University of the Philippines v. Philab Industries, Inc.
REITERATIONFacts
The Antecedents: The University of the Philippines (UP) initiated the Research Complex project, including the acquisition of laboratory equipment and furniture for the National Institute of Biotechnology and Applied Microbiology (BIOTECH). The Ferdinand E. Marcos Foundation (FEMF) agreed to fund the acquisition of laboratory furniture. PHILAB Industries, Inc. (PHILAB) was contracted to fabricate and deliver the furniture for the BIOTECH Building Project, with FEMF funding the acquisition. PHILAB made partial deliveries and received partial payments from FEMF totaling ₱2,236,119.52 out of the total project cost of ₱2,934,068.90. A Memorandum of Agreement (MOA) was executed between UP and FEMF for financial support not exceeding ₱29,000,000.00 for the Research Complex. PHILAB submitted a final invoice for ₱702,939.40, but FEMF failed to pay due to the EDSA Revolution. Procedural History: PHILAB filed a complaint for sum of money and damages against UP, seeking payment of the outstanding balance, exemplary damages, attorney's fees, and costs. The Regional Trial Court (RTC) dismissed the complaint, ruling that PHILAB's recourse was against FEMF. PHILAB appealed to the Court of Appeals (CA), which reversed the RTC's decision, holding UP liable under the principle of unjust enrichment. UP's motion for reconsideration was denied, leading to the present petition for review on certiorari. The Petition: UP contends that the CA erred in failing to apply the law on contracts between PHILAB and FEMF and in applying the principle of unjust enrichment to hold UP liable instead of FEMF.
Issue(s)
Whether the Court of Appeals erred in failing to apply the law on contracts between PHILAB and the Marcos Foundation. Whether 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.
Ruling
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.
Ratio Decidendi
On the issue of whether the Court of Appeals erred in failing to apply the law on contracts between PHILAB and the Marcos Foundation: The Court held that PHILAB failed to prove that UP ever obliged itself to pay for the laboratory furniture. There was no written contract between UP and PHILAB. PHILAB was not privy to the MOA between UP and FEMF, and thus not bound by it. The Court found that an implied-in-fact contract of sale existed between PHILAB and FEMF, as evidenced by the fact that FEMF funded the project, made partial payments, and PHILAB issued receipts to FEMF. The conduct of the parties indicated that FEMF was the one engaged to pay for the furniture, and UP was merely the donee-beneficiary. On the issue of whether 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: The Court rejected the CA's ruling based on unjust enrichment. It clarified that unjust enrichment claims do not lie simply because one party benefits from another's efforts; it requires that the enrichment be unjust, meaning illegal or unlawful. To substantiate such a claim, the claimant must prove that another party knowingly received something of value to which they were not entitled, and that it would be unjust for them to keep the benefit. The Court emphasized that accion in rem verso (unjust enrichment) is an auxiliary action, available only when no other remedy exists. In this case, PHILAB had a remedy against FEMF based on an implied-in-fact contract. Therefore, the principle of unjust enrichment was not applicable.
Main Doctrine
A claim for unjust enrichment under Article 22 of the Civil Code is an auxiliary action, available only when there is no other remedy on contract, quasi-contract, crime, or quasi-delict. If an action under positive law is obtainable, it must be resorted to, and the principle of unjust enrichment will not lie.