GR 1227; (May, 1903) (Digest)
G.R. No. 1227 : May 13, 1903
THE UNITED STATES, complainant-appellee, vs. HOWARD D. TERRELL, defendant-appellant.
FACTS:
The defendant, Howard D. Terrell, was convicted of estafa under Article 535 of the Penal Code. The charge alleged that on December 1, 1902, in Manila, he defrauded William Tutherly by selling him a law library and representing it as unencumbered property of their partnership, while fraudulently concealing that he had previously sold the same library to Jacinto Lim Jap on December 28, 1901. The evidence showed that on December 28, 1901, Terrell borrowed ₱1,000 from Jacinto Lim Jap, sending a promissory note and a bill of sale for the library (and other property) as security, explicitly stating in an accompanying letter that the bill of sale was security for the loan. Lim Jap advanced the money but never took possession of the property. Terrell retained possession and later sold half of the library to Tutherly upon forming a partnership on August 14, 1902, and the remaining half upon the partnership’s dissolution on December 1, 1902. The prosecution did not prove the alleged sale to A. S. Stevens.
ISSUE:
Whether the defendant committed the crime of estafa by defrauding either William Tutherly or Jacinto Lim Jap through the sale of the law library.
RULING:
The Supreme Court reversed the conviction and acquitted the defendant. The Court held:
1. As to defrauding Tutherly: No estafa was committed because Tutherly acquired good title to the library. Jacinto Lim Jap never perfected a pledge or lien over the property since he never took possession, as required by Article 1863 of the Civil Code and common law principles. Without a valid encumbrance, Tutherly was not deceived or exposed to loss.
2. As to defrauding Lim Jap: No estafa was committed because the transaction was an unperfected pledge. The bill of sale, treated by both parties as security, did not create a lien due to lack of delivery. Terrell remained the general owner with the right to sell the property. His failure to fulfill the contractual obligation or hold the property did not constitute criminal fraud; it was a civil matter. The Court cited precedents (U.S. v. Mendezona and U.S. v. Apilo) where similar failures to comply with security agreements were held not to be estafa.
Thus, the prosecution failed to prove the essential elements of estafa. The judgment of the Court of First Instance was reversed, and the defendant was acquitted with costs de oficio.