Municipality of Pililla, Rizal vs. Court of Appeals

A private attorney cannot represent a municipality in litigation; representation is vested in the provincial fiscal or municipal attorney, and private counsel may be employed only when the provincial fiscal is disqualified and that disqualification appears on record. The lack of authority may be questioned at any stage, and the client’s compromise and satisfaction of judgment without counsel’s participation impliedly dismisses counsel.

The Municipality of Pililla, Rizal, and Philippine Petroleum Corporation were parties to a dispute over municipal taxes and fees imposed under Municipal Tax Ordinance No. 1. The municipality sought to collect business tax, storage permit fee, mayor’s permit fee, and sanitary inspection fee from PPC. Under Section 1683 of the Revised Administrative Code and Section 3 of Republic Act No. 2264, provinces and municipalities are represented in litigation by the provincial fiscal or municipal attorney, with private counsel allowed only when the provincial fiscal is disqualified. Atty. Felix E. Mendiola appeared as private counsel for the municipality in the execution stage of the case.

The Municipality of Pililla, Rizal, assessed Philippine Petroleum Corporation (PPC) under Municipal Tax Ordinance No. 1 for business tax under Section 9(A), storage permit fee under Section 10, paragraph Z(13)(b-1-c), mayor’s permit fee under Section 10, paragraph (P)(2), and sanitary inspection fee. On March 17, 1989, the Regional Trial Court of Tanay, Rizal, Branch 80, in Civil Case No. 057-T, rendered judgment for the municipality, ordering PPC to pay P5,301,385.00 as business tax for 1979 to 1983 plus accruing tax; P3,321,730.00 as storage permit fee for 1975 to 1986 plus accruing fee; P12,120.00 as mayor’s permit fee for 1975 to 1984 plus accruing fee; P1,010.00 as sanitary inspection fee for 1975 to 1984 plus accruing fee; and costs. On June 3, 1991, the Supreme Court in G.R. No. 90776 affirmed the judgment with modifications: business taxes accruing prior to 1976 were not to be paid because prescribed, and storage fees were not to be paid because the storage tanks were owned by PPC and not by the municipality and could not be bases of a charge for service. The judgment became final and executory on July 13, 1991, and the records were remanded to the trial court for execution.

In the execution proceedings, Atty. Felix E. Mendiola filed a motion on October 14, 1991, in behalf of the plaintiff municipality with the Regional Trial Court, Branch 78, Morong, Rizal, for examination of PPC’s gross sales for 1976 to 1978 and 1984 to 1991 to compute the tax on business under the Local Tax Code, as amended. On October 21, 1991, PPC filed a manifestation stating that on October 18, 1991, Pililla Mayor Nicomedes Patenia had received from PPC P11,457,907.00 as full satisfaction of the Supreme Court judgment, as evidenced by release and quitclaim documents executed by the mayor. On October 31, 1991, the trial court denied the municipality’s motion for examination and execution of judgment because the judgment had already been satisfied.

On November 21, 1991, Atty. Mendiola moved for reconsideration, claiming that PPC’s total liability was P24,176,599.00 while the amount covered by the release and quitclaim was only P12,718,692; that Mayor Patenia could not waive the balance representing taxes due under the judgment; and that his law firm had registered two liens for alleged consultancy services of 25% and attorneys’ fees of 25%, amounting to more than P12 million. The trial court denied the motion on January 28, 1992. On February 18, 1992, Atty. Mendiola, again ostensibly in behalf of the municipality, filed a petition for certiorari with the Supreme Court, which referred the petition to the Court of Appeals for proper disposition, where it was docketed as CA-G.R. SP No. 27504. On March 2, 1992, PPC filed a motion questioning Atty. Mendiola’s authority to represent the municipality.

On March 31, 1992, the Court of Appeals dismissed the petition because it had been filed by a private counsel in violation of law and jurisprudence, but without prejudice to the filing of a similar petition by the Municipality of Pililla through the proper provincial or municipal legal officer. The Court of Appeals denied reconsideration on June 9, 1992. The records showed no indication that the provincial fiscal was disqualified to act as counsel for the Municipality of Pililla on appeal. The municipality itself, through the Office of the Provincial Prosecutor of Rizal, raised the lack of authority of Atty. Mendiola in its comment and opposition to his motion for execution of his lien. The municipality, through Mayor Patenia and without Atty. Mendiola’s participation, had entered into a compromise agreement with PPC regarding execution of the judgment and filed a “Satisfaction of Judgment” and a “Release and Quitclaim”; a manifestation and motion for withdrawal of those documents was pending with the trial court.

• New Issue on Appeal: Petitioner argued that the Court of Appeals erred in considering private respondent’s new issue raised for the first time on appeal, because it had never been raised in the court below and could no longer be considered on appeal.
• Dismissal and Alternative Remedy: Petitioner argued that the Court of Appeals erred in dismissing the petition with the alternative remedy of filing a similar petition, as this was a departure from established jurisprudence.
• Private Counsel Representation: Petitioner argued that the Court of Appeals erred in ruling that the filing of the petition by private counsel was in violation of law and jurisprudence.
• Refusal of Provincial Fiscal: Atty. Mendiola submitted that the exception allowing private counsel is broad enough to include situations where the provincial fiscal refuses to handle the case.
• Amount of Liability and Liens: In the motion for reconsideration, petitioner claimed that PPC’s total liability was P24,176,599.00 while the release and quitclaim covered only P12,718,692; that the mayor could not waive the balance; and that the law firm had registered liens for consultancy services and attorneys’ fees exceeding P12 million.

• Authority of Counsel: Respondent PPC filed a motion questioning Atty. Mendiola’s authority to represent petitioner Municipality of Pililla.
• Satisfaction of Judgment: Respondent PPC manifested that the judgment had already been fully satisfied by its payment of P11,457,907.00 to Mayor Nicomedes Patenia, as evidenced by release and quitclaim documents.

• Authority of Private Counsel: Whether the Court of Appeals correctly dismissed the petition filed by Atty. Felix E. Mendiola, a private counsel, in behalf of the Municipality of Pililla for lack of authority to represent a municipality.
• Exception for Disqualified or Refusing Fiscal: Whether the provincial fiscal’s refusal to handle the case justified the municipality’s employment of private counsel.
• Timing of Objection: Whether lack of authority of private counsel to represent a municipality may be raised for the first time on appeal or at any stage of the proceedings.
• Revocation of Counsel’s Authority: Whether the municipality’s compromise and execution of a Satisfaction of Judgment and Release and Quitclaim without counsel’s participation revoked the private counsel’s authority to continue representing it.
• Attorney’s Fees and Liens: Whether the private counsel’s claim for consultancy fees and attorney’s fees, and the registered liens therefor, could prevent or hold in abeyance the approval or effectivity of the compromise and satisfaction of judgment.
• Alternative Remedy in Dismissal: Whether the Court of Appeals erred in dismissing the petition without prejudice to the filing of a similar petition by the municipality through its proper legal officer.

• Authority of Private Counsel: No. A private attorney cannot represent a municipality; only the provincial fiscal or municipal attorney may do so under Section 1683 of the Revised Administrative Code and Section 3 of Republic Act No. 2264.
• Exception for Disqualified or Refusing Fiscal: No. The exception applies only when the provincial fiscal is disqualified, and the disqualification must appear on record; refusal to handle the case is not a legal justification for employing private counsel.
• Timing of Objection: No. The legality of counsel’s representation may be questioned at any stage of the proceedings, including for the first time on appeal.
• Revocation of Counsel’s Authority: Yes. Even assuming authority, the municipality’s compromise and filing of a Satisfaction of Judgment and Release and Quitclaim without counsel’s participation impliedly dismissed the lawyer and revoked his authority.
• Attorney’s Fees and Liens: No. A lawyer’s right to fees may not be invoked to disapprove or hold in abeyance the approval of a compromise agreement; the lawyer may enforce such rights in a proper proceeding.
• Alternative Remedy in Dismissal: No. The dismissal without prejudice to a similar petition by the municipality through the proper provincial or municipal legal officer was proper; the apprehension that the municipality would not file was conjectural and without factual basis.

• Authority of Private Counsel: The Court of Appeals correctly held that Atty. Mendiola had no authority to file a petition in behalf of and in the name of the Municipality of Pililla. Under Section 1683 of the Revised Administrative Code, the provincial fiscal shall represent the province and any municipality or municipal district thereof in any court, except where original jurisdiction is vested in the Supreme Court or where the municipality is adverse to the provincial government or another municipality in the same province. Complemented by Section 3 of Republic Act No. 2264, only the provincial fiscal and the municipal attorney can represent a province or municipality in lawsuits. The provision is mandatory. The municipality’s authority to employ a private lawyer is expressly limited to situations where the provincial fiscal is disqualified to represent it. Because the records contained nothing to show that the provincial fiscal was disqualified to act as counsel for the Municipality of Pililla on appeal, Atty. Mendiola’s appearance was without authority of law. The Court relied on Ramos vs. Court of Appeals and Province of Cebu vs. Intermediate Appellate Court.
• Exception for Disqualified or Refusing Fiscal: Atty. Mendiola’s submission that the exception includes situations where the provincial fiscal refuses to handle the case was rejected. The fiscal’s refusal to represent the municipality is not a legal justification for employing private counsel. Unlike a practicing lawyer who may decline employment, a fiscal cannot refuse to perform functions on grounds not provided by law without violating his oath of office. Instead of engaging a special attorney, the municipal council should request the Secretary of Justice to appoint an acting provincial fiscal in place of the provincial fiscal who declined, pursuant to Section 1679 of the Revised Administrative Code. The Court cited Enriquez, Sr. vs. Gimenez and De Guia vs. The Auditor General.
• Timing of Objection: The contention that PPC could not raise lack of authority for the first time on appeal was untenable. The legality of counsel’s representation can be questioned at any stage of the proceedings. In the cited cases, the issue of lack of authority of private counsel to represent a municipality was raised for the first time in proceedings for collection of attorney’s fees after the decision had become final and executory and/or had been executed. Thus, the objection was timely.
• Revocation of Counsel’s Authority: Even assuming Atty. Mendiola was duly authorized, the authority was deemed revoked when the municipality, through the municipal mayor and without his participation, entered into a compromise agreement with PPC regarding execution of the judgment and filed a “Satisfaction of Judgment” and a “Release and Quitclaim.” A client, by appearing personally and presenting a motion by himself, is considered to have impliedly dismissed his lawyer. The municipality was entitled to dispense with his services at any time. Both at common law and under Section 26, Rule 138 of the Rules of Court, a client may dismiss his lawyer at any time or at any stage of the proceedings, and nothing prevents a litigant from appearing before the court to conduct his own litigation. The client also has an undoubted right to compromise a suit without the intervention of his lawyer. The Court cited Rustia vs. The Judge of the Court of First Instance of Batangas and Aro vs. Nañawa.
• Attorney’s Fees and Liens: The lawyers’ right to fees from their clients may not be invoked by the lawyers themselves as a ground for disapproving or holding in abeyance the approval of a compromise agreement. The lawyers concerned can enforce their rights in the proper court in an appropriate proceeding in accordance with the Rules of Court, but those rights may not be used to prevent approval of the compromise agreement. The Court cited Jesalva vs. Bautista and Cabildo vs. Navarro.
• Alternative Remedy in Dismissal: The apprehension of Atty. Mendiola that it was impossible for the municipality to file a similar petition because the mayor who controls its legislative body would not take the initiative was not only conjectural but without factual basis. Contrary to his pretensions, there was a manifestation and motion pending with the trial court filed by the municipal mayor for the withdrawal of the “Satisfaction of Judgment” and the “Release and Quitclaim” previously filed. Thus, the Court of Appeals’ dismissal without prejudice to a similar petition by the proper legal officer was proper.

• Legal Representation of Municipalities — Under Section 1683 of the Revised Administrative Code and Section 3 of Republic Act No. 2264, only the provincial fiscal and municipal attorney can represent a province or municipality in lawsuits. Private attorneys cannot. The municipality’s authority to employ a private lawyer is limited to situations where the provincial fiscal is disqualified, and the disqualification must appear on record. If the fiscal refuses, the municipal council should request the Secretary of Justice to appoint an acting provincial fiscal under Section 1679.
• Questioning Authority of Counsel at Any Stage — The lack of authority of a private counsel to represent a municipality may be questioned at any stage of the proceedings, including for the first time on appeal or in proceedings to collect attorney’s fees after final judgment.
• Revocation of Counsel’s Authority by Client’s Acts — A client may dismiss his lawyer at any time or at any stage of the proceedings. A client who appears personally and files a motion by himself is considered to have impliedly dismissed his lawyer. A client also has the right to compromise a suit without the intervention of his lawyer.
• Attorney’s Fees and Compromise — A lawyer’s right to fees may not be invoked to disapprove or hold in abeyance the approval of a compromise agreement; the lawyer must enforce the right in a separate appropriate proceeding.
• Compromise and Satisfaction of Judgment — The client may compromise a suit without the intervention of counsel, and counsel’s fee lien does not prevent the approval or effectivity of the compromise.

• "The Court of Appeals is correct in holding that Atty. Mendiola has no authority to file a petition in behalf of and in the name of the Municipality of Pililla." — States the core holding that private counsel cannot file a petition for a municipality.
• "Under the above provision, complemented by Section 3, Republic Act No. 2264, the Local Autonomy Law, only the provincial fiscal and the municipal attorney can represent a province or municipality in their lawsuits. The provision is mandatory. The municipality's authority to employ a private lawyer is expressly limited only to situations where the provincial fiscal is disqualified to represent it." — Canonical formulation of the rule on municipal legal representation and its limited exception.
• "The legality of his representation can be questioned at any stage of the proceedings." — Establishes that lack of authority of counsel is not waived by failure to raise it earlier.
• "A client, by appearing personally and presenting a motion by himself, is considered to have impliedly dismissed his lawyer." — Defines the implied dismissal of counsel when the client acts personally in the litigation.

• Ramos vs. Court of Appeals, et al., G.R. No. 53766, October 30, 1981, 108 SCRA 728 — Controlling precedent cited for the rule that private attorneys cannot represent a province or municipality in lawsuits.
• Province of Cebu vs. Intermediate Appellate Court, et al., G.R. No. 72841, January 29, 1987, 147 SCRA 447 — Reiterated the rule that private attorneys cannot represent a province or municipality.
• Municipality of Bocaue, et al. vs. Manotok, 93 Phil. 173 (1953) — Cited for the limitation that a municipality’s authority to employ a private lawyer is expressly limited to situations where the provincial fiscal is disqualified.
• Enriquez, Sr. vs. Gimenez, etc., 107 Phil. 932 (1960) — Cited in support of the rule on disqualification and the rejection of the fiscal’s refusal as justification for private counsel.
• De Guia vs. The Auditor General, et al., L-29824, 44 SCRA 169 — Cited for the requirement that the provincial fiscal’s disqualification must appear on record and that refusal is not a legal justification.
• Rustia vs. The Judge of the Court of First Instance of Batangas, et al., 44 Phil. 62 (1922) — Cited for the rule that a client may dismiss his lawyer at any time and may compromise a suit without the lawyer’s intervention.
• Aro vs. Nañawa, et al., L-24163, April 28, 1969, 27 SCRA 1090 — Cited for the client’s right to compromise a suit without the intervention of his lawyer.
• Jesalva, et al. vs. Bautista, et al., 105 Phil. 348 (1959) and Cabildo, et al. vs. Navarro, et al., L-31865, November 26, 1973, 54 SCRA 26 — Cited for the rule that a lawyer’s right to fees cannot be used to disapprove or hold in abeyance a compromise agreement.

• Section 1683, Revised Administrative Code — Duty of fiscal to represent provinces and provincial subdivisions in litigation. The provincial fiscal shall represent the province and any municipality or municipal district thereof in any court, except where original jurisdiction is vested in the Supreme Court or where the municipality is adverse to the provincial government or another municipality in the same province. When the interests of a provincial government and of any political division thereof are opposed, the provincial fiscal shall act on behalf of the province. When the provincial fiscal is disqualified to serve any municipality or other political subdivision of a province, a special attorney may be employed by its council. Applied: only the provincial fiscal and municipal attorney can represent a municipality; private counsel is unauthorized absent disqualification on record.
• Section 3, Republic Act No. 2264 (Local Autonomy Law) — The municipal attorney, as the head of the legal division or office of a municipality, shall act as legal counsel of the municipality and perform such duties and exercise such powers as may be assigned to him by the council. Applied: complements Section 1683 in limiting representation to the provincial fiscal and municipal attorney.
• Section 1679, Revised Administrative Code — Cited for the procedure when a fiscal declines to handle a case: the municipal council should request the Secretary of Justice to appoint an acting provincial fiscal in place of the provincial fiscal who declined. Applied: refusal of the fiscal is not justification for employing private counsel.
• Section 26, Rule 138, Rules of Court — A client may dismiss his lawyer at any time or at any stage of the proceedings. Applied: the municipality’s compromise and filings without counsel’s participation impliedly dismissed Atty. Mendiola.
• Section 9, Administrative Code of 1987 (E.O. No. 292) — Cited in the footnote to Section 1683; it retains provincial/city prosecution offices and provides that they shall continue to discharge their functions under existing law. Applied: supports the continued application of the representation rules under existing law.

Narvasa, C.J.; Padilla, J.; Puno, J.; Mendoza, J.