Province of Cebu vs. Intermediate Appellate Court

A province that retains the benefits of litigation conducted by privately engaged counsel is liable for reasonable attorney's fees on quantum meruit, even absent Provincial Board authorization, where the Provincial Board itself is the adverse party and the provincial fiscal is effectively unavailable, making compliance with the mandatory fiscal-representation rule an impossibility.

The Province of Cebu acts through its governor and Provincial Board, with authority to direct civil suits governed by the Revised Administrative Code. Section 1683 thereof mandates representation of the province by the provincial fiscal and permits employment of a special attorney only when the fiscal is disqualified, complemented by Section 3 of the Local Autonomy Law. The scheme was intended to spare local governments the expense of private counsel and to entrust their litigation to accountable government lawyers.

On February 4, 1964, while Governor Rene Espina was on official business in Manila, Vice-Governor Priscillano Almendras and three members of the Provincial Board enacted Resolution No. 188 donating to the City of Cebu 210 province-owned lots in the City of Cebu with an aggregate area of over 380 hectares, and authorizing the Vice-Governor to sign the deed. The deed was immediately executed by Almendras for the province and accepted by Mayor Sergio Osmeña, Jr. for the city, prepared and notarized by a private lawyer and later approved by the Office of the President through Executive Secretary Juan Cancio. Under the deed, the city was to sell the lots to raise funds for public improvement projects, with one year from August 15, 1964 within which to dispose of them.

Upon his return, Espina denounced the donation as illegal and immoral, involving practically all patrimonial property of the province whose income was less than one-fourth that of the city. To prevent disposition, officers and members of the Cebu Mayor's League for their municipalities with some taxpayers, including Atty. Pablo P. Garcia, filed Civil Case No. R-8669 as a derivative suit for the Province of Cebu against the City of Cebu, Mayor Osmeña, Jr. and the responsible provincial officials. The city defendants moved to dismiss for lack of legal capacity to sue, and in May 1965 the court dismissed the case on the ground that plaintiffs were not the real parties in interest, denying reconsideration. Meanwhile, Mayor Osmeña, Jr. announced he would borrow from the Philippine National Bank using the donated lots as collaterals, and in July 1965 the city advertised the sale of all remaining unsold lots.

Apprehensive that the lots would be irretrievably lost, Espina engaged Garcia to file and prosecute a case in his behalf and in behalf of the Province of Cebu. On August 6, 1965, Garcia filed the complaint for annulment with application for preliminary injunction, which was granted the same day. The complaint was later amended to implead Mayor Carlos P. Cuizon after Osmeña filed his certificate of candidacy for senator on September 9, 1965. Sometime in 1972 the Provincial Board authorized Provincial Attorney Alfredo G. Baguia to appear for the province and incumbent officials, and on January 30, 1973 Baguia entered appearance as additional counsel for the province and for Governor Osmundo Rama, Vice-Governor Salutario Fernandez and Board Members Leonardo Enad, Guillermo Legazpi and Rizalina Migallos. On January 31, 1973, Baguia filed a complaint in intervention stating that the Province of Cebu and Provincial Board were joining former Governor Espina and adopting his causes of action, claims and position in the August 6, 1965 complaint.

On June 25, 1974, the province and the city reached a compromise agreement, approved by the court on July 15, 1974 with decision rendered on that basis. The court ordered the city to return and deliver the enumerated lots to the province upon payment by the province of P1,500,000.00, declared the city's retention of eleven lots, namely Lot Nos. 1141, 1261, 1268, 1269, 1272, 1273, 917, 646-A, 646-A-4-0 and 10107-C, ordered turnover of P187,948.93 mentioned in Annex A of defendants' October 21, 1974 manifestation, declared the city and its past and present officers free from liabilities to third persons in connection with the lots to be assumed by the province, and ordered the Register of Deeds to cancel city titles and issue new ones in the province's name. On December 4, 1974, the court directed issuance of a writ of execution to implement the decision.

On April 14, 1975, Garcia filed through counsel a Notice of Attorney's Lien pursuant to Section 37, Rule 138 of the Rules of Court, which the province opposed on April 23, 1975 as not allowed by law and jurisprudence, with a rejoinder filed thereafter. After hearing, the trial court found that Garcia's filing of the case and securing of the injunction against the city and Osmeña from selling the lots, against Board members from extending the automatic reversion beyond August 15, 1965, and against the Register of Deeds from transferring title, had frustrated disposition to third parties and saved the lots for eventual recovery.

• Unauthorized Employment: Petitioner argued that Governor Espina's employment of claimant as counsel for the Province of Cebu was unauthorized and violative of Sections 1681 to 1683 in relation to Section 1679 of the Revised Administrative Code, because no Provincial Board resolution authorized it.
• Exclusive Fiscal Representation: Petitioner maintained that only the provincial fiscal and municipal attorney can represent a province or municipality, that employment of private counsel is limited to disqualification of the fiscal, and that the fiscal here was not disqualified.
• Inapplicability of Attorney's Lien: Petitioner argued that payment of attorney's fees and reimbursement of incidental expenses are not allowed by law and settled jurisprudence, and that the claim is beyond the purview of Section 37, Rule 138 of the Rules of Court.
• Lack of Causation and Excessiveness: Petitioner argued that Garcia's services did not save the lots because the donation contained a reversion clause automatically reverting undisposed lots as of August 15, 1965, with only about 17 lots disposed by then, and that 30% or 5% of properties worth P120,000,000.00 in 1979 was out of the question.

• Impossibility of Board Authorization: Respondent argued that the cited provisions contemplate a normal situation where the adverse party is a third person, whereas here the controversy was an intramural fight between the Governor and Board members, making it unthinkable for the Board to authorize suit against itself or direct the fiscal to file it.
• Disqualification of Fiscal: Respondent argued that the Board effectively disqualified the fiscal by directing him to appear for its members in Civil Case No. R-8669 to defend Resolution No. 186 and uphold the donation's validity, and that even a willing fiscal could have been frustrated by dismissal orders or refusal to appropriate litigation funds.
• Necessity of Injunction Despite Reversion: Respondent argued that the reversion clause gave the Provincial Board discretion to extend the period beyond August 15, 1965, and with the majority's predisposition extension and eventual disposition of all lots would have been a matter of course without the injunction.

• Authority to Employ Private Counsel: Whether the Province of Cebu may be held liable for fees of private counsel engaged by the Governor without Provincial Board resolution, despite Sections 1681 to 1683 of the Revised Administrative Code.
• Disqualification of Provincial Fiscal: Whether the provincial fiscal was disqualified or effectively unavailable to represent the province so as to justify private representation.
• Right to Compensation: Whether respondent counsel is entitled to recover attorney's fees from the province on quantum meruit and under Section 37, Rule 138 of the Rules of Court.
• Amount of Fees: Whether the proper compensation is 30% as claimed, 5% of market value as fixed by the Intermediate Appellate Court, or P30,000.00 as fixed by the trial court.

• Authority to Employ Private Counsel: Yes, liability was imposed by way of exception. Strict application was excused because the Board whose authorization was required was the very party to be sued, rendering compliance an impossibility correctible in equity.
• Disqualification of Provincial Fiscal: Yes. The fiscal was effectively disqualified, having been directed to defend the Board members and uphold the donation in Civil Case No. R-8669 and being subject to Board control over prosecution and funding.
• Right to Compensation: Yes. Entitlement on quantum meruit was sustained, the province having knowingly accepted the benefits through intervention and continuance of counsel, amounting to ratification and estoppel.
• Amount of Fees: P30,000.00 plus P289.43 expenses. Both 30% and 5% of properties worth P120,000,000.00 in 1979 were rejected as excessive for a case decided by compromise without hearing on the merits.

• Authority to Employ Private Counsel: The mandatory rule that only the fiscal or municipal attorney may represent a local government, intended to avoid private-lawyer expense and ensure dedicated service, was acknowledged. It was held inapplicable to the abnormal intramural dispute where the Governor sought redress against the Board members themselves. Because the Board could not be expected to authorize employment of counsel to sue itself or to direct the fiscal under Section 2102 to bring the action, equity required departure from the general rule.
• Disqualification of Provincial Fiscal: Representation by respondent became necessary because of the Board's failure or refusal to direct suit for recovery. The Board's direction that the fiscal appear for its members in Civil Case No. R-8669, with an answer upholding the donation's validity, placed the fiscal in a position incompatible with representing the province to recover the same properties. Designation of another prosecutor was likewise unavailable after Malacañang had approved the donation.
• Right to Compensation: The presumption that an attorney acts under his purported client's authority applied, his authority having gone unquestioned below, and acquiescence with knowledge without prompt repudiation was tantamount to ratification. The successor board and officials allowed Garcia to continue and joined him by intervention, leading him to believe his services remained necessary. Under implied municipal liability, a municipality accepting benefits it had general power to contract for must do justice therefor, and having reaped the recovery it was estopped to plead ultra vires to deny answerability; denial would deprive counsel of property without due process.
• Amount of Fees: The records were reviewed and the trial judge's exhaustive findings adopted. Garcia's filing and injunction were credited with frustrating disposition and preserving the lots for recovery, notwithstanding the reversion clause, since the Board could have extended the August 15, 1965 date. Nevertheless, the case was resolved by compromise without Garcia's participation and without hearing on the merits after pre-trial, making percentage-of-value awards disproportionate and unreasonable on quantum meruit.

• Mandatory representation by government lawyer — Section 1683 of the Revised Administrative Code, complemented by Section 3 of the Local Autonomy Law, mandatorily requires that a province or municipality be represented by the provincial fiscal or municipal attorney, with private counsel permitted only when the fiscal is disqualified. The rule was reaffirmed as settled under Ramos vs. Court of Appeals, De Guia vs. Auditor General, Municipality of Bocaue vs. Manotok, and Enriquez, Sr. vs. Gimenez, but held subject to equitable exception in the intramural dispute presented.
• Equity as correction to general law — Where strict application of a comprehensive law would, through want of a provided exception, deny redress for a valid grievance and require an impossibility, equity permits departure. Applied to excuse lack of board authorization where the board to authorize suit was the defendant, invoking Nemo tenetur ad impossibile.
• Implied municipal liability and estoppel — A municipality may become obligated upon implied contract to pay the reasonable value of benefits accepted or appropriated where it has general power to contract; the obligation arises not from the unlawful contract but from considerations outside it, measured by benefit received. Having regarded the engagement as valid to reap recovery of the lots, the province was estopped to plead ultra vires to deny fees.
• Presumption of attorney authority and ratification by acquiescence — Until clearly shown otherwise, an attorney is presumed to act under the litigant's authority, especially when unquestioned below. Even employment by an unauthorized person binds the client with knowledge that fails promptly to repudiate, acquiescence being tantamount to ratification. Applied to the successor board's intervention joining Espina and allowance of Garcia's continuance as counsel.

• "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." — States the statutory allocation of the fiscal's duty under Section 1683 when province and subdivision interests conflict, framing the representation issue.
• "The petitioner can not set up the plea that the contract was ultra vires and still retain benefits thereunder." — Expresses the estoppel basis for holding the province liable after accepting recovery secured through private counsel's services.
• "Nemo tenetur ad impossibile (The law obliges no one to perform an impossibility)." — Justifies excusing board authorization and fiscal representation where the board to authorize was the party to be sued.
• "To deny private respondent compensation for his professional services would amount to a deprivation of property without due process of law (Cristobal v. Employees' Compensation Commission, 103 SCRA 329)." — Grounds the quantum meruit recovery in due process protection for professional services rendered and benefited from.

• Ramos vs. Court of Appeals, 108 SCRA 728 — Cited as settling that collaboration of a private firm with the fiscal and municipal attorney is not allowed and that local governments must be represented by government lawyers.
• De Guia vs. Auditor General, 44 SCRA 169 — Cited for the limitation that municipal authority to employ private counsel exists only where the provincial fiscal is disqualified.
• Municipality of Bocaue, et al. vs. Manotok, 93 Phil. 173 — Cited to the same effect on exclusive fiscal representation and the disqualification exception.
• Enriquez, Sr. vs. Gimenez, 107 Phil. 932 — Cited as illustrating the normal situation where the adverse party is a third person, distinguished from the present intramural fight.
• Tan Lua vs. O'Brien, 55 Phil. 53 — Cited for the rule that acquiescence in an attorney's employment with knowledge and without prompt repudiation is tantamount to ratification.
• Cristobal vs. Employees' Compensation Commission, 103 SCRA 329 — Cited for the proposition that denial of compensation for professional services amounts to deprivation of property without due process.

• Section 1683, Revised Administrative Code — Imposes duty on provincial fiscal to represent province and its subdivisions except where original jurisdiction is in the Supreme Court or where municipality is adverse to province or another subdivision, and allows special attorney only when fiscal is disqualified; applied as the general mandatory rule for representation.
• Sections 1681 to 1683 in relation to Section 1679, Revised Administrative Code — Invoked by petitioner to assail unauthorized employment; construed as contemplating normal third-party adversaries, not suits against the authorizing Board itself.
• Section 2102, Revised Administrative Code — Vests authority in the Provincial Board to direct bringing or defense of civil suits on behalf of the provincial government; held unworkable where Board members were defendants.
• Section 3, Local Autonomy Law — Cited as complementing Section 1683 in restricting representation to government lawyers.
• Section 37, Rule 138, Rules of Court — Basis for Garcia's April 14, 1975 Notice of Attorney's Lien to have his claim entered on the record; province opposed as beyond its purview, but entitlement was sustained on quantum meruit.

Fernan, Alampay, Paras and Padilla, JJ., concur. Bidin, J., took no part.