1) What “estafa” means in Philippine criminal law

Estafa (swindling) is a crime under Article 315 of the Revised Penal Code (RPC). In lending and financing settings, estafa most commonly appears in two forms:

Estafa by misappropriation or conversion (abuse of confidence) — typically under Article 315(1)(b); and
Estafa by means of deceit (false pretenses, fraudulent acts) — typically under Article 315(2)(a) and related modes.

“Misappropriation of lending funds” usually points to the abuse-of-confidence variety (the person received money in trust/administration/commission, then pocketed it or used it as their own). But many lending-related scams are actually deceit-based (money was obtained by tricking the lender/investor/borrower).

2) The most relevant provision: Article 315(1)(b) (misappropriation / conversion)

A. The legal idea: you were entrusted, not paid

Estafa under Article 315(1)(b) targets situations where the accused:

received money, goods, or other personal property
in trust, or on commission, or for administration, or under any obligation to deliver or return the same; and
later misappropriated or converted it, or denied having received it; causing prejudice to another.

This is the classic “entrusted funds” crime: the core wrongdoing is betraying the trust attached to possession.

B. The critical concept: juridical possession vs. mere ownership transfer

A make-or-break issue in lending-fund disputes is whether the accused had juridical possession (possession that carries a duty to keep/return/deliver/ account for the property for someone else), as opposed to receiving money in a way that transferred ownership (like a typical loan).

If the transaction is truly a loan (mutuum), the receiver generally becomes owner of the money and is only obliged to pay an equivalent amount later. Non-payment is ordinarily civil, not estafa by misappropriation.
If the money was received for a specific purpose with a duty to account, deliver, or return, the receiver may have juridical possession, and using it as one’s own can become estafa.

This distinction is why many “unpaid loan” complaints fail criminally: mere inability/refusal to pay a debt is not automatically estafa.

3) What counts as “misappropriation” or “conversion”

Philippine criminal practice treats the following as strong indicators:

Appropriation: taking the funds as if you owned them (e.g., transferring collections to a personal account, spending collections for personal expenses, “borrowing” from the fund without authority).
Conversion: using funds for a purpose different from the authorized purpose, when the funds were held with a duty to apply them only as authorized (e.g., collections meant for the company used to pay one’s personal debts).
Denial of receipt: falsely claiming you never received the money, when proof shows you did.
Failure to account upon demand: not an element by itself, but often used as evidence that conversion occurred.

Good faith (honest mistake, authorized use, reasonable belief of entitlement) is a common defense that can negate criminal intent.

4) The “demand” rule (often misunderstood)

In misappropriation estafa cases:

Demand is not strictly an element in every situation; the elements focus on receipt-in-trust, misappropriation/conversion/denial, and prejudice.
But demand is powerful evidence, because if someone truly holds funds in trust and has not converted them, they can usually account or return/deliver them when asked.

In lending operations, demand commonly takes the form of:

written demand to remit collections,
audit findings with a request to explain/settle,
reconciliation requests and refusal to cooperate.

5) Lending-world fact patterns: when it is estafa (and when it is not)

A. Common scenarios that fit Article 315(1)(b)

Collector pockets borrowers’ payments

A collector receives amortizations “for and on behalf of” the lending company (or cooperative) and must remit them.
Instead, they keep the cash or reroute it.
This often fits estafa by misappropriation, because the collector holds the money with a duty to deliver/remit.

Branch/cashier/admin custodian of lending funds “shorts” the vault

Cash is entrusted for custody/disbursement/accounting.
Shortages paired with falsified receipts, missing funds, refusal to account, or personal benefit strongly support conversion.

Loan processor/agent receives funds to pay specific payees (e.g., release to borrower, pay a dealer/supplier) and diverts

Funds released to the agent for a defined purpose with an obligation to apply and account can trigger misappropriation estafa if diverted.

Partner/agent managing a lending pool (not a simple debtor-creditor loan) diverts collections/capital

If the structure is administration/agency (you manage someone else’s money and must account), diversion risks estafa.
If the structure is truly “you borrowed and will repay,” it trends civil.

B. Scenarios often not misappropriation estafa (typically civil)

Borrower receives a loan and then uses it differently

If the transaction is a standard loan, the borrower owns the money upon receipt.
Using it for something else is usually contract breach, not estafa by misappropriation.
It can become criminal only if the facts show the money was not a loan in substance but a trust/agency arrangement, or if the borrower used fraudulent means to obtain it (deceit-based estafa).

Failure to pay an investor a promised “interest” from a lending venture

If it’s framed as a borrowing/investment where the accused received money as their own capital and simply defaulted, it can be civil.
If the money was obtained by false pretenses or there was a duty to deliver/return under a trust-like arrangement, criminal theories become more viable.

6) Estafa by deceit in lending contexts (Article 315(2) and related modes)

Many “lending fund” cases are better analyzed as deceit-based estafa, where the accused got money through lies and fraudulent representations.

A. Typical deceit-based patterns

Fake loan approval / processing-fee scam

Victim pays “processing fee,” “insurance,” “facilitation,” or “release fee” based on false promises of a loan release.
The loan never exists; accused disappears or keeps stalling.
This is often estafa by deceit, not misappropriation.

Ponzi-style “lending investment”

Funds solicited as “capital for lending” with guaranteed returns, but the operation is misrepresented and funds are diverted.
Criminal exposure may include estafa by deceit and, depending on facts, other laws (see Section 9).

B. Key elements (simplified)

False pretense / fraudulent act made before or at the time money was obtained;
Victim relied on it;
Victim suffered damage/prejudice;
Accused acted with intent to defraud.

7) Evidence that usually decides these cases

A. For misappropriation/conversion (315(1)(b))

Proof of entrustment: job description, written authority, remittance policies, cash accountability forms, collection reports.
Proof of receipt: borrower receipts, ledger entries, bank deposit slips, CCTV, acknowledgment receipts, messages admitting receipt.
Proof of duty to remit/deliver/return: policies, contracts, agency/administration documents.
Proof of conversion: unexplained shortages, forged/altered receipts, diversion to personal accounts, inconsistent accounting, denial of receipt.
Proof of prejudice: audit reports, reconciliations, unpaid accounts, loss computations.

B. For deceit-based estafa

Ads/messages promising loans/investments.
Proof of representations (chat logs, emails, brochures).
Proof the representations were false and intended to induce payment.
Receipts/transfers proving the victim paid because of the representation.

8) Penalties: driven largely by the amount of damage

For estafa under Article 315, the penalty increases as the amount of fraud/damage increases. Philippine law has updated monetary thresholds over time (notably through statutory amendments adjusting value brackets). In practice:

Larger amounts can raise exposure to higher prison terms, and the amount also affects bail, litigation strategy, and settlement dynamics.
Courts also impose civil liability (restitution/repayment, damages) alongside criminal penalties.

9) Related offenses commonly charged alongside, or instead of, estafa

Lending-related misappropriation is fact-sensitive; prosecutors sometimes choose other offenses depending on the exact relationship and evidence.

Qualified theft (employee takes employer’s money/property without consent)

If the funds legally remain the employer’s and the employee unlawfully takes them (as opposed to receiving them in trust to deliver), qualified theft may be alleged.
The dividing line between qualified theft and estafa often turns on how possession was obtained and the nature of the duty over the funds.

B.P. Blg. 22 (Bouncing Checks Law)

If payment/settlement is made with a check that bounces and statutory notice requirements are met, B.P. 22 may apply, independent of estafa.

Trust Receipts Law (financing context)

In commercial financing, misuse or failure to deliver proceeds/goods under a trust receipt structure can trigger separate criminal consequences under the trust receipts framework (common in trade financing rather than small consumer lending).

Securities / investment-solicitation violations

When “lending funds” are raised from the public as an “investment” product, liability can expand beyond estafa depending on how the product was offered and whether proper authority/registration exists. This often arises in “lending investment” schemes.

Syndicated estafa (special aggravating framework in certain public-victim schemes)

Some large-scale investment/lending schemes involving multiple perpetrators and broad public victimization can fall into a harsher regime, depending on strict factual requisites.

10) Corporate and “lending company” settings: who gets charged

Philippine criminal liability is generally personal:

A corporation is not jailed; natural persons (owners/officers/managers/employees) are prosecuted.
For company officers, exposure depends on proof of participation, approval, direction, or benefit, not just job title.
For employees, exposure depends on their actual handling/receipt of funds and the accountability structure.

11) Civil vs. criminal: the most important boundary in “lending funds” disputes

A reliable way to frame the boundary:

A. It tends to be civil when:

The relationship is pure debtor-creditor (ordinary loan);
The “misuse” is essentially failure to pay or breach of loan terms;
The complainant is trying to criminalize a collection problem without proof of entrustment or deception.

B. It tends to be criminal estafa when:

There is clear entrustment with a duty to deliver/remit/return/account (misappropriation theory), or
There are clear lies/fraudulent acts used to obtain the money in the first place (deceit theory).

12) Restitution, settlement, and criminal liability

Paying back money can reduce practical exposure and may influence prosecutorial and judicial discretion in some contexts, but restitution does not automatically erase criminal liability once the crime is complete.
In prosecution, what matters is whether the elements were present at the time of receipt and misappropriation/deceit, not only whether money was later returned.

13) Procedure in practice (high-level)

Complaint-affidavit filed with the prosecutor (or appropriate office) by the offended party (individual or company representative).
Counter-affidavit and evidence submissions.
Resolution on probable cause; then Information filed in court if warranted.
Arraignment, trial, and judgment; civil liability is usually addressed in the criminal action unless properly separated.

Venue and jurisdiction can hinge on where money was received, where the obligation to account/remit existed, and where the damage was felt—facts matter.

14) Compliance and risk control for lending businesses (why documentation matters)

Organizations reduce criminal exposure and strengthen prosecution/defense by having:

Clear cash accountability rules and signed acknowledgments;
Defined collection/remittance workflows;
Regular audits and reconciliations;
Controls on authority to receive funds;
Standardized receipts and strict anti-alteration measures;
Written agency/administration documents where applicable (so “entrustment” is clear);
Segregation of duties (collection vs. posting vs. custody).

These documents often become the backbone of either:

a strong prosecution (showing entrustment + conversion), or
a strong defense (showing authority/good faith/no conversion).

15) Bottom line

“Misappropriation of lending funds” becomes estafa in the Philippines when the money was entrusted (or obtained by fraud) and the accused converted it, misapplied it, or denied receipt, causing prejudice. The hardest—and most decisive—question is often whether the money was received in a way that created a duty to deliver/return/account (estafa risk), or whether it was received as a loan that transferred ownership (usually civil default, not misappropriation estafa).