There Is No Cause of Action to Recover Damages Caused by Municipality’s Negligence or Bad Faith in Requiring Performance of Services Without
There Is No Cause of Action to Recover Damages Caused by Municipality’s Negligence or Bad Faith in Requiring Performance of Services Without
Contract
In Super Diesel & Gas Auto Shop, Inc. v. Mun. de Mayagüez, the P.R. Court of Appeals affirmed a dismissal of an action seeking to recover damages caused by a municipality’s bad faith or negligence in requiring services without a contract in place.
The court noted that the P.R. Supreme Court has consistently rejected the availability of equitable remedies, such as an action for unjust enrichment, to compensate a contractor for the damages suffered as a result of noncompliance with Puerto Rico’s government contracting requirements.
Without citing any on-point authority in support, the intermediate appellate court reasoned that the high court’s prohibition against equitable remedies also means that a tort action is similarly barred, as government contracting requirements would otherwise be ineffective if such action was allowed.
Interestingly, in a footnote, the court of appeals seems to suggest that the judiciary’s hands are tied and called for a more flexible “statutory scheme”. It explained: “A more flexible norm would be more consistent with the daily reality of government administration, would allow the government to timely offer its services in urgent or exigent circumstances and, in any case, would reduce the costs of contracts (this, because it would reduce the risk of the private party of contracting under highly inflexible norms).” (author’s translation).
I question whether the judiciary’s hands are as tied as the appeals court suggests. I am not aware of any instance in which the high court has said that tort actions are barred the same way as equitable remedies are barred in this context.
For me, a tort claim is materially different as there is express statutory authorization for such cause of action against the government, so the constitutional requirement that public funds only be used as prescribed by law should not be an issue.
The only instance that I am aware of where the high court has directly addressed a similar cause of action was in Alco Corp. v. Mun. de Toa Alta, 183 DPR 530, 553 (2011), but it was in the context of imposition of personal liability to the responsible official, not the government entity. Specifically, the high court suggested that, to address the unfairness of not paying a vendor for services rendered, an alternative could be to impose liability directly on the public official responsible for the damages caused to the vendor.
However, the authority cited by the court in support of such alternative cautioned that it should be implemented through legislative action. Luis Muñiz Argüelles, Obligaciones Y Contratos, 77 Rev. Jur. U.P.R. 645, 650–51 (2008).
Another alternative is that the high court could reconsider its bar against unjust enrichment claims against the government. Of note, in that same article that the high court cited in Alco Corp., Prof.
Argüelles called for revisiting the norm against not allowing unjust enrichment claims against the government. He also cited a Spanish law professor for the proposition that a government entity may be liable under said doctrine. Moreover, Prof.
Argüelles also noted that, in the United States, federal agencies can be held liable for services or goods received in the absence of a valid contract, if the responsible public official had authority to bind the entity.