Republic of the Philippines Evangelina maintains that Article 111 of the Labor Code is the law that should
f the Labor Code is the law that should govern Atty.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 183385               February 13, 2009
EVANGELINA MASMUD (as substitute complainant for ALEXANDER J.
MASMUD), Petitioner, 
vs.
NATIONAL LABOR RELATIONS COMMISSION (First Division) and ATTY. ROLANDO B.
GO, JR., Respondents.
RESOLUTION
NACHURA, J.:
Before the Court is a petition for review on certiorari 1 assailing the Decision2 dated October 31,
2007 and the Resolution dated June 6, 2008 of the Court of Appeals (CA) in CA-G.R. SP No.
96279.
The facts of the case are as follows:
On July 9, 2003, Evangelina Masmud’s (Evangelina) husband, the late Alexander J. Masmud
(Alexander), filed a complaint 3 against First Victory Shipping Services and Angelakos (Hellas)
S.A. for non-payment of permanent disability benefits, medical expenses, sickness allowance,
moral and exemplary damages, and attorney’s fees. Alexander engaged the services of Atty.
Rolando B. Go, Jr. (Atty. Go) as his counsel.
In consideration of Atty. Go’s legal services, Alexander agreed to pay attorney’s fees on a
contingent basis, as follows: twenty percent (20%) of total monetary claims as settled or paid
and an additional ten percent (10%) in case of appeal. It was likewise agreed that any award of
attorney’s fees shall pertain to respondent’s law firm as compensation.
On November 21, 2003, the Labor Arbiter (LA) rendered a Decision granting the monetary
claims of Alexander. The dispositive portion of the decision, as quoted in the CA Decision,
reads: WHEREFORE, foregoing considered, judgment is rendered finding the [First Victory
Shipping Services and Angelakos (Hellas) S.A.] jointly and severally liable to pay [Alexander’s]
total permanent disability benefits in the amount of US$60,000.00 and his sickness allowance
of US$2,348.00, both in Philippine currency at the prevailing rate of exchange at the time of
payment; and to pay further the amount of ₱200,000.00 as moral damages, ₱100,000.00 as
exemplary damages and attorney’s fees equivalent to ten percent (10%) of the total monetary
award. [Alexander’s] claim for payment of medical expenses is dismissed for lack of basis. SO
ORDERED.4
Alexander’s employer filed an appeal before the National Labor Relations Commission
(NLRC). During the pendency of the proceedings before the NLRC, Alexander died. After
explaining the terms of the lawyer’s fees to Evangelina, Atty. Go caused her substitution as
complainant. On April 30, 2004, the NLRC rendered a Decision dismissing the appeal of
Alexander’s employer. The employer subsequently filed a motion for reconsideration. The
NLRC denied the same in an Order dated October 26, 2004.
On appeal before the CA, the decision of the LA was affirmed with modification. The award of
moral and exemplary damages was deleted. 5 Alexander’s employers filed a petition for
certiorari 6 before this Court. On February 6, 2006, the Court issued a Resolution dismissing the
case for lack of merit.
Eventually, the decision of the NLRC became final and executory. Atty. Go moved for the
execution of the NLRC decision, which was later granted by the LA. The surety bond of the
employer was garnished. Upon motion of Atty. Go, the surety company delivered to the NLRC
Cashier, through the NLRC Sheriff, the check amounting to ₱3,454,079.20. Thereafter, Atty.
Go moved for the release of the said amount to Evangelina.
On January 10, 2005, the LA directed the NLRC Cashier to release the amount of
₱3,454,079.20 to Evangelina. Out of the said amount, Evangelina paid Atty. Go the sum of
₱680,000.00.
Dissatisfied, Atty. Go filed a motion to record and enforce the attorney’s lien alleging that
Evangelina reneged on their contingent fee agreement. Evangelina paid only the amount of
₱680,000.00, equivalent to 20% of the award as attorney’s fees, thus, leaving a balance of
10%, plus the award pertaining to the counsel as attorney’s fees.
In response to the motion filed by Atty. Go, Evangelina filed a comment with motion to release
the amount deposited with the NLRC Cashier. In her comment, Evangelina manifested that
Atty. Go’s claim for attorney’s fees of 40% of the total monetary award was null and void based
on Article 111 of the Labor Code.
On February 14, 2005, the LA issued an Order 7 granting Atty. Go’s motion, the fallo of which
reads: WHEREFORE, premises considered, and further considering the substitute
complainant’s initial payment of 20% to movant-counsel of the monetary claims as paid, let the
balance or unpaid twenty (20%) per cent of attorney’s fees due movant-counsel (or the amount
of ₱839,587.39) be recorded as lien upon all the monies that may still be paid to substitute
complainant Evangelina Masmud.
Accordingly, the NLRC Cashier is directed to pay movant-counsel the amount of ₱677,589.96
which is currently deposited therein to partially satisfy the lien. SO ORDERED. 8
Evangelina questioned the February 14, 2005 Order of the LA before the NLRC. On January
31, 2006, the NLRC issued a Resolution9 dismissing the appeal for lack of merit.
Evangelina then elevated the case to the CA via a petition for certiorari. 10 On October 31,
2007, the CA rendered a Decision 11 partially granting the petition. The dispositive portion of the
decision reads: WHEREFORE, the petition is PARTIALLY GRANTED. The Resolutions dated
January 31, 2006 and July 18, 2006 are hereby AFFIRMED with MODIFICATION in that the
Attorney’s fees of respondent Atty. Rolando B. Go, Jr. is declared fully compensated by the
amount of ₱1,347,950.11 that he has already received. SO ORDERED. 12
Evangelina filed a motion for reconsideration. However, on June 6, 2008, the CA issued a
Resolution13 denying the motion for reconsideration for lack of merit.
Hence, the instant petition. Evangelina presented this issue, viz.:
THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR OF LAW IN
ITS DECISION DATED 31 OCTOBER 2007 AND RESOLUTION DATED 6 JUNE 2008
INSOFAR AS IT UPHOLDS RESPONDENT LAWYER’S CLAIM OF FORTY PERCENT (40%)
OF THE MONETARY AWARD IN A LABOR CASE AS ATTORNEY’S FEES. 14
In effect, petitioner seeks affirmance of her conviction that the legal compensation of a lawyer
in a labor proceeding should be based on Article 111 of the Labor Code.
There are two concepts of attorney's fees. In the ordinary sense, attorney's fees represent the
reasonable compensation paid to a lawyer by his client for the legal services rendered to the
latter. On the other hand, in its extraordinary concept, attorney's fees may be awarded by the
court as indemnity for damages to be paid by the losing party to the prevailing party, 15 such
that, in any of the cases provided by law where such award can be made, e.g., those
authorized in Article 2208 of the Civil Code, the amount is payable not to the lawyer but to the
client, unless they have agreed that the award shall pertain to the lawyer as additional
compensation or as part thereof. 16
Here, we apply the ordinary concept of attorney’s fees, or the compensation that Atty. Go is
entitled to receive for representing Evangelina, in substitution of her husband, before the labor
tribunals and before the court.
1|Page
Go’s compensation as her counsel and assiduously opposes their agreed retainer contract.
Article 111 of the said Code provides:
ART. 111. Attorney's fees. — (a) In cases of unlawful withholding of wages the culpable party
may be assessed attorney's fees equivalent to ten percent of the amount of the wages
recovered.1avvphi1.zw+
Contrary to Evangelina’s proposition, Article 111 of the Labor Code deals with the
extraordinary concept of attorney’s fees. It regulates the amount recoverable as attorney's fees
in the nature of damages sustained by and awarded to the prevailing party. It may not be used
as the standard in fixing the amount payable to the lawyer by his client for the legal services he
rendered.17
In this regard, Section 24, Rule 138 of the Rules of Court should be observed in determining
Atty. Go’s compensation. The said Rule provides:
SEC. 24. Compensation of attorney's; agreement as to fees. — An attorney shall be entitled to
have and recover from his client no more than a reasonable compensation for his services,
with a view to the importance of the subject matter of the controversy, the extent of the
services rendered, and the professional standing of the attorney. No court shall be bound by
the opinion of attorneys as expert witnesses as to the proper compensation, but may disregard
such testimony and base its conclusion on its own professional knowledge. A written contract
for services shall control the amount to be paid therefor unless found by the court to be
unconscionable or unreasonable. 18
The retainer contract between Atty. Go and Evangelina provides for a contingent fee. The
contract shall control in the determination of the amount to be paid, unless found by the court
to be unconscionable or unreasonable. 19Attorney's fees are unconscionable if they affront
one's sense of justice, decency or reasonableness. 20 The decree of unconscionability or
unreasonableness of a stipulated amount in a contingent fee contract will not preclude
recovery. It merely justifies the fixing by the court of a reasonable compensation for the
lawyer's services.21
The criteria found in the Code of Professional Responsibility are also to be considered in
assessing the proper amount of compensation that a lawyer should receive. Canon 20, Rule
20.01 of the said Code provides:
CANON 20 — A LAWYER SHALL CHARGE ONLY FAIR AND REASONABLE FEES.
Rule 20.01. — A lawyer shall be guided by the following factors in determining his fees:
(a) The time spent and the extent of the services rendered or required;
(b) The novelty and difficulty of the question involved;
(c) The importance of the subject matter;
(d) The skill demanded;
(e) The probability of losing other employment as a result of acceptance of the
proffered case;
(f) The customary charges for similar services and the schedule of fees of the
IBP Chapter to which he belongs;
(g) The amount involved in the controversy and the benefits resulting to the client
from the service;
(h) The contingency or certainty of compensation;
(i) The character of the employment, whether occasional or established; and
(j) The professional standing of the lawyer.
Contingent fee contracts are subject to the supervision and close scrutiny of the court in order
that clients may be protected from unjust charges. 22 The amount of contingent fees agreed
upon by the parties is subject to the stipulation that counsel will be paid for his legal services
only if the suit or litigation prospers. A much higher compensation is allowed as contingent fees
because of the risk that the lawyer may get nothing if the suit fails. 23The Court finds nothing
illegal in the contingent fee contract between Atty. Go and Evangelina’s husband. The CA
committed no error of law when it awarded the attorney’s fees of Atty. Go and allowed him to
receive an equivalent of 39% of the monetary award.
The issue of the reasonableness of attorney's fees is a question of fact. Well-settled is the rule
that conclusions and findings of fact of the CA are entitled to great weight on appeal and will
not be disturbed except for strong and cogent reasons which are absent in the case at bench.
The findings of the CA, which are supported by substantial evidence, are almost beyond the
power of review by the Supreme Court.24
Considering that Atty. Go successfully represented his client, it is only proper that he should
receive adequate compensation for his efforts. Even as we agree with the reduction of the
award of attorney's fees by the CA, the fact that a lawyer plays a vital role in the administration
of justice emphasizes the need to secure to him his honorarium lawfully earned as a means to
preserve the decorum and respectability of the legal profession. A lawyer is as much entitled to
judicial protection against injustice or imposition of fraud on the part of his client as the client is
against abuse on the part of his counsel. The duty of the court is not alone to ensure that a
lawyer acts in a proper and lawful manner, but also to see that a lawyer is paid his just fees.
With his capital consisting of his brains and with his skill acquired at tremendous cost not only
in money but in expenditure of time and energy, he is entitled to the protection of any judicial
tribunal against any attempt on the part of his client to escape payment of his just
compensation. It would be ironic if after putting forth the best in him to secure justice for his
client, he himself would not get his due. 25
WHEREFORE, in view of the foregoing, the Decision dated October 31, 2007 and the
Resolution dated June 6, 2008 of the Court of Appeals in CA-G.R. SP No. 96279 are hereby
AFFIRMED. SO ORDERED.
 54 F.3d 150
1995-1 Trade Cases P 70,970
The INDUSTRY NETWORK SYSTEM, INC., v.
ARMSTRONG WORLD INDUSTRIES, INC. Steven M. Kramer, Appellant.
Nos. 94-5132 and 94-5164.
United States Court of Appeals,
Third Circuit.
Argued Dec. 1, 1994.
Decided April 25, 1995.
As Corrected May 4, 1995
1 Appellant Steven M. Kramer is an attorney who represented The Industry Network System,
Inc. and Elliot Fineman in the underlying litigation, an antitrust case against Armstrong World
Industries. After the first trial, in which his clients prevailed, Mr. Kramer ceased to represent
both plaintiffs.1 The issues that culminate in this appeal arise from the severance of that
relationship. Kramer believes he is entitled to a lien to ensure that his fees will be paid and
argues that the district court failed to recognize a lien. He appeals from three orders of the
district court: the order dated January 21, 1994, compelling Kramer to turn over his files to the
substituted counsel; the order dated February 8, 1994, denying reconsideration of its January
21st order; and the order dated February 25, 1994, denying Kramer's February 16, 1994
motion for an attorney's lien pursuant to New Jersey statutory law. These matters are now
before us for review pursuant to the appellant's notice of appeal filed March 7, 1994.2 Kramer
represented himself in the district court and does so again before us. We will affirm.
2 Kramer sets forth three issues in his opening brief to this court: (1) whether the district court
refused to recognize an attorney's lien, to which Kramer contends he is entitled for defending
his client from counterclaims, and erred by holding him in contempt when he refused to
surrender his files to substituted counsel; (2) whether the district court should have insisted
that Kramer be paid before new counsel replaced him; and (3) whether the district judge
should be disqualified from hearing any matter concerning him.3
I.
3 The underlying case was filed by Network and Elliot Fineman, Network's majority
shareholder, against Armstrong, alleging antitrust, tortious interference and breach of contract
claims. After a jury verdict in favor of plaintiffs, the district court granted Armstrong's motions
for JNOV and for a new trial. Fineman v. Armstrong World Indus. Inc., 774 F.Supp. 225
(D.N.J.1991). Fineman v. Armstrong World Indus., Inc., 980 F.2d 171 (3d Cir.1992), cert.
denied, --- U.S. ----, 113 S.Ct. 1285, 122 L.Ed.2d 677 (1993). In the second trial, the jury
awarded no damages to Network. This verdict has been appealed and is now pending before
another panel of this court.
4 Kramer ceased to represent Fineman and Network between the first and second trials.
Kramer refused, however, to turn his files over to Network's new attorneys. After Network
sought an order compelling Kramer to relinquish the files, Kramer moved to recuse the trial
judge and, in a separate motion, requested, inter alia, that, before relinquishing his files,
Network be required to post a bond to guarantee payment for his services. The district court
ordered Kramer to relinquish his files, allowed Network to substitute new counsel, but did not
require that Network post a bond or pay Kramer. Industry Network System, Inc. v. Armstrong
World Indus., Inc., No. 84-3837 (D.N.J. Jan. 21, 1994) (unpublished order). Later, the district
court denied Kramer's motion to recuse. Industry Network System, Inc. v. Armstrong World
Indus., Inc., No. 84-3837 (D.N.J. Feb. 14, 1994) (unpublished opinion).
5 Kramer then filed a motion contending that he was entitled to a statutory attorney's lien for
work done defending the plaintiffs from Armstrong's counterclaims. The district court also
denied this motion. Industry Network System, Inc. v. Armstrong World Indus., Inc., No. 84-3837
(D.N.J. Feb. 25, 1994) (unpublished opinion). Following an order by the district court holding
Kramer in contempt of its orders requiring him to relinquish his files, Kramer obeyed.
II.
A. Attorney's Lien
6 Kramer claims that defending Network against Armstrong's counterclaims entitles him to a
fee and a lien to secure payment of it. He avers that all predicates to his claim are satisfied
because his fee is not contingent upon Network's success in its antitrust case against
Armstrong, and hence the jury's verdict for Network on the counterclaims, which was not
contested on appeal, is for all purposes final. We conclude that the issue is ripe for review but
is without factual or legal support. We will affirm.
7 The matters before us on appeal have been unduly complicated by appellant. His theory on
why he is entitled to a fee and an attorney's lien, for example, has been evolving throughout
the proceedings, from a quantum meruit request for $3.2 million in fees to compensate him for
an alleged 8,000 hours of work; to a retaining lien for his defense to counterclaims;4 to a
charging lien based upon the New Jersey Statutes (upon which he based the motion that the
district court denied on February 25, 1994, which is one of the orders Kramer specified in his
notice of appeal); to a fee based upon a bankruptcy order authorizing him to represent
Fineman in bankruptcy; and at oral argument he contended for the first time that he is entitled
to a lien under unspecified bankruptcy laws. Throughout his arguments, Kramer seems to
conflate the terms "fee" and "lien." They are two different matters. With respect to a lien, we
have before us on appeal only whether the district court adequately protected Kramer's
retaining lien or erred by denying him a statutory charging lien.
8 It is axiomatic, of course, that Kramer must show that he is or will become entitled to a fee
before he is entitled to a lien. When pressed by the court at oral argument for the fee
agreement or other basis entitling him to a fee for defending the counterclaims, Kramer
referred the court to Supplemental Appendix page 29. This, as the court then pointed out, is
only an order denying him a fee and deeming the district court's referral of jurisdiction with
respect to fees withdrawn. Nevertheless, Kramer then argued that by authorizing the debtor-in-
possession Fineman to employ him as his antitrust attorney, the bankruptcy court created the
obligation to pay him a fee.
9 There are several problems with Kramer's contentions. First, Fineman, who was the debtor-
in-possession, signed the application only in his individual capacity, and any fee Kramer has
earned is from the bankrupt estate for preserving its assets, not from the parties to the
underlying litigation.5 Under the Bankruptcy Code, an attorney for a debtor-in-possession is
entitled to be paid only in accordance with an agreement filed with the court. 11 U.S.C. Sec.
328. But the Code does not entitle the attorney to a lien--and for good reason. Section 503(b)
of the Code allows reasonable compensation for an attorney as an administrative expense of
the estate and Sec. 507(a)(1) gives the expense priority. A lien, however, is neither authorized
by the Code nor necessary.
10 Second, Kramer's argument is disingenuous at best and deceptive at worst. As debtor-in-
possession, Fineman applied to the bankruptcy court, with full knowledge of and assistance by
Kramer, to have Kramer appointed "under the terms and conditions set forth in the annexed
2|Page
affidavit of proposed antitrust counsel." Kramer, in his "Affidavit of Proposed Special Counsel
for Debtor-inPossession," which he submitted with the Application to the Bankruptcy Court,
averred:
11 I have rendered to debtor professional services in connection with the within action and in
accordance with a retainer agreement memorialized by letter attached hereto as Exhibit A.... In
connection with this retention I shall assist the Debtor-in-Possession in resolving all issues in
the [underlying litigation] and shall try the case to conclusion or settlement as is necessary.
12 (emphasis added). Moreover, Kramer concludes his affidavit:
13 I am unable to estimate the time for completion of these services. This case involves a
prosecution of a complex anti-trust case and inasmuch as my application will be based on a
contingency agreement set forth in Exhibit A the amount of time necessary is not applicable
under these circumstances.
14 (emphasis added).6
15 Kramer contends that his right to a fee, hence his right to a statutory lien, is for the "hours
he spent." Yet from his own sworn words, his fee is "based upon the contingency agreement
set forth in Exhibit A." This contingency agreement, which is signed by both Kramer and Elliot
Fineman individually, provides that Kramer
16 shall receive 36% of any and all sums recovered, whether by settlement or judgment.
Recovery shall be defined as all monies recovered, including damages, treble damages, and
counsel fees paid by defendant pursuant to statute.
17 In sum, Kramer agreed to represent the debtor-in-possession on "all issues" for a fee that
was contingent upon Fineman's success in the antitrust case and not, as he has argued,
based upon a hourly sum for time spent or in quantum meruit. Because Fineman recovered
nothing, and indeed did not participate in the second trial, the condition precedent to Kramer's
right to a fee--a verdict in the antitrust case in Fineman's favor--has not occurred, and the
entire basis of Kramer's counterclaim lien theory collapses. On this record he simply is not
entitled to either a fee or a lien.
18 But Kramer is wrong in his other arguments as well. He relies upon our decision in Novinger
v. E.I. duPont de Nemours & Co., Inc., 809 F.2d 212 (3d Cir.), cert. denied, 481 U.S. 1069, 107
S.Ct. 2462, 95 L.Ed.2d 871 (1987), in which we held that the district court was required to
affirmatively protect an attorney's retaining lien before requiring that he relinquish his files. His
reliance, however, is misplaced.
19 Under New Jersey law, an attorney will lose a retaining lien by voluntarily relinquishing files
to substituted counsel. In New Jersey, however, an attorney will not lose the lien if the files are
given to substituted counsel under compulsion of a court order. In Frenkel v. Frenkel, 252
N.J.Super. 214, 599 A.2d 595 (1991), counsel for plaintiff likewise refused to give case files to
substituted counsel until his fees were paid by plaintiff. The court held that a "conflict between
the withdrawing attorney and the former client should not be allowed to delay the underlying
action." Id. 599 A.2d at 598. It concluded that a withdrawing attorney's common law retaining
lien "[was] not relinquished" when it obeyed the court's order to turn them over. Id.; accord
Brauer v. Hotel Assoc., Inc., 40 N.J. 415, 192 A.2d 831, 835 (1963).
20 The situation is no different here. When Kramer was ordered by the court to relinquish his
files, he had no choice but to do so. His retaining lien was and is protected, as the district court
explicitly recognized. Industry Network, Inc., v. Armstrong, No. 84-3837, slip. op. at 10 (D.N.J.
Jan. 21, 1994) (unpublished opinion):
21 At issue today is not whether Mr. Kramer should voluntarily turn over the files, thereby
destroying his retaining lien. Rather, the issue is whether the court should order Mr. Kramer to
turn over the files involuntarily, a step which would preserve Mr. Kramer's lien rights.
22 Kramer unnecessarily exposed himself to contempt by his disobedience, and without any
foundation in the law he appealed the surrender order.
23 Kramer also incorrectly asserts that the district court erred by denying his February 16,
1994 motion in which he requested a statutory charging lien for the work done defending the
counterclaims. First, the motion was entirely redundant because he was already protected by
his common law retaining lien. But, more fundamentally, he relied in his motion upon N.J.S.A.
Sec. 2A:13-5, which provides:
24 After the filing of a complaint or third-party complaint or the service of a pleading containing
a counterclaim or cross-claim, the attorney or counsellor at law, who shall appear in the cause
for the party instituting the action or maintaining the third-party claim or counterclaim or cross-
claim, shall have a lien for compensation, upon his client's action, cause of action, claim or
counterclaim or cross-claim, which shall contain and attach to a verdict, report, decision,
award, judgment or final order in his client's favor, and the proceeds thereof in whosesoever
hands they may come.
25 The district court held that this statute was limited on its face to attorneys who initiate claims
and "confers no rights whatsoever upon an attorney in his capacity as the representative of a
party successfully defending a claim of another party." Industry Network System, Inc. v.
Armstrong World Indus., Inc., No. 84-3837, slip op. at 3 (D.N.J. Feb. 25, 1994) (unpublished
opinion). We agree.
26 The plain language of N.J.S.A. Sec. 2A:13-5 grants a lien to an attorney for affirmatively
pursuing his client's "action, cause of action, claim or counterclaim or cross-claim." Rather than
providing a lien for all services performed by an attorney, the state legislature took pains to list
those specific services to which the lien applies, but it did not include the defense to a
defendant's counterclaims. And Kramer has neither cited to us nor have we found any New
Jersey case that interprets this statute otherwise. At least one case, however, recognizes the
plain language of the statute as a barrier to the same argument that Kramer now makes. See
Wilde v. Wilde, 76 N.J.Super. 415, 184 A.2d 758 (1962) (questioning the propriety of defense
counsel's claim that he should be entitled to a lien under Sec. 2A:13-5 for successfully
defending his client's title to property). We decline to contravene the plain language of the
statute and read new rights into it.
27 For all of the foregoing reasons, the district court's order of January 21, 1994 and its order
of February 8, 1994 denying reconsideration will be affirmed.
B. Substitution of Counsel
28 Kramer argues that New Jersey law required the district court to refuse substitution of new
counsel for him in the underlying case until it required Network to pay him or to post a bond.
This argument, too, is without support. Kramer relies only upon St. John the Baptist Greek
Catholic Church v. Gengor, 2 A.2d 337 (N.J. Ch.1938). He contends that the district court
"simply ignored that authority," and that, "[h]ad it not done so, the orders in which appellant has
been in contempt would never have been entered."

29 There are a number of problems with Kramer's contentions here as well. First, as we have
shown by his own sworn statement, he is not yet entitled to be paid a fee. Second, St. John
does not support Kramer's position. Indeed, the court in St. John said specifically that "the
petition for substitution will not be granted until the liens have been satisfied." Id. at 339
(emphasis added). When Kramer was before the district court his right to a fee was not ripe,
nor is it now because the primary contingency has not yet happened. His retaining lien simply
could not be satisfied when the district court ordered him to surrender his files because it could
not then be quantified. Inasmuch as we have held that the district court properly denied
Kramer's petition for the lien he requested under N.J.S.A. Sec. 2A:13-5, this argument fails as
well.

30 Finally, New Jersey law contradicts Kramer's argument. Under Frenkel, Kramer is protected
by his retaining lien. Hence, should a court at some time determine that Kramer is entitled to a
fee, "there has not been a voluntary surrender of possession which would extinguish [his]
common law retaining lien. On the contrary, the lien is not relinquished." 599 A.2d at 598.
Kramer simply had no right to withhold the files as he did. We conclude that the district court
properly allowed substitution of counsel without ordering immediate payment of some arbitrary
amount of fees or requiring that plaintiffs post bond.

C. Recusal of Trial Judge

31 At oral argument Kramer limited his recusal request to matters dealing specifically with his
right to fees.7 There is, however, no indication that Judge Bissell has any matter pertaining to
Kramer's fee before him. Therefore, Kramer's request that Judge Bissell recuse himself from
hearing matters relating to fees is simply not ripe for review. Should the conditions precedent
to Kramer's fee occur, the matter would then still be in the first stage between him and his ex-
client. If his ex-client refuses to pay and Kramer believes he has a legitimate claim, he may opt
to present the issue before a court. And to hypothesize further, if that issue should come
before Judge Bissell; if Kramer still believes that Judge Bissell will not fairly adjudicate his
claim and asks him to recuse; if Judge Bissell should refuse to recuse; and finally, if Kramer is
dissatisfied with any fee order and elects to appeal that order, then he has an appealable
order. But the record reflects nothing of the sort now. His appeal on this issue, as he has
limited it, is premature.

III.

32 In sum, the issues before us, reduced to their essence, are whether the district court failed
to protect Kramer's retaining lien, erred by denying Kramer a charging lien under the N.J.S.A.,
and whether the trial judge erred by not recusing himself from matters involving Kramer's
entitlement to a fee. Inasmuch as we have determined that Kramer's retaining lien is protected
by New Jersey common law, and that on this record he is entitled neither to a fee nor a
statutory charging lien, we will affirm the district court's orders of January 21, February 8 and
25, 1994, and its order holding him in contempt. We will dismiss the appeal to the extent it
challenges the district court's refusal to recuse.

1 There is a dispute between Kramer and his former clients whether he was discharged or
withdrew. The district court made no finding on this point, but the circumstances of how the
relationship was severed are not significant to our decision

2 Kramer also filed another handwritten, but legible, notice of appeal on March 30, 1994, in
which he appealed "the orders of March 30, 1994, holding him in contempt, denying
emergency stay and the January 21st and February 25th orders, and the orders denying
recusal and all related orders." Since he fails to pursue the stay order, it is abandoned. The
balance of the issues in the handwritten "notice of appeal" are subsumed in the earlier notice
of appeal

3 We note that, to the extent Kramer argues issues in the text of his brief other than those first
raised in the "Statement of Issues," under the circumstances of this case, we will exercise our
discretion to treat these matters as waived. See Nagle v. Alspach, 8 F.3d 141, 143 (3d
Cir.1993) and Fed.R.App.P. 28(a)(3), (a)(6)

4 Kramer states in his brief that he spent "seven years of work in successfully defending the
multi-million dollar counterclaims." He modified this contention downward at oral argument to
"defending the $400,000 counter-claims." Neither estimate, however, is material to our
decision except to note the labile nature of Kramer's contentions

5 Fineman withdrew from the litigation after the first trial, and is no longer a party

6 In the Appendix Kramer filed on appeal, he supplied the court with neither his Affidavit nor
Elliot Fineman's Application. Inasmuch as Kramer's entire argument on appeal, by his own
account, depends upon the bankruptcy court's order, it is difficult for the court to view Kramer's
act of omitting these documents, so damaging to his argument and so critical to our review and
decision, as other than deliberate

7 Kramer did not appeal from the district court's denial of his earlier motion for recusal, and we
denied a petition by Kramer for a writ of mandamus to disqualify the trial judge from hearing
any matter related to this case in which Kramer is involved. Industry Network System, Inc., v.
Armstrong World Indus., Inc, No. 94-5183 (3d Cir. Apr. 22, 1994) (unpublished order)

3|Page
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 169079 August 28, 2007

FRANCISCO RAYOS, Petitioner,

vs.
ATTY. PONCIANO G. HERNANDEZ, Respondent.

RESOLUTION

CHICO-NAZARIO, J.:

Before Us is a Motion for Reconsideration dated 16 March 2007 filed by respondent Atty.
Ponciano G. Hernandez, seeking a modification of the Decision dated 12 February 2007.

The dispositive portion of the Decision states:

WHEREFORE the Court Resolves that:

1. Respondent is guilty of violation of the attorney’s oath and of serious professional

misconduct and shall be SUSPENDED from the practice of law for six (6) months and
WARNED that repetition of the same or similar offense will be dealt with more severely;

2. Respondent is entitled to attorney’s fees in the amount equivalent to thirty-five percent

(35%) of the total amount awarded1 to petitioner in Civil Case No. SM-951; and

3. Respondent is to return the amount of Two Hundred Ninety Thousand One Hundred Nine
Pesos and Twenty-One Centavos (₱290,109.21),2 which he retained in excess of what we
herein declared as fair and reasonable attorney’s fees, plus legal interest from date of finality of
this judgment until full payment thereof.

Let copies of this Decision be entered in the personal record of respondent as member of the
Bar and furnished the Office of the Bar Confidant, the IBP, and the Court Administrator for
circulation to all courts of the country.

Respondent received a copy of the Decision on 5 March 2007. Hence, the Motion for
Reconsideration was filed within the reglementary period provided under the Rules.

Respondent begs the compassionate understanding and magnanimity of the Honorable Court
for some leniency regarding his unintentional transgression and prays that the penalty of
suspension of six months imposed upon him be reduced to a fine, invoking his almost 15 years
of patient, devoted, complete and successful professional services rendered to petitioner; for
the bad faith of the latter in dismissing him as counsel without justifiable cause; and his good
faith in retaining the money "contingently" with the view of winning petitioner’s cause.

In light of respondent’s sincere plea for compassion from the Court, we take a second look at
the penalty imposed.

In several administrative cases, the Court has refrained from imposing the actual penalties in
the presence of mitigating factors. Factors such as the respondent’s length of service, the
respondent’s acknowledgement of his or her infractions and feeling of remorse, family
circumstances, humanitarian and equitable considerations, respondent’s advanced age,
among other things, have had varying significance in the Court’s determination of the
imposable penalty.31avvphi1

Applying the rationale in the aforesaid catena of cases, it is appropriate for this Court, in the
case at bar, to consider the following circumstances, to wit:

a) respondent had spent 15 years in defending petitioner’s cause from the trial court to the
Supreme Court;

b) his efforts at defending their cause were palpably real, complete, and total, with utmost
devotion and zealousness;

c) respondent’s advanced age;

d) this is the first time that respondent has been found administratively liable per available
record; and

e) respondent’s good faith in retaining what he sincerely believed to be his contingent fee. As
can be gleaned from the facts, petitioner and respondent entered into a contingent fee
arrangement whereby the latter, as counsel, will be paid for the legal services only if he
secures a judgment favorable for his client. When respondent retained the amount of
₱557,961.21 and ₱159,120.00 out of the ₱1,219,920.00, he did so believing in good faith that
it was a reasonable payment for the contingent fees which he was entitled to retain. It cannot
be ignored that respondent indeed successfully defended petitioner’s case in Civil Case No.
SM-951.

We are persuaded to exhibit a degree of leniency towards the respondent. We, thus, maintain
a more compassionate approach.

WHEREFORE, the respondent’s Motion for Reconsideration is partly GRANTED. The Decision
dated 12 February 2007 is MODIFIED in that the suspension of six months is DELETED, and
in lieu thereof a fine of ₱20,000.00 is IMPOSED, effective from date of receipt of herein
Resolution, with warning that repetition of the same or similar acts will be dealt with more
severely. The said Decision is AFFIRMED in all other respects.

SO ORDERED.

4|Page
G.R. No. 155224 August 23, 2006

VINSON B. PINEDA, Petitioner,

vs.
ATTY. CLODUALDO C. DE JESUS, ATTY. CARLOS AMBROSIO and ATTY. EMMANUEL
MARIANO, Respondents.

DECISION

CORONA, J.:

The subject of this petition for review is the April 30, 2002 decision1 of the Court of Appeals in
CA-G.R. CV No. 68080 which modified the order2 of the Regional Trial Court (RTC) of Pasig
City, Branch 151, in JDRC Case No. 2568 entitled Ma. Aurora D. Pineda v. Vinson B. Pineda.

The facts follow.

On April 6, 1993, Aurora Pineda filed an action for declaration of nullity of marriage against
petitioner Vinson Pineda in the RTC of Pasig City, Branch 151, docketed as JDRC Case No.
2568. Petitioner was represented by respondents Attys. Clodualdo de Jesus, Carlos Ambrosio
and Emmanuel Mariano.

During the pendency of the case, Aurora proposed a settlement to petitioner regarding her
visitation rights over their minor child and the separation of their properties. The proposal was
accepted by petitioner and both parties subsequently filed a motion for approval of their
agreement. This was approved by the trial court. On November 25, 1998, the marriage
between petitioner and Aurora Pineda was declared null and void.

Throughout the proceedings, respondent counsels were well-compensated.3 They, including

their relatives and friends, even availed of free products and treatments from petitioner’s
dermatology clinic. This notwithstanding, they billed petitioner additional legal fees amounting
to P16.5 million4 which the latter, however, refused to pay. Instead, petitioner issued them
several checks totaling P1.12 million5 as "full payment for settlement."6

Still not satisfied, respondents filed in the same trial court7 a motion for payment of lawyers’
fees for P50 million.8

On April 14, 2000, the trial court ordered petitioner to pay P5 million to Atty. de Jesus, P2
million to Atty. Ambrosio and P2 million to Atty. Mariano.

On appeal, the Court of Appeals reduced the amount as follows: P1 million to Atty. de Jesus,
P500,000 to Atty. Ambrosio and P500,000 to Atty. Mariano. The motion for reconsideration
was denied. Hence, this recourse.

The issues raised in this petition are:

(1) whether the Pasig RTC, Branch 151 had jurisdiction over the claim for additional legal fees
and

(2) whether respondents were entitled to additional legal fees.

First, a lawyer may enforce his right to his fees by filing the necessary petition as an incident of
the main action in which his services were rendered or in an independent suit against his
client. The former is preferable to avoid multiplicity of suits.9

The Pasig RTC, Branch 151, where the case for the declaration of nullity of marriage was filed,
had jurisdiction over the motion for the payment of legal fees. Respondents sought to collect
P50 million which was equivalent to 10% of the value of the properties awarded to petitioner in
that case. Clearly, what respondents were demanding was additional payment for legal
services rendered in the same case.

Second, the professional engagement between petitioner and respondents was governed by
the principle of quantum meruit which means "as much as the lawyer deserves."10 The
recovery of attorney’s fees on this basis is permitted, as in this case, where there is no express
agreement for the payment of attorney’s fees. Basically, it is a legal mechanism which prevents
an unscrupulous client from running away with the fruits of the legal services of counsel without
paying for it. In the same vein, it avoids unjust enrichment on the part of the lawyer himself.

Further, Rule 20.4 of the Code of Professional Responsibility advises lawyers to avoid
controversies with clients concerning their compensation and to resort to judicial action only to
prevent imposition, injustice or fraud. Suits to collect fees should be avoided and should be
filed only when circumstances force lawyers to resort to it.11

In the case at bar, respondents’ motion for payment of their lawyers’ fees was not meant to
collect what was justly due them; the fact was, they had already been adequately paid.

Demanding P50 million on top of the generous sums and perks already given to them was an
act of unconscionable greed which is shocking to this Court.

As lawyers, respondents should be reminded that they are members of an honorable

profession, the primary vision of which is justice. It is respondents’ despicable behavior which
gives lawyering a bad name in the minds of some people. The vernacular has a word for it:
nagsasamantala. The practice of law is a decent profession and not a money-making trade.
Compensation should be but a mere incident.12

Respondents’ claim for additional legal fees was not justified. They could not charge petitioner
a fee based on percentage, absent an express agreement to that effect. The payments to them
in cash, checks, free products and services from petitioner’s business — all of which were not
denied by respondents — more than sufficed for the work they did. The "full payment for
settlement"13 should have discharged petitioner’s obligation to them.

The power of this Court to reduce or even delete the award of attorneys’ fees cannot be
denied. Lawyers are officers of the Court and they participate in the fundamental function of
administering justice.14 When they took their oath, they submitted themselves to the authority
of the Court and subjected their professional fees to judicial control. 15

WHEREFORE, the petition is hereby PARTIALLY GRANTED. The decision of the Court of
Appeals dated April 30, 2002 in CA–G.R. CV No. 68080 is hereby MODIFIED. The award of
additional attorney’s fees in favor of respondents is hereby DELETED.

SO ORDERED.

5|Page
Adm. Case No. 5020 December 18, 2001
ROSARIO JUNIO, complainant,
vs.
ATTY. SALVADOR M. GRUPO, respondent.
MENDOZA, J.:
This is a complaint for disbarment filed against Atty. Salvador M. Grupo for malpractice and
gross misconduct.
Complainant Rosario N. Junio alleged that —
3. Sometime in 1995, [she] engaged the services of [respondent], then a private
practitioner, for the redemption of a parcel of land covered by Transfer Certificate of Title No.
20394 registered in the name of her parents, spouses Rogelio and Rufina Nietes, and located
at Concepcion, Loay, Bohol.
4. On 21 August 1995, [complainant] entrusted to [respondent] the amount of
P25,000.00 in cash to be used in the redemption of the aforesaid property. Respondent
received the said amount as evidenced by an acknowledgment receipt, a copy of which is
being hereto attached as Annex "A".
5. Notwithstanding the foregoing and for no valid reason, respondent did not
redeem the property; as a result of which the right of redemption was lost and the property was
eventually forfeited.
6. Because of respondent's failure to redeem the property, complainant had
demanded [the] return of the money which she entrusted to the former for the above-stated
purpose.
7. Despite repeated demands made by the complainant and without justifiable
cause, respondent has continuously refused to refund the money entrusted to him.1
In his Answer, petitioner admitted receiving the amount in question for the purpose for which it
was given. However, he alleged that —
6. The subject land for which the money of complainant was initially intended to be
applied could really not be redeemed anymore . .;
7. Complainant knew the mortgage agreement between her parents and the
mortgage-owner had already expired, and what respondent was trying to do was a sort of [a]
desperate, last-ditch attempt to persuade the said mortgagee to relent and give back the land
to the mortgagors with the tender of redemption; but at this point, the mortgagee simply would
not budge anymore. For one reason or another, he would no longer accept the sum offered;
8. By the time that complainant was to return to Manila, it was already a foregone
matter that respondent's efforts did not succeed. And so, when transaction failed, respondent
requested the complainant that he be allowed, in the meantime, to avail of the money because
he had an urgent need for some money himself to help defray his children's educational
expenses. It was really a personal request, a private matter between respondent and
complainant, thus, respondent executed a promissory note for the amount, a copy of which is
probably still in the possession of the complainant.
9. . . . [T]he family of the complainant and that of the respondent were very close
and intimate with each other. Complainant, as well as two of her sisters, had served
respondent's family as household helpers for many years when they were still in Manila, and
during all those times they were treated with respect, affection, and equality. They were
considered practically part of respondent's own family.
That is why, when complainant requested . . . assistance regarding the problem of the
mortgaged property which complainant wanted to redeem, respondent had no second-
thoughts in extending a lending hand . . . .
Respondent did not ask for any fee. His services were purely gratuitous; his acts [were] on his
own and by his own. It was more than pro bono; it was not even for charity; it was simply an
act of a friend for a friend. It was just lamentably unfortunate that his efforts failed.
xxx xxx xxx
Of course, respondent accepts his fault, because, indeed, there were occasions when
complainant's sisters came to respondent to ask for the payment in behalf of complainant, and
he could not produce the money because the circumstances somehow, did not allow it. [I]t
does not mean that respondent will not pay, or that he is that morally depraved as to wilfully
and deliberately re[nege] in his obligation towards the complainant.2
Complainant filed a reply denying that respondent informed her of his failure to redeem the
property and that respondent requested her to instead lend the money to him.3
The case was thereafter referred to the Integrated Bar of the Philippines (IBP) for investigation,
report, and recommendation. However, while two hearings were set for this purpose, both were
postponed at the instance of respondent. For this reason, on August 28, 2000, complainant
asked the Investigating Commissioner4 to consider the case submitted for decision on the
basis of the pleadings theretofore filed. Respondent was required to comment on
complainant's motion, but he failed to do so. Consequently, the case was considered
submitted for resolution.
In his report, dated January 5, 2001, the Investigating Commissioner found respondent liable
for violation of Rule 16.04 of the Code of Professional Responsibility which forbids lawyers
from borrowing money from their clients unless the latter's interests are "protected by the
nature of the case or by independent advice." The Investigating Commissioner found that
respondent failed to pay his client's money. However, in view of respondent's admission of
liability and "plea for magnanimity," the Investigating Commissioner recommended that
respondent be simply reprimanded and ordered to pay the amount of P25,000.00 loan plus
interest at the legal rate.
In its Resolution No. XIV-2001-183, dated April 29, 2001, the IBP Board of Governors adopted
and approved the Investigating Commissioner's findings. However, it ordered —
[R]espondent . . . suspended indefinitely from the practice of law for the commission of an act
which falls short of the standard of the norm of conduct required of every attorney and . . .
ordered [him] to return to the complainant the amount of P25,000.00 plus interest at the legal
rate from the time the said amount was misappropriated, until full payment; provided that the
total suspension shall be at least one (1) year from the date of said full payment
6|Page
On July 4, 2001, respondent filed a motion for reconsideration alleging that —
(a) there was no actual hearing of the case wherein respondent could have fully
ventilated and defended his position;
(b) the subject Resolution gravely modified the Report and Recommendation of the
Trial Commissioner, Hon. Pedro Magpayo, Jr., . . . such that the resultant sanctions that are
ordered imposed are too leonine, unjust and cruel;
(c) that the factual circumstances attending the matter which gave rise to the
complaint were not rightly or fairly appreciated.5
He argues that the Court should adopt the report and recommendation of the IBP Investigating
Commissioner.
In its resolution of August 15, 2001, the Court resolved to treat respondent's motion for
reconsideration as a petition for review of IBP Resolution No. XIV 2001-183 and required
complainant to comment on the petition.
In her comment, complainant states that her primary interest is to recover the amount of
P25,000.00 with interest and that she is leaving it to the Court to decide whether respondent
deserves the penalty recommended by the IBP.6
The Court resolves to partially grant the petition. In his report and recommendation,
Investigating Commissioner Magpayo, Jr. made the following findings:
In his Answer, the respondent ADMITS all the allegations in paragraph 4 of the complaint
which avers:
4. On 21 August 1995, complainant entrusted to respondent the amount of
P25,000.00 in cash to be used in the redemption of the aforesaid property (parcel of land
covered by TCT No. 20394 registered in the name of complainant's parents located at
Concepcion, Loay, Bohol). Respondent received the said amount as evidenced by an
acknowledgment receipt (Annex A).
By way of confession and avoidance, the respondent, . . . however, contended that when the
mortgagee refused to accept the sum tendered as the period of redemption had already
expired, he requested the complainant to allow him in the meantime to use the money for his
children's educational expenses[,] to which request the complainant allegedly acceded and
respondent even executed a promissory note (please see 4th par. of Annex "B" of complaint).
Respondent takes further refuge in the intimate and close relationship existing between himself
and the complainant's family on the basis of which his legal services were purely gratuitous or
"simply an act of a friend for a friend" with "no consideration involved." Unfortunately, his
efforts to redeem the foreclosed property, as already stated, did not produce the desired result
because the mortgagee "would not budge anymore" and "would not accept the sum offered."
Thus, the respondent concluded that there was, strictly speaking, no attorney-client
[relationship] existing between them. Rather, right from the start[,] everything was sort of
personal, he added.
Granting to the respondent the benefit of the doubt, we shall assume that there was in reality a
loan in the amount of P25,000.00. This is likewise confirmed by the execution of a promissory
note on 12 December 1996 by the respondent who "undertook to pay Mrs. Junio on or before
January 1997" (Annex B of complaint). Moreover, the demand letter of 12 March 1998 (Annex
B) mentions of "reimbursement of the sum received" and interest of "24% per annum until fully
paid" giving the impression that the funds previously intended to be used for the repurchase of
a certain property (Annex A of complaint) was converted into a loan with the consent of the
complainant who gave way to the request of the respondent "to help defray his children's
educational expenses" (par. 8 of Answer).
Be that as it may, the duty and obligation to repay the loan remains unshaken. Having utilized
the sum to fulfill his "urgent need for some money," it is but just and proper that he return the
amount borrowed together with interest.
Five (5) years had already passed since respondent retained the cash for his own personal
use. But notwithstanding the same and his firm promise "to pay Mrs. Junio on or before
January 1997" he has not demonstrated any volition to settle his obligation to his creditor[,]
although admittedly "there w[ere] occasions when complainant's sister came to respondent to
ask for the payment in behalf of complainant," worse, "the passage of time made respondent
somehow forgot about the obligation."
A lawyer shall not borrow money from his client unless the client's interests are fully protected
by the nature of the case or by independent advice (Rule 16.04, Code of Professional
Responsibility). This rule is intended to prevent the lawyer from taking advantage of his
influence over the client.
This rule is especially significant in the instant case where the respondent enjoys an immense
ascendancy over the complainant who, "as well as two of his sisters, had served respondent's
family as household helpers for many years."
Having gained dominance over the complainant by virtue of such long relation of master and
servant, the respondent took advantage of his influence by not returning the money entrusted
to him. Instead, he imposed his will on the complainant and borrowed her funds without giving
adequate security therefor and mindless of the interest of the complainant
In the light of the foregoing, . . . respondent has committed an act which falls short of the
standard of the norm of conduct required of every attorney. If an ordinary borrower of money is
required by the law to repay the loan failing which he may be subjected to court action, it is
more so in the case of a lawyer whose conduct serves as an example.7
It would indeed appear from the records of the case that respondent was allowed to borrow the
money previously entrusted to him by complainant for the purpose of securing the redemption
of the property belonging to complainant's parents. Respondent, however, did not give
adequate security for the loan and subsequently failed to settle his obligation. Although
complainant denied having loaned the money to respondent, the fact is that complainant
accepted the promissory note given her by respondent on December 12,1996. In effect,
complainant consented to and ratified respondent's use of the money. It is noteworthy that
complainant did not attach this promissory note to her complaint nor explain the circumstances
surrounding its execution. She only mentioned it in her demand letter of March 12, 1998
(Annex B), in which she referred to respondent's undertaking to pay her the P25,000.00 on or
before January 1997. Under the circumstances and in view of complainant's failure to deny the
promissory note, the Court is constrained to give credence to respondent's claims that the
money previously entrusted to him by complainant was later converted into a loan.
Respondent's liability is thus not for misappropriation or embezzlement but for violation of Rule
16.04 of the Code of Professional Responsibility which forbids lawyers from borrowing money
from their clients unless the latter's interests are protected by the nature of the case or by
independent advice. In this case, respondent's liability is compounded by the fact that not only
did he not give any security for the payment of the amount loaned to him but that he has also
refused to pay the said amount. His claim that he could not pay the loan "because
circumstances . . . did not allow it" and that, because of the passage of time, "he somehow
forgot about his obligation" only underscores his blatant disregard of his obligation which
reflects on his honesty and candor. A lawyer is bound to observe candor, fairness, and loyalty
in all his dealings and transactions with his client.8

Respondent claims that complainant is a close personal friend and that in helping redeem the
property of complainant's parents, he did not act as a lawyer but as a friend, hence there is no
client-attorney relationship between them. This contention has no merit. As explained in Hilado
v. David,9

To constitute professional employment it is not essential that the client should have employed
the attorney professionally on any previous occasion . . . It is not necessary that any retainer
should have been paid. promised, or charged for; neither is it material that the attorney
consulted did not afterward undertake the case about which the consultation was had. If a
person, in respect to his business affairs or troubles of any kind, consults with his attorney in
his professional capacity with the view to obtaining professional advice or assistance, and the
attorney voluntarily permits or acquiesces in such consultation, then the professional
employment must be regarded as established . . .

Considering the foregoing, the Investigating Commissioner's recommendation to impose on

respondent the penalty of reprimand and restitution of the amount loaned by him is clearly
inadequate. On the other hand, the penalty of indefinite suspension with restitution imposed by
the IBP Board of Governors is too harsh in view of respondent's apparent lack of intent to
defraud complainant and of the fact that this appears to be his first administrative
transgression. It is the penalty imposed in Igual v. Javier10 which applies to this case. In that
case, this Court ordered the respondent suspended for one month from the practice of law and
directed him to pay the amount given him by his clients within 30 days from notice for his
failure to return the money in question notwithstanding his admission that he did not use the
money for the filing of the appellee's brief, as agreed by them, because of an alleged quarrel
with his clients.

Anent petitioner's allegation regarding the lack of hearing during the IBP investigation, suffice it
to say that he waived such right when he failed to comment on petitioner's motion to submit the
case for resolution on the basis of the pleadings theretofore filed despite due notice to him, not
to mention the fact that it was he who had requested the postponement of the two hearings
scheduled by the Investigating Commissioner.

WHEREFORE, the Court finds petitioner guilty of violation of Rule 16.04 of the Code of
Professional Responsibility and orders him suspended from the practice of law for a period of
one (1) month and to pay to respondent, within 30 days from notice, the amount of P25,000.00
with interest at the legal rate, computed from December 12, 1996.

SO ORDERED.

7|Page
Republic of the Philippines 1. The Court of Appeals erred in finding that the petitioner appears not to be the proper party to
SUPREME COURT appeal the decision in Sp. Proc. No. 58325 of the Court of First Instance of Manila.
Manila
2. Assuming the petitioner's right of appeal is doubtful, the Court of Appeals erred in dismissing
FIRST DIVISION his petition for mandamus; and

G.R. No. L-29184 January 30, 1989 3. The Court of Appeals erred in not reversing the decision in Sp. Proc. No. 58325 denying the
probate of the holographic will of the late Maxima C. Reselva, said decision being patently
BENEDICTO LEVISTE, petitioner, erroneous.
vs.
THE COURT OF APPEALS, HON. JUDGE LUIS B. REYES, COURT OF FIRST INSTANCE Under his first assignment of error, petitioner argues that by virtue of his contract of services
OF MANILA, ROSA DEL ROSARIO, RITA BANU, CARMEN DE GUZMAN-MARQUEZ, with Del Rosario, he is a creditor of the latter, and that under Article 1052 of the Civil Code
JESUS R. DE GUZMAN, RAMON R. DE GUZMAN, JACINTO R. DE GUZMAN and ANTONIO which provides:
R. DE GUZMAN, respondents.
ART. 1052. If the heir repudiates the inheritance to the prejudice of his own creditors, the latter
Benedicto Leviste for and in his own behalf. may petition the court to authorize them to accept it in the name of the heir.

Gatchalian, Ignacio & Associates for respondents de Guzman. The acceptance shall benefit the creditors only to an extent sufficient to cover the amount of
their credits. The excess, should there be any, shall in no case pertain to the renouncer, but
shall be adjudicated to the persons to whom, in accordance with the rules established in this
GRIÑO-AQUINO, J.: Code, it may belong.

The issue in this case is whether or not an attorney who was engaged on a contingent fee
basis may, in order to collect his fees, prosecute an appeal despite his client's refusal to
appeal the decision of the trial court.
On September 7, 1963, the petitioner, a practicing attorney, entered into a written agreement
with the private respondent Rosa del Rosario to appear as her counsel in a petition for probate
of the holographic will of the late Maxima C. Reselva. Under the will, a piece of real property at
Sales Street, Quiapo, Manila, was bequeathed to Del Rosario. It was agreed that petitioner's
contigent fee would be thirty-five per cent (35%) of the property that Rosa may receive upon
the probate of the will (Annex "A", p. 59, Rollo).
In accordance with their agreement, Leviste performed the following services as Del Rosario's
counsel:
he has a right to accept for his client Del Rosario to the extent of 35% thereof the devise in her
favor (which she in effect repudiated) to protect his contigent attorney's fees.
The argument is devoid of merit. Article 1052 of the Civil Code does not apply to this case.
That legal provision protects the creditor of a repudiating heir. Petitioner is not a creditor of
Rosa del Rosario. The payment of his fees is contingent and dependent upon the successful
probate of the holographic will. Since the petition for probate was dismissed by the lower court,
the contingency did not occur. Attorney Leviste is not entitled to his fee.
Furthermore, Article 1052 presupposes that the obligor is an heir. Rosa del Rosario is not a
legal heir of the late Maxima C. Reselva. Upon the dismissal of her petition for probate of the
decedent's will, she lost her right to inherit any part of the latter's estate. There is nothing for
the petitioner to accept in her name.

(1) Thoroughly researched and studied the law on probate and succession;
(2) Looked for and interviewed witnesses, and took their affidavits;
(3) Filed the petition for. probate is Special Proceeding No. 58325;
(4) Made the proper publications;
(5) Presented at the trial the following witnesses:
a) Eleuterio de Jesus
b) Lucita de Jesus
c) Purita L. Llanes
d) Rita Banu
e) Jesus Lulod.
On August 20, 1965, Leviste received a letter from Ms. Del Rosario, informing him that she
was terminating his services as her counsel due to "conflicting interest." This consisted,
according to the letter, in petitioner's moral obligation to protect the interest of his brother-in-
law, Gaudencio M. Llanes, whom Del Rosario and the other parties in the probate proceeding
intended to eject as lessee of the property which was bequeathed to Del Rosario under the will
(Annex "B", p. 60, Rollo).
On September 20, 1965, petitioner filed a "Motion to Intervene to Protect His Rights to Fees for
Professional Services." (Annex "B", p. 60, Rollo.)
In an order dated November 12, 1965 the trial court denied his motion on the ground that he
had "not filed a claim for attorney's fees nor recorded his attorney's lien." (p. 3, Rollo.)
On November 23, 1965, petitioner filed a "Formal Statement of Claim for Attorney's Fees and
Recording of Attorney's Lien,' which was noted in the court's order of December 20, 1965
(Annexes "D" and "E", pp. 63 & 64, Rollo).
Although the order denying his motion to intervene had become final, petitioner continued to
receive copies of the court's orders, as well the pleadings of the other parties in the case. He
also continued to file pleadings. The case was submitted for decision without the respondents'
evidence.
On November 23, 1966, Del Rosario and Rita Banu, the special administratrix-legatee, filed a
"Motion To Withdraw Petition for Probate" alleging that Del Rosario waived her rights to the
devise in her favor and agreed that the De Guzman brothers and sisters who opposed her
petition for probate, shall inherit all the properties left by the decedent. (Annex "F", p. 65,
Rollo.)
This Court had ruled in the case of Recto vs. Harden, 100 Phil. 1427, that "the contract (for
contingent attorney's fees) neither gives, nor purports to give, to the appellee (lawyer) any right
whatsoever, personal or real, in and to her (Mrs. Harden's) aforesaid share in the conjugal
partnership. The amount thereof is simply a basis for the computation of said fees."
The Court of Appeals did not err in dismissing the petition for mandamus, for while it is true
that, as contended by the petitioner, public policy favors the probate of a will, it does not
necessarily follow that every will that is presented for probate, should be allowed. The law lays
down procedures which should be observed and requisites that should be satisfied before a
will may be probated. Those procedures and requirements were not followed in this case
resulting in the disallowance of the will. There being no valid will, the motion to withdraw the
probate petition was inconsequential.
Petitioner was not a party to the probate proceeding in the lower court. He had no direct
interest in the probate of the will. His only interest in the estate is an indirect interest as former
counsel for a prospective heir. In Paras vs. Narciso, 35 Phil. 244, We had occassion to rule
that one who is only indirectly interested in a will may not interfere in its probate. Thus:
... the reason for the rule excluding strangers from contesting the will, is not that thereby the
court maybe prevented from learning facts which would justify or necessitate a denial of
probate, but rather that the courts and the litigants should not be molested by the intervention
in the proceedings of persons with no interest in the estate which would entitle them to be
heard with relation thereto. (Paras vs. Narciso, 35 Phil. 244, 246.)
Similary, in Morente vs. Firmalino, 40 O.G. 21st Supp. 1, We held:
We are of the opinion that the lower court did not err in holding that notice of an attorney's lien
did not entitle the attorney-appellant to subrogate himself in lieu of his client. It only gives him
the right to collect a certain amount for his services in case his client is awarded a certain sum
by the court.
WHEREFORE, the petition for certiorari is denied for lack of merit. Costs against the petitioner.
SO ORDERED.

In an order of April 13, 1967 the trial court denied the motion to withdraw the petition for being
contrary to public policy (Annex "G", pp. 66-67, Rollo).

Nonetheless, on August 28, 1967, the court disallowed the will, holding that the legal
requirements for its validity were not satisfied as only two witnesses testified that the will and
the testatrix's signature were in the handwriting of Maxima Reselva.

The petitioner filed an appeal bond, notice of appeal, and record on appeal. The private
respondents filed a motion to dismiss the appeal on the ground that petitioner was not a party
in interest.

The petitioner opposed the motion to dismiss his appeal, claiming that he has a direct and
material interest in the decision sought to be reviewed. He also asked that he be substituted as
party-petitioner, in lieu of his former client, Ms. Del Rosario.

On March 28, 1968, the trial judge dismissed the appeal and denied petitioner's motion for
substitution.

The petitioner filed in the Court of Appeals a petition for mandamus (CA-G.R. No. 41248)
praying that the trial court be ordered to give due course to his appeal and to grant his motion
for substitution.

On May 22, 1968, the Court of Appeals dismissed the petition for being insufficient in form and
substance as the petitioner did not appear to be the proper party to appeal the decision in
Special Proceeding No. 58325 (Annex 1, p. 77, Rollo).

Upon the denial of his motion for reconsideration, petitioner appealed by certiorari to this Court,
assigning the following errors against the Court of Appeals' resolution:

8|Page
 Republic of the Philippines As to the second proposition that the court below could not dismiss the case after the bill of
SUPREME COURT exceptions had been approved, it is very true upon such approval the lower court loses its
Manila jurisdiction over all contentious matters connected with the issues in the case. But there is
nothing to prevent all of the parties by agreement to withdraw the bill of exceptions with the
EN BANC consent of said court and resubmit the case to the jurisdiction of the court. That was all that
was done in this case. A valid agreement between the parties to a case is the law of the case
G.R. No. L-19695 November 17, 1922 in everything covered by the agreement. (Civil Code, art. 1091; Compañia General de Tabacos
vs. Obed, 13 Phil., 391.) The petitioner might have protected his interests by entering an
JUAN S. RUSTIA, petitioner, attorney's lien under section 37 of the Code of Civil Procedure.
vs.
THE JUDGE OF FIRST INSTANCE OF BATANGAS, Thirteenth Judicial District, Honorable The petition for a writ of certiorari was therefore properly denied. So ordered.
FRANCISCO DOMINGUEZ, ROSA H. DE PORCUNA and her husband JUSTO M. PORCUNA
and EULALIA MAGSOMBOL, respondents.

The petitioner in his own behalf.

The respondents Porcunas in their own behalf.
Jose Mayo Librea for the other respondents.

OSTRAND, J.:

This is a petition for a writ of certiorari, the petitioner alleging that the respondent Judge of the
Court of First Instance exceeded his jurisdiction in dismissing a pending action at the instance
of the parties but without the intervention of the attorney for the plaintiff in the case, the herein
petitioner.

It appears from the record that on July 31, 1921, the respondent Justo Porcuna, for himself
and on behalf of his wife, the respondent Rosa H. de Porcuna, by means of a written contract,
retained the petitioner to represent them as their lawyer in case No. 1435 then pending in the
Court of First Instance of Batangas and in which Rosa H. de Porcuna was the plaintiff and one
Eulalia Magsombol was the defendant. The contract fixed the petitioner's fee at P200 in
advance with an additional contigent fee of P1,300. It was also provided in the contract that
Justo Porcuna should not compromise the claim against the defendant in the case without
express consent of his lawyer, the herein petitioner.

After trial, the petitioner then being plaintiffs' attorney of record, the Court of First Instance,
under date of December 24, 1921, rendered judgment in favor of Justo Porcuna and Rosa H.
de Porcuna ordering the defendant Eulalia Magsombol to return to them 602 pieces of cloth or
in default thereof to pay to them the sum of P3,250. On January 14, 1922, Eulalia Magsombol
filed her exception to the judgment and on the following day presented a motion for a new trial,
which was denied on the 21st of the same month. She thereupon gave notice of appeal and
presented a bill of exceptions which was approved on February 20, 1922. On March 2, 1922,
and before the transmission of the bill of exceptions to this court, the plaintiffs presented the
following motion in the Court of First Instance.

The plaintiffs, without any further intervention of their attorney, now appear before this
Honorable Court and respectfully aver:

That, through Mr. Miguel Olgado, they already settled this case with the herein defendant.

That the basis of the compromise is that we, the plaintiffs, finally agree that we should be paid
the amount of eight hundred pesos (P800) in two installments; P300 to be paid on this same
date, and the remaining five hundred pesos (P500) at the end of March, 1922.

That we, the plaintiffs, recognize not to have any further rights in this case than to the aforesaid
amount of eight hundred pesos (P800) and that this is the total amount the defendant Eulalia
Magsombol should pay us, and we have no right whatever to any other amount than the
aforementioned.

That we have not sold to any other person our rights as plaintiffs in this case.

Wherefore, the plaintiffs respectfully request the dismissal of this case without any
pronouncement as to costs, and that the appeal interposed by the defendant be further
dismissed.

Batangas, Batangas, P.I., March 2, 1922.

(Sgd.) ROSA H. PORCUNA

Plaintiff

JUSTO M. PORCUNA
Plaintiff .

The defendant, through here attorney, Jose Mayo Librea, having signified her assent to the
motion, the Court of First Instance on the same day, March 2, dismissed the action without
notice to counsel for the plaintiffs.

The petitioner alleges that he did not discover the dismissal of the action until April 4, 1922.
After an unsuccessful effort to obtain a reconsideration of the order of dismissal from the trial
court, he filed the present petition for a writ of certiorari. By resolution dated October 24, 1922,
this court denied the petition and upon motion of the petitioner we shall now briefly state our
reason for such denial.lawph!l.net

The burden of the petitioner's contention is (1) that he, as attorney of record, was entitled to
notice of his client's motion to dismiss the case, and (2) that after the approval of the bill of
exceptions the lower court had lost jurisdiction of the case and had no power to dismiss it. A
moment's reflection should make it clear that neither of these propositions is tenable.

Both at the common law and under section 32 of the Code of Civil Procedure a client may
dismiss his lawyer at any time or at any stage of the proceedings and there is nothing to
prevent a litigant from appearing before the court to conduct his own litigation. (Sec. 34, Code
of Civil Procedure.) The client has also an undoubted right to compromise a suit without the
intervention of his lawyer.

Though there is a valid agreement for the payment to the attorney of a large proportion of the
sum recovered in case of success, this does not give the attorney such an interest in the cause
of action that it prevents plaintiff from compromising the suit. (4 Cyc., 990, and authorities cited
in Note 6; see also Louque vs. Dejan, 129 La., 519; Price vs. Western Loan and Savings Co.,
19 Ann. Cas., 589 and Note.)

In the present instance the clients did nothing that they did not have a perfect right to do. By
appearing personally and presenting a motion they impliedly dismissed their lawyer. The
petitioner's contingent interest in the judgment rendered did not appear of record. Neither as a
party in interest nor as an attorney was he therefore entitled to notice of the motion.

9|Page
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-24163 April 28, 1969
REGINO B. ARO, petitioner,
vs.
THE HON. ARSENIO NAÑAWA, Presiding Judge of Branch IV, Court of First Instance of
Laguna, LUIS MAGTIBAY, PABLO MAGTIBAY, AURELLO MARTINEZ, GREGORIO
LONTOK, MARIA MENDOZA, MAXIMO PORTO and ROSARlO ANDAYA, respondents.
Regino B. Aro in his own behalf as petitioner.
Enrique C. Villanueva for respondents.
BARREDO, J.:
Original petition: (1) for certiorari to annul the order of the Court of First Instance of Laguna,
dated November 21, 1964, dismissing its Civil Case No. SC-525 "without prejudice to the right
of Atty. Regino B. Aro (petitioner herein) to file a separate action against both the plaintiffs and
defendants (private respondents herein) with respect to his alleged attorney's fees", as well as
its order dated January 9, 1965, denying petitioner's motion for reconsideration thereof for lack
of merit and (2) for mandamus to compel respondent Judge to take cognizance of petitioner's
opposition and countermotion or petition dated November 3, 1964 and to resolve the same on
the merits.
There appears to be no dispute as to the following facts alleged in the petition:
2. That the services of herein petitioner, as practising attorney, was engaged by respondents
Luis Magtibay and Pablo Magtibay for the prosecution of their claim, as heirs, in the estate of
their deceased uncle Lucio Magtibay, consisting of properties which were in the possession of
the respondents Aurelia Martinez,1spouses Gregorio Lontok and Maria Mendoza and spouses
Maximo Porto and Rosario Andaya.
3. That being without means to prosecute their claim against the persons concerned,
respondents Luis Magtibay and Pablo Magtibay agreed with herein petitioner to avail of his
services and entrust the prosecution of their claim on a contingent basis as shown in the
agreement, copy of which is hereto attached as Annex 'A' and is made an integral part hereof.2
4. That by virtue of said agreement, herein petitioner took the necessary steps to gather the
needed papers and documents for the filing of a petition to litigate as pauper and a complaint
in the Court of First Instance of Laguna, in which respondents Luis Magtibay and Pablo
Magtibay were the plaintiffs and the other respondents, excepting the respondent Judge, were
the defendants, ....
5. That said petition to litigate as pauper filed by herein petitioner for respondents Luis
Magtibay and Pablo Magtibay was granted by the respondent Judge as per the order dated
September 10, 1964, .....
6. That to plaintiffs' complaint in Civil Case No. SC-525, the defendants in said case interposed
a motion to dismiss dated September 29, 1964....3
7. That to the said motion to dismiss herein petitioner, as attorney for the plaintiffs (now
respondents Luis Magtibay and Pablo Magtibay) filed an opposition dated October 5, 1964.....4
8. That after the hearing of the motion to dismiss filed by the defendants and the opposition
thereto by the plaintiffs, which finally took place on October 24, 1964, the respondent Judge
issued its resolution or order dated October 24, 1964, denying the motion to dismiss, ....5
9. That on the very day of and after the hearing of the motion to dismiss, or on October 24,
1964, before receipt of a copy of the said order (Annex 'G'), there was a conversation which
took place between herein petitioner and the attorney of the defendants, Atty. Rustico de los
Reyes, Jr., in the civil case and one who was then acting as a sort of spokesman for the
defendants (Ex-Mayor Cordova of Sta. Maria, Laguna) for the amicable settlement of the case
between the plaintiffs and the defendants to the effect that a certain property of the spouses
Lucio Magtibay (deceased) and respondent Aurelia Martinez, worth P3,000.00, would be given
to the plaintiffs in full settlement of their claim, as share in the properties left by their deceased
uncle Lucio Magtibay, it having been agreed by herein petitioner and Atty. de los Reyes and
the spokesman of the defendants that for the purpose of said amicable settlement, the plaintiffs
or one of them and herein petitioner would go to Sta. Maria, Laguna, on October 23, 1964.
10. That having given notice to the plaintiffs (now respondents Luis Magtibay and Pablo
Magtibay) at their given address in Calauag, Quezon to come to Candelaria for the purpose of
going to Sta. Maria, Laguna on October 23, 1964, petitioner had waited for said plaintiffs to go
to his office on or before said date for the engagement mentioned, but due to their (plaintiffs')
failure to come to Candelaria, petitioner had to send a telegram to Ex-Mayor Cordova notifying
him of his (petitioner's) and plaintiffs' not being able to go to Sta. Maria because of the failure
of any of the plaintiffs to come to Candelria, ....
11. That it was only on October 28, 1964, when herein petitioner received a copy of the order
dated October 24, 1964 (Annex "G") and to his surprise he also received on the said day a
second motion to dismiss dated October 26, 1964; together with Annex "A" of said motion,
which is entitled KASULATAN NG PAGHAHATIAN NA LABAS SA HUKUMAN AT
PAGPAPALABI, dated October 23, 1964 at Sta. Cruz, Laguna and signed by the plaintiffs and
defendant Aurelia Martinez (the three being now respondents in this case), it having been
made to appear in said Annex "A" of the second motion to dismiss, among others, that the
plaintiffs and defendant Aurelia Martinez had made an extrajudicial partition of the properties of
the deceased Lucio Magtibay and the said Aurelia Martinez adjudicating to the plaintiffs one-
fourth (¼) share in the properties of the spouses and three-fourth (3/4) share of the defendant
Aurelia Martinez, but making it appear also that said plaintiffs waived their share in favor of
Aurelia Martinez, ..., thru which fraudulent waiver, herein petitioner was deprived of his
contingent fees, agreed upon, as evidenced by Annex "A" of this petition.6
xxx xxx xxx
14. That petitioner filed by registered mail, on November 4, 1964, his "OPPOSITION TO THE
SECOND MOTION TO DISMISS AND COUNTER-MOTION OR PETITION TO SET ASIDE
DEED OF EXTRAJUDICIAL PARTITION AND WAIVER DATED OCTOBER 23, 1964 AND TO
RECORD ATTORNEY'S LIEN", dated November 3, 1964, wherein he (petitioner) prayed,
among others, invoking the provisions of Section 5(d) and Section 6, Rule 135 of the Revised
Rules of Court, for the protection of the rights of herein petitioner as an officer of the Court, to
wit:
10 | P a g e
(a) to deny the second motion to dismiss and get aside and annul the deed of extrajudicial
partition and waiver dated October 23, 1964;
(b) to fix the compensation of herein counsel in the proportion of one-third (1/3) of the shares of
plaintiffs, if in land, or in the amount of P1,000.00, if in cash, and to record the same and
expenses advanced by him for the plaintiffs in the sum of P22.15 as lien in favor of herein
claimant-petitioner over the properties in litigation, particularly over the one-fourth (1/4) share
of the plaintiffs in all the properties of the spouses;
xxx xxx xxx
(d) as an alternative to prayer (a) above, to grant the second motion to dismiss, subjecting,
however, the properties in litigation and subject-matters of the extrajudicial partition and waiver
to the lien for attorney's fees and expenses in favor of herein claimant-petitioner, after fixing
said attorney's fees as prayed for in (b) above.
xxx xxx xxx
15. That on the day f finally set for the hearing of the second motion to dismiss, as well as of
the counter-motion or petition, or on November 21, 1964, because of the inquiries or
interpellation made by respondent Judge to herein petitioner as to whether there is a Philippine
precedent which allows or directs the protection by the Court of the rights of any of its officers
(lawyer) against any collusion perpetrated by the parties in a case to defraud or cheat an
attorney of his compensation agreed upon by him and his clients, and his answer that insofar
as his researches were concerned, he could not find any, although there are a number of
cases to that effect in American jurisdiction, the respondent Judge had opined in open court
that the claim for and the fixing of the attorney's fees should better be done in a separate
action and, in spite of petitioner's memorandum citing American authorities to the effect that,
Though a party may without the consent of his attorney money make a bona fide adjustment
with the adverse party and dismiss an action or suit before a judgment or a decree has been
rendered thereon, if it appears, however, that such settlement was collosive and consummated
pursuant to the intent of both parties to defraud the attorney, the court in which the action was
pending may interfere to protect him as one of its officers, by setting aside the order of
dismissal, .... (Jackson vs. Stearns, 48 Ore. 25, 84 Pac. 798).
... the respondent Judge, instead of denying the second motion to dismiss and fixing his
attorney's fees in the said case and recording the same as lien, ... dismissed the case and
refused to give herein petitioner any kind of immediate protection to safeguard his rights ... in
said Civil Case No. SC-525 of the Court of First Instance of Laguna.
16. That by the express terms of the agreement, Annex "A" of this petition, plaintiffs in Civil
Case No. SC-525 had expressly ceded to herein petitioner one-half (½) [later verbally reduced
to one-third (1/3) or P1,000.00] or whatever share they would get from the estate of their
deceased uncle Lucio Magtibay, and the defendants in said Civil Case had full knowledge of
said right of herein petitioner in the properties in controversy from and after the time they were
served with summons and copies of the complaint in said civil case — because of the
allegations contained in par. 10 thereof. 7 [Emphasis by the Court]
18. That on December 5, 1964, herein petitioner filed his motion for reconsideration dated
December 4, 1664 asking for the reconsideration of the order dated November 21, 1964, ....
19. That the motion for reconsideration was denied by the court, thru the respondent Judge, as
per the order dated January 9, 1965, ....
Upon these facts, petitioner tries to make out before this Court a case of certiorari for grave
abuse of discretion on the part of respondent Judge in dismissing the case on the basis of the
compromise agreement of the parties, entered into at the back of petitioner notwithstanding the
reservation made in his favor to file an action against both parties "with respect to his alleged
attorney's fees", as well as a case of mandamus "to order and command the said respondent
judge" to take cognizance of and resolve his opposition and counter-motion for the court to fix
the compensation he should be paid. Unable to find any local precedent to support his position,
he cites American authorities thus:
In the American jurisdiction, it would seem that, even without the specific provisions of the
rules of court cited above, courts had always intervened, in the mere exercise of their inherent
powers, to protect attorneys against collusive agreements or fraudulent settlements entered
into by the parties in a case to cheat attorneys out of their costs or of their fees. Thus, it was
held or had been stated in:
(a) Coughlin vs. N.Y. Cont. & H.R.R. Co., 71 N.Y. 443, 27 Am. Rep. 75.
... But since the time of Lord Mansfield, it has been the practice of courts to intervene to protect
attorneys against settlement made to cheat them out of their costs. If an attorney has
commenced an action, and his client settles it with the opposite party before judgment,
collusively, to deprive him of his costs, the court will permit the attorney to go on with the suit
for the purpose of collecting his costs. Swain v. Senate, 5 Bos. & Pul. 99; Cole v. Bennett, 6
Price, 15; Moore v. Cook, 13 Id. 473; Talcott v. Bronson, 4 Paige, 501; Rusquin v. The
Knickerbocker Stage Col., 12 Abb. Pr 324; Ward v. Syme, 9 How. Pr. 16; McDonald v. Napier,
14 Ga. 89.
There are many cases where this had been allowed to be done. It is impossible to ascertain
precisely when this practice commenced, nor how originated, nor upon what principle it was
based. It was not upon the principle of a lien, because an attorney has no lien upon the cause
of as it upon the action before judgment for his costs; nor was it upon principle that his services
had produced the money paid his client upon the settlement, because that could not be known,
and in fact no money may have been paid upon the settlement. So far as I can perceive, it was
based upon no principle. It was a mere arbitrary exercise of power by the courts; not arbitrary
in the sense that it was unjust or improper, but in the sense that it was not based upon any
right or principle recognized in other cases. The parties being in court, and a suit commenced
and pending, for the purpose of protecting attorneys who were their officers and subject to their
control, the courts invented this practice and assumed this extraordinary power to defeat
attempts to cheat the attorneys out of their costs. The attorney's fees were fixed in definite
sums, easily determined by taxation and this power was exercised to secure them their fees.
(pp. 76-77)
(b) Randall v. Van Wagenan et al., 22 N.E. 361, 362.lawphi1.nêt
... But where such settlement is made collusively for the purpose of defrauding the attorney out
of his costs, courts have been accustomed to intervene, and to protect the attorney by
permitting him to proceed with the suit, and, if he is able to establish a right to recover on the
cause of action as it originally stood, to permit such recovery to the extent of his costs in the
action. Coughlin v. Railroad Co., 71 N. Y. 443, and pages cited. And the court will set aside an
order of discontinuance if it stands in the way. This is an adequate remedy, and we think the
exclusive remedy where the suit has been fraudulently settled by the parties before judgment
to cheat the attorney out of his costs. We have found no case of an equitable action to enforce
the inchoate right of an attorney, under such circumstances, and no such precedent ought, we
think, to be established.
(c) Jackson v. Stearns, et al., 43 Ore 25, 84 Pac. 798.
... Though a party may, without the consent of his attorney, make a bona fide adjustment with
the adverse party, and dismiss an action or suit before a judgment or a decree has been
rendered therein, if it appears, however, that such settlement was collusive and consummated
pursuant to the intent of both parties to defraud the attorney, the court in which the action or
suit was pending may interfere to protect him, as one of its officers, by setting aside the order
of dismissal and permitting him to proceed in the cause in the name of his client to final
determination to ascertain what sum of money, or interest in the subject-matter, if any, is due
him for his services when fully performed. Jones v. Morgage 99 Am. Dec. 458; Randall v. Van
Wagenen (N.Y.) 22 N.E. 361, 12 Am. St. Rep. 828. (p. 800)
Before a court will set aside an order dismissing a suit or an action, made upon stipulation of
the parties, without the consent of plaintiff's attorney, and allow the latter to proceed with the
cause in the name of his client, to determine the amount of fees due him, it must appear that
the defendant participated in the fraudulent intent to deprive the attorney of his compensation.
Courtney v. McGavock, 25 Wis. 619. When no adequate consideration is given by the
defendant for the settlement and discharge of an action or a suit, the insufficiency of the
inducement to the contract affords evidence of his bad faith. Young v. Dearborn, 27 N.E. 324.
It will be remembered that the complaint alleges that the value of the real property in question
is $3,000.00, and that Stearns executed to Wilson a deed to the premises for a nominal
consideration. This is a sufficient averment of the defendant's intent to deprive the plaintiff of
his compensation thereby imputing to Wilson bad faith. (p. 800)
(d) Desaman v. Butler Bros., 188 Minn. 198, 136 N.W. 747.
We have recently held that a client has always the right to settle his cause of action and stop
litigation at any stage of the proceeding, subject, however, to the right of the attorney to receive
compensation for services rendered. Burho v. Camichael 135 N.W. 386. It is therefore
contended by defendant that a litigant retains the unrestricted right to determine for what
amount the cause of action may be settled, and, having so done, the lien of his attorney for
services is measured by the amount determined on and actually settled for. Conceding, without
deciding, that this may be true of any time prior to the rendition of a verdict in the action which
the attorney has been employed to bring, we are of opinion that after verdict fixing the amount
of a plaintiff's cause of action a secret and collusive compromise between parties litigant does
not affect the amount of the attorney's lien...; but therein is also clearly indicated by Mr. Justice
Brown that, if there be fraud and collusion to deprive the attorney of his lien, the settlement will
not be permitted to accomplish such result. (p. 748)
To be sure, these authorities are quite persuasive, but contrary to petitioner's impression, there
is already a precedent setting decision of this Court handed down way back in 1922 in a case
very similar to his, that in Rustia vs. the Judge of the Court of First Instance of Batangas, et al.,
44 Phil. 62. As it is very brief, it can be quoted in full:
This is a petition for a writ of certiorari, the petitioner alleging that the respondent Judge of the
Court of First Instance exceeded his jurisdiction in dismissing a pending action at the instance
of the parties but without the intervention of the attorney for the plaintiff in the case, the herein
petitioner.
It appears from the record that on July 31, 1921, the respondent Justo Porcuna, for himself
and on behalf of his wife, the respondent Rosa H. de Porcuna, by means of a written contract,
retained the petitioner to represent them as their lawyer in case No. 1435 then pending in the
Court of First Instance of Batangas and in which Rosa H. de Porcuna was the plaintiff and one
Eulalia Magsombol was the defendant. The contract fixed the petitioner's fee at P200 in
advance with an additional contingent fee of P1,300. It was also provided in the contract that
Justo Porcuna should not compromise the claim against the defendant in the case without
express consent of his lawyer, the herein petitioner.
After trial, the petitioner then being plaintiff's attorney of record, the Court of First Instance,
under date of December 24, 1921, rendered judgment in favor of Justo Porcuna and Rosa H.
de Porcuna ordering the defendant Eulalia Magsombol to return to them 602 pieces of cloth or
in default thereof to pay to them the sum of P3,250. On January 14, 1922, Eulalia Magsombol
filed her exception to the judgment and on the following day presented a motion for a new trial,
which was denied on the 21st of the same month. She thereupon gave notice of appeal and
presented a bill of exceptions which was approved on February 20, 1922. On March 2, 1922,
and before the transmission of the bill of exceptions to this court, the plaintiffs presented the
following motion in the Court of First Instance:
The plaintiffs, without any further intervention of their attorney, now appear before this
Honorable Court and respectfully aver:
That, through Mr. Miguel Olgado they already settled this case with the herein defendant.
That the basis of the compromise is that we, the plaintiffs, finally agree that we should be paid
the amount of eight hundred pesos (P800) in two installments; P300 to be paid on this same
date, and the remaining five hundred pesos (P500) at the end of March, 1922.
That we, the plaintiffs, recognize not to have any further rights in this case than to the aforesaid
amount of eight hundred pesos (P800) and that this is the total amount the defendant Eulalia
Magsombol should pay us, and we have no right whatever to any other amount than the
aforementioned.
That we have not sold to any other person our rights as plaintiffs in this case.
Wherefore, the plaintiffs respectfully request the dismissal of this case, without any
pronouncement as to costs, and that the appeal interposed by the defendant be further
dismissed.
Batangas, Batangas, P.I., March 2, 1922.
(Sgd) ROSA H. PORCUNA
Plaintiff
JUSTO M. PORCUNA
Plaintiff
The defendant, through her attorney, Jose Mayo Librea, having signified her assent to the
motion, the Court of First Instance on the same day, March 2, dismissed the action without
notice to counsel for the plaintiffs.
11 | P a g e
The petitioner alleges that he did not discover the dismissal of the action until April 4, 1922.
After an unsuccessful effort to obtain a reconsideration of the order of dismissal from the trial
court, he filed the present petition for a writ of certiorari. By resolution dated October 24, 1922,
this court denied the petition and upon motion of the petitioner we shall now briefly state our
reasons for such denial.
The burden of the petitioner's contention is (1) that he, as attorney of record, was entitled to
notice of his client's motion to dismiss the case, and (2) that after the approval of the bill of
exceptions the lower court had lost jurisdiction of the case and had no power to dismiss it. A
moment's reflection should make it clear that neither of these propositions is tenable.
Both at the common law and under section 32 of the Code of Civil Procedure a client may
dismiss his lawyer at any time or at any stage of the proceedings and there is nothing to
prevent a litigant from appearing before the court to conduct his own litigation. (Sec. 34, Code
of Civil Procedure.) The client has also an undoubted right to compromise a suit without the
intervention of his lawyer.
Though there is a valid agreement for the payment to the attorney of a large proportion of the
sum recovered in case of success this does not give the attorney such an interest in the cause
of action that it prevents plaintiff from compromising the suit. (4 Cyc. 990, and authorities cited
in Note 6; see also Louque vs. Dejan 129 La. 519; Price vs. Western Loan & Savings Co., 19
Am. Cas. 589 and Note.)
In the present instance the clients did nothing that they did not have a perfect right to do. By
appearing personally and presenting a motion they impliedly dismissed their lawyer. The
petitioner's contingent interests in the judgment rendered did not appear of record. Neither as a
party in interest nor as and attorney was he therefore entitled to notice of the motion.
As to the second proposition that the court below could not dismiss the case after the bill of
exceptions had been approved, it is very true that upon such approval the lower court loses its
jurisdiction over all contentious matters connected with the issues in the case. But there is
nothing to prevent all of the parties by agreement to withdraw the bill of exceptions with the
consent of said court and resubmit the case to the jurisdiction of the court. That was all that
was done in this case. A valid agreement between the parties to a case is the law of the case
in everything covered by the agreement. (Civil Code, art. 1091; Compania General de Tabacos
vs. Obed, 13 Phil. 391.) The petitioner might have protected his interests by entering an
attorney's lien under section 37 of the Code of Civil Procedure.
The petition for a writ of certiorari was therefore properly denied. So ordered.
The difference We perceive, however, between petitioner's case, on the one hand, and that of
Atty. Rustia, in the above decision, on the other, is that in the latter's case, neither the court nor
the party adverse to his clients were aware of the exact agreement as to his fees, whereas in
the case of petitioner, both the court and the other parties knew the terms of the contract for
professional services between petitioner and his clients, the Magtibay brothers, because the
written contract therefor, Annex A, was made part of the complaint, and none seriously
disputes its authenticity. Besides, the court had already dismissed the case when Atty. Rustia
raised the question of his fees before the court; in petitioner's instance, he opposed the motion
to dismiss and pleaded with the court to protect his rights as officer of the court before the first
order in question was issued by respondent judge. Were it not for these differences, We would
have inclined towards denying the herein petition in line with the Rustia ruling that, in any
event, certiorari is not the appropriate remedy, the American authorities cited by petitioner not
withstanding.
Withal, there is another Philippine case which Us to sustain petitioner. In the case of Recto vs.
Harden, 100 Phil. 440, Atty. Claro M. Recto found himself practically in the same situation as
petitioner herein. After Atty. Recto had rendered services to Mrs. Esperanza P. de Harden in a
protracted suit against her husband for the purposes of securing an increase of her and her
daughter's monthly support, (the spouses were separated), to P10,000.00 and of protecting
and preserving her rights in the properties of the conjugal partnership, which suit lasted from
1941 to 1949, and after the Court of First Instance of Manila had rendered a judgment
favorable to Mrs. Harden acknowledging, inter alia, her rights to the assets of the conjugal
partnership, which turned out to be P4,000,000, and awarding her a monthly support of
P2,500, practically as prayed for in Atty. Recto's pleadings, while the case was already
pending on appeal before this Court, Mrs. Harden and her husband, Mr. Fred Harden, entered
into a compromise of their case, without the knowledge of Atty. Recto, whereby said spouses
"purportedly agreed to settle their differences in consideration of the sum of P5,000 paid by Mr.
Harden to Mrs. Harden, and a monthly pension of $500 to be paid by him to her; (2) Mr.
Harden created a trust fund of $20,000 from which said monthly pension of $500 would be
taken; and (3) Mr. and Mrs. Harden had mutually released and forever discharged each other
from all actions, debts, duties, accounts, demands and claims to the conjugal partnership, in
consideration of the sum of $1." (p. 435)
Whereupon Atty. Recto filed a motion with this Court praying that:
a) Pending the resolution of this motion, the receiver appointed herein be authorized to
continue holding the properties above mentioned in his custody in order not to defeat the
undersigned's inchoate lien on them;
b) A day set aside to receive the evidence of the undersigned and those of the plaintiff and the
defendant Fred M. Harden, in order to determine the amount of fees due to the undersigned,
by the appointment of a referee or commissioner for the reception of such evidence;
c) After due hearing, the undersigned be declared entitled to the sum of P400,000 as his fees
for services rendered in behalf of the plaintiff in this case, under paragraph 3 of the contract,
Annex "A" and to that end a charging lien therefore be established upon the properties above-
mentioned;
d) And the receiver be ordered to pay to the undersigned the full amount of the fees to which
the latter is found to be entitled.
This motion was objected to by Mr. Hardens counsel, who in turn, moved for the dismissal of
the case, to which Atty. Recto objected. Under these circumstances, this Court acceded to
Atty. Recto's prayer that the case be not dismissed, that the receivership be maintained except
as to certain properties not material to mention here, and that the case be remanded to the
lower court so that his fees may be determined and ordered paid. Upon the remand of the case
to the lower court, a commissioner was appointed to hear the matter of the amount of the fees
in question, and after the commissioner had submitted a report recommending the payment to
Atty. Recto of the 20,70 attorney's fees stipulated in the contract for his services, equivalent to
P369,410.04, the court rendered judgment as follows:
The contingent fee to which the claimant is entitled under paragraph 3 of the contract, Exhibit
JJJ or 20, is 20% of P1,920,554.85 or the sum of P384,110.97.
WHEREFORE, this Court hereby approves the recommendation of the Commissioner with the
above-stated modification, and finds that Attorney Claro M. Recto is entitled to the sum of
THREE HUNDRED EIGHTY-FOUR THOUSAND ONE HUNDRED AND TEN PESOS AND
NINETY-SEVEN CENTAVOS (P384,110.97), representing 20% of Esperanza P. de Harden's
share in the conjugal properties owned by her and her husband, Fred M. Harden, as
contingent fee stipulated in paragraph 3 of the Contract of Professional Services, Exhibit JJJ or
20, and the said Esperanza P. de Harden is hereby ordered to pay the said amount above-
stated.
the payment of petitioner's claim of attorney's fees in the form of either one-third of the ¼ share
acknowledged as his clients in the compromise in question or P1,000.00, which should
constitute as a lien on the said share, in spite of the waiver thereof in favor of respondent
Aurelia Martinez. It is unnecessary to consider the petition for mandamus. Costs against,
private respondents.

On appeal from this judgment to this Court, the same was affirmed, the decision stating
pertinently in part:

The last objection is based upon principles of equity, but, pursuant thereto, one who seeks
equity must come with clean hands (Bastida et al. vs. Dy Buncio & Co., 93 Phil. 195; 30 C.J.S.
475), and appellants have not done so, for the circumstances surrounding the case show, to
our satisfaction, that their aforementioned agreements, ostensibly for the settlement of the
differences between husband and wife, were made for the purpose of circumventing or
defeating the rights of herein appellee, under his above-quoted contract of services with Mrs.
Harden. Indeed, having secured a judgment in her favor, acknowledging her rights to the
assets of the conjugal partnership, which turned out to be worth almost P4,000,000 in addition
to litis expensae in the sum of P175,000, it is inconceivable that Mrs. Harden would have
waived such rights, as well as the benefits of all orders and judgments in her favor, in
consideration of the paltry sum of $5,000 allegedly paid to her by Mr. Harden and the
additional sum of $20,000 to be paid by him in installments, at the rate of $500 a month. In
fact, no explanation has been given for this moat unusual avowed settlement between Mr. and
Mrs. Harden. One can not even consider the possibility of a reconciliation between the
spouses, the same being inconsistent with the monetary consideration for said alleged
settlement. What is more, the records show that the relations between said spouses — which
were bad indeed, not only in July, 1941, when Mrs. Harden engaged the services of the
appellee, but, even, before, for Mr. and Mrs. Harden were separated since 1938 — had
worsened considerably thereafter, as evidenced by an action for divorce filed by Mr. Harden in
New Jersey, in July 1948, upon the ground of repeated acts of infidelity allegedly committed by
Mrs. Harden in 1940 and 1941.

On the same considerations of equity, and for the better protection of lawyers, who, trusting in
the good faith of their clients, render professional services on contingent basis, and so that it
may not be said that this Court, sanctions in any way the questionable practice of clients of
compromising their cases at the back of their counsel with the consequence that the stipulated
contingent fees of the lawyer are either unreasonably reduced or even completely rendered
without basis, as in this case — wherein the clients waived the whole of their rights in favor of
their opponent after the latter had acknowledged, in effect, the correctness of said clients'
contention — We have decided to grant the herein petition, in so far as the rights of petitioner
have been prejudiced by the questioned compromise agreement. While We here reaffirm the
rule that "the client has an undoubted right to compromise a suit without the intervention of his
lawyer", 8 We hold that when such compromise is entered into in fraud of the lawyer, with
intent to deprive him of the fees justly due him, the compromise must be subject to the said
fees, and that when it is evident that the said fraud is committed in confabulation with the
adverse party who had knowledge of the lawyer's contingent interest or such interest appears
of record and who would benefit under such compromise, the better practice is to settle the
matter of the attorney's fees in the same proceeding, after hearing all the affected parties and
without prejudice to the finality of the compromise in so far as it does not adversely affect the
rights of the lawyer. Surely, "the client cannot, by setting, compromising or dismissing his suit
during its pendency, deprive the attorney of his compensation for the agreed amount, unless
the lawyer consents to such settlement, compromise or dismissal", (Legal and Judicial Ethics
by Martin, 1967 Rev. Ed p. 121) for the, attorney is or "Shall be entitled to have and recover
from his client - a reasonable compensation (not more) for his services, with a view to the
importance of the subject-matter of the controversy, the extent of the services rendered, and
the professional standing of the attorney", (Sec. 24, Rule 138, on Attorney and Admission to
Bar) albeit, under Canon 12 of the Canons of Professional Ethics, "in fixing fees, it should not
be forgotten that the profession is a branch of the administration of justice and not a mere
money-getting trade."

True it is also that "a client may, at anytime, dismiss his attorney or substitute another in his
place", (Sec. 26, Rule 138) but it must be emphasized that the same provision, which is an
incorporation of Republic Act 636 into the Rules of Court, also provides that "if the contract
between client and attorney had been reduced to writing and the dismissal of the attorney was
without justifiable cause, he shall be entitled to recover from the client full compensation ..." In
the case at bar, by entering into the compromise agreement in question and even inserting
therein a prayer to the court to dismiss their case filed by petitioner, (see footnote 6, ante)
petitioner's clients impliedly dismissed him. (Rustia vs. the Court, etc., supra.) Such implied
dismissal appears to Us to have been made without justifiable cause, none is urged anywhere
in the record, and so, the above-quoted provision of Section 26, Rule 138 applies here. The
terms of the compromise in question, as spelled out in Annex A of Annex I of the petition,
indicate clearly that Aurelia Martinez, the defendant aunt in-law of petitioner's clients,
acknowledged that the rights of said clients were practically as alleged by petitioner in the
complaint he filed for them. In other words, through the services of petitioner, his clients
secured, in effect, a recognition, which had been previously denied by their aunt-in-law, that
they were entitled to a ¼ share in the estate left by their uncle. We hold that under these
circumstances, and since it appears that said clients have no other means to pay petitioner,
since they instituted their case as paupers, and that their aunt-in-law was aware of the terms of
their contract of professional services with petitioner', said clients had no right to waive the
portion of their such acknowledged rights in favor of their opponent to the extent that such
waiver would prejudice the stipulated contingent interest of their lawyer and their aunt-in-law
had no right to accept such waiver unqualified. The Civil Code enjoins that:

ART. 19. Every person must, in the exercise of his rights and in the performance of his duties,
act with justice, give everyone his due, and observe honesty and good faith.

Under the circumstance extant in the record, it is clear that the compromise agreement in
question falls short of the moral requirements of this quoted article of the Civil Code. If for this
reason alone, it should not be allowed to prejudice the rights of petitioner. Accordingly, as all of
these circumstances were presented to respondent judge before he issued the challenged
order of dismissal and all the parties were heard thereon, it was incumbent upon His Honor, in
equity and to avoid multiplicity of suits, particularly, because the amount claimed by petitioner
is only P1,000.00, to have directly passed upon petitioner's claim, and not having done so, it
would appear that the court a quo abused its discretion gravely enough to warrant the writ of
certiorari herein prayed for in so far as the questioned orders prejudiced petitioner's right to the
fees for the professional services which appear to have been creditably rendered by him.
Respondents allege that the judgment of dismissal in question is already final because no
appeal was taken therefrom, but since We hold that the same was rendered with enough grave
abuse of discretion to warrant the certiorari prayed for, such alleged finality could not have
materialized; obviously, petitioner could not have appealed, not being a party in the case.

IN VIEW OF THE FOREGOING, the orders of the respondent court dated November 21, 1964
and January 9, 1965 in Civil Case No. SC-525 are hereby set aside in so far as they prejudice

12 | P a g e
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 179892-93 January 30, 2009
ATTY. VICTORIANO V. OROCIO, Petitioner,
vs.
EDMUND P. ANGULUAN, LORNA T. DY and NATIONAL POWER CORPORATION,
Respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition1 for Review on Certiorari under Rule 45 of the Rules of Court seeking
to set aside the Resolution2 dated 31 October 2006, Decision3 dated 29 January 2007, and
Resolution4 dated 27 September 2007, of the Court of Appeals in CA-G.R. SP Nos. 95786 and
95946.
The facts culled from the records are as follows:
On 26 September 1978, the National Power Corporation Board of Directors (NAPOCOR
Board), pursuant to its specific power and duty to fix the compensation, allowance and benefits
of the NAPOCOR employees under Section 6(c) of Republic Act No. 6395, as amended,
passed Resolution No. 78-119 approving the grant of a monthly welfare allowance equivalent
to 10% of an employee’s basic pay to all NAPOCOR employees effective 1 October 1978.5
Pursuant thereto, the NAPOCOR Welfare Plan Committee, renamed and reconstituted later on
as the NAPOCOR Welfare Fund Board of Trustees (NAPOCOR-WFBT), issued and
promulgated a charter for the NAPOCOR Welfare Fund which includes the following
provisions:
ARTICLE VII
TERMINATION/AMENDMENT OF THE PLAN
"Section 1. Termination/Amendment of the Plan – The Board of Directors may amend, revise,
repeal any or all of the provisions herein contained and/or terminate the Plan, subject to the
pertinent provisions of the Trust Agreement.
Section 2. Payment of Member’s share – In the event of termination of the Plan, the balance to
the credit of each member and the General Reserve for Employee Benefits shall be paid to the
members in full. The accumulated amount in the General Reserve for Employee Benefits shall
be distributed among the members in the proportion to the amount outstanding to their credit
as of the time of termination.6
The NAPOCOR Board subsequently passed Resolution No. 82-172 fixing a NAPOCOR
employee’s contribution to the NAPOCOR Welfare Fund in a sum equivalent to 5% of his basic
pay.7
Almost two decades thereafter, on 8 June 2001, Congress passed Republic Act No. 9136,
otherwise known as the Electric Power Industry Reform Act (EPIRA). EPIRA directed the
restructuring of the power industry which includes the reorganization of NAPOCOR. Following
the directive of EPIRA, the NAPOCOR Board passed Resolution No. 2003-43 on 26 March
2003 abolishing the NAPOCOR Welfare Fund Department and other departments, and
dissolving the NAPOCOR Welfare Fund upon the effectivity of EPIRA on 26 June 2001.8
Consequently, some of the employees in the NAPOCOR Welfare Fund Department and in
other departments (who were also members of the NAPOCOR Welfare Fund) resigned, retired
or separated from service. Thereafter, the liquidation and dissolution process for the
NAPOCOR Welfare Fund commenced.
On 11 May 2004, the NAPOCOR-WFBT, with authority from the Commission on Audit,
approved Resolution No. 2004-001 authorizing the release of ₱184 million (which represented
40% of the liquid assets of NAPOCOR Welfare Fund in the total amount of ₱462 million as of
16 April 2004) for distribution to the NAPOCOR Welfare Fund members who resigned, retired,
or separated upon the effectivity of EPIRA on 26 June 2001 (EPIRA separated members).9
Pursuant to Resolution No. 2004-001, herein respondent Edmund P. Anguluan (Anguluan), as
Ex-Officio Chairman of NAPOCOR-WFBT, issued a memorandum on 17 May 2004 to
implement the release of ₱184 million only to the EPIRA separated members to the exclusion
of the NAPOCOR employees (who were also members of the NAPOCOR Welfare Fund) who
have resigned, retired, or separated prior to the effectivity of EPIRA (non-EPIRA separated
members).10
This prompted Mrs. Perla A. Segovia (Segovia), former Vice-President of Human Resources
and Administration and former Ex-Officio Chairman of the NAPOCOR-WFBT, in behalf of the
559 non-EPIRA separated members and in her own personal capacity, to write a letter to Mr.
Rogelio M. Murga, then NAPOCOR President, demanding their equal shares in the remaining
assets of the NAPOCOR Welfare Fund and access to information and records thereof.11
On 13 July 2004, there being no action or response on her letter, Segovia, together with Mrs.
Emma C. Baysic (Baysic), former President of the NAPOCOR Employees Association and
former member of the NAPOCOR-WFBT, in their personal capacities and on behalf of the 559
non-EPIRA separated members, filed with the Quezon City Regional Trial Court (RTC), Branch
217, a Petition for Mandamus, Accounting and Liquidation with a Prayer for the Issuance of
Temporary Restraining Order and Injunction against respondents NAPOCOR, the NAPOCOR
Board, Anguluan (as NAPOCOR Vice-President, Human Resources, Administration and
Finance Department) and Lorna T. Dy (as NAPOCOR Senior Department Manager on
Finance).12 The Petition was docketed as Civil Case No. Q04-53121.
Segovia, Baysic and the 559 non-EPIRA separated members were represented in Civil Case
No. Q04-53121 by petitioner Atty. Victoriano V. Orocio under a "Legal Retainer Agreement"13
dated 1 September 2004, pertinent portions of which are reproduced below:
SUBJECT: Petition for Mandamus with Damages Temporary Restraining Order/Injunction, etc.
with the Court "NPC RETIREES versus NPC, NP Board of Directors, et. al. before the RTC
Quezon City for the payment/settlement of their claims for NPC Welfare Fund (P462 Million
assets and other assets liquid or non-liquid).
Dear Ms. Segovia and Ms. Baysic:
In connection with the above-stated subject, hereunder are our terms and conditions, to wit:
1. No acceptance fee;
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2. All costs of litigation ([filing] and docket fees, etc.), miscellaneous and out-of-pocket
expenses the prosecution of said action shall be for the account of the clients;
3. No appearance/meeting fee;
4. Contingency or success fees of fifteen percent (15%) of whatever amounts/value of assets
(liquid and/or non-liquid) are recovered;
5. This Retainer Agreement serves as Legal Authority for the Law Firm to receive and/or
collect its contingency/success fee without further demand.
On 22 February 2006, the parties in the above-mentioned case, duly assisted by their
respective counsels, executed a Compromise Agreement14 whereby they agreed to amicably
settle their dispute under the following terms and conditions:
COMPROMISE AGREEMENT
xxxx
WHEREAS, the parties have agreed to settle the instant case amicably.
PREMISES CONSIDERED, the parties herein have agreed as follows:
1. Both the NPC EPIRA separated members (those members of the Welfare Fund affected by
the EPIRA law and ceased to be members of the Welfare Fund anytime from June 26, 2001
[effectivity of the EPIRA LAW] to March 1, 2003 [implementation of the EPIRA law and date of
abolition of the Welfare Fund]) and NPC non-EPIRA separated members (those who ceased to
be members of the Fund prior to June 26, 2001) are entitled to "Earnings Differential" of the
NPC Welfare Fund;
2. "Corrected Earnings Differential" refers to a benefit which is a result of re-computation of
Member’s Equity Contributions and Earnings using the correct rates of return vis-à-vis what
was used when they were separated. Period covered by the discrepancy is from 1989 to 2003.
Hence, affected are WF members separated anytime within the period 1989 to 2003;
xxxx
4. The Corrected Earnings Differential of all affected WF separated members shall earn 6%
legal interest per annum computed from the separation of the members from service up to
March 31, 2006 for all the non-EPIRA separated members and May 31, 2006 for the EPIRA
separated members;
5. As of March 2006, the estimated Corrected Earnings Differential for the non-EPIRA
separated members is ₱119.196 Million while for the EPIRA separated members is ₱173.589
Million or a total of ₱292.785 Million, inclusive of the 6% legal interest;
6. In conformity with the Retainer Agreement dated September 1, 2004 between Mrs. Perla A.
Segovia, Mrs. Emma Y. Baysic and Atty. Victoriano V. Orocio; and Irrevocable Special Power
of Attorney dated July 20, 2005 executed by Mrs. Perla A. Segovia and Mrs. Emma Y. Baysic
in favor of Atty. Victoriano V. Orocio, counsel for petitioners, (copies attached as Annexes "A"
and "B" respectively), 15% attorney’s fees shall be deducted from the corresponding Corrected
Earnings Differential of those non-EPIRA separated members who have already executed the
corresponding Special Power of Attorney/Written Authority for the deduction/payment of said
attorney’s fees, and shall be paid to V.V. Orocio and Associates Law Office, represented by
Atty. Victoriano V. Orocio, as compensation for his legal services as counsel for the non-
EPIRA separated members subject to deduction of applicable taxes;
xxxx
15. The parties herein shall exert their best effort in order that the terms and conditions of this
agreement are implemented and complied with in the spirit of fairness, transparency and
equity;
16. This Agreement is not contrary to law, good customs, public order or public policy and is
voluntarily entered into by the parties of their own free will.15
The parties filed with the RTC the very next day, 23 February 2006, a Joint Motion before the
RTC for the approval of their Compromise Agreement.16 The RTC rendered a Decision on 3
April 2006 granting the parties’ Joint Motion and approving the said Compromise
Agreement.17
On 10 April 2006, petitioner filed with the RTC a Motion for Approval of Charging (Attorney’s)
Lien. Petitioner asked the RTC to issue an order declaring him entitled to collect an amount
equivalent to 15% of the monies due the non-EPIRA separated members as his attorney’s fees
in conformity with the Compromise Agreement.18 In an Order dated 15 May 2006, the RTC
granted petitioner’s motion and decreed that he is entitled to collect the amount so
demanded.19
On 20 June 2006, petitioner filed with the RTC a Motion for the Issuance of a Writ of Execution
of the RTC Order dated 15 May 2006.20 Respondents opposed the motion on the ground that
there was no stipulation in the Compromise Agreement to the effect that petitioner is entitled to
collect an amount equivalent to 15% of the monies due the non-EPIRA separated members.
Respondents contended that the amount of ₱119,196,000.00 due the non-EPIRA separated
members under the compromise agreement was a mere estimate and, as such, cannot be
validly used by petitioner as basis for his claim of 15% attorney’s fees.21
The RTC issued an Order on 25 July 2006 granting petitioner’s Motion22 and, accordingly, a
Writ of Execution of the RTC Order dated 15 May 2006 was issued on 26 July 2006. Pursuant
to the said Writ of Execution, RTC Branch Sheriff Reynaldo B. Madoloria (Sheriff Madoloria)
issued a Notice of Garnishment to Ms. Aurora Arenas (Arenas), Assistant Vice-President and
Business Manager of the Philippine National Bank (PNB)-NAPOCOR Extension Office,
Diliman, Quezon City, and to Mr. Emmanuel C. Mendoza (Mendoza), Unit Head of the
Landbank of the Philippines-NAPOCOR Extension Office, Diliman, Quezon City.23
Respondents filed a Motion for Reconsideration of the RTC Order dated 25 July 2006.24
On 12 August 2006, Sheriff Madoloria served to Arenas an "Order for Delivery of Money."25
Respondents Anguluan and Dy filed before the Court of Appeals on 22 August 2006 a Petition
for Certiorari under Rule 65 of the Rules of Court, docketed as CA-G.R. SP No. 95786,
assailing the RTC Order dated 25 July 2006 and praying that a temporary restraining order
and/or a writ of preliminary injunction be issued enjoining the implementation of the said RTC
order.26 Respondent NAPOCOR filed with the Court of Appeals on the same date another
Petition for Certiorari under Rule 65 of the Rules of Court, docketed as CA-G.R. SP No. 95946,
also challenging the RTC Order dated 25 July 2006 and praying that it be set aside and a
temporary restraining order and/or a writ of preliminary injunction be issued prohibiting the
RTC from enforcing the said order and the corresponding writ of execution and notice of
garnishment.27 Subsequently, respondent NAPOCOR filed a Motion to Consolidate CA-G.R.
SP No. 95946 with CA-G.R. SP No. 95786 which was granted by the appellate court.28
On 31 October 2006, the Court of Appeals issued a Resolution granting respondents’
application for a TRO and writ of preliminary injunction. It enjoined the RTC from implementing
its Order dated 25 July 2006 and the corresponding writ of execution and notice of
garnishment during the pendency of CA-G.R. SP No. 95946 and No. 95786. Petitioner filed a
motion for reconsideration of the said resolution.29
On 29 January 2007, the Court of Appeals promulgated its Decision annulling and setting
aside: (1) the RTC Order dated 25 July 2006; (2) the corresponding Writ of Execution dated 26
July 2006; (3) the Notice of Garnishment dated 28 July 2006; and (4) Order for Delivery of
Money dated 10 August 2006. It also held that petitioner was entitled only to an amount of
₱1,000,000.00 as attorney’s fees on the basis of quantum meruit.
The Court of Appeals held that the amount of ₱17,794,572.70 sought to be collected by
petitioner as attorney’s fees, equivalent to 15% of the ₱119,196,000.00 estimated corrected
earnings differential for non-EPIRA separated members, was excessive based on the following
reasons: (1) the corrected earnings differential in the amount of ₱119,196,000.00 due the non-
EPIRA separated members was a mere estimate and was hypothetical. Thus, petitioner was
unjustified in using said amount as basis for his 15% attorney’s fees; (2) there was hardly any
work by petitioner since (a) the compromise agreement was reached without trial or hearing on
the merits; (b) there was no issue regarding the release and distribution of the NAPOCOR
Welfare Fund to the non-EPIRA separated members as the enactment of EPIRA, not the
efforts of petitioner, made such distribution possible; (c) there was no issue on how much each
non-EPIRA separated members would receive because the amount of their respective
contribution was duly recorded by the respondents; (d) respondents have already distributed
the corrected earnings differential to some non-EPIRA separated members, and have given
petitioner his corresponding partial attorney’s fees amounting to ₱3,512,007.32; (e) most of the
non-EPIRA separated members have not yet received their share under the compromise
agreement but petitioner, who was merely their agent, was already given partial payment as
attorney’s fees; (f) the amount of ₱17,794,572.70 represents "only less than one fourth partial
release of the NAPOCOR Welfare Fund which means that the equivalent of three-fourths more
would be demanded [by petitioner] in the future;" and (3) the money claim of the non-EPIRA
separated members was settled through a compromise agreement and not won by petitioner in
a trial on the merits.
The Court of Appeals determined that petitioner was entitled only to an amount of
₱1,000,000.00 as attorney’s fees on the basis of quantum meruit. However, since petitioner
already received ₱3,512,007.32 from respondents as partial payment of his supposed 15%
attorney’s fees, it ruled that such amount was more than sufficient and petitioner was not
entitled to claim anymore the additional amount of ₱14,282,565.38. The fallo of the Decision of
the Court of Appeals reads:
WHEREFORE, premises considered, the assailed July 25, 2006 Order, the July 26, 2006 Writ
of Execution, the July 28, 2006 Notice of Garnishment, and the August 10, 2006 Order of
Delivery of Money are hereby ANNULLED and SET ASIDE, and a new one is ordered,
CAPPING at ₱3,512,007.32, the amount manifested to have already been received from the
welfare fund as attorneys fees, as the maximum amount that may be billed or collected as
attorneys fees from the whole welfare fund – which amount is NOTED to have already
exceeded what this court had fixed at ₱1,000,000.00 as the reasonable amount, on quantum
meruit, that may be collected as attorneys’ fees, pursuant to the guidelines codified in Rule
20.01, Canon 20 of the Code of Professional Responsibility.30
Petitioner filed a motion for reconsideration of the aforementioned Decision but this was denied
by the Court of Appeals in its Resolution dated 27 September 2007.31
Hence, petitioner brought the instant petition before us assigning the following errors:
I.
THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENTS EDMUND P.
ANGULUAN, LORNA T. DY AND NATIONAL POWER CORPORATION (NPC) ARE
ENTITLED TO [PRELIMINARY] INJUNCTION AS THEY HAVE MATERIAL AND
SUBSTANTIAL RIGHTS, WHICH ARE CLEAR AND UNMISTAKABLE, i.e. RIGHTS OF
BEING CLIENTS TO QUESTION THE REASONABLENESS OF THE ATTORNEY’S FEES OF
A LAWYER. THIS ALLEGED RIGHT IS NON-EXISTENT AND IN FACT FABRICATED
CONSIDERING THAT THE RESPONDENTS ARE NOT THE CLIENTS AT ALL OF
PETITIONER, ATTY. VICTORIANO V. OROCIO;
II.
THE COURT OF APPEALS ERRED IN RULING THAT THE FIFTEEN PERCENT (15%)
CONTINGENCY/SUCCESS FEE OF PETITIONER VICTORIANO V. OROCIO IS
UNCONSCIONABLE AND UNREASONABLE DESPITE THE UNDISPUTED FACT THAT THE
SAID ATTORNEY’S FEES IS AMONG THE TERMS AND CONDITIONS OF A JUDICIALLY
APPROVED COMPROMISE AGREEMENT AND COURT ORDER APPROVING HIS
CHARGING LIEN, WHICH AGREEMENT AND ORDER HAVE ALREADY BECOME FINAL
AND EXECUTORY.32
In his first assigned error, petitioner assails the Resolution dated 31 October 2006 of the Court
of Appeals granting respondents’ application for a writ of preliminary injunction.lawphil.net He
claims that the Court of Appeals issued a writ of preliminary injunction in favor of respondents
because petitioner allegedly violated respondents’ material and substantial right as petitioner’s
clients to pay only reasonable attorney’s fees. Petitioner asserts that none of the respondents
is his client in the present case; that even respondents themselves have not alleged or claimed
that they are his clients; that the amount of attorney’s fees he claimed was chargeable on a
portion of the NAPOCOR Welfare Fund due his clients, the non-EPIRA separated employees;
that if anyone would be injured by his claim of attorney’s fees, it would be his clients, the non-
EPIRA separated employees, and not respondents; that none of his clients has questioned or
complained about the amount of attorney’s fees he is claiming; that respondents are not the
real parties-in-interest and at most are merely nominal parties-in-interest; that as mere nominal
parties-in-interest, respondents are not entitled to a writ of preliminary injunction under the
Rules of Court; and that the requisites for the proper issuance of a writ of preliminary injunction
are lacking in the instant case.33
In its Resolution dated 31 October 2006, the Court of Appeals granted respondents’ application
for a writ of preliminary injunction based on the following reasons:
This Court finds that [herein respondents] have prima facie established [their] compliance with
strict requirements for issuance of a writ of preliminary injunction in this case. Under the
leading case of Valencia vs. Court of Appeals, 352 SCRA 72 (2001), the requisites of
14 | P a g e
preliminary injunction are as follows: (a) the invasion of the right of [herein respondents] is
material and substantial; (b) the right of [herein respondents] is clear and unmistakable; and (c)
there is an urgent and paramount necessity for the writ to prevent serious irreparable damage
to [herein respondents].
The right of [herein respondents] alleged to have been invaded is that a client has the right to
pay only a reasonable amount of attorney’s fees and only for services actually rendered –
which is clearly and unmistakably available to all clients. What [herein respondents] are
claiming is a material and substantial right. This Court finds that [herein respondents] have
prima facie established an urgent and paramount necessity for the issuance of the writ of
preliminary injunction prayed for, to avoid irreparable injury to [herein respondents]. x x x.
As can be gleaned from the foregoing, the basis of the Court of Appeals in granting the writ
was petitioner’s alleged violation or invasion of respondents’ right, as petitioner’s clients, to pay
only a reasonable amount of attorney’s fees to, and only for services actually rendered by,
petitioner.
The Court of Appeals is clearly mistaken.
It should be made clear that petitioner is the counsel for the non-EPIRA separated members in
the latter’s quest to claim their shares in the NAPOCOR Welfare Fund. Petitioner was never
hired or employed by respondents as their counsel in the cases at bar. Respondents
themselves do not claim or allege that they are clients of petitioner. In fact, petitioner is
representing the non-EPIRA separated members, the opposing party to the respondents in the
present cases.
Further, the amount of attorney’s fees being claimed by petitioner is chargeable to the
₱119,196,000.00 corrected earnings differential of his clients, the non-EPIRA separated
members. Respondents have actually partially distributed such amount to some non-EPIRA
separated members pursuant to the Compromise Agreement. In other words, the non-EPIRA
separated members are the lawful owners/beneficiaries of the amount from which petitioner’s
attorney’s fees had been and shall be taken.
Hence, if anyone would be injured by petitioner’s claim for attorney’s fees, it would be his
clients, the non-EPIRA separated members, and not respondents. It appears, however, that
none of the non-EPIRA separated members has questioned or complained about petitioner’s
claim for attorney’s fees.
A preliminary injunction is an order granted at any stage of an action or proceeding prior to the
judgment or final order, requiring a party or a court, agency or a person to refrain from a
particular act or acts.34 A writ of preliminary injunction is a provisional remedy, an adjunct to a
main suit, as well as a preservative remedy issued to preserve the status quo of the things
subject of the action or the relations between the parties during the pendency of the suit.35 For
a writ of preliminary injunction to issue, the applicant is tasked to establish and convincingly
show the following: (1) a right in esse or a clear and unmistakable right to be protected; (2) a
violation of that right; and (3) there is an urgent and permanent act and urgent necessity for the
writ to prevent serious damage.36
A clear legal right means one clearly founded on or granted by law or is enforceable as a
matter of law.37 The existence of a right violated is a prerequisite to the granting of a writ of
preliminary injunction.38 A writ of preliminary injunction will not issue to protect a right not in
esse and which may never arise.39 It may be issued only if the applicant has clearly shown an
actual existing right that should be protected during the pendency of the principal action.40 In
the absence of a clear legal right, or when the applicant’s right or title is doubtful or disputed,
preliminary injunction is not proper.41
It is evident from the foregoing that respondents do not have a clear right or right in esse to pay
only a reasonable amount of attorney’s fees to the petitioner because such right belongs solely
to petitioner’s clients, the non-EPIRA separated members. There can be no violation of a right
which does not exist in the first place. Also, there was no necessity for the writ of preliminary
injunction since the non-EPIRA separated members do not claim any damage or injury caused
by the execution of the RTC Order dated 15 May 2006. Even assuming that respondents
would probably suffer damages as administrators or custodians of the NAPOCOR Welfare
Fund if the writ of preliminary injunction was not granted, our ruling would still be the same. We
have held that the possibility of irreparable damage without proof of an actual existing right is
not a ground for the issuance of a writ of preliminary injunction.42 Given these considerations,
we hold that the issuance by the Court of Appeals of a writ of preliminary injunction in favor of
respondents in its Resolution, dated 31 October 2006, was improper.lawphil.net
With regard to his second assigned error, petitioner maintained that his claim for attorney’s
fees equivalent to 15% of the ₱119,196,000.00 estimated corrected earnings differential due
the non-EPIRA separated members was not unreasonable or unconscionable because such
amount was expressly agreed upon in the Compromise Agreement between the non-EPIRA
separated members and respondents. The Compromise Agreement was submitted to the RTC
for approval through the joint motion of the non-EPIRA separated members and respondents,
and the RTC had rendered a final and executory decision approving the same. By virtue of res
judicata, the Court of Appeals cannot alter or change the terms of the Compromise Agreement
by prohibiting petitioner from collecting his stipulated amount of attorney’s fees.43
Petitioner also avers that the amount of ₱17,794,572.70, which is equivalent to 15% of the
₱119,196,000.00 estimated corrected earnings differential due the non-EPIRA separated
members from the NAPOCOR Welfare Fund is already the total, not partial, amount he is
claiming as attorney’s fees; that the ₱119,196,000.00 estimated corrected earnings differential
due the non-EPIRA separated members from the NAPOCOR Welfare Fund is not hypothetical,
such amount having been actually computed and fixed by respondents themselves without the
participation of petitioner and his clients, the non-EPIRA separated members; that he did a lot
of legal work and utilized his legal skills on discovery procedures to force respondents to enter
into the Compromise Agreement with the non-EPIRA separated members; that the passage of
EPIRA merely paved the way for the distribution of the remaining assets of the NAPOCOR
Welfare Fund; that if not for his legal work and skills, the non-EPIRA separated members
would not have received their lawful shares in the remaining assets of the NAPOCOR Welfare
Fund; and that his claim for 15% attorney’s fees is supported by jurisprudence.44
An attorney’s fee, in its ordinary concept, refers to the reasonable compensation paid to a
lawyer for the legal services he has rendered to a client.45 The client and his lawyer may enter
into a written contract whereby the latter would be paid attorney’s fees only if the suit or
litigation ends favorably to the client. This is called a contingency fee contract. The amount of
attorney’s fees in this contract may be on a percentage basis, and a much higher
compensation is allowed in consideration of the risk that the lawyer may get nothing if the suit
fails.46 In the case at bar, the non-EPIRA separated members and petitioner voluntarily
entered into a contingency fee contract whereby petitioner did not receive any acceptance fee
or appearance/meeting fee. The non-EPIRA separated members expressly agreed to pay
petitioner "contingency or success fees of fifteen percent (15%) of whatever amount/value of
assets (liquid and/or non-liquid)" recovered; and authorized petitioner’s law firm "to receive
and/or collect its contingency/success fee without further demand."
 The abovementioned case may be reasonably applied by analogy in the instant case since
Contingent fee contracts are permitted in this jurisdiction because they redound to the benefit they have substantially similar circumstances. In the case before us, although the non-EPIRA
of the poor client and the lawyer "especially in cases where the client has meritorious cause of separated members were not illegally dismissed, they were, nevertheless, separated from
action, but no means with which to pay for legal services unless he can, with the sanction of work by reason of EPIRA. In addition, the non-EPIRA separated members had a legal retainer
law, make a contract for a contingent fee to be paid out of the proceeds of litigation. agreement/contingency fee contract with petitioner as their counsel.
Oftentimes, the contingent fee arrangement is the only means by which the poor clients can
have their rights vindicated and upheld." Further, such contracts are sanctioned by Canon 13 It should also be emphasized that the practice of law is a profession not a moneymaking
of the Canons of Professional Ethics.47 venture. A lawyer is not merely the defender of his client’s cause and a trustee of his client’s
cause of action and assets; he is also, and first and foremost, an officer of the court and
However, in cases where contingent fees are sanctioned by law, the same should be participates in the fundamental function of administering justice in society. It follows that a
reasonable under all the circumstances of the case, and should always be subject to the lawyer’s compensation for professional services rendered is subject to the supervision of the
supervision of a court, as to its reasonableness, such that under Canon 20 of the Code of court, not just to guarantee that the fees he charges and receives remain reasonable and
Professional Responsibility, a lawyer is tasked to charge only fair and reasonable fees.48 commensurate with the services rendered, but also to maintain the dignity and integrity of the
legal profession to which he belongs. Upon taking his attorney’s oath as an officer of the court,
A stipulation on a lawyer’s compensation in a written contract for professional services a lawyer submits himself to the authority of the courts to regulate his right to charge
ordinarily controls the amount of fees that the contracting lawyer may be allowed, unless the professional fees.58
court finds such stipulated amount to be unreasonable or unconscionable. If the stipulated
amount for attorney’s fees is excessive, the contract may be disregarded even if the client Thus, taking into account the foregoing circumstances and recognized principles, the 15%
expressed their conformity thereto.49 Attorney’s fees are unconscionable if they affront one’s attorney’s fees of petitioner should be reduced to 10%. As such, petitioner is entitled to collect
sense of justice, decency or reasonableness, or if they are so disproportionate to the value of only, as attorney’s fees, an amount equivalent to 10% of the ₱119,196,000.00 or
the services rendered. In such a case, courts are empowered to reduce the attorney’s fee or fix ₱11,919,600.00.
a reasonable amount thereof taking into consideration the surrounding circumstances and the
established parameters.50 We note, however, that the compromise agreement was partially implemented in the first week
of April 2006 with the payment of ₱23,416,000.00 to some non-EPIRA separated members.59
The principle of quantum meruit (as much as he deserves) may be a basis for determining the Petitioner admitted having already received an amount of ₱3,512,007.32 as his attorney’s fees
reasonable amount of attorney’s fees. Quantum meruit is a device to prevent undue on the said partial payment of ₱23,416,000.00.60 Accordingly, the amount of ₱3,512,007.32
enrichment based on the equitable postulate that it is unjust for a person to retain benefit received by petitioner as attorney’s fees should be deducted from the fixed 10% attorney’s fees
without paying for it. It is applicable even if there was a formal written contract for attorney’s or the amount of ₱11,919,600.00. Per computation, petitioner is entitled to recover the amount
fees as long as the agreed fee was found by the court to be unconscionable. In fixing a of ₱8,407,592.68 as attorney’s fees.
reasonable compensation for the services rendered by a lawyer on the basis of quantum
meruit, factors such as the time spent, and extent of services rendered; novelty and difficulty of WHEREFORE, premises considered, the Resolution of the Court of Appeals dated 31 October
the questions involved; importance of the subject matter; skill demanded; probability of losing 2006 in CA-G.R. SP Nos. 95786 and 95946 granting the issuance of a writ of preliminary
other employment as a result of acceptance of the proferred case; customary charges for injunction is hereby ANNULLED and SET ASIDE. The Decision and Resolution, dated 29
similar services; amount involved in the controversy and the benefits resulting to the client; January 2007 and 27 September 2007, respectively, of the Court of Appeals in CA-G.R. SP
certainty of compensation; character of employment; and professional standing of the lawyer, Nos. 95786 and 95946 are hereby AFFIRMED with the MODIFICATION that petitioner is
may be considered.51 entitled to recover attorney’s fees in the amount of ₱8,407,592.68 on the corrected earnings
differential of the non-EPIRA separated members. No costs.
It appears that the non-EPIRA separated members chose petitioner as their counsel because
the latter, as former member of the NAPOCOR-WFBT for two terms or four years, is familiar SO ORDERED.
and knowledgeable on the operation of the NAPOCOR Welfare Fund.52 Yet, according to the
contingency fee contract agreement between petitioner and the non-EPIRA separated
members, petitioner received no acceptance fee and appearance/meeting fee when he took on
the non-EPIRA separated members’ case. Petitioner’s attorney’s fees were absolutely
dependent on the success of non-EPIRA separated members’ claim on the NAPOCOR
Welfare Fund. Despite these circumstances, petitioner worked diligently in advocating the
claims of the non-EPIRA separated members against respondents as shown by the following:
(1) petitioner took pains in verifying the identity and claim of each of the 559 non-EPIRA
separated members on the NAPOCOR Welfare Fund; (2) petitioner prepared and filed a well-
researched and well-argued petition with the RTC for the claims of the non-EPIRA separated
members;53 (3) he prepared and presented several witnesses and numerous pertinent
documents before the RTC in support of their application for the issuance of a temporary
restraining order and/or writ of preliminary injunction against respondents’ plan to exclude the
non-EPIRA separated members from receiving their shares in the NAPOCOR Welfare Fund;
(4) he participated, as non-EPIRA separated members’ counsel, in the conduct of several
hearings regarding the said application for the issuance of temporary restraining order and/or
writ of preliminary injunction;54 (5) he obtained a temporary restraining order and a writ of
preliminary injunction from the RTC which enjoined/prohibited respondents from excluding the
non-EPIRA separated members from their shares in the NAPOCOR Welfare Fund;55 (6) he
held numerous conferences with the non-EPIRA separated members wherein he apprised the
latter of the status of their claims and his legal strategies pertinent thereto;56 and (7) he
exerted utmost efforts which eventually led to the execution of the Compromise Agreement
between the non-EPIRA separated members and respondents.

By reason of petitioner’s dedication and persistence as can be gleaned above, respondents

finally agreed to settle amicably with the non-EPIRA separated members as regards the latter’s
claim for shares in the NAPOCOR Welfare Fund by virtue of the Compromise Agreement.

Undoubtedly, were it not for petitioner’s vigilance and zeal, respondents would not have
executed the Compromise Agreement with the non-EPIRA separated members. Hence, it is
fair to conclude that petitioner was entitled to a reasonably high compensation.

However, petitioner’s attorney’s fees in the amount of ₱17,794,572.70 or equivalent to 15% of

the ₱ 119,196,000.00 corrected earnings differential of the non-EPIRA separated members
should be equitably reduced.

In NPC Drivers and Mechanics Association (NPC DAMA) v. The National Power Corporation
(NPC),57 we awarded separation pay in lieu of reinstatement plus backwages to several NPC
employees because they were illegally dismissed by the NPC. The NPC employees were
represented by a certain Atty. Cornelio P. Aldon (Atty. Aldon) and Atty. Victoriano V. Orocio,
(the petitioner in the instant cases) under a legal retainer agreement which provides: (1) no
acceptance fee; (2) miscellaneous/out of pocket expenses in the amount of ₱25,000.00; and
(3) twenty-five percent (25%) of whatever amounts/monies are recovered in favor of said NPC
personnel contingent on the success of the case. Atty. Aldon and Atty. Orocio filed a Motion for
Approval of Charging (Attorney’s) Lien pursuant to the legal retainer agreement. Although we
granted the said motion, we reduced the amount of attorney’s fees which was chargeable on
the monies recoverable by the NPC employees from 25% to 10% because:

While we duly recognize the right of Atty. Aldon and Atty. Orocio to a charging lien on the
amounts recoverable by petitioners pursuant to our 26 September 2006 Decision,
nevertheless, we deem it proper to reduce the same. Under Section 24, Rule 138 of the Rules
of Court, a written contract for services shall control the amount to be paid therefor unless
found by the court to be unconscionable or unreasonable. The amounts which petitioners may
recover as the logical and necessary consequence of our Decision of 26 September 2006, i.e.,
backwages and separation pay (in lieu of reinstatement), are essentially the same awards
which we grant to illegally dismissed employees in the private sector. In such cases, our Labor
Code explicitly limits attorney’s fees to a maximum of 10% of the recovered amount.
Considering by analogy the said limit on attorney’s fees in this case of illegal dismissal of
petitioners by respondent NPC, a government-owned and controlled corporation; plus the facts
that petitioners have suffered deprivation of their means of livelihood for the last five years; and
the fact that this case was originally filed before us, without any judicial or administrative
proceedings below; as well as the fundamental ethical principle that the practice of law is a
profession and not a commercial enterprise, we approve in favor of Atty. Aldon and Atty.
Orocio a charging lien of 10% (instead of 25%) on the amounts recoverable by petitioners from
NPC pursuant to our Decision dated 26 September 2006.

15 | P a g e
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 104600 July 2, 1999
RILLORAZA, AFRICA, DE OCAMPO and AFRICA, petitioner,
vs.
EASTERN TELECOMMUNICATIONS PHILS., INC. and PHILIPPINE LONG DISTANCE
TELEPHONE COMPANY, respondents.
PARDO, J.:
The basic issue submitted for consideration of the Court is whether or not petitioner is entitled
to recover attorney's fees amounting to Twenty Six Million Three Hundred Fifty Thousand
Seven Hundred Seventy Nine Pesos and Ninety One Centavos (P26,350,779.91) for handling
the case for its client Eastern Telecommunications Philippines, Inc. filed with the Regional Trial
Court, Makati, though its services were terminated in midstream and the client directly
compromised the case with the adverse party.
The Facts
In giving due course to the petition, we carefully considered the facts attendant to the case. On
August 28, 1987, Eastern Telecommunications Philippines, Inc. (ETPI) represented by the law
firm San Juan, Africa, Gonzales and San Agustin (SAGA), filed with the Regional Trial Court,
Makati, a complaint for recovery of revenue shares against Philippine Long Distance
Telephone Company (PLDT). Atty. Francisco D. Rilloraza, a partner of the firm appeared for
ETPI.
After ETPI rested its case, it paid SAGA the billed amount of One Hundred Thousand Pesos
(P100,000.00). On September 18, 1987, the trial court issued a resolution granting ETPI's
application for preliminary restrictive and mandatory injunctions. During this period, SAGA was
dissolved and four of the junior partners formed the law firm Rilloraza, Africa, De Ocampo &
Africa (RADA), which took over as counsel in the case for ETPI. The latter signed a retainer
agreement with counsel dated October 1, 1987. 1
Petitioners presented the three aspects of the main case in the trial court. First, the traffic
revenue shares which ETPI sought to recover from PLDT in accordance with the contract
between them. Second, ETPI sought preventive injunctive relief against the PLDT's threats to
deny ETPI access to the Philippines international gateway switch. Third, ETPI called this the
"foreign correspondentships aspect" where ETPI sought preventive injunctive relief against
PLDT's incursions and inducements directed at ETPI's foreign correspondents in Hongkong,
Taiwan and Singapore, to break their correspondentship contracts with PLDT, using the threat
of denying them access to the international gateway as leverage.
In this connection, ETPI filed with the trial court two urgent motions for restraining order, one
on October 30, 1987 and another on November 4, 1987. As the applications were not acted
upon, ETPI brought the case up to the Court of Appeals by petition for certiorari.
On June 28, 1988, petitioner received a letter from ETPI signed by E. M. Villanueva, President
and Chief Executive Officer. In substance, the letter stated that ETPI was terminating the
retainer contract dated October 1, 1987, effective June 30, 1988.
On June 29, 1988, petitioner filed with the Regional Trial Court a notice of attorney's lien,
furnishing copies to the plaintiff ETPI, to the signatory of the termination letter and PLDT. On
the same date, petitioner additionally sent a letter to ETPI attaching its partial billing statement.
In its notice, RADA informed the court that there were negotiations towards a compromise
between ETPI and PLDT.
In April 1990, petitioner confirmed that indeed the parties arrived at an amicable settlement
and that the same was entered as a judgment. On April 26, 1990, petitioner filed a motion for
the enforcement of attorney's lien with the Regional Trial Court of Makati and then appraised
the Supreme Court thereof by manifestation. 2 We noted the manifestation in a resolution
dated July 23, 1990.
On May 24, 1990, PLDT filed with the trial court a manifestation that it is not a party to nor in
any manner involved in the attorney's lien being asserted by Atty. Rilloraza for and in behalf of
the law firm, 3 while ETPI filed its opposition thereto on June 11, 1990.
The Lower Court's Ruling
The trial court in its resolution dated September 14, 1990 denied the motion for enforcement of
attorney's lien. Thus:
WHEREFORE, premises considered, the court finds that the Notice of Attorney's Lien filed by
the law firm of Rilloraza, Africa, De Ocampo and Africa has no basis in fact and in law, and
therefore denies the Motion for Enforcement of Attorney's Lien.
SO ORDERED.
Makati, Metro Manila, September 4, 1990.
(s/t) ZEUS C, ABROGAR
Judge 4
On October 10, 1990, petitioner filed with the trial court a notice of appeal from the above-
mentioned order to the Supreme Court. On November 6, 1990, ETPI filed a Motion to Dismiss
Appeal contending that the case could be brought to the Supreme Court only via a petition for
review on certiorari, not by a mere notice of appeal. In an order dated January 16, 1991, the
trial court dismissed RADA's appeal.
The trial court said:
There is no more regular appeal from the Regional Trial Court to the Supreme Court. Under
the amendment of Section 17 of the Judiciary Act by R.A. 5440, orders and judgments of the
Regional Trial Court may be elevated to the Supreme Court only by petition for review on
certiorari.
xxx xxx xxx
16 | P a g e
Wherefore, premises considered, the order dated September 14, 1990 is hereby reconsidered
and set aside. The Notice of Appeal filed by movant RADA is dismissed.
SO ORDERED.
Given this 16th day of January, 1991, at Makati, Metro Manila.
(s/t) ZEUS C, ABROGAR
Judge 5
Hence, on February 9, 1991, petitioner filed a petition for certiorari with the Supreme Court,
which we remanded to the Court of Appeals. The latter dismissed the petition in a decision
promulgated on November 14, 1991, 6 ruling that the judge committed no abuse of discretion
in denying petitioner's motion for enforcement of attorney's lien. Thus:
We therefore rule that respondent judge committed no abuse of discretion, much less a grave
one, in denying petitioner's motion for enforcement of attorney's lien.
Assuming that respondent judge committed an error in denying petitioner's motion for
enforcement of attorney's lien, it cannot be corrected by certiorari.
WHEREFORE, the writs prayed for are DENIED, and the petition is hereby DISMISSED, with
cost against petitioner.
SO ORDERED.
(s/t) REGINA G. ORDOÑEZ-BENITEZ
Associate Justice
WE CONCUR:
(s/t) JOSE A. R. MELO (s/t) EMETERIO C, CUI
Associate Justice Associate Justice 7
DISCUSSION
A. The Procedural Aspect
There is nothing sacrosanct about procedural rules, which are liberally construed in order to
promote their objectives and assist the parties in obtaining just, speedy and inexpensive
determination of every action or proceeding. 8 In analogous case, 9 we ruled that where the
rigid application of the rules would frustrate substantial justice 10, or bar the vindication of a
legitimate grievance, the courts are justified in exempting a particular case from the operation
of the rules.
In A-One Feeds, Inc. vs. Court of Appeals, we said —
Litigations should, as much as possible, be decided on the merits and not on technicality.
Dismissal of appeals purely on technical grounds is frowned upon, and the rules of procedure
ought not to be applied in a very rigid, technical sense, for they are adopted to help secure, not
override, substantial justice and thereby defeat their very claims. As has been the constant
ruling of this Court, every party litigant should be afforded the amplest opportunity for the
proper and just determination of his cause, free from the constraints of technicalities. 11
A basic legal principle is that no one shall be unjustly enriched at the expense of another. 12
This principle is one of the mainstays of every legal system for centuries and which the Civil
Code echoes:
Art. 22. Every person who through an act of performance by another, or any other
means, acquires or comes into possession of something at the expense of the latter without
just or legal ground, shall return the same to him. 13
The Code Commission, its report, emphasized that:
It is most needful that this ancient principle be clearly and specifically consecrated in the
proposed Civil Code to the end that in cases not foreseen by the lawmaker, no one may
unjustly benefit himself to the prejudice of another. The German Civil Code has a similar
provision (Art. 812). 14
With this in mind, one could easily understand why, despite technical deficiencies, we resolved
to give due course to this petition. More importantly, the case on its face appears to be
impressed with merit.
B. The Attorney's Fees
We understand that Atty. Francisco Rilloraza handled the case from its inception until ETPI
terminated the law firm's services in 1988. Petitioner's claim for attorney's fees hinges on two
grounds: first, the fact that Atty. Rilloraza personally handled the case when he was working for
SAGA; and second, the retainer agreement dated October 1, 1987.
We agree that petitioners are entitled to attorneys' fees. We, however, are not convinced with
the petitioner's arguments that the services RADA rendered merit the amount they are
claiming.
First, petitioner contends that Atty. Rilloraza initiated the filing of the complaint. When a client
employs the services of a law firm, he does not employ the services of the lawyer who is
assigned to personally handle the case. Rather, he employs the entire law firm. In the event
that the counsel appearing for the client resigns, the firm is bound to provide a replacement.
Thus, RADA could not claim to have initiated the filing of the complaint considering that ETPI
hired SAGA. What is more, on September 17, 1987, ETPI paid SAGA the amount of One
Hundred Thousand Pesos (P100,00.00) 15 representing services performed prior to
September 17, 1987. SAGA assigned one of its associates, Atty. Francisco Rilloraza, to handle
the case for the firm. Although Atty. Rilloraza handled the case personally, he did so for and in
behalf of SAGA.
Second, petitioner claims that under the retainer agreement, which provides:
6.2 B.Court Cases:
Should recourse to judicial action be necessary to effect collection or judicial action be taken
by adverse party, our attorney's fees shall be fifteen percent (15%) of the amounts collected or
the value of the property acquired or liability saved. 16
the firm is entitled to the fees agreed upon.

However, the retainer agreement has been terminated. True, Attorney Rilloraza played a vital
role during the inception of the case and in the course of the trial. We cannot also ignore the
fact that an attorney-client relationship between petitioner and respondent no longer existed
during its culmination by amicable agreement. To award the attorneys' fees amounting to 15%
of the sum of One Hundred Twenty Five Million Six Hundred Seventy One Thousand Eight
Hundred Eighty Six Pesos and Four Centavos (P125,671,886.04) plus Fifty Million Pesos
(P50,000,000.00) paid by PLDT to ETPI would be too unconscionable.1âwphi1.nêt

"In any case, whether there is an agreement or not, the courts shall fix a reasonable
compensation which lawyers may receive for their professional services. "17 "A lawyer has the
right to be paid for the legal services he has extended to his client, which compensation must
be reasonable." 18 A lawyer would be entitled to receive what he merits for his services.
Otherwise stated, the amount must be determined on a quantum meruit basis.

"Quantum meruit, meaning 'as much as he deserved' is used as a basis for determining the
lawyer's professional fees in the absence of a contract but recoverable by him from his client.
19 Recovery of attorney's fees on the basis of quantum meruit is authorized when (1) there is
no express contract for payment of attorney's fees agreed upon between the lawyer and the
client; (2) when although there is a formal contract for attorney's fees, the fees stipulated are
found unconscionable or unreasonable by the court; and (3) when the contract for attorney's
fee's is void due to purely formal defects of execution; (4) when the counsel, for justifiable
cause, was not able to finish the case to its conclusion; (5) when lawyer and client disregard
the contract for attorney's
fees, 20

In fixing a reasonable compensation for the services rendered by a lawyer on the basis of
quantum meruit, the elements to be considered are generally (1) the importance of the subject
matter in controversy, (2) the extent of services rendered, and (3) the professional standing of
the lawyer. A determination of these factors would indispensably require nothing less than a
full-blown trial where private respondents can adduce evidence to establish the right to lawful
attorney's fees and for petitioner to oppose or refute the same. 21 The trial court has the
principal task of fixing the amount of attorney's fees. 22 Hence, the necessity of a hearing is
beyond cavil.

C. Charging Lien

Petitioner contends that pursuant to Rule 138 of the Revised Rules of Court, it is entitled to a
charging lien. The rule provides:

Sec. 37. Attorney's liens. — An attorney shall have a lien upon the funds, documents and
papers of his client, which have lawfully come into his possession and may retain the same
until his lawful fees and disbursements have been paid, and may apply such funds to the
satisfaction thereof. He shall also have a lien to the same extent upon all judgments for the
payment of money, and executions issued in pursuance of such judgments, which he has
secured in a litigation of his client, from and after the time when he shall have caused a
statement of his claim of such lien to be entered upon the records of the court rendering such
judgment, or issuing such execution, and shall have caused written notice thereof to be
delivered to his client and to the adverse party; and he shall have the same right and power
over such judgments and executions as his client would have to enforce his lien and secure
the payment of his just fees and disbursements." (Emphasis supplied).

We do not agree. A charging lien to be enforceable as security for the payment of attorney's
fees requires as a condition sine qua non a judgment for money and execution in pursuance of
such judgment secured in the main action by the attorney in favor of his client 23. A charging
lien presupposes that the attorney has secured a favorable money judgment for his client. 24
From the facts of the case it would seem that petitioner had no hand in the settlement that
occurred, nor did it ever obtain a favorable judgment for ETPI.

ETPI entered into a compromise agreement when it ended the services of petitioner and
through the effort of ETPI's new lawyers, the law firm Romulo, Mabanta, Buenaventura, Sayoc
and De los Angeles. Whether there was bad faith in the substitution of the lawyers to avoid
compliance with the retainer agreement could only be determined after a trial of the case on
the merits.

This decision, however, should not be interpreted as to impose upon petitioner any additional
burden in collecting its attorney's fees. The petitioner must avail itself of the proper remedy in
order to forestall the possibility of any injustice on or unjust enrichment of any of the parties.

The Judgment (Fallo)

ACCORDINGLY, the Court GRANTS the petition, REVERSES the decision of the Court of
Appeals in CA-G. R. SP No. 24463 and REMANDS the case to the court of origin for the
determination of the amount of attorney's fees to which petitioner is entitled.

No costs.

SO ORDERED

17 | P a g e
SECOND DIVISION Relations at Camp Crame and to this Court. He did not file any civil action to enforce the
agreement.
[A.C. No. 1261. December 29, 1983.]
In his 1974 comment, David clarified that the partnership was composed of himself as
TAN TEK BENG, Complainant, v. TIMOTEO A. DAVID, Respondent. manager, Tan Tek Beng as assistant manager and lawyer Pedro Jacinto as president and
financier. When Jacinto became ill and the costs of office maintenance mounted, David
Basilio Lanoria for complainant. suggested that Tan Tek Beng should also invest some money or shoulder a part of the
business expenses but Tan Tek Beng refused.chanrobles.com : virtual law library
Timoteo A. David for and in his own behalf.
This case was referred to the Solicitor General for investigation, report and recommendation.
Hearings were scheduled from 1974 to 1981. It was proposed that respondent should submit a
SYLLABUS stipulation of facts but that did not materialize because the scheduled hearings were not held
due to the nonavailability of Tan Tek Beng and his counsel.

1. LEGAL ETHICS; MEMBER OF THE BAR; SOLICITING CASES AT LAW FOR
THE PURPOSE OF GAIN; CONSTITUTES MALPRACTICE. — Where in the agreement
lawyer David not only agreed to give one-half of his professional fees to an intermediary or
commission agent but he also bound himself not to deal directly with the clients, the Court held
that the said agreement is void because it was tantamount to malpractice which is "the practice
of soliciting cases at law for the purpose of gain, either personally or through paid agents or
brokers" (Sec. 27, Rule 138, Rules of Court). Malpractice ordinarily refers to any malfeasance
or dereliction of duty committed by a lawyer. Section 27 gives a special and technical meaning
to the term "malpractice" (Act No. 2828, amending Sec. 21 of Act No. 190). That meaning is in
consonance with the elementary notion that the practice of law is a profession, not a business.
"The lawyer may not seek or obtain employment by himself or through others for to do so
would be unprofessional" (2 R.C.L. 1097 cited in In re Tagorda, 33 Phil. 37, 42).
2. ID.; ID.; ID.; UNPROFESSIONAL CONDUCT; CAUSE FOR CENSURE. — The
commercialization of law practice is condemned in certain canons of professional ethics
adopted by the American Bar Association. "Unprofessional conduct in an attorney is that which
violates the rules or ethical code of his profession or which is unbecoming a member of that
profession" (Note 14, 7 C.J.S. 743). We censure lawyer David for having entered and acted
upon such void and unethical agreement. We discountenance his conduct, not because of the
complaint of Tan Tek Beng (who did not know legal ethics) but because David should have
known better.
DECISION
AQUINO, J.:
On September 16, 1977 Tan Tek Beng died at the Philippine Union Colleges Compound,
Baesa, Caloocan City but it was only in the manifestation of his counsel dated August 10, 1981
that the Solicitor General’s Office was informed of that fact. A report on this case dated March
21, 1983 was submitted by the Solicitor General to this Court.
We hold that the said agreement is void because it was tantamount to malpractice which is
"the practice of soliciting cases at law for the purpose of gain, either personally or through paid
agents or brokers" Sec. 27, Rule 138, Rules of Court). Malpractice ordinarily refers to any
malfeasance or dereliction of duty committed by a lawyer. Section 27 gives a special and
technical meaning to the term "malpractice" (Act No. 2828, amending sec. 21 of Act No. 190).
That meaning is in consonance with the elementary notion that the practice of law is a
profession, not a business. "The lawyer may not seek or obtain employment by himself or
through others for to do so would be unprofessional" (2 R.C.L. 1097 cited in In re Tagorda, 53
Phil. 37, 42; Malcolm, J., Jayme v. Bualan, 58 Phil. 422; Arce v. Philippine National Bank, 62
Phil. 569). The commercialization of law practice is condemned in certain canons of
professional ethics adopted by the American Bar Association:jgc:chanrobles.com.ph
"34. Division of Fees. — No division of fees for legal services is proper, except with
another lawyer, based upon a division of service or responsibility."cralaw virtua1aw library
"35. Intermediaries. — The professional services of a lawyer should not be controlled
or exploited by any law agency, personal or corporate, which intervenes between client and
lawyer. A lawyer’s responsibilities and qualifications are individual. He should avoid all
relations which direct the performance of his duties by or in the interest of such intermediary. A
lawyer’s relation to his client should be personal, and the responsibility should be direct to the
client. . . ."cralaw virtua1aw library

The issue in this case is whether disciplinary action should be taken against lawyer Timoteo A.
David (admitted to the bar in 1945) for not giving Tan Tek Beng, a nonlawyer (alleged
missionary of the Seventh Day Adventists), one-half of the attorney’s fees received by David
from the clients supplied by Tan Tek Beng. Their agreement reads:jgc:chanrobles.com.ph
"December 3, 1970
"Mr. Tan Tek Beng
"38. Compensation, Commissions and Rebates. — A lawyer should accept no
compensation, commissions, rebates or other advantages from others without the knowledge
and consent of his client after full disclosure." (Appendix, Malcolm, Legal Ethics).
We censure lawyer David for having entered and acted upon such void and unethical
agreement. We discountenance his conduct, not because of the complaint of Tan Tek Beng
(who did not know legal ethics) but because David should have known better.chanrobles law
library

"Manila
"Dear Mr. Tan:chanrob1es virtual 1aw library
In compliance with your request, I am now putting into writing our agreement which must be
followed in connection with the accounts that you will entrust to me for collection. Our terms
and conditions shall be as follows:jgc:chanrobles.com.ph
"Unprofessional conduct in an attorney is that which violates the rules or ethical code of his
profession or which is unbecoming a member of that profession" (Note 14, 7 C.J.S. 743).
WHEREFORE, respondent is reprimanded for being guilty of malpractice. A copy of this
decision should be attached to his record in the Bar Confidant’s office.
SO ORDERED.

"1. On all commission or attorney’s fees that we shall receive from our clients by
virtue of the collection that we shall be able to effect on their accounts, we shall divide fifty-fifty.
Likewise you are entitled to commission, 50/50 from domestic, inheritance and commercial
from our said clients or in any criminal cases where they are involved.

"2. I shall not deal directly with our clients without your consent.

"3. You shall take care of collecting our fees as well as advances for expenses for
the cases referred to us by our clients and careful in safeguarding our interest.

"4. It is understood that legal expenses that we shall recover from the debtors shall
be turned over to our clients. Other clients who directly or indirectly have been approached or
related (sic) to you as a result of your labor are your clients.

"I hereby pledge in the name of God, our Heavenly Father, that I will be sincere, honest and
fair with you in connection with our transactions with our clients. Likewise you must be sincere,
honest and fair with me.

Very truly yours,

(Sgd.) Illegible

TIMOTEO A. DAVID

"P.S.

I will be responsible for all documents entrusted me by our clients.

(Sgd.) Initial

"CONFORME to the above and likewise will reciprocate my sincerity to Atty. David as stated in
the last paragraph of this letter.

(Sgd.) Tan Tek Beng

MR. TAN TEK BENG"

The foregoing was a reiteration of an agreement dated August 5, 1969. Note that in said
agreement lawyer David not only agreed to give one-half of his professional fees to an
intermediary or commission agent but he also bound himself not to deal directly with the
clients.

The business relationship between David and Tan Tek Beng did not last. There were mutual
accusations of doublecross. For allegedly not living up to the agreement, Tan Tek Beng in
1973 denounced David to Presidential Assistant Ronaldo B. Zamora, to the Office of Civil

18 | P a g e
Republic of the Philippines connection with the other works and services of the lawyer to which they are related, acquire
SUPREME COURT an unquestionable value. That is why even the time employed is not itself an appropriate basis
Manila for fixing the compensation. (Haussermann vs. Rahmeyer, 12 Phil., 350; Bachrach vs. Teal
and Teal Motor Co., 53 Phil., 631, 634.)
EN BANC
The respondents in their brief insinuate that the services of the petitioner were unsolicited and
G.R. No. 46396 September 30, 1939 unauthorized. The trial court as well as the Court of Appeals, upon the proof submitted,
concluded that the employment of the petitioner was duly made and solicited by the president
ALEJANDRO DE GUZMAN, petitioner, and manager of the respondent corporations, and such finding cannot be disturbed. "It is
vs. elementary that an attorney is entitled to have and receive the just and reasonable
VISAYAN RAPID TRANSIT CO., INC., NEGROS TRANSPORTATION CO., INC., and compensation for services performed at the special instance and request of his client . . . That
NICOLAS CONCEPCION, respondents. is to say, as long as the plaintiff was honestly and in good faith trying to serve and represent
the interest of the client, he should have a reasonable compensation for his services. . . ."
Licerio Floirendo and Eulogio de Guzman for petitioner. (Wolfson vs. Anderson, 48 Phil., 672, 675.)
E.P. Virata for respondents.
The amount of the professional fees to be paid to the petitioner had not been fixed, but the
LAUREL, J.: intention and promise to pay him is evidently shown by the records in this case. And in any
case, whether there is an agreement or not, the courts can fix a reasonable compensation
This is a petition for certiorari to review the decision of the Court of Appeals of September 20, which lawyers should receive for their professional services. (Panis vs. Yangco, 52 Phil., 499,
1938, in the above-entitled case on various alleged errors of law. 502.)

The Visayan Rapid Transit Co. and the Negros Transportation Co., Inc., during the time the
legal services are claimed to have been rendered by the petitioner, were operating automobile
lines in the Province of Occidental Negros. The respondent, Nicolas Concepcion, was at the
time the president, general manager, and controlling stockholder of these two transportation
companies. In January, 1933, Concepcion engaged the professional services of the petitioner,
who was then a law practitioner in the City of Manila. The employment was for the purpose of
obtaining the suppression, reduction and refund of certain toll rates on various bridges along
the line operated by the respondent transportation companies. According to the petitioner,
these toll bridges are in places known as Bago, Calatrava, Danao, Hinigiran, Malogo, Talavan-
Dacu, Talabangay, Bagacay, Binmalayan and Sicaba. At the time of the employment of the
petitioner, it appears that the respondent transportation companies had paid the sum of
P89,816.70 as toll charges up to December 31, 1932, an amount said to represent one-
seventh of their gross income up to that date, and in view of their high rates, the payment of
the toll charges were detrimental to the transportation business of the respondent if not
remedied in time. The herein petitioner accordingly took steps to obtain first the suppression,
and later the reduction of toll rates on said bridges and also the refund of P50,000 of toll
charges already collected by the Province of Occidental Negros. For this purpose, he appears
to have signed Exhibit A which Concepcion brought to Manila, asking that the Bago and
Malogo bridges be declared free, and said petition was filed with the Secretary of Public Works
and Communications in January, 1933.
Believing that the suppression of tolls on the Bago and Malogo bridges could not be effected,
the petitioner filed with the said Secretary of Public Works and Communication, petition Exhibit
B asking for the reduction of toll charges over the eleven (11) bridges in Occidental Negros.
This fact was brought to the knowledge of Nicolas Concepcion who in turn wrote to the
petitioner, Exhibit K-1, the pertinent part of which reads thus:
No hard and fast rule can be stated which will serve even as a guide in determining what is or
what is not a reasonable fee. That must be determined from the facts in each case. (2
Thornton on Attorney at Law, p. 783.)
We have noted in the beginning that the services here were rendered in a case of an
administrative nature. But that does not alter the application of the proper rule:
Professional services, to prepare and advocate just claims for compensation, are as legitimate
as services rendered in court in arguing a cause to convince a court or jury that the claim
presented or the defense set up against a claim presented by the other party ought to be
allowed or rejected. Parties in such cases require advocates; and the legal profession must
have a right to accept such employment and to receive compensation for their services; nor
can courts of justice adjudge such contracts illegal, if they are free from any taint of fraud,
misrepresentation, or unfairness. (Stanton vs. Embry, 23 Law. ed [U.S.], 983, 985.)
As warranted by the records, it is obvious that as a result of the reduction of the rates of the toll
of the bridges in the said province, the respondents were benefited with an economy of
P78,448. The refund to the said corporations of the amount of P50,000 is a great relief and
enhancement of their business. Facts and circumstances considered, we are of the opinion
that the reasonable compensation of the petitioner is P7,000, deducting therefrom, however,
the sum of P1,280 which the petitioner had already received.
The judgment of the Court of Appeals is accordingly modified, without pronouncement
regarding costs. So ordered.
Avanceña, C.J., Villa-Real, Imperial, Diaz, and Concepcion, JJ., concur.

Now compadre if this toll business will not all be effected I would like to request you therefore
to work for at least 50 per cent reduction on all toll bridges, so that our little business will
prosper a bit. We will always hope of course for the best to come. (In English.)

The Insular authorities readily saw the justice of the transportation companies' petition and
urged the provincial board of Occidental Negros to act favorably. The provincial board,
however, declined to follow the suggestion. The Secretary of Commerce and Public Works
warned the provincial officials by sending them the communication, dated April 23, 1934, with
the admonition that "if the toll rates have not been revised by . . . June 15, 1934, this office,
much to its regrets, will be forced to withdraw its approval of the existing toll rates." By reason
of this communication, the provincial board, on March 7, 1934, with the conformity of Nicolas
Concepcion, adopted a resolution reducing the tolls for 2-ton trucks or more, the only kind of
motor vehicles operated by the respondents, from P1.20 to P0.50 on one bridge, and from
P1.20 to 0.40 on the other. And on April 10, 1935 "upon authority of the Insular Auditor,
concurred in by the Department of the Interior" the provincial board refunded P50,000 as
bridge tolls illegally collected from the Visayan Rapid Transit Company, Inc., and the Negros
Transportation Company, Inc., said amount to be applied to future payments for tolls by said
companies. As a result of this reduction of tolls, the respondents have been benefited with an
economy of P78,448 for every eighteen months. (Exhibit V.)

The various incidental questions raised by the petitioner revolves around the reasonable
compensation to which he is entitled, and we pass on to the consideration of this point.

Although the professional services rendered by the petitioner are purely administrative and did
not require a high degree of professional skill and experience, the fact remains that these
services were rendered and were productive of substantial beneficial results to his clients. It is
clear that for these services the petitioner is entitled to compensation, and the only question is
the reasonable amount to which he is entitled. He claimed in the lower court the sum of
P20,000. The trial court awarded him P10,000. On appeal, the Court of Appeals reduced this
amount to P3,500.

Section 29 of the Code of Civil Procedure provides that "a lawyer shall be entitled to have and
recover from his client no more than a reasonable compensation for the services rendered,
with a view to the importance of the subject matter of the controversy, to the extent of the
services rendered, and the professional standing of the lawyer . . .." The following are the
circumstances to be considered in determining the compensation of an attorney: the amount
and character of the services rendered; the labor, time, and trouble involved; the nature and
importance of the litigation or business in which the services were rendered; the responsibility
imposed; the amount of money or the value of the property affected by the controversy, or
involved in the employment, the skill and experience called for in the performance of the
services; the professional character and social standing of the attorney; the results secured;
and whether or not the fee is absolute or contingent, it being a recognized rule that an attorney
may properly charge a much a larger fee when it is to be contingent that when it is not. The
financial ability of the defendant may also be considered not to enhance the amount above a
reasonable compensation, but to determine whether or not he is able to pay a fair and just
compensation for the services rendered, or as as incident in ascertaining the importance and
gravity of the interests involved in the litigation. (Delgado vs. De la Rama, 43 Phil., 419; Panis
vs. Yangco, 52 Phil., 499.)

The services of the petitioner in this case were not limited to the preparation and filing with the
authorities concerned of the petitions Exhibits A and B and other papers submitted in evidence,
for he appears to have had various conferences with the Secretary of Public Works and
Communications, the Secretary of the Interior, the Secretary of Labor and the Insular Auditor,
and had otherwise taken steps to secure the objectives of his clients. The importance, merits
and value of professional services of a lawyer are measured not alone by his work taken
separately, but by his work taken as a whole. There are services which, when taken
separately, may not in themselves have any noticeable special merit, but when considered in

19 | P a g e
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 77439 August 24, 1989
DONALD DEE petitioner,
vs.
COURT OF APPEALS and AMELITO MUTUC, respondents.
Tanjuatco, Oreta & Tanjuatco for petitioner.
Amelito R. Mutuc for and in his own behalf
REGALADO, J.:
Petitioner assails the resolution of respondent court, dated February 12,1987, reinstating its
decision promulgated on May 9, 1986 in AC-G.R. CV No. 04242 wherein it affirmed the
decision of the that court holding that the services rendered by private respondent was on a
professional, and not on a gratis et amore basis and ordering petitioner to pay private
respondent the sum of P50,000.00 as the balance of the latter's legal fee therefor.
The records show that sometime in January, 1981, petitioner and his father went to the
residence of private respondent, accompanied by the latter's cousin, to seek his advice
regarding the problem of the alleged indebtedness of petitioner's brother, Dewey Dee, to
Caesar's Palace, a well-known gambling casino at Las Vegas, Nevada, U.S.A. Petitioner's
father was apprehensive over the safety of his son, Dewey, having heard of a link between the
mafia and Caesar's Palace and the possibility that his son may be harmed at the instance of
the latter. 1
Private respondent assured petitioner and his father that he would inquire into the matter, after
which his services were reportedly contracted for P100,000. 00. From his residence, private
respondent called up Caesar's Palace and, thereafter, several long distance telephone calls
and two trips to Las Vegas by him elicited the information that Dewey Dee's outstanding
account was around $1,000,000.00. Further investigations, however, revealed that said
account had actually been incurred by Ramon Sy, with Dewey Dee merely signing for the chits.
Private respondent communicated said information to petitioner's a father and also assured
him that Caesar's Palace was not in any way linked to the mafia.2
In June, 1981, private respondent personally talked with the president of Caesar's Palace at
Las Vegas, Nevada. He advised the president that for the sake and in the interest of the casino
it would be better to make Ramon Sy answer for the indebtedness. The president told him that
if he could convince Ramon Sy to acknowledge the obligation, Dewey Dee would be
exculpated from liability for the account. Upon private respondent's return to Manila, he
conferred with Ramon Sy and the latter was convinced to acknowledge the indebtedness. In
August, 1981, private respondent brought to Caesar's Palace the letter of Ramon Sy owning
the debt and asking for a discount. Thereafter, the account of Dewey Dee was cleared and the
casino never bothered him. 3
Having thus settled the account of petitioner's brother, private respondent sent several demand
letters to petitioner demanding the balance of P50,000.00 as attorney's fees. Petitioner,
however, ignored said letters. On October 4, 1982, private respondent filed a complaint against
petitioner in the Regional Trial Court of Makati, Branch CXXXVI, for the collection of attorney's
fees and refund of transport fare and other expenses.4
Private respondent claimed that petitioner formally engaged his services for a fee of
P100,000.00 and that the services he rendered were professional services which a lawyer
renders to a client. Petitioner, however, denied the existence of any professional relationship of
attorney and client between him and private respondent. He admits that he and his father
visited private respondent for advice on the matter of Dewey Dee's gambling account.
However, he insists that such visit was merely an informal one and that private respondent had
not been specifically contracted to handle the problem. On the contrary, respondent Mutuc had
allegedly volunteered his services "as a friend of defendant's family" to see what he could do
about the situation. As for the P50,000.00 inceptively given to private respondent, petitioner
claims that it was not in the nature of attomey's fees but merely "pocket money" solicited by the
former for his trips to Las Vegas and the said amount of P50,000.00 was already sufficient
remuneration for his strictly voluntary services.
After trial, the court a quo rendered judgment ordering herein petitioner to pay private
respondent the sum of P50,000.00 with interest thereon at the legal rate from the filing of the
complaint on October 4, 1982 and to pay the costs. All other claims therein of private
respondent and the counterclaim of petitioner were dismissed. 5 On appeal, said judgment
was affirmed by the then Intermediate Appellate Court on May 9, 1986. 6
Petitioner, in due time, filed a motion for reconsideration contending that the Appellate Court
overlooked two important and decisive factors, to wit: (1) At the time private respondent was
ostensibly rendering services to petitioner and his father, he was actually working "in the
interest" and "to the advantage" of Caesar's Palace of which he was an agent and a
consultant, hence the interests of the casino and private respondent were united in their
objective to collect from the debtor; and (2) Private respondent is not justified in claiming that
he rendered legal services to petitioner and his father in view of the conflicting interests
involved.
In its resolution of July 31, 1986, respondent court reconsidered its decision and held that the
sum of P50,000.00 already paid by petitioner to private respondent was commensurate to the
services he rendered, considering that at the time he was acting as counsel for petitioner he
was also acting as the collecting agent and consultant of, and receiving compensation from,
Caesar's Palace.7 However, upon a motion for reconsideration thereafter filed by private
respondent, the present respondent Court of Appeals issued another resolution, dated
February 12, 1987, reinstating the aforesaid decision of May 9, 1986.8
Petitioner is now before us seeking a writ of certiorari to overturn the latter resolution.
It is necessary, however, to first clear the air of the questions arising from the change of stand
of the First Civil Cases Division of the former Intermediate Appellate Court when, acting on the
representations in petitioner's undated motion for reconsideration supposedly filed on May
28,1986, it promulgated its July 31, 1986 resolution reconsidering the decision it had rendered
in AC-G.R. CV No. 04242. Said resolution was, as earlier noted, set aside by the Twelfth
Division of the reorganized Court of Appeals which, at the same time, reinstated the aforesaid
decision.
20 | P a g e
Because of its clarificatory relevance to some issues belatedly raised by petitioner, which
issues should have been disregarded 9 but were nevertheless auspiciously discussed therein,
at the risk of seeming prolixity we quote hereunder the salient portions of the assailed
resolution which demonstrate that it was not conceived in error.
The reason for then IAC's action is that it deemed the P50,000.00 plaintiff-appellee had
previously received from defendant-appellant as adequate compensation for the services
rendered by am for defendant-appellant, considering that at the time plaintiff-appellee was
acting as counsel for defendant-appellant, he was also acting as the collecting agent and
consultant of, and receiving compensation from Caesar's Palace in Las Vegas, Nevada, the
entity with whom defendant-appellant was having a problem and for which he had engaged the
services of plaintiff-appellee. The crux of the matter, therefore, is whether or not the evidence
on record justifies this finding of the IAC.
Plaintiff-appellee maintains that his professional services to defendant-appellant were rendered
between the months of July and September of 1981, while his employment as collection agent
and consultant of Caesar's Palace covered the period from December 1981 to October 1982.
This positive testimony of plaintiff-appellee, however, was disregarded by the IAC for the
following reasons:
1. In August l983, plaintiff-appellee testified that he was a representative of
Caesar's Palace in the Philippines 'about two or three years ago.' From this the IAC concluded
that the period covers the time plaintiff-appellee rendered professional services to defendant-
appellant.
We do not think that IAC's conclusion is necessarily correct. When plaintiff-appellee gave the
period 'about two or three years ago,' he was merely stating an approximation. Considering
that plaintiff-appellee was testifying in August 1983, and his employment with Caesar's Palace
began in December 1981, the stated difference of two years is relatively correct. . . .
2. The plaintiff appellee had testified that he was working for the sake,' 'in the
interest,' and 'to the advantage' of Caesar's Palace. x x x "We detect nothing from the above
which would support IAC's conclusion that plaintiff-appellee was then in the employ of Caesar's
Palace. What is gathered is that plaintiff-appellee was simply fulfilling a condition which
plaintiff-appellee had proposed to, and was accepted by, Caesar's Palace, for the release of
Dewey Dee from his obligation to Caesar's Palace.
3. Caesar's Palace would not have listened to, and acted upon, the advice of
plaintiff-appellee if he were no longer its consultant and alter ego.
Why not? We are witnesses to many successful negotiations between contending parties
whose representing lawyers were not and were never in the employ of the opposite party. The
art of negotiation is precisely one of the essential tools of a good practitioner, and mastery of
the art takes into account the circumstance that one may be negotiating, among others, with a
person who may not only be a complete stranger but antagonistic as well. The fact that
plaintiff-appellee was able to secure a favorable concession from Caesar's Palace for
defendant-appellant does not justify the conclusion that it could have been secured only
because of plaintiff-appellee's professional relationship with Caesar's Palace. It could have
been attributable more to plaintiff-appellee's stature as a former ambassador of the Philippines
to the United States, his personality, and his negotiating technique.
Assuming, however, that plaintiff-appellee was employed by Caesar's Palace during the time
that he was rendering professional services for defendant-appellant, this would not
automatically mean the denial of additional attorney's fees to plaintiff appellee. The main
reason why the IAC denied plaintiff-appellee additional compensation was because the latter
was allegedly receiving compensation from Caesar's Palace, and, therefore, the amount of
P50,000.00 plaintiff-appellee had previously received from defendant-appellant is 'reasonable
and commensurate. This conclusion, however, can only be justified if the fact and amount of
remuneration had been established. These were not proven at all. No proof was presented as
to the nature of plaintiff-appellee's remuneration, and the mode or manner in which it was
paid.. . .10
Both the lower court and the appellate court concur in their findings that there was a lawyer-
client relationship between petitioner and private respondent Mutuc. We find no reason to
interfere with this factual finding. There may be instances when there is doubt as to whether an
attorney-client relationship has been created. The issue may be raised in the trial court, but
once the trial court and the Court of Appeals have found that there was such a relationship the
Supreme Court cannot disturb such finding of fact, 11 absent cogent reasons therefor.
The puerile claim is advanced that there was no attorney-client relationship between petitioner
and private respondent for lack of a written contract to that effect. The absence of a written
contract will not preclude the finding that there was a professional relationship which merits
attorney's fees for professional services rendered. Documentary formalism is not an essential
element in the employment of an attorney; the contract may be express or implied. To
establish the relation, it is sufficient that the advice and assistance of an attorney is sought and
received in any matter pertinent to his profession. An acceptance of the relation is implied on
the part of the attorney from his acting on behalf of his client in pursuance of a request from the
latter.12
There is no question that professional services were actually rendered by private respondent to
petitioner and his family. Through his efforts, the account of petitioner's brother, Dewey Dee,
with Caesar's Palace was assumed by Ramon Sy and petitioner and his family were further
freed from the apprehension that Dewey might be harmed or even killed by the so-called
mafia. For such services, respondent Mutuc is indubitably entitled to receive a reasonable
compensation and this right cannot be concluded by petitioner's pretension that at the time
private respondent rendered such services to petitioner and his family, the former was also the
Philippine consultant of Caesar's Palace.
On the first aspect, the evidence of record shows that the services of respondent Mutuc were
engaged by the petitioner for the purposes hereinbefore discussed. The previous partial
payments totalling P50,000.00 made by petitioner to respondent Mutuc and the tenor of the
demand letters sent by said private respondent to petitioner, the receipt thereof being
acknowledged by petitioner, ineluctably prove three facts, viz: that petitioner hired the services
of private respondent Mutuc; that there was a prior agreement as to the amount of attorney's
fees to be given to the latter; and there was still a balance due and payable on said fees. The
duplicate original copy of the initial receipt issued and signed in this connection by private
respondent reads:
RECEIVED from Mr. Donald Dee, for professional services rendered, the sum of THIRTY
THOUSAND PESOS (P30,000.00) as partial payment, leaving a balance of SEVENTY
THOUSAND PESOS (P70,000.00), payable on demand.
Makati, Metro Manila, July 25,1981.13
Thereafter, several demand letters for payment of his fees, dated August 6, 1981, December 2,
1981, January 29, 1982, March 7, 1982, and September 7, 1982 were sent by private
respondent to petitioner, 14 all to no avail.

On the second objection, aside from the facts stated in the aforequoted resolution of
respondent Court of Appeals, it is also not completely accurate to judge private respondent's
position by petitioner's assumption that the interests of Caesar's Palace were adverse to those
of Dewey Dee. True, the casino was a creditor but that fact was not contested or opposed by
Dewey Dee, since the latter, as verifications revealed, was not the debtor. Hence, private
respondent's representations in behalf of petitioner were not in resistance to the casino's claim
but were actually geared toward proving that fact by establishing the liability of the true debtor,
Ramon Sy, from whom payment was ultimately and correctly exacted. 15

Even assuming that the imputed conflict of interests obtained, private respondent's role therein
was not ethically or legally indefensible. Generally, an attorney is prohibited from representing
parties with contending positions. However, at a certain stage of the controversy before it
reaches the court, a lawyer may represent conflicting interests with the consent of the
parties.16 A common representation may work to the advantage of said parties since a mutual
lawyer, with honest motivations and impartially cognizant of the parties' disparate positions,
may well be better situated to work out an acceptable settlement of their differences, being free
of partisan inclinations and acting with the cooperation and confidence of said parties.

Here, even indulging petitioner in his theory that private respondent was during the period in
question an agent of Caesar's Palace, petitioner was not unaware thereof, hence he actually
consented to and cannot now decry the dual representation that he postulates. This knowledge
he admits, thus:

It is a fair question to ask why, of all the lawyers in the land, it was the private respondent who
was singled out by the petitioner's father for consultation in regard to an apparent problem,
then pending in Caesar's Palace. The testimony of Arthur Alejandrino, cousin to private
respondent, and the admission of the private respondent himself supply the answer.
Alejandrino testified that private respondent was the representative of Caesar's Palace in the
Philippines (p. 23, t.s.n., Nov. 29, 1983).lâwphî1.ñèt Private respondent testified that he was
such representative tasked by the casino to collect the gambling losses incurred by Filipinos in
Las Vegas. (p. 5, t.s.n., Sept. 21, 1983). 17

A lawyer is entitled to have and receive the just and reasonable compensation for services
rendered at the special instance and request of his client and as long as he is honestly and in
good faith trying to serve and represent the interests of his client, the latter is bound to pay his
just fees.18

WHEREFORE, the resolution of respondent Court of Appeals, dated February 12,1987,

reinstating its original decision of May 9, 1986 is hereby AFFIRMED, with costs against l
petitioner.

SO ORDERED.

21 | P a g e
97 Wn.2d 598, ROSS v. SCANNELL
CITE: 97 Wn.2d 598, 647 P.2d 1004
ROSS v. SCANNELL
CAUSE NUMBER: 47861-9
FILE DATE: July 8, 1982
CASE TITLE: Lawrence M. Ross, Appellant, v. William
G. Scannell, Respondent.
[1] Liens - Attorney and Client - Compensation - Lien on Judgment - Construction. RCW
60.40.010(4), which provides for an attorney's lien upon a judgment obtained for a client as
security for compensation, is in derogation of the common law and will be strictly construed.
[2] Liens - Attorney and Client - Compensation - Lien on Judgment - Real Property. The
attorney's lien upon a judgment obtained for a client (RCW 60.40.010(4)) does not attach to
real property which is the subject of the judgment.
[3] Attorney and Client - Compensation - Contingent Fees - Incomplete Performance - Effect.
An attorney who has not substantially completed the legal services contracted for may not
recover contingent fees; his recovery is limited to the reasonable value of the services actually
rendered.
[4] Attorney and Client - Compensation - Misconduct of Attorney - Effect. An attorney may be
unable to recover fees for services involving misconduct in violation of the Code of
Professional Responsibility.
NAMES OF CONCURRING OR DISSENTING JUDGES: Rosellini, J., dissents by separate
opinion; Stafford and Pearson, JJ., did not participate in the disposition of this case.
NATURE OF ACTION: An attorney sought to collect a contingent fee and to foreclose an
attorney's lien on real property. The defendant client counterclaimed for slander of title and for
damages resulting from his inability to sell the property subject to the attorney's lien.
Superior Court: The Superior Court for Klickitat County, No. 12594, Ted Kolbaba, J., entered a
judgment in favor of the attorney on June 24, 1980.
Supreme Court: Holding that the attorney's lien could not attach to real property and that the
attorney had not substantially completed his services in the previous action and was entitled at
most to an attorney fee award based on quantum meruit, the court REVERSES the judgment
and REMANDS for consideration of the client's counterclaim and recomputation of attorney
fees.
COUNSEL: KENNETH S. KESSLER, for appellant.
WEINRICH, GILMORE & ADOLPH, P.S., A. PETER PARSONS, and SCOTT L.
SCHMIDTMAN, for respondent.
AUTHOR OF MAJORITY OPINION: Dimmick, J. -
MAJORITY OPINION: This case was certified here by the Court of Appeals, Division Three.
The issues as certified are:
1. Does RCW 60.40.010 (Washington's attorney lien statute) allow an attorney to file a lien on
the real property of his client?
2. Can an attorney recover fees, based on a contingency fee agreement if, prior to full
completion of the contingency, the attorney ceases to render the required legal services for his
client?
3. Can an attorney recover any fees if the attorney has acted unethically in the course of
providing the services for which the fees are claimed due?
We answer the first two questions in the negative, and are unable, given the state of this
record, to answer the third.
Appellant Lawrence M. Ross is a lawyer practicing in Tacoma and respondent/ cross appellant
William G. Scannell, a former business partner and client of Ross, is a real estate broker in
Pierce County. The facts are as follows:
In December 1976 Scannell entered into negotiations with Wayne B. Knight and others for the
purchase of 1,410 acres of land in Klickitat County and deposited $2,500 as earnest money.
Scannell then contacted Ross and inquired if he knew of any investors who might be interested
in the property. Two of Ross' clients, Mr. Topel and Mr. Campbell, his law partner, Mr. Griffies,
a Mr. McKinney, and Ross decided to become partners in the joint venture for the purchase of
the land.
The land purchase was not completed due to the sellers' refusal and/ or inability to clear title to
all the acreage and sell to the joint venture. Thus ended the proposed joint venture. Acting
upon Ross' advice, Scannell commenced an action against sellers entitled Scannell v. Knight,
et al. (Klickitat County cause 12828) in which Scannell sought specific performance and
damages. By agreement of counsel, the venue of the action was changed to Pierce County
where it was tried. Scannell and Ross orally agreed at the outset of the action that Ross would
receive a contingent fee.
After the action against sellers had commenced, one of the former joint venturers, McKinney,
commenced an action against Scannell for breach of fiduciary duty. Ross agreed to represent
Scannell in this action simultaneously with the Knight action.
On November 3, 1977, the oral fee agreement was reduced to writing in a letter from Ross and
acknowledged by Scannell. The letter stated in pertinent part:
" I have agreed to represent you on such basis with the understanding that all actual costs
incurred will be paid by yourself, but that payment of attorney fees will be based on the result
of each action. It is my understanding that any damages awarded in connection with either
action over and above costs incurred will be shared with you receiving two-thirds of such
damages and I to receive one-third.
It is understood, however, that as the recovery may involve the granting of a specific
performance for the purchase of a certain portion of the property, that in that event we will
share on the same proportionate basis any commission, finder's fee or other similar fee which
you receive in connection with the sale of that portion of the property or its placement with the
venture or partnership.
22 | P a g e
Early in the Knight litigation Ross realized he was potentially a key witness in the case.
Although disputed, Scannell testified that he told Ross of this possibility shortly after the
transaction failed to close. Ross assured his client that he could serve as both witness and
attorney and continued work on the case. Finally, just prior to trial Ross retained the services of
Mr. Warren Peterson on an hourly basis to try the case. Ross assisted Peterson during the trial
although he was the principal witness for Scannell.
The trial court entered judgment for Scannell in the Knight matter. In addition to granting
specific performance for 960 acres of the 1,410 originally contracted for, damages were
awarded in the amount of $32,499, plus the return of the $2,500 earnest money (plus interest)
originally deposited by Scannell.
In October 1978, Scannell entered into negotiations for the sale of a portion of the property
obtained in the Knight litigation. Ross was privy to those negotiations and learned that his
client was about to realize a substantial profit upon the resale of the property. Scannell offered
Ross a one-third equity participation in the property with full credit for fees of one-third of the
damages which had been applied toward the purchase price. At this time Ross informed
Scannell that he was entitled to one-third of the profits that Scannell might derive from the sale,
as well as one-third of the damages. Ross continued to insist upon these profits even though,
as he admitted, the contingency fee agreement letter that he drafted made absolutely no
mention of profits. Scannell disputed that one-third of the profits from the sale of the land
should go to Ross, absent further contribution from him toward the purchase price of the
property.
After this dispute as to fees arose Ross asked Topel and Campbell, two of the former joint
venturers, to pay the fees owed trial counsel Peterson. Although Ross asserted that he did not
represent Topel and Campbell, he did state that he believed there was a serious question that
Scannell was in fact representing their interests in the Knight action and that Scannell held the
property subject to a resulting trust in favor of Topel and Campbell. Apparently Ross did not
discuss with Scannell or Topel and Campbell the possible problems regarding any conflict of
interests in their claims. Topel and Campbell are currently suing Scannell alleging that they
each are entitled to one-third interest in the property.
Scannell experienced difficulty in obtaining a contract for the conveyance of the property in
accordance with the judgment requiring specific performance and Mr. Knight refused to grant
necessary easement across adjoining property. In view of their dispute over fees, Ross did not
represent Scannell in clearing up this matter. Thus, in December 1978 Scannell had still not
obtained title to the property.
Scannell reluctantly paid Ross' unreimbursed costs and retained the services of the law firm of
Johnson, Lane & Gallagher who after several posttrial hearings obtained a properly executed
contract with an easement. Ross testified that the services provided by the new law firm were a
part of the litigation and he would have performed them if there had not been a falling-out with
regard to the fees. Scannell paid Johnson, Lane & Gallagher $3,023 in connection with the
completion of the specific performance action.
Shortly after Scannell refused to agree to give Ross one third of any profits from the future sale
of the property, Ross filed a claim of attorney's lien which included the legal description of the
property involved in the Knight action. Ross filed his claim with the Pierce County Superior
Court. Then, with the admitted purpose of clouding title to the property, Ross mailed a copy of
the claim of lien and property description to the title company in Klickitat County and filed the
lien with the Klickitat County Superior Court after obtaining a new cause number in Klickitat
County and filing an abstract of the Pierce County judgment.
At that time Scannell had entered into an agreement with prospective purchasers to sell 790 of
the 960 acres at a price of $456 per acre. Ross computed the amount of his claim of lien based
upon this sale price and claimed a total of $92,551.61 attorneys fees. Due solely to the cloud
on the title caused by Ross' unadjudicated claim of attorney lien, Scannell was unable to
deliver marketable title and the purchasers canceled the transaction.
Ross sued Scannell in Klickitat County to collect the contingent fee and foreclose the
attorney's lien. Scannell counterclaimed for damages resulting from the loss of sale and for
slander of title. The property had not sold at the time of trial, and due to economic conditions
and local governmental restrictions, the land had a reduced value of $400 per acre.
The trial court found in favor of Ross attaching the lien and clouding title to the real property.
The court, however, did not uphold Ross' percentage-of-profits theory of attorneys fees for
$92,551.61, and instead awarded him $21,443 pursuant to the contingent fee agreement. The
court accordingly denied Scannell's counterclaim. This appeal by both parties followed.
I
The first issue, never before addressed by this court, is whether RCW 60.40.010 allows an
attorney to file a lien on the real property of a client. The statute provides:
" An attorney has a lien for his compensation, whether specially agreed upon or implied, as
hereinafter provided: (1) Upon the papers of his client, which have come into his possession in
the course of his professional employment; (2) upon money in his hands belonging to his
client; (3) upon money in the hands of the adverse party in an action or proceeding, in which
the attorney was employed, from the time of giving notice of the lien to that party; (4) upon a
judgment to the extent of the value of any services performed by him in the action, or if the
services were rendered under a special agreement, for the sum due under such agreement,
from the time of filing notice of such lien or claim with the clerk of the court in which such
judgment is entered, which notice must be filed with the papers in the action in which such
judgment was rendered, and an entry made in the execution docket, showing name of
claimant, amount claimed and date of filing notice.
This statute, in existence since 1881, provides a delineated and limited statutory attorney's lien
designed to be a tool in the collection of fees. The statute in part is merely declaratory of the
general or retaining lien recognized at common law. This possessory and passive lien gives an
attorney the right to retain papers and documents which come into the attorney's possession
during the course of his professional employment. It is a possessory and passive lien and is
not enforceable by foreclosure and sale. SEE GOTTSTEIN v. HARRINGTON, 25 Wash. 508,
65 P. 753 (1901); Stevens, OUR INADEQUATE ATTORNEY'S LIEN STATUTES - A
SUGGESTION, 31 Wash. L. Rev. 1 (1956).
The statute, however, also goes beyond the common law in recognizing the special or
charging lien. This lien is upon the judgment obtained for the client as a result of the attorney's
professional services to secure his compensation. RCW 60.40.010(4). Such a lien has the
capacity to be adjudicated and enforced. SEE STATE EX REL. ANGELES BREWING &
MALTING CO. v. SUPERIOR COURT, 89 Wash. 342, 154 P. 603 (1916); GOTTSTEIN;
Stevens, SUPRA.
Many states either do not statutorily recognize attorneys' liens or only recognize the general or
retaining lien. «1»
«1» Arizona, California, Connecticut, Delaware, Florida, Hawaii, Kansas, Louisiana, Maine,
Maryland, Michigan, Mississippi, Missouri, Nebraska, New Mexico, North Carolina, North
Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Texas, Vermont, West
Virginia, and Wyoming.
The statutory provisions of the states recognizing charging liens on judgments vary. A few
states specifically allow the lien to attach to real property. «2»
«2» Ala. Code 34-3-61 (1967); Ga. Code Ann. 9-613 (1973); Minn. Stat. Ann. 481.13 (West
1971); Or. Rev. Stat. 87.445, .490 (1979).
Others provide for a charging lien on the client's cause of action or judgment and any proceeds
therefrom or property recovered. «3»
«3» Ark. Stat. Ann. 25-301 (1962); Idaho Code 3-205 (1979); Ill. Ann. Stat. ch. 13, 14 (Smith-
Hurd 1963); Mass. Gen. Laws Ann. ch. 221, 50 (West 1958); Mont. Code Ann. 37-61-420
(1981); Nev. Rev. Stat. 18.015 (1979); N.H. Rev. Stat. Ann. 311.13 (1966); N.J. Stat. Ann.
2A:13-5 (West 1952); N.Y. Jud. Law 475 (McKinney 1968); R.I. Gen. Laws 9-3-1, 9-3-2 (1970);
Tenn. Code Ann. 23-2-102 (1980); Utah Code Ann. 78-51-41 (1977); Va. Code 54-70 (1978);
Wis. Stat. Ann. 256-36 (West 1971).
Five states, including Washington, recognize a charging lien upon the judgment only. «4»
«4» Alaska Stat. 34.35.430 (1981); Ind. Code Ann. 33-1-3-1 (Burns 1975); Iowa Code Ann.
610.18 (West 1975); Ky. Rev. Stat. 376.460 (Supp. 1980).
[1, 2] One of the states with a statute similar to ours has held that the attorney lien statute must
be strictly followed and not judicially expanded to reach real property as fruits of a judgment.
KEEHN v. KEEHN, 115 Iowa 467, 88 N.W. 957 (1902). We agree with this analysis. As noted
above RCW 60.40.010(4) is in derogation of the common law and therefore must be strictly
construed. SEE A.A.C. CORP. v. REED, 73 Wn.2d 612, 440 P.2d 465 (1968). If the
Legislature had intended attorneys' liens to attach to real property as proceeds of a judgment,
it would have included a provision to that effect as other states have done. We note that the
Legislature has not left an attorney remediless in collecting fees after the attorney-client
relationship has been terminated. He has, among other remedies afforded general creditors,
the ability to reduce his fees to judgment and thus subject his client's real property to a
judgment lien pursuant to RCW 4.56. If additional measures are necessary, the attorney may
post a bond and proceed with a writ of attachment pursuant to RCW 7.12. The attorney must,
of course, balance these rights with the Code of Professional Responsibility EC 2-23:
" A lawyer should be zealous in his efforts to avoid controversies over fees with clients and
should attempt to resolve amicably any differences on the subject. He should not sue a client
for a fee unless necessary to prevent fraud or gross imposition by the client.
The analysis requiring strict construction of the attorney lien statute is especially persuasive in
light of the dangers of our countenancing the practice of attorneys attaching liens to real
property for unadjudicated and unliquidated claims. Although we recognize the common
problems faced by attorneys in collecting their well deserved fees, the reasons for our
hesitancy are apparent. The result of our approving the practice would allow members of the
bar to cloud title to real property with "claims of attorney lien" without resort to any adjudication
of such claims. The potential for economic coercion by attorneys is obvious. In today's
economic setting a client may well be forced to settle the attorney's claim for fees, no matter
how unfounded, simply to gain the ability to convey, lease or otherwise utilize the "liened"
property. A similar objection was recognized in HUMPHREY v. BROWNING, 46 Ill. 476 (1868),
where the Supreme Court of Illinois held that if unadjudicated liens were allowed for the
professional services of lawyers, no one could foresee the difficulties and confusion that would
result, as every tract of land which had been the subject of litigation would lose most of its
exchangeable value from an apprehension of some latent lien in favor of an attorney.
In fact, the only state with a statute similar to ours that has allowed the practice recognized
these dangers but discounted them in favor of giving attorneys an additional tool to collect
fees. «5»
«5» After the Supreme Court of Colorado decided to allow unadjudicated attorneys' liens to
attach property, FILLMORE v. WELLS, 10 Colo. 228, 15 P. 343 (1887), the Legislature
amended the statute to reflect that holding extending the lien to "any" property. Colo. Rev. Stat.
12-5-119 (1978).
The Colorado Supreme Court in FILLMORE v. WELLS, 10 Colo. 228, 15 P. 343 (1887) stated:
" Again, [an] objection . . . is thus stated in FORSYTHE v. BEVERIDGE, 52 Ill. 268: "There
would be cases in which a very unreasonable portion of the fruits would be demanded by the
attorney, and collected under the pressure he could bring to bear upon his client." This
objection is declared by the learned court to be of "great weight."
10 Colo. at 235. We are convinced that the dangers of extending our statute beyond its terms
are too great to discount.
The dangers of allowing attorneys to file liens for unadjudicated, unliquidated claims thus
clouding title are especially clear in the instant case. The contingent fee contract relied upon is
ambiguous. Ross did not try the action due to a conflict of interest which he should have been
aware of before accepting the case. After the trial, difficulties arose and Ross abandoned the
case before securing title to the property for his client. Another attorney had to complete the
case. Throughout the action Scannell expressed disagreement as to the amount of attorney
fees owed. Ross filed a lien in Pierce County (where the cause was tried by agreement of the
parties), in Klickitat County (where the land was located), and with the title company, with the
admitted purpose of clouding title. Purchasers canceled a transaction with Scannell when they
were denied a clear title and since that time the land has decreased in value. In addition, less
than one-quarter of Ross' lien was allowed at trial.
In an age when the ethics of the bar are scrutinized in every quarter, we must hold that the
result reached by the trial court is one neither contemplated by the attorney lien statute nor in
accord with the public interest. Accordingly, we remand this matter to the trial court to
determine whether Ross' actions constituted slander of title as defined in LEE v. MAGGARD,
197 Wash. 380, 85 P.2d 654, 87 P.2d 106 (1938).
II
The second issue is whether an attorney can recover fees based on a contingency fee contract
if, prior to full consideration of the contingency, the attorney ceases to render the required legal
services for his client. We hold that under the circumstances of this case an attorney may not
recover on the contract but must seek recovery of fees on the theory of quantum meruit.
23 | P a g e
The letter agreement stated that if the court granted specific performance, attorney fees were
to be based upon a commission or fee received by Scannell upon his selling or otherwise
transferring the property. The parties obviously agreed that Ross would not only represent
Scannell in obtaining the judgment for specific performance but also in finalizing the transfer of
the land. Ross in his testimony, in fact, admitted that such services would have been
performed by him pursuant to the contract. After trial, wherein Scannell was represented by
Peterson and not Ross, the parties became involved in an argument over litigation costs and
fees. At this point Scannell contacted another law firm to complete the transaction. It is not
clear from the record whether Ross refused to continue performance until the controversy was
resolved or whether Scannell picked up the files and took the matter to other lawyers,
precluding Ross from continuing. In any event, other counsel completed the task of obtaining a
necessary easement and a contract for conveying the land. Ross points out that he did
complete the defense of the McKinney suit by getting the complaint dismissed, but it is to be
remembered that he accepted this matter after the original contingent fee arrangement was
made and agreed to defend it for no additional fees.
[3] The settled law in this state is expressed in RAMEY v. GRAVES, 112 Wash. 88, 91, 191 P.
801 (1920):
"The rule is that, where the compensation of an attorney is to be paid to him contingently on
the successful prosecution of a suit and he is discharged or prevented from performing the
service, the measure of damages is not the contingent fee agreed upon, but reasonable
compensation for the services actually rendered.
This general rule has been clarified throughout the years. We have noted that "damages" was
an inexact use of terms and was intended to mean merely "recovery." WRIGHT v.
JOHANSON, 132 Wash. 682, 233 P. 16, ADHERED TO ON REH'G, 135 Wash. 696, 236 P.
807 (1925). In CAVERS v. OLD NAT'L BANK & UNION TRUST CO., 166 Wash. 449, 7 P.2d
23 (1932), we quoted the general rule and held that the case at bar was not one in which an
attorney had been discharged "after completing or substantially completing" the agreed
services. CAVERS, at 452.
We recognize as the court did in CAVERS that the general rule does not necessarily foreclose
recovery of fees pursuant to a contingency fee contract if an attorney substantially performs
the contingency. However, the instant case does not present such a situation. There was no
express finding by the trial court that Ross substantially completed performance of the
contract. It is apparent that Ross did not fully or substantially perform the contingency agreed
upon by the parties.
Thus, we conclude that if Ross is entitled to attorney fees, the measure of those fees is not the
contingent fee agreed upon but the reasonable value of the services rendered. We cannot
determine the value of the services from the record and remand this matter to the trial court.
III
The last issue certified inquires whether an attorney who has acted unethically in the course of
providing services is entitled to any fees at all. We are unable to determine from the record that
any of the questions of unethical conduct raised in Scannell's brief were presented to the trial
court.
The charges of unethical conduct herein are grave. Scannell asserts that Ross violated: CPR
DR 2-106 prohibiting an attorney from collecting an illegal or clearly excessive fee; CPR DR 5-
103 prohibiting an attorney from acquiring a proprietary interest in the client's cause of action;
CPR DR 5-102(A) requiring an attorney to withdraw from the conduct of the trial if the lawyer
learns or it is obvious that he ought to be called as a witness on behalf of his client unless such
testimony falls within the exceptions listed in CPR DR 5-101(B); CPR DR 5-105 restricting an
attorney from representing multiple clients if his independent professional judgment is
impaired; and CPR DR 5-107 requiring an attorney to avoid influence by others than his client.
Such charges are normally heard by a disciplinary committee of the Washington State Bar
Association. However, a trial court may consider such allegations in determining attorneys
fees.
[4] Accordingly, on remand we instruct the trial court to consider the charges of unethical
conduct in relation to several principles enunciated by this court in determining the amount of
fees due Ross. Professional misconduct may be grounds for denying an attorney his fees.
YOUNT v. ZARBELL, 17 Wn.2d 278, 135 P.2d 309 (1943). In addition, as stated in DAILEY v.
TESTONE, 72 Wn.2d 662, 664, 435 P.2d 24 (1967):
"When an attorney is guilty of fraudulent acts or gross misconduct in violation of a statute or
against public policy, the client may have a complete defense to the attorney's action for fees.
In sum, we reverse and remand this action to the trial court to determine whether Ross' actions
constituted slander of title and what, if any, damages Scannell is entitled to receive. Upon
remand we also instruct the trial court to determine what, if any, fees are owed Ross upon a
theory of quantum meruit, and not on the ambiguous, uncompleted contingent fee agreement.
CONCURRING JUDGES: Brachtenbach, C.J., Utter, Dolliver, Williams, and Dore, JJ., and
Cunningham, J. Pro Tem., concur.
AUTHOR OF DISSENTING OPINION: Rosellini, J. (dissenting) -
DISSENTING OPINION: The majority reads the attorney lien provision out of RCW
60.40.010(4). The rationale for so doing is based on an improbable assumption. The majority
states on page 606:
"The result of our approving the practice [RCW 60.40.010(4)] would allow members of the bar
to cloud title to real property with "claims of attorney lien" without resort to any adjudication of
such claims. The potential for economic coercion by attorneys is obvious. In today's economic
setting a client may well be forced to settle the attorney's claim for fees, no matter how
unfounded, simply to gain the ability to convey, lease or otherwise utilize the "liened" property.
I cannot conceive of an attorney violating his oath of office and subjecting himself to a
disciplinary proceeding by doing what is suggested by the majority's rationale. In my opinion,
attorneys have high professional and ethical standards and would not jeopardize the standards
nor their right to practice law under these circumstances.
" An attorney has a lien for his compensation, whether specially agreed upon or implied, as
hereinafter provided: . . . (4) upon a judgment to the extent of the value of any services
performed by him in the action, or if the services were rendered under a special agreement, for
the sum due under such agreement, from the time of filing notice of such lien or claim with the
clerk of the court in which such judgment is entered, which notice must be filed with the papers
in the action in which such judgment was rendered, and an entry made in the execution
docket, showing name of claimant, amount claimed and date of filing notice.
RCW 60.40.010(4) in pertinent part.

If the words "upon a judgment to the extent of the value of any services performed by [an
attorney]" mean anything, they mean that the lien reaches the fruits of the judgment. There is
nothing in them which confines their scope to money judgments.

It is true that subsections 1 and 2 of the attorney lien statute are possessory liens. However,
under subsections 3 and 4 nonpossessory liens are created.

Subsection 3 provides that an attorney has a lien for his compensation

"upon money in the hands of the adverse party in an action or proceeding, in which the
attorney was employed, from the time of giving notice of the lien to that party[.]

Many liens are nonpossessory, E.G., RCW 60.04, mechanics' and materialmen's liens; RCW
60.14, lien for agricultural dusting or spraying; RCW 60.22, lien for furnishing fertilizers,
pesticides, weed killers; RCW 60.24, lien for labor and services on timber and lumber. These
are nonpossessory liens and do not appear to have caused any of the dire consequences
envisioned by the majority.

The attorney's lien on a judgment can be filed only where an attorney was successful in
obtaining the judgment. The trial record discloses that after judgment was entered in the Pierce
County trial action, Ross and Scannell became involved in an argument over litigation costs
and the fee agreement. Ross had successfully completed the defense of the McKinney suit by
getting the complaint dismissed. The question whether there was incomplete performance by
Ross was resolved by the trial court here in favor of the attorney. While we would have
preferred a more detailed finding on the issue, the trial court stated in finding of fact 7: "Plaintiff
[Ross] represented defendant throughout the Knight, et al, suit until differences arose between
the parties after judgment had been entered." The majority substitutes its own findings for
those of the trial court.

Consistent with the second paragraph of its memorandum opinion the trial court, in its formal
conclusions of law, found that Ross is entitled to the contingent fee. It approved Ross' filing of
the notice of attorney's lien, fixed the amount of the fee, and foreclosed the lien. Granted, the
amount allowed was less than that which was claimed, but the question involved complex
factors.

As provided in the statute, Ross filed a claim of lien under the Pierce County cause number on
which a judgment was entered. Venue in the cause had by agreement been transferred to
Pierce County from Klickitat County where the real property involved in the suit was situated
and where the initial action had been instituted. After the judgment was entered in Pierce
County, a new cause number was obtained in Klickitat County. An abstract of the Pierce
County judgment was filed under that number, as was Ross' claim of lien.

The trial court found this procedure to be proper and I agree that this procedure is allowable
under RCW 60.40.010(4). It is a lien upon the judgment, obtained for a claimant as a result of
the attorney's professional services, to secure his compensation for such services in that
particular case. Such a lien has the capacity to be adjudicated and ultimately enforced. STATE
EX REL. ANGELES BREWING & MALTING CO. v. SUPERIOR COURT, 89 Wash. 342, 154
P. 603 (1916).

The charging lien attaches to the fruits of the judgment when that judgment involves real
property, just as it attaches to cash proceeds where there is a money judgment. I am
persuaded that if the attorney whose skill and effort produces the judgment is entitled to protect
his compensation through a lien on the judgment, he is entitled to have the lien attach to the
fruits of the judgment.

The lien filed under RCW 60.40.010(4) attaches to the underlying real property that is the
subject matter of the judgment concerned. I agree with the statement of the Supreme Court of
Colorado in the early case of FILLMORE v. WELLS, 10 Colo. 228, 233, 15 P. 343 (1887):

" The attorney's lien, in so far as it relates to judgments, may be accurately defined as a right
conferred by statute, or recognized by the common law, to have his compensation or costs, or
both, directly secured by the fruits of the judgment. To declare him entitled to a lien upon the
judgment, without permitting him, through such lien, to reach and control the subject-matter of
the recovery, would be bestowing upon him the shadow, and withholding the substance. He
would be no better off than are other general creditors of his client. What equitable
consideration supports the conclusion that he should be secured in this way by the fruits of a
money judgment, and yet, as to the fruits of a decree or judgment relating to realty, that he
should occupy the attitude of a mere general creditor? The fruits of the latter judgment are
often far more valuable to his client than are the fruits of the former. Cases involving the title to
or the possession of real estate present questions quite as complicated and difficult, and
demand of the attorney quite as much learning and labor, as do those relating to damages for
torts, or for the violation of simple contracts.

As the majority acknowledges, the Colorado Legislature approved that interpretation by

enacting a law making it explicit. Evidently the Colorado Legislature did not assume, as the
majority does here, that the lien right would be abused. The Legislature of Washington has
recognized that an attorney is "worthy of his hire" as are others who perform services and has
granted him lien rights accordingly. The court should not be niggardly in its construction of
those rights.

As for the contention that the attorney violated the code of professional ethics, it was not
argued before the trial court. Consequently that court did not err in failing to make findings with
respect to the matter. If the defendant wishes to pursue complaints, it should be addressed to
the disciplinary committee of the bar association.

I would affirm the trial court.

POST-OPINION INFORMATION: Reconsideration denied September 29, 1982.

24 | P a g e
A.C. No. 6210 December 9, 2004
FEDERICO N. RAMOS, complainant,
vs.
ATTY. PATRICIO A. NGASEO, respondent.
DECISION
YNARES-SANTIAGO, J.:
This is a complaint for suspension of respondent Atty. Patricio A. Ngaseo for violation of the
Code of Professional Responsibility and Article 1491 of the Civil Code by demanding from his
client, complainant Federico N. Ramos, the delivery of 1,000 square meters of land, a litigated
property, as payment for his appearance fees.
The facts as narrated by the complainant are as follows:
Sometime in 1998, complainant Federico Ramos went to respondent Atty. Patricio Ngaseo's
Makati office to engage his services as counsel in a case1 involving a piece of land in San
Carlos, Pangasinan. Respondent agreed to handle the case for an acceptance fee of
P20,000.00, appearance fee of P1,000.00 per hearing and the cost of meals, transportation
and other incidental expenses. Complainant alleges that he did not promise to pay the
respondent 1,000 sq. m. of land as appearance fees.2
On September 16, 1999, complainant went to the respondent's office to inquire about the
status of the case. Respondent informed him that the decision was adverse to them because a
congressman exerted pressure upon the trial judge. Respondent however assured him that
they could still appeal the adverse judgment and asked for the additional amount of P3,850.00
and another P2,000.00 on September 26, 2000 as allowance for research made.3
Although an appeal was filed, complainant however charges the respondent of purposely
failing to submit a copy of the summons and copy of the assailed decision. Subsequently,
complainant learned that the respondent filed the notice of appeal 3 days after the lapse of the
reglementary period.
On January 29, 2003, complainant received a demand-letter from the respondent asking for
the delivery of the 1,000 sq. m. piece of land which he allegedly promised as payment for
respondent's appearance fee. In the same letter, respondent also threatened to file a case in
court if the complainant would not confer with him and settle the matter within 30 days.
Respondent alleged that sometime in the late 1997, a former client, Federico Ramos and his
brother, Dionisio, went to his Makati office to engage his professional services in connection
with a 2-hectare parcel of land situated in San Carlos, Pangasinan which the complainant's
family lost 7 years earlier through an execution sale in favor of one Alfredo T. Castro.
Complainant, who was deaf and could only speak conversational Tagalog haltingly, was
assisted by his brother Dionisio. They came all the way from Pangasinan because no lawyer in
San Carlos City was willing to handle the case. Complainant, through Dionisio, avers that he
has consulted 2 local lawyers but did not engage their services because they were demanding
exorbitant fees. One local lawyer was willing to handle the case for at least one-half of the land
involved as his attorney's fee, plus cash expenses, while the other asked for ¼ of the land in
addition to a large sum of money. Respondent agreed to handle the case for an acceptance
fee of P60,000.00 plus an appearance fee of P3,000.00 per hearing. Complainant told him that
he would consult his siblings on the matter.
Six months later, i.e., in April 1998, complainant, assisted by one Jose Castillo, went to
respondent's office to discuss the legal fees. Complainant, through Castillo, told respondent
that he was willing to pay an acceptance fee of P40,000.00, P20,000.00 of which shall be paid
upon engagement and the remaining P20,000.00 to be paid after their treasure hunt operations
in Nueva Viscaya were terminated. Further, complainant offered, in lieu of P3,000.00 per
appearance, 1,000 sq. m. of land from the land subject matter of the case, if they win, or from
another piece of property, if they lose. In addition, complainant also offered to defray the
expenses for transportation, meals and other incidental expenses. Respondent accepted the
complainant's offer.
lieu of the appearance fees, the case has been terminated, when the appellate court ordered
the return of the 2-hectare parcel of land to the family of the complainant.
Respondent further contends that he can collect the unpaid appearance fee even without a
written contract on the basis of the principle of quantum meruit. He claims that his acceptance
and appearance fees are reasonable because a Makati based legal practitioner, would not
handle a case for an acceptance fee of only P20,000.00 and P1,000.00 per court appearance.
Under Article 1491(5) of the Civil Code, lawyers are prohibited from acquiring either by
purchase or assignment the property or rights involved which are the object of the litigation in
which they intervene by virtue of their profession.7 The prohibition on purchase is all
embracing to include not only sales to private individuals but also public or judicial sales. The
rationale advanced for the prohibition is that public policy disallows the transactions in view of
the fiduciary relationship involved, i.e., the relation of trust and confidence and the peculiar
control exercised by these persons.8 It is founded on public policy because, by virtue of his
office, an attorney may easily take advantage of the credulity and ignorance of his client and
unduly enrich himself at the expense of his client.9 However, the said prohibition applies only if
the sale or assignment of the property takes place during the pendency of the litigation
involving the client's property. Consequently, where the property is acquired after the
termination of the case, no violation of paragraph 5, Article 1491 of the Civil Code attaches.
Invariably, in all cases where Article 1491 was violated, the illegal transaction was
consummated with the actual transfer of the litigated property either by purchase or
assignment in favor of the prohibited individual. In Biascan v. Lopez, respondent was found
guilty of serious misconduct and suspended for 6 months from the practice of law when he
registered a deed of assignment in his favor and caused the transfer of title over the part of the
estate despite pendency of Special Proceedings No. 98037 involving the subject property.10 In
the consolidated administrative cases of Valencia v. Cabanting,11 the Court suspended
respondent Atty. Arsenio Fer Cabanting for six (6) months from the practice of law when he
purchased his client's property which was still the subject of a pending certiorari proceeding.
In the instant case, there was no actual acquisition of the property in litigation since the
respondent only made a written demand for its delivery which the complainant refused to
comply. Mere demand for delivery of the litigated property does not cause the transfer of
ownership, hence, not a prohibited transaction within the contemplation of Article 1491. Even
assuming arguendo that such demand for delivery is unethical, respondent's act does not fall
within the purview of Article 1491. The letter of demand dated January 29, 2003 was made
long after the judgment in Civil Case No. SCC-2128 became final and executory on January
18, 2002.
We note that the report of the IBP Commissioner, as adopted by the IBP Board of Governors in
its Resolution No. XVI-2003-47, does not clearly specify which acts of the respondent
constitute gross misconduct or what provisions of the Code of Professional Responsibility have
been violated. We find the recommended penalty of suspension for 6 months too harsh and
not proportionate to the offense committed by the respondent. The power to disbar or suspend
must be exercised with great caution. Only in a clear case of misconduct that seriously affects
the standing and character of the lawyer as an officer of the Court and member of the bar will
disbarment or suspension be imposed as a penalty.12 All considered, a reprimand is deemed
sufficient and reasonable.
WHEREFORE, in view of the foregoing, respondent Atty. Patricio A. Ngaseo is found guilty of
conduct unbecoming a member of the legal profession in violation of Rule 20.04 of Canon 20
of the Code of Professional Responsibility. He is REPRIMANDED with a warning that repetition
of the same act will be dealt with more severely.
SO ORDERED.

Respondent claims that after the trial court dismissed Civil Case No. SCC 2128, he filed a
timely notice of appeal and thereafter moved to be discharged as counsel because he had
colon cancer. Complainant, now assisted by one Johnny Ramos, implored respondent to
continue handling the case, with an offer to double the 1,000 sq. m. piece of land earlier
promised and the remaining balance of P20,000.00 acceptance fee. Johnny Ramos made a
written commitment and gave respondent's secretary P2,000.00 of the P3,850.00 expenses for
the preparation of the appellant's brief.

On July 18, 2001, the Court of Appeals rendered a favorable decision ordering the return of the
disputed 2-hectare land to the complainant and his siblings. The said decision became final
and executory on January 18, 2002. Since then complainant allegedly failed to contact
respondent, which compelled him to send a demand letter on January 29, 2003.

On February 14, 2003, complainant filed a complaint before the IBP charging his former
counsel, respondent Atty. Ngaseo, of violation of the Code of Professional Responsibility for
demanding the delivery of 1,000 sq. m. parcel of land which was the subject of litigation.

In a report dated July 18, 2003, IBP Commissioner Rebecca Villanueva-Maala found the
respondent guilty of grave misconduct and conduct unbecoming of a lawyer in violation of the
Code of Professional Responsibility and recommended that he be suspended from the practice
of law for 1 year.4

On August 30, 2003, the IBP Board of Governors passed Resolution No. XVI-2003-47 the full
text of which reads:5

RESOLVED to ADOPT and APPROVE, as it is hereby ADOPTED and APPROVED, the

Report and Recommendation of the Investigating Commissioner of the above-entitled case,
herein made part of this Resolution/Decision as Annex "A"; and, finding the recommendation
fully supported by the evidence on record and the applicable laws and rules, with modification,
and considering that respondent have violated the Code of Professional Responsibility for
grave misconduct and conduct unbecoming of a lawyer Atty. Patricio A. Ngaseo is hereby
SUSPENDED from the practice of law for six (6) months.

On December 11, 2003, respondent filed a petition for review assailing IBP Resolution No.
XVI-2003-47 for having been issued without or in excess of jurisdiction.6

Respondent argues that he did not violate Article 1491 of the Civil Code because when he
demanded the delivery of the 1,000 sq. m. of land which was offered and promised to him in

25 | P a g e
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-26868 February 27, 1969
IN THE MATTER OF ATTORNEY LOPE E. ADRIANO Member of the Philippine Bar. PEOPLE
OF THE PHILIPPINES, plaintiff-appellee,
vs.
REMIGIO ESTEBIA, accused-appellant.
SANCHEZ, J.:
Once again, this Court is confronted with the unwanted task of ascertaining whether certain
acts and conduct of a member of the Bar deserve disciplinary action.
The problem arose because of facts that follow:
One Remigio Estebia was convicted of rape by the Court of First Instance of Samar, 1 and
sentenced to suffer the capital punishment. His case came up before this Court on review.
On December 14, 1966, Lope E. Adriano, a member of the Bar, was appointed by this Court as
Estebia's counsel de oficio. In the notice of his appointment, Adriano was required to prepare
and file his brief within thirty days from notice. He was advised that to enable him to examine
the case, the record would be at his disposal. Adriano received this notice on December 20,
1966. On January 19, 1967, Adriano sought for a 30-day extension to file appellant's brief in
mimeographed form. On February 18, Adriano again moved for a 20-day extension (his
second). This was followed by a third filed on March 8, for fifteen days. And a fourth on March
27, also for fifteen days. He moved for a "last" extension of ten days on April 11. On April 21,
he even sought a special extension of five days. All these motions for extension were granted.
The brief was due on April 26, 1967. But no brief was filed.
On September 25, 1967, Adriano was ordered to show cause within ten days from notice
thereof why disciplinary action should not be taken against him for failure to file appellant's
brief despite the lapse of the time therefor. Adriano did not bother to give any explanation.
For failing to comply with the September 25, 1967 resolution, this Court, on October 3, 1968,
resolved to impose upon him a fine of P500 payable to this Court within fifteen days from
notice with a warning that upon further non-compliance with the said resolution of September
25, 1967 within the same period of fifteen days, "more drastic disciplinary action will be taken
against him." Still, counsel paid no heed.
Finally, on December 5, 1968, this Court ordered Adriano to show cause within ten days from
notice thereof why he should not be suspended from the practice of law "for gross misconduct
and violation of his oath of office as attorney." By express order of this Court, the resolution
was personally served upon him on December 18, 1968. He ignored the resolution.
Upon the facts just narrated, we now pass judgment.
2. An attorney's duty of prime importance is "[t]o observe and maintain the respect due to the
courts of justice and judicial officers. The first Canon of the Code of Ethics enjoins a lawyer "to
maintain towards the Courts a respectful attitude, not for the sake of the temporary incumbent
of the judicial office, but for the maintenance of its supreme importance." By the oath of office,
the lawyer undertook to "obey the laws as well as the legal orders of the duly constituted
authorities." In People vs. Carillo, 8 this Court's pointed observation was that as an officer of
the court, it is a lawyer's "sworn and moral duty to help build and not destroy unnecessarily that
high esteem and regard towards the courts so essential to the proper administration of justice."
Here, we have a clear case of an attorney whose acts exhibit willful dis-obedience of lawful
orders of this Court. A cause sufficient is thus present for suspension or disbarment. 9 Counsel
has received no less than three resolutions of this Court requiring compliance of its orders. To
be recalled is that on September 25, 1967, this Court directed him, in ten days from notice, to
show cause why disciplinary action should not be taken against him for his failure to file
appellant's brief despite the lapse of the time therefor. Nothing was done by counsel for over a
year. To impress upon counsel the gravity of his repeated failure to obey this Court's orders,
on October 3,1968, a fine of P500 was clamped upon him. He was directed to pay that fine in
ten days. He was in that order also required to file his brief in fifteen days. He was warned that
more drastic disciplinary action would be taken upon his failure to do either. Still he remained
unmoved. Then, this Court issued the peremptory order of December 5, 1968 commanding
him to show cause within ten days from notice thereof why he should not be suspended from
the practice of law for gross misconduct and violation of his oath of office. The Court made it
certain that this order would reach him. He personally acknowledged receipt thereof. He has
not paid the fine. He has done nothing.
This is 1969. No brief has as yet been filed. And this, inspite of the fact that as early as March
27, 1967, when he moved for a fourth extension of time to file his brief de oficio, he
represented to this Court that all that was needed was to redraft and to rehash some significant
portions of the brief which was almost through and to have the same stencilled and
mimeographed upon completion of a definitive text.
Disrespect is here present. Contumacy is as patent. Disciplinary action is in order.
Controlling here is the 1961 decision In the Matter of Atty. Filoteo Dianala Jo. 10 There, as
here, counsel failed to file appellant's brief (in a criminal case) despite extensions of time
granted him by this Court. Likewise, this Court issued a show-cause order why disciplinary
action should not be taken against him. The explanation was considered unsatisfactory. This
Court imposed a fine of P50 payable in ten days from notice. Attorney Dianala Jo did not pay
that fine. Came the subsequent resolution of this Court advising him to pay the fine, otherwise,
he would be arrested and confined to jam. This warning was not heeded. On November 18,
1960, the Court resolved to give him ten days from notice within which to explain why he
should not be suspended from the practice of law. Despite receipt of this notice, he did not
care to explain his behaviour which this Court considered as "consumacy and unwillingness to
comply with the lawful orders of this Court of which he is an officer or to conduct himself as a
lawyer should, in violation of his oath of office." He was suspended from the practice of law for
three months.
In the present case, counsel's pattern of conduct, it would seem to us, reveals a propensity on
the part of counsel to benumb appreciation of his obligation as counsel de oficio and of the
courtesy and respect that should be accorded this Court.

1. By specific authority, this Court may assign an attorney to render professional aid to a
destitute appellant in a criminal case who is unable to employ an attorney. Correspondingly, a
duty is imposed upon the lawyer so assigned "to render the required service." 2 A lawyer so
appointed "as counsel for an indigent prisoner", our Canons of Professional Ethics demand,
"should always exert his best efforts" in the indigent's behalf. 3
For the reasons given, we vote to suspend Attorney Lope E. Adriano from the practice of law
throughout the Philippines for a period of one (1) year.
Let a copy of this resolution be attached to the personal record, in this Court, of Lope E.
Adriano as member of the Bar. So ordered.

No excuse at all has been offered for non-presentation of appellant's brief. And yet, between Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Fernando, Capistrano,
December 20, 1966, when he received notice of his appointment, and December 5, 1968, Teehankee and Barredo, JJ., concur.
when the last show cause order was issued by this Court, more than sufficient time was
afforded counsel to prepare and file his brief de oficio. The death sentence below imposed was
upon a plea of guilty. The record of the proceedings leading to the lower court's sentence
consists of but 31 pages. Counsel had the record since January 19, 1967. In fact, in his third
motion for extension of time, he manifested that the drafting of apellant's brief "is more than
half-way through" and that "additional time is needed to review, effectuate the necessary
corrections, put in final form and print the said brief." In his motion for fourth extension, he
intimated that the preparation of the brief "is almost through" and that "additional time is
needed to redraft and rehash some significant portions of said brief and have the same
stencilled and mimeographed upon completion of a definitive text." His motion for last (fifth)
extension of time came with the excuse that he "suddenly got sick (influenza) in the course of
redrafting and rehashing some significant portions of said brief, which ailment hampered and
interrupted his work thereon for sometime." Finally, in his "Special Extension of Time" to file
brief, he claimed that he needed only five days from April 21, 1967 to put said brief in final form
and have the same stencilled and mimeographed.lawphi1.nêt

In the face of the fact that no brief has ever been filed, counsel's statements in his motions for
extension have gone down to the level of empty and meaningless words; at best, have dubious
claim to veracity.

It is true that he is a court-appointed counsel. But we do say that as such counsel de oficio, he
has as high a duty to the accused as one employed and paid by defendant himself. Because,
as in the case of the latter, he must exercise his best efforts and professional ability in behalf of
the person assigned to his care. His is to render effective assistance. The accused defendant
expects of him due diligence, not mere perfunctory representation. We do not accept the
paradox that responsibility is less where the defended party is poor. It has been said that
courts should "have no hesitancy in demanding high standards of duty of attorneys appointed
to defend indigent persons charged with crime." 4 For, indeed, a lawyer who is a vanguard in
the bastion of justice is expected to have a bigger dose of social conscience and a little less of
self interest. Because of this, a lawyer should remain ever conscious of his duties to the
indigent he defends.

Worth remembering is the 1905 case of In the matter of Jose Robles Lahesa. 5 He was
counsel de oficio before the Supreme Court in two cases: one for robo en cuadrilla and the
other for homicide. He failed to take any action in behalf of the defendants in both eases. This
Court imposed upon him a fine of P200. Significant is the pronouncement we there made that:
"This court should exact from its officers and subordinates the most scrupulous performance of
their official duties, especially when negligence in the performance of those duties necessarily
result in delays in the prosecution of criminal cases and the detention of accused persons
pending appeal." The validity of the foregoing observation remains to the present day. 6 It
applies to the present case.

Here, appellant was without brief since December 20, 1966. The effect of this long delay need
not be essayed. We, therefore, find that Attorney Lope E. Adriano has violated his oath that he
will conduct himself as a lawyer according to the best of his "knowledge and discretion".

26 | P a g e
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
A.C. No. 9872 January 28, 2014
NATIVIDAD P. NAVARRO and HILDA S. PRESBITERO, Complainants,
vs.
ATTY. IVAN M. SOLIDUM, JR., Respondent.
DECISION
PER CURIAM:
This case originated from a complaint for disbarment, dated 26 May 2008, filed by Natividad P.
Navarro (Navarro) and Hilda S. Presbitero (Presbitero) against Atty. Ivan M. Solidum, Jr.
(respondent) before the Integrated Bar of the Philippines Commission on Bar Discipline (IBP-
CBD).
From the Report, dated 1July 2009, of the IBP-CBD, we gathered the following facts of the
case:
On 4 April 2006, respondent signed a retainer agreement with Presbitero to follow up the
release of the payment for the latter’s 2.7-hectare property located in Bacolod which was the
subject of a Voluntary Offer to Sell (VOS) to the Department of Agrarian Reform (DAR). The
agreement also included the payment of the debts of Presbitero’s late husband to the
Philippine National Bank (PNB), the sale of the retained areas of the property, and the
collection of the rentals due for the retained areas from their occupants. It appeared that the
DAR was supposed to pay ₱700,000 for the property but it was mortgaged by Presbitero and
her late husband to PNB for ₱1,200,000. Presbitero alleged that PNB’s claim had already
prescribed, and she engaged the services of respondent to represent her in the matter.
Respondent proposed the filing of a case for quieting of title against PNB. Respondent and
Presbitero agreed to an attorney’s fee of 10% of the proceeds from the VOS or the sale of the
property, with the expenses to be advanced by Presbitero but deductible from respondent’s
fees. Respondent received ₱50,000 from Presbitero, supposedly for the expenses of the case,
but nothing came out of it.
In May 2006, Presbitero’s daughter, Ma. Theresa P. Yulo (Yulo), also engaged respondent’s
services to handle the registration of her 18.85-hectare lot located in Nasud-ong, Caradio-an,
Himamaylan, Negros. Yulo convinced her sister, Navarro, to finance the expenses for the
registration of the property. Respondent undertook to register the property in consideration of
30% of the value of the property once it is registered. Respondent obtained ₱200,000 from
Navarro for the registration expenses. Navarro later learned that the registration decree over
the property was already issued in the name of one Teodoro Yulo. Navarro alleged that she
would not have spent for the registration of the property if respondent only apprised her of the
real situation of the property.
On 25 May 2006, respondent obtained a loan of ₱1,000,000 from Navarro to finance his sugar
trading business. Respondent and Navarro executed a Memorandum of Agreement (MOA)
and agreed that the loan (a) shall be for a period of one year; (b) shall earn interest at the rate
of 10% per month; and (c) shall be secured by a real estate mortgage over a property located
in Barangay Alijis, Bacolod City, covered by Transfer Certificate of Title No. 304688. They also
agreed that respondent shall issue postdated checks to cover the principal amount of the loan
as well as the interest thereon. Respondent delivered the checks to Navarro, drawn against an
account in Metrobank, Bacolod City Branch, and signed them in the presence of Navarro.
In June 2006, respondent obtained an additional loan of ₱1,000,000 from Navarro, covered by
a second MOA with the same terms and conditions as the first MOA. Respondent sent
Navarro, through a messenger, postdated checks drawn against an account in Bank of
Commerce, Bacolod City Branch. Respondent likewise discussed with Navarro about securing
a "Tolling Agreement" with Victorias Milling Company, Inc. but no agreement was signed.
At the same time, respondent obtained a loan of ₱1,000,000 from Presbitero covered by a third
MOA, except that the real estate mortgage was over a 263-square-meter property located in
Barangay Taculing, Bacolod City. Respondent sent Presbitero postdated checks drawn against
an account in Metrobank, Bacolod City Branch.
Presbitero was dissatisfied with the value of the 263-square-meter property mortgaged under
the third MOA, and respondent promised to execute a real estate mortgage over a 1,000-
square-meter parcel of land adjacent to the 4,000-square-meter property he mortgaged to
Navarro.
However, respondent did not execute a deed for the additional security.
Respondent paid the loan interest for the first few months. He was able to pay complainants a
total of ₱900,000. Thereafter, he failed to pay either the principal amount or the interest
thereon. In September 2006, the checks issued by respondent to complainants could no longer
be negotiated because the accounts against which they were drawn were already closed.
When complainants called respondent’s attention, he promised to pay the agreed interest for
September and October 2006 but asked for a reduction of the interest to 7% for the
succeeding months.
In November 2006, respondent withdrew as counsel for Yulo. On the other hand, Presbitero
terminated the services of respondent as counsel. Complainants then filed petitions for the
judicial foreclosure of the mortgages executed by respondent in their favor. Respondent
countered that the 10% monthly interest on the loan was usurious and illegal. Complainants
also filed cases for estafa and violation of Batas Pambansa Blg. 22 against respondent.
Complainants alleged that respondent induced them to grant him loans by offering very high
interest rates. He also prepared and signed the checks which turned out to be drawn against
his son’s accounts. Complainants further alleged that respondent deceived them regarding the
identity and value of the property he mortgaged because he showed them a different property
from that which he owned. Presbitero further alleged that respondent mortgaged his 263-
square-meter property to her for ₱1,000,000 but he later sold it for only ₱150,000.
Respondent, for his defense, alleged that he was engaged in sugar and realty business and
that it was Yulo who convinced Presbitero and Navarro to extend him loans. Yulo also assured
him that Presbitero would help him with the refining of raw sugar through Victorias Milling
Company, Inc. Respondent alleged that Navarro fixed the interest rate and he agreed because
he needed the money. He alleged that their business transactions were secured by real estate
mortgages and covered by postdated checks. Respondent denied that the property he
mortgaged to Presbitero was less than the value of the loan. He also denied that he sold the
27 | P a g e
property because the sale was actually rescinded. Respondent claimed that the property he
mortgaged to Navarro was valuable and it was actually worth more than ₱8,000,000.
Respondent alleged that he was able to pay complainants when business was good but he
was unable to continue paying when the price of sugar went down and when the business with
Victorias Milling Company, Inc. did not push through because Presbitero did not help him.
Respondent also denied that he was hiding from complainants.
Respondent further alleged that it was Yulo who owed him ₱530,000 as interest due for
September to December 2005. He denied making any false representations. He claimed that
complainants were aware that he could no longer open a current account and they were the
ones who proposed that his wife and son issue the checks. Respondent further alleged that he
already started with the titling of Yulo’s lot but his services were terminated before it could be
completed.
A supplemental complaint was filed charging respondent with accepting cases while under
suspension. In response, respondent alleged that he accepted Presbitero’s case in February
2006 and learned of his suspension only in May 2006.
After conducting a hearing and considering the position papers submitted by the parties, the
IBP-CBD found that respondent violated the Code of Professional Responsibility.
The IBP-CBD found that respondent borrowed ₱2,000,000 from Navarro and ₱1,000,000 from
Presbitero which he failed to pay in accordance with the MOAs he executed. The IBP-CBD
found that based on the documents presented by the parties, respondent did not act in good
faith in obtaining the loans. The IBP-CBD found that respondent either promised or agreed to
pay the very high interest rates of the loans although he knew them to be exorbitant in
accordance with jurisprudence. Respondent likewise failed to deny that he misled Navarro and
her husband regarding the identity of the property mortgaged to them. Respondent also
mortgaged a property to Presbitero for ₱1,000,000 but documents showed that its value was
only ₱300,000. Documents also showed that he sold that property for only ₱150,000.
Respondent conspired with Yulo to secure loans by promising her a 10% commission and later
claimed that they agreed that Yulo would "ride" on the loan by borrowing ₱300,000 from the
amount he obtained from Navarro and Presbitero. Respondent could not explain how he lost
all the money he borrowed in three months except for his claim that the price of sugar went
down.
The IBP-CBD found that respondent misled Navarro and Presbitero regarding the issuance of
the postdated checks, and there was nothing in the records that would show that he informed
them that it would be his wife or son who would issue the checks. The IBP-CBD also found that
respondent had not been transparent in liquidating the money he received in connection with
Presbitero’s VOS with DAR. He was also negligent in his accounting regarding the registration
of Yulo’s property which was financed by Navarro.
The IBP-CBD found that respondent was guilty of violating Rule 1.01 of the Code of
Professional Responsibility for committing the following acts:
(1) signing drawn checks against the account of his son as if they were from his own account;
(2) misrepresenting to Navarro the identity of the lot he mortgaged to her;
(3) misrepresenting to Presbitero the true value of the 263-square-meter lot he mortgaged to
her;
(4) conspiring with Yulo to obtain the loans from complainants;
(5) agreeing or promising to pay 10% interest on his loans although he knew that it was
exorbitant; and
(6) failing to pay his loans because the checks he issued were dishonored as the accounts
were already closed.
The IBP-CBD also found that respondent violated Canon 16 and Rule 16.01 of the Code of
Professional Responsibility when he failed to properly account for the various funds he
received from complainants.
In addition, the IBP-CBD found that respondent violated Rule 16.04 of the Code of
Professional Responsibility which prohibits borrowing money from a client unless the client’s
interest is fully protected or the client is given independent advice.
On the matter of practicing law while under suspension, the IBP-CBD found that the records
were not clear whether the notice of suspension respondent received on 29 May 2006 was the
report and recommendation of the IBP-CBD or the final decision of this Court. The IBP-CBD
likewise found that there was insufficient evidence to prove that respondent mishandled his
cases.
The IBP-CBD recommended that respondent be meted the penalty of disbarment.
In Resolution No. XIX-2011-267 dated 14 May 2011, the IBP Board of Governors adopted and
approved the recommendation of the IBP-CBD with modification by reducing the
recommended penalty from disbarment to suspension from the practice of law for two years.
The IBP Board of Governors likewise ordered respondent to return the amount of his unpaid
obligation to complainants.
Complainants filed a motion for reconsideration, praying that the penalty of disbarment be
instead imposed upon respondent.
The only issue in this case is whether respondent violated the Code of Professional
Responsibility.
The records show that respondent violated at least four provisions of the Code of Professional
Responsibility.
Rule 1.01 of the Code of Professional Responsibility provides:
Rule 1.01. - A lawyer shall not engage in unlawful, dishonest, immoral or deceitful conduct.
With respect to his client, Presbitero, it was established that respondent agreed to pay a high
interest rate on the loan he obtained from her. He drafted the MOA. Yet, when he could no
longer pay his loan, he sought to nullify the same MOA he drafted on the ground that the
interest rate was unconscionable. It was also established that respondent mortgaged a 263-
square-meter property to Presbitero for ₱1,000,000 but he later sold the property for only
₱150,000, showing that he deceived his client as to the real value of the mortgaged property.
Respondent’s allegation that the sale was eventually rescinded did not distract from the fact
that he did not apprise Presbitero as to the real value of the property.

Respondent failed to refute that the checks he issued to his client Presbitero and to Navarro
belonged to his son, Ivan Garcia Solidum III whose name is similar to his name. He only
claimed that complainants knew that he could no longer open a current bank account, and that
they even suggested that his wife or son issue the checks for him. However, we are inclined to
agree with the IBP-CBD’s finding that he made complainants believe that the account
belonged to him. In fact, respondent signed in the presence of Navarro the first batch of checks
he issued to Navarro. Respondent sent the second batch of checks to Navarro and the third
batch of checks to Presbitero through a messenger, and complainants believed that the checks
belonged to accounts in respondent’s name.
It is clear that respondent violated Rule 1.01 of the Code of Professional Responsibility. We
have ruled that conduct, as used in the Rule, is not confined to the performance of a lawyer’s
professional duties.1 A lawyer may be disciplined for misconduct committed either in his
professional or private capacity.2 The test is whether his conduct shows him to be wanting in
moral character, honesty, probity, and good demeanor, or whether it renders him unworthy to
continue as an officer of the court.3
In this case, the loan agreements with Navarro were done in respondent’s private capacity.
Although Navarro financed the registration of Yulo’s lot, respondent and Navarro had no
lawyer-client relationship. However, respondent was Presbitero’s counsel at the time she
granted him a loan. It was established that respondent misled Presbitero on the value of the
property he mortgaged as a collateral for his loan from her. To appease Presbitero, respondent
even made a Deed of Undertaking that he would give her another 1,000-square-meter lot as
additional collateral but he failed to do so.
allowed to continue as a member of the Bar.9 Our only concern is the determination of
respondent’s administrative liability.10
Our findings have no material bearing on other judicial action which the parties may choose to
file against each other.11 Nevertheless, when a lawyer receives money from a client for a
particular purpose involving the client-attorney relationship, he is bound to render an
accounting to the client showing that the money was spent for that particular purpose.12 If the
lawyer does not use the money for the intended purpose, he must immediately return the
money to his client.13 Respondent was given an opportunity to render an accounting, and he
failed. He must return the full amount of the advances given him by Presbitero, amounting to
₱50,000.
WHEREFORE, the Court finds Atty. Ivan M. Solidum, Jr. GUILTY of violating Rule 1.01, Canon
16, Rule 16.01, and Rule 16.04 of the Code of Professional Responsibility. Accordingly, the
Court DISBARS him from the practice of law effective immediately upon his receipt of this
Decision.
Atty. Solidum is ORDERED to return the advances he received from Hilda S. Presbitero,
amounting to ₱50,000, and to submit to the Office of the Bar Confidant his compliance with this
order within thirty days from finality of this Decision.
Let copies of this Decision be furnished the Office of the Bar Confidant, the Integrated Bar of
the Philippines for distribution to all its chapters, and the Office of the Court Administrator for
dissemination to all courts all over the country. Let a copy of this Decision be attached to the
personal records of respondent.

Clearly, respondent is guilty of engaging in dishonest and deceitful conduct, both in his SO ORDERED.
professional capacity with respect to his client, Presbitero, and in his private capacity with
respect to complainant Navarro. Both Presbitero and Navarro allowed respondent to draft the
terms of the loan agreements. Respondent drafted the MOAs knowing that the interest rates
were exorbitant. Later, using his knowledge of the law, he assailed the validity of the same
MOAs he prepared. He issued checks that were drawn from his son’s account whose name
was similar to his without informing complainants. Further, there is nothing in the records that
will show that respondent paid or undertook to pay the loans he obtained from complainants.

Canon 16 and Rule 16.01 of the Code of Professional Responsibility provide:

CANON 16. - A LAWYER SHALL HOLD IN TRUST ALL MONEYS AND PROPERTIES OF
HIS CLIENT THAT MAY COME INTO HIS POSSESSION.

Rule 16.01 – A lawyer shall account for all money or property collected or received for or from
the client.

The fiduciary nature of the relationship between the counsel and his client imposes on the
lawyer the duty to account for the money or property collected or received for or from his
client.4 We agree with the IBP-CBD that respondent failed to fulfill this duty. In this case, the
IBP-CBD pointed out that respondent received various amounts from complainants but he
could not account for all of them.

Navarro, who financed the registration of Yulo’s 18.85-hectare lot, claimed that respondent
received ₱265,000 from her. Respondent countered that ₱105,000 was paid for real estate
taxes but he could not present any receipt to prove his claim. Respondent also claimed that he
paid ₱70,000 to the surveyor but the receipt was only for ₱15,000. Respondent claimed that he
paid ₱50,000 for filing fee, publication fee, and other expenses but again, he could not
substantiate his claims with any receipt. As pointed out by the IBP-CBD, respondent had been
less than diligent in accounting for the funds he received from Navarro for the registration of
Yulo’s property.

Unfortunately, the records are not clear whether respondent rendered an accounting to Yulo
who had since passed away.

As regards Presbitero, it was established during the clarificatory hearing that respondent
received ₱50,000 from Presbitero. As the IBP-CBD pointed out, the records do not show how
respondent spent the funds because he was not transparent in liquidating the money he
received from Presbitero.

Clearly, respondent had been negligent in properly accounting for the money he received from
his client, Presbitero.1âwphi1 Indeed, his failure to return the excess money in his possession
gives rise to the presumption that he has misappropriated it for his own use to the prejudice of,
and in violation of the trust reposed in him by, the client.5

Rule 16.04 of the Code of Professional Responsibility provides:

Rule 16.04. - A lawyer shall not borrow money from his client unless the client’s interests are
fully protected by the nature of the case or by independent advice. Neither shall a lawyer lend
money to a client except, when in the interest of justice, he has to advance necessary
expenses in a legal matter he is handling for the client.

Here, respondent does not deny that he borrowed ₱1,000,000 from his client Presbitero. At the
time he secured the loan, respondent was already the retained counsel of Presbitero.

While respondent’s loan from Presbitero was secured by a MOA, postdated checks and real
estate mortgage, it turned out that respondent misrepresented the value of the property he
mortgaged and that the checks he issued were not drawn from his account but from that of his
son. Respondent eventually questioned the terms of the MOA that he himself prepared on the
ground that the interest rate imposed on his loan was unconscionable. Finally, the checks
issued by respondent to Presbitero were dishonored because the accounts were already
closed. The interest of his client, Presbitero, as lender in this case, was not fully protected.
Respondent violated Rule 16.04 of the Code of Professional Responsibility, which presumes
that the client is disadvantaged by the lawyer’s ability to use all the legal maneuverings to
renege on his obligation.6 In his dealings with his client Presbitero, respondent took advantage
of his knowledge of the law as well as the trust and confidence reposed in him by his client.

We modify the recommendation of the IBP Board of Governors imposing on respondent the
penalty of suspension from the practice of law for two years. Given the facts of the case, we
see no reason to deviate from the recommendation of the IBP-CBD imposing on respondent
the penalty of disbarment. Respondent failed to live up to the high standard of morality,
honesty, integrity, and fair dealing required of him as a member of the legal profession.7
Instead, respondent employed his knowledge and skill of the law and took advantage of his
client to secure undue gains for himself8 that warrants his removal from the practice of law.
Likewise, we cannot sustain the IBP Board of Governors’ recommendation ordering
respondent to return his unpaid obligation to complainants, except for advances for the
expenses he received from his client, Presbitero, that were not accounted at all. In disciplinary
proceedings against lawyers, the only issue is whether the officer of the court is still fit to be

28 | P a g e
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 173188 January 15, 2014
THE CONJUGAL PARTNERSHIP OF THE SPOUSES VICENTE CADAVEDO AND BENITA
ARCOY-CADAVEDO (both deceased), substituted by their heirs, namely: HERMINA,
PASTORA, Heirs of FRUCTUOSA, Heirs of RAQUEL, EVANGELINE, VICENTE, JR., and
ARMANDO, all surnamed CADAVEDO, Petitioners,
vs.
VICTORINO (VIC) T. LACAYA, married to Rosa Legados, Respondents.
DECISION
BRION, J.:
We solve in this Rule 45 petition for review on certiorari1 the challenge to the October 11, 2005
decision2 and the May 9, 2006 resolution3 of the Court of Appeals (CA) inPetitioners, CA-G.R.
CV No. 56948. The CA reversed and set aside the September 17, 1996 decision4 of the
Regional Trial Court (RTC), Branch 10, of Dipolog City in Civil Case No. 4038, granting in part
the complaint for recovery of possession of property filed by the petitioners, the Conjugal
Partnership of the Spouses Vicente Cadavedo and Benita Arcoy-Cadavedo against Atty.
Victorino (Vic) T. Lacaya, married to Rosa Legados (collectively, the respondents).
The Factual Antecedents
The Spouses Vicente Cadavedo and Benita Arcoy-Cadavedo (collectively, the spouses
Cadavedo) acquired a homestead grant over a 230,765-square meter parcel of land known as
Lot 5415 (subject lot) located in Gumay, Piñan, Zamboanga del Norte. They were issued
Homestead Patent No. V-15414 on March 13, 1953andOriginal Certificate of Title No. P-376
on July 2, 1953.On April30, 1955, the spouses Cadavedo sold the subject lot to the spouses
Vicente Ames and Martha Fernandez (the spouses Ames) Transfer Certificate of Title (TCT)
No. T-4792 was subsequently issued in the name of the spouses Ames.
The present controversy arose when the spouses Cadavedo filed an action5 before the
RTC(then Court of First Instance) of Zamboanga City against the spouses Ames for sum of
money and/or voiding of contract of sale of homestead after the latter failed to pay the balance
of the purchase price. The spouses Cadavedo initially engaged the services of Atty. Rosendo
Bandal who, for health reasons, later withdrew from the case; he was substituted by Atty.
Lacaya.
On February 24, 1969, Atty. Lacaya amended the complaint to assert the nullity of the sale and
the issuance of TCT No. T-4792 in the names of the spouses Ames as gross violation of the
public land law. The amended complaint stated that the spouses Cadavedo hired Atty. Lacaya
on a contingency fee basis. The contingency fee stipulation specifically reads:
10. That due to the above circumstances, the plaintiffs were forced to hire a lawyer on
contingent basis and if they become the prevailing parties in the case at bar, they will pay the
sum of ₱2,000.00 for attorney’s fees.6
In a decision dated February 1, 1972, the RTC upheld the sale of the subject lot to the spouses
Ames. The spouses Cadavedo, thru Atty. Lacaya, appealed the case to the CA.
On September 18, 1975, and while the appeal before the CAin Civil Case No. 1721was
pending, the spouses Ames sold the subject lot to their children. The spouses Ames’ TCT No.
T-4792 was subsequently cancelled and TCT No. T-25984was issued in their children’s
names. On October 11, 1976, the spouses Ames mortgaged the subject lot with the
Development Bank of the Philippines (DBP) in the names of their children.
On August 13, 1980, the CA issued itsdecision in Civil Case No. 1721,reversing the decision of
the RTC and declaring the deed of sale, transfer of rights, claims and interest to the spouses
Ames null and void ab initio. It directed the spouses Cadavedo to return the initial payment and
ordered the Register of Deeds to cancel the spouses Ames’ TCT No. T-4792 and to reissue
another title in the name of the spouses Cadavedo. The case eventually reached this Court via
the spouses Ames’ petition for review on certiorari which this Court dismissed for lack of merit.
Meanwhile, the spouses Ames defaulted in their obligation with the DBP. Thus, the DBP
caused the publication of a notice of foreclosure sale of the subject lot as covered by TCT No.
T-25984(under the name of the spouses Ames’ children). Atty. Lacaya immediately informed
the spouses Cadavedo of the foreclosure sale and filed an Affidavit of Third Party Claim with
the Office of the Provincial Sheriff on September 14, 1981.
With the finality of the judgment in Civil Case No. 1721,Atty. Lacaya filed on September 21,
1981 a motion for the issuance of a writ of execution.
On September 23, 1981,and pending the RTC’s resolution of the motion for the issuance of a
writ of execution, the spouses Ames filed a complaint7 before the RTC against the spouses
Cadavedo for Quieting of Title or Enforcement of Civil Rights due Planters in Good Faith with
prayer for Preliminary Injunction. The spouses Cadavedo, thru Atty. Lacaya, filed a motion to
dismiss on the ground of res judicata and to cancel TCT No. T-25984 (under the name of the
spouses Ames’ children).
On October 16, 1981, the RTC granted the motion for the issuance of a writ of execution in
Civil Case No. 1721,andthe spouses Cadavedo were placed in possession of the subject lot on
October 24, 1981. Atty. Lacaya asked for one-half of the subject lot as attorney’s fees. He
caused the subdivision of the subject lot into two equal portions, based on area, and selected
the more valuable and productive half for himself; and assigned the other half to the spouses
Cadavedo.
Unsatisfied with the division, Vicente and his sons-in-law entered the portion assigned to the
respondents and ejected them. The latter responded by filing a counter-suit for forcible entry
before the Municipal Trial Court (MTC); the ejectment case was docketed as Civil Case No.
215. This incident occurred while Civil Case No. 3352was pending.
On May 13, 1982, Vicente andAtty. Lacaya entered into an amicable settlement (compromise
agreement)8 in Civil Case No. 215 (the ejectment case), re-adjusting the area and portion
obtained by each. Atty. Lacaya acquired 10.5383 hectares pursuant to the agreement. The
MTC approved the compromise agreementin a decision dated June 10, 1982.
Meanwhile, on May 21, 1982, the spouses Cadavedo filed before the RTC an action against
the DBP for Injunction; it was docketed as Civil Case No. 3443 (Cadavedo v. DBP).The RTC
subsequently denied the petition, prompting the spouses Cadavedo to elevate the case to the
29 | P a g e
CAvia a petition for certiorari. The CA dismissed the petition in its decision of January 31,
1984.
The records do not clearly disclose the proceedings subsequent to the CA decision in Civil
Case No. 3443. However, on August 18, 1988, TCT No. 41051was issued in the name of the
spouses Cadavedo concerning the subject lot.
On August 9, 1988, the spouses Cadavedo filed before the RTC an action9 against the
respondents, assailing the MTC-approved compromise agreement. The case was docketed as
Civil Case No. 4038 and is the root of the present case. The spouses Cadavedo prayed,
among others, that the respondents be ejected from their one-half portion of the subject lot;
that they be ordered to render an accounting of the produce of this one-half portion from
1981;and that the RTC fix the attorney’s fees on a quantum meruit basis, with due
consideration of the expenses that Atty. Lacaya incurred while handling the civil cases.
During the pendency of Civil Case No. 4038, the spouses Cadavedo executed a Deed of
Partition of Estate in favor of their eight children. Consequently, TCT No. 41051 was cancelled
and TCT No. 41690 was issued in the names of the latter. The records are not clear on the
proceedings and status of Civil Case No. 3352.
The Ruling of the RTC
In the September 17, 1996 decision10 in Civil Case No. 4038, the RTC declared the contingent
fee of 10.5383 hectares as excessive and unconscionable. The RTC reduced the land area to
5.2691 hectares and ordered the respondents to vacate and restore the remaining
5.2692hectares to the spouses Cadavedo.
The RTC noted that, as stated in the amended complaint filed by Atty. Lacaya, the agreed
attorney’s fee on contingent basis was ₱2,000.00. Nevertheless, the RTC also pointed out that
the parties novated this agreement when they executed the compromise agreement in Civil
Case No. 215 (ejectment case), thereby giving Atty. Lacaya one-half of the subject lot. The
RTC added that Vicente’s decision to give Atty. Lacaya one-half of the subject lot, sans
approval of Benita, was a valid act of administration and binds the conjugal partnership. The
RTC reasoned out that the disposition redounded to the benefit of the conjugal partnership as
it was done precisely to remunerate Atty. Lacaya for his services to recover the property itself.
These considerations notwithstanding, the RTC considered the one-half portion of the subject
lot, as Atty. Lacaya’s contingent fee,excessive, unreasonable and unconscionable. The RTC
was convinced that the issues involved in Civil Case No. 1721were not sufficiently difficult and
complicated to command such an excessive award; neither did it require Atty. Lacaya to
devote much of his time or skill, or to perform extensive research.
Finally, the RTC deemed the respondents’ possession, prior to the judgment, of the excess
portion of their share in the subject lot to be in good faith. The respondents were thus entitled
to receive its fruits.
On the spouses Cadavedo’s motion for reconsideration, the RTC modified the decision in its
resolution11 dated December 27, 1996. The RTC ordered the respondents to account for and
deliver the produce and income, valued at ₱7,500.00 per annum, of the 5.2692hectares that
the RTC ordered the spouses Amesto restore to the spouses Cadavedo, from October 10,
1988 until final restoration of the premises.
The respondents appealed the case before the CA.
The Ruling of the CA
In its decision12 dated October 11, 2005, the CA reversed and set aside the RTC’s September
17, 1996 decision and maintained the partition and distribution of the subject lot under the
compromise agreement. In so ruling, the CA noted the following facts: (1) Atty. Lacaya served
as the spouses Cadavedo’s counsel from 1969 until 1988,when the latter filed the present case
against Atty. Lacaya; (2) during the nineteen (19) years of their attorney-client relationship,
Atty. Lacaya represented the spouses Cadavedo in three civil cases –Civil Case No. 1721,
Civil Case No. 3352, and Civil Case No. 3443; (3) the first civil case lasted for twelve years and
even reached this Court, the second civil case lasted for seven years, while the third civil case
lasted for six years and went all the way to the CA;(4) the spouses Cadavedo and Atty. Lacaya
entered into a compromise agreement concerning the division of the subject lot where Atty.
Lacaya ultimately agreed to acquire a smaller portion; (5) the MTC approved the compromise
agreement; (6) Atty. Lacaya defrayed all of the litigation expenses in Civil Case No. 1721; and
(7) the spouses Cadavedo expressly recognized that Atty. Lacaya served them in several
cases.
Considering these established facts and consistent with Canon 20.01 of the Code of
Professional Responsibility (enumerating the factors that should guide the determination of the
lawyer’s fees), the CA ruled that the time spent and the extent of the services Atty. Lacaya
rendered for the spouses Cadavedo in the three cases, the probability of him losing other
employment resulting from his engagement, the benefits resulting to the spouses Cadavedo,
and the contingency of his fees justified the compromise agreement and rendered the agreed
fee under the compromise agreement reasonable.
The Petition
In the present petition, the petitioners essentially argue that the CA erred in: (1) granting the
attorney’s fee consisting of one-half or 10.5383 hectares of the subject lot to Atty. Lacaya,
instead of confirming the agreed contingent attorney’s fees of ₱2,000.00; (2) not holding the
respondents accountable for the produce, harvests and income of the 10.5383-hectare portion
(that they obtained from the spouses Cadavedo) from 1988 up to the present; and (3)
upholding the validity of the purported oral contract between the spouses Cadavedo and Atty.
Lacaya when it was champertous and dealt with property then still subject of Civil Case No.
1721.13
The petitioners argue that stipulations on a lawyer’s compensation for professional services,
especially those contained in the pleadings filed in courts, control the amount of the attorney’s
fees to which the lawyer shall be entitled and should prevail over oral agreements. In this case,
the spouses Cadavedo and Atty. Lacaya agreed that the latter’s contingent attorney’s fee was
₱2,000.00 in cash, not one-half of the subject lot. This agreement was clearly stipulated in the
amended complaint filed in Civil Case No. 1721. Thus, Atty. Lacaya is bound by the expressly
stipulated fee and cannot insist on unilaterally changing its terms without violating their
contract.
The petitioners add that the one-half portion of the subject lot as Atty. Lacaya’s contingent
attorney’s fee is excessive and unreasonable. They highlight the RTC’s observations and
argue that the issues involved in Civil Case No. 1721, pursuant to which the alleged contingent
fee of one-half of the subject lot was agreed by the parties, were not novel and did not involve
difficult questions of law; neither did the case require much of Atty. Lacaya’s time, skill and
effort in research. They point out that the two subsequent civil cases should not be considered
in determining the reasonable contingent fee to which Atty. Lacaya should be entitled for his
services in Civil Case No. 1721,as those cases had not yet been instituted at that time. Thus,
these cases should not be considered in fixing the attorney’s fees. The petitioners also claim
that the spouses Cadavedo concluded separate agreements on the expenses and costs for
each of these subsequent cases, and that Atty. Lacaya did not even record any attorney’s lien
in the spouses Cadavedo’s TCT covering the subject lot.
The petitioners further direct the Court’s attention to the fact that Atty. Lacaya,in taking over the
case from Atty. Bandal, agreed to defray all of the litigation expenses in exchange for one-half
of the subject lot should they win the case. They insist that this agreement is a champertous
contract that is contrary to public policy, prohibited by law for violation of the fiduciary
relationship between a lawyer and a client.
Finally, the petitioners maintain that the compromise agreement in Civil Case No. 215
(ejectment case) did not novate their original stipulated agreement on the attorney’s fees. They
reason that Civil Case No. 215 did not decide the issue of attorney’s fees between the spouses
Cadavedo and Atty. Lacaya for the latter’s services in Civil Case No. 1721.
The Case for the Respondents
In their defense,14 the respondents counter that the attorney’s fee stipulated in the amended
complaint was not the agreed fee of Atty. Lacaya for his legal services. They argue that the
questioned stipulation for attorney’s fees was in the nature of a penalty that, if granted, would
inure to the spouses Cadavedo and not to Atty. Lacaya.
The respondents point out that: (1) both Vicente and Atty. Lacaya caused the survey and
subdivision of the subject lot immediately after the spouses Cadavedo reacquired its
possession with the RTC’s approval of their motion for execution of judgment in Civil Case No.
1721; (2) Vicente expressly ratified and confirmed the agreement on the contingent attorney’s
fee consisting of one-half of the subject lot; (3) the MTC in Civil Case No. 215 (ejectment case)
approved the compromise agreement; (4) Vicente is the legally designated administrator of the
conjugal partnership, hence the compromise agreement ratifying the transfer bound the
partnership and could not have been invalidated by the absence of Benita’s acquiescence; and
(5) the compromise agreement merely inscribed and ratified the earlier oral agreement
between the spouses Cadavedo and Atty. Lacaya which is not contrary to law, morals, good
customs, public order and public policy.
While the case is pending before this Court, Atty. Lacaya died.15 He was substituted by his
wife -Rosa -and their children –Victoriano D.L. Lacaya, Jr., Rosevic Lacaya-Ocampo, Reymar
L. Lacaya, Marcelito L. Lacaya, Raymundito L. Lacaya, Laila Lacaya-Matabalan, Marivic
Lacaya-Barba, Rosalie L. Lacaya and Ma. Vic-Vic Lacaya-Camaongay.16
The Court’s Ruling
We resolve to GRANT the petition.
The subject lot was the core of four successive and overlapping cases prior to the present
controversy. In three of these cases, Atty. Lacaya stood as the spouses Cadavedo’s counsel.
For ease of discussion, we summarize these cases (including the dates and proceedings
pertinent to each) as follows:
Civil Case No. 1721 – Cadavedo v. Ames (Sum of money and/or voiding of contract of sale of
homestead), filed on January 10, 1967. The writ of execution was granted on October 16,
1981.
Civil Case No. 3352 – Ames v. Cadavedo (Quieting of Title and/or Enforcement of Civil Rights
due Planters in Good Faith with Application for Preliminary injunction), filed on September 23,
1981.
Civil Case No. 3443 – Cadavedo v. DBP (Action for Injunction with Preliminary Injunction), filed
on May 21, 1982.
Civil Case No. 215 –Atty. Lacaya v. Vicente Cadavedo, et. al. (Ejectment Case), filed between
the latter part of 1981 and early part of 1982. The parties executed the compromise agreement
on May 13, 1982.
Civil Case No. 4038 –petitioners v. respondents (the present case).
The agreement on attorney’s fee
consisting of one-half of the subject
lot is void; the petitioners are entitled
to recover possession
The core issue for our resolution is whether the attorney’s fee consisting of one-half of the
subject lot is valid and reasonable, and binds the petitioners. We rule in the NEGATIVE for the
reasons discussed below.
A. The written agreement providing for
a contingent fee of ₱2,000.00 should prevail
over the oral agreement providing for one-
half of the subject lot
The spouses Cadavedo and Atty. Lacaya agreed on a contingent fee of ₱2,000.00 and not, as
asserted by the latter, one-half of the subject lot. The stipulation contained in the amended
complaint filed by Atty. Lacaya clearly stated that the spouses Cadavedo hired the former on a
contingency basis; the Spouses Cadavedo undertook to pay their lawyer ₱2,000.00 as
attorney’s fees should the case be decided in their favor.
Contrary to the respondents’ contention, this stipulation is not in the nature of a penalty that the
court would award the winning party, to be paid by the losing party. The stipulation is a
representation to the court concerning the agreement between the spouses Cadavedo and
Atty. Lacaya, on the latter’s compensation for his services in the case; it is not the attorney’s
fees in the nature of damages which the former prays from the court as an incident to the main
action.
At this point, we highlight that as observed by both the RTC and the CA and agreed as well by
both parties, the alleged contingent fee agreement consisting of one-half of the subject lot was
not reduced to writing prior to or, at most, at the start of Atty. Lacaya’s engagement as the
spouses Cadavedo’s counsel in Civil Case No. 1721.An agreement between the lawyer and
his client, providing for the former’s compensation, is subject to the ordinary rules governing
contracts in general. As the rules stand, controversies involving written and oral agreements on
attorney’s fees shall be resolved in favor of the former.17 Hence, the contingency fee of
₱2,000.00 stipulated in the amended complaint prevails over the alleged oral contingency fee
agreement of one-half of the subject lot.
30 | P a g e
B. The contingent fee agreement between
the spouses Cadavedo and Atty. Lacaya,
awarding the latter one-half of the subject
lot, is champertous
Granting arguendo that the spouses Cadavedo and Atty. Lacaya indeed entered into an oral
contingent fee agreement securing to the latter one-half of the subject lot, the agreement is
nevertheless void.
In their account, the respondents insist that Atty. Lacaya agreed to represent the spouses
Cadavedo in Civil Case No. 1721 and assumed the litigation expenses, without providing for
reimbursement, in exchange for a contingency fee consisting of one-half of the subject lot. This
agreement is champertous and is contrary to public policy.18
Champerty, along with maintenance (of which champerty is an aggravated form), is a common
law doctrine that traces its origin to the medieval period.19 The doctrine of maintenance was
directed "against wanton and in officious intermeddling in the disputes of others in which the
intermeddler has no interest whatever, and where the assistance rendered is without
justification or excuse."20 Champerty, on the other hand, is characterized by "the receipt of a
share of the proceeds of the litigation by the intermeddler."21 Some common law court
decisions, however, add a second factor in determining champertous contracts, namely, that
the lawyer must also, "at his own expense maintain, and take all the risks of, the litigation."22
The doctrines of champerty and maintenance were created in response "to medieval practice
of assigning doubtful or fraudulent claims to persons of wealth and influence in the expectation
that such individuals would enjoy greater success in prosecuting those claims in court, in
exchange for which they would receive an entitlement to the spoils of the litigation."23 "In order
to safeguard the administration of justice, instances of champerty and maintenance were made
subject to criminal and tortuous liability and a common law rule was developed, striking down
champertous agreements and contracts of maintenance as being unenforceable on the
grounds of public policy."24
In this jurisdiction, we maintain the rules on champerty, as adopted from American decisions,
for public policy considerations.25 As matters currently stand, any agreement by a lawyer to
"conduct the litigation in his own account, to pay the expenses thereof or to save his client
therefrom and to receive as his fee a portion of the proceeds of the judgment is obnoxious to
the law."26 The rule of the profession that forbids a lawyer from contracting with his client for
part of the thing in litigation in exchange for conducting the case at the lawyer’s expense is
designed to prevent the lawyer from acquiring an interest between him and his client. To permit
these arrangements is to enable the lawyer to "acquire additional stake in the outcome of the
action which might lead him to consider his own recovery rather than that of his client or to
accept a settlement which might take care of his interest in the verdict to the sacrifice of that of
his client in violation of his duty of undivided fidelity to his client’s cause."27
In Bautista v. Atty. Gonzales,28 the Court struck down the contingent fee agreement between
therein respondent Atty. Ramon A. Gonzales and his client for being contrary to public policy.
There, the Court held that an reimbursement of litigation expenses paid by the former is
against public policy, especially if the lawyer has agreed to carry on the action at his expense
in consideration of some bargain to have a part of the thing in dispute. It violates the fiduciary
relationship between the lawyer and his client.29
In addition to its champertous character, the contingent fee arrangement in this case expressly
transgresses the Canons of Professional Ethics and, impliedly, the Code of Professional
Responsibility.30 Under Rule 42 of the Canons of Professional Ethics, a lawyer may not
properly agree with a client that the lawyer shall pay or beat the expense of litigation.31 The
same reasons discussed above underlie this rule.
C. The attorney’s fee consisting of
one-half of the subject lot is excessive
and unconscionable
We likewise strike down the questioned attorney’s fee and declare it void for being excessive
and unconscionable.1âwphi1 The contingent fee of one-half of the subject lot was allegedly
agreed to secure the services of Atty. Lacaya in Civil Case No. 1721.Plainly, it was intended
for only one action as the two other civil cases had not yet been instituted at that time. While
Civil Case No. 1721 took twelve years to be finally resolved, that period of time, as matters
then stood, was not a sufficient reason to justify a large fee in the absence of any showing that
special skills and additional work had been involved. The issue involved in that case, as
observed by the RTC(and with which we agree), was simple and did not require of Atty.
Lacaya extensive skill, effort and research. The issue simply dealt with the prohibition against
the sale of a homestead lot within five years from its acquisition.
That Atty. Lacaya also served as the spouses Cadavedo’s counsel in the two subsequent
cases did not and could not otherwise justify an attorney’s fee of one-half of the subject lot. As
assertedby the petitioners, the spouses Cadavedo and Atty. Lacaya made separate
arrangements for the costs and expenses foreach of these two cases. Thus, the expenses for
the two subsequent cases had been considered and taken cared of Based on these
considerations, we therefore find one-half of the subject lot as attorney’s fee excessive and
unreasonable.
D. Atty. Lacaya’s acquisition of
the one-half portion contravenes
Article 1491 (5) of the Civil Code
Article 1491 (5) of the Civil Code forbids lawyers from acquiring, by purchase or assignment,
the property that has been the subject of litigation in which they have taken part by virtue of
their profession.32 The same proscription is provided under Rule 10 of the Canons of
Professional Ethics.33
A thing is in litigation if there is a contest or litigation over it in court or when it is subject of the
judicial action.34 Following this definition, we find that the subject lot was still in litigation when
Atty. Lacaya acquired the disputed one-half portion. We note in this regard the following
established facts:(1)on September 21, 1981, Atty. Lacaya filed a motion for the issuance of a
writ of execution in Civil Case No. 1721; (2) on September 23, 1981, the spouses Ames filed
Civil Case No. 3352 against the spouses Cadavedo; (3)on October 16, 1981, the RTC granted
the motion filed for the issuance of a writ of execution in Civil Case No. 1721 and the spouses
Cadavedo took possession of the subject lot on October 24, 1981; (4) soon after, the subject
lot was surveyed and subdivided into two equal portions, and Atty. Lacaya took possession of
one of the subdivided portions; and (5) on May 13, 1982, Vicente and Atty. Lacaya executed
the compromise agreement.
From these timelines, whether by virtue of the alleged oral contingent fee agreement or an
agreement subsequently entered into, Atty. Lacaya acquired the disputed one-half portion
(which was after October 24, 1981) while Civil Case No. 3352 and the motion for the issuance
of a writ of execution in Civil Case No. 1721were already pending before the lower courts.
Similarly, the compromise agreement, including the subsequent judicial approval, was effected
during the pendency of Civil Case No. 3352. In all of these, the relationship of a lawyer and a
client still existed between Atty. Lacaya and the spouses Cadavedo.
Thus, whether we consider these transactions –the transfer of the disputed one-half portion
and the compromise agreement –independently of each other or resulting from one another,
we find them to be prohibited and void35 by reason of public policy.36 Under Article 1409 of
the Civil Code, contracts which are contrary to public policy and those expressly prohibited or
declared void by law are considered in existent and void from the beginning.37
The allotted portion of the subject lot properly recognizes that litigation should be for the benefit
of the client, not the lawyer, particularly in a legal situation when the law itself holds clear and
express protection to the rights of the client to the disputed property (a homestead lot).
Premium consideration, in other words, is on the rights of the owner, not on the lawyer who
only helped the owner protect his rights. Matters cannot be the other way around; otherwise,
the lawyer does indeed effectively acquire a property right over the disputed property. If at all,
due recognition of parity between a lawyer and a client should be on the fruits of the disputed
property, which in this case, the Court properly accords.

What did not escape this Court’s attention is the CA’s failure to note that the transfer violated
the provisions of Article 1491(5) of the Civil Code, although it recognized the concurrence of
the transfer and the execution of the compromise agreement with the pendency of the two civil
cases subsequent to Civil Case No. 1721.38 In reversing the RTC ruling, the CA gave weight
to the compromise agreement and in so doing, found justification in the unproved oral
contingent fee agreement.
While contingent fee agreements are indeed recognized in this jurisdiction as a valid exception
to the prohibitions under Article 1491(5) of the Civil Code,39 contrary to the CA’s position,
however, this recognition does not apply to the present case. A contingent fee contract is an
agreement in writing where the fee, often a fixed percentage of what may be recovered in the
action, is made to depend upon the success of the litigation.40 The payment of the contingent
fee is not made during the pendency of the litigation involving the client’s property but only
after the judgment has been rendered in the case handled by the lawyer.41
WHEREFORE, in view of these considerations, we hereby GRANT the petition. We AFFIRM
the decision dated September 17, 1996 and the resolution dated December 27, 1996of the
Regional Trial Court of Dipolog City, Branch 10,in Civil Case No. 4038, with the
MODIFICATION that the respondents, the spouses Victorino (Vic) T. Lacaya and Rosa
Legados, are entitled to two (2) hectares (or approximately one-tenth [1/10] of the subject lot)
as attorney’s fees. The fruits that the respondents previously received from the disputed one-
half portion shall also form part of the attorney’s fees. We hereby ORDER the respondents to
return to the petitioners the remainder of the 10.5383-hectare portion of the subject lot that
Atty. Vicente Lacaya acquired pursuant to the compromise agreement.
SO ORDERED.

In the present case, we reiterate that the transfer or assignment of the disputed one-half
portion to Atty. Lacaya took place while the subject lot was still under litigation and the lawyer-
client relationship still existed between him and the spouses Cadavedo. Thus, the general
prohibition provided under Article 1491 of the Civil Code, rather than the exception provided in
jurisprudence, applies. The CA seriously erred in upholding the compromise agreement on the
basis of the unproved oral contingent fee agreement.

Notably, Atty. Lacaya, in undertaking the spouses Cadavedo’s cause pursuant to the terms of
the alleged oral contingent fee agreement, in effect, became a co-proprietor having an equal, if
not more, stake as the spouses Cadavedo. Again, this is void by reason of public policy; it
undermines the fiduciary relationship between him and his clients.42

E.The compromise agreement could not

validate the void oral contingent fee
agreement; neither did it supersede the
written contingent fee agreement

The compromise agreement entered into between Vicente and Atty. Lacaya in Civil Case No.
215 (ejectment case) was intended to ratify and confirm Atty. Lacaya’s acquisition and
possession of the disputed one-half portion which were made in violation of Article 1491 (5) of
the Civil Code. As earlier discussed, such acquisition is void; the compromise agreement,
which had for its object a void transaction, should be void.

A contract whose cause, object or purpose is contrary to law, morals, good customs, public
order or public policy is in existent and void from the beginning.43 It can never be ratified44 nor
the action or defense for the declaration of the in existence of the contract prescribe;45 and
any contract directly resulting from such illegal contract is likewise void and in existent.46

Consequently, the compromise agreement did not supersede the written contingent fee
agreement providing for attorney’s fee of ₱2,000.00; neither did it preclude the petitioners from
questioning its validity even though Vicente might have knowingly and voluntarily acquiesced
thereto and although the MTC approved it in its June 10, 1982 decision in the ejectment case.
The MTC could not have acquired jurisdiction over the subject matter of the void compromise
agreement; its judgment in the ejectment case could not have attained finality and can thus be
attacked at any time. Moreover, an ejectment case concerns itself only with the issue of
possession de facto; it will not preclude the filing of a separate action for recovery of
possession founded on ownership. Hence, contrary to the CA’s position, the petitioners–in
filing the present action and praying for, among others, the recovery of possession of the
disputed one-half portion and for judicial determination of the reasonable fees due Atty. Lacaya
for his services –were not barred by the compromise agreement.

Atty. Lacaya is entitled to receive attorney’s fees on a quantum meruit basis

In view of their respective assertions and defenses, the parties, in effect, impliedly set aside
any express stipulation on the attorney’s fees, and the petitioners, by express contention,
submit the reasonableness of such fees to the court’s discretion. We thus have to fix the
attorney’s fees on a quantum meruit basis.

"Quantum meruit—meaning ‘as much as he deserves’—is used as basis for determining a

lawyer’s professional fees in the absence of a contract x x x taking into account certain factors
in fixing the amount of legal fees."47 "Its essential requisite is the acceptance of the benefits by
one sought to be charged for the services rendered under circumstances as reasonably to
notify him that the lawyer performing the task was expecting to be paid compensation"48 for it.
The doctrine of quantum meruit is a device to prevent undue enrichment based on the
equitable postulate that it is unjust for a person to retain benefit without paying for it.49

Under Section 24, Rule 138 of the Rules of Court50 and Canon 20 of the Code of Professional
Responsibility,51 factors such as the importance of the subject matter of the controversy, the
time spent and the extent of the services rendered, the customary charges for similar services,
the amount involved in the controversy and the benefits resulting to the client from the service,
to name a few, are considered in determining the reasonableness of the fees to which a lawyer
is entitled.

In the present case, the following considerations guide this Court in considering and setting
Atty. Lacaya’s fees based on quantum meruit: (1) the questions involved in these civil cases
were not novel and did not require of Atty. Lacaya considerable effort in terms of time, skill or
the performance of extensive research; (2) Atty. Lacaya rendered legal services for the
Spouses Cadavedo in three civil cases beginning in 1969 until 1988 when the petitioners filed
the instant case; (3) the first of these civil cases (Cadavedo v. Ames) lasted for twelve years
and reaching up to this Court; the second (Ames v. Cadavedo) lasted for seven years; and the
third (Cadavedo and Lacaya v. DBP) lasted for six years, reaching up to the CA; and (4) the
property subject of these civil cases is of a considerable size of 230,765 square meters or
23.0765 hectares.

All things considered, we hold as fair and equitable the RTC’s considerations in appreciating
the character of the services that Atty. Lacaya rendered in the three cases, subject to
modification on valuation. We believe and so hold that the respondents are entitled to two (2)
hectares (or approximately one-tenth [1/10] of the subject lot), with the fruits previously
received from the disputed one-half portion, as attorney’s fees. They shall return to the
petitioners the remainder of the disputed one-half portion.

31 | P a g e
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-27394 October 13, 1967

ARMANDO V. AMPIL, petitioner,

vs.
THE HONORABLE JUDGE CORAZON JULIANO-AGRAVA, ANTONIO M. PEREZ and
BENIGNO PEREZ Y TUAZON, respondents.

Leonardo Abola for respondent.

No apperance for the petioner.

RESOLUTION

DIZON, J.:

In his petition for certiorari filed on March 31, 1967, petitioner prayed for the issuance of a writ
of preliminary injunction temporarily restraining the respondents from enforcing and/or
executing the order marked as Annex D attached thereto, at any time during the pendency of
the present case. We granted the petition for the issuance of the writ aforesaid upon the filing
of a P1,000.00 bond.

We have now before Us a motion filed by respondent Antonio M. Perez praying that said writ
be lifted as against him and that petitioner be ordered to deliver to him the properties covered
by Transfer Certificates of Title Nos. 24927 and 24928 of the City of Manila, said properties
having been already awarded to him by virtue of a compromise agreement entered into
between the parties in G. R. No. L-19711 and approved by Us on November 17, 1966.

Our resolution of August 30, 1967 required petitioner to comment, within five days from notice,
on the aforesaid motion, but the record shows that up to this time no such comment has been
submitted by him.

It being a fact that the compromise agreement mentioned heretofore was approved by Us; that
by virtue thereof the properties covered by Transfer Certificates of Title Nos. 24927 and 24928
of the City of Manila were awarded to respondent Antonio M. Perez, and that said certificates
of title are presently in the possession of petitioner, petitioner is hereby ordered to deliver said
certificates of title to respondent Antonio M. Perez, upon the filing and approval of a bond in
the sum of P25,000.00 answerable for whatever damages may be suffered by him (petitioner)
in connection with his claim for attorney's fees against his former client, Angela Tuason de
Perez, by reason of the lifting of the writ of preliminary injunction mentioned heretofore.

Reyes, J.B.L., Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.
Concepcion, C.J. and Bengzon, J.P., J., are on official leave, took no part.

32 | P a g e
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-26137 September 23, 1968
EUGENIO V. VILLANUEVA, JR., petitioner,
vs.
HON. Jose R. QUERUBIN, in his capacity as Judge of the Court of First Instance of Negros
Occidental, ELVIRA GUANZON and MIGUEL MATTI, respondents.
Jose W. Diokno and Eugenio Villanueva & Associates for petitioner.
Judge Jose R. Querubin for and in his own behalf.
Soto & Banzon for private respondents.
FERNANDO, J.:
Petitioner Eugenio V. Villanueva, Jr., a member of the Philippine Bar, prays for the issuance of
the writ of certiorari to annul the order of respondent judge of June 1, 1966, requiring him "to
surrender the documents and papers" which allegedly had lawfully come to his possession in
his professional capacity as counsel of Elvira Guanzon and Miguel Matti in Civil Case No. 7725
of the Court of First Instance of Negros Occidental, pending before respondent Judge. It turned
out that petitioner was dismissed, while the trial of the above-entitled case was still in progress
and before petitioner's attorney's fees were fixed and paid. He would likewise have this Court
annul the order of the respondent Judge, dated June 3, 1966, declaring petitioner in contempt
of Court and ordering his arrest for having failed to surrender the aforementioned documents
and papers. Prohibition is likewise sought to restrain respondent Judge from enforcing its
aforementioned orders of June 1, 1966 and June 3, 1966. There is equally a plea for
mandamus to compel respondents to recognize petitioner's retaining lien over such documents
and papers.1 As will hereafter be made more explicit, the question presented possesses an
element of novelty.
His former clients, Elvira Guanzon and Miguel Matti, were made respondents in addition to the
Honorable Jose R. Querubin, Judge of the Court of First Instance of Negros Occidental.
The statement of facts, as set forth in the petition, revealed that respondents Elvira Guanzon
and Miguel Matti, Board Members of Negros Occidental, engaged the professional services of
petitioner for the purpose of filing an action against the Provincial Governor, Vice-Governor,
Treasurer, Auditor and Secretary to the Provincial Board of Negros Occidental. On November
4, 1965, petitioner filed an action for injunction, recovery of a sum of money and damages with
preliminary injunction, Civil Case No. 7725 of the Court of First Instance of Negros Occidental,
against such provincial officials. On the same day, the hearing on the preliminary injunction
was held, the writ being granted. 2
Thereafter, several hearings took place, petitioner asserting that "he gave all his time, effort
and utmost ability to protect the interest of his clients." In his preparation of the case, petitioner
was able to acquire documents and papers which were subsequently presented and marked
as exhibits during the trial thereof. On March 19, 1966, however, respondents Elvira Guanzon
and Miguel Matti requested petitioner to allow them to have the expediente of Civil Case No.
7725 under the pretext that they would study the records to prepare them for a conference. At
the resumption of the trial of Civil Case No. 7725 on April 14, 1966, petitioner was surprised
when in open court, his clients, respondents Guanzon and Matti, "manifested before the
respondent Judge that they were already terminating the services of petitioner. In the course of
their manifestation, said respondents read their letters, addressed to petitioner, advising the
latter of the termination of his professional services." 3
On May 10, 1966, petitioner filed with the respondent Judge, a pleading opposing his dismissal
as counsel. On June 1, 1966, "without resolving the above opposition and motion, respondent
Judge issued an order requiring petitioner to 'deposit with the Clerk of Court all the documents
presented by him and marked as exhibits during the hearing conducted by him, so that same
will be presented as exhibits before closing the evidence of the plaintiffs,' . . . ." 4
The petition goes on to state: "Immediately upon receipt of this order on the same day, June 1,
1966, petitioner filed a manifestation and motion informing the respondent Judge that 'all said
documents are in Manila where they were brought because they were the subject of
conference with Atty. Jose W. Diokno recently and therefore the same could not be delivered
to the Clerk of Court, because it is humanly impossible to do so,' and moving 'that the said ...
order issued in the absence of [petitioner] be held in abeyance to give [him] the time, the
means and the opportunity to go to Manila.' ...; Respondent Judge, however, orally denied on
the same day petitioner's manifestation and motion and forthwith ordered the latter's
incarceration in the provincial jail of Negros Occidental. After repeated but respectful
entreaties, and after raising the point that he has a charging lien over the documents which is
dependent upon his possession of said documents, petitioner was allowed to go free but with a
warning if within eighteen [18] hours, should fail to surrender the documents, a warrant for his
arrest would be issued. On the same day, petitioner flew to Manila to get the documents.
However, on June 2, 1966, petitioner received a long distance call from his office informing him
that the respondent Judge had declared him in contempt of Court and issued a warrant for his
arrest for his failure to surrender the documents. . . . ." 5
It is the allegation of petitioner that he "has no appeal or adequate remedy in the ordinary
course of law to protect not only his rights and honor but, what is more important, the decorum
and respectability of the legal profession, from the arbitrary and unreasoning actuations and
orders of the respondent Judge, save this petition." 6 It is petitioner's contention further that
"the documents and papers which respondent Judge requires petitioner to surrender had
lawfully come to [his] possession in the course of his employment by his clients, the
respondents Elvira Guanzon and Matti. In gathering these documents which he successfully
utilized as evidence in Civil Case No. 7725, petitioner — bound by his loyalty and relationship
of trust to his clients — had to spend considerable time, effort and money. When, therefore,
respondents Guanzon and Matti terminated petitioner's services without paying his lawful
attorney's fees, petitioner acquired the right — and the respondents, particularly respondent
Judge, are bound to recognize this right — to retain all these documents and papers until his
fees are paid. [Respondent Judge in] issuing orders requiring petitioner to surrender the said
documents . . . and declaring him in contempt of court, and issuing a warrant for his arrest
because of his failure to do so, . . . has acted without jurisdiction and in manifest violation of
law and jurisprudence. Petitioner respectfully submits, therefore, that the writs therein prayed
for lie and should issue." 7
On the 8th day of June, 1966, this Court adopted a resolution giving due course to the above
petition for certiorari, prohibition and mandamus. A restraining order effective immediately up
to and includiing June 24, 1966, the hearing being set for June 22, 1966, forms part of the
aforesaid resolution.
33 | P a g e
Respondent Judge himself filed an answer the pertinent portion of which contained the
following: "That this certiorari case stemmed from orders of the undersigned dated June 1,
June 3 and June 6, 1966, in connection with Civil Case 7725, Guanzon, et al. vs. Gomez, et
al., for injunction. Atty. Eugenio Villanueva., Jr., filed said case on behalf of Board Member
Elvira Guanzon and Miguel Matti to stop Governor Benjamin M. Gomez, Treasurer Juan D.
Taala and Provincial Auditor Tereso Bomediano from disbursing funds of the government for
electioneering purposes. A writ of preliminary injunction was issued. The case was set for
hearing on the merits. Before the presentation of the plaintiffs' evidence, the plaintiffs wanted
Attys. Alfredo Soto and Francisco G. Banzon, to handle the presentation of evidence but after
a huddle among the plaintiffs' lawyers, the Court granted Atty. Villanueva to present the
plaintiffs' first witness inasmuch as he personally examined the documentary evidence. When
he was about to present his second witness, Atty. Elvira Guanzon submitted a written notice
dispensing with the services of Atty. Villanueva. Due to the fact that he was still acting as
counsel for plaintiff Matti, he was allowed to proceed with the presentation of his second
witness. In the afternoon session, Atty. Villanueva received a written notice of his dismissal as
counsel for plaintiff Matti. The Court allowed Attys. Soto & Banzon to take over the
presentation of evidence. Upon petition, Atty. Villanueva, Jr. was allowed to continue his
appearance as amicus curiae. After the testimony of the second witness, Attys. Soto and
Banzon asked that the exhibits be deposited with the Clerk of Court. Atty. Villanueva prayed
that he be given custody of the exhibits, consisting of public documents, which the Court
granted, with the understanding that said exhibits be made available when needed by the
Court. The hearing was continued for another date. Atty. Villanueva did not appear. The Court
set three days successively for the next hearing of the case with the view to terminate it as
expeditiously as possible. When the plaintiffs finished the presentation of their oral evidence,
Attys. Soto & Banzon asked that Atty. Villanueva, Jr. be ordered to bring to Court the exhibits
under his custody for formal presentation of said documentary evidence. Hence the
controversial orders were issued;. . . ." 8
It was likewise explained by respondent Judge that petitioner was given up to the afternoon of
June 1, 1966 to produce the exhibits under his custody. After manifesting that such exhibits
were in the possession of Senator Diokno, petitioners were given forty-eight hours to produce
the same. It was by virtue of his failure either to appear on the next day as well as in the
morning session of June 3, 1966 that respondent Judge issued the order for the arrest of
petitioner. 9
It was further stressed in the answer of respondent Judge that the ruling in Rustia vs. Abeto,
"has absolutely no application in this present case at bar." It stands as authority for "the right of
attorney's retaining lien over the documents and moneys turned over by a client to his
counsel." Here, "the documents consist of public records, which were brought to Court in virtue
of a subpoena duces tecum. The said documents were marked as Exhibits and Atty.
Villanueva was given permission to have under his custody the said exhibits with the
understanding that same should be made available in case the Court orders their production
thereof." His defiance of the court orders to produce such exhibits amounted to contempt. 10
Respondent Judge would rely on his power to discipline and punish erring practitioners. 11 For
him, the dismissal of the petition is called for.
Respondent Judge prays for the dismissal of this petition. His plea must be granted. No
certiorari lies as the orders complained of were not issued without or in excess of jurisdiction or
with grave abuse of discretion. The enforcement thereof cannot be restrained by prohibition.
Neither is petitioner entitled to mandamus to compel respondent Judge to recognize his
alleged retaining lien over the disputed documents and papers.
As admitted in the petition, the documents and papers in question were introduced as exhibits;
moreover, as set forth in the answer of respondent Judge, they consist of public documents.
There is no occasion, therefore, for the privilege of a retaining lien granted an attorney to be
availed of. It would be to extend its scope beyond unwarranted limits to make it applicable to
the kind of documents and papers of such character. Moreover, it would be to curtail unduly
the inherent power of a judicial tribunal in the conduct of the proceedings before it if it is to be
held bereft of power to compel the surrender of such documents. Such an undesirable
eventuality this Court cannot willingly allow to pass.
Rustia v. Abeto, 12 a 1941 decision, is relied upon by petitioner. Such a reliance is misplaced.
It does not aid its cause at all, as correctly stated by respondent Judge. That was a petition for
certiorari and mandamus to declare null and void certain orders of respondent Judge in an
intestate case before him as well as to compel the return to the petitioner of a transfer
certificate of title and to recognize his retaining lien over certain "documents, papers, funds and
properties of the deceased" in such intestate proceeding. Petitioner, likewise a member of the
Philippine Bar, rendered professional services as counsel for the administratrix. After being
relieved of his services as attorney, he presented a bill for professional services, the claim
being submitted for resolution of respondent Judge. He sought not only the immediate
payment of his honorarium but likewise a retaining lien over all funds, documents and papers
in his possession until he was fully paid. His plea was rejected. Instead, the respondent court
required petitioner to deliver the certificate of title in question to the probate clerk of court of the
Court of First Instance of Manila. Petitioner complied but three days thereafter instituted this
proceeding for certiorari and mandamus.1awphîl.nèt
In the decision of the Court granting the writ prayed for, the opinion being penned by Justice
Laurel, it was stressed: "That the petitioner rendered professional services in behalf of the
respondent administratrix and other heirs of the deceased, Antonio de la Riva, is not disputed.
We are not concerned with the disagreement between the petitioner and the respondent
administratrix as to the value of the said professional services, nor with the alleged preferential
right of the petitioner to the payment of his fees, as they are not at issue in the instant
proceedings. Suffice it to state here that the petitioner has already interposed an appeal from
the orders of December 3, 1940, and January 3, 1941, which orders, among other things,
reduced the professional fees claimed by the petitioner from P32,330 to P2,000. Moreover,
such dispute does not, and cannot, affect the general or retaining lien conceded to the
petitioner by the first sentence of section 33 of No. 127 of the Rules of Court, which provides
that 'An attorney shall have a lien upon the funds, documents and papers of his client which
have lawfully come into his possession, and may retain the same until his lawful fees and
disbursements have been paid, and may apply such funds to the satisfaction thereof.' The
general, possessory, or retaining lien of an attorney attaches to all property, papers, books,
documents, or securities of the client that come to the attorney professionally or in the course
of his professional employment, such as a bond, a municipal warrant, a promissory note or
other negotiable papers, an account, a voucher, a bank book, a letter or writing, a contract,
insurance policy, or lease, a deed, or a mortgage." 13
Later, the opinion likewise stated: "We are aware of the inconvenience that may accrue to the
client because of the retention of important papers by an attorney claiming fees for services
rendered, but this is the reason and essence of the lien. Withal, the courts may require the
attorney to deliver up the papers in his possession which may serve to embarrass his client,
provided the client files proper security for the attorney's compensation. This proceeds from
the power of the courts to control its own officers and to compel attorneys to act equitably and
fairly towards their clients." 14
It is thus obvious that even if the most expansive interpretation be accorded the rather
generous recognition of an attorney's retaining lien, the situation presented by this controversy
falls outside its operation. What must be stressed anew is that if petitioner were to be indulged
in his refusal to abide by the lawful orders of respondent Judge, the proper and due respect to
which a court of justice is by right entitled would be diminished. That cannot be permitted.

The disputed documents and papers were public in character. Moreover, they were introduced
as exhibits. They were properly subject to the court's custody. The intransigence of the
petitioner in his persistence to continue in possession of the same based on his erroneous
belief as to the extent of the privilege of a retaining lien, to impart a semblance of legality to his
defiance, must not be, as earlier noted, accorded the imprimatur of the approval of this
Tribunal. If such were not the law, the resulting injury to a fair and efficient administration of
justice might well prove to be incalculable. Against such a deplorable consequence this Court
must resolutely set its face.

The record is bereft of the slightest indication that in acting as he did, respondent Judge laid
himself open to any accusation of failing to follow the dictates of the law. There is no occasion
then for the supervisory authority of this Tribunal to come into play. The orders of respondent
Judge complained of can stand the test of the most vigorous scrutiny.

WHEREFORE, this petition for certiorari, prohibition and mandamus is dismissed. With costs
against petitioner.

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