G.R. No. L-10790; October 31, 1957
CHUNG TE and COMPANY, doing business under the style LA SUERTE CIGAR and CIGARETTE FACTORY, plaintiff-appellee, vs. LUZON SURETY COMPANY, INC., defendant-appellant.

FACTS

Jose Trillanes was employed as a salesman by Chung Te and Company. To indemnify the employer against loss from the employee’s dishonesty amounting to larceny or estafa, Trillanes furnished a surety bond in the sum of P2,000 executed by Luzon Surety Company, Inc., effective from February 26, 1951, to February 26, 1952. The bond was renewed for another term from February 26, 1952, to February 26, 1953. On March 1, 1952, Trillanes received P2,000 as a contingent fund from his employer. On March 19, 1952, when required to account for the fund, he could only account for P324, admitting he misappropriated the balance for his personal use. After crediting his March salary of P220, the shortage was P1,456. Trillanes signed a statement acknowledging this shortage. He later paid P105, reducing the unaccounted balance to P1,351. The employer made formal demands on both Trillanes and the surety company for payment, but neither paid. The employer filed an action against the surety company in the Municipal Court of Manila, which ruled in favor of the plaintiff. The defendant appealed to the Court of First Instance of Manila, which also rendered judgment ordering the defendant to pay the plaintiff P1,351 plus legal interest. The defendant appealed further. The Court of Appeals certified the appeal to the Supreme Court, as it involved questions of law regarding the proper construction of the bond and whether the facts constituted positive proof of estafa.

ISSUE

Whether, under the terms of the surety bond, a criminal conviction of the employee for estafa is a condition precedent for the surety company’s liability, or if it is sufficient to show by positive proof that the employee actually misappropriated the funds.

RULING

The Supreme Court affirmed the lower court’s judgment. The terms of the bond do not require that the employee be convicted of the crime of estafa by a competent court as a condition for the surety’s liability. It is sufficient to show by positive proof that the employee actually misappropriated the money entrusted to him. The trial court found that the evidence positively and conclusively established that Jose Trillanes was guilty of estafa in misappropriating the funds. The Supreme Court, citing a prior minute resolution in a related case (Luzon Surety Company, Inc. vs. Chung Te and Co., G.R. No. L-10640), reiterated that the bond did not require actual conviction in a criminal case. Therefore, the surety company is liable on its undertaking.