Domestic Petroleum Retailer v. Manila International Airport Authority
REITERATIONFacts
The Antecedents: Petitioner Domestic Petroleum Retailer Corporation (DPRC) and respondent Manila International Airport Authority (MIAA) entered into a Contract of Lease for a parcel of land and a building. DPRC paid monthly rentals as stipulated. MIAA issued Resolution No. 98-30 and Administrative Order No. 1, Series of 1998, increasing rentals effective June 1, 1998. DPRC initially refused to pay the increased rentals, which were decreed without prior notice and hearing. MIAA demanded payment of rental arrears based on the increase. DPRC protested in writing but paid the increased amount to comply in good faith. Subsequently, in Manila International Airport Authority v. Airspan Corporation, et al. (G.R. No. 157581), the Supreme Court nullified MIAA's Resolution Nos. 98-30 and 99-11 for non-observance of notice and hearing requirements. Based on this ruling, DPRC stopped paying the increased rental rate on January 1, 2006, and demanded a refund of overpayments made from December 11, 1998, to December 5, 2005, totaling ₱9,593,179.87. MIAA demanded payment for January-June 2006, which DPRC denied, reiterating its claim for refund. MIAA ignored the demand, prompting DPRC to file a Complaint for Collection of Sums of Money. Procedural History: The Regional Trial Court (RTC), Pasay City, Branch 119, ruled in favor of DPRC, ordering MIAA to pay the principal amount of ₱9,593,179.87 plus legal interest and attorney's fees. The RTC later clarified the interest to be 12% per annum from July 27, 2006. MIAA appealed to the Court of Appeals (CA). The CA affirmed the RTC's decision but modified the award, reducing MIAA's liability to ₱3,839,643.05 plus legal interest, applying the six-year prescriptive period for quasi-contracts (solutio indebiti) and limiting recovery to payments made from January 9, 2003, to December 5, 2005. DPRC filed a Motion for Partial Reconsideration, which was denied. Hence, DPRC filed the present Petition for Review on Certiorari. The Petition: DPRC assails the CA's modification of the RTC's Decision, specifically the reduction of MIAA's liability based on the application of the six-year prescriptive period for solutio indebiti.
Issue(s)
Whether the Court of Appeals erred in reducing the amount of respondent MIAA's liability by applying the six-year prescriptive period governing the quasi-contract of solutio indebiti. Whether petitioner DPRC's claim against respondent MIAA for full refund of the overpayment of rentals has prescribed.
Ruling
The Supreme Court granted the Petition, partially reversing and setting aside the Decision and Resolution of the Court of Appeals. The Court reinstated the Decision of the Regional Trial Court, ordering Manila International Airport Authority to pay Domestic Petroleum Retailer Corporation the full amount of ₱9,593,179.87 plus legal interest at 12% per annum computed from July 27, 2006.
Ratio Decidendi
On the issue of whether the Court of Appeals erred in reducing the amount of respondent MIAA's liability by applying the six-year prescriptive period governing the quasi-contract of solutio indebiti: The Supreme Court found that the CA erred in applying the six-year prescriptive period for solutio indebiti. The Court clarified that the essential requisites for solutio indebiti are not present in this case. Firstly, there exists a binding juridical relationship between DPRC and MIAA as lessor-lessee under a Contract of Lease, negating the absence of a binding relation required for solutio indebiti. Secondly, the payments made by DPRC were not by mistake but were made deliberately under protest, in compliance with MIAA's Resolution No. 98-30, which was presumed valid until judicially declared otherwise. The Court emphasized that DPRC's cause of action is based on the violation of a contractual stipulation in the lease agreement, specifically the failure of MIAA to issue a valid Administrative Order and provide prior notice for price escalation, as required by the contract. Therefore, the claim for refund is founded on a breach of contract, not on a quasi-contract. On the issue of whether petitioner DPRC's claim against respondent MIAA for full refund of the overpayment of rentals has prescribed: Since the cause of action is based on a contract, the applicable prescriptive period is ten years under Article 1144 of the Civil Code, not the six years for quasi-contracts. Furthermore, the Court held that the right of action accrues not from the date of payment, but from the time the administrative policy or issuance is declared invalid by the Court. In this case, the Supreme Court's Decision in Manila International Airport Authority v. Airspan Corporation, et al., which invalidated Resolution No. 98-30, was promulgated on December 1, 2004. Thus, DPRC's right of action accrued on this date. The filing of the Complaint on December 23, 2008, was well within the ten-year prescriptive period. Moreover, the written extrajudicial demand made by DPRC on July 27, 2006, interrupted the prescriptive period, causing it to commence anew from the date of demand. This means DPRC had until July 27, 2016, to file its action, making its December 23, 2008 complaint timely for the full refund.
Main Doctrine
The Supreme Court held that the claim for refund of overpaid rentals by a lessee against a lessor, arising from an invalidly imposed price escalation due to non-compliance with contractual stipulations and legal requirements for notice and hearing, is based on a violation of contract, not on the quasi-contract of solutio indebiti. Consequently, the ten-year prescriptive period for actions based on contracts applies, and the prescriptive period begins to run not from the date of payment, but from the date of judicial declaration of invalidity of the administrative issuance, or from the date of written extrajudicial demand, whichever is later.