When does a person or group guilty of unjust enrichment?

As a rule, a contract is perfected upon the meeting of the minds of the two parties.  Under Article 1475[13] of the Civil Code,a contract of sale is perfected the moment there is a meeting of the minds on the thing which is the object of the contract and on the price.

            In the case of Traders Royal Bank v. Cuison Lumber Co., Inc.,[14] the Court ruled:

Under the law, a contract is perfected by mere consent, that is, from the moment that there is a meeting of the offer and the acceptance upon the thing and the cause that constitute the contract. The law requires that the offer must be certain and the acceptance absolute and unqualified. An acceptance of an offer may be express and implied; a qualified offer constitutes a counter-offer. Case law holds that an offer, to be considered certain, must be definite, while an acceptance is considered absolute and unqualified when it is identical in all respects with that of the offer so as to produce consent or a meeting of the minds. We have also previously held that the ascertainment of whether there is a meeting of minds on the offer and acceptance depends on the circumstances surrounding the case.

… the offer must be certain and definite with respect to the cause or consideration and object of the proposed contract, while the acceptance of this offer – express or implied – must be unmistakable,  unqualified, and identical in all respects to the offer.  The required concurrence, however, may not always be immediately clear and may have to be read from the attendant circumstances; in fact, a binding contract may exist between the parties whose minds have met, although they did not affix their signatures to any written document.  (Italics supplied.)

         Also, in Manila Metal Container Corporation v. Philippine National Bank,[15] the Court ruled,

            A qualified acceptance or one that involves a new proposal constitutes a counter-offer and a rejection of the original offer. A counter-offer is considered in law, a rejection of the original offer and an attempt to end the negotiation between the parties on a different basis. Consequently, when something is desired which is not exactly what is proposed in the offer, such acceptance is not sufficient to guarantee consent because any modification or variation from the terms of the offer annuls the offer. The acceptance must be identical in all respects with that of the offer so as to produce consent or meeting of the minds.  (Italics supplied.)

            In the present case, Medrano’s offer to sell the shares of the minority stockholders at the price of 65% of the par value was not absolutely and unconditionally accepted by DBP.  DBP imposed several conditions to its acceptance and it is clear that Medrano indeed tried in good faith to comply with the conditions given by DBP but unfortunately failed to do so. Hence, there was no birth of a perfected contract of sale between the parties.

            The petitioner is also correct that Paragraph 1, Article 1545 of the Civil Code speaks of a perfected contract of sale.  Paragraph 1, Article 1545 of the Civil Code provides:

            ART. 1545. Where the obligation of either party to a contract of sale is subject to any condition which is not performed, such party may refuse to proceed with the contract or he may waive performance of the condition. If the other party has promised that the condition should happen or be performed, such first mentioned party may also treat the nonperformance of the condition as a breach of warranty.

            x x x x (Italics supplied.)

            It is clear from a plain reading of this article that it speaks of a party to a contract of sale who fails in the performance of his/her obligation.  The application of this article presupposes that there is a perfected contract between the parties and that one of them fails in the performance of an obligation under the contract.

            The present case does not fall under this article because there is no perfected contract of sale to speak of. Medrano’s failure to comply with the conditions set forth by DBP prevented the perfection of the contract of sale. Hence, Medrano and DBP remained as prospective-seller and prospective-buyer and not parties to a contract of sale.

         This notwithstanding, however, we cannot simply agree with DBP’s argument that since there is no perfected contract of sale, DBP should not be ordered to pay Medrano any amount.

            The factual scenario of this case took place in 1980 or over thirty (30) years ago.  Medrano had turned over and delivered his own shares of stock to DBP in his attempt to comply with the conditions given by DBP.  DBP then accepted the shares of stock as partial fulfillment of the conditions that it imposed on Medrano.  However, after the lapse of some time and after it became clear that Medrano would not be able to comply with the conditions, DBP decided to retain Medrano’s shares of stock without paying Medrano.  After the realization that DBP would in fact not pay him for his shares of stock, Medrano was constrained to file a suit to enforce his rights.[16]

            In civil law, DBP’s act of keeping the shares delivered by Medrano without paying for them constitutes unjust enrichment. As we held in Car Cool Philippines, Inc. v. Ushio Realty and Development Corporation[17],

         … “[t]here 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.” Article 22 of the Civil Code provides that “[e]very 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.” The principle of unjust enrichment under Article 22 requires two conditions: (1) that a person is benefited without a valid basis or justification, and (2) that such benefit is derived at another’s expense or damage.

            It was not proper for DBP to hold on to Medrano’s shares of stock after it became obvious that he will not be able to comply with the conditions for the contract of sale.  From that point onwards, the prudent and fair thing to do for DBP was to return Medrano’s shares because DBP had no just or legal ground to retain them.

         We find that equitable considerations militate against DBP’s claimed right over the subject shares.  First, it is clear that DBP did not buy the shares from Medrano as it even asserts there was no perfected contract of sale because of the failure of the latter to comply with DBP’s conditions. Second, it cannot be said that Medrano voluntarily donated his shares of stock as he is in fact still trying to recover them 30 years later.  Third, it cannot be said that DBP was merely holding the shares of stock for safekeeping as DBP even claims that the shares were transferred to the APT (now PMO).  In fine, there is no reason whatsoever for DBP to continue in the possession of the shares of stock against Medrano. For nearly 30 years, Medrano was deprived of his shares without any compensation at all from DBP.  To this Court, such situation is tantamount to the loss of respondent’s shares of stock, by reason of DBP’s unjustified retention.

http://sc.judiciary.gov.ph/jurisprudence/2011/february2011/167004.htm

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About Erineus

Born on December 28, 1965, Surallah, South Cotabato, Southern Mindanao, Philippines.
This entry was posted in Civil Law, Obligations and Contracts, Sales, Unjust Enrichment and tagged . Bookmark the permalink.

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