Flashcards Studio

Z pays Y PHP 1,000,000 hoping to settle a debt that Z believes Y owes. In truth, no debt exists. Y accepts the money in good faith and uses PHP 420,000 to pay his suppliers, PHP 300,000 to bolster his business operations, and keeps PHP 280,000 for personal use. After Z discovers the error, Z demands the return of PHP 1,000,000. Y contends that his good faith and the portion used for legitimate obligations justify retaining at least part of the sum, and that he should not be liable for the full amount. a)Identify the primary doctrine governing this scenario and state the controlling rule. b)Does Y’s good faith affect his obligation to return the money? Explain with respect to restitution and possible damages. c)Apply the rule to the facts and state the result for Z and Y, including whether any interest or fruits are involved and why.