Article 22 and the Principle of Unjust Enrichment

 

Persons 15: Article 22 and the Principle of Unjust Enrichment (lexinmotion)

Recap on distinctions of the cause of action: Under Art. 20 of the Civil Code, the basis of the action is always an unlawful act, or an act that is contrary to some specific provision of the law and that such act, must be done willfully or negligently.

On the other hand, an action under Art. 21 of the Civil Code is one that is also called contra bonus mores. It can never be committed by mere negligence, only through a willful or voluntary act.

By the end of today’s lesson, you should be able to:

1. Define the principle of unjust enrichment;
2. Identify the requisites for an accion in rem verso to prosper;
3. Distinguish accion in rem verso from solutio indebiti.

            Art. 22 of the Civil Code provides that, “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.”

            Article 22, just like some of the provisions of the chapter on human relations, is an admonishment or a firm warning that is addressed to everyone - to all persons - be they natural persons like us or artificial persons like corporations, partnerships and city governments. Art. 22 tells us that anyone who acquires or comes into possession of something; means that the principle does not distinguish on the nature of the thing or value. In the next line of the codal provision, the law adds a qualification at the expense of another. The law imposes upon us the duty to return the thing.

            In the case of lexinmotion’s story, there was unjust enrichment on the part of his brother. He acquired or came into possession of the amount of Php 26,000. He received it without just or legal ground.

Classic example of unjust enrichment: mga sitwasyon kung saan sobra ang sukli. In Jalandoni vs. Encomienda, the Supreme Court lays down the following requisites for unjust enrichment.

There is unjust enrichment under Art. 22 of the Civil Code when:

1. A person is unjustly benefited;
2. Such benefit is derived at the expense of or with damages to another.

When it comes to unjust enrichment, dalawa lang ang hanap natin: (1) may isang taong nagbabayad kahit wala siyang obligasyon na magbayad; (2) may isang taong makakatanggap kahit malinaw na wala naman siyang karapatan na makatanggap

Jalandoni-Osmena vs. Encomienda

The regional trial court of Cebu City ruled against Encomienda. It gave credence to the argument of Osmena that indeed there was no loan at all. On appeal, the Court of Appeals reversed the Regional Trial Court and held that Georgia Jalandoni Osmena should be liable to pay the expenses advanced by Carmen Encomienda. The Supreme Court refused to believe the argument advanced by Georgia.

The SC ruled that, “The principle of unjust enrichment finds application in this case. Unjust enrichment exists when a person unfairly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity, and good conscience....”

The principle essentially contemplates payment when there is no duty to pay and the person who receives the payment has no right to receive it.

There are verbal contracts of loan. A contract of loan does not lose its effects just because the parties failed to write it down. Contracts are binding between the parties whether oral or written. The law is explicit that all contracts shall be obligatory in whatever form they may have been entered into provided all the essential requisites for their validity are present.

A simple loan or mutuum exists when a person receives a loan of money or any other fungible thing and acquires its ownership. He is bound to pay to the creditor the equal amount of the same kind and quality.

Beumer vs. Amores

            The regional trial court ruled that the power tools and equipment taken by Willem belonged to him alone. Whatever Avelina acquired as her inheritance shall also belong to her alone. The lots that were bought during their union shall also belong exclusively to Avelina because of the constitutional prohibition against foreign ownership of lands in the Philippines. Finally, the two houses shall be co-owned by the two of them.

            On appeal, the Court of Appeals affirmed the ruling of the regional trial court. The Court of Appeals applied the doctrine of in pari delicto or the rule that he who comes to court must come with clean hands. The COA pointed out that Willem is not entitled to one half of the price of the lots because he acquired them against the prohibition on foreign ownership.

            For his appeal to the SC, Willem advanced another theory. He argued that if the courts were to allow Avelina to keep the lands all for herself, she would be unjustly enriched at the cost and damage of Willem.

            In this case, the SC ruled that, “Article 22 is expressed in the maxim: memo cum alterius deter detremento protest (no person shall unjustly enrich himself at the expense of another). An action for recovery of what has been paid without just cause has been designated as an accion in rem verso. This prohibition does not apply if, as in this case, the action is proscribed by the Constitution or by the application of the Pari delicto doctrine.” The SC adds that while the foreign spouse cannot own lands in the Philippines, he is nevertheless allowed to own the improvements built there on.

Loria vs. Munoz

This is a decision penned by Justice Marie Vic Leonen.

            The regional trial court ruled in favor of Munoz. The court ordered Loria to pay not only the money but also interests, damages, and attorney’s fees. COA also ruled in favor of Munoz pero inalis ang damages at attorney’s fees. The issue in this case is whether or not Carlos Loria is liable to pay Lu Dulpho Munoz the amount of two million pesos.

The principle of unjust enrichment has two conditions:

1. A person must have been benefited without a real or valid basis or justification;
2. The benefit was derived at another person’s expense or damage.

Loria received two million pesos from Munoz for a subcontract of a government project to dredge the Masarawag and San Francisco rivers in Guinobatan, Albay. However, contrary to the parties’ agreement, Munoz was not subcontracted for the project. Nevertheless, Loria retained the two million pesos. Thus, Loria was unjustly enriched; he retained Munoz’s money without valid basis or justification.

Under Art. 22 of the Civil Code. Loria must return the two million to Munoz. However, Loria tried one more argument and that is pari delicto. It is a settled rule that there can be no recovery to an illegal contract.

From these three cases, we can now come up with the following rules:

1. There is unjust enrichment when one person receives an unjust benefit and that this benefit comes at the expense and damage of another person.
2. The exceptions to unjust enrichment are the Constitutional Prohibition against foreign ownership of lands and the principle of pari delicto.
3. The exception to the exception of pari delicto is when its application will violate public policy.

Question: Paano ba naging exception ang pari delicto sa kaso ni Beumer vs. Amores pero siya naman ang naging basehan ni Justice Leonen sa Loria vs. Munoz?

Answer: Walang unjust enrichment sa kaso ni Beumer vs. Amores dahil hindi naman pwedeng maging owner ng lupa ang isang foreigner. Sa Loria vs. Munoz ay may unjust enrichment dahil nabudol ni Loria si Munoz sa halagang dalawang milyon. Applicable man ang pari delicto ay hindi pa rin lusot si Loria dahil bawal ayon sa ating public policy ang manlamang ng kapwa. Kaya in the end, dapat pa ring isoli ni Loria ang two million pesos.

University of the Philippines vs. PHILAB Industries

The regional trial court ruled in favor of UP. it ruled that Philab was owed the money but it had no right to collect from UP. it did have the right to collect from the assets of the foundation.

            On appeal, the COA