< All Topics

B. Solutio Indebiti

1. CONCEPT

The quasi-contract of solutio indebiti harks back to the ancient principle that no one shall enrich himself unjustly at the expense of another. (Domestic Petroleum Retailer Corporation v. Manila International Airport Authoriti, G.R. No. 210641, 27 March 2019)

a. Kinds of solution indebiti

1) Delivery by mistake

If something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises. (Article 2154, Civil Code)

2) Mistake in payment

Payment by reason of a mistake in the construction or application of a doubtful or difficult question of law may come within the scope of the preceding article. (Article 2155, Ibid.)

a) Right to recovery by payer

If the payer was in doubt whether the debt was due, he may recover if he proves that it was not due. (Article 2156, Ibid.)

b) Solidary liability of two or more payees

The responsibility of two or more payees, when there has been payment of what is not due, is solidary. (Article 2157, Ibid.)

c) Case law or jurisprudence

1) Undue interest on a loan: Under Article 1960 of the Civil Code, if the borrower of loan pays interest when there has been no stipulation therefor, the provisions of the Civil Code concerning solutio indebiti shall be applied. Article 2154 provides that if something is received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises. In such a case, a creditor-debtor relationship is created under a quasi-contract whereby the payor becomes the creditor who then has the right to demand the return of payment made by mistake, and the person who has no right to receive such payment becomes obligated to return the same. (Siga-an v. Villanueva, G.R. No. 173227, 20 January 2009)

2) Bank checks incorrectly deposited to an account: First, Metrobank acted in a manner akin to a mistake when it deposited the AMC checks to Ayala Lumber and Hardware’s account; because of Chua’s control over AMC’s operations, Metrobank assumed that the checks payable to AMC could be deposited to Ayala Lumber and Hardware’s account. Second, Ayala Lumber and Hardware had no right to demand and receive the checks that were deposited to its account; despite Chua’s control over AMC and Ayala Lumber and Hardware, the two entities are distinct, and checks exclusively and expressly payable to one cannot be deposited in the account of the other. This disjunct created an obligation on the part of Ayala Lumber and Hardware, through its sole proprietor, Chua, to return the amount of these checks to Metrobank. (Metropolitan Bank & Trust Company v. Absolute Management Corporation, G.R. No. 170498, 09 January 2013)

3) Overpayment of loan payments: As respondents had already fully paid the principal and all conventional interest that had accrued, they were no longer obliged to make further payments. Any further payment they made was only because of a mistaken impression that they were still due. Accordingly, petitioners are now bound by a quasi-contractual obligation under solution indebiti to return any and all excess payments delivered by respondents. (Sps. Abella v. Sps. Abellai, G.R. No. 195166, 08 July 2015)

b. Elements

The two requisites for solutio indebiti are:

1) A payment is made when there exists no binding relation between the payor who has no duty to pay, and the person who received the payment, and

2) The payment is made through mistake, and not through liberality or some other cause. (Domestic Petroleum Retailer Corporation v. Manila International Airport Authoriti, supra.)

For the concept of solutio indebiti to apply, the undue payment must have been made by reason of either an essential mistake of fact or a mistake in the construction or application of a doubtful or difficult question of law. (Ibid.)

Mistake entails an error, misconception, or misunderstanding. (Ibid.)

c. Property/money belongs to third person

When the property delivered or money paid belongs to a third person, the payee shall comply with the provisions of Article 1984. (Article 2158, Civil Code)  

Cross-referenced article/s

The depositary cannot demand that the depositor prove his ownership of the thing deposited. (Article 1984, Ibid.)

Nevertheless, should he discover that the thing has been stolen and who its true owner is, he must advise the latter of the deposit. (Paragraph 2, Article 1984, Ibid.)

If the owner, in spite of such information, does not claim it within the period of one month, the depositary shall be relieved of all responsibility by returning the thing deposited to the depositor. (Paragraph 3, Article 1984, Ibid.)

If the depositary has reasonable grounds to believe that the thing has not been lawfully acquired by the depositor, the former may return the same. (Paragraph 4, Article 1984, Ibid.)

d. Bad faith acceptance

Whoever in bad faith accepts an undue payment, shall:

1) Pay legal interest if a sum of money is involved;

2) Be liable for fruits received or which should have been received if the thing produces fruits. (Article 2159, Ibid.)

He shall furthermore be answerable for any loss or impairment of the thing from any cause, and for damages to the person who delivered the thing, until it is recovered. (Paragraph 2, Article 2159, Ibid.)

e. Good faith acceptance

1) Responsible to the extend that he has been benefited

He who in good faith accepts an undue payment of a thing certain and determinate shall only be responsible for the impairment or loss of the same or its accessories and accessions insofar as he has thereby been benefited. (Article 2160, Ibid.)

If he has alienated it, he shall return the price or assign the action to collect the sum. (Ibid.)

2) Exempt from restoration

He shall be exempt from the obligation to restore who, believing in good faith that the payment was being made of a legitimate and subsisting claim, destroyed the document, or allowed the action to prescribe, or gave up the pledges, or cancelled the guaranties for his right. (Article 2162, Ibid.)

He who paid unduly may proceed only against the true debtor or the guarantors with regard to whom the action is still effective. (Ibid.)  

f. Reimbursement for improvements and expenses

As regards the reimbursement for improvements and expenses incurred by him who unduly received the thing, the provisions of Title V of Book II shall govern. (Article 2161, Ibid.)

NB: Title V of Book II refers to POSSESSION.  Hence, the rules in possession for reimbursement related to improvements and expenses is applicable to solutio indebiti.

g. Presumption

It is presumed that there was a mistake in the payment if something which had never been due or had already been paid was delivered; but he from whom the return is claimed may prove that the delivery was made out of liberality or for any other just cause. (Article 2163, Ibid.)  

h. Prescription

For a case of payment by mistake or solutio indebiti, the prescriptive period for quasi-contracts of six years applies, as provided by Article 1145. (Philippine National Bank v. CA, G.R. No. 97995, 21 January 1993)

C. OTHER QUASI-CONTRACTS Added

1. Support given by a stranger

GENERAL RULE: When, without the knowledge of the person obliged to give support, it is given by a stranger, the latter shall have a right to claim the same from the former.

EXCEPTION: … unless it appears that he gave it out of piety and without intention of being repaid. (Article 2164, Ibid.)  

When the person obliged to support an orphan, or an insane or other indigent person unjustly refuses to give support to the latter, any third person may furnish support to the needy individual, with right of reimbursement from the person obliged to give support. The provisions of this article apply when the father or mother of a child under eighteen years of age unjustly refuses to support him. (Article 2166, Ibid.)

2. Funeral expenses paid by a third person

When funeral expenses are borne by a third person, without the knowledge of those relatives who were obliged to give support to the deceased, said relatives shall reimburse the third person, should the latter claim reimbursement. (Article 2165, Ibid.)

3. Medical treatment while not in a condition to give consent

When through an accident or other cause a person is injured or becomes seriously ill, and he is treated or helped while he is not in a condition to give consent to a contract, he shall be liable to pay for the services of the physician or other person aiding him, unless the service has been rendered out of pure generosity. (Article 2167, Ibid.)

4. Property saved from destruction due to fire, flood, storm, etc.

When during a fire, flood, storm, or other calamity, property is saved from destruction by another person without the knowledge of the owner, the latter is bound to pay the former just compensation. (Article 2168, Ibid.)

5. Government expenses for failure to comply with health or safety regulations

When the government, upon the failure of any person to comply with health or safety regulations concerning property, undertakes to do the necessary work, even over his objection, he shall be liable to pay the expenses. (Article 2169, Ibid.)

6. Commningling of movables due to accident or fortuitous event

When by accident or other fortuitous event, movables separately pertaining to two or more persons are commingled or confused, the rules on co-ownership shall be applicable. (Article 2170, Ibid.)

7. Finders of lost personal property

The rights and obligations of the finder of lost personal property shall be governed by Articles 719 and 720. (Article 2171, Ibid.)

8. Reimbursment for necessary and useful expenses by poessessor in good faith

The right of every possessor in good faith to reimbursement for necessary and useful expenses is governed by Article 546. (Article 2172, Ibid.)

9. Payment of debt without debtor’s knowlege

When a third person, without the knowledge of the debtor, pays the debt, the rights of the former are governed by Articles 1236 and 1237. (Article 2173, Ibid.)

10. Mutual protection expenses

When in a small community a nationality of the inhabitants of age decide upon a measure for protection against lawlessness, fire, flood, storm or other calamity, any one who objects to the plan and refuses to contribute to the expenses but is benefited by the project as executed shall be liable to pay his share of said expenses. (Article 2174, Ibid.)

11. Payment of taxes for another

Any person who is constrained to pay the taxes of another shall be entitled to reimbursement from the latter. (Article 2175, Ibid.)

12. Analogous cases

Indubitably, the Civil Code does not confine itself exclusively to the quasi-contracts enumerated from Articles 2144 to 2175 but is open to the possibility that, absent a pre-existing relationship, there being neither crime nor quasi-delict, a quasi-contractual relation may be forced upon the parties to avoid a case of unjust enrichment. There being no express consent, in the sense of a meeting of minds between the parties, there is no contract to speak of. However, in view of the peculiar circumstances or factual environment, consent is presumed to the end that a recipient of benefits or favors resulting from lawful, voluntary and unilateral acts of another may not be unjustly enriched at the expense of another. (Philippine National Bank v. CA, G.R. No. 97995, 21 January 1993)

Previous A. Negotiorum Gestio
Table of Contents