Rosario Jr.

vs deGuzman

Facts:

Sometime in August 1990, Spouses Pedro and Rosita de Guzman (Spouses de

Guzman) engaged the legal services of Atty. Francisco L. Rosario, Jr. (petitioner) as
defense counsel in the complaint filed against them by one Loreta A. Chong (Chong)
for annulment of contract and recovery of possession with damages involving a
parcel of land in Parañaque City, covered by Transfer Certificate of Title (TCT) No.
1292, with an area of 266 square meters, more or less. Petitioner’s legal services
commenced from the RTC and ended up in this Court.3 Spouses de Guzman,
represented by petitioner, won their case at all levels. While the case was pending
before this Court, Spouses de Guzman died in a vehicular accident. Thereafter, they
were substituted by their children, namely: Rosella de Guzman-Bautista, Lellani de
Guzman, Arleen de Guzman, and Philip Ryan de Guzman (respondents).4

On September 8, 2009, petitioner filed the Motion to Determine Attorney’s

Fees5 before the RTC. He alleged, among others, that he had a verbal agreement
with the deceased Spouses de Guzman that he would get 25% of the market value
of the subject land if the complaint filed against them by Chong would be dismissed.
Despite the fact that he had successfully represented them, respondents refused his
written demand for payment of the contracted attorney’s fees. Petitioner insisted
that he was entitled to an amount equivalent to 25% percent of the value of the
subject land on the basis of quantum meruit.

On November 23, 2009, the RTC rendered the assailed order denying petitioner’s
motion on the ground that it was filed out of time. The RTC stated that the said
motion was filed after the judgment rendered in the subject case, as affirmed by this
Court, had long become final and executory on October 31, 2007. The RTC wrote
that considering that the motion was filed too late, it had already lost jurisdiction
over the case because a final decision could not be amended or corrected except for
clerical errors or mistakes. There would be a variance of the judgment rendered if
his claim for attorney’s fees would still be included.

Issues:

THE TRIAL COURT COMMITTED A REVERSIBLE ERROR IN DENYING THE MOTION TO

DETERMINE ATTORNEY’S FEES ON THE GROUND THAT IT LOST JURISDICTION
OVER THE CASE SINCE THE JUDGMENT IN THE CASE HAS BECOME FINAL AND
EXECUTORY; II chan

THE TRIAL COURT SERIOUSLY ERRED IN DECLARING THAT PETITIONER’S CLAIM

FOR ATTORNEY’S FEES WOULD RESULT IN A VARIANCE OF THE JUDGMENT THAT
HAS LONG BECOME FINAL AND EXECUTORY; chanroblesvirtualawlibrary

1
 III

THE TRIAL COURT ERRED IN NOT DECLARING THAT THE FINALITY OF THE
DECISION DID NOT BAR PETITIONER FROM FILING THE MOTION TO RECOVER HIS
ATTORNEY’S FEES.

Ruling:

With respect to the merits of the case, the Court finds in favor of petitioner.

In order to resolve the issues in this case, it is necessary to discuss the two concepts
of attorney’s fees – ordinary and extraordinary. In its ordinary sense, it is the
reasonable compensation paid to a lawyer by his client for legal services rendered.
In its extraordinary concept, it is awarded by the court to the successful litigant to
be paid by the losing party as indemnity for damages. 13 Although both concepts are
similar in some respects, they differ from each other, as further explained below: cralavvonlinelawlibrary

The attorney’s fee which a court may, in proper cases, award to a winning litigant is,
strictly speaking, an item of damages. It differs from that which a client pays his
counsel for the latter’s professional services. However, the two concepts have many
things in common that a treatment of the subject is necessary. The award that the
court may grant to a successful party by way of attorney’s fee is
an indemnity for damages sustained by him in prosecuting or defending,
through counsel, his cause in court. It may be decreed in favor of the party, not
his lawyer, in any of the instances authorized by law. On the other hand, the
attorney’s fee which a client pays his counsel refers to the compensation
for the latter’s services. The losing party against whom damages by way of
attorney’s fees may be assessed is not bound by, nor is his liability dependent upon,
the fee arrangement of the prevailing party with his lawyer. The amount stipulated
in such fee arrangement may, however, be taken into account by the court in fixing
the amount of counsel fees as an element 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 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.

The two concepts of attorney’s fees are similar in other respects. They both require,
as a prerequisite to their grant, the intervention of or the rendition of professional
services by a lawyer. As a client may not be held liable for counsel fees in favor of
his lawyer who never rendered services, so too may a party be not held liable for
attorney’s fees as damages in favor of the winning party who enforced his rights
without the assistance of counsel. Moreover, both fees are subject to judicial control
and modification. And the rules governing the determination of their reasonable
amount are applicable in one as in the other.

In the case at bench, the attorney’s fees being claimed by the petitioner refers to
the compensation for professional services rendered, and not as indemnity for

2
damages. He is demanding payment from respondents for having successfully
handled the civil case filed by Chong against Spouses de Guzman. The award of
attorney’s fees by the RTC in the amount of P10,000.00 in favor of Spouses de
Guzman, which was subsequently affirmed by the CA and this Court, is of no
moment. The said award, made in its extraordinary concept as indemnity for
damages, forms part of the judgment recoverable against the losing party and is to
be paid directly to Spouses de Guzman (substituted by respondents) and not to
petitioner. Thus, to grant petitioner’s motion to determine attorney’s fees would not
result in a double award of attorney’s fees. And, contrary to the RTC ruling, there
would be no amendment of a final and executory decision or variance in judgment.

The Court now addresses two (2) important questions: (1) How can attorney’s fees
for professional services be recovered? (2) When can an action for attorney’s fees
for professional services be filed? The case of Traders Royal Bank Employees Union-
Independent v. NLRC15 is instructive:cralavvonlinelawlibrary

As an adjunctive episode of the action for the recovery of bonus differentials in

NLRC-NCR Certified Case No. 0466, private respondent’s present claim for attorney’s
fees may be filed before the NLRC even though or, better stated, especially after its
earlier decision had been reviewed and partially affirmed. It is well settled that a
claim for attorney’s fees may be asserted either in the very action in which
the services of a lawyer had been rendered or in a separate action.

With respect to the first situation, the remedy for recovering attorney’s fees as an
incident of the main action may be availed of only when something is due to the
client. Attorney’s fees cannot be determined until after the main litigation
has been decided and the subject of the recovery is at the disposition of the
court. The issue over attorney’s fees only arises when something has been
recovered from which the fee is to be paid.

While a claim for attorney’s fees may be filed before the judgment is
rendered, the determination as to the propriety of the fees or as to the
amount thereof will have to be held in abeyance until the main case from
which the lawyer’s claim for attorney’s fees may arise has become final.
Otherwise, the determination to be made by the courts will be premature.
Of course, a petition for attorney’s fees may be filed before the judgment in
favor of the client is satisfied or the proceeds thereof delivered to the
client.

It is apparent from the foregoing discussion that a lawyer has two options as to
when to file his claim for professional fees. Hence, private respondent was well
within his rights when he made his claim and waited for the finality of the
judgment for holiday pay differential, instead of filing it ahead of the
award’s complete resolution. To declare that a lawyer may file a claim for
fees in the same action only before the judgment is reviewed by a higher
tribunal would deprive him of his aforestated options and render ineffective
the foregoing pronouncements of this Court. [Emphases and underscoring
supplied]

3
In this case, petitioner opted to file his claim as an incident in the main action, which
is permitted by the rules. As to the timeliness of the filing, this Court holds that the
questioned motion to determine attorney’s fees was seasonably filed.

The records show that the August 8, 1994 RTC decision became final and executory
on October 31, 2007. There is no dispute that petitioner filed his Motion to
Determine Attorney’s Fees on September 8, 2009, which was only about one (1)
year and eleven (11) months from the finality of the RTC decision. Because
petitioner claims to have had an oral contract of attorney’s fees with the deceased
spouses, Article 1145 of the Civil Code 16 allows him a period of six (6) years within
which to file an action to recover professional fees for services rendered.
Respondents never asserted or provided any evidence that Spouses de Guzman
refused petitioner’s legal representation. For this reason, petitioner’s cause of action
began to run only from the time the respondents refused to pay him his attorney’s
fees.

At this juncture, having established that petitioner is entitled to attorney’s fees and
that he filed his claim well within the prescribed period, the proper remedy is to
remand the case to the RTC for the determination of the correct amount of
attorney’s fees. Such a procedural route, however, would only contribute to the
delay of the final disposition of the controversy as any ruling by the trial court on the
matter would still be open for questioning before the CA and this Court. In the
interest of justice, this Court deems it prudent to suspend the rules and simply
resolve the matter at this level.

With respect to petitioner’s entitlement to the claimed attorney’s fees, it is the

Court’s considered view that he is deserving of it and that the amount should be
based on quantum meruit.

Quantum meruit  – literally meaning as much as he deserves – is used as basis for

determining an attorney’s professional fees in the absence of an express agreement.
The recovery of attorney’s fees on the basis of quantum meruit is a device that
prevents an unscrupulous client from running away with the fruits of the legal
services of counsel without paying for it and also avoids unjust enrichment on the
part of the attorney himself. An attorney must show that he is entitled to reasonable
compensation for the effort in pursuing the client’s cause, taking into account certain
factors in fixing the amount of legal fees. 20

Rule 20.01 of the Code of Professional Responsibility lists the guidelines for

determining the proper amount of attorney fees, to wit: cralavvonlinelawlibrary

4
Rule 20.1 – A lawyer shall be guided by the following factors in determining his
fees:cralavvonlinelawlibrary

a) The time spent and the extent of the services rendered or required; chanroblesvirtualawlibrary

b) The novelty and difficulty of the questions involved; chanroblesvirtualawlibrary

c) The importance of the subject matter; chanroblesvirtualawlibrary

d) The skill demanded; chanroblesvirtualawlibrary

e) The probability of losing other employment as a result of acceptance of the

proffered case; chanroblesvirtualawlibrary

f) The customary charges for similar services and the schedule of fees of the IBP
chapter to which he belongs; chanroblesvirtualawlibrary

g) The amount involved in the controversy and the benefits resulting to the client
from the service; chanroblesvirtualawlibrary

h) The contingency or certainty of compensation; chanroblesvirtualawlibrary

i) The character of the employment, whether occasional or established; and

j) The professional standing of the lawyer.

Petitioner unquestionably rendered legal services for respondents’ deceased parents

in the civil case for annulment of contract and recovery of possession with damages.
He successfully represented Spouses de Guzman from the trial court level in 1990
up to this Court in 2007, for a lengthy period of 17 years. After their tragic death in
2003, petitioner filed a notice of death and a motion for substitution of parties with
entry of appearance and motion to resolve the case before this Court. 21 As a
consequence of his efforts, the respondents were substituted in the place of their
parents and were benefited by the favorable outcome of the case.

As earlier mentioned, petitioner served as defense counsel for deceased Spouses de

Guzman and respondents for almost seventeen (17) years. The Court is certain that
it was not an easy task for petitioner to defend his clients’ cause for such a long
period of time, considering the heavy and demanding legal workload of petitioner
which included the research and preparation of pleadings, the gathering of
documentary proof, the court appearances, and the various legal work necessary to
the defense of Spouses de Guzman. It cannot be denied that petitioner devoted
much time and energy in handling the case for respondents. Given the considerable
amount of time spent, the diligent effort exerted by petitioner, and the quality of
work shown by him in ensuring the successful defense of his clients, petitioner
clearly deserves to be awarded reasonable attorney’s fees for services rendered.
Justice and equity dictate that petitioner be paid his professional fee based
on quantum meruit.

5
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 layer 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. 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. 22

The Court, however, is resistant in granting petitioner's prayer for an award of 25%
attorney's fees based on the value of the property subject of litigation because
petitioner failed to clearly substantiate the details of his oral agreement with
Spouses de Guzman. A fair and reasonable amount of attorney's fees should be 15%
of the market value of the property.

WHEREFORE, the petition is GRANTED. Accordingly, the Court grants the Motion
to Determine Attorney's Fees filed by petitioner Atty. Francisco L. Rosario, Jr. Based
on quantum meruit, the amount of attorney's fees is at the rate of 15% of the
market value of the parcel of land, covered by Transfer Certificate of Title No. 1292,
at the time of payment.

6
Radiowealth Finance Corp vs IBC

Facts:

Sometime in 1978, petitioners Radiowealth, Inc. (RWI) and Radiowealth Finance Company, Inc. (RFC)
applied for and obtained credit facilities from private respondent International Corporate Bank
(Interbank). Petitioners Domingo Guevara (Guevara, for short) and D.M.G., Inc., acted as sureties to
the obligations contracted by RWI and RFC. The obligations of petitioners were accordingly covered
and evidenced by promissory notes, trust receipts and agreements.

A common stipulation in the covering promissory notes, trust receipts, and continuing surety
agreements between the borrowing petitioners and the lending private respondent provided, to wit:

In the event of the bringing of any action or suit by you or any default of the undersigned hereunder
I/We shall on demand pay you reasonable attorney's fees and other fees and costs of collection,
which shall in no cases be less than ten percentum (10 %) of the value of the property and the
amount involved by the action or suit. (Rollo, p. 211).

From 1978 to 1980, petitioners were not able to comply with their obligations on time with
Interbank due to subsequent severe economic and financial reverses. Petitioners thus asked
Interbank for a restructuring of their outstanding loans, but the parties were not able to arrive at a
mutually acceptable proposition.

On December 28, 1979, Interbank, constrained to seek judicial remedy, through its counsel Norberto
J. Quisumbing and Associates, lodged before the then Court of First Instance of Manila its first
complaint, docketed thereat as Civil Case No. 128744, for collection of sum of money with an
application for a writ of preliminary attachment against RWI and Guevara covering the principal sum
of P1,585,933.61 plus penalties, service charges, interests, attorney's fees, costs and exemplary
damages (Rollo, pp. 31-38).

This was followed by another complaint filed on January 9, 1980 before the same trial court against
RFC, RWI and D.M.G., Inc., also with an application for a writ of preliminary attachment, docketed as
Civil Case No. 128897, for the collection of the principal sum of P2,113,444.58, plus interests,
penalties, service charges, attorney's fees, costs and exemplary damages (Rollo, pp. 39-47).

Petitioners, however, opted to amicably settle their obligations promptly. They, therefore, did not
file any answer nor any responsive pleading to the complaints, and instead entered into a
compromise agreement with Interbank shortly about four (4) months later. Said compromise
agreement between the parties was embodied in two Motions for Judgment Based on Compromise
dated March 21, 1980 (Rollo, pp. 48-55) corresponding to the separate claims in the said two
complaints which were accordingly submitted to the court a quo for approval. These motions did not
however, cover the payment by the petitioners of Interbank's claims for attorney's fees, costs of
collection and expenses of litigation which were left open by the parties for further negotiations.

In its decision in Civil Case No. 128744, dated March 28, 1980, the trial court approved the parties'
corresponding compromise agreement thereto, with the reservation that "(T)his decision does not
terminate this case because matters respecting payment of attorney's fees, costs and collection."

Similarly, the trial court, in its decision in Civil Case No. 128897 of even date, also approved the
parties' corresponding compromise agreement thereto with the Identical reservation as aforequoted
(Rollo, pp. 60-61).

7
Thereafter, further proceedings were conducted by the trial court particularly on the issue of the
alleged unreasonableness and unconscionableness of the attorney's fees. It appears from the
records of the cases, however, that Atty. Norberto J. Quisumbing, counsel for Interbank, was able to
adduce his evidence in support for the attorney's fees due to his said client, while Attys. Reyes and
Guevara, counsel for petitioners in the trial court, were not given their request for further hearing
against the claimed attorney's fees despite some supervening events as alleged in their motion for
reconsideration dated January 29, 1981 (Rollo, pp. 82-84) which was denied in the Order of January
30, 1981 (Rollo, p. 85).

At any rate, the trial court, in its Order dated January 2, 1981, had already reduced Interbank's claim
for attorney's fees, from the stipulated 10 % to 8 %.

Issues:

I. Whether or not the reasonableness of attorney's fees in the case at bar is a question of law;

II. Whether or not the award of attorney's fees in the case at bar is reasonable;

III. Whether or not a contracted stipulation regarding attorney's fees may be disregarded by this
Honorable Court;

IV. whether or not attorney's fees require proof (Rollo, p. 243).

Ruling:

As a basic premise, the contention of petitioners that this Court may alter, modify or change even an
admittedly valid stipulation between the parties regarding attorney's fees is conceded. The high
standards of the legal profession as prescribed by law and the Canons of Professional Ethics regulate
if not limit the lawyer's freedom in fixing his professional fees. The moment he takes his oath, ready
to undertake his duties first, as a practitioner in the exercise of his profession, and second, as an
officer of the court in the administration of justice, the lawyer submits himself to the authority of the
court. It becomes axiomatic therefore, that power to determine the reasonableness or the
unconscionable character of attorney's fees stipulated by the parties is a matter falling within the
regulatory prerogative of the courts (Panay Electric Co., Inc. vs. Court of Appeals, 119 SCRA 456
[1982]; De Santos vs. City of Manila, 45 SCRA 409 [1972]; Rolando vs. Luz, 34 SCRA 337 [1970]; Cruz
vs. Court of Industrial Relations, 8 SCRA 826 [1963]). And this Court has consistently ruled that even
with the presence of an agreement between the parties, the court may nevertheless reduce
attorney's fees though fixed in the contract when the amount thereof appears to be unconscionable
or unreasonable (Borcena vs. Intermediate Appellate Court, 147 SCRA 111 [1987]; Mutual Paper Inc.
vs. Eastern Scott Paper Co., 110 SCRA 481 [1981]; Gorospe vs. Gochango, 106 Phil. 425 [1959];
Turner vs. Casabar, 65 Phil. 490 [1938]; F.M. Yap Tico & Co. vs. Alejano, 53 Phil. 986 [1929]). 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 (Philippine Engineering Co. vs. Green, 48 Phil. 466).

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 (Air France vs. Carrascoso, 18 SCRA 155

8
[1966]), and where the issue is the construction or interpretation to be placed by the appellate court
upon documentary evidence, or when a case is submitted upon an agreed statement of facts or
where all the facts are stated in the judgment, the question is one of law where the issue is the
correctness of the conclusion drawn therefrom (Cunanan vs. Lazatin, 74 Phil. 719 [1944]; Ng Young
vs. Villa, 93 Phil. 21 [1953]). In the case at bar, the issues do not call for an examination of the
probative value of the evidence because the ultimate facts are admitted by the parties and all the
basic facts are stated in the judgment.

Nevertheless, a careful review of the records shows that the modified attorney's fees fixed by the
trial court and affirmed by the respondent appellate court, appears reasonable and fair under the
admitted circumstances of the case. As aptly reasoned out by the said court:

We find nothing wrong in the aforegoing disquisition of the lower court.

It is to be remembered that attorney's fees provided in contracts as recoverable against the other
party and damages are not, strictly speaking, the attorney's fees recoverable as between attorneys
and client spoken of and regulated by the Rules of Court. Rather, the attorney's fees here are in the
nature of liquidated damages and the stipulations therefor is aptly called a penal clause, So long as
such stipulation does not contravene law, morals, or public order, it is strictly binding upon the
defendant (Polytrade Corporation vs. Blanco, 30 SCRA 187 [1969]). However:

"Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably reduced if

they are iniquitous or unconscionable. For this reason, we do not really have to strictly view the
reasonableness of the attorney's fees in the light of such facts as the amount and character of the
service rendered, the nature and importance of the litigation, and the professional character and the
social standing of the attorney. We do concede, however that these factors may be an aid in the
determination of the inequity or unconscionableness of attorney's fees as liquidated damages.
(Supra)

May the attorney's fees granted by the court be tagged as iniquitous or unconscionable? We give the
answer in the negative. The high standing of plaintiffs counsel has not been challenged.

In the motion for judgment based on compromise agreement, defendants acknowledged and
admitted their default or failure to pay their joint and several obligations or indebtedness arising
from the credit facilities which plaintiff extended to defendants and availed of by the latter, the
punctual payment of which having been guaranteed and warranted by the other defendants. Having
admitted such default in the payment of their obligations, the filing of the action in court and,
consequently, the legal services of counsel became imperative and thereby, set into operation the
contract clause on the payment of attorney's fees.

The complaints are not simple actions for collection. They are accompanied with a prayer for the
issuance of a writ of preliminary attachment, and charge defendants with violation of the trust
receipts law and they involve several letters of credit and trust receipts. The fact that the
compromise agreements were entered into after the complaints were filed against appellants
indubitably proves that the legal action taken by counsel for the plaintiff against the defendants
contributed in no measure to the early settlement of defendants' obligation.

Considering further that, apart from the reduction and waiver of penalty charges due to the plaintiff
to the extent of P79, 191.72, the service charge of 2 % was further deducted by the lower court
thereby, reducing the attorney's fees to 8 % the court is of the considered opinion and so holds that
given the prestige of plaintiff's counsel, the nature of the action and quality of legal services

9
rendered, the award of attorney's fees in a sum equivalent to 8 % of the judgment which is below
the stipulated fees of 10 % could hardly be suggested as iniquitous and unconscionable. On the
contrary, it easily falls within the rule of conscionable and reasonable. (Rollo, pp. 100-101).

The foregoing disquisition merits our assent.

Moreover, even if the so-called supervening event which ought to have been heard in the trial court
as alleged in petitioners' motion for reconsideration dated January 29, 1981, i.e., "that supervening
events happened from the time the trust receipt agreements were signed in which the defendants
agreed to pay 10 % of the amount due as attorney's fees and costs of collection up to the actual
filing of the complaint and these events were the payments of interest in the amount of
P285,341.27, as interest, P41,507.37 as service charges and P76,568.47 as penalty by Radiowealth,
Inc.; that Radiowealth Finance Co., Inc. has paid the amount of P281,940.12 as interest, P38,721.83
as service charges and P96,804.57 as penalty (Rollo, pp. 137-138), were to be considered, they
would still be insufficient to justify a further substantial reduction in the adjudged attorney's fees. At
any rate, it would be noted that petitioners have not even prayed for a specific reduction as to
amount or percentage of the attorney's fees except for their sweeping allegations of
unreasonableness, exhorbitance and unconscionableness.

WHEREFORE, the assailed decision of the respondent appellate court is Affirmed, with costs de
officio.

10
Lacson vs Reyes

Facts:

On August 26, 1987, the private respondent, Ephraim Serquina, petitioned the respondent court for
the probate of the last will and testament of Carmelita Farlin. His petition was docketed as Sp. Proc.
No. 127-87 of the respondent court, entitled "In Re Testate Estate of Carmelita S. Farlin, Ephraim J.
Serquina, Petitioner." He also petitioned the court in his capacity as counsel for the heirs, the herein
petitioners, and as executor under the will.

The petition was not opposed and hence, on November 17, 1987, the respondent court issued a
"certificate of allowance,"  the dispositive part of which reads as follows:

WHEREFORE, upon the foregoing, the Court hereby renders certification that subject will and
testament is accordingly allowed in accordance with Sec. 13 of Rule 76 of the Rules of Court.

SO ORDERED. 

On March 14, 1988, Atty. Ephraim Serquina filed a "motion for attorney's fees"  against the
petitioners, alleging that the heirs had agreed to pay, as and for his legal services rendered, the sum
of P68,000.00.

Thereafter summonses were served upon the heirs "as if it were a complaint against said
heirs" directing them to answer the motion.

Thereafter, the heirs filed their answer and denied the claim for P68,000.00 alleging that the sum
agreed upon was only P7,000.00, a sum they had allegedly already paid.

After pre-trial, the respondent court rendered judgment and disposed as follows:

In the light of the foregoing, considering the extent of the legal services rendered to the clients, the
value of the properties gained by the clients out of said services, the petition for attorney's fees is
granted. Judgment is hereby rendered directing the respondent heirs to pay their lawyer the sum of
P65,000.00 as true and reasonable attorney's fees which shall be a lien on the subject properties.
Cost against the respondent.

SO ORDERED

On October 27, 1988, the respondent court issued an order "noting" the notice on appeal
"appellants [the heirs] having failed to correct or complete the same within the reglementary period
to effect an appeal." 

On November 24, 1988, the respondent court issued yet another order denying the notice of appeal
for failure of the heirs to file a record on appeal. 

Thereafter, Atty. Serquina moved for execution.

On December 5, 1988, the respondent court issued an order granting execution. 

11
Issue:

The petitioners submit that the decision, dated October 26, 1988, and the orders, dated October 27,
1988, November 24, 1988, and December 5, 1988, respectively, are nun and void for the following
reasons: (1) the respondent court never acquired jurisdiction over the "motion for attorney's fees"
for failure on the part of the movant, Ephraim Serquina, to pay docket fees;  and (3) the respondent
court also gravely abused its discretion in awarding attorney's fees contrary to the provisions of
Section 7, of Rule 85, of the Rules of Court.

Ruling:

We take these up seriatim.

I.

Anent docket fees, it has been held  that the court acquires jurisdiction over any case only upon
payment of the prescribed docket fee.

Although the rule has since been tempered,  that is, there must be a clear showing that the party
had intended to evade payment and to cheat the courts, it does not excuse him from paying docket
fees as soon as it becomes apparent that docket fees are indeed payable.

In the case at bar, the "motion for attorney's fees" was clearly in the nature of an action commenced
by a lawyer against his clients for attorney's fees. The very decision of the court states:

This case is an out-growth from Sp. Proc. No. 127-87 of same Court which was long decided (sic). It
resulted from the filing of a petition for attorney's fees by the lawyer of the petitioner's heirs in the
case against the latter.

Upon the filing of the petition for attorney's fees, the heir- respondents (sic) were accordingly
summoned to answer the petition as if it were a complaint against said heirs who retained the
petitioner as their lawyer in the said case.

In that event, the parties should have known, the respondent court in particular, that docket fees
should have been priorly paid before the court could lawfully act on the case, and decide it.

It may be true that the claim for attorney's fees was but an incident in the main case, still, it is not an
escape valve from the payment of docket fees because as in all actions, whether separate or as an
offshoot of a pending proceeding, the payment of docket fees is mandatory.

Assuming, therefore, ex gratia argumenti, that Atty. Serquina's demand for attorney's fees in the
sum of P68,000.00 is valid, he, Atty. Serquina, should have paid the fees in question before the
respondent court could validly try his "motion".

III.

It is pointed out that an attorney who is concurrently an executor of a will is barred from recovering
attorney's fees from the estate. 

12
The rule is therefore clear that an administrator or executor may be allowed fees for the necessary
expenses he has incurred as such, but he may not recover attorney's fees from the estate. His
compensation is fixed by the rule but such a compensation is in the nature of executor's or
administrator's commissions, and never as attorney's fees. In one case, we held that "a greater sum
[other than that established by the rule] may be allowed 'in any special case, where the estate is
large, and the settlement has been attended with great difficulty, and has required a high degree of
capacity on the part of the executor or administrator.'" It is also left to the sound discretion of the
court. With respect to attorney's fees, the rule, as we have seen, disallows them. Accordingly, to the
extent that the trial court set aside the sum of P65,000.00 as and for Mr. Serquina's attorney's fees,
to operate as a "lien on the subject properties,"  the trial judge must be said to have gravely abused
its discretion (apart from the fact that it never acquired jurisdiction, in the first place, to act on said
Mr. Serquina's "motion for attorney's fees").

The next question is quite obvious: Who shoulders attorney's fees? We have held that a lawyer of an
administrator or executor may not charge the estate for his fees, but rather, his client. Mutatis
mutandis, where the administrator is himself the counsel for the heirs, it is the latter who must pay
therefor.

In that connection, attorney's fees are in the nature of actual damages, which must be duly
proved.  They are also subject to certain standards, to wit: (1) they must be reasonable, that is to
say, they must have a bearing on the importance of the subject matter in controversy; (2) the extent
of the services rendered; and (3) the professional standing of the lawyer.  In all cases, they must be
addressed in a full-blown trial and not on the bare word of the parties. And always, they are subject
to the moderating hand of the courts.

The records show that Atty. Ephraim Serquina, as counsel for the heirs, performed the following:

xxx xxx xxx

5. That after the order of allowance for probate of the will, the undersigned counsel assisted the
heirs to transfer immediately the above-mentioned real estate in their respective names, from (sic)
the payment of estate taxes in the Bureau of Internal Revenue to the issuance by the Registry of
Deeds of the titles, in order for the heirs to sell the foregoing real estate of 10,683 sq. cm (which was
also the subject of sale prior to the death of the testator) to settle testator's obligations and day-to-
day subsistence being (sic) that the heirs, except Zena F. Velasco, are not employed neither doing
any business; 

The Court is not persuaded from the facts above that Atty. Serquina is entitled to the sum claimed by
him (P68,000.00) or that awarded by the lower court (P65,000.00). The Court observes that these
are acts performed routinely since they form part of what any lawyer worth his salt is expected to
do. The will was furthermore not contested. They are not, so Justice Pedro Tuason wrote, "a case
[where] the administrator was able to stop what appeared to be an improvident disbursement of a
substantial amount without having to employ outside legal help at an additional expense to the
estate," to entitle him to a bigger compensation. He did not exactly achieve anything out of the
ordinary.

The records also reveal that Atty. Serquina has already been paid the sum of P6,000.00.  It is our
considered opinion that he should be entitled to P15,000.00 for his efforts on a quantum
meruit basis. Hence, we hold the heirs liable for P9,000.00 more.

13
Tanhueco vs Dumo

Facts:

On 24 February 1975, complainant Hilaria Tanhueco filed before the Court a Petition
for Disbarment (docketed as Administrative Case No. 1437) against respondent
Justiniano G. de Dumo for having violated the Canons of Professional Ethics by his
(a) refusal to remit to her money collected by him from debtors of the complainant;
and (b) refusal to return documents entrusted to him as counsel of complainant in
certain collection cases.

In his Answer and Counter-Petition 1 filed on 3 April 1975, respondent denied the
charges. Complainant filed a Rejoinder [should be Reply] to Answer with Counter-
Petition, on 18 April 1975. By a Resolution 2 dated 16 June 1975, the Court referred
this case to the Solicitor General for investigation, report and recommendation.

A year later, on 25 June 1976, one Jose Florencio N. Tanhueco, claiming to be the
nephew and representative of the complainant, addressed a sworn letter complaint
to Mrs. Imelda R. Marcos against the respondent for (a) refusal to remit the money
collected by respondent from debtors of complainant’s aunt, Mrs. Hilaria Tanhueco
Vda. de David; (b) refusal to return documents entrusted to him in his capacity as
counsel in certain cases; and (c) abandonment of cases in respect of which his
professional services had been engaged. On 24 August 1976, the letter complaint
was forwarded by the then Public Information Assistance Staff, Department of Public
Information, to this Court for appropriate action (and docketed as Administrative
Case No. 1683). After respondent had filed his Answer, the Court, by a Resolution 3
dated 9 December 1976, referred this case to then Acting Judicial Consultant Ricardo
C. Puno for study, report and recommendation.

Since Administrative Case No. 1683 and Administrative Case No. 1437 involved the
same parties and the same subject matter, Hon. Ricardo C. Puno referred the former
case to the Office of the Solicitor General for consolidation with the latter one.

The Office of the Solicitor General held two (2) hearings, one on 3 December 1975
and another on 18 April 1988. In the first hearing, respondent de Dumo was absent
although he had been notified thereof. At the end of the first hearing, continuation
of the hearing of the case was set for 14 January 1976. The records show that the
second hearing took place on 18 April 1988 but do not indicate the reason for the
12-year interregnum. By then, complainant Tanhueco had died. There was no
appearance at the second hearing by complainant Jose Florencio Tanhueco but
respondent de Dumo was then present. chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

14
The report of the Solicitor General, dated June 15, 1988 in Administrative Case No.
1437 summarized the evidence for the complainant in the following manner:

Complainant Hilaria Tanhueco testified that she secured the legal services of
respondent to collect indebtedness from her different debtors. Although she offered
to execute a document evidencing their lawyer client relationship, respondent told
her that it was not necessary. She nonetheless offered to give him 15% of what he
may be able to collect from the debtors (pp. 4-7. tsn, Dec. 3, 1975).

Complainant also declared that respondent borrowed from her P2,000.00,

P1,300.00, and P3,000.00 on three separate occasions, but she could not remember
when she gave those amounts. Respondent did not pay those loans (pp. 89, tsn,
Id.)

She confirmed that respondent filed cases against her debtors and that one of them,
Constancia Mañosca, paid P12,500.00 to Respondent. Informed of such payment by
Mañosca herself, complainant confronted respondent but the later denied having
received payment from any of her debtors. Complainant then brought the matter to
the attention of Malacañang which referred her to Camp Crame. Notwithstanding
subsequent demands of complainant for the money, respondent had refused to give
her the amount (pp. 11-15, tsn, Id.)."

"FINDINGS

There is in the case at bar clear admissions by both complainant and respondent of
an attorney-client relationship between them, specifically in the collection of debts
owing complainant. Respondent also admitted, in his answer to the complaint and in
his testimony, having received P12,000.00 from judgment-debtor Constancia
Mañosca, without turning over the amount to his client, complainant herein, and
applying it instead as part of his attorney’s fees. It has been held that the money
collected by a lawyer in pursuance of a judgment in favor of his client is held in trust
(Aya v. Bigonia, 67 Phil. 8; Daroy v. Legaspi, 65 SCRA 304), and that the attorney
should promptly account for all funds and property received or held by him for the
client’s benefit (Daroy v. Legaspi, supra; In re Bamberger, 49 Phil. 962). The
circumstance that an attorney has a lien for his attorney’s fees on the money in his
hands collected for his client does not relieve him from the obligation to make a
prompt accounting (Doming[o] v. Doming[o], G.R. No. 30573, Oct. 29, 1971; Daroy
v. Legaspi, supra). Undoubtedly, respondent’s failure to account for the P12,000.00,
representing payment of the judgment debt of Mañosca constitutes unprofessional
conduct and subjects him to disciplinary action. Nonetheless, it has likewise been
recognized that a lawyer is as much entitled to judicial protection against injustice,
imposition or fraud on the part of his client; and that the attorney is entitled to be
paid his just fees. The attorney should be protected against any attempt on the part
of his client to escape payment of his just compensation (Fernandez v. Bello, 107
Phil. 1140; Albano v. Coloma, G.R. Adm. Case No. 528, Oct. 11, 1967). This
countervailing rule mitigates the actions of Respondent.

15
The Solicitor General then recommended that: jgc:chanrobles.com.ph

"For failure to turn over the amount of P12,000.00 to the complainant, and applying
it as his attorney’s fees, respondent Atty. Justiniano G. de Dumo be severely
reprimanded and admonished that repetition of the same or similar offense will be
dealt with in severely." cralaw virtua1aw library

Ruling:

We find the findings of fact of the Solicitor General supported by the evidence of
record. We are, however, unable to accept his recommendation.

Moneys collected by an attorney on a judgment rendered in favor of his client,

constitute trust funds and must be immediately paid over to the client. 4 Canon 11
of the Canons of Professional Ethics 5 then in force, provides as follows: jgc:chanrobles.com.ph

"11. Dealing with trust property.

The lawyer should refrain from any action whereby for his personal benefit or gain
he abuses or takes advantage of the confidence reposed in him by his client.

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."
(Italic’s supplied)

When respondent withheld and refused to deliver the money received by him for his
client, the deceased complainant Hilaria Tanhueco, he breached the trust reposed
upon him. The claim of the respondent that complainant had failed to pay his
attorney’s fees, is not an excuse for respondent’s failure to deliver any amount to
the complainant. 6 It is of course true that under Section 37 of Rule 138 of the
Revised Rules of Court, an attorney has —

"a lien upon the funds, documents and papers of his client which have lawfully come
into his possession and may retain the same until his lawful fees and disbursements
have been paid, and may apply such funds to the satisfaction thereof. He shall also
have a lien to the same extent upon all judgments for the payment of money, and
executions issued in pursuance of such judgments, which he has secured in a
litigation of his client, from and after the time when he shall have caused a
statement of his claim of such lien to be entered upon the records of the court
rendering such judgment, or issuing such execution, and shall have caused written
notice thereof to be delivered to his client and to the adverse party; and he shall
have the same right and power over such judgments and executions as his client
would have to enforce his lien and secure the payment of his just fees and
disbursements." cralaw virtua1aw library

16
The fact that a lawyer has a lien for fees on moneys in his hands collected for his
client, does not relieve him from his duty promptly to account for the moneys
received; his failure to do so constitutes professional misconduct. 7

In the present case, what respondent could have properly done was to make an
accounting with his client, the complainant, deduct his attorney’s fees due in respect
of the amount actually collected by him, and turn over the remaining balance to the
complainant. The Court notes that the services of respondent de Dumo were
engaged by the complainant on a number of cases and that these were on differing
stages of completion. Respondent was not entitled to hold on to the entire amount
of P12,000.00 collected by him until all his fees for the other cases had also been
paid and received by him. There was not enough evidence in the record to show how
much money, if any, respondent had in fact previously (i.e., other than the
P12,000.00 from Mañosca) collected for and turned over to complainant (thereby
waiving his lien thereon) without deducting therefrom his claimed contingent fees in
respect of such collections.

There is another aspect to this case which the Court cannot gloss over. Respondent
claimed that he charged complainant, his client, a contingent fee of fifty percent
(50%) of the amount collected by him, plus interest and whatever attorney’s fees
may be awarded by the trial court chargeable to the other party. In this jurisdiction,
contingent fees are not per se prohibited by law. 8 But when it is shown that a
contract for a contingent fee was obtained by undue influence exercised by the
attorney upon his client or by any fraud or imposition, or that the compensation is
clearly excessive, the Court must and will protect the aggrieved party. 9

From the Answer of respondent de Dumo, it appears that in three (3) collection
cases filed by him for the complainant and which were decided in favor of the
complainant, the awards totalled P31,390.00. Respondent asserted that he was
entitled to attorney’s fees amounting to P18,840.00 out of the aggregate total of
P31,390.00: jgc:chanrobles.com.ph

"7. That the understanding between Hilaria Tanhueco and me was a fifty-fifty on
collected principal and interests. The lawyer has the right to charge attorney’s fees
to the other party-defendant and that Hilaria Tanhueco shall not interfere nor be
included in the computation.

Under this scheme, respondent was actually collecting as attorney’s fees sixty
percent (60%) or more than half of the total amount due from defendant debtors;
indeed, he was appropriating for himself more than what he was, according to him,
to turn over to his client. chanrobles law library : red

We believe and so hold that the contingent fee here claimed was, under the facts
obtaining in this case, grossly excessive and unconscionable. 11 Such a fee
structure, when considered in conjunction with the circumstances of this case, also
shows that an unfair advantage was taken of the client and legal fraud and
imposition perpetrated upon her.

17
The complainant was an old and sickly woman and, in respondent’s own words,
"penniless." She was at the time she filed her complaint in 1976, already seventy-six
(76) years old. In her circumstances, and given her understandable desire to realize
upon debts owed to her before death overtook her, she would easily succumb to the
demands of respondent attorney regarding his attorney’s fees. It must be stressed
that the mere fact that an agreement had been reached between attorney and client
fixing the amount of the attorney’s fees, does not insulate such agreement from
review and modification by the Court where the fees clearly appear to be excessive
or unreasonable. In Mambulao Lumber Company v. Philippine National Bank, Et Al.,
12 this Court stressed: jgc:chanrobles.com.ph

"The principle that courts should reduce stipulated attorney’s fees whenever it is
found under the circumstances of the case that the same is unreasonable, is now
deeply rooted in this jurisdiction to entertain any serious objection to it. Thus, this
Court has explained: chanrob1es virtual 1aw library

‘But the principle that it may be lawfully stipulated that the legal expenses involved
in the collection of a debt shall be defrayed by the debtor does not imply that such
stipulations must be enforced in accordance with the terms, no matter how injurious
or oppressive they may be. The lawful purpose to be accomplished by such a
stipulation is to permit the creditor to receive the amount due him under his contract
without a deduction of the expenses caused by the delinquency of the debtor. It
should not be permitted for him to convert such a stipulation into a source of
speculative profit at the expense of the debtor.

x           x          x

Since then this Court has invariably fixed counsel fees on a quantum meruit basis
whenever the fees stipulated appear excessive, unconscionable, or unreasonable,
because a lawyer is primarily a court officer charged with the duty of assisting the
court in administering impartial justice between the parties, and hence, the fees
should be subject to judicial control. Nor should it 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 (See, Gorospe, Et. Al. v. Gochangco, supra). And it is not material that
the present action is between attorney and client. As courts have power to fix the
fee as between attorney and client, it must necessarily have the right to say whether
a stipulation like this, inserted in a mortgage contract, is valid (Bachrach v.
Golingco, supra).

x       x       x" 13

This Court has power to guard a client, 14 especially an aged and necessitous client,
15 against such a contract. We hold that on a quantum meruit basis, no
circumstances of special difficulty attending the collection cases having been shown
by respondent, respondent attorney’s fees should be reduced from sixty percent
(60%) to fifteen percent (16%) of the total amount (including attorney’s fees
stipulated as chargeable to the debtors) collected by him on behalf of his client.

With respect to charges of refusal to return documents entrusted to respondent

lawyer and abandonment of cases in which his services had been engaged, we

18
accept the findings of the Solicitor General that the evidence of record is not
sufficient to prove these allegations.

WHEREFORE, the Court Resolved that: chanrob1es virtual 1aw library

1. respondent is guilty of violation of the attorneys’ oath and of serious professional

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

2. the attorney’s fees that respondent is entitled to in respect of the collection cases
here involved shall be an amount equivalent to fifteen percent (15%) of the total
amount collected by respondent from the debtors in those cases;

3. respondent shall return forthwith to the estate of complainant Hilaria Tanhueco,

the P12,000.00 respondent received on behalf of his client less attorney’s fees due
to him in respect of that amount (P12,000.00 less fifteen percent [15%] thereof) or
a net amount of P10,200.00; and

4. respondent shall return to the estate of complainant Hilaria Tanhueco any

documents and papers received by him from the deceased complainant in
connection with the collection cases for which he was retained. If he has in fact
made any other collections from deceased complainant’s debtors, he shall promptly
account therefor to complainant’s estate and shall be entitled to receive in respect
thereof the fifteen percent (15%) attorney’s fees provided for herein.

19
Dalisay vs Mauricio Jr.

Facts:

On October 13, 2001, Valeriana U. Dalisay, complainant, engaged

respondent's services as counsel in Civil Case No. 00-044,
entitled "Lucio De Guzman, etc., complainants, v. Dalisay U.
Valeriana, respondent," pending before the Municipal Trial Court,
Branch 1, Binangonan, Rizal. Notwithstanding his receipt of
documents and attorney's fees in the total amount of P56,000.00
from complainant, respondent never rendered legal services for
her. As a result, she terminated the attorney-client relationship
and demanded the return of her money and documents, but
respondent refused.

On January 13, 2004, Investigating Commissioner Lydia A.

Navarro of the Integrated Bar of the Philippines (IBP) Commission
on Bar Discipline, found that "for the amount of P56,000.00
paid by the complainant x x x, no action had been taken
nor any pleadings prepared by the respondent except his
alleged conferences and opinions rendered when
complainant frequented his law office." She recommended
that respondent be required to refund the amount of P56,000.00
to the complainant, and surprisingly, that the complaint be
dismissed.

On February 27, 2004, the IBP Board of Governors passed

Resolution No. XVI-2004-121, adopting and approving
in toto  Commissioner Navarro's Report and Recommendation.

On April 22, 2005, we rendered the assailed Decision.

Incidentally, upon learning of our Decision, respondent went to

the MTC, Branch I, Binangonan, Rizal to verify the status of Civil
Case No. 00-044. There, he learned of the trial court's Decision
dated December 6, 2001 holding that "the tax declarations and
title" submitted by complainant "are not official records of the
Municipal Assessor and the Registry of Deed." Thereupon,
respondent filed a Sworn Affidavit Complaint1 against complainant
charging her with violations of Article 1712 and 172,3 and/or
Article 1824 of the Revised Penal Code. He alleged that
complainant offered tampered evidence.

20
Issue:

(2) respondent should have returned her money

Ruling:

It is axiomatic that no lawyer is obliged to act either as adviser or

advocate for every person who may wish to become his client. He
has the right to decline employment. But once he accepts money
from a client, an attorney-client relationship is established, giving
rise to the duty of fidelity to the client's cause.5 From then on, he
is expected to be mindful of the trust and confidence reposed in
him. He must serve the client with competence and diligence, and
champion the latter's cause with wholehearted devotion.

Undoubtedly, respondent's present version is a flagrant departure

from his previous pleadings. This cannot be countenanced. A
party should decide early what version he is going to advance. A
change of theory in the latter stage of the proceedings is
objectionable, not due to the strict application of procedural rules,
but because it is contrary to the rules of fair play, justice and due
process.9 The present administrative case was resolved by the
IBP on the basis of respondent's previous admission that
complainant engaged his legal services in Civil Case No. 00-044.
He cannot now unbind himself from such admission and its
consequences. In fact, if anything at all has been achieved by
respondent's inconsistent assertions, it is his dishonesty to this
Court.

At any rate, assuming arguendo that complainant indeed engaged

respondent's services in filing the two (2) new petitions, instead
of Civil Case No. 00-044, still, his liability is unmistakable. There
is nothing in the records to show that he filed any petition. The
ethics of the profession demands that, in such a case, he should
immediately return the filing fees to complainant. In Pariñas v.
Paguinto,10 we held that "a lawyer shall account for all money
or property collected from the client. Money entrusted to a
lawyer for a specific purpose, such as for filing fee, but not
used for failure to file the case must immediately be

21
returned to the client on demand." Per records, complainant
made repeated demands, but respondent is yet to return the
money.

Neither do we find merit in respondent's second argument. The

fact thatCivil Case No. 00-044 was already "submitted for
decision" does not justify his inaction. After agreeing to handle
Civil Case No. 00-044, his duty is, first and foremost, to enter his
appearance. Sadly, he failed to do this simple task. He should
have returned complainant's money. Surely, he cannot expect
to be paid for doing nothing.

In his third argument, respondent attempts to evade

responsibility by shifting the blame to complainant. He claims
that she refused to provide him with documents vital to the case.
He further claims that he would be violating the Code of
Professional Responsibility by handling a case without adequate
preparation. This is preposterous. When a lawyer accepts a case,
his acceptance is an implied representation that he possesses the
requisite academic learning, skill and ability to handle the
case.11 As a lawyer, respondent knew where to obtain copies of
the certificates of title. As a matter of fact, he admitted that his
Law Office, on its own, managed to verify the authenticity of
complainant's title. It bears reiterating that respondent did not
take any action on the case despite having been paid for his
services. This is tantamount to abandonment of his duties as a
lawyer and taking undue advantage of his client.

In fine, let it be stressed that the authority of an attorney begins

with his or her retainer.12 It gives rise to a relationship between
an attorney and a client that is highly fiduciary in nature and of a
very delicate, exacting, and confidential character, requiring a
high degree of fidelity and good faith.13 If much is demanded
from an attorney, it is because the entrusted privilege to practice
law carries with it the correlative duties not only to the client but
also to the court, to the bar, and to the public. A lawyer who
performs his duty with diligence and candor not only protects the
interest of his client; he also serves the ends of justice, does
honor to the bar, and helps maintain the respect of the
community to the legal profession.14 Indeed, law is an exacting
goddess demanding of her votaries not only intellectual but also
moral discipline.

22
Camacho vs CA

Facts:

Petitioner Aurora Camacho, together with the Municipality of Balanga, Bataan, fled
Civil Case No. 424 on November 18, 1969 for forcible entry in the municipal court of
the same town against one Silvestre Tuazon. Petitioner was then represented by
private respondent Angelino M. Banzon as counsel of record.

In their complaint, it was alleged that the defendant was an agricultural lessee of Lot
No. 261, covered by Transfer Certificate of Title No. T-10.185 of the Register of
Deeds of Bataan, who surrendered his landholding by virtue of an agreement
entitled "Agreement With Voluntary Surrender" dated August 22, 1968. Defendant
allegedly re-entered the lot in question by force, strategy and stealth, thereby
obstructing the construction of a provisional road to the market site of the town as
well as depriving the plaintiffs of possession thereof. 1

After trial on the merits, the inferior court rendered a decision, dated March 1, 1971,
in favor of the plaintiffs ordering the defendant to vacate the premises. 2 The case
was elevated by the defendant to the then Court of First Instance of Bataan where it
was assigned to Branch I presided by Judge Abraham P. Vera, Docketed as Civil
Case No. 3512, the case was tried de novo because no stenographic notes were
taken of the proceedings in the inferior court.chanrobles virtual lawlibrary

While the trial de novo was ongoing, private respondent was dismissed as counsel
by petitioner. This led to the filing of a complaint in intervention by private
respondent on December 17, 1973 against both the petitioner, who was a plaintiff
therein, and defendant Tuazon. Private respondent’s complaint in intervention was
predicated on an alleged contract of attorney’s fees 3 wherein petitioner was
supposed to have bound herself to pay private respondent five thousand (5,000)
square meters of the lot in litigation for his legal services rendered in negotiating for
the transfer of the town’s market site to petitioner’s property. Additionally, private
respondent claimed one thousand (1,000) square meters of the lot which petitioner
allegedly orally bound herself to pay him as attorney’s fees in handling her seven (7)
other cases. 4 It is averred that his discharge from the case was without justifiable
cause and with clear intent of avoiding payment of the attorney’s fees agreed upon.
5 Private respondent further asserted that he purchased from petitioner eighty (80)
square meters and from third parties eight hundred (800) square meters of the lot
in question. Thus, private respondent, as intervenor, joined petitioner in praying for
the ejectment of the defendant but, at the same time, asked the trial court to order
petitioner to deliver to him the aforestated portions of Lot No. 261, plus rentals,
additional attorney’s fees and expenses of litigation.

Issue:

Worthy of note, in this connection, is that the attorney’s fees of a counsel may be
claimed in the very action in which the services in question have been rendered. As
an incident of the main action, the fees may be properly adjudged after such
litigation is terminated and the subject of recovery is at the disposition of the Court. 

23
Ruling:

Worthy of note, in this connection, is that the attorney’s fees of a counsel may be
claimed in the very action in which the services in question have been rendered. As
an incident of the main action, the fees may be properly adjudged after such
litigation is terminated and the subject of recovery is at the disposition of the Court.
17

The foregoing rule applies where the counsel was dismissed without cause pending
the litigation, although the amount of recovery may be different depending on the
circumstances. As observed by respondent appellate court, the rules even provide
that if the contract between the client and his counsel has been reduced to writing
and the dismissal of the attorney was without justifiable cause, he shall be entitled
to recover from the client the full compensation stipulated in the contract and may
in the discretion of the court intervene to protect his rights.

Complete reliance on this particular rule per se cannot, however, be made. The
records show that the intervenor claims properties supposedly due to him not only
because of the legal services rendered in the same case where it is being claimed
but also in some other cases or undertakings, as well as consequent to certain
conveyances made in his favor. We must, therefore, also view and take into account
these other claims of the intervenor in the determination of the effect of the
judgment on compromise. chanrobles.com : virtual law library

There is no question that intervention is only collateral or ancillary to the main

action. Hence, it was previously ruled that the final dismissal of the principal action
results in the dismissal of said ancillary action. The main action having ceased to
exist, there is no pending proceeding whereon the intervention may be based. 19 In
the case at bar, however, there was no such final or complete dismissal but rather
an approval of a compromise agreement which was embodied in what was
specifically designated as a "Partial Decision" affecting only the interests of herein
petitioner and the defendant in said case but not those of her co-plaintiff
municipality and the intervenor. The clear intent of the court below in making the
partial decision is to make a reservation to determine the rights of the intervenor
and, presumably, the plaintiff municipality. There may be nothing much left to be
done with respect to the main case but as far as the proceedings in the trial court
are concerned, the controversy therein has not been fully settled and the disposition
of the case is definitely incomplete.

It bears mention that the complaint in intervention was filed against the plaintiffs
and the defendant in said case. The settlement forged by petitioner and the
defendant therein would not necessarily settle the rights of the intervenor and may
even be prejudicial to the latter considering that his interest as alleged in the
complaint in intervention, if substantiated, will entitle him to portions of the property
in question.

Also, considerations of equity weigh heavily in favor of private Respondent. To

require private respondent to refile another case for the settlement of his claims will
necessarily result in greater prejudice and delay, aside from the inevitable
consequence that it will entail multiplicity of suits. It should also be borne in mind
that this complaint in intervention has been pending for almost sixteen (16) years
now, during which period private respondent has already rested his case after
presentation of evidence and petitioner is in the process of presenting her own
evidence. 20 Predictably, the rights of the intervenor car no longer be as adequately

24
protected in another future proceeding which will require presentation anew of the
same evidence adduced in the hearings of the case below, some of which evidence
may no longer be available or extant by then. Undeniably, such cumbersome and
duplicitous procedure would run counter to the desirable legal norm required for the
orderly and expeditious administration of justice.
chanrobles law library : red

Petitioner should also be faulted for not opportunely assailing the denial of her
motion to dismiss the intervention. After her motion was denied on March 16, 1979,
she waited until September 3, 1983 to again question the propriety of the
proceedings on the complaint in intervention. All throughout these intervening four
(4) years, she did not avail herself of the remedies provided by law. Such actuation
of petitioner, bordering on, if not altogether constitutive of, estoppel by laches
ineluctably leads us to hold that her petition for certiorari seeking to annul the
purported improper grant of the motion for intervention was not filed within the
reasonable period of time required in the rules. In fine, the confluence of the
aforementioned considerations dictate that the adjudicative process on the
questioned intervention can validly proceed to its proper conclusion.

ON THE FOREGOING PREMISES, the petition is DENIED and the decision of

respondent appellate court is hereby AFFIRMED.

25
Licudan vs CA

Facts:

The practice of law is a profession rather than trade. Courts must guard against the charging of
unconscionable and excessive fees by lawyers for their services when engaged as counsel. Whether
or not the award of attorney's fees in this case is reasonable, being in the nature of contingent fees,
is the principal issue.

The respondent lawyer was retained as counsel by his brother-in-law and sister, the now deceased
petitioners' parents, spouses Aurelio and Felicidad Licudan. His services as counsel pertained to two
related civil cases docketed as Civil Case No. Q-12254 for partition and Civil Case No. Q-28655 for a
sum of money in connection with the redemption of the property subject matter of the two cases
covered by Transfer Certificate of Title No. 818 of the Register of Deeds of Quezon City. In both
cases, the respondent lawyer obtained a judgment in favor of his clients.

On August 13,1979, the respondent lawyer filed a Petition for Attorney's Lien with Notification to his
Clients which substantially alleged that his clients executed two written contracts for professional
services in his favor which provided that:

a) The undersigned counsel is entitled to own 97.5 square meters of the plaintiff's share of the lot in
question.

b) The undersigned counsel shall have a usufructuary right for a period of ten (10) years of plaintiffs'
share of the lot in question.

c) And that all damages accruing to plaintiffs to be paid by the defendant is for the undersigned
counsel.(Annex "H" of the Petition, Rollo, p. 54)

On September 19, 1979, the trial court handling Civil Case No. Q-12254 ordered the annotation at
the back of TCT No. 818 of the Register of Deeds of Quezon City of the respondent lawyer's Contract
for Professional Services dated August 30, 1979 signed by petitioner Wilfredo Licudan and Aurelio
Licudan on his own behalf and on behalf of his daughter, petitioner Cristina Licudan-Campos. The
said trial court's Order, being one of two Orders being essentially challenged in this petition, is
reproduced below:

Before the court for consideration is a Petition for Attorney's Lien filed by Atty. Teodoro D.
Domalanta, counsel for the plaintiff, praying that his attorney's fees be annotated as a lien at the
back of Transfer Certificate of Title No. 818 of the Register of Deeds of Quezon City, subject matter
of this case.

For the protection of the plaintiffs, the court required the plaintiff Aurelio Licudan as well as his son
to appear this morning. Plaintiff Aurelio Licudan together with his son Wilfredo Licudan, who
appears to be intelligent and in fact he speaks (the) English language well, appeared. Both Aurelio
and Wilfredo Licudan manifested that they have freely and voluntarily signed the Contract for
Professional Services, dated August 30, 1979 and notarized before Notary Public Amado Garrovillas
as Doc. No. 32, Page 8, Book No. XIX, Series of 1979.

26
Considering the manifestation of plaintiff, Aurelio Licudan and Alfredo (sic) Licudan that they have
entered freely and voluntarily in the said contract of professional services, let the same be
annotated at the back of TCT 818 of the Register of Deeds of Quezon City, upon payment of the
required legal fees. 

The Contract for Professional Services dated August 30, 1979 differs from the earlier contractual
provisions in that it entitled the respondent lawyer to one-third (1/3) of the subject property or 90.5
square meters and provided for usufructuary rights over the entire lot in question in favor of the
respondent lawyer's son, Teodoro M. Domalanta, Jr. for an agreed consideration.

On September 30, 1985, the trial court denied the motion on the ground that the respondent lawyer
cannot collect attorney's fees for other cases in the action for partition.

The petitioners fault the respondent Court for its failure to exercise its inherent power to review and
determine the propriety of the stipulated attorney's fees in favor of the respondent lawyer and
accuse the respondent lawyer of having committed an unfair advantage or legal fraud by virtue of
the Contract for Professional Services devised by him after the trial court awarded him attorney's
fees for P1,000.00 only instead of respecting the trust and confidence of the highest level reposed
on him considering the close blood and affinal relationship between him and his clients.

Ruling:

It is a well-entrenched rule that attorney's fees may be claimed in the very action in which the
services in question have been rendered or as an incident of the main action. The fees may be
properly adjudged after such litigation is terminated and the subject of recovery is at the disposition
of the court.

It is an equally deeply-rooted rule that contingent fees are not per se prohibited by law. They are
sanctioned by Canon 13 of the Canons of Professional Ethics and Canon 20, Rule 20.01 of the
recently promulgated Code of Professional Responsibility. However, as we have held in the case
of Tanhueco v. De Dumo (172 SCRA 760 [1989]):

. . . When it is shown that a contract for a contingent fee was obtained by undue influence exercised
by the attorney upon his client or by any fraud or imposition, or that the compensation is clearly
excessive, the Court must and will protect the aggrieved party.

In the case at bar, the respondent lawyer caused the annotation of his attorney's fees lien in the
main action for partition docketed as Civil Case No. Q-12254 on the basis of a Contract for
Professional Services dated August 30, 1979. We find reversible error in the Court of Appeals'
holding that:

When the reasonableness of the appellee's lien as attorney's fees over the properties of his clients
awarded to him by the trial court had not been questioned by the client, and the said orders had
already become final and executory, the same could no longer be disturbed, not even by the court
which rendered them (Tañada v. Court of Appeals, 139 SCRA 419). (CA Decision p. 7; Rollo, p. 36)

On the contrary, we rule that the questioned Orders dated September 19, 1979 and October 21,
1985 cannot become final as they pertain to a contract for a contingent fee which is always subject
to the supervision of the Court with regard to its reasonableness as unequivocally provided in
Section 13 of the Canons of Professional Ethics which reads:

27
13. Contingent Fees.—

A contract for a contingent fee, where sanctioned by law, should be reasonable under all the
circumstances of the case including the risk and uncertainty of the compensation, but
should always be subject to the supervision of a court, as to its reasonableness. (Emphasis supplied).

There is no dispute in the instant case that the attorney's fees claimed by the respondent lawyer are
in the nature of a contingent fee. There is nothing irregular about the execution of a written contract
for professional services even after the termination of a case as long as it is based on a previous
agreement on contingent fees by the parties concerned and as long as the said contract does not
contain stipulations which are contrary to law, good morals, good customs, public policy or public
order.

Although the Contract for Professional Services dated August 30, 1979 was apparently voluntarily
signed by the late Aurelio Licudan for himself and on behalf of his daughter, petitioner Cristina
Licudan-Campos and by the petitioner Wilfredo Licudan who both manifested in open court that
they gave their free and willing consent to the said contract we cannot allow the said contract to
stand as the law between the parties involved considering that the rule that in the presence of a
contract for professional services duly executed by the parties thereto, the same becomes the law
between the said parties is not absolute but admits an exception—that the stipulations therein are
not contrary to law, good morals, good customs, public policy or public order (see Philippine
American Life Insurance Company v. Pineda, 175 SCRA 416 [1989]; Syjuco v. Court of Appeals, 172
SCRA 111 [1989]).

Under Canon 20 of the Code of Professional Responsibility, a lawyer shall charge only fair and
reasonable fees.1âwphi1 In determining whether or not the lawyer fees are fair and reasonable,
Rule 20-01 of the same Code enumerates the factors to be considered in resolving the said issue.
They are as follows:

a) The time spent and the extent of the services 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 proferred 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.

A similar provision is contained under Section 24, Rule 138 of the Revised Rules of Court which partly
states that:

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 to

28
the importance of the subject matter of the controversy, the extent of the services rendered, and
the professional standing of the attorney. . . . A written contract for services shall control the amount
to be paid therefor unless found by the court to be unconscionable or unreasonable.

All that the respondent lawyer handled for his deceased sister and brother-in-law was a simple case
of partition which necessitated no special skill nor any unusual effort in its preparation. The
subsequent case for redemption was admittedly but an offshot of the partition case. Considering the
close blood and affinal relationship between the respondent lawyer and his clients, there is no doubt
that Atty. Domalanta took advantage of the situation to promote his own personal interests instead
of protecting the legal interests of his clients. A careful perusal of the provisions of the contract for
professional services in question readily shows that what the petitioners won was a pyrrhic victory
on account of the fact that despite the successful turnout of the partition case, they are now
practically left with nothing of the whole subject lot won in the litigation. This is because aside from
the 121.5 square meters awarded to Atty. Domalanta as attorney's fees, the said contract for
professional services provides that the remaining portion shall pertain to the respondent lawyer's
son by way of usufruct for ten (10) years. There should never be an instance where a lawyer gets as
attorney's fees the entire property involved in the litigation. It is unconscionable for the victor in
litigation to lose everything he won to the fees of his own lawyer.

The respondent lawyer's argument that it is not he but his son Teodoro M. Domalanta, Jr. who is
claiming the usufructuary right over the remaining portion of the subject lot is inaccurate. The
records show that the matter of usufruct is tied up with this case since the basis for the said
usufructuary right is the contract for professional services the reasonableness of which is being
questioned in this petition. We find the ten-year usufruct over the subject lot part and parcel of the
attorney's fees being claimed by the respondent lawyer.

In resolving the issue of reasonableness of the attorney's fees, we uphold the time-honoured legal
maxim that a lawyer shall at all times uphold the integrity and dignity of the legal profession so that
his basic ideal becomes one of rendering service and securing justice, not money-making. For the
worst scenario that can ever happen to a client is to lose the litigated property to his lawyer in whom
an trust and confidence were bestowed at the very inception of the legal controversy. We find the
Contract for Professional Services dated August 30, 1979, unconscionable and unreasonable. The
amount of P20,000.00 as attorney's fees, in lieu of the 121.5 square meters awarded to the
respondent lawyer and the ten-year usufructuary right over the remaining portion of 150 square
meters by the respondent lawyer's son, is, in the opinion of this Court, commensurate to the
services rendered by Atty. Domalanta.

WHEREFORE, IN VIEW OF THE FOREGOING, the instant petition is GRANTED. The Court of Appeals'
decision of September 12, 1989 is hereby REVERSED and SET ASIDE. Atty. Domalanta is awarded
reasonable attorney's fees in the amount of P20,000.00.

29
Fabillo vs IAC

Facts:

In the instant petition for review on certiorari, petitioners seek the reversal of the appellate court's
decision interpreting in favor of lawyer Alfredo M. Murillo the contract of services entered into
between him and his clients, spouses Florencio Fabillo and Josefa Taña.

In her last will and testament dated August 16, 1957, Justina Fabillo bequeathed to her brother,
Florencio, a house and lot in San Salvador Street, Palo, Leyte which was covered by tax declaration
No. 19335, and to her husband, Gregorio D. Brioso, a piece of land in Pugahanay, Palo, Leyte.1 After
Justina's death, Florencio filed a petition for the probate of said will. On June 2, 1962, the probate
court approved the project of partition "with the reservation that the ownership of the land declared
under Tax Declaration No. 19335 and the house erected thereon be litigated and determined in a
separate proceedings."2

Two years later, Florencio sought the assistance of lawyer Alfredo M. Murillo in recovering the San
Salvador property.

Pursuant to said contract, Murillo filed for Florencio Fabillo Civil Case No. 3532 against Gregorio D.
Brioso to recover the San Salvador property. The case was terminated on October 29, 1964 when the
court, upon the parties' joint motion in the nature of a compromise agreement, declared Florencio
Fabillo as the lawful owner not only of the San Salvador property but also the Pugahanay parcel of
land.

Consequently, Murillo proceeded to implement the contract of services between him and Florencio
Fabillo by taking possession and exercising rights of ownership over 40% of said properties. He
installed a tenant in the Pugahanay property.

Sometime in 1966, Florencio Fabillo claimed exclusive right over the two properties and refused to
give Murillo his share of their produce.5 Inasmuch as his demands for his share of the produce of the
Pugahanay property were unheeded, Murillo filed on March 23, 1970 in the then Court of First
Instance of Leyte a complaint captioned "ownership of a parcel of land, damages and appointment
of a receiver" against Florencio Fabillo, his wife Josefa Taña, and their children Ramon (sic) Fabillo
and Cristeta F. Maglinte.6

Murillo prayed that he be declared the lawful owner of forty per cent of the two properties; that
defendants be directed to pay him jointly and severally P900.00 per annum from 1966 until he
would be given his share of the produce of the land plus P5,000 as consequential damages and
P1,000 as attorney's fees, and that defendants be ordered to pay moral and exemplary damages in
such amounts as the court might deem just and reasonable.

In its decision of December 2, 1975,7 the lower court ruled that there was insufficient evidence to
prove that the Fabillo spouses' consent to the contract was vitiated. It noted that the contract was
witnessed by two of their children who appeared to be highly educated. The spouses themselves
were old but literate and physically fit.

30
The lower court resolved the motions and modified its decision thus:

ACCORDINGLY, the judgment heretofore rendered is modified to read as follows:

(a) Declaring the plaintiff as entitled to and the true and lawful owner of forty percent (40%) of the
parcels of land and improvements thereon covered by Tax Declaration Nos. 19335 and 6229
described in Paragraph 5 of the complaint;

(b) Directing all the defendants to pay jointly and severally to the plaintiff the sum of Two Thousand
Four Hundred Fifty Pesos (P2,450.00) representing 40% of the net produce of the Pugahanay
property from 1967 to 1973;

(c) Declaring the plaintiff entitled to 40% of the 1974 and 1975 income of said riceland now on
deposit with the Prudential Bank, Tacloban City, deposited by Mr. Pedro Elona, designated receiver
of the property;

(d) Ordering the defendants to pay the plaintiff the sum of Three Hundred Pesos (P 300.00) as
attorney's fees; and

(e) Ordering the defendants to pay the costs of this suit.

Issue:

The instant petition for review on certiorari which was interposed by the Fabillo children, was filed
shortly after Murillo himself died. His heirs likewise substituted him in this case. The Fabillos herein
question the appellate court's interpretation of the contract of services and contend that it is in
violation of Article 1491 of the Civil Code.

Ruling:

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 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.9

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.10

As long as the lawyer does not exert undue influence on his client, that no fraud is committed or
imposition applied, or that the compensation is clearly not excessive as to amount to extortion, a
contract for contingent fee is valid and enforceable.11 Moreover, contingent fees were impliedly
sanctioned by No. 13 of the Canons of Professional Ethics which governed lawyer-client relationships
when the contract of services was entered into between the Fabillo spouses and Murillo.12

However, we disagree with the courts below that the contingent fee stipulated between the Fabillo
spouses and Murillo is forty percent of the properties subject of the litigation for which Murillo
appeared for the Fabillos. A careful scrutiny of the contract shows that the parties intended forty

31
percent of the value of the properties as Murillo's contingent fee. This is borne out by the stipulation
that "in case of success of any or both cases," Murillo shall be paid "the sum equivalent to forty per
centum of whatever benefit" Fabillo would derive from favorable judgments. The same stipulation
was earlier embodied by Murillo in his letter of August 9, 1964 aforequoted.

Worth noting are the provisions of the contract which clearly states that in case the properties are
sold, mortgaged, or leased, Murillo shall be entitled respectively to 40% of the "purchase price,"
"proceeds of the mortgage," or "rentals." The contract is vague, however, with respect to a situation
wherein the properties are neither sold, mortgaged or leased because Murillo is allowed "to have
the option of occupying or leasing to any interested party forty per cent of the house and lot." Had
the parties intended that Murillo should become the lawful owner of 40% of the properties, it would
have been clearly and unequivocally stipulated in the contract considering that the Fabillos would
part with actual portions of their properties and cede the same to Murillo.

The ambiguity of said provision, however, should be resolved against Murillo as it was he himself
who drafted the contract.13 This is in consonance with the rule of interpretation that, in construing
a contract of professional services between a lawyer and his client, such construction as would be
more favorable to the client should be adopted even if it would work prejudice to the
lawyer.14 Rightly so because of the inequality in situation between an attorney who knows the
technicalities of the law on the one hand and a client who usually is ignorant of the vagaries of the
law on the other hand.15

Considering the nature of the case, the value of the properties subject matter thereof, the length of
time and effort exerted on it by Murillo, we hold that Murillo is entitled to the amount of Three
Thousand Pesos (P3,000.00) as reasonable attorney's fees for services rendered in the case which
ended on a compromise agreement. In so ruling, we uphold "the time-honored legal maxim that a
lawyer shall at all times uphold the integrity and dignity of the legal profession so that his basic ideal
becomes one of rendering service and securing justice, not money-making. For the worst scenario
that can ever happen to a client is to lose the litigated property to his lawyer in whom all trust and
confidence were bestowed at the very inception of the legal controversy."16

WHEREFORE, the decision of the then Intermediate Appellate Court is hereby reversed and set aside
and a new one entered (a) ordering the petitioners to pay Atty. Alfredo M. Murillo or his heirs the
amount of P3,000.00 as his contingent fee with legal interest from October 29, 1964 when Civil Case
No. 3532 was terminated until the amount is fully paid less any and all amounts which Murillo might
have received out of the produce or rentals of the Pugahanay and San Salvador properties, and (b)
ordering the receiver of said properties to render a complete report and accounting of his
receivership to the court below within fifteen (15) days from the finality of this decision. Costs
against the private respondent.

32
Law Firm of Armovil vs CA

Facts:

Before the Court is Atty. Raymundo Armovit’s claim for attorney’s fees against the
private Respondent.

It appears that Atty. Armovit was engaged as counsel for the private respondent in a
complaint to have an extrajudicial foreclosure of certain properties by the
Government Service Insurance System declared null and void; that the parties
allegedly agreed that the private respondent shall pay P15,000.00 as initial
compensation and twenty percent in contingent fees; that after trial, the defunct
Court of First Instance rendered judgment annulling foreclosure and ordering the
Government Service Insurance System to restructure the private respondent’s loan;
that thereafter, the System appealed; that on appeal, the Court of Appeals affirmed
the decision of the lower court; and that the Appellate Court’s judgment has since
attained finality.

It also appears that when Atty. Armovit sought execution with the court a quo, he
was informed by Romualdo Bengzon, president of the respondent corporation, that
the firm had retained the services of Atty. Pacifico Yadao. He was also informed that
the company would pay him the agreed compensation and that Atty. Yadao’s fees
were covered by a separate agreement. The private respondent, however, later
ignored his billings and over the phone, directed him allegedly not to take part in the
execution proceedings. Forthwith, he sought the entry of an attorney’s lien in the
records of the case. The lower court allegedly refused to make the entry and on the
contrary, issued an order ordering the Philippine National Bank to "release to the
custody of Mr. Romualdo F. Bengzon and or Atty. Pacifico Yadao" 1 the sum of
P2,760,000.00 (ordered by the Court of Appeals as rentals payable by the
Government Service Insurance System). chanrobles virtual lawlibrary

Atty. Armovit then moved, apparently for the hearing of his motion to recognize
attorney’s lien, and thereafter, the trial court issued an order in the tenor as
follows: chanrob1es virtual 1aw library

When this case was called for hearing on the petition to record attorney’s charging
lien, Attys. Armovit and Aglipay appeared for the petitioners.

Atty. Armovit informed the Court that they are withdrawing the petition considering
that they are in the process of amicably settling their differences with the plaintiff,
which manifestation was confirmed by Atty. Yadao as well as the plaintiffs,
Romualdo Bengson and Brenda Bengson, who are present today.

In view of this development, the petition to record attorneys charging lien, the same
being in order and not contrary to law, morals and public policy, as prayed for by
Attys. Armovit and Aglipay, it is hereby withdrawn. The parties, therefore are hereby
directed to comply faithfully with their respective obligations.

However, upon the turnover of the money to the private respondent, Mrs. Brenda
Bengson (wife of Romualdo Bengzon) delivered to Atty. Armovit the sum of

33
P300,000.00 only. Atty. Armovit protested and demanded the amount of
P552,000.00 (twenty percent of P2,760,000.00), for which Mrs. Bengzon made
assurances that he will be paid the balance.

In compliance with the Order of this Court, the plaintiff submitted a pleading
denominated as compliance alleging that petitioner (Atty. Armovit) has already
received from the plaintiff the sum of P300,000.00, Philippine Currency, as and by
way of attorneys fees. With the receipt by the petitioner from the plaintiff of this
amount, the latter has faithfully complied with its obligation.

WHEREFORE, the Order of this Court dated October 11, 1988 approving the
withdrawal of the petition to record attorney s charging lien, on motion of the
petitioner, is now final.

Issue:

The only issue is whether or not Atty. Armovit is entitled to the sum of P252,000.00
more, in addition to the sum of P300,000.00 already paid him by the
private Respondent.

Ruling:

There is no question that the parties had agreed on a compensation as follows: chanrob1es virtual 1aw library

a) P15,000.00 by way of acceptance and study fee, payable within five (5) days
from date;

b) 20% contingent fee computed on the value to be recovered by favorable

judgment in the cases; and

c.) the execution and signing of a final retainer agreement complete with all
necessary details. 7

(While the parties’ agreement speaks of "a final retainer agreement" 8 to be

executed later, it does not appear that the parties did enter into a "final" agreement
thereafter.)

The private respondent’s version however is that while it may be true that the
agreed compensation was twenty percent of all recoveries, the parties later agreed
on a compromise sum approved allegedly by the trial court, per its Order of October
11, 1988.

The Court is inclined to believe that Atty. Armovit never agreed on the compromise
sum of P300,000.00. It is true that he did agree to withdraw his motion to annotate
attorney’s lien, but because the parties were "in the process of amicably settling
their differences" 9 and not because Atty. Armovit had agreed to accept a lower
amount as full payment. There is nothing, on top of that, in Atty. Armovit’s
manifestation that would suggest that he was accepting the sum of P300,000.00 as

34
agreed final payment, other than the fact that an agreement was supposedly
certain. 

There is nothing there that would indicate Atty. Armovit’s willingness to accept, in
fact, a lower figure in consideration of his withdrawal of his request to enter
attorney’s lien. What the Court takes his statement to mean is that he was
withdrawing his request on the certainty that the private respondent would pay him
the money, presumably, under more becoming circumstances.

The Court does not therefore see how the private respondent can hold Atty. Armovit
to have been in estoppel.chanrobles law library : red

The fact that Atty. Armovit did not, after all, accept the sum of P300,000.00 as final
compensation is indeed indicated by the behavior of the private respondent, through
Mrs. Romualdo Bengson, when she assured Atty. Armovit that the balance was
forthcoming. 11 According to Mrs. Bengson, she wished the rest of the Bengsons to
witness the final payment and when the occasion was present, wished for a
postponement on account of "All Saints Day." 12

The parties never therefore amended their original agreement, and what appears to
the Court is a clear effort on the part of a client, with the apparent approval of the
trial court, to renege on a valid agreement with its lawyer.

The Court believes that the trial court, in accepting the private respondent’s
"compliance" as a final payment of Atty. Armovit’s fees, was guilty of a grave abuse
of discretion. The private respondent had nothing with which to comply, and the
parties, as manifested by Atty. Armovit, were "in the process [merely] of amicably
settling their differences." 13

It is apparent furthermore that the trial judge himself was out to deny Atty. Armovit
the agreed compensation. In his order of October 4, 1988, he commanded: chanrob1es virtual 1aw library

The PNB is hereby ordered and directed to release to the custody of Mr. Romualdo F.
Bengson and/or Atty. Pacifico Yadao, counsel for the plaintiff, the sum of Two Million
Seven Hundred Sixty Thousand Pesos (P2,760,000.00), Philippine Currency for the
satisfaction of the rentals of the Bengson Building against the GSIS. 14

in spite of the fact that Atty. Armovit had remained the private respondent’s counsel
of record. It is fundamental that unless a lawyer has been validly discharged, his
authority to act for his client continues and should be recognized by the court. 15

The fact that the receipt evidencing payment by the private respondent of the
amount of P300,000.00 "was without any qualification as ‘advance’ or ‘partial’ or
‘incomplete’," 16 as the Court of Appeals noted and the Court of Appeals took to
mean "full payment", will not weaken Atty. Armovit’s demand for the balance. There
is nothing in that receipt that will suggest that it was full payment either, and the
fact that Atty. Armovit accepted it does not mean that he was satisfied that it was
final payment. The fact of the matter is that the private respondent had assured him
that the balance was forthcoming.

35
The private respondent can not justifiably downplay Atty. Armovit as negligent (for
failing to appeal) or his demand for fees excessive (that he had been paid enough).
Atty. Armovit, after all, succeeded in obtaining a favorable decision for his client,
and although his prayer for various damages were denied, he succeeded in obtaining
a substantial award (P1,900,000.00 in unpaid rentals) for his client. On appeal, the
Court of Appeals sustained his theory. It should be noted that the private
respondent had in fact stood to lose substantial properties on foreclosure — Atty.
Armovit not only restored to the private respondent its foreclosed properties, he
succeeded in having the private respondent’s loans restructured and the
Government Service Insurance System pay rentals. No client can ask a better result
from a lawyer. chanrobles.com:cralaw:red

Obviously, the private respondent’s effort to downgrade Atty. Armovit’s performance

is a wild, if not cheap, shot of a client out to evade its obligations to its lawyer. The
fact that Atty. Armovit may have been paid substantially (in initial fees) while the
case was dragging is no justification for denying him the full amount under their
agreement. It has been held that initial fees and fees paid in the progress of
litigation are independent of the contingent fees. 17

That the retainer agreement was never approved by the board of the corporation is
also a poor excuse because the fact of the matter is that the private respondent did
deliver to Atty. Armovit the sum of P300,000.00 in partial payment, and the private
respondent can not now deny him the balance by alleging lack of authority of the
Bengson spouses.

Contingent fees are valid in this jurisdiction. 18 It is true that attorney’s fees must
at all times be reasonable; 19 however, we do not find Atty. Armovit’s claim for
"twenty percent of all recoveries" to be unreasonable. In the case of Aro v. Nañawa,
20 decided in 1969, this Court awarded the agreed fees amid the efforts of the client
to deny him fees by terminating his services. In parallel vein, we are upholding Atty.
Armovit’s claim for P252,000.00 more — pursuant to the contingent fee agreement
— amid the private respondent’s own endeavours to evade its obligations.

Several times, we have come down hard on erring practitioners. We will not however
be slow either, in coming to the rescue of aggrieved brother-lawyers in protecting
the integrity of the bar from unscrupulous litigants.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

The private respondent is ORDERED to pay the petitioner the sum of P252,000.00.
Costs against the private Respondent.

Chua vs NLRC

36
Facts:
The instant petition questions the jurisdiction of the National Labor Relations Commission (NLRC) in
issuing three (3) resolutions dated October 6, 1988, November 3, 1988 and January 3, 1990 in NLRC
Injunction Case No. 1793. The October 6, 1988 resolution denied for lack of merit the petitioners'
petition for writ of prohibition to stay further proceedings in the five (5) consolidated labor cases
involving the former employees of Stanford Microsystems, Inc. pending with respondent Labor Arbiter
Dominador M. Cruz. The November 3, 1988 resolution ordered petitioners' Liquidation Committee of
Stanford Microsystems, Inc. to defer the payment of SIX MILLION PESOS (P6,000,000.00) to the
former employees of Stanford Microsystems, Inc. The January 3, 1990 resolution, among others
directed petitioner Liquidation Committee to deposit with the NLRC the deducted attorney's fees
representing ten percent (10%) of the amount due and/or to be paid to the former employees of
Stanford Microsystems Inc.

Except for cases (a), (b) and (c) which were assigned to different labor arbiters, cases (d) to (h)
were consolidated and as signed to respondent Labor Arbiter Dominador M. Cruz. The
petitioners in case (d) comprise the former daily paid employees of Stanford who were members
of the Stanford Microsystems, Inc., Labor Union ("SMILU"). They formed a "Caretaker
Committee", and the individual members appointed Ludivina L. Sabalza, Adeliza E. Cantillo and
Remigio P. Pestano as Attorneys-In-Fact for the purpose of prosecuting and settling their claims
against Stanford, both before the SEC and the DOLE. The Attorneys-In-Fact engaged the
services of private respondent, Atty. Vicente Ocampo, to act as their legal counsel.

In January, 1987, the SEC disapproved the Rehabilitation Plan submitted by SGV and dismissed
Stanford's Petition for Suspension of Payments and Appointment of a Rehabilitation Receiver.
(Annex "C', Petition) Subsequently, the SEC ordered Stanford's liquidation.

which have an aggregate principal exposure of Two Hundred Thirty One Million Six Hundred
Thousand Pesos (P231,600,000.00), and the twelve (12) duly authorized Attorneys-In-Fact of six
thousand three hundred forty one (6,341) former employees of Stanford (89% of the total
employees) with employees' claims of approximately One Hundred Twenty Five Million Seven
Hundred Ten thousand Pesos (P125,710,000.00) reached a mutually acceptable plan for the
speedy and orderly liquidation of Stanford. Hence, representatives of the seven (7) secured
banks and the employees' Attorneys-In- Fact assisted by their respective counsel held marathon
meetings and negotiations in the Office of Director Luna C. Piezas of the DOLE, National Capital
Region resulting in the execution of a Memorandum of Agreement dated March 13, 1987
("MOA", Annex "D", Petition). The MOA was signed by all the parties and duly attested by
Director Luna C. Piezas.

It is to be noted that the group of employees whose attorneys-in-fact are Ludivina L. Sabalza,
Adeliza E. Cantillo and Remigio P. Pestaño were represented in the negotiations leading to the
execution of the MOA by new counsel, the Bacungan Larcia Bacungan Law Office. Respondent
Atty. Vicente Ocampo's legal services were terminated by the attorneys-in-fact as early as
October and November 1986 in view of his refusal to represent the group in the negotiations with
the other former Stanford employees and Stanford creditors towards an out-of-court settlement of
their claims against Stanford. 

On October 12, 1988, the SEC en banc denied Atty. Ocampo's motion for reconsideration of the
October 2, 1987 order (Annex "E", Petition) and various other motions. It issued an Omnibus
Order (Annex "H") approving the MOA and confirming the appointment of the members of the
MOA Liquidation Committee as members of the Stanford Liquidation Committee. In the same
order, the SEC clarified that Atty. Ocampo represents only thirty four (34) employees. Actually,

37
Atty. Ocampo represents only twenty five (25) former Stanford employees who are now the
private respondents in the instant petition.

As regards the money claims filed by the former employees of Stanford, the following events
meanwhile transpired:

On June 30, 1988, the Stanford Liquidation Committee filed a Manifestation (Annex "L", Petition)
with the labor arbiters, including Labor Arbiter Cruz, before whom the labor cases filed against
Stanford were pending, advising said labor arbiters of the October 2, 1987 SEC order appointing
the Stanford Liquidation Committee as the permanent liquidator of Stanford and of the execution
of the MOA among the secured creditor banks and six thousand three hundred forty one (6,341)
former employees of Stanford.

On September 19, 1988, the petitioners, including the complainants in the consolidated labor
cases except the twenty five (25) private respondents represented by Atty. Ocampo, filed a Joint
Motion to Stay Proceedings (Annex "M", Petition) praying that the Labor Arbiters stay
proceedings in the labor cases pending before them. On the other hand, Atty. Ocampo on behalf
of the twenty five (25) private respondents filed an Urgent Petition for Injunction with Prayer for
Issuance of a Temporary Restraining Order in the consolidated labor cases pending before
respondent Labor Arbiter Cruz.

These motions notwithstanding, the NLRC had not acted upon them nor had it resolved the
injunction case despite the parties' submission of their respective memoranda prompting the
petitioners to file the instant petition.

At the time the three questioned NLRC resolutions were issued, the MOA Liquidation Committee
was already in the process of distributing money claims to the former employees of Stanford. 

The petitioners aver that the NLRC acted with grave abuse of discretion amounting to lack of
jurisdiction and/or without or in excess of its jurisdiction in issuing the three (3) questioned
resolutions considering that:

Issue:

INDUBITABLY, ATTY. VICENTE T. OCAMPO DOES NOT HAVE THE INTEREST OF LABOR
AT HEART AS HE HAS CONSISTENTLY AND PERSISTENTLY ATTACKED, DELAYED AND
IMPEDED THE LIQUIDATION OF STANFORD MICROSYSTEMS, INC. AND THE
DISTRIBUTION OF THE 'LIQUIDATION' PROCEEDS THEREOF TO THE FORMER
EMPLOYEES OF STANFORD MlCROSYSTEMS, INC.

Ruling:

As regards the January 3, 1989 NLRC resolution which directed petitioner Stanford Liquidation
Committee to deposit with the NLRC the deducted attorney's fees representing 10% of the
amount due and/or to be paid to the former employees of Stanford Microsystems, Inc. we agree
with the petitioners that such directive was jurisdictionally defective and premature. Such
directive is premature because the NLRC, in effect, prematurely and unduly disposed of,
resolved and prejudged the contentious issues raised in the Stanford Employees' Injunction
case, based on the bare assertions of Atty. Ocampo and his twenty five (25) clients the private
respondents herein. The Solicitor General, who agrees with the petitioners that the NLRC
resolution is premature aptly observed:

... [A]ny attorney's fee that may be awarded in the aforesaid cases would be
assessed from whatever money award is made in favor of the employees. In
other words, the attorney's fee is not a Stanford obligation but a lien on the

38
 employees' money award. By requiring the Liquidation Committee to make
deposit, the NLRC in effect would shift the obligation from the employees to
Stanford. (Public respondent's Memorandum, p. 1638)

Obviously, the NLRC directive was for the benefit of respondent Atty. Vicente Ocampo who is
claiming attorney's fees as counsel of the group of former Stanford employees headed by
Ludivina L. Sabalza, Adeliza Cantillo and Remigio P. Pestaño. But as stated earlier in this
decision, the group terminated the services of Atty. Ocampo when he refused to represent them
in the negotiations with the creditors and other former employees of Stanford. This,
notwithstanding, Atty. Ocampo insisted on acting as counsel of the group by filing pleadings on
their behalf with SEC and NLRC. He opposed the appearance dated June 30, 1988 (Annex
"NN", Petition) filed by the Bacungan Larcia Bacungan law offices in the case pending before the
SEC and the respondents Labor Arbiter Cruz and NLRC, in substitution of Atty. Ocampo, which
appearance bears the conformity of the group.

Eventually, however, the SEC found that Atty. Ocampo represented only thirty four (34)
employees which is less than 1% of the total Stanford employees.

The record shows that Atty. Ocampo filed with the SEC a Notice of Attorney's Lien dated
November 11, 1987.

Since the contract for legal services was on. a contingent basis, Atty. Ocampo as counsel can be
paid only if he wins the case for the group. As it turned out, however, Atty. Ocampo's services
were terminated by the group as early as October and November 1986 when he refused to
represent the group in the negotiations with the other creditors of Stanford for an out of court
settlement of their claims resulting in the execution of the Memorandum of Agreement. In an
earlier case involving Atty. Ocampo, entitled Ocampo v. Lerum (162 SCRA 498 [1988]), we ruled:

The record of the case clearly discloses that The private respondent Atty. Lerum
was primarily responsible for negotiating for the PALEA the retroactive wage
increases mentioned earlier, to the exclusion of petitioner Atty. Ocampo. PAL
could validly deal with the Biangco Faction represented by Atty. Lerum because
no court order had been issued restraining PAL from doing so. The record of the
case also reveals that Atty. Ocampo tried his best to enjoin the negotiations
initiated by Atty. Lerum by questioning the same before the Court of Industrial
Relations and even this Court.

On the basis of the foregoing observations, We cannot see how Atty. Ocampo
could be entitled to any part of the said attorney's fees. The attorney's fees
emanated from the retroactive wage increases negotiated by Atty. Lerum.
Accordingly, and under the circumstances obtaining in this case, the said
attomey's fees should belong to Atty. Lerum to the exclusion of Atty. Ocampo.
We, therefore, find no grave abuse of discretion on the part of the public
respondents in reaching this conclusion. (at p. 502)

Considering that Atty. Ocampo took no part in the negotiations leading to the execution of the
Memorandum of Agreement, a compromise agreement among the creditors and former
employees of Stanford to liquidate Stanford which we rule as valid, we find no plausible reason
for Atty. Ocampo to interfere with its implementation by filing complaints and/or pleadings with
the SEC, the Labor Arbiter and the NLRC in his effort to collect attorney's fees not due him. With
the foregoing findings, we find no need to discuss the other arguments posed by the petitioners.

WHEREFORE, the instant petition is GRANTED. The questioned resolutions dated October 6,
1988, November 3, 1988 and January 3, 1989 of the National Labor Relations Commission are
declared NULL and VOID and are hereby SET ASIDE. The Court Orders:

39
3) Private respondents and Atty. Vicente T. Ocampo and associates, their representatives,
agents and any other person assisting them or acting for them and on their behalf to desist from
interfering with the implementation of the Memorandum of Agreement, the liquidation of the
Stanford Microsystems, Inc., and the exercise by the Stanford Liquidation Committee duly
appointed by the Securities and Exchange Commission of its functions. No costs.

Cadavedo vs Lacaya

Facts:

40
The Spouses Vicente Cadavedo and Benita Arcoy-Cadavedo (collectively, the spouses Cadavedo)
acquired a homestead grant over a 230,765-square meter parcel of land known as Lot 5415 (subject
lot) located in Gumay, Piñan, Zamboanga del Norte. They were issued Homestead Patent No. V-
15414 on March 13, 1953andOriginal Certificate of Title No. P-376 on July 2, 1953.On April30, 1955,
the spouses Cadavedo sold the subject lot to the spouses Vicente Ames and Martha Fernandez (the
spouses Ames) Transfer Certificate of Title (TCT) No. T-4792 was subsequently issued in the name of
the spouses Ames.

The present controversy arose when the spouses Cadavedo filed an action5 before the RTC(then
Court of First Instance) of Zamboanga City against the spouses Ames for sum of money and/or
voiding of contract of sale of homestead after the latter failed to pay the balance of the purchase
price. The spouses Cadavedo initially engaged the services of Atty. Rosendo Bandal who, for health
reasons, later withdrew from the case; he was substituted by Atty. Lacaya.

On February 24, 1969, Atty. Lacaya amended the complaint to assert the nullity of the sale and the
issuance of TCT No. T-4792 in the names of the spouses Ames as gross violation of the public land
law. The amended complaint stated that the spouses Cadavedo hired Atty. Lacaya on a contingency
fee basis. The contingency fee stipulation specifically reads:

10. That due to the above circumstances, the plaintiffs were forced to hire a lawyer on contingent
basis and if they become the prevailing parties in the case at bar, they will pay the sum of ₱2,000.00
for attorney’s fees.6

In a decision dated February 1, 1972, the RTC upheld the sale of the subject lot to the spouses Ames.
The spouses Cadavedo, thru Atty. Lacaya, appealed the case to the CA.

On September 18, 1975, and while the appeal before the CAin Civil Case No. 1721was pending, the
spouses Ames sold the subject lot to their children. The spouses Ames’ TCT No. T-4792 was
subsequently cancelled and TCT No. T-25984was issued in their children’s names. On October 11,
1976, the spouses Ames mortgaged the subject lot with the Development Bank of the Philippines
(DBP) in the names of their children.

On August 13, 1980, the CA issued itsdecision in Civil Case No. 1721,reversing the decision of the RTC
and declaring the deed of sale, transfer of rights, claims and interest to the spouses Ames null and
void ab initio. It directed the spouses Cadavedo to return the initial payment and ordered the
Register of Deeds to cancel the spouses Ames’ TCT No. T-4792 and to reissue another title in the
name of the spouses Cadavedo. The case eventually reached this Court via the spouses Ames’
petition for review on certiorari which this Court dismissed for lack of merit.

Meanwhile, the spouses Ames defaulted in their obligation with the DBP. Thus, the DBP caused the
publication of a notice of foreclosure sale of the subject lot as covered by TCT No. T-25984(under the
name of the spouses Ames’ children). Atty. Lacaya immediately informed the spouses Cadavedo of
the foreclosure sale and filed an Affidavit of Third Party Claim with the Office of the Provincial Sheriff
on September 14, 1981.

On October 16, 1981, the RTC granted the motion for the issuance of a writ of execution in Civil Case
No. 1721,andthe spouses Cadavedo were placed in possession of the subject lot on October 24,
1981. Atty. Lacaya asked for one-half of the subject lot as attorney’s fees. He caused the subdivision
of the subject lot into two equal portions, based on area, and selected the more valuable and
productive half for himself; and assigned the other half to the spouses Cadavedo.

41
Unsatisfied with the division, Vicente and his sons-in-law entered the portion assigned to the
respondents and ejected them. The latter responded by filing a counter-suit for forcible entry before
the Municipal Trial Court (MTC); the ejectment case was docketed as Civil Case No. 215. This incident
occurred while Civil Case No. 3352was pending.

On May 13, 1982, Vicente andAtty. Lacaya entered into an amicable settlement (compromise
agreement)8 in Civil Case No. 215 (the ejectment case), re-adjusting the area and portion obtained
by each. Atty. Lacaya acquired 10.5383 hectares pursuant to the agreement. The MTC approved the
compromise agreementin a decision dated June 10, 1982.

Meanwhile, on May 21, 1982, the spouses Cadavedo filed before the RTC an action against the DBP
for Injunction; it was docketed as Civil Case No. 3443 (Cadavedo v. DBP).The RTC subsequently
denied the petition, prompting the spouses Cadavedo to elevate the case to the CAvia a petition for
certiorari. The CA dismissed the petition in its decision of January 31, 1984.

The records do not clearly disclose the proceedings subsequent to the CA decision in Civil Case No.
3443. However, on August 18, 1988, TCT No. 41051was issued in the name of the spouses Cadavedo
concerning the subject lot.

On August 9, 1988, the spouses Cadavedo filed before the RTC an action9 against the respondents,
assailing the MTC-approved compromise agreement. The case was docketed as Civil Case No. 4038
and is the root of the present case. The spouses Cadavedo prayed, among others, that the
respondents be ejected from their one-half portion of the subject lot; that they be ordered to render
an accounting of the produce of this one-half portion from 1981;and that the RTC fix the attorney’s
fees on a quantum meruit basis, with due consideration of the expenses that Atty. Lacaya incurred
while handling the civil cases.

During the pendency of Civil Case No. 4038, the spouses Cadavedo executed a Deed of Partition of
Estate in favor of their eight children. Consequently, TCT No. 41051 was cancelled and TCT No.
41690 was issued in the names of the latter. T

Issue:

The core issue for our resolution is whether the attorney’s fee consisting of one-half of the subject
lot is valid and reasonable, and binds the petitioners. We rule in the NEGATIVE for the reasons
discussed below.

Ruling:

42
A. The written agreement providing for
a contingent fee of ₱2,000.00 should prevail
over the oral agreement providing for one-
half of the subject lot

The spouses Cadavedo and Atty. Lacaya agreed on a contingent fee of ₱2,000.00 and not, as
asserted by the latter, one-half of the subject lot. The stipulation contained in the amended
complaint filed by Atty. Lacaya clearly stated that the spouses Cadavedo hired the former on a
contingency basis; the Spouses Cadavedo undertook to pay their lawyer ₱2,000.00 as attorney’s fees
should the case be decided in their favor.

Contrary to the respondents’ contention, this stipulation is not in the nature of a penalty that the
court would award the winning party, to be paid by the losing party. The stipulation is a
representation to the court concerning the agreement between the spouses Cadavedo and Atty.
Lacaya, on the latter’s compensation for his services in the case; it is not the attorney’s fees in the
nature of damages which the former prays from the court as an incident to the main action.

At this point, we highlight that as observed by both the RTC and the CA and agreed as well by both
parties, the alleged contingent fee agreement consisting of one-half of the subject lot was not
reduced to writing prior to or, at most, at the start of Atty. Lacaya’s engagement as the spouses
Cadavedo’s counsel in Civil Case No. 1721.An agreement between the lawyer and his client,
providing for the former’s compensation, is subject to the ordinary rules governing contracts in
general. As the rules stand, controversies involving written and oral agreements on attorney’s fees
shall be resolved in favor of the former.17 Hence, the contingency fee of ₱2,000.00 stipulated in the
amended complaint prevails over the alleged oral contingency fee agreement of one-half of the
subject lot.

B. The contingent fee agreement between

the spouses Cadavedo and Atty. Lacaya,
awarding the latter one-half of the subject
lot, is champertous

Granting arguendo that the spouses Cadavedo and Atty. Lacaya indeed entered into an oral
contingent fee agreement securing to the latter one-half of the subject lot, the agreement is
nevertheless void.

In their account, the respondents insist that Atty. Lacaya agreed to represent the spouses Cadavedo
in Civil Case No. 1721 and assumed the litigation expenses, without providing for reimbursement, in
exchange for a contingency fee consisting of one-half of the subject lot. This agreement is
champertous and is contrary to public policy.18

Champerty, along with maintenance (of which champerty is an aggravated form), is a common law
doctrine that traces its origin to the medieval period.19 The doctrine of maintenance was directed
"against wanton and in officious intermeddling in the disputes of others in which the intermeddler
has no interest whatever, and where the assistance rendered is without justification or
excuse."20 Champerty, on the other hand, is characterized by "the receipt of a share of the proceeds
of the litigation by the intermeddler."21 Some common law court decisions, however, add a second
factor in determining champertous contracts, namely, that the lawyer must also, "at his own
expense maintain, and take all the risks of, the litigation."22

43
The doctrines of champerty and maintenance were created in response "to medieval practice of
assigning doubtful or fraudulent claims to persons of wealth and influence in the expectation that
such individuals would enjoy greater success in prosecuting those claims in court, in exchange for
which they would receive an entitlement to the spoils of the litigation."23 "In order to safeguard the
administration of justice, instances of champerty and maintenance were made subject to criminal
and tortuous liability and a common law rule was developed, striking down champertous
agreements and contracts of maintenance as being unenforceable on the grounds of public
policy."24

In this jurisdiction, we maintain the rules on champerty, as adopted from American decisions, for
public policy considerations.25 As matters currently stand, any agreement by a lawyer to "conduct
the litigation in his own account, to pay the expenses thereof or to save his client therefrom and to
receive as his fee a portion of the proceeds of the judgment is obnoxious to the law."26 The rule of
the profession that forbids a lawyer from contracting with his client for part of the thing in litigation
in exchange for conducting the case at the lawyer’s expense is designed to prevent the lawyer from
acquiring an interest between him and his client. To permit these arrangements is to enable the
lawyer to "acquire additional stake in the outcome of the action which might lead him to consider
his own recovery rather than that of his client or to accept a settlement which might take care of his
interest in the verdict to the sacrifice of that of his client in violation of his duty of undivided fidelity
to his client’s cause."27

In Bautista v. Atty. Gonzales,28 the Court struck down the contingent fee agreement between
therein respondent Atty. Ramon A. Gonzales and his client for being contrary to public policy. There,
the Court held that an reimbursement of litigation expenses paid by the former is against public
policy, especially if the lawyer has agreed to carry on the action at his expense in consideration of
some bargain to have a part of the thing in dispute. It violates the fiduciary relationship between the
lawyer and his client.29

In addition to its champertous character, the contingent fee arrangement in this case expressly
transgresses the Canons of Professional Ethics and, impliedly, the Code of Professional
Responsibility.30 Under Rule 42 of the Canons of Professional Ethics, a lawyer may not properly
agree with a client that the lawyer shall pay or beat the expense of litigation.31 The same reasons
discussed above underlie this rule.

C. The attorney’s fee consisting of

one-half of the subject lot is excessive
and unconscionable

We likewise strike down the questioned attorney’s fee and declare it void for being excessive and
unconscionable.1âwphi1 The contingent fee of one-half of the subject lot was allegedly agreed to
secure the services of Atty. Lacaya in Civil Case No. 1721.Plainly, it was intended for only one action
as the two other civil cases had not yet been instituted at that time. While Civil Case No. 1721 took
twelve years to be finally resolved, that period of time, as matters then stood, was not a sufficient
reason to justify a large fee in the absence of any showing that special skills and additional work had
been involved. The issue involved in that case, as observed by the RTC(and with which we agree),
was simple and did not require of Atty. Lacaya extensive skill, effort and research. The issue simply
dealt with the prohibition against the sale of a homestead lot within five years from its acquisition.

That Atty. Lacaya also served as the spouses Cadavedo’s counsel in the two subsequent cases did not
and could not otherwise justify an attorney’s fee of one-half of the subject lot. As assertedby the

44
petitioners, the spouses Cadavedo and Atty. Lacaya made separate arrangements for the costs and
expenses foreach of these two cases. Thus, the expenses for the two subsequent cases had been
considered and taken cared of Based on these considerations, we therefore find one-half of the
subject lot as attorney’s fee excessive and unreasonable.

D. Atty. Lacaya’s acquisition of

the one-half portion contravenes
Article 1491 (5) of the Civil Code

Article 1491 (5) of the Civil Code forbids lawyers from acquiring, by purchase or assignment, the
property that has been the subject of litigation in which they have taken part by virtue of their
profession.32 The same proscription is provided under Rule 10 of the Canons of Professional
Ethics.33

A thing is in litigation if there is a contest or litigation over it in court or when it is subject of the
judicial action.34 Following this definition, we find that the subject lot was still in litigation when
Atty. Lacaya acquired the disputed one-half portion. We note in this regard the following established
facts:(1)on September 21, 1981, Atty. Lacaya filed a motion for the issuance of a writ of execution in
Civil Case No. 1721; (2) on September 23, 1981, the spouses Ames filed Civil Case No. 3352 against
the spouses Cadavedo; (3)on October 16, 1981, the RTC granted the motion filed for the issuance of
a writ of execution in Civil Case No. 1721 and the spouses Cadavedo took possession of the subject
lot on October 24, 1981; (4) soon after, the subject lot was surveyed and subdivided into two equal
portions, and Atty. Lacaya took possession of one of the subdivided portions; and (5) on May 13,
1982, Vicente and Atty. Lacaya executed the compromise agreement.

From these timelines, whether by virtue of the alleged oral contingent fee agreement or an
agreement subsequently entered into, Atty. Lacaya acquired the disputed one-half portion (which
was after October 24, 1981) while Civil Case No. 3352 and the motion for the issuance of a writ of
execution in Civil Case No. 1721were already pending before the lower courts. Similarly, the
compromise agreement, including the subsequent judicial approval, was effected during the
pendency of Civil Case No. 3352. In all of these, the relationship of a lawyer and a client still existed
between Atty. Lacaya and the spouses Cadavedo.

Thus, whether we consider these transactions –the transfer of the disputed one-half portion and the
compromise agreement –independently of each other or resulting from one another, we find them
to be prohibited and void35 by reason of public policy.36 Under Article 1409 of the Civil Code,
contracts which are contrary to public policy and those expressly prohibited or declared void by law
are considered in existent and void from the beginning.37

What did not escape this Court’s attention is the CA’s failure to note that the transfer violated the
provisions of Article 1491(5) of the Civil Code, although it recognized the concurrence of the transfer
and the execution of the compromise agreement with the pendency of the two civil cases
subsequent to Civil Case No. 1721.38 In reversing the RTC ruling, the CA gave weight to the
compromise agreement and in so doing, found justification in the unproved oral contingent fee
agreement.

While contingent fee agreements are indeed recognized in this jurisdiction as a valid exception to
the prohibitions under Article 1491(5) of the Civil Code,39 contrary to the CA’s position, however,
this recognition does not apply to the present case. A contingent fee contract is an agreement in
writing where the fee, often a fixed percentage of what may be recovered in the action, is made to
depend upon the success of the litigation.40 The payment of the contingent fee is not made during

45
the pendency of the litigation involving the client’s property but only after the judgment has been
rendered in the case handled by the lawyer.41

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

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

E.The compromise agreement could not

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

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

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

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

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

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

46
"Quantum meruit—meaning ‘as much as he deserves’—is used as basis for determining a lawyer’s
professional fees in the absence of a contract x x x taking into account certain factors in fixing the
amount of legal fees."47 "Its essential requisite is the acceptance of the benefits by one sought to be
charged for the services rendered under circumstances as reasonably to notify him that the lawyer
performing the task was expecting to be paid compensation"48 for it. The doctrine of quantum
meruit is a device to prevent undue enrichment based on the equitable postulate that it is unjust for
a person to retain benefit without paying for it.49

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

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

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

The allotted portion of the subject lot properly recognizes that litigation should be for the benefit of
the client, not the lawyer, particularly in a legal situation when the law itself holds clear and express
protection to the rights of the client to the disputed property (a homestead lot). Premium
consideration, in other words, is on the rights of the owner, not on the lawyer who only helped the
owner protect his rights. Matters cannot be the other way around; otherwise, the lawyer does
indeed effectively acquire a property right over the disputed property. If at all, due recognition of
parity between a lawyer and a client should be on the fruits of the disputed property, which in this
case, the Court properly accords.

Baltazar vs Banez

Facts:

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Complainants are the owners of three parcels of land located in Dinalupihan, Bataan.1 n 4
September 2002, they entered into an agreement, they stood to be paid ₱35,000.000 for all the lots
that would be sold in the subdivision.2 For that purpose, they executed a Pecial Power of Attorney
authorizing Fevidal to enter into all agreements concerning the parcels of land and to sign those
agreements on their behalf.3

Fevidal did not update complainants about the status of the subdivision project and failed to accout
for the titles to the subdivided land.4 Complainants also found that he had sold a number of parcels
to third parties, but that he did not turn the proceeds over to them. Neither were complainants
invited to the ceremonial opening of the subdivision project.5

Thus, on 23 August 2005, they revoked the Special Power of Attorney they had previously executed
in his favor.6

Complainants subsequently agreed to settle with Fevidal for the amount of ₱10,000,000, but the
latter again failed to pay them.7

Complainants engaged the professional services of respondent for the purpose of assisting them in
the preparation of a settlement agreement.8

Instead of drafting a written settlement, respondent encouraged them to institute actions against
Fevidal in order to recover their properties. Complainants then signed a contract of legal
services,9 in which it was agreed that they would not pay acceptance and appearance fees to
respondent, but that the docket fees would instead be shared by the parties. Under the contract,
complainants would pay respondent 50% of whatever would be recovered of the properties. In
preparation for the filing of an action against Fevidal, respondent prepared and notarized an
Affidavit of Adverse Claim, seeking to annotate the claim of complainants to at least 195 titles in the
possession of Fevidal.10

A certain Luzviminda Andrade (Andrade) was tasked to submit the Affidavit of Adverse Claim to the
Register of Deeds of Bataan.11

The costs for the annotation of the adverse claim were paid by respondent. Unknown to him, the
adverse claim was held in abeyance, because Fevidal got wind of it and convinced complainants to
agree to another settlement.12

Meanwhile, on behalf of complainants, and after sending Fevidal a demand letter dated 10 July
2006, respondent filed a complaint for annulment, cancellation and revalidation of titles, and
damages against Fevidal before the Regional Trial Court (RTC) of Bataan on 13 October 2006.13

Complainants found it hard to wait for the outcome of the action. Thus, they terminated the services
of respondent on 8 June 2007, withdrew their complaint against Fevidal on 9 June 2007, and
finalized their amicable settlement with him on 5 July 2007.14

Respondent filed a Manifestation and Opposition15 dated 20 July 2007 before the RTC, alleging that
the termination of his services and withdrawal of the complaint had been done with the intent of
defrauding counsel. On the same date, he filed a Motion for Recording of Attorney’s Charging Lien in
the Records of the Above-Captioned Cases.

On 26 June 2011, it denied his motion for reconsideration. On 26 November 2012, this Court noted
the Indorsement of the IBP Commission on Bar Discipline, as well as respondent’s second motion for

48
reconsideration. We find that respondent did not violate any of the canons cited by complainants. In
fact, we have reason to believe that complainants only filed the instant complaint against him at the
prodding of Fevidal.

Respondent cannot be faulted for advising complainants to file an action against Fevidal to recover
their properties, instead of agreeing to a settlement of ₱10,000,000 – a measly amount compared to
that in the original agreement, under which Fevidal undertook to pay complainants the amount of
₱35,000,000. Lawyers have a sworn duty and responsibility to protect the interest of any prospective
client and pursue the ends of justice.

Ruling:

Respondent cannot be faulted for advising complainants to file an action against Fevidal to recover
their properties, instead of agreeing to a settlement of ₱10,000,000 – a measly amount compared to
that in the original agreement, under which Fevidal undertook to pay complainants the amount of
₱35,000,000. Lawyers have a sworn duty and responsibility to protect the interest of any prospective
client and pursue the ends of justice.31

Any lawyer worth his salt would advise complainants against the abuses of Fevidal under the
circumstances, and we cannot countenance an administrative complaint against a lawyer only
because he performed a duty imposed on him by his oath. The claim of complainants that they were
not informed of the status of the case is more appropriately laid at their door rather than at that of
respondent. He was never informed that they had held in abeyance the filing of the adverse claim.
Neither was he informed of the brewing amicable settlement between complainants and Fevidal.
We also find it very hard to believe that while complainants received various amounts as loans from
respondent from August 2006 to June 2007,32 they could not spare even a few minutes to ask about
the status of the case. We shall discuss this more below. As regards the claim that respondent
refused to "patch up" with Fevidal despite the pleas of complainants, we note the latter’s
Sinumpaang Salaysay dated 24 September 2007, in which they admitted that they could not
convince Fevidal to meet with respondent to agree to a settlement.33

Finally, complainants apparently refer to the motion of respondent for the recording of his
attorney’s charging lien as the "legal problem" preventing them from enjoying the fruits of their
property. Section 26, Rule 138 of the Rules of Court allows an attorney to intervene in a case to
protect his rights concerning the payment of his compensation. According to the discretion of the
court, the attorney shall have a lien upon all judgments for the payment of money rendered in a case
in which his services have been retained by the client. We recently upheld the right of counsel to
intervene in proceedings for the recording of their charging lien. In Malvar v. KFPI,34 we granted
counsel’s motion to intervene in the case after petitioner therein terminated his services without
justifiable cause. Furthermore, after finding that petitioner and respondent had colluded in order to
deprive counsel of his fees, we ordered the parties to jointly and severally pay counsel the stipulated
contingent fees. Thus, the determination of whether respondent is entitled to the charging lien is
based on the discretion of the court before which the lien is presented. The compensation of
lawyers for professional services rendered is subject to the supervision of the court, not only to
guarantee that the fees they charge remain reasonable and commensurate with the services they
have actually rendered, but to maintain the dignity and integrity of the legal profession as well.35

In any case, an attorney is entitled to be paid reasonable compensation for his services.36

49
That he had pursued its payment in the appropriate venue does not make him liable for disciplinary
action.1âwphi1 Notwithstanding the foregoing, respondent is not without fault. Indeed, we find that
the contract for legal services he has executed with complainants is in the nature of a champertous
contract – an agreement whereby an attorney undertakes to pay the expenses of the proceedings to
enforce the client’s rights in exchange for some bargain to have a part of the thing in dispute.37

Such contracts are contrary to public policy38 and are thus void or inexistent.39

They are also contrary to Canon 16.04 of the Code of Professional Responsibility, which states that
lawyers shall not lend money to a client, except when in the interest of justice, they have to advance
necessary expenses in a legal matter they are handling for the client. A reading of the contract for
legal services40 shows that respondent agreed to pay for at least half of the expense for the docket
fees. He also paid for the whole amount needed for the recording of complainants’ adverse claim.
While lawyers may advance the necessary expenses in a legal matter they are handling in order to
safeguard their client’s rights, it is imperative that the advances be subject to reimbrusement.41 The
purpose is to avoid a situation in which a lawyer acquires a personal stake in the clients cause.
Regrettably, nowhere in the contract for legal services is it stated that the expenses of litigation
advanced by respondents shall be subject to reimbursement by complainants.

In addition, respondent gave various amounts as cash advances (bali), gasoline and transportation
allowance to them for the duration of their attorney-client relationship. In fact, he admits that the
cash advances were in the nature of personal loans that he extended to complainants.42

Clearly, respondent lost sight of his responsibility as a lawyer in balancing the clients interests with
the ethical standards of his profession. Considering the surrounding circumstances in this case, an
admonition shall suffice to remind him that however dire the needs of the clients, a lawyer must
always avoid any appearance of impropriety to preserve the integrity of the profession.

WHEREFORE, Attorney Juan B. Bañez, Jr. is hereby ADMONISHED for advancing the litigation
expenses in a legal matter her handled for a client without providing for terms of reimbursement
and lending money to his client, in violation of Canon 16.04 of the Code of Professional
Responsibility. He us sternly warned that a repetition of the same or similar act would be dealt with
more severly.

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