This article explains how Philippine law treats the misappropriation of capital in informal “5-6” lending (utang na “5 bayad 6”), and what criminal and civil remedies are available to a financier when a runner, collector, cashier, clerk, co-lender, or borrower diverts the money.

1) The “5-6” Setup in a Nutshell

“5-6” is shorthand for small-ticket, short-term lending at very high interest (e.g., borrow ₱5, repay ₱6 soon after). Operations are typically cash-heavy and rely on trusted runners or collectors to (a) release loans and (b) collect daily/weekly amortizations. Because relationships are informal and documentation can be thin, capital is vulnerable to misappropriation (pagkakupit/pagwawala ng pondo).

Misappropriation scenarios commonly include:

A collector pockets part of the day’s collections.
A runner/agent receives cash “for lending to customers” but uses it personally.
A co-lender/partner treats pooled funds as their own.
A borrower obtains funds via false pretense (e.g., bogus IDs, fictitious collateral) or issues a worthless check.

Each scenario triggers different consequences under criminal (Revised Penal Code and special laws) and civil law (Civil Code and procedural rules).

2) Criminal Liability: Estafa (Swindling) Under the Revised Penal Code

A. Core Provision

Article 315, as amended, punishes estafa (swindling). The most relevant modality for misappropriated lending capital is Art. 315(1)(b) — estafa with abuse of confidence by misappropriating or converting money received in trust, on commission, for administration, or under any obligation to deliver or return.

B. Elements You Must Prove (Art. 315(1)(b))

Receipt of money or property by the accused in trust/for administration/under duty to return or deliver (e.g., a collector receiving the day’s capital/collections; a runner receiving a “lending float”).
Misappropriation or conversion (treating it as one’s own, spending it, hiding it).
Prejudice or potential prejudice to the entrustor (the financier).
Demand (not an element per se, but strong evidence of conversion: failure to account or return upon formal demand is commonly used to prove abuse of confidence).

Practical tip: Send a written, dated demand (preferably notarized and delivered with proof of receipt). Keep text messages acknowledging receipt/shortages—these are admissible under the Rules on Electronic Evidence.

C. Other Estafa Modalities That May Apply

Art. 315(2)(a): by false pretenses or fraudulent acts (e.g., pretending to be an authorized agent to get capital).
Art. 315(2)(d): post-dated checks issued to obtain money knowing there are no funds or stopping payment with intent to defraud (distinct from, and may concur with, B.P. 22).

D. Estafa vs. Related Crimes

Qualified theft: taking without consent from the owner, but no fiduciary entrustment to return.
Theft/robbery: taking without authority (no trust relationship).
B.P. 22 (Bouncing Checks Law): focuses on issuance of a worthless check (malum prohibitum), separate from estafa’s deceit. You can proceed with both if facts fit.

E. Penalties & Prescription

Penalties scale with the amount defrauded and are calibrated by law.
Prescription depends on the penalty imposable (afflictive vs. correctional). As a working guide: higher-amount estafa generally prescribes in 15 years; lower-amount estafa can prescribe in 10 years (counted from discovery or from the day of the last act, subject to tolling rules).

Because thresholds and penalty ranges have been amended by statute over time, always align your computation with the current value brackets when preparing a case theory.

F. Venue & Procedure (Criminal)

Prepare a Complaint-Affidavit detailing the entrustment, misappropriation, demand, and loss; attach proofs (receipts, ledgers, chat logs, IDs, photo/video, audit sheets).
File with the Office of the City/Provincial Prosecutor where the crime occurred or where any essential element transpired (e.g., place of entrustment or demand).
Preliminary investigation; if probable cause is found, an Information is filed in the trial court.
Arraignment and trial; the court may order restitution and civil liability ex delicto upon conviction.

Barangay conciliation isn’t typically required for estafa because penalties normally exceed the Katarungang Pambarangay thresholds for offenses handled at the barangay level. For purely civil disputes between individuals in the same city/municipality, barangay conciliation may apply (see §6 below).

3) When Is It Not Estafa?

Criminal liability is exceptional. Courts guard against converting ordinary breaches of contract into crimes. Estafa usually fails when:

The relationship is pure debtor-creditor (simple loan or “mutuum”) with no duty to return the same money and no entrustment “in trust/for administration”.
The dispute is about accounting errors, pricing/interest, or allocation within a true partnership/co-ownership, absent proof of deceitful conversion.
There is good-faith inability to pay, without evidence of prior deceit or fiduciary abuse.

4) Civil Liability Paths (With or Without a Criminal Case)

A. Civil Action Ex Delicto (tied to Estafa)

If you file estafa, the civil action for restitution and damages is deemed instituted with the criminal case unless you (i) expressly waive it, (ii) reserve it, or (iii) file it ahead of time in a separate civil case.
Standard of proof for civil liability ex delicto is preponderance of evidence (lower than criminal).

B. Independent Civil Actions

You may sue civilly even if you do not (or cannot) pursue estafa:

Contract (loan/agency/partnership): breach of the written or verbal contract; prescriptive period generally 10 years for written contracts.
Quasi-contract / Unjust Enrichment: to recover funds wrongly retained; generally 6 years.
Quasi-delict (torts): if negligence caused loss (e.g., a cashier’s negligent release); generally 4 years.
Fraud under Article 33 (Civil Code): an independent civil action for fraud that can proceed separately from the criminal case and requires only preponderance of evidence.

Choosing the civil theory correctly matters for prescription, evidence, and damages.

C. Remedies & Relief You Can Ask For

Sum of money (principal + lawful interest) and damages (actual, moral, exemplary, attorney’s fees).
Accounting and reconveyance (for agents/co-lenders entrusted with a fund).
Constructive trust (where someone holds money/property that in equity belongs to you).
Injunction (stop further dissipation) and receivership (rare; for grave risk to assets).
Provisional remedies to secure assets while the case is pending:
- Preliminary attachment (Rule 57) if the defendant is about to abscond, has committed fraud in contracting the obligation, is disposing/secretly removing property to defraud creditors, etc.
- Preliminary injunction/TRO to freeze bank withdrawals or transfers by specific acts, when allowed.
- Replevin is for specific movable property; not suitable for fungible cash.

For small claims (purely civil, no estafa) up to the current small-claims jurisdictional amount, you can use the Small Claims procedure (no lawyers required, streamlined). Check the latest threshold applicable nationwide.

5) Interest, Pricing, and the “Unconscionability” Safety Valve

The Usury Law ceilings have long been lifted, so charging high interest is not automatically illegal. However, the courts may reduce or nullify unconscionable interest rates and penalty charges (cases have struck down multi-percent monthly rates as excessive). In a civil suit to recover capital, be prepared that:

Courts may enforce the principal but cut interest to a reasonable rate.
Penalty charges may be invalidated or moderated if oppressive.
Document your cost of funds, risk model, and market practice to defend pricing.

6) Barangay Conciliation (When Purely Civil)

If the financier and the adverse party are both natural persons who reside in the same city/municipality, and the matter is purely civil, you usually must first undergo Barangay Justice (Lupon) before filing in court, unless an exception applies (e.g., a party is a corporation/sole prop registered outside, parties live in different cities/municipalities, urgent relief, etc.). Keep the Certificate to File Action.

7) Evidence: What Wins (or Sinks) a Case

Best evidence to prove entrustment and conversion:

Authority/agency documents (even simple memoranda), ID photos of runners, and acknowledgment receipts for every cash hand-off.
Daily collection sheets, passbooks, audit logs, GPS delivery/collection routes.
Digital evidence (texts, chats, emails) admitting receipt/shortage, and readable accounting screenshots; observe chain-of-custody and metadata where possible.
Demand letter (with proof of service) and any partial remittances after demand.
CCTV or body-cam footage during cash turn-over/collections.
Witnesses (co-collectors, borrowers, office cashier) to establish routine and deviation.

Common pitfalls:

“Floating” cash without written entrustment.
Commingled funds (personal + business) making audit trails murky.
Purely verbal terms on interest/penalties; no borrower IDs.
No demand, or demand sent to the wrong address/number.
Inconsistent ledgers vs. bank deposits.

8) Strategic Choices: Criminal, Civil, or Both?

If facts clearly show entrustment + conversion, File estafa and pursue civil liability ex delicto (or reserve a separate civil action if tactically better).
If facts show a broken loan promise (debtor-creditor only) without deceit, skip estafa; file civil (sum of money) and consider attachment if there’s fraud in contracting or asset flight.
If a worthless check was used, add B.P. 22 (administratively easier to prove for the check count), while still evaluating estafa under deceit.

9) Compliance & Risk Controls for “5-6” Operators

Even informal lenders can professionalize to reduce loss and strengthen cases:

Know-Your-Customer (KYC): Valid IDs, selfie-with-ID, residence verification, employer references.
Runner/Collector Accreditation: ID, background check, signed agency/entrustment agreement stating duty to return/deliver; clear cash-handling SOPs.
Receipting: Two-copy receipts for releases/collections; QR or e-receipt where possible.
Daily Reconciliation: Fixed cut-off, dual sign-off, and same-day bank deposit.
Float Limits: Cap per runner; require cash bonds or surety for high floats.
Digital Trail: Use messaging channels you control; disable auto-delete; back-up daily.
Demand Protocol: 24–48h internal audit → written demand → escalation tree.
Data Room for Litigation: A one-folder set containing IDs, contracts, ledgers, receipts, demand proofs, and incident timeline.

10) Templates (Practical)

A. Basic Entrustment Clause (for Runners/Collectors)

“Mr./Ms. ___ acknowledges receipt of ₱___ in trust and for administration to be used solely for loan releases/collections on route ___, and undertakes to return and account for the entire amount and proceeds at ___ (time/place) on ___, together with a detailed collection sheet and receipts. Any failure to account, misappropriation, or conversion shall constitute breach of trust and may be prosecuted.”

B. Demand Letter (Short Form)

Subject: Final Demand – Return/Account for Lending Funds Dear , On ___ you received ₱ in trust for our lending operations (Route ). As of today, you failed to account/return ₱ despite reminders. This is a final demand to (a) return ₱___ in full and (b) submit a complete accounting within 72 hours of receipt. Failure will leave us no choice but to file estafa and pursue civil remedies (damages, attachment). Sincerely, ___ [Attach acknowledgment, route sheets, summary of shortages. Send by courier/email/messaging with proof of delivery.]

11) Damages & Interest (Civil)

Actual damages: unrecovered principal, audit and tracing costs, courier fees.
Moral damages: available upon competent proof of mental anguish, besmirched reputation, etc., especially for fraud/abuse of confidence.
Exemplary damages: to deter similar acts (especially for fiduciary breaches).
Legal interest: courts often apply 12% per annum historically for forbearance of money before mid-2013 and 6% per annum thereafter; contract rates may apply but are subject to reduction if unconscionable.

12) Timelines (Quick Guide)

Criminal estafa: promptly after discovery; observe prescriptive periods.
Civil (contract): generally 10 years from breach for written contracts;
Civil (quasi-delict): 4 years from injury;
Civil (quasi-contract/unjust enrichment): generally 6 years;
Independent civil action for fraud (Art. 33): separately actionable; file early to preserve evidence and enable attachment.

13) Checklists

Before filing estafa

Entrustment proof (agreement/receipts).
Timeline of fund flow.
Demand letter + proof of delivery.
Audit package (ledgers, deposits, variance report).
Witness names and contact details.
Digital evidence exported (PDF/screenshots with timestamps).

Before filing civil

Determine correct theory (contract, fraud under Art. 33, unjust enrichment).
Draft prayer for attachment (state statutory grounds).
Compute principal + reasonable interest + damages.
Consider barangay conciliation if required.

14) FAQs

Q: Can I sue criminally and civilly at the same time? Yes. You can file estafa and pursue civil liability ex delicto; or reserve/bring an independent civil action (e.g., fraud under Art. 33). Avoid double recovery; courts will offset.

Q: Is a demand letter mandatory for estafa? Not a statutory element, but very persuasive evidence of conversion when the accused fails to return/account after demand.

Q: The runner says it was just “utang.” If documentation shows money was “received in trust/for administration” with a duty to return/account, that supports abuse of confidence estafa—different from a simple loan.

Q: Borrower issued a bad check. What do I file? Consider B.P. 22 (for the check) and estafa (if deceit/false pretense is present). They can be pursued concurrently.

Q: Our interest is “5-6”—will court enforce it? Courts may enforce principal but can reduce unconscionable interest/penalties. Document risk/operational cost to justify your pricing.

15) Bottom Line

For misappropriated “5-6” capital, the cleanest estafa case hinges on entrustment + conversion + prejudice, reinforced by a formal demand and a tight paper trail. If the facts are closer to a broken promise to pay, treat it as civil—and move fast to secure assets via attachment and obtain a money judgment (with interest and damages). Meanwhile, strengthen operations with written entrustment, daily reconciliation, and audit-ready records to prevent and, if necessary, win the next case.