G.R. No. 155692 ; October 23, 2003
PHIVIDEC INDUSTRIAL AUTHORITY and ATTY. CESILO ADAZA, petitioners, vs. CAPITOL STEEL CORPORATION and CHENG HAN SUI, respondents.

FACTS

Petitioner PHIVIDEC Industrial Authority, a government-owned and controlled corporation (GOCC), through private lawyer Atty. Cesilo Adaza, filed a complaint for expropriation against respondents. Respondents moved to dismiss the case on two grounds: first, the amended complaint lacked the required certification against forum shopping, and second, Atty. Adaza lacked the authority to represent PHIVIDEC as its counsel. The Regional Trial Court denied the motion to dismiss. On appeal, the Court of Appeals initially affirmed the RTC but, upon reconsideration, reversed itself. The appellate court held that the engagement of a private counsel by a GOCC requires the prior written concurrence of the Office of the Government Corporate Counsel (OGCC) and the Commission on Audit (COA) under pertinent circulars, which PHIVIDEC failed to secure at the time of filing. The case was dismissed without prejudice.

ISSUE

Whether the Court of Appeals erred in dismissing the expropriation complaint on the grounds of the private counsel’s lack of authority and the absence of a forum shopping certification.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals. On the authority of counsel, the Court meticulously traced the legal history governing GOCC legal representation. It highlighted that Presidential Decree No. 1415 designates the OGCC as the exclusive law office for all GOCCs, without exception. This law, enacted in 1978, impliedly repealed earlier statutes that allowed exceptions with written consent. The subsequent issuance of Memorandum Circular No. 9 and COA Circular No. 86-255, which require OGCC and COA concurrence for hiring private lawyers, merely reinforces this stringent policy. Since PHIVIDEC failed to secure the required prior written concurrences at the time it filed the complaint through Atty. Adaza, the representation was invalid, rendering the complaint fatally defective. The Court emphasized that this rule is rooted in public policy to prevent irregular expenditures of public funds. Regarding the forum shopping certification, while its subsequent submission might ordinarily constitute substantial compliance, this defect was rendered moot by the more fundamental flaw of unauthorized representation. The dismissal without prejudice was proper, allowing PHIVIDEC to refile the action through the OGCC or a duly authorized private counsel.