Wednesday, February 08, 2012

Reyes vs. Lim, G. R. No. 134241, August 11, 2003

Facts: Petitioner Reyes filed a complaint for annulment of contract and damages against respondent Lim and Harrison Lumber. In his complaint he alleged that he and Lim entered into a contract to sell a parcel of land wherein the other respondent Harrison Lumber was occupying as lessee. That petitioner had informed Harrison Lumber to vacate the property and if they failed to vacate, he will hold them liable for the penalty of 400,000 a month as provided in the contract to sell. He further alleged that Lim connived with Harrison Lumber not to vacate the property until the 400,000 monthly penalties would have accumulated and equaled the unpaid purchase price of 18,000. Harrison in their answer denies the allegation of connivance between them and Lim to defraud Reyes. They alleged that Reyes approved their request to extend their time to vacate the premise due to the difficulty in finding a new location for their business. While Lim in his answer alleged that he was ready and willing to pay the balance of the purchase price and requested a meeting with Reyes but Reyes kept on postponing the meeting and instead offered to return the 10,000,000 down payment because Reyes has a hard time in removing the lessee to the property but Lim rejected the offer and proceeded to verify the status of Reyes title to the property, and he learned that it was already sold to Line One Corporation.

(1) Whether or not the act of Reyes constitute unjust enrichment

(2) Whether or not the principle of unjust enrichment applies to procedural remedies


The principle that no person may unjustly enrich himself at the expense of another is embodied in Article 22 of the Civil Code. This principle applies not only to substantive rights but also to procedural remedies. One condition for invoking this principle is that the aggrieved party has no other action based on contract, quasi-contract, crime, quasi-delict or any other provision of law. Courts can extend this condition to the hiatus in the Rules of Court where the aggrieved party, during the pendency of the case, has no other recourse based on the provisional remedies of the Rules of Court. Thus, a court may not permit a seller to retain, pendente lite, money paid by a buyer if the seller himself seeks rescission of the sale because he has subsequently sold the same property to another buyer. By seeking rescission, a seller necessarily offers to return what he has received from the buyer. Such a seller may not take back his offer if the court deems it equitable, to prevent unjust enrichment and ensure restitution, to put the money in judicial deposit.

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. In this case, it was just, equitable and proper for the trial court to order the deposit of the P10 million down payment to prevent unjust enrichment by Reyes at the expense of Lim.

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