2. Solutio Indebiti

B. Solutio Indebiti (Civil Code, arts. 2154-2163)

Civil Code, arts. 2154-2163

ECTION 2

Solutio Indebiti

Article 2154. 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. (1895)

Article 2155. 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. (n)

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

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

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

Article 2159. 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. (1896a)

Article 2160. 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. (1897)

Article 2161. 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. (1898)

Article 2162. 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. (1899)

Article 2163. 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. (1901)

When something is received when there is no right to demand it, and it was unduly delivered through mistake. The recipient has the duty to return it. (Art. 2154, NCC)

2. Solutio Indebiti

a. Distinction from Accion in Rem Verso b. Mistake of law as basis for solutio indebiti c. Significance of good faith on the part of the payee

Indispensable Requisites of the Juridical Relation of Solutio Indebiti

• He who paid was not under obligation to do so; and
• The payment was made through mistake, which may include a mistake in the construction or application of a doubtful or difficult question of law. (Civil Code, Arts. 2154–2155) (City of Cebu v. Piccio and Caballero L-13012 and 14876, 31 Dec. 1960)

A Creditor-Debtor Relationship is Created Under a Quasi-Contract

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. The quasi-contract of solutio indebiti harks back to the ancient principle that no one shall enrich himself unjustly at the expense of another. (Sta. Maria, 2017, citing Sebastian Siga-An v. Alicia Villanueva, G.R. No. 173227, 19 Jan. 2009)

Contract vs. Quasi-Contract

Q: DPRC and MIAA entered into a Contract of Lease whereby the DPRC leased from the MIAA a parcel of land and the building thereon located at Domestic Road, Pasay City. MIAA passed a Resolution No. 98-30 increasing the rentals. DPRC initially refused to pay the increased rentals which was decreed without prior notice and hearing. DPRC paid in protest. The Court promulgated its Decision in the case of MIAA v. Airspan Corporation, et al, where it nullified resolutions issued by MIAA for non-observance of the notice and hearing requirements for the fixing rates required by the Administrative Code. DPRC sought the refund of its overpaid monthly rentals under protest. The RTC ruled in favor of DPRC. The CA ruled that some of the overpaid monthly rentals have prescribed because overpaid monthly rentals was in the nature of a quasi-contract of solutio indebiti; hence, the claim of refund must be commenced within 6 years from date of payment under the Civil Code. Is the CA correct?

A: NO. To establish the application of solutio indebiti in a given situation, two conditions must concur: (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. Here, there exists a binding relation between DPRC and MIAA, as both of them are mutually bound to each other under a Contract of Lease. Thus, the cause of action of petitioner DPRC is based on the violation of a contractual stipulation in the parties' Contract of Lease, and not due to the existence of a quasi- contract. DPRC made the overpayments in monthly rentals not due to any mistake, error, or omission as to any factual matter surrounding the payment of rentals. Nor did DPRC make the overpayments due to any mistaken construction or application of a doubtful question of law. Instead, DPRC deliberately made the payments in accordance with respondent MIAA's resolutions, albeit under protest. Hence, the action based on a written contract must be brought within 10 years from the time the right of action accrues pursuant to Art. 1144 of the NCC, and not within 6 years for actions based on quasi- contract. (Domestic Petroleum Retailer Corp. v. MIAA, G.R. No. 210641, 27 Mar. 2019)

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

For example, A is indebted to B and C for P2,000. The obligation is of a solidary nature such that A can pay only to one of them the whole obligation, and the debt is considered paid as to both. Thus, if A pays B the amount of P2,000, the debt is considered paid. It is up to C to claim from B his share of the credit, which is P1,000. If A instead makes a payment that was not due to B and C as payees, their responsibility to return the undue payment is solidary under Article 2157. (Sta. Maria, 2017)

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

For example, A is obliged to pay B his obligation by giving B a watch. Despite the fact that the payment is not yet due, A gives B the watch which turns out to be stolen from X. At the time of his receipt of the watch, B has no obligation to ask A questions as to who owns the watch. However, if B later finds out that X really owns the watch, B must advise X that he (B) is in possession of his (X's) watch. X must claim the watch within one month from the advice. If X does not claim the watch, B is excused from all liability if, A, because of solutio indebiti, claims back the watch, and B gives back the watch to A. However, if at the time A gives the watch to B, the latter has reasonable grounds to believe that it has been acquired unlawfully, B can return the same to A. (Sta. Maria, 2017)

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 (Art. 2159)

Payment of an existing debt before it falls due is not, for that reason alone, an undue payment under Article 2154. A debtor who pays before the period arrives, unaware of the period or believing the obligation already due, may recover what was paid, with fruits and interests (Art. 1195). Article 2159 applies when a payee accepts an undue payment in bad faith.

Presumption that there is a Mistake in the Payment

It is presumed that there is 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, NCC)

A debtor who pays in solutio indebiti may recover what he has paid by mistake. However, the person to whom the payment has been made can show that such payment is a gift or a donation by showing the proper evidence like a valid deed of donation. (Sta. Maria, 2017)