You are on page 1of 35

CANON20

ATTY. VICTORIANO V. OROCIO, G.R. No. 179892-93


Petitioner,
Present:
AUSTRIA-MARTINEZ, J.,
- versus - Acting Chairperson,
TINGA,*
CHICO-NAZARIO,
LEONARDO-DE CASTRO,** and
EDMUND P. ANGULUAN, LORNA T. PERALTA, JJ.
DY and NATIONAL POWER
CORPORATION, Promulgated:
Respondents.
January 30, 2009
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition[1] for Review on Certiorari under Rule 45 of the Rules of Court seeking to set
aside the Resolution[2] dated 31 October 2006, Decision[3] dated 29 January 2007, and
Resolution[4] dated 27 September 2007, of the Court of Appeals in CA-G.R. SP Nos. 95786 and
95946.

The facts culled from the records are as follows:

On 26 September 1978, the National Power Corporation Board of Directors (NAPOCOR Board),
pursuant to its specific power and duty to fix the compensation, allowance and benefits of the
NAPOCOR employees under Section 6(c) of Republic Act No. 6395, as amended, passed Resolution
No. 78-119 approving the grant of a monthly welfare allowance equivalent to 10% of an employees
basic pay to all NAPOCOR employees effective 1 October 1978.[5] Pursuant thereto, the NAPOCOR
Welfare Plan Committee, renamed and reconstituted later on as the NAPOCOR Welfare Fund Board of
Trustees (NAPOCOR-WFBT), issued and promulgated a charter for the NAPOCOR Welfare Fund
which includes the following provisions:

ARTICLE VII
TERMINATION/AMENDMENT OF THE PLAN

Section 1. Termination/Amendment of the Plan The Board of Directors may amend,


revise, repeal any or all of the provisions herein contained and/or terminate the Plan,
subject to the pertinent provisions of the Trust Agreement.

Section 2. Payment of Members share In the event of termination of the Plan, the
balance to the credit of each member and the General Reserve for Employee Benefits
shall be paid to the members in full. The accumulated amount in the General Reserve for
Employee Benefits shall be distributed among the members in the proportion to the
amount outstanding to their credit as of the time of termination.[6]

The NAPOCOR Board subsequently passed Resolution No. 82-172 fixing a NAPOCOR employees
contribution to the NAPOCOR Welfare Fund in a sum equivalent to 5% of his basic pay.[7]

Almost two decades thereafter, on 8 June 2001, Congress passed Republic Act No. 9136, otherwise
known as the Electric Power Industry Reform Act (EPIRA). EPIRA directed the restructuring of the
power industry which includes the reorganization of NAPOCOR. Following the directive of EPIRA,
the NAPOCOR Board passed Resolution No. 2003-43 on 26 March 2003 abolishing the NAPOCOR
Welfare Fund Department and other departments, and dissolving the NAPOCOR Welfare Fund upon
the effectivity of EPIRA on 26 June 2001.[8] Consequently, some of the employees in the NAPOCOR
Welfare Fund Department and in other departments (who were also members of the NAPOCOR
Welfare Fund) resigned, retired or separated from service. Thereafter, the liquidation and dissolution
process for the NAPOCOR Welfare Fund commenced.

On 11 May 2004, the NAPOCOR-WFBT, with authority from the Commission on Audit, approved
Resolution No. 2004-001 authorizing the release of P184 million (which represented 40% of the liquid
assets of NAPOCOR Welfare Fund in the total amount of P462 million as of 16 April 2004) for
distribution to the NAPOCOR Welfare Fund members who resigned, retired, or separated upon the
effectivity of EPIRA on 26 June 2001 (EPIRA separated members).[9]

Pursuant to Resolution No. 2004-001, herein respondent Edmund P. Anguluan (Anguluan), as Ex-
Officio Chairman of NAPOCOR-WFBT, issued a memorandum on 17 May 2004 to implement the
release of P184 million only to the EPIRA separated members to the exclusion of the NAPOCOR
employees (who were also members of the NAPOCOR Welfare Fund) who have resigned, retired, or
separated prior to the effectivity of EPIRA (non-EPIRA separated members).[10]

This prompted Mrs. Perla A. Segovia (Segovia), former Vice-President of Human Resources and
Administration and former Ex-Officio Chairman of the NAPOCOR-WFBT, in behalf of the 559 non-
EPIRA separated members and in her own personal capacity, to write a letter to Mr. Rogelio M. Murga,
then NAPOCOR President, demanding their equal shares in the remaining assets of the NAPOCOR
Welfare Fund and access to information and records thereof.[11]
On 13 July 2004, there being no action or response on her letter, Segovia, together with Mrs. Emma C.
Baysic (Baysic), former President of the NAPOCOR Employees Association and former member of the
NAPOCOR-WFBT, in their personal capacities and on behalf of the 559 non-EPIRA separated
members, filed with the Quezon City Regional Trial Court (RTC), Branch 217, a Petition
for Mandamus, Accounting and Liquidation with a Prayer for the Issuance of Temporary Restraining
Order and Injunction against respondents NAPOCOR, the NAPOCOR Board, Anguluan (as
NAPOCOR Vice-President, Human Resources, Administration and Finance Department) and Lorna T.
Dy (as NAPOCOR Senior Department Manager on Finance).[12] The Petition was docketed as Civil
Case No. Q04-53121.

Segovia, Baysic and the 559 non-EPIRA separated members were represented in Civil Case No. Q04-
53121 by petitioner Atty. Victoriano V. Orocio under a Legal Retainer Agreement[13] dated 1
September 2004, pertinent portions of which are reproduced below:
SUBJECT: Petition for Mandamus with Damages Temporary Restraining
Order/Injunction, etc. with the Court NPC RETIREES versus NPC, NP Board of
Directors, et. al. before the RTC Quezon City for the payment/settlement of their claims
for NPC Welfare Fund (P462 Million assets and other assets liquid or non-liquid).

Dear Ms. Segovia and Ms. Baysic:

In connection with the above-stated subject, hereunder are our terms and conditions, to
wit:

1. No acceptance fee;

2. All costs of litigation ([filing] and docket fees, etc.), miscellaneous and
out-of-pocket expenses the prosecution of said action shall be for the account of the
clients;

3. No appearance/meeting fee;

4. Contingency or success fees of fifteen percent (15%) of whatever


amounts/value of assets (liquid and/or non-liquid) are recovered;

5. This Retainer Agreement serves as Legal Authority for the Law Firm to
receive and/or collect its contingency/success fee without further demand.

On 22 February 2006, the parties in the above-mentioned case, duly assisted by their respective
counsels, executed a Compromise Agreement[14] whereby they agreed to amicably settle their dispute
under the following terms and conditions:

COMPROMISE AGREEMENT
xxxx

WHEREAS, the parties have agreed to settle the instant case amicably.

PREMISES CONSIDERED, the parties herein have agreed as follows:

1. Both the NPC EPIRA separated members (those members of the Welfare Fund
affected by the EPIRA law and ceased to be members of the Welfare Fund anytime
from June 26, 2001 [effectivity of the EPIRA LAW] to March 1, 2003
[implementation of the EPIRA law and date of abolition of the Welfare Fund]) and
NPC non-EPIRA separated members (those who ceased to be members of the Fund
prior to June 26, 2001) are entitled to Earnings Differential of the NPC Welfare
Fund;

2. Corrected Earnings Differential refers to a benefit which is a result of re-


computation of Members Equity Contributions and Earnings using the correct
rates of return vis--vis what was used when they were separated. Period covered by
the discrepancy is from 1989 to 2003. Hence, affected are WF members separated
anytime within the period 1989 to 2003;

xxxx

4. The Corrected Earnings Differential of all affected WF separated members shall earn
6% legal interest per annum computed from the separation of the members from service
up to March 31, 2006 for all the non-EPIRA separated members and May 31, 2006 for
the EPIRA separated members;

5. As of March 2006, the estimated Corrected Earnings Differential for the non-
EPIRA separated members is P119.196 Million while for the EPIRA separated
members is P173.589 Million or a total of P292.785 Million, inclusive of the 6%
legal interest;

6. In conformity with the Retainer Agreement dated September 1, 2004 between


Mrs. Perla A. Segovia, Mrs. Emma Y. Baysic and Atty. Victoriano V. Orocio; and
Irrevocable Special Power of Attorney dated July 20, 2005 executed by Mrs. Perla
A. Segovia and Mrs. Emma Y. Baysic in favor of Atty. Victoriano V. Orocio, counsel
for petitioners, (copies attached as Annexes A and B respectively), 15% attorneys
fees shall be deducted from the corresponding Corrected Earnings Differential of
those non-EPIRA separated members who have already executed the
corresponding Special Power of Attorney/Written Authority for the
deduction/payment of said attorneys fees, and shall be paid to V.V. Orocio and
Associates Law Office, represented by Atty. Victoriano V. Orocio, as compensation
for his legal services as counsel for the non-EPIRA separated members subject to
deduction of applicable taxes;

xxxx
15. The parties herein shall exert their best effort in order that the terms and conditions
of this agreement are implemented and complied with in the spirit of fairness,
transparency and equity;

16. This Agreement is not contrary to law, good customs, public order or public policy
and is voluntarily entered into by the parties of their own free will.[15]

The parties filed with the RTC the very next day, 23 February 2006, a Joint Motion before the RTC for
the approval of their Compromise Agreement.[16] The RTC rendered a Decision on 3 April 2006
granting the parties Joint Motion and approving the said Compromise Agreement.[17]

On 10 April 2006, petitioner filed with the RTC a Motion for Approval of Charging (Attorneys)
Lien. Petitioner asked the RTC to issue an order declaring him entitled to collect an amount equivalent
to 15% of the monies due the non-EPIRA separated members as his attorneys fees in conformity with
the Compromise Agreement.[18] In an Order dated 15 May 2006, the RTC granted petitioners motion
and decreed that he is entitled to collect the amount so demanded.[19]

On 20 June 2006, petitioner filed with the RTC a Motion for the Issuance of a Writ of Execution of the
RTC Order dated 15 May 2006.[20] Respondents opposed the motion on the ground that there was no
stipulation in the Compromise Agreement to the effect that petitioner is entitled to collect an amount
equivalent to 15% of the monies due the non-EPIRA separated members. Respondents contended that
the amount of P119,196,000.00 due the non-EPIRA separated members under the compromise
agreement was a mere estimate and, as such, cannot be validly used by petitioner as basis for his claim
of 15% attorneys fees.[21]

The RTC issued an Order on 25 July 2006 granting petitioners Motion[22] and, accordingly, a Writ of
Execution of the RTC Order dated 15 May 2006 was issued on 26 July 2006. Pursuant to the said Writ
of Execution, RTC Branch Sheriff Reynaldo B. Madoloria (Sheriff Madoloria) issued a Notice of
Garnishment to Ms. Aurora Arenas (Arenas), Assistant Vice-President and Business Manager of the
Philippine National Bank (PNB)-NAPOCOR Extension Office, Diliman, Quezon City, and to Mr.
Emmanuel C. Mendoza (Mendoza), Unit Head of the Landbank of the Philippines-NAPOCOR
Extension Office, Diliman, Quezon City.[23]

Respondents filed a Motion for Reconsideration of the RTC Order dated 25 July 2006.[24]

On 12 August 2006, Sheriff Madoloria served to Arenas an Order for Delivery of Money.[25]

Respondents Anguluan and Dy filed before the Court of Appeals on 22 August 2006 a Petition
for Certiorari under Rule 65 of the Rules of Court, docketed as CA-G.R. SP No. 95786, assailing the
RTC Order dated 25 July 2006 and praying that a temporary restraining order and/or a writ of
preliminary injunction be issued enjoining the implementation of the said RTC order.[26] Respondent
NAPOCOR filed with the Court of Appeals on the same date another Petition for Certiorari under Rule
65 of the Rules of Court, docketed as CA-G.R. SP No. 95946, also challenging the RTC Order dated 25
July 2006 and praying that it be set aside and a temporary restraining order and/or a writ of preliminary
injunction be issued prohibiting the RTC from enforcing the said order and the corresponding writ of
execution and notice of garnishment.[27] Subsequently, respondent NAPOCOR filed a Motion to
Consolidate CA-G.R. SP No. 95946 with CA-G.R. SP No. 95786 which was granted by the appellate
court.[28]

On 31 October 2006, the Court of Appeals issued a Resolution granting respondents application for a
TRO and writ of preliminary injunction. It enjoined the RTC from implementing its Order dated 25
July 2006 and the corresponding writ of execution and notice of garnishment during the pendency of
CA-G.R. SP No. 95946 and No. 95786. Petitioner filed a motion for reconsideration of the said
resolution.[29]

On 29 January 2007, the Court of Appeals promulgated its Decision annulling and setting aside: (1) the
RTC Order dated 25 July 2006; (2) the corresponding Writ of Execution dated 26 July 2006; (3) the
Notice of Garnishment dated 28 July 2006; and (4) Order for Delivery of Money dated 10 August
2006. It also held that petitioner was entitled only to an amount of P1,000,000.00 as attorneys fees on
the basis of quantum meruit.

The Court of Appeals held that the amount of P17,794,572.70 sought to be collected by petitioner as
attorneys fees, equivalent to 15% of the P119,196,000.00 estimated corrected earnings differential for
non-EPIRA separated members, was excessive based on the following reasons: (1) the corrected
earnings differential in the amount of P119,196,000.00 due the non-EPIRA separated members was a
mere estimate and was hypothetical. Thus, petitioner was unjustified in using said amount as basis for
his 15% attorneys fees; (2) there was hardly any work by petitioner since (a) the compromise
agreement was reached without trial or hearing on the merits; (b) there was no issue regarding the
release and distribution of the NAPOCOR Welfare Fund to the non-EPIRA separated members as the
enactment of EPIRA, not the efforts of petitioner, made such distribution possible; (c) there was no
issue on how much each non-EPIRA separated members would receive because the amount of their
respective contribution was duly recorded by the respondents; (d) respondents have already distributed
the corrected earnings differential to some non-EPIRA separated members, and have given petitioner
his corresponding partial attorneys fees amounting to P3,512,007.32; (e) most of the non-EPIRA
separated members have not yet received their share under the compromise agreement but petitioner,
who was merely their agent, was already given partial payment as attorneys fees; (f) the amount
of P17,794,572.70 represents only less than one fourth partial release of the NAPOCOR Welfare Fund
which means that the equivalent of three-fourths more would be demanded [by petitioner] in the
future; and (3) the money claim of the non-EPIRA separated members was settled through a
compromise agreement and not won by petitioner in a trial on the merits.

The Court of Appeals determined that petitioner was entitled only to an amount of P1,000,000.00 as
attorneys fees on the basis of quantum meruit. However, since petitioner already
received P3,512,007.32 from respondents as partial payment of his supposed 15% attorneys fees, it
ruled that such amount was more than sufficient and petitioner was not entitled to claim anymore the
additional amount of P14,282,565.38. The fallo of the Decision of the Court of Appeals reads:

WHEREFORE, premises considered, the assailed July 25, 2006 Order, the July 26,
2006 Writ of Execution, the July 28, 2006 Notice of Garnishment, and the August 10,
2006 Order of Delivery of Money are hereby ANNULLED and SET ASIDE, and a
new one is ordered, CAPPING at P3,512,007.32, the amount manifested to have
already been received from the welfare fund as attorneys fees, as the maximum
amount that may be billed or collected as attorneys fees from the whole welfare fund
which amount is NOTED to have already exceeded what this court had fixed
at P1,000,000.00 as the reasonable amount, on quantum meruit, that may be collected
as attorneys fees, pursuant to the guidelines codified in Rule 20.01, Canon 20 of the
Code of Professional Responsibility.[30]

Petitioner filed a motion for reconsideration of the aforementioned Decision but this was denied by the
Court of Appeals in its Resolution dated 27 September 2007.[31]

Hence, petitioner brought the instant petition before us assigning the following errors:

I.

THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENTS EDMUND


P. ANGULUAN, LORNA T. DY AND NATIONAL POWER CORPORATION (NPC)
ARE ENTITLED TO [PRELIMINARY] INJUNCTION AS THEY HAVE MATERIAL
AND SUBSTANTIAL RIGHTS, WHICH ARE CLEAR AND UNMISTAKABLE, i.e.
RIGHTS OF BEING CLIENTS TO QUESTION THE REASONABLENESS OF THE
ATTORNEYS FEES OF A LAWYER. THIS ALLEGED RIGHT IS NON-EXISTENT
AND IN FACT FABRICATED CONSIDERING THAT THE RESPONDENTS ARE
NOT THE CLIENTS AT ALL OF PETITIONER, ATTY. VICTORIANO V. OROCIO;
II.
THE COURT OF APPEALS ERRED IN RULING THAT THE FIFTEEN PERCENT
(15%) CONTINGENCY/SUCCESS FEE OF PETITIONER VICTORIANO V.
OROCIO IS UNCONSCIONABLE AND UNREASONABLE DESPITE THE
UNDISPUTED FACT THAT THE SAID ATTORNEYS FEES IS AMONG THE
TERMS AND CONDITIONS OF A JUDICIALLY APPROVED COMPROMISE
AGREEMENT AND COURT ORDER APPROVING HIS CHARGING LIEN, WHICH
AGREEMENT AND ORDER HAVE ALREADY BECOME FINAL AND
EXECUTORY.[32]

In his first assigned error, petitioner assails the Resolution dated 31 October 2006 of the Court of
Appeals granting respondents application for a writ of preliminary injunction. He claims that the Court
of Appeals issued a writ of preliminary injunction in favor of respondents because petitioner allegedly
violated respondents material and substantial right as petitioners clients to pay only reasonable
attorneys fees. Petitioner asserts that none of the respondents is his client in the present case; that even
respondents themselves have not alleged or claimed that they are his clients; that the amount of
attorneys fees he claimed was chargeable on a portion of the NAPOCOR Welfare Fund due his clients,
the non-EPIRA separated employees; that if anyone would be injured by his claim of attorneys fees, it
would be his clients, the non-EPIRA separated employees, and not respondents; that none of his clients
has questioned or complained about the amount of attorneys fees he is claiming; that respondents are
not the real parties-in-interest and at most are merely nominal parties-in-interest; that as mere nominal
parties-in-interest, respondents are not entitled to a writ of preliminary injunction under the Rules of
Court; and that the requisites for the proper issuance of a writ of preliminary injunction are lacking in
the instant case.[33]

In its Resolution dated 31 October 2006, the Court of Appeals granted respondents application for a
writ of preliminary injunction based on the following reasons:

This Court finds that [herein respondents] have prima facie established [their]
compliance with strict requirements for issuance of a writ of preliminary injunction in
this case. Under the leading case of Valencia vs. Court of Appeals, 352 SCRA 72 (2001),
the requisites of preliminary injunction are as follows: (a) the invasion of the right of
[herein respondents] is material and substantial; (b) the right of [herein respondents] is
clear and unmistakable; and (c) there is an urgent and paramount necessity for the writ
to prevent serious irreparable damage to [herein respondents].

The right of [herein respondents] alleged to have been invaded is that a client has
the right to pay only a reasonable amount of attorneys fees and only for services
actually rendered which is clearly and unmistakably available to all clients. What
[herein respondents] are claiming is a material and substantial right. This Court finds
that [herein respondents] haveprima facie established an urgent and paramount necessity
for the issuance of the writ of preliminary injunction prayed for, to avoid irreparable
injury to [herein respondents]. x x x.
As can be gleaned from the foregoing, the basis of the Court of Appeals in granting the writ was
petitioners alleged violation or invasion of respondents right, as petitioners clients, to pay only a
reasonable amount of attorneys fees to, and only for services actually rendered by, petitioner.

The Court of Appeals is clearly mistaken.

It should be made clear that petitioner is the counsel for the non-EPIRA separated members in the
latters quest to claim their shares in the NAPOCOR Welfare Fund. Petitioner was never hired or
employed by respondents as their counsel in the cases at bar. Respondents themselves do not claim or
allege that they are clients of petitioner. In fact, petitioner is representing the non-EPIRA separated
members, the opposing party to the respondents in the present cases.

Further, the amount of attorneys fees being claimed by petitioner is chargeable to the P119,196,000.00
corrected earnings differential of his clients, the non-EPIRA separated members. Respondents have
actually partially distributed such amount to some non-EPIRA separated members pursuant to the
Compromise Agreement. In other words, the non-EPIRA separated members are the lawful
owners/beneficiaries of the amount from which petitioners attorneys fees had been and shall be taken.

Hence, if anyone would be injured by petitioners claim for attorneys fees, it would be his clients, the
non-EPIRA separated members, and not respondents. It appears, however, that none of the non-EPIRA
separated members has questioned or complained about petitioners claim for attorneys fees.

A preliminary injunction is an order granted at any stage of an action or proceeding prior to the
judgment or final order, requiring a party or a court, agency or a person to refrain from a particular act
or acts.[34] A writ of preliminary injunction is a provisional remedy, an adjunct to a main suit, as well
as a preservative remedy issued to preserve the status quo of the things subject of the action or the
relations between the parties during the pendency of the suit.[35] For a writ of preliminary injunction to
issue, the applicant is tasked to establish and convincingly show the following: (1) a right in esse or a
clear and unmistakable right to be protected; (2) a violation of that right; and (3) there is an urgent and
permanent act and urgent necessity for the writ to prevent serious damage.[36]

A clear legal right means one clearly founded on or granted by law or is enforceable as a matter of law.
[37] The existence of a right violated is a prerequisite to the granting of a writ of preliminary
injunction.[38] A writ of preliminary injunction will not issue to protect a right not in esse and which
may never arise.[39] It may be issued only if the applicant has clearly shown an actual existing right
that should be protected during the pendency of the principal action.[40] In the absence of a clear legal
right, or when the applicants right or title is doubtful or disputed, preliminary injunction is not proper.
[41]

It is evident from the foregoing that respondents do not have a clear right or right in esse to pay only a
reasonable amount of attorneys fees to the petitioner because such right belongs solely to petitioners
clients, the non-EPIRA separated members. There can be no violation of a right which does not exist in
the first place. Also, there was no necessity for the writ of preliminary injunction since the non-EPIRA
separated members do not claim any damage or injury caused by the execution of the RTC Order dated
15 May 2006. Even assuming that respondents would probably suffer damages as administrators or
custodians of the NAPOCOR Welfare Fund if the writ of preliminary injunction was not granted, our
ruling would still be the same. We have held that the possibility of irreparable damage without proof of
an actual existing right is not a ground for the issuance of a writ of preliminary injunction.[42] Given
these considerations, we hold that the issuance by the Court of Appeals of a writ of preliminary
injunction in favor of respondents in its Resolution, dated 31 October 2006, was improper.

With regard to his second assigned error, petitioner maintained that his claim for attorneys fees
equivalent to 15% of the P119,196,000.00 estimated corrected earnings differential due the non-EPIRA
separated members was not unreasonable or unconscionable because such amount was expressly
agreed upon in the Compromise Agreement between the non-EPIRA separated members and
respondents. The Compromise Agreement was submitted to the RTC for approval through the joint
motion of the non-EPIRA separated members and respondents, and the RTC had rendered a final and
executory decision approving the same. By virtue of res judicata, the Court of Appeals cannot alter or
change the terms of the Compromise Agreement by prohibiting petitioner from collecting his stipulated
amount of attorneys fees.[43]

Petitioner also avers that the amount of P17,794,572.70, which is equivalent to 15% of
the P119,196,000.00 estimated corrected earnings differential due the non-EPIRA separated members
from the NAPOCOR Welfare Fund is already the total, not partial, amount he is claiming as attorneys
fees; that the P119,196,000.00 estimated corrected earnings differential due the non-EPIRA separated
members from the NAPOCOR Welfare Fund is not hypothetical, such amount having been actually
computed and fixed by respondents themselves without the participation of petitioner and his clients,
the non-EPIRA separated members; that he did a lot of legal work and utilized his legal skills on
discovery procedures to force respondents to enter into the Compromise Agreement with the non-
EPIRA separated members; that the passage of EPIRA merely paved the way for the distribution of the
remaining assets of the NAPOCOR Welfare Fund; that if not for his legal work and skills, the non-
EPIRA separated members would not have received their lawful shares in the remaining assets of the
NAPOCOR Welfare Fund; and that his claim for 15% attorneys fees is supported by jurisprudence.[44]

An attorneys fee, in its ordinary concept, refers to the reasonable compensation paid to a lawyer for the
legal services he has rendered to a client.[45] The client and his lawyer may enter into a written
contract whereby the latter would be paid attorneys fees only if the suit or litigation ends favorably to
the client. This is called a contingency fee contract. The amount of attorneys 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.[46] 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. The non-EPIRA separated members expressly agreed to
pay petitioner contingency or success fees of fifteen percent (15%) of whatever amount/value of assets
(liquid and/or non-liquid) recovered; and authorized petitioners law firm to receive and/or collect its
contingency/success fee without further demand.

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. Further, such
contracts are sanctioned by Canon 13 of the Canons of Professional Ethics.[47]

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.[48]

A stipulation on a lawyers 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 attorneys fees is
excessive, the contract may be disregarded even if the client expressed their conformity thereto.
[49] Attorneys fees are unconscionable if they affront ones 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 attorneys fee or fix a reasonable amount thereof taking into consideration the
surrounding circumstances and the established parameters.[50]

The principle of quantum meruit (as much as he deserves) may be a basis for determining the
reasonable amount of attorneys 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 attorneys fees as long as the agreed fee was
found by the court to be unconscionable. In fixing a reasonable compensation for the services rendered
by a lawyer on the basis of quantum meruit, factors such as the time spent, and extent of services
rendered; novelty and difficulty of the questions involved; importance of the subject matter; skill
demanded; probability of losing other employment as a result of acceptance of the proferred case;
customary charges for similar services; amount involved in the controversy and the benefits resulting to
the client; certainty of compensation; character of employment; and professional standing of the
lawyer, may be considered.[51]

It appears that the non-EPIRA separated members chose petitioner as their counsel because the latter,
as former member of the NAPOCOR-WFBT for two terms or four years, is familiar and
knowledgeable on the operation of the NAPOCOR Welfare Fund.[52] Yet, according to the
contingency fee contract agreement between petitioner and the non-EPIRA separated members,
petitioner received no acceptance fee and appearance/meeting fee when he took on the non-EPIRA
separated members case. Petitioners attorneys fees were absolutely dependent on the success of non-
EPIRA separated members claim on the NAPOCOR Welfare Fund. Despite these circumstances,
petitioner worked diligently in advocating the claims of the non-EPIRA separated members against
respondents as shown by the following: (1) petitioner took pains in verifying the identity and claim of
each of the 559 non-EPIRA separated members on the NAPOCOR Welfare Fund; (2) petitioner
prepared and filed a well-researched and well-argued petition with the RTC for the claims of the non-
EPIRA separated members;[53] (3) he prepared and presented several witnesses and numerous
pertinent documents before the RTC in support of their application for the issuance of a temporary
restraining order and/or writ of preliminary injunction against respondents plan to exclude the non-
EPIRA separated members from receiving their shares in the NAPOCOR Welfare Fund; (4) he
participated, as non-EPIRA separated members counsel, in the conduct of several hearings regarding
the said application for the issuance of temporary restraining order and/or writ of preliminary
injunction;[54] (5) he obtained a temporary restraining order and a writ of preliminary injunction from
the RTC which enjoined/prohibited respondents from excluding the non-EPIRA separated members
from their shares in the NAPOCOR Welfare Fund;[55] (6) he held numerous conferences with the non-
EPIRA separated members wherein he apprised the latter of the status of their claims and his legal
strategies pertinent thereto;[56] and (7) he exerted utmost efforts which eventually led to the execution
of the Compromise Agreement between the non-EPIRA separated members and respondents.

By reason of petitioners dedication and persistence as can be gleaned above, respondents finally agreed
to settle amicably with the non-EPIRA separated members as regards the latters claim for shares in the
NAPOCOR Welfare Fund by virtue of the Compromise Agreement.

Undoubtedly, were it not for petitioners vigilance and zeal, respondents would not have executed the
Compromise Agreement with the non-EPIRA separated members. Hence, it is fair to conclude that
petitioner was entitled to a reasonably high compensation.

However, petitioners attorneys fees in the amount of P17,794,572.70 or equivalent to 15% of


the P 119,196,000.00 corrected earnings differential of the non-EPIRA separated members should be
equitably reduced.
In NPC Drivers and Mechanics Association (NPC DAMA) v. The National Power Corporation (NPC),
[57] we awarded separation pay in lieu of reinstatement plus backwages to several NPC employees
because they were illegally dismissed by the NPC. The NPC employees were represented by a certain
Atty. Cornelio P. Aldon (Atty. Aldon) and Atty. Victoriano V. Orocio, (the petitioner in the instant
cases) under a legal retainer agreement which provides: (1) no acceptance fee; (2) miscellaneous/out of
pocket expenses in the amount of P25,000.00; and (3) twenty-five percent (25%) of whatever
amounts/monies are recovered in favor of said NPC personnel contingent on the success of the
case. Atty. Aldon and Atty. Orocio filed a Motion for Approval of Charging (Attorneys) Lien pursuant
to the legal retainer agreement. Although we granted the said motion, we reduced the amount of
attorneys fees which was chargeable on the monies recoverable by the NPC employees from 25% to
10% because:

While we duly recognize the right of Atty. Aldon and Atty. Orocio to a charging lien on
the amounts recoverable by petitioners pursuant to our 26 September 2006 Decision,
nevertheless, we deem it proper to reduce the same. 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. The amounts
which petitioners may recover as the logical and necessary consequence of our Decision
of 26 September 2006, i.e., backwages and separation pay (in lieu of reinstatement), are
essentially the same awards which we grant to illegally dismissed employees in the
private sector. In such cases, our Labor Code explicitly limits attorneys fees to a
maximum of 10% of the recovered amount. Considering by analogy the said limit on
attorneys fees in this case of illegal dismissal of petitioners by respondent NPC, a
government-owned and controlled corporation; plus the facts that petitioners have
suffered deprivation of their means of livelihood for the last five years; and the fact that
this case was originally filed before us, without any judicial or administrative
proceedings below; as well as the fundamental ethical principle that the practice of law
is a profession and not a commercial enterprise, we approve in favor of Atty. Aldon and
Atty. Orocio a charging lien of 10% (instead of 25%) on the amounts recoverable by
petitioners from NPC pursuant to our Decision dated 26 September 2006.

The abovementioned case may be reasonably applied by analogy in the instant case since they have
substantially similar circumstances. In the case before us, although the non-EPIRA separated members
were not illegally dismissed, they were, nevertheless, separated from work by reason of EPIRA. In
addition, the non-EPIRA separated members had a legal retainer agreement/contingency fee contract
with petitioner as their counsel.

It should also be emphasized that the practice of law is a profession not a moneymaking venture. A
lawyer is not merely the defender of his clients cause and a trustee of his clients cause of action and
assets; he is also, and first and foremost, an officer of the court and participates in the fundamental
function of administering justice in society. It follows that a lawyers 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 attorneys 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.[58]

Thus, taking into account the foregoing circumstances and recognized principles, the 15% attorneys
fees of petitioner should be reduced to 10%. As such, petitioner is entitled to collect only, as attorneys
fees, an amount equivalent to 10% of the P119,196,000.00 or P11,919,600.00.

We note, however, that the compromise agreement was partially implemented in the first week of April
2006 with the payment of P23,416,000.00 to some non-EPIRA separated members.[59] Petitioner
admitted having already received an amount of P3,512,007.32 as his attorneys fees on the said partial
payment of P23,416,000.00.[60]Accordingly, the amount of P3,512,007.32 received by petitioner as
attorneys fees should be deducted from the fixed 10% attorneys fees or the amount of P11,919,600.00.
Per computation, petitioner is entitled to recover the amount of P8,407,592.68 as attorneys fees.

WHEREFORE, premises considered, the Resolution of the Court of Appeals dated 31 October 2006
in CA-G.R. SP Nos. 95786 and 95946 granting the issuance of a writ of preliminary injunction is
hereby ANNULLED and SET ASIDE. The Decision and Resolution, dated 29 January 2007 and 27
September 2007, respectively, of the Court of Appeals in CA-G.R. SP Nos. 95786 and 95946 are
hereby AFFIRMED with the MODIFICATION that petitioner is entitled to recover attorneys fees in
the amount ofP8,407,592.68 on the corrected earnings differential of the non-EPIRA separated
members. No costs.

G.R. No. 73886 January 31, 1989


JOHN C. QUIRANTE and DANTE CRUZ, petitioners,
vs.
THE HONORABLE INTERMEDIATE APPELLATE COURT, MANUEL C. CASASOLA, and
ESTRELLITA C. CASASOLA, respondents.
Quirante & Associates Law Office for petitioners.
R.S. Bernaldo & Associates for private respondents.

REGALADO, J.:
This appeal by certiorari seeks to set aside the judgment' 1 of the former Intermediate Appellate Court
promulgated on November 6, 1985 in AC-G.R. No. SP-03640, 2 which found the petition
for certiorari therein meritorious, thus:
Firstly, there is still pending in the Supreme Court a petition which may or may
not ultimately result in the granting to the Isasola (sic) family of the total amount of
damages given by the respondent Judge. Hence the award of damages confirmed in the
two assailed Orders may be premature. Secondly, assuming that the grant of damages to
the family is eventually ratified, the alleged confirmation of attorney's fees will not and
should not adversely affect the non-signatories thereto.
WHEREFORE, in view of the grave abuse of discretion (amounting to lack of
jurisdiction) committed by the respondent Judge, We hereby SET ASIDE his questioned
orders of March 20, 1984 and May 25, 1984. The restraining order previously issued is
made permanent. 3
The challenged decision of respondent court succinctly sets out the factual origin of this case as
follows:
... Dr. Indalecio Casasola (father of respondents) had a contract with a building
contractor named Norman GUERRERO. The Philippine American General Insurance
Co. Inc. (PHILAMGEN, for short) acted as bondsman for GUERRERO. In view of
GUERRERO'S failure to perform his part of the contract within the period specified, Dr.
Indalecio Casasola, thru his counsel, Atty. John Quirante, sued both GUERRERO and
PHILAMGEN before the Court of first Instance of Manila, now the Regional Trial Court
(RTC) of Manila for damages, with PHILAMGEN filing a cross-claim against
GUERRERO for indemnification. The RTC rendered a decision dated October 16, 1981.
... 4
In said decision, the trial court ruled in favor of the plaintiff by rescinding the contract; ordering
GUERRERO and PHILAMGEN to pay the plaintiff actual damages in the amount of P129,430.00,
moral damages in the amount of P50,000.00, exemplary damages in the amount of P40,000.00 and
attorney's fees in the amount of P30,000.00; ordering Guerrero alone to pay liquidated damages of
P300.00 a day from December 15, 1978 to July 16, 1979; and ordering PHILAMGEN to pay the
plaintiff the amount of the surety bond equivalent to P120,000.00. 5 A motion for reconsideration filed
by PHILAMGEN was denied by the trial court on November 4, 1982. 6
Not satisfied with the decision of the trial court, PHILAMGEN filed a notice of appeal but the same
was not given due course because it was allegedly filed out of time. The trial court thereafter issued a
writ of execution. 7
A petition was filed in AC-G.R. No. 00202 with the Intermediate Appellate Court for the quashal of the
writ of execution and to compel the trial court to give due course to the appeal. The petition was
dismissed on May 4, 1983 8 so the case was elevated to this Court in G.R. No. 64334. 9 In the
meantime, on November 16, 1981, Dr. Casasola died leaving his widow and several children as
survivors. 10
On June 18, 1983, herein petitioner Quirante filed a motion in the trial court for the confirmation of his
attorney's fees. According to him, there was an oral agreement between him and the late Dr. Casasola
with regard to his attorney's fees, which agreement was allegedly confirmed in writing by the widow,
Asuncion Vda. de Casasola, and the two daughters of the deceased, namely Mely C. Garcia and
Virginia C. Nazareno. Petitioner avers that pursuant to said agreement, the attorney's fees would be
computed as follows:
A. In case of recovery of the P120,000.00 surety bond, the attorney's fees of the undersigned counsel
(Atty. Quirante) shall be P30,000.00.
B. In case the Honorable Court awards damages in excess of the P120,000.00 bond, it shall be divided
equally between the Heirs of I. Casasola, Atty. John C. Quirante and Atty. Dante Cruz.
The trial court granted the motion for confirmation in an order dated March 20, 1984, despite an
opposition thereto. It also denied the motion for reconsideration of the order of confirmation in its
second order dated May 25, 1984. 11
These are the two orders which are assailed in this case.
Well settled is the rule that counsel's claim for attorney's fees may be asserted either in the very action
in which the services in question have been rendered, or in a separate action. If the first alternative is
chosen, the Court may pass upon said claim, even if its amount were less than the minimum prescribed
by law for the jurisdiction of said court, upon the theory that the right to recover attorney's fees is but
an incident of the case in which the services of counsel have been rendered ." 12 It also rests on the
assumption that the court trying the case is to a certain degree already familiar with the nature and
extent of the lawyer's services. The rule against multiplicity of suits will in effect be subserved. 13
What is being claimed here as attorney's fees by petitioners is, however, different from attorney's fees
as an item of damages provided for under Article 2208 of the Civil Code, wherein the award is made in
favor of the litigant, not of his counsel, and the litigant, not his counsel, is the judgment creditor who
may enforce the judgment for attorney's fees by execution. 14 Here, the petitioner's claims are based on
an alleged contract for professional services, with them as the creditors and the private respondents as
the debtors.
In filing the motion for confirmation of attorney's fees, petitioners chose to assert their claims in the
same action. This is also a proper remedy under our jurisprudence. Nevertheless, we agree with the
respondent court that the confirmation of attorney's fees is premature. As it correctly pointed out, the
petition for review on certiorari filed by PHILAMGEN in this Court (G.R. No. 64834) "may or may
not ultimately result in the granting to the Isasola (sic) family of the total amount of damages" awarded
by the trial court. This especially true in the light of subsequent developments in G.R. No. 64334. In a
decision promulgated on May 21, 1987, the Court rendered judgment setting aside the decision of May
4, 1983 of the Intermediate Appellate Court in AC-G.R. No. 00202 and ordering the respondent
Regional Trial Court of Manila to certify the appeal of PHILAMGEN from said trial court's decision in
Civil Case No. 122920 to the Court of Appeal. Said decision of the Court became final and executory
on June 25, 1987.
Since the main case from which the petitioner's claims for their fees may arise has not yet become final,
the determination of the propriety of said fees and the amount thereof should be held in abeyance. This
procedure gains added validity in the light of the rule that the remedy for recovering attorney's fees as
an incident of the main action may be availed of only when something is due to the client. Thus, it was
ruled that:
... an attorney's fee cannot be determined until after the main litigation has been decided
and the subject of recovery is at the disposition of the court. The issue over attorney's fee
only arises when something has been recovered from which the fee is to be paid. 15
It is further observed that the supposed contract alleged by petitioners as the basis for their fees
provides that the recovery of the amounts claimed is subject to certain contingencies. It is subject to the
condition that the fee shall be P30,000.00 in case of recovery of the P120,000.00 surety bond, plus an
additional amount in case the award is in excess of said P120,000.00 bond, on the sharing basis
hereinbefore stated.
With regard to the effect of the alleged confirmation of the attorney's fees by some of the heirs of the
deceased. We are of the considered view that the orderly administration of justice dictates that such
issue be likewise determined by the court a quo inasmuch as it also necessarily involves the same
contingencies in determining the propriety and assessing the extent of recovery of attorney's fees by
both petitioners herein. The court below will be in a better position, after the entire case shall have been
adjudicated, inclusive of any liability of PHILAMGEN and the respective participations of the heirs of
Dr. Casasola in the award, to determine with evidentiary support such matters like the basis for the
entitlement in the fees of petitioner Dante Cruz and as to whether the agreement allegedly entered into
with the late Dr. Casasola would be binding on all his heirs, as contended by petitioner Quirante.
We, therefore, take exception to and reject that portion of the decision of the respondent court which
holds that the alleged confirmation to attorney's fees should not adversely affect the non-signatories
thereto, since it is also premised on the eventual grant of damages to the Casasola family, hence the
same objection of prematurity obtains and such a holding may be pre-emptive of factual and
evidentiary matters that may be presented for consideration by the trial court.
WHEREFORE, with the foregoing observation, the decision of the respondent court subject of the
present recourse is hereby AFFIRMED.
SO ORDERED.

Metrobank vs CA 181 SCRA 367


FACTS: A certain Celedonio Javier bought seven (7) parcels of land owned by Eustaquio Alejandro, et
al., with a total area of about ten (10) hectares. These properties were thereafter mortgaged by Javier
with the petitioner to secure a loan obligation of one Felix Angelo Bautista and/or International Hotel
Corporation. During the pendency of these suits that these parcels of land were sold by petitioner to its
sister corporation, Service Leasing Corporation and on the same day, the properties were resold by the
latter to Herby Commercial and Construction Corporation. Three months later, mortgaged the same
properties with Banco de Oro wherein the lower court found that private respondent, did not have
knowledge of these transfers and transactions. Petitioner filed an urgent motion for substitution
of party as a consequence of the transfer of said parcels of land to Service Leasing Corporation. Private
respondent, on its part, filed a verified motion to enter in the records of the aforesaid civil cases its
charging lien, pursuant to Section 37, Rule 138 of the Rules of Court, equivalent to twenty-five percent
(25%) of the actual and current market values of the litigated properties as its attorney's fees. Despite
due notice, petitioner failed to appear and oppose said motion, as a result of which the lower court
granted the same and ordered the, Register of Deeds of Rizal to annotate the attorney's liens on the
certificates of title of the parcels of land.

Private respondent filed a motion to fix its attorney's fees, based on quantum meruit, which motion
precipitated an exchange of argumentsbetween the parties. On May 30, 1984, petitioner manifested that
it had fully paid private respondent; the latter, in turn, countered that the amount of P50,000.00 given
by petitioner could not be considered as full payment but merely a cash advance, including the amount
of P14,000.00 paid to it on December 15, 1980. It further appears that private respondent attempted
to arrange a compromise with petitioner in order to avoid suit, offering a compromise amount of
P600,000.00 but the negotiations were unsuccessful.

ISSUES:
1. Whether or not private respondent is entitled to the enforcement of its charging lien for payment of
its attorney's fee.

2. Whether or not a separate civil suit is necessary for the enforcement of such lien.
3. Whether or not private respondent is entitled to twenty-five (25%) of the actual and current market
values of the litigated properties on a quantum meruit basis.

HELD:
1. NO. On the matter of attorney's liens Section 37, Rule 138 provides: He shall also have a lien to the
same extent upon all judgments for the payment of money, and executions issued in pursuance of such
judgments, which he has secured in a litigation of his client, from and after the time when he shall have
caused a statement of his claim of such lien to be entered upon the records of the court rendering such
judgment, or issuing such execution, and shall have caused written notice thereof to be delivered to his
client and to the adverse party; and he shall have the same right and power over such judgments and
executions as his client would have to enforce his lien and secure the payment of his just fees and
disbursements. Consequent to such provision, 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 lawyer
may enforce his right to fees by filing the necessary petition as an incident in the main action in which
his services were rendered when something is due his client in the action from which the fee is to be
paid. The civil cases below were dismissed upon the initiative of the plaintiffs "in view of the frill
satisfaction of their claims."

2. NOT NECESSARY. At this juncture an enforceable charging lien, duly recorded, is within the
jurisdiction of the court trying the main case and this jurisdiction subsists until the lien is settled. Court
trying main case will determine attorney’s fees.

3. The Court refused to resolve issue but gave the elements to be considered in fixing a reasonable
compensation for the services rendered by a lawyer on the basis of quantum meruit. These are:

(1) the importance of the subject matter in controvers


(2) the extent of the services rendered, and
(3) the professional standing of the lawyer order of the trial court is hereby

REVERSED and SET.


ACCORDINGLY, the instant petition for review is hereby GRANTED and the decision of respondent
Court of Appeals of February 11, 1988 affirming the order of the trial court is hereby REVERSED and
SET ASIDE, without prejudice to such appropriate proceedings as may be brought by private
respondent to establish its right to attorney's fees and the amount thereof.

G.R. No. 124074. January 27, 1997]

RESEARCH and SERVICES REALTY, INC., petitioner, vs. COURT OF APPEALS and
MANUEL S. FONACIER, JR., respondents.

DECISION
DAVIDE, JR., J.:

This petition for review on certiorari under Rule 45 of the Rules of Court questions the propriety
of the award for, and the reasonableness of the amount of, attorney's fees granted in favor of the private
respondent by the Regional Trial Court (RTC) of Makati City, Branch 64,[1] in Civil Case No. 612,
[2] which the Court of Appeals affirmed in its decision[3] of 31 March 1995 in CA-G.R. CV No.
44839.

The undisputed facts are as follows:

On 3 November 1969, the petitioner entered into a Joint Venture Agreement with Jose, Fidel, and
Antonia Carreon. Under the said agreement, the petitioner undertook to develop, subdivide, administer,
and promote the sale of the parcels of land owned by the Carreons. The proceeds of the sale of the lots
were to be paid to the Philippine National Bank (PNB) for the landowner's mortgage obligation, and
the net profits to be shared by the contracting parties on a 50-50 basis.

On 4 April 1983, the Carreons and a certain Patricio C. Sarile instituted before the RTC of Makati
City an action against the petitioner for rescission of the Joint Venture Agreement.They prayed therein
that pending the hearing of the case, a writ of preliminary injunction be issued to enjoin the petitioner
from selling the lots subject of the agreement and that after hearing, the writ be made permanent; the
agreement be rescinded; and the petitioner be ordered to pay the PNB the stipulated 15% per annum of
the outstanding obligation and to pay the plaintiffs attorney's fees, exemplary damages, expenses of
litigation, and costs of suit. This case was docketed as Civil Case No. 612 at Branch 64 of the said
court.

In its answer, which was prepared and signed by Atty. Apolonio G. Reyes, the petitioner sought the
denial of the writ of preliminary injunction, the dismissal of the complaint, and payment in its favor of
(a) P10 million by way of actual damages; (b) P5 million by way of return to the petitioner of the
amount advanced to the Carreons, payments to the PNB, and cost of the work on the subdivision;
(c) P100,000.00 by way of exemplary damages; (d) any and all damages up to the amount
of P4,638,420.00 which the petitioner may suffer under the terms of its Performance Bond in favor of
the National Housing Authority; (e) P50,000.00 as attorney's fees; and (f) costs of suit.

On 9 April 1985, the petitioner engaged the services of private respondent Atty. Manuel S.
Fonacier, Jr., [4] who then entered his appearance in Civil Case No. 612.

While the said case was pending, or on 24 July 1992, the petitioner, without the knowledge of the
private respondent, entered into a Memorandum of Agreement (MOA)[5] with another land developer,
Filstream International, Inc. (hereinafter Filstream). Under this MOA, the former assigned its rights
and obligations under the Joint Venture Agreement in favor of the latter for a consideration of P28
million, payable within twenty-four months.

On 31 March 1993, the petitioner terminated the legal services of the private respondent. At the
time the petitioner had already received P7 million from Filstream.

Upon knowing the existence of the MOA, the private respondent filed in Civil Case No. 612 an
Urgent Motion to Direct Payment of Attorney's Fees and/or Register Attorney's Charging Lien praying,
among other things, that the petitioner be ordered to pay him the sum of P700,000.00 as his contingent
fee in the case.[6]

After hearing the motion, the trial court issued an order dated 11 October 1993 directing the
petitioner to pay the private respondent the sum of P600,000.00 as attorney's fees on the basis
of quantum meruit.

The trial court justified the award in this manner:


Insofar as material to the resolution of this Motion the records of this case show that movant Atty.
Fonacier became the counsel of defendant Research in May 1985 while this case has been in progress.
(Records, p.770). By this time also, the defendant Research has been enjoined by the Court from
executing Contracts To Sell involving Saranay Homes Subdivision . . . . (Order dated December 3,
1984, Records pp. 625-626). However, the said counsel for defendant Research prepared for the latter
various pleadings and represented it in Court (See Records after May 1985). Until his services were
terminated the lawyer client relationship between Atty. Fonacier and Research was governed by a
"contract" embodied in a letter addressed to Atty. Fonacier on April 19, 1985 [sic], the pertinent portion
of which is reproduced below, as follows . . .

xxx
Soon after said letter, cases were referred to him including this case. In accordance with their
agreement, there were instances that Research gave Atty. Fonacier ten (10%) percent of the amount
received as the latter's attorney's fees pursuant to their agreement.
The instant case in which defendant is praying to be awarded attorney's fees, is an action for rescission
of the Joint Venture Agreement between plaintiffs, Patricio Sarile, et al., as owners of a parcel of land
and defendant Research & Service Realty, Inc., as developer of the land. At the time Atty. Fonacier
entered his appearance as counsel for defendant Research, the Court has issued a preliminary injunction
against Research. Thus all developmental and commercial activities of defendant had to stop. In this
regard, Atty. Fonacier did spade work towards persuading the plaintiffs to agree to the relaxation of the
effects of the injunction to pave the way to a negotiation with a third-party, the Filstream. Atty.
Fonancier's efforts were complemented by the efforts of his counterpart in the plaintiff's side. The third-
party Filstream Inc., became the assignee of defendant Research. In this connection, a memorandum of
agreement was entered into between them. By the terms of agreement, defendant Research will be
receiving from the third party Filstream International, Inc. (Filstream) the following amount. . . .

xxx
The termination of the legal services of Atty. Fonacier was made definite on March 31, 1993 at which
time the Memorandum of Agreement which Research entered into with Filstream, Inc., has already
been effective. By this time also, defendant Research has already received the first two stipulated
consideration of the agreement in the total sum of Six Million (P6,000,000.00). The necessary and legal
consequence of said "Memorandum of Agreement" is the termination of the case insofar as plaintiff
Patricio Sarile, et al. and defendant Research is concerned. The conclusion of the Memorandum of
Agreement insofar as the cause of Research is concerned, is a legal victory for defendant
Research. What could have been a loss in investment has been turned to a legal victory. Atty.
Fonancier's effort contributed to defendant's victory, albeit outside the Court which would not have
been possible without the legal maneuvering of a lawyer.
The dismissal of the case before this Court will come in a matter of time considering that plaintiffs,
with the assumption by the third party, Filstream Inc., of what were supposed to be the obligations to
them of defendant Research pursuant to their Joint Venture Agreement, is no longer interested in
pursuing the rescission.
It is a matter of record that Atty. Fonacier is the last of the three lawyers who handled this case.
Moreover it is Atty. Fonacier who contributed to the forging of the memorandum of agreement as
testified to by Atty. Rogel Atienza one of the two retained counsels of plaintiffs.
Considering the importance which is attached to this case, certainly it would not be fair for Atty.
Fonacier if his attorney's fees in this case would be equated only to the measly monthly allowance of
(P800.00) Pesos and office space and other office facilities provided by defendant Research. Ten (10%)
per cent of the amount which Research had received from Filstream at the time of the termination of a
lawyer-client relationship between Atty. Fonacier and Research or P600,000.00 will be a just and
equitable compensation for Atty. Fonancier's legal services, by way of quantum meruit (See Cabildo v.
Provincial Treasurer, Ilocos Norte, et al., 54 SCRA 26).[7]

In its Order[8] of 12 January 1994, the trial court denied the petitioner's motion for reconsideration
of the above order.

The petitioner appealed to the Court of Appeals. In its Appellant's Brief,[9] the petitioner alleged
that the private respondent was not entitled to attorney's fees under the retainer contract.Moreover, the
private respondent did not exert any effort to amicably settle the case, nor was he even present during
the negotiations for the settlement of the same. There was, therefore, no legal and factual justification
for the private respondent's "fantastic and unreasonable claim for attorney's fees of P600,000.00."

On the other hand, the private respondent asserted that he was assured by the petitioner that non-
collection cases were included in the contingent fee arrangement specified in the retainer contract
wherein there was to be contingent compensation for any award arising from any lawsuit handled by
him. According to him, Civil Case No. 612 was not the only "non-collection" case he handled for the
petitioner. There was a "right of way" dispute where the petitioner was awarded P50,000.00, and the
latter paid him P5,000.00, or 10% of the award as attorney's fees. He thus stressed that since under the
memorandum of agreement the petitioner was to receive P28 million, he should be entitled to 10%
thereof or P2.8 million as attorney's fees.

In its decision [10] of 31 March 1995, the Court of Appeals affirmed the challenged order of the
trial court. It ratiocinated as follows:
Movant-appellee, on the other hand, correctly argues that it was the clear intention of appellant and
counsel to compensate the latter for any legal services rendered by him to the former. Stated otherwise,
it was never the intention of the parties in the instant appeal that counsel's services shall be free or to be
rendered ex gratia.

xxx
It must in addition be underscored that the retainer contract of April 9, 1985 is the law that governs the
relationship between appellant and appellee. In fact, the following provisions squarely and
categorically supports the award of P600,000.00 to counsel, to wit:
Minimal allowance of P800 per month plus contingent fees and collection cases (case to case basis)
aside from the attorney's fee recovered from any law suit.
(Paragraph 3, Retainer Contract)
In an American jurisprudence on this point cited in local annotation on the Canon of Professional
Ethics, it was held that "if a lawyer renders valuable services to one who receives the benefits thereof, a
promise to pay a reasonable value is presumed, unless such services were intended to be gratuitous"
(Young vs. Buere, 78 Cal. Am. 127) In effect, to compensate a lawyer, we are faced with the pivotal
question: "was the legal services intended to be free or not?" If it is not free, then, appellant must
simply pay. The 10% contingent fee of the amount collected and/or to be collected in Civil Case No.
612 of the lower court, is, to Our mind fair and reasonable. As ruled by the Supreme Court in the case
of Cosmopolitan Insurance Co. vs. Angel Reyes (G.R. L-20199, Nov. 23, 1965) 15% was even deemed
reasonable. [11]

The petitioner filed a motion for reconsideration [12] on the ground among other things, that the
decision is contrary to the evidence, as the trial court granted the claim for attorney's fees based
on quantum meruit, yet, the Court of Appeals granted the same on a contingent basis which it based on
an erroneous quotation and comprehension of the following provision of the retainer contract:
Minimal allowance of P800.00 per month plus contingent fees on collection cases (case to case basis)
aside from the attorney's fees recovered from any law suit. (underscoring ours) [13]

In its decision, the Court of Appeals substituted the word "on" after "contingent fees" with the word
"and." Under the aforequoted paragraph, the private respondent was entitled to attorney's fees on
contingent basis in collection cases only. In non collection cases, he was entitled only to the attorney's
fees that might be recovered in the lawsuit. [14] Since Civil Case No. 612 is not a collection case but an
action for rescission of a contract, then the aforequoted paragraph is not applicable as a basis for
awarding attorney's fees to the private respondent. [15]

Finding nothing new in the motion for reconsideration, the Court of Appeals denied it in the re-
solution [16] of 15 February 1996.

The petitioner then came to us via this petition for review wherein it contends that

RESPONDENT COURT OF APPEALS HAD DECIDED THE CASE NOT IN ACCORD WITH LAW
AND THE UNDISPUTED FACTS OF THE CASE.

II

RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN


AWARDING ON CONTINGENT BASIS RESPONDENT-APPELLEE'S ATTORNEY'S FEES ON
THE BASIS OF A MEMORANDUM OF AGREEMENT IN WHICH HE HAD NO PARTICIPATION
IN THE NEGOTIATION AND PREPARATION THEREOF.

III

RESPONDENT COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN AWARDING


EXCESSIVE AND UNREASONABLE ATTORNEY'S FEES.
IV

THE TRIAL COURT AND THE RESPONDENT COURT OF APPEALS HAVE NO JURISDICTION
TO SATISFY ATTORNEY'S CHARGING LIEN ON A SUM OF MONEY THAT THE COURT HAD
NO AUTHORITY TO DISPOSE OF AND OVER WHICH THE TRIAL COURT HAD MADE NO
FINAL ADJUDICATION.

The petitioner's more important argument in support of the first error is the Court of Appeals'
misquotation of the provision in the retainer contract regarding attorney's fees on contingent basis,
which the petitioner had stressed in its motion for reconsideration. The petitioner maintains that under
the contract, attorney's fees on contingent basis could only be awarded in collection cases, and Civil
Case No. 612 is not a collection case. Hence, the Court of Appeals erred in affirming the award on that
basis, while the trial court was correct in applying the principle of quantum meruit.

In its second assigned error, the petitioner asserts that the private respondent admitted in his Urgent
Motion to Direct Payment of Attorney's Fees and/or Register Attorney's Charging Lien that he had not
participated in the negotiations and preparation of the memorandum of agreement, thus:
Despite the dishonest concealment, by the light of Providence coupled with a streak of good luck,
counsel discovered in the first week of March 1993 that the parties had respectively entered into a
meaningful agreement with a third-party as early as July 27, 1992, which in the case of client, case in
the form of a "Memorandum of Agreement" (MOA) . . . . [17]

The third assigned error is but a logical consequence of the second, and the petitioner maintains
that since the private respondent "did not do anything spectacular or out of the ordinary" in Civil Case
No. 612, "except to ask for the suspension or postponement of the proceedings thereof from 1985 to
1993," the P600,000.00 attorney's fees, whether on contingent basis or quantum meruit, is excessive
and unreasonable.

In the fourth imputed error, the petitioner argues that the memorandum of agreement was never
submitted to the trial court, and the trial court never made any disposition or adjudication over the
proceeds of the said agreement. What would eventually happen then is the dismissal of Civil Case No.
612, as the trial court itself had intimated in its challenged order.Necessarily then, there would be no
money adjudication in favor of the petitioner as the defendant therein. Since such lien is collectible
only from an award of money that a court would adjudicate in a judgment rendered in favor of the
attorney's client pursuant to Section 37, Rule 138 of the Rules of Court, it would follow that no
attorney's charging lien could be validly entered.

We uphold the petitioner, but not necessarily on the strength of it arguments.

The parties are in agreement that the lawyer-client relationship between the petitioner and the
private respondent, Atty. Manuel S. Fonacier, Jr., was governed by a retainer contract dated 9 April
1985. The petitioner's undertakings thereunder are outlined as follows:
I. CORPORAT[ION]:
1. Corporation will provide the following:
a. Office space airconditioned
b. Furnishings, tables, executive chairs, visitor's chair & steel filing cabinet
c. Telephone facilities and partial secretarial services.
2. Legal service referrals by the corporation to its clients for additional income of the lawyer.
3. Minimal allowance of P800 per month plus contingent fees on contingent fees on collection cases
(case to case basis) aside from the attorney's fees recovered from any lawsuit.
4. That in case of legal problems to be attended to outside Metro Manila and Suburbs, the corporation
shall defray expenses for transportation, lodging and other legal expenses incidental in the case. [18]

An analysis of the contract clearly shows that it was a general retainer, since its primary purpose
was to secure beforehand the services of the private respondent for any legal problem which might
afterward arise. [19] The fixed retaining fee was P800.00 a month. 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. [20]

In the retainer contract in question, there was no intention to make the retaining fee as the
attorney's fees for the services contemplated. This is evident from the provision allowing additional
attorney's fees in collection cases consisting of (1) a "contingent fee" and (2) whatever the petitioner
might recover as attorney's fees in each case. The latter could only refer to the attorney's fees which the
court might award to the petitioner in appropriate cases.

While the contract did not mention non-collection cases, it is, nevertheless, clear therefrom that
such cases were not excluded from the retainership, as borne out by the provision requiring the private
respondent to "make appearances in Court for cases involving the corporation or any allied cases
pertaining to the latter." As to such cases, there was no specific stipulation of additional attorney's
fees. Nevertheless, nothing therein shows that the private respondent agreed to render professional
service in such cases gratuitously. The absence then of the stipulation of additional attorney's fees
cannot be construed as a bar to the collection of additional attorney's fees in non-collection cases.

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. The second is that, unless expressly stipulated, rendition of professional services by a lawyer
is for a fee or compensation and is not gratuitous. This is implicit from the opening clause of Section
24, Rule 138 of the Rules of Court, which states that "[a]n attorney shall be entitled to have and recover
from his client no more than a reasonable compensation for his services . . .," and by virtue of the
innominate contract of facio ut des (I do and you give), as enunciated by this Court in Corpus v. Court
of Appeals, [21] thus:
Moreover, the payment of attorney's fees . . . 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 that such contracts shall be regulated by the
stipulations of the parties, by the general provisions or principles of obligations and contracts, by the
rules governing the most analogous nominate contracts, and by the customs of the people. The rationale
of this article was stated in the 1903 case of Perez vs. Pomar (2 Phil. 682).

In Perez v. Pomar, [22] this Court stated:


[B]ut whether the plaintiff's services were solicited or whether they were offered to the defendant for
his assistance, inasmuch as these services were accepted and made use of by the latter, we must
consider that there was a tacit and mutual consent as to the rendition of the services. This gives rise to
the obligation upon the person benefited by the services to make compensation therefor, since the
bilateral obligation to render service as interpreter, on the one hand, and on the other to pay for the
services rendered, is thereby incurred. (Arts. 1088, 1089, and 1262 of the Civil Code).

Accordingly, as to non-collection cases where the petitioner was either a plaintiff or a defendant,
the private respondent could still collect attorney's fees, apart from his regular retaining fee, on the
basis of any-supplemental agreement or, in its absence, under the principle of quantum meruit. There
was no such supplemental agreement in this case.

We cannot sustain the private respondent's theory that he could collect attorney's fees on
contingent basis because in the other "non-collection" cases he handled for the petitioner' he was paid
on contingent basis at the rate of 10% of what was awarded to the petitioner. In the first place, Civil
Case No. 612 is still unresolved, and no judgment has yet been rendered in favor of the petitioner. The
amount in the memorandum of agreement could not be made the basis of a "contingent fee" in the said
case for at least three reasons. First, in his own Urgent Motion to Direct Payment of Attorney's Fees
and/or Register Attorney's Charging Lien, the private respondent based the contingent fee not only in
Civil Case No. 612 but in a "multitude of peripheral cases," and the contingent fee would become due
and collectible only if and when the petitioner obtains a judgment in his favor in Civil Case No. 612.
The second paragraph of page 3 of the said motion reads as follows:
Hence, from May 1985 and continuously thru the years without interruption and surviving a series of
no less than five (5) changes of Presiding Judges, the undersigned counsel labored tirelessly in handling
the defense of client. In addition to the instant lawsuit, a multitude of peripheral cases, civil, criminal
and administrative, arising from the non-delivery of titles by client on fully paid lots in the subdivision
project were also filed as a consequence, not only against defendant but also against its President and
Chief Executive Officer (CEO). Needless to state, the undersigned was designated to handle majority
of these cases for both, where he appeared and conducted trial without any "appearance fees" for more
than eight (8) long years solely relying on the contingent fee in case of recovery in the instant main
case.[23] (underscoring supplied for emphasis)

Second, the amount of P28 million, which Filstream agreed to pay the petitioner, was not a
judgment or award in favor of the petitioner in Civil Case No. 612. It was the consideration of the
assignment, transfer, and conveyance to Filstream of all the petitioner's "rights, interest and
participation embodied and specified in the Joint Venture Agreement (Annex "A") and in all the eight
hundred seventy-five (875) parcels of land comprising the SARANAY HOMES subdivision. . . ." The
plaintiffs in Civil Case No. 612 were not parties to the memorandum of agreement, and there is no
showing that they agreed to the assignment of the petitioner's rights, interest, and participation in the
Joint Venture Agreement. While paragraph 10 of the memorandum of agreement provides that the
petitioner
shall cause to sign a JOINT MOTION TO DISMISS, together with the CARREONS regarding Civil
Case No. 612 of the Regional Trial Court of Makati and to further DISMISS, the case filed against
PNB docketed as Civil Case No. 6918 of the Regional Trial Court of Makati . . . [and] shall obtain the
dismissal of all cases filed by lot buyers against it now pending with the HLURB

the fact remains that no such motion to dismiss has been filed yet in Civil Case No. 612, and there is no
assurance whatsoever that the plaintiffs therein will sign a joint motion to dismiss. Third, as correctly
posited by the petitioner, the private respondent had no participation in the negotiations leading to, and
in the preparation of, the memorandum of agreement.

Indisputably then, the private respondent's attorney's fee on "contingent basis" in Civil Case No.
612 is unwarranted. If at all, he could only be entitled to attorney's fees on quantum meruit basis as of
the expiration of his retainer contract on 31 March 1993.

Quantum meruit simply means "as much as he deserves." [24] In no case, however, must a lawyer
be allowed to recover more than what is reasonable pursuant to Section 24, Rule 138 of the Rules of
Court, which provides:
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. 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.

This Court had earlier declared the following as circumstances to be considered in determining the
reasonableness of a claim for attorney's fees: (1) the amount and character of the service rendered; (2)
labor, time, and trouble involved; (3) the nature and importance of the litigation or business in which
the services were rendered; (4) the responsibility imposed; (5) the amount of money or the value of the
property affected by the controversy or involved in the employment; (6) the skill and experience called
for in the performance of the services; (7) the professional character and social standing of the
attorney; (8) the results secured; and (9) whether the fee is absolute or contingent, it being recognized
that an attorney may properly charge a much larger fee when it is contingent than when it is not. [25]

Rule 20.1, Canon 20 of the Code of Professional Responsibility enumerates the following factors
which should guide a lawyer in determining his fees:
(a) The time spent and the extent of the services rendered or required;
(b) The novelty and difficulty of the questions involved;
(c) The importance of the subject matter;
(d) The skill demanded;
(e) The probability of losing other employment as a result of acceptance of the 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.

It was incumbent upon the private respondent to prove the reasonable amount of attorney's fees,
taking into account the foregoing factors or circumstances. The records before us and the trial court's 11
October 1993 order do not confirm that the private respondent proved by either testimonial or
documentary evidence that the award of P600,000.00 was reasonable. The private respondent's
testimony thereon was crucial. Yet, it does not appear from the 11 October 1993 order that he took the
witness stand. From the Minutes of the trial court attached to the Rollo of CA-G.R. CV No.
44839, [26] it appears that only Atty. Atienza and Mr. Suazo gave oral testimony on the motion.

It necessarily follows then that the 11 October 1993 order has insufficient factual basis, and the
trial court committed grave abuse of discretion in arbitrarily fixing the private respondent's attorney's
fees at P600,000.00. The affirmance of the said order by the Court of Appeals premised on the
provision in the retainer contract regarding contingent fee is thus fatally flawed.

The interest for both the petitioner and the private respondent demands that the trial court should
conduct further proceedings in Civil Case No. 612 relative to the private respondent's motion for the
payment of attorney's fees and, thereafter, fix it in light of Section 24, Rule 138 of the Rules of Court;
Rule 20.1, Canon 20 of the Code of Professional Responsibility; and the jurisprudentially established
guiding principles in determining attorney's fees on quantum meruit basis.

WHEREFORE, the instant petition is GRANTED. The challenged Decision of 31 March 1995 of
the Court of Appeals in CA-G.R. CV No. 44839 and the Order of 11 October 1993 of the Regional
Trial Court of Makati, Branch 64, in Civil Case No. 612 are hereby SET ASIDE. The trial court is
further DIRECTED to set for further hearing the private respondent's Urgent Motion to Direct Payment
of Attorney's Fees and/or Register Attorney's Charging Lien and thereafter to fix the private
respondent's attorney's fees in Civil Case No. 612 as of 31 March 1993 when his contract with the
petitioner was effectively terminated, taking into account Section 24, Rule 138 of the Rules of Court;
Rule 20.1, Canon 20 of the Code of Professional Responsibility; and the jurisprudentially established
guiding principles in determining attorney's fees on quantum meruit basis.

No pronouncement as to costs.

SO ORDERED.

[A.C. No. 4863. September 7, 2001]

URBAN BANK, INC., complainant, vs. ATTY. MAGDALENO M. PEA, respondent.

RE S O LUTI ON

PUNO, J.:

Before us is an administrative case for disbarment filed by complainant Urban Bank, Inc., a
commercial bank, against respondent Atty. Magdaleno M. Pea. Complainant charges that respondent is
guilty of deceit, malpractice and gross misconduct in violation of Section 27, Rule 138, of the Revised
Rules of Court. The allegations of the Complaint in support of the accusation are as follows:
3. Last 1 December 1994, Complainant bought a parcel of land located along Roxas Boulevard from
the Isabela Sugar Company (ISC for brevity). One of the conditions of the sale was for ISC to cause the
eviction of all the occupants found in said property. This condition was incorporated in the Contract to
Sell and adopted in the subsequent Deed of Absolute Sale executed by and between ISC and
Complainant dated 15 November 1994 and 29 Novemebr 1994, respectively.
4. To fully implement the abovementioned condition, ISC engaged the services of herein Respondent
Atty. Magdaleno M. Pea. This was communicated by ISC to Respondent in a Memorandum dated 20
November 1994 and relayed to Complainant in a Letter dated 19 December 1994.
5. Respondent accepted the engagement of his services by ISC and he proceeded to take the necessary
steps to evict the occupants of the property subject of the sale.
6. During the eviction process, Complainant was informed by ISC and Respondent about the necessity
of a letter of authority in favor of the latter, granting him the authority to represent Complainant in
maintaining possession of the aforesaid property and to represent Complainant in any court action that
may be instituted in connection with the exercise of said duty.
7. Complainant acceded to the request and issued a letter-authority dated 15 December 1994, but only
after making it very clear to the Respondent that it was ISC which contracted his services and not
Complainant. This clarification was communicated to Respondent by Atty. Corazon M. Bejasa and Mr.
Arturo E. Manuel, Jr., Senior Vice-President and Vice-President, respectively of Complainant bank in a
letter addressed to respondent dated 15 December 1994. A copy of said letter is attached hereto and
made an integral part of this Complaint as Annex E.
8. Subsequently however, Respondent requested for a modification of said letter of authority by
furnishing Complainant with a draft containing the desired wordings (including the date, i.e., 19
December 1994) and asking Complainant to modify the previous letter by issuing a new one similarly
worded as his draft. A copy of said request is attached hereto and made an integral part of this
Complaint as Annex F.
9. If only to expedite and facilitate matters, Complainant willingly obliged and re-issued a new letter of
authority to Respondent, this time incorporating some of Respondents suggestions. Thus it came to
pass that the actual letter of authority was dated 19 December 1994, while Complainants clarificatory
letter was dated 15 December 1994.
10. Eventually, the eviction of the occupants of the property in question was successfully carried out.
After the lapse of more than thirteen (13) months, Respondent filed a collection suit against herein
Complainant and its senior officers for recovery of agents compensation and expenses, damages and
attorneys fees, on the strength of the letter of authority issued by Atty. Bejasa and Mr. Manuel, Jr. A
copy of the complaint filed by herein Respondent with the Bago City Regional Trial Court is attached
hereto and made an integral part hereof as Annex G.
11. The act of Respondent in securing the letter of authority from Complainant, ostensibly for the
purpose of convincing the occupants sought to be evicted that he was duly authorized to take
possession of the property and then using the same letter as basis for claiming agents compensation,
expenses and attorneys fees from Complainant, knowing fully well the circumstances surrounding the
issuance of said letter of authority, constitutes deceit, malpractice and gross misconduct under Section
27, Rule 138 of the Revised Rules of Court. Said provision enumerates the grounds for the suspension
and disbarment of lawyers, namely:
Sec. 27. Attorneys removed or suspended by Supreme Court, on what grounds, - A member of the bar
may be removed or suspended from his office as attorney by the Supreme Court for any deceit,
malpractice or other gross misconduct in such office, grossly immoral conduct or by reason of his
conviction of a crime involving moral turpitude, or for any violation of the oath of which he is
required to take before admission to practice, or for willful disobedience of any lawful order of a
superior court or for corruptly or wilfully appearing as an attorney for a party to a case without any
authority to do so.The practice of soliciting cases at law for the purpose of gain, either personally or
through paid agents or brokers, constitutes malpractice. (Emphasis supplied)[1]

In answer to these allegations, respondent submitted with this Court his Comment, wherein he
refuted all the charges against him. Preliminarily, he claimed that the present complaint should be
dismissed outright since its filing constitutes forum shopping and it involves a matter which is sub-
judice, in view of the pending civil action involving the same parties. Respondent then disputed that he
was guilty of deceit, malpractice or gross misconduct. He declared that complainant, through its duly
authorized officers, engaged his services to rid the property of tenants and intruders in the course of a
telephone conversation. He added that there was no reason for him to deceive complainant into writing
a letter of authority because he knew very well that the verbal agreement was sufficient to constitute an
attorney-client relationship. The request for a letter of authority, according to him, was merely to
formalize the engagement.[2] Lastly, he argued that the complainant accepted the benefits of his
service, just as it never disclaimed that he was acting in its behalf during the period of engagement.

We referred the matter to the Integrated Bar of the Philippines (IBP) for investigation. Both parties
presented their respective evidence before the Commission on Bar Discipline of the IBP. After only one
hearing, and upon agreement of the parties, the case was submitted for resolution on the basis of their
respective pleadings and annexes thereto. The investigating officer, Commissioner Navarro, required
both parties to file their own memoranda. The commissioner made the following findings:
After going over the evidence submitted by the parties, the Undersigned noted that the complainant
(plaintiff) in RTC Bago City Civil Case is the respondent in the present case which only showed that to
get even with the respondent, complainant instituted the present case as leverage for respondents
complaint in the civil case. The complainant in the RTC Bago City Civil case is the respondent in the
present case and vice-versa; therefore there was no institution by the same party for remedies in
different fora which negates forum shopping.
The fact remains however that complainant never contested the actuations done by the respondent to
rid its property from tenants and intruders; and even executed a letter of authority in favor of
respondent dated December 19, 1994; otherwise complainant should have engaged the services of other
lawyers.
Nevertheless, it is not for this Office to determine who should pay the respondent for this is a matter
not within its jurisdiction but for the proper court to do so.
The only issue for resolution of this Office is whether or not respondent committed malpractice, deceit
and gross misconduct in the practice of his profession as member of the bar.
The evidence on record showed that respondent successfully performed his task of evicting the tenants
and intruders in the property in question. More so, no less than Senior Vice-President Corazon Bejasa
was very thankful for his job well done.
Complainant benefited from respondents task and for a period of fifty (50) days no behest or complaint
was received by the respondent from the complainant. It was only when payment for his legal services
was demanded that complainant re-acted when it is incumbent upon the benefactor of services that just
compensation should be awarded.
It is but just and proper that if refusal to pay just compensation ensues in any transaction, the proper
remedy is to institute an action before the proper court and such actuation of the respondent herein did
not constitute deceit, malpractice or gross misconduct.
In view of the foregoing, the Undersigned hereby recommends that the complaint against Atty.
Magdaleno Pea be dismissed for lack of merit.[3]

Thereafter, IBP Board of Governors passed a Resolution DISMISSING the Complaint based on the
Report and Recommendation of Commissioner Navarro. It appears that on April 26, 2000, the
complainant was closed by the Monetary Board of the Bangko Sentral Ng Pilipinas and was placed
under receivership of the Philippine Deposit Insurance Corporation (PDIC). On May 8, 2000, it
received a notice of the resolution. With the PDIC now acting as its counsel, it sought reconsideration
of the resolution with the IBP, which was denied there being no substantive reason to reverse the
findings therein and because the pleading is improper as the remedy of the complainant is to file the
appropriate Motion with the Supreme Court within fifteen days from receipt of notice of said Decision
pursuant to Section 12 of Rule 139-B.[4]

On October 5, 2000, we received a Manifestation from the complainant, represented this time by
Corazon M. Bejasa, praying that the IBP Commission on Bar Discipline and Board of Governors be
ordered to make a more thorough determination of whether or not respondent committed the acts of
deceit, malpractice and gross misconduct complained of as grounds for the latters disbarment. We then
resolved to treat this manifestation as an appeal. Disbarment proceedings are matters of public interest,
[5] undertaken for public welfare and for the purpose of preserving courts of justice from the official
ministration of the persons unfit to practice them.[6]

The sole issue raised in this appeal is whether or not respondent should be disbarred on the ground
of deceit, malpractice and gross misconduct. We rule in the negative.

From the record and evidence before us, we agree with the commissioners conclusion that
respondent cannot be found guilty of the charges against him. Apart from the allegations it made in
various pleadings, complainant has not proferred any proof tending to show that respondent really
induced it, through machination or other deceitful means, to issue the December 19 letter of authority
ostensibly for the purpose of evicting illegal occupants, then using the very same letter for demanding
agents compensation. During the scheduled hearing, it did not introduce a single witness to testify
apropos the circumstance under which the letter was dispatched. Those who signed and issued the
letter, Corazon M. Bejasa and Arturo E. Manuel Jr., were never presented before the investigating
commissioner to substantiate its assertion that the letter it gave to the respondent was only for show,
and for a purpose which is limited in scope. Similarly, not even the sworn statements from these or
other vital witnesses were attached to the memorandum or the other pleadings it submitted. It is one
thing to allege deceit, malpractice and gross misconduct, and another to demonstrate by evidence the
specific acts constituting the same.

To be sure, no evidence in respect of the supposed deceit, malpractice or gross misconduct was
adduced by the complainant. It is axiomatic that he who alleges the same has the onus of validating
it. In disbarment proceedings, the burden of proof is upon the complainant and this Court will exercise
its disciplinary power only if the former establishes its case by clear, convincing, and satisfactory
evidence.[7]In this regard, we find that complainant failed to meet the required standard.
In an effort to lend credence to its claim that there was no contractual relation between them,
complainant attempted to establish that the legal services of the respondent was engaged, not by it, but
by the seller of the lot, Isabela Sugar Company. This should presumably settle any doubt that the
December 19 letter was only to be used by respondent for the purpose of supervising the eviction of the
occupants of the property and protecting it from intruders, and nothing more. To support this, it
submitted correspondence coming from people who appear to be responsible officers of ISC (one from
Enrique Montilla III, and another from Julie Abad and Herman Ponce) informing respondent of the
engagement of his services by the ISC. These letters, though, cannot by themselves be accorded strong
probative weight in the face of respondents emphatic assertion that he has never seen any of these
documents.[8] Likewise, they do not indicate that copies thereof were received by him or by any
authorized person in his behalf. It bears stressing that they do not carry his signature, nor the time or
date he took possession of them. It follows that they cannot be used to bind and prejudice the
respondent absent any showing that he had actual and ample knowledge of their contents.

Lastly, complainant seems to belabor under the mistaken assumption that the basis of the
respondent in instituting the civil case against it was the December 19 letter of authority. Well to point
out, the suit was grounded on an oral contract of agency purportedly entered into between him and the
complainant, represented by its duly authorized officers. This is evident from the averments embodied
in the Complaint filed with the Bago City Trial Court, the pertinent portions of which state:
7. The defendant URBAN BANK through its president, defendant TEODORO BORLONGAN, and the
defendants Board of Directors as well as its Senior Vice President CORAZON BEJASA and Vice
President, ANTONIO MANUEL, JR., entered into an agency agreement with the plaintiff, whereby
the latter in behalf of the defendant URBAN BANK, shall hold and maintain possession of the
aforedescribed property, prevent entry of intruders, interlopers and squatters therein and finally turn
over peaceful possession thereof to defendant URBAN BANK; it was further agreed that for the
services rendered as its agent, defendant URBAN BANK shall pay plaintiff a fee in an amount
equivalent to 10 % of the the market value of the property prevailing at the time of payment;
8. The plaintiff accepted the engagement and in a letter dated December 19, 1994, defendant URBAN
BANK through its authorized officials, namely, defendant CORAZON BEJASA and ARTURO E.
MANUEL, JR., Senior Vice President and Vice President respectively, of defendant URBAN
BANK, officially confirmed the engagement of the services of the plaintiff as its Agent-representative
for the following specific purposes; x x x to hold and maintain possession of our abovecaptioned
property and to protect the same from tenants, occupants or any other person who are threatening to
return to the said property and/or to interfere with your possession of the said property for and in our
behalf. You are likewise authorized to represent Urban Bank in any court action that you may institute
to carry out your aforementioned duties, and to prevent any intruder, squatter or any other person not
otherwise authorized in writing by Urban bank from entering or staying in the premises.
A photocopy of the letter dated December 19, 1994 is hereto attached as Annex C and made integral
part hereof.[9] (Emphasis supplied.)

It is clear from the above that what respondent was trying to enforce were the terms and conditions of
the contract. The letter, from the his own admission, just served to officially confirm a done deal. It
was, hence, utilized solely as documentary evidence to buttress respondents assertion regarding the
existence of the agency agreement. In fact, the amount of compensation (to the tune of 10% of the
market value of the property) he was recovering in the action was never mentioned in the letter, but
apparently settled in the course of an oral conversation. Indeed, respondent, with or without the letter,
could have instituted a suit against the complainant. There is no gainsaying that a verbal engagement is
sufficient to create an attorney-client relationship.[10]

In sum, we find that, under the premises, respondent can hardly be faulted and accused of deceit,
malpractice and gross misconduct for invoking the aid of the court in recovering recompense for legal
services which he claims he undertook for the complainant, and which the latter does not deny to have
benefited from. Indeed, what he did was a lawful exercise of a right.

IN VIEW WHEREOF, the disbarment complaint against respondent Atty. Magdaleno M. Pea is
hereby DISMISSED for lack of merit.

SO ORDERED.

[A.C. No. 6210. December 9, 2004]

FEDERICO N. RAMOS, complainant, vs. ATTY. PATRICIO A. NGASEO, respondent.

DECISION

YNARES-SANTIAGO, J.:

This is a complaint for suspension of respondent Atty. Patricio A. Ngaseo for violation of the Code
of Professional Responsibility and Article 1491 of the Civil Code by demanding from his client,
complainant Federico N. Ramos, the delivery of 1,000 square meters of land, a litigated property, as
payment for his appearance fees.

The facts as narrated by the complainant are as follows:

Sometime in 1998, complainant Federico Ramos went to respondent Atty. Patricio Ngaseos Makati
office to engage his services as counsel in a case[1] involving a piece of land in San Carlos,
Pangasinan. Respondent agreed to handle the case for an acceptance fee of P20,000.00, appearance fee
of P1,000.00 per hearing and the cost of meals, transportation and other incidental expenses.
Complainant alleges that he did not promise to pay the respondent 1,000 sq. m. of land as appearance
fees.[2]

On September 16, 1999, complainant went to the respondents office to inquire about the status of
the case. Respondent informed him that the decision was adverse to them because a congressman
exerted pressure upon the trial judge. Respondent however assured him that they could still appeal the
adverse judgment and asked for the additional amount of P3,850.00 and another P2,000.00 on
September 26, 2000 as allowance for research made.[3]
Although an appeal was filed, complainant however charges the respondent of purposely failing to
submit a copy of the summons and copy of the assailed decision. Subsequently, complainant learned
that the respondent filed the notice of appeal 3 days after the lapse of the reglementary period.

On January 29, 2003, complainant received a demand-letter from the respondent asking for the
delivery of the 1,000 sq. m. piece of land which he allegedly promised as payment for respondents
appearance fee. In the same letter, respondent also threatened to file a case in court if the complainant
would not confer with him and settle the matter within 30 days.

Respondent alleged that sometime in the late 1997, a former client, Federico Ramos and his
brother, Dionisio, went to his Makati office to engage his professional services in connection with a 2-
hectare parcel of land situated in San Carlos, Pangasinan which the complainants family lost 7 years
earlier through an execution sale in favor of one Alfredo T. Castro. Complainant, who was deaf and
could only speak conversational Tagalog haltingly, was assisted by his brother Dionisio. They came all
the way from Pangasinan because no lawyer in San Carlos City was willing to handle the case.
Complainant, through Dionisio, avers that he has consulted 2 local lawyers but did not engage their
services because they were demanding exorbitant fees. One local lawyer was willing to handle the case
for at least one-half of the land involved as his attorneys fee, plus cash expenses, while the other asked
for of the land in addition to a large sum of money. Respondent agreed to handle the case for an
acceptance fee of P60,000.00 plus an appearance fee of P3,000.00 per hearing. Complainant told him
that he would consult his siblings on the matter.

Six months later, i.e., in April 1998, complainant, assisted by one Jose Castillo, went to
respondents office to discuss the legal fees. Complainant, through Castillo, told respondent that he was
willing to pay an acceptance fee of P40,000.00, P20,000.00 of which shall be paid upon engagement
and the remaining P20,000.00 to be paid after their treasure hunt operations in Nueva Viscaya were
terminated. Further, complainant offered, in lieu of P3,000.00 per appearance, 1,000 sq. m. of land
from the land subject matter of the case, if they win, or from another piece of property, if they lose. In
addition, complainant also offered to defray the expenses for transportation, meals and other incidental
expenses. Respondent accepted the complainants offer.

Respondent claims that after the trial court dismissed Civil Case No. SCC 2128, he filed a timely
notice of appeal and thereafter moved to be discharged as counsel because he had colon cancer.
Complainant, now assisted by one Johnny Ramos, implored respondent to continue handling the case,
with an offer to double the 1,000 sq. m. piece of land earlier promised and the remaining balance of
P20,000.00 acceptance fee. Johnny Ramos made a written commitment and gave respondents secretary
P2,000.00 of the P3,850.00 expenses for the preparation of the appellants brief.

On July 18, 2001, the Court of Appeals rendered a favorable decision ordering the return of the
disputed 2-hectare land to the complainant and his siblings. The said decision became final and
executory on January 18, 2002. Since then complainant allegedly failed to contact respondent, which
compelled him to send a demand letter on January 29, 2003.

On February 14, 2003, complainant filed a complaint before the IBP charging his former counsel,
respondent Atty. Ngaseo, of violation of the Code of Professional Responsibility for demanding the
delivery of 1,000 sq. m. parcel of land which was the subject of litigation.
In a report dated July 18, 2003, IBP Commissioner Rebecca Villanueva-Maala found the
respondent guilty of grave misconduct and conduct unbecoming of a lawyer in violation of the Code of
Professional Responsibility and recommended that he be suspended from the practice of law for 1 year.
[4]

On August 30, 2003, the IBP Board of Governors passed Resolution No. XVI-2003-47 the full text
of which reads:[5]
RESOLVED to ADOPT and APPROVE, as it is hereby ADOPTED and APPROVED, the Report and
Recommendation of the Investigating Commissioner of the above-entitled case, herein made part of
this Resolution/Decision as Annex A; and, finding the recommendation fully supported by the evidence
on record and the applicable laws and rules, with modification, and considering that respondent have
violated the Code of Professional Responsibility for grave misconduct and conduct unbecoming of a
lawyer Atty. Patricio A. Ngaseo is hereby SUSPENDED from the practice of law for six (6) months.

On December 11, 2003, respondent filed a petition for review assailing IBP Resolution No. XVI-
2003-47 for having been issued without or in excess of jurisdiction.[6]

Respondent argues that he did not violate Article 1491 of the Civil Code because when he
demanded the delivery of the 1,000 sq. m. of land which was offered and promised to him in lieu of the
appearance fees, the case has been terminated, when the appellate court ordered the return of the 2-
hectare parcel of land to the family of the complainant.

Respondent further contends that he can collect the unpaid appearance fee even without a written
contract on the basis of the principle of quantum meruit. He claims that his acceptance and appearance
fees are reasonable because a Makati based legal practitioner, would not handle a case for an
acceptance fee of only P20,000.00 and P1,000.00 per court appearance.

Under Article 1491(5) of the Civil Code, lawyers are prohibited from acquiring either by purchase
or assignment the property or rights involved which are the object of the litigation in which they
intervene by virtue of their profession.[7] The prohibition on purchase is all embracing to include not
only sales to private individuals but also public or judicial sales. The rationale advanced for the
prohibition is that public policy disallows the transactions in view of the fiduciary relationship
involved, i.e., the relation of trust and confidence and the peculiar control exercised by these persons.
[8] It is founded on public policy because, by virtue of his office, an attorney may easily take advantage
of the credulity and ignorance of his client and unduly enrich himself at the expense of his client.
[9] However, the said prohibition applies only if the sale or assignment of the property takes place
during the pendency of the litigation involving the clients property. Consequently, where the property is
acquired after the termination of the case, no violation of paragraph 5, Article 1491 of the Civil Code
attaches.

Invariably, in all cases where Article 1491 was violated, the illegal transaction was consummated
with the actual transfer of the litigated property either by purchase or assignment in favor of the
prohibited individual. In Biascan v. Lopez, respondent was found guilty of serious misconduct and
suspended for 6 months from the practice of law when he registered a deed of assignment in his favor
and caused the transfer of title over the part of the estate despite pendency of Special Proceedings No.
98037 involving the subject property.[10] In the consolidated administrative cases of Valencia v.
Cabanting,[11] the Court suspended respondent Atty. Arsenio Fer Cabanting for six (6) months from
the practice of law when he purchased his client's property which was still the subject of a
pending certiorari proceeding.

In the instant case, there was no actual acquisition of the property in litigation since the respondent
only made a written demand for its delivery which the complainant refused to comply. Mere demand
for delivery of the litigated property does not cause the transfer of ownership, hence, not a prohibited
transaction within the contemplation of Article 1491. Even assuming arguendo that such demand for
delivery is unethical, respondents act does not fall within the purview of Article 1491. The letter of
demand dated January 29, 2003 was made long after the judgment in Civil Case No. SCC-2128 became
final and executory on January 18, 2002.

We note that the report of the IBP Commissioner, as adopted by the IBP Board of Governors in its
Resolution No. XVI-2003-47, does not clearly specify which acts of the respondent constitute gross
misconduct or what provisions of the Code of Professional Responsibility have been violated. We find
the recommended penalty of suspension for 6 months too harsh and not proportionate to the offense
committed by the respondent. The power to disbar or suspend must be exercised with great caution.
Only in a clear case of misconduct that seriously affects the standing and character of the lawyer as an
officer of the Court and member of the bar will disbarment or suspension be imposed as a penalty.
[12] All considered, a reprimand is deemed sufficient and reasonable.

WHEREFORE, in view of the foregoing, respondent Atty. Patricio A. Ngaseo is found guilty of
conduct unbecoming a member of the legal profession in violation of Rule 20.04 of Canon 20 of the
Code of Professional Responsibility. He is REPRIMANDED with a warning that repetition of the
same act will be dealt with more severely.

SO ORDERED.