University of the Philippines vs Philab Industries, Inc.

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University of the Philippines vs Philab Industries, Inc.
G.R. No. 152411
September 29, 2004

Facts:

This case is a petition for review on certiorari of the Decision of the Court of Appeals.

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.

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.

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, and 2) Fabrication and Supply of office furniture for the BIOTECH Building Project, and paying the downpayment of 50% or P286,687.50

Ten days after, Padolina informed Hector Navasero, the President of PHILAB, to proceed with the fabrication of the laboratory furniture, per the directive of FEMF Executive Assistant Lirio. 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 Board of Regents of the UP approved the MOA with Philab on November 25, 1982.
Later, President Marcos was ousted from office during the February 1986 EDSA Revolution. On April 22, 1986, PHILAB wrote President Corazon C. Aquino asking her help to secure the payment of the amount due from the FEMF. In the meantime, the PCGG wrote UP requesting for a copy of the relevant contract and the MOA for its perusal.

PHILAB filed a complaint for sum of money and damages against UP. In the complaint, PHILAB prayed that it be paid the following: (1) 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) P50,000.00 as and for attorney’s fees; and (3) Cost of suit.

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 furniture. UP specifically denied obliging itself to pay for the laboratory furniture supplied by PHILAB.

Issue:

Whether or not the Court of Appeals erred in applying the legal principle of unjust enrichment when it held that UP and not FEMF, is liable to Philab?

Held:

There is no dispute that the respondent is not privy to the MOA executed by the petitioner and 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. 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 Court of Appeals agreed with the petitioner that, based on the records, an implied-in-fact contract of sale was entered into between the Philab and FEMF.
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; to be entitled to remuneration, one must confer benefit by mistake, fraud, coercion, or request. Unjust enrichment is not itself a theory of reconvey. Rather, it is a prerequisite for the enforcement of the doctrine of restitution.

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 under the MOA with FEMF; hence, it is entitled to keep the laboratory furniture.

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 with no costs.