Quasi-contracts

Define quasi-contracts

Quasi-contracts are those juridical relations arising from lawful, voluntary and unilateral acts of persons based on the principle that no one shall be unjustly enriched or benefited at the expense of another.

Kinds of quasi-contracts

1. Nominate

     a. Negotiorum gestio

     b. Solutio Indebiti

2. Innominate – those regulated by Arts. 2164 to 2174 of the Civil Code

Support given by a stranger

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, unless it appears that he gave it out of piety and without intention of being repaid. (Art. 2164, CC)

Funeral expenses borne 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. (Art. 2165, CC)

Support to an orphan, insane, indigent person given by a third person

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. (Art. 2166, CC)

When through an accident a person injured is treated or helped

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. (Art. 2167, CC)

When property is saved during a fire, flood, storm or other calamity

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. (Art. 2168, CC)

When government undertakes necessary work

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. (Art. 2169, CC)

When movables are commingled or confused

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. (Art. 2170, CC)

When lost property is found

The rights and obligations of the finder of lost personal property shall be governed by articles 719 and 720. (Art. 2171, CC)

Possessor in good faith right of reimbursement

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

When a third person pays the debt without knowledge of the debtor.

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. (Art. 2173, CC)

When a person refuses to contribute but is benefited by a project

When in a small community a majority 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. (Art. 2174, CC)

When a person is constrained to pay the taxes of another

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

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Negotiorum Gestio

What is meant by negotiorum gestio?

Negotiorum gestio refers to the juridical relation which arises when a person voluntarily takes charge of the agency or management of the business or property of another, without any power from the latter, as a consequence of which, he is obliged to continue the same until the termination of the affair and its incidents, or to require the person concerned to substitute him, if the owner is in a position to do so. (Art. 2144, CC)

What are its requisites?

Its requisites are as follows:

1. The gestor must voluntarily assume the agency or management of the business or property of another.

2. The business or property must be either neglected or abandoned.

3. The agency or management must not be authorized by the owner either expressly or impliedly.

4. The assumption of the the agency or management must be made in good faith.

Negotiorum gestio does not arise in either of these instances:

1) When the property or business is not neglected or abandoned;

2) If in fact the manager has been tacitly authorized by the owner. (Art. 2144, CC)

Distinguish between negotiorum gestio and implied agency.

1) In negotiorum gestio, it is essential that the gestor should never have been authorized in any manner whatsoever to assume the agency or management of the business or property of another, whereas in implied agency, the agent is actually authorized to assume the agency

a.  by virtue of the acts of the owner or

b.  by virtue of his silence or inaction, or

c.   his failure to repudiate the agency, knowing that another is acting on his behalf without any authority.

2) In the first, it essential that the business or property should be either neglected or abandoned, whereas in the second, this is not required.

3) So long as the owner does not know that another is acting on his behalf without authority, the quasi-contract of negotiorum gestio exists, but once he becomes aware of such fact and still he does not repudiate the acts of the agent, the quasi-contract ceases to exist; it has become a contract of implied agency. 

When is a gestor or officious manager liable for fortuitous event?

The officious manager shall be liable for any fortuitous event:

1) If he undertakes risky operations which the owner was not accustomed to embark upon;

2) If he has preferred his own interest to that of the owner;

3) If he fails to return the property or business after demand by the owner;

4) If he assumed the management in bad faith. 

Except when the management was assumed to save property or business from imminent danger, the officious manager shall be liable for fortuitous events:

1) If he is manifestly unfit to carry on the management;

2) If by his intervention he prevented a more competent person from taking up the management.

Diligence required of the officious manager

The officious manager shall perform his duties with all the diligence of a good father of a family, and pay the damages which through his fault or negligence may be suffered by the owner of the property or business under management.

The courts may, however, increase or moderate the indemnity according to the circumstances of each case. (Art. 2145, CC)

Rule if the officious manager delegates his duties

If the officious manager delegates to another person all or some of his duties, he shall be liable for the acts of the delegate, without prejudice to the direct obligation of the latter toward the owner of the business.

The responsibility of two or more officious managers shall be solidary, unless the management was assumed to save the thing or business from imminent danger. (Art. 2146, CC)

Effect of the ratification of the owner of the business

The ratification of the management by the owner of the business produces the effects of an express agency, even if the business may not have been successful. (Art. 2149, CC)

Specific liabilities of the owner even if there is no ratification

Although the officious management may not have been expressly ratified, the owner of the property or business who enjoys the advantages of the same shall be liable for obligations incurred in his interest, and shall reimburse the officious manager for the necessary and useful expenses and for the damages which the latter may have suffered in the performance of his duties.

The same obligation shall be incumbent upon him when the management had for its purpose the prevention of an imminent and manifest loss, although no benefit may have been derived. (Art. 2150, CC)

Liability of the owner even if no benefit or danger

Even though the owner did not derive any benefit and there has been no imminent and manifest danger to the property or business, the owner is liable as under the first paragraph of the preceding article, provided:

1) The officious manager has acted in good faith, and

2) The property or business is intact, ready to be returned to the owner. (Art. 2151, CC)

Personal liability of officious manager towards third person

The officious manager is personally liable for contracts which he has entered into with third persons, even though he acted in the name of the owner, and there shall be no right of action between the owner and third persons. These provisions shall not apply:

  

1) If the owner has expressly or tacitly ratified the management, or

2) When the contract refers to things pertaining to the owner of the business. (Art. 2152, CC)

Causes of extinguishment of the officious management

The management is extinguished:

1) When the owner repudiates it or puts an end thereto;

2) When the officious manager withdraws from the management, subject to the provisions of article 2144;

3) By the death, civil interdiction, insanity or insolvency of the owner or the officious manager. (Art. 2153, CC)

Bar Questions 

In fear of reprisals from lawless elements besieging his barangay, X abandoned his fishpond, fled to Manila and left for Europe. Seeking that the fish in the fishpond were ready for harvest, Y, who is in the business of managing fishponds on a commission basis, took possession of the property, harvested the fish and sold the entire harvest to Z. Thereafter, Y borrowed money from W and used the money to buy new supplies of fish fry and to prepare the fishpond for the next crop. a)   What is the Juridical relation between X and Y during X's absence? b) Upon the return of X to the barangay, what are the obligations of Y to X as regards the contract with Z? c) Upon X's return, what are the obligations of X as regards Y's contract with W? d) What legal effects will result if X expressly ratifies Y's management and what would be the obligations of X in favor of Y? Explain all your answers. (1992)

SUGGESTED ANSWER:

(a) The juridical relation is that of the quasi-contract of "negotiorum gestio". Y is the "gestor" or "officious manager" and X is the "owner" (Art. 2144, Civil Code).

(b) Y must render an account of his operations and deliver to X the price he received for the sale of the harvested fish (Art, 2145, Civil Code).

(c)  X must pay the loan obtained by Y from W because X must answer for obligations contracted with third persons in the interest of the owner (Art. 2150, Civil Code),

(d) Express ratification by X provides the effects of an express agency and X is liable to pay the commissions habitually received by the gestor as manager (Art. 2149, Civil Code).

In September, 1972, upon declaration of martial rule in the Philippines. A, together with his wife and children. disappeared from his residence along A. Mabini Street. Ermita, Manila. B, his immediate neighbor, noticing that mysterious disappearance of A and his family, closed the doors and windows of his house to prevent it from being burglarized. Years passed without B hearing from A and his family, B continued taking care of A's house, even causing minor repairs to be done at his house to preserve it. In 1976, when business began to perk up in the area, an enterprising man. C, approached B and proposed that they build stores at the ground floor of the house and convert its second floor into a pension house. B agreed to Cs proposal and together they spent for the construction of stores at the ground floor and the conversion of the second floor into a pension house. While construction was going on, fire occurred at a nearby house. The houses at the entire block, including A's were burned. After the EDSA revolution in February 1986, A and his family returned from the United States where they took refuge in 1972. Upon learning of what happened to his house. A sued B for damages, B pleaded as a defense that he merely took charge of his house under the principle of negotiorum gestio. He was not liable as the burning of the house is a fortuitous event. Is B liable to A for damages under the foregoing circumstances? (1993)

SUGGESTED ANSWER:

No. B is not liable for damages, because he is a gestor in negotiorum gestio (Art. 2144, Civil Code) Furthermore, B is not liable to A because Article 2147 of the Civil Code is not applicable.

B did not undertake risky operations which the owner was not accustomed to embark upon: a) he has not preferred his own interest to that of the owner; b)  he has not failed to return the property or business after demand by the owner; and c)  he has not assumed the management in bad faith.

ALTERNATIVE ANSWER:

He would be liable under Art. 2147 (1) of the Civil Code, because he used the property for an operation which the operator is not accustomed to, and in so doing, he exposed the house to increased risk, namely the operation of a pension house on the second floor and stores on the first floor

Armando owns a row of residential apartments in San Juan, Metro Manila, which he rents out to tenants. On 1 April 1991 he left for the United States without appointing any administrator to manage his apartments such that uncollected rentals accumulated for three (3) years. Amparo, a niece of Armando, concerned with the interest of her uncle, took it upon herself to administer the property. As a consequence, she incurred expenses in collecting the rents and in some instances even spent for necessary repairs to preserve the property. (1995)

1. What Juridical relation between Amparo and Armando, if any, has resulted from Amparo's unilateral act of assuming the administration of Armando's apartments? Explain.

2. What rights and obligations, if any, does Amparo have under the circumstances? Explain.

SUGGESTED ANSWER:

1.   Negotiorum gestio existed between Amparo and Armando. She voluntarily took charge of the agency or management of the business or property of her uncle without any power from her uncle whose property was neglected. She is called the gestor negotiorum or officious manager, (Art. 2144, NCC)

2. It is recommended by the Committee that an enumeration of any two (2) obligations and two (2) rights as enumerated in Arts. 2145 to 2152, NCC, would entitle the examinee to full credit. 

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Antichresis

Define antichresis

Antichresis is a contract by virtue of which the creditor acquires the right to receive the fruits of an immovable of his debtor, with the obligation to apply them to the payment of the interest, if owing, and thereafter to the principal of his credit. (Art. 2132, CC)

Characteristics of antichresis

1. Accessory contract

2. Formal contract - it must be in writing

3. Deal only with immovable property

4. Real right

5. Real contract

6. Can guarantee all kinds of valid obligations. 

It is not essential that the loan should earn interest in order that it can be guaranteed with a contract of antichresis. Antichresis is susceptible of guaranteeing all kinds of obligations, pure or conditional. (Javier vs. Valliser, No. 2648-R, April 29, 1950; Sta. Rosa vs. Noble, 35 O.G. 27241)

Delivery of the property to the creditor is required only in order that the creditor may receive the fruits and not for the validity of the contract.

How is a contract of antichresis be validly established?

The amount of the principal and of the interest shall be specified in writing; otherwise, the contract of antichresis shall be void.  (Art. 2134, CC)

How should the amount of payment in antichresis be determined?

The actual market value of the fruits at the time of the application thereof to the interest and principal shall be the measure of such application. (Art. 2133, CC)

What are the obligations of the creditor?

1.) The creditor, unless there is a stipulation to the contrary, is obliged to pay the taxes and charges upon the estate.

2.) He is also bound to bear the expenses necessary for its preservation and repair.

The sums spent for the purposes stated in this article shall be deducted from the fruits. (Art. 2135, CC)

3.) To apply the fruits received for the payment of the outstanding interest, if any, and thereafter to the principal of his credit.

How can the creditor be exempted from the obligations imposed by Art. 2135, CC?

The creditor may exempt himself from the two obligations imposed by Art. 2135 by compelling the debtor to enter again upon the enjoyment of the property, except when there is a stipulation to the contrary. (Art. 2136, CC)

Can the debtor reacquire the enjoyment of the immovable?

The debtor cannot reacquire the enjoyment of the immovable without first having totally paid what he owes the creditor.

But the latter, in order to exempt himself from the obligations imposed upon him by the preceding article, may always compel the debtor to enter again upon the enjoyment of the property, except when there is a stipulation to the contrary. (Art. 2136, CC)

The property delivered stands as a security for the payment of the obligation of the debtor in antichresis. Hence, the debtor cannot demand its return until the debt is totally paid. 

The debtor can only demand the return of the property after having fully paid his obligations to the creditor. It is not fair for the creditor to regain the possession of the property when his debt has not been fully paid. Until there is full payment of the obligation, the property shall stand as security therefor. (Macapinlac vs. Gutierrez Repide, No. 18574, September 20, 1922, 43 Phil 770)

May the creditor acquire ownership of the real estate for non-payment of debt?

The creditor does not acquire the ownership of the real estate for non-payment of the debt within the period agreed upon. Every stipulation to the contrary shall be void. (Art. 2137, CC)

What is the remedy of the creditor in case of non-payment of his credit?

The creditor may petition the court for the payment of the debt or the sale of the real property. In this case, the Rules of Court on the foreclosure of mortgages shall apply. (Art. 2137, CC)

1. Action for collection

2. Petition for the public sale of the property

Interest be compensated with the fruits

The contracting parties may stipulate that the interest upon the debt be compensated with the fruits of the property which is the object of the antichresis, provided that if the value of the fruits should exceed the amount of interest allowed by the laws against usury, the excess shall be applied to the principal. (Art. 2138, CC)

Is prescription as a mode of acquiring ownership available to the creditor in antichresis?

No. His possession of the property is not in the concept of an owner but that of a mere holder during the existence of the contract (Ramirez vs. Court of Appeals, G.R. No. L-38185, September 24, 1986).

Antichresis vs. contract of sale with a right of repurchase

1) Antichresis is an accessory contract, whereas sale with right of repurchase is a principal and independent contract.

2) In the first, there is no transfer of the title over the property from the debtor to the creditor, whereas in the second there is a transfer of the title over the property from the vendor a retro to the vendee a retro although conditional.

3) In the first, if the debtor fails to pay his debt, the creditor cannot appropriate the property or dispose of it, whereas in the second, as soon as there is a consolidation of title in the vendee a retro, he may dispose of it as absolute owner.

4) In the first, if the debtor fails to pay his debt within the time agreed upon, the creditor does not acquire the ownership of the property, whereas in the second, if the vendor a retro does not redeem the property within the time agreed upon, the vendee a retro irrevocably acquires absolute ownership thereof.

Antichresis vs. pledge

1) Antichresis is a consensual contract whereas pledge is a real contract.

2) In the first, the subject matter is a real property, whereas in the second, the subject matter is a personal property.

3) In the first, the requirement that the contract must be in writing is essential for validity, whereas in the second, the requirement that the contact must be in public instrument is merely for the purpose of binding third persons. 

4) In the first, the foreclosure in case of non-payment of debt is as a rule judicial, although the parties may agree to make it extrajudicial whereas in the second, the sale in case of non-payment of the debt is always extrajudicial.

Antichresis vs. real estate mortgage

1) In antichresis, the creditor acquires the right to receive the fruits of the property, but with the obligation to apply them to the payment of the interest and thereafter to the principal of his credit, whereas in real estate mortgage, the creditor does not acquire such right.

2) In the first, the creditor as a rule is in possession of the property, whereas in the second, the debtor is always in possession of the property.

3) In the first, the requirement that the contract must be in writing is essential for validity, whereas in the second, the requirement that the contact must be registered in the Registry of Property is merely for the purpose of binding third persons.

4) In the first, there is an obligation of the creditor to pay taxes and charges upon the property as well as the expenses necessary for its preservation and repair, whereas in the second, such obligation is not imposed upon the creditor.

5) In the first, foreclosure in case of non-payment of debts is a rule judicial, although the parties may agree to make it extra-judicial, whereas in the second, the foreclosure may be judicial or extra-judicial at the option of the creditor. 

A obtains a loan of P500 from B and delivers to the latter a piece of coconut land as security for the payment of the loan. In the deed executed, A agreed that B would avail of the fruits of the land during the time that the loan remains unpaid, without saying that the value of said fruits should be applied to the interest or the capital of the loan. What is the nature of the contract between the parties?

It is submitted that the contract in this case is a a type of equitable mortgage, because, although it lacks some of the formalities required by law, nevertheless, it shows the intention of the parties to charge real property as security for the payment of a debt and contains nothing that is contrary to law (Art. 1602, CC). Strictly speaking, it cannot be considered a contract of antichresis becuase it lacks the requisite regarding the obligation of the creditor to apply the fruits received by him to the payment of the interest, if owing, and thereafter to the principal of his credit. (Art. 1232, CC) In spite of the fact that it is a type of equitable mortgage where the mortgagee is in possession, it has been held by the Supreme Court, however, that the rights and obligations of the parties are similar and in may respect identical with those in a contract of antichresis. (Macapinlac vs. Gutierrez Repide, 43 Phil 770; Diaz vs. Mendezona, 48 Phil 666; Miranda vs. Imperial, 77 Phil 1066) 

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Solutio Indebiti

What is meant by solutio indebiti?

Solutio indebiti refers to the juridical relation which arises whenever a person unduly delivers a thing through mistake to another who has no right to demand it. 

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. (Art. 2154, CC)

What are the requisites solutio indebiti?

1. There must be a payment or delivery made by one person to another;

2. The person who made the payment or delivery was under no obligation to do so;

3. The payment or delivery was made by reason of a mistake.

Examples of solutio indebiti

1. Erroneous payment of interest not due

2. Erroneous payment of rental not called for in view of the expiration of the lease contract

3. Taxes erroneously given.

Can solutio indebiti be applied because of doubtful or difficult questions of law?

Payment by reason of a mistake in the construction or application of a doubtful or difficult question of law may come within the scope solutio indebiti (Art. 2155, CC)

Payment not yet due

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

Solidary responsibility of two or more payees

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

When the property or money belongs to a third person

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

The depositary cannot demand that the depositor prove his ownership of the thing deposited. Nevertheless, should he discover that the thing has been stolen and who its true owner is, he must advise the latter of the deposit.

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.

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. (Art. 1984, CC)

Rule if payee is in bad faith

Whoever in bad faith accepts an undue payment, shall pay legal interest if a sum of money is involved, or shall be liable for fruits received or which should have been received if the thing produces fruits.

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. (Art. 2159, CC)

What is the liability of payee in good faith

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. If he has alienated it, he shall return the price or assign the action to collect the sum. (Art. 2160, CC)

Reimbursement for improvements

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. (Art. 2161, CC)

Right of the payee who destroys the evidence or proofs of his right

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. He who paid unduly may proceed only against the true debtor or the guarantors with regard to whom the action is still effective. (Art. 2162, CC)

When mistake is presumed

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. (Art. 2163, CC)

GMC Corp. used to compute and pay monthly cost of living allowance (COLA) on the basis of 30 days a month ever since the law mandated  the payment of COLA. Wage Order 6 was implemented, increasing the COLA by P3 a day. GMC, however, multiplied the P3 additional COLA by 22 days. The Union objected arguing that the management's unilateral act was tantamount to withdrawal of benefits. Is there a mistake in the application of law?

GMC cannot be faulted for the erroneous application of law. Payment may be said to have been made by reason of a mistake in the construction or application of "doubtful or difficult question of law. Since it is a past error that it being corrected, no vested right may be said to have arisin nor any diminution of benefit under Art. 100 of the Labor Code, may be said to have resulted by virtue of the correction. (Globe Mackay Cable and Radio Corp. vs. NLRC, G.R. No. 74156, June 29, 1988)

BAR QUESTIONS

C, a Filipino resident of the US sent to his father D in Manila $500 through X Bank. Due to mistake of the employees of the Bank, D was paid $5,000 instead. Upon discovery of the mistake, the Bank demanded from D the return of $4,500. D refused and the Bank sued him. Is the Bank entitled to recover from D? (1980)

Yes, the Bank is entitled to recover the $4,500 from D. We have in this case an example of a quasi-contract of solutio indebiti which arises whenever a person unduly delivers a thing through mistake to another who has no right to demand it. Its requisite are:

1. There must be a payment or delivery made by one person to another;

2. The person who made the payment or delivery was under no obligation to do so;

3. The payment or delivery was made by reason of a mistake.

It is obvious that the above requisites are present in the instant case. 

DPO went to a store to buy a pack of cigarettes worth P225.00 only. He gave the vendor, RRA, a P500-peso bill. The vendor gave him the pack plus P375.00 change.  Was there a discount, an oversight, or an error in the amount given? What would be DPO’s duty, if any, in case of an excess in the amount of change given by the vendor?  How is this situational relationship between DPO and RRA denominated?  Explain. (5%) 

SUGGESTED ANSWER: 

There was error in the amount of change given by RRA. This is a case of solutio indebiti in that DPO received something that is not due him. He has the obligation to return the P100.00; otherwise, he will unjustly enrich himself at the expense of RRA. (Art. 2154, Civil Code) 

ALTERNATIVE ANSWER: 

DPO has the duty to return to RRA the excess P100 as trustee under Article 1456 of the Civil Code which provides: If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. There is, in this case, an implied or constructive trust in favor of RRA. 

  

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