PALE - Topic 4 Attorney's Fees

Problem Areas in Legal Ethics:
Cases & Commentaries
Topic 4 – Attorney’s fees & Compensation for Legal Services

Atty. Rodel V. Capule, MD, author
Atty. Leah P. Laja, co-author
Problem Areas in Legal Ethics

Arellano University School of Law – Arellano Law Foundation
2019-2020
WARNING
Unauthorized reproduction or claim of ownership of this original [derivative] work by any person amounts to
copyright infringement.
Lawyering is NOT a money-making venture
Lawyering is not a moneymaking venture and lawyers are not merchants. Law advocacy is not capital that
yields profits. The returns it births are simple rewards for a job done or service rendered. It is a calling that,
unlike mercantile pursuits which enjoy a greater deal of freedom from governmental interference, is
impressed with a public interest, for which it is subject to state regulation.
- Atty. Raul H. Sesbreño v. Court of Appeals, et. al., G.R. No. 161390, April 16, 2008
Law practice is not a pro bono proposition either

As a rule, law practice is not a pro bono proposition and a lawyer's sensitivity and concern for unpaid fees are
understandable; lawyers incur expenses in running their practice and generally depend, too, on their law
practice income for their living expenses. – Somosot v. Atty Lara, A.C. No. 7024 January 30, 2009
Contract for legal service is not necessarily the law between the parties
Contracts for attorney's services in this jurisdiction stand upon an entirely different footing from contracts
for the payment of compensation for any other services. – Bachrach v. Golingco, G.R. No. L-13660, November
13, 1918
This is a very different rule from that announced in [xxx] reference to the obligation of contract in general,
where it is said that such obligation has the force of law between the contracting parties.
In order to enable the court to ignore an express contract for an attorney's fees, it is not necessary to show, as
in other contracts, that it is contrary to morality or public policy (art. 1255, Civil Code). It is enough that it
is unreasonable or unconscionable. – Bachrach v. Golingco, G.R. No. L-13660, November 13, 1918
Basic principles
An attorney earns a fee only when the attorney provides a benefit or service to the client.
A lawyer cannot charge a fee for doing nothing.
All client funds xxx must be held in trust until there is a basis on which to conclude that the attorney
"earned" the fee, otherwise, the funds must remain in the client’s trust account because they are not the
attorney's property.
Honorarium lawfully earned

The fact that the practice of law is not a business and the attorney plays a vital role in the administration of
justice underscores the need to secure him his honorarium lawfully earned as a means to preserve the
decorum and respectability of the legal profession.
A lawyer is as much entitled to judicial protection against injustice, imposition or fraud on the part of his
client as the client against abuse on the part of his counsel. The duty of the court is not alone to see that a
lawyer acts in a proper and lawful manner; it is also its duty to see that a lawyer is paid his just fees.
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With his capital consisting of his brains and with his skill acquired at tremendous cost not only in money but
in expenditure of time and energy, he is entitled to the protection of any judicial tribunal against any attempt
on the part of his client to escape payment of his just compensation. It would be ironic if after putting forth
the best in him to secure justice for his client he himself would not get his due. - Aquino v. Hon. Casabar, et.
al., G.R. No. 191470 January 26, 2015
Terms of employment included in the fiduciary relationship

Attorneys have a fiduciary relationship with their clients and, therefore, must deal with them with the
utmost good faith.
The fiduciary relationship arises when a client first consults an attorney and extends to all dealings between
the attorney and the client, including the process by which the attorney and the client reach an agreement
concerning the terms of employment.
The amount of good faith which an attorney must exercise in transactions with a client is, therefore, much
higher than that required in other business transactions where the parties are dealing at arm's length.
An attorney's fiduciary obligations affect both the process used to set a fee and the amount of the fee itself.
- Alexander & Davis, Jr. v. Inman, 903 S.W.2d 686 (1995)
In order to enforce a contract [of employment] with a client, an attorney must demonstrate the
following
(1) that he or she provided the client with the same information and advice that the attorney would have
provided the client had he or she not been personally interested in the transaction;
(2) that the client fully understood the meaning and effect of the contract;
(3) that the client's understanding of the contract was the same as the attorney's; and
(4) that the contract is just and reasonable.
Agreeing on the terms of compensation is an integral part of the employment process

As soon as feasible after a lawyer has been employed, it is desirable that he [or she] reach a clear agreement
with his [or her] client as to the basis of the fee charges to be made. Such a course will not only prevent later
misunderstanding but will also work for good relations between the lawyer and the client.
It is usually beneficial to reduce to writing the understanding of the parties regarding the fee, particularly
when it is contingent. A lawyer should be mindful that many persons who desire to employ him [or her] may
have had little or no experience with fee charges of lawyers, and for this reason he [or she] should explain
fully to such persons the reasons for the particular fee arrangement he [or she] proposes.
- Alexander & Davis, Jr. v. Inman, 903 S.W.2d 686 (1995) citing Tenn.S.Ct.R. 8, EC 2-19
Client’s conformity to the amount is not controlling

“The fact that the client agreed to the [amount of the fee] does not relieve the attorney from the burden of
showing that the amount agreed upon was fair and reasonable." – Attorney Grievance Commission of
Maryland v. Korotki, 569 A.2d 1224, 1990
Rule 138
Sec. 24. Compensation of attorneys; agreement as to fees. - An attorney shall be entitled to have and recover
from his client no more than a reasonable compensation for his services, with a view:
1) to the importance of the subject matter of the controversy,
2) the extent of the services rendered, and
3) the professional standing of the attorney.
No court shall be bound by the opinion of attorneys as expert witnesses as to the proper compensation, but
may disregard such testimony and base its conclusion on its own professional knowledge. A written contract
for services shall control the amount to be paid therefor unless found by the court to be unconscionable or
unreasonable.
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SEC. 25. Unlawful retention of client’s funds; contempt — When an attorney unjustly retains in his hands
money of his client after it has been demanded he may be punished for contempt as an officer of the Court
who has misbehaved in his official transactions; but proceedings under this section shall not be a bar to a
criminal prosecution.
Rule on division of legal fees

Rule 9.02 - A lawyer shall not divide or stipulate to divide a fee for legal services with persons not licensed to
practice law, except:
(a) Where there is a pre-existing agreement with a partner or associate that, upon the latter's death,
money shall be paid over a reasonable period of time to his estate or to persons specified in the
agreement; or
(b) Where a lawyer undertakes to complete unfinished legal business of a deceased lawyer; or
(c) Where a lawyer or law firm includes non-lawyer employees in a retirement plan even if the plan is
based in whole or in part, on a profit sharing agreement.
Rule when moneys and properties of client come into possession of counsel
CANON 16 - A LAWYER SHALL HOLD IN TRUST ALL MONEYS AND PROPERTIES OF HIS CLIENT
THAT MAY COME INTO HIS POSSESSION.
Rule 16.01 - A lawyer shall account for all money or property collected or received for or from the client.
Rule 16.02 - A lawyer shall keep the funds of each client separate and apart from his own and those of
others kept by him.
Rule 16.03 - A lawyer shall deliver the funds and property of his client when due or upon demand.
However, he shall have a lien over the funds and may apply so much thereof as may be necessary to
satisfy his lawful fees and disbursements, giving notice promptly thereafter to his client. He shall also
have a lien to the same extent on all judgments and executions he has secured for his client as provided
for in the Rules of Court.
Guidelines in determining fair and reasonable fees

CANON 20 - A LAWYER SHALL CHARGE ONLY FAIR AND REASONABLE FEES.
Rule 20.01 - A lawyer shall be guided by the following factors in determining his fees:
(a) the time spent and the extent of the service rendered or required;
(b) the novelty and difficulty of the questions involved;
(c) The importance of the subject matter;
(d) The skill demanded;
(e) The probability of losing other employment as a result of acceptance of the proffered case;
……..
(f) The customary charges for similar services and the schedule of fees of the IBP chapter to which he
belongs;
(g) The amount involved in the controversy and the benefits resulting to the client from the service;
(h) The contingency or certainty of compensation;
(i) The character of the employment, whether occasional or established; and
(j) The professional standing of the lawyer.
……
Rule 20.02 - A lawyer shall, in case of referral, with the consent of the client, be entitled to a division of fees
in proportion to the work performed and responsibility assumed.
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Rule 20.03 - A lawyer shall not, without the full knowledge and consent of the client, accept any fee, reward,
costs, commission, interest, rebate or forwarding allowance or other compensation whatsoever related to his
professional employment from anyone other than the client.
Rule 20.04 - A lawyer shall avoid controversies with clients concerning his compensation and shall resort to
judicial action only to prevent imposition, injustice or fraud.
The following are the circumstances to be considered in determining the compensation of an

attorney
1. the amount and character of the services rendered;
2. the labor, time, and trouble involved;
3. the nature and importance of the litigation or business in which the services were rendered; the
responsibility imposed;
4. the amount of money or the value of the property affected by the controversy, or involved in the
employment,
5. the skill and experience called for in the performance of the services;
……
6. the professional character and social standing of the attorney;
7. the results secured; and
8. whether or not the fee is absolute or contingent, it being a recognized rule that an attorney may properly
charge a much a larger fee when it is to be contingent that when it is not.
9. The financial ability of the defendant may also be considered not to enhance the amount above a
reasonable compensation, but to determine whether or not he is able to pay a fair and just compensation for
the services rendered, or as incident in ascertaining the importance and gravity of the interests involved in
the litigation. – Research and Services Realty, Inc, v. CA, G.R. No. 124074 January 27, 1997
Attorney's fee is basically a compensation

Attorney's fee is basically a compensation. In its ordinary sense, "the term (compensation) applies not only
to salaries, but to compensation by fees for specific services.”
– Ruiz, et. Al. v. CA, et. al., G.R. No. 116909 February 25, 1999
Bases for just compensation

With his capital consisting of his brains and with his skill acquired at tremendous cost not only in money but
in expenditure of time and energy, he is entitled to the protection of any judicial tribunal against any attempt
on the part of his client to escape payment of his just compensation.
– Masmud v. NLRC, G.R. No. 183385, February 13, 2009
Lawyer concedes that his/her professional fee is subject to court’s regulatory power
Upon taking his attorney’s oath as an officer of the court, a lawyer submits himself to the authority of the
courts to regulate his right to charge professional fees.
– Rayos v. Atty. Hernandez, G.R. No. 169079, February 12, 2007
Lawyer’s compensation for professional services rendered is subject to the supervision of the court
Under Section 24, Rule 138 of the Rules of Court, a written contract for services shall control the amount to
be paid therefor unless found by the court to be unconscionable or unreasonable.
It follows that a lawyer’s compensation for professional services rendered is subject to the supervision of the
court, not just to guarantee that the fees he charges and receives remain reasonable and commensurate with
the services rendered, but also to maintain the dignity and integrity of the legal profession to which he
belongs. Upon taking his attorney’s oath as an officer of the court, a lawyer submits himself to the authority
of the courts to regulate his right to charge professional fees.
- Atty. Orocio v. Angulan et. al., G.R. No. 179892-93 [2009]
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xxx a lawyer is primarily a court officer charged with the duty of assisting the court in administering impartial
justice between the parties, and hence, his fees should be subject to judicial control. Nor it should be ignored
that sound public policy demands that courts disregard stipulations for counsel fees whenever they appear to
be a source of speculative profit at the expense of the debtor or mortgagor. – Gorospe and Sebastian, G.R. No.
L-12735, October 30, 1959
The court has discretion to modify the attorney's fees previously agreed upon by the parties under a
valid contractual stipulation
For the law recognizes the validity of stipulations included in documents such as negotiable instruments and
mortgages with respect to attorney's fees in the form of penalty provided that they are not unreasonable or
unconscionable.
There is no mistake, however, that the reasonableness of attorney's fees, though seemingly a matter of fact
which takes into account the peculiar circumstances of the case, is a question of law where the facts are
not disputed at all. For a question of law does not call for an examination of the probative value of the
evidence presented by the parties. – Radiowealth Finance Co. Inc. v. International Corporate bank and Court
of Appeals, GR. No. 77042-43 February 28, 1990
Primary characteristics which distinguish the legal profession from business

1. A duty of public service, of which the emolument is a byproduct, and in which one may attain the highest
eminence without making much money.
2. A relation as an "officer of court" to the administration of justice involving thorough sincerity, integrity,
and reliability.
3. A relation to clients in the highest degree fiduciary.
4. A relation to colleagues at the bar characterized by candor, fairness, and unwillingness to resort to current
business methods of advertising and encroachment on their practice, or dealing directly with their
clients.
– Atty. Khan, Jr. v. Atty. Simbillo, A.C. No. 5299, August 19, 2003
Fees must be earned

We hold that an attorney earns fees only by conferring a benefit on or performing a legal service for the
client. Unless the attorney provides some benefit or service in exchange for the fee, the attorney has not
earned any fees and, with a possible exception in very limited circumstances, the attorney cannot treat
advance fees as her property.
– In the matter of Larry D. Sather, 3 P.3d 403 (2000)
When is the best time to agree on the attorney’s fees?

As regards his professional fees, we stress that the proper time to deal with this delicate issue is upon the
commencement of the lawyer-client relationship. xxx Such prudence would have spared the Court this
controversy over a lawyer's compensation, a suit that should be avoided except to prevent imposition,
injustice or fraud.
- Dolores Silva vda. de Fajardo v. Atty. Rexie Efren A. Bugaring, A.C. NO. 5113, October 7, 2004
Contracts made during the existence of the attorney-client relationship

It is important to determine at the outset whether the fee contract was made, as defendants contend and the
trial court found, during the existence of an attorney-client relationship between plaintiff and defendants or,
as plaintiff argues, at the inception thereof. It is more difficult for an attorney to enforce such a contract if
made during the existence of the relationship rather than at its inception.
Some courts hold a contract for a percentage of the recovery made while such a relationship exists is void and
no more than fair and reasonable compensation may be recovered no matter what sum is mentioned in the
contract.
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…….
Where such contracts made during the existence of the attorney-client relationship are not regarded as void
they are viewed with suspicion and closely scrutinized by the courts, as are all dealings between trustee and
cestui.
There is a presumption of unfairness or invalidity attaching to a contract for compensation made after the
relationship has been established and the burden is on the attorney to show it was fairly and openly made,
that the client was fully informed concerning it and understood its effect.
– Lawrence v. Tschirgi, 57 N.W.2d 46 (1953)
“Fee” v. “Lien”
They are two different matters.
It is axiomatic, of course, that [lawyer] must show that he is or will become entitled to a fee before he is
entitled to a lien.
- The Industry Network System, Inc. v. Armstrong World Industries, Inc. 54 F.3d 150 (1995)
Professional fee is subject to court’s regulatory power

Upon taking his attorney’s oath as an officer of the court, a lawyer submits himself to the authority of the
courts to regulate his right to charge professional fees.
–Rayos v. Atty. Hernandez, G.R. No. 169079, February 12, 2007
Unconscionable fee
Attorney's fees are unconscionable if they affront one's sense of justice, decency or reasonableness, or if they
are so disproportionate to the value of the services rendered.
Under Section 24, Rule 138 of the Rules of Court, a written contract for services shall control the amount to
be paid therefor unless found by the court to be unconscionable or unreasonable.
– Atty. Orocio v. Anguluan and NPC, G.R. NO. 179892-93, January 30, 2009
“Money down first” policy is unethical

The impropriety lies in the fact that she suggested that complainant borrow money from Domingo Natavio
for the payment thereof. This act impresses upon the Court that respondent would do nothing to the cause
of complainant’s mother-in-law unless payment of the acceptance fee is made. Her duty to render legal
services to her client with competence and diligence should not depend on the payment of acceptance fee.
– Ceniza v. Atty. Rubia, A.C. No. 6166, October 2, 2009
I, do solemnly swear that xxx I will delay no man for money xxx.
Two commonly accepted concepts of attorney’s fees
In its ordinary concept, an attorney’s fee is the reasonable compensation paid to a lawyer by his client for the
legal services he has rendered to the latter. The basis of this compensation is the fact of his employment by
and his agreement with the client.
In its extraordinary concept, an attorney’s fee is an indemnity for damages ordered by the court to be paid by
the losing party in a litigation. The basis of this is any of the cases provided by law where such award can be
made, such as those authorized in Article 2208, Civil Code, and is payable not to the lawyer but to the client,
unless they have agreed that the award shall pertain to the lawyer as additional compensation or as part
thereof.
- Traders Royal Bank Employees Union-Independent v. NLRC G.R. No. 120592. March 14, 1997
Award of (extraordinary) attorney’s fee is discretionary
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The power of this Court to reduce or even delete the award of attorneys’ fees cannot be denied. Lawyers are
officers of the Court and they participate in the fundamental function of administering justice. When they
took their oath, they submitted themselves to the authority of the Court and subjected their professional fees
to judicial control.
– Pineda v. Atty. De Jesus, et. al. G.R. No. 155224 August 23, 2006
Attorney’s fees not to be awarded every time a party wins a suit

(T)he law is clear that in the absence of stipulation, attorney’s fees may be recovered as actual or
compensatory damages under any of the circumstances provided for in Article 2208 of the Civil Code.
The general rule is that attorney’s fees cannot be recovered as part of damages because of the policy that no
premium should be placed on the right to litigate. They are not to be awarded every time a party wins a suit.
The power of the court to award attorney’s fees under Article 2208 demands factual, legal, and equitable
justification. Even when a claimant is compelled to litigate with third persons or to incur expenses to protect
his rights, still attorney’s fees may not be awarded where no sufficient showing of bad faith could be reflected
in a party’s persistence in a case other than an erroneous conviction of the righteousness of his cause. –
Philippine National Construction Corp. v. APAC Marketing Corp., G.R. No. 190957, June 5, 2013
Attorney's fees and expenses of litigation proper (under the New Civil Code)
Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs,
cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid,
just and demandable claim.
……….
6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmen's compensation and employer's liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorney's fees and expenses of
litigation should be recovered.
In all cases, the attorney's fees and expenses of litigation must be reasonable.
Effect if contract for legal services is made before or during the attorney-client relationship
contract. – Lawrence v. Tschirgi, 57 N.W.2d 46 (1953)
……..
cestui. There is a presumption of unfairness or invalidity attaching to a contract for compensation made after
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the relationship has been established and the burden is on the attorney to show it was fairly and openly
made, that the client was fully informed concerning it and understood its effect. – Lawrence v. Tschirgi, 57
N.W.2d 46 (1953)
Forum does not qualify payment of compensation

We have noted in the beginning that the services here were rendered in a case of an administrative nature.
But that does not alter the application of the proper rule:
Professional services, to prepare and advocate just claims for compensation, are as legitimate as services
rendered in court in arguing a cause to convince a court or jury that the claim presented or the defense set up
against a claim presented by the other party ought to be allowed or rejected. Parties in such cases require
advocates; and the legal profession must have a right to accept such employment and to receive
compensation for their services.
– De Guzman v. Visayan Rapid Transport Co. Inc. G.R. No. 46396 September 30, 1939
Quality of legal service should not vary if rendered for free

It is true that he is a court-appointed counsel. But we do say that as such counsel de oficio, he has as high a
duty to the accused as one employed and paid by defendant himself. Because, as in the case of the latter, he
must exercise his best efforts and professional ability in behalf of the person assigned to his care. His is to
render effective assistance. The accused defendant expects of him due diligence, not mere perfunctory
representation. We do not accept the paradox that responsibility is less where the defended party is poor. -
In Re: Atty. Adriano, G.R. No. L-26868 [1969]
Rule 14.04 - A lawyer who accepts the cause of a person unable to pay his professional fees shall observe the
same standard of conduct governing his relations with paying clients.
Written v. Oral Agreements

An agreement between the lawyer and his client, providing for the former’s compensation, is subject to the
ordinary rules governing contracts in general. As the rules stand, controversies involving written and oral
agreements on attorney’s fees shall be resolved in favor of the former.
- Conjugal Partnership of the Spouses Vicente Cadavedo v. Atty. Lacaya, G.R. No. 173188, January 15, 2014
Written contract of legal fees is ordinarily controlling

A stipulation on a lawyer’s compensation in a written contract for professional services ordinarily controls the
amount of fees that the contracting lawyer may be allowed, unless the court finds such stipulated amount to
be unreasonable or unconscionable. If the stipulated amount for attorney’s fees is excessive, the contract
may be disregarded even if the client expressed their conformity thereto.
Attorney’s fees are unconscionable if they affront one’s sense of justice, decency or reasonableness, or if they
are so disproportionate to the value of the services rendered. In such a case, courts are empowered to reduce
the attorney’s fee or fix a reasonable amount thereof taking into consideration the surrounding
circumstances and the established parameters. - Atty. Orocio v. Angulan et. al., G.R. No. 179892-93 [2009]
Basis when there is no written contract

Moreover, the payment of attorney's fees to respondent David may also be justified by virtue of the
innominate contract of facio ut des (I do and you give) which is based on the principle that "no one shall
unjustly enrich himself at the expense of another." Innominate contracts have been elevated to a codal
provision in the New Civil Code by providing under Article 1307 xxx.
While there was no expressed contract between the parties for the payment of attorney's fees, the fact
remains that respondent David rendered legal services to petitioner Corpus and therefore as aforestated, is
entitled to compensation under the innominate contract of facio ut des. And such being the case, respondent
David is entitled to a reasonable compensation.
- Corpuz v. Court of Appeals, G.R. No. L-40424 June 30, 1980
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Interpreting and enforcing attorney-client fee agreements
When interpreting and enforcing attorney-client fee agreements, it is "not enough to simply say that a
contract is a contract. There are ethical considerations overlaying the contractual relationship." - Lopez v.
Muñoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 868 (Tex.2000)
Duty to issue a receipt

Moreover, Atty. Camacho failed to issue a receipt to MDAHI from the moment he received the said amount.
In Tarog v. Ricafort, the Court held that ethical and practical considerations made it both natural and
imperative for a lawyer to issue receipts, even if not demanded, and to keep copies of the receipts for his own
records. Pursuant to Rule 16.01 of the CPR, a lawyer must be aware that he is accountable for the money
entrusted to him by the clients, and that his only means of ensuring accountability is by issuing and keeping
receipts. - Sison, Jr. v. Atty. Camacho, A.C. No. 10910 [Formerly CBD Case No. 12-3594], January 19, 2016
“Contract for legal services” or
“Contract of professional employment” not susceptible to a claim for breach of contract
That the client may at any time for any reason or without any reason discharge his attorney is a firmly
established rule which springs from the personal and confidential nature of the relation which such a
contract of employment calls into existence.
If the client has the right to terminate the relationship of attorney and client at any time without cause, it
follows as a corollary that the client cannot be compelled to pay damages for exercising a right which is an
implied condition of the contract.
…….
If in such a case the client can be compelled to pay damages to his attorney for the breach of the contract, the
contract under which a client employs an attorney would not differ from the ordinary contract of
employment.
In such a case the attorney may recover the reasonable value of the services which he has rendered but he
cannot recover for damages for the breach of contract.
The discharge of the attorney by his client does not constitute a breach of the contract, because it is a term of
such contract, implied from the peculiar relationship which the contract calls into existence, that the client
may terminate the contract at any time with or without cause. – Cristobal v. Ocson, G.R. No. L-19205,
February 13, 1923
No breach of contract when terminating a lawyer and client relationship

If the client has the right to terminate the relationship of attorney and client at any time without cause, it
follows as a corollary that the client cannot be compelled to pay damages for exercising a right which is an
implied condition of the contract.
If in such a case the client can be compelled to pay damages to his attorney for the breach of the contract, the
contract under which a client employs an attorney would not differ from the ordinary contract of
employment. In such a case the attorney may recover the reasonable value of the services which he has
rendered but he cannot recover for damages for the breach of contract. The discharge of the attorney by his
client does not constitute a breach of the contract, because it is a term of such contract, implied from the
peculiar relationship which the contract calls into existence, that the client may terminate the contract at any
time with or without cause. – Cristobal v. Ocson, G.R. No. L-19205, February 13, 1923
WON the fee-shifting provision in the Agreement required that the trial court award attorney fees
to a prevailing party
The fee-shifting provision at issue in this case provides:
In the event that any action is filed with regard to this Agreement, the unsuccessful party in the action
shall pay to the successful party, in addition to all sums that either party may be called upon to
pay, a reasonable sum for the successful parties [sic] attorney fees at the discretion of the court.
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Unlike the statutory scheme, fee-shifting provisions in contracts generally serve not to ensure access to the
courts, but rather to ensure that the prevailing party in a contract dispute is made whole. – Capellari v.
Capellari, CNo. 37A05–1505–DR–479, December 22, 2015
Opinion of a judge as to the capacity of a lawyer is not the basis of the right to a lawyer's fee
In his answer before this Court respondent judge justifies his order for the return of the P200.00 on the
ground that petitioner is "below average standard of a lawyer." The opinion of a judge as to the capacity of
a lawyer is not the basis of the right to a lawyer's fee. It is the contract between the lawyer and client and the
nature of the services rendered. - Atty. Manuel L. Fernandez v. Hon. Eloy B. Bello, G.R. No. L-14277, April 30,
1960
A non-lawyer is not entitled to attorney’s fees

On the last issue of attorney's fees or service fees for private respondents' authorized representative, Article
222 of the Labor Code, as amended by Section 3 of Presidential Decree No. 1691, states that non-lawyers may
appear before the NLRC or any labor arbiter only (1) if they represent themselves, or (2) if they represent their
organization or the members thereof. While it may be true that Guillermo H. Pulia was the authorized
representative of private respondents, he was a non-lawyer who did not fall in either of the foregoing
categories. Hence, by clear mandate of the law, he is not entitled to attorney's fees.
Furthermore, the statutory rule that an attorney shall be entitled to have and recover from his client a
reasonable compensation for his services necessarily imports the existence of an attorney-client relationship
as a condition for the recovery of attorney's fees, and such relationship cannot exist unless the client's
representative is a lawyer. - Five J Taxi and/or Juan S. Armamento v. NLRC, et. al., G.R. No. 111474, August 22,
1994
Is the right of a client to enter into a compromise agreement without the consent of his lawyer
defeated by a contrary written contract?
It appears from the record that on July 31, 1921, the respondents by means of a written contract, retained the
petitioner to represent them as their lawyer. The contract fixed the petitioner's fee at P200 in advance with an
additional contigent fee of P1,300. It was also provided in the contract that respondent should not
compromise the claim against the defendant in the case without express consent of his lawyer.
Through the sole effort of respondents the case was dismissed without notice to their counsel.
The burden of the petitioner's (counsel of record) contention is (1) that he, as attorney of record, was entitled
to notice of his client's motion to dismiss the case, and (2) that after the approval of the bill of exceptions the
lower court had lost jurisdiction of the case and had no power to dismiss it.
Right of a client to compromise suit

The client has also an undoubted right to compromise a suit without the intervention of his lawyer.
Though there is a valid agreement for the payment to the attorney of a large proportion of the sum recovered
in case of success this does not give the attorney such an interest in the cause of action that it prevents
plaintiff from compromising the suit. – Rustia v. The Judge of First Instance of Batangas, G.R. No. L-19695
November 17, 1922
We have recently held that a client has always the right to settle his cause of action and stop litigation
at any stage of the proceeding, subject, however, to the right of the attorney to receive compensation for
services rendered. - Aro v. The Hon. Nañawa, G.R. No. L-24163 [1969]
Limitation of client’s right to compromise suit

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
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such compromise, the better practice is to settle the matter of the attorney's fees in the same
proceeding, after hearing all the affected parties and without prejudice to the finality of the compromise in
so far as it does not adversely affect the rights of the lawyer. - Aro v. The Hon. Nañawa, G.R. No. L-24163
[1969]
Applies only in civil cases

Rule 1.04 - A lawyer shall encourage his clients to avoid, end or settle a controversy if it will admit of a fair
settlement.
FEES & FUNDS

Rule 16.02 - A lawyer shall keep the funds of each client separate and apart from his own and those of others
kept by him.
“Technical commingling” and a “Technical conversion of the funds”

"And while technically, perhaps, there was no commingling of funds when respondent put his client's money
in the safety deposit box, we are of the belief that such a covert method of handling a client's funds is highly
unprofessional and one which can only create suspicion and harmful inference.
A lawyer's clients, the courts and public alike, have a vital interest in his integrity and are entitled to require
that he shun even the appearance of any fraudulent design or purpose. - In re Richard Leon Clayter, 399
N.E.2d 1318 (1980)
Lawyers are required to deposit all advance payment of fees in a client trust account.

The ethical importance of the creation and maintenance of the client trust account is rooted in the general
principle that a lawyer who holds the funds or property of a client or third person in trust, even if for a brief
time or intermittently, has the duty as a fiduciary to safeguard and segregate those assets from the lawyer's
personal and business assets. –West Virginia Client Trust Account Handbook, 2017: A Guide to Creating and
Maintaining Client Trust Accounts
Client trust account

A "client trust account" is defined as an interest-bearing client account established to hold the funds of a
client.
It is a "special" bank account, usually a checking or savings account, that is a depository for all funds
belonging to clients and other persons coming into the lawyer's possession in connection with a
representation.
It is an interest or dividend-bearing account opened on behalf of one client or matter (usually in situations
where there is a large amount of money being held for a long period of time), where the interest earned on
the account can be calculated and remitted to the individual client or third person.
A lawyer may have one or more client trust accounts depending on need.
It prohibits funds of clients or third persons from being deposited in non-interest or non-dividend-bearing
accounts.
Required to deposit all advance payment of fees

Requiring lawyers to deposit all advance fee payments in a client trust account provides a "safe harbor"
approach for lawyers, which we adopt. We hold that lawyers must deposit all advance fee payments into a
client trust account.
Lawyers are required to deposit all advance payment of fees in a client trust account. – Iowa Supreme Court
Board of Professional Ethics and Conduct v. G. Richard Apland, 577 N.W.2d 50 (1998)
General Retainer
The only exception are retainer fees paid on a regular and continuing basis. Such a fee is commonly referred
to as a "general retainer," which is a fee for agreeing to make legal services available when needed during a
specified time period. In form it is an option contract; the fee is earned by the attorney when paid since the
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attorney is entitled to the money regardless of whether he actually performs any services for the client. –
Iowa Supreme Court Board of Professional Ethics and Conduct v. G. Richard Apland, 577 N.W.2d 50 (1998)
Special Retainer
In contrast to a general retainer is a "special retainer." A special retainer covers payment of funds for a specific
service. If the client and attorney agree that the attorney shall receive the special retainer payment in advance
of performing the services, then the payment is commonly referred to as an "advance fee payment."
Such a fee is a payment made by a client to the attorney prior to the performance of contemplated services.
The attorney depletes the prepayment as he renders services. If the matter is completed or the attorney's
work on the case otherwise ends, the attorney is obligated to refund the balance of the advance payment to
the client. – Iowa Supreme Court Board of Professional Ethics and Conduct v. G. Richard Apland, 577 N.W.2d
50 (1998)
Flat fee
A fixed or "flat fee" means the fee "embraces all work to be done, whether it be relatively simple and of short
duration, or complex and protracted." [] Such fees are commonplace for fairly routine and standardized legal
services, such as drafting a simple will or real estate document, or representing a party in an uncontested
divorce proceeding. []
Flat fees have their place. By our discussion we do not intend to discourage their use.
We see the flat fee as nothing more than an advance fee payment which a majority of authorities now agree
must be deposited in a client trust account. This position is consistent with our case law. Funds remain the
property of the client until the attorney earns them. – Iowa Supreme Court Board of Professional Ethics and
Conduct v. G. Richard Apland, 577 N.W.2d 50 (1998)
Whose money is it?

If it's the client's money, in whole or in part, it is subject to the trust account requirements.
If it is the lawyer's money, placing it into a trust account would violate the anti-commingling rule. – Iowa
Supreme Court Board of Professional Ethics and Conduct v. G. Richard Apland, 577 N.W.2d 50 (1998)
Why funds advanced by a client must be segregated

The rule requiring that an attorney segregate funds advanced by the client from the attorney's own funds
serves important interests. As a fiduciary to the client, one of an attorney's primary responsibilities is to
safeguard the interests and property of the client over which the attorney has control.
Requiring the attorney to segregate all client funds— including advance fees—from the attorney's own
accounts unless and until the funds become the attorney's property protects the client's property from
the attorney's creditors and from misuse by the attorney. - In re: Larry D. Sather, No. 9SA72, May 22,
2000
Three important purposes of prohibiting commingling

Requiring lawyers to segregate clients’ funds by depositing them in a trust account serves three important
purposes.
First, this regime protects clients’ funds from lawyers’ creditors.
Second, commingling funds exposes clients to a risk of loss in the event of a lawyer’s death or
disability.
Third, preventing commingling reduces the likelihood of lawyers’ conversion or misappropriation of
client funds.
– Dowling v. Chicago Options Associates and Michael E. Davis, 875 N.E.2d 1012
(2007)
Strong policy considerations support [the] position that lawyers must deposit all advance fee
payments in a client trust account
This approach:
(1) "preserve[s] the client's property from the reach of the lawyer's creditors,"
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(2) "preserve[s] the client's property from possible misappropriation by the lawyer," and
(3) "enable[s] the client to realistically dispute a fee where the funds are already in the lawyer's possession by
disallowing a self-help resolution by the lawyer and instead preserving the disputed funds intact
until the dispute is resolved.“ [].– Iowa Supreme Court Board of Professional Ethics and Conduct v.
G. Richard Apland, 577 N.W.2d 50 (1998)
Failure to return unearned fees is a major disciplinary problem

First, empirical data on the causes of lawyer defalcation indicates that the failure to return unearned advance
fees constitutes a major disciplinary problem and generates substantial claims by clients against
client protection funds.
Clients often are unable to obtain the return of unearned advanced fee payments because their lawyers have
either spent the money or otherwise made it unavailable to the client.
A rule mandating that advance fees be deposited to the client trust account would reduce both the volume
of litigation that clients pursue against lawyers for refunds of advance fee payments as well as the
number of client claims against lawyers that are paid through client protection funds, in each case saving
substantial sums of money. – Iowa Supreme Court Board of Professional Ethics and Conduct v. G. Richard
Apland, 577 N.W.2d 50 (1998)
If the fee is contested, counsel cannot withdraw the amount

Second, such a rule would effectuate the intent of [the code], which allows the client to contest the amount of
the lawyer's fee when funds deposited to the security account include fees claimed by the attorney. Once the
client exercises her right to contest the fee, the funds may not be withdrawn until the dispute is resolved. –
Iowa Supreme Court Board of Professional Ethics and Conduct v. G. Richard Apland, 577 N.W.2d 50 (1998)
Failure to remove or withdraw earned fees from trust account
The attorney’s practice of leaving unearned fees in his trust account for an indeterminate amount of time
violated the [rule] - Attorney Grievance Comm’n v. Thomas, 409 Md. 121, 150, 973 A.2d 185, 202 (2009)
The attorney violated both the [Rule] by failing, on multiple occasions, to remove earned fees held in trust for
periods of one year or more) - Attorney Grievance Comm’n v. Zuckerman, 386 Md. 341, 370-71, 872 A.2d 693,
710-11 (2005)
“The purpose of the anti-commingling rules is to protect client funds from the claims of creditors of the
attorney.” - Attorney Grievance Comm’n v. Webster, 348 Md. 662, 677, 705 A.2d 1135, 1142 (1998)
Duty when money of the client comes in the lawyer’s possession

Money of the client or collected for the client, or other trust property coming into the possession of the
lawyer, should be reported and accounted for promptly and should not, under any circumstances, be
commingled with his own or be used by him. Consequently, a lawyer's failure to return upon demand the
funds or property held by him on behalf of his client gives rise to the presumption that he has appropriated
the same for his own use to the prejudice of, and in violation of the trust reposed in him by, his client.
-Marites E. Freeman v. Atty. Zenaida P. Reyes, A.C. No. 6246, November 15, 2011
Exception to the comingling rule

Although the default rule is that an attorney must hold flat fees in a client trust or escrow account until
earned, we note that an attorney may obtain informed consent from the client to deposit all of the money in
the lawyer's operating account or to deposit some of the money in the lawyer's operating account as it is
earned, per their agreement. – In re Robert W. Mance, 980 A.2d 1196 (2009)
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Borrowing and lending money during A-C relationship
Rule 16.04 - A lawyer shall not borrow money from his client unless the client's interest are fully protected by
the nature of the case or by independent advice. Neither shall a lawyer lend money to a client except, when in
the interest of justice, he has to advance necessary expenses in a legal matter he is handling for the client.
This rule is intended to prevent the lawyer from taking advantage of his influence over the client.
– Junio v. Atty. Grupo, A.C. No. 5020, December 18, 2001
Acceptance fee
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.
– Dalupan v. Gacott, A.C. No. 5067, June 29, 2015

……….
An acceptance fee is not a contingent fee, but is an absolute fee arrangement which entitles a lawyer to get
paid for his efforts regardless of the outcome of the litigation.
- Yu v. Bondal, A.C. No. 5534, January 17, 2005
What is a contingency contract

The client and his lawyer may enter into a written contract whereby the latter would be paid attorney’s fees
only if the suit or litigation ends favorably to the client. This is called a contingency fee contract. The
amount of attorney’s fees in this contract may be on a percentage basis, and a much higher compensation is
allowed in consideration of the risk that the lawyer may get nothing if the suit fails.
In the case at bar, the non-EPIRA separated members and petitioner voluntarily entered into a contingency
fee contract whereby petitioner did not receive any acceptance fee or appearance/meeting fee.
Notice of an attorney's lien did not entitle the attorney-appellant to subrogate himself in lieu of his
client.
This Court had ruled xxx that "the contract (for contingent attorney's fees) neither gives, nor purports to give,
to the appellee (lawyer) any right whatsoever, personal or real, in and to her (Mrs. Harden's) aforesaid share
in the conjugal partnership. The amount thereof is simply a basis for the computation of said fees."
We are of the opinion that the lower court did not err in holding that notice of an attorney's lien did not
entitle the attorney-appellant to subrogate himself in lieu of his client. It only gives him the right to collect a
certain amount for his services in case his client is awarded a certain sum by the court.
- Leviste v. CA, G.R. No. L-29184 [1989]
Why contingency fee is allowed

Contingent fee contracts are permitted in this jurisdiction because they redound to the benefit of the poor
client and the lawyer “especially in cases where the client has meritorious cause of action, but no means with
which to pay for legal services unless he can, with the sanction of law, make a contract for a contingent fee to
be paid out of the proceeds of litigation. Oftentimes, the contingent fee arrangement is the only means by
which the poor clients can have their rights vindicated and upheld.”
Why contingent fees contracts are subject to restrictions
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Controls on contingent fees are needed to "reduce financial incentives that encourage lawyers to file
unnecessary, unwarranted[,] and unmeritorious suits.“ – Gisbrecht, et. al. v. Barnhart, 535 U.S. 789 (2002)
Two fold purpose of contingent fee arrangements

First, they enable clients who are unable to pay a reasonable fixed fee to obtain competent representation.
Second, they provide a risk-shifting mechanism not present with traditional hourly billing that requires the
attorney to bear all or part of the risk that the client's claim will be unsuccessful.
Contingent fees are generally higher than hourly fees.

Contingency fee agreement must satisfy four requirements to be valid

(1) an attorney should propose a contingent fee only when the arrangement will be beneficial to his or her
client;
(2) an attorney must inform his or her client of all the relevant considerations concerning the use of a
contingent fee arrangement;
(3) an attorney should generally not propose a contingent fee arrangement to a client who is able to pay a
reasonable fixed fee; and
(4) the resulting contingent fee must be reasonable.
Improper to charge a fee in domestic relations cases that is either contingent on a favorable
judgment in alimony, child support, or marital property
The most often stated reasons for this prohibition are:
1)the public policy favoring marriage;
2) disapproval of giving attorneys a financial incentive to promote divorce;
3) the statutory availability of attorney fee awards making contingent fees unnecessary;
4) the potential for over-reaching or undue influence in a highly emotional situation; and
5) a need for the court to make an informed distribution of property which includes the obligation of
attorney fees.
……..
A contingent defense fee was voided as unreasonable in the circumstances when the contract was entered
during the existence of the attorney-client relationship, and the lawyer's co-executors did not meet their
burden to show that the transaction was fair and equitable. [Priester-Lawrence principle]
- Priester v. Citizens National Trust Savings Bank, 131 Cal.App.2d 314, 280
P.2d 835 (1955)
No case has involved a contingent defense fee predicated on a percentage of the amount saved under the
prayer in defending an unliquidated tort claim. We therefore depend on principles governing fee contracts
generally.
We have disapproved contingent fees based on a percentage of the property obtained for the client in a
divorce case on public policy grounds.
- Wunschel Law Firm, P.C. v. Clabaugh, 291 N.W.2d 331 (Iowa 1980)
Contingent fee to a witness

Witnesses should always testify truthfully and should be free from any financial inducements that might
tempt them to do otherwise. A lawyer should not pay or agree to pay a non-expert witness an amount in
excess of reimbursement for expenses and financial loss incident to being a witness; however, a lawyer may
15
pay or agree to pay an expert witness a reasonable fee for services as an expert. But in no event should a
lawyer pay or agree to pay a contingent fee to any witness. – Swafford v. Harris, 967 S.W.2d 319 (1998)
Is a contingent fee contract for the defense of unliquidated tort damage claims in which the fee is
fixed as a percentage of the difference between the amount prayed for in the petition and the
amount actually awarded valid?
We hold that a contingent fee contract for the defense of an unliquidated tort damage claim which is based
upon a percentage of the difference between the prayer of the petition and the amount awarded is void.
The critical factors in determining the amount of a contingent fee are (1) the percentage and (2) the amount
against which the percentage is taken in order to determine the fee.
The Committee therefore believes that since these critical factors are missing from a defense-contingent fee
arrangement in an unliquidated tort action, that such fee is based upon pure speculation. A fee based purely
upon speculation cannot be reasonable as required by the Code. The Committee is unanimous in its decision
that in a tort action claiming unliquidated damages, a defense contingent fee based upon a percentage of the
difference between the prayer in the plaintiff's petition and the jury's verdict is improper.
Its decision is the same even if the actual amount of the prayer is written into the contingent fee contract (as
in the case at bar) so that the fee would not increase if the prayer is increased.
Reverse contingent fees

This enables a defendant in a civil case to compensate a lawyer based upon the amount the client saved as a
result of the lawyer’s successful defense of the suit. The amount demanded in the plaintiff’s complaint,
however, should not be the sole basis for calculating a reverse contingent fee. The difference in the reverse
contingent fee is that there is no res created (no money recovered) as there is in a normal contingent fee
arrangement agreed to by a plaintiff. In a reverse contingent arrangement, the lawyer’s fee is measured by the
amount a defendant saves rather than the amount a plaintiff recovers.
……………
A reverse contingent fee arrangement entitles an attorney to a share of the amount of money the attorney's
services save the client.
The Model Rules do not prohibit "reverse" contingent fee agreements for representation of defendants in civil
cases where the contingency rests on the amount of money, if any, saved the client, provided the amount
saved is reasonably determinable, the fee is reasonable in amount under the circumstances, and the client's
agreement to the fee arrangement is fully informed.
Attorney cannot acquire by purchase or assignment the object of any litigation

Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in
person or through the mediation of another:
xxxx
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and
employees connected with the administration of justice, the property and rights in litigation
or levied upon an execution before the court within whose jurisdiction or territory they exercise
their respective functions; this prohibition includes the act of acquiring by assignment and
shall apply to lawyers, with respect to the property and rights which may be the object of any
litigation in which they may take part by virtue of their profession.
xxx
Contingent fee agreement does not violate Article 1491(5) of the NCC
The contract of services did not violate said provision of law. Article 1491 of the Civil Code, specifically
paragraph 5 thereof, prohibits lawyers from acquiring by purchase even at a public or judicial auction,
properties and rights which are the objects of litigation in which they may take part by virtue of their
16
profession. The said prohibition, however, applies only if the sale or assignment of the property takes place
during the pendency of the litigation involving the client's property.
Hence, a contract between a lawyer and his client stipulating a contingent fee is not covered by said
prohibition under Article 1491 (5) of the Civil Code because the payment of said fee is not made during the
pendency of the litigation but only after judgment has been rendered in the case handled by the lawyer. In
fact, under the 1988 Code of Professional Responsibility, a lawyer may have a lien over funds and property of
his client and may apply so much thereof as may be necessary to satisfy his lawful fees and disbursements.
- Fabillo and Tana v. IAC G.R. No. L-68838 [1991]
Whether or not an attorney who stopped providing legal services could recover based on a
contingent fee contract "prior to full consideration of the contingency”
No. The court held that, "under the circumstances of this case an attorney may not recover on the contract
but must seek recovery of fees on the theory of quantum meruit." That holding does not establish that any
attorney who withdraws from a contingent fee representation may always recover fees in quantum meruit.
Rather, it establishes that the measure of recovery should be quantum meruit, as opposed to some portion of
the contingent contract. The court concluded, "if Ross is entitled to attorney fees, the measure of those fees is
not the contingent fee agreed upon but the reasonable value of the services rendered.“
- Ross v. Scannell, 97 Wash. 2d 598, 647 P.2d 1004 (1982)
Is the lawyer entitled to a professional fee in a contingent fee arrangement if the client terminates
the relationship with or without cause?
When a client agrees to pay an attorney under a contingency fee agreement and terminates the attorney
before occurrence of the contingency, the attorney may recover based on quantum meruit.
In contrast to withdrawal, this rule applies whether the client terminates the relationship with or without
cause."
However, there are two exceptions to this rule. First, if an attorney violates the RPCs, then compensation is
not available. Second, if the attorney substantially performs the duties owed to the client, then the attorney
may recover the full contingency, not just quantum meruit.
The substantial performance exception only applies in the rare case where full performance is delinquent by
"minor and relatively unimportant deviations."
No recovery, no contingent fee

Mr. Culpepper sent Mr. Cole a letter in which he confirmed that he would accept the representation on a
contingent fee basis of one-third "of whatever additional property or money we can get for you.
After negotiation between Mr. Culpepper and counsel for the estate of Mr. Cole's mother, Mr. Cole was
offered property worth $21,600.03 over and above what he would have received under the terms of the
decedent's will. Mr. Culpepper thought the compromise was reasonable and recommended to Mr. Cole that
he accept the offer. However, Mr. Cole refused to settle his claim for that amount, believing he was entitled to
a larger share of his mother's succession as a forced heir. When Mr. Culpepper refused to file suit in the
matter, Mr. Cole terminated his representation.
Pursuant to the parties' agreement, Mr. Culpepper is entitled to one-third "of whatever additional property or
money" he obtained on behalf of Mr. Cole. It is undisputed that Mr. Cole recovered no additional property or
money as a result of the litigation against his mother's estate. Because Mr. Cole obtained no recovery, it
follows that Mr. Culpepper is not entitled to any contingent fee.
……..
Nonetheless, Mr. Culpepper urges us to find that his contingency should attach to the settlement offer he
obtained on behalf of his client, even though his client refused to accept that offer. According to Mr.
Culpepper, he did the work for which Mr. Cole retained him, and he is therefore entitled to one-third of the
amount offered in settlement, notwithstanding Mr. Cole's rejection of the settlement offer.
Decision
17
To allow Mr. Culpepper to recover a contingent fee under these circumstances would penalize Mr. Cole for
exercising his right to reject the settlement. We find no statutory or jurisprudential support for such a
proposition. Indeed, this court has rejected any interpretation of the Rules of Professional Conduct which
would place restrictions on the client's fundamental right to control the case.
In summary, we find that Mr. Culpepper did not obtain any recovery on behalf of Mr. Cole. In the absence of
a recovery, it follows that Mr. Culpepper cannot collect a contingent fee for his services. - Culpepper v. Cole
929 So.2d 1224 [2006]
Contingent fee arrangement must be written

It bears to stress that a contingent fee arrangement is valid in this jurisdiction and is generally recognized as
valid and binding but must be laid down in an express contract.
– Felicisima Mendoza vda. De Robosa v. Atty. Mendoza & Atty. Navarro, Jr., A.C. no. 6056,
September 09, 2015
However, a contract for contingent fees is an agreement in writing by which the fees, usually a fixed
percentage of what may be recovered in the action, are made to depend upon the success in the effort to
enforce or defend a supposed right. Contingent fees depend upon an express contract … - Aquino v. Hon.
Casabar, G.R. No. 191470 January 26, 2015
When a contingent fee is agreed verbally

Petitioner claims that he and Atty. Domingo agreed to a contract for contingent fees equivalent to thirty
percent (30%) of the increase of the just compensation awarded, albeit verbally.
Contingent fees depend upon an express contract, without which the attorney can only recover on the basis
of quantum meruit. Here, considering that the contract was made verbally and that there was no evidence
presented to justify the 30% contingent fees being claimed by petitioner, the only way to determine his right
to appropriate attorney’s fees is to apply the principle of quantum meruit. - Aquino v. Hon. Casabar, et. al., ,
G.R. No. 191470 January 26, 2015
Ordinarily, We would have left it to the trial court the determination of attorney's fees based on quantum
meruit, however, following the several pronouncements of the Court that it will be just and equitable to now
assess and fix the attorney's fees in order that the resolution thereof would not be needlessly prolonged, this
Court, which holds and exercises the power to fix attorney's fees on quantum meruit basis in the absence of
an express written agreement between the attorney and the client, deems it fair to fix petitioner's attorney's
fees at fifteen percent (15%) of the increase in the just compensation awarded to private respondents. -
Aquino v. Hon. Casabar, et. al., , G.R. No. 191470 January 26, 2015
In the absence of an expressed contract attorney can only recover on the basis of quantum meruit
Contingent fees depend upon an express contract, without which the attorney can only recover on the basis
of quantum meruit. – NPC v. Heirs of Sangkay, G.R. No. 165828 August 24, 2011
Agreement to render legal services without any terms of compensation does not convert it into a
contingency fee agreement
There was no contract for contingent fee between Corpus and respondent David. Contingent fees depend on
an express contract therefor. Thus, "an attorney is not entitled to a percentage of the amount recovered by his
client in the absence of an express contract to that effect“.
Where services were rendered without any agreement whatever as to the amount or terms of compensation,
the attorney is not acting under a contract for a contingent fee, and a letter by the attorney to the client
stating that a certain sum would be a reasonable amount to charge for his services and adding that a rate of
not less than five percent nor more than ten would be reasonable and customary does not convert the
original agreement into a contract for a contingent fee.

…….
18
While there was no express contract between the parties for the payment of attorney's fees, the fact remains
that respondent David rendered legal services to petitioner Corpus and therefore as aforestated, is entitled to
compensation under the innominate contract of facio ut des. And such being the case, respondent David is
entitled to a reasonable compensation. - Corpuz v. Court of Appeals, G.R. No. L-40424 June 30, 1980
Limitations of a contingency agreement

However, in cases where contingent fees are sanctioned by law, the same should be reasonable under all the
circumstances of the case, and should always be subject to the supervision of a court, as to its reasonableness,
such that under Canon 20 of the Code of Professional Responsibility, a lawyer is tasked to charge only fair
and reasonable fees. - Atty. Orocio v. Angulan et. al., G.R. No. 179892-93 [2009]
One court said a provision entitling a lawyer to the “present value” of his contingent fee in the event he is
discharged prematurely is contrary to public policy and unenforceable. - Hoover Slovacek LLP v. Walton, 206
S.W.3d 557, 22 Law. Man. Prof. Conduct 573 (Tex. 2006).
An attorney cannot exact a penalty for a right of discharge

We approve the philosophy that there is an overriding need to allow clients freedom to substitute attorneys
without economic penalty as a means of accomplishing the broad objective of fostering public confidence in
the legal profession. Failure to limit quantum meruit recovery defeats the policy against penalizing the client
for exercising his right to discharge. However, attorneys should not be penalized either and should have the
opportunity to recover for services performed. – The Florida Bar v. John Doe, 550 So. 2d 1111 (1989)
“Discharge clause" in a contingent fee agreement is prohibited

The contract included a "discharge clause" [post-discharge fee]
which permitted the client to discharge respondent only after paying him the greater of three hundred fifty
dollars per hour for all the time spent on her case or forty percent of the greatest gross amount offered in
settlement.
Respondent's contract was deficient in several areas. She opined that the discharge clause "may very well be
an excessive fee" and that "[t]he apparent purpose ... is to intimidate the client into not exercising his right to
discharge you from representation... ." – The Florida Bar v. John Doe, 550 So. 2d 1111 (1989)
Proper basis for compensating an attorney discharged without cause by his client after he has
performed substantial legal services under a valid contract of employment.
We hold that a lawyer discharged without cause is entitled to the reasonable value of his services on the basis
of quantum meruit, but recovery is limited to the maximum fee set in the contract entered into for those
services.
Quantum meruit may well be the proper standard when the discharge under a contingent fee contract occurs
prior to the obtaining of the full settlement contracted for under the attorney-client agreement, with the
cause of action accruing only upon the happening of the contingency to the benefit of the former client.
-Rosenberg v. Levin, 409 So. 2d 1016 (Fla. 1982)
Right of client to discharge counsel versus Right of counsel to adequate compensation

There are two conflicting interests involved in the determination of the issue presented in this type of
attorney-client dispute:
The first is the need of the client to have confidence in the integrity and ability of his attorney and, therefore,
the need for the client to have the ability to discharge his attorney when he loses that necessary confidence in
the attorney.
The second is the attorney's right to adequate compensation for work performed.
Backdoor dealings of a client not allowed
19
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.
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.
– Malvar v. Kraft Foods (Phils.), Inc. (KFPI), G.R. No. 183952, September 9, 2013
Recovery in contingent fee agreement cannot exceed the actual amount received
In refusing to interpret "any amount received" as permitting collection of a contingent fee exceeding the
client's net recovery, we emphasized that the lawyer is entitled to receive the contingent fee "`only when and
to the extent the client receives payment.'" - Hoover Slovacek LLP (Hoover) v. John B. Walton, Jr. 206 S.W.3d
557 (2006)
WON an attorney, who was retained on a contingent fee agreement and discharged for cause prior to
the fulfillment of the contingency, may recover from his client the reasonable value of the services
rendered prior to his discharge?
In that where an attorney is discharged because the client has a good faith basis to no longer wish to be
represented by the attorney and where the attorney has not engaged in serious misconduct, the
attorney may recover compensation from the client for the reasonable value of the services
rendered by the attorney prior to his discharge. he attorney's compensation is to be measured in light
of the benefits obtained by the client as a result of the attorney's services and the nature and gravity of the
cause that led to the discharge. In a contingent fee contract the attorney's cause of action, however, does not
accrue until the contingency is fulfilled. – Somuah v. Flachs, 721 A.2d 680 (1998)
An attorney who withdraws for good cause

We conclude that an attorney who withdraws for good cause from representation under a contingent-fee
agreement may recover in quantum meruit the reasonable value of services rendered prior to withdrawal,
provided that the attorney's recovery in the event of withdrawal for good cause is not otherwise
addressed in the contract and the attorney satisfies the ethical obligations governing withdrawal from
representation. - IN RE: Petition for Distribution of Attorney’s Fees between Stowman Law Firm N.W.2d 755
(Minn. 2015)
Further, ethical obligations continue after an attorney has withdrawn from representation and, therefore, it
is not unreasonable to allow an attorney who withdraws for good cause to recover in quantum meruit if
the client ultimately recovers. - IN RE: Petition for Distribution of Attorney’s Fees between Stowman Law Firm
N.W.2d 755 (Minn. 2015)
An attorney who withdraws without good cause

On the other hand, when an attorney terminates the attorney-client relationship without good cause the
circumstances are materially different, because such an attorney demonstrates a willingness to forfeit a
fee.
The withdrawing lawyer “could not have reasonably expected payment after” he “terminated his
representation” under a contingent-fee agreement, and the clients and successor attorney “should [not]
reasonably have expected that [the lawyer] would share in” a later recovery “absent a clear agreement to that
effect” with the clients and successor attorney.
Absent some express contract language to the contrary, it is objectively unreasonable for an attorney in
these circumstances to expect compensation for pre-withdrawal services. This is because the
reasonable expectation of at least the client, if not both parties to a contingent-fee agreement, is that the
attorney who voluntarily withdraws without good cause forfeits the right to recover a portion of a
contingent fee later obtained by substitute counsel. - IN RE: Petition for Distribution of Attorney’s Fees
between Stowman Law Firm N.W.2d 755 (Minn. 2015)
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Refusal of a client to accept a settlement offer in a civil case does not constitute good cause to
withdraw
[Counsel] also argues that the client's refusal to consider a reasonable settlement offer constitutes good cause
to withdraw. We disagree. The decision whether to settle a case is the client's to make, and the attorney must
accept the decision made.
Dissatisfaction with a client's exercise of that right does not constitute good cause for a lawyer's withdrawal
from representation.
We conclude that the refusal of a client to accept a settlement offer in a civil case does not constitute good
cause to withdraw. - IN RE: Petition for Distribution of Attorney’s Fees between Stowman Law Firm N.W.2d
755 (Minn. 2015)
Absence of an express provision which addresses possible appeal in contingency fee agreement
The ordinary rule of construction of contingent fee contracts is that, in the absence of an express provision
which addresses possible appeal, services rendered by an attorney in upholding a judgment on appeal are
within the undertaking under the contingent fee contract. The attorney is not entitled to any
additional compensation for such appellate representation, even if the reasonable value of all of the
services rendered through the successful, final outcome on appeal exceeds the fee calculated under the
contingent fee agreement. – Attorney Grievance Commission of Maryland v. Korotki, 569 A.2d 1224 (1990)
“Bad bargain” and additional compensation

Numerous courts have held that the fact that an attorney may have made a “bad bargain” with a client will
not justify the attorney from either asking for additional compensation or from withdrawing from the case
upon a refusal of the client to agree to such request.
– see Quarture Et Ux. v. Allegheny Co., 14 A.2d 575 (1940)
The ordinary rule of construction of contingent fee contracts is that, in the absence of an express provision
which addresses possible appeal, services rendered by an attorney in upholding a judgment on appeal are
within the undertaking under the contingent fee contract.
– Attorney Grievance Commission of Maryland v. Korotki, 569 A.2d 1224 (1990)
Fee calculated under the contingent fee agreement is controlling

The attorney is not entitled to any additional compensation for such appellate representation, even if the
reasonable value of all of the services rendered through the successful, final outcome on appeal exceeds the
fee calculated under the contingent fee agreement. – Attorney Grievance Commission of Maryland v. Korotki,
569 A.2d 1224 (1990)
Attorney cannot demand more than 50% of the award in contingency fee agreement
In seeking the increase, [counsel] also crossed the fifty percent line and acquired a greater interest in the
outcome of the litigation than his clients. Without passing upon whether there can ever be circumstances
justifying a contingent fee in excess of fifty percent, it is generally a violation of the rule for the attorney's
stake in the result to exceed the client's stake. - Attorney Grievance Commission of Maryland v. Korotki, 569
A.2d 1224 (1990)
When the final amount becomes excessive

When the principal amount of [counsel’s] still contingent, 40% fee became quantified, it remained subject to
the prohibition against clear excessiveness and to testing for reasonableness under the factors, including the
risk of the contingency, [], as well as under other relevant factors.
The court said "that if at the conclusion of a lawyer's services it appears that a fee, which seemed reasonable
when agreed upon, has become excessive, the attorney may not stand upon the contract; he must reduce the
fee." - Attorney Grievance Commission of Maryland v. Korotki, 569 A.2d 1224 (1990)
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When is the proper time to perfect the fee contract for legal services
contract.
…….
cestui.
There is a presumption of unfairness or invalidity attaching to a contract for compensation made after the
relationship has been established and the burden is on the attorney to show it was fairly and openly made,
that the client was fully informed concerning it and understood its effect.
– Lawrence v. Tschirgi, 57 N.W.2d 46 (1953)
Cause of action to recover compensation for services rendered under a contingent fee
We further hold that the cause of action to recover compensation for services rendered under a contingent
fee contract does not accrue until the occurrence of the stated contingency. - In the matter of the Estate of
Adela Pawlovich Poli, deceased, 338 A.2d 888 1975
With this right as part of the contract, traditional contract principles are applied to allow quantum meruit
recovery on the basis of services performed to date. Under [this] rule, the attorney's cause of action accrues
immediately upon his discharge by the client, under the reasoning that it is unfair to make the attorney's
right to compensation dependent on the performance of a successor over whom he has no control.
Whether an attorney who was engaged on a contingent fee basis may, in order to collect his fees,
prosecute an appeal despite his client's refusal to appeal the decision of the trial court
A practicing attorney, entered into a written agreement with the private respondent to appear as her counsel
in a petition for probate of the holographic will. Under the will, a piece of real property at Sales Street,
Quiapo, Manila, was bequeathed to private respondent. It was agreed that the attorney’s contigent fee would
be thirty-five per cent (35%) of the property that private respondent may receive upon the probate of the will.
The payment of his fees is contingent and dependent upon the successful probate of the holographic will.
Since the petition for probate was dismissed by the lower court, the contingency did not occur. Attorney
Leviste is not entitled to his fee. - Leviste v. CA, G.R. No. L-29184 [1989]
The amount in a contingent fee contract must be computed as settlement payments are received
Some authorities have concluded that absent an express agreement to the contrary, a lawyer may not take her
entire contingent fee “off the top” of a client's “structured settlement.” [citations omitted]
Instead, the contingent fee must be distributed to the lawyer on a pro rata basis when—and if—the
settlement payments are received. [citations omitted]
Client consent is essential, one court said, because “deferred payments involve a time value factor and
collection risks, and the client must be informed of those risks.” - The Ethics and Financial Impact of
Dropping a Client for Nonpayment of Legal Fees, February 27, 2015
……
Thus, the attorney-client relationship was subject to the general rule in California that, "[a]bsent other
agreement, a contingency fee is payable only as the client obtains recovery. Thus, where the settlement calls
for future payments on a periodic basis, the attorney's fee is payable pro rata; i.e., the attorney is entitled to
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the agreed percentage of each periodic payment when, as and if actually received by the client.“ – Knight v.
Aqui, 966 F.Supp.2d 989 (2013)
Full performance, however, is not required in all contingency fee cases

[C]ourts have recognized an exception where an attorney is discharged after "substantially" performing the
duties owed to a client. This exception prevents clients from firing their attorneys immediately before the
contingency occurs to avoid paying a contingency fee.
The doctrine of substantial performance is applied in rare instances where only "minor and relatively
unimportant deviations" remain to accomplish full contractual performance. - Taylor & Taylor v. Shigaki, et.
al. , 930 P.2d 340 (1997)
…..
However, there are two exceptions to this rule.
First, if an attorney violates the RPCs, then compensation is not available.
Second, if the attorney substantially performs the duties owed to the client, then the attorney may recover
the full contingency, not just quantum meruit.
The substantial performance exception only applies in the rare case where full performance is delinquent by
"minor and relatively unimportant deviations." - Taylor & Taylor v. Shigaki, et. al. , 930 P.2d 340 (1997)
Retaining and charging lien

Rule 16.03 - A lawyer shall deliver the funds and property of his client when due or upon demand. However,
he shall have a lien over the funds and may apply so much thereof as may be necessary to satisfy his lawful
fees and disbursements, giving notice promptly thereafter to his client. He shall also have a lien to the same
extent on all judgments and executions he has secured for his client as provided for in the Rules of Court.
Elements of retaining lien

An attorney's retaining lien is fully recognized if the presence of the following elements concur:
(1) lawyer-client relationship;
(2) lawful possession of the client's funds, documents and papers; and
(3) unsatisfied claim for attorney's fees.
Further, the attorney's retaining lien is a general lien for the balance of the account between the attorney and
his client, and applies to the documents and funds of the client which may come into the attorney's
possession in the course of his employment. - Valentin C. Miranda v. Atty. Macario D. Carpio, A. C. No. 6281,
September 26, 2011
“Registration of the lien” distinguished from the “Enforcement of the lien”

The registration of the lien should also be distinguished from the enforcement of the lien. Registration
merely determines the birth of the lien. 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. As 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. – Navarez v. Atty. Manuel Abrogar III, G.R. No. 191641, September 2, 2015
Charging lien does not attach to an award of alimony or maintenance

Pursuant to existing case law, in a matrimonial action a charging lien will be available "'to the extent that an
equitable distribution award reflects the creation of a new fund by an attorney greater than the value of the
interest already held by the client.”
"It is well settled that as a matter of public policy a charging lien does not attach to an award of alimony or
maintenance." Additionally, [courts] have held that as a matter of public policy "an attorney's charging
lien cannot attach to an award of child support ." - Dayan v Dayan, 2017 NY Slip Op 27399 November 30,
2017
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There is no lien on a title or interest already held by the client
However, "[w]here the attorney's services do not create any proceeds, but consist solely of defending a title or
interest already held by the client, there is no lien on that title or interest." – Charnow v. Charnow, 2015 NY
Slip Op 09241 (2015)
The lien exists only so long as the attorney retains possession ends
It may therefore be seen that the right of a lawyer to insure the payment of his professional fee is either to
retain the funds, documents, and papers of his client which may have lawfully come into his possession, or
to enforce it upon any judgment for the payment of money he may secure in favor of his client. And it has
been held that the retaining lien is dependent upon possession and does not attach to anything not in
attorney's hand. The lien exists only so long as the attorney retains possession ends. - Elena Peralta Vda. De
Caisa, et. al. v. Hon. Victoriano, et. Al., G. R. No. L-12905, February 26, 1959 ]
Settlement amounts to waiver of right to a lien

xxx this court declared that satisfaction of the judgment, in general, does not by itself bar or extinguish
the attorney’s liens, as the court may even vacate such satisfaction and enforce judgment for the amount of
the lien.
However, the satisfaction of the judgment extinguishes the lien if there has been a waiver, as shown
either by the attorney’s conduct or by his passive omission. In the instant case, petitioner’s act in
withdrawing the case against the camineros and agreeing to settle their dispute may be considered a waiver
of his right to the lien. No rule will allow a lawyer to collect from his client and then collect anew from the
judgment debtor except, perhaps, on a claim for a bigger amount which, as earlier discussed, is baseless. -
Atty. Raul H. Sesbreño v. Court of Appeals, et. al., G.R. No. 161390, April 16, 2008
Remedy for unpaid professional fees

Rule 1.03 - A lawyer shall not, for any corrupt motive or interest, encourage any suit or proceeding or delay
any man's cause.
Rule 1.04 - A lawyer shall encourage his clients to avoid, end or settle a controversy if it will admit of a
fair settlement.
Rule 22.01 - A lawyer may withdraw his services in any of the following case:
(e) When the client deliberately fails to pay the fees for the services or fails to comply with the
retainer agreement.
Rule 20.04 - A lawyer shall avoid controversies with clients concerning his compensation and shall
resort to judicial action only to prevent imposition, injustice or fraud.
Nonpayment of fees is usually not a sufficient basis to withdraw as counsel

“On the other hand, ‘the nonpayment of fees is usually not a sufficient basis, standing alone, to override the
attorney's ethical responsibilities of continued representation of a client....'” - In re Schley, 2012 BL 394116, No.
09-34182-DOT (Bankr. E.D. Va. May 9, 2012).
xxx[but] “the representation [must not] result in an unreasonable financial burden on the lawyer.”
Although we acknowledge that every lawyer must be paid what is due to him, he must never resort to
judicial action to recover his fees, in a manner that detracts from the dignity of the profession.
– Cueto v. Atty. Jose B. Jimenez, Jr., A.C. NO. 5798
January 20, 2005
If non-payment is further accompanied by other manifestations of deterioration in the attorney-

client relationship
Courts routinely permit attorney withdrawal where clients fail to pay fees in accordance with the terms of
engagement.
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Where a client's failure to pay fees is accompanied by other manifestations of deterioration in the
attorney-client relationship, the justification for withdrawal increases.
In all cases, the court must still consider the potential prejudice to all parties involved and the
potential disruption to the administration of justice from attorney withdrawal. If there is an
impending trial or other key proceeding, failure to pay fees may not justify withdrawal. - Abbott v. Gordon,
Civil Action No. DKC 09-0372, October 25, 2010
Additional professional fees not agreed upon prohibited

Indeed, it is highly improper for a lawyer to impose additional professional fees upon his client which were
never mentioned nor agreed upon at the time of the engagement of his services. – Balingit v. Atty. Cervanyes
& Atty. Delarmente, A.C. No. 11059, November 09, 2016
Professional fees issue creates an irreconcilable conflict of interest

Assuming respondents are entitled to additional payment of professional fees, their manner of enforcing it
still warrants disciplinary sanction. Rule 20.4 of the CPR advises lawyers to avoid controversies with clients
concerning their compensation and to resort to judicial action only to prevent imposition, injustice or fraud.
This is because matters of fees present an irreconcilable conflict of interests between a client and
his lawyer. Suits to collect fees should be avoided and should be filed only when circumstances force lawyers
to resort to it, such as "when [a] conflict has reached such point that it only becomes the lawyer's duty to
withdraw from the action but to assert his right to compensation because of the intolerable attitude assumed
by his client, x x x." – Balingit v. Atty. Cervanyes & Atty. Delarmente, A.C. No. 11059, November 09, 2016
Enforcing fees in the main action or file an independent civil action

In these exceptional circumstances, a lawyer may enforce his right to his fees by filing the necessary
petition as an incident of the main action in which his services were rendered. Thus, in Malvar v. Kraft
Food Philippines, Inc., We approved the filing of a motion for intervention as a measure to protect a counsel's
right to the fees agreed upon with his client. Alternatively, an aggrieved lawyer may also file an
independent civil action against his client for the payment of his fees. The former is preferable to avoid
multiplicity of suits. – Balingit v. Atty. Cervanyes & Atty. Delarmente, A.C. No. 11059, November 09, 2016
WON filing suit against a current client to collect a fee creates an untenable conflict of interest
between the lawyer's duty to that client and the lawyer's "personal interest" in collecting his or her
fee
Specifically, we must address whether respondent, Richard J. Simon, violated RPC 1.7(a)(2) by suing his
client, while still representing him, allegedly in order to preserve property which could be used to pay for his
services. We conclude that there was a clear violation of the Rule and ethical standards, but limit the
discipline imposed based on the totality of circumstances. However, we take this opportunity to emphasize
that any future suit by an attorney against a current or existing client in an effort to withdraw from litigation
shall not be tolerated. – In the matter of Richard J. Simon, 20 A.3d 421 (2011)
Suing a current client

If a lawyer wishes to sue a current client for fees, the lawyer must either withdraw from the representation
(if permitted by the rules of professional conduct) or wait until the lawyer’s duties in the matter are
complete.
Lawyers may take action, including assertive action, to collect their fees. They may not, however, sue a client
they currently represent.
Can the court order the losing party to pay the prevailing party the attorney’s fee, as an item of
damages?
The fee as an item of damages belongs to the party litigant and not to his lawyer. It forms part of his
judgment recoveries against the losing party. The client and his lawyer may, however, agree that whatever
attorney’s fee as an element of damages the court may award shall pertain to the lawyer as his
25
compensation or as part thereof. In such a case, the court upon proper motion may require the losing
party to pay such fee directly to the lawyer of the prevailing party.
Penalty clause in a contract for legal services void

A client's discharge of his attorney "is not a breach of the contract of employment but the exercise of his
right." - Aflac, Inc. v. Williams, 444 S.E.2d 314, 1994
An attorney may not recover damages under a penalty clause when a client exercises the legal right to
terminate the attorney's retainer contract. Xxx This opinion deals only with contracts of attorneys in private
practice and does not address the employment relationship between employers and in-house counsel or
other full-time employees. E. - Aflac, Inc. v. Williams, 444 S.E.2d 314, 1994 2d 314, 1994
Champerty and Doctrine of Maintenance

Champerty, along with maintenance (of which champerty is an aggravated form), is a common law doctrine
that traces its origin to the medieval period.
The doctrine of maintenance was directed "against wanton and in officious intermeddling in the disputes of
others in which the intermeddler has no interest whatever, and where the assistance rendered is without
justification or excuse."
Champerty, on the other hand, is characterized by "the receipt of a share of the proceeds of the litigation by
the intermeddler." Some common law court decisions, however, add a second factor in determining
champertous contracts, namely, that the lawyer must also, "at his own expense maintain, and take all the
risks of, the litigation.“ - Conjugal Partnership of the Spouses Vicente Cadavedo v. Atty. Lacaya, G.R. No.
173188, January 15, 2014
Avoiding Champertous contracts

The rule of the profession that forbids a lawyer from contracting with his client for part of the thing in
litigation in exchange for conducting the case at the lawyer’s expense is designed to prevent the lawyer from
acquiring an interest between him and his client.
……
To permit these arrangements is to enable the lawyer to "acquire additional stake in the outcome of the
action which might lead him to consider his own recovery rather than that of his client or to accept a
settlement which might take care of his interest in the verdict to the sacrifice of that of his client in violation
of his duty of undivided fidelity to his client’s cause. - Conjugal Partnership of the Spouses Vicente Cadavedo
v. Atty. Lacaya, G.R. No. 173188, January 15, 2014
Advancing the expenses without reimbursement

Although a lawyer may in good faith, advance the expenses of litigation, the same should be subject to
reimbursement. The agreement between respondent and the Fortunados, however, does not provide for
reimbursement to respondent of litigation expenses paid by him. An agreement whereby an attorney
agrees to pay expenses of proceedings to enforce the client's rights is champertous xxx.
Such agreements are against public policy especially where, as in this case, the attorney has agreed to carry
on the action at his own expense in consideration of some bargain to have part of the thing in dispute xxx.
The execution of these contracts violates the fiduciary relationship between the lawyer and his client, for
which the former must incur administrative sanctions.
- Bautista v. Atty. Gonzales, A.M. No. 1625 February
Champertous contract
A champertous contract is defined as a contract between a stranger and a party to a lawsuit, whereby the
stranger pursues the party's claim in consideration of receiving part or any of the proceeds recovered under
the judgment; a bargain by a stranger with a party to a suit, by which such third person undertakes to carry
26
on the litigation at his own cost and risk, in consideration of receiving, if successful, a part of the proceeds or
subject sought to be recovered.
An Agreement whereby the attorney agrees to pay expenses of proceedings to enforce the client's rights is
champertous. Such agreements are against public policy especially where as in this case, the attorney has
agreed to carry on the action at its own expense in consideration of some bargain to have part of the thing in
dispute. The execution of these contracts violates the fiduciary relationship between the lawyer and his
client, for which the former must incur administrative sanction. – Atty. Romeo G. Roxas v. Republic Real
Estate Corp., G.R. No. 208205, June 01, 2016 and Republic Real Estate Corp v. Republic of the Philippines, G.R.
No. 208212
Quantum meruit
The principle of quantum meruit (as much as he deserves) may be a basis for determining the reasonable
amount of attorney’s fees.
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. It is applicable even if there was a formal written contract
for attorney’s fees as long as the agreed fee was found by the court to be unconscionable. - Atty. Orocio v.
Angulan et. al., G.R. No. 179892-93, January 30, 2009
In the case of goods sold and delivered, the theory is quantum valebat (as much as they were worth), and in
that of work and services performed, quantum meruit (as much as he deserved). – Chambliss, Bahner &
Crawford v. Luther, et. al., 531 S.W.2d 108 (1975)
……..
The determination of attorney's fees on the basis of quantum meruit is also authorized "when the counsel, for
justifiable cause, was not able to finish the case to its conclusion."
More over, quantum meruit becomes the basis of recovery of compensation by the attorney where the
circumstances of the engagement indicate that it will be contrary to the parties' expectation to deprive the
attorney of all compensation. In this case, since respondent was not able to fulfill one of the conditions
provident in the Contract for Legal Services, his attorney's fees shall be based on quantum meruit. –
Villarama v. Atty. De Jesus, G.R. No. 217004, April 17, 2017
2 purposes of application Quantum meruit

The recovery of attorney’s fees on this basis is permitted, as in this case, where there is no express agreement
for the payment of attorney’s fees. Basically, it is a legal mechanism which prevents an unscrupulous client
from running away with the fruits of the legal services of counsel without paying for it. In the same
vein, it avoids unjust enrichment on the part of the lawyer himself. - Pineda v. Atty. De Jesus, et. al.
G.R. No. 155224 August 23, 2006
When is Quantum meruit authorized

(1) there is no express contract for payment of attorney's fees agreed upon between the lawyer and the client;
(2) when although there is a formal contract for attorney's fees, the fees stipulated are found unconscionable
or unreasonable by the court; and
(3) when the contract for attorney's fee's is void due to purely formal defects of execution;
(4) when the counsel, for justifiable cause, was not able to finish the case to its conclusion;
(5) when lawyer and client disregard the contract for attorney's fees, - Rilloza, et. al. v. Eastern
Telecommunications Phils., Inc., G.R. No. 104600 [1999]
Factors for application of quantum meruit

In fixing a reasonable compensation for the services rendered by a lawyer on the basis of quantum meruit,
factors such as the time spent, and extent of services rendered; novelty and difficulty of the questions
involved; importance of the subject matter; skill demanded; probability of losing other employment as a
result of acceptance of the proferred case; customary charges for similar services; amount involved in the
27
controversy and the benefits resulting to the client; certainty of compensation; character of employment; and
professional standing of the lawyer, may be considered. - Atty. Orocio v. Angulan et. al., G.R. No. 179892-93,
January 30, 2009
The court shall fix the amount

In fixing a reasonable compensation for the services rendered by a lawyer on the basis of quantum meruit, the
elements to be considered are generally
(1) the importance of the subject matter in controversy,
(2) the extent of services rendered, and
(3) the professional standing of the lawyer.
A determination of these factors would indispensably require nothing less than a full-blown trial where
private respondents can adduce evidence to establish the right to lawful attorney's fees and for petitioner to
oppose or refute the same. The trial court has the principal task of fixing the amount of attorney's fees.
Hence, the necessity of a hearing is beyond cavil. -Rilloza, et. al. v. Eastern Telecommunications Phils., Inc.,
G.R. No. 104600 [1999]
Referral fee is void

Referrals by one lawyer to another are treated differently. The rule is that a contract to pay an improper
referral fee to a lawyer who steers a client to another lawyer is void.
When the issue of the propriety of a referral-fee agreement arises in litigation-usually when the referring
attorney seeks to enforce the agreement-most courts look to the disciplinary rules.-Joseph M. Perillo,The Law
of Lawyers' Contracts Is Different, 67 Fordham L. Rev. 443 (1998).
Rationale behind prohibition of fee splitting with non-lawyers

The rationale usually given for the prohibition of fee splitting with non-lawyers is that "[a] person
entitled to share a lawyer's fees is likely to attempt to influence the lawyer's activities so as to maximize those
fees. That could lead to inadequate legal services.“ -Joseph M. Perillo, The Law of Lawyers' Contracts Is
Different, 67 Fordham L. Rev. 443 (1998).
Referral fee
The pure referral fee, which compensates one lawyer with a percentage of a contingent fee for doing nothing
more than obtaining the signature of a client upon a retainer agreement while the lawyer to whom the case is
referred performs the work, is far from necessary to the injured person's recovery. To the extent that the
referral fee is paid for that purpose, loss has not been socialized. Rather, the obtaining of business by a lawyer
who, by his own motion, has conceded his inability to handle it has been subsidized." – Moran v. Harris, et.
al., 131 Cal.App.3d 913 (1982)
Enforceability of a referral fee contract

The honoring of a referral fee is even more puzzling where the referring attorney is merely heeding the Rules
of Professional Conduct in rejecting a case which he does not have the requisite skill or experience to handle
competently.
Regardless of the logic of this argument, there is another point of view. If the ultimate goal is to assure the
best possible representation for a client, a forwarding fee is an economic incentive to less capable lawyers to
seek out experienced specialists to handle a case. Thus, with marketplace forces at work, the specialist
develops a continuing source of business, the client is benefited and the conscientious, but less experienced
lawyer is subsidized to competently handle the cases he retains and to assure his continued search for referral
of complex cases to the best lawyers in particular fields. – Moran v. Harris, et. al., 131 Cal.App.3d 913 (1982)
WON a GOCC represented by OGCC is entitled to an award of attorney’s fees
In the petition at bar, petitioners claim that Philcotton, a government-owned or -controlled corporation, is
not entitled to an award of attorney’s fees;
Petitioners contend that the award of attorney’s fees was unwarranted and contrary to law, considering that
Philcotton is a government-owned and controlled Corporation which was represented by the Office of the
Government Corporate Counsel in this and other litigations. Petitioner argues that for an award of
28
attorney’s fees to be proper, one or more of the special circumstances mentioned in Article 2208 of the Civil
Code must exist and that Philcotton must have availed itself lawfully of the services of private counsel.
– Pacific Mills, Inc. and Lim v. Court of Appeals and Philippine Cotton Corporation, G.R. No. 87182. February
17, 1992
…….
The Court considers that there is, as a matter of principle, no reason why a government-owned or controlled
corporation, or any other government agency or entity for that matter, which is compelled to bring suit
against a private person or entity in order to protect its rights and interests, should not be granted an award
of attorney’s fees, where such an award would be proper if the suit had been brought by a private
entity.
While such a corporation, agency or entity may be represented by government lawyers, clearly, costs are
incurred either by the plaintiff-corporation or entity directly or by the general tax-paying public
indirectly, by reason of the default or other breach of contract or violation of law committed by the
defendant…..
…….
Under Article 2209 of the Civil Code, an award of attorney’s fees is proper either because of a contractual
stipulation for the payment of attorney’s fees or because of the existence of one or more of the
circumstances listed in Article 2208. In the instant case, the promissory notes on which Philcotton sued
contained, as already noted, a stipulation for payment of attorney’s fees in case judicial enforcement
thereof became necessary. There can be no dispute that the petitioners’ failure to comply with their
obligations under the promissory notes compelled Philcotton to resort to enforcement of its rights under
those notes through the judicial process. - Pacific Mills, Inc. and Lim v. Court of Appeals and Philippine
Cotton Corporation
An representative who is non-member of the bar is not entitled to compensation

The permission for a non-member of the bar to represent or appear or defend in the said court on behalf of
a party-litigant does not by itself entitle the representative to compensation for such representation. For
Section 24, Rule 138, of the Rules of Court, providing —
Sec. 24. Compensation of attorney's agreement as to fees. — An attorney shall be entitled to have and recover
from his client no more than a reasonable compensation for his services, ...imports the
existence of an attorney-client relationship as a condition to the recovery of attorney's
fees. Such a relationship cannot exist unless the client's representative in court be a lawyer.
……
Since respondent Muning is not one, he cannot establish an attorney-client relationship with Enrique Entila
and Victorino Tenezas or with PAFLU, and he cannot, therefore, recover attorney's fees. Certainly public
policy demands that legal work in representation of parties litigant should be entrusted only to those
possessing tested qualifications and who are sworn, to observe the rules and the ethics of the profession, as
well as being subject to judicial disciplinary control for the protection of courts, clients and the public. -
PAFLU et al. vs. Binalbagan Isabela Sugar Co., et al.“, G.R. No. L-23959 November 29, 1971
Oppressive methods of attempting to collect legal fees have been held to involve moral turpitude
Various oppressive methods of attempting to collect legal fees have been held to involve moral
turpitude. The fact that the attorney may be entitled to the fee he sought to obtain or to a fee does not
exonerate him.
In [a case] the attorney intentionally withheld his client's funds in an attempt to coerce payment of a fee.
In [another case] the attorney, in an attempt through fear to force the payment of his bill for legal
services, made threats of action injurious to his client and another. [] in holding that the attorney's conduct
29
involved moral turpitude, noted that his acts constituted the crime of attempted extortion. - Bluestein v.
State Bar of California, 175, 529 P.2d 799 (1974)
Fee agreements "between lawyers who are not in the same firm" or who are "not associated in the
same law firm" where there will be a division of legal fees
As relevant here, for such a fee agreement to be valid:
(1) the agreement must include language stating the manner in which the fees will be divided, whether in
proportion to services performed by each lawyer or by stating that each lawyer assumes joint
responsibility for the representation;
(2) the client must be informed of the fee-splitting arrangements at or before entering into the fee
agreement; and
(3) the client must consent to those arrangements in writing.
- Matter of Hayes (Quigley) 2018 NY Slip Op 28034 Decided on February 7, 2018
WON a government-owned or controlled corporation, is entitled to an award of attorney’s fees

Petitioners contend that the award of attorney’s fees was unwarranted and contrary to law, considering that
Philcotton is a government-owned and controlled Corporation which was represented by the Office of the
Government Corporate Counsel in this and other litigations.
Petitioner argues that for an award of attorney’s fees to be proper, one or more of the special circumstances
mentioned in Article 2208 of the Civil Code must exist and that Philcotton must have availed itself lawfully
of the services of private counsel.
…….
Whenever a government-owned and controlled corporation, or corporation the majority stock of which is
owned or controlled by the Government, or an instrumentality of the Government performing proprietary
functions, is awarded attorney’s fees in a judicial proceeding handled by the Office of the Government
Corporate Counsel, one-half of said attorney’s fees shall be paid directly to the General Fund."
Section 10, Chapter III of the 1987 Revised Administrative Code which reads as follows:
"The OGCC is authorized to receive the attorney’s fees adjudged in favor of their government-owned or
controlled corporations, their subsidiaries, other corporate offsprings and government acquired asset
corporations. These attorney’s fees shall accrue to a Special Fund of the OGCC, and shall be deposited in an
authorized government depository as a trust liability and shall be made available for expenditure without the
need for a Cash Disbursement Ceiling, for purposes of upgrading facilities and equipment, granting of
employees’ incentive pay and other benefits, and defraying such other incentive expenses not provided for in
the General Appropriations Act as may be determined by the Government Corporate Counsel.“ - Pacific Mills
Inc and Lim v. CA, G.R. No. 87182. February 17, 1992
Lawyers' right to fees from their clients may not be invoked by the lawyers themselves as a ground
for disapproving or holding in abeyance the approval of a compromise agreement
The client has also an undoubted right to compromise a suit without the intervention of his lawyer. Even the
lawyers' right to fees from their clients may not be invoked by the lawyers themselves as a ground for
disapproving or holding in abeyance the approval of a compromise agreement. The lawyers concerned can
enforce their rights in the proper court in an appropriate proceeding in accordance with the Rules of Court,
but said rights may not be used to prevent the approval of the compromise agreement. - Municipality of
Pililla, Rizal vs. Court of Appeals, G.R. No. 105909 June 28, 1994
Attorney’s fees not allowed to pro se litigants

The adage that "a lawyer who represents himself has a fool for a client" is the product of years of experience
by seasoned litigators.
A rule that authorizes awards of counsel fees to pro se litigants -- even if limited to those who are members of
the bar -- would create a disincentive to employ counsel whenever such a plaintiff considered
himself competent to litigate on his own behalf. The statutory policy of furthering the successful
30
prosecution of meritorious claims is better served by a rule that creates an incentive to retain counsel in
every such case. -Kay v. Ehrler, 499 U.S. 432 (1991)
Attorneys' fees proper for pro se litigants who are lawyers

Appellant next contends that attorneys' fees should be denied to certain appellees who are attorneys and who
represented themselves. The law in this area is far from clear. Here, we conclude that the award was proper.
The award of attorneys' fees in this case furthers the underlying policy of discouraging frivolous or
harassing litigation. - Ellis v. Cassidy, 625 F.2d 227 (9th Cir.1980)
Law firm that represents itself is not eligible for attorney fees
A party that represents itself, however, is not eligible for attorney fees. We have held that another attorney fee
provision, NRS 69.030, which provides that a prevailing party shall receive reasonable attorney fees and costs,
does not authorize an award of attorney fees to a prevailing proper person litigant, even if that litigant is an
attorney. The reasoning for that decision is that "an attorney proper person litigant must be genuinely
obligated to pay attorney fees before he may recover such fees."
Here, Smith & Harmer represented itself in the attorney fees litigation, and thus it was not genuinely
obligated to pay attorney fees. As with fees awarded under NRS 69.030, we conclude that attorneys who
represent themselves in litigation generally may not recover attorney fees for doing so. -Frank Settelmeyer &
Sons, Inc. v. Smith & Harmer, Ltd., 197 P.3d 1051 (2008)
Professional misconduct forfeits the right to assert a retaining lien

An attorney's ability to assert his lien can be waived or lost. When an attorney is discharged or removed from
a particular case for professional misconduct in the handling of his client's affairs, he has no right to assert
a "retaining lien" as to that client's papers which are in his possession.
Misconduct in a another case

Misconduct in a particular case, if suspension or disbarment is not involved, should not, however, result
in the loss of an attorney's ability to assert his lien in other cases where professional misconduct is not
involved. An attorney's loss of a "retaining lien" upon the files of clients who have received legal services
which were rendered in a manner consistent with the high standards of the profession, would be an
inordinate and unwarranted penalty.
Is a pro se litigant entitled to attorney’s fees?

A party that represents itself, however, is not eligible for attorney fees. We have held that another attorney
fee provision, xxxx, which provides that a prevailing party shall receive reasonable attorney fees and costs,
does not authorize an award of attorney fees to a prevailing proper person litigant, even if that litigant is an
attorney.
The reasoning for that decision is that "an attorney proper person litigant must be genuinely obligated to pay
attorney fees before he may recover such fees."
Here, Smith & Harmer represented itself in the attorney fees litigation, and thus it was not genuinely
obligated to pay attorney fees. Xxx we conclude that attorneys who represent themselves in litigation
generally may not recover attorney fees for doing so. - Frank Settelmeyer & Sons, Inc. v. Smith & Harmer,
Ltd. P.3d 1051 (2008)
There must be a favorable judgment

A charging lien to be enforceable as security for the payment of attorney's fees requires as a condition sine
qua non a judgment for money and execution in pursuance of such judgment secured in the main action by
the attorney in favor of his client. A charging lien presupposes that the attorney has secured a favorable
money judgment for his client. - Rilloza, et. al. v. Eastern Telecommunications Phils., Inc., G.R. No. 104600
[1999]
Retaining lien to Charging lien
31
If the funds recovered for the client come into the lawyer's possession, the lawyer may detain the amount
claimed as a fee. This use has some similarity to a retaining lien, except that the lawyer may keep only
proceeds of the matter in which the fee is claimed, and only the amount so claimed.
Suppose, however, the certificates of title belonging to a client, come to the possession of his lawyer,
but subsequently, by virtue of a compromise agreement judicially approved, the properties covered
by these are conveyed to other persons, is the retaining lien lost?
It is not.
The position of the lawyer in such a situation is similar to that of a creditor who holds an attachment lien
over the properties, and the client-debtor must discharge the lien before he can dispose the properties of
a third person free of such lien. - Ampil v. Agrava G.R. No. 27394, July 31, 1970.
What if the title to the property is the very subject of the litigation?
A different rule obtains if the title to the property is the very subject in, dispute in the case, and the court
determines that the client's adversary is rightfully entitled to it. In this latter case, the title to the property
could not be said to be the properties of the client, over which the lawyer may claim a retaining lien. -
Carmelo V. Sison citing Vda. de Caifia v. Victoriano, 105 Phil. 194 (1959)
Court can order the surrender of documents

“If it be entirely indispensable for the court to gain possession of the documents that have come to the
attorney and are held by him in the course of his employment as counsel, it can require the surrender thereof
by requiring the client or claimant to first file proper and adequate security for the lawyers' compensation." –
Ampil v. Hon. Juliano-Agrava, et. al., G.R. No. L-27394 July 31, 1970
Public documents not subject to retaining lien

The privilege of a retaining lien granted to an attorney does not cover papers and documents which are public
in character and which have been introduced as exhibits. Such papers and documents are properly subject to
the Court’s custody.
In the case at bar, the intransigence of the petitioner in his persistence to continue in possession of the
papers and documents in question based on his erroneous belief as to the extent of the privilege of a
retaining lien, must not be accorded the imprimatur of the approval of this Tribunal. If such were not the
law, the resulting injury to a fair and efficient administration of justice might well prove to be incalculable. –
Villanueva, Jr. v. Hon. Judge Querubin, et. al., G.R. No. L-26137. September 23, 1968
Features of an attorney's general, retaining or possessory lien

Retaining lien of an attorney is only a passive right and cannot be actively enforced.
It amounts to a mere right to retain the documents and papers as against the client, until the attorney is fully
paid, the exception being that funds of the client in the attorney's possession may be applied to the
satisfaction of his fees.
The attorney's retaining lien is a general lien for the balance of the account between the attorney and his
client, and applies to the documents and funds of the client which may come into the attorney's possession
in the course of his employment.
The attorney's retaining lien attaches to the client's documents and funds in the attorney's possession
regardless of the outcome, favorable or adverse, of any cases he may have handled for his client. - Ampil v.
Hon. Juliano-Agrava, et. al., G.R. No. L-27394 July 31, 1970
……
The attorney's retaining lien is a general lien for the balance of the account between the attorney and his
client, and applies to the documents and funds of the client which may come into the attorney's possession
in the course of his employment.
The attorney's retaining lien attaches to the client's documents and funds in the attorney's possession
regardless of the outcome, favorable or adverse, of any cases he may have handled for his client. - Ampil
v. Hon. Juliano-Agrava, et. al., G.R. No. L-27394 July 31, 1970
32
Retaining lien not applicable to adverse party’s property
The situation would be different where title to the properties is the very subject in dispute in the case
and the court adjudges the client's adversary to be rightfully entitled thereto. In such a case, the titles to the
property could not be said to be properties of the client, over which the attorney may claim a retaining lien.
The attorney may enforce his lien only over properties of his client and not against those of his client's
adversary. And the adversary's right as prevailing party to enforce the judgment for the property adjudged to
him should not depend on or be prejudiced by the client's ability or refusal to pay the attorney. - Ampil v.
Hon. Juliano-Agrava, et. al., G.R. No. L-27394 July 31, 1970
The documents and money must be in the possession of the attorney

A side question also arose because of the lawyer's claim that he "is from time to time also in possession of the
titles belonging to the estate.“
The rule is that the retaining lien is dependent on possession and does not attach to anything not in the
attorney's hands. It exists only so long as the attorney retains possession of the subject matter and expires
when the possession ends. - Carmelo V. Sison citing Vda. de Caifia v. Victoriano, 105 Phil. 194 (1959)
Fees for legal services
CONCEPTS:
Earned fees v. unearned fees
Advanced fees - "lump-sum" fees or "flat fees“
Non-refundable fees
Retainer fees
“General retainer" or "engagement retainer“
Negative retainer
Acceptance fee
A nonrefundable retainer
A nonrefundable retainer is defined as “a fee paid by a client in advance of services and denominated by the
lawyer as nonrefundable, irrespective of whether the client discontinues the representation or whether the
lawyer does any work.”
Non-refundable fee agreements pose two potential problems
Nonrefundable fee agreements pose two potential problems.
First, they burden the client’s right to discharge a lawyer for any reason at any time, because the client may be
unable to afford to hire new counsel.
Second, they can give rise to excessive fees. As the Committee noted, “There is little doubt that some
attorneys have attempted to disguise excessive fees using a nonrefundable clause.”
Fee labeled as "non-refundable"

A fee labeled "non-refundable" misinforms the client about the nature of the fee and interferes with the
client's basic rights in the attorney-client relationship. Attorney fees are always subject to refund if they are
excessive or unearned.
A fee agreement that suggests that advance fees are "non-refundable" undermines the client's understanding
of her rights and may discourage a client from seeking refunds to which the client may be entitled.
…….
In addition to misinforming the client, "non-refundable fees" may discourage the client from discharging his
attorney for fear that the client will not be able to recover advance fees for which the attorney has yet to
perform any work.
Because the label is inaccurate and misleading, and discourages a client from exercising the right to discharge
an attorney, we hold that attorneys may not enter into "non-refundable fee" agreements or otherwise
communicate to their clients that the fees are "non-refundable."
33
Labeling a fee "non-refundable" is unethical
Because fees are always subject to refund under certain conditions, labeling a fee "non-refundable" misleads
the client and may deter a client from exercising their rights to refunds of unearned fees.
Thus, we hold that attorneys cannot enter into "non-refundable" retainer or fee agreements. As is the case
with our holding that attorneys must place all unearned funds in trust until the attorney confers a benefit on
or performs a service for the client, we have not previously made this prohibition explicit.
…….
Some forms of advance fees called "non-refundable" fees are often treated by attorneys as earned on receipt
and thus as the attorney's property. In these agreements, attorneys inform their clients that the non-
refundable fee becomes earned on receipt and is the attorney's property irrespective of whether the attorney
performs future legal services and regardless of the time the attorney devotes to the client's case. These
arrangements are controversial because attorneys treat funds as their own property before performing any
legal services for the client.
……
A fee labeled "non-refundable" misinforms the client about the nature of the fee and interferes with the
client's basic rights in the attorney-client relationship. Attorney fees are always subject to refund if they are
excessive or unearned.
A fee agreement that suggests that advance fees are "non-refundable" undermines the client's understanding
of her rights and may discourage a client from seeking refunds to which the client may be entitled.
…….
In addition to misinforming the client, "non-refundable fees" may discourage the client from discharging his
attorney for fear that the client will not be able to recover advance fees for which the attorney has yet to
perform any work.
Because the label is inaccurate and misleading, and discourages a client from exercising the right to discharge
an attorney, we hold that attorneys may not enter into "non-refundable fee" agreements or otherwise
communicate to their clients that the fees are "non-refundable."
A client may advance professional fees

In contrast to engagement retainers, a client may advance funds—often referred to as "advance fees,"
"special retainers," "lump sum fees," or "flat fees"—to pay for specified legal services to be performed by the
attorney and to cover future costs.
Features of Advance fees

Advance fees present an attractive option for both the client and the attorney. Like engagement retainers,
advance fees allow clients to secure their choice of counsel.
Additionally, some forms of advance fees, e.g., "lump sums" or "flat fees," benefit the client by establishing
before representation the maximum amount of fees that the client must pay.
…….
In these instances, the client knows how much the total cost for legal fees will be in advance, permitting the
client to budget based on a fixed sum rather than face potentially escalating hourly fees that may exceed the
client's ability to pay.
So long as the fees are reasonable, such arrangements do not violate ethical rules governing attorney fees.
…….
Advance fees benefit the attorney because the attorney can secure payment for future legal services,
eliminating the risk of non-payment after the attorney does the work.
34
Often, attorneys collect a certain amount from the client in advance of any work and deduct from that
amount according to the hours worked or mutually agreed-upon "milestones" reached during representation
(e.g., investigation, pretrial work and motions, negotiations, filings, handling a company's initial public
offering, etc.).
…….
Attorneys often deduct costs from advance payments as they incur the costs, similar to the manner in which
they deduct their fees as they are earned. Advance fees represent an alternative method of obtaining legal
assistance that accommodates legitimate needs of both clients and attorneys, and by this opinion we do not
intend to discourage these fee arrangements provided the fee agreements comply with the ethical principles
discussed in this case.
What is a “flat fee”?

A flat fee is one that "embraces all work to be done, whether it be relatively simple and of short duration, or
complex and protracted.“
A flat fee is different from an engagement retainer, which "is a fee paid, apart from any other compensation,
to ensure that a lawyer will be available for the client if required.“
"In contrast to engagement retainers, a client may advance funds-often referred to as ... `flat fees'-to pay for
specific legal services to be performed by the attorney and to cover future costs."
…….
In sum, a flat fee is an advance of unearned fees because it is money paid up-front for legal services that are
yet to be performed.
A corollary to the rule that a flat fee is an advance of unearned fees, is that the fee must be held as client
funds in a client's trust or escrow account until they are earned by the lawyer's performance of legal services.
Engagement retainer
An engagement retainer is a nonrefundable payment to assure the availability of the attorney whether
services are performed or not. Engagement retainers are earned when received, but it may become necessary
to refund even a portion of a retainer if the lawyer withdraws or is discharged prematurely.
These retainers typically compensate an attorney for agreeing to take a case, which requires the attorney to
commit his time to the client's case and causes the attorney to forego other potential employment
opportunities as a result of time commitments or conflicts.
Presumption
A fee payment that does not cover services already rendered and that is not otherwise identified is presumed
to be a deposit against future services.
“Advance fees” or “Retainer”

The terms “advance fees” and “retainer” are often used loosely and have been the source of much confusion.
The “true,” “classic” or “general” retainer is rare. It is a fee paid to ensure the lawyer’s availability for a
representation that may or may not be necessary in the future. It is sometimes characterized as an option
agreement in which the client purchases the right to call upon the lawyer’s services for a specified period of
time or a specified case or matter.
“Advance payment retainer”

This type of retainer consists of a present payment to the lawyer in exchange for the commitment to provide
legal services in the future. Ownership of this retainer passes to the lawyer immediately upon payment.
General Retainer Fee

A retaining fee is a preliminary fee paid to ensure and secure a lawyer's future services, to remunerate him for
being deprived, by being retained by one party, of the opportunity of rendering services to the other party
and of receiving pay from him.
35
In the absence of an agreement to the contrary, the retaining fee is neither made nor received in
consideration of the services contemplated; it is apart from what the client has agreed to pay for the services
which he has retained him to perform. - Research and Services Realty, Inc. v. CA and Fonacier, Jr., G.R. No.
124074. January 27, 1997
General retainer earned upon receipt

The most logical reading of In re Cooperman is that the court intended to (1) prohibit non-refundable
security retainers; and (2) permit lawyers to treat general retainers as earned upon receipt, but not to
describe them to clients as non-refundable.
After all, because a court may require any fee—including one earned upon receipt—to be disgorged or
refunded if it is ultimately determined to be unreasonable, describing a general retainer as non-
refundable is misleading. - Douglas R. Richmond; Understanding Retainers and Flat Fees; The Journal of
the Legal Profession Vol. 34 (2009)
……
Only general retainers are “retainers” in the genuine sense of the word; special retainers are in fact fee
advances.
Special retainers are further divided into two subcategories: “security retainers” and “advance fee retainers”
or “advance payment retainers.”
……..
The second type of retainer is referred to as a "security retainer."
Under this arrangement, the funds paid to the lawyer are not present payment for future services; rather, the
retainer remains the property of the client until the lawyer applies it to charges for services that are
actually rendered. Any unearned funds are refunded to the client. The purpose of a security retainer is to
secure payment of fees for future services that the lawyer is expected to perform.
Features of a Retaining fee agreement

Two basic principles come into play:
The first is as stated earlier, viz., that the retaining fee is neither made nor received in consideration of
the services contemplated unless the contract itself so provides.
An evergreen retainer
An evergreen retainer, on the other hand, contemplates that the client will pay regularly and that the lawyer
will not tap the retainer for payment until the final bill is due, or, in the case of a bankruptcy representation,
until the court approves the final fee application.
Because the retainer is intact and those funds are unused until the representation concludes, the retainer is
said to be “evergreen.” An evergreen retainer is designed to minimize a lawyer’s risk of nonpayment if the
client’s financial condition deteriorates over the course of the representation, or should the client for some
other reason decline or be unable to pay the lawyer’s fees as they come due.
Interest on overdue fees

Lawyers are allowed to charge clients reasonable interest on overdue fees if they specify that obligation in
their engagement letters or fee agreements.
Assignment to third parties to collect unpaid fees

Affected clients might raise malpractice as a defense to payment.
Thank you for your attention!!
36

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Problem Areas in Legal Ethics:

Cases & Commentaries

Topic 4 – Attorney’s fees & Compensation for Legal Services

Problem Areas in Legal Ethics

Law practice is not a pro bono proposition either

Honorarium lawfully earned

Terms of employment included in the fiduciary relationship

Agreeing on the terms of compensation is an integral part of the employment process

Client’s conformity to the amount is not controlling

Rule on division of legal fees

Guidelines in determining fair and reasonable fees

The following are the circumstances to be considered in determining the compensation of an

Attorney's fee is basically a compensation

Bases for just compensation

Primary characteristics which distinguish the legal profession from business

Fees must be earned

When is the best time to agree on the attorney’s fees?

Contracts made during the existence of the attorney-client relationship

Professional fee is subject to court’s regulatory power

“Money down first” policy is unethical

Two commonly accepted concepts of attorney’s fees

Award of (extraordinary) attorney’s fee is discretionary

Attorney’s fees not to be awarded every time a party wins a suit

Forum does not qualify payment of compensation

Quality of legal service should not vary if rendered for free

Written v. Oral Agreements

Written contract of legal fees is ordinarily controlling

Basis when there is no written contract

Duty to issue a receipt

No breach of contract when terminating a lawyer and client relationship

A non-lawyer is not entitled to attorney’s fees

Right of a client to compromise suit

Limitation of client’s right to compromise suit

Applies only in civil cases

FEES & FUNDS

“Technical commingling” and a “Technical conversion of the funds”

Lawyers are required to deposit all advance payment of fees in a client trust account.

Client trust account

Required to deposit all advance payment of fees

Whose money is it?

Why funds advanced by a client must be segregated

Three important purposes of prohibiting commingling

Failure to return unearned fees is a major disciplinary problem

If the fee is contested, counsel cannot withdraw the amount

Failure to remove or withdraw earned fees from trust account

Duty when money of the client comes in the lawyer’s possession

Exception to the comingling rule

What is a contingency contract

Why contingency fee is allowed

Why contingent fees contracts are subject to restrictions

Two fold purpose of contingent fee arrangements

Contingent fees are generally higher than hourly fees.

Contingency fee agreement must satisfy four requirements to be valid

Contingent fee to a witness

Reverse contingent fees

Attorney cannot acquire by purchase or assignment the object of any litigation

No recovery, no contingent fee

Contingent fee arrangement must be written

When a contingent fee is agreed verbally

Limitations of a contingency agreement

An attorney cannot exact a penalty for a right of discharge

“Discharge clause" in a contingent fee agreement is prohibited

Right of client to discharge counsel versus Right of counsel to adequate compensation

PALE - Topic 4 Attorney's Fees

PALE - Topic 4 Attorney's Fees