UP vs. PHILAB PDF

8/7/2017 CentralBooks:Reader
VOL. 439, 467

SEPTEMBER 29,
2004
University of the
Philippines vs. Philab
Industries, Inc.
*
G.R. No. 152411. September 29, 2004.
UNIVERSITY OF THE PHILIPPINES, petitioner, vs. PHILAB INDUSTRIES, INC., respondent.
Remedial Law; Appeals; The doctrinal rule is that pure questions of facts may not be the subject of
appeal by certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as this mode of appeal is generally
restricted to questions of law—however, this rule is not absolute—the Court may review the factual findings
of the Court of Appeals should they be contrary to those of the trial court; Correspondingly, this Court may
review findings of facts when the judgment of the Court of Appeals is premised on a misapprehension of facts.
—The doctrinal rule is that pure questions of facts may not be
_______________
* SECOND DIVISION.
468
468 SUPREME
COURT
REPORTS
ANNOTATED
University of the
Industries, Inc.
the subject of appeal by certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as this mode of
appeal is generally restricted to questions of law. However, this rule is not absolute. The Court may review
the factual findings of the CA should they be contrary to those of the trial court. Correspondingly, this Court
may review findings of facts when the judgment of the CA is premised on a misapprehension of facts.
Contracts; Parties to a Contract; There is no dispute that the respondent is not privy to the Memorandum
of Agreement (MOA) executed by the petitioner and Ferdinand E. Marcos Foundation (FEMF), hence it is not
bound by the said agreement; Contracts take effect only between the parties and their assigns; A contract
cannot be binding upon and cannot be enforced against one who is not a party to it, even if he is aware of
such contract and has acted with knowledge thereof.—Contracts take effect only between the parties and
their assigns. A contract cannot be binding upon and cannot be enforced against one who is not a party to it,
even if he is aware of such contract and has acted with knowledge thereof. Likewise admitted by the parties,
is the fact that there was no written contract executed by the petitioner, the respondent and FEMF relating
to the fabrication and delivery of office and laboratory furniture to

http://central.com.ph/sfsreader/session/0000015dbbeb4d25dcbb7790003600fb002c009e/t/?o=False the BIOTECH. Even the CA failed to
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to the fabrication and delivery of office and laboratory furniture to the BIOTECH. Even the CA failed to
specifically declare that the petitioner and the respondent entered into a contract of sale over the said
laboratory furniture. The parties are in accord that the FEMF had remitted to the respondent partial
payments via checks drawn and issued by the FEMF to the respondent, through Padolina, in the total
amount of P2,288,573.74 out of the total cost of the project of P2,934,068.90 and that the respondent
received the said checks and issued receipts therefor to the FEMF. There is also no controversy that the
petitioner did not pay a single centavo for the said furniture delivered by the respondent that the petitioner
had been using ever since.
Same; Implied-in-Fact Contracts; A contract implied-in-fact is one implied from facts and circumstances
showing as mutual intention to contract—it arises where the intention of the parties is not expressed, but an
agreement in fact creating an obligation; An implied-in-fact contract will not arise unless the meeting of
minds is indicated by some intelligent conduct, act, or sign.—A contract implied in fact is one implied from
facts and circumstances showing a
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29, 2004
University of the
Industries, Inc.
mutual intention to contract. It arises where the intention of the parties is not expressed, but an
agreement in fact creating an obligation. It is a contract, the existence and terms of which are manifested by
conduct and not by direct or explicit words between parties but is to be deduced from conduct of the parties,
language used, or things done by them, or other pertinent circumstances attending the transaction. To
create contracts implied in fact, circumstances must warrant inference that one expected compensation and
the other to pay. An implied-in-fact contract requires the parties’ intent to enter into a contract; it is a true
contract. The conduct of the parties is to be viewed as a reasonable man would view it, to determine the
existence or not of an implied-in-fact contract. The totality of the acts/conducts of the parties must be
considered to determine their intention. An implied-in-fact contract will not arise unless the meeting of
minds is indicated by some intelligent conduct, act or sign.
Same; Principle of “Solutio Indebiti”; Unjust enrichment claims do not lie simply because one party
benefits from the efforts or obligations of others, but instead must be shown that a party was unjustly
enriched in the sense that the term unjustly could mean illegally or unlawfully.—Unjust enrichment claims
do not lie simply because one party benefits from the efforts or obligations of others, but instead it must be
shown that a party was unjustly enriched in the sense that the term unjustly could mean illegally or
unlawfully.
Same; Restitution or “Accion In Rem Verso”; In order that an “accion in rem verso” may prosper, the
essential elements must be present: (1) that the defendant has been enriched, (2) that plaintiff has suffered a
loss, (3) that the enrichment of the defendant is without just or legal ground, (4) and that plaintiff has no
other action based on contract, quasi-contract, crime or quasi-delict.—In order that accion in rem verso may
prosper, the essential elements must be present: (1) that the defendant has been enriched, (2) that the
plaintiff has suffered a loss, (3) that the enrichment of the defendant is without just or legal ground, and
(4) that the plaintiff has no other action based on contract, quasi-contract, crime or quasi-delict. An accion in
rem verso is considered merely an auxiliary action, available only when there is no other remedy on
contract, quasi-contract, crime, and quasi-delict. If there is an obtainable action under any other institution
of positive law, that action must be resorted to, and the principle of accion in rem verso will not lie.
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470
470 SUPREME COURT

REPORTS
ANNOTATED
University of the
Industries, Inc.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.

Office of the Legal Services for petitioner.
Agana, Ferrer & Associates for respondent.
CALLEJO, SR., J.:
1
Before the Court is a petition for review on certiorari
2
of the Decision of the Court of Appeals
in CA-G.R. CV No. 44209, as well as its Resolution denying the petitioner’s
3
motion for the
reconsideration thereof. The Court of Appeals set aside the Decision of Branch 150 of the
Regional Trial Court (RTC) of Makati City, which dismissed the complaint of the respondent
against the petitioner for sum of money and damages.
The Facts of the Case
Sometime in 1979, the University of the Philippines (UP) decided to construct an integrated
system of research organization known as the Research Complex. As part of the project,
laboratory equipment and furniture were purchased for the National Institute of Biotechnology
and Applied Microbiology (BIOTECH) at the UP Los Baños. Providentially, the Ferdinand E.
Marcos Foundation (FEMF) came forward and agreed to fund the acquisition of the laboratory
furniture, including the fabrication thereof.
_______________
1 Penned by Associate Justice Demetrio G. Demetria (retired), with Associate Justices Ramon Mabutas, Jr. (retired)
and Jose L. Sabio, Jr., concurring.
2 Penned by Associate Justice Jose L. Sabio, Jr., with Associate Justices Oswaldo Agcaoili (retired) and Sergio L.
Pestaño, concurring.
3 Penned by Judge Zeus C. Abrogar.
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University of the
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Renato E. Lirio, the Executive Assistant of the FEMF, gave the go-signal to BIOTECH to contact
a corporation to accomplish the project. On July 23, 1982, Dr. William Padolina, the Executive
Deputy Director of BIOTECH, arranged for Philippine Laboratory Industries, Inc. (PHILAB), to
fabricate the laboratory furniture and deliver the same to BIOTECH for the BIOTECH Building
Project, for the account of the FEMF. Lirio directed Padolina to give the go-signal to PHILAB to
proceed with the fabrication of the laboratory furniture, and requested Padolina to forward the
contract of the project to FEMF for its approval.
On July 13, 1982, Padolina wrote Lirio and requested for the issuance of the purchase order
and downpayment for the office and laboratory furniture for the project, thus:
1. Supply and Installation of Laboratory furniture for the BIOTECH Building Project
Amount : P2,934,068.90
Supplier : Philippine
Laboratory
Furniture
Co., College,
Laguna
Attention : Mr. Hector C.
Navasero
President
Downpayment : 40% or
P1,173,627.56
2. Fabrication and Supply of office furniture for the BIOTECH Building Project
Amount : P573,375.00
Supplier : Trans-
Oriental
Woodworks,
Inc. 1st
Avenue,
Bagumbayan
Tanyag,
Taguig,
Metro
Manila
Downpayment : 50% or 4
P286,687.50
_______________
4 Rollo, p. 104.
472
472 SUPREME COURT

REPORTS
ANNOTATED
University of the
Industries, Inc.
Padolina assured Lirio that the contract would be prepared as soon as possible before the
issuance of the purchase orders and the downpayment for the goods, and would be transmitted to
the FEMF as soon as possible.
In a Letter dated July 23, 1982, Padolina informed Hector Navasero, the President of
PHILAB, to proceed with the fabrication of the laboratory furniture, per the directive of FEMF
Executive5
Assistant Lirio. Padolina also requested for copies of the shop drawings and a sample
contract for the project, and that such contract and drawings had to be finalized before the down
payment could be remitted to the PHILAB the following week. However, PHILAB failed to
forward any sample contract.
Subsequently, PHILAB made partial deliveries of office and laboratory furniture to BIOTECH
after having been duly inspected by their representatives and FEMF Executive Assistant Lirio.
On August 24, 1982, FEMF remitted P600,000 to PHILAB as downpayment for the laboratory
furniture for the BIOTECH project, for which PHILAB issued Official Receipt No. 253 to FEMF.
On October 22, 1982, FEMF made another partial payment of P800,000 to PHILAB, for which
the latter issued Official Receipt No. 256 to FEMF. The remittances were in the form of checks
drawn by FEMF and delivered to PHILAB, through Padolina.
On October 16, 1982, UP, through Emil Q. Javier, the Chancellor of UP Los Baños and FEMF,
represented by its Executive Officer, Rolando Gapud, executed a Memorandum of Agreement
(MOA) in which FEMF agreed to grant financial support and donate sums of money to UP for the
construction of buildings, installation of laboratory and other capitalization for the project, not to
exceed P29,000,000.00. The obligations of FEMF under the MOA are the following:
_______________
5 Exhibit “I”.
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University of the
Industries, Inc.
ARTICLE II
OBLIGATIONS OF THE FOUNDATION
2.1. The FOUNDATION, in carrying out its principal objectives of promoting philantrophic and scientific
projects through financial support to such projects that will contribute to the country’s economic
development, shall grant such financial support and donate such sums of money to the RESEARCH
COMPLEX as may be necessary for the construction of buildings, installation of laboratories, setting up of
offices and physical plants and facilities and other capital investment of the RESEARCH COMPLEX and/or
any of its component Research Institutes not to exceed P29 Million. For this purpose, the FOUNDATION
shall:
(a) Acquire and donate to the UNIVERSITY the site for the RESEARCH COMPLEX; and
(b) Donate or cause to be donated to the UNIVERSITY the sum of TWENTY-NINE MILLION PESOS
(P29,000,000.00) for the construction of the buildings of the National Institutes of Biotechnology and
Applied Microbiology (BIOTECH) and the installation of their laboratories and their physical plants
and other facilities to enable them to commence operations.
2.2. In addition, the FOUNDATION shall, subject to the approval of the Board of Trustees of the
FOUNDATION, continue to support the activities of the RESEARCH COMPLEX by way of recurrent
additional grants and donations for specific research and development projects which may be mutually
agreed upon and, from time to time, additional grants and donations of such amounts as may be necessary
to provide the RESEARCH COMPLEX and/or any of its Research Institutes with operational flexibility
especially with regard to incentives to staff purchase of equipment/facilities, travel abroad, recruitment of
local and expatriate staff and such
6
other activities and inputs which are difficult to obtain under usual
government rules and regulations.
_______________
6 Rollo, p. 65.
474
474 SUPREME COURT

REPORTS
ANNOTATED
University of the
Industries, Inc.
7
The Board of Regents of the UP approved the MOA on November 25, 1982.
In the meantime, Navasero promised to submit the contract for the installation of laboratory
furniture to BIOTECH, by January 12, 1983. However, Navasero failed to do so. In a Letter dated
February 1, 1983, BIOTECH reminded Navasero of the need to 8
submit the contract so that it
could be submitted to FEMF for its evaluation and approval. Instead of submitting the said
contract, PHILAB submitted to BIOTECH an accomplishment9
report on the project as of
February 28, 1983, and requested payment thereon. By May 1983, PHILAB had completed 78%
of the project, amounting to P2,288,573.74 out of the total cost of P2,934,068.90. The FEMF had
already paid forty percent (40%) of the total cost of the project.
10
On May 12, 1983, Padolina wrote
Lirio and furnished him the progress billing from PHILAB. On August 11, 1983, the FEMF
made another partial payment of P836,119.52 representing the already delivered laboratory and
office furniture after the requisite inspection and verification thereof by representatives from the
BIOTECH, FEMF, and PHILAB. The payment was made in the11 form of a check, for which
PHILAB issued Official Receipt No. 202 to FEMF through Padolina.
On July 1, 1984, PHILAB submitted to BIOTECH Invoice No. 01643 in the amount of
P702,939.40 for the final payment of laboratory furniture. Representatives from BIOTECH,
PHILAB, and Lirio for the FEMF, conducted a verification of the accomplishment of the work and
confirmed the same. BIOTECH forwarded the invoice to Lirio on December 18, 1984 for its
12
payment. Lirio, in turn, forwarded the invoice to Gapud, presumably
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12
payment. Lirio, in turn, forwarded the invoice to Gapud, presumably sometime in the early part
of 1985. How-
_______________
7 Exhibit “24”.
8 Exhibit “2”.
9 Exhibit “3”.
10 Exhibit “4”.
11 Rollo, p. 109.
12 Ibid.
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SEPTEMBER 29,
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University of the
Industries, Inc.
ever, the FEMF failed

13
to pay the bill. PHILAB reiterated its request for payment through a letter
on May 9, 1985. 14
BIO-TECH again wrote Lirio on March 21, 1985, requesting the payment of
PHILAB’s bill. It sent another 15
letter to Gapud, on November 22, 1985, again appealing for the
payment of PHILAB’s bill. In a Letter to BIOTECH dated December 16
5, 1985, PHILAB requested
payment of P702,939.40 plus interest thereon of P224,940.61. There was, however, no response
from the FEMF. On February 24,17 1986, PHILAB wrote BIO-TECH, appealing for the payment of
its bill even on installment basis.
President Marcos was ousted from office during the February 1986 EDSA Revolution. On
March 26, 1986, Navasero wrote BIOTECH requesting for its much-needed assistance for the
payment of the balance 18
already due plus interest of P295,234.55 for its fabrication and supply of
laboratory furni-ture.
On April 22, 1986, PHILAB wrote President 19
Corazon C. Aquino asking her help to secure the
payment of the amount due from the FEMF. The letter was referred to then Budget Minister
Alberto Romulo, who referred the letter to then UP President Edgardo Angara on June 9, 1986.
On September 30, 1986, Raul P. De Guzman, the Chancellor of UP Los Baños, wrote then
Chairman of the Presidential Commission on Good Government (PCGG) Jovito Salonga,
submitting PHILAB’s claim to be officially 20
entered as “accounts payable” as soon as the assets of
FEMF were liquidated by the PCGG.
_______________
13 Exhibit “8”.
14 Exhibit “7”.
15 Exhibit “9”.
16 Exhibit “10”.
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REPORTS
ANNOTATED
University of the
Industries, Inc.
In the meantime, 21
the PCGG wrote UP requesting for a copy of the relevant contract and the MOA
for its perusal.
Chancellor De Guzman wrote Navasero requesting for a copy of the contract executed between
PHILAB and FEMF. In a Letter dated October 20, 1987, Navasero informed De Guzman that
PHILAB and FEMF did not execute any contract regarding the fabrication and delivery of
laboratory furniture to BIOTECH.
Exasperated, PHILAB filed a complaint for sum of money and damages against UP. In the
complaint, PHILAB prayed that it be paid the following:
(1) PESOS: SEVEN HUNDRED TWO THOUSAND NINE HUNDRED THIRTY NINE &
40/100 (P702,939.40) plus an additional amount (as shall be determined during the
hearing) to cover the actual cost of money which at the time of transaction the value of
the peso was eleven to a dollar (P11.00:$1) and twenty seven (27%) percent interest on
the total amount from August 1982 until fully paid;
(2) PESOS: ONE HUNDRED THOUSAND (P100,000.00) exemplary damages;
(3) FIFTY THOUSAND [PESOS] (P50,000.00) as and for attorney’s fees; and
22
(4) Cost of suit.
PHILAB alleged, inter alia, that:

3. Sometime in August 1982, defendant, through its officials, particularly MR. WILLIAM PADOLINA,
Director, asked plaintiff to supply and install several laboratory furnitures and equipment at BIOTECH, a
research laboratory of herein defendant located at its campus in College, Laguna, for a total contract price of
PESOS: TWO MILLION NINE HUNDRED THIRTY-NINE THOUSAND FIFTY-EIGHT & 90/100
(P2,939,058.90);
4. After the completion of the delivery and installation of said laboratory furnitures and equipment at
defendant’s BIOTECH Laboratory, defendant paid three (3) times on installment basis:
_______________
22 Rollo, p. 45.
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SEPTEMBER 29,
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University of the
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a) 600,000.00 as per Official Receipt No. 253 dated August 24, 1982;
b) 800,000.00 as per Official Receipt No. 256 dated October 22, 1982;
c) 836,119.52 as per Official Receipt No. 202 dated August 11, 1983;
thus leaving a balance of PESOS: SEVEN HUNDRED TWO THOUSAND NINE HUNDRED THIRTY-
NINE & 40/100 (P702,939.40).
5. That notwithstanding repeated demands for the past eight years, defendant arrogantly and
maliciously made plaintiff believe that it was going to pay the balance aforestated, that was why plaintiff’s
President and General Manager himself, HECTOR C. NAVASERO, personally went to and from UP Los
Baños to talk with defendant’s responsible officers in the hope of expecting payment, when, in truth and in
fact, defendant had no intention to pay whatsoever right from the start on a misplaced ground of
technicalities. Some of plaintiff’s demand letters since year 1983 up to the present are hereto attached as
Annexes “A”, “B”, “C”, “D”, “E”, “F”, “G”, and “H” hereof;
6. That by reason of defendant’s malicious, evil and unnecessary misrepresentations that it was going to
pay its obligation and asking plaintiff so many red tapes and requirements to submit, compliance of all of
which took plaintiff almost eight (8) years to finish, when, in truth and in fact, defendant had no intention to
pay, defendant should be ordered to pay plaintiff no less than PESOS: ONE HUNDRED THOUSAND
(P100,000.00) exemplary damages, so that other government institutions23
may be warned that they must not
unjustly enrich themselves at the expense of the people they serve.
In its answer, UP denied liability and alleged that PHILAB had no cause of action against it
because it was merely the donee/beneficiary of the laboratory furniture in the BIOTECH; and
that the FEMF, which funded the project, was liable to the PHILAB for the purchase price of the
laboratory
_______________
23 Id., at pp. 43-44.
478
478 SUPREME COURT

REPORTS
ANNOTATED
University of the
Industries, Inc.
furniture. UP specifically denied obliging itself to pay for the laboratory furniture supplied by
PHILAB.
After due proceedings, the trial court rendered judgment dismissing the complaint without
prejudice to PHILAB’s recourse against the FEMF. The falloof the decision reads:
“WHEREFORE, this case is hereby DISMISSED for lack of merit without prejudice to plaintiff’s recourse to
the assets of the Marcos
24
Foundation for the unpaid balance of P792,939.49.
“SO ORDERED.”
Undaunted, PHILAB appealed to the Court of Appeals (CA) alleging that the trial court erred in
finding that:
1. the contract for the supply and installation of subject laboratory furniture and equipment
was between PHILAB and the Marcos Foundation; and,
2. the Marcos Foundation, not the University25 of the Philippines, is liable to pay the
respondent the balance of the purchase price.
The CA reversed and set aside the decision of the RTC and held that there was never a contract
between FEMF and PHILAB. Consequently, PHILAB could not be bound by the MOA between
the FEMF and UP since it was never a party thereto. The appellate court ruled that, although
UP did not bind itself to pay for the laboratory furniture; nevertheless, it is liable to PHILAB
under the maxim: “No one should unjustly enrich himself at the expense of another.”
The Present Petition
Upon the denial of its motion for reconsideration of the appellate court’s decision, UP, now the
petitioner, filed its petition for review contending that:
_______________
24 Id., at p. 58.
25 Records, p. 52.
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SEPTEMBER 29,
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University of the
Industries, Inc.
I. THE COURT OF APPEALS ERRED WHEN IT FAILED TO APPLY THE LAW ON

CONTRACTS BETWEEN PHILAB AND THE MARCOS FOUNDATION.
II. THE COURT OF APPEALS ERRED IN APPLYING THE LEGAL PRINCIPLE OF
UNJUST ENRICHMENT WHEN IT HELD THAT 26THE UNIVERSITY, AND NOT THE
MARCOS FOUNDATION, IS LIABLE TO PHILAB.
Prefatorily, the doctrinal rule is that pure questions of facts may not be the subject of appeal by
certiorari under Rule 45 of the271997 Rules of Civil Procedure, as this mode of appeal is generally
restricted to questions of law. However, this rule is not absolute. The Court 28
may review the
factual findings of the CA should they be contrary to those of the trial court. Correspondingly,
this Court may review 29findings of facts when the judgment of the CA is premised on a
misapprehension of facts.
On the first assigned error, the petitioner argues that the CA overlooked the evidentiary effect
and substance of the corresponding letters and communications which support the statements of
the witnesses showing affirmatively that an implied contract of sale existed between PHILAB
and the FEMF. The petitioner furthermore asserts that no contract existed between it and the
respondent as it could not have entered into any agreement without the requisite public bidding
and a formal written contract.
The respondent, on the other hand, submits that the CA did not err in not applying the law on
contracts between the respondent and the FEMF. It, likewise, attests that it was
_______________
26 Rollo, p. 11.
27 MetropolitanBank and Trust Company v. Wong, 359 SCRA 608(2001).
28 Tando v. Court of Appeals, 372 SCRA 321 (2001).
29 Spouses Constante Firme and Azucena E. Firme v. Bukal Enterprises and Development Corporation, G.R. No.
146608, October 23, 2003, 414 SCRA 190.
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REPORTS
ANNOTATED
University of the
Industries, Inc.
never privy to the MOA entered into between the petitioner and the FEMF. The respondent adds
that what the FEMF donated was a sum of money equivalent to P29,000,000, and not the
laboratory equipment supplied by it to the petitioner. The respondent submits that the petitioner,
being the recipient of the laboratory furniture, should not enrich itself at the expense of the
respondent.
The petition is meritorious.
It bears stressing that the respondent’s cause of action is one for sum of money predicated on
the alleged promise of the petitioner to pay for the purchase price of the furniture, which, despite
demands, the petitioner failed to do. However, the respondent failed to prove that the petitioner
ever obliged itself to pay for the laboratory furniture supplied by it. Hence, the respondent is not
entitled to its claim against the petitioner.
There is no dispute that the respondent is not privy to the MOA executed by the petitioner and
FEMF; hence, it is not bound
30
by the said agreement. Contracts take effect only between the
parties and their assigns. A contract cannot be binding upon and cannot be enforced against one
who is 31not a party to it, even if he is aware of such contract and has acted with knowledge
thereof. Likewise admitted by the parties, is the fact that there was no written contract
executed by the petitioner, the respondent and FEMF relating to the fabrication and delivery of
office and laboratory furniture to the BIOTECH. Even the CA failed to specifically declare that
the petitioner and the respondent entered into a contract of sale over the said laboratory
furniture. The parties are in accord that the FEMF had remitted to the respondent partial
payments via checks drawn and issued by the FEMF to the respondent, through Padolina, in the
total amount of
_______________
30 Article 1311, New Civil Code.
31 Manila Port Services, Inc. v. Court of Appeals, 20 SCRA 1214(1967).
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University of the
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P2,288,573.74 out of the total cost of the project of P2,934,068.90 and that the respondent
received the said checks and issued receipts therefor to the FEMF. There is also no controversy
that the petitioner did not pay a single centavo for the said furniture delivered by the respondent
that the petitioner had been using ever since.
We agree with the petitioner that, based on the records, an implied-in-fact contract of sale was
entered into between the respondent and FEMF. A contract implied in fact is one implied from
facts and circumstances showing a mutual intention to contract. It arises where the intention of
the parties is not expressed, but an agreement in fact creating an obligation. It is a contract, the
existence and terms of which are manifested by conduct and not by direct or explicit words
between parties but is to be deduced from conduct of the parties, language used, or things done
by them, or other pertinent circumstances attending the transaction. To create contracts implied
in fact,
32
circumstances must warrant inference that one expected compensation and the other to
pay. An33implied-in-fact contract requires the parties’ intent to enter into a contract; it is a true
contract. The conduct of the parties is to be viewed as a34 reasonable man would view it, to
determine the existence or not of an implied-in-fact contract. The totality of the acts/conducts of
the parties must be considered to determine their intention. An implied-in-fact contract 35
will not
arise unless the meeting of minds is indicated by some intelligent conduct, act or sign.
In this case, the respondent was aware, from the time Padolina contacted it for the fabrication
and supply of the laboratory furniture until the go-signal was given to it to fabricate and deliver
the furniture to BIOTECH as beneficiary, that the FEMF was to pay for the same. Indeed,
Padolina asked the
_______________
32 17Corpus Juris Secundum, Contract, pp. 559-560.
33 G.T. Fogle & Co. v. United States, 135 F.2d 117 (1943).
34 Roebling v. Dillon, 288 F.2d 386 (1961).
35 Baltimore & O.R. Co. v. United States, 261 U.S. 592 (1923).
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REPORTS
ANNOTATED
University of the
Industries, Inc.
respondent to prepare the draft of the contract to be received by the FEMF prior to the execution
of the parties (the respondent and FEMF), but somehow, the respondent failed to prepare one.
The respondent knew that the petitioner was merely the donee-beneficiary of the laboratory
furniture and not the buyer; nor was it liable for the payment of the purchase price thereof. From
the inception, the FEMF paid for the bills and statement of accounts of the respondent, for which
the latter unconditionally issued receipts to and under the name of the FEMF. Indeed, witness
Lirio testified:
Q: Now, did you know,

Mr. Witness, if
PHILAB Industries
was aware that it was
the Marcos
Foundation who
would be paying for
this particular
transaction for the
completion of this
particular
transaction?
A: I think they are fully
aware.
Q: What is your basis for
saying so?
A: First, I think they
were appraised by Dr.
Padolina. Secondly,
there were occasions
during our inspection
in Los Baños, at the
installation site, there
were occasions, two or
three occasions, when
we met with Mr.
Navasero who is the
President, I think, or
manager of PHILAB,
and we appraised him
that it was really
between the
foundation and him to
which includes (sic)
the construction
company constructing
the building. He is
fully aware that it is
the foundation who
(sic) engaged them
and issued36the
payments.
The respondent, in its Letter dated March 26, 1986, informed the petitioner and sought its
assistance for the collection of the amount due from the FEMF:
Dear Dr. Padolina:
May we request for your much-needed assistance in the payment of the balance still due us
on the laboratory furniture we supplied and installed two years ago?
_______________
36 TSN, 17 August 1992, p. 14.
483
VOL. 439, 483

SEPTEMBER
29, 2004
University of the
Philippines vs.
Philab Industries,
Inc.
Business is still slow and we will appreciate having these funds as soon as possible to keep
up our operations. We look forward to hearing from you regarding this matter.
Very truly yours, 37

PHILAB INDUSTRIES, INC.
The respondent even wrote former President Aquino seeking her assistance for the payment of
the amount due, in which the respondent admitted it tried to collect from her predecessor,
namely, the former President Ferdinand E. Marcos:
YOUR EXCELLENCY:
At the instance of the national government, subject laboratory furnitures were supplied by our company to
the National Institute of Biotechnology & Applied Microbiology (BIOTECH), University of the Philippines,
Los Baños, Laguna, in 1984.
Out of the total contract price of PESOS: TWO MILLION NINE HUNDRED THIRTY-NINE
THOUSAND FIFTY-EIGHT & 90/100 (P2,939,058.90), the previous administration had so far paid us the
sum of P2,236,119.52 thus leaving a balance of PESOS: ONE MILLION FOUR HUNDRED TWELVE
THOUSAND SEVEN HUNDRED FORTY-EIGHT & 61/100 (P1,412.748.61) inclusive of interest of 24% per
annum and 30% exchange rate adjustment.
On several occasions, we have tried to collect this amount from your predecessor, the latest of which was
subject invoice (01643) we submitted to DR. W. PADOLINA, deputy director of BIOTECH. But this,
notwithstanding, our claim has remained unacted upon up to now. Copy of said invoice is hereto attached
for easy reference.
Now that your excellency is the head of our government, we sincerely hope that payment of this
obligation will
38
soon be made as this is one project the Republic of the Philippines has use of and derives
benefit from.
_______________
484
484 SUPREME COURT

REPORTS
ANNOTATED
University of the
Industries, Inc.
Admittedly, the respondent sent to the petitioner its bills and statements of accounts for the
payments of the laboratory furniture it delivered to the petitioner which the petitioner, through
Padolina, transmitted to the FEMF for its payment. However, the FEMF failed to pay the last
statement of account of the respondent because of the onset of the EDSA upheaval. It was only
when the respondent lost all hope of collecting its claim from the government and/or the PCGG
did it file the complaint against the petitioner for the collection of the payment of its last delivery
of laboratory furniture.
We reject the ruling of the CA holding the petitioner liable for the claim of the respondent
based on the maxim that no one should enrich itself at the expense of another.
Unjust enrichment claims do not lie simply because one party benefits from the efforts or
obligations of others, but instead it must be shown that a party 39
was unjustly enriched in the
sense that the term unjustly could mean illegally or unlawfully.
Moreover, to substantiate a claim for unjust enrichment, the claimant must unequivocally
prove that another party knowingly received something of value to which he was not entitled and
that the 40
state of affairs are such that it would be unjust for the person to keep the
benefit. Unjust enrichment is a term used to depict result or effect of failure to make
remuneration of or for property or benefits received under circumstances that give rise to legal or
equitable obligation to account for them;
41
to be entitled to remuneration, one must confer benefit
by mistake, fraud, coercion, or request. Unjust
_______________
39 Mon-Ray, Inc. v. Granite Re, Inc., 677 N.W.2d 434 (2004) citing First National Bank of St. Paul v. Ramier, 311 N.W.
2d 502, 504 (1981).
40 ServiceMaster of St. Cloud v. GAB Bus. Services, Inc., 544 N.W.2d 302, 306 (1996).
41 Callaway Golf Company v. Dunlop Slazenger Group Americas, Inc., 318 F.Supp.2d 216 (2004); Dinosaur Dev., Inc. v.
White, 216 Cal.App.3d 1310, 265 Cal.Rptr. 525 (1989).
485
VOL. 439, 485

SEPTEMBER 29,
2004
University of the
Industries, Inc.
enrichment is not itself a 42theory of reconvey. Rather, it is a prerequisite for the enforcement of
the doctrine of restitution.
Article 22 of the New Civil Code reads:
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. (Boldface supplied)
In order that accion in rem verso may prosper, the essential elements must be present: (1) that
the defendant has been enriched, (2) that the plaintiff has suffered a loss, (3) that the enrichment
of the defendant is without just or legal ground, and (4) that the
43
plaintiff has no other action
based on contract, quasi-contract, crime or quasi-delict.
An accion in rem verso is considered merely an auxiliary action, available only when there is
no other remedy on contract, quasi-contract, crime, and quasi-delict. If there is an obtainable
action under any other institution of positive44
law, that action must be resorted to, and the
principle of accion in rem verso will not lie.
The essential requisites for the application of Article 22 of the New Civil Code do not obtain in
this case. The respondent had a remedy against the FEMF via an action based on an implied-in-
fact contract with the FEMF for the payment of its claim. The petitioner legally acquired the
laboratory furniture
_______________
42 Reeves v. Alyeska Pipeline Service Company, 926 P.2d 1130 (1996).
43 Tolentino, Arturo M., Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. I, pp. 77;
In Albrecht v. Walter,572 N.W.2d 809 (1997), it was held that:
. . . (1) an enrichment; (2) an impoverishment; (3) some connection between enrichment and impoverishment; (4) the
absence of justification for enrichment and impoverishment; and (5) the absence of a remedy provided by law.
44 Id., at p. 82.
486
486 SUPREME COURT

REPORTS
ANNOTATED
University of the
Industries, Inc.
under the MOA with FEMF; hence, it is entitled to keep the laboratory furniture.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Decision of
the Court of Appeals is REVERSED AND SET ASIDE. The Decision of the Regional Trial Court,
Makati City, Branch 150, is REINSTATED. No costs.
SO ORDERED.
Puno (Chairman), Austria-Martinez and Tinga, JJ., concur.
Chico-Nazario, J., On Leave.
Petition granted, assailed decision reversed and set aside. That of the trial court reinstated.
Note.—Contract could not affect third persons because of the basic civil law principle of
relativity of contracts which provides that contract can only bind the parties who entered into it,
and it cannot favor or prejudice a third person, even if he is aware of such contract and has acted
with knowledge thereof. (Integrated Packaging Corp. vs. Court of Appeals, 333 SCRA 170 [2000])
——o0o——

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VOL. 439, 467

UNIVERSITY OF THE PHILIPPINES, petitioner, vs. PHILAB INDUSTRIES, INC., respondent.

to the fabrication and delivery of office and laboratory furniture to

VOL. 439, 469

470 SUPREME COURT

The facts are stated in the opinion of the Court.

The Facts of the Case

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472 SUPREME COURT

VOL. 439, 473

OBLIGATIONS OF THE FOUNDATION

474 SUPREME COURT

VOL. 439, 475

ever, the FEMF failed

476 SUPREME COURT

PHILAB alleged, inter alia, that:

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478 SUPREME COURT

The Present Petition

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I. THE COURT OF APPEALS ERRED WHEN IT FAILED TO APPLY THE LAW ON

146608, October 23, 2003, 414 SCRA 190.

480 SUPREME COURT

VOL. 439, 481

482 SUPREME COURT

Q: Now, did you know,

Dear Dr. Padolina:

VOL. 439, 483

Very truly yours, 37

484 SUPREME COURT

White, 216 Cal.App.3d 1310, 265 Cal.Rptr. 525 (1989).

VOL. 439, 485

486 SUPREME COURT

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