Problem Areas in Legal Ethics:

Cases & Commentaries

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

Atty. Rodel V. Capule, MD, author
Atty. Leah P. Laja, co-author

Problem Areas in Legal Ethics

Arellano University School of Law – Arellano Law Foundation
2020-2021

WARNING
Unauthorized reproduction or claim of ownership of this original [derivative] work by any person
amounts to copyright infringement.
Lawyering is NOT a money-making venture

Lawyering is not a moneymaking venture and lawyers are not merchants. Law advocacy is not
capital that yields profits. The returns it births are simple rewards for a job done or service
rendered. It is a calling that, unlike mercantile pursuits which enjoy a greater deal of freedom from
governmental interference, is impressed with a public interest, for which it is subject to state
regulation.
- Atty. Raul H. Sesbreño v. Court of Appeals, et. al., G.R. No.
161390, April 16, 2008

Law practice is not a pro bono proposition either

As a rule, law practice is not a pro bono proposition and a lawyer's sensitivity and concern for
unpaid fees are understandable; lawyers incur expenses in running their practice and generally
depend, too, on their law practice income for their living expenses. – Somosot v. Atty Lara, A.C. No.
7024 January 30, 2009

Meaning of Pro bono

This is called “pro bono” work, an abbreviation of the “pro bono publico,” which translates to “for
the public good.”

Contract for legal service is not necessarily the law between the parties
Contracts for attorney's services in this jurisdiction stand upon an entirely different footing from
contracts for the payment of compensation for any other services. – Bachrach v. Golingco, G.R. No. L-
13660, November 13, 1918
This is a very different rule from that announced in [xxx] reference to the obligation of contract in
general, where it is said that such obligation has the force of law between the contracting
parties.
In order to enable the court to ignore an express contract for an attorney's fees, it is not necessary
to show, as in other contracts, that it is contrary to morality or public policy (art. 1255, Civil
Code). It is enough that it is unreasonable or unconscionable. – Bachrach v. Golingco, G.R. No. L-
13660, November 13, 1918

Basic principles
An attorney earns a fee only when the attorney provides a benefit or service to the client.
A lawyer cannot charge a fee for doing nothing.

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All client funds xxx must be held in trust until there is a basis on which to conclude that the attorney
"earned" the fee, otherwise, the funds must remain in the client’s trust account because they are not
the attorney's property.

Honorarium lawfully earned

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

Terms of employment included in the fiduciary relationship

Attorneys have a fiduciary relationship with their clients and, therefore, must deal with them with
the utmost good faith.
The fiduciary relationship arises when a client first consults an attorney and extends to all dealings
between the attorney and the client, including the process by which the attorney and the client
reach an agreement concerning the terms of employment.
The amount of good faith which an attorney must exercise in transactions with a client is, therefore,
much higher than that required in other business transactions where the parties are dealing at
arm's length.
An attorney's fiduciary obligations affect both the process used to set a fee and the amount of the
fee itself.

In order to enforce a contract [of employment] with a client, an attorney must demonstrate
the following
(1) that he or she provided the client with the same information and advice that the attorney would
have provided the client had he or she not been personally interested in the transaction;
(2) that the client fully understood the meaning and effect of the contract;
(3) that the client's understanding of the contract was the same as the attorney's; and
(4) that the contract is just and reasonable.

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

As soon as feasible after a lawyer has been employed, it is desirable that he [or she] reach a clear
agreement with his [or her] client as to the basis of the fee charges to be made. Such a course will
not only prevent later misunderstanding but will also work for good relations between the lawyer
and the client.
It is usually beneficial to reduce to writing the understanding of the parties regarding the fee,
particularly when it is contingent. A lawyer should be mindful that many persons who desire to
employ him [or her] may have had little or no experience with fee charges of lawyers, and for this
reason he [or she] should explain fully to such persons the reasons for the particular fee
arrangement he [or she] proposes.

Client’s conformity to the amount is not controlling

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“The fact that the client agreed to the [amount of the fee] does not relieve the attorney from the
burden of showing that the amount agreed upon was fair and reasonable." –

Rule 138
Sec. 24. Compensation of attorneys; agreement as to fees. - An attorney shall be entitled to have and
recover from his client no more than a reasonable compensation for his services, with a view:
1) to the importance of the subject matter of the controversy,
2) the extent of the services rendered, and
3) the professional standing of the attorney.

No court shall be bound by the opinion of attorneys as expert witnesses as to the proper
compensation, but may disregard such testimony and base its conclusion on its own professional
knowledge. A written contract for services shall control the amount to be paid therefor unless found
by the court to be unconscionable or unreasonable.

………
SEC. 25. Unlawful retention of client’s funds; contempt — When an attorney unjustly retains in his
hands money of his client after it has been demanded he may be punished for contempt as an officer
of the Court who has misbehaved in his official transactions; but proceedings under this section
shall not be a bar to a criminal prosecution.

Rule on division of legal fees

Rule 9.02 - A lawyer shall not divide or stipulate to divide a fee for legal services with persons not
licensed to practice law, except:
(a) Where there is a pre-existing agreement with a partner or associate that, upon the latter's
death, money shall be paid over a reasonable period of time to his estate or to persons
specified in the agreement; or
(b) Where a lawyer undertakes to complete unfinished legal business of a deceased lawyer; or
(c) Where a lawyer or law firm includes non-lawyer employees in a retirement plan even if the
plan is based in whole or in part, on a profit sharing agreement.

Rule when moneys and properties of client come into possession of counsel
CANON 16 - A LAWYER SHALL HOLD IN TRUST ALL MONEYS AND PROPERTIES OF HIS CLIENT
THAT MAY COME INTO HIS POSSESSION.

Rule 16.01 - A lawyer shall account for all money or property collected or received for or from
the client.
Rule 16.02 - A lawyer shall keep the funds of each client separate and apart from his own and
those of others kept by him.
Rule 16.03 - A lawyer shall deliver the funds and property of his client when due or upon
demand. However, he shall have a lien over the funds and may apply so much thereof as may
be necessary to satisfy his lawful fees and disbursements, giving notice promptly thereafter to
his client. He shall also have a lien to the same extent on all judgments and executions he has
secured for his client as provided for in the Rules of Court.

Guidelines in determining
fair and reasonable fees
CANON 20 - A LAWYER SHALL CHARGE ONLY FAIR AND REASONABLE FEES.
Rule 20.01 - A lawyer shall be guided by the following factors in determining his fees:
(a) the time spent and the extent of the service rendered or required;

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(b) the novelty and difficulty of the questions involved;
(c) The importance of the subject matter;
(d) The skill demanded;
(e) The probability of losing other employment as a result of acceptance of the proffered case;

……..
(f) The customary charges for similar services and the schedule of fees of the IBP chapter to which
he belongs;
(g) The amount involved in the controversy and the benefits resulting to the client from the service;
(h) The contingency or certainty of compensation;
(i) The character of the employment, whether occasional or established; and
(j) The professional standing of the lawyer.

……
Rule 20.02 - A lawyer shall, in case of referral, with the consent of the client, be entitled to a division
of fees in proportion to the work performed and responsibility assumed.

Rule 20.03 - A lawyer shall not, without the full knowledge and consent of the client, accept any fee,
reward, costs, commission, interest, rebate or forwarding allowance or other compensation
whatsoever related to his professional employment from anyone other than the client.

Rule 20.04 - A lawyer shall avoid controversies with clients concerning his compensation and shall
resort to judicial action only to prevent imposition, injustice or fraud.
The following are the circumstances to be considered in determining the compensation of an
attorney
1. the amount and character of the services rendered;
2. the labor, time, and trouble involved;
3. the nature and importance of the litigation or business in which the services were rendered; the
responsibility imposed;
4. the amount of money or the value of the property affected by the controversy, or involved in the
employment,
5. the skill and experience called for in the performance of the services;
……
6. the professional character and social standing of the attorney;
7. the results secured; and
8. whether or not the fee is absolute or contingent, it being a recognized rule that an attorney may
properly charge a much a larger fee when it is to be contingent that when it is not.
9. The financial ability of the defendant may also be considered not to enhance the amount above a
reasonable compensation, but to determine whether or not he is able to pay a fair and just
compensation for the services rendered, or as incident in ascertaining the importance and gravity of
the interests involved in the litigation. – Research and Services Realty, Inc, v. CA, G.R. No. 124074
January 27, 1997

Attorney's fee is basically a compensation

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

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 Bases for just compensation
With his capital consisting of his brains and with his skill acquired at tremendous cost not only in
money but in expenditure of time and energy, he is entitled to the protection of any judicial
tribunal against any attempt on the part of his client to escape payment of his just compensation.
– Masmud v. NLRC, G.R. No. 183385, February 13, 2009

Lawyer concedes that his/her professional fee is subject to court’s regulatory power
Upon taking his attorney’s oath as an officer of the court, a lawyer submits himself to the authority
of the courts to regulate his right to charge professional fees.
– Rayos v. Atty. Hernandez, G.R. No. 169079, February 12, 2007

Lawyer’s compensation for professional services rendered is subject to the supervision of

the court
Under Section 24, Rule 138 of the Rules of Court, a written contract for services shall control the
amount to be paid therefor unless found by the court to be unconscionable or unreasonable.
It follows that a lawyer’s compensation for professional services rendered is subject to the
supervision of the court, not just to guarantee that the fees he charges and receives remain
reasonable and commensurate with the services rendered, but also to maintain the dignity and
integrity of the legal profession to which he belongs. Upon taking his attorney’s oath as an officer of
the court, a lawyer submits himself to the authority of the courts to regulate his right to charge
professional fees.
- Atty. Orocio v. Angulan et. al., G.R. No. 179892-93
[2009]

……..
xxx a lawyer is primarily a court officer charged with the duty of assisting the court in
administering impartial justice between the parties, and hence, his fees should be subject to judicial
control. Nor it should be ignored that sound public policy demands that courts disregard
stipulations for counsel fees whenever they appear to be a source of speculative profit at the
expense of the debtor or mortgagor. – Gorospe and Sebastian, G.R. No. L-12735, October 30, 1959

The court has discretion to modify the attorney's fees previously agreed upon by the parties
under a valid contractual stipulation
For the law recognizes the validity of stipulations included in documents such as negotiable
instruments and mortgages with respect to attorney's fees in the form of penalty provided that they
are not unreasonable or unconscionable.
There is no mistake, however, that the reasonableness of attorney's fees, though seemingly a matter
of fact which takes into account the peculiar circumstances of the case, is a question of law where
the facts are not disputed at all. For a question of law does not call for an examination of the
probative value of the evidence presented by the parties. – Radiowealth Finance Co. Inc. v.
International Corporate bank and Court of Appeals, GR. No. 77042-43 February 28, 1990

Primary characteristics which distinguish the legal profession from business

1. A duty of public service, of which the emolument is a byproduct, and in which one may attain the
highest eminence without making much money.
2. A relation as an "officer of court" to the administration of justice involving thorough sincerity,
integrity, and reliability.
3. A relation to clients in the highest degree fiduciary.

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4. A relation to colleagues at the bar characterized by candor, fairness, and unwillingness to resort
to current business methods of advertising and encroachment on their practice, or dealing
directly with their clients.
– Atty. Khan, Jr. v. Atty. Simbillo, A.C. No. 5299, August 19, 2003

Fees must be earned

We hold that an attorney earns fees only by conferring a benefit on or performing a legal service for
the client. Unless the attorney provides some benefit or service in exchange for the fee, the attorney
has not earned any fees and, with a possible exception in very limited circumstances, the attorney
cannot treat advance fees as her property.

When is the best time

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

Contracts made during the existence of the attorney-client relationship

It is important to determine at the outset whether the fee contract was made, as defendants
contend and the trial court found, during the existence of an attorney-client relationship between
plaintiff and defendants or, as plaintiff argues, at the inception thereof. It is more difficult for an
attorney to enforce such a contract if made during the existence of the relationship rather than at its
inception.

Some courts hold a contract for a percentage of the recovery made while such a relationship exists
is void and no more than fair and reasonable compensation may be recovered no matter what sum
is mentioned in the contract.

…….
Where such contracts made during the existence of the attorney-client relationship are not
regarded as void they are viewed with suspicion and closely scrutinized by the courts, as are all
dealings between trustee and cestui.
There is a presumption of unfairness or invalidity attaching to a contract for compensation made
after the relationship has been established and the burden is on the attorney to show it was fairly
and openly made, that the client was fully informed concerning it and understood its effect.

“Fee” v. “Lien”
They are two different matters.
It is axiomatic, of course, that [lawyer] must show that he is or will become entitled to a fee before
he is entitled to a lien.

Professional fee is subject

to court’s regulatory power
Upon taking his attorney’s oath as an officer of the court, a lawyer submits himself to the authority
of the courts to regulate his right to charge professional fees. 
–Rayos v. Atty. Hernandez, G.R. No. 169079, February 12, 2007

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 Unconscionable fee
Attorney's fees are unconscionable if they affront one's sense of justice, decency or reasonableness,
or if they are so disproportionate to the value of the services rendered.
Under Section 24, Rule 138 of the Rules of Court, a written contract for services shall control the
amount to be paid therefor unless found by the court to be unconscionable or unreasonable.
– Atty. Orocio v. Anguluan and NPC, G.R. NO. 179892-93, January 30,
2009

“Money down first” policy is unethical

The impropriety lies in the fact that she suggested that complainant borrow money from Domingo
Natavio for the payment thereof. This act impresses upon the Court that respondent would do
nothing to the cause of complainant’s mother-in-law unless payment of the acceptance fee is made .
Her duty to render legal services to her client with competence and diligence should not depend on
the payment of acceptance fee.
– Ceniza v. Atty. Rubia, A.C. No. 6166, October 2,
2009

I, do solemnly swear that xxx I will delay no man for money xxx.

Two commonly accepted concepts of

attorney’s fees

In its ordinary concept, an attorney’s fee is the reasonable compensation paid to a lawyer by his
client for the legal services he has rendered to the latter. The basis of this compensation is the fact
of his employment by and his agreement with the client.
In its extraordinary concept, an attorney’s fee is an indemnity for damages ordered by the court to
be paid by the losing party in a litigation. The basis of this is any of the cases provided by law
where such award can be made, such as those authorized in Article 2208, Civil Code, and is payable
not to the lawyer but to the client, unless they have agreed that the award shall pertain to the
lawyer as additional compensation or as part thereof.
- Traders Royal Bank Employees Union-Independent v. NLRC G.R. No. 120592.
March 14, 1997

Award of (extraordinary) attorney’s fee

is discretionary
The power of this Court to reduce or even delete the award of attorneys’ fees cannot be denied.
Lawyers are officers of the Court and they participate in the fundamental function of administering
justice. When they took their oath, they submitted themselves to the authority of the Court and
subjected their professional fees to judicial control.
– Pineda v. Atty. De Jesus, et. al. G.R. No. 155224 August 23, 2006

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

(T)he law is clear that in the absence of stipulation, attorney’s fees may be recovered as actual or
compensatory damages under any of the circumstances provided for in Article 2208 of the Civil
Code.
The general rule is that attorney’s fees cannot be recovered as part of damages because of the policy
that no premium should be placed on the right to litigate. They are not to be awarded every time a

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party wins a suit. The power of the court to award attorney’s fees under Article 2208 demands
factual, legal, and equitable justification. Even when a claimant is compelled to litigate with third
persons or to incur expenses to protect his rights, still attorney’s fees may not be awarded where no
sufficient showing of bad faith could be reflected in a party’s persistence in a case other than an
erroneous conviction of the righteousness of his cause. – Philippine National Construction Corp. v.
APAC Marketing Corp., G.R. No. 190957, June 5, 2013

Attorney's fees and expenses of litigation proper (under the New Civil Code)
Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial
costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons
or to incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's
plainly valid, just and demandable claim.

……….
6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmen's compensation and employer's liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorney's fees and expenses
of litigation should be recovered.

In all cases, the attorney's fees and expenses of litigation must be reasonable.

Effect if contract for legal services is made before or during the attorney-client relationship
It is important to determine at the outset whether the fee contract was made, as defendants
contend and the trial court found, during the existence of an attorney-client relationship between
plaintiff and defendants or, as plaintiff argues, at the inception thereof. It is more difficult for an
attorney to enforce such a contract if made during the existence of the relationship rather than at its
inception.
Some courts hold a contract for a percentage of the recovery made while such a relationship exists
is void and no more than fair and reasonable compensation may be recovered no matter what sum
is mentioned in the contract.

……..
Where such contracts made during the existence of the attorney-client relationship are not
regarded as void they are viewed with suspicion and closely scrutinized by the courts, as are all
dealings between trustee and cestui. There is a presumption of unfairness or invalidity attaching to
a contract for compensation made after the relationship has been established and the burden is on
the attorney to show it was fairly and openly made, that the client was fully informed concerning it
and understood its effect. – Lawrence v. Tschirgi, 57 N.W.2d 46 (1953)

Forum does not qualify payment of compensation

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

Quality of legal service should not vary

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

Written v. Oral Agreements

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

Written contract of legal fees is ordinarily controlling

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

Basis when there is no written contract

Moreover, the payment of attorney's fees to respondent David may also be justified by virtue of the
innominate contract of facio ut des (I do and you give) which is based on the principle that "no one
shall unjustly enrich himself at the expense of another." Innominate contracts have been elevated to
a codal provision in the New Civil Code by providing under Article 1307 xxx.
While there was no expressed contract between the parties for the payment of attorney's fees, the
fact remains that respondent David rendered legal services to petitioner Corpus and therefore as

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aforestated, is entitled to compensation under the innominate contract of facio ut des. And such
being the case, respondent David is entitled to a reasonable compensation.
- Corpuz v. Court of Appeals, G.R. No. L-40424 June
30, 1980

Interpreting and enforcing attorney-client fee agreements

When interpreting and enforcing attorney-client fee agreements, it is "not enough to simply say that
a contract is a contract. There are ethical considerations overlaying the contractual relationship." -
Lopez v. Muñoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 868 (Tex.2000)

Duty to issue a receipt

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

…….
If in such a case the client can be compelled to pay damages to his attorney for the breach of the
contract, the contract under which a client employs an attorney would not differ from the ordinary
contract of employment.
In such a case the attorney may recover the reasonable value of the services which he has rendered
but he cannot recover for damages for the breach of contract.
The discharge of the attorney by his client does not constitute a breach of the contract, because it is
a term of such contract, implied from the peculiar relationship which the contract calls into
existence, that the client may terminate the contract at any time with or without cause. – Cristobal v.
Ocson, G.R. No. L-19205, February 13, 1923

No breach of contract when terminating a lawyer and client relationship

If the client has the right to terminate the relationship of attorney and client at any time without
cause, it follows as a corollary that the client cannot be compelled to pay damages for exercising a
right which is an implied condition of the contract.
If in such a case the client can be compelled to pay damages to his attorney for the breach of the
contract, the contract under which a client employs an attorney would not differ from the ordinary
contract of employment. In such a case the attorney may recover the reasonable value of the
services which he has rendered but he cannot recover for damages for the breach of contract. The
discharge of the attorney by his client does not constitute a breach of the contract, because it is a
term of such contract, implied from the peculiar relationship which the contract calls into existence,
that the client may terminate the contract at any time with or without cause. – Cristobal v. Ocson,
G.R. No. L-19205, February 13, 1923

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WON the fee-shifting provision in the Agreement required that the trial court award attorney
fees to a prevailing party
The fee-shifting provision at issue in this case provides:
In the event that any action is filed with regard to this Agreement, the unsuccessful party in
the action shall pay to the successful party, in addition to all sums that either party may
be called upon to pay, a reasonable sum for the successful parties [sic] attorney fees at
the discretion of the court.
Unlike the statutory scheme, fee-shifting provisions in contracts generally serve not to ensure
access to the courts, but rather to ensure that the prevailing party in a contract dispute is made
whole. – Capellari v. Capellari, CNo. 37A05–1505–DR–479, December 22, 2015

Opinion of a judge as to the capacity of a lawyer is not the basis of the right to a lawyer's fee
In his answer before this Court respondent judge justifies his order for the return of the P200.00 on
the ground that petitioner is "below average standard of a lawyer." The opinion of a judge as to
the capacity of a lawyer is not the basis of the right to a lawyer's fee. It is the contract between the
lawyer and client and the nature of the services rendered. - Atty. Manuel L. Fernandez v. Hon. Eloy B.
Bello, G.R. No. L-14277, April 30, 1960
A non-lawyer is not entitled to attorney’s fees
On the last issue of attorney's fees or service fees for private respondents' authorized
representative, Article 222 of the Labor Code, as amended by Section 3 of Presidential Decree No.
1691, states that non-lawyers may appear before the NLRC or any labor arbiter only (1) if they
represent themselves, or (2) if they represent their organization or the members thereof. While it
may be true that Guillermo H. Pulia was the authorized representative of private respondents, he
was a non-lawyer who did not fall in either of the foregoing categories. Hence, by clear mandate of
the law, he is not entitled to attorney's fees.
Furthermore, the statutory rule that an attorney shall be entitled to have and recover from his client
a reasonable compensation for his services necessarily imports the existence of an attorney-client
relationship as a condition for the recovery of attorney's fees, and such relationship cannot exist
unless the client's representative is a lawyer. - Five J Taxi and/or Juan S. Armamento v. NLRC, et. al.,
G.R. No. 111474, August 22, 1994

Is the right of a client to enter into a compromise agreement without the consent of his
lawyer defeated by a contrary written contract ?
It appears from the record that on July 31, 1921, the respondents by means of a written contract,
retained the petitioner to represent them as their lawyer. The contract fixed the petitioner's fee at
P200 in advance with an additional contigent fee of P1,300. It was also provided in the contract that
respondent should not compromise the claim against the defendant in the case without express
consent of his lawyer.
Through the sole effort of respondents the case was dismissed without notice to their counsel.
The burden of the petitioner's (counsel of record) contention is (1) that he, as attorney of record,
was entitled to notice of his client's motion to dismiss the case, and (2) that after the approval of the
bill of exceptions the lower court had lost jurisdiction of the case and had no power to dismiss it.

Right of a client to compromise suit

The client has also an undoubted right to compromise a suit without the intervention of his
lawyer.

Though there is a valid agreement for the payment to the attorney of a large proportion of the sum
recovered in case of success this does not give the attorney such an interest in the cause of

11
action that it prevents plaintiff from compromising the suit. – Rustia v. The Judge of First Instance of
Batangas, G.R. No. L-19695 November 17, 1922

We have recently held that a client has always the right to settle his cause of action and stop
litigation at any stage of the proceeding, subject, however, to the right of the attorney to receive
compensation for services rendered. - Aro v. The Hon. Nañawa, G.R. No. L-24163 [1969]

Limitation of client’s right

to compromise suit
While We here reaffirm the rule that "the client has an undoubted right to compromise a suit
without the intervention of his lawyer", We hold that when such compromise is entered into in
fraud of the lawyer, with intent to deprive him of the fees justly due him, the compromise must
be subject to the said fees, and that when it is evident that the said fraud is committed in
confabulation with the adverse party who had knowledge of the lawyer's contingent interest or
such interest appears of record and who would benefit under such compromise, the better
practice is to settle the matter of the attorney's fees in the same proceeding, after hearing all
the affected parties and without prejudice to the finality of the compromise in so far as it does not
adversely affect the rights of the lawyer. - Aro v. The Hon. Nañawa, G.R. No. L-24163 [1969]
Applies only in civil cases

Rule 1.04 - A lawyer shall encourage his clients to avoid, end or settle a controversy if it will admit
of a fair settlement.
FEES & FUNDS
Rule 16.02 - A lawyer shall keep the funds of each client separate and apart from his own and those
of others kept by him.

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

"And while technically, perhaps, there was no commingling of funds when respondent put his
client's money in the safety deposit box, we are of the belief that such a covert method of handling a
client's funds is highly unprofessional and one which can only create suspicion and harmful
inference.
A lawyer's clients, the courts and public alike, have a vital interest in his integrity and are entitled to
require that he shun even the appearance of any fraudulent design or purpose.

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

The ethical importance of the creation and maintenance of the client trust account is rooted in the
general principle that a lawyer who holds the funds or property of a client or third person in trust,
even if for a brief time or intermittently, has the duty as a fiduciary to safeguard and segregate those
assets from the lawyer's personal and business assets.

Client trust account

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

12
A lawyer may have one or more client trust accounts depending on need.
It prohibits funds of clients or third persons from being deposited in non-interest or non-dividend-
bearing accounts.

Required to deposit all advance payment of fees

Requiring lawyers to deposit all advance fee payments in a client trust account provides a "safe
harbor" approach for lawyers, which we adopt. We hold that lawyers must deposit all advance fee
payments into a client trust account.
Lawyers are required to deposit all advance payment of fees in a client trust account.

General Retainer
The only exception are retainer fees paid on a regular and continuing basis. Such a fee is commonly
referred to as a "general retainer," which is a fee for agreeing to make legal services available when
needed during a specified time period. In form it is an option contract; the fee is earned by the
attorney when paid since the attorney is entitled to the money regardless of whether he actually
performs any services for the client.

Special Retainer
In contrast to a general retainer is a "special retainer." A special retainer covers payment of funds
for a specific service. If the client and attorney agree that the attorney shall receive the special
retainer payment in advance of performing the services, then the payment is commonly referred to
as an "advance fee payment."
Such a fee is a payment made by a client to the attorney prior to the performance of contemplated
services. The attorney depletes the prepayment as he renders services. If the matter is completed or
the attorney's work on the case otherwise ends, the attorney is obligated to refund the balance of
the advance payment to the client.
Flat fee
A fixed or "flat fee" means the fee "embraces all work to be done, whether it be relatively simple and
of short duration, or complex and protracted." [] Such fees are commonplace for fairly routine and
standardized legal services, such as drafting a simple will or real estate document, or representing a
party in an uncontested divorce proceeding. []
Flat fees have their place. By our discussion we do not intend to discourage their use.
We see the flat fee as nothing more than an advance fee payment which a majority of authorities
now agree must be deposited in a client trust account. This position is consistent with our case law.
Funds remain the property of the client until the attorney earns them.

Whose money is it?

If it's the client's money, in whole or in part, it is subject to the trust account requirements.
If it is the lawyer's money, placing it into a trust account would violate the anti-commingling rule.
Why funds advanced by a client must be segregated

The rule requiring that an attorney segregate funds advanced by the client from the attorney's own
funds serves important interests. As a fiduciary to the client, one of an attorney's primary
responsibilities is to safeguard the interests and property of the client over which the attorney has
control.
Requiring the attorney to segregate all client funds— including advance fees—from the
attorney's own accounts unless and until the funds become the attorney's property protects
the client's property from the attorney's creditors and from misuse by the attorney.

13
 Three important purposes of prohibiting commingling

Requiring lawyers to segregate clients’ funds by depositing them in a trust account serves three
important purposes.
First, this regime protects clients’ funds from lawyers’ creditors.
Second, commingling funds exposes clients to a risk of loss in the event of a lawyer’s death or
disability.
Third, preventing commingling reduces the likelihood of lawyers’ conversion or
misappropriation of client funds.

Strong policy considerations support [the] position that lawyers must deposit all advance fee
payments in a client trust account
This approach:
(1) "preserve[s] the client's property from the reach of the lawyer's creditors,"
(2) "preserve[s] the client's property from possible misappropriation by the lawyer," and
(3) "enable[s] the client to realistically dispute a fee where the funds are already in the lawyer's
possession by disallowing a self-help resolution by the lawyer and instead preserving the
disputed funds intact until the dispute is resolved.“ [].–

Failure to return unearned fees is a major disciplinary problem

First, empirical data on the causes of lawyer defalcation indicates that the failure to return
unearned advance fees constitutes a major disciplinary problem and generates substantial
claims by clients against client protection funds.
Clients often are unable to obtain the return of unearned advanced fee payments because their
lawyers have either spent the money or otherwise made it unavailable to the client.
A rule mandating that advance fees be deposited to the client trust account would reduce both the
volume of litigation that clients pursue against lawyers for refunds of advance fee payments
as well as the number of client claims against lawyers that are paid through client protection funds,
in each case saving substantial sums of money.

If the fee is contested, counsel cannot withdraw the amount

Second, such a rule would effectuate the intent of [the code], which allows the client to contest the
amount of the lawyer's fee when funds deposited to the security account include fees claimed by the
attorney. Once the client exercises her right to contest the fee, the funds may not be withdrawn until
the dispute is resolved.

Failure to remove or withdraw earned fees

from trust account

The attorney’s practice of leaving unearned fees in his trust account for an indeterminate
amount of time violated the [rule].

The attorney violated both the [Rule] by failing, on multiple occasions, to remove earned fees
held in trust for periods of one year or more)

“The purpose of the anti-commingling rules is to protect client funds from the claims of
creditors of the attorney.”

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

14
Money of the client or collected for the client, or other trust property coming into the possession of
the lawyer, should be reported and accounted for promptly and should not, under any
circumstances, be commingled with his own or be used by him. Consequently, a lawyer's failure to
return upon demand the funds or property held by him on behalf of his client gives rise to the
presumption that he has appropriated the same for his own use to the prejudice of, and in violation
of the trust reposed in him by, his client. -Marites E. Freeman v. Atty. Zenaida P. Reyes, A.C. No. 6246,
November 15, 2011

Exception to the comingling rule

Although the default rule is that an attorney must hold flat fees in a client trust or escrow
account until earned, we note that an attorney may obtain informed consent from the client to
deposit all of the money in the lawyer's operating account or to deposit some of the money in
the lawyer's operating account as it is earned, per their agreement.

Borrowing and lending money during A-C relationship

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

This rule is intended to prevent the lawyer from taking advantage of his influence over the
client.
– Junio v. Atty. Grupo, A.C. No. 5020, December 18,
2001

Acceptance fee
On the other hand, acceptance fee refers to the charge imposed by the lawyer for merely accepting
the case. This is because once the lawyer agrees to represent a client, he is precluded from handling
cases of the opposing party based on the prohibition on conflict of interest. Thus, the incurs an
opportunity cost by merely accepting the case of the client which is therefore indemnified by the
payment of acceptance fee.

Since the acceptance fee only seeks to compensate the lawyer for the lost opportunity, it is not
measured by the nature and extent of the legal services rendered.
– Dalupan v. Gacott, A.C. No. 5067, June 29,
2015
 

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

What is a contingency contract

The client and his lawyer may enter into a written contract whereby the latter would be paid
attorney’s fees only if the suit or litigation ends favorably to the client. This is called a contingency

15
fee contract. The amount of attorney’s fees in this contract may be on a percentage basis, and a
much higher compensation is allowed in consideration of the risk that the lawyer may get nothing if
the suit fails.
In the case at bar, the non-EPIRA separated members and petitioner voluntarily entered into a
contingency fee contract whereby petitioner did not receive any acceptance fee or
appearance/meeting fee.
- Atty. Orocio v. Angulan et. al., G.R. No. 179892-93 [2009]

Notice of an attorney's lien did not entitle the attorney-appellant to subrogate himself in lieu
of his client.
This Court had ruled xxx that "the contract (for contingent attorney's fees) neither gives, nor
purports to give, to the appellee (lawyer) any right whatsoever, personal or real, in and to her (Mrs.
Harden's) aforesaid share in the conjugal partnership. The amount thereof is simply a basis for the
computation of said fees."
We are of the opinion that the lower court did not err in holding that notice of an attorney's lien did
not entitle the attorney-appellant to subrogate himself in lieu of his client. It only gives him the right
to collect a certain amount for his services in case his client is awarded a certain sum by the court.
- Leviste v. CA, G.R. No. L-29184 [1989]

Why contingency fee is allowed

Contingent fee contracts are permitted in this jurisdiction because they redound to the benefit of
the poor client and the lawyer “especially in cases where the client has meritorious cause of action,
but no means with which to pay for legal services unless he can, with the sanction of law, make a
contract for a contingent fee to be paid out of the proceeds of litigation. Oftentimes, the contingent
fee arrangement is the only means by which the poor clients can have their rights vindicated and
upheld.”
- Atty. Orocio v. Angulan et. al., G.R. No.
179892-93 [2009]

Why contingent fees contracts are subject to restrictions

Controls on contingent fees are needed to "reduce financial incentives that encourage lawyers to file
unnecessary, unwarranted[,] and unmeritorious suits.“ – Gisbrecht, et. al. v. Barnhart, 535 U.S. 789
(2002)

Two fold purpose of contingent fee arrangements

First, they enable clients who are unable to pay a reasonable fixed fee to obtain competent
representation.
Second, they provide a risk-shifting mechanism not present with traditional hourly billing that
requires the attorney to bear all or part of the risk that the client's claim will be unsuccessful.
- Alexander & Davis, Jr. v. Inman, 903 S.W.2d 686 (1995)

Contingent fees are generally higher than hourly fees.

- Alexander & Davis, Jr. v. Inman, 903 S.W.2d 686 (1995)

Contingency fee agreement must satisfy four requirements to be valid

(1) an attorney should propose a contingent fee only when the arrangement will be beneficial to his
or her client;
(2) an attorney must inform his or her client of all the relevant considerations concerning the use of
a contingent fee arrangement;

16
(3) an attorney should generally not propose a contingent fee arrangement to a client who is able to
pay a reasonable fixed fee; and
(4) the resulting contingent fee must be reasonable.
- Alexander & Davis, Jr. v. Inman, 903 S.W.2d 686 (1995)

Improper to charge a fee in domestic relations cases that is either contingent on a favorable
judgment in alimony, child support, or marital property
The most often stated reasons for this prohibition are:
• the public policy favoring marriage;
2) disapproval of giving attorneys a financial incentive to promote divorce;
3) the statutory availability of attorney fee awards making contingent fees unnecessary;
4) the potential for over-reaching or undue influence in a highly emotional situation; and
5) a need for the court to make an informed distribution of property which includes the obligation
of attorney fees.

……..
A contingent defense fee was voided as unreasonable in the circumstances when the contract was
entered during the existence of the attorney-client relationship, and the lawyer's co-executors did
not meet their burden to show that the transaction was fair and equitable. [Priester-Lawrence
principle]

No case has involved a contingent defense fee predicated on a percentage of the amount saved
under the prayer in defending an unliquidated tort claim. We therefore depend on principles
governing fee contracts generally.

We have disapproved contingent fees based on a percentage of the property obtained for the client
in a divorce case on public policy grounds.

Contingent fee to a witness

Witnesses should always testify truthfully and should be free from any financial inducements that
might tempt them to do otherwise. A lawyer should not pay or agree to pay a non-expert witness an
amount in excess of reimbursement for expenses and financial loss incident to being a witness ;  
however, a lawyer may pay or agree to pay an expert witness a reasonable fee for services as an
expert.  But in no event should a lawyer pay or agree to pay a contingent fee to any witness.

Is a contingent fee contract for the defense of unliquidated tort damage claims in which the
fee is fixed as a percentage of the difference between the amount prayed for in the petition
and the amount actually awarded valid?
We hold that a contingent fee contract for the defense of an unliquidated tort damage claim which is
based upon a percentage of the difference between the prayer of the petition and the amount
awarded is void.
The critical factors in determining the amount of a contingent fee are (1) the percentage and (2) the
amount against which the percentage is taken in order to determine the fee.
The Committee therefore believes that since these critical factors are missing from a defense-
contingent fee arrangement in an unliquidated tort action, that such fee is based upon pure
speculation. A fee based purely upon speculation cannot be reasonable as required by the Code. The
Committee is unanimous in its decision that in a tort action claiming unliquidated damages, a
defense contingent fee based upon a percentage of the difference between the prayer in the

17
plaintiff's petition and the jury's verdict is improper. Its decision is the same even if the actual
amount of the prayer is written into the contingent fee contract (as in the case at bar) so that the fee
would not increase if the prayer is increased.

Reverse contingent fees

This enables a defendant in a civil case to compensate a lawyer based upon the amount the client
saved as a result of the lawyer’s successful defense of the suit. The amount demanded in the
plaintiff’s complaint, however, should not be the sole basis for calculating a reverse contingent fee.
The difference in the reverse contingent fee is that there is no res created (no money recovered)
as there is in a normal contingent fee arrangement agreed to by a plaintiff. In a reverse contingent
arrangement, the lawyer’s fee is measured by the amount a defendant saves rather than the
amount a plaintiff recovers.

……………
A reverse contingent fee arrangement entitles an attorney to a share of the amount of money the
attorney's services save the client.
The Model Rules do not prohibit "reverse" contingent fee agreements for representation of
defendants in civil cases where the contingency rests on the amount of money, if any, saved the
client, provided the amount saved is reasonably determinable, the fee is reasonable in amount
under the circumstances, and the client's agreement to the fee arrangement is fully informed.
Attorney cannot acquire by purchase or assignment the object of any litigation
Art. 1491. The following persons cannot acquire by purchase, even at a public or judicial auction,
either in person or through the mediation of another:
xxxx
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other
officers and employees connected with the administration of justice, the property and
rights in litigation or levied upon an execution before the court within whose
jurisdiction or territory they exercise their respective functions; this prohibition
includes the act of acquiring by assignment and shall apply to lawyers, with respect
to the property and rights which may be the object of any litigation in which they may
take part by virtue of their profession.
xxx

Contingent fee agreement does not violate Article 1491(5) of the NCC
The contract of services did not violate said provision of law. Article 1491 of the Civil Code,
specifically paragraph 5 thereof, prohibits lawyers from acquiring by purchase even at a public or
judicial auction, properties and rights which are the objects of litigation in which they may take
part by virtue of their profession. The said prohibition, however, applies only if the sale or
assignment of the property takes place during the pendency of the litigation involving the client's
property.
Hence, a contract between a lawyer and his client stipulating a contingent fee is not covered by said
prohibition under Article 1491 (5) of the Civil Code because the payment of said fee is not made
during the pendency of the litigation but only after judgment has been rendered in the case
handled by the lawyer. In fact, under the 1988 Code of Professional Responsibility, a lawyer may
have a lien over funds and property of his client and may apply so much thereof as may be
necessary to satisfy his lawful fees and disbursements.
- Fabillo and Tana v. IAC G.R. No. L-68838
[1991]

18
 Whether or not an attorney who stopped providing legal services could recover based on a
contingent fee contract "prior to full consideration of the contingency”

No. The court held that, "under the circumstances of this case an attorney may not recover on the
contract but must seek recovery of fees on the theory of quantum meruit." That holding does not
establish that any attorney who withdraws from a contingent fee representation may always
recover fees in quantum meruit.
Rather, it establishes that the measure of recovery should be quantum meruit, as opposed to some
portion of the contingent contract. The court concluded, "if Ross is entitled to attorney fees, the
measure of those fees is not the contingent fee agreed upon but the reasonable value of the services
rendered.“

Is the lawyer entitled to a professional fee in a contingent fee arrangement if the client
terminates the relationship with or without cause?
When a client agrees to pay an attorney under a contingency fee agreement and terminates the
attorney before occurrence of the contingency, the attorney may recover based on quantum meruit.
In contrast to withdrawal, this rule applies whether the client terminates the relationship with or
without cause."
However, there are two exceptions to this rule. First, if an attorney violates the RPCs, then
compensation is not available. Second, if the attorney substantially performs the duties owed to the
client, then the attorney may recover the full contingency, not just quantum meruit.
The substantial performance exception only applies in the rare case where full performance is
delinquent by "minor and relatively unimportant deviations."

No recovery, no contingent fee

Mr. Culpepper sent Mr. Cole a letter in which he confirmed that he would accept the representation
on a contingent fee basis of one-third "of whatever additional property or money we can get for
you.
After negotiation between Mr. Culpepper and counsel for the estate of Mr. Cole's mother, Mr. Cole
was offered property worth $21,600.03 over and above what he would have received under the terms
of the decedent's will. Mr. Culpepper thought the compromise was reasonable and recommended
to Mr. Cole that he accept the offer. However, Mr. Cole refused to settle his claim for that amount,
believing he was entitled to a larger share of his mother's succession as a forced heir. When Mr.
Culpepper refused to file suit in the matter, Mr. Cole terminated his representation.
Pursuant to the parties' agreement, Mr. Culpepper is entitled to one-third "of whatever additional
property or money" he obtained on behalf of Mr. Cole. It is undisputed that Mr. Cole recovered no
additional property or money as a result of the litigation against his mother's estate. Because Mr.
Cole obtained no recovery, it follows that Mr. Culpepper is not entitled to any contingent fee.

……..
Nonetheless, Mr. Culpepper urges us to find that his contingency should attach to the settlement
offer he obtained on behalf of his client, even though his client refused to accept that offer.
According to Mr. Culpepper, he did the work for which Mr. Cole retained him, and he is therefore
entitled to one-third of the amount offered in settlement, notwithstanding Mr. Cole's rejection of
the settlement offer.
Decision

19
To allow Mr. Culpepper to recover a contingent fee under these circumstances would penalize Mr.
Cole for exercising his right to reject the settlement. We find no statutory or jurisprudential
support for such a proposition. Indeed, this court has rejected any interpretation of the Rules of
Professional Conduct which would place restrictions on the client's fundamental right to control
the case.
In summary, we find that Mr. Culpepper did not obtain any recovery on behalf of Mr. Cole. In the
absence of a recovery, it follows that Mr. Culpepper cannot collect a contingent fee for his services. -
Culpepper v. Cole 929 So.2d 1224 [2006]

Contingent fee arrangement must be written

It bears to stress that a contingent fee arrangement is valid in this jurisdiction and is generally
recognized as valid and binding but must be laid down in an express contract.
– Felicisima Mendoza vda. De Robosa v. Atty. Mendoza & Atty. Navarro, Jr., A.C. no. 6056,
September 09, 2015 

However, a contract for contingent fees is an agreement in writing by which the fees, usually a fixed
percentage of what may be recovered in the action, are made to depend upon the success in the
effort to enforce or defend a supposed right. Contingent fees depend upon an express contract … -
Aquino v. Hon. Casabar, G.R. No. 191470 January 26, 2015

When a contingent fee is agreed verbally

Petitioner claims that he and Atty. Domingo agreed to a contract for contingent fees equivalent to
thirty percent (30%) of the increase of the just compensation awarded, albeit verbally.
Contingent fees depend upon an express contract, without which the attorney can only recover on
the basis of quantum meruit. Here, considering that the contract was made verbally and that there
was no evidence presented to justify the 30% contingent fees being claimed by petitioner, the only
way to determine his right to appropriate attorney’s fees is to apply the principle of quantum
meruit. - Aquino v. Hon. Casabar, et. al., , G.R. No. 191470 January 26, 2015

Supreme Court, holds and exercises the power to fix attorney's fees on quantum meruit basis
Ordinarily, We would have left it to the trial court the determination of attorney's fees based on
quantum meruit, however, following the several pronouncements of the Court that it will be just and
equitable to now assess and fix the attorney's fees in order that the resolution thereof would not be
needlessly prolonged, this Court, which holds and exercises the power to fix attorney's fees on
quantum meruit basis in the absence of an express written agreement between the attorney and the
client, deems it fair to fix petitioner's attorney's fees at fifteen percent (15%) of the increase in the
just compensation awarded to private respondents. - Aquino v. Hon. Casabar, et. al., , G.R. No. 191470
January 26, 2015

In the absence of an expressed contract attorney can only recover on the basis of quantum
meruit
Contingent fees depend upon an express contract, without which the attorney can only recover on
the basis of quantum meruit. – NPC v. Heirs of Sangkay, G.R. No. 165828 August 24, 2011

Agreement to render legal services without any terms of compensation does not convert it
into a contingency fee agreement

20
There was no contract for contingent fee between Corpus and respondent David. Contingent fees
depend on an express contract therefor. Thus, "an attorney is not entitled to a percentage of the
amount recovered by his client in the absence of an express contract to that effect“.
Where services were rendered without any agreement whatever as to the amount or terms of
compensation, the attorney is not acting under a contract for a contingent fee, and a letter by the
attorney to the client stating that a certain sum would be a reasonable amount to charge for his
services and adding that a rate of not less than five percent nor more than ten would be reasonable
and customary does not convert the original agreement into a contract for a contingent fee.
 

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

Limitations of a contingency agreement

However, in cases where contingent fees are sanctioned by law, the same should be reasonable
under all the circumstances of the case, and should always be subject to the supervision of a court,
as to its reasonableness, such that under Canon 20 of the Code of Professional Responsibility, a
lawyer is tasked to charge only fair and reasonable fees. - Atty. Orocio v. Angulan et. al., G.R. No.
179892-93 [2009]

One court said a provision entitling a lawyer to the “present value” of his contingent fee in the event
he is discharged prematurely is contrary to public policy and unenforceable.

An attorney cannot exact a penalty for a right of discharge

We approve the philosophy that there is an overriding need to allow clients freedom to substitute
attorneys without economic penalty as a means of accomplishing the broad objective of fostering
public confidence in the legal profession. Failure to limit quantum meruit recovery defeats the
policy against penalizing the client for exercising his right to discharge. However, attorneys should
not be penalized either and should have the opportunity to recover for services performed.

“Discharge clause" in a contingent fee agreement is prohibited

The contract included a "discharge clause" [post-discharge fee]
which permitted the client to discharge respondent only after paying him the greater of three
hundred fifty dollars per hour for all the time spent on her case or forty percent of the greatest
gross amount offered in settlement.

Respondent's contract was deficient in several areas. She opined that the discharge clause "may
very well be an excessive fee" and that "[t]he apparent purpose ... is to intimidate the client into not
exercising his right to discharge you from representation... ."

Proper basis for compensating an attorney discharged without cause by his client after he
has performed substantial legal services under a valid contract of employment.
We hold that a lawyer discharged without cause is entitled to the reasonable value of his services on
the basis of quantum meruit, but recovery is limited to the maximum fee set in the contract entered
into for those services.

21
Quantum meruit may well be the proper standard when the discharge under a contingent fee
contract occurs prior to the obtaining of the full settlement contracted for under the attorney-client
agreement, with the cause of action accruing only upon the happening of the contingency to the
benefit of the former client.

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

There are two conflicting interests involved in the determination of the issue presented in this type
of attorney-client dispute:
The first is the need of the client to have confidence in the integrity and ability of his attorney and,
therefore, the need for the client to have the ability to discharge his attorney when he loses that
necessary confidence in the attorney.
The second is the attorney's right to adequate compensation for work performed.

Backdoor dealings of a client not allowed

On considerations of equity and fairness, the Court disapproves of the tendencies of clients
compromising their cases behind the backs of their attorneys for the purpose of unreasonably
reducing or completely setting to naught the stipulated contingent fees.
Thus, the Court grants the Intervenor’s Motion for Intervention to Protect Attorney’s Rights as a
measure of protecting the Intervenor’s right to its stipulated professional fees that would be denied
under the compromise agreement. The Court does so in the interest of protecting the rights of the
practicing Bar rendering professional services on contingent fee basis.
– Malvar v. Kraft Foods (Phils.), Inc. (KFPI), G.R. No. 183952,
September 9, 2013

Recovery in contingent fee agreement cannot exceed the actual amount received

* In refusing to interpret "any amount received" as permitting collection of a contingent fee

exceeding the client's net recovery, we emphasized that the lawyer is entitled to receive the
contingent fee "`only when and to the extent the client receives payment.'"

WON an attorney, who was retained on a contingent fee agreement and discharged for cause
prior to the fulfillment of the contingency, may recover from his client the reasonable value
of the services rendered prior to his discharge?

In that where an attorney is discharged because the client has a good faith basis to no longer wish
to be represented by the attorney and where the attorney has not engaged in serious
misconduct, the attorney may recover compensation from the client for the reasonable value
of the services rendered by the attorney prior to his discharge.  he attorney's compensation is
to be measured in light of the benefits obtained by the client as a result of the attorney's
services and the nature and gravity of the cause that led to the discharge. In a contingent fee
contract the attorney's cause of action, however, does not accrue until the contingency is
fulfilled.

An attorney who withdraws for good cause

We conclude that an attorney who withdraws for good cause from representation under a
contingent-fee agreement may recover in quantum meruit the reasonable value of services
rendered prior to withdrawal, provided that the attorney's recovery in the event of withdrawal
for good cause is not otherwise addressed in the contract and the attorney satisfies the ethical
obligations governing withdrawal from representation.

22
Further, ethical obligations continue after an attorney has withdrawn from representation and,
therefore, it is not unreasonable to allow an attorney who withdraws for good cause to recover
in quantum meruit if the client ultimately recovers.

An attorney who withdraws without good cause

On the other hand, when an attorney terminates the attorney-client relationship without good
cause the circumstances are materially different, because such an attorney demonstrates a
willingness to forfeit a fee.
The withdrawing lawyer “could not have reasonably expected payment after” he “terminated his
representation” under a contingent-fee agreement, and the clients and successor attorney “should
[not] reasonably have expected that [the lawyer] would share in” a later recovery “absent a clear
agreement to that effect” with the clients and successor attorney.
Absent some express contract language to the contrary, it is objectively unreasonable for an
attorney in these circumstances to expect compensation for pre-withdrawal services. This is
because the reasonable expectation of at least the client, if not both parties to a contingent-fee
agreement, is that the attorney who voluntarily withdraws without good cause forfeits the
right to recover a portion of a contingent fee later obtained by substitute counsel.

Refusal of a client to accept a settlement offer in a civil case does not constitute good cause to
withdraw
[Counsel] also argues that the client's refusal to consider a reasonable settlement offer constitutes
good cause to withdraw. We disagree. The decision whether to settle a case is the client's to make,
and the attorney must accept the decision made.
Dissatisfaction with a client's exercise of that right does not constitute good cause for a lawyer's
withdrawal from representation.
We conclude that the refusal of a client to accept a settlement offer in a civil case does not constitute
good cause to withdraw.

Absence of an express provision which addresses possible appeal in contingency fee

agreement
The ordinary rule of construction of contingent fee contracts is that, in the absence of an express
provision which addresses possible appeal, services rendered by an attorney in upholding a
judgment on appeal are within the undertaking under the contingent fee contract. The
attorney is not entitled to any additional compensation for such appellate representation,
even if the reasonable value of all of the services rendered through the successful, final outcome on
appeal exceeds the fee calculated under the contingent fee agreement.

“Bad bargain” and additional compensation

Numerous courts have held that the fact that an attorney may have made a “bad bargain” with a
client will not justify the attorney from either asking for additional compensation or from
withdrawing from the case upon a refusal of the client to agree to such request.

The ordinary rule of construction of contingent fee contracts is that, in the absence of an express
provision which addresses possible appeal, services rendered by an attorney in upholding a
judgment on appeal are within the undertaking under the contingent fee contract.

Fee calculated under the contingent fee agreement is controlling

23
The attorney is not entitled to any additional compensation for such appellate representation, even
if the reasonable value of all of the services rendered through the successful, final outcome on
appeal exceeds the fee calculated under the contingent fee agreement.

Attorney cannot demand more than 50% of the award in contingency fee agreement
In seeking the increase, [counsel] also crossed the fifty percent line and acquired a greater interest
in the outcome of the litigation than his clients. Without passing upon whether there can ever be
circumstances justifying a contingent fee in excess of fifty percent, it is generally a violation of the
rule for the attorney's stake in the result to exceed the client's stake.

When the final amount becomes excessive

When the principal amount of [counsel’s] still contingent, 40% fee became quantified, it remained
subject to the prohibition against clear excessiveness and to testing for reasonableness under the
factors, including the risk of the contingency, [], as well as under other relevant factors.

The court said "that if at the conclusion of a lawyer's services it appears that a fee, which seemed
reasonable when agreed upon, has become excessive, the attorney may not stand upon the contract;
he must reduce the fee."

When is the proper time to perfect the fee contract for legal services
It is important to determine at the outset whether the fee contract was made, as defendants
contend and the trial court found, during the existence of an attorney-client relationship between
plaintiff and defendants or, as plaintiff argues, at the inception thereof. It is more difficult for an
attorney to enforce such a contract if made during the existence of the relationship rather than at its
inception.

Some courts hold a contract for a percentage of the recovery made while such a relationship exists
is void and no more than fair and reasonable compensation may be recovered no matter what sum
is mentioned in the contract.

…….
Where such contracts made during the existence of the attorney-client relationship are not
regarded as void they are viewed with suspicion and closely scrutinized by the courts, as are all
dealings between trustee and cestui.

There is a presumption of unfairness or invalidity attaching to a contract for compensation made

after the relationship has been established and the burden is on the attorney to show it was fairly
and openly made, that the client was fully informed concerning it and understood its effect.

Cause of action to recover compensation for services rendered under a contingent fee
We further hold that the cause of action to recover compensation for services rendered under a
contingent fee contract does not accrue until the occurrence of the stated contingency.

With this right as part of the contract, traditional contract principles are applied to allow quantum
meruit recovery on the basis of services performed to date. Under [this] rule, the attorney's cause of
action accrues immediately upon his discharge by the client, under the reasoning that it is unfair to
make the attorney's right to compensation dependent on the performance of a successor over
whom he has no control.

24
 Whether an attorney who was engaged on a contingent fee basis may, in order to collect his
fees, prosecute an appeal despite his client's refusal to appeal the decision of the trial
court

A practicing attorney, entered into a written agreement with the private respondent to appear as
her counsel in a petition for probate of the holographic will. Under the will, a piece of real property
at Sales Street, Quiapo, Manila, was bequeathed to private respondent. It was agreed that the
attorney’s contigent fee would be thirty-five per cent (35%) of the property that private respondent
may receive upon the probate of the will.

The payment of his fees is contingent and dependent upon the successful probate of the
holographic will. Since the petition for probate was dismissed by the lower court, the contingency
did not occur. Attorney Leviste is not entitled to his fee. - Leviste v. CA, G.R. No. L-29184 [1989]

The amount in a contingent fee contract must be computed as settlement payments are
received
Some authorities have concluded that absent an express agreement to the contrary, a lawyer may
not take her entire contingent fee “off the top” of a client's “structured settlement.” [citations
omitted]
Instead, the contingent fee must be distributed to the lawyer on a pro rata basis when—and if—the
settlement payments are received. [citations omitted]
Client consent is essential, one court said, because “deferred payments involve a time value factor
and collection risks, and the client must be informed of those risks.”
……
Thus, the attorney-client relationship was subject to the general rule in California that, "[a]bsent
other agreement, a contingency fee is payable only as the client obtains recovery. Thus, where the
settlement calls for future payments on a periodic basis, the attorney's fee is payable pro rata; i.e.,
the attorney is entitled to the agreed percentage of each periodic payment when, as and if actually
received by the client.“

Full performance, however, is not required in all contingency fee cases

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

Retaining and charging lien

Rule 16.03 - A lawyer shall deliver the funds and property of his client when due or upon demand.
However, he shall have a lien over the funds and may apply so much thereof as may be necessary to
satisfy his lawful fees and disbursements, giving notice promptly thereafter to his client. He shall

25
also have a lien to the same extent on all judgments and executions he has secured for his client as
provided for in the Rules of Court.

Elements of retaining lien

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

“Registration of the lien” distinguished from the “Enforcement of the lien”

The registration of the lien should also be distinguished from the enforcement of the lien.
Registration merely determines the birth of the lien. The enforcement of the lien, on the other
hand, can only take place once a final money judgment has been secured in favor of the client. The
enforcement of the lien is a claim for attorney’s fees that may be prosecuted in the very action
where the attorney rendered his services or in a separate action.

However, a motion for the enforcement of the lien is in the nature of an action commenced by a
lawyer against his clients for attorney’s fees. As in every action for a sum of money, the attorney-
movant must first pay the prescribed docket fees before the trial court can acquire jurisdiction to
order the payment of attorney’s fees. – Navarez v. Atty. Manuel Abrogar III, G.R. No. 191641,
September 2, 2015

Charging lien does not attach to an award of alimony or maintenance

Pursuant to existing case law, in a matrimonial action a charging lien will be available "'to the extent
that an equitable distribution award reflects the creation of a new fund by an attorney greater than
the value of the interest already held by the client.”
"It is well settled that as a matter of public policy a charging lien does not attach to an award of
alimony or maintenance." Additionally, [courts] have held that as a matter of public policy "an
attorney's charging lien cannot attach to an award of child support ."

There is no lien on a title or interest already held by the client

However, "[w]here the attorney's services do not create any proceeds, but consist solely of
defending a title or interest already held by the client, there is no lien on that title or interest."

The lien exists only so long as the attorney retains possession ends
It may therefore be seen that the right of a lawyer to insure the payment of his professional fee is
either to retain the funds, documents, and papers of his client which may have lawfully come into
his possession, or to enforce it upon any judgment for the payment of money he may secure in favor
of his client. And it has been held that the retaining lien is dependent upon possession and does
not attach to anything not in attorney's hand. The lien exists only so long as the attorney retains
possession ends. - Elena Peralta Vda. De Caisa, et. al. v. Hon. Victoriano, et. Al., G. R. No. L-12905,
February 26, 1959 ]

Settlement amounts to waiver of right to a lien

26
xxx this court declared that satisfaction of the judgment, in general, does not by itself bar or
extinguish the attorney’s liens, as the court may even vacate such satisfaction and enforce
judgment for the amount of the lien.
However, the satisfaction of the judgment extinguishes the lien if there has been a waiver, as
shown either by the attorney’s conduct or by his passive omission. In the instant case, petitioner’s
act in withdrawing the case against the camineros and agreeing to settle their dispute may be
considered a waiver of his right to the lien. No rule will allow a lawyer to collect from his client
and then collect anew from the judgment debtor except, perhaps, on a claim for a bigger amount
which, as earlier discussed, is baseless. - Atty. Raul H. Sesbreño v. Court of Appeals, et. al., G.R. No.
161390, April 16, 2008

Remedy for unpaid professional fees

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

Nonpayment of fees is usually not a sufficient basis to withdraw as counsel

“On the other hand, ‘the nonpayment of fees is usually not a sufficient basis, standing alone, to
override the attorney's ethical responsibilities of continued representation of a client....'”

xxx[but] “the representation [must not] result in an unreasonable financial burden on the lawyer.”
Although we acknowledge that every lawyer must be paid what is due to him, he must never
resort to judicial action to recover his fees, in a manner that detracts from the dignity of the
profession.
– Cueto v. Atty. Jose B. Jimenez, Jr., A.C. NO. 5798 January
20, 2005

If non-payment is further accompanied by other manifestations of deterioration in the

attorney-client relationship
Courts routinely permit attorney withdrawal where clients fail to pay fees in accordance with the
terms of engagement.
Where a client's failure to pay fees is accompanied by other manifestations of deterioration in
the attorney-client relationship, the justification for withdrawal increases.
In all cases, the court must still consider the potential prejudice to all parties involved and the
potential disruption to the administration of justice from attorney withdrawal. If there is an
impending trial or other key proceeding, failure to pay fees may not justify withdrawal.

Additional professional fees not agreed upon prohibited

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

27
 Professional fees issue creates an irreconcilable conflict of interest
Assuming respondents are entitled to additional payment of professional fees, their manner of
enforcing it still warrants disciplinary sanction. Rule 20.4 of the CPR advises lawyers to avoid
controversies with clients concerning their compensation and to resort to judicial action only to
prevent imposition, injustice or fraud. This is because matters of fees present an irreconcilable
conflict of interests between a client and his lawyer. Suits to collect fees should be avoided and
should be filed only when circumstances force lawyers to resort to it, such as "when [a] conflict has
reached such point that it only becomes the lawyer's duty to withdraw from the action but to assert
his right to compensation because of the intolerable attitude assumed by his client, x x x." – Balingit
v. Atty. Cervanyes & Atty. Delarmente, A.C. No. 11059, November 09, 2016

Enforcing fees in the main action or file an independent civil action

In these exceptional circumstances, a lawyer may enforce his right to his fees by filing the
necessary petition as an incident of the main action in which his services were rendered. Thus, in
Malvar v. Kraft Food Philippines, Inc., We approved the filing of a motion for intervention as a
measure to protect a counsel's right to the fees agreed upon with his client. Alternatively, an
aggrieved lawyer may also file an independent civil action against his client for the payment of
his fees. The former is preferable to avoid multiplicity of suits. – Balingit v. Atty. Cervanyes & Atty.
Delarmente, A.C. No. 11059, November 09, 2016

WON filing suit against a current client to collect a fee creates an untenable conflict of
interest between the lawyer's duty to that client and the lawyer's "personal interest" in
collecting his or her fee
Specifically, we must address whether respondent, Richard J. Simon, violated RPC 1.7(a)(2) by suing
his client, while still representing him, allegedly in order to preserve property which could be used
to pay for his services. We conclude that there was a clear violation of the Rule and ethical
standards, but limit the discipline imposed based on the totality of circumstances. However, we
take this opportunity to emphasize that any future suit by an attorney against a current or existing
client in an effort to withdraw from litigation shall not be tolerated.

Suing a current client

If a lawyer wishes to sue a current client for fees, the lawyer must either withdraw from the
representation (if permitted by the rules of professional conduct) or wait until the lawyer’s
duties in the matter are complete.
Lawyers may take action, including assertive action, to collect their fees. They may not, however, sue
a client they currently represent.

Can the court order the losing party to pay the prevailing party the attorney’s fee, as an item
of damages?
The fee as an item of damages belongs to the party litigant and not to his lawyer. It forms part of his
judgment recoveries against the losing party. The client and his lawyer may, however, agree that
whatever attorney’s fee as an element of damages the court may award shall pertain to the
lawyer as his compensation or as part thereof. In such a case, the court upon proper motion
may require the losing party to pay such fee directly to the lawyer of the prevailing party.

Penalty clause in a contract for legal services void

A client's discharge of his attorney "is not a breach of the contract of employment but the exercise
of his right."

28
An attorney may not recover damages under a penalty clause when a client exercises the legal right
to terminate the attorney's retainer contract. Xxx This opinion deals only with contracts of
attorneys in private practice and does not address the employment relationship between employers
and in-house counsel or other full-time employees.

Champerty and Doctrine of Maintenance

Champerty, along with maintenance (of which champerty is an aggravated form), is a common law
doctrine that traces its origin to the medieval period.
The doctrine of maintenance was directed "against wanton and in officious intermeddling in the
disputes of others in which the intermeddler has no interest whatever, and where the assistance
rendered is without justification or excuse."

Champerty, on the other hand, is characterized by "the receipt of a share of the proceeds of the
litigation by the intermeddler." Some common law court decisions, however, add a second factor in
determining champertous contracts, namely, that the lawyer must also, "at his own expense
maintain, and take all the risks of, the litigation.“ - Conjugal Partnership of the Spouses Vicente
Cadavedo v. Atty. Lacaya, G.R. No. 173188, January 15, 2014

Avoiding Champertous contracts

The rule of the profession that forbids a lawyer from contracting with his client for part of the thing
in litigation in exchange for conducting the case at the lawyer’s expense is designed to prevent the
lawyer from acquiring an interest between him and his client.

……
To permit these arrangements is to enable the lawyer to "acquire additional stake in the outcome of
the action which might lead him to consider his own recovery rather than that of his client or
to accept a settlement which might take care of his interest in the verdict to the sacrifice of that of
his client in violation of his duty of undivided fidelity to his client’s cause. - Conjugal Partnership of
the Spouses Vicente Cadavedo v. Atty. Lacaya, G.R. No. 173188, January 15, 2014

Advancing the expenses without reimbursement

Although a lawyer may in good faith, advance the expenses of litigation, the same should be subject
to reimbursement. The agreement between respondent and the Fortunados, however, does not
provide for reimbursement to respondent of litigation expenses paid by him. An agreement
whereby an attorney agrees to pay expenses of proceedings to enforce the client's rights is
champertous xxx.
Such agreements are against public policy especially where, as in this case, the attorney has agreed
to carry on the action at his own expense in consideration of some bargain to have part of the
thing in dispute xxx. The execution of these contracts violates the fiduciary relationship between
the lawyer and his client, for which the former must incur administrative sanctions.
- Bautista v. Atty. Gonzales, A.M. No. 1625
February

Champertous contract
A champertous contract is defined as a contract between a stranger and a party to a lawsuit,
whereby the stranger pursues the party's claim in consideration of receiving part or any of the
proceeds recovered under the judgment; a bargain by a stranger with a party to a suit, by which
such third person undertakes to carry on the litigation at his own cost and risk, in consideration of
receiving, if successful, a part of the proceeds or subject sought to be recovered.

29
An Agreement whereby the attorney agrees to pay expenses of proceedings to enforce the client's
rights is champertous. Such agreements are against public policy especially where as in this case,
the attorney has agreed to carry on the action at its own expense in consideration of some bargain
to have part of the thing in dispute. The execution of these contracts violates the fiduciary
relationship between the lawyer and his client, for which the former must incur administrative
sanction. – Atty. Romeo G. Roxas v. Republic Real Estate Corp., G.R. No. 208205, June 01, 2016 and
Republic Real Estate Corp v. Republic of the Philippines, G.R. No. 208212

Quantum meruit
The principle of quantum meruit (as much as he deserves) may be a basis for determining the
reasonable amount of attorney’s fees.
Quantum meruit is a device to prevent undue enrichment based on the equitable postulate that it is
unjust for a person to retain benefit without paying for it. It is applicable even if there was a formal
written contract for attorney’s fees as long as the agreed fee was found by the court to be
unconscionable. - Atty. Orocio v. Angulan et. al., G.R. No. 179892-93, January 30, 2009

In the case of goods sold and delivered, the theory is quantum valebat (as much as they were
worth), and in that of work and services performed, quantum meruit (as much as he deserved).

……..
The determination of attorney's fees on the basis of quantum meruit is also authorized "when the
counsel, for justifiable cause, was not able to finish the case to its conclusion."
More over, quantum meruit becomes the basis of recovery of compensation by the attorney where
the circumstances of the engagement indicate that it will be contrary to the parties' expectation to
deprive the attorney of all compensation. In this case, since respondent was not able to fulfill one of
the conditions provident in the Contract for Legal Services, his attorney's fees shall be based on
quantum meruit. – Villarama v. Atty. De Jesus, G.R. No. 217004, April 17, 2017

2 purposes of application Quantum meruit

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

When is Quantum meruit authorized

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

Factors for application of quantum meruit

In fixing a reasonable compensation for the services rendered by a lawyer on the basis of quantum
meruit, factors such as the time spent, and extent of services rendered; novelty and difficulty of the
questions involved; importance of the subject matter; skill demanded; probability of losing other
employment as a result of acceptance of the proferred case; customary charges for similar services;

30
amount involved in the controversy and the benefits resulting to the client; certainty of
compensation; character of employment; and professional standing of the lawyer, may be
considered. - Atty. Orocio v. Angulan et. al., G.R. No. 179892-93, January 30, 2009

The court shall fix the amount

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

Referral fee is void

Referrals by one lawyer to another are treated differently. The rule is that a contract to pay an
improper referral fee to a lawyer who steers a client to another lawyer is void.
When the issue of the propriety of a referral-fee agreement arises in litigation-usually when the
referring attorney seeks to enforce the agreement-most courts look to the disciplinary rules.

Rationale behind prohibition of fee splitting with non-lawyers

The rationale usually given for the prohibition of fee splitting with non-lawyers is that "[a]
person entitled to share a lawyer's fees is likely to attempt to influence the lawyer's activities so as
to maximize those fees. That could lead to inadequate legal services.“

Referral fee
The pure referral fee, which compensates one lawyer with a percentage of a contingent fee for doing
nothing more than obtaining the signature of a client upon a retainer agreement while the lawyer to
whom the case is referred performs the work, is far from necessary to the injured person's recovery.
To the extent that the referral fee is paid for that purpose, loss has not been socialized. Rather, the
obtaining of business by a lawyer who, by his own motion, has conceded his inability to handle it
has been subsidized."

Enforceability of a referral fee contract

The honoring of a referral fee is even more puzzling where the referring attorney is merely heeding
the Rules of Professional Conduct in rejecting a case which he does not have the requisite skill or
experience to handle competently.
Regardless of the logic of this argument, there is another point of view. If the ultimate goal is to
assure the best possible representation for a client, a forwarding fee is an economic incentive to
less capable lawyers to seek out experienced specialists to handle a case. Thus, with marketplace
forces at work, the specialist develops a continuing source of business, the client is benefited and
the conscientious, but less experienced lawyer is subsidized to competently handle the cases he
retains and to assure his continued search for referral of complex cases to the best lawyers in
particular fields.

WON a GOCC represented by OGCC is entitled to an award of attorney’s fees

In the petition at bar, petitioners claim that Philcotton, a government-owned or -controlled
corporation, is not entitled to an award of attorney’s fees;

31
Petitioners contend that the award of attorney’s fees was unwarranted and contrary to law,
considering that Philcotton is a government-owned and controlled Corporation which was
represented by the Office of the Government Corporate Counsel in this and other litigations.
Petitioner argues that for an award of attorney’s fees to be proper, one or more of the special
circumstances mentioned in Article 2208 of the Civil Code must exist and that Philcotton must have
availed itself lawfully of the services of private counsel. – Pacific Mills, Inc. and Lim v. Court of
Appeals and Philippine Cotton Corporation, G.R. No. 87182. February 17, 1992
…….
The Court considers that there is, as a matter of principle, no reason why a government-owned or
controlled corporation, or any other government agency or entity for that matter, which is
compelled to bring suit against a private person or entity in order to protect its rights and interests,
should not be granted an award of attorney’s fees, where such an award would be proper if the
suit had been brought by a private entity.
While such a corporation, agency or entity may be represented by government lawyers, clearly,
costs are incurred either by the plaintiff-corporation or entity directly or by the general tax-
paying public indirectly, by reason of the default or other breach of contract or violation of law
committed by the defendant…..
…….
Under Article 2209 of the Civil Code, an award of attorney’s fees is proper either because of a
contractual stipulation for the payment of attorney’s fees or because of the existence of one or
more of the circumstances listed in Article 2208. In the instant case, the promissory notes on which
Philcotton sued contained, as already noted, a stipulation for payment of attorney’s fees in case
judicial enforcement thereof became necessary. There can be no dispute that the petitioners’
failure to comply with their obligations under the promissory notes compelled Philcotton to resort
to enforcement of its rights under those notes through the judicial process. - Pacific Mills, Inc. and
Lim v. Court of Appeals and Philippine Cotton Corporation

An representative who is non-member of the bar is not entitled to compensation

The permission for a non-member of the bar to represent or appear or defend in the said court on
behalf of a party-litigant does not by itself entitle the representative to compensation for such
representation. For Section 24, Rule 138, of the Rules of Court, providing —

Sec. 24. Compensation of attorney's agreement as to fees. — An attorney shall be entitled to have
and recover from his client no more than a reasonable compensation for his
services, ...imports the existence of an attorney-client relationship as a
condition to the recovery of attorney's fees. Such a relationship cannot exist unless
the client's representative in court be a lawyer.

……
Since respondent Muning is not one, he cannot establish an attorney-client relationship with
Enrique Entila and Victorino Tenezas or with PAFLU, and he cannot, therefore, recover attorney's
fees. Certainly public policy demands that legal work in representation of parties litigant should be
entrusted only to those possessing tested qualifications and who are sworn, to observe the rules
and the ethics of the profession, as well as being subject to judicial disciplinary control for the
protection of courts, clients and the public. - PAFLU et al. vs. Binalbagan Isabela Sugar Co., et al.“, G.R.
No. L-23959 November 29, 1971

Oppressive methods of attempting to collect legal fees have been held to involve moral
turpitude

32
Various oppressive methods of attempting to collect legal fees have been held to involve
moral turpitude. The fact that the attorney may be entitled to the fee he sought to obtain or to a fee
does not exonerate him.
In [a case] the attorney intentionally withheld his client's funds in an attempt to coerce payment
of a fee. In [another case] the attorney, in an attempt through fear to force the payment of his bill
for legal services, made threats of action injurious to his client and another. [] in holding that the
attorney's conduct involved moral turpitude, noted that his acts constituted the crime of attempted
extortion.

Fee agreements "between lawyers who are not in the same firm" or who are "not associated
in the same law firm" where there will be a division of legal fees
As relevant here, for such a fee agreement to be valid:
(1) the agreement must include language stating the manner in which the fees will be divided,
whether in proportion to services performed by each lawyer or by stating that each lawyer
assumes joint responsibility for the representation;
(2) the client must be informed of the fee-splitting arrangements at or before entering into the fee
agreement; and
(3) the client must consent to those arrangements in writing.

WON a government-owned or controlled corporation, is entitled to an award of attorney’s

fees
Petitioners contend that the award of attorney’s fees was unwarranted and contrary to law,
considering that Philcotton is a government-owned and controlled Corporation which was
represented by the Office of the Government Corporate Counsel in this and other litigations.
Petitioner argues that for an award of attorney’s fees to be proper, one or more of the special
circumstances mentioned in Article 2208 of the Civil Code must exist and that Philcotton must have
availed itself lawfully of the services of private counsel.
…….
Whenever a government-owned and controlled corporation, or corporation the majority stock of
which is owned or controlled by the Government, or an instrumentality of the Government
performing proprietary functions, is awarded attorney’s fees in a judicial proceeding handled by the
Office of the Government Corporate Counsel, one-half of said attorney’s fees shall be paid
directly to the General Fund."
Section 10, Chapter III of the 1987 Revised Administrative Code which reads as follows:
"The OGCC is authorized to receive the attorney’s fees adjudged in favor of their government-
owned or controlled corporations, their subsidiaries, other corporate offsprings and government
acquired asset corporations. These attorney’s fees shall accrue to a Special Fund of the OGCC, and
shall be deposited in an authorized government depository as a trust liability and shall be made
available for expenditure without the need for a Cash Disbursement Ceiling, for purposes of
upgrading facilities and equipment, granting of employees’ incentive pay and other benefits, and
defraying such other incentive expenses not provided for in the General Appropriations Act as may
be determined by the Government Corporate Counsel.“ - Pacific Mills Inc and Lim v. CA, G.R. No.
87182. February 17, 1992

Lawyers' right to fees from their clients may not be invoked by the lawyers themselves as a
ground for disapproving or holding in abeyance the approval of a compromise agreement
The client has also an undoubted right to compromise a suit without the intervention of his lawyer.
Even the lawyers' right to fees from their clients may not be invoked by the lawyers themselves as a

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ground for disapproving or holding in abeyance the approval of a compromise agreement. The
lawyers concerned can enforce their rights in the proper court in an appropriate proceeding in
accordance with the Rules of Court, but said rights may not be used to prevent the approval of the
compromise agreement. - Municipality of Pililla, Rizal vs. Court of Appeals, G.R. No. 105909 June 28,
1994

Attorney’s fees not allowed to pro se litigants

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

Attorneys' fees proper for pro se litigants who are lawyers

Appellant next contends that attorneys' fees should be denied to certain appellees who are
attorneys and who represented themselves. The law in this area is far from clear. Here, we conclude
that the award was proper. The award of attorneys' fees in this case furthers the underlying policy
of discouraging frivolous or harassing litigation.

Law firm that represents itself is not eligible for attorney fees
A party that represents itself, however, is not eligible for attorney fees. We have held that another
attorney fee provision, NRS 69.030, which provides that a prevailing party shall receive reasonable
attorney fees and costs, does not authorize an award of attorney fees to a prevailing proper person
litigant, even if that litigant is an attorney. The reasoning for that decision is that "an attorney
proper person litigant must be genuinely obligated to pay attorney fees before he may recover such
fees."
Here, Smith & Harmer represented itself in the attorney fees litigation, and thus it was not
genuinely obligated to pay attorney fees. As with fees awarded under NRS 69.030, we conclude that
attorneys who represent themselves in litigation generally may not recover attorney fees for doing
so.

Professional misconduct forfeits the right to assert a retaining lien

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

Misconduct in a another case

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

Is a pro se litigant entitled to

attorney’s fees?
A party that represents itself, however, is not eligible for attorney fees. We have held that another
attorney fee provision, xxxx, which provides that a prevailing party shall receive reasonable

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attorney fees and costs, does not authorize an award of attorney fees to a prevailing proper person
litigant, even if that litigant is an attorney.
The reasoning for that decision is that "an attorney proper person litigant must be genuinely
obligated to pay attorney fees before he may recover such fees."
Here, Smith & Harmer represented itself in the attorney fees litigation, and thus it was not
genuinely obligated to pay attorney fees. Xxx we conclude that attorneys who represent
themselves in litigation generally may not recover attorney fees for doing so.

There must be a favorable judgment

A charging lien to be enforceable as security for the payment of attorney's fees requires as a
condition sine qua non a judgment for money and execution in pursuance of such judgment secured
in the main action by the attorney in favor of his client. A charging lien presupposes that the
attorney has secured a favorable money judgment for his client. - Rilloza, et. al. v. Eastern
Telecommunications Phils., Inc., G.R. No. 104600 [1999]

Retaining lien to Charging lien

If the funds recovered for the client come into the lawyer's possession, the lawyer may detain the
amount claimed as a fee. This use has some similarity to a retaining lien, except that the lawyer
may keep only proceeds of the matter in which the fee is claimed, and only the amount so claimed.
Suppose, however, the certificates of title belonging to a client, come to the possession of his
lawyer, but subsequently, by virtue of a compromise agreement judicially approved, the
properties covered by these are conveyed to other persons, is the retaining lien lost?
It is not.
The position of the lawyer in such a situation is similar to that of a creditor who holds an
attachment lien over the properties, and the client-debtor must discharge the lien before he can
dispose the properties of a third person free of such lien. - Ampil v. Agrava G.R. No. 27394, July 31,
1970.

What if the title to the property is the very subject of the litigation?
A different rule obtains if the title to the property is the very subject in, dispute in the case, and the
court determines that the client's adversary is rightfully entitled to it. In this latter case, the title to
the property could not be said to be the properties of the client, over which the lawyer may claim a
retaining lien. - Carmelo V. Sison citing Vda. de Caifia v. Victoriano, 105 Phil. 194 (1959)

Court can order the surrender of documents

“If it be entirely indispensable for the court to gain possession of the documents that have come to
the attorney and are held by him in the course of his employment as counsel, it can require the
surrender thereof by requiring the client or claimant to first file proper and adequate security for
the lawyers' compensation." – Ampil v. Hon. Juliano-Agrava, et. al., G.R. No. L-27394 July 31, 1970

Public documents not subject to retaining lien

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

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 Features of an attorney's general, retaining or possessory lien
Retaining lien of an attorney is only a passive right and cannot be actively enforced.
It amounts to a mere right to retain the documents and papers as against the client, until the
attorney is fully paid, the exception being that funds of the client in the attorney's possession may
be applied to the satisfaction of his fees.
The attorney's retaining lien is a general lien for the balance of the account between the attorney
and his client, and applies to the documents and funds of the client which may come into the
attorney's possession in the course of his employment.
The attorney's retaining lien attaches to the client's documents and funds in the attorney's
possession regardless of the outcome, favorable or adverse, of any cases he may have handled for
his client. - Ampil v. Hon. Juliano-Agrava, et. al., G.R. No. L-27394 July 31, 1970
……
The attorney's retaining lien is a general lien for the balance of the account between the attorney
and his client, and applies to the documents and funds of the client which may come into the
attorney's possession in the course of his employment.
The attorney's retaining lien attaches to the client's documents and funds in the attorney's
possession regardless of the outcome, favorable or adverse, of any cases he may have handled
for his client. - Ampil v. Hon. Juliano-Agrava, et. al., G.R. No. L-27394 July 31, 1970

Retaining lien not applicable to adverse party’s property

The situation would be different where title to the properties is the very subject in dispute in
the case and the court adjudges the client's adversary to be rightfully entitled thereto. In such a
case, the titles to the property could not be said to be properties of the client, over which the
attorney may claim a retaining lien.

The attorney may enforce his lien only over properties of his client and not against those of his
client's adversary. And the adversary's right as prevailing party to enforce the judgment for the
property adjudged to him should not depend on or be prejudiced by the client's ability or refusal to
pay the attorney. - Ampil v. Hon. Juliano-Agrava, et. al., G.R. No. L-27394 July 31, 1970

The documents and money must be in the possession of the attorney

A side question also arose because of the lawyer's claim that he "is from time to time also in
possession of the titles belonging to the estate.“
The rule is that the retaining lien is dependent on possession and does not attach to anything not
in the attorney's hands. It exists only so long as the attorney retains possession of the subject
matter and expires when the possession ends. - Carmelo V. Sison citing Vda. de Caifia v. Victoriano,
105 Phil. 194 (1959)

Fees for legal services

CONCEPTS:
Earned fees v. unearned fees
Advanced fees - "lump-sum" fees or "flat fees“
Non-refundable fees
Retainer fees
“General retainer" or "engagement retainer“
Negative retainer
Acceptance fee
A nonrefundable retainer

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A nonrefundable retainer is defined as “a fee paid by a client in advance of services and
denominated by the lawyer as nonrefundable, irrespective of whether the client discontinues the
representation or whether the lawyer does any work.”

Non-refundable fee agreements pose two potential problems

Nonrefundable fee agreements pose two potential problems.
First, they burden the client’s right to discharge a lawyer for any reason at any time, because the
client may be unable to afford to hire new counsel.
Second, they can give rise to excessive fees. As the Committee noted, “There is little doubt that some
attorneys have attempted to disguise excessive fees using a nonrefundable clause.”

Fee labeled as "non-refundable"

A fee labeled "non-refundable" misinforms the client about the nature of the fee and interferes with
the client's basic rights in the attorney-client relationship. Attorney fees are always subject to
refund if they are excessive or unearned.

A fee agreement that suggests that advance fees are "non-refundable" undermines the client's
understanding of her rights and may discourage a client from seeking refunds to which the client
may be entitled.
…….
In addition to misinforming the client, "non-refundable fees" may discourage the client from
discharging his attorney for fear that the client will not be able to recover advance fees for which
the attorney has yet to perform any work.

Because the label is inaccurate and misleading, and discourages a client from exercising the right to
discharge an attorney, we hold that attorneys may not enter into "non-refundable fee" agreements
or otherwise communicate to their clients that the fees are "non-refundable."

Labeling a fee "non-refundable" is unethical

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

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In addition to misinforming the client, "non-refundable fees" may discourage the client from
discharging his attorney for fear that the client will not be able to recover advance fees for which
the attorney has yet to perform any work.
Because the label is inaccurate and misleading, and discourages a client from exercising the right to
discharge an attorney, we hold that attorneys may not enter into "non-refundable fee" agreements
or otherwise communicate to their clients that the fees are "non-refundable."

A client may advance professional fees

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

Features of Advance fees

Advance fees present an attractive option for both the client and the attorney. Like engagement
retainers, advance fees allow clients to secure their choice of counsel.

Additionally, some forms of advance fees, e.g., "lump sums" or "flat fees," benefit the client by
establishing before representation the maximum amount of fees that the client must pay.
…….
In these instances, the client knows how much the total cost for legal fees will be in advance,
permitting the client to budget based on a fixed sum rather than face potentially escalating hourly
fees that may exceed the client's ability to pay.

So long as the fees are reasonable, such arrangements do not violate ethical rules governing
attorney fees.

…….
Advance fees benefit the attorney because the attorney can secure payment for future legal services,
eliminating the risk of non-payment after the attorney does the work.

Often, attorneys collect a certain amount from the client in advance of any work and deduct from
that amount according to the hours worked or mutually agreed-upon "milestones" reached during
representation (e.g., investigation, pretrial work and motions, negotiations, filings, handling a
company's initial public offering, etc.).
…….
Attorneys often deduct costs from advance payments as they incur the costs, similar to the manner
in which they deduct their fees as they are earned. Advance fees represent an alternative method of
obtaining legal assistance that accommodates legitimate needs of both clients and attorneys, and by
this opinion we do not intend to discourage these fee arrangements provided the fee agreements
comply with the ethical principles discussed in this case.

What is a “flat fee”?

A flat fee is one that "embraces all work to be done, whether it be relatively simple and of short
duration, or complex and protracted.“

A flat fee is different from an engagement retainer, which "is a fee paid, apart from any other
compensation, to ensure that a lawyer will be available for the client if required.“

"In contrast to engagement retainers, a client may advance funds-often referred to as ... `flat fees'-to
pay for specific legal services to be performed by the attorney and to cover future costs."

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 …….
In sum, a flat fee is an advance of unearned fees because it is money paid up-front for legal services
that are yet to be performed.
A corollary to the rule that a flat fee is an advance of unearned fees, is that the fee must be held as
client funds in a client's trust or escrow account until they are earned by the lawyer's performance
of legal services.

Engagement retainer
An engagement retainer is a nonrefundable payment to assure the availability of the attorney
whether services are performed or not. Engagement retainers are earned when received, but it may
become necessary to refund even a portion of a retainer if the lawyer withdraws or is discharged
prematurely.
These retainers typically compensate an attorney for agreeing to take a case, which requires the
attorney to commit his time to the client's case and causes the attorney to forego other potential
employment opportunities as a result of time commitments or conflicts.

Presumption
A fee payment that does not cover services already rendered and that is not otherwise identified is
presumed to be a deposit against future services.

“Advance fees” or “Retainer”

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

General Retainer Fee

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

General retainer earned upon receipt

The most logical reading of In re Cooperman is that the court intended to (1) prohibit non-
refundable security retainers; and (2) permit lawyers to treat general retainers as earned upon
receipt, but not to describe them to clients as non-refundable.
After all, because a court may require any fee—including one earned upon receipt—to be disgorged
or refunded if it is ultimately determined to be unreasonable, describing a general retainer as
non-refundable is misleading.
……
Only general retainers are “retainers” in the genuine sense of the word; special retainers are in fact
fee advances.

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Special retainers are further divided into two subcategories: “security retainers” and “advance fee
retainers” or “advance payment retainers.”

……..
The second type of retainer is referred to as a "security retainer."
Under this arrangement, the funds paid to the lawyer are not present payment for future services;
rather, the retainer remains the property of the client until the lawyer applies it to charges
for services that are actually rendered. Any unearned funds are refunded to the client. The
purpose of a security retainer is to secure payment of fees for future services that the lawyer is
expected to perform.

Features of a Retaining fee agreement

Two basic principles come into play:
The first is as stated earlier, viz., that the retaining fee is neither made nor received in
consideration of the services contemplated unless the contract itself so provides.

An evergreen retainer
An evergreen retainer, on the other hand, contemplates that the client will pay regularly and that
the lawyer will not tap the retainer for payment until the final bill is due, or, in the case of a
bankruptcy representation, until the court approves the final fee application.

Because the retainer is intact and those funds are unused until the representation concludes, the
retainer is said to be “evergreen.” An evergreen retainer is designed to minimize a lawyer’s risk of
nonpayment if the client’s financial condition deteriorates over the course of the representation, or
should the client for some other reason decline or be unable to pay the lawyer’s fees as they come
due.

Interest on overdue fees

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

Assignment to third parties to collect unpaid fees

Affected clients might raise malpractice as a defense to payment.

Thank you for your attention!!

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