DAVID REYES, petitioner vs.

JOSE LIM, CHUY CHENG KENG, and HARRISON LUMBER,

Inc., defendant. G.R. No. 134241. August 11, 2003.

TOPIC: Quasi-contracts

FACTS:
This is a petition for review on certiorari of the CA’s decision in dismissing Reyes’ (Petitioner) petition
for certiorari. Reyes (seller/petitioner) entered into a contract to sell a parcel of land with Lim (buyer).
Harrison was a lessee of the property with a monthly rental of 35K. The contract between Reyes and Lim
stipulated that the land will be purchased at 28M, including the 10M down-payment (upon signing of the
contract)
 18M paid on or before March 8, 1995 at 9:30AM at a bank set by the buyer upon the
vacation of the tenants or occupants of the property. If tenants vacated prior to date,
vendor shall give vendee 1 week advance notice for payment of balance and execution of
absolute sale
 However, if the tenants do not vacate on the date vendee can withhold 18M and vendor
pays a penalty of 4% per month based on the down-payment until complete vacation by
tenants

a) Petitioner’s Arguments (Reyes – Lost)

Reyes argued that Lim connived with Harrison Lumber not to vacate the property until the monthly
penalty (400K) would accumulate and be equaled to the unpaid purchase price (18M). Furthermore,
Reyes filed a motion to set aside the order that requires him to deposit the 10M down-payment on the
ground that the said order practically granted the reliefs Lim prayed for in his amended answer.

b) Respondent’s Argument’s (Lim - Won)

- Keng and Harrison denied connivance with Lim. Reyes even approved their request for extension of
time to vacate and that it was already transferring some of its properties.
- Lim was willing to pay the purchase price on or before March 8, 1995 and wanted a meeting with
Reyes but Reyes kept postponing it. Reyes offered to return the 10M due to difficulty of removing the
lessee, Lim rejected the offer and learned that Reyes already sold the property to Line One Foods
Corporation for P16M (16,782,840). Lim filed for estafa and for an action for specific performance and
nullification of sale. He then filed an amended answer requesting for the writ of preliminary attachment
but was denied by the RTC. After denial, he requested the deposit of 10M.
ISSUE:
WON the hiatus/gap in the law and in the Rules of Court, if left alone, will result in unjust enrichment to
Reyes (Petitioner) at the expense of Lim (Respondent).

FINDINGS OF THE Lower Court:

The court ordered the deposit of 10M.

FINDINGS OF THE Court of Appeals:

Affirmed RTC ruling.

RULING:
Decision is affirmed.

Rule:
This case is one in which there was a hiatus (gap) in the law. If left alone, Reyes is unjustly enriched. The
hiatus may also imperil restitution, which is a precondition to the rescission of the Contract to Sell
that Reyes himself seeks. This is not a case of equity overruling a positive provision of law or judicial
rule for there is none that governs this particular case. This is a case of silence or insufficiency of the
law and the Rules of Court. In this case, Article 9 of the Civil Code expressly mandates the courts to
make a ruling despite the "silence, obscurity or insufficiency of the laws." This calls for the
application of equity, which "fills the open spaces in the law.”

Application:
The trial court can validly order the deposit of 10M to avoid unjust enrichment. Reyes admitted to the
receipt of 10M but opposes the order to deposit it arguing that he has the rights to enjoy it as the
owner. However, since he sold the property to Line One he cannot claim ownership of the 10M. Thus
he has no plausible or justifiable reason to oppose the deposit since it is also in Article 22 of the Civil
Code- no one can be unjustly enriched.

Conclusion:
Thus, Reyes should deposit the 10M to avoid unjust enrichment. It would be unreasonable and unjust for
him to object the deposit considering that Lim (Respondent) deposited the 10M in good faith and later
on discover that said property was already sold to another buyer. The contract to sell cannot be
 enforced since both of them are now seeking rescission of the said contract. Under Article 1385 of the
Civil Code, rescission creates the obligation to return the things that are the object of the contract.
Furthermore, Reyes should not benefit from the pendency of the suit at the expense of whomever the
court might ultimately adjudge as the lawful owner.

CONCLUSION IN CASE OF EMERGENCY: (Thus, a court may not permit a seller to retain, pendente
lite, money paid by a buyer if the seller himself seeks rescission of the sale because he has
subsequently sold the same property to another buyer. By seeking rescission, a seller necessarily
offers to return what he has received from the buyer. Such a seller may not take back his offer if the
court deems it equitable, to prevent unjust enrichment and ensure restitution, to put the money in
judicial deposit)