1) The everyday problem—and the legal trap in the word “loan”

A common scenario: you hand money to someone you trust (a relative, partner, friend, employee, agent, “runner,” broker, officer of an organization). The understanding is that the money will be used for a specific purpose—paying someone, buying something for you, depositing to a bank, remitting collections, keeping funds safe, or holding funds for a transaction. Instead, the person spends the money for personal use and later cannot (or will not) produce it.

Many people describe the money as “pinautang ko muna” or “I loaned it to him/her,” but criminal liability in the Philippines does not turn on labels. It turns on the real nature of the transaction:

Was it a true loan (mutuum) where the recipient became owner of the money and had the right to spend it?
Or was it money received in trust / for administration / for delivery / for a specific purpose where the recipient was supposed to hold it, account for it, or deliver it—and had no right to treat it as their own?

That distinction is often the difference between a purely civil case (collection of sum of money) and a criminal case (estafa or another felony).

2) The main criminal law: Estafa under the Revised Penal Code

In private disputes about “trusted persons spending money,” the most-cited offense is Estafa (Swindling) under Article 315 of the Revised Penal Code (RPC). Article 315 covers several forms of fraud. The two most relevant clusters are:

A) Estafa by abuse of confidence (misappropriation / conversion)

This is the classic “entrusted money was pocketed” situation—commonly charged under Article 315(1)(b) (wording varies by version/formatting, but the concept is consistent): estafa committed by misappropriating or converting money or property received in trust, on commission, for administration, or under an obligation to deliver or return.

B) Estafa by deceit (false pretenses / fraudulent acts)

This covers situations where the offender used deceit to obtain the money in the first place (false pretenses, fraudulent representations, or similar deception). Here, even if what followed looks like “nonpayment,” the key is that the money was obtained through fraud at the start.

Why this matters: In many “loan” disputes, the prosecution fails if it cannot prove either (1) a trust/obligation-to-deliver arrangement (abuse of confidence), or (2) deceit at inception (estafa by deceit).

3) Estafa by misappropriation/conversion: what must be proven

While exact phrasing in court decisions varies, the prosecution generally has to establish these core ideas for estafa by misappropriation/conversion:

Receipt of money/property under a special obligation The accused received the money/property in trust, for administration, on commission, for delivery to another, or with an obligation to return/deliver (not merely a promise to pay a debt).
Misappropriation, conversion, or denial of receipt The accused treated the money/property as their own, used it in an unauthorized manner, disposed of it, refused to account, or denied receiving it.
Damage or prejudice The offended party suffered loss or was prejudiced.
Demand is usually important evidence Demand is often used to show conversion: you demanded return/delivery/accounting, and the accused failed/refused. Courts often treat demand as strong proof, though legal discussions frequently note it is not always a strictly indispensable element in the abstract—its practical value is that it helps prove misappropriation and intent.

Key concepts explained

Misappropriation: taking the money/property for oneself, or applying it to a purpose different from the one agreed upon.
Conversion: an act showing the offender treated the money/property as their own (spending it, transferring it, refusing to return it, refusing to account for it).
Juridical possession vs. mere physical possession: this is crucial in choosing between estafa and theft/qualified theft (explained below).

4) The “loan” rule: why many cases are civil, not criminal

A) In a true loan (mutuum), the borrower becomes owner of the money

Under Philippine civil law principles, money is generally “consumable.” In a simple loan (mutuum), ownership of the money passes to the borrower upon delivery. The borrower is allowed to spend it, because the obligation is to pay back an equivalent amount, not to return the very same bills/coins.

Result: If it was truly a loan, the borrower’s spending of the money is not “misappropriation” in the estafa sense. Nonpayment is typically a civil liability (collection of sum of money, damages), not estafa—unless there was deceit at the start.

B) The crucial question: was the recipient allowed to treat it as their own?

Courts look at the intent of the parties and the obligation at the time of receipt:

If the recipient had the right to use the money as their own, it leans toward loan.
If the recipient had the duty to keep it, account for it, deliver it, or use it only for a specific purpose (and not treat it as theirs), it leans toward trust/agency/administration—and misuse can be estafa.

C) Labels don’t control; substance controls

Even if parties casually call it “utang,” it may legally be:

Agency/commission (buy something for me; pay someone for me)
Deposit/safekeeping (hold this money; keep it for me)
Administration (manage these funds; remit collections)
Partnership/joint venture (invest funds; share profits/losses) Each has different criminal/civil consequences.

5) Practical guide: when spending the money is likely estafa vs. likely civil only

Scenario set 1: Usually civil (no estafa), unless there was deceit

“I loaned you ₱X. Pay me back on Friday.”

Borrower can spend the money.
Nonpayment is generally civil (collection), not estafa.
Estafa may apply only if borrower used fraud to get the money (fake identity, fake documents, false pretenses that induced you).

“I advanced money for your personal needs; you promised to repay.”

Typically a loan/advance = civil obligation.

Scenario set 2: Often estafa (abuse of confidence) if unauthorized spending is proven

“Here is ₱X—pay the seller/tuition/contractor today.”

Money is for delivery to a third person.
Spending it personally is classic misappropriation.

“Here is ₱X—buy a specific item for me, and return the change/receipt.”

Money is for a specific purpose under agency/commission.
Pocketing it or using it for something else can be estafa.

“Please deposit these collections / remit the money to the office.”

Money is received for administration/remittance.
Misuse can be estafa—or sometimes qualified theft, depending on possession and employment role (see Section 7).

“Hold this money for me; I will get it next week.”

This is closer to deposit/safekeeping than loan.
Spending it can be estafa.

Scenario set 3: “Investment” arrangements—fact-sensitive

“Invest this money; you’ll earn X% monthly.” This can go three ways:

Legitimate investment with risk → loss/nonpayment may be civil.
Misappropriation of entrusted investment funds (money given for a specific placement, with obligation to account/return) → may be estafa by abuse of confidence.
Fraudulent investment scheme (deceit at inception) → estafa by deceit; may also implicate other laws depending on structure.

6) How to tell if it was “loan” or “entrustment”: evidence courts typically examine

Because many disputes are “he said / she said,” the deciding factor is often documentation and conduct. Common indicators:

Indicators pointing to a loan (civil)

Written agreement or messages clearly saying it’s a loan/utang for the borrower’s use.
Interest terms typical of loans (though interest alone is not conclusive).
No requirement to deliver to a third person or to buy something for the lender.
Borrower had discretion to use funds for personal purposes.
Repayment schedule like a standard debt.

Indicators pointing to trust/agency/administration (possible estafa)

Explicit purpose: “ipambabayad,” “ipambibili,” “ipa-deposit,” “ipa-remit,” “pang-hawak lang,” “pang-release lang pag…”
Receipt acknowledging funds “for” a specific transaction (purchase, remittance, deposit).
Duty to account (receipts, liquidation, return of change, reporting).
The money is clearly not meant for the recipient’s own use.
The recipient’s role is fiduciary: agent, collector, cashier, treasurer, officer handling other people’s money.

7) Misappropriation isn’t always estafa: theft/qualified theft and other related crimes

A) Estafa vs. Theft/Qualified Theft (common in workplace cases)

A frequent complication: when an employee takes employer funds.

Theft/qualified theft generally involves taking without consent (unlawful taking).
Estafa involves receiving property with a duty to deliver/return/account, then converting it.

In practice, Philippine cases often analyze whether the employee had juridical possession (possession recognized by law, linked to a fiduciary obligation) versus mere physical/material possession (holding it for the employer who retains juridical possession).

If the employee only had physical possession and then took the money as if stealing it, it often fits qualified theft (especially if with grave abuse of confidence and employer-employee relationship).
If the circumstances show the employee received the money under a distinct obligation to deliver/return/account in a manner more consistent with juridical possession, estafa may be charged.

Bottom line: Many “cashier/collector pocketed money” cases are charged as qualified theft, not estafa, depending on facts.

B) If the offender is a public officer handling public funds: Malversation, not estafa

When the trusted person is a public officer accountable for public funds/property, the relevant crime is commonly malversation (and related offenses) under the RPC—not estafa.

C) If checks are involved: possible B.P. Blg. 22 and/or estafa by postdated check

If the “trusted person” issues a check that bounces, there may be exposure under:

B.P. Blg. 22 (Bouncing Checks Law) (a special law), and/or
Estafa variants involving checks in certain factual settings.

Which applies depends on timing, representations, and circumstances of issuance.

D) If documents/receipts were falsified: Falsification (plus estafa)

Fake receipts, forged acknowledgments, altered liquidation reports, or falsified documents can add falsification offenses and strengthen proof of fraudulent intent.

8) Estafa by deceit: when a “loan” can still become criminal

Even if the transaction resembles a loan, criminal liability may arise if the borrower used fraud to get your money.

Examples of deceit-at-inception patterns:

Pretending to have authority to sell a property, collect a fee, or process a release/permit when they do not.
Using fake IDs, fake employment, fake collateral, or fabricated purchase orders to induce lending.
Claiming an urgent emergency with fabricated proof to induce you to hand money over.
Pretending the money will be used for a specific purpose as a deliberate lie, when the real plan was to pocket it.

Critical distinction:

Mere failure to keep a promise is usually not deceit.
False representations or fraudulent acts that induced you to part with money can be deceit.

9) Demand, accounting, and the “refusal” that often makes or breaks the case

In practice, many prosecutors and courts look for a clear narrative:

Money was received for a specific purpose / in trust.
The accused failed to do the purpose or failed to return/account.
The offended party made a demand (letter, chat, email, personal demand).
The accused refused, ignored, gave inconsistent excuses, denied receipt, or admitted spending without authority.

Best practices for demand evidence (practical, not procedural advice)

A demand letter is common, but demand can also be shown through messages, emails, and witnesses.
What matters is that demand is clear (amount, purpose, requirement to return/deliver/account) and that the response (or silence) supports conversion.

10) What needs to be proven—and what commonly fails in prosecution

Common proof requirements

Proof of receipt: bank transfer, remittance receipts, acknowledgment, witnesses, screenshots of messages, CCTV if relevant.
Proof of the specific obligation: messages showing “ipambayad/ipabili/ipa-deposit,” written instructions, receipts “for purchase,” liquidation requirement.
Proof of misappropriation/conversion: admission of spending, refusal to return, inconsistent accounting, denial of receipt, diversion to personal accounts.
Proof of prejudice: you lost the money, the purchase/payment did not happen, you were held liable to a third party, penalties/interest incurred.

Frequent reasons cases get dismissed or weakened

The arrangement is shown to be a simple loan.
The “purpose” is vague and looks like a personal borrowing.
No reliable proof of instructions or fiduciary obligation.
Evidence is mostly conclusory (“he scammed me”) without documentation.
The dispute looks like a business deal that went bad without proof of fraud or conversion.

11) Civil liability always remains—even if criminal liability does not

Whether or not an estafa case succeeds, a person who received money and did not return/pay it may still be liable civilly for:

Payment of the amount (sum of money)
Damages (depending on proof and legal basis)
Interest (if agreed, or if legally imposed)

A criminal case for estafa typically includes civil liability (restitution) if convicted. But even without a criminal conviction, the lender/owner may pursue civil remedies if the evidence supports a contractual or quasi-contractual claim.

12) Procedure in broad strokes (complaint to prosecution; what gets evaluated)

In the Philippines, estafa is typically initiated by filing a complaint-affidavit with the Office of the City/Provincial Prosecutor. The prosecutor conducts preliminary investigation to determine probable cause (whether there is sufficient ground to believe a crime was committed and the respondent is probably guilty). If probable cause is found, an information is filed in court; if not, the complaint may be dismissed (without prejudice in certain situations).

Because estafa hinges on transaction nature, the preliminary investigation often becomes a battle of:

What exactly was the agreement?
Was it loan or entrustment?
Was there deceit?
Do the documents/messages support the criminal elements?

13) Penalties: graduated by amount and circumstances

Estafa penalties under Article 315 are graduated—the larger the amount of damage, the heavier the penalty. The law’s monetary brackets have been updated by legislation over time, so the exact cutoff amounts depend on the currently controlling text. In addition to imprisonment, courts may impose restitution and other civil consequences.

What remains constant conceptually:

Amount matters (it affects the penalty range).
Proof beyond reasonable doubt is required for conviction.
Civil liability for return/restitution is typically addressed alongside or after criminal judgment.

14) Prevention and documentation: how to avoid the “civil vs criminal” ambiguity

Because outcomes often turn on whether the money was a loan or entrusted funds, documentation should match the real intent:

If it is truly a loan

Put in writing that it is a loan, for the borrower’s personal use.
State principal, due date(s), interest (if any), and mode of payment.

If it is entrusted funds for a purpose

Avoid phrasing that sounds like personal borrowing.
Specify the purpose: “for payment to ___,” “for purchase of ___,” “to deposit/remit to ___.”
Require liquidation: receipts, return of change, confirmation of payment.
Use transfers with clear memos/notes.

This is not about “creating a case”; it is about ensuring the paper trail reflects the real transaction.

15) Summary: the legal core in one sentence

When a trusted person spends money you gave them, it becomes estafa only if the money was received under a duty to deliver/return/account (or was obtained through deceit), not when it was a true loan where the recipient had the right to spend it and merely failed to repay.