The Supreme Court ruled that while a final judgment generally cannot be altered, the principle of unjust enrichment allows for recovery when one party benefits unfairly at another’s expense. The Court balanced the need for finality in legal decisions with the equitable principle that no one should unjustly profit from another’s loss, especially in cases involving public services like power supply.

Fueling Inequity: Can Gratuitous Acts Be Reclaimed Under Unjust Enrichment?

This case revolves around a dispute between the National Power Corporation (NAPOCOR) and Delta P, Inc., an independent power producer. NAPOCOR supplied fuel to Delta P’s power plant to prevent a power shortage in Palawan. Later, NAPOCOR sought to debit Delta P’s account for these fuel costs, claiming unjust enrichment, but Delta P argued that the supply was gratuitous and the prior court decision on payments was final and immutable. The central legal question is whether NAPOCOR’s unilateral action to supply fuel allows it to recover costs despite the lack of a prior agreement and the principle of immutability of judgment.

The Regional Trial Court (RTC) initially ruled in favor of Delta P, a decision affirmed by the Court of Appeals (CA). These courts viewed NAPOCOR’s fuel supply as a donation and upheld the immutability of a prior judgment that ordered NAPOCOR to pay Delta P for electricity provided. However, NAPOCOR argued that it never intended to donate the fuel and that Delta P was unjustly enriched by receiving it without compensation. NAPOCOR also pointed to a post-audit that revealed discrepancies in fuel costs, justifying the debit memo issued to Delta P.

The Supreme Court (SC) partly reversed the CA’s decision, agreeing with NAPOCOR that Delta P was indeed unjustly enriched. The SC emphasized the two conditions necessary for unjust enrichment: first, that a person is benefited without a valid basis or justification; and second, that such benefit is derived at the expense of another. While the SC acknowledged that NAPOCOR’s supply of fuel was initially gratuitous, it noted that Delta P continued to benefit from this arrangement even after its internal issues were resolved, without NAPOCOR receiving any compensation in return. This, the SC reasoned, resulted in a monetary loss for NAPOCOR and unjust enrichment for Delta P.

The Court distinguished this situation from one where a party intends to donate, stating that while an intent to donate might negate a claim for unjust enrichment, the lack of compensation to NAPOCOR, especially from the local government that requested the fuel supply, created an inequitable situation. The SC cited Almario v. Philippine Airlines, Inc. to define enrichment as any patrimonial, physical, or moral advantage appreciable in money. It may include the enjoyment of a thing belonging to the plaintiff or the benefits from service rendered by the plaintiff to the defendant. The court emphasized that the enrichment of the defendant must have a correlative prejudice, disadvantage, or injury to the plaintiff.

However, the Supreme Court upheld the doctrine of the immutability of judgments, stating that final judgments are generally unalterable. The doctrine is founded on public policy and the need to end judicial controversies definitively. As the Court emphasized in PCI Leasing and Finance, Inc. v. Milan, et al.:

It is axiomatic that when a final judgment is executory, it becomes immutable and unalterable. It may no longer be modified in any respect either by the tribunal which rendered it or even by this Court. The doctrine is founded on considerations of public policy and sound practice that, at the risk of occasional errors, judgments must become final at some definite point in time.

The Court acknowledged exceptions to this rule, such as clerical errors, nunc pro tunc entries, void judgments, and supervening events. In FGU Insurance Corp. v. RTC of Makati City, Br. 66, et al., the Court detailed the exceptions, stating that the doctrine of finality of judgment or immutability of judgment can be deviated from to correct clerical errors, to make nunc pro tunc entries which cause no prejudice to any party, in void judgments, and whenever circumstances transpire after the finality of the decision rendering its execution unjust and inequitable.

NAPOCOR argued that the post-audit qualified as a supervening event justifying a modification of the judgment. However, the Court rejected this argument, stating that a supervening event must alter the execution of the judgment to become inequitable, impossible, or unfair. In Abrigo, et al. v. Flores, et al., the Court clarified that a supervening event consists of facts that transpire after the judgment became final and executory, or of new circumstances that develop after the judgment attained finality, including matters that the parties were not aware of prior to or during the trial because such matters were not yet in existence at that time.

In this case, the post-audit was based on the Power Purchase Agreement (PPA) already in existence, making it irrelevant as a supervening event. The Court also emphasized that allowing a post-audit to modify the judgment would undermine the finality of court decisions. Nevertheless, the Court found that the lower courts erred in not recognizing the unjust enrichment of Delta P. Despite the unilateral nature of NAPOCOR’s fuel supply and the lack of a direct obligation for Delta P to pay, the continued benefit to Delta P without compensation to NAPOCOR warranted a remedy.

Because NAPOCOR failed to properly substantiate the exact amount it spent on supplying fuel, the Court remanded the case to the trial court. The trial court was instructed to determine the specific amount NAPOCOR spent on fuel between February 25, 2003, and June 25, 2003, which Delta P would then be liable to pay. This outcome balances the need to uphold the immutability of judgments with the equitable principle of preventing unjust enrichment.

FAQs

What was the key issue in this case?	The key issue was whether Delta P was unjustly enriched by NAPOCOR’s fuel supply, and if so, whether NAPOCOR could recover the costs despite the immutability of a prior judgment.
What is unjust enrichment?	Unjust enrichment occurs 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.
What is the doctrine of immutability of judgment?	The doctrine of immutability of judgment states that a final judgment can no longer be modified in any respect by the court that rendered it, except in certain limited circumstances.
What is a supervening event?	A supervening event is a fact that transpires after a judgment becomes final and executory, which renders the execution of the judgment unjust or inequitable.
Why did the Supreme Court remand the case to the trial court?	The Supreme Court remanded the case because NAPOCOR failed to properly substantiate the exact amount it spent on supplying fuel to Delta P, requiring the trial court to determine the specific amount Delta P was liable to pay.
What is the principle of solutio indebiti?	The principle of solutio indebiti applies when someone receives something they are not entitled to, delivered through mistake. The obligation to return it arises.
How does this case affect power purchase agreements?	This case highlights the importance of clearly defining the responsibilities and compensation terms in power purchase agreements, especially when unforeseen circumstances arise.
What was the basis for NAPOCOR’s claim?	NAPOCOR claimed that Delta P was unjustly enriched because it received fuel without paying for it, causing financial loss to NAPOCOR.
Did the Court fully side with NAPOCOR?	No, while the Court agreed on the unjust enrichment, it also upheld the immutability of the prior judgment and required the trial court to determine the exact amount Delta P owed to NAPOCOR.

In conclusion, the Supreme Court’s decision balances the principles of unjust enrichment and the immutability of judgments, providing clarity on the circumstances under which recovery can be sought despite a final court ruling. The case underscores the need for clear contractual terms and the importance of equity in business relationships.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: National Power Corporation vs. Delta P, Inc., G.R. No. 221709, October 16, 2019