G.R. No. 131287 - Balgami vs. Court of Appeals

On 20 April 1999, the Litonjua Group executed a letter-agreement with Trendline Securities, Inc. confirming an earlier agreement for the acquisition of an 85% majority membership seat in the Philippine Stock Exchange (PSE).
Key features of the agreement included:

The sale of an 85% majority equity membership/seat to the Litonjua Group, with the balance of 15% retained by Trendline (or its immediate family members).
The total price of P23,000,000.00, allocated as P19,555,000.00 for the Litonjua Group and P3,445,000.00 for Zapanta (Trendline’s representative).
Conditions for payment included settling Trendline’s outstanding obligations to PSE amounting to P18,547,643.81, lifting the membership suspension, and subsequent organizational and nomination requirements.

On 21 April 1999, the Litonjua Group confirmed its undertaking to pay P18,547,643.81 directly to PSE within three working days, provided that the payment would satisfy Trendline’s outstanding obligations and lead to the resumption of normal trading.
Trendline, through its president Priscilla D. Zapanta, confirmed the agreement’s terms, and on 26 April 1999, Trendline advised PSE of these conditions.

On 29 April 1999, PSE, via Atty. Ruben L. Almadro, communicated that the Business Conduct and Ethics Committee accepted P19,000,000.00 as full settlement of Trendline’s obligations, cautioning that non-payment by 13 May 1999 would trigger enforcement actions.
On 3 May 1999, Trendline acknowledged the terms and assured that the Litonjua Group would effect the payment.
On 12 May 1999, the Litonjua Group delivered three checks totaling P19,000,000.00 to PSE as advance payment, which were received and acknowledged with an annotation that the checks were for full settlement of Trendline’s obligation.

PSE failed to lift the suspension on Trendline’s trading seat.
On 30 July 2006, the Litonjua Group formally requested a reimbursement of the P19,000,000.00, having earlier paid the sum in the belief it secured the seat’s transfer.

It was not a party to the letter-agreement due to the absence of an authorized board resolution.
The payment was received from Trendline (as the entity originally obligated) and that Litonjua’s remedy was against Trendline.

The Litonjua Group filed a Complaint for Collection of Sum of Money with Damages against PSE before the Regional Trial Court (RTC) of Pasig City.
The RTC ruled in favor of the Litonjua Group, ordering PSE to refund the payment along with legal interest, exemplary damages, attorney’s fees, and costs.
On 23 May 2012, the Court of Appeals (CA) affirmed the RTC decision, relying on the doctrine of constructive trust to address the unjust enrichment of PSE.
PSE elevated the case to the Supreme Court through a Petition for Review on Certiorari, raising several issues concerning its non-party status and the applicability of relevant civil provisions.

Whether the PSE is considered a party to the 20 April 1999 letter-agreement given the absence of a board resolution.
Whether PSE’s subsequent actions (i.e., receiving payment) amount to its tacit consent or create an estoppel precluding it from denying its status as a party.

Whether the refund claim ought to be directed against PSE or Trendline, especially in light of Article 1236 of the Civil Code.
Whether the Litonjua Group’s cause of action is properly founded on quasi-contractual remedies against the wrongfully received payment.

Whether PSE’s retention of the P19,000,000.00 constitutes unjust enrichment.
Whether the application of the principles of solutio indebiti and constructive trust is appropriate to remedy the situation.

Whether PSE’s actions justify the award of exemplary damages.
Whether the conversion from an initial interest rate of 12% per annum to 6% per annum is legally proper based on applicable monetary board circulars.