6 January 2021
The concept of “unjust enrichment” is enshrined in Article 22 of the Civil Code of the Philippines, which provides that “every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.”
There is unjust enrichment when a person unjustly retains a benefit to the loss of another, or when a person retains money or property of another against the fundamental principles of justice, equity and good conscience. The principle of unjust enrichment requires two conditions: (1) that a person is benefited without a valid basis or justification, and (2) that such benefit is derived at the expense of another.
The fundamental doctrine of unjust enrichment is the transfer of value without just cause or consideration. The elements of this doctrine are: enrichment on the part of the defendant; impoverishment on the part of the plaintiff; and lack of cause. The main objective is to prevent one to enrich himself at the expense of another. It is commonly accepted that this doctrine simply means that a person shall not be allowed to profit or enrich himself inequitably at another’s expense.
The fundamental doctrine of unjust enrichment is the transfer of value without just cause or consideration.
The elements of this doctrine are: enrichment on the part of the defendant; impoverishment on the part of the plaintiff; and lack of cause.
The main objective is to prevent one to enrich himself at the expense of another. It is commonly accepted that this doctrine simply means that a person shall not be allowed to profit or enrich himself inequitably at another’s expense.
The concept is aptly illustrated in the context of business dealings in the case of Philippine Stock Exchange Inc. (PSE) vs Litonjua (GR 204014, 5 December 2016).
The Litonjua Group wrote a letter-agreement to Trendline Securities Inc. (Trendline) for the acquisition of the 85 percent majority equity of Trendline’s membership seat in PSE, for an aggregate price of P23,000,000 and paying a portion directly to PSE within for the full settlement of all claims and outstanding obligations including interest of Trendline to lift its membership suspension and the resumption to normal trading operation.
PSE resolved to accept the amount of P19,000,000 as full and final settlement of its outstanding obligations.
However, despite several exchange of letters of conformity and delivery of checks representing payment of full settlement of Trendline’s obligations, PSE failed to lift the suspension imposed on Trendline’s seat, prompting the Litonjua Group to demand reimbursement, upon knowledge that the specific performance by PSE of transferring the membership seat under the agreement will no longer be possible.
The trial court ruled in favor of the Litonjua Group and directed PSE to return the said amount.
On appeal, the Supreme Court ruled that PSE is liable to return the money it received pursuant to the principles of unjust enrichment and estoppel.
While PSE insists that there is no unjust enrichment when it received the P19,000,000 since it has every right to accept the amount which was voluntarily and knowingly paid by the Litonjua Group to discharge Trendline from its obligations to the corporation, the Supreme Court held that anyone who comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him.
The main objective of the principle against unjust enrichment is to prevent one from enriching himself at the expense of another without just cause or consideration. Applying law and jurisprudence, the principle of unjust enrichment requires PSE to return the money it had received at the expense of the Litonjua Group since it benefited from the use of it without any valid justification.
In addition, principle of estoppel finds application.
Estoppel, like unjust enrichment, is a legal principle with strong roots in equity.
It is a response to the demands of moral right and natural justice.
For estoppel to exist, it is indispensable that there be a declaration, act, or omission by the party who is sought to be bound.
It is equally a requisite that he, who would claim the benefits of such a principle, must have altered his position, having been so intentionally and deliberately led to comport himself; thus, by what was declared or what was done or failed to be done.
In this case, the Litonjua Group was led to believe that the payment of P19,000,000 will be the full settlement of all the obligations due, including the penalties and interests, in order to effect the lifting of the suspension of the seat/membership.
The scripture says that just as a partridge that hatches eggs which it has not laid, so is he who makes a fortune, but unjustly — in the midst of his days it will forsake him, and in the end, he will be a fool. Indeed, justness in everyday dealings, especially with respect to profiting at the expense of another, is a moral as well as a legal obligation.
First published on The Daily Tribune.
For further information, please contact:
Nilo T. Divina, Managing Partner, DivinaLaw
nilo.divina@divinalaw.com
