Unjust enrichment

Solutio indebiti is a quasi contract based on the principle that no one shall enrich himself at the expense of another. This is illustrated in this case of George, a German national and the spouses Vicky, a Filipina and Frank, another German national.

When the couple Vicky and Frank learned that George was interested to own a house along the beach, they urged him to buy a beach house and the lease right over the land where the house stands located in Puerto Galera belonging to their friend John. George agreed and trusted the couple to keep a time deposit account for him in a bank. After the sale was executed, John was paid the amount of DM 221,700 or its peso equivalent of P3,297,800. Thereafter George stayed in the beach house for about ten weeks and spent about P200,000 more for the repair and maintenance of the house. Later on however, George discovered that the sale of the beach house and the assignment of the lease right over the land were surreptitiously made in favor of Vicky with the connivance of their lawyer. So George immediately filed a complaint for annulment of the sale and reconveyance of the property with damages and prayer for a writ of attachment. Could George recover?

Yes. Article 2154 of the new Civil Code on the principle of solutio indebti should be the applicable provision in the resolution of this controversy. It 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 this case, a bank to bank payment was made by George to John actually in favor of Vicky who turned out to be the purchaser. George was under no duty to make such payment for the benefit of Vicky. There was no binding relationship between George and the beneficiary, Vicky. The payment was clearly a mistake. Since Vicky received something when there was no right to demand it, she had the obligation to return it.

When (1) a person is unjustly benefited, and (2) such benefit is derived at the expense of or to the damage of another, there is unjust enrichment (Art. 22 Civil Code). In this case, Vicky had been unjustly enriched at the expense of George. She acquired the property through deceit, fraud and abuse of confidence. The principle of justice and equity does not work in her favor but in favor of George. Whatever she might have received by mistake from and at the expense of George should thus be returned to the latter, if the demands of justice are to be served. So the property should be reconveyed to George and the spouses Vicky and Frank should pay George P50,000 nominal damages since his property rights has been invaded through defraudation and abuse of confidence (Lentfer et. al. vs. Wolff, G.R. 152317, November 10, 2004).

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