DOJ Opinion No. 013, s. 2003

DOJ OPINION NO. 013 , s. 2003 March 14, 2003 Mr. Rufo Colayco President and Chief Executive Officer Bases Conversion and Development Authority BCDA Corporate Center Gozar corner Lucas Streets Villamor Air Base, Pasay City Sir : This refers to your request to grant the Bases Conversion and Development Authority (BCDA) permission to hire external counsel to prosecute and/or defend its cases involving the Heritage Park Project (HPP). cITCAa It is disclosed that the BCDA is embroiled in major cases involving private parties and the Public Estates Authority (PEA) but is unable to obtain appropriate legal advice from the Office of the Government Corporate Counsel (OGCC). It appears that the magnitude and urgency of the problem has arisen in view of the following antecedent facts: 1. On September 4, 1994, BCDA, PEA and the Philippine National Bank (PNB) entered into a Pool Formation Trust Agreement (PFTA) for the construction of a one hundred five hectare (105)-memorial park on a parcel of land owned by BCDA located at Fort Bonifacio, Taguig, known as the Heritage Park Project; 2. To realize the construction of the Heritage Park, the Office of the President designated BCDA as Principal Proponent and Project Owner, with PEA as Project Manager and PNB as Trustee under the PFTA; 3. PEA, the Project Manager then, entered into construction contracts with several contractors, including Edison Development and Construction (EDC), for the construction of the Park; 4. By reason of the extensive and unreasonable delay by EDC in the performance of its obligations under its landscape and terrasolaeum contracts, PEA, on the basis of the technical findings of the resident works engineer, terminated the landscaping and terrasolaeum contracts of EDC; 5. Due to its poor performance, PEA's appointment as Project Manager was also terminated. 6. Due to the aforementioned termination of EDC and PEA's services, complaints have been filed by EDC against PEA and BCDA before the Construction Industry Administration Commission (CIAC) praying for damages in varying sums of approximately one hundred ninety six million pesos (P196M), and likewise before other courts; 7. The PFTA also called for the eventual formation of a private non-stock, non-profit corporation consisting of Certificateholders as members, in a manner stated as follows: 'At any time within the three-year development period, but not later than 60 days prior to the completion of the project, as estimated by the PEA/Works Engineer, BCDA shall organize or cause to be organized, under the laws of the Republic of the Philippines, a non-stock, nonprofit corporation, with the Certificateholders as its members, whose voting rights correspond to the type of lot covered by their certificates in accordance with Section 9.05 and Section 11.03 of this Agreement.' 8. Thus, BCDA, in coordination with PNB and PEA, and with the assistance of the OGCC, incorporated the Heritage Park Management Council (HPMC) and its Board of trustees was subsequently elected; 9. Upon its incorporation and election of the Board of Trustees, HPMC assumed the management and trusteeship of the Park and has become a private organization, as provided for by the PFTA, to wit: 'Upon the creation of the Board of Trustees, the nature of the ownership of the Project is determined by the controlling majority of Certificateholders. The Heritage Park Project is deemed private where the majority of the certificates are held by private Certificateholders.' 10. BCDA is now a certificateholder of HPMC although it is bound by its representations and warranties on the Heritage Park's brochures and prospectus as the original Project Owner. It is stated that despite the clear liability of PEA under the relevant provisions of the PFTA where its contractor is concerned, the OGCC, while protecting PEA's interests, is not in a position to protect the interests of BCDA that are contrary to PEA's and that the OGCC has, in fact, instructed BCDA to pay PEA's liabilities in one case despite absolute lack of basis therefor. It is also stated that the OGCC has not taken any action to protect BCDA and HPMC against attempts of PEA's contractor for satisfaction of judgments rendered by CIAC against PEA, even if HPMC is not even a party to the case. In sum, the instant request is basically anchored on the following: (1) the OGCC lawyers assigned to BCDA are already handling a wide scope of legal matters for BCDA and are already swamped with work; (2) OGCC is in a conflict-situation with regard to all HPMC-related cases where BCDA is concerned and this can only be resolved by the hiring of an independent counsel; (3) the subject matter of the Heritage Park, BCDA, PEA and its contractor involves private rights (majority of the certificates are held by private certificateholders) and private funds where HPMC is concerned, and (4) public interest which will be prejudiced because of the inability of the OGCC to adequately protect BCDA's interests as the original Project owner. As the discussion below will show, this Department is without authority to grant the instant request of BCDA, a government-owned or controlled corporation, for permission to hire external counsel. Commission on Audit (COA) Circular No. 86-255 dated April 2, 1986 (Inhibitions Against Employment by Government Agencies and Instrumentalities, Including Government-Owned or Controlled Corporations, of Private Lawyers to Handle their Legal Cases), reads in part: ". . . payment out of public funds of retainer fees to private law practitioners who are so hired or employed without the prior written conformity and acquiescence of the Solicitor General or the Government Corporate Counsel , as the case may be, as well as the written concurrence of the Commission on Audit shall be disallowed in audit and the same shall be a personal liability of the officials concerned." The amendatory COA Circular No. 98-002, s. 1998, likewise pertinently provides: ". . . public funds shall not be utilized for payment of the services of a private legal counsel or law firm to represent government agencies in court or to render legal services for them. In the event that such legal services cannot be avoided or is justified under extraordinary or exceptional circumstances for government agencies and instrumentalities including government-owned or controlled corporations, the written conformity and acquiescence of the Solicitor General or the Government Corporate Counsel , as the case may be, and the written concurrence of the commission on audit shall first be secured before the hiring or employment of a private lawyer or law firm ." Although a circular duly issued is not strictly a statute or law, it has, however, the force and effect of law ( Banco Filipino Savings and Mortgage Bank vs. Navarro, 152 SCRA 346 [1987] ; Pascual vs. Commissioner of Customs, 4 SCRA 1020 [1962] ). Administrative rules and regulations issued in accordance with law, have the force and effect of law ( Victorias Milling Co., Inc. vs. Office of the Presidential Assistant for Legal Affairs, 153 SCRA 317 [1987] ; Macailing vs. Andrada, 31 SCRA 126 [1970] ; Antique Sawmills, Inc. vs. Zayco, et al . , 17 SCRA 316 [1966] ; Valerio vs. Secretary of Agriculture and Natural Resources, 7 SCRA 719 [1963] ). While this Department exercises supervision and control over the OGCC, we have to consider the express provision of law that the OGCC is the ex-officio legal counsel of the BCDA (Sec. 18, R.A. No. 7227), as well as the above-cited Circulars which were issued by COA in the exercise of its mandate as the agency which has the "exclusive authority . . . to define the scope of its audit and examination, establish the techniques and methods required therefor, and promulgate accounting and auditing rules and regulations , including those for the prevention and disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable expenditures, or uses of government funds and properties" ( Sec . 2[2], Article IX-D, 1987 Constitution ). ( Emphasis Supplied ) In light of the foregoing, it is suggested that you obtain the written conformity and acquiescence of the OGCC and the written concurrence of the COA as required by COA Circular No. 98-002, s. 1998. CIAHaT Very truly yours, (SGD.) SIMEON A. DATUMANONG Secretary