G.R. No. 155692




SECOND DIVISION G.R. No. 155692 October 23, 2003 PHIVIDEC INDUSTRIAL AUTHORITY and ATTY. CESILO ADAZA, petitioners, vs. CAPITOL STEEL CORPORATION and CHENG HAN SUI, respondents. D E C I S I O N TINGA, J.: Before us is a Petition for Review on Certiorari filed by petitioner Phividec International Authority (PHIVIDEC) and Atty. Cesilo Adaza (Atty. Adaza) seeking to overturn the Amended Decision dated 28 May 2002 in CA-G.R. SP No. 60181 of the Former Sixth Division of the Court of Appeals.1 The respondents Capitol Steel Corporation and Cheng Han Sui had originally filed before the Court of Appeals a Petition for Certiorari, Prohibition and Mandamus with a prayer for the issuance of a Temporary Restraining Order and a Writ of Preliminary Injunction, assailing the orders of the Regional Trial Court2 of Misamis Oriental (RTC) denying the respondents’ Motion to Dismiss.3 The Court of Appeals had initially affirmed the orders of the RTC in a Decision4 dated 23 November 2001, but acting upon the respondents’ Motion for Reconsideration5 it reversed itself in the challenged Amended Decision. Hence, the current petition. PHIVIDEC, through Atty. Adaza who is a private lawyer, filed a complaint6 for expropriation against the respondents on 24 August 1999. PHIVIDEC is a government-owned corporation which was created by Presidential Decree No. 538. Five (5) days later, or on 29 August 1999, PHIVIDEC, also through Atty. Adaza, filed an Amended Complaint,7 which however lacked the prescribed certification against forum shopping. On 13 October 1999, respondents filed an Omnibus Motion,8 praying for the dismissal of the expropriation case on the grounds of absence of the certification against forum shopping and lack of authority of Atty. Adaza to represent PHIVIDEC. Along with its Opposition9 to the Omnibus Motion, PHIVIDEC filed a Manifestation/Motion, attaching thereto a "Certification of Non-Forum Shopping." In an Order10 dated 4 November 1999, the RTC denied the Omnibus Motion. Respondents moved for the reconsideration of the RTC’s Order, but the motion for reconsideration was denied on 27 June 2000. On 13 October 1999, respondents filed an Omnibus Motion praying for the dismissal of the expropriation case on the grounds of absence of the certification against forum shopping and the lack of authority of Atty. Adaza to represent PHIVIDEC. PHIVIDEC opposed the Motion to Dismiss and filed as well a Manifestation/Motion, attaching thereto the Certificate of Non-Forum Shopping. In an Order dated 4 November 1999, the RTC denied the Omnibus Motion. Respondents moved for the reconsideration of the RTC Order, but the motion was denied on 27 June 2000. Respondents then elevated the RTC orders to the Court of Appeals, through their petition in CA-G.R. No. 60181. After denying respondents’ application for a temporary restraining order,11 the appellate court promulgated its Decision12 dismissing respondents’ petition for lack of merit. However, on Motion for Reconsideration of the respondents, the Court of Appeals came out with the assailed Amended Decision. Pointing out that under Section 3 of Memorandum Circular No. 9,13 and COA Circular No. 86-25514 the engagement of a private counsel of a government-owned or controlled corporation (GOCC) requires the prior written concurrence of the Office of the Government Corporate Counsel (OGCC) and the Commission on Audit (COA), respectively, the appellate court held that Atty. Adaza’s representation of PHIVIDEC in the expropriation case was not valid. The dispositive portion of the Amended Decision reads: "WHEREFORE, finding the Motion for Reconsideration to be of merit, the assailed Decision is hereby SET ASIDE, without prejudice to the filing of similar petition by PHIVIDEC though (sic) a proper legal officer or counsel."15 In the petition, petitioners maintain that PHIVIDEC has secured the written concurrences of the COA and the OGCC to its engagement of Atty. Adaza as its counsel in the expropriation case, substantially complying with the requirements of COA Circular No. 86-255 and Memorandum Circular No. 9. Petitioners also argue that the subsequent filing of the certification of non-forum shopping before the RTC constituted substantial compliance with the law. A review of the laws involving the role of the OGCC as official counsel of all GOCCs from the time the office was made separate and distinct from the Office of the Solicitor General is in order. This is necessary to determine the nature and extent of the OGCC’s legal representation in behalf of GOCCs and the public policy, if any, as regards the engagement by GOCCs of the services of private lawyers. In 1959, Republic Act No. 2327, which declared the position of Government Corporate Counsel separate and distinct from that of the Solicitor General, was enacted. Four years later, it was amended by Republic Act No. 3838. The amendatory law made the Government Corporate Counsel the principal law officer of GOCCs. It also imposed the prohibition on GOCCs from hiring private counsels. The full text of the amendments reads: "Section 1. x x x [The Government Corporate Counsel] shall be the principal law office of all government-owned or controlled corporations. To enable him to discharge, his functions as such, it shall be the duty of all said corporations to refer to him all important legal questions for opinion, advice and determination, all proposed contracts, and all important court cases for his services. He shall, moreover, exercise control and supervision over all the legal divisions maintained separately by said corporations. No government-owned or controlled corporation shall hire a private law practitioner to handle any of its legal cases without the written consent of the Government Corporate Counsel or of the Secretary of Justice." (Emphasis supplied) Thus, beginning with the year 1963, the general rule disallowing GOCCs from hiring private lawyers was put in place, subject to the exception that the GOCC may do so with the written consent of the Government Corporate Counsel or the Secretary of Justice. Republic Act No. 2327 was further amended by Republic Act No. 6000,16 but it did not change the general rule and the exception thereto.1a\^/phi1.net Then, in 1978, President Marcos in the exercise of his legislative powers17 promulgated Presidential Decree No. 1415 (P.D. No. 1415), which further delineated the powers and functions of the Office of the Government Corporate Counsel. This time, the previously established exception to the rule prohibiting the hiring of private lawyers was deleted, and a more stringent policy adopted. Section 1 of P.D. No. 1415 reads: "Section 1. The Office of the Government Corporate Counsel shall be the principal law office of all government-owned or controlled corporations, without exception, including their subsidiaries." (Emphasis supplied) Clearly, the OGCC was ordained to serve as the exclusive law office of all GOCCs. While P.D. No. 1415 did not contain a repealing clause, the new policy it established was patently inconsistent with what had been provided by Republic Act No. 2327, as amended. Thus the prior laws were effectively repealed.18 In 1987, the President Aquino issued Executive Order No. 292 (E.O. No. 292), otherwise known as the Administrative Code of 1987, in the exercise of her transitory legislative powers under the aegis of the 1987 Constitution.19 This Code remains to this day as the governing law on the role and functions of the OGCC in relation to GOCCs. Section 10, Book IV, Title III, Chapter 3 thereof provides: "Section 10. Office of the Government Corporate Counsel. — The Office of the Government Corporate Counsel (OGCC) shall act as the principal law office of all government-owned or controlled corporations, their subsidiaries, other corporate offsprings and government acquired asset corporations and shall exercise control and supervision over all legal departments or divisions maintained separately and such powers and functions as are now or may hereafter be provided by law. xxx" (Emphasis supplied) Noteworthy in the law is the deletion of the phrase "without exception" employed in P.D. No. 1415 which theretofore rendered exclusive and absolute the authority of the OGCC to represent GOCCs. So, it should be asked: What is the significance of the elimination of the phrase? Certainly, the amendatory deletion did not alter the mandate of the OGCC to handle the cases of the GOCCs nor did it signal the abandonment of the policy not to engage private lawyers for the GOCCs. Not only has the aforequoted Section 10 retained the explicit key provision that the OGCC "shall act as not principal law office of all government-owned or controlled corporations", it has even expanded the reach of the OGCC by conferring on it "control and supervision over all legal departments or divisions" of the GOCCs, as well as their "subsidiaries, other corporate offsprings and government acquired asset corporations." With the change it effected, however, the new Administrative Code has made the powers of the President come into play as regards the inter-relationship between the GOCCs and the OGCC.1a\^/phi1.net Under the Constitution, it is the President who exercises both executive20 and administrative powers.21 As administrative head, the President’s duty is to see that every government office is managed and maintained properly by the persons in charge of it in accordance with pertinent laws and regulations.22 Corollary to these powers is the power to promulgate rules and issuances that would ensure a more efficient management of the executive branch, for so long as such issuances are not contrary to law. President Aquino, however, did not promulgate any issuance on the matter. It was President Fidel V. Ramos who did so, through Administrative Order No. 130 which he issued in 1994. Section 1 thereof reads: "Section 1. All legal matters pertaining to government-owned or controlled corporations, their subsidiaries, other corporate offsprings and government acquired asset corporations (hereinafter collectively referred to as "GOCCs") shall be exclusively referred to and handled by the Office of the Government Corporate Counsel (hereinafter referred to as "OGCC"), unless their respective charters expressly name the Office of the Solicitor General (hereinafter referred to as "OSG") as their legal counsel. When authorized by the President, or by the head of the office concerned and approved by the President, the OSG shall also represent GOCCs." (emphasis supplied) The above-quoted provision not only reaffirmed but strengthened the exclusive mandate of the OGCC. Moreover, it effectively removed from the GOCCs the opportunity to engage the services of private lawyers. Under its terms, the President may authorize only the Office of the Solicitor General to represent the GOCCs in place of or in addition to the OGCC. Then came Memorandum Circular No. 9 issued by President Joseph Estrada on 27 August 1998. Section 3 thereof states: "GOCCs are likewise enjoined to refrain from hiring private lawyers or law firms to handle their cases and legal matters. But in exceptional cases, the written conformity and acquiescence of the Solicitor General or the Government Corporate Counsel, as the case may be, and the written concurrence of the Commission on Audit shall first be secured before the hiring or employment of a private lawyer or law firm." (Emphasis supplied) It was only with the enactment of Memorandum Circular No. 9 in 1998 that an exception to the general prohibition was allowed for the first time since P.D. No. 1415 was enacted in 1978. However, indispensable conditions precedent were imposed before any hiring of private lawyer could be effected. First, private counsel can be hired only in exceptional cases. Second, the GOCC must first secure the written conformity and acquiescence of the Solicitor General or the Government Corporate Counsel, as the case may be, before any hiring can be done. And third, the written concurrence of the COA must also be secured prior to the hiring. There are strong reasons behind this public policy. One is the need of the government to curtail unnecessary public expenditures, such as the legal fees charged by private lawyers against GOCCs. Precisely, the two whereas clauses of Memorandum Circular No. 9 recite this particular concern, viz: WHEREAS, there is a need to reduce government expenditures by minimizing the expenses of government-owned or controlled corporations (GOCCs) which hire private lawyers and law firms, considering the high cost of retainers, fees and charges that are paid to said private lawyers and law firms; WHEREAS, one way of realizing savings on the part of government-owned or controlled corporations (GOCCs) is to implement and enforce pertinent laws and regulations which prohibit GOCCs from hiring private retainers and law firms to handle their cases and legal matters, and those which direct GOCCs to refer their cases and legal matters to the Office of the Government Corporate Counsel (OGCC) for proper handling. The other factor is anchored on the perceived strong ties of the OGCC lawyers to their client government corporations. Thus, compared to outside lawyers the OGCC lawyers are expected to be imbued with a deeper sense of fidelity to the government’s cause and more attuned to the need to preserve the confidentiality of sensitive information. Evidently, OGCC is tasked by law to serve as the law office of GOCCs to the exclusion of private lawyers. Evidently again, there is a strong policy bias against the hiring by GOCCs of private counsel. Thus, it behooves this Court, hearkening the dictates of law and public policy, to examine with a skeptical eye any claim of professional representation by a private counsel in behalf of a GOCC. Now, petitioners make such a claim before us. Under any reasonable yardstick, however, they utterly failed to comply with the requirements set by Memorandum Circular No. 9. PHIVIDEC argues that it submitted the approval of the COA and the OGCC to the hiring of Atty. Adaza as its counsel. Yet, in clear contravention of Memorandum Circular No. 9, Atty. Adaza, on 24 August 1999, filed the expropriation suit in behalf of PHIVIDEC before the GOCC could secure the required prior written concurrences of both the OGCC or the COA. The documents which petitioners submitted in support of their claim do not indicate that they obtained the requisite concurrences at all. Petitioners primarily rely on a certified true copy of an Indorsement23 issued by COA Regional Office No. 10 as proof of written concurrence on the part of the COA. All that it contains is a second-hand claim that the COA General Counsel had allegedly concurred in the retainer contract between PHIVIDEC and Atty. Adaza. The written concurrence itself which may be the best evidence of the alleged concurrence was not presented. It is also worth noting that the said Indorsement was dated 4 June 2002, or approximately two years after the filing of the expropriation case by Atty. Adaza. Neither is there proof that the written concurrence of the Office of the Government Corporate Counsel was secured. The Court of Appeals in its original decision referred to a letter24 sent by the OGCC to PHIVIDEC, wherein the former supposedly suggested changes to the retainer contract already signed by Atty. Adaza and PHIVIDEC.25 Given the clear language of Memorandum Circular No. 9, the letter cannot serve as proof of concurrence by the OGCC to PHIVIDEC’s hiring of Atty. Adaza. In fact, the letter even indicates that the OGCC disapproved the retainer contract, as it evinced the OGCC’s disagreement with the provisions of the alleged retainer contract. On their part, petitioners on whose shoulders rest the burden of proving the concurrences, failed to point out the specific document which contains the alleged OGCC conformity. It is also apparent that petitioners failed to comply with the requirements laid down by the COA in its Circular No. 86-255. The Circular requires the prior written concurrences of the OGCC or the Solicitor General and the COA before GOCCs may hire private counsels.26 It must be noted though that the COA Circular is not decisive in the disposition of this case. It cannot by any measure grant or disallow the authority for GOCCs to hire private counsels. The function pertains to the executive branch. Its mandate is to audit the disbursement of public funds. As regards the payment of funds belonging to GOCCs to lawyers retained by them, COA Circular 86-255 is the governing regulation. All told, it is ineluctable that Atty. Adaza had no authority to file in behalf of the petitioner the expropriation case against the respondents. In the analogous cases of Municipality of Bocaue v. Manotok27 and Municipality of Pililia v. Court of Appeals,28 this Court ruled that the want of authority on the part of lawyer to file a suit in behalf of a local government unit is cause enough to dismiss the actions filed by the lawyer. The same rule applies in this case. The Court of Appeals, therefore, is correct in ordering the dismissal of the case, without prejudice to the filing of a similar petition by PHIVIDEC through a proper legal officer or counsel. In view of the unauthorized engagement by PHIVIDEC of the legal services of Atty. Adaza and the nullity of the moves the latter has undertaken in behalf of the former, there is no more need to discuss the other issue raised in the petition which is, after all, merely procedural. WHEREFORE, the petition is denied for lack of merit. Costs against petitioner. SO ORDERED. Bellosillo, (Chairman), Quisumbing, Austria-Martinez, and Callejo, Sr., JJ., concur. Footnotes 1 The Amended Decision was written by Justice E.R. Bello, Jr., and concurred in by Justices G. Jacinto and J. Guevara-Salonga. 2 Presided by Judge Maximo W. Paderanga. 3 The assailed Orders of the RTC were issued on 4 November 1999 and 27 June 2000. 4 Rollo, p. 204. 5 Id. at 213. 6 Id. at 17. 7 See Section 5, Rule 7, Revised Rules of Court. 8 Rollo, p. 112. 9 Id., at 127. 10 Id., at 140-141. 11 Per its Resolution dated 11 January 2001. 12 Dated 23 November 2001. 13 Issued by the Office of the President on 27 August 1998. 14 Issued on 2 April 1986. 15 Rollo, p. 50. 16 Promulgated on 4 August 1969. 17 See Amendment No. 5, Amendments to the 1973 Constitution. 18 P.D. No. 1415 does not contain any repealing clause, and implied repeals are generally not favored. See e.g., Rubberworld v. NLRC, 365 Phil. 273. However, implied repeals may be deemed operative if it is convincingly and unambigously demonstrated that the two laws are so clearly repugnant and patently inconsistent that they cannot co-exist. See e.g., Ty v. Trampe, 321 Phil. 81. Since Republic Act No. 2627, as amended, provided for an exception to the non-hiring of private lawyers while the later P.D. No. 1415 prohibited any exceptions, the two laws are palpably inconsistent with one another and incapable of co-existence. 19 Sec. 7, Art. XVIII, 1987 Constitution. "The incumbent President shall continue to exercise legislative powers until the first Congress is convened." 20 "The executive power shall be vested in the President of the Philippines." Sec. 1, Art. VII, Constitution. 21 "The President shall have control of all the executive departments, bureaus and offices." Sec. 17, Art. VII, Constitution. 22 Vincent G. Sinco, Philippine Political Law 234-235 (11th ed., 1962), as cited by J. Mendoza (dissenting) in Ople v. Torres, 354 Phil. 948, 1014-1015. "Executive power refers to the legal and political function of the President involving the exercise of discretion. Administrative power, on the other hand, concerns itself with the work of applying policies and enforcing orders as determined by proper governmental organs. These two functions are often confused by the public; but they are distinct from each other. The President as the executive authority has the duty of supervising the enforcement of laws for the maintenance of general peace and public order. As administrative head, his duty is to see that every government office is managed and maintained properly by the persons in charge of it in accordance with pertinent laws and regulations." Id. 23 Rollo, p. 65. 24 Vide Decision dated 23 November 2001, CA GR SP No. 60181, Rollo, p. 204. 25 Rollo, pp. 210-211. However, this Decision was subsequently reconsidered by the Court of Appeals, which had noted that it had not earlier taken into consideration the COA and Memorandum Circulars which require the prior concurrence of the OGCC and the COA. See Rollo, p. 47. 26 "Accordingly, it is hereby directed that henceforth, the payment of public funds of retainer fees to private law practitioners who are so hired or employed without the written conformity and acquiescence of the Government Corporate Counsel as well as the written concurrence of the Commission on Audit and shall continue in effect until terminated or cancelled by the Board or the OGCC." COA Circular No. 86-255. 27 93 Phil. 173 28 G.R. No. 105909, 28 June 1994, 233 SCRA 484. The Lawphil Project - Arellano Law Foundation