Inciong v. Domingo
REITERATIONFacts
The Antecedents: The Philippine Sugar Commission (PHILSUCOM), now Philippine Sugar Refineries Corporation, failed to pay real estate taxes on its refinery in Balayan, Batangas. The Provincial Treasurer scheduled a public auction for the property. PHILSUCOM filed a petition for prohibition in the Court of Appeals (CA) to restrain the sale. Barangay Caloocan, represented by petitioner Atty. Ceferino Inciong, intervened, asserting its right to a 10% share of the property taxes. Eventually, PHILSUCOM and the Municipal Treasurer entered into an Amnesty Compromise Agreement under Executive Order No. 42, leading to the dismissal of the CA case. PHILSUCOM paid P7,199,887.51, and the Municipal Treasurer allocated P719,988.75 (10%) to Barangay Caloocan. Procedural History: Atty. Inciong filed a case for payment of attorney's fees (Civil Case No. 1878) against the Province, Municipality, and Barangay before the Regional Trial Court (RTC) of Balayan, Batangas. On August 9, 1989, the RTC ruled in favor of Inciong, awarding him 10% of the Barangay's share as fair and reasonable compensation. This decision became final and executory. However, when the withdrawal voucher was presented for audit, the Provincial Auditor referred the matter to the Commission on Audit (COA). The COA Chairman, Eufemio Domingo, disallowed the payment, citing that the hiring of Inciong lacked Sangguniang Barangay approval under Batas Pambansa Bilang 337 (Local Government Code of 1983), lacked an appropriation, and was not approved by the Solicitor General or COA per COA Circular No. 86-255. The Petition: Atty. Inciong filed the instant petition challenging the COA's disallowance. The Office of the Solicitor General (OSG) manifested that it disagreed with the COA Chairman's position, arguing that the RTC decision was final and the Barangay was bound by the employment of counsel. The COA Legal Office, representing the respondent, further argued that even if fees were due, the basis was wrong because the Barangay's share should only have been P359,994.38 under Republic Act No. 5447 (Special Education Fund Act), as the other half of the tax collection belonged to the Special Education Fund (SEF).
Issue(s)
Whether the Commission on Audit (COA) can disallow the payment of attorney's fees mandated by a final and executory judgment of the Regional Trial Court (RTC). Whether the 10% attorney's fees should be based on the actual amount allocated to the Barangay or the legally correct share under Republic Act No. 5447.
Ruling
The petition is GRANTED. The respondent Commission on Audit (COA) is ordered to direct the payment of attorney's fees to petitioner Atty. Ceferino Inciong in an amount equivalent to 10% of P359,994.38.
Ratio Decidendi
On Issue 1: The Supreme Court held that the Commission on Audit (COA) Chairman acted improperly in disallowing the payment. First, the employment of Atty. Inciong by Barangay Caloocan, even if technically unauthorized by the Sangguniang Barangay, is binding because the Barangay took no prompt measures to repudiate the employment and instead accepted the benefits of his legal services. Citing Province of Cebu v. Intermediate Appellate Court, the Court emphasized that an entity cannot enjoy the fruits of a lawyer's labor and then deny the obligation to pay. Second, the RTC Decision dated August 9, 1989, which directed the payment of attorney's fees, had long become final and executory. Applying Mercado v. Court of Appeals, the Court reiterated that final judgments are binding and must be executed. Third, COA Circular No. 86-255 is an administrative issuance that cannot diminish or override the substantive right of the petitioner to recover fees established by a final judicial decree. The COA's audit power does not extend to vacating final court decisions. On Issue 2: Regarding the basis of the computation, the Court agreed with the COA Legal Office's interpretation of the law. Under Republic Act No. 5447 (Special Education Fund Act), the Barangay is entitled to a share only from the basic real property tax. Since 50% of the total amount paid by PHILSUCOM was legally mandated to go to the Special Education Fund (SEF), the Barangay's rightful share was only P359,994.38, not the P719,988.75 erroneously allocated by the Municipal Treasurer. Because the RTC awarded attorney's fees as a percentage of the 'amount awarded' to the Barangay, the computation must be based on the legally correct amount. Therefore, the 10% fee must be calculated against the corrected figure of P359,994.38 to ensure the payment complies with the statutory limits of tax distribution.
Main Doctrine
The doctrine of finality of judgments dictates that once a decision becomes executory, it is immutable and unalterable. The Commission on Audit (COA) lacks the authority to set aside a final court judgment awarding attorney's fees by invoking administrative requirements for the hiring of counsel. When a local government unit accepts the services of a lawyer and benefits from a favorable judgment without timely repudiating the representation, it is bound by the court's award of reasonable compensation.