Update...
I finally got hold of the owner... or he got hold of me by replying to the emails i sent him....
He has already got a new iPhone and wasnt bothered about me returning the phone!!!!!
I am guessing you didn't even bother to inform the owner that his old iPhone can bring in a good amount of cash, am I wrong? How convenient! There are many iPhone users who have no idea how much a used iPhone is worth.
OP, just say that you really wanted to keep his iPhone yourself. You did what you had to do and it's yours now. Congratulations... yeah, right.