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 certain
parcels of land which she alleged had been sold by the defendants to plaintiff's deceased
husband, Ramon Neri San Jose, with right of repurchase. She further alleged that
defendants had remained in possession of said land under a contract of lease, but that for
over 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 who
died 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 alleged
that the real agreement was loan secured by a mortgage of those lands; and that whereas
the 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 to
bring this suit; that the real question involved is the collection of a debt; that defendants
admit having executed Exhibits A to E; that plaintiff admits defendants have made the
payments according to the receipts marked as Exhibits 1 to 22; and that the lands described
in the above-mentioned documents have been give as a security for the payment of the
obligation of defendants.
The trial court found that the total amount loaned on various dates by the deceased Neri to
the defendants, was P3,067; that defendants paid P4,429.88, of which P3,997.25 was
received by Neri and P432.63 by plaintiff; that these payments were not made by way of
interests or rents, but as payment for the principal; that defendants overpaid the amount of
P1,362.88. The court below exenorated defendants from the complaint and ordered plaintiff
to return to defendants the sum of P432.63 which she, plaintiff, had received from
defendants although said amount was not due, applying article 1895 of the Civil Code. As for
the amount received by deceased Neri, the court held that the same not having been
presented before the committee on appraisal and claims during the administration of the
estate 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, likewise
purports to be a sale of three parcels of land for P400, with a right of repurchase within three
years. Each of these two contracts has the following stipulation: "El comprador Ramon Neri
San Jose toma posession delas fincas vendidas, y el sera quien cosechara todos los
productos que dan o puedan dar las fincas aqui vendidas durante el plazo de rectracto y
puede hacer y ejercitar todos los actos de dominio con tal que no este en pugna con el
derecho de recompra de los vendedores." (In exhibit D the last words of this clause are "del
vendedor" because only defendant Balzarsa signed the contract.) Exhibits B, C, and E are
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 recites
that 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 of
the 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 to
be applied to the principal, as contended by defendants, or were considered as either rents
or interest, upon the theory advanced by plaintiff.
The payments could not have been intended as rents because in accordance with a clause
in the contract, Neri took possession of the lands, and collected the fruits thereof. The
creditor having enjoyed the beneficial use of lands delivered as security of loan, it appears to
have 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 by
defendants to pay rents. It would have been strange for such a clause to appear in Exhibits A
and D wherein it was stipulated that the creditor took possession of the lands and would reap
the fruits of the same. It is true that in the receipts signed by Neri and by plaintiff these
payments 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 that
they 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 the
lands and reaped the fruits thereof, it must have been thought by the parties that it was unfair
to make the borrower pay interest in addition. It is also significant that the borrower paid a
total 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 was
collected as interests, then out and out usury was committed by the lender, which cannot be
presumed.
Counsel for appellant argues that as the deceased Ramon Neri San Jose "was publicly
known 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 if
that fact appeared in the record, it would not constitute sufficient compliance with the
requisite 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 loaned
P1,500 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 these
rents received by him should be applied to the payment of interests. But this Court held
otherwise, 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 the
latter to collect the rent of property owned by the debtor and keep the amounts so
collected, it must be assumed that it was in order to provide for the refund of the debt
arising from the loan. It is not possible to apply the money except in settlement of the
debt, unless the allegation of the debtor be disproven; the record does not contain
any proof of the contrary allegation to the effect it was stipulated that the rent
collected should be applied to the payment of interest, and the allegation of the
defendants debtor is all the more convincing and irrefutable, inasmuch as it has not
in 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 the
principal.
As this juncture, article 1756 of the Civil Code comes into view. It provides that, "The
borrower who has paid interests without their being stipulated, cannot recover them nor
apply them to the principal." It seems plausible to argue that although the parties originally
intended no interests when the loans were made, nevertheless if defendants wished to pay
and did pay interests, according to said article 1756 they can neither recover the amounts
nor apply them to the principal. However, the trial court found as a fact that "los pagos
hechos no fueron ni en concepto de intereses ni de alquieleres, sino como pagos del
capital." ("the payments made were not either by way of interests nor of rents but as
payments for the principal.") The court further found that "the question would have been
different if the defendants had admitted, or if it had been proved that the payments made by
the defendants were by way of interests."
The liability of plaintiff to return the excess payments is in keeping with article 1895 of the
Civil 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 two
requisites are present: (1) there is no right to collect these excess sums; as (2) the amounts
have been paid through mistake by defendants. Such mistake is shown by the fact that the
parties in their contracts never intended that either rents or interests should be paid, and by
the further fact that when these payments were made, they were intended by defendants to
be 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 manifestations
of the ancient principle that no one shall enrich himself unjustly at the expense of another. In
the Roman Law Digest the maxim was formulated thus: "Jure naturae acquum est, neminen
cum alterius detrimento et injuria fieri locupletiorem." And the Partidas declared: "Ninguno
non deue enriquecerse tortizeramante con dao de otro." Such axiom has grown through the
centuries in legislation, in the science of law and in court decisions. The lawmaker has found
it one of the helpful guides in framing statutes and codes. Thus, it is unfolded in many
articles 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-honored
aphorism has also been adopted by jurists in their study of the conflict of rights. It has been
accepted by the courts, which have not hesitated to apply it when the exigencies of right and
equity 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 speak
or do so with a confused voice.
As for the amount to be returned by plaintiff, the trial court held that the plaintiff should return
only the excess sum she actually received (P432.63) but not the over-payment made to the
deceased 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, section
5 of the new Rules of Court) might have been studied. Under that provision, contingent
claims which become absolute after the settlement of the estate of a deceased person may
be enforced proportionately against the distributees of the estate, and in the instant case this
claim against Neri did not become absolute till the discovery of the mistake, after the
distribution of his estate. But defendants not having appealed, this aspect of the case will not
be 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'S
WEARING APPAREL,"petitioner,
vs.
MANUFACTURERS HANOVER & TRUST CORPORATION and COURT OF
APPEALS, 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 certiorari is the judgment of the Court of Appeals,
which, applying the doctrine of solutio indebiti, reversed the decision of the Regional Trial
Court, 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 and
foreign buyers. Among its foreign buyers was Facets Funwear, Inc. (hereinafter referred to
as FACETS) of the United States.
In the course of the business transaction between the two, FACETS from time to time
remitted 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 to
petitioner via Philippine National Bank, Sta. Cruz Branch, Manila (hereinafter referred to as
PNB).
Acting on said instruction, FNSB instructed private respondent Manufacturers Hanover and
Trust Corporation to effect the above- mentioned transfer through its facilities and to charge
the amount to the account of FNSB with private respondent. Although private respondent
was 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 the
payee designated in the telex was only "Wearing Apparel." Upon query by PNB, private
respondent sent PNB another telex dated August 27, 1980 stating that the payment was to
be made to "Irene's Wearing Apparel." On August 28, 1980, petitioner received the
remittance of $10,000.00 through Demand Draft No. 225654 of the PNB.
Meanwhile, on August 25, 1980, after learning about the delay in the remittance of the
money to petitioner, FACETS informed FNSB about the situation. On September 8, 1980,
unaware that petitioner had already received the remittance, FACETS informed private
respondent about the delay and at the same time amended its instruction by asking it to
effect the payment through the Philippine Commercial and Industrial Bank (hereinafter
referred to as PCIB) instead of PNB.
Accordingly, private respondent, which was also unaware that petitioner had already
received the remittance of $10,000.00 from PNB instructed the PCIB to pay $10,000.00 to
petitioner. Hence, on September 11, 1980, petitioner received a second $10,000.00
remittance.
Private respondent debited the account of FNSB for the second $10,000.00 remittance
effected through PCIB. However, when FNSB discovered that private respondent had made
a 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 Trial
Court, Branch CV, Quezon City which was decided in favor of petitioner as defendant. The
trial court ruled that Art. 2154 of the New Civil Code is not applicable to the case because the
second remittance was made not by mistake but by negligence and petitioner was not
unjustly enriched by virtue thereof [Record, p. 234]. On appeal, the Court of Appeals held
that Art. 2154 is applicable and reversed the RTC decision. The dispositive portion of the
Court of Appeals' decision reads as follows:
WHEREFORE, the appealed decision is hereby REVERSED and SET
ASIDE and another one entered in favor of plaintiff-appellant and against
defendant-appellee Domelita (sic) M. Andres, doing business under the
name and style "Irene's Wearing Apparel" to reimburse and/or return to
plaintiff-appellant the amount of $10,000.00, its equivalent in Philippine
currency, with interests at the legal rate from the filing of the complaint on
May 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 private
respondent has the right to recover the second $10,000.00 remittance it had delivered to
petitioner. The resolution of this issue would hinge on the applicability of Art. 2154 of the
New Civil Code which provides that:
Art. 2154. If something received when there is no right to demand it, and it
was 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.
In Velez v. Balzarza, 73 Phil. 630 (1942), the Court, speaking through Mr. Justice Bocobo
explained the nature of this article thus:
Article 1895 [now Article 2154] of the Civil Code abovequoted, is therefore
applicable. This legal provision, which determines the quasi-contract of
solution indebiti, is one of the concrete manifestations of the ancient principle
that no one shall enrich himself unjustly at the expense of another. In the
Roman Law Digest the maxim was formulated thus: "Jure naturae acquum
est, neminem cum alterius detrimento et injuria fieri locupletiorem." And the
Partidas declared: "Ninguno non deue enriquecerse tortizeramente con dano
de otro." Such axiom has grown through the centuries in legislation, in the
science of law and in court decisions. The lawmaker has found it one of the
helpful guides in framing statutes and codes. Thus, it is unfolded in many
articles 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.) This time-honored aphorism has also been adopted by jurists in their
study of the conflict of rights. It has been accepted by the courts, which have
not hesitated to apply it when the exigencies of right and equity demanded its
assertion. It is a part of that affluent reservoir of justice upon which judicial
discretion draws whenever the statutory laws are inadequate because they
do 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 not
under obligation to do so; and, (2) that payment was made by reason of an essential mistake
of 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 its
requisites 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 are
credited 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 a
pre-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, was
with 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 to
petitioner was entered into by private respondent with FNSB. Petitioner, although named as
the 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 no
contractual relation between them, petitioner has no right to apply the second $10,000.00
remittance delivered by mistake by private respondent to the outstanding account of
FACETS.
Petitioner next contends that the payment by respondent bank of the second $10,000.00
remittance was not made by mistake but was the result of negligence of its employees. In
connection with this the Court of Appeals made the following finding of facts:
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 New
Jersey through the Consulate General of the Philippines in New York,
Adelaide C. Schachel, the investigation and reconciliation clerk in the said
bank testified that a request to remit a payment for Facet Funwear Inc. was
made in August, 1980. The total amount which the First National State Bank
of New Jersey actually requested the plaintiff-appellant Manufacturers
Hanover & Trust Corporation to remit to Irene's Wearing Apparel was US
$10,000.00. Only one remittance was requested by First National State Bank
of 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 borne
out by the fact that both remittances have the same reference invoice
number 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 that
defendant-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 facts
which petitioner would have this Court review. The Court holds that the finding by the Court
of Appeals that the second $10,000.00 remittance was made by mistake, being based on
substantial evidence, is final and conclusive. The rule regarding questions of fact being
raised with this Court in a petition for certiorari under Rule 45 of the Revised Rules of Court
has 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 a
petition 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, its
findings 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 the
Supreme Court to analyze or weigh such evidence all over again, its
jurisdiction being limited to reviewing errors of law that might have been
committed 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 showing
that the findings complained of are totally devoid of support in the record, or
that they are so glaringly erroneous as to constitute serious abuse of
discretion, such findings must stand, for this Court is not expected or required
to examine or contrast the oral and documentary evidence submitted by the
parties" [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 suffer
by the wrongful act of a third person, the loss must be borne by the one whose negligence
was the proximate cause of the loss.
The rule is that principles of equity cannot be applied if there is a provision of law specifically
applicable 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, 142
SCRA 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 De
Garcia v. Court of Appeals, G.R. No. L-20264, January 30, 1971, 37 SCRA 129, citing Aznar
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 must
suffer by a fraud perpetrated by another, the law imposes the loss upon the
party who, by his misplaced confidence, has enabled the fraud to be
committed, cannot be applied in a case which is covered by an express
provision of the new Civil Code, specifically Article 559. Between a common
law 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 doctrine
of solutio indebiti, applies in the case at bar, the Court must reject the common law principle
invoked by petitioner.
Finally, in her attempt to defeat private respondent's claim, petitioner makes much of the fact
that from the time the second $10,000.00 remittance was made, five hundred and ten days
had elapsed before private respondent demanded the return thereof. Needless to say,
private respondent instituted the complaint for recovery of the second $10,000.00 remittance
well 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 hereby
AFFIRMED.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr. and Bidin, JJ., concur.
Feliciano, J., is on leave.