G.R. No. 96628 July 3, 1992
CEFERINO INCIONG, petitioner, vs. HONORABLE EUFEMIO DOMINGO, Chairman, Commission on Audit, respondents.

FACTS

The Philippine Sugar Commission (PHILSUCOM) failed to pay real estate taxes on its sugar refinery in Barangay Caloocan, Balayan, Batangas. The Provincial Treasurer scheduled a public auction for March 6, 1986. PHILSUCOM filed a petition for prohibition in the Court of Appeals (CA-G.R. SP No. 08467) to restrain the sale, and the CA issued a restraining order on March 5, 1986. Atty. Ceferino Inciong filed a Motion for Intervention on behalf of Barangay Caloocan, alleging it was an indispensable party entitled to a 10% share of the property tax. Barangay Caloocan also filed an Answer and a motion for reconsideration of the restraining order. On December 24, 1986, PHILSUCOM and the Municipal Treasurer entered into an Amnesty Compromise Agreement under Executive Order No. 42, leading to the dismissal of the case. PHILSUCOM paid P7,199,887.51, and the Municipal Treasurer allocated 10% (P719,988.75) to Barangay Caloocan. Atty. Inciong then filed a case for attorney’s fees (Civil Case No. 1878) against the Province of Batangas, Municipality of Balayan, and Barangay Caloocan before the Regional Trial Court (RTC), Branch XI, Balayan, Batangas. On August 9, 1989, the RTC rendered a partial judgment in favor of Inciong, ordering Barangay Caloocan to pay attorney’s fees equivalent to 10% of the amount awarded to the barangay. This decision became final, and a writ of execution was issued. However, when a Withdrawal Voucher was presented for audit, the Provincial Auditor referred the matter to the Commission on Audit (COA). The COA Director, in a 2nd Indorsement, noted that the Barangay Captain’s request for legal assistance was not approved by the Sangguniang Barangay, nor by the Solicitor General and concurred in by COA as required under COA Circular No. 86-255. In a 3rd Indorsement dated December 12, 1990, COA Chairman Eufemio Domingo disallowed the payment, citing lack of Sangguniang Barangay approval, appropriation, and compliance with COA Circular No. 86-255. Hence, Atty. Inciong filed the instant petition.

ISSUE

Whether the Commission on Audit correctly disallowed the payment of attorney’s fees to Atty. Ceferino Inciong based on the lack of required approvals under COA Circular No. 86-255 and non-compliance with procedural requirements under B.P. 337.

RULING

The Supreme Court GRANTED the petition. The Court held that the COA’s disallowance was improper for three reasons: (1) The employment of Atty. Inciong by Barangay Caloocan, even if allegedly unauthorized by the Sangguniang Barangay, was binding on the barangay as it took no prompt measure to repudiate it, citing Province of Cebu v. Intermediate Appellate Court. (2) The RTC decision dated August 9, 1989, directing payment of attorney’s fees, had become final and executory and was binding upon Barangay Caloocan, citing Mercado v. Court of Appeals. (3) COA Circular No. 86-255 could not diminish the substantive right of petitioner to recover attorney’s fees under the final and executory RTC decision. However, the Court noted the COA’s argument that Barangay Caloocan’s rightful share under Republic Act No. 5447 was only P359,994.38 (50% of the basic tax, as the other half goes to the Special Education Fund), not P719,988.75. Thus, the Court ordered the COA to direct payment of attorney’s fees to Atty. Inciong equivalent to 10% of P359,994.38.