G.R. No.

152072
January 31, 2006
ROMEO G. ROXAS and SANTIAGO N. PASTOR, Petitioners,
vs.
ANTONIO DE ZUZUARREGUI, JR., ENRIQUE DE ZUZUARREGUI, PACITA JAVIER,
ELIZABETH R. GONZALES, JOSEFINA R. DAZA, ELIAS REYES, NATIVIDAD REYES,
TERESITA REYES, JOSE REYES and ANTONIO REYES, Respondents.
x----------------------------------x
G.R. No. 152104
January 31, 2006
ANTONIO DE ZUZUARREGUI, JR., ENRIQUE DE ZUZUARREGUI, PACITA JAVIER,
ELIZABETH R. GONZALES, JOSEFINA R. DAZA, ELIAS REYES, NATIVIDAD REYES,
TERESITA REYES, JOSE REYES and ANTONIO REYES, Petitioners,
vs.
THE NATIONAL HOUSING AUTHORITY, JOSE B. H. PEDROSA, ROMEO G. ROXAS
and SANTIAGO N. PASTOR, Respondents.
The instant cases had their beginnings in 1977 when the National Housing Authority
(NHA) filed expropriation proceedings against the Zuzuarreguis for parcels of land
belonging to the latter situated in Antipolo, Rizal. The said case was ordered archived.
About a month before the aforecited case was ordered archived, the Zuzuarreguis
engaged the legal services of Attys. Romeo G. Roxas and Santiago N. Pastor, to
represent them. This was sealed by a Letter-Agreement which indicates that: The lawyers
endeavor to secure the just compensation with the National Housing Authority and other
governmental agencies at a price of ELEVEN PESOS (P11.00) or more per square meter.
Any lower amount shall not entitle us to any attorneys fees. At such price of P11.00 per
square meter or more our contingent fee[s] is THIRTY PERCENT (30%) of the just
compensation. The lawyers fees shall be in the proportion of the cash/bonds ratio of the
just compensation.
A Motion to Set Case for Hearing was filed by Attys. Roxas and Pastor praying that the
case be revived and be set for hearing by the court at the earliest date available in its
calendar.
The appropriate proceedings thereafter ensued. A Partial Decision was rendered fixing the
just compensation to be paid to the Zuzuarreguis at P30.00 per square meter.
A Letter-Agreement was executed by and between Antonio Zuzuarregui, Jr., Pacita Javier
and Enrique De Zuzuarregui, on the one hand, and Attys. Romeo G. Roxas and Santiago
Pastor, on the other. It confirms an amendment to their agreement regarding the attorneys
fees. The Zuzuarreguis confirmed and agreed that they are willing to accept as final and
complete settlement for their 179 hectares expropriated by NHA a price of SEVENTEEN
PESOS (P17.00) per square meter, or for a total of THIRTY MILLION FOUR HUNDRED
THOUSAND PESOS (P30.4 Million), all payable in NHA Bonds. And that they also agree
and confirm to pay their lawyers and counsels the contingent attorneys fees any and all
amount in excess of the SEVENTEEN PESOS (P17.00) per square meter payable in NHA
bonds.
A resolution was issued by the NHA stating that the Zuzuarregui property would be
acquired at a cost of P19.50 per square meter; that the Zuzuarreguis would be paid in
NHA Bonds, subject to the availability of funds; and that the yield on the bonds to be paid
to the Zuzuarreguis shall be based on the Central Bank rate at the time of payment.
The total amount in NHA bonds released by the NHA Legal Department to Atty. Romeo G.
Roxas in behalf of the Zuzuarreguis amounted to P54,500,000.00. Out of this amount, the
records show that the amount turned over to the Zuzuarreguis by Atty. Roxas amounted to
P30,520,000.00 in NHA bonds.
Computed at P19.50 per square meter, the 1,790,570.36 square meters property of the
Zuzuarreguis was expropriated at a total price of P34,916,122.00. The total amount
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released by the NHA was P54,500,000.00. The difference of P19,583,878.00 is,

undoubtedly, the yield on the bonds.
A letter was sent by the Zuzuarreguis new counsel, Jose F. Gonzalez, to Attys. Roxas and
Pastor, demanding that the latter deliver to the Zuzuarreguis the yield corresponding to
bonds paid by the NHA within a period of 10 days from receipt, under pain of
administrative, civil and/or criminal action.
Attys. Roxas and Pastor answered via a letter stated therein, among other things, that the
amount that they got seems huge from the surface, but it just actually passed their hands,
as it did not really go to them.
A letter was sent by the Zuzuarreguis through Antonio De Zuzuarregui, Jr., to Attys.
Romeo G. Roxas and Santiago N. Pastor, informing the latter that their services as
counsels of the Zuzuarreguis (except Betty) in the expropriation proceedings filed by the
NHA was being formally terminated.
The Zuzuarreguis filed a civil action for Sum of Money and Damages before the RTC,
Quezon City against the NHA, Jose B. H. Pedrosa, Atty. Romeo G. Roxas and Atty.
Santiago N. Pastor. The Zuzuarreguis demanded that the yield on the NHA bonds be
turned over to them.
A Decision was rendered dismissing the Complaint. It further ordered plaintiffs, jointly and
solidarily, to pay for moral damages, exemplary damages, attorneys fee and the cost of
suit.
Upon appeal by the Zuzuarreguis a Decision was eventually promulgated reversing and
setting aside the ruling of RTC. Defendants-Appellees Roxas and Pastor were ordered to
return to plaintiffs-appellants the amount of P12,596,696.425, the balance from the
P17,073,122.70, received as yield from NHA bonds after deducting the reasonable
attorneys fees in the amount of P4,476,426.275.25 (P2.50 per square meter of the
1,790,570.51 square meter)
Both parties filed a Petition for Review on Certiorari assailing the Decision of the Court of
Appeals.
ISSUE:
WHETHER OR NOT THE LETTER-AGREEMENT EXECUTED BY THE
ZUZUARREGUIS, AND ATTYS. ROXAS AND PASTOR, FIXING THE EXACT AMOUNT
THAT MUST GO TO THE FORMER, SHOULD STAND AS LAW BETWEEN THE
PARTIES.
Attys. Roxas and Pastors Contentions:
The Zuzuarreguis are only entitled to the amount of P17.00 per square meter for the
1,790,570.36 square meters expropriated by the government. This was embodied in
the Letter-Agreement wherein the Zuzuarreguis agreed to accept the price of
P17.00 per square meter.
The price of P17.00 was even way above the P11.00 that the Zuzuarreguis were
willing to accept for their properties under the Letter of Engagement executed by the
parties earlier.
Computed at P17.00 per square meter, they stress that the amount that should go to
the Zuzuarreguis for their 1,790,570.36 square meters property should be
P30,439,696.10, and that in fact the Zuzuarreguis have received P30,520,000.00.
The Letter-Agreement should stand as law between the parties. Since this LetterAgreement, which was "as plain and simple as can be such that there is no need for
2

any further construction," already fixed the amount that would go to the
Zuzuarreguis (P17.00 per square meter), then it should be so.
Zuzuarreguis Contentions:
The amounts awarded them were not enough. According to them, the
P12,596,696.425 awarded by the Court of Appeals was not correct. They should
have been awarded the amount of P17,073,122.70.
Quoting the Zuzuarreguis: Respondents Roxas and Pastor retained for themselves
the amount of P3,980,000.00 which represented the agreed attorneys fees of
Roxas and Pastor at P2.50 per square meter. The amount of P20,000,000.00
representing the yield of all the bearer bonds was, in the words of the Court of
Appeals, "deliberately hidden" by respondents Roxas and Pastor from petitioners.
By mathematical computation, the P20,000,000.00 yield should be proportionately
divided at the ratio of P17.00 (petitioners) and P2.50 (share of respondents Roxas
and Pastor). Following this ratio of division, of the P20,000,000.00 yield,
P17,073,122.70 should pertain to petitioners and the balance of P2,926,877.30 to
respondents Roxas and Pastor. Add this amount to the total of P3,980,000.00 at the
agreed rate of P2.50 per square meter, the total attorneys fees of respondents
Roxas and Pastor should be P6,906,877.30, not bad, again in the words of the
Court of Appeals, for handling "a simple expropriation case which ended up in a
compromise agreement." It was, therefore, in error to still deduct the amount of
P4,476,426.28 from petitioners share in the yield in the amount of P17,073,122.70
leaving then only P12,596,696.42. What was done, however, is that the product of
1,790,570.36 sq m. (area of the expropriated land of petitioners) and P2.50 which is
4,476,426.28 was again deducted from the P17,073,122.70 which is the
corresponding share of the petitioners out of the total yield of P20,000,000.00. If this
were a criminal case, petitioners were being sentenced twice for the same offense.
Legal interest on the amount of P17,073,122.70 be imposed from the date of the
filing of the complaint, including moral and exemplary damages, and attorneys fees.
RULING:
Dispositive Portion:
The Decision and Resolution of the Court of Appeals are AFFIRMED but with the
MODIFICATION that Attys. Romeo G. Roxas and Santiago N. Pastor are hereby ordered
to return to the Zuzuarreguis the amount of P17,073,224.84. No costs.
Rationale:
It is basic that a contract is the law between the parties. Obligations arising from contracts
have the force of law between the contracting parties and should be complied with in good
faith. Unless the stipulations in a contract are contrary to law, morals, good customs,
public order or public policy, the same are binding as between the parties.
Under the contract in question, Attys. Roxas and Pastor are to receive contingent fees for
their professional services. It is a deeply-rooted rule that contingent fees are not per se
prohibited by law. They are sanctioned by Canon 13 of the Canons of Professional Ethics,
viz:
13. Contingent Fees.
A contract for contingent fee, where sanctioned by law, should be reasonable under all the
circumstances of the case including the risk and uncertainty of the compensation, but
should always be subject to the supervision of a court, as to its reasonableness.
and Canon 20 of the Code of Professional Responsibility,46 viz:
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CANON 20 A LAWYER SHALL CHARGE ONLY FAIR AND REASONABLE FEES.

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.
Indubitably entwined with the lawyers duty to charge only reasonable fees is the power of
this Court to reduce the amount of attorneys fees if the same is excessive and
unconscionable. Thus, Section 24, Rule 138 of the Rules of Court partly states:
SEC. 24. Compensation of attorneys; agreement as to fees. An attorney shall be entitled
to have and recover from his client no more than a reasonable compensation for his
services, with a view to the importance of the subject matter of the controversy, the extent
of the services rendered, and the professional standing of the attorney. x x x. A written
contract for services shall control the amount to be paid therefore unless found by the
court to be unconscionable or unreasonable.
Attorneys fees are unconscionable if they affront ones sense of justice, decency or
reasonableness. It becomes axiomatic therefore, that power to determine the
reasonableness or the, unconscionable character of attorney's fees stipulated by the
parties is a matter falling within the regulatory prerogative of the courts.
In the instant case, Attys. Roxas and Pastor received an amount which was equal to fortyfour percent (44%) of the just compensation paid (including the yield on the bonds) by the
NHA to the Zuzuarreguis, or an amount equivalent to P23,980,000.00 of the
P54,500,000.00. Considering that there was no full blown hearing in the expropriation
case, ending as it did in a Compromise Agreement, the 44% is, undeniably,
unconscionable and excessive under the circumstances. Its reduction is, therefore, in
order.
It is imperative that the contingent fees received by Attys. Roxas and Pastor must be
equitably reduced. In the opinion of this Court, the yield that corresponds to the
percentage share of the Zuzuarreguis in the P19.50 per square meter just compensation
paid by the NHA must be returned by Attys. Roxas and Pastor.
The yield on the NHA bonds amounted to P19,583,878.00. This amount must therefore be
divided between the Zuzuarreguis, on the one hand, and Attys. Roxas and Pastor, on the
other. The division must be pro rata. The Zuzuarreguis are entitled to the yield equal to
87.18% (17/19.5) of the P19,583,878.00, while Attys. Roxas and Pastor are entitled to
12.82%(2.5/19.5) of said amount. The amount corresponding to 87.17% of
P19,583,878.00 is P17,073,224.84. This is the yield that the Zuzuarreguis are entitled to.
Attys. Roxas and Pastor, on the other hand, are entitled to P2,510,653.16.
Attys. Roxas and Pastor, in the opinion of this Court, were not shortchanged for their
efforts for they would still be earning or actually earned attorneys fees in the amount of
P6,987,078.75 (P4,476,425.59 + P2,510,653.16).
The amount of P17,073,224.84 must therefore be returned by Attys. Roxas and Pastor to
the Zuzuarreguis. They can take this out from the yield in the amount of P19,583,878.00
which they have appropriated for themselves.
On the issue of moral and exemplary damages, we cannot award the same for there was
no direct showing of bad faith on the part of Attys. Roxas and Pastor, for as we said
earlier, contingency fees are not per se prohibited by law. It is only necessary that it be
reduced when excessive and unconscionable.