[G.R. No. L-12289. May 28, 1958.

LIM SIOK HUEY, ET AL., Plaintiffs-Appellants, v. ALFREDO LAPIZ, ET

Al., Defendants-Appellees.

Godofredo C. Montesines and Alfonso E. Generoso for Appellants.

Tengco Rosales for appellees Vicente Reyes and Lazaro Limjuco.

SYLLABUS

1. PARTIES; CITIZENS AND RESIDENTS OF FOREIGN COUNTRY; REPRESENTED BY

COUNSEL WITHOUT AUTHORITY. — If it appears that the plaintiffs in an action for
recovery of damages are citizens and residents of a foreign country and are
represented merely by their counsel without proper authority to do so, the case should
be dismissed.

2. ATTORNEYS AT LAW; LAWYER MAY BE REQUIRED TO SHOW AUTHORITY TO

REPRESENT ANY CAUSE. — While a lawyer is presumed to be properly authorized to
represent any cause in which he appears, he may however be required by the court on
motion of either party to produce his authority under which he appears. (Section 20,
Rule 127)

3. PARTIES; GUARDIAN Ad Litem APPOINTED WITHOUT AUTHORITY TO REPRESENT. —

The representation of an appointed guardian ad litem of two of the plaintiffs who
allegedly are minors in the prosecution of the case at bar without proper authority from
them is ineffective. Such representation would not suffice to meet the requirement of
the rule which provides that every action must be prosecuted in the name of the real
party in interest (Section 2, Rule 3 of the Rules of Court.)

DECISION

BAUTISTA ANGELO, J.:

This is an action to recover damages amounting to P83,701.30 filed in the Court of First
Instance of Laguna. The plaintiffs are Lim Siok Huey, Pua Yek Ben, Pua Chok Ben, Pua
Sam Ben and Pua Go Kuan, the first being the surviving spouse and the last four the
surviving children of Chua Pua Lun, represented by their counsel, and the defendants
are Alfredo Lapiz, Victorino Sapin, Vicente Reyes and Lazaro Limjuco. The damages are
claimed by reason of the death of Chua Pua Lun as a result of a collision suffered by the
jeepney in which he was a passenger.

Defendant Alfredo Lapiz, the driver of the Jaguar jeepney, in answer to the complaint,
alleged that the vehicle driven by him was hit by the Kapalaran bus which was driven by
defendant Vicente Reyes due to the negligence of the latter, thereby causing the death
of Chua Pua Lun who was a passenger of the jeepney. Defendant Victorino Sapin in turn
alleged that he was not the owner of the jeepney driven by Lapiz, while defendants
Vicente Reyes and Lazaro Limjuco, the first as driver and the second as owner of the
bus, alleged that the collision between the two vehicles was due to the negligence of
Alfredo Lapiz.

Plaintiffs Pua Sam Ben and Pua Go Kuan, being minors, the court, upon motion of their
counsel, appointed Chua Pua Tam, a brother of the deceased, as guardian ad litem to
represent them in this case.

After trial, the court rendered decision "dismissing the complaint, defendant Lapiz’
cross-claim against defendants Reyes and Limjuco as well as the counterclaim of these
last two named defendants against the plaintiffs and their cross-claim against
defendants Lapiz and Sapin." Plaintiffs appealed directly to this Court in view of the
amount involved.

In dismissing the complaint, the trial court made the following pronouncement: jgc:chanrobles.com.ph

"Notwithstanding the above conclusion, the Court is however, of the opinion that the
present action cannot be maintained not on the ground invoked by the defendants but
on the theory that the plaintiffs have not authorized anyone to file the complaint
against the defendants. While an attorney representing a client in a case pending in
Court is presumed to be authorized for the purpose, nevertheless in the case under
consideration, such presumption had been destroyed and overcome by the very
evidence presented by counsel himself. The plaintiffs are all citizens and residents of
Communist China and they have not communicated with anyone in the Philippines in
connection with the filing of an action for damages in their behalf arising from the death
of Chua Pau Lun. Chua Pua Tam, who is the brother-in-law of the first plaintiff and uncle
of the others, testified that the plaintiffs had not written to him nor had he
communicated with them. The letters supposedly sent to Lim Ping Kok by his sister Lim
Siok Huey (Exh. J) and his mother (Exh. K) did not contain any intimation much less of
an authorization for the filing of a claim for damages in behalf of the widow and children
of the deceased, Chua Pua Lun, against the parties responsible for his death. Under this
situation, the Court has no other alternative but to dismiss the complaint on the ground
that the evidence on record does not show that the plaintiffs have authorized much less
directed the commencement of the present action." cralaw virtua1aw library

Appellants now contend that the trial court erred (1) in finding that plaintiffs, being
residents of Communist China, have not authorized anyone to file the present case
against the defendants; (2) in dismissing the complaint when the authority to prosecute
the case stems from the appointment of Chua Pua Tam as guardian ad litem of minors
Pua Sam Ben and Pua Go Kuan; (3) in dismissing the case when the same could be
considered as prosecuted by a negotiorum gestor and (4) in finding that there was no
authority to file the case when such question was not raised in issue nor was evidence
adduced on the point.

With regard to the first question, we find no error in the findings made by the trial
court. Indeed, the same is supported by the record and the evidence. Thus, it appears
that the plaintiffs who are the widow and children of the deceased Chua Pua Lun are all
citizens and residents of Communist China and notwithstanding the fact that they have
been informed of the death of the deceased, they have not sent any communication to
anyone in the Philippines giving authority to take whatever action may be proper to
obtain an indemnity for his death other than two letters supposedly sent to Lim Ping
Kok by his sister Lim Siok Huey and his mother, which do not contain any intimation nor
authorization for the filing of the present action. The most that they contain was an
inquiry with regard to the progress of the case and the administration of the duck-
raising business which the deceased left in the Philippines. Such certainly cannot be
considered as an authority to the present counsel to file and prosecute the present case
in behalf of the widow and children now residing in Communist China.

It should be noted that the present action was initiated by plaintiffs represented merely
by their counsel and the question arose as to whether the latter had the proper
authority to represent the former in view of the fact that they are all residents of a
foreign country. And the question was properly raised in view of the rule that, while a
lawyer is presumed to be properly authorized to represent any cause in which he
appears, he may however be required by the court on motion of either party to produce
his authority under which he appears (Section 20, Rule 127). Undoubtedly, the question
was properly raised by counsel for the defendants as otherwise the trial court would not
have given proper attention to the matter. Indeed, on this point, the trial court made
this important comment: "While an attorney representing a client in a case pending in
Court is presumed to be authorized for the purpose, nevertheless in the case under
consideration, such presumption had been destroyed and come by the very evidence
presented by counsel himself ." (Emphasis supplied)

It is true that one Chua Pua Tam was appointed as guardian ad litem of two of plaintiffs
who allegedly are minors to represent them in the prosecution of the present case, but
while this representation may only benefit the minors, and not the other plaintiffs, yet
the same would not suffice to meet the requirement of the rule which provides that
every action must be prosecuted in the name of the real party in interest (Section 2,
Rule 3). Again, we need hereto show that Chua Pua Tam was authorized by the heirs
abroad to act as such in behalf of the minors for it was in this belief that he was so
appointed by the trial court. But when in the course of the trial it developed that he
never had any communication with any of the heirs and much less received any
authority from them either to prosecute this case or to act as such guardian in behalf of
the minors, the trial court lost no time in disauthorizing him and considering his
representation ineffective. Thus, on this point, the trial court said: "Chua Pua Tam, who
is the brother-in law of the first plaintiff and uncle of the others, testified that the
plaintiffs had not written to him nor had he communicated with them. The letters
supposedly sent to Lim Ping Kok by his sister Lim Siok Huey (Exh. J) and his mother
(Exh. K) did not contain any intimation much less an authorization for the filing of the
claim for damages in behalf of the widow and children of the deceased." cralaw virtua1aw library

Nor can the claim that Chua Pua Tam can be considered as negotiorum gestor be
entertained because in the present case there is need of express authority on his part
to represent the minors by virtue of an express provision of our Rules of Court. In
negotiorum gestio no such authority is required.

The contention that the trial court considered the issue regarding the lack of authority
on the part of counsel to represent plaintiffs in this case or of Chua Pua Tam to act as
guardian ad litem of the minors even if the same was not raised by any of the opposing
parties or their counsel, cannot be entertained, it appearing that the same was
expressly raised by defendants Reyes and Limjuco not only in the course of the trial but
in their answer. Moreover, this flaw in the case of the plaintiffs was discovered by the
court in the course of the trial in view of the evidence presented by the very counsel of
plaintiffs. In view of such development, the trial court could not but take notice of the
matter considering the prayer in defendants’ answer that they be given "such reliefs as
this Court may deem just and equitable in the premises." cralaw virtua1aw library

Wherefore, the decision appealed from in so far as it dismisses the complaint is hereby
affirmed, with costs against appellants.

January 1993 - Philippine Supreme Court Decisions/Resolutions

Philippine Supreme Court Jurisprudence

Philippine Supreme Court Jurisprudence > Year 1993 > January 1993 Decisions > G.R.
No. 97995 January 21, 1993 - PHILIPPINE NATIONAL BANK v. COURT OF APPEALS, ET
AL.:
 THIRD DIVISION

[G.R. No. 97995. January 21, 1993.]

PHILIPPINE NATIONAL BANK, Petitioner, v. COURT OF APPEALS AND B.P.

MATA AND CO., INC., Respondents.

Roland A. Niedo for Petitioner.

Benjamin C. Santos Law Office for Respondent.

SYLLABUS

1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; TRUSTS; EXPRESS TRUST

DISTINGUISHED FROM IMPLIED TRUST. — Trusts are either express or implied. While
express trusts are created by the intention of the trustor or of the parties, implied
trusts come into being by operation of law. Implied trusts are those which, without
being expressed, are deducible from the nature of the transaction as matters of the
intent or which are superinduced on the transaction by operation of law as matters of
equity, independently of the particular intention of the parties.

2. ID.; ID.; ID.; KINDS OF IMPLIED TRUSTS; RESULTING TRUST DISTINGUISHED

FROM CONSTRUCTIVE TRUST. — Implied trusts are subdivided into resulting and
constructive trusts. A resulting trust is a trust raised by implication of law and
presumed always to have been contemplated by the parties, the intention of which is
found in the nature of the transaction, but not expressed in the deed or instrument of
conveyance. Examples of resulting trusts are found in Articles 1448 to 1455 of the Civil
Code. On the other hand, a constructive trust is one not created by words either
expressly or impliedly, but by construction of equity in order to satisfy the demands of
justice. An example of a constructive trust is Article 1456 quoted above.

3. ID.; ID.; ID.; ID.; CONSTRUCTIVE TRUST UNDER ARTICLE 1456 OF THE NEW CIVIL
CODE NOT A TRUST IN THE TECHNICAL SENSE; REASON THEREFOR; CASE AT BAR. —
A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense for
in a typical trust, confidence is reposed in one person who is named a trustee for the
benefit of another who is called the cestui que trust, respecting property which is held
by the trustee for the benefit of the cestui que trust. A constructive trust, unlike an
express trust, does not emanate from, or generate a fiduciary relation. While in an
express trust, a beneficiary and a trustee are linked by confidential or fiduciary
relations, in a constructive trust, there is neither a promise nor any fiduciary relation to
speak of and the so-called trustee neither accepts any trust nor intends holding the
property for the beneficiary. In the case at bar, Mata, in receiving the US$14,000 in its
account through IBAA, had no intent of holding the same for a supposed beneficiary or
cestui que trust, namely PNB. But under Article 1456, the law construes a trust, namely
a constructive trust, for the benefit of the person from whom the property comes, in
this case PNB, for reasons of justice and equity.

4. ID.; ID.; ID.; ID.; MISTAKE GIVING RISE TO CONSTRUCTIVE TRUST MAY BE
COMMITTED EITHER BY GRANTOR OR GRANTEE. — We agree with petitioner’s stand
that under Article 1456, the law does not make any distinction since mutual mistake is
a possibility on either side - on the side of either the grantor or the grantee. Thus, it
was error to conclude that in a constructive trust, only the person obtaining the
property commits a mistake. This is because it is also possible that a grantor, like PNB
in the case at hand, may commit the mistake.

5. ID.; ID.; ID.; ID.; RESULTING OR CONSTRUCTIVE TRUST MAY BE BARRED BY

PRESCRIPTION AND ALSO BY LACHES; LACHES DISTINGUISHED FROM PRESCRIPTION;
CASE AT BAR. — Proceeding now to the issue of whether or not petitioner may still
claim the US$14,000 it erroneously paid private respondent under a constructive trust,
we rule in the negative. Although we are aware that only seven (7) years lapsed after
petitioner erroneously credited private respondent with the said amount and that under
Article 1144, petitioner is well within the prescriptive period for the enforcement of a
constructive or implied trust, we rule that petitioner’s claim cannot prosper since it is
already barred by laches. It is a well-settled rule now that an action to enforce an
implied trust, whether resulting or constructive, may be barred not only by prescription
but also by laches. While prescription is concerned with the fact of delay, laches deals
with the effect of unreasonable delay. It is amazing that it took petitioner almost seven
years before it discovered that it had erroneously paid private Respondent. Petitioner
would attribute its mistake to the heavy volume of international transactions handled by
the Cable and Remittance Division of the International Department of PNB. Such
specious reasoning is not persuasive. It is unbelievable for a bank, and a government
bank at that, which regularly publishes its balanced financial statements annually or
more frequently, by the quarter, to notice its error only seven years later. As a universal
bank with worldwide operations, PNB cannot afford to commit such costly mistakes.
Moreover, as between parties where negligence is imputable to one and not to the
other, the former must perforce bear the consequences of its neglect. Hence, petitioner
should bear the cost of its own negligence.

6. ID.; QUASI-CONTRACTS; QUASI-CONTRACTUAL RELATIONS MAY BE FORCED UPON

PARTIES WHOSE CONSENT THERETO IS PRESUMED, TO AVOID CASE OF UNJUST
ENRICHMENT; SOLUTION INDEBITI; REQUISITES; CASE AT BAR. — the Civil Code does
not confine itself exclusively to the quasi-contracts enumerated from Articles 2144 to
2175 but is open to the possibility that, absent a pre-existing relationship, there being
neither crime nor quasi-delict, a quasi-contractual relation may be forced upon the
parties to avoid a case of unjust enrichment. There being no express consent, in the
sense of a meeting of minds between the parties, there is no contract to speak of.
However, in view of the peculiar circumstances or factual environment, consent is
presume to the end that a recipient of benefits or favors resulting from lawful,
voluntary and unilateral acts of another may not be unjustly enriched at the expense of
another. Undoubtedly, the instant case fulfills the indispensable requisites of solutio
indebiti as defined in Article 2154: that something (in this case money) has been
received when there was no right to demand it and (2) the same was unduly delivered
through mistake. There is a presumption that there was a mistake in the payment "if
something which had never been due or had already been paid was delivered; but he
from whom the return is claimed may prove that the delivery was made out of liberality
or for any other just cause." In the case at bar, a payment in the corrected amount of
US$1,400 through Cashier’s Check No. 269522 had already been made by PNB for the
account of Mata on February 25, 1975. Strangely, however, fourteen days later, PNB
effected another payment through Cashier’s Check No. 270271 in the amount of
US$14,000, this time purporting to be another transmittal of reimbursement from Star
Kist, private respondent’s foreign principal.

7. ID.; AMERICAN JURISPRUDENCE ON CONSTRUCTIVE TRUST AND QUASI-

CONTRACTS. — Under American Law, a court of equity does not consider a constructive
trustee for all purposes as though he were in reality a trustee; although it will force him
to return the property, it will not impose upon him the numerous fiduciary obligations
ordinarily demanded from a trustee of an express trust. It must be borne in mind that
in an express trust, the trustee has active duties of management while in a constructive
trust, the duty is merely to surrender the property. Still applying American case law,
quasi-contractual obligations give rise to a personal liability ordinarily enforceable by an
action at law, while constructive trusts are enforceable by a proceeding in equity to
compel the defendant to surrender specific property. To be sure, the distinction is more
procedural than substantive. Further reflection on these concepts reveals that a
constructive "trust" is as much a misnomer as a "quasi-contract," so far removed are
they from trusts and contracts proper, respectively. In the case of a constructive trust,
as in the case of quasi-contract, a relationship is "forced" by operation of law upon the
parties, not because of any intention on their part but in order to prevent unjust
enrichment, thus giving rise to certain obligations not within the contemplation of the
parties. Although we are not quite in accord with the opinion that "the trusts known to
American and English equity jurisprudence are derived from the fidei commissa of the
Roman Law," it is safe to state that their roots are firmly grounded on such Civil Law
principles as expressed in the Latin maxim, "Nemo cum alterius detrimento locupletari
potest," particularly the concept of constructive trust.

DECISION

ROMERO, J.:

Rarely is this Court confronted with a case calling for the delineation in broad strokes of
the distinctions between such closely allied concepts as the quasi-contract called
"solutio indebiti" under the venerable Spanish Civil Code and the species of implied
trust denominated "constructive trusts," commonly regarded as of Anglo-American
origin. Such a case is the one presented to us now which has highlighted more of the
affinity and less of the dissimilarity between the two concepts as to lead the legal
scholar into the error of interchanging the two. Presented below are the factual
circumstances that brought into juxtaposition the twin institutions of the Civil Law
quasi-contract and the Anglo-American trust.

Private Respondent B. P. Mata & Co. Inc. (Mata), is a private corporation engaged in
providing goods and services to shipping companies. Since 1966, it has acted as a
manning or crewing agent for several foreign firms, one of which is Star Kist Foods,
Inc., USA (Star Kist). As part of their agreement, Mata makes advances for the crew’s
medical expenses, National Seaman’s Board fees, Seaman’s Welfare fund, and standby
fees and for the crew’s basic personal needs. Subsequently, Mata sends monthly billings
to its foreign principal Star Kist, which in turn reimburses Mata by sending a telegraphic
transfer through banks for credit to the latter’s account.

Against this background, on February 21, 1975, Security Pacific National Bank (SEPAC)
of Los Angeles which had an agency arrangement with Philippine National Bank (PNB),
transmitted a cable message to the International Department of PNB to pay the amount
of US$14,000 to Mata by crediting the latter’s account with the Insular Bank of Asia and
America (IBAA), per order of Star Kist. Upon receipt of this cabled message on February
24, 1975, PNB’s International Department noticed an error and sent a service message
to SEPAC Bank. The latter replied with instructions that the amount of US$14,000
should only be for US$1,400. chanroblesvirtualawlibrary

On the basis of the cable message dated February 24, 1975, Cashier’s Check No.
269522 in the amount of US$1,400 (P9,772.96) representing reimbursement from Star
Kist, was issued by the Star Kist for the account of Mata on February 25, 1975 through
the Insular Bank of Asia and America (IBAA).

However, fourteen days after or on March 11, 1975, PNB effected another payment
through Cashier’s Check No. 270271 in the amount of US$14,000 (P97,878.60)
purporting to be another transmittal of reimbursement from Star Kist, private
respondent’s foreign principal.

Six years later, or more specifically, on May 13, 1981, PNB requested Mata for refund of
US$14,000 (P97,878.60) after it discovered its error in effecting the second payment.
lawlibrary
chanrobles virtual

On February 4, 1982, PNB filed a civil case for collection and refund of US$14,000
against Mata arguing that based on a constructive trust under Article 1456 of the Civil
Code, it has a right to recover the said amount it erroneously credited to respondent
Mata. 1

After trial, the Regional Trial Court of Manila rendered judgment dismissing the
complaint ruling that the instant case falls squarely under Article 2154 on solutio
indebiti and not under Article 1456 on constructive trust. The lower court rules out
constructive trust, applying strictly the technical definition of a trust as "a right of
property, real or personal, held by one party for the benefit of another; that there is a
fiduciary relation between a trustee and a cestui que trust as regards certain property,
real, personal, money or choses in action." 2

In affirming the lower court, the appellate court added in its opinion that under Article
2154 on solutio indebiti, the person who makes the payment is the one who commits
the mistake vis-a-vis the recipient who is unaware of such a mistake. 3 Consequently,
recipient is duty bound to return the amount paid by mistake. But the appellate court
concluded that petitioner’s demand for the return of US$14,000 cannot prosper because
its cause of action had already prescribed under Article 1145, paragraph 2 of the Civil
Code which states: jgc:chanrobles.com.ph

"The following actions must be commenced within six years: chanrob1es virtual 1aw library

x x x

(2) Upon a quasi-contract." cralaw virtua1aw library

This is because petitioner’s complaint was filed only on February 4, 1982, almost seven
years after March 11, 1975 when petitioner mistakenly made payment to
private Respondent.

Hence, the instant petition for certiorari proceeding seeking to annul the decision of the
appellate court on the basis that Mata’s obligation to return US$14,000 is governed, in
the alternative, by either Article 1456 on constructive trust or Article 2154 of the Civil
Code on quasi-contract. 4

Article 1456 of the Civil Code provides: jgc:chanrobles.com.ph

"If property is acquired through mistake or fraud, the person obtaining it is, by force of
law, considered a trustee of an implied trust for the benefit of the person from whom
the property comes." cralaw virtua1aw library

On the other hand, Article 2154 states: jgc:chanrobles.com.ph

"If something is received when there is no right to demand it, and it was unduly
delivered through mistake, the obligation to return it arises." cralaw virtua1aw library

Petitioner naturally opts for an interpretation under constructive trust as its action filed
on February 4, 1982 can still prosper, as it is well within the prescriptive period of ten
(10) years as provided by Article 1144, paragraph 2 of the Civil Code. 5

If it is to be construed as a case of payment by mistake or solutio indebiti, then the

prescriptive period for quasi-contracts of six years applies, as provided by Article 1145.
As pointed out by the appellate court, petitioner’s cause of action thereunder shall have
prescribed, having been brought almost seven years after the cause of action accrued.
However, even assuming that the instant case constitutes a constructive trust and
prescription has not set in, the present action has already been barred by laches. chanrobles virtual lawlibrary
To recall, trusts are either express or implied. While express trusts are created by the
intention of the trustor or of the parties, implied trusts come into being by operation of
law. 6 Implied trusts are those which, without being expressed, are deducible from the
nature of the transaction as matters of the intent or which are superinduced on the
transaction by operation of law as matters of equity, independently of the particular
intention of the parties. 7

In turn, implied trusts are subdivided into resulting and constructive trusts. 8 A
resulting trust is a trust raised by implication of law and presumed always to have been
contemplated by the parties, the intention of which is found in the nature of the
transaction, but not expressed in the deed or instrument of conveyance. 9 Examples of
resulting trusts are found in Articles 1448 to 1455 of the Civil Code. 10 On the other
hand, a constructive trust is one not created by words either expressly or impliedly, but
by construction of equity in order to satisfy the demands of justice. An example of a
constructive trust is Article 1456 quoted above. 11

A deeper analysis of Article 1456 reveals that it is not a trust in the technical sense 12
for in a typical trust, confidence is reposed in one person who is named a trustee for
the benefit of another who is called the cestui que trust, respecting property which is
held by the trustee for the benefit of the cestui que trust. 13 A constructive trust, unlike
an express trust, does not emanate from, or generate a fiduciary relation. While in an
express trust, a beneficiary and a trustee are linked by confidential or fiduciary
relations, in a constructive trust, there is neither a promise nor any fiduciary relation to
speak of and the so-called trustee neither accepts any trust nor intends holding the
property for the beneficiary. 14

In the case at bar, Mata, in receiving the US$14,000 in its account through IBAA, had
no intent of holding the same for a supposed beneficiary or cestui que trust, namely
PNB. But under Article 1456, the law construes a trust, namely a constructive trust, for
the benefit of the person from whom the property comes, in this case PNB, for reasons
of justice and equity.

At this juncture, a historical note on the codal provisions on trust and quasi-contracts is
in order.

Originally, under the Spanish Civil Code, there were only two kinds of quasi contracts:
negotiorum gestio and solutio indebiti. But the Code Commission, mindful of the
position of the eminent Spanish jurist, Manresa, that "the number of quasi contracts
may be indefinite," added Section 3 entitled "Other Quasi-Contracts." 15

Moreover, even as Article 2142 of the Civil Code defines a quasi-contract, the
succeeding article provides that: "The provisions for quasi-contracts in this Chapter do
not exclude other quasi-contracts which may come within the purview of the preceding
article." 16

Indubitably, the Civil Code does not confine itself exclusively to the quasi-contracts
enumerated from Articles 2144 to 2175 but is open to the possibility that, absent a pre-
existing relationship, there being neither crime nor quasi-delict, a quasi-contractual
relation may be forced upon the parties to avoid a case of unjust enrichment. 17 There
being no express consent, in the sense of a meeting of minds between the parties,
there is no contract to speak of. However, in view of the peculiar circumstances or
factual environment, consent is presume to the end that a recipient of benefits or favors
resulting from lawful, voluntary and unilateral acts of another may not be unjustly
enriched at the expense of another. cralawnad

Undoubtedly, the instant case fulfills the indispensable requisites of solutio indebiti as
defined in Article 2154: that something (in this case money) has been received when
there was no right to demand it and (2) the same was unduly delivered through
mistake. There is a presumption that there was a mistake in the payment "if something
which had never been due or had already been paid was delivered; but he from whom
the return is claimed may prove that the delivery was made out of liberality or for any
other just cause." 18

In the case at bar, a payment in the corrected amount of US$1,400 through Cashier’s
Check No. 269522 had already been made by PNB for the account of Mata on February
25, 1975. Strangely, however, fourteen days later, PNB effected another payment
through Cashier’s Check No. 270271 in the amount of US$14,000, this time purporting
to be another transmittal of reimbursement from Star Kist, private respondent’s foreign
principal.

While the principle of undue enrichment or solutio indebiti, is not new, having been
incorporated in the subject on quasi-contracts in Title XVI of Book IV of the Spanish
Civil Code entitled "Obligations incurred without contract," 19 the chapter on Trusts is
fairly recent, having been introduced by the Code Commission in 1949. Although the
concept of trusts is nowhere to be found in the Spanish Civil Code, the framers of our
present Civil Code incorporated implied trusts, which includes constructive trusts, on
top of quasi-contracts, both of which embody the principle of equity above strict
legalism. 20

In analyzing the law on trusts, it would be instructive to refer to Anglo-American

jurisprudence on the subject. Under American Law, a court of equity does not consider
a constructive trustee for all purposes as though he were in reality a trustee; although
it will force him to return the property, it will not impose upon him the numerous
fiduciary obligations ordinarily demanded from a trustee of an express trust. 21 It must
be borne in mind that in an express trust, the trustee has active duties of management
while in a constructive trust, the duty is merely to surrender the property.

Still applying American case law, quasi-contractual obligations give rise to a personal
liability ordinarily enforceable by an action at law, while constructive trusts are
enforceable by a proceeding in equity to compel the defendant to surrender specific
property. To be sure, the distinction is more procedural than substantive. 22

Further reflection on these concepts reveals that a constructive "trust" is as much a

misnomer as a "quasi-contract," so far removed are they from trusts and contracts
proper, respectively. In the case of a constructive trust, as in the case of quasi-contract,
a relationship is "forced" by operation of law upon the parties, not because of any
intention on their part but in order to prevent unjust enrichment, thus giving rise to
certain obligations not within the contemplation of the parties. 23

Although we are not quite in accord with the opinion that "the trusts known to American
and English equity jurisprudence are derived from the fidei commissa of the Roman
Law," 24 it is safe to state that their roots are firmly grounded on such Civil Law
principles as expressed in the Latin maxim, "Nemo cum alterius detrimento locupletari
potest," 25 particularly the concept of constructive trust.

Returning to the instant case, while petitioner may indeed opt to avail of an action to
enforce a constructive trust or the quasi-contract of solutio indebiti, it has been
deprived of a choice, for prescription has effectively blocked quasi-contract as an
alternative, leaving only constructive trust as the feasible option.

Petitioner argues that the lower and appellate courts cannot indulge in semantics by
holding that in Article 1456 the recipient commits the mistake while in Article 2154, the
recipient commits on mistake. 26 On the other hand, private respondent, invoking the
appellate court’s reasoning, would impress upon us that under Article 1456, there can
be no mutual mistake. Consequently, private respondent contends that the case at bar
is one of solutio indebiti and not a constructive trust.
chanrobles virtual lawlibrary

We agree with petitioner’s stand that under Article 1456, the law does not make any
distinction since mutual mistake is a possibility on either side — on the side of either
the grantor or the grantee. 27 Thus, it was error to conclude that in a constructive
trust, only the person obtaining the property commits a mistake. This is because it is
also possible that a grantor, like PNB in the case at hand, may commit the mistake.

Proceeding now to the issue of whether or not petitioner may still claim the US$14,000
it erroneously paid private respondent under a constructive trust, we rule in the
negative. Although we are aware that only seven (7) years lapsed after petitioner
erroneously credited private respondent with the said amount and that under Article
1144, petitioner is well within the prescriptive period for the enforcement of a
constructive or implied trust, we rule that petitioner’s claim cannot prosper since it is
already barred by laches. It is a well-settled rule now that an action to enforce an
implied trust, whether resulting or constructive, may be barred not only by prescription
but also by laches. 28

While prescription is concerned with the fact of delay, laches deals with the effect of
unreasonable delay. 29 It is amazing that it took petitioner almost seven years before it
discovered that it had erroneously paid private Respondent. Petitioner would attribute
its mistake to the heavy volume of international transactions handled by the Cable and
Remittance Division of the International Department of PNB. Such specious reasoning is
not persuasive. It is unbelievable for a bank, and a government bank at that, which
regularly publishes its balanced financial statements annually or more frequently, by the
quarter, to notice its error only seven years later. As a universal bank with worldwide
operations, PNB cannot afford to commit such costly mistakes. Moreover, as between
parties where negligence is imputable to one and not to the other, the former must
perforce bear the consequences of its neglect. Hence, petitioner should bear the cost of
its own negligence.

WHEREFORE, the decision of the Court of Appeals dismissing petitioner’s claim against
private respondent is AFFIRMED.

Costs against petitioner.

SO ORDERED.

G.R. No. 119745 June 20, 1997

POWER COMMERCIAL AND INDUSTRIAL CORPORATION, petitioner,
vs.
COURT OF APPEALS, SPOUSES REYNALDO and ANGELITA R. QUIAMBAO and PHILIPPINE NATIONAL
BANK, respondents.
PANGANIBAN, J.:
Is the seller's failure to eject the lessees from a lot that is the subject of a contract of sale with assumption of mortgage a ground
(1) for rescission of such contract and (2) for a return by the mortgagee of the amortization payments made by the buyer who
assumed such mortgage?
Petitioner posits an affirmative answer to such question in this petition for review on certiorari of the March 27, 1995
Decision1 of the Court of Appeals, Eighth Division, in CA-G.R. CV Case No. 32298 upholding the validity of the contract of
sale with assumption of mortgage and absolving the mortgagee from the liability of returning the mortgage payments already
made.2
The Facts
Petitioner Power Commercial & Industrial Development Corporation, an industrial asbestos manufacturer, needed a
bigger office space and warehouse for its products. For this purpose, on January 31, 1979, it entered into a contract
of sale with the spouses Reynaldo and Angelita R. Quiambao, herein private respondents. The contract involved a
612-sq. m. parcel of land covered by Transfer Certificate of Title No. S-6686 located at the corner of Bagtican and St.
Paul Streets, San Antonio Village, Makati City. The parties agreed that petitioner would pay private respondents
P108,000.00 as down payment, and the balance of P295,000.00 upon the execution of the deed of transfer of the title
over the property. Further, petitioner assumed, as part of the purchase price, the existing mortgage on the land. In full
satisfaction thereof, he paid P79,145.77 to Respondent Philippine National Bank ("PNB" for brevity).

On June 1, 1979, respondent spouses mortgaged again said land to PNB to guarantee a loan of P145,000.00, P80,000.00 of which
was paid to respondent spouses. Petitioner agreed to assume payment of the loan.
On June 26, 1979, the parties executed a Deed of Absolute Sale With Assumption of Mortgage which contained the following
terms and conditions:3
That for and in consideration of the sum of Two Hundred Ninety-Five Thousand Pesos (P295,000.00) Philippine Currency, to us
in hand paid in cash, and which we hereby acknowledge to be payment in full and received to our entire satisfaction, by POWER
COMMERCIAL AND INDUSTRIAL DEVELOPMENT CORPORATION, a 100% Filipino Corporation, organized and
existing under and by virtue of Philippine Laws with offices located at 252-C Vito Cruz Extension, we hereby by these presents
SELL, TRANSFER and CONVEY by way of absolute sale the above described property with all the improvements existing
thereon unto the said Power Commercial and Industrial Development Corporation, its successors and assigns, free from all liens
and encumbrances.
We hereby certify that the aforesaid property is not subject to nor covered by the provisions of the Land Reform Code — the
same having no agricultural lessee and/or tenant.
We hereby also warrant that we are the lawful and absolute owners of the above described property, free from any lien and/or
encumbrance, and we hereby agree and warrant to defend its title and peaceful possession thereof in favor of the said Power
Commercial and Industrial Development Corporation, its successors and assigns, against any claims whatsoever of any and all
third persons; subject, however, to the provisions hereunder provided to wit:
That the above described property is mortgaged to the Philippine National Bank, Cubao, Branch, Quezon City for the amount of
one hundred forty-five thousand pesos, Philippine, evidenced by document No. 163, found on page No. 34 of Book No. XV,
Series of 1979 of Notary Public Herita
L. Altamirano registered with the Register of Deeds of Pasig (Makati), Rizal . . . ;
That the said Power Commercial and Industrial Development Corporation assumes to pay in full the entire amount of the said
mortgage above described plus interest and bank charges, to the said mortgagee bank, thus holding the herein vendor free from
all claims by the said bank;
That both parties herein agree to seek and secure the agreement and approval of the said Philippine National Bank to the herein
sale of this property, hereby agreeing to abide by any and all requirements of the said bank, agreeing that failure to do so shall
give to the bank first lieu (sic) over the herein described property.
On the same date, Mrs. C.D. Constantino, then General Manager of petitioner-corporation, submitted to PNB said deed with a
formal application for assumption of mortgage.4
On February 15, 1980, PNB informed respondent spouses that, for petitioner's failure to submit the papers necessary for approval
pursuant to the former's letter dated January 15, 1980, the application for assumption of mortgage was considered withdrawn; that
the outstanding balance of P145,000.00 was deemed fully due and demandable; and that said loan was to be paid in full within
fifteen (15) days from notice.5
Petitioner paid PNB P41,880.45 on June 24, 1980 and P20,283.14 on December 23, 1980, payments which were to be applied to
the outstanding loan. On December 23, 1980, PNB received a letter from petitioner which reads:6
With regard to the presence of the people who are currently in physical occupancy of the (l)ot . . . it is our desire as buyers and
new owners of this lot to make use of this lot for our own purpose, which is why it is our desire and intention that all the people
who are currently physically present and in occupation of said lot should be removed immediately.
For this purpose we respectfully request that . . . our assumption of mortgage be given favorable consideration, and that the
mortgage and title be transferred to our name so that we may undertake the necessary procedures to make use of this lot
ourselves.
It was our understanding that this lot was free and clear of problems of this nature, and that the previous owner would be
responsible for the removal of the people who were there. Inasmuch as the previous owner has not been able to keep his
commitment, it will be necessary for us to take legal possession of this lot inorder (sic) to take physical possession.
On February 19, 1982, PNB sent petitioner a letter as follows:7
(T)his refers to the loan granted to Mr. Reynaldo Quiambao which was assumed by you on June 4, 1979 for P101,500.00. It was
last renewed on December 24, 1980 to mature on June 4, 1981.
A review of our records show that it has been past due from last maturity with interest arrearages amounting to P25,826.08 as of
February 19, 1982. The last payment received by us was on December 24, 1980 for P20,283. 14. In order to place your account in
current form, we request you to remit payments to cover interest, charges, and at least part of the principal.
On March 17, 1982, petitioner filed Civil Case No. 45217 against respondent spouses for rescission and damages before the
Regional Trial Court of Pasig, Branch 159. Then, in its reply to PNB's letter of February 19, 1982, petitioner demanded the return
of the payments it made on the ground that its assumption of mortgage was never approved. On May 31, 1983,8 while this case
was pending, the mortgage was foreclosed. The property was subsequently bought by PNB during the public auction. Thus, an
amended complaint was filed impleading PNB as party defendant.
On July 12, 1990, the trial court9 ruled that the failure of respondent spouses to deliver actual possession to petitioner entitled the
latter to rescind the sale, and in view of such failure and of the denial of the latter's assumption of mortgage, PNB was obliged to
return the payments made by the latter. The dispositive portion of said decision states: 10
IN VIEW OF ALL THE FOREGOING, the Court hereby renders judgment in favor of plaintiff and against defendants:
(1) Declaring the rescission of the Deed of Sale with Assumption of Mortgage executed between plaintiff and defendants Spouses
Quiambao, dated June 26, 1979;
(2) Ordering defendants Spouses Quiambao to return to plaintiff the amount of P187,144.77 (P108,000.00 plus P79,145.77) with
legal interest of 12% per annum from date of filing of herein complaint, that is, March 17, 1982 until the same is fully paid;
(3) Ordering defendant PNB to return to plaintiff the amount of P62,163.59 (P41,880.45 and P20,283.14) with 12% interest
thereon from date of herein judgment until the same is fully paid.
No award of other damages and attorney's fees, the same not being warranted under the facts and circumstances of the case.
The counterclaim of both defendants spouses Quiambao and PNB are dismissed for lack of merit.
No pronouncement as to costs.
SO ORDERED.
On appeal by respondent-spouses and PNB, Respondent Court of Appeals reversed the trial court. In the assailed Decision, it held
that the deed of sale between respondent spouses and petitioner did not obligate the former to eject the lessees from the land in
question as a condition of the sale, nor was the occupation thereof by said lessees a violation of the warranty against eviction.
Hence, there was no substantial breach to justify the rescission of said contract or the return of the payments made. The
dispositive portion of said Decision reads: 11
WHEREFORE, the Decision appealed from is hereby REVERSED and the complaint filed by Power Commercial and Industrial
Development Corporation against the spouses Reynaldo and Angelita Quiambao and the Philippine National Bank is
DISMISSED. No costs.
Hence, the recourse to this Court.
Issues
Petitioner contends that: (1) there was a substantial breach of the contract between the parties warranting rescission; and (2) there
was a "mistake in payment" made by petitioner, obligating PNB to return such payments. In its Memorandum, it specifically
assigns the following errors of law on the part of Respondent Court: 12
A. Respondent Court of Appeals gravely erred in failing to consider in its decision that a breach of implied warranty under
Article 1547 in relation to Article 1545 of the Civil Code applies in the case-at-bar.
B. Respondent Court of Appeals gravely erred in failing to consider in its decision that a mistake in payment giving rise to a
situation where the principle of solutio indebiti applies is obtaining in the case-at-bar.
The Court's Ruling
The petition is devoid of merit. It fails to appreciate the difference between a condition and a warranty and the
consequences of such distinction.

Conspicuous Absence of an Imposed Condition

The alleged "failure" of respondent spouses to eject the lessees from the lot in question and to deliver actual and physical
possession thereof cannot be considered a substantial breach of a condition for two reasons: first, such "failure" was not
stipulated as a condition — whether resolutory or suspensive — in the contract; and second, its effects and consequences were
not specified either. 13
The provision adverted to by petitioner does not impose a condition or an obligation to eject the lessees from the lot. The deed of
sale provides in part: 14
We hereby also warrant that we are the lawful and absolute owners of the above described property, free from any lien and/or
encumbrance, and we hereby agree and warrant to defend its title and peaceful possession thereof in favor of the said Power
Commercial and Industrial Development Corporation, its successors and assigns, against any claims whatsoever of any and all
third persons; subject, however, to the provisions hereunder provided to wit:
By his own admission, Anthony Powers, General Manager of petitioner-corporation, did not ask the corporation's lawyers to
stipulate in the contract that Respondent Reynaldo was guaranteeing the ejectment of the occupants, because there was already a
proviso in said deed of sale that the sellers were guaranteeing the peaceful possession by the buyer of the land in
question. 15 Any obscurity in a contract, if the above-quoted provision can be so described, must be construed against the party
who caused it. 16 Petitioner itself caused the obscurity because it omitted this alleged condition when its lawyer drafted said
contract.
If the parties intended to impose on respondent spouses the obligation to eject the tenants from the lot sold, it should have
included in the contract a provision similar to that referred to in Romero vs. Court of Appeals, 17 where the ejectment of the
occupants of the lot sold by private respondent was the operative act which set into motion the period of petitioner's compliance
with his own obligation, i.e., to pay the balance of the purchase price. Failure to remove the squatters within the stipulated period
gave the other party the right to either refuse to proceed with the agreement or to waive that condition of ejectment in consonance
with Article 1545 of the Civil Code. In the case cited, the contract specifically stipulated that the ejectment was a condition to be
fulfilled; otherwise, the obligation to pay the balance would not arise. This is not so in the case at bar.
Absent a stipulation therefor, we cannot say that the parties intended to make its nonfulfillment a ground for rescission. If they
did intend this, their contract should have expressly stipulated so. In Ang vs. C.A.,18 rescission was sought on the ground that the
petitioners had failed to fulfill their obligation "to remove and clear" the lot sold, the performance of which would have given rise
to the payment of the consideration by private respondent. Rescission was not allowed, however, because the breach was not
substantial and fundamental to the fulfillment by the petitioners of the obligation to sell.
As stated, the provision adverted to in the contract pertains to the usual warranty against eviction, and not to a condition that was
not met.
The terms of the contract are so clear as to leave no room for any other interpretation. 19
Furthermore, petitioner was well aware of the presence of the tenants at the time it entered into the sales transaction. As testified
to by Reynaldo, 20 petitioner's counsel during the sales negotiation even undertook the job of ejecting the squatters. In fact,
petitioner actually filed suit to eject the occupants. Finally, petitioner in its letter to PNB of December 23, 1980 admitted that it
was the "buyer(s) and new owner(s) of this lot."
Effective Symbolic Delivery
The Court disagrees with petitioner's allegation that the respondent spouses failed to deliver the lot sold. Petitioner asserts that the
legal fiction of symbolic delivery yielded to the truth that, at the execution of the deed of sale, transfer of possession of said lot
was impossible due to the presence of occupants on the lot sold. We find this misleading.
Although most authorities consider transfer of ownership as the primary purpose of sale, delivery remains an indispensable
requisite as our law does not admit the doctrine of transfer of property by mere consent. 21 The Civil Code provides that delivery
can either be (1) actual (Article 1497) or (2) constructive (Articles 1498-1501). Symbolic delivery (Article 1498), as a species of
constructive delivery, effects the transfer of ownership through the execution of a public document. Its efficacy can, however, be
prevented if the vendor does not possess control over the thing sold, 22 in which case this legal fiction must yield to reality.
The key word is control, not possession, of the land as petitioner would like us to believe. The Court has consistently held
that: 23
. . . (I)n order that this symbolic delivery may produce the effect of tradition, it is necessary that the vendor shall have had
such control over the thing sold that . . . its material delivery could have been made. It is not enough to confer upon the purchaser
the ownership and the right of possession. The thing sold must be placed in his control. When there is no impediment whatever to
prevent the thing sold passing into the tenancy of the purchaser by the sole will of the vendor, symbolic delivery through the
execution of a public instrument is sufficient. But if, notwithstanding the execution of the instrument, the purchaser cannot have
the enjoyment and material tenancy of the thing and make use of it himself or through another in his name, because such tenancy
and enjoyment are opposed by the interposition of another will, then fiction yields to reality — the delivery has not been effected.
Considering that the deed of sale between the parties did not stipulate or infer otherwise, delivery was effected through the
execution of said deed. The lot sold had been placed under the control of petitioner; thus, the filing of the ejectment suit was
subsequently done. It signified that its new owner intended to obtain for itself and to terminate said occupants' actual possession
thereof. Prior physical delivery or possession is not legally required and the execution of the deed of sale is deemed equivalent to
delivery. 24 This deed operates as a formal or symbolic delivery of the property sold and authorizes the buyer to use the
document as proof of ownership. Nothing more is required.
Requisites of Breach of Warranty Against Eviction
Obvious to us in the ambivalent stance of petitioner is its failure to establish any breach of the warranty against eviction. Despite
its protestation that its acquisition of the lot was to enable it to set up a warehouse for its asbestos products and that failure to
deliver actual possession thereof defeated this purpose, still no breach of warranty against eviction can be appreciated because the
facts of the case do not show that the requisites for such breach have been satisfied. A breach of this warranty requires the
concurrence of the following circumstances:
(1) The purchaser has been deprived of the whole or part of the thing sold;
(2) This eviction is by a final judgment;
(3) The basis thereof is by virtue of a right prior to the sale made by the vendor; and
(4) The vendor has been summoned and made co-defendant in the suit for eviction at the instance of the vendee. 25
In the absence of these requisites, a breach of the warranty against eviction under Article 1547 cannot be declared.
Petitioner argues in its memorandum that it has not yet ejected the occupants of said lot, and not that it has been evicted
therefrom. As correctly pointed out by Respondent Court, the presence of lessees does not constitute an encumbrance of the
land, 26 nor does it deprive petitioner of its control thereof.
We note, however, that petitioner's deprivation of ownership and control finally occurred when it failed and/or discontinued
paying the amortizations on the mortgage, causing the lot to be foreclosed and sold at public auction. But this deprivation is due
to petitioner's fault, and not to any act attributable to the vendor-spouses.
Because petitioner failed to impugn its integrity, the contract is presumed, under the law, to be valid and subsisting.
Absence of Mistake In Payment
Contrary to the contention of petitioner that a return of the payments it made to PNB is warranted under Article 2154 of the
Code, solutio indebiti does not apply in this case. This doctrine applies where: (1) a payment is made when there exists no
binding relation between the payor, who has no duty to pay, and the person who received the payment, and (2) the payment is
made through mistake, and not through liberality or some other cause. 27
In this case, petitioner was under obligation to pay the amortizations on the mortgage under the contract of sale and the deed of
real estate mortgage. Under the deed of sale (Exh. "2"), 28 both parties agreed to abide by any and all the requirements of PNB in
connection with the real estate mortgage. Petitioner was aware that the deed of mortgage (Exh. "C") made it solidarily and,
therefore, primarily 29 liable for the mortgage obligation: 30
(e) The Mortgagor shall neither lease the mortgaged property. . . nor sell or dispose of the same in any manner, without the
written consent of the Mortgagee. However, if not withstanding this stipulation and during the existence of this mortgage, the
property herein mortgaged, or any portion thereof, is . . . sold, it shall be the obligation of the Mortgagor to impose as a condition
of the sale, alienation or encumbrance that the vendee, or the party in whose favor the alienation or encumbrance is to be made,
should take the property subject to the obligation of this mortgage in the same terms and condition under which it is constituted,
it being understood that the Mortgagor is not in any manner relieved of his obligation to the Mortgagee under this mortgage by
such sale, alienation or encumbrance; on the contrary both the vendor and the vendee, or the party in whose favor the alienation
or encumbrance is made shall be jointly and severally liable for said mortgage obligations. . . .
Therefore, it cannot be said that it did not have a duty to pay to PNB the amortization on the mortgage.
Also, petitioner insists that its payment of the amortization was a mistake because PNB disapproved its assumption of mortgage
after it failed to submit the necessary papers for the approval of such assumption.
But even if petitioner was a third party in regard to the mortgage of the land purchased, the payment of the loan by petitioner was
a condition clearly imposed by the contract of sale. This fact alone disproves petitioner's insistence that there was a "mistake" in
payment. On the contrary, such payments were necessary to protect its interest as a "the buyer(s) and new owner(s) of the lot."
The quasi-contract of solutio indebiti is one of the concrete manifestations of the ancient principle that no one shall enrich
himself unjustly at the expense of another. 31 But as shown earlier, the payment of the mortgage was an obligation petitioner
assumed under the contract of sale. There is no unjust enrichment where the transaction, as in this case, is quid pro quo, value for
value.
All told, respondent Court did not commit any reversible error which would warrant the reversal of the assailed Decision.
WHEREFORE, the petition is hereby DENIED, and the assailed Decision is AFFIRMED.
SO ORDERED.

G.R. No. 152411 September 29, 2004

UNIVERSITY OF THE PHILIPPINES, petitioner,
vs.
PHILAB INDUSTRIES, INC., respondent.
DECISION
CALLEJO, SR., J.:
Before the Court is a petition for review on certiorari of the Decision 1 of the Court of Appeals in CA-
G.R. CV No. 44209, as well as its Resolution2 denying the petitioner’s motion for the reconsideration
thereof. Themo1 mo2 Court of Appeals set aside the Decision3 of Branch 150 of the Regional Trial Court
(RTC) of Makati City, which dismissed the complaint of the respondent against the petitioner for sum
of money and damages.
The Facts of the Case
Sometime in 1979, the University of the Philippines (UP) decided to construct an integrated system
of research organization known as the Research Complex. As part of the project, laboratory
equipment and furniture were purchased for the National Institute of Biotechnology and Applied
Microbiology (BIOTECH) at the UP Los Baños. Providentially, the Ferdinand E. Marcos Foundation
(FEMF) came forward and agreed to fund the acquisition of the laboratory furniture, including the
fabrication thereof.
Renato E. Lirio, the Executive Assistant of the FEMF, gave the go-signal to BIOTECH to contact a
corporation to accomplish the project. On July 23, 1982, Dr. William Padolina, the Executive Deputy
Director of BIOTECH, arranged for Philippine Laboratory Industries, Inc. (PHILAB), to fabricate the
laboratory furniture and deliver the same to BIOTECH for the BIOTECH Building Project, for the
account of the FEMF. Lirio directed Padolina to give the go-signal to PHILAB to proceed with the
fabrication of the laboratory furniture, and requested Padolina to forward the contract of the project
to FEMF for its approval.
On July 13, 1982, Padolina wrote Lirio and requested for the issuance of the purchase order and
downpayment for the office and laboratory furniture for the project, thus:
1 Supply and Installation of Laboratory furniture for the BIOTECH Building
. Project
Amount : P2,934,068.90

Supplier : Philippine Laboratory Furniture Co.,

College, Laguna

Attention : Mr. Hector C. Navasero

President

Downpayment : 40% or ₱1,173,627.56

2 Fabrication and Supply of office furniture for the BIOTECH Building Project
.
Amount : P573,375.00

Supplier : Trans-Oriental Woodworks, Inc.

1st Avenue, Bagumbayan Tanyag, Taguig, Metro Manila

Downpayment : 50% or ₱286,687.504

Padolina assured Lirio that the contract would be prepared as soon as possible before the issuance
of the purchase orders and the downpayment for the goods, and would be transmitted to the FEMF
as soon as possible.
In a Letter dated July 23, 1982, Padolina informed Hector Navasero, the President of PHILAB, to
proceed with the fabrication of the laboratory furniture, per the directive of FEMF Executive Assistant
Lirio. Padolina also requested for copies of the shop drawings and a sample contract 5 for the project,
and that such contract and drawings had to be finalized before the down payment could be remitted
to the PHILAB the following week. However, PHILAB failed to forward any sample contract.
Subsequently, PHILAB made partial deliveries of office and laboratory furniture to BIOTECH after
having been duly inspected by their representatives and FEMF Executive Assistant Lirio.
On August 24, 1982, FEMF remitted ₱600,000 to PHILAB as downpayment for the laboratory
furniture for the BIOTECH project, for which PHILAB issued Official Receipt No. 253 to FEMF. On
October 22, 1982, FEMF made another partial payment of ₱800,000 to PHILAB, for which the latter
issued Official Receipt No. 256 to FEMF. The remittances were in the form of checks drawn by
FEMF and delivered to PHILAB, through Padolina.
On October 16, 1982, UP, through Emil Q. Javier, the Chancellor of UP Los Baños and FEMF,
represented by its Executive Officer, Rolando Gapud, executed a Memorandum of Agreement
(MOA) in which FEMF agreed to grant financial support and donate sums of money to UP for the
construction of buildings, installation of laboratory and other capitalization for the project, not to
exceed ₱29,000,000.00. The obligations of FEMF under the MOA are the following:
ARTICLE II
OBLIGATIONS OF THE FOUNDATION
2.1. The FOUNDATION, in carrying out its principal objectives of promoting philantrophic and
scientific projects through financial support to such projects that will contribute to the
country’s economic development, shall grant such financial support and donate such sums
of money to the RESEARCH COMPLEX as may be necessary for the construction of
buildings, installation of laboratories, setting up of offices and physical plants and facilities
 and other capital investment of the RESEARCH COMPLEX and/or any of its component
Research Institutes not to exceed ₱29 Million. For this purpose, the FOUNDATION shall:
(a) Acquire and donate to the UNIVERSITY the site for the RESEARCH COMPLEX;
and
(b) Donate or cause to be donated to the UNIVERSITY the sum of TWENTY-NINE
MILLION PESOS (₱29,000,000.00) for the construction of the buildings of the
National Institutes of Biotechnology and Applied Microbiology (BIOTECH) and the
installation of their laboratories and their physical plants and other facilities to enable
them to commence operations.
2.2. In addition, the FOUNDATION shall, subject to the approval of the Board of Trustees of
the FOUNDATION, continue to support the activities of the RESEARCH COMPLEX by way
of recurrent additional grants and donations for specific research and development projects
which may be mutually agreed upon and, from time to time, additional grants and donations
of such amounts as may be necessary to provide the RESEARCH COMPLEX and/or any of
its Research Institutes with operational flexibility especially with regard to incentives to staff
purchase of equipment/facilities, travel abroad, recruitment of local and expatriate staff and
such other activities and inputs which are difficult to obtain under usual government rules
and regulations.6
The Board of Regents of the UP approved the MOA on November 25, 1982. 7
In the meantime, Navasero promised to submit the contract for the installation of laboratory furniture
to BIOTECH, by January 12, 1983. However, Navasero failed to do so. In a Letter dated February 1,
1983, BIOTECH reminded Navasero of the need to submit the contract so that it could be submitted
to FEMF for its evaluation and approval.8 Instead of submitting the said contract, PHILAB submitted
to BIOTECH an accomplishment report on the project as of February 28, 1983, and requested
payment thereon.9 By May 1983, PHILAB had completed 78% of the project, amounting to
₱2,288,573.74 out of the total cost of ₱2,934,068.90. The FEMF had already paid forty percent
(40%) of the total cost of the project. On May 12, 1983, Padolina wrote Lirio and furnished him the
progress billing from PHILAB.10 On August 11, 1983, the FEMF made another partial payment of
₱836,119.52 representing the already delivered laboratory and office furniture after the requisite
inspection and verification thereof by representatives from the BIOTECH, FEMF, and PHILAB. The
payment was made in the form of a check, for which PHILAB issued Official Receipt No. 202 to
FEMF through Padolina.11
On July 1, 1984, PHILAB submitted to BIOTECH Invoice No. 01643 in the amount of ₱702,939.40
for the final payment of laboratory furniture. Representatives from BIOTECH, PHILAB, and Lirio for
the FEMF, conducted a verification of the accomplishment of the work and confirmed the same.
BIOTECH forwarded the invoice to Lirio on December 18, 1984 for its payment. 12 Lirio, in turn,
forwarded the invoice to Gapud, presumably sometime in the early part of 1985. However, the FEMF
failed to pay the bill. PHILAB reiterated its request for payment through a letter on May 9,
1985.13 BIOTECH again wrote Lirio on March 21, 1985, requesting the payment of PHILAB’s bill. 14 It
sent another letter to Gapud, on November 22, 1985, again appealing for the payment of PHILAB’s
bill.15 In a Letter to BIOTECH dated December 5, 1985, PHILAB requested payment of ₱702,939.40
plus interest thereon of ₱224,940.61.16 There was, however, no response from the FEMF. On
February 24, 1986, PHILAB wrote BIOTECH, appealing for the payment of its bill even on
installment basis.17
President Marcos was ousted from office during the February 1986 EDSA Revolution. On March 26,
1986, Navasero wrote BIOTECH requesting for its much-needed assistance for the payment of the
balance already due plus interest of ₱295,234.55 for its fabrication and supply of laboratory
furniture.18
On April 22, 1986, PHILAB wrote President Corazon C. Aquino asking her help to secure the
payment of the amount due from the FEMF.19 The letter was referred to then Budget Minister Alberto
Romulo, who referred the letter to then UP President Edgardo Angara on June 9, 1986. On
September 30, 1986, Raul P. de Guzman, the Chancellor of UP Los Baños, wrote then Chairman of
the Presidential Commission on Good Government (PCGG) Jovito Salonga, submitting PHILAB’s
claim to be officially entered as "accounts payable" as soon as the assets of FEMF were liquidated
by the PCGG.20
In the meantime, the PCGG wrote UP requesting for a copy of the relevant contract and the MOA for
its perusal.21
Chancellor De Guzman wrote Navasero requesting for a copy of the contract executed between
PHILAB and FEMF. In a Letter dated October 20, 1987, Navasero informed De Guzman that
PHILAB and FEMF did not execute any contract regarding the fabrication and delivery of laboratory
furniture to BIOTECH.
Exasperated, PHILAB filed a complaint for sum of money and damages against UP. In the
complaint, PHILAB prayed that it be paid the following:
(1) PESOS: SEVEN HUNDRED TWO THOUSAND NINE HUNDRED THIRTY NINE &
40/100 (₱702,939.40) plus an additional amount (as shall be determined during the hearing)
to cover the actual cost of money which at the time of transaction the value of the peso was
eleven to a dollar (₱11.00:$1) and twenty seven (27%) percent interest on the total amount
from August 1982 until fully paid;
(2) PESOS: ONE HUNDRED THOUSAND (₱100,000.00) exemplary damages;
(3) FIFTY THOUSAND [PESOS] (₱50,000.00) as and for attorney’s fees; and
(4) Cost of suit.22
PHILAB alleged, inter alia, that:
3. Sometime in August 1982, defendant, through its officials, particularly MR. WILLIAM
PADOLINA, Director, asked plaintiff to supply and install several laboratory furnitures and
equipment at BIOTECH, a research laboratory of herein defendant located at its campus in
College, Laguna, for a total contract price of PESOS: TWO MILLION NINE HUNDRED
THIRTY-NINE THOUSAND FIFTY-EIGHT & 90/100 (₱2,939,058.90);
4. After the completion of the delivery and installation of said laboratory furnitures and
equipment at defendant’s BIOTECH Laboratory, defendant paid three (3) times on
installment basis:
a) ₱600,000.00 as per Official Receipt No. 253 dated August 24, 1982;
b) ₱800,000.00 as per Official Receipt No. 256 dated October 22, 1982;
c) ₱836,119.52 as per Official Receipt No. 202 dated August 11, 1983;
thus leaving a balance of PESOS: SEVEN HUNDRED TWO THOUSAND NINE HUNDRED
THIRTY-NINE & 40/100 (₱702,939.40).
5. That notwithstanding repeated demands for the past eight years, defendant arrogantly and
maliciously made plaintiff believe that it was going to pay the balance aforestated, that was
why plaintiff’s President and General Manager himself, HECTOR C. NAVASERO, personally
went to and from UP Los Baños to talk with defendant’s responsible officers in the hope of
expecting payment, when, in truth and in fact, defendant had no intention to pay whatsoever
right from the start on a misplaced ground of technicalities. Some of plaintiff’s demand letters
since year 1983 up to the present are hereto attached as Annexes A, B, C, D, E, F, G, and H
hereof;
6. That by reason of defendant’s malicious, evil and unnecessary misrepresentations that it
was going to pay its obligation and asking plaintiff so many red tapes and requirements to
submit, compliance of all of which took plaintiff almost eight (8) years to finish, when, in truth
and in fact, defendant had no intention to pay, defendant should be ordered to pay plaintiff
no less than PESOS: ONE HUNDRED THOUSAND (₱100,000.00) exemplary damages, so
that other government institutions may be warned that they must not unjustly enrich
themselves at the expense of the people they serve.23
In its answer, UP denied liability and alleged that PHILAB had no cause of action against it because
it was merely the donee/beneficiary of the laboratory furniture in the BIOTECH; and that the FEMF,
which funded the project, was liable to the PHILAB for the purchase price of the laboratory furniture.
UP specifically denied obliging itself to pay for the laboratory furniture supplied by PHILAB.
After due proceedings, the trial court rendered judgment dismissing the complaint without prejudice
to PHILAB’s recourse against the FEMF. The fallo of the decision reads:
WHEREFORE, this case is hereby DISMISSED for lack of merit without prejudice to
plaintiff's recourse to the assets of the Marcos Foundation for the unpaid balance of
₱792,939.49.
SO ORDERED.24
Undaunted, PHILAB appealed to the Court of Appeals (CA) alleging that the trial court erred in
finding that:
1. the contract for the supply and installation of subject laboratory furniture and equipment
was between PHILAB and the Marcos Foundation; and,
2. the Marcos Foundation, not the University of the Philippines, is liable to pay the
respondent the balance of the purchase price.25
The CA reversed and set aside the decision of the RTC and held that there was never a contract
between FEMF and PHILAB. Consequently, PHILAB could not be bound by the MOA between the
FEMF and UP since it was never a party thereto. The appellate court ruled that, although UP did not
bind itself to pay for the laboratory furniture; nevertheless, it is liable to PHILAB under the maxim:
"No one should unjustly enrich himself at the expense of another."
The Present Petition
Upon the denial of its motion for reconsideration of the appellate court’s decision, UP, now the
petitioner, filed its petition for review contending that:
I. THE COURT OF APPEALS ERRED WHEN IT FAILED TO APPLY THE LAW ON
CONTRACTS BETWEEN PHILAB AND THE MARCOS FOUNDATION.
II. THE COURT OF APPEALS ERRED IN APPLYING THE LEGAL PRINCIPLE OF UNJUST
ENRICHMENT WHEN IT HELD THAT THE UNIVERSITY, AND NOT THE MARCOS
FOUNDATION, IS LIABLE TO PHILAB.26
Prefatorily, the doctrinal rule is that pure questions of facts may not be the subject of appeal by
certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as this mode of appeal is generally
restricted to questions of law.27 However, this rule is not absolute. The Court may review the factual
findings of the CA should they be contrary to those of the trial court. 28 Correspondingly, this Court
may review findings of facts when the judgment of the CA is premised on a misapprehension of
facts.29
On the first assigned error, the petitioner argues that the CA overlooked the evidentiary effect and
substance of the corresponding letters and communications which support the statements of the
witnesses showing affirmatively that an implied contract of sale existed between PHILAB and the
FEMF. The petitioner furthermore asserts that no contract existed between it and the respondent as
it could not have entered into any agreement without the requisite public bidding and a formal written
contract.
The respondent, on the other hand, submits that the CA did not err in not applying the law on
contracts between the respondent and the FEMF. It, likewise, attests that it was never privy to the
MOA entered into between the petitioner and the FEMF. The respondent adds that what the FEMF
donated was a sum of money equivalent to ₱29,000,000, and not the laboratory equipment supplied
by it to the petitioner. The respondent submits that the petitioner, being the recipient of the laboratory
furniture, should not enrich itself at the expense of the respondent.
The petition is meritorious.
It bears stressing that the respondent’s cause of action is one for sum of money predicated on the
alleged promise of the petitioner to pay for the purchase price of the furniture, which, despite
demands, the petitioner failed to do. However, the respondent failed to prove that the petitioner ever
obliged itself to pay for the laboratory furniture supplied by it. Hence, the respondent is not entitled to
its claim against the petitioner.
There is no dispute that the respondent is not privy to the MOA executed by the petitioner and
FEMF; hence, it is not bound by the said agreement. Contracts take effect only between the parties
and their assigns.30 A contract cannot be binding upon and cannot be enforced against one who is
not a party to it, even if he is aware of such contract and has acted with knowledge
thereof.31 Likewise admitted by the parties, is the fact that there was no written contract executed by
the petitioner, the respondent and FEMF relating to the fabrication and delivery of office and
laboratory furniture to the BIOTECH. Even the CA failed to specifically declare that the petitioner and
the respondent entered into a contract of sale over the said laboratory furniture. The parties are in
accord that the FEMF had remitted to the respondent partial payments via checks drawn and issued
by the FEMF to the respondent, through Padolina, in the total amount of ₱2,288,573.74 out of the
total cost of the project of ₱2,934,068.90 and that the respondent received the said checks and
issued receipts therefor to the FEMF. There is also no controversy that the petitioner did not pay a
single centavo for the said furniture delivered by the respondent that the petitioner had been using
ever since.
We agree with the petitioner that, based on the records, an implied-in-fact contract of sale was
entered into between the respondent and FEMF. A contract implied in fact is one implied from facts
and circumstances showing a mutual intention to contract. It arises where the intention of the parties
is not expressed, but an agreement in fact creating an obligation. It is a contract, the existence and
terms of which are manifested by conduct and not by direct or explicit words between parties but is
to be deduced from conduct of the parties, language used, or things done by them, or other pertinent
circumstances attending the transaction. To create contracts implied in fact, circumstances must
warrant inference that one expected compensation and the other to pay. 32 An implied-in-fact contract
requires the parties’ intent to enter into a contract; it is a true contract. 33 The conduct of the parties is
to be viewed as a reasonable man would view it, to determine the existence or not of an implied-in-
fact contract.34 The totality of the acts/conducts of the parties must be considered to determine their
intention. An implied-in-fact contract will not arise unless the meeting of minds is indicated by some
intelligent conduct, act or sign.35
In this case, the respondent was aware, from the time Padolina contacted it for the fabrication and
supply of the laboratory furniture until the go-signal was given to it to fabricate and deliver the
furniture to BIOTECH as beneficiary, that the FEMF was to pay for the same. Indeed, Padolina
asked the respondent to prepare the draft of the contract to be received by the FEMF prior to the
execution of the parties (the respondent and FEMF), but somehow, the respondent failed to prepare
one. The respondent knew that the petitioner was merely the donee-beneficiary of the laboratory
furniture and not the buyer; nor was it liable for the payment of the purchase price thereof. From the
inception, the FEMF paid for the bills and statement of accounts of the respondent, for which the
latter unconditionally issued receipts to and under the name of the FEMF. Indeed, witness Lirio
testified:
Q: Now, did you know, Mr. Witness, if PHILAB Industries was aware that it was the Marcos
Foundation who would be paying for this particular transaction for the completion of this
particular transaction?
A: I think they are fully aware.
Q: What is your basis for saying so?
A: First, I think they were appraised by Dr. Padolina. Secondly, there were occasions during
our inspection in Los Baños, at the installation site, there were occasions, two or three
occasions, when we met with Mr. Navasero who is the President, I think, or manager of
PHILAB, and we appraised him that it was really between the foundation and him to which
includes (sic) the construction company constructing the building. He is fully aware that it is
the foundation who (sic) engaged them and issued the payments.36
The respondent, in its Letter dated March 26, 1986, informed the petitioner and sought its assistance
for the collection of the amount due from the FEMF:
Dear Dr. Padolina:
May we request for your much-needed assistance in the payment of the balance still due us
on the laboratory furniture we supplied and installed two years ago?
Business is still slow and we will appreciate having these funds as soon as possible to keep
up our operations.
We look forward to hearing from you regarding this matter.
Very truly yours,
PHILAB INDUSTRIES, INC.37
The respondent even wrote former President Aquino seeking her assistance for the payment of the
amount due, in which the respondent admitted it tried to collect from her predecessor, namely, the
former President Ferdinand E. Marcos:
YOUR EXCELLENCY:
At the instance of the national government, subject laboratory furnitures were supplied by
our company to the National Institute of Biotechnology & Applied Microbiology (BIOTECH),
University of the Philippines, Los Baños, Laguna, in 1984.
Out of the total contract price of PESOS: TWO MILLION NINE HUNDRED THIRTY-NINE
THOUSAND FIFTY-EIGHT & 90/100 (₱2,939,058.90), the previous administration had so far
paid us the sum of ₱2,236,119.52 thus leaving a balance of PESOS: ONE MILLION FOUR
HUNDRED TWELVE THOUSAND SEVEN HUNDRED FORTY-EIGHT & 61/100
(₱1,412.748.61) inclusive of interest of 24% per annum and 30% exchange rate adjustment.
On several occasions, we have tried to collect this amount from your predecessor, the latest
of which was subject invoice (01643) we submitted to DR. W. PADOLINA, deputy director of
BIOTECH. But this, notwithstanding, our claim has remained unacted upon up to now. Copy
of said invoice is hereto attached for easy reference.
Now that your excellency is the head of our government, we sincerely hope that payment of
this obligation will soon be made as this is one project the Republic of the Philippines has
use of and derives benefit from.38
Admittedly, the respondent sent to the petitioner its bills and statements of accounts for the
payments of the laboratory furniture it delivered to the petitioner which the petitioner, through
Padolina, transmitted to the FEMF for its payment. However, the FEMF failed to pay the last
statement of account of the respondent because of the onset of the EDSA upheaval. It was only
when the respondent lost all hope of collecting its claim from the government and/or the PCGG did it
file the complaint against the petitioner for the collection of the payment of its last delivery of
laboratory furniture.
We reject the ruling of the CA holding the petitioner liable for the claim of the respondent based on
the maxim that no one should enrich itself at the expense of another.
Unjust enrichment claims do not lie simply because one party benefits from the efforts or obligations
of others, but instead it must be shown that a party was unjustly enriched in the sense that the term
unjustly could mean illegally or unlawfully.39
Moreover, to substantiate a claim for unjust enrichment, the claimant must unequivocally prove that
another party knowingly received something of value to which he was not entitled and that the state
of affairs are such that it would be unjust for the person to keep the benefit. 40 Unjust enrichment is a
term used to depict result or effect of failure to make remuneration of or for property or benefits
received under circumstances that give rise to legal or equitable obligation to account for them; to be
entitled to remuneration, one must confer benefit by mistake, fraud, coercion, or request. 41 Unjust
enrichment is not itself a theory of reconvey. Rather, it is a prerequisite for the enforcement of the
doctrine of restitution.42
Article 22 of the New Civil Code reads:
 Every person who, through an act of performance by another, or any other means, acquires
or comes into possession of something at the expense of the latter without just or legal
ground, shall return the same to him. (Boldface supplied)
In order that accion in rem verso may prosper, the essential elements must be present: (1) that the
defendant has been enriched, (2) that the plaintiff has suffered a loss, (3) that the enrichment of the
defendant is without just or legal ground, and (4) that the plaintiff has no other action based on
contract, quasi-contract, crime or quasi-delict.43
An accion in rem verso is considered merely an auxiliary action, available only when there is no
other remedy on contract, quasi-contract, crime, and quasi-delict. If there is an obtainable action
under any other institution of positive law, that action must be resorted to, and the principle of accion
in rem verso will not lie.44
The essential requisites for the application of Article 22 of the New Civil Code do not obtain in this
case. The respondent had a remedy against the FEMF via an action based on an implied-in-fact
contract with the FEMF for the payment of its claim. The petitioner legally acquired the laboratory
furniture under the MOA with FEMF; hence, it is entitled to keep the laboratory furniture.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Decision of the Court
of Appeals is REVERSED AND SET ASIDE. The Decision of the Regional Trial Court, Makati City,
Branch 150, is REINSTATED. No costs.
SO ORDERED.

G.R. No. 210641, March 27, 2019

DOMESTIC PETROLEUM RETAILER CORPORATION, PETITIONER, v. MANILA
INTERNATIONAL AIRPORT AUTHORITY, RESPONDENT.
DECISION
CAGUIOA, J.:
Before the Court is a Petition for Review on Certiorari1 (Petition) under Rule 45 of the
Rules of Court filed by petitioner Domestic Petroleum Retailer Corporation (petitioner
DPRC) against respondent Manila International Airport Authority (respondent MIAA),
assailing the Decision2 dated May 31, 2013 (assailed Decision) and Resolution 3 dated
November 29, 2013 (assailed Resolution) promulgated by the Court of Appeals (CA)
Special Second Division and Former Special Second Division, respectively, in CA-G.R.
CV No. 98378, which affirmed the Decision4 dated August 15, 2011 of the Regional Trial
Court, Pasay City, Branch 119 (RTC) in Civil Case No. R-PSY-08-08963.
The Facts and Antecedent Proceedings
As narrated by the CA in its assailed Decision, and as culled from the records of the
case, the essential facts and antecedent proceedings of the instant case are as follows:
On December 23, 2008, [petitioner DPRC] filed a Complaint 5 for "Collection of Sums of
Money" against [respondent MIAA] before the [RTC,] averring that: on June 4, 1998,
[petitioner DPRC] and [respondent MIAA] entered into a Contract of Lease whereby the
former leased from the latter a 1,631.12-square meter parcel of land and a 630.88-
square meter building both located at Domestic Road, Pasay City[.]
[Petitioner DPRC] was obliged to pay monthly rentals of P75,357.74 for the land and
P33,310.46 for the building; [petitioner DPRC] faithfully complied with its obligation to
pay the monthly rentals since the start of the lease contract[.]
[O]n April 2, 1998, [respondent MIAA] passed Resolution No. 98-30 which took effect
on June 1, 1998 increasing the rentals paid by its concessionaires and lessees[.]
[Respondent MIAA] issued Administrative Order No. 1[,] Series of 1998 reflecting the
new schedule of fees, charges, and rates[.] [Petitioner] DPRC initially refused to pay
the increased rentals which was decreed without prior notice and hearing[.]
[O]n November 19, 1998, [respondent MIAA] demanded its payment of P655,031.13 as
rental in arrears which was based on the increase prescribed in Resolution No. 98-30
with 2% interest compounded monthly[.] [Respondent MIAA] also demanded payment
of P628,895.43 after recomputing and deducting the amount of P26,135.70 from the
original amount of P655,031.13[.]
[O]n December 8, 1998, [petitioner DPRC] protested in writing to [respondent MIAA]
the increased rentals and the computation[.] [H]owever, it also signified its intention to
comply in good faith with the terms and conditions of the lease contract by paying the
amount charged[.] [O]n December 11, 1998, [petitioner DPRC] paid [respondent MIAA]
P628,895.43 which was based on the new rates[.]
[On December 1, 2004, the First (1st ) Division of the Court promulgated its Decision in
the case of Manila International Airport Authority v. Airspan Corporation, et
al.,6 docketed as G.R. No. 157581. In the said case, the Court nullified Resolution Nos.
98-30 and 99-11 issued by respondent MIAA for non-observance of the notice and
hearing requirements for the fixing rates required by the Administrative Code.]
[O]n December 21, 2005, [petitioner DPRC] advised [respondent] MIAA of its intention
to stop paying the increased rental rate, and on January 1, 2006, it stopped paying the
increased rental rate[,] but continued paying the original rental rate prescribed in the
lease contract[.] [Petitioner DPRC's] decision to stop paying the increased rental rate
was based on the [Court's] Decision dated December 1, 2004 in the case of Manila
International Airport Authority vs. Air span Corporation, et al. x x x [Petitioner DPRC]
paid [respondent] MIAA a total amount of P9,593,179.87, which is in excess of the
stipulated monthly rentals from December 11, 1998 up to December 5, 2005[.]
[O]n June 22, 2006, [respondent] MIAA required the payment of P645,216.21 allegedly
representing the balance of the rentals from January up to June 2006[.] [O]n July 27,
2006, [petitioner DPRC] sent its reply to [respondent] MIAA denying the unpaid
obligation, reiterating that the rental could no longer be computed based on the
nullified Resolution No. 98-30, and demanding for the refund of its overpayment in the
amount of P9,593,179.87[.] [Respondent] MIAA ignored its demand[,] prompting
[petitioner DPRC] to send a final written demand dated November 5, 2008[.] [The
latter] was constrained to file [the Complaint for Collection of Sums of Money.]
xxxx
On August 15, 2011, the [RTC] rendered [its Decision, ruling in favor of petitioner
DPRC. The dispositive portion of the RTC's Decision dated August 15, 2011 states the
following:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff Domestic Petroleum
Retailer Corporation and against defendant Manila International Airport Authority,
ordering the latter to pay the former the following:
(1) the principal amount of P9,593,179.87, plus legal interest computed from the time of the
 extra-judicial demand on July 27, 2006;

� �

(2) the sum of P300,00.00 (sic) as and for attorney's fees; and

� �

(3) the cost of suit.

SO ORDERED.7 ]
Upon [petitioner] DPRC's motion, the [RTC] issued an Order dated November 17, 2011
clarifying its [D]ecision to read as follows: "(1) the principal amount of P9,593,179.87
plus 12% per annum legal interest computed from the time of the extrajudicial demand
on July 27, 2006."
Hence, [respondent MIAA filed an appeal before the CA, arguing that (1) the decided
case of Manila International Airport Authority v. Airspan Corporation does not apply as
to the instant case; (2) the RTC erred in considering the receipts respondent MIAA
issued as for alleged payment of the increased rental rate; and (3) prescription or
laches has set in to bar petitioner DPRC from asserting its claim against respondent
MIAA.]8
The Ruling of the CA
In the assailed Decision, the CA affirmed the RTC's Decision holding respondent MIAA
liable to petitioner DPRC, but with a modification as to the amount. Instead of holding
respondent MIAA liable for the entire amount of P9,593,179.87, the CA decreased
respondent MIAA's liability to P3,839,643.05 plus legal interest at 12% per annum
computed from the time of'extrajudicial demand on July 27, 2006. The dispositive
portion of the assailed Decision reads:
WHEREFORE, premises considered, the Decision dated August 15, 2011 of the RTC,
Branch 119, Pasay City in Civil Case No. R-PSY-08-08963 is AFFIRMED WITH
MODIFICATION by ordering defendant-appellant Manila International Airport
Authority to pay plaintiff-appellee Domestic Petroleum Retailer Corporation the principal
amount of P3,839,643.05 paid during the period from January 9, 2003 to December 5,
2005, plus legal interest at 12% per annum computed from the time of the extra-
judicial demand on July 27, 2006.
In all other respects, the appealed decision so stands as AFFIRMED.
SO ORDERED.9
In the assailed Decision, the CA found that the liability of respondent MIAA to petitioner
DPRC for overpaid monthly rentals was in the nature of a quasi-contract of solutio
indebiti. And because petitioner DPRC's claim against respondent MIAA is purportedly in
the nature of solutio indebiti, the CA held that "the claim of refund must be commenced
within six (6) years from date of payment pursuant to Article 1145(2) 10 of the Civil
Code."11
Proceeding from such premise, the CA found that, despite the records showing that
petitioner DPRC made overpayment in monthly rentals from December 11, 1998 up to
December 5, 2005, such claim could not be fully awarded to petitioner DPRC due to
prescription.
The CA explained that:
As already stated, the claim for refund must be made within six (6) years from date of
payment. Since [petitioner] DPRC demanded the refund of the increase in monthly
rentals mistakenly paid only on July 27, 2006 and filed this case before the [RTC] only
on December 23, 2008, it can recover only those paid during the period from January
9,2003 to December 5, 2005[,] or a total amount of P3,839,643.05[,] broken down as
follows:
Amount Paid Under
Date of Payment Protest inclusive of 5%
Withholding Tax

January 9, 2003 106,297.33

February 5, 2003 106,297.33

March 5, 2003 106,297.33

April 4, 2003 106,297.33

May 5, 2003 106,297.33

June 5, 2003 106,297.33

July 4, 2003 106,297.33

August 5, 2003 106,297.33

September 5, 2003 129,126.87

October 4, 2003 105,931.02

November 5, 2003 105,931.02

December 5, 2003 105,931.02

January 5, 2004 105,931.02

February 5, 2004 105,931.02

March 5, 2004 105,931.02

April 5, 2004 105,931.02

May 5, 2004 105,931.02

June 4, 2004 105,931.02

July 5, 2004 105,931.02

August 5, 2004 105,931.02

 September 6, 2004 105,931.02

October 5, 2004 105,931.02

November 5, 2004 105,931.02

December 6, 2004 105,931.02

January 5, 2005 105,931.02

February 4, 2005 105,931.02

March 4, 2005 105,931.02

April 5, 2005 105,931.02

May 5, 2005 105,931.02

June 5, 2005 105,931.02

July 5, 2005 105,931.02

August 5, 2005 105,931.02

September 5, 2005 105,931.02

October 5, 2005 105,931.02

November 7, 2005 105,931.02

December 5, 2005 105,931.02

TOTAL P3,839,643.05

[Petitioner] DPC has, by reason of the six (6) years prescriptive period, lost its right to
recover the amount of P5,753,536.82 paid during the period from December 11, 1998
to December 5, 2002.12
Unsatisfied, petitioner DPRC filed a Motion for Partial Reconsideration 13 dated June 28,
2013, which was denied by the CA in the assailed Resolution.
Hence, the instant Petition.
The Court notes that, based on the records, respondent MIAA has not filed an appeal of
the assailed Decision and Resolution promulgated by the CA.
However, respondent MIAA filed its Comment14 (On the Petition for Review) dated July
8, 2014, to which petitioner DPRC responded with its Reply15 dated November 17, 2014.
Issues
The only issue raised by petitioner DPRC in the instant Petition is whether the CA was
correct in amending the RTC's Decision, modifying the amount of respondent MIAA's
liability from the full amount of P9,593,179.87 to just P3,839,643.05 plus legal interest
at 12% per annum computed from the time of extra-judicial demand on July 27, 2006,
on the basis of the application of the six-year prescriptive period governing the quasi-
contract of solutio indebiti.
The Court's Ruling
The Court finds merit in the instant Petition.
The CA posited the view that the quasi-contract of solutio indebiti applies as to the
instant case because petitioner "DPRC's payment of the increased rental to [respondent
MIAA], who was found to have no authority to increase fees, charges and rates without
the approval of the DOTC Secretary, due to a mistake in the interpretation and
imposition of Administrative Order No. 98-30, which was later found to be invalid for
lack of the required prior notice and public hearing, gives rise to the application of the
principle of solutio indebiti under Articles 2154, 2155 and 2156 of the Civil Code in this
case."16
Article 2154 of the Civil Code explains the concept of the quasi-contract of solutio
indebiti:
Art. 2154. If something is received when there is no right to demand it, and it was
unduly delivered through mistake, the obligation to return it arises.
The quasi-contract of solutio indebiti harks back to the ancient principle that no one
shall enrich himself unjustly at the expense of another. 17
In order to establish the application of solutio indebiti in a given situation, two
conditions must concur: (1) a payment is made when there exists no binding
relation between the payor who has no duty to pay, and the person who received the
payment, and (2) the payment is made through mistake, and not through liberality
or some other cause.18 In the instant case, the Court finds that the essential requisites
of solutio indebiti are not present.
There exists a binding relation between petitioner DPRC and respondent MIAA.

First and foremost, it is undisputed by all parties that respondent MIAA and petitioner
DPRC are mutually bound to each other under a Contract of Lease, which both parties
entered on June 4, 1998, covering the 1,631.12-square-meter parcel of land and a
630.88-square-meter building both located at Domestic Road, Pasay City. Hence, with
respondent MIAA and petitioner DPRC having the juridical relationship of a lessor-
lessee, it cannot be said that in the instant case, the overpayment of monthly rentals
was made when there existed no binding juridical tie or relation between the pay
or, i.e., petitioner DPRC, and the person who received the payment, i.e., respondent
MIAA. In fact, respondent MIAA itself acknowledged in its Comment that there was a
"pre-existing contractual relation" between itself and petitioner DPRC. 19
The Court's Decision in National Commercial Bank of Saudi Arabia v. Court of
Appeals20 is instructive.
In the said case, therein petitioner National Commercial Bank of Saudi Arabia (NCBSA)
filed a case against therein respondent Philippine Banking Corporation (PBC) to recover
the duplication in the payment of the proceeds of a letter of credit, under which NCBSA
obliged itself to pay PBC subject to compliance with certain conditions provided in the
letter of credit.
Assailing the lower court's decision granting NCBSA's complaint for recovery of money,
therein respondent PBC argued that "[therein petitioner] NCBSA's complaint is 'based
on the quasi-contract of solutio indebiti,'' hence, it prescribes in six years and,
therefore, when NCBSA filed its complaint nine years after the cause of action arose, it
had prescribed."21
In denying the aforesaid argument and upholding NCBSA's claim of refund against PBC
due to double payment, the Court held that, since solutio indebiti applies only where no
binding relation exists between the payor and the person who received the
payment, solutio indebiti was not applicable because the parties therein were bound by
a contract, i.e., a letter of credit. As such, the cause of action against PBC was
deemed to be based on the violation of a contract instead of a quasi-contract:
Technicality aside, en passant, on the merits of PBC's Motion for Reconsideration of the
trial court's decision, the trial court did not err in brushing aside its main defense of
prescription � that NCBSA's complaint is "based on the quasi-contract of solutio
indebiti" hence, it prescribes in six years and, therefore, when NCBSA filed its complaint
nine years after the cause of action arose, it had prescribed.
Solutio indebiti applies where: (1) a payment is made when there exists no binding
relation between the payor, who has no duty to pay, and the person who received the
payment, and (2) the payment is made through mistake, and not through liberality or
some other cause. In the case at bar, PBC and NCBSA were bound by their
contract, the letter of credit, under which NCBSA obliged itself to pay PBC,
subject to compliance by the latter with certain conditions provided therein.
As such, the cause of action was based on a contract, and the prescriptive
period is ten, not six years.22
Similarly, in Genova v. De Castro,23 despite holding that the therein petitioner is entitled
to a refund of what he had previously paid to the therein respondent, the Court held
that solutio indebiti was not applicable because the first element was not present,
considering that petitioner therein made payments to respondent therein pursuant to
an underlying agreement to repurchase property that governed the relation of the
parties therein.24
Applying the foregoing to the instant case, akin to National Commercial Bank of Saudi
Arabia v. Court of Appeals, the Court finds that the cause of action of petitioner DPRC is
based on the violation of a contractual stipulation in the parties' Contract of Lease, and
not due to the existence of a quasi-contract.
As admitted by respondent MIAA in its Comment, the overpayment made by petitioner
DPRC is rooted in Section 2.06 of the Contract of Lease, which provided that petitioner
DPRC's monthly rentals shall be subject to price escalation on the condition that
respondent MIAA will issue a valid Administrative Order calling for the price escalation
and that petitioner DPRC will be given prior notice of such price escalation.
Hence, by filing its Complaint, petitioner DPRC invoked the Contract of Lease and
alleged that respondent MIAA violated the aforementioned contractual stipulation,
considering that the latter imposed a price escalation of monthly rentals despite
reneging on its contractual obligation to first issue a valid Administrative Order and give
petitioner DPRC prior notice.
No less than the CA in the assailed Decision held that, pursuant to the agreement of the
parties in their Contract of Lease, "an Administrative Order must be issued by
[respondent] MIAA and [petitioner] DPRC should be notified of the said increase in
rental and other charges thirty (30) days before their imposition." 25 The CA agreed with
the RTC that there exists a valid cause of action against respondent MIAA because "the
requirements provided in x x x the lease contract itself were not satisfied in this case." 26
In arguing in its Comment that petitioner DPRC's cause of action is not based on a
contract, respondent MIAA asserts that "[petitioner] DPRC's cause of action for refund
is not based on contract (since there is no provision in the Contract that [petitioner]
DPRC can rely upon for refund) but on quasi-contract since [respondent MIAA] allegedly
does not have the right to hold on the excess amounts." 27
Respondent MIAA's supposition that there is no provision in the Contract of Lease that
petitioner DPRC can rely upon to ask for a refund is completely mistaken. To reiterate,
respondent MIAA readily admits that according to the Contract of Lease, petitioner
DPRC's monthly rentals shall be subject to price escalation only when respondent MIAA
issues a valid Administrative Order calling for price escalation and when petitioner DPRC
is given prior notice. By still imposing a price escalation despite the non-observance of
both requirements, both the RTC and CA found that respondent MIAA violated the
Contract of Lease.
Just because the Contract of Lease in itself may be silent as to petitioner DPRC's
entitlement to a refund does not mean that such claim for refund is not provided for in
the contract and cannot be asserted by petitioner DPRC.
It must be stressed that applicable laws form part of, and are read into, contracts
without need for any express reference thereto. 28 Specifically on lease contracts, Article
165929 of the Civil Code, in relation to Article 1657,30 states that the aggrieved party in
a contract of lease may ask for indemnification when the other party fails to comply
with his/her obligations, one of which is to ask from the lessee the price of the lease
only according to the terms stipulated.
Hence, with these provisions of law read into the parties' Contract of Lease, respondent
MIAA's argument that there is no provision in the Contract of Lease that petitioner
DPRC can rely on to claim for refund of overpayment of monthly rentals is erroneous.
In the instant case, there was no payment by mistake.

Furthermore, it cannot be said that petitioner DPRC's payments in monthly rentals from
December 11, 1998 up to December 5, 2005 in observance with the subsequently
nullified Resolution No. 98-30 were made due to mistake on the part of petitioner
DPRC.
For the concept of solutio indebiti to apply, the undue payment must have been made
by reason of either an essential mistake of fact 31 or a mistake in the construction or
application of a doubtful or difficult question of law.32 Mistake entails an error,
misconception, or misunderstanding.33
In the instant case, petitioner DPRC made the overpayments in monthly rentals from
December 11, 1998 to December 5, 2005 not due to any mistake, error, or omission as
to any factual matter surrounding the payment of rentals. Nor did petitioner DPRC
make the overpayments due to any mistaken construction or application of a doubtful
question of law.
Instead, petitioner DPRC deliberately made the payments in accordance with
respondent MIAA's Resolution No. 98-30, albeit under protest. It must be recalled that
after the issuance of Resolution No. 98-30, on December 8, 1998, petitioner DPRC
protested in writing to respondent MIAA, alleging that Resolution No. 98-30 was
invalidly issued. However, petitioner DPRC also signified its intention to comply in good
faith with the terms and conditions of the lease contract by paying the amount charged
in accordance with Resolution No. 98-30 despite registering its objection to its validity.
Solutio indebiti applies when payment was made on the erroneous belief of facts or law
that such payment is due.34 In the case at hand, petitioner DPRC's overpayment of
rentals from 1998 to 2005 was not made by sheer inadvertence of the facts or the
misconstruction and misapplication of the law. Petitioner DPRC did not make payment
because it mistakenly and inadvertently believed that the increase in rentals instituted
by the subsequently voided Resolution No. 98-30 was indeed due and demandable.
From the very beginning, petitioner DPRC was consistent in its belief that the increased
rentals were not due as Resolution No. 98-30 was, in its view, void.
However, petitioner DPRC still made payment despite its objection, not due to any
mistaken belief, but for the sole reason that prior to the Court's Decision in Manila
International Airport Authority v. Airspan Corporation, et al., Resolution No. 98-30 was
still presumed to be legal, having the force of law in the absence of any judicial
declaration to the contrary. Hence, without any judicial declaration on the nullity of
Resolution No. 98-30 at that time, petitioner DPRC had no alternative but to make the
subject payments, though under protest. Therefore, it is not correct to say that the
subject payments made by petitioner DPRC were made by mistake or inadvertence.
Therefore, with the absence of the two essential requisites of solutio indebiti in the
instant case, petitioner DPRC's cause of action is not based on the quasi-contract
of solutio indebiti.
Petitioner DPRC's claim against respondent MIAA for full refund of the overpayment of rentals has not
prescribed.

Considering that petitioner DPRC's cause of action is not based on a quasi-contract and
is instead founded on the enforcement of a contract, the CA erred in applying Article
1145(2) of the Civil Code in the instant case.
Instead of the prescriptive period of six years for quasi-contracts, it is Article 1144 35 of
the Civil Code that finds application in the instant case. This Article provides that an
action based on a written contract must be brought within 10 years from the time
the right of action accrues.
Aside from erroneously applying the six-year prescriptive period governing quasi-
contracts, the CA likewise erred in stating that the applicable prescriptive period is
reckoned from the date of petitioner DPRC's first overpayment on December 11, 1998.
In Espa�ol v. Board of Administrators, Philippine Veterans Administration,36 as to
when the right of action of a party who claims payment from the government due to
the nullification of an administrative policy or issuance accrues, the Court held that the
claimant has a cause of action for payment against the government only from the
time that the Court declared invalid the questioned administrative policy. This
is so because it is at that point when the presumption of legality of the questioned
administrative policy had been rebutted and thus it can be said with certainty that the
government infringed on the right of the claimant:
The contention of appellant PVA that the action of appellee Maria U. Espa�ol to
compel the restoration of her monthly pension and that of her children, effective from
the date of cancellation on November 1, 1951, has already prescribed, inasmuch as the
same was filed more than 10 years from the date of cancellation, is without merit.
xxxx
The right of action accrues when there exists a cause of action, which consists of 3
elements, namely: a) a right in favor of the plaintiff by whatever means and under
whatever law it arises or is created; b) an obligation on the part of defendant to respect
such right; and c) an act or omission on the part of such defendant violative of the right
of the plaintiff (Cole vs. Vda. de Gregorio, 116 SCRA 670 [1982]; Mathay vs.
Consolidated Bank & Trust Co., 58 SCRA 559 [1974]; Vda. de Enriquez vs. De la Cruz,
54 SCRA 1 [1973]). It is only when the last element occurs or takes place that it can be
said in law that a cause of action has arisen (Cole vs. Vda. de Gregorio, supra).
The appellee cannot be said to have a cause of action, in compelling appellant to
continue paying her monthly pension on November 1,1951, because appellant's act of
cancellation, being pursuant to an administrative policy, cannot be considered a
violation of appellee's right to receive her monthly pension.
It is elementary rule in administrative law that administrative regulations and policies
enacted by administrative bodies to interpret the law which they are entrusted to
enforce, have the force of law, are entitled to great respect (Sierra Madre Trust vs.
Secretary of Agriculture and Natural Resources, 121 SCRA 384 [1983]; Asturias Sugar
Central Inc. vs. Commissioner of Customs, 29 SCRA 617 [1969]; Antique Sawmill Inc.
vs. Zayco, et al., 17 SCRA 316 [1966]), and have in their favor a presumption of
legality. Thus, appellant's act of cancelling appellee's monthly pension being presumed
legal and valid, cannot be taken as a violation of appellee's right to receive her monthly
pension under R.A. No. 65.
In the case of Del Mar vs. The Philippine Veterans Administration (51 SCRA 340
[1973]), this Court did not consider prescription in favor of PVA, even though the action
of Del Mar was filed on June 20, 1964 or more than 10 years from the cancellation of
his monthly pension in March, 1950; because the action of Del Mar was basically to
declare the questioned administrative policy invalid, which action does not prescribe.
It is only when this Court declared invalid the questioned administrative policy in the
case of Del Mar vs. The Philippine Veterans Administration, supra, promulgated on June
27, 1973, can the appellee be said to have a cause of action to compel appellant to
resume her monthly pension; because it is at that point in time, when the presumption
of legality of the questioned administrative policy had been rebutted and thus it can be
said with certainty that appellant's act was in violation of appellee's right to receive her
monthly pension.37
Therefore, considering that the Court's Decision in Manila International Airport
Authority v. Airspan Corporation, et al. invalidating Resolution No. 98-30 was
promulgated only on December 1, 2004, the right of action of petitioner DPRC for the
refund of the overpaid rentals accrued only on the said date. Hence, the filing of
petitioner DPRC's Complaint for sum of money on December 23, 2008 was well
within the prescriptive period.
Therefore, regardless of whether the prescriptive period to be applied in the instant
case is the one pertaining to actions arising from quasi-contracts, i.e., six years, or
from contracts, i.e., 10 years, considering that the prescriptive period started to run
only on December 1, 2004, petitioner DPRC's claim for a complete refund of all the
overpaid rentals has not prescribed.
More so, it is likewise undisputed that on July 27, 2006, petitioner DPRC sent
respondent MIAA a written demand for the refund of P9,593,179.87, which covers the
overpayment of monthly rentals made by petitioner DPRC since December 11, 1998. 38
According to Article 1155 of the Civil Code, the prescription of actions is
interrupted when a written extrajudicial demand is made. And so, when written
extrajudicial demand for refund of overpayments was made by petitioner DPRC on July
27, 2006, not only was the prescriptive period to file an action suspended;
jurisprudence holds that "[t]he interruption of the prescriptive period by written
extrajudicial demand means that the said period would commence anew from the
receipt of the demand[,] x x x written extrajudicial demand wipes out the period
that has already elapsed and starts anew the prescriptive period."39
Hence, after petitioner DPRC made its written extrajudicial demand on July 27, 2006, it
actually had until July 27, 2016 to file an action for the full recovery of the
overpayment of monthly rentals. Accordingly, at the time of the institution of the
Complaint for Collection of Sums of Money by petitioner DPRC on December 23,2008,
no claim for refund of overpaid monthly rentals had prescribed.
For the aforementioned reasons, the Court holds that the CA erred in issuing the
assailed Decision and Resolution insofar as it modified the amount of respondent MIAA's
liability. The Court finds that petitioner DPRC is entitled to the full amount of
P9,593,179.87 plus legal interest at 12% per annum computed from the time of
extrajudicial demand on July 27, 2006.
WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The
Decision dated May 31, 2013 and Resolution dated November 29, 2013 promulgated by
the Court of Appeals, Special Second Division and Former Special Second Division,
respectively in CA-G.R. CV No. 98378 are PARTIALLY REVERSED and SET
ASIDE insofar as the Court of Appeals reduced the total amount of liability of
respondent Manila International Airport Authority to P3,839,643.05, plus legal interest
at 12% per annum computed from the time of the extrajudicial demand on July 27,
2006.
Accordingly, the Decision dated August 15, 2011 of the Regional Trial Court, Pasay City,
Branch 119 in Civil Case No. R-PSY-08-08963, as clarified in its Order dated November
17, 2011, is REINSTATED.
SO ORDERED