A.C. No.
5359               March 10, 2014 had not remitted the full payment of the filing fee, he should have found a way to
ERMELINDA LAD VOA. DE DOMINGUEZ, represented by her Attorney-in-Fact,
VICENTE A. PICHON,Complainant,  file the complaint. Atty. Agleron obviously lacked professionalism in dealing with
vs.
ATTY. ARNULFO M. AGLERON, SR., Respondent.
Complainant Ermelinda Lad Vda. De Dominguez (complainant) was the widow of the
late Felipe Domiguez who died in a vehicular accident in Caraga, Davao Oriental, on
October 18, 1995, involving a dump truck owned by the Municipality of Caraga.
Aggrieved, complainant decided to file charges against the Municipality of Caraga
and engaged the services of respondent Atty. Arnulfo M. Agleron, Sr. (Atty. Agleron).
On three (3) occasions, Atty. Agleron requested and received from complainant the
following amounts for the payment of filing fees and sheriffs fees, to wit: (1) June 3,
1996 -₱3,000.00; (2) June 7, 1996 -Pl,800.00; and September 2, 1996 - ₱5,250.00 or
a total of ₱10,050.00. After the lapse of four (4) years, however, no complaint was
filed by Atty. Agleron against the Municipality of Caraga.1
Atty. Agleron admitted that complainant engaged his professional service and
received the amount of ₱10,050.00. He, however, explained that their agreement was
that complainant would pay the filing fees and other incidental expenses and as soon
as the complaint was prepared and ready for filing, complainant would pay 30% of the
agreed attorney’s fees of ₱100,000.00. On June 7, 1996, after the signing of the
complaint, he advised complainant to pay in full the amount of the filing fee and
sheriff’s fees and the 30% of the attorney’s fee, but complainant failed to do so. Atty.
Agleron averred that since the complaint could not be filed in court, the amount of
₱10,050.00 was deposited in a bank while awaiting the payment of the balance of the
filing fee and attorney’s fee.2
In reply,3 complainant denied that she did not give the full payment of the filing fee
and asserted that the filing fee at that time amounted only to ₱7,836.60.
In the Report and Recommendation,4 dated January 12, 2012, the Investigating
Commissioner found Atty. Agleron to have violated the Code of Professional
Responsibility when he neglected a legal matter entrusted to him, and recommended
that he be suspended from the practice of law for a period of four (4) months.
In its April 16, 2013 Resolution,5 the Integrated Bar of the Philippines (IBP) Board of
Governors adopted and approved the report and recommendation of the Investigating
Commissioner with modification that Atty. Agleron be suspended from the practice of
law for a period of only one (1) month.
The Court agrees with the recommendation of the IBP Board of Governors except as
to the penalty imposed.
Atty. Agleron violated Rule 18.03 of the Code of Professional Responsibility, which
provides that:
Rule 18.03-A lawyer shall not neglect a legal matter entrusted to him, and his
negligence in connection therewith shall render him liable.
Once a lawyer takes up the cause of his client, he is duty bound to serve his client
with competence, and to attend to his client’s cause with diligence, care and devotion
regardless of whether he accepts it for a fee or for free. 6 He owes fidelity to such
cause and must always be mindful of the trust and confidence reposed on him.7
In the present case, Atty. Agleron admitted his failure to file the complaint against the
Municipality of Caraga, Davao Oriental, despite the fact that it was already prepared
and signed. He attributed his non-filing of the appropriate charges on the failure of
complainant to remit the full payment of the filing fee and pay the 30% of the
attorney's fee. Such justification, however, is not a valid excuse that would exonerate
him from liability. As stated, every case that is entrusted to a lawyer deserves his full
attention whether he accepts this for a fee or free. Even assuming that complainant
speak to his client and inform him about the insufficiency of the filing fee so he could
complainant and showed incompetence when he failed to file the appropriate
charges.1âwphi1
In a number of cases,8 the Court held that a lawyer should never neglect a legal
matter entrusted to him, otherwise his negligence renders him liable for disciplinary
action such as suspension ranging from three months to two years. In this case, the
Court finds the suspension of Atty. Agleron from the practice of law for a period of
three (3) months sufficient.
WHEREFORE, the resolution of the IBP Board of Governors is hereby AFFIRMED
with MODIFICATION. Accordingly, respondent ATTY. ARNULFO M. AGLERON, SR.
is hereby SUSPENDED from the practice of law for a period of THREE (3) MONTHS,
with a stern warning that a repetition of the same or similar wrongdoing will be dealt
with more severely.
Let a copy of this resolution be furnished the Bar Confidant to be included in the
records of the respondent; the Integrated Bar of the Philippines for distribution to all
its chapters; and the Office of the Court Administrator for dissemination to all courts
throughout the country.
SO ORDERED.
A.C. No. 9091
Baltazar v Banes
SERENO, C.J.:
Complainants are the owners of three parcels of land located in Dinalupihan, Bataan.
[1]
 On 4 September 2002, they entered into an agreement with Gerry R. Fevidal
(Fevidal), a subdivision developer. In that agreement, they stood to be paid
P35,000,000 for all the lots that would be sold in the subdivision. [2] For that purpose,
they executed a Special Power of Attorney authorizing Fevidal to enter into all
agreements concerning the parcels of land and to sign those agreements on their
behalf.[3]
Fevidal did not update complainants about the status of the subdivision project and
failed to account for the titles to the subdivided land. [4] Complainants also found that
he had sold a number of parcels to third parties, but that he did not turn the proceeds
over to them. Neither were complainants invited to the ceremonial opening of the
subdivision project.[5] Thus, on 23 August 2005, they revoked the Special Power of
Attorney they had previously executed in his favor. [6]
Complainants subsequently agreed to settle with Fevidal for the amount of
P10,000,000, but the latter again failed to pay them. [7]Complainants engaged the
professional services of respondent for the purpose of assisting them in the
preparation of a settlement agreement.[8] Instead of drafting a written settlement,
respondent encouraged them to institute actions against Fevidal in order to recover
their properties.
Complainants then signed a contract of legal services, [9] in which it was agreed that
they would not pay acceptance and appearance fees to respondent, but that the
docket fees would instead be shared by the parties. Under the contract, complainants
would pay respondent 50% of whatever would be recovered of the properties.
In preparation for the filing of an action against Fevidal, respondent prepared and
notarized an Affidavit of Adverse Claim, seeking to annotate the claim of
complainants to at least 195 titles in the possession of Fevidal. [10] A certain
Luzviminda Andrade (Andrade) was tasked to submit the Affidavit of Adverse Claim to
the Register of Deeds of Bataan.[11] The costs for the annotation of the adverse claim
were paid by respondent. Unknown to him, the adverse claim was held in abeyance,
because Fevidal got wind of it and convinced complainants to agree to another
settlement.[12]
Meanwhile, on behalf of complainants, and after sending Fevidal a demand letter
dated 10 July 2006, respondent filed a complaint for annulment, cancellation and
revalidation of titles, and damages against Fevidal before the Regional Trial Court
(RTC) of Bataan on 13 October 2006. [13]
Complainants found it hard to wait for the outcome of the action. Thus, they
terminated the services of respondent on 8 June 2007, withdrew their complaint
against Fevidal on 9 June 2007, and finalized their amicable settlement with him on 5
July 2007.[14]
Respondent filed a Manifestation and Opposition[15] dated 20 July 2007 before the
RTC, alleging that the termination of his services and withdrawal of the complaint had
been done with the intent of defrauding counsel. On the same date, he filed a Motion
for Recording of Attorney's Charging Lien in the Records of the Above-Captioned
Cases.[16] When the RTC granted the withdrawal of the complaint,[17] he filed a
Manifestation and Motion for Reconsideration.[18]
After an exchange of pleadings between respondent and Fevidal, with the latter
denying the former's allegation of collusion,[19]complainants sought the
suspension/disbarment of respondent through a Complaint[20] filed before the
Integrated Bar of the Philippines (IBP) on 14 November 2007. Complainants alleged
that they were uneducated and underprivileged, and could not taste the fruits of their
properties because the disposition thereof was "now clothed with legal problems"
brought about by respondent.[21] In their complaint, they alleged that respondent had
violated Canons 1.01,[22] 1.03,[23] 1.04,[24] 12.02,[25] 15.05,[26] 18.04,[27] and 20.04[28] of
the Code of Professional Responsibility.
On 14 August 2008, the IBP Commission on Bar Discipline adopted and approved the
Report and Recommendation[29] of the investigating commissioner. It suspended
respondent from the practice of law for a period of one year for entering into a
champertous agreement.[30] On 26 June 2011, it denied his motion for
reconsideration.
On 26 November 2012, this Court noted the Indorsement of the IBP Commission on
Bar Discipline, as well as respondent's second motion for reconsideration.
We find that respondent did not violate any of the canons cited by complainants. In
fact, we have reason to believe that complainants only filed the instant complaint
against him at the prodding of Fevidal.
Respondent cannot be faulted for advising complainants to file an action against
Fevidal to recover their properties, instead of agreeing to a settlement of P10,000,000
a measly amount compared to that in the original agreement, under which Fevidal
undertook to pay complainants the amount of P35,000,000. Lawyers have a sworn
duty and responsibility to protect the interest of any prospective client and pursue the
ends of justice.[31] Any lawyer worth his salt would advise complainants against the
abuses of Fevidal under the circumstances, and we cannot countenance an
administrative complaint against a lawyer only because he performed a duty imposed
on him by his oath.
The claim of complainants that they were not informed of the status of the case is
more appropriately laid at their door rather than at that of respondent. He was never
informed that they had held in abeyance the filing of the adverse claim. Neither was
he informed of the brewing amicable settlement between complainants and Fevidal.
We also find it very hard to believe that while complainants received various amounts
as loans from respondent from August 2006 to June 2007,[32] they could not spare
even a few minutes to ask about the status of the case. We shall discuss this more
below.
As regards the claim that respondent refused to "patch up" with Fevidal despite the
pleas of complainants, we note the latter's Sinumpaang Salaysay dated 24
September 2007, in which they admitted that they could not convince Fevidal to meet
with respondent to agree to a settlement.[33]
Finally, complainants apparently refer to the motion of respondent for the recording of
his attorney's charging lien as the "legal problem" preventing them from enjoying the
fruits of their property.
Section 26, Rule 138 of the Rules of Court allows an attorney to intervene in a case to
protect his rights concerning the payment of his compensation. According to the
discretion of the court, the attorney shall have a lien upon all judgments for the
payment of money rendered in a case in which his services have been retained by
the client.
We recently upheld the right of counsel to intervene in proceedings for the recording
of their charging lien. In Malvar v. KFPI,[34] we granted counsel's motion to intervene in
the case after petitioner therein terminated his services without justifiable cause.
Furthermore, after finding that petitioner and respondent had colluded in order to
deprive counsel of his fees, we ordered the parties to jointly and severally pay
counsel the stipulated contingent fees.
Thus, the determination of whether respondent is entitled to the charging lien is based
on the discretion of the court before which the lien is presented. The compensation of
lawyers for professional services rendered is subject to the supervision of the court,
not only to guarantee that the fees they charge remain reasonable and
commensurate with the services they have actually rendered, but to maintain the
dignity and integrity of the legal profession as well.[35] In any case, an attorney is
entitled to be paid reasonable compensation for his services.[36] That he had pursued
its payment in the appropriate venue does not make him liable for disciplinary action.
Notwithstanding the foregoing, respondent is not without fault. Indeed, we find that
the contract for legal services he has executed with complainants is in the nature of a
champertous contract an agreement whereby an attorney undertakes to pay the
expenses of the proceedings to enforce the client's rights in exchange for some
bargain to have a part of the thing in dispute.[37] Such contracts are contrary to public
policy[38] and are thus void or inexistent.[39] They are also contrary to Canon 16.04 of
the Code of Professional Responsibility, which states that lawyers shall not lend
money to a client, except when in the interest of justice, they have to advance
necessary expenses in a legal matter they are handling for the client.
A reading of the contract for legal services[40] shows that respondent agreed to pay for
at least half of the expense for the docket fees. He also paid for the whole amount
needed for the recording of complainants' adverse claim.
While lawyers may advance the necessary expenses in a legal matter they are
handling in order to safeguard their client's rights, it is imperative that the advances
be subject to reimbursement.[41] The purpose is to avoid a situation in which a lawyer
acquires a personal stake in the client's cause. Regrettably, nowhere in the contract
for legal services is it stated that the expenses of litigation advanced by respondent
shall be subject to reimbursement by complainants.
In addition, respondent gave various amounts as cash advances (bali), gasoline and
transportation allowance to them for the duration of their attorney-client relationship.
In fact, he admits that the cash advances were in the nature of personal loans that he
extended to complainants.[42]
Clearly, respondent lost sight of his responsibility as a lawyer in balancing the client's
interests with the ethical standards of his profession. Considering the surrounding
circumstances in this case, an admonition shall suffice to remind him that however
dire the needs of the clients, a lawyer must always avoid any appearance of
impropriety to preserve the integrity of the profession.
WHEREFORE, Attorney Juan B. Bañez, Jr. is hereby ADMONISHED for advancing
the litigation expenses in a legal matter he handled for a client without providing for
terms of reimbursement and lending money to his client, in violation of Canon 16.04
of the Code of Professional Responsibility. He is sternly warned that a repetition of
the same or a similar act would be dealt with more severely.
Let a copy of this Resolution be attached to the personal record of Attorney Bañez, Jr.
SO ORDERED.
G.R. No. 191641
EDMUNDO NAVAREZ, Petitioner,  On November 21, 2008, the motion was submitted for resolution without oral
vs.
ATTY. MANUEL ABROGAR III, Respondent.
This is a petition for certiorari under Rule 65 1 of the Rules of Court, filed from the
October 16, 2009 Decision and the March 12, 2010 Resolution of the Court of
Appeals (CA) in CA-G.R. SP No. 108675.2 The CA dismissed the petition for certiorari
that the present petitioner filed against the January 21, 2009 Order of the Regional
Trial Court (RTC).
ANTECEDENTS
On July 30, 2007, petitioner Edmundo Navarez engaged the services of Abrogar
Valerio Maderazo and Associates Law Offices (the Firm) through the respondent,
Atty. Manuel Abrogar III. The Firm was to represent Navarez in Sp. Proc. No. Q-05-
59112 entitled "Apolonia Quesada, Jr. v. Edmundo Navarez" as collaborating counsel
of Atty. Perfecto Laguio. The case involved the settlement of the estate of Avelina
Quesada-Navarez that was then pending before the Regional Trial Court (RTC),
Branch 83, Quezon City. The pertinent portions of the Retainer Agreement read:
Our services as collaborating counsel will cover investigation, research and
representation with local banks, concerns regarding deposits (current and savings)
and investment instruments evidenced by certificate of deposits. Our office may also
initiate appropriate civil and/or criminal actions as well as administrative remedies
needed to adjudicate the Estate of Avelina Quesada-Navarez expeditiously,
peacefully and lawfully.
Effective Date: June 2007
Acceptance Fee: P100,000.00 in an installment basis
Success Fee: 2% of the total money value of your share as co-owner and heir of the
Estate (payable proportionately upon your receipt of any amount) Appearance Fee:
P2,500.00 per Court hearing or administrative meetings and/or other meetings.
Filing of Motions and/or pleadings at our initiative shall be for your account and you
will be billed accordingly.
OUT-OF-POCKET EXPENSES: Ordinary out-of-pocket expenses such as telex,
facsimile, word processing, machine reproduction, and transportation expenses, as
well as per diems and accommodations expenses incurred in undertaking work for
you outside Metro Manila area and other special out-of-pocket expenses as you may
authorized [sic] us to incur (which shall always be cleared with you in advance) shall
be for your account. Xxxx
On September 2, 2008, Navarez filed a Manifestation with the RTC that he was
terminating the services of Atty. Abrogar. On the same day, Navarez also caused the
delivery to Atty. Abrogar of a check in the amount of P220,107.51 – allegedly
equivalent to one half of 7.5% of petitioner’s P11,200,000.00 share in the estate of his
deceased wife less Atty. Abrogar’s cash advances.
On September 9, 2008, Atty. Abrogar manifested that with respect to the petitioner’s
one-half (½) share in the conjugal partnership, the RTC had already resolved the
matter favorably because it had issued a release order for the petitioner to withdraw
the amount. Atty. Abrogar further declared that the Firm was withdrawing as counsel
effective upon the appointment of an Administrator of the estate from the remaining
proceedings for the settlement of the estate of Avelina Quesada-Navarez.
On September 22, 2008, the petitioner wrote to Atty. Abrogar offering to pay his
attorney’s fees in accordance with their Retainer Agreement minus the latter’s cash
advances – an offer that Atty. Abrogar had previously refused in August 2008.
On October 7, 2008, Atty. Abrogar filed a Motion to Enter into the Records his
attorney’s lien pursuant to Rule 138, Section 37 of the Rules of Court.
arguments.
On January 21, 2009, the RTC issued an order granting the motion and directed the
petitioner to pay Atty. Abrogar’s attorney’s fees. The Order reads:
WHEREFORE, premises considered, it is hereby ordered:
1. That the attorney’s lien of Manuel Abrogar III conformably with the
Retainer Agreement dated July 30, 2007, be entered into the records of this
case in consonance with Section 37, Rule 138 of the Rules of Court;
2. That oppositor Edmundo Navarez pay the amount of 7.5% of
P11,196,675.05 to Manuel Abrogar III;
3. That the oppositor pay the administrative costs/expenses of P103,000.00
to the movant; and
4. That the prayers for P100,000.00 as exemplary damages, P200,000.00 as
moral damages and for writ of preliminary attachment be denied.
SO ORDERED.
On February 18, 2009, the petitioner filed a Motion for Reconsideration.
On March 17, 2009, the RTC denied the motion for reconsideration and issued a Writ
of Execution of its Order dated January 21, 2009.
The petitioner elevated the case to the CA via a petition for certiorari. He argued that
the RTC committed grave abuse of discretion because: (1) the RTC granted Atty.
Abrogar’s claim for attorney’s fees despite non-payment of docket fees; (2) the RTC
denied him the opportunity of a full-blown trial to contradict Atty. Abrogar’s claims and
prove advance payments; and (3) the RTC issued a writ of execution even before the
lapse of the reglementary period.
In its decision dated October 16, 2009, the CA dismissed the petition and held that
the RTC did not commit grave abuse of discretion.
The petitioner moved for reconsideration which the CA denied in a Resolution dated
March 12, 2010.
On April 6, 2010, and April 26, 2010, the petitioner filed his first and second motions
for extension of time to file his petition for review. This Court granted both motions for
extension totaling thirty (30) days (or until May 5, 2010) in the Resolution dated July
26, 2010.
On May 5, 2010, the petitioner filed the present petition entitled "Petition for Review."
However, the contents of the petition show that it is a petition for certiorari under Rule
65 of the Rules of Court.3
THE PETITION
The petitioner argues that the CA gravely erred in dismissing his petition for certiorari
that challenged the RTC ruling ordering the payment of attorney’s fees. He maintains
his argument that the RTC committed grave abuse of discretion because: (1) it
granted Atty. Abrogar’s claim for attorney’s fees despite lack of jurisdiction due to
non-payment of docket fees; (2) it granted the claim for attorney’s fees without
requiring a fullblown trial and without considering his advance payments; and (3) it
issued the writ of execution before the lapse of the reglementary period. The
petitioner also points out that the CA nullified the RTC’s release order in CA-G.R. SP
No. 108734.
In his Comment dated September 8, 2010, Atty. Abrogar adopted the CA’s position in
its October 16, 2009 Decision.
OUR RULING
We observe that the petitioner used the wrong remedy to challenge the CA’s decision
and resolution. The petitioner filed a petition for certiorari under Rule 65, not a petition
for review on certiorari under Rule 45. A special civil action for certiorari is a remedy
of last resort, available only to raise jurisdictional issues when there is no appeal or
any other plain, speedy, and adequate remedy under the law.
Nonetheless, in the spirit of liberality that pervades the Rules of Court4 and in the
interest of substantial justice,5 this Court has, on appropriate occasions, treated a
petition for certiorari as a petition for review on certiorari, particularly when: (1) the
petition for certiorari was filed within the reglementary period to file a petition for
review on certiorari;6(2) the petition avers errors of judgment;7 and (3) when there is
sufficient reason to justify the relaxation of the rules. 8 Considering that the present
petition was filed within the extension period granted by this Court and avers errors of
law and judgment, this Court deems it proper to treat the present petition for certiorari
as a petition for review on certiorari in order to serve the higher ends of justice.
With the procedural issue out of the way, the remaining issue is whether or not the
CA erred when it held that the RTC acted within its jurisdiction and did not commit
grave abuse of discretion when it ordered the payment of attorney’s fees.
We find merit in the petition.
An attorney has a right to be paid a fair and reasonable compensation for the services
he has rendered to a client. As a security for his fees, Rule 138, Section 37 of the
Rules of Court grants an attorney an equitable right to a charging lien over money
judgments he has secured in litigation for his client. For the lien to be enforceable, the
attorney must have caused: (1) a statement of his claim to be entered in the record of
the case while the court has jurisdiction over the case and before the full satisfaction
of the judgment;9 and (2) a written notice of his claim to be delivered to his client and
to the adverse party.
However, the filing of the statement of the claim does not, by itself, legally determine
the amount of the claim when the client disputes the amount or claims that the
amount has been paid.10 In these cases, both the attorney and the client have a right
to be heard and to present evidence in support of their claims. 11 The proper
procedure for the court is to ascertain the proper amount of the lien in a full dress trial
before it orders the registration of the charging lien. 12 The necessity of a hearing is
obvious and beyond dispute.13
In the present case, the RTC ordered the registration of Atty. Abrogar’s lien without a
hearing even though the client contested the amount of the lien. The petitioner had
the right to be heard and to present evidence on the true amount of the charging lien.
The RTC acted with grave abuse of discretion because it denied the petitioner his
right to be heard, i.e., the right to due process.
The registration of the lien should also be distinguished from the enforcement of the
lien. Registration merely determines the birth of the lien. 14 The enforcement of the
lien, on the other hand, can only take place once a final money judgment has been
secured in favor of the client. The enforcement of the lien is a claim for attorney’s fees
that may be prosecuted in the very action where the attorney rendered his services or
in a separate action.
However, a motion for the enforcement of the lien is in the nature of an action
commenced by a lawyer against his clients for attorney’s fees. 15As in every action for
a sum of money, the attorney-movant must first pay the prescribed docket fees before
the trial court can acquire jurisdiction to order the payment of attorney’s fees.
In this case, Atty. Abrogar only moved for the registration of his lien. He did not pay
any docket fees because he had not yet asked the RTC to enforce his lien. However,
the RTC enforced the lien and ordered the petitioner to pay Atty. Abrogar’s attorney’s
fees and administrative expenses.
Under this situation, the RTC had not yet acquired jurisdiction to enforce the charging
lien because the docket fees had not been paid. The payment of docket fees is
mandatory in all actions, whether separate or an offshoot of a pending proceeding. In
Lacson v. Reyes,16 this Court granted certiorari and annulled the decision of the trial
court granting a "motion for attorney’s fees" because the attorney did not pay the
docket fees. Docket fees must be paid before a court can lawfully act on a case and
grant relief. Therefore, the RTC acted without or in excess of its jurisdiction when it
ordered the payment of the attorney’s fees.
Lastly, the enforcement of a charging lien can only take place after a final money
judgment has been rendered in favor of the client.17 The lien only attaches to the
money judgment due to the client and is contingent on the final determination of the
main case. Until the money judgment has become final and executory, enforcement
of the lien is premature.
The RTC again abused its discretion in this respect because it prematurely enforced
the lien and issued a writ of execution even before the main case became final; no
money judgment was as yet due to the client to which the lien could have attached
itself. Execution was improper because the enforceability of the lien is contingent on a
final and executory award of money to the client. This Court notes that in CA-G.R. SP
No. 108734, the CA nullified the "award" to which the RTC attached the attorney’s
lien as there was nothing due to the petitioner. Thus, enforcement of the lien was
premature.
The RTC’s issuance of a writ of execution before the lapse of the reglementary period
to appeal from its order is likewise premature.1âwphi1 The Order of the RTC dated
January 21, 2009, is an order that finally disposes of the issue on the amount of
attorney’s fees Atty. Abrogar is entitled to. The execution of a final order issues as a
matter of right upon the expiration of the reglementary period if no appeal has been
perfected.18 Under Rule 39, Section 2 of the Rules of Court, discretionary execution
can only be made before the expiration of the reglementary period upon a motion of
the prevailing party with notice to the adverse party. Discretionary execution may only
issue upon good reasons to be stated in a special order after due hearing.19
The RTC ordered execution without satisfying the requisites that would have justified
discretionary execution. Atty. Abrogar had not moved for execution and there were no
good reasons to justify the immediate execution of the RTC's order. Clearly, the RTC
gravely abused its discretion when it ordered the execution of its order dated January
21, 2009, before the lapse of the reglementary period.
For these reasons, this Court finds that the CA erred when it held that the RTC did
not commit grave abuse of discretion and acted without jurisdiction.
As our last word, this decision should not be construed as imposing unnecessary
burden on the lawyer in collecting his just fees. But, as in the exercise of any other
right conferred by law, the lawyer - and the courts - must avail of the proper legal
remedies and observe the procedural rules to prevent the possibility, or even just the
perception, of abuse or prejudice.20
WHEREFORE, premises considered, we hereby GRANT the petition. The decision of
the Court of Appeals in CA-G.R. SP No. 108675 dated October 16, 2009, is hereby
REVERSED, and the decision of the Regional Trial Court, Branch 83, Quezon City in
Sp. Proc. No. Q-05-59112 is hereby ANNULLED and SET ASIDE.
SO ORDERED.
G.R. No. 185544               January 13, 2015
THE LAW FIRM OF LAGUESMA MAGSALIN CONSULTA AND
GASTARDO, Petitioner,  the Government Corporate Counsel approves the retainership contract with finality.19
vs.
THE COMMISSION ON AUDIT and/or REYNALDO A. VILLAR and JUANITO G.
ESPINO, JR. in their capacities as Chairman and Commissioner,
respectively, Respondents.
When a government entity engages the legal services of private counsel, it must do
so with the necessary authorization required by law; otherwise, its officials bind
themselves to be personally liable for compensating private counsel’s services.
This is a petition1 for certiorari filed pursuant to Rule XI, Section 1 of the 1997
Revised Rules of Procedure of the Commission on Audit. The petition seeks to annul
the decision2 dated September 27, 2007 and resolution 3 dated November 5, 2008 of
the Commission on Audit, which disallowed the payment of retainer fees to the law
firm of Laguesma Magsalin Consulta and Gastardo for legal services rendered to
Clark Development Corporation.4
Sometime in 2001, officers of Clark Development Corporation, 5 a government-owned
and controlled corporation, approached the law firm of Laguesma Magsalin Consulta
and Gastardo for its possible assistance in handling the corporation’s labor cases.6
Clark Development Corporation, through its legal officers and after the law firm’s
acquiescence, "sought from the Office of the Government Corporate Counsel
[‘OGCC’] its approval for the engagement of [Laguesma Magsalin Consulta and
Gastardo] as external counsel."7
On December 4, 2001, the Office of the Government Corporate Counsel denied the
request.8 Clark Development Corporation then filed a request for reconsideration.9
On May 20, 2002, the Office of the Government Corporate Counsel, through
Government Corporate Counsel Amado D. Valdez (Government Corporate Counsel
Valdez), reconsidered the request and approved the engagement of Laguesma
Magsalin Consulta and Gastardo.10 It also furnished Clark Development Corporation a
copy of a pro-forma retainership contract11 containing the suggested terms and
conditions of the retainership.12 It instructed Clark Development Corporation to submit
a copy of the contract to the Office of the Government Corporate Counsel after all the
parties concerned have signed it.13
In the meantime, Laguesma Magsalin Consulta and Gastardo commenced rendering
legal services to Clark Development Corporation. At this point, Clark Development
Corporation had yet to secure the authorization and clearance from the Office of the
Government Corporate Counsel or the concurrence of the Commission on Audit of
the retainership contract. According to the law firm, Clark Development Corporation’s
officers assured the law firm that it was in the process of securing the approval of the
Commission on Audit.14
On June 28, 2002, Clark Development Corporation, through its Board of Directors,
approved Laguesma Magsalin Consulta and Gastardo’s engagement as private
counsel.15 In 2003, it also approved the assignment of additional labor cases to the
law firm.16
On July 13, 2005, Clark Development Corporation requested the Commission on
Audit for concurrence of the retainership contract it executed with Laguesma
Magsalin Consulta and Gastardo.17 According to the law firm, it was only at this
pointwhen Clark Development Corporation informed them that the Commission on
Audit required the clearance and approval of the Office of the Government Corporate
Counsel before it could approve the release of Clark Development Corporation’s
funds to settle the legal fees due to the law firm.18
On August 5, 2005, State Auditor IVElvira G. Punzalan informed Clark Development
Corporation that itsrequest for clearance could not be acted upon until the Office of
On August 10, 2005, Clark Development Corporation sent a letterrequest to the Office
of the Government Corporate Counsel for the final approval of the retainership
contract, in compliance with the Commission on Audit’s requirements.20
On December 22, 2005, GovernmentCorporate Counsel Agnes VST Devanadera
(Government Corporate Counsel Devanadera) denied Clark Development
Corporation’s request for approval on the ground that the proforma retainership
contract given to them was not "based on the premise that the monthly retainer’s fee
and concomitant charges are reasonable and could pass in audit by COA." 21 She
found that Clark Development Corporation adopted instead the law firm’s proposals
concerning the payment of a retainer’s fee on a per case basis without informing the
Office of the Government Corporate Counsel. She, however, ruled that the law firm
was entitled to payment under the principle of quantum meruitand subject to Clark
Development Corporation Board’s approval and the usual government auditing rules
and regulations.22
On December 27, 2005, Clark Development Corporation relayed Government
Corporate Counsel Devanadera’s letter to the Commission’s Audit Team Leader,
highlighting the portion on the approval of payment to Laguesma Magsalin Consulta
and Gastardo on the basis of quantum meruit.23
On November 9, 2006, the Commission on Audit’s Office of the General Counsel,
Legal and Adjudication Sector issued a "Third Indorsement" 24 denying Clark
Development Corporation’s request for clearance, citing its failure to secure a prior
written concurrence of the Commission on Audit and the approval with finality of the
Office of the Government Corporate Counsel.25 It also stated that its request for
concurrence was made three (3) years after engaging the legal services of the law
firm.26
On December 4, 2006, Laguesma Magsalin Consulta and Gastardo appealed the
"Third Indorsement"to the Commission on Audit. On December 12, 2006, Clark
Development Corporation also filed a motion for reconsideration.27
On September 27, 2007, the Commission on Audit rendered the assailed decision
denying the appeal and motion for reconsideration. It ruled that Clark Development
Corporation violated Commission on Audit Circular No. 98-002 dated June 9, 1998
and Office of the President Memorandum Circular No. 9 dated August 27, 1998
whenit engaged the legal services of Laguesma Magsalin Consulta and Gastardo
without the final approval and written concurrence of the Commission on Audit.28 It
also ruled that it was not the government’s responsibility to pay the legal fees already
incurred by Clark Development Corporation, but rather by the government officials
who violated the regulations on the matter.29
Clark Development Corporation and Laguesma Magsalin Consulta and Gastardo
separately filed motions for reconsideration,30 which the Commission on Audit denied
in the assailed resolution dated November 5, 2008. The resolution also disallowed the
payment of legal fees to the law firm on the basis of quantum meruitsince the
Commission on Audit Circular No. 86-255 mandates that the engagementof private
counsel without prior approval "shall be a personal liability of the officials
concerned."31
Laguesma Magsalin Consulta and Gastardo filed this petition for certiorari on
December 19, 2008.32 Respondents, through the Office of the Solicitor General, filed
their comment33 dated May 7, 2009. The reply34 was filed on September 1, 2009.
The primordial issue to be resolved by this court is whether the Commission on Audit
erred in disallowing the payment of the legal fees to Laguesma Magsalin Consulta
and Gastardo as Clark Development Corporation’s private counsel.
To resolve this issue, however, several procedural and substantive issues must first
be addressed:
Procedural:
1. Whether the petition was filed on time; and
2. Whether petitioner is the real party-in-interest.
Substantive:
1. Whether the Commission on Audit erred in denying Clark Development
Corporation’s requestfor clearance in engaging petitioner as private counsel;
2. Whether the Commission on Audit correctly cited Polloso v. Gangan35 and
PHIVIDEC Industrial Authority v. Capitol Steel Corporation36 in support of its
denial; and
3. Whether the Commission on Audit erred in ruling that petitioner should not
be paid on the basis of quantum meruitand that any payment for its legal
services should be the personal liability of Clark Development Corporation’s
officials.
Petitioner argues that Pollosoand PHIVIDEC are not applicable to the circumstances
at hand because in both cases, the government agency concerned had failed to
secure the approval of both the Office of the Government Corporate Counsel and the
Commission on Audit.37 Petitioner asserts that it was able to secure authorization
from the Office of the Government Corporate Counsel prior to rendering services to
Clark Development Corporation for all but two (2) of the labor cases assigned to it.38 It
argues that the May 20, 2002 letter from Government Corporate Counsel Valdez was
tantamount to a grant of authorization since it granted Clark Development
Corporation’s request for reconsideration.39
In their comment,40 respondents argue that petitioner is not a real party-in-interest to
the case.41 They argue that it is Clark Development Corporation, and not petitioner,
who isa real party-in-interest since the subject of the assailed decision was the denial
of the corporation’s request for clearance.42
Respondents also allege that it was only on July 13, 2005, or three (3) years after the
hiring of petitioner, when Clark Development Corporation requested the Commission
on Audit’s concurrence of the retainership contract between Clark Development
Corporation and petitioner.43 They argue that the retainership contract was not
approved with finality by the Office of the Government Corporate Counsel. 44 Further,
Polloso and PHIVIDE Care applicable to this case since both cases involve the
"indispensability of [the] prior written concurrence of both [the Office of the
Government Corporate Counsel] and the [Commission on Audit] before any
[government-owned and controlled corporation] can hire an external counsel."45
In its reply,46 petitioner argues that it is a real party-in-interest since "it rendered its
services to [Clark Development Corporation], which ultimately redounded to the
benefit of the Republic"47 and that "it deserves to be paid what is its due as a matter of
right."48 Petitioner also reiterates its argument that Polloso and PHIVIDE Care not
applicable to this case since the factual antecedents are not the same.49
The petition is denied.
The petition was filed out of time
Petitioner states that it filed this petition under Rule XI, Section 1 of the 1997 Revised
Rules of Procedure of the Commission on Audit.50 The rule states:
RULE XI
JUDICIAL REVIEW SECTION
1. Petition for Certiorari.— Any decision, order or resolution of the Commission may
be brought to the Supreme Court on certiorari by the aggrieved party within thirty (30)
days from receipt of a copy thereof in the manner provided by law, the Rules of
Court51 and these Rules.
This rule is based on Article IX-A, Section 7 of the Constitution, which states:
Section 7. Each Commission shall decide by a majority vote of all its Members, any
case or matter brought before it within sixty days from the date of its submission for
decision or resolution. A case or matter is deemed submitted for decision or
resolution upon the filing of the last pleading, brief, or memorandum required by the
rules of the Commission or by the Commission itself. Unless otherwise provided by
this Constitution or by law, any decision, order, or ruling of each Commission may be
brought to the Supreme Court on certiorari by the aggrieved party within thirty days
from receipt of a copy thereof. (Emphasis supplied)
Ordinarily, a petition for certiorari under Rule 65 of the Rules of Court has a
reglementary period of 60 days from receipt of denial of the motion for
reconsideration. The Constitution, however, specifies that the reglementary period for
assailing the decisions, orders, or rulings of the constitutional commissions is thirty
(30) days from receipt of the decision, order, or ruling. For this reason, a separate rule
was enacted in the Rules of Court.
Rule 64 of the Rules of Civil Procedure provides the guidelines for filing a petition for
certiorari under this rule. Section 2 of the rule specifies that "[a] judgment or final
order or resolution of the Commission on Elections and the Commission on Audit may
be brought by the aggrieved party to the Supreme Court on certiorari under Rule 65,
except as hereinafter provided."
The phrase, "except as hereinafter provided," specifies that any petition for certiorari
filed under this rule follows the same requisites as those of Rule 65 except for certain
provisions found only in Rule 64. One of these provisions concerns the time given to
file the petition.
Section 3 of Rule 64 of the Rules of Civil Procedure states:
SEC. 3. Time to file petition. — The petition shall be filed within thirty (30) days from
notice of the judgment or final order or resolution sought to be reviewed. The filing of
a motion for new trial or reconsideration of said judgment or final order or resolution, if
allowed under the procedural rules of the Commission concerned, shall interrupt the
period herein fixed. If the motion is denied, the aggrieved party may file the petition
within the remaining period, but which shall not be less than five (5) days in any
event, reckoned from notice of denial.(Emphasis supplied)
Under this rule, a party may file a petition for review on certiorari within 30 days from
notice of the judgment being assailed. The reglementary period includes the time
taken to file the motion for reconsideration and is only interrupted once the motion is
filed. If the motion is denied, the party may filethe petition only within the period
remaining from the notice of judgment.
The difference between Rule 64 and Rule 65 has already been exhaustively
discussed by this court in Pates v. Commission on Elections:52
Rule 64, however, cannot simply be equated to Rule 65 even if it expressly refers to
the latter rule. They exist as separate rules for substantive reasons as discussed
below. Procedurally, the most patent difference between the two – i.e., the exception
that Section 2, Rule 64 refers to – is Section 3 which provides for a special period for
the filing of petitions for certiorari from decisions or rulings of the COMELEC en banc.
The period is 30 days from notice of the decision or ruling (instead of the 60 days that
Rule 65 provides), with the intervening period used for the filing of any motion for
reconsideration deductible from the originally granted 30 days (instead of the fresh
period of 60 days that Rule 65 provides).53 (Emphasis supplied)
In this case, petitioner received the decision of the Commission on Audit on October
16, 2007.54 It filed a motion for reconsideration on November 6, 2007,55 or after 21
days. It received notice of the denial of its motion on November 20, 2008. 56 The
receipt of this notice gave petitioner nine (9) days, or until November 29, 2008, to file
a petition for certiorari. Since November 29, 2008 fell on a Saturday, petitioner could
still have filed on the next working day, or on December 1, 2008. It, however, filed the
petition on December 19, 2008,57 which was well beyond the reglementary period.
This petition could have been dismissed outright for being filed out of time. This court,
however, recognizes that there are certain exceptions that allow a relaxation of the
procedural rules. In Barranco v. Commission on the Settlement of Land Problems:58
The Court is fully aware that procedural rules are not to be belittled or simply
disregarded for these prescribed procedures insure an orderly and speedy
administration of justice. However, it is equally true that litigation is not merely a game
of technicalities. Law and jurisprudence grant to courts the prerogative to relax
compliance with procedural rules of even the most mandatory character, mindful of
the duty to reconcile both the need to put an end to litigation speedily and the parties’
right to an opportunity to be heard.
In Sanchez v. Court of Appeals, the Court restated the reasons which may provide
justification for a court to suspend a strict adherence to procedural rules, such as: (a)
matters of life, liberty, honor or property[,] (b) the existence of special or compelling
circumstances, (c) the merits of the case, (d) a cause not entirely attributable to the
fault or negligence of the party favored by the suspension of the rules, (e) a lack of
any showing that the review sought is merely frivolous and dilatory, and (f) the other
party will not be unjustly prejudiced thereby.59 (Emphasis supplied)
Considering that the issues in thiscase involve the right of petitioner to receive due
compensation on the one hand and respondents’ duty to prevent the unauthorized
disbursement of public funds on the other, a relaxation of the technical rules is in
order.
Petitioner is a real party-in-interest
Respondents argue that it is Clark Development Corporation, and not petitioner,
which is the real party-in-interest since the subject of the assailed decision and
resolution was the corporation’s request for clearance to pay petitioner its legal fees.
Respondents argue that any interest petitioner may have in the case is merely
incidental.60This is erroneous.
Petitioner is a real party-in-interest, as defined in Rule 3, Section 2 of the 1997 Rules
of Civil Procedure:
SEC. 2. Parties in interest.— A real party in interest is the party who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the avails of
the suit. Unless otherwise authorized by law or these Rules, every action must be
prosecuted or defended in the name of the real party in interest.
Petitioner does not have a "mere incidental interest," 61 and its interest is not "merely
consequential."62 Respondents mistakenly narrow down the issue to whether they
erred in denying Clark Development Corporation’s request for clearance of the
retainership contract.63 In doing so, they argue that the interested parties are limited
only to Clark Development Corporation and respondents.64
The issue at hand, however, relates to the assailed decision and resolution of
respondents, which disallowed the disbursement of public funds for the payment of
legal fees to petitioner. Respondents admit that legal services were performed by
petitioner for which payment of legal fees are due. The question that they resolved
was which among the parties, the government, or the officials of Clark Development
Corporation were liable.
The net effect of upholding or setting aside the assailed Commission on Audit rulings
would be to either disallow or allow the payment of legal fees to petitioner. Petitioner,
therefore, stands to either be benefited or injured by the suit, or entitled to its avails. It
is a real party-in-interest. Clark Development Corporation’s Board of Directors, on the
other hand, should have been impleaded inthis case as a necessary party.
A necessary party is defined as "onewho is not indispensable but who ought to be
joined as a party if complete relief is to be accorded as to those already parties, or for
a complete determination or settlement of the claim subject of the action."65
The actions of the Board of Directors precipitated the issues in this case. If the
petition is granted, then the officers are relieved of liability to petitioner. If the rulings
of respondents are upheld, then it is the Board of Directors that will be liable to
petitioner. Any relief in this case would be incomplete without joining the members of
the Board of Directors.
The Commission on Audit did not
commit grave abuse of discretion in
denying the corporation’s request
for clearance to engage the services
of petitioner as private counsel
Book IV, Title III, Chapter 3, Section 10 of the Administrative Code of 1987 provides:
Section. 10. Office of the Government Corporate Counsel. - The Office of the
Government Corporate Counsel (OGCC) shall act as the principal law office of all
government-owned or controlled corporations, their subsidiaries, other corporate off-
springs and government acquired asset corporations and shall exercise control and
supervision over all legal departments or divisions maintained separately and such
powers and functions as are now or may hereafter be provided by law. In the exercise
of such control and supervision, the Government Corporate Counsel shall promulgate
rules and regulations toeffectively implement the objectives of this Office. (Emphasis
supplied)
The Office of the Government Corporate Counsel is mandated by law to provide legal
services to government-owned and controlled corporations such as Clark
Development Corporation.
As a general rule, government-owned and controlled corporations are not allowed to
engage the legal services of private counsels. However, both respondent and the
Office of the President have made issuances that had the effect of providing certain
exceptions to the general rule, thus: Book IV, Title III, Chapter 3, Section 10 of
Executive Order No. 292, otherwise known as the Administrative Code of 1987,
provides that the Office of the Government Corporate Counsel (OGCC) shall act as
the principal law office of all GOCCs, their subsidiaries, other corporate off-springs,
and government acquired asset corporations. Administrative Order No. 130, issued
by the Office of the President on 19 May 1994, delineating the functions and
responsibilities of the OSG and the OGCC, clarifies that all legal matters pertaining to
GOCCs, their subsidiaries, other corporate off[-]springs, and government acquired
asset corporations shall be exclusively referred to and handled by the OGCC, unless
their respective charters expressly name the OSG as their legal counsel.
Nonetheless, the GOCC may hire the services of a private counsel in exceptional
cases with the written conformity and acquiescence of the Government Corporate
Counsel, and with the concurrence of the Commission on Audit (COA).66 (Emphasis
supplied)
The rules and regulations concerning the engagement of private counsel by
government-owned and controlled corporations is currently provided for by
Commission on Audit Circular No. 86-25567 dated April 2, 1986, and Office of the
President Memorandum Circular No. 9 dated August 27, 1998.
Commission on Audit Circular No. 86-255, dated April 2, 1986, as amended, states:
Accordingly and pursuant to this Commission's exclusive authority to promulgate
accounting and auditing rules and regulations, including for the prevention and
disallowance of irregular, unnecessary, excessive, extravagant and/or
unconscionable expenditure or uses of public funds and property (Sec. 2-2, Art. IX-D,
Constitutional, public funds shall not be utilized for payment of the services of a
private legal counsel or law firm to represent government agencies and
instrumentalities, including government-owned or controlled corporations and local
government units in court or to render legal services for them. In the event that such
legal services cannot be avoided or isjustified under extraordinary or exceptional
circumstances for government agencies and instrumentalities, including government-
owned or controlled corporations, the written conformity and acquiescence of the
Solicitor General or the Government Corporate Counsel, as the case maybe, and the
written concurrence of the Commission on Audit shall first be secured before the
hiring or employment of a private lawyer or law firm.(Emphasis supplied)
The Office of the President Memorandum Circular No. 9, on the other hand, states:
SECTION 1.All legal matters pertainingto government-owned or controlled
corporations, their subsidiaries, other corporate offsprings and government acquired
asset corporations (GOCCs) shall be exclusively referred to and handled by the
Office of the Government Corporate Counsel (OGCC).
GOCCs are thereby enjoined from referring their cases and legal matters to the Office
of the Solicitor General unless their respective charters expressly name the Office of
the Solicitor General as their legal counsel.
However, under exceptional circumstances, the OSG may represent the GOCC
concerned, Provided: This is authorized by the President; or by the head of the office
concerned and approved by the President.
SECTION 2. All pending cases of GOCCs being handled by the OSG, and all pending
requests for opinions and contract reviews which have been referred by saidGOCCs
to the OSG, may be retained and acted upon by the OSG; but the latter shall inform
the OGCC of the said pending cases, requests for opinions and contract reviews, if
any, to ensure proper monitoring and coordination.
SECTION 3. GOCCs are likewise enjoined to refrain from hiring private lawyers or
law firms to handle their cases and legal matters. But in exceptional cases, the written
conformity and acquiescence of the Solicitor General or the Government Corporate
Counsel, as the case may be, and the written concurrence of the Commission on
Audit shall first be secured before the hiring or employment of a private lawyer or law
firm. (Emphasis supplied)
According to these rules and regulations, the general rule is that government-owned
and controlled corporations must refer all their legal matters to the Office of the
Government Corporate Counsel. It is only in "extraordinary or exceptional
circumstances" or "exceptional cases" that it is allowed to engage the services of
private counsels.
Petitioner claims that it was hired by Clark Development Corporation due to
"numerous labor cases which need urgent attention[.]"68 In its request for
reconsideration to the Office of the Government Corporate Counsel, Clark
Development Corporation claims that it was obtaining the services of petitioner
"acting through Atty. Ariston Vicente R. Quirolgico, known expert in the field of labor
law and relations."69
The labor cases petitioner handled were not of a complicated or peculiar nature that
could justify the hiring of a known expert in the field. On the contrary, these appear to
be standard labor cases of illegal dismissal and collective bargaining agreement
negotiations,70 which Clark Development Corporation’s lawyers or the Office of the
Government Corporate Counsel could have handled.
Commission on Audit Circular No. 86-255 dated April 2, 1986 and Office of the
President Memorandum Circular No. 9 also require that "before the hiring or
employment"of private counsel, the "written conformity and acquiescence of the
[Government Corporate Counsel] and the written concurrence of the Commissionon
Audit shall first be secured. . . ."
In this case, Clark Development Corporation had failed to secure the final approval of
the Office of the Government Corporate Counsel and the written concurrence of
respondent before it engaged the services of petitioner.
When Government Corporate Counsel Valdez granted Clark Development
Corporation’s request for reconsideration, the approval was merely conditional and
subject to its submission of the signed pro-forma retainership contract provided for by
the Office of the Government Corporate Counsel. In the letter dated May 20, 2002,
Government Corporate Counsel Valdez added:
For the better protection of the interests of CDC, we hereby furnish you with a Pro-
Forma Retainership Agreement containing the suggested terms and conditions of the
retainership, which you may adopt for this purpose.
After the subject Retainership Agreement shall have been executed between your
corporation and the retained counsel, please submit a copy thereof to our Office for
our information and file.71
Upon Clark Development Corporation’s failure to submit the retainership contract, the
Office of the Government Corporate Counsel denied Clark Development
Corporation’s request for final approval of its legal services contracts, including that of
petitioner. In the letter72 dated December 22, 2005, Government Corporate Counsel
Devanadera informed Clark Development Corporation that:
[i]t appears, though, that our Pro-Forma Retainership Agreement was not followed
and CDC merely adopted the proposal of aforesaid retainers/consultants. Also, this
Office was never informed that CDC agreed on payment of retainer’s fee on a per
case basis.73
In view of Clark Development Corporation’s failure to secure the final conformity and
acquiescence of the Office of the Government Corporate Counsel, its retainership
contract with petitioner could not have been considered as authorized.
The concurrence of respondents was also not secured by Clark Development
Corporation priorto hiring petitioner’s services. The corporation only wrote a letter-
request to respondents three (3) years after it had engaged the services of petitioner
as private legal counsel.
The cases that the private counsel was asked to manage are not beyond the range of
reasonable competence expected from the Office of the Government Corporate
Counsel. Certainly, the issues do not appear to be complex or of substantial national
interest to merit additional counsel. Even so, there was no showing that the delays in
the approval also were due to circumstances not attributable to petitioner nor was
there a clear showing that there was unreasonable delay in any action of the
approving authorities. Rather, it appears that the procurement of the proper
authorizations was mere afterthought.
Respondents, therefore, correctly denied Clark Development Corporation’s request
for clearance in the disbursement of funds to pay petitioner its standing legal fees.
Polloso v. Ganganand PHIVIDEC
Industrial Authority v. Capitol Steel
Corporationapply in this case
Petitioner argues that Polloso does not apply since the denial was based on the
"absence of a written authority from the OSG or OGCC[.]"74 It also argues that the
PHIVIDEC case does not apply since "the case [was] represented by a private lawyer
whose engagement was secured without the conformity of the OGCC andthe
COA."75 Petitioner argues that, unlike these cases, Clark Development Corporation
was able to obtain the written conformity of the Office of the Government Corporate
Counsel to engage petitioner’s services.
In Polloso, the legal services of Atty. Benemerito A. Satorre were engaged by the
National Power Corporation for its Leyte-Cebu and Leyte Luzon Interconnection
Projects.76 The Commission on Audit disallowed the payment of services to Atty.
Satore on the basis of quantum meruit, citing Commission on Audit Circular No. 86-
255 dated April 2, 1986.77 In upholding the disallowance by the Commission on Audit,
this court ruled:
It bears repeating that the purpose of the circular is to curtail the unauthorized and
unnecessary disbursement of public funds to private lawyers for services rendered to
the government. This is in line with the Commission on Audit’s constitutional mandate
to promulgate accounting and auditing rules and regulations including those for the
prevention and disallowance of irregular, unnecessary, excessive, extravagant or
unconscionable expenditures or uses of government fundsand properties. Having
determined the intent of the law, this Court has the imperative duty to give it effect
even if the policy goes beyond the letter or words of the statute.
Hence, as the hiring of Atty. Satorre was clearly done without the prior conformity and
acquiescence of the Office of the Solicitor General or the Government Corporate
Counsel, as well as the written concurrence of the Commission on Audit, the payment
of fees to Atty. Satorre was correctly disallowed in audit by the COA.78
In PHIVIDEC, this court found the engagement by PHIVIDEC Industrial Authority, a
government-owned and controlled corporation, of Atty. Cesilo Adaza’s legal services
to be unauthorized for the corporation’s failure to secure the written conformity of the
Office of the Government Corporate Counsel and the Commission on Audit.79Citing
the provisions of Office of the President Memorandum Circular No. 9, this court ruled
that:
[i]t was only with the enactment of Memorandum Circular No. 9 in 1998 that an
exception to the general prohibition was allowed for the first time since P.D. No. 1415
was enacted in 1978. However, indispensable conditions precedent were imposed
before any hiring of private lawyer could be effected. First, private counsel can be
hired only in exceptional cases. Second, the GOCC must first secure the written
conformity and acquiescence of the Solicitor General or the Government Corporate
Counsel, as the case may be, before any hiring can be done. And third, the written
concurrence of the COA must also be secured prior to the hiring. 80 (Emphasis
supplied)
The same ruling was likewise reiterated in Vargas v. Ignes, 81 wherein this court
stated:
Under Section 10, Chapter 3, Title III, Book IV of the Administrative Code of1987, it is
the OGCC which shall act as the principal law office of all GOCCs. And Section 3 of
Memorandum Circular No. 9, issued by President Estrada on August 27, 1998,
enjoins GOCCs to refrain from hiring private lawyers or law firms to handle their
cases and legal matters. But the same Section 3 provides that in exceptional cases,
the written conformity and acquiescence of the Solicitor General or the Government
Corporate Counsel, as the case may be, and the written concurrence of the COA
shall first be secured before the hiring or employment of a private lawyer or law firm.
In Phividec Industrial Authority v. Capitol Steel Corporation, we listed three (3)
indispensable conditions before a GOCC can hirea private lawyer: (1) private counsel
can only be hired in exceptional cases; (2) the GOCC must first secure the written
conformity and acquiescence of the Solicitor General or the Government Corporate
Counsel, as the case may be; and (3) the written concurrence of the COA must also
be secured.82 (Emphasis supplied) On the basis of Pollosoand PHIVIDEC, petitioner’s
arguments are unmeritorious.
Petitioner fails to understand that Commission on Audit Circular No. 86-255 requires
not only the conformity and acquiescence of the Office of the Solicitor General or
Office of the Government Corporate Counsel but also the written conformity of the
Commission on Audit. The hiring of private counsel becomes unauthorized if it is only
the Office of the Government Corporate Counsel that gives its conformity. The rules
and jurisprudence expressly require that the government-owned and controlled
corporation concerned must also secure the concurrence of respondents.
It is also erroneous for petitioner to assume that it had the conformity and
acquiescence of the Office of the Government Corporate Counsel since Government
Corporate Counsel Valdez’s approval of Clark Development Corporation’s request
was merely conditional on its submission of the retainership contract. Clark
Development Corporation’s failure to submit the retainership contract resulted in
itsfailure to securea final approval.
The Commission on Audit did not
commit grave abuse of discretion in
disallowing the payment to
petitioner on the basis of quantum
meruit
When Government Corporate Counsel Devanadera denied Clark Development
Corporation’s request for final approval of its legal services contracts, she, however,
allowed the payment to petitioner for legal services already rendered on a quantum
meruitbasis.83
Respondents disallowed Clark Development Corporation from paying petitioner on
this basis as the contract between them was executed "in clear violation of the
provisions of COA Circular No. 86-255 and OP Memorandum Circular No. 9[.]" 84 It
then ruled that the retainership contract between them should be deemed a private
contract for which the officials of Clark Development Corporation should be liable,
citing Section 10385 of Presidential Decree No. 1445, otherwise known as the
Government Auditing Code of the Philippines.86
In National Power Corporation v. Heirs of Macabangkit Sangkay, quantum meruit:87
— literally meaning as much as he deserves — is used as basis for determining an
attorney’s professional fees in the absence of an express agreement. The recovery
ofattorney’s fees on the basis of quantum meruitis a device that prevents an
unscrupulous client from running away with the fruits of the legal services of counsel
without paying for it and also avoids unjust enrichment on the part of the attorney
himself. An attorney must show that he is entitled to reasonable compensation for the
effort in pursuing the client’s cause, taking into account certain factors in fixing the
amount of legal fees.88
Here, the Board of Directors, acting on behalf of Clark Development Corporation,
contracted the services of petitioner, without the necessary prior approvals required
by the rules and regulations for the hiring of private counsel. Their actions were
clearly unauthorized.
It was, thus, erroneous for Government Corporate Counsel Devanadera to bind Clark
Development Corporation, a government entity, to pay petitioner on a quantum meruit
basis for legal services, which were neither approved nor authorized by the
government. Even granting that petitioner ought to be paid for services rendered, it
should not be the government’s liability, but that of the officials who engaged the
services of petitioner without the required authorization. The amendment of
Commission on
Audit Circular No. 86-255 by
Commission on Audit Circular No.
98-002 created a gap in the law
Commission on Audit Circular No. 86-255 dated April 2, 1986 previously stated that:
[a]ccordingly, it is hereby directed that, henceforth, the payment out of public funds of
retainer fees to private law practitioners who are so hired or employed without the
prior written conformity and acquiescence of the Solicitor General or the Government
Corporate Counsel, as the case may be, as well as the written concurrence of the
Commission on Audit shall be disallowed in audit and the same shall be a personal
liability of the officials concerned. (Emphasis supplied) However, when Commission
on Audit Circular No. 86-255 was amended by Commission on Audit Circular No. 98-
002 on June 9, 1998, it failed to retain the liability of the officials who violated the
circular.89 This gap in the law paves the way for both the erring officials of the
government owned and controlled corporations to disclaim any responsibility for the
liabilities owing to private practitioners.
It cannot be denied that petitioner rendered legal services to Clark Development
Corporation.1âwphi1 It assisted the corporation in litigating numerous labor
cases90 during the period of its engagement. It would be an injustice for petitioner not
to be compensated for services rendered even if the engagement was unauthorized.
The fulfillment of the requirements of the rules and regulations was Clark
Development Corporation’s responsibility, not petitioner’s. The Board of Directors, by
its irresponsible actions, unjustly procured for themselves petitioner’s legal services
without compensation.
To fill the gap created by the amendment of Commission on Audit Circular No. 86-
255, respondents correctly held that the officials of Clark, Development Corporation
who violated the provisions of Circular No. 98-002 and Circular No. 9 should be
personally liable to pay the legal fees of petitioner, as previously provided for in
Circular No. 86-255.
This finds support in Section 103 of the Government Auditing Code of the
Philippines,91 which states:
SEC. 103. General liability for unlawful expenditures. -Expenditures of government
funds or uses of government property in violation of law or regulations shall be a
personal liability of the official or employee found to be directly responsible therefor.
This court has also previously held in Gumaru v. Quirino State College92 that:
the fee of the lawyer who rendered legal service to the government in lieu of the OSG
or the OGCC is the personal liability of the government official who hired his services
without the prior written conformity of the OSG or the OGCC, as the case may be.93
WHEREFORE, the petition is DISMISSED without prejudice to petitioner filing
another action against the proper parties.
SO ORDERED.
[ A.C. No. 10573, January 13, 2015 ]
FERNANDO W. CHU, COMPLAINANT, VS. ATTY. JOSE C. GUICO, JR.,
RESPONDENT.
Fernando W. Chu invokes the Court's disciplinary authority in resolving this
disbarment complaint against his former lawyer, respondent Atty. Jose C. Guico, Jr.,
whom he has accused of gross misconduct.
Antecedents
Chu retained Atty. Guico as counsel to handle the labor disputes involving his
company, CVC San Lorenzo Ruiz Corporation (CVC).[1]Atty. Guico's legal services
included handling a complaint for illegal dismissal brought against CVC (NLRC Case
No. RAB-III-08-9261-05 entitled Kilusan ng Manggagawang Makabayan (KMM)
Katipunan CVC San Lorenzo Ruiz Chapter, Ladivico Adriano, et al. v. CVC San
Lorenzo Ruiz Corp. and Fernando Chu).[2] On September 7, 2006, Labor Arbiter
Herminio V. Suelo rendered a decision adverse to CVC.[3] Atty. Guico filed a timely
appeal in behalf of CVC.
According to Chu, during a Christmas party held on December 5, 2006 at Atty.
Guico's residence in Commonwealth, Quezon City, Atty. Guico asked him to prepare
a substantial amount of money to be given to the NLRC Commissioner handling the
appeal to insure a favorable decision.[4] On June 10, 2007, Chu called Atty. Guico to
inform him that he had raised P300,000.00 for the purpose. Atty. Guico told him to
proceed to his office at No. 48 Times Street, Quezon City, and to give the money to
his assistant, Reynaldo (Nardo) Manahan. Chu complied, and later on called Atty.
Guico to confirm that he had delivered the money to Nardo. Subsequently, Atty.
Guico instructed Chu to meet him on July 5, 2007 at the UCC Coffee Shop on T.
Morato Street, Quezon City. At the UCC Coffee Shop, Atty. Guico handed Chu a copy
of an alleged draft decision of the NLRC in favor of CVC. [5] The draft decision[6] was
printed on the dorsal portion of used paper apparently emanating from the office of
Atty. Guico. On that occasion, the latter told Chu to raise another P300,000.00 to
encourage the NLRC Commissioner to issue the decision. But Chu could only
produce P280,000.00, which he brought to Atty. Guico's office on July 10, 2007
accompanied by his son, Christopher Chu, and one Bonifacio Elipane. However, it
was Nardo who received the amount without issuing any receipt. [7]
Chu followed up on the status of the CVC case with Atty. Guico in December 2007.
However, Atty. Guico referred him to Nardo who in turn said that he would only know
the status after Christmas. On January 11, 2008, Chu again called Nardo, who invited
him to lunch at the Ihaw Balot Plaza in Quezon City. Once there, Chu asked Nardo if
the NLRC Commissioner had accepted the money, but Nardo replied in the negative
and simply told Chu to wait. Nardo assured that the money was still with Atty. Guico
who would return it should the NLRC Commissioner not accept it.[8]
[9]
On January 19, 2009, the NLRC promulgated a decision adverse to CVC.  Chu
confronted Atty. Guico, who in turn referred Chu to Nardo for the filing of a motion for
reconsideration. After the denial of the motion for reconsideration, Atty. Guico caused
the preparation and filing of an appeal in the Court of Appeals. Finally, Chu
terminated Atty. Guico as legal counsel on May 25, 2009. [10]
In his position paper,[11] Atty. Guico described the administrative complaint as replete
with lies and inconsistencies, and insisted that the charge was only meant for
harassment. He denied demanding and receiving money from Chu, a denial that
Nardo corroborated with his own affidavit.[12] He further denied handing to Chu a draft
decision printed on used paper emanating from his office, surmising that the used
paper must have been among those freely lying around in his office that had been
pilfered by Chu's witnesses in the criminal complaint he had handled for Chu.[13]
Findings and Recommendation of the
IBP Board of Governors
IBP Commissioner Cecilio A.C. Villanueva found that Atty. Guico had violated Rules
1.01 and 1.02, Canon I of the Code of Professional Responsibility for demanding and
receiving P580,000.00 from Chu; and recommended the disbarment of Atty. Guico in
view of his act of extortion and misrepresentation that caused dishonor to and
contempt for the legal profession.[14]
On February 12, 2013, the IBP Board of Governors adopted the findings of IBP
Commissioner Villanueva in its Resolution No. XX-2013-87,[15] but modified the
recommended penalty of disbarment to three years suspension, viz.:
RESOLVED to ADOPT and APPROVE, as it is hereby unanimously ADOPTED and
APPROVED, with modification, the Report and Recommendation of the
Investigating Commissioner in the above-entitled case, herein made part of this
Resolution as Annex "A," and finding the recommendation fully supported by the
evidence on record and the applicable laws and rules and considering Respondent's
violation of Canon 1, Rules 1.01 and 1.02 of the Code of Professional Responsibility,
Atty.  Jose C. Guico, Jr. is hereby SUSPENDED from the practice of law for three
(3) years with Warning that a repetition of the same or similar act shall be dealt with
more severely and Ordered to Return the amount of Five Hundred  Eighty Thousand
(P580,000.00) Pesos with legal interest within thirty (30) days from receipt of notice.
Atty. Guico moved for reconsideration,[16] but the IBP Board of Governors denied his
motion for reconsideration on March 23, 2014 in Resolution No. XXI-2014-173.[17]
Neither of the parties brought a petition for review vis-à-vis Resolution No. XX-2013-
87 and Resolution No. XXI-2014-173.
Issue
Did Atty. Guico violate the Lawyer's Oath and Rules 1.01 and 1.02, Canon I of the
Code of Professional Responsibility for demanding and receiving P580,000.00 from
Chu to guarantee a favorable decision from the NLRC?
Ruling of the Court
In disbarment proceedings, the burden of proof rests on the complainant to establish
respondent attorney's liability by clear, convincing and satisfactory evidence. Indeed,
this Court has consistently required clearly preponderant evidence to justify the
imposition of either disbarment or suspension as penalty.[18]
Chu submitted the affidavits of his witnesses,[19] and presented the draft decision that
Atty. Guico had represented to him as having come from the NLRC. Chu credibly
insisted that the draft decision was printed on the dorsal portion of used
paper emanating from Atty. Guico's office,[20] inferring that Atty. Guico commonly
printed documents on used paper in his law office. Despite denying being the source
of the draft decision presented by Chu, Atty. Guico's participation in the generation of
the draft decision was undeniable. For one, Atty. Guico impliedly admitted Chu's
insistence by conceding that the used paper had originated from his office, claiming
only that used paper was just "scattered around his office."[21] In that context, Atty.
Guico's attempt to downplay the sourcing of used paper from his office was futile
because he did not expressly belie the forthright statement of Chu. All that Atty. Guico
stated by way of deflecting the imputation was that the used paper containing the
draft decision could have been easily taken from his office by Chu's witnesses in a
criminal case that he had handled for Chu,[22] pointing out that everything in his office,
except the filing cabinets and his desk, was "open to the public xxx and just anybody
has access to everything found therein."[23] In our view, therefore, Atty. Guico made
the implied admission because he was fully aware that the used paper had
unquestionably come from his office.
The testimony of Chu, and the circumstances narrated by Chu and his witnesses,
especially the act of Atty. Guico of presenting to Chu the supposed draft decision that
had been printed on used paper emanating from Atty. Guico's office, sufficed to
confirm that he had committed the imputed gross misconduct by demanding and
receiving P580,000.00 from Chu to obtain a favorable decision. Atty. Guico offered
only his general denial of the allegations in his defense, but such denial did not
overcome the affirmative testimony of Chu. We cannot but conclude that the
production of the draft decision by Atty. Guico was intended to motivate Chu to raise
money to ensure the chances of obtaining the favorable result in the labor case. As
such, Chu discharged his burden of proof as the complainant to establish his
complaint against Atty. Guico. In this administrative case, a fact may be deemed
established if it is supported by substantial evidence, or that amount of relevant
evidence which a reasonable mind might accept as adequate to justify a conclusion. implies a wrongful intent and not mere error of judgment."[28] There is no question that
[24]
any gross misconduct by an attorney in his professional or private capacity renders
him unfit to manage the affairs of others, and is a ground for the imposition of the
What is the condign penalty for Atty. Guico? penalty of suspension or disbarment, because good moral character is an essential
qualification for the admission of an attorney and for the continuance of such
In taking the Lawyer's Oath, Atty. Guico bound himself to: privilege.[29]

x x x maintain allegiance to the Republic of the Philippines; x x x support its
Constitution and obey the laws as well as the legal orders of the duly constituted
authorities therein; x x x do no falsehood, nor consent to the doing of any in court; x x
x delay no man for money or malice x x x.
Accordingly, the recommendation of the IBP Board of Governors to suspend him from
the practice of law for three (3) years would be too soft a penalty. Instead, he should
be disbarred,[30] for he exhibited his unworthiness of retaining his membership in the
legal profession. As the Court has reminded in Samonte v. Abellana:[31]

The Code of Professional Responsibility echoes the Lawyer's Oath, to wit:
CANON 1 A lawyer shall uphold the constitution, obey the laws of the land and
promote respect for law and for legal processes.
Rule 1.01 A lawyer shall not engage in unlawful, dishonest, immoral or deceitful
conduct.
Rule 1.02 A lawyer shall not counsel or abet activities aimed at defiance of the law or
at lessening confidence in the legal system.
The sworn obligation to respect the law and the legal processes under the Lawyer's
Oath and the Code of Professional Responsibility is a continuing condition for every
lawyer to retain membership in the Legal Profession. To discharge the obligation,
every lawyer should not render any service or give advice to any client that would
involve defiance of the very laws that he was bound to uphold and obey, [25] for he or
she was always bound as an attorney to be law abiding, and thus to uphold the
integrity and dignity of the Legal Profession.[26]Verily, he or she must act and comport
himself or herself in such a manner that would promote public confidence in the
integrity of the Legal Profession.[27] Any lawyer found to violate this obligation forfeits
his or her privilege to continue such membership in the legal profession.
Atty. Guico willingly and wittingly violated the law in appearing to counsel Chu to raise
the large sums of money in order to obtain a favorable decision in the labor case. He
thus violated the law against bribery and corruption. He compounded his violation by
actually using said illegality as his means of obtaining a huge sum from the client that
he soon appropriated for his own personal interest. His acts constituted gross
dishonesty and deceit, and were a flagrant breach of his ethical commitments under
the Lawyer's Oath not to delay any man for money or malice; and under Rule 1.01 of
the Code of Professional Responsibility that forbade him from engaging in unlawful,
dishonest, immoral or deceitful conduct. His deviant conduct eroded the faith of the
people in him as an individual lawyer as well as in the Legal Profession as a whole. In
doing so, he ceased to be a servant of the law.
Atty. Guico committed grave misconduct and disgraced the Legal Profession. Grave
misconduct is "improper or wrong conduct, the transgression of some established and
definite rule of action, a forbidden act, a dereliction of duty, willful in  character, and
Disciplinary proceedings against lawyers are designed to ensure that whoever
is granted the privilege to practice law in this country should remain faithful to
the Lawyer's Oath. Only thereby can lawyers preserve their fitness to remain as
members of the Law Profession. Any resort to falsehood or deception,
including adopting artifices to cover up one's misdeeds committed against
clients and the rest of the trusting public, evinces an unworthiness to continue
enjoying the privilege to practice law and highlights the unfitness to remain a
member of the Law Profession. It deserves for the guilty lawyer stern
disciplinary sanctions.
Lastly, the recommendation of the IBP Board of Governors that Atty. Guico be
ordered to return the amount of P580,000.00 to Chu is well-taken. That amount was
exacted by Atty. Guico from Chu in the guise of serving the latter's interest as the
client. Although the purpose for the amount was unlawful, it would be unjust not to
require Atty. Guico to fully account for and to return the money to Chu. It did not
matter that this proceeding is administrative in character, for, as the Court has pointed
out in Bayonla v. Reyes:[32]
Although the Court renders this decision in an administrative proceeding primarily to
exact the ethical responsibility on a member of the Philippine Bar, the Court's silence
about the respondent lawyer's legal obligation to restitute the complainant will be both
unfair and inequitable. No victim of gross ethical misconduct concerning the client's
funds or property should be required to still litigate in another proceeding what the
administrative proceeding has already established as the respondent's liability. x x x
ACCORDINGLY, the Court FINDS and DECLARES respondent ATTY. JOSE C.
GUICO, JR. GUILTY of the violation of the Lawyer's Oath, and Rules 1.01 and 1.02,
Canon I of the Code of Professional Responsibility, and DISBARS him from
membership in the Integrated Bar of the Philippines. His name is ORDERED
STRICKEN from the Roll of Attorneys.
Let copies of this Decision be furnished to the Office of the Bar Confidant, to be
appended to Atty. Guico's personal record as an attorney; to the Integrated Bar of the
Philippines; and to all courts and quasi-judicial offices in the country for their
information and guidance.
SO ORDERED.
A.C. No. 5067               June 29, 2015
CORAZON M. DALUPAN, Complainant,  acceptance fee of ₱5,000 per case and an appearance fee of ₱500 for each court
vs.
ATTY. GLENN C. GACOTT1, Respondent.
DECISION
VILLARAMA, JR., J.:
Before us is a petition for review under Rule 139-B, Section 12 (c) of the Rules of
Court assailing Resolution No. XVII-20072 dated March 17, 2007 and Resolution No.
XIX-201005443 dated October 8, 2010 of the Board of Governors of the Integrated
Bar of the Philippines (IBP) which adopted and approved the Report and
Recommendation4 dated December 12, 2006 of the Investigating Commissioner of
the Commission on Bar Discipline of the IBP. Although the IBP Board of Governors
dismissed the complaint for disbarment filed against the respondent, it ordered the
latter to return the payment of the attorney’s fee to the complainant in the amount of
₱5,000. This order to return the attorney’s fee is subject of the present petition.
The salient facts of the case follow:
In her affidavit-complaint5 dated April 20, 1999, the complainant claimed that she was
a defendant in a criminal case for grave slander pending before the Municipal Trial
Court (MTC) of Puerto Princesa City, Palawan. Meanwhile, her son, Wilmer Dalupan,
was also a defendant in a separate criminal case for grave slander and malicious
mischief pending before the same court. In order to represent the complainant and
her son, the complainant engaged the legal services of the respondent who then
charged an acceptance fee of ₱10,000.
On August 20, 1996, the complainant paid the respondent ₱5,000 as initial payment
for his acceptance fee.
On August 27, 1996, the complainant requested the respondent to draft a Motion to
Reduce Bail Bond. However, the respondent allegedly denied the request and
claimed that it was beyond the scope of his retainer services. Thus, the complainant
alleged that she caused a certain Rolly Calbento to draft the same which was
however signed by the respondent.
On January 31, 1997, the complainant paid the respondent the remaining balance of
₱5,000 for his acceptance fee. When the complainant asked for an Official Receipt
from the respondent, the latter refused saying that there was no need for the issuance
of a receipt. On that same day, the complainant also paid the respondent ₱500 for his
appearance fee in the preliminary conference and arraignment which occurred on the
same day.
Thereafter, the complainant alleged that the respondent neglected his duties as
counsel and failed to attend any of the hearings before the MTC. In view of the
respondent’s repeated absences before the MTC, Judge Jocelyn S. Dilig issued an
Order which appointed a counsel de oficio to represent the complainant.
Aggrieved, the complainant filed the instant complaint for disbarment against the
respondent.
On the other hand, in his comment6, the respondent denied all the allegations of the
complainant.
The respondent allege that the complainant approached him and represented herself
as an indigent party in the following cases for which she sought to engage the legal
services of the respondent: (1) Criminal Case No. 12586, People of the Philippines v.
Corazon Dalupan, et al. for Grave Slander, (2) Criminal Case No. 12585, People of
the Philippines v. Wilmer Dalupan for Malicious Mischief, (3) I.S. No. 96-1104,
Custodio Family v. Cesar Dalupan, et al. for Frustrated Murder, (4) I.S. No. 97-54,
Dalupan Family v. Romulo Custodio, et al. for Physical Injuries, and (5) I.S. No. 9760
Dalupan Family v. Romulo Custodio for Frustrated Murder. The respondent agreed to
represent the complainant in the aforementioned cases subject to the payment of an
appearance.
On August 20, 1996, the complainant paid the respondent ₱5,000 for his acceptance
fee.
On August 27, 1996, the respondent filed a Motion for Reduction of Bail in favor of the
complainant before the MTC of Puerto Princesa City. On that same day, the
complainant proceeded to the law office of the respondent and demanded that the
latter negotiate with the MTC judge to ensure the grant of the Motion of Bail. When
the respondent refused the demand of the complainant, the latter replied at the top of
her voice: "Binabayaran kita, bakit hindi mo ginagawa ang gusto ko?" The respondent
answered her with, "Hindi po lahat ng gusto ninyo ay gagawin ko, sa tama lamang po
tayo, abogado po ninyo ako, hindi ako fixer."7 This irked the complainant who then
made verbal threats that she will replace the respondent with a certain Atty. Roland
Pay who held office nearby. However, when the MTC of Puerto Princesa City
eventually ruled in favor of the complainant and granted the motion, the latter revoked
her threat that she will replace the respondent.
On August 19, 1997, the MTC of Puerto Princesa City issued a Notice of Hearing to
the complainant and her son Wilmer Dalupan which ordered them to appear before
the court on September 9, 1997 in connection with their criminal cases pending
therein. However, the respondent failed to attend the scheduled hearing as he
allegedly failed to receive a copy of the Notice of Hearing. Thus, in his written
explanation dated October 7, 1997, the respondent attributed his failure to appear
before the MTC to the inefficiency of the process server of the said court.
On October 10, 1997, the complainant told the respondent that she was terminating
the latter’s services on the ground of loss of trust and confidence. Furthermore, the
complainant also told the respondent that she engaged the services of Atty. Roland
Pay to replace the respondent. As a result, on October 30, 1997, the complainant
withdrew all her records from the law office of the respondent.
On January 29, 1998, the MTC of Puerto Princesa City issued an Order which
relieved the respondent of any responsibility in Criminal Case Nos. 12585 and 12586:
Acting on what the counsel of record of all the accused in the above-entitled cases
call "Compliance", where obvious on the face of which is his desire to withdraw as
Counsel, and it appearing that said intention to withdraw is not only with the full
conformity of all the accused but at their own initiative, Atty. Glenn Gacott is hereby
relieved of any responsibility in the further prosecution of the above-captioned cases.8
In view of the above Order, the respondent argued that he was not guilty of
abandonment or neglect of duty because it was the complainant who willfully
terminated his services even without fault or negligence on his part.
We referred this case to the IBP for its investigation, report, and recommendation.
On December 12, 2006, Investigating Commissioner Wilfredo E.J.E Reyes
recommended the dismissal of the complaint for disbarment against the respondent.
At the same time, he also recommended that the respondent return the payment of
the attorney’s fee to the complainant in the amount of ₱5,000.9
The Investigating Commissioner opined that the respondent cannot be held liable for
abandonment or neglect of duty because it was the complainant who discharged the
respondent for loss of trust and confidence. This was confirmed by the act of the
complainant in withdrawing all her records from the law office of the respondent.
Furthermore, the Investigating Commissioner said that absent evidence showing that
the respondent committed abandonment or neglect of duty, the presumption of
regularity should prevail in favor of the respondent.
Although there was no evidence to support the claim of the complainant that she paid
the respondent the remaining balance of ₱5,000 as acceptance fee and an
appearance fee of ₱500 on January 31, 1997, the Investigating Commissioner gave
credence to an Official Receipt dated August 20, 1996 which proved that the
complainant indeed paid the respondent an amount of ₱5,000. However, the
Investigating Commissioner found that the respondent did not perform any substantial
legal work on behalf of the complainant. For this reason, and in the interest of justice,
the Investigating Commissioner recommended that the respondent return the amount
of ₱5,000 to the complainant.
On March 17, 2007, the IBP Board of Governors passed Resolution No. XVII-2007-
115 which adopted and approved in toto the Report and Recommendation of the
Investigating Commissioner.
On October 8, 2010, the IBP Board of Governors passed Resolution No. XIX-2010-
544 which denied the Motion for Reconsideration dated July 27, 2007 filed by the
respondent.
Hence, the present petition10 which raises the sole issue of whether the respondent
should return the payment of the attorney’s fee to the complainant in the amount of
₱5,000.
Firstly, the respondent argued that when the MTC of Puerto Princesa City issued the
Order dated January 29, 1998 which relieved the respondent of any responsibility in
Criminal Case Nos. 12585 and 12586, the trial court did not require the respondent to
reimburse the payment of the attorney’s fee to the complainant. Thus, the IBP Board
of Governors exceeded its authority in ordering the respondent to return such fees to
the complainant.
Secondly, the respondent argued that a plain reading of the Official Receipt dated
August 20, 1996 would reveal that the parties intended the payment of ₱5,000 to
serve as acceptance fee which is different from attorney’s fee. According to the
respondent, the acceptance fee corresponds to the opportunity cost incurred by the
lawyer for not representing other potential clients due to a conflict of interest with the
present client. Thus, the payment of acceptance fee to the lawyer does not depend
on the latter’s performance of legal services.
Since the complainant failed to file any comment on the petition for review, we
proceed to resolve the sole issue raised, and rule in favor of the respondent.
We find that the respondent did not commit any fault or negligence in the
performance of his obligations under the retainer agreement which was wilfully
terminated by the complainant on the ground of loss of trust and confidence. As held
by the Investigating Commissioner, the evidence on record shows that the
respondent is not liable for abandonment or neglect of duty.
However, we disagree with the conclusion of the Investigating Commissioner that the
respondent should return the payment of the attorney’s fee to the complainant in the
amount of ₱5,000.
Firstly, the Investigating Commissioner seriously erred in referring to the amount to be
returned by the respondent as attorney’s fee. Relevantly, we agree with the
respondent that there is a distinction between attorney’s fee and acceptance fee.
It is well-settled that attorney’s fee is understood both in its ordinary and extraordinary
concept.11 In its ordinary sense, attorney’s fee refers to the reasonable compensation
paid to a lawyer by his client for legal services rendered. Meanwhile, in its
extraordinary concept, attorney’s fee is awarded by the court to the successful litigant
to be paid by the losing party as indemnity for damages. 12 In the present case, the
Investigating Commissioner referred to the attorney’s fee in its ordinary concept.
On the other hand, acceptance fee refers to the charge imposed by the lawyer for
merely accepting the case. This is because once the lawyer agrees to represent a
client, he is precluded from handling cases of the opposing party based on the
prohibition on conflict of interest. Thus, the incurs an opportunity cost by merely
accepting the case of the client which is therefore indemnified by the payment of
acceptance fee. Since the acceptance fee only seeks to compensate the lawyer for
the lost opportunity, it is not measured by the nature and extent of the legal services
rendered.
In the present case, based on a simple reading of the Official Receipt dated August
20, 1996, the parties clearly intended the payment of ₱5,000 to serve as acceptance
fee of the respondent, and not attorney’s fee. Moreover, both parties expressly
claimed that they intended such payment as the acceptance fee of the respondent.
Absent any other evidence showing a contrary intention of the parties, we find that the
Investigating Commissioner gravely erred in referring to the amount to be returned by
the respondent as attorney’s fee.
Since the Investigating Commissioner made an erroneous reference to attorney’s fee,
he therefore mistakenly concluded that the respondent should return the same as he
did not perform any substantial legal work on behalf of the complainant. As previously
mentioned, the payment of acceptance fee does not depend on the nature and extent
of the legal services rendered.
Secondly, the respondent did not commit any fault or negligence which would entail
the return of the acceptance fee.
Once a lawyer receives the acceptance fee for his legal services, he is expected to
serve his client with competence, and to attend to his client’s cause with diligence,
care and devotion.13 In Carino v. Atty. De Los Reyes,14 the respondent lawyer who
failed to file a complaint-affidavit before the prosecutor’s office, returned the ₱10,000
acceptance fee paid to him. Moreover, he was admonished by the Court to be more
careful in the performance of his duty to his clients. Meanwhile, in Voluntad-Ramirez
v. Baustista,15 we ordered the respondent lawyer to return the ₱14,000 acceptance
fee because he did nothing to advance his client’s cause during the six-month period
that he was engaged as counsel.
In the present case, the complainant alleged that she requested the respondent to
draft a Motion to Reduce Bail Bond which was denied by the latter.1âwphi1 She also
claimed that the respondent failed to attend any of the hearing before the MTC. Thus,
the complainant filed the present complaint for disbarment on the ground of
abandonment or neglect of duty. On the other hand, the respondent denied the
allegation that he failed to draft the Motion to Reduce Bail Bond and submitted a copy
of the MTC Order16 dated August 28, 1996 granting the motion to reduce bail. He also
justified his failure to attend the hearings before the MTC to the failure of the process
server to provide him with a Notice of Hearing.
Other than her bare allegations, the complainant failed to present any evidence to
support her claim that the respondent committed abandonment or neglect of duty.
Thus, we are constrained to affirm the factual findings of the Investigating
Commissioner that the presumption of regularity should prevail in favor of the
respondent. Absent any fault or negligence on the part of the respondent, we see no
legal basis for the order of the Investigating Commissioner to return the attorney’s fee
(acceptance fee) of ₱5,000.
WHEREFORE, premises considered, the petition is hereby GRANTED. Resolution
No. XVII-2007-115 and Resolution No. XIX-2010-544 of the IBP Board of Governors
insofar as they ordered the respondent to return the attorney’s fee (acceptance fee) to
the complainant in the amount of Five Thousand Pesos (₱5,000) are REVERSED
and SET ASIDE.
SO ORDERED.
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,  Meanwhile, the spouses Ames defaulted in their obligation with the DBP. Thus, the
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 resolution 3 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 action 5 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.
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 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 The stipulation is a representation to the court concerning the agreement between the
Civil Case No. 1721; (2) Vicente expressly ratified and confirmed the agreement on spouses Cadavedo and Atty. Lacaya, on the latter’s compensation for his services in
the contingent attorney’s fee consisting of one-half of the subject lot; (3) the MTC in the case; it is not the attorney’s fees in the nature of damages which the former prays
Civil Case No. 215 (ejectment case) approved the compromise agreement; (4) from the court as an incident to the main action.
Vicente is the legally designated administrator of the conjugal partnership, hence the At this point, we highlight that as observed by both the RTC and the CA and agreed
compromise agreement ratifying the transfer bound the partnership and could not as well by both parties, the alleged contingent fee agreement consisting of one-half of
have been invalidated by the absence of Benita’s acquiescence; and (5) the the subject lot was not reduced to writing prior to or, at most, at the start of Atty.
compromise agreement merely inscribed and ratified the earlier oral agreement Lacaya’s engagement as the spouses Cadavedo’s counsel in Civil Case No. 1721.An
between the spouses Cadavedo and Atty. Lacaya which is not contrary to law, agreement between the lawyer and his client, providing for the former’s
morals, good customs, public order and public policy. compensation, is subject to the ordinary rules governing contracts in general. As the
While the case is pending before this Court, Atty. Lacaya died. 15 He was substituted rules stand, controversies involving written and oral agreements on attorney’s fees
by his wife -Rosa -and their children –Victoriano D.L. Lacaya, Jr., Rosevic Lacaya- shall be resolved in favor of the former. 17 Hence, the contingency fee of ₱2,000.00
Ocampo, Reymar L. Lacaya, Marcelito L. Lacaya, Raymundito L. Lacaya, Laila stipulated in the amended complaint prevails over the alleged oral contingency fee
Lacaya-Matabalan, Marivic Lacaya-Barba, Rosalie L. Lacaya and Ma. Vic-Vic agreement of one-half of the subject lot.
Lacaya-Camaongay.16 B. The contingent fee agreement between
The Court’s Ruling the spouses Cadavedo and Atty. Lacaya,
We resolve to GRANT the petition. awarding the latter one-half of the subject
The subject lot was the core of four successive and overlapping cases prior to the lot, is champertous
present controversy. In three of these cases, Atty. Lacaya stood as the spouses Granting arguendo that the spouses Cadavedo and Atty. Lacaya indeed entered into
Cadavedo’s counsel. For ease of discussion, we summarize these cases (including an oral contingent fee agreement securing to the latter one-half of the subject lot, the
the dates and proceedings pertinent to each) as follows: agreement is nevertheless void.
Civil Case No. 1721 – Cadavedo v. Ames (Sum of money and/or voiding of contract In their account, the respondents insist that Atty. Lacaya agreed to represent the
of sale of homestead), filed on January 10, 1967. The writ of execution was granted spouses Cadavedo in Civil Case No. 1721 and assumed the litigation expenses,
on October 16, 1981. without providing for reimbursement, in exchange for a contingency fee consisting of
Civil Case No. 3352 – Ames v. Cadavedo (Quieting of Title and/or Enforcement of one-half of the subject lot. This agreement is champertous and is contrary to public
Civil Rights due Planters in Good Faith with Application for Preliminary injunction), policy.18
filed on September 23, 1981. Champerty, along with maintenance (of which champerty is an aggravated form), is a
Civil Case No. 3443 – Cadavedo v. DBP (Action for Injunction with Preliminary common law doctrine that traces its origin to the medieval period.19 The doctrine of
Injunction), filed on May 21, 1982. maintenance was directed "against wanton and in officious intermeddling in the
Civil Case No. 215 –Atty. Lacaya v. Vicente Cadavedo, et. al. (Ejectment Case), filed disputes of others in which the intermeddler has no interest whatever, and where the
between the latter part of 1981 and early part of 1982. The parties executed the assistance rendered is without justification or excuse."20 Champerty, on the other
compromise agreement on May 13, 1982. hand, is characterized by "the receipt of a share of the proceeds of the litigation by
Civil Case No. 4038 –petitioners v. respondents (the present case). the intermeddler."21 Some common law court decisions, however, add a second factor
The agreement on attorney’s fee in determining champertous contracts, namely, that the lawyer must also, "at his own
consisting of one-half of the subject expense maintain, and take all the risks of, the litigation."22
lot is void; the petitioners are entitled The doctrines of champerty and maintenance were created in response "to medieval
to recover possession practice of assigning doubtful or fraudulent claims to persons of wealth and influence
The core issue for our resolution is whether the attorney’s fee consisting of one-half of in the expectation that such individuals would enjoy greater success in prosecuting
the subject lot is valid and reasonable, and binds the petitioners. We rule in the those claims in court, in exchange for which they would receive an entitlement to the
NEGATIVE for the reasons discussed below. spoils of the litigation."23 "In order to safeguard the administration of justice, instances
A. The written agreement providing for of champerty and maintenance were made subject to criminal and tortuous liability
a contingent fee of ₱2,000.00 should prevail and a common law rule was developed, striking down champertous agreements and
over the oral agreement providing for one- contracts of maintenance as being unenforceable on the grounds of public policy."24
half of the subject lot In this jurisdiction, we maintain the rules on champerty, as adopted from American
The spouses Cadavedo and Atty. Lacaya agreed on a contingent fee of ₱2,000.00 decisions, for public policy considerations.25 As matters currently stand, any
and not, as asserted by the latter, one-half of the subject lot. The stipulation contained agreement by a lawyer to "conduct the litigation in his own account, to pay the
in the amended complaint filed by Atty. Lacaya clearly stated that the spouses expenses thereof or to save his client therefrom and to receive as his fee a portion of
Cadavedo hired the former on a contingency basis; the Spouses Cadavedo the proceeds of the judgment is obnoxious to the law."26 The rule of the profession
undertook to pay their lawyer ₱2,000.00 as attorney’s fees should the case be that forbids a lawyer from contracting with his client for part of the thing in litigation in
decided in their favor. exchange for conducting the case at the lawyer’s expense is designed to prevent the
Contrary to the respondents’ contention, this stipulation is not in the nature of a lawyer from acquiring an interest between him and his client. To permit these
penalty that the court would award the winning party, to be paid by the losing party. 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.1âwphi1The 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.34Following 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 void 35 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
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
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 Court 50 and Canon 20 of the Code of
Professional Responsibility,51factors 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.
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.
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.
G.R. No. 183952               September 9, 2013
CZARINA T. MALVAR, Petitioner, 
vs.
KRAFT FOOD PHILS., INC. and/or BIENVENIDO BAUTISTA, KRAFT FOODS
INTERNATIONAL, Respondents.
DECISION
BERSAMIN, J.:
Although the practice of law is not a business, an attorney is entitled to be properly
compensated for the professional services rendered for the client, who is bound by
her express agreement to duly compensate the attorney. The client may not deny her
attorney such just compensation.
The Case
The case initially concerned the execution of a final decision of the Court of Appeals
(CA) in a labor litigation, but has mutated into a dispute over attorney's fees between
the winning employee and her attorney after she entered into a compromise
agreement with her employer under circumstances that the attorney has bewailed as
designed to prevent the recovery of just professional fees.
Antecedents
On August 1, 1988, Kraft Foods (Phils.), Inc. (KFPI) hired Czarina Malvar (Malvar) as
its Corporate Planning Manager. From then on, she gradually rose from the ranks,
becoming in 1996 the Vice President for Finance in the Southeast Asia Region of
Kraft Foods International (KFI),KFPI’s mother company. On November 29, 1999,
respondent Bienvenido S. Bautista, as Chairman of the Board of KFPI and
concurrently the Vice President and Area Director for Southeast Asia of KFI, sent
Malvar a memo directing her to explain why no administrative sanctions should be
imposed on her for possible breach of trust and confidence and for willful violation of
company rules and regulations. Following the submission of her written explanation,
an investigating body was formed. In due time, she was placed under preventive
suspension with pay. Ultimately, on March 16, 2000, she was served a notice of
termination.
Obviously aggrieved, Malvar filed a complaint for illegal suspension and illegal
dismissal against KFPI and Bautista in the National Labor Relations Commission
(NLRC). In a decision dated April 30, 2001,1 the Labor Arbiter found and declared her
suspension and dismissal illegal, and ordered her reinstatement, and the payment of
her full backwages, inclusive of allowances and other benefits, plus attorney’s fees.
On October 22, 2001, the NLRC affirmed the decision of the Labor Arbiter but
additionally ruled that Malvar was entitled to "any and all stock options and bonuses
she was entitled to or would have been entitled to had she not been illegally
dismissed from her employment," as well as to moral and exemplary damages.2
KFPI and Bautista sought the reconsideration of the NLRC’s decision, but the NLRC
denied their motion to that effect.3
Undaunted, KFPI and Bautista assailed the adverse outcome before the CA on
certiorari (CA-G.R. SP No. 69660), contending that the NLRC thereby committed
grave abuse of discretion. However, the petition for certiorari was dismissed by the
CA on December 22, 2004, but with the CA reversing the order of reinstatement and
instead directing the payment of separation pay to Malvar, and also reducing the
amounts awarded as moral and exemplary damages.4
After the judgment in her favor became final and executory on March14, 2006, Malvar
moved for the issuance of a writ of execution. 5 The Executive Labor Arbiter then
referred the case to the Research and Computation Unit (RCU) of the NLRC for the
computation of the monetary awards under the judgment. The RCU’s computation
ultimately arrived at the total sum of ₱41,627,593.75.6
On November 9, 2006, however, Labor Arbiter Jaime M. Reyno issued an
order,7 finding that the RCU’s computation lacked legal basis for including the salary
increases that the decision promulgated in CA-G.R. SP No. 69660 did not include.
Hence, Labor Arbiter Reyno reduced Malvar’s total monetary award to
₱27,786,378.11, viz:
WHEREFORE, premises considered, in so far as the computation of complainant’s
other benefits and allowances are concerned, the same are in order. However,
insofar as the computation of her backwages and other monetary benefits (separation
pay, unpaid salary for January 1 to 26, 2005,holiday pay, sick leave pay, vacation
leave pay, 13th month pay), the same are hereby recomputed as follows:
SO ORDERED.
Both parties appealed the computation to the NLRC, which, on April19, 2007,
rendered its decision setting aside Labor Arbiter Reyno’s November 9, 2006 order,
and adopting the computation by the RCU.8
In its resolution dated May 31, 2007,9 the NLRC denied the respondents’ motion for
reconsideration.
Malvar filed a second motion for the issuance of a writ of execution to enforce the
decision of the NLRC rendered on April 19, 2007. After the writ of execution was
issued, a partial enforcement as effected by garnishing the respondents’ funds
deposited with Citibank worth 37,391,696.06.10
On July 27, 2007, the respondents went to the CA on certiorari (with prayer for the
issuance of a temporary restraining order (TRO) or writ of preliminary injunction),
assailing the NLRC’s setting aside of the computation by Labor Arbiter Reyno (CA-
G.R. SP No. 99865). The petition mainly argued that the NLRC had gravely abused
its discretion in ruling that: (a) the inclusion of the salary increases and other
monetary benefits in the award to Malvar was final and executory; and (b) the finality
of the ruling in CA-G.R. SP No. 69660 precluded the respondents from challenging
the inclusion of the salary increases and other monetary benefits. The CA issued a
TRO, enjoining the NLRC and Malvar from implementing the NLRC’s decision.11
On April 17, 2008, the CA rendered its decision in CA-G.R. SP No. 99865, 12 disposing
thusly:
WHEREFORE, premises considered, the herein Petition is GRANTED and the 19
April 2007 Decision of the NLRC and the 31May 2007 Resolution in NLRC NCR 30-
07-02316-00 are hereby REVERSED and SET ASIDE.
The matter of computation of monetary awards for private respondent is hereby
REMANDED to the Labor Arbiter and he is DIRECTED to recompute the monetary
award due to private respondent based on her salary at the time of her termination,
without including projected salary increases. In computing the said benefits, the Labor
Arbiter is further directed to DISREGARD monetary awards arising from: (a) the
management incentive plan and (b) the share option grant, including cash dividends
arising therefrom without prejudice to the filing of the appropriate remedy by the
private respondent in the proper forum. Private respondent’s allowances for car
maintenance and gasoline are likewise DELETED unless private respondent proves,
by appropriate receipts, her entitlement thereto.
With respect to the Motion to Exclude the Undisputed Amount of ₱14,252,192.12
from the coverage of the Writ of Preliminary Injunction and to order its immediate
release, the same is hereby GRANTED for reasons stated therefor, which amount
shall be deducted from the amount to be given to private respondent after proper
computation.
As regards the Motions for Reconsideration of the Resolution denying the Motion for
Voluntary Inhibition and the Omnibus Motion dated 30 October 2007, both motions
are hereby DENIED for lack of merit.
SO ORDERED.13
Malvar sought reconsideration, but the CA denied her motion on July30, 2008.14
Aggrieved, Malvar appealed to the Court, assailing the CA’s decision.
On December 9, 2010, while her appeal was pending in this Court, Malvar and the
respondents entered into a compromise agreement, the pertinent dispositive portion
of which is quoted as follows:
NOW, THEREFORE, for and in consideration of the covenants and understanding
between the parties herein, the parties hereto have entered into this Agreement on
the following terms and conditions:
1. Simultaneously upon execution of this Agreement in the presence of Ms. Malvar’s
attorney, KFPI shall pay Ms. Malvar the amount of Philippine Pesos Forty Million (Php
40,000,000.00), which is in addition to the Philippine Pesos Fourteen Million Two
Hundred Fifty-Two Thousand One Hundred Ninety-Two and Twelve Centavos
(Php14,252,192.12) already paid to and received by Ms. Malvar from KFPI in
August2008 (both amounts constituting the "Compromise Payment").
The Compromise Payment includes full and complete payment and settlement of Ms.
Malvar’s salaries and wages up to the last day of her employment, allowances, 13th
and 14th month pay, cash conversion of her accrued vacation, sick and emergency
leaves, separation pay, retirement pay and such other benefits, entitlements, claims
for stock, stock options or other forms of equity compensation whether vested or
otherwise and claims of any and all kinds against KFPI and KFI and Altria Group, Inc.,
their predecessors-in-interest, their stockholders, officers, directors, agents or
successors-in-interest, affiliates and subsidiaries, up to the last day of the aforesaid
cessation of her employment.
2. In consideration of the Compromise Payment, Ms. Malvar hereby freely and
voluntarily releases and forever discharges KFPI and KFI and Altria Group, Inc., their
predecessors or successors-in-interest, stockholders, officers, including Mr. Bautista
who was impleaded in the Labor Case as a party respondent, directors, agents or
successors-in-interest, affiliates and subsidiaries from any and all manner of action,
cause of action, sum of money, damages, claims and demands whatsoever in law or
in equity which Ms. Malvar or her heirs, successors and assigns had, or now have
against KFPI and/or KFI and/or Altria Group, Inc., including but not limited to, unpaid
wages, salaries, separation pay, retirement pay, holiday pay, allowances, 13th and
14th month pay, claims for stock, stock options or other forms of equity compensation
whether vested or otherwise whether arising from her employment contract, company
grant, present and future contractual commitments, company policies or practices, or
otherwise, in connection with Ms. Malvar’s employment with KFPI.15
xxxx
Thereafter, Malvar filed an undated Motion to Dismiss/Withdraw Case,16 praying that
the appeal be immediately dismissed/withdrawn in view of the compromise
agreement, and that the case be considered closed and terminated.
Intervention
Before the Court could act on Malvar’s Motion to Dismiss/Withdraw Case, the Court
received on February 15, 2011 a so-called Motion for Intervention to Protect
Attorney’s Rights17 from The Law Firm of Dasal, Llasos and Associates, through its Of
Counsel Retired Supreme Court Associate Justice Josue N. Bellosillo18 (Intervenor),
whereby the Intervenor sought, among others, that both Malvar and KFPI be held and
ordered to pay jointly and severally the Intervenor’s contingent fees.
The Motion for Intervention relevantly averred:
xxxx
Lawyers, oftentimes, are caricatured as alligators or some other specie of voracious
carnivore; perceived also as leeches sucking dry the blood of their adversaries, and
even their own clients they are sworn to serve and protect! As we lay down the facts
in this case, this popular, rather unpopular, perception will be shown wrong. This case
is a reversal of this perception.
xxxx
Here, it is the lawyer who is eaten up alive by the warring but conspiring litigants who
finally settled their differences without the knowledge, much less, participation, of
Petitioner’s counsel that labored hard and did everything to champion her cause.
xxxx
This Motion for Intervention will illustrate an aberration from the norm where the
lawyer ends up seeking protection from his client’s and Respondents’ indecent and
cunning maneuverings. x x x.
xxxx
On 18 March 2008 Petitioner engaged the professional services of Intervenor x x x on
a contingency basis whereby the former agreed in writing to pay the latter
contingency fees amounting to almost ₱19,600,000.00 (10% of her total claim of
almost ₱196,000,000.00 in connection with her labor case against Respondents. x x
x.
xxxx
According to their agreement (Annex "A"), Petitioner bound herself to pay Intervenor
contingency fees as follows (a) 10% of ₱14,252, 192.12 upon its collection; (b) 10%
of the remaining balance of ₱41,627,593.75; and (c)10% of the value of the stock
options Petitioner claims to be entitled to, or roughly ₱154,000,000.00 as of April
2008.
xxxx
Intervenor’s efforts resulted in the award and partial release of Petitioner’s claim
amounting to ₱14,252,192.12 out of which Petitioner paid Intervenor 10% or
₱1,425,219.21 as contingency fees pursuant to their engagement agreement (Annex
"A"). Copy of the check payment of Petitioner payable to Intervenor’s Of Counsel is
attached as Annex "C".
xxxx
On 12 September 2008 Intervenor filed an exhaustive Petition for Review with the
Supreme Court containing 70 pages, including its Annexes "A" to "R", or a total of 419
pages against Respondents to collect on the balance of Petitioner’s claims amounting
to at least ₱27,000,000.00 and ₱154,000,000.00 the latter representing the estimated
value of Petitioner’s stock options as of April 2008.
xxxx
On 15 January 2009 Respondents filed their Comment to the Petition for Review.
xxxx
On 13 April 2009 Intervenor, in behalf of Petitioner, filed its Reply to the Comment.
xxxx
All the pleadings in this Petition have already been submitted on time with nothing
more to be done except to await the Resolution of this Honorable Court which, should
the petition be decided in her favor, Petitioner would stand to gain ₱182,000,000.00,
more or less, which victory would be largely through the efforts of Intervenor.19 (Bold
emphasis supplied).
xxxx
It appears that in July 2009, to the Intervenor’s surprise, Malvar unceremoniously and
without any justifiable reason terminated its legal service and required it to withdraw
from the case.20 Hence, on October 5,2009, the Intervenor reluctantly filed a
Manifestation (With Motion to Withdraw as Counsel for Petitioner),21 in which it
spelled out: (a) the terms of and conditions of the Intervenor’s engagement as
counsel; (b) the type of legal services already rendered by the Intervenor for Malvar;
(c) the absence of any legitimate reason for the termination of their attorney-client
relationship; (d) the reluctance of the Intervenor to withdraw as Malvar’s counsel; and
(e) the desire of the Intervenor to assert and claim its contingent fee notwithstanding
its withdrawal as counsel. The Intervenor prayed that the Court furnish it with copies
of resolutions, decisions and other legal papers issued or to be issued after its
withdrawal as counsel of Malvar in the interest of protecting its interest as her
attorney.
The Intervenor indicated that Malvar’s precipitate action had baffled, shocked and
even embarrassed the Intervenor, because it had done everything legally possible to
serve and protect her interest. It added that it could not recall any instance of conflict
or misunderstanding with her, for, on the contrary, she had even commended it for its
dedication and devotion to her case through her following letter to Justice Bellosillo, to
wit:
July 16, 2008
Justice Josue Belocillo (sic)
Dear Justice,
It is almost morning of July 17 as I write this letter to you. Let me first thank you for
your continued and unrelenting lead, help and support in the case. You have been
our "rock" as far as this case is concerned. Jun and I are forever grateful to you for all
your help. I just thought I’d express to you what is in the innermost of my heart as we
proceed in the case. It has been around four months now since we met mid-March
early this year.
The most important and immediate aspect of the case at this time for me is the
collection of the undisputed amount of Pesos 14million which the Court has clearly
directed and ordered the NLRC to execute. The only impending constraint for NLRC
to execute and collect this amount from the already garnished amount of Pesos 41
million at Citibank is the MR of Kraft on the Order of the Court (CA) to execute
collection. We need to get a denial of this motion for NLRC to execute immediately.
We already obtained commitment from NLRC that all it needed to execute collection
is the denial of the MR. Jun and I applaud your initiative and efforts to mediate with
Romulo on potential settlement. However, as I expressed to you in several instances,
I have serious reservations on the willingness of Romulo to settle within reasonable
amounts specifically as it relates to the stock options. Let us continue to pursue this
route vigorously while not setting aside our efforts to influence the CA to DENY their
Motion on the Undisputed amount of Pesos 14million.
At this point, I cannot overemphasize to you our need for funds. We have made
financial commitments that require us to raise some amount. But we can barely meet
our day to day business and personal requirements given our current situation right
now.
Thank you po for your understanding and support.22
According to the Intervenor, it was certain that the compromise agreement was
authored by the respondents to evade a possible loss of ₱182,000,000.00 or more as
a result of the labor litigation, but considering the Intervenor’s interest in the case as
well as its resolve in pursuing Malvar’s interest, they saw the Intervenor as a major
stumbling block to the compromise agreement that it was then brewing with her.
Obviously, the only way to remove the Intervenor was to have her terminate its
services as her legal counsel. This prompted the Intervenor to bring the matter to the
attention of the Court to enable it to recover in full its compensation based on its
written agreement with her, averring thus:
xxxx
28. Upon execution of the Compromise Agreement and pursuant thereto, Petitioner
immediately received (supposedly) from Respondents₱40,000,000.00. But despite
the settlement between the parties, Petitioner did not pay Intervenor its just
compensation as set forth in their engagement agreement; instead, she immediately
moved to Dismiss/Withdraw the Present Petition.
29. To parties’ minds, with the dismissal by Petitioner of Intervenor as her counsel,
both Petitioner and Respondents probably thought they would be able to settle the
case without any cost to them, with Petitioner saving on Intervenor’s contingent fees
while Respondents able to take advantage of the absence of Intervenor in
determining the settlement price.
30. The parties cannot be any more mistaken. Pursuant to the Second Paragraph of
Section 26, Rule 138, of the Revised Rules of Court quoted in paragraph 3 hereof,
Intervenor is still entitled to recover from Petitioner the full compensation it deserves
as stipulated in its contract.
31. All the elements for the full recovery of Intervenor’s compensation are present.
First, the contract between the Intervenor and Petitioner is reduced into writing.
Second, Intervenor is dismissed without justifiable cause and at the stage of
proceedings where there is nothing more to be done but to await the Decision or
Resolution of the Present Petition.23
xxxx
In support of the Motion for Intervention, the Intervenor cites the rulings in Aro v.
Nañawa24 and Law Firm of Raymundo A. Armovit v. Court of Appeals,25 particularly
the following passage:
x x x. While We here reaffirm the rule that "the client has an undoubted right to
compromise a suit without the intervention of his lawyer," 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 agreement in so far as
it does not adversely affect the right of the lawyer.26 x x x.
The Intervenor prays for the following reliefs:
a) Granting the Motion for Intervention to Protect Attorney’s Rights in favor of
the Intervenor;
b) Directing both Petitioner and Respondents jointly and severally to pay
Intervenor its contingent fees;
c) Granting a lien upon all judgments for the payment of money and
executions issued in pursuance of such judgments; and
d) Holding in Abeyance in the meantime the Resolution of the Motion to
Dismiss/Withdraw Case filed by Petitioner and granting the Motion only after
Intervenor has been fully paid its just compensation; and
e) Other reliefs just and equitable.27
Opposing the Motion for Intervention,28 Malvar stresses that there was no truth to the
Intervenor’s claim to defraud it of its professional fees; that the Intervenor lacked the
legal capacity to intervene because it had ceased to exist after Atty. Marwil N. Llasos
resigned from the Intervenor and Atty. Richard B. Dasal became barred from private
practice upon his appointment as head of the Legal Department of the Small
Business Guarantee and Finance Corporation, a government subsidiary; and that
Atty. Llasos and Atty. Dasal had personally handled her case.
Malvar adds that even assuming, arguendo, that the Intervenor still existed as a law
firm, it was still not entitled to intervene for the following reasons, namely: firstly, it
failed to attend to her multiple pleas and inquiries regarding the case, as when
communications to the Intervenor through text messages were left unanswered;
secondly, maintaining that this was a justifiable cause to dismiss its services, the
Intervenor only heeded her repeated demands to withdraw from the case when Atty.
Dasal was confronted about his appointment to the government subsidiary; thirdly, it
was misleading and grossly erroneous for the Intervenor to claim that it had rendered
to her full and satisfactory services when the truth was that its participation was
strictly limited to the preparation, finalization and submission of the petition for review
with the Supreme Court; and finally, while the Intervenor withdrew its services on
October 5, 2009, the compromise agreement was executed with the respondents on
December 9,2010 and notarized on December 14, 2010, after more than a year and
two months, dispelling any badge of bad faith on their end.
On June 21, 2011, the respondents filed their comment to the Intervenor’s Motion for
Intervention.
On November 18, 2011, the Intervenor submitted its position on the respondent’s
comment dated June 21, 2011,29and thereafter the respondents sent in their reply.30
Issues
The issues for our consideration and determination are two fold, namely: (a) whether
or not Malvar’s motion to dismiss the petition on the ground of the execution of the
compromise agreement was proper; and (b) whether or not the Motion for
Intervention to protect attorney’s rights can prosper, and, if so, how much could it
recover as attorney’s fees.
Ruling of the Court
We shall decide the issues accordingly.
1.
Client’s right to settle litigation
by compromise agreement, and
to terminate counsel; limitations
A compromise agreement is a contract, whereby the parties undertake reciprocal
obligations to avoid litigation, or put an end to one already commenced.31 The client
may enter into a compromise agreement with the adverse party to terminate the
litigation before a judgment is rendered therein. 32 If the compromise agreement is
found to be in order and not contrary to law, morals, good customs and public policy,
its judicial approval is in order.33 A compromise agreement, once approved by final
order of the court, has the force of res judicata between the parties and will not be
disturbed except for vices of consent or forgery.34
A client has an undoubted right to settle her litigation without the intervention of the
attorney, for the former is generally conceded to have exclusive control over the
subject matter of the litigation and may at anytime, if acting in good faith, settle and
adjust the cause of action out of court before judgment, even without the attorney’s
intervention.35 It is important for the client to show, however, that the compromise
agreement does not adversely affect third persons who are not parties to the
agreement.36
By the same token, a client has the absolute right to terminate the attorney-client
relationship at any time with or without cause.37 But this right of the client is not
unlimited because good faith is required in terminating the relationship. The limitation
is based on Article 19 of the Civil Code, which mandates that "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." The right is also subject to
the right of the attorney to be compensated. This is clear from Section 26, Rule 138 of
the Rules of Court, which provides:
Section 26. Change of attorneys. - An attorney may retire at anytime from any action
or special proceeding, by the written consent of his client filed in court. He may also
retire at any time from an action or special proceeding, without the consent of his
client, should the court, on notice to the client and attorney, and on hearing,
determine that he ought to be allowed to retire. In case of substitution, the name of
the attorney newly employed shall be entered on the docket of the court in place of
the former one, and written notice of the change shall be given to the adverse party.
A client may at any time dismiss his attorney or substitute another in his place, but if
the contract between client and attorney has been reduced to writing and the
dismissal of the attorney was without justifiable cause, he shall be entitled to recover
from the client the full compensation stipulated in the contract. However, the attorney
may, in the discretion of the court, intervene in the case to protect his rights. For the
payment of his compensation the attorney shall have a lien upon all judgments for the
payment of money, and executions issued in pursuance of such judgment, rendered
in the case wherein his services had been retained by the client. (Bold emphasis
supplied)
In fine, it is basic that an attorney is entitled to have and to receive a just and
reasonable compensation for services performed at the special instance and request
of his client. The attorney who has acted in good faith and honesty in representing
and serving the interests of the client should be reasonably compensated for his
service.38
2.
Compromise agreement is to be approved
despite favorable action on the
Intervenor’s Motion for Intervention
On considerations of equity and fairness, the Court disapproves of the tendencies of
clients compromising their cases behind the backs of their attorneys for the purpose
of unreasonably reducing or completely setting to naught the stipulated contingent
fees.39 Thus, the Court grants the Intervenor’s Motion for Intervention to Protect
Attorney’s Rights as a measure of protecting the Intervenor’s right to its stipulated
professional fees that would be denied under the compromise agreement. The Court
does so in the interest of protecting the rights of the practicing Bar rendering
professional services on contingent fee basis.
Nonetheless, the claim for attorney’s fees does not void or nullify the compromise
agreement between Malvar and the respondents. There being no obstacles to its
approval, the Court approves the compromise agreement. The Court adds, however,
that the Intervenor is not left without a remedy, for the payment of its adequate and
reasonable compensation could not be annulled by the settlement of the litigation
without its participation and conformity. It remains entitled to the compensation, and
its right is safeguarded by the Court because its members are officers of the Court
who are as entitled to judicial protection against injustice or imposition of fraud
committed by the client as much as the client is against their abuses as her counsel.
In other words, the duty of the Court is not only to ensure that the attorney acts in a
proper and lawful manner, but also to see to it that the attorney is paid his just fees.
Even if the compensation of the attorney is dependent only on winning the litigation,
the subsequent withdrawal of the case upon the client’s initiative would not deprive
the attorney of the legitimate compensation for professional services rendered.40
The basis of the intervention is the written agreement on contingent fees contained in
the engagement executed on March 19, 2008 between Malvar and the
Intervenor,41 the pertinent portion of which stipulated that the Intervenor would "collect
ten percent (10%) of the amount of Ph₱14,252,192.12 upon its collection and another
ten percent (10%) of the remaining balance of Ph₱41,627,593.75 upon collection
thereof, and also ten percent (10%) of whatever is the value of the stock option you
are entitled to under the Decision." There is no question that such arrangement was a
contingent fee agreement that was valid in this jurisdiction, provided the fees therein
fixed were reasonable.42
We hold that the contingent fee of 10% of ₱41,627,593.75 and 10% of the value of
the stock option was reasonable. The ₱41,627,593.75 was already awarded to
Malvar by the NLRC but the award became the subject of the appeal in this Court
because the CA reversed the NLRC. Be that as it may, her subsequent change of
mind on the amount sought from the respondents as reflected in the compromise
agreement should not negate or bar the Intervenor’s recovery of the agreed attorney’s
fees.
Considering that in the event of a dispute between the attorney and the client as to
the amount of fees, and the intervention of the courts is sought, the determination
requires that there be evidence to prove the amount of fees and the extent and value
of the services rendered, taking into account the facts determinative thereof, 43 the
history of the Intervenor’s legal representation of Malvar can provide a helpful
predicate for resolving the dispute between her and the Intervenor.
The records reveal that on March 18, 2008, Malvar engaged the professional services
of the Intervenor to represent her in the case of illegal dismissal. At that time, the
case was pending in the CA at the respondents’ instance after the NLRC had set
aside the RCU’s computation of Malvar’s backwages and monetary benefits, and had
upheld the computation arrived at by the NLRC Computation Unit. On April 17, 2008,
the CA set aside the assailed resolution of the NLRC, and remanded the case to the
Labor Arbiter for the computation of her monetary awards. It was at this juncture that
the Intervenor commenced its legal service, which included the following incidents,
namely:
a) Upon the assumption of its professional duties as Malvar’s counsel, a
Motion for Reconsideration of the Decision of the Court of Appeals dated
April 17, 2008 consisting of thirty-eight pages was filed before the Court of
Appeals on May 6, 2008.
b) On June 2, 2009, Intervenors filed a Comment to Respondents’ Motion for
Partial Reconsideration, said Comment consisted 8 pages.
c) In the execution proceedings before Labor Arbiter Jaime Reyno,
Intervenor prepared and filed on Malvar’s behalf an "Ex-Parte Motion to
Release to Complainant the Undisputed amount of ₱14,252,192.12" in
NLRC NCR Case No. 30-07-02716-00.
d) On July 29, 2000, Intervenor prepared and filed before theLabor Arbiter a
Comment to Respondents’ Opposition to the "Ex-Parte Motion to Release"
and a "Motion Reiterating Immediate Implementation of the Writ of
Execution"
e) On August 6, 2008, Intervenor prepared and filed before the Labor Arbiter
Malvar’s Motion Reiterating Motion to Release the Amount of
₱14,252,192.12.44
The decision promulgated on April 17, 200845 and the resolution promulgated on July
30, 200846 by the CA prompted Malvar to appeal on August 15, 2008 to this Court
with the assistance of the Intervenor. All the subsequent pleadings, including the reply
of April 13, 2009,47 were prepared and filed in Malvar’s behalf by the Intervenor.
Malvar should accept that the practice of law was not limited to the conduct of cases
or litigations in court but embraced also the preparation of pleadings and other papers
incidental to the cases or litigations as well as the management of such actions and
proceedings on behalf of the clients.48 Consequently, fairness and justice demand
that the Intervenor be accorded full recognition as her counsel who discharged its
responsibility for Malvar’s cause to its successful end.
But, as earlier pointed out, although a client may dismiss her lawyer at any time, the
dismissal must be for a justifiable cause if a written contract between the lawyer and
the client exists.49
Considering the undisputed existence of the written agreement on contingent fees,
the question begging to be answered is: Was the Intervenor dismissed for a justifiable
cause?
We do not think so.
In the absence of the lawyer’s fault, consent or waiver, a client cannot deprive the
lawyer of his just fees already earned in the guise of a justifiable reason. Here, Malvar
not only downplayed the worth of the Intervenor’s legal service to her but also
attempted to camouflage her intent to defraud her lawyer by offering excuses that
were not only inconsistent with her actions but, most importantly, fell short of being
justifiable.
The letter Malvar addressed to Retired Justice Bellosillo, who represented the
Intervenor, debunked her allegations of unsatisfactory legal service because she
thereby lavishly lauded the Intervenor for its dedication and devotion to the
prosecution of her case and to the protection of her interests. Also significant was that
the attorney-client relationship between her and the Intervenor was not severed upon
Atty. Dasal’s appointment to public office and Atty. Llasos’ resignation from the law
firm. In other words, the Intervenor remained as her counsel of record, for, as we held
in Rilloraza, Africa, De Ocampo and Africa v. Eastern Telecommunication Philippines,
Inc.,50 a client who employs a law firm engages the entire law firm; hence, the
resignation, retirement or separation from the law firm of the handling lawyer does not
terminate the relationship, because the law firm is bound to provide a replacement.
The stipulations of the written agreement between Malvar and the Intervenors, not
being contrary to law, morals, public policy, public order or good customs, were valid
and binding on her. They expressly gave rise to the right of the Intervenor to demand
compensation. In a word, she could not simply walk away from her contractual
obligations towards the Intervenor, for Article 1159 of the Civil Code provides that
obligations arising from contracts have the force of law between the parties and
should be complied with in good faith.
To be sure, the Intervenor’s withdrawal from the case neither cancelled nor
terminated the written agreement on the contingent attorney’s fees. Nor did the
withdrawal constitute a waiver of the agreement. On the contrary, the agreement
continued between them because the Intervenor’s Manifestation (with Motion to
Withdraw as Counsel for Petitioner)explicitly called upon the Court to safeguard its
rights under the written agreement, to wit:
WHEREFORE, premises considered, undersigned counsel respectfully pray that
instant Motion to Withdraw as Counsel for Petitioner be granted and their attorney’s
lien pursuant to the written agreement be reflected in the judgment or decision that
may be rendered hereafter conformably with par. 2, Sec. 26, Rule 138 of the Rules of
Court.
Undersigned counsel further requests that they be furnished copy of the decision,
resolutions and other legal processes of this Honorable Court to enable them to
protect their interests.51
Were the respondents also liable?
The respondents would be liable if they were shown to have connived with Malvar in
the execution of the compromise agreement, with the intention of depriving the
Intervenor of its attorney’s fees. Thereby, they would be solidarily liable with her for
the attorney’s fees as stipulated in the written agreement under the theory that they
unfairly and unjustly interfered with the Intervenor’s professional relationship with
Malvar.
The respondents insist that they were not bound by the written agreement, and
should not be held liable under it.1âwphi1
We disagree with the respondents’ insistence. The respondents were complicit in
Malvar’s move to deprive the Intervenor of its duly earned contingent fees.
First of all, the unusual timing of Malvar’s letter terminating the Intervenor’s legal
representation of her, of her Motion to Dismiss/Withdraw Case, and of the execution
of compromise agreement manifested her desire to evade her legal obligation to pay
to the Intervenor its attorney’s fees for the legal services rendered. The objective of
her withdrawal of the case was to release the respondents from all her claims and
causes of action in consideration of the settlement in the stated amount of
₱40,000.000.00, a sum that was measly compared to what she was legally entitled to,
which, to begin with, already included the ₱41,627,593.75 and the value of the stock
option already awarded to her. In other words, she thereby waived more than what
she was lawfully expected to receive from the respondents.
Secondly, the respondents suddenly turned around from their strong stance of
berating her demand as offensive to all precepts of justice and fair play and as a form
of unjust enrichment for her to a surprisingly generous surrender to her demand,
allowing to her through their compromise agreement the additional amount of
₱40,000,000.00 on top of the₱14,252,192.12 already received by her in August 2008.
The softening unavoidably gives the impression that they were now categorically
conceding that Malvar deserved much more. Under those circumstances, it is
plausible to conclude that her termination of the Intervenor’s services was instigated
by their prodding in order to remove the Intervenor from the picture for being a solid
obstruction to the settlement for a much lower liability, and thereby save for
themselves and for her some more amount.
Thirdly, the compromise agreement was silent on the Intervenor’s contingent fee,
indicating that the objective of the compromise agreement was to secure a huge
discount from its liability towards Malvar.
Finally, contrary to the stipulation in the compromise agreement, only Malvar, minus
the respondents, filed the Motion to Dismiss/Withdraw Case.
At this juncture, the Court notes that the compromise agreement would have Malvar
waive even the substantial stock options already awarded by the NLRC’s
decision,52 which ordered the respondents to pay to her, among others, the value of
the stock options and all other bonuses she was entitled to or would have been
entitled to had she not been illegally dismissed from her employment. This ruling was
affirmed by the CA.53 But the waiver could not negate the Intervenor’s right to 10% of
the value of the stock options she was legally entitled to under the decisions of the
NLRC and the CA, for that right was expressly stated in the written agreement
between her and the Intervenor. Thus, the Intervenor should be declared entitled to
recover full compensation in accordance with the written agreement because it did
not assent to the waiver of the stock options, and did not waive its right to that part of
its compensation.
These circumstances show that Malvar and the respondents needed an escape from
greater liability towards the Intervenor, and from the possible obstacle to their plan to
settle to pay. It cannot be simply assumed that only Malvar would be liable towards
the Intervenor at that point, considering that the Intervenor, had it joined the
negotiations as her lawyer, would have tenaciously fought all the way for her to
receive literally everything that she was entitled to, especially the benefits from the
stock option. Her rush to settle because of her financial concerns could have led her
to accept the respondents’ offer, which offer could be further reduced by the
Intervenor’s expected demand for compensation. Thereby, she and the respondents
became joint tort-feasors who acted adversely against the interests of the Intervenor.
Joint tort-feasors are those who command, instigate, promote, encourage, advise,
countenance, cooperate in, aid or abet the commission of a tort, or who approve of it
after it is done, if done for their benefit.54
They are also referred to as those who act together in committing wrong or whose
acts, if independent of each other, unite in causing a single injury. 55 Under Article
2194 of the Civil Code, joint tort-feasors are solidarily liable for the resulting damage.
As regards the extent of their respective liabilities, the Court said in Far Eastern
Shipping Company v. Court of Appeals:56
x x x. Where several causes producing an injury are concurrent and each is an
efficient cause without which the injury would not have happened, the injury may be
attributed to all or any of the causes and recovery may be had against any or all of
the responsible persons although under the circumstances of the case, it may appear
that one of them was more culpable, and that the duty owed by them to the injured
person was not same. No actor’s negligence ceases to be a proximate cause merely
because it does not exceed the negligence of other acts. Each wrongdoer is
responsible for the entire result and is liable as though his acts were the sole cause of
the injury.
There is no contribution between joint tort-feasors whose liability is solidary since both
of them are liable for the total damage. Where the concurrent or successive negligent
acts or omissions of two or more persons, although acting independently, are in
combination the direct and proximate cause of a single injury to a third person, it is
impossible to determine in what proportion each contributed to the injury and either of
them is responsible for the whole injury. x x x
Joint tort-feasors are each liable as principals, to the same extent and in the same
manner as if they had performed the wrongful act themselves. It is likewise not an
excuse for any of the joint tort-feasors that individual participation in the tort was
insignificant as compared to that of the other.57 To stress, joint tort-feasors are not
liable pro rata. The damages cannot be apportioned among them, except by
themselves. They cannot insist upon an apportionment, for the purpose of each
paying an aliquot part. They are jointly and severally liable for the whole
amount.58 Thus, as joint tort-feasors, Malvar and the respondents should be held
solidarily liable to the Intervenor. There is no way of appreciating these circumstances
except in this light.
That the value of the stock options that Malvar waived under the compromise
agreement has not been fixed as yet is no hindrance to the implementation of this
decision in favor of the Intervenor. The valuation could be reliably made at a
subsequent time from the finality of this adjudication. It is enough for the Court to hold
the respondents and Malvar solidarily liable for the 10% of that value of the stock
options.
As a final word, it is necessary to state that no court can shirk from enforcing the
contractual stipulations in the manner they have agreed upon and written. As a rule,
the courts, whether trial or appellate, have no power to make or modify contracts
between the parties. Nor can the courts save the parties from disadvantageous
provisions.59The same precepts hold sway when it comes to enforcing fee
arrangements entered into in writing between clients and attorneys. In the exercise of
their supervisory authority over attorneys as officers of the Court, the courts are
bound to respect and protect the attorney’s lien as a necessary means to preserve
the decorum and respectability of the Law Profession.60 Hence, the Court must thwart
any and every effort of clients already served by their attorneys’ worthy services to
deprive them of their hard-earned compensation. Truly, the duty of the courts is not
only to see to it that attorneys act in a proper and lawful manner, but also to see to it
that attorneys are paid their just and lawful fees.61
WHEREFORE, the Court APPROVES the compromise agreement; GRANTS the
Motion for Intervention to Protect Attorney's Rights; and ORDERS Czarina T. Malvar
and respondents Kraft Food Philippines Inc. and Kraft Foods International to jointly
and severally pay to Intervenor Law Firm, represented by Retired Associate Justice
Josue N. Bellosillo, its stipulated contingent fees of 10% of ₱41,627,593.75, and the
further sum equivalent to 10% of the value of the stock option. No pronouncement on
costs of suit.
SO ORDERED.
REBECCA J. PALM, A.C. No. 8242
- versus - 
ATTY. FELIPE ILEDAN, JR., Promulgated:
Respondent. October 2, 2009
The case before the Court is a disbarment proceeding filed by Rebecca J. Palm
(complainant) against Atty. Felipe Iledan, Jr. (respondent) for revealing information
obtained in the course of an attorney-client relationship and for representing an
interest which conflicted with that of his former client, Comtech Worldwide Solutions
Philippines, Inc. (Comtech).
 
The Antecedent Facts
Complainant is the President of Comtech, a corporation engaged in the business of
computer software development. From February 2003 to November 2003, respondent
served as Comtechs retained corporate counsel for the amount of P6,000 per month
as retainer fee. From September to October 2003, complainant personally met with
respondent to review corporate matters, including potential amendments to the
corporate by-laws. In a meeting held on 1 October 2003, respondent suggested that
Comtech amend its corporate by-laws to allow participation during board meetings,
through teleconference, of members of the Board of Directors who were outside the
Philippines.
 
Prior to the completion of the amendments of the corporate by-laws, complainant
became uncomfortable with the close relationship between respondent and Elda
Soledad (Soledad), a former officer and director of Comtech, who resigned and who
was suspected of releasing unauthorized disbursements of corporate funds.Thus,
Comtech decided to terminate its retainer agreement with respondent effective
November 2003.
In a stockholders meeting held on 10 January 2004, respondent attended as proxy for
Gary Harrison (Harrison). Steven C. Palm (Steven) and Deanna L. Palm, members of
the Board of Directors, were present through teleconference. When the meeting was
called to order, respondent objected to the meeting for lack of quorum. Respondent
asserted that Steven and Deanna Palm could not participate in the meeting because
the corporate by-laws had not yet been amended to allow teleconferencing.
 
On 24 March 2004, Comtechs new counsel sent a demand letter to Soledad to return
or account for the amount of P90,466.10 representing her unauthorized
disbursements when she was the Corporate Treasurer of Comtech. On 22 April 2004,
Comtech received Soledads reply, signed by respondent. In July 2004, due to
Soledads failure to comply with Comtech's written demands, Comtech filed a
complaint for Estafa against Soledad before the Makati Prosecutors Office. In the
proceedings before the City Prosecution Office of Makati, respondent appeared as
Soledads counsel.
 
On 26 January 2005, complainant filed a Complaint[1] for disbarment against
respondent before the Integrated Bar of the Philippines (IBP).
 
In his Answer,[2] respondent alleged that in January 2002, Soledad consulted him on
process and procedure in acquiring property. In April 2002, Soledad again consulted
him about the legal requirements of putting up a domestic corporation. In February
2003, Soledad engaged his services as consultant for Comtech.Respondent alleged
that from February to October 2003, neither Soledad nor Palm consulted him on
confidential or privileged matter concerning the operations of the
corporation. Respondent further alleged that he had no access to any record of
Comtech.
 
Respondent admitted that during the months of September and October 2003,
complainant met with him regarding the procedure in amending the corporate by-laws
to allow board members outside the Philippines to participate in board meetings.
Respondent further alleged that Harrison, then Comtech President, appointed him as
proxy during the 10 January 2004 meeting. Respondent alleged that Harrison
instructed him to observe the conduct of the meeting. Respondent admitted that he
objected to the participation of Steven and Deanna Palm because the corporate by-
laws had not yet been properly amended to allow the participation of board members
by teleconferencing.
 
 
Respondent alleged that there was no conflict of interest when he represented
Soledad in the case for Estafa filed by Comtech. He alleged that Soledad was already
a client before he became a consultant for Comtech. He alleged that the criminal case
was not related to or connected with the limited procedural queries he handled with
Comtech.
The IBPs Report and Recommendation
 
In a Report and Recommendation dated 28 March 2006, [3] the IBP Commission on
Bar Discipline (IBP-CBD) found respondent guilty of violation of Canon 21 of the
Code of Professional Responsibility and of representing interest in conflict with that of
Comtech as his former client.
The IBP-CBD ruled that there was no doubt that respondent was Comtechs retained
counsel from February 2003 to November 2003. The IBP-CBD found that in the
course of the meetings for the intended amendments of Comtechs corporate by-laws,
respondent obtained knowledge about the intended amendment to allow members of
the Board of Directors who were outside the Philippines to participate in board
meetings through teleconferencing. The IBP-CBD noted that respondent knew that
the corporate by-laws have not yet been amended to allow the
teleconferencing. Hence, when respondent, as representative of Harrison, objected to
the participation of Steven and Deanna Palm through teleconferencing on the ground
that the corporate by-laws did not allow the participation, he made use of a privileged
information he obtained while he was Comtechs retained counsel.
 
The IBP-CBD likewise found that in representing Soledad in a case filed by Comtech,
respondent represented an interest in conflict with that of a former client.The IBP-
CBD ruled that the fact that respondent represented Soledad after the termination of
his professional relationship with Comtech was not an excuse.
 
The IBP-CBD recommended that respondent be suspended from the practice of law
for one year, thus:
 
WHEREFORE, premises considered, it is most respectfully
recommended that herein respondent be found guilty of the
charges preferred against him and be suspended from the practice
of law for one (1) year.[4]
 
In Resolution No. XVII-2006-583[5] passed on 15 December 2006, the IBP Board of
Governors adopted and approved the recommendation of the Investigating
Commissioner with modification by suspending respondent from the practice of law
for two years.
 
Respondent filed a motion for reconsideration.[6]
In an undated Recommendation, the IBP Board of Governors First Division found that
respondents motion for reconsideration did not raise any new issue and was just a
rehash of his previous arguments. However, the IBP Board of Governors First

Division recommended that respondent be suspended from the practice of law for
only one year.
 
In Resolution No. XVIII-2008-703 passed on 11 December 2008, the IBP Board of
Governors adopted and approved the recommendation of the IBP Board of
Governors First Division. The IBP Board of Governors denied respondents motion for
reconsideration but reduced his suspension from two years to one year.
The IBP Board of Governors forwarded the present case to this Court as provided
under Section 12(b), Rule 139-B[7] of the Rules of Court.
The Ruling of this Court
 
We cannot sustain the findings and recommendation of the IBP.
Violation of the Confidentiality
of Lawyer-Client Relationship
 
Canon 21 of the Code of Professional Responsibility provides:
 
Canon 21. A lawyer shall preserve the confidence and secrets of
his client even after the attorney-client relationship is
terminated. (Emphasis supplied)
 
We agree with the IBP that in the course of complainants consultations, respondent
obtained the information about the need to amend the corporate by-laws to allow
board members outside the Philippines to participate in board meetings through
teleconferencing. Respondent himself admitted this in his Answer.
 
However, what transpired on 10 January 2004 was not a board meeting but a
stockholders meeting. Respondent attended the meeting as proxy for Harrison. The
physical presence of a stockholder is not necessary in a stockholders meeting
because a member may vote by proxy unless otherwise provided in the articles of
incorporation or by-laws.[8] Hence, there was no need for Steven and Deanna Palm to
participate through teleconferencing as they could just have sent their proxies to the
meeting.
In addition, although the information about the necessity to amend the corporate by-
laws may have been given to respondent, it could not be considered a confidential
information. The amendment, repeal or adoption of new by-laws may be effected by
the board of directors or trustees, by a majority vote thereof, and the owners of at
least a majority of the outstanding capital stock, or at least a majority of members of a
non-stock corporation.[9] It means the stockholders are aware of the proposed
amendments to the by-laws. While the power may be delegated to the board of
directors or trustees, there is nothing in the records to show that a delegation was
made in the present case. Further, whenever any amendment or adoption of new by-
laws is made, copies of the amendments or the new by-laws are filed with the
Securities and Exchange Commission (SEC) and attached to the original articles of
incorporation and by-laws.[10] The documents are public records and could not be
considered confidential.
It is settled that the mere relation of attorney and client does not raise a presumption
of confidentiality.[11] The client must intend the communication to be confidential.
[12]
 Since the proposed amendments must be approved by at least a majority of
the stockholders, and copies of the amended by-laws must be filed with the
SEC, the information could not have been intended to be confidential. Thus, the
disclosure made by respondent during the stockholders meeting could not be
considered a violation of his clients secrets and confidence within the contemplation
of Canon 21 of the Code of Professional Responsibility.
 
 
 
Representing Interest in Conflict
With the Interest of a Former Client
 
The IBP found respondent guilty of representing an interest in conflict with that of a
former client, in violation of Rule 15.03, Canon 15 of the Code of Professional
Responsibility which provides:
 
Rule 15.03 - A lawyer shall not represent conflicting interest except
by written consent of all concerned given after a full disclosure of
the facts.
 
We do not agree with the IBP.
 
In Quiambao v. Bamba,[13] the Court enumerated various tests to determine conflict of
interests. One test of inconsistency of interests is whether the lawyer will be asked to
use against his former client any confidential information acquired through their
connection or previous employment.[14] The Court has ruled that what a lawyer owes
his former client is to maintain inviolate the clients confidence or to refrain from doing
anything which will injuriously affect him in any matter in which he previously
represented him.[15]
 
We find no conflict of interest when respondent represented Soledad in a case filed
by Comtech. The case where respondent represents Soledad is an Estafa case filed
by Comtech against its former officer. There was nothing in the records that would
show that respondent used against Comtech any confidential information
acquired while he was still Comtechs retained counsel. Further, respondent
made the representation after the termination of his retainer agreement with
Comtech. A lawyers immutable duty to a former client does not cover transactions
that occurred beyond the lawyers employment with the client. [16] The intent of the law
is to impose upon the lawyer the duty to protect the clients interests only on matters
that he previously handled for the former client and not for matters that arose after
the lawyer-client relationship has terminated.[17]
    
WHEREFORE, we DISMISS the complaint against Atty. Felipe Iledan, Jr. for lack of
merit.
 
SO ORDERED.
 
 JESSIE R. DE LEON, A.C. No. 8620 Respondent also made a mockery of the aforesaid judicial
Complainant,   proceedings by representing dead persons therein who, he falsely
-versus  Present: made to appear, as contesting the complaints, counter-suing and
ATTY. EDUARDO G. CASTELO, cross-suing the adverse parties.
Respondent.    
Promulgated: 12. That, as a consequence of the above criminal acts,
  complainant respectfully submits that respondent likewise violated:
January 12, 2011  
 
This administrative case, which Jessie R. De Leon initiated on April 29,
(a)    His Lawyers Oath:
2010, concerns respondent attorneys alleged dishonesty and falsification committed
xxx
in the pleadings he filed in behalf of the defendants in the civil action in which De
(b)   The Code of Professional Responsibility:[3]
Leon intervened.
xxx
 
 
Antecedents
On June 23, 2010, the Court directed the respondent to comment on
 
De Leons administrative complaint.[4]
On January 2, 2006, the Government brought suit for the purpose of
 
correcting the transfer certificates of title (TCTs) covering two parcels of land located
In due course, or on August 2, 2010,[5] the respondent rendered the following
in Malabon City then registered in the names of defendants Spouses Lim Hio and
explanations in his comment, to wit:
Dolores Chu due to their encroaching on a public callejon and on a portion of the
 1. The persons who had engaged him as attorney to represent the Lim
Malabon-Navotas River shoreline to the extent, respectively, of an area of 45 square
family in Civil Case No. 4674MN were William and Leonardo Lim, the children of
meters and of about 600 square meters. The suit, entitled Republic of the  Philippines,
Spouses Lim Hio and Dolores Chu;
represented by the Regional Executive Director, Department of Environment and
2. Upon his (Atty. Castelo) initial queries relevant to the material allegations
Natural Resources v. Spouses Lim Hio and Dolores Chu, Gorgonia Flores, and the
of the Governments complaint in Civil Case No. 4674MN, William Lim, the
Registrar of Deeds of  Malabon  City, was docketed as Civil Case No. 4674MN of the
representative of the Lim Family, informed him:
Regional Trial Court (RTC), Branch 74, in Malabon City.[1]
a.     That the Lim family had acquired the properties from Georgina Flores;
 
b.     That William and Leonardo Lim were already actively managing the
De Leon, having joined Civil Case No. 4674MN as a voluntary intervenor two
family business, and now co-owned the properties by virtue of the deed of absolute
years later (April 21, 2008), now accuses the respondent, the counsel of record of the
sale their parents, Spouses Lim Hio and Dolores Chu, had executed in their favor;
defendants in Civil Case No. 4674MN, with the serious administrative offenses of
and
dishonesty and falsification warranting his disbarment or suspension as an attorney.
c. That because of the execution of the deed of absolute sale, William and
The respondents sin was allegedly committed by his filing for defendants Spouses
Leonardo Lim had since honestly assumed that their parents had already caused the
Lim Hio and Dolores Chu of various pleadings (that is, answer with counterclaim and
transfer of the TCTs to their names.
cross-claim  in relation to the main complaint; and answer to the complaint in
3. Considering that William and Leonardo Lim themselves were the ones
intervention with counterclaim and cross-claim) despite said spouses being already
who had engaged his services, he (Atty. Castelo) consequently truthfully stated in the
deceased at the time of filing.[2]
motion seeking an extension to file responsive pleading dated February 3, 2006 the
 
fact that it was the family of the defendants that had engaged him, and that he had
De Leon avers that the respondent committed dishonesty and falsification as
then advised the children of the defendants to seek the assistance as well of a
follows:
licensed geodetic surveyor and engineer;
 
4.     He (Atty. Castelo) prepared the initial pleadings based on his honest
xxx in causing it (to) appear that persons (spouses Lim Hio
belief that Spouses Lim Hio and Dolores Chu were then still living. Had he known that
and Dolores Chu) have participated in an act or proceeding (the
they were already deceased, he would have most welcomed the information and
making and filing of the Answers) when they did not in fact so
would have moved to substitute Leonardo and William Lim as defendants for that
participate; in fact, they could not have so participated because
reason;
they were already dead as of that time, which is punishable under
5.     He (Atty. Castelo) had no intention to commit either a falsehood or a
Article 172, in relation to Article 171, paragraph 2, of the Revised
falsification, for he in fact submitted the death certificates of Spouses Lim Hio and
Penal Code.
Dolores Chu in order to apprise the trial court of that fact; and
 
6.     The Office of the Prosecutor for Malabon City even dismissed the
Respondent also committed the crime of Use of Falsified
criminal complaint for falsification brought against him (Atty. Castelo) through the
Documents, by submitting the said falsified Answers in the judicial
resolution dated February 11, 2010. The same office denied the complainants motion
proceedings, Civil Case No. 4674MN;
for reconsideration on May 17, 2010.
 
 
 On September 3, 2010, the complainant submitted a reply,[6] whereby he
asserted that the respondents claim in his comment that he had represented the Lim
family was a deception, because the subject of the complaint against the respondent
was his filing of the answers in behalf of Spouses Lim Hio and Dolores Chu despite
their being already deceased at the time of the filing. The complainant regarded as
baseless the justifications of the Office of the City Prosecutor for Malabon City in
dismissing the criminal complaint against the respondent and in denying his motion
for reconsideration.
 
The Court usually first refers administrative complaints against members of
the Philippine Bar to the Integrated Bar of the Philippines (IBP) for investigation and
appropriate recommendations. For the present case, however, we forego the prior
referral of the complaint to the IBP, in view of the facts being uncomplicated and
based on the pleadings in Civil Case No. 4674MN. Thus, we decide the complaint on
its merits.
Ruling
 
We find that the respondent, as attorney, did not commit any falsehood or
falsification in his pleadings in Civil Case No. 4674MN. Accordingly, we dismiss the
patently frivolous complaint.
 
I Attorneys Obligation to tell the truth
 
All attorneys in the Philippines, including the respondent, have sworn to the
vows embodied in following Lawyers Oath,[7] viz:
 
The Code of Professional Responsibility echoes the Lawyers Oath,
providing:[8]
 CANON 1 - A LAWYER SHALL UPHOLD THE CONSTITUTION, OBEY
THE LAWS OF THE LAND AND PROMOTE RESPECT FOR LAW AND LEGAL
PROCESSES.
Rule 1.01 - A lawyer shall not engage in unlawful, dishonest, immoral or
deceitful conduct.
CANON 10 - A LAWYER OWES CANDOR, FAIRNESS AND GOOD FAITH
TO THE COURT.
Rule 10.01 - A lawyer shall not do any falsehood, nor consent to the doing of
any in Court; nor shall he mislead, or allow the Court to be misled by any artifice.
 
The foregoing ordain ethical norms that bind all attorneys, as officers of the
Court, to act with the highest standards of honesty, integrity, and trustworthiness. All
attorneys are thereby enjoined to obey the laws of the land, to refrain from doing any
falsehood in or out of court or from consenting to the doing of any in court, and to
conduct themselves according to the best of their knowledge and discretion with all
good fidelity as well to the courts as to their clients. Being also servants of the Law,
attorneys are expected to observe and maintain the rule of law and to make
themselves exemplars worthy of emulation by others.[9] The least they can do in that
regard is to refrain from engaging in any form or manner of unlawful conduct (which
broadly includes any act or omission contrary to law, but does not necessarily imply
the element of criminality even if it is broad enough to include such element).[10]
 
To all attorneys, truthfulness and honesty have the highest value, for, as the
Court has said in Young v. Batuegas:[11]
 A lawyer must be a disciple of truth. He swore upon his admission to the
Bar that he will do no falsehood nor consent to the doing of any in court and he shall
conduct himself as a lawyer according to the best of his knowledge and discretion
with all good fidelity as well to the courts as to his clients. He should bear in mind that
as an officer of the court his high vocation is to correctly inform the court upon the law
and the facts of the case and to aid it in doing justice and arriving at correct
conclusion. The courts, on the other hand, are entitled to expect only complete
honesty from lawyers appearing and pleading before them. While a lawyer has the
solemn duty to defend his clients rights and is expected to display the utmost zeal in
defense of his clients cause, his conduct must never be at the expense of truth.
 
 
Their being officers of the Court extends to attorneys not only the
presumption of regularity in the discharge of their duties, but also the immunity from
liability to others for as long as the performance of their obligations to their clients
does not depart from their character as servants of the Law and as officers of the
Court. In particular, the statements they make in behalf of their clients that are
relevant, pertinent, or material to the subject of inquiry are absolutely privileged
regardless of their defamatory tenor. Such cloak of privilege is necessary and
essential in ensuring the unhindered service to their clients causes and in protecting
the clients confidences. With the cloak of privilege, they can freely and courageously
speak for their clients, verbally or in writing, in the course of judicial and quasi-judicial
proceedings, without running the risk of incurring criminal prosecution or actions for
damages.[12]
 
Nonetheless, even if they enjoy a number of privileges by reason of their
office and in recognition of the vital role they play in the administration of justice,
attorneys hold the privilege and right to practice law before judicial, quasi-judicial, or
administrative tribunals or offices only during good behavior.[13]
 
IIRespondent did not violate the Lawyers Oath
and the  Code of Professional Responsibility 
 
On April 17, 2006, the respondent filed an answer with counterclaim and
cross-claim  in behalf of Spouses Lim Hio and Dolores Chu, the persons whom the
Government as plaintiff named as defendants in Civil Case No. 4674MN.[14] He
alleged therein that:
 2. The allegations in paragraph 2 of the complaint are
ADMITTED. Moreover, it is hereby made known that defendants spouses Lim
Hio and Dolores Chu had already sold the two (2) parcels of land, together with
the building and improvements thereon, covered by Transfer Certificate of Title
No. (148805) 139876 issued by the Register of Deeds of Rizal, to Leonardo C.
Lim and William C. Lim, of Rms. 501 502 Dolores Bldg., Plaza del Conde,
Binondo, Manila. Hence, Leonardo Lim and William Lim are their successors-in-
interest and are the present lawful owners thereof.
In order to properly and fully protect their rights, ownership and
interests, Leonardo C. Lim and William C. Lim shall hereby represent the
defendants-spouses Lim Hio and Dolores Chu as substitute/representative
parties in this action. In this manner, a complete and expeditious resolution of
the issues raised in this case can be reached without undue delay. A photo copy
of the Deed of Absolute Sale over the subject property, executed by herein
defendants-spouses Lim Hio and Dolores Chu in favor of said Leonardo C. Lim and
William C. Lim, is hereto attached as Annex 1 hereof.21. There is improper joinder of
parties in the complaint. Consequently, answering defendants are thus unduly
compelled to litigate in a suit regarding matters and facts as to which they have no
knowledge of nor any involvement or participation in
22. Plaintiff is barred by the principle of estoppel in bringing this suit, as it
was the one who, by its governmental authority, issued the titles to the subject
property.
This action is barred by the principles of prescription and
laches for plaintiffs unreasonable delay in brining this suit,
particularly against defendant Flores, from whom herein answering
defendants acquired the subject property in good faith and for
value. If truly plaintiff has a clear and valid cause of action on the
subject property, it should not have waited thirty (30) years to bring
suit.
 
Two years later, or on April 21, 2008, De Leon filed his complaint in
intervention in Civil Case No. 4674MN.[15] He expressly named therein as
defendants vis--vis his intervention not only the Spouses Lim Hio and Dolores Chu,
the original defendants, but also their sons Leonardo Lim, married to Sally Khoo, and
William Lim, married to Sally Lee, the same persons whom the respondent had
already alleged in the answer, supra, to be the transferees and currentowners of the
parcels of land.[16]
 
The following portions of De Leons complaint in intervention in Civil Case
No. 4674MN are relevant, viz:
2. Defendant spouses Lim Hio and Dolores Chu, are Filipino citizens
with addresses at 504 Plaza del Conde, Manila and at 46 C. Arellano St., San
Agustin, Malabon City, where they may be served with summons and other
court processes;
3. Defendant spouses Leonardo Lim and Sally Khoo and defendant
spouses William Lim and Sally Lee are all of legal age and with postal address
at Rms. 501-502 Dolores Bldg., Plaza del Conde, Binondo, Manila, alleged
purchasers of the property in question from defendant spouses Lim Hio and
Dolores Chu;
4. Defendants Registrar of Deeds of Malabon City holds office
in Malabon City, where he may be served with summons and other court
processes. He is charged with the duty, among others, of registering decrees of Land
Registration in Malabon City under the Land Registration Act;
7. That intervenor Jessie de Leon, is the owner of a parcel of land located
in Malabon City described in TCT no. M-15183 of the Register of Deeds of Malabon
City, photocopy of which is attached to this Complaint as Annex G, and copy of the
location plan of the aforementioned property is attached to this complaint as Annex H
and is made an integral part hereof;
8. That there are now more or less at least 40 squatters on intervenors
property, most of them employees of defendant spouses Lim Hio and Dolores Chu
and defendant spouses Leonardo Lim and Sally Khoo and defendant spouses William
Lim and Sally Lee who had gained access to intervenors property and built their
houses without benefit of any building permits from the government who had made
their access to intervenors property thru a two panel metal gate more or less 10
meters wide and with an armed guard by the gate and with permission from
defendant spouses Lim Hio and Dolores Chu and/or and defendant spouses
Leonardo Lim and Sally Khoo and defendant spouses William Lim and Sally Lee
illegally entered intervenors property thru a wooden ladder to go over a 12 foot wall
now separating intervenors property from the former esquinita which is now part of
defendant spouses Lim Hio and Dolores Chus and defendant spouses Leonardo Lim
and Sally Khoos and defendant spouses William Lim and Sally Lees property and this
illegally allowed his employees as well as their relatives and friends thereof to illegally
enter intervenors property through the ladders defendant spouses Lim Hio and
Dolores Chu installed in their wall and also allowed said employees and relatives as
well as friends to build houses and shacks without the benefit of any building permit
as well as permit to occupy said illegal buildings;
9. That the enlargement of the properties of spouses Lim Hio and Dolores
Chu had resulted in the closure of street lot no. 3 as described in TCT no. 143828,
spouses Lim Hio and Dolores Chu having titled the street lot no. 3 and placed a wall
at its opening on C. Arellano street, thus closing any exit or egress or entrance to
intervenors property as could be seen from Annex H hereof and thus preventing
intervenor from entering into his property resulted in preventing intervenor from fully
enjoying all the beneficial benefits from his property;
10. That defendant spouses Lim Hio and Dolores Chu and later on
defendant spouses Leonardo Lim and Sally Khoo and defendant spouses
William Lim and Sally Lee are the only people who could give permission to
allow third parties to enter intervenors property and their control over
intervenors property is enforced through his armed guard thus exercising
illegal beneficial rights over intervenors property at intervenors loss and
expense, thus depriving intervenor of legitimate income from rents as well as
legitimate access to intervenors property and the worst is preventing the
Filipino people from enjoying the Malabon Navotas River and enjoying the right
of access to the natural fruits and products of the Malabon Navotas River and
instead it is defendant spouses Lim Hio and Dolores Chu and defendant
spouses Leonardo Lim and Sally Khoo and defendant spouses William Lim and
Sally Lee using the public property exclusively to enrich their pockets;
xxx
13. That defendant spouses Lim Hio and Dolores Chu and
defendant spouses Leonardo Lim and Sally Khoo and
defendant spouses William Lim and Sally Lee were
confederating, working and helping one another in their
actions to inhibit intervenor Jessie de Leon to gain access and
beneficial benefit from his property;
 
On July 10, 2008, the respondent, representing all the defendants named in
De Leons complaint in intervention, responded in an answer to the complaint in
intervention with counterclaim and cross-claim,[17] stating that spouses Lim Hio and
Dolores Chu xxx are now both deceased, to wit
2. The allegations in paragraphs 2 and 3 of the Complaint are ADMITTED,
with the qualification that defendants-spouses Leonardo Lim and Sally Khoo Lim,
William Lim and Sally Lee Lim are the registered and lawful owners of the
subject property covered by Transfer Certificate of Title No. M-35929, issued by
the Register of Deeds for Malabon City, having long ago acquired the same
from the defendants-spouses Lim Hio and Dolores Chu, who are now both
deceased. Copy of the TCT No. M-35929 is attached hereto as Annexes 1 and 1-
A. The same title has already been previously submitted to this Honorable Court
on December 13, 2006
 The respondent subsequently submitted to the RTC a so-called clarification
and submission,[18] in which he again adverted to the deaths of Spouses Lim Hio and
Dolores Chu, as follows:
 1. On March 19, 2009, herein movants-defendants Lim filed before this
Honorable Court a Motion for Substitution of Defendants in the Principal Complaint of
the plaintiff Republic of the Philippines, represented by the DENR;
2. The Motion for Substitution is grounded on the fact that the two (2)
parcels of land, with the improvements thereon, which are the subject matter of
the instant case, had long been sold and transferred by the principal
defendants-spouses Lim Hio and Dolores Chu to herein complaint-in-
intervention defendants Leonardo C. Lim and William C. Lim, by way of a Deed
of Absolute Sale, a copy of which is attached to said Motion as Annex 1 thereof.
3. Quite plainly, the original principal defendants Lim Hio and Dolores
Chu, having sold and conveyed the subject property, have totally lost any title,
claim or legal interest on the property. It is on this factual ground that this
Motion for Substitution is based and certainly not on the wrong position of
Intervenor de Leon that the same is based on the death of defendants Lim Hio
and Dolores Chu.
4. Under the foregoing circumstances and facts, the demise of
defendants Lim Hio and Dolores Chu no longer has any significant relevance to
the instant Motion. To, however, show the fact of their death, photo copy of their
respective death certificates are attached hereto as Annexes 1 and 2 hereof.
5. The Motion for substitution of Defendants in the Principal Complaint
dated March 18, 2009 shows in detail why there is the clear, legal and imperative
need to now substitute herein movants-defendants Lim for defendants Lim Hio and
Dolores Chu in the said principal complaint.
6. Simply put, movants-defendants Lim have become the indispensable
defendants in the principal complaint of plaintiff DENR, being now the registered and
lawful owners of the subject property and the real parties-in-interest in this
case. Without them, no final determination can be had in the Principal complaint.
7. Significantly, the property of intervenor Jessie de Leon, which is the
subject of his complaint-in-intervention, is identically, if not similarly, situated as that
of herein movants-defendants Lim, and likewise, may as well be a proper subject of
the Principal Complaint of plaintiff DENR.
8. Even the plaintiff DENR, itself, concedes the fact that herein movants-
defendants Lim should be substituted as defendants in the principal complaint as
contained in their Manifestation dated June 3, 2009, which has been filed in this case.
WHEREFORE, herein movants-defendants Lim most respectfully submit
their Motion for substitution of Defendants in the Principal Complaint and pray that the
same be granted.
xxx
 
Did the respondent violate the letter and spirit of the Lawyers Oath and
the Code of Professional Responsibility in making the averments in the aforequoted
pleadings of the defendants?
A plain reading indicates that the respondent did not misrepresent that
Spouses Lim Hio and Dolores Chu were still living. On the contrary, the respondent
directly stated in the answer to the complaint in intervention with counterclaim and
cross-claim, supra, and in the clarification and submission, supra, that the Spouses
Lim Hio and Dolores Chu were already deceased.
Even granting, for the sake of argument, that any of the respondents
pleadings might have created any impression that the Spouses Lim Hio and Dolores
Chu were still living, we still cannot hold the respondent guilty of any dishonesty or
falsification. For one, the respondent was acting in the interest of the actual owners of
the properties when he filed the answer with counterclaim and cross-claim on April
17, 2006. As such, his pleadings were privileged and would not occasion any action
against him as an attorney. Secondly, having made clear at the start that the Spouses
Lim Hio and Dolores Chu were no longer the actual owners of the affected properties
due to the transfer of ownership even prior to the institution of the action, and that the
actual owners (i.e., Leonardo and William Lim) needed to be substituted in lieu of said
spouses, whether the Spouses Lim Hio and Dolores Chu were still living or already
deceased as of the filing of the pleadings became immaterial. And, lastly,
De Leon could not disclaim knowledge that the Spouses Lim Hio and Dolores Chu
were no longer living. His joining in the action as a voluntary intervenor charged him
with notice of all the other persons interested in the litigation. He also had an actual
awareness of such other persons, as his own complaint in intervention, supra, bear
out in its specific allegations against Leonardo Lim and William Lim, and their
respective spouses. Thus, he could not validly insist that the respondent committed
any dishonesty or falsification in relation to him or to any other party.
 
III
Good faith must always motivate any complaint
against a Member of the Bar
 
 
According to Justice Cardozo,[19] xxx the fair fame of a lawyer, however
innocent of wrong, is at the mercy of the tongue of ignorance or malice. Reputation in
such a calling is a plant of tender growth, and its bloom, once lost, is not easily
restored.
 
A lawyers reputation is, indeed, a very fragile object. The Court, whose
officer every lawyer is, must shield such fragility from mindless assault by the
unscrupulous and the malicious. It can do so, firstly, by quickly cutting down any
patently frivolous complaint against a lawyer; and, secondly, by demanding good faith
from whoever brings any accusation of unethical conduct. A Bar that is insulated from
intimidation and harassment is encouraged to be courageous and fearless, which can
then best contribute to the efficient delivery and proper administration of justice.
 
The complainant initiated his complaint possibly for the sake of harassing
the respondent, either to vex him for taking the cudgels for his clients in connection
with Civil Case No. 4674MN, or to get even for an imagined wrong in relation to the
subject matter of the pending action, or to accomplish some other dark purpose. The
worthlessness of the accusation apparent from the beginning has impelled us into
resolving the complaint sooner than later.
 
WHEREFORE, we dismiss the complaint for disbarment or suspension filed
against Atty. Eduardo G. Castelo for utter lack of merit.
 
SO ORDERED.