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G.R. No. L-48389 July 27, 1942

CLEOFE VELEZ,plaintiff-appellant,vs.MAXIMO BALZARSA and FLAVIA MABILIN,defendants-appellees.

Mariano H. de Joya, Domingo Veloso and Teogenes Velez for appellant.Jose M. Espina and Eufrosino Limbaco for appellees.

BOCOBO, J .:

On November 16, 1937, plaintiff in an amended complaint prayed for the return of certainparcels of land which she alleged had been sold by the defendants to plaintiff's deceasedhusband, Ramon Neri San Jose, with right of repurchase. She further alleged thatdefendants had remained in possession of said land under a contract of lease, but that forover two years defendants had not paid the agreed rentals. In paragraph 4 of the complaint,she stated that "in the distribution of the estate of the deceased Ramon Neri San Jose whodied November 7, 1932, duly approved by this Honorable Court, the said lands were

adjudicated as share of the herein plaintiff." In their amended answer, defendants allegedthat the real agreement was loan secured by a mortgage of those lands; and that whereasthe amount borrowed was only P2,400, defendants had however already paid P4,420.88.Defendants therefore prayed for the return of the excess, or P2,029.88.

As the trial, the parties agreed to the following stipulation of facts: that plaintiff has a right tobring this suit; that the real question involved is the collection of a debt; that defendantsadmit having executed Exhibits A to E; that plaintiff admits defendants have made thepayments according to the receipts marked as Exhibits 1 to 22; and that the lands describedin the above-mentioned documents have been give as a security for the payment of theobligation of defendants.

The trial court found that the total amount loaned on various dates by the deceased Neri tothe defendants, was P3,067; that defendants paid P4,429.88, of which P3,997.25 wasreceived by Neri and P432.63 by plaintiff; that these payments were not made by way ofinterests or rents, but as payment for the principal; that defendants overpaid the amount ofP1,362.88. The court below exenorated defendants from the complaint and ordered plaintiffto return to defendants the sum of P432.63 which she, plaintiff, had received fromdefendants although said amount was not due, applying article 1895 of the Civil Code. As forthe amount received by deceased Neri, the court held that the same not having beenpresented before the committee on appraisal and claims during the administration of theestate of said Neri, defendants are not entitled to its return. Plaintiff appealed from the

judgment.

It is necessary to inquire into the contractual relations between Neri and defendants. Exhibit

A, dated December 24, 1927, purports to be sale of four parcels of land for the price of P600,with a right of repurchase within three years. Exhibit D, dated March 16, 1928, likewisepurports to be a sale of three parcels of land for P400, with a right of repurchase within threeyears. Each of these two contracts has the following stipulation: "El comprador Ramon NeriSan Jose toma posession delas fincas vendidas, y el sera quien cosechara todos losproductos que dan o puedan dar las fincas aqui vendidas durante el plazo de rectracto ypuede hacer y ejercitar todos los actos de dominio con tal que no este en pugna con elderecho de recompra de los vendedores." (In exhibit D the last words of this clause are "delvendedor" because only defendant Balzarsa signed the contract.) Exhibits B, C, and E are


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contracts of loan, dated respectively, December 24, 1927; February 2, 1928; and February 6,1930, for various amounts from Neri to defendants. Each of these three documents recitesthat defendants received a certain amount from Neri; that on November 23, 1927,defendants sold three parcels of land to Neri; and that defendants have promised to Neri;that upon return of the amount mentioned in said document of November 23, 1927,defendants will return the sum borrowed by means of the present contract.

Evidently all these five loans appearing in Exhibits A to E were secured by the mortgage ofthe seven parcels of land mentioned in Exhibits A and D. These transactions being loans,according to the stipulation of facts, the question is whether the payments were intended tobe applied to the principal, as contended by defendants, or were considered as either rentsor interest, upon the theory advanced by plaintiff.

The payments could not have been intended as rents because in accordance with a clausein the contract, Neri took possession of the lands, and collected the fruits thereof. Thecreditor having enjoyed the beneficial use of lands delivered as security of loan, it appears tohave been the intention of the parties that the creditor should be compensated thereby.Furthermore, in none of the contracts offered in evidence is there any promise made bydefendants to pay rents. It would have been strange for such a clause to appear in Exhibits Aand D wherein it was stipulated that the creditor took possession of the lands and would reapthe fruits of the same. It is true that in the receipts signed by Neri and by plaintiff thesepayments are called rents. But these receipts have been prepared by Neri and by plaintiff,and defendants in their ignorance did not look into the wording, being merely satisfied thatthey were proofs of payment.

If these payments were not rents, plaintiff-appellant maintains they must have been interests.Neither is this contention tenable because no interest is due unless it is expressly stipulated.(Article 1755, Civil Code.), Moreover, as under the contract the lender took possession of thelands and reaped the fruits thereof, it must have been thought by the parties that it was unfairto make the borrower pay interest in addition. It is also significant that the borrower paid atotal of P1,143.50 up to August 5, 1929 (a period of 1 year, 8 months and 13 days from the

initial loan) when the debt up to that date was only P2,100. If such amount of P1,143.50 wascollected as interests, then out and out usury was committed by the lender, which cannot bepresumed.

Counsel for appellant argues that as the deceased Ramon Neri San Jose "was publiclyknown as a money lender" the parties must have had in mind the payment of interests.However, the alleged occupation of said Neri does not appear in the stipulation of facts or ifthat fact appeared in the record, it would not constitute sufficient compliance with therequisite of article 1755 of the Civil Code that interest must be expressly stipulated.

In Guzman vs. Balarag(11 Phil., 503, 508-509 [year 1908]), the plaintiff therein loanedP1,500 to defendant who mortgaged his house and lot. Plaintiff took possession of the

premises and collected rents from third persons. It was claimed by the plaintiff that theserents received by him should be applied to the payment of interests. But this Court heldotherwise, saying:

If the debtor Pascual Balarag is only under the obligation to pay the creditor,Guzman, the 1,500 person received as a loan, without interest, upon permitting thelatter to collect the rent of property owned by the debtor and keep the amounts socollected, it must be assumed that it was in order to provide for the refund of the debtarising from the loan. It is not possible to apply the money except in settlement of the


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debt, unless the allegation of the debtor be disproven; the record does not containany proof of the contrary allegation to the effect it was stipulated that the rentcollected should be applied to the payment of interest, and the allegation of thedefendants debtor is all the more convincing and irrefutable, inasmuch as it has notin any way been demonstrated that interests on the loan was stipulated.

Therefore the trial court was right in finding that these payments were applied to theprincipal.

As this juncture, article 1756 of the Civil Code comes into view. It provides that, "Theborrower who has paid interests without their being stipulated, cannot recover them norapply them to the principal." It seems plausible to argue that although the parties originallyintended no interests when the loans were made, nevertheless if defendants wished to payand did pay interests, according to said article 1756 they can neither recover the amountsnor apply them to the principal. However, the trial court found as a fact that "los pagoshechos no fueron ni en concepto de intereses ni de alquieleres, sino como pagos delcapital." ("the payments made were not either by way of interests nor of rents but aspayments for the principal.") The court further found that "the question would have beendifferent if the defendants had admitted, or if it had been proved that the payments made bythe defendants were by way of interests."

The liability of plaintiff to return the excess payments is in keeping with article 1895 of theCivil Code which provides that "when something is received which there is no right to collect,and which by mistake has been unduly delivered, the obligation to restore it arises." The tworequisites are present: (1) there is no right to collect these excess sums; as (2) the amountshave been paid through mistake by defendants. Such mistake is shown by the fact that theparties in their contracts never intended that either rents or interests should be paid, and bythe further fact that when these payments were made, they were intended by defendants tobe applied to the principal, but they overpaid the amounts loaned of them.

Article 1895 of the Civil Code above quoted, is therefore applicable. This legal provision,

which determines the quasi-contract of solutio indebiti, is one of the concrete manifestationsof the ancient principle that no one shall enrich himself unjustly at the expense of another. Inthe Roman Law Digest the maxim was formulated thus: "Jure naturae acquum est, neminencum alterius detrimento et injuria fieri locupletiorem." And the Partidas declared: "Ningunonon deue enriquecerse tortizeramante con dao de otro." Such axiom has grown through thecenturies in legislation, in the science of law and in court decisions. The lawmaker has foundit one of the helpful guides in framing statutes and codes. Thus, it is unfolded in manyarticles scattered in the Spanish Civil Code. (See for example, articles 360, 361, 464, 647,648, 797, 1158, 1163, 1295, 1303, 1304, 1893 and 1895, Civil Code.) The time-honoredaphorism has also been adopted by jurists in their study of the conflict of rights. It has beenaccepted by the courts, which have not hesitated to apply it when the exigencies of right andequity demanded its assertion. It is a part of that affluent reservoir of justice upon which

judicial discretion draws whenever statutory laws are inadequate because they do not speakor do so with a confused voice.

As for the amount to be returned by plaintiff, the trial court held that the plaintiff should returnonly the excess sum she actually received (P432.63) but not the over-payment made to thedeceased Neri. If the defendants had appealed from the latter phase of the judgment,perhaps the application of section 749 of the Code of Civil Procedure (now Rules 89, section5 of the new Rules of Court) might have been studied. Under that provision, contingentclaims which become absolute after the settlement of the estate of a deceased person may


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be enforced proportionately against the distributees of the estate, and in the instant case thisclaim against Neri did not become absolute till the discovery of the mistake, after thedistribution of his estate. But defendants not having appealed, this aspect of the case will notbe passed upon.

WHEREFORE the judgment appealed from is affirmed, with costs the appellant. So ordered.

Yulo, C.J., Moran, Ozaeta and Paras, JJ.,concur.

G.R. No. 82670 September 15, 1989

DOMETILA M. ANDRES, doing business under the name and style "IRENE'SWEARING APPAREL,"petitioner,vs.MANUFACTURERS HANOVER & TRUST CORPORATION and COURT OFAPPEALS, respondents.

Roque A. Tamayo for petitioner.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for private respondent.

CORTES, J .:

Assailed in this petition for review on certiorariis the judgment of the Court of Appeals,which, applying the doctrine of solutio indebiti, reversed the decision of the Regional TrialCourt, Branch CV, Quezon City by deciding in favor of private respondent.

Petitioner, using the business name "Irene's Wearing Apparel," was engaged in the

manufacture of ladies garments, children's wear, men's apparel and linens for local andforeign buyers. Among its foreign buyers was Facets Funwear, Inc. (hereinafter referred toas FACETS) of the United States.

In the course of the business transaction between the two, FACETS from time to timeremitted certain amounts of money to petitioner in payment for the items it had purchased.Sometime in August 1980, FACETS instructed the First National State Bank of New Jersey,Newark, New Jersey, U.S.A. (hereinafter referred to as FNSB) to transfer $10,000.00 topetitioner via Philippine National Bank, Sta. Cruz Branch, Manila (hereinafter referred to asPNB).

Acting on said instruction, FNSB instructed private respondent Manufacturers Hanover and

Trust Corporation to effect the above- mentioned transfer through its facilities and to chargethe amount to the account of FNSB with private respondent. Although private respondentwas able to send a telex to PNB to pay petitioner $10,000.00 through the Pilipinas Bank,where petitioner had an account, the payment was not effected immediately because thepayee designated in the telex was only "Wearing Apparel." Upon query by PNB, privaterespondent sent PNB another telex dated August 27, 1980 stating that the payment was tobe made to "Irene's Wearing Apparel." On August 28, 1980, petitioner received theremittance of $10,000.00 through Demand Draft No. 225654 of the PNB.


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Meanwhile, on August 25, 1980, after learning about the delay in the remittance of themoney to petitioner, FACETS informed FNSB about the situation. On September 8, 1980,unaware that petitioner had already received the remittance, FACETS informed privaterespondent about the delay and at the same time amended its instruction by asking it toeffect the payment through the Philippine Commercial and Industrial Bank (hereinafterreferred to as PCIB) instead of PNB.

Accordingly, private respondent, which was also unaware that petitioner had alreadyreceived the remittance of $10,000.00 from PNB instructed the PCIB to pay $10,000.00 topetitioner. Hence, on September 11, 1980, petitioner received a second $10,000.00remittance.

Private respondent debited the account of FNSB for the second $10,000.00 remittanceeffected through PCIB. However, when FNSB discovered that private respondent had madea duplication of the remittance, it asked for a recredit of its account in the amount of$10,000.00. Private respondent complied with the request.

Private respondent asked petitioner for the return of the second remittance of $10,000.00 but

the latter refused to pay. On May 12, 1982 a complaint was filed with the Regional TrialCourt, Branch CV, Quezon City which was decided in favor of petitioner as defendant. Thetrial court ruled that Art. 2154 of the New Civil Code is not applicable to the case because thesecond remittance was made not by mistake but by negligence and petitioner was notunjustly enriched by virtue thereof [Record, p. 234]. On appeal, the Court of Appeals heldthat Art. 2154 is applicable and reversed the RTC decision. The dispositive portion of theCourt of Appeals' decision reads as follows:

WHEREFORE, the appealed decision is hereby REVERSED and SETASIDE and another one entered in favor of plaintiff-appellant and againstdefendant-appellee Domelita (sic) M. Andres, doing business under thename and style "Irene's Wearing Apparel" to reimburse and/or return toplaintiff-appellant the amount of $10,000.00, its equivalent in Philippine

currency, with interests at the legal rate from the filing of the complaint onMay 12, 1982 until the whole amount is fully paid, plus twenty percent (20%)of the amount due as attomey's fees; and to pay the costs.

With costs against defendant-appellee.

SO ORDERED. [Rollo, pp. 29-30.]

Thereafter, this petition was filed. The sole issue in this case is whether or not the privaterespondent has the right to recover the second $10,000.00 remittance it had delivered topetitioner. The resolution of this issue would hinge on the applicability of Art. 2154 of theNew Civil Code which provides that:

Art. 2154. If something received when there is no right to demand it, and itwas unduly delivered through mistake, the obligation to return it arises.

This provision is taken from Art. 1895 of the Spanish Civil Code which provided that:

Art. 1895. If a thing is received when there was no right to claim it and which,through an error, has been unduly delivered, an obligation to restore it arises.


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In Velez v. Balzarza, 73 Phil. 630 (1942), the Court, speaking through Mr. Justice Bocoboexplained the nature of this article thus:

Article 1895 [now Article 2154] of the Civil Code abovequoted, is thereforeapplicable. This legal provision, which determines the quasi-contract ofsolution indebiti, is one of the concrete manifestations of the ancient principle

that no one shall enrich himself unjustly at the expense of another. In theRoman Law Digest the maxim was formulated thus: "Jure naturae acquumest, neminem cum alterius detrimento et injuria fieri locupletiorem."And thePartidas declared: "Ninguno non deue enriquecerse tortizeramente con danode otro."Such axiom has grown through the centuries in legislation, in thescience of law and in court decisions. The lawmaker has found it one of thehelpful guides in framing statutes and codes. Thus, it is unfolded in manyarticles scattered in the Spanish Civil Code. (See for example, articles, 360,361, 464, 647, 648, 797, 1158, 1163, 1295, 1303, 1304, 1893 and 1895, CivilCode.) This time-honored aphorism has also been adopted by jurists in theirstudy of the conflict of rights. It has been accepted by the courts, which havenot hesitated to apply it when the exigencies of right and equity demanded itsassertion. It is a part of that affluent reservoir of justice upon which judicialdiscretion draws whenever the statutory laws are inadequate because theydo not speak or do so with a confused voice. [at p. 632.]

For this article to apply the following requisites must concur: "(1) that he who paid was notunder obligation to do so; and, (2) that payment was made by reason of an essential mistakeof fact" [City of Cebu v. Piccio, 110 Phil. 558, 563 (1960)].

It is undisputed that private respondent delivered the second $10,000.00 remittance.However, petitioner contends that the doctrine of solutio indebiti, does not apply because itsrequisites are absent.

First, it is argued that petitioner had the right to demand and therefore to retain the second

$10,000.00 remittance. It is alleged that even after the two $10,000.00 remittances arecredited to petitioner's receivables from FACETS, the latter allegedly still had a balance of$49,324.00. Hence, it is argued that the last $10,000.00 remittance being in payment of apre-existing debt, petitioner was not thereby unjustly enriched.

The contention is without merit.

The contract of petitioner, as regards the sale of garments and other textile products, waswith FACETS. It was the latter and not private respondent which was indebted to petitioner.On the other hand, the contract for the transmittal of dollars from the United States topetitioner was entered into by private respondent with FNSB. Petitioner, although named asthe payee was not privy to the contract of remittance of dollars. Neither was private

respondent a party to the contract of sale between petitioner and FACETS. There being nocontractual relation between them, petitioner has no right to apply the second $10,000.00remittance delivered by mistake by private respondent to the outstanding account ofFACETS.

Petitioner next contends that the payment by respondent bank of the second $10,000.00remittance was not made by mistake but was the result of negligence of its employees. Inconnection with this the Court of Appeals made the following finding of facts:


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The fact that Facets sent only one remittance of $10,000.00 is not disputed.In the written interrogatories sent to the First National State Bank of NewJersey through the Consulate General of the Philippines in New York,

Adelaide C. Schachel, the investigation and reconciliation clerk in the saidbank testified that a request to remit a payment for Facet Funwear Inc. wasmade in August, 1980. The total amount which the First National State Bank

of New Jersey actually requested the plaintiff-appellant ManufacturersHanover & Trust Corporation to remit to Irene's Wearing Apparel was US$10,000.00. Only one remittance was requested by First National State Bankof New Jersey as per instruction of Facets Funwear (Exhibit "J", pp. 4-5).

That there was a mistake in the second remittance of US $10,000.00 is borneout by the fact that both remittances have the same reference invoicenumber which is 263 80. (Exhibits "A-1- Deposition of Mr. Stanley Panasow"and "A-2-Deposition of Mr. Stanley Panasow").

Plaintiff-appellant made the second remittance on the wrong assumption thatdefendant-appellee did not receive the first remittance of US $10,000.00.[Rollo, pp. 26-27.]

It is evident that the claim of petitioner is anchored on the appreciation of the attendant factswhich petitioner would have this Court review. The Court holds that the finding by the Courtof Appeals that the second $10,000.00 remittance was made by mistake, being based onsubstantial evidence, is final and conclusive. The rule regarding questions of fact beingraised with this Court in a petition for certiorariunder Rule 45 of the Revised Rules of Courthas been stated in Remalante v. Tibe, G.R. No. 59514, February 25, 1988, 158 SCRA 138,thus:

The rule in this jurisdiction is that only questions of law may be raised in apetition for certiorari under Rule 45 of the Revised Rules of Court. "The

jurisdiction of the Supreme Court in cases brought to it from the Court of

Appeals is limited to reviewing and revising the errors of law imputed to it, itsfindings of fact being conclusive" [Chan v. Court of Appeals, G.R. No. L-27488, June 30, 1970, 33 SCRA 737, reiterating a long line of decisions].This Court has emphatically declared that "it is not the function of theSupreme Court to analyze or weigh such evidence all over again, its

jurisdiction being limited to reviewing errors of law that might have beencommitted by the lower court" [Tiongco v. De la Merced, G.R. No. L-24426,July 25, 1974, 58 SCRA 89; Corona v. Court of Appeals, G.R. No. L-62482,

April 28, 1983, 121 SCRA 865; Baniqued v. Court of Appeals, G. R. No. L-47531, February 20, 1984, 127 SCRA 596]. "Barring, therefore, a showingthat the findings complained of are totally devoid of support in the record, orthat they are so glaringly erroneous as to constitute serious abuse ofdiscretion, such findings must stand, for this Court is not expected or requiredto examine or contrast the oral and documentary evidence submitted by theparties" [Santa Ana, Jr. v. Hernandez, G.R. No. L-16394, December 17,1966, 18 SCRA 9731. [at pp. 144-145.]

Petitioner invokes the equitable principle that when one of two innocent persons must sufferby the wrongful act of a third person, the loss must be borne by the one whose negligencewas the proximate cause of the loss.


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The rule is that principles of equity cannot be applied if there is a provision of law specificallyapplicable to a case [Phil. Rabbit Bus Lines, Inc. v. Arciaga, G.R. No. L-29701, March 16,1987,148 SCRA 433; Zabat, Jr. v. Court of Appeals, G.R. No. L36958, July 10, 1986, 142SCRA 587; Rural Bank of Paranaque, Inc. v. Remolado, G.R. No. 62051, March 18, 1985,135 SCRA 409; Cruz v. Pahati, 98 Phil. 788 (1956)]. Hence, the Court in the case of DeGarcia v. Court of Appeals,G.R. No. L-20264, January 30, 1971, 37 SCRA 129, citingAznar

v. Yapdiangco, G.R. No. L-18536, March 31, 1965, 13 SCRA 486, held:

... The common law principle that where one of two innocent persons mustsuffer by a fraud perpetrated by another, the law imposes the loss upon theparty who, by his misplaced confidence, has enabled the fraud to becommitted, cannot be applied in a case which is covered by an expressprovision of the new Civil Code, specifically Article 559. Between a commonlaw principle and a statutory provision, the latter must prevail in this

jurisdiction. [at p. 135.]

Having shown that Art. 2154 of the Civil Code, which embodies the doctrineof solutioindebiti, applies in the case at bar, the Court must reject the common law principleinvoked by petitioner.

Finally, in her attempt to defeat private respondent's claim, petitioner makes much of the factthat from the time the second $10,000.00 remittance was made, five hundred and ten dayshad elapsed before private respondent demanded the return thereof. Needless to say,private respondent instituted the complaint for recovery of the second $10,000.00 remittancewell within the six years prescriptive period for actions based upon a quasi-contract [Art.1145 of the New Civil Code].

WHEREFORE, the petition is DENIED and the decision of the Court of Appeals is herebyAFFIRMED.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr. and Bidin, JJ., concur.

Feliciano, J., is on leave.

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