012 Polloso v.
Gangan (KC)
July 14, 2000 | Kapunan, J. | Prohibition on hiring private lawyers to render any form
of legal service for the government
PETITIONER: Dante M. Polloso
RESPONDENTS: Hon. Celso D. Gangan, Chairman, Commission on Audit, Hon.
Raul C. Flores, Commissioner, Commission on Audit, Hon. Emmanuel M. Dalman,
Commission, Commission on Audit
SUMMARY: The National Power Corporation had several interconnection
projects. Its President entered into a contract of service with Atty. Satorre,
providing him with a montly salary plus representationa and transporation
allowance (note: please refer to the facts for the services). The Unit Auditor of
COA disallowed the disbursement of funds for Atty. Satorre’s fees and held various
governenment officials personally liable, in particular Dane Polloso who solely
appealed the case. According to him Circular No. 86-255 was not violated because
it only referred to “retainer fees”. He also argued that the same was unconstitutional
for curtailing the law profession and that he merely implemented a valid contract
which Pres. Viray entered into. The Supreme Court affirmed the COA decision
saying that to adhere in Dante Polloso’s interpretion would result into the
circumvention of the circular. Retainer fees should not be technically construed
because it would run contrary to the very purpose of the circular to prevent and
disallow of irregular, unnecessary, excessive, extravagant or unconscionable
expenditures or uses of government funds and properties. No dictum is more
fundamental in statcon than that the intent of the law must prevail over the letter for
whatever is within the spirit of the statute is within the statute. Contrary to Dante
Polloso’s view, the prohibition covers the hiring of private lawyers to renderTO any
form of legal service. It makes no distinction WoN the legal services to be
performed involve an actual controversy or court litigation. Moreover, the circular
is constitutional. The circular merely sets forth the prerequisits for a gov’t agency
in hiring a private lawyer, which are reasonable safeguards. The Court failedSUBJECT
to see
how the restrictions could be considered as a curtailment on the practice of the legal
profession. Finally, by invoking the Administrative Code, Dante Polloso seeks to
escape personal liability. The Court held that his liability arose from the fact that as
a project manager, he approved the said claim. It was his duty not to approve the
same for payment upon finding out that such was irregular and in contravention of
the circular. To allow the disbursement and compensate Atty. Satorre based on the
principle of quantum meruit – the gov’t being unjustly enriched, would allow
circumvention of the circular.
DOCTRINE: Government agencies and instrumentalities are restricted in their
hiring of private lawyers to render services and handle their cases. The prohibitin
covers the hiring of private lawyers to render any form of legal service. No public
funds will be disbursed for the paymet to private lawyers unless prior to hiring of
said lawyer, there is a written conformity and acquiescence from the Solicitor
General or the Government Corporate Counsel.
FACTS:
5. The National Power Corporation (NPC) had projects called Leyte-Cebu and
Leyte-Luzon Interconnection Projects.
6. President Francisco Viray (President Viray) of NPC entered into a service
contract with Atty. Benemerito Satorre (Atty. Satorre) providing for a
monthly salary plus representation and transportation allowance. He was to
perform the ff services:
1. Provide services on administrative and legal matters
2. Facilitate, coordinate between the Office of the Project Director
and the Project Manager, and the Office of the Regional Legal
Counsel and other NPC Offices, LGUs and Agencies of
Government involving administrative cases and legal problems
3. Provide direction, supervision, coordination and control of right-
of-way activities in the project
4. Perform other pertinent services as may be assigned him by the
Project Director and Project Manager from time to time
7. The Unit Auditor Alexander Tan (Auditor Tan) of NPC-VRC Cebu issued a
Notice of Disallowance for the payment of the services. The reasons being:
1. The contract for service did not have the written conformity and
acquescience of the OSG or the Corporate Counsel and
concurrence of COA as required by COA Circ. No. 86-2553
3
COMMISSION ON AUDIT CIRCULAR NO. 86-255 April 2, 1986
: Heads of Ministries, Bureaus and Offices of the National Government;
Managing Heads and Governing Bodies of Government-owned and/or controlled
Corporations, including their Subsidiaries, Self-governing Boards, Commissions or Agencies,
and State Colleges and Universities; Local Chief Executives; All Accountable Officers; COA
Managers, Regional Directors and Unit Auditors; and Others Concerned.
: Inhibition against employment by government agencies and instrumentalities,
including government-owned or controlled corporations, of private lawyers to handle their
legal cases.
It has come to the attention of this Commission that notwithstanding restrictions or
prohibitions on the matter under existing laws, certain government agencies, instrumentalities,
and government-owned and/or controlled corporations, notably government banking and
financing institutions, persist in hiring or employing private lawyers or law practitioners to
render legal services for them and/or to handle their legal cases in consideration of fixed
retainer fees, at times in unreasonable amounts, paid from public funds. In keeping with the
retrenchment policy of the present administration, this Commission frowns upon such a
practice.
Accordingly, it is hereby directed that, henceforth, the payment out of public funds
of retainer fees to private law practitioners who are so hired or employed without the prior
written conformity and acquiescence of the Solicitor General or the Government Corporate
Counsel, as the case may be, as well as the written concurrence of the Commission on Audit
shall be disallowed in audit and the same shall be a personal liability of the officials
concerned.
This Circular shall take effect on April 15, 1986.
 2. x x x
3. x x x.
8. Accordingly, Pres. Viray, Manolo Marquez (certified the claim as lawful
and authorized), Andrea Roa and Romeo Gallego (verified the supporting
documents to be complete and proper), Jesus Aliño (reviewed the
supporting documents to be complete and proper), and Dante Polloso
(Project Manager II) were held personally responsible for the amounts due
to Atty. Satorre
9. Dante Polloso refuted the violation and sought reconsideration but was
denied. The same was denied, on appeal, by the Regional Director of COA.
The Commission Proper, COA, likewise denied the petition for review
ISSUE/s:
6. WoN the service contract was in contravention of the circular which
prohibits the hiring of private lawyers by government – YES, the circular
does not differentiate from any form of legal service
7. WoN the Circular operate to restrict the practice of law and therefore
repugnant to Sec. 5 Art. 7 of the Philippine Constitution – NO, these are
reasonable rule which would promote the COA’s constitutional mandate
8. WoN Dante Polloso is personally liable for the service contract – YES, he
approved the necessary documents although he knew it was in
contravention of the circular
RULING: WHEREFORE, the petition is hereby DENIED for lack of showing that
the respondents committed a reversible error.
SO ORDERED.
RATIO:
First Issue
10. What can be gleaned from reading the circular is that government agenices
and instrumentalities are restricted from hiring private lawyers to render
legal services or handle their cases.
11. No public funds should be disbursed for the payment of said lawyers unless
prior to hiring, there is a written conformity and acquiescence from the
SolGen or the Gov’t Corporate Counsel (for GOCCs)
12. Dante Polloso insists that the prohibition only pertains to handling of legal
cases because that is what’s stated in the title of the circular. He also insists
that the service contract is outside the ambit of the circular because it only
prohibits payment of retainer fees and not payment of fees for legal services
actually rendered
13. Contrary to Dante Polloso’s view, the prohibition covers the hiring of
private lawyers to render any form of legal service. It makes no distinction
(SGD.) TEOFISTO T. GUINGONA, JR., Chairman
WoN the legal services to be performed involve an actual controversy or
court litigation.
14. To rely on the title would go against basic statutory construction, not to
study a particular clause as a detached and isolated expression
15. A retainer fee has been defined as “preliminary fee to an attorney or counsel
to insure and secure his future services and induce him to act for the client.
[I]ts payment has no relation to the obligation of the client to pay his
attorney for the services for which he has retained him to perform.”
HOWEVER, to give such a technical interpretation to the term “retainer
fees” would go against the purpose of the circular and render the same
ineffectual
16. As to the contention of Dante Polloso that the circular does not apply in this
case because the inhibition provided for in said circular only relates to the
handling of cases of a gov’t agency and that Atty. Satorre was not only
hired in that capacity but to handle legal matters, the Court rules that it is
within the scope of the inhibition which clearly involves “hiring or
emplying private lawyers or law practicioners to render legal services for
them and/or to handle their legal cases”
17. The intention of the circular is to curb the observed and persistent violation
of existing laws and regulations, one of which is the employment of private
lawyers which involves disbursement of public funds.
18. The manner of payment, whether fixed retainer basis or fixed contract price,
is therefore, immaterial as both involve the outlay of public funds and also
the contractual employment/hiring of a private lawyer.
19. As pointed out by the OSG, the interpretation of Dante Polloso would open
the floodgate to future circumventions. The circular is in line with COA’s
constitutional mandate x x x for the prevention and disallowance of
irregular, unnecessary, excessive, extravagant or unconscionable
expenditures or uses of government funds and properties.
Second Issue
20. The circular is not unconstitutional because the gov’t has its own counsel
while the GOCCs have the Gov’t Corporate Counsel. It is only when special
cases where these gov’t entities may engage the services of private lawyers.
The circular merely sets forth the prerequisits for a gov’t agency in hiring a
private lawyer, which are reasonable safeguards. The Court failed to see
how the restrictions could be considered as a curtailment on the practice of
the legal profession
Third Issue
21. As to Dante Polloso’s argument that he cannot be held personally liable for
the disallowed amount because he is not privy, the Court ruled that his
liability arose from the fact that as a project manager, he approved the said
claim. It was his duty not to approve the same for payment upon finding out
that such was irregular and in contravention of the circular.
22. To allow the disbursement and compensate Atty. Satorre based on the
principle of quantum meruit, on the gov’t will be unjustly enriched, would
allow circumvention of the circular.