G.R. No. 187240.  October 15, 2014.

*
 
CARLOS A. LORIA, petitioner, vs. LUDOLFO P. MUÑOZ,
JR., respondent.

Remedial Law; Civil Procedure; Appeals; Petition for Review

on Certiorari; Under Section 1, Rule 45 of the Rules of Court, the
Supreme Court (SC) only entertains questions of law — questions
as to the applicable law given a set of facts — in a petition for
review on certiorari.—We first address Loria’s contention that
Muñoz failed to prove his initial receipt of P3,000,000.00. This is a
question of fact the trial and appellate courts have already
resolved. In a Rule 45 petition, we do not address questions of
fact, questions which require us to rule on “the truth or falsehood
of alleged facts.” Under Section 1, Rule 45 of the Rules of Court,
we only entertain questions of law — questions as to the
applicable law given a set of facts — in a petition for review on
certiorari: Section 1. Filing of petition with Supreme Court.—A
party desiring to appeal by certiorari from a judgment or final
order or resolution of the Court of Appeals, the Sandiganbayan,
the Regional Trial Court or other courts whenever authorized by
law, may file with the Supreme Court a verified petition for
review on certiorari. The petition shall raise only questions of law
which must be distinctly set forth. (Emphasis supplied) We may
review questions of fact in a Rule 45 petition: . . . (1) when the
findings are grounded entirely on speculations, surmises, or
conjectures; (2) when the inference made is manifestly mistaken,
absurd, or impossible; (3) when there is a grave abuse of
discretion; (4) when the judgment is based on misappreciation of
facts; (5) when the findings of fact are conflicting; (6) when in
making its findings, the

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*  SECOND DIVISION.

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398 SUPREME COURT REPORTS ANNOTATED

Loria vs. Muñoz, Jr.
  
 

same are contrary to the admissions of both appellant and

appellee; (7) the findings are contrary to those of the trial court;
(8) when the findings are conclusions without citation of specific
evidence on which they are based; (9) the facts set forth in the
petition as well as in petitioner’s main and reply briefs are not
disputed by respondent; and (10) the findings of fact are premised
on the supposed absence of evidence and contradicted by the
evidence on record.
Civil Law; Unjust Enrichment; 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.”—
Under Article 22 of the Civil Code of the Philippines, “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.” 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.” The principle of
unjust enrichment has two conditions. First, a person must have
been benefited without a real or valid basis or justification.
Second, the benefit was derived at another person’s expense or
damage.
Government Infrastructure Contracts; Presidential Decree No.
1594; Subcontracting; Under Section 6 of the Presidential Decree
(PD) No. 1594, a contractor shall not subcontract a part or interest
in a government infrastructure project without the approval of the
relevant department secretary; A subcontract, therefore, is void
only if not approved by the department secretary.—Under Section
6 of the Presidential Decree No. 1594, a contractor shall not
subcontract a part or interest in a government infrastructure
project without the approval of the relevant department secretary:
Section 6. Assignment and Contract.—The contractor shall not
assign, transfer, pledge, subcontract or make any other
disposition of the contract or any part or interest therein except
with the approval of the Minister of Public Works, Transportation
and Communications, the Minister of Public Highways, or the
Minister of Energy, as the case may be. Approval of the
subcontract shall not relieve the main contractor from any
liability or obligation under his contract with the Government nor
shall it create any contractual relation between the sub

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Loria vs. Muñoz, Jr.

 
 

contractor and the Government. A subcontract, therefore, is

void only if not approved by the department secretary.
Civil Law; Contracts; Illegal Contracts; Generally, parties to
an illegal contract may not recover what they gave under the
contract.—Generally, parties to an illegal contract may not
recover what they gave under the contract. Under the doctrine of
in pari delicto, “no action arises, in equity or at law, from an
illegal contract[.] No suit can be maintained for its specific
performance, or to recover the property agreed to be sold or
delivered, or the money agreed to be paid, or damages for its
violation[.]” Nevertheless, this court allowed Tarnate, Jr. to
recover 10% of the retention fee. According to this court, “the
application of the doctrine of in pari delicto is not always rigid.”
An exception to the doctrine is “when its application contravenes
well-established public policy.” In Gonzalo v. Tarnate, Jr., 713
SCRA 224 (2014), this court ruled that “the prevention of unjust
enrichment is a recognized public policy of the State.” It is,
therefore, an exception to the application of the in pari delicto
doctrine.

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.
 Batocabe & Associates Law Office for petitioner.
  Joventino S. Sardana for respondent.

 
LEONEN,  J.:
 
No person should unjustly enrich himself or herself at
the expense of another.
This is a petition for review on certiorari1 to set aside
the Court of Appeals’ decision2 and resolution3 in C.A.-G.R.
CV

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1  Rollo, pp. 3-33.

2  Id., at pp. 34-45. This decision is dated October 23, 2009. Associate
Justice Arcangelita M. Romilla­-Lontok penned the decision, with
Associate Justices Mariano C. Del Castillo (now a Justice of this court)
and Romeo F. Barza, concurring.
 400

400 SUPREME COURT REPORTS ANNOTATED

Loria vs. Muñoz, Jr.

 
 
No. 81882. The Court of Appeals ordered petitioner
Carlos A. Loria to pay respondent Ludolfo P. Muñoz, Jr.
P2,000,000.00 in actual damages with 12% interest per
year from the filing of the complaint until full payment.4
The facts of this case are as follows:
Ludolfo P. Muñoz, Jr. (Muñoz) filed a complaint for sum
of money and damages with an application for issuance of a
writ of preliminary attachment against Carlos A. Loria
(Loria) with the Regional Trial Court of Legazpi City.5
In his complaint, Muñoz alleged that he has been
engaged in construction under the name, “Ludolfo P.
Muñoz, Jr. Construction.” In August 2000, Loria visited
Muñoz in his office in Doña Maria Subdivision in Daraga,
Albay. He invited
Muñoz to advance
P2,000,000.00 for a subcontract of a
P50,000,000.00 river-dredging project in Guinobatan.6
Loria represented that he would make arrangements
such that Elizaldy Co, owner of Sunwest Construction and
Development Corporation, would turn out to be the lowest
bidder for the project. Elizaldy Co would pay P8,000,000.00
to ensure the project’s award to Sunwest. After the award
to Sunwest, Sunwest would subcontract 20% or
P10,000,000.00 worth of the project to Muñoz.7
Since Muñoz had known Loria for five years, Muñoz
accepted Loria’s proposal.8
On October 2, 2000, Muñoz requested Allied Bank to
release P3,000,000.00 from his joint account with his
business partner, Christopher Co, to a certain Grace delos
Santos

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3  Id., at p. 46.
4  Id., at p. 44.
5  Id., at p. 47.
6  Id., at pp. 35 and 51.
7  Id., at p. 35.
8  Id., at p. 51.

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(delos Santos). Loria then obtained the money from delos
Santos.9
Four days later, P1,800,000.00 of the P3,000,000.00 was
returned to Muñoz.10
On January 10, 2001, Loria collected Muñoz’s
P800,000.00 balance. After deducting Loria’s personal
loans from Muñoz, Muñoz issued a check to Loria for
P481,800.00. Loria acknowledged receiving this amount
from Muñoz.11
The project to dredge the Masarawag and San Francisco
Rivers in Guinobatan was subjected to public bidding. The
project was awarded to the lowest bidder, Sunwest
Construction and Development Corporation.12
Sunwest allegedly finished dredging the Masarawag and
San Francisco Rivers without subcontracting Muñoz.13
With the project allegedly finished, Muñoz demanded Loria
to return his P2,000,000.00. Loria, however, did not return
the money.14
Muñoz first charged Loria and Elizaldy Co with estafa.
This criminal case was dismissed by the Municipal Trial
Court of Daraga, Albay for lack of probable cause.15
Muñoz then filed the complaint for sum of money. The
case was raffled to Branch 6 and presided by Judge
Vladimir B. Brusola.16
Loria answered Muñoz’s complaint. He admitted
receiving P481,800.00 from Muñoz but argued that the
complaint did not state a cause of action against him.
According to Loria, he

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9  Id.
10  Id., at pp. 35-51.
11  Id.
12  Id., at p. 51.
13  Id.
14  Id., at pp. 11 and 51.
15  Id.
16  Id., at pp. 11 and 52.

402

402 SUPREME COURT REPORTS ANNOTATED

 Loria vs. Muñoz, Jr.

 
 
followed up the project’s approval with the Central
Office of the Department of Public Works and Highways as
the parties agreed upon. He was, therefore, entitled to his
representation expenses.17
Loria also argued that Muñoz was guilty of forum
shopping. Muñoz first filed a criminal complaint for estafa
against him and Elizaldy Co, which complaint the
Municipal Trial Court of Daraga, Albay dismissed. The
subsequently filed complaint for sum of money, allegedly a
complaint to recover the civil aspect of the estafa case,
must, therefore, be dismissed as argued by Loria.18
During pretrial, the parties agreed to litigate the sole
issue of whether Loria is liable to Muñoz for
P2,000,000.00.19
According to the trial court, Muñoz established with
preponderant evidence that Loria received P2,000,000.00
from Muñoz for a subcontract of the river-dredging project.
Since no part of the project was subcontracted to Muñoz,
Loria must return the P2,000,000.00 he received, or he
would be “unduly enriching himself at the expense of
[Muñoz].”20
On the claim of forum shopping, the trial court ruled
that Loria’s obligation to return the P2,000,000.00 did not
arise from criminal liability. Muñoz may, therefore, file a
civil action to recover his P2,000,000.00.21
As to the prayer for issuance of a writ of preliminary
attachment, the trial court denied the prayer for lack of
sufficient basis.22

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17  Id., at p. 49.
18  Id.
19  Id., at p. 50.
20  Id., at p. 52.
21  Id., at pp. 52-53.
22  Id., at p. 53.

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Loria vs. Muñoz, Jr.
  
 
Thus, in the decision23 dated January 30, 2004, the trial
court ordered Loria to return the P2,000,000.00 to Muñoz
as actual damages with 12% interest from the filing of the
complaint until the amount’s full payment. The trial court
likewise ordered Loria to pay Muñoz P100,000.00 in
attorney’s fees, P25,000.00 in litigation expenses, and
P25,000.00 in exemplary damages with costs against
Loria.24
Loria appealed to the Court of Appeals, arguing that
Muñoz failed to establish his receipt of the P2,000,000.00.
Specifically, Muñoz failed to establish that he obtained
P3,000,000.00 from a certain Grace delos Santos. Loria also
appealed the award of attorney’s fees, litigation expenses,
and exemplary damages for having no basis in fact and in
law.25
The Court of Appeals sustained the trial court’s factual
findings. In ruling that Loria received the net amount of
P2,000,000.00 from Muñoz, the Court of Appeals referred
to Muñoz’s testimony that he ordered Allied Bank to
release P3,000,000.00 from his joint account with
Christopher Co to a certain Grace delos Santos.26 Loria
then obtained the money from delos Santos and confirmed
with Muñoz his receipt of the money.27 This testimony,
according to the appellate court, was supported by Exhibit
“C,” a check voucher the trial court admitted in evidence.
Loria signed this check voucher and acknowledged
receiving P1,200,000.00 on October 2, 2000 and
P800,000.00 on January 10, 2001, or a total of
P2,000,000.00.28
Considering that Muñoz did not benefit from paying
Loria P2,000,000.00, the appellate court ruled that Loria
must return the money to Muñoz under the principle of
unjust enrichment.29

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23  Id.
24  Id.
25  Id., at p. 37.
26  Id., at pp. 39-40.
27  Id., at p. 40.
28  Id.
29  Id., at pp. 43-44.

404
404 SUPREME COURT REPORTS ANNOTATED
Loria vs. Muñoz, Jr.

 
 
The appellate court, however, ruled that Muñoz failed to
show his right to exemplary damages and attorney’s fees.30
Thus, in the decision31 dated October 23, 2008, the Court
of Appeals affirmed the trial court’s decision but deleted
the award of exemplary damages and attorney’s fees.32 The
appellate court likewise denied Loria’s motion for
reconsideration in the resolution33 dated March 12, 2009.
Loria filed a petition for review on certiorari34 with this
court, arguing that the principle of unjust enrichment does
not apply in this case. As the trial and appellate courts
found, Muñoz paid Loria P2,000,000.00 for a subcontract of
a government project. The parties’ agreement, therefore,
was void for being contrary to law, specifically, the Anti-
Graft and Corrupt Practices Act, the Revised Penal Code,
and Section 6 of Presidential Decree No. 1594. The
agreement was likewise contrary to the public policy of
public or open competitive bidding of government
contracts.35
Since the parties’ agreement was void, Loria argues that
the parties were in pari delicto, and Muñoz should not be
allowed to recover the money he gave under the contract.36
On the finding that he received a net amount of
P2,000,000.00 from Muñoz, Loria maintains that Muñoz
failed to prove his receipt of P3,000,000.00 through a
certain Grace delos Santos.37
In the resolution38 dated June 3, 2009, this court
ordered Muñoz to comment on Loria’s petition.

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30  Id., at p. 44.
31  Id., at pp. 34-45.
32  Id., at p. 45.
33  Id., at p. 46.
34  Id., at pp. 3-33.
35  Id., at pp. 13-21.
36  Id., at pp. 21-26.
37  Id., at pp. 26-28.
38  Id., at p. 54.

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In his comment,39 Muñoz argues that Loria’s petition
raises questions of fact and law that the trial and appellate
courts have already passed upon and resolved in his favor.
He prays that this court deny Loria’s petition for raising
questions of fact.
Loria replied40 to the comment, arguing that he raised
only questions of law in his petition.41 Even assuming that
he raised questions of fact, Loria argues that this does not
warrant the automatic dismissal of his petition since the
trial and appellate courts allegedly erred in ruling for
Muñoz.42
On October 8, 2010, the parties filed their joint motion
to render judgment based on the compromise agreement.43
In their compromise agreement,44 the parties declared that
this case “was a product of a mere misunderstanding.”45 To
amicably settle their dispute, the parties agreed to waive
all their claims, rights, and interests against each other.46
This court denied the joint motion for lack of merit in
the resolution47 dated December 15, 2010.
The issues for our resolution are the following:
I. Whether Loria initially obtained P3,000,000.00 from a
certain Grace delos Santos.
II. Whether Loria is liable for P2,000,000.00 to Muñoz.
We rule for Muñoz and deny Loria’s petition for review
on certiorari.

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39  Id., at pp. 62-64.

40  Id., at pp. 81-86.
41  Id., at p. 82.
42  Id., at pp. 82-84.
43  Id., at pp. 90-91.
44  Id., at pp. 92-95.
45  Id., at p. 93.
46  Id.
47  Id., at p. 96.

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406 SUPREME COURT REPORTS ANNOTATED

Loria vs. Muñoz, Jr.
  
 
I
 
Whether Loria initially received P3,000,000.00 is a
question of fact not proper in a petition for review on
certiorari
 
We first address Loria’s contention that Muñoz failed to
prove his initial receipt of P3,000,000.00. This is a question
of fact the trial and appellate courts have already resolved.
In a Rule 45 petition, we do not address questions of fact,
questions which require us to rule on “the truth or
falsehood of alleged facts.”48 Under Section 1, Rule 45 of
the Rules of Court, we only entertain questions of law —
questions as to the applicable law given a set of facts49 —
in a petition for review on certiorari:

Section  1.  Filing of petition with Supreme Court.—

A party desiring to appeal by certiorari from a judgment or
final order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other courts
whenever authorized by law, may file with the Supreme Court a
verified petition for review on certiorari. The petition shall raise
only questions of law which must be distinctly set forth.
(Emphasis supplied)50

We may review questions of fact in a Rule 45 petition:

. . . (1)  when the findings are grounded entirely on

speculations, surmises, or conjectures; (2) when the inference
made is manifestly mistaken, absurd, or impossi-

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48  Century Iron Works, Inc. v. Bañas, G.R. No. 184116, June 19, 2013,
699 SCRA 157, 166 [Per J. Brion, Second Division].
49  Id.
50  Rules of Court, Rule 45, Sec. 1.

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Loria vs. Muñoz, Jr.

 
 
ble; (3) when there is a grave abuse of discretion; (4) when the
judgment is based on misappreciation of facts; (5) when the
findings of fact are conflicting; (6) when in making its findings,
the same are contrary to the admissions of both appellant and
appellee; (7) the findings are contrary to those of the trial court;
(8) when the findings are conclusions without citation of specific
evidence on which they are based; (9) the facts set forth in the
petition as well as in petitioner’s main and reply briefs are not
disputed by respondent; and (10) the findings of fact are premised
on the supposed absence of evidence and contradicted by the
evidence on record.51 [Emphases omitted]

 
Loria failed to convince us why we should make an
exception in this case.
During trial, Muñoz testified that he ordered Allied
Bank to release P3,000,000.00 from his joint account with
Christopher Co to a certain Grace delos Santos.52 Loria
then obtained the money from delos Santos and confirmed
with Muñoz his receipt of the amount.53 P1,800,000.00 was
subsequently returned to Muñoz, leaving a P1,200,000.00
balance with Loria. This testimony was supported by
Exhibit “C,” the check voucher where Loria acknowledged
receiving P1,200,000.00 from Muñoz.54
We agree that these pieces of evidence duly prove Loria’s
initial receipt of P3,000,000.00. We will not disturb this
finding.

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51   Macasero v. Southern Industrial Gases Philippines, 597 Phil. 494,

498-499; 577 SCRA 500, 504 (2009) [Per J. Carpio-Morales, Second
Division], citing Uy v. Villanueva, 553 Phil. 69, 79; 526 SCRA 73, 83-84
(2007) [Per J. Nachura, Third Division].
52  Rollo, p. 38.
53  Id., at pp. 39-40.
54  Id., at p. 40.

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408 SUPREME COURT REPORTS ANNOTATED

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II
Loria must return Munoz’s P2,000,000.00 under the
principle of unjust enrichment
  
Under Article 22 of the Civil Code of the Philippines,
“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.”
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.”55
The principle of unjust enrichment has two conditions.
First, a person must have been benefited without a real or
valid basis or justification. Second, the benefit was derived
at another person’s expense or damage.56
In this case, Loria received P2,000,000.00 from Muñoz
for a subcontract of a government project to dredge the
Masarawag and San Francisco Rivers in Guinobatan,
Albay. However, contrary to the parties’ agreement, Muñoz
was not subcon-

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55  Locsin II v. Mekeni Food Corporation, G.R. No. 192105, December 9,

2013, 711 SCRA 658 <http://sc.judiciary.gov.ph/pdf/web/viewer.html?
file=/jurisprudence/2013/december2013/192105.pdf> [Per J. Del Castillo,
Second Division]; Elegir v. Philippine Airlines, Inc., G.R. No. 181995, July
16, 2012, 676 SCRA 463, 484 [Per J. Reyes, Second Division].
56   Locsin II v. Mekeni Food Corporation, id.; Elegir v. Philippine
Airlines, Inc., id.; Privatization and Management Office v. Legaspi Towers
300, Inc., 611 Phil. 16, 28; 593 SCRA 382, 395 (2009) [Per J. Peralta,
Third Division]; Tamio v. Ticson, 485 Phil. 434, 443; 443 SCRA 44, 53
(2004) [Per J. Panganiban, Third Division]; H.L. Carlos Construction, Inc.
v. Marina Properties Corp., 466 Phil. 182, 197; 421 SCRA 428, 437 (2004)
[Per J. Panganiban, First Division].

409

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tracted for the project. Nevertheless, Loria retained the
P2,000,000.00.
Thus, Loria was unjustly enriched. He retained Muñoz’s
money without valid basis or justification. Under Article 22
of the Civil Code of the Philippines, Loria must return the
P2,000,000.00 to Muñoz.
Contrary to Loria’s claim, Section 6 of the Presidential
Decree No. 1594 does not prevent Muñoz from recovering
his money.
Under Section 6 of the Presidential Decree No. 1594,57 a
contractor shall not subcontract a part or interest in a
government infrastructure project without the approval of
the relevant department secretary:

Section  6.  Assignment and Contract.—The contractor shall

not assign, transfer, pledge, subcontract or make any other
disposition of the contract or any part or interest therein except
with the approval of the Minister of Public Works, Transportation
and Communications, the Minister of Public Highways, or the
Minister of Energy, as the case may be. Approval of the
subcontract shall not relieve the main contractor from any
liability or obligation under his contract with the Government nor
shall it create any contractual relation between the subcontractor
and the Government.

 
A subcontract, therefore, is void only if not approved by
the department secretary.
In this case, it is premature to rule on the legality of the
parties’ agreement precisely because the subcontract did
not push through. No actual agreement was proven in
evidence. The Secretary of Public Works and Highways
could have

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57   Pres. Decree No. 1594 (1978), Prescribing Policies, Guidelines,

Rules and Regulations for Government Infrastructure Contracts.

410

410 SUPREME COURT REPORTS ANNOTATED

Loria vs. Muñoz, Jr.

 
 
approved the subcontract, which is allowed under
Section 6 of the Presidential Decree No. 1594.
At any rate, even assuming that there was a
subcontracting arrangement between Sunwest
Construction and Development Corporation and Muñoz,
this court has allowed recovery under a void subcontract as
an exception to the in pari delicto doctrine.
In Gonzalo v. Tarnate, Jr.,58 the Department of Public
Works and Highways (DPWH) awarded the contract to
Dominador Gonzalo to improve the Sadsadan-Maba-ay
section of the Mountain Province Road. Gonzalo then
subcontracted the supply of materials and labor to John
Tarnate, Jr. without the approval of the Secretary of Public
Works and Highways. The parties agreed to a total
subcontract fee of 12% of the project’s contract price.59
Tarnate, Jr. also rented equipment to Gonzalo. In a deed
of assignment, the parties agreed to a retention fee of 10%
of Gonzalo’s total collection from the Department of Public
Works and Highways, or P233,526.13, as rent for the
equipment. They then submitted the deed of assignment to
the Department for approval.60
Subsequently, Tarnate, Jr. learned that Gonzalo filed
with the Department of Public Works and Highways an
affidavit to unilaterally cancel the deed of assignment.
Gonzalo also collected the retention fee from the
Department.61
Tarnate, Jr. demanded payment for the rent of the
equipment, but Gonzalo ignored his demand. He then filed
a complaint for sum of money and damages with the
Regional Trial

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58   G.R. No. 160600, January 15, 2014, 713 SCRA 224

<http://sc.judiciary.gov.ph/pdf/web/viewer.html?file=/jurisprudence/2014/

january2014/160600.pdf> [Per J. Bersamin, First Division].

59  Id., at p. 226.
60  Id.
61  Id.

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Court of Mountain Province to collect on the 10%
retention fee.62
In his defense, Gonzalo argued that the subcontract was
void for being contrary to law, specifically, Section 6 of the
Presidential Decree No. 1594. Since the deed of assignment
“was a mere product of the subcontract,”63 the deed of
assignment was likewise void. With Tarnate, Jr. “fully
aware of the illegality and ineffectuality of the deed of
assignment,”64 Gonzalo contended that Tarnate, Jr. could
not collect on the retention fee under the principle of in
pari delicto.65
This court ruled that the subcontract was void for being
contrary to law. Under Section 6 of the Presidential Decree
No. 1594, a contractor shall not subcontract the
implementation of a government infrastructure project
without the approval of the relevant department
secretary.66 Since Gonzalo subcontracted the project to
Tarnate, Jr. without the approval of the Secretary of Public
Works and Highways, the subcontract was void, including
the deed of assignment, which “sprung from the
subcontract.”67
Generally, parties to an illegal contract may not recover
what they gave under the contract.68 Under the doctrine of
in pari delicto, “no action arises, in equity or at law, from
an

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62  Id.
63  Id.
64  Id.
65  Id.
66  Id., at p. 231.
67  Id.
68  Civil Code, Art. 1412(1) provides:
Art.   1412.  If the act in which the unlawful or forbidden cause
consists does not constitute a criminal offense, the following rules shall be
observed:
(1)  When the fault is on the part of both contracting parties, neither
may recover what he has given by virtue of the contract, or demand the
performance of the other’s undertaking[.]

412

412 SUPREME COURT REPORTS ANNOTATED

Loria vs. Muñoz, Jr.

 
 
illegal contract[.] No suit can be maintained for its
specific performance, or to recover the property agreed to
be sold or delivered, or the money agreed to be paid, or
damages for its violation[.]”69
 Nevertheless, this court allowed Tarnate, Jr. to recover
10% of the retention fee. According to this court, “the
application of the doctrine of in pari delicto is not always
rigid.”70 An exception to the doctrine is “when its
application contravenes well-established public policy.”71 In
Gonzalo, this court ruled that “the prevention of unjust
enrichment is a recognized public policy of the State.”72 It
is, therefore, an exception to the application of the in pari
delicto doctrine. This court explained:

. . . the application of the doctrine of in pari delicto is not

always rigid. An accepted exception arises when its application
contravenes well-established public policy. In this jurisdiction,
public policy has been defined as “that principle of the law which
holds that no subject or citizen can lawfully do that which has a
tendency to be injurious to the public or against the public good.”
Unjust enrichment exists, according to Hulst v. PR Builders, Inc.,
“when a person unjustly retains a benefit at the loss of another, or
when a person retains money or property of another against the
fundamental principles of justice, equity and good conscience.”
The prevention of unjust enrichment is a recognized public policy
of the State, for Article 22 of the Civil Code explicitly provides
that “[e]very 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.” It

_______________

69  Supra note 58.

70  Id., at p. 233.
71   Id., citing Pajuyo v. Court of Appeals, G.R. No. 146364, June 3,
2004, 430 SCRA 492, 515 [Per J. Carpio, First Division].
72  Id.

413

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Loria vs. Muñoz, Jr.

 
 

is well to note that Article 22 “is part of the chapter of the Civil
Code on Human Relations, the provisions of which were
formulated as basic principles to be observed for the rightful
relationship between human beings and for the stability of the
social order; designed to indicate certain norms that spring from
the fountain of good conscience; guides for human conduct that
should run as golden threads through society to the end that law
may approach its supreme ideal which is the sway and dominance
of justice.”73 (Citations omitted)

 
Given that Tarnate, Jr. performed his obligations under
the subcontract and the deed of assignment, this court
ruled that he was entitled to the agreed fee. According to
this court, Gonzalo “would be unjustly enriched at the
expense of Tarnate if the latter was to be barred from
recovering because of the rigid application of the doctrine of
in pari delicto.”74
In this case, both the trial and appellate courts found
that Loria received P2,000,000.00 from Muñoz for a
subcontract of the river-dredging project. Loria never
denied that he failed to fulfill his agreement with Muñoz.
Throughout the case’s proceedings, Loria failed to justify
why he has the right to retain Muñoz’s P2,000,000.00. As
the Court of Appeals ruled, “it was not shown that [Muñoz]
benefited from the delivery of the amount of P2,000,000.00
to [Loria].”75
Loria, therefore, is retaining the P2,000,000.00 without
just or legal ground. This cannot be done. Under Article 22
of the Civil Code of the Philippines, he must return the
P2,000,000.00 to Muñoz.
This court notes the possible irregularities in these
transactions. At the very least, there appears to have been
an attempt to circumvent our procurement laws. If
petitioner indeed had the authority of Sunwest
Construction and Devel-

_______________

73  Id.
74  Id., at p. 234.
75  Rollo, p. 44.

414

414 SUPREME COURT REPORTS ANNOTATED

Loria vs. Muñoz, Jr.

 
 
opment Corporation, it is strange that Loria could have
guaranteed a bidding result. If he did not have any true
dealing with Sunwest Construction, then his is an
elaborate scheme to cause financiers to lose their hard-
earned money for nothing.
WHEREFORE, the petition for review on certiorari is
DENIED. The Court of Appeals’ decision and resolution in
C.A.-G.R. CV No. 81882 are AFFIRMED with
MODIFICATION as to interest rate. Petitioner Carlos A.
Loria shall pay respondent Ludolfo P. Muñoz, Jr.
P2,000,000.00 in actual damages, with interest of 12%
interest per annum from the filing of the complaint until
June 30, 2013, and 6% interest per annum from July 1,
2013 until full payment.76
Let a copy of this decision be SERVED on the Office of
the Ombudsman and the Department of Justice for their
appropriate actions.
SO ORDERED.

Carpio (Chairperson), Mendoza, Reyes** and Perlas-

Bernabe,*** JJ., concur.

Petition denied, judgment and resolution affirmed with

modification.

Notes.—The principle of unjust enrichment requires

two conditions: (1) that a person is benefited without a
valid basis or justification, and (2) that such benefit is
derived at the expense of another. (Flores vs. Lindo, Jr.,
648 SCRA 772 [2011])

_______________

76   Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013, 703
SCRA 439, 456 [Per J. Peralta, En Banc].
* * Designated acting member per Special Order No. 1844 dated
October 14, 2014.
* ** Designated additional member per Raffle dated October 13, 2014.

415

VOL. 738, OCTOBER 15, 2014 415

Loria vs. Muñoz, Jr.

 
 

Under the civil law principle of unjust enrichment, the

registered owner of the motor vehicle has a right to be
indemnified by the actual employer of the driver of the
amount that he may be required to pay as damages for the
 injury caused to another. (Filcar Transport Services vs.
Espinas, 674 SCRA 117 [2012])
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