of P3,541.20 and an initial deposit of P24,000.00.
On April 30, 1976, the Isuzu dump truck was delivered to petitioner.

On September 16, 1976, the parties entered into another Equipment Lease Agreement (Contract No. LC-2729) for a Kimco Hough JH65CN Payloader (Motor No. 10282261; Serial No. JH65CN8484) for forty-eight (48) months at a monthly rental of P5,311.80.
On March 15, 1977, IFC filed a civil complaint before the Court of First Instance of Rizal alleging rental defaults on both leased equipment.
The complaint sought payment of outstanding rentals, attorney’s fees calculated at an equivalent of 20% of the amounts due, and replevin and damages.
On April 3, 1978, a decision was rendered in the civil case ordering petitioner to pay the rents, penalties, and confirming IFC’s right to the possession of the leased equipment, although execution of the decision was not pursued.

On June 23, 1981, despite the earlier civil ruling, IFC’s counsel sent a demand letter to petitioner to settle his outstanding financial obligations under the lease agreements.
Petitioner’s continued failure to settle his accounts led IFC to file a criminal information charging him with estafa.
The estafa charge alleged that between April 30, 1976, and September 7, 1976, petitioner, entrusted with the dump truck and payloader, misappropriated, misapplied, and converted these properties to his own use.
Specifically, petitioner was accused of wrongfully subleasing the dump truck to a third party, Mr. Gorospe, without the lessor’s consent, thereby depriving IFC of its property.

Petitioner was arraigned on July 25, 1983, where he pleaded “not guilty” to the charge of estafa.
The prosecution presented witnesses including Melecio Rayosa, who confirmed the existence of the lease agreements, the delivery of the dump truck, and the issuance of demand letters, as well as evidence of the civil suit.
Leonardo Gado, a security guard and liaison officer of the Bureau of Land Transportation (BLT), testified regarding the surrender of the dump truck’s original registration certificate to the BLT.
Evidence showed that after subleasing the truck, petitioner admitted failing to return it. The truck was later dismantled by individuals reportedly associated with Mr. Gorospe, leaving only the chassis.

On July 27, 1989, the Regional Trial Court of Makati convicted petitioner of estafa, sentencing him to an indeterminate penalty of 8 years and 1 day to 10 years and 1 day of imprisonment, along with ordering indemnification of P55,000.00 for the lost truck.
Petitioner appealed the decision, contending that the misappropriation or conversion element of estafa was absent since his failure to return the truck was due to circumstances beyond his control and attributable to the actions of third parties.
On May 21, 1993, the Court of Appeals affirmed the conviction with a modification of the penalty to an indeterminate term of four (4) years and two (2) months to ten (10) years of prision mayor.
The appellate court emphasized that by subleasing the truck without IFC’s consent, petitioner had committed abuse of confidence amounting to conversion of the property.

On review, the Supreme Court scrutinized whether petitioner’s unauthorized sublease and failure to return the dump truck sufficiently established criminal intent (mens rea) as required for estafa.
The petition argued that although there was a breach of contract, there was no deliberate intent to defraud IFC as petitioner had made efforts to recover the truck from Mr. Gorospe.
Ultimately, the Supreme Court acquitted petitioner of the crime of estafa under Article 315(1)(b) of the Revised Penal Code.
However, petitioner was held civilly liable for the value of the lost dump truck, amounting to P55,000.00 with 12% interest per annum from July 1981 until full payment.

Whether petitioner’s act of subleasing the dump truck without IFC’s consent, and his subsequent failure to return the property, constitutes the misappropriation or conversion element required for the crime of estafa.

Determination of whether the elements of estafa—specifically the wrongful conversion or misappropriation of property received in trust—were present.
Analysis of whether the breach of a civil duty under the lease agreement automatically implies criminal intent.

Whether the absence of a clear demonstration of criminal intent (mens rea) in petitioner’s actions negates the attribution of estafa.

Whether petitioner’s efforts to recover the truck from the sublessee can be viewed as mitigating the characterization of his conduct as felonious.
The role of evidentiary proof in establishing “moral certainty” beyond a reasonable doubt compared to the civil preponderance standard.

Whether the continuation of the lease contract (implied by IFC’s acquiescence) affects the criminal liability for the alleged misappropriation.

The impact of IFC’s failure to execute the civil judgment on the determination of estafa.
The differentiation between a contractual breach and a criminal act under Article 315(b) of the Revised Penal Code.