Ghost projects, unjust enrichment and Madera doctrine

By Atty. Eduardo T. Reyes III

To say that the Filipino people are disgusted with ghost or substandard projects that have been recently exposed would be an understatement.

People’s money, public funds, monies that ordinary people have earned through their hard and honest work, are being funneled to projects that are mere mirages or sand castles.

Of course, criminal and/or administrative liability will be incurred by those responsible for the anomalies in accordance with the Anti-Graft and Corrupt Practices law (RA 3019).

But the main concern of this article is on the issue of getting the people’s money back.

Known as the Madera doctrine, rules on unjustified releases of allowances or benefits to government employees have been laid down. In the more recent cases of General Manager Leonardo Rey D. Vasquez v. Commission on Audit, G.R. No. 218374, December 1, 2020 and Social Security System v. Commission on Audit, G.R. No. 231391, June 22, 2021, the Madera guidelines have been fine-tuned into the following:

1)The recipients of public funds unlawfully released, whether they received the monies in good or bad faith, are duty-bound to return the money based on the principle of solutio indebiti which is a quasi-contractual obligation enunciated in Articles 22 and 2154 of the New Civil Code; and,

2)The responsible government officers who have had a hand in certifying and authorizing the release of public funds shall be solidarily liable with the recipients to refund the monies back to the public coffers.

The Madera doctrine, while it is strictly applicable to monetary benefits released to government employees may, by analogy, be applied to any person who has received public funds, unlawfully or even by mistake.

Madera further stresses that as to the public officials involved in the irregularities, the three-fold liability rule applies such that for a single anomalous transaction, the erring public official may be charged with criminal, civil and administrative cases all at the same time.

Meanwhile, as to the proper legal action to be filed, the remedy is to avail of what is known as accion in rem verso. Jurisprudence has explained that “An action for recovery of what has been paid without just cause has been designated as an accion in rem verso.” (Willem Beumer v. Avelina Amores, G.R. No. 195670, December 03, 2012).

Accion in rem verso aims to recover what has been unjustly paid or released to anyone, whether government employee, or private person, to avoid any unjust enrichment.

In turn, “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 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. The main objective of the principle against unjust enrichment is to prevent one from enriching himself at the expense of another without just cause or consideration.” (Rolando de Roca v. Eduardo C. Dabuyan, G.R. No. March 05, 2018).

While investigations by the legislative body and prosecutions by the executive department of government may be pursued, it must not be forgotten that the people’s money must be returned, as well.

If taxes are deemed the lifeblood of the State, it bears stating that the people’s money is borne of their blood, sweat and tears.

(The author is the senior partner of ET Reyes III & Associates (ETRIIILaw)– a law firm based in Iloilo City. He is a litigation attorney, a law professor, MCLE lecturer, bar reviewer and a book author. Among the books he authored is Law on Property and Essentials of Land Registration [2024 Edition] which was on the bestseller’s list in online shops for several months. His website is etriiilaw.com).