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Case Digests (Cases 24-30)

PALE- Atty. Laja-Otto 5:30pm-8:30pm


CASE No. 24
Aro vs. Nañawa
The services of herein petitioner Atty. Aro, as practising attorney, was engaged by respondents Luis
Magtibay and Pablo Magtibay for the prosecution of their claim, as heirs, in the estate of their deceased
uncle Lucio Magtibay, consisting of properties which were in the possession of the respondents Aurelia

Respondents Luis Magtibay and Pablo Magtibay agreed with Atty. Aro to prosecute their claim on a
contingent basis and to litigate as paupers.

There was a conversation which took place between Atty. Aro and the attorney of the defendants, Atty.
Rustico de los Reyes, Jr for the amicable settlement of the case between the Magtibays and the defendants
to the effect that a certain property of the spouses Lucio Magtibay (deceased) and respondent Aurelia
Martinez, worth P3,000.00, would be given to the plaintiffs

It having been agreed that for the purpose of said amicable settlement, the Magtibays or one of them and
Atty. Aro would go to Sta. Maria, Laguna, on October 23, 1964.

Atty. Aro had waited for said Magtibays to go to his office but the Magtibays failed to meet with Atty.

On October 28, 1964 and to his surprise he received on the said day a motion to dismiss dated October
26, 1964, it having been made to appear in a document Annexed to the motion to dismiss, ,that the
Magtibays and defendant Aurelia Martinez had made an extrajudicial partition of the properties of the
deceased Lucio Magtibay but making it appear that they waived their share in favor of Aurelia Martinez,
x x x, thru which fraudulent waiver, Atty. Aro was deprived of his contingent fees, agreed upon


The respondent Judge dismissed the case and refused to give herein petitioner any kind of immediate
protection to safeguard his rights on the basis of the compromise agreement of the parties and the
respondent Judge had opined in open court that the claim for and the fixing of the attorney’s fees should
better be done in a separate action.


Case Digests (Cases 24-30)
PALE- Atty. Laja-Otto 5:30pm-8:30
The orders of the respondent court are hereby set aside in so far as they prejudice the payment of
petitioner’s claim of attorney’s fees.

While the Supreme Court in the case at bar reaffirm the rule that “the client has an undoubted right to
compromise a suit without the intervention of his lawyer”, it held that when such compromise is entered
into in fraud of the lawyer, with intent to deprive him of the fees justly due him, the compromise must be
subject to the said fees, and the better practice is to settle the matter of the attorney’s fees in the same
proceeding, after hearing all the affected parties and without prejudice to the finality of the compromise
in so far as it does not adversely affect the rights of the lawyer,

Further, a client may, at anytime, dismiss his attorney or substitute another in his place”, (Sec. 26, Rule
138) but it must be emphasized that the same provision, which is an incorporation of Republic Act 636
into the Rules of Court, also provides that “if the contract between client and attorney had been reduced
to writing and the dismissal of the attorney was without justifiable cause, he shall be entitled to recover
from the client full compensation.

In the case at bar, by entering into the compromise agreement in question and even inserting therein a
prayer to the court to dismiss their case filed by petitioner, petitioner’s clients impliedly dismissed him.
Such implied dismissal appears to have been made without justifiable cause, none is urged anywhere in
the record, and so, he shall be entitled to recover from the client full compensation.

Through the services of petitioner, his clients secured, in effect, a recognition that they were -entitled to
a 1/4 share in the estate left by their uncle. The Supreme Court held that under these circumstances, and
that their aunt-in-Iaw was aware’ of the terms of their contract of professional services with petitioner,
said clients had no right to waive the portion of their rights in favor of their opponent to the extent that
such waiver would prejudice the stipulated contingent interest of their lawyer and their aunt-in-law had
no right to accept such. waiver unqualifiedly.

CASE No. 25
On 1978, napocor board, upon its power to fix compensation, allowance and benefits of napocor
employees passed a resolution approving the grant of monthly welfare allowance, equivalent to 10% of
an emplooyees basic pay to all napocor employees and fixing their contribution to the welfare fund.

Two decades passed, the congress enacted r.a. 9136 known as electric power industry reform act (epira)
directing the restructuring of the power industry and reorganization of napocor. Thus its board dissolved
napocor welfare fund department and issued a memorandum releasing 184million to be distributed to the
napocor welfare fund members who resigned, retired and separated upon the effectivity of epira law. Said
fund was to be released 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. Demand of equal shares was initiated but in vain, thus a case was filed against the
napocor, its board by the non-epira separated members as represented by Atty. Victoriano v. Orocio.

The case was ended in a compromise agreement entered by the parties entitling the complainants non
epira members to “earning differentials” of the npc welfare fund and among others is a portion that 15%
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Case Digests (Cases 24-30)
PALE- Atty. Laja-Otto 5:30pm-8:30
attorney’s fees shall be deducted from the said earning differential of those non-epira members who have
already executed an spa for the deduction/ payment of attorney’s fees amounting almost 18 million.

Atty. Orocio filed a motion of approval of attorney’s lien to the rtc and was granted but such was contested
by the respondents by denying that there was a stipulation in the compromise agreement as to Atty.
Orocio’s lien. Rtc sided with the Atty. Orocio and upon appeal, the ca reversed the rtc ruling and approved
the writ of preliminary injuction enjoining the implementation of the order of rtc and determined that
Atty. Orocio is entitled only to an amount of 1million on the basis of quantum meruit.

Whether or not the stipulation as to attorney’s lien in the compromise agreement cannot be subject of
alteration by the court and thus final and executory.

No, the attorney’s fee is subject to the supervision of the court.
The court held that attorney’s fee, in its ordinary concept, refers to the reasonable compensation paid to
a lawyer for the legal services he has rendred to a client. The client and his lawyer may enter into a written
contract whereby the latter would be paid attorney’s fees only if the suit or litigation ends favorably to
the client. This is called a contingency fee contract.

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.

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.

A stipulation on a lawyer’s compensation in a written contract for professional services ordinarily controls
the amount of fees that the contracting lawyer may be allowed, unless the court finds such stipulated
amount to be unreasonable or unconscionable. If the stipulated amount for attorney’s fees is excessive,
the contract may be disregarded even if the client expressed their conformity thereto. Attorney’s fees are
unconscionable if they affront one’s sense of justice, decency or reasonableness, or if they are so
disproportionate to the value of the services rendered. In such a case, courts are empowered to reduce the
attorney’s fee or fix a reasonable amount thereof taking into consideration the surrounding circumstances
and the established parameters.

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.

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Case Digests (Cases 24-30)
PALE- Atty. Laja-Otto 5:30pm-8:30
By reason of petitioner’s dedication and persistence as can be gleaned above, respondents finally agreed
to settle amicably with the non-epira separated members as regards the latter’s claim for shares in the
napocor welfare fund by virtue of the compromise agreement.

Undoubtedly, were it not for petitioner’s 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, petitioner’s attorney’s 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

Citing previous jurisprudence, the court rendered a decision based on the circumstances of the non epira
members. They were 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 client’s cause and a trustee of his client’s 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 lawyer’s compensation for professional services rendered
is subject to the supervision of the court, not just to guarantee that the fees he charges and receives remain
reasonable and commensurate with the services rendered, but also to maintain the dignity and integrity of
the legal profession to which he belongs. Upon taking his attorney’s oath as an officer of the court, a
lawyer submits himself to the authority of the courts to regulate his right to charge professional fees.

The court then reduced the lien from 18 million to 12 million.

CASE No. 26
Rilloraza vs. Eastern Telecomm

On August 28, 1987, Eastern Telecommunications Philippines, Inc. (ETPI) represented by the law firm
San Juan, Africa, Gonzales and San Agustin (SAGA), filed with the Regional Trial Court, Makati, a
complaint for recovery of revenue shares against Philippine Long Distance Telephone Company (PLDT).
Atty. Francisco D. Rilloraza, a partner of the firm appeared for ETPI.
After ETPI rested its case, it paid SAGA the billed amount of One Hundred Thousand Pesos
(P100,000.00). On September 18, 1987, the trial court issued a resolution granting ETPI's application for
preliminary restrictive and mandatory injunctions. During this period, SAGA was dissolved and four of
the junior partners formed the law firm Rilloraza, Africa, De Ocampo & Africa (RADA), which took over
as counsel in the case for ETPI. The latter signed a retainer agreement with counsel dated October 1, 1987
which provides that “should recourse to judicial action be necessary to effect collection or judicial action
be taken by adverse party, our attorney's fees shall be fifteen percent (15%) of the amounts collected or
the value of the property acquired or liability saved.”
On June 28, 1988, petitioner received a letter from ETPI signed by E. M. Villanueva, President and Chief
Executive Officer which states that ETPI was terminating the retainer contract dated October 1, 1987,

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Case Digests (Cases 24-30)
PALE- Atty. Laja-Otto 5:30pm-8:30
effective June 30, 1988. The next day, RADA filed a notice of attorney’s lien. In its notice, RADA
informed the court that there were negotiations towards a compromise between ETPI and PLDT.
In April 1990, petitioner confirmed that the parties arrived at an amicable settlement and that the same
was entered as a judgment. On April 26, 1990, petitioner filed a motion for the enforcement of attorney's
lien with the Regional Trial Court of Makati and then appraised the Supreme Court thereof by

Whether RADA is entitled to recover attorney's fees.

Yes. We, however, are not convinced with the petitioner's arguments that the services RADA rendered
merit the amount they are claiming.
"In any case, whether there is an agreement or not, the courts shall fix a reasonable compensation which
lawyers may receive for their professional services." "A lawyer has the right to be paid for the legal
services he has extended to his client, which compensation must be reasonable." A lawyer would be
entitled to receive what he merits for his services. Otherwise stated, the amount must be determined on a
quantum meruit basis.

CASE No. 27
Tan Tek Beng vs. Timoteo A. David

This is an administrative case filed in the Supreme Court wherein Tan Tek Beng (non-lawyer) had an
agreement with Timoteo David (lawyer) as documented by a letter made by David with terms and
condition that reads:

1. All commission or attorney’s fees from the clients supplied by Tan will be divided 50-50 between them
2. David will not deal directly with their clients without Tan’s consent
3. Tan will be collecting and keeping the said fees/advances
4. Other clients who are related to Tan and are contacted through him will be his clients

This agreement was agreed by the parties but their business relationship did not last due to accusations
and double-cross. Because of the alleged breach of agreement Tan accused David to Pres. Asst. Zamora,
Office of Civil Relations and to Supreme Court, This case was sent to Solicitor General for investigation,
report and recommendation.

Whether or not a disciplinary action may be taken against David?

David is reprimanded for being guilty of malpractice.

Where in the agreement lawyer David not only agreed to give one-half of his professional fees to an
intermediary or commission agent but he also bound himself not to deal directly with the clients, the Court
held that the said agreement is void because it was tantamount to malpractice which is "the practice of
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Case Digests (Cases 24-30)
PALE- Atty. Laja-Otto 5:30pm-8:30
soliciting cases at law for the purpose of gain, either personally or through paid agents or brokers" (Sec.
27, Rule 138, Rules of Court).

Also, Section 27 gives a special and technical meaning to the term "malpractice". That meaning is in
consonance with the elementary notion that the practice of law is a profession, not a business. "The lawyer
may not seek or obtain employment by himself or through others for to do so would be unprofessional"

CASE No. 28
De Guzman vs. Visayan Rapid Transit

The legal services of Atty. De Guzman were engaged by Nicolas Concepcion, the President of the
automobile lines of Visayan Rapid Transit and Negros Transportation Co. His services were to obtain
refund from the Secretary of Public Work and Communications the amount being paid by the transport
lines as its toll. Thereafter, it through petitioner that also lobbied for the fifty percent reduction of the tolls
with the Secretary. Through the efforts of De Guzman, the transport lines were refunded P50,000 and
some tolls were reduced as well benefiting them to a total amount of P78,448. Petitioner now claims for
the reasonable compensation to which he is entitled. The respondents contend that the services of De
Guzmanwere unsolicited and unauthorized.

Whether Atty. De Guzman is entitled to compensation for his services?

YES, the Court ruled that a lawyer shall be entitled to have and recover from his client no more than a
reasonable compensation for the services rendered, with a view to the importance of the subject matter of
the controversy, to the extent of the services rendered, and the professional standing of the lawyer.
Furthermore, The following are the circumstances to be considered in determining the compensation of
an attorney: the amount and character of the services rendered; the labor, time, and trouble involved; the
nature and importance of the litigation or business in which the services were rendered; the responsibility
imposed; the amount of money or the value of the property affected by the controversy, or involved in
the employment, the skill and experience called for in the performance of the services; the professional
character and social standing of the attorney; the results secured; and whether or not the fee is absolute or
contingent. The services of the petitioner in this case were not limited to the preparation and filing with
the authorities concerned of the petitions and other papers submitted in evidence, for he appears to have
had various conferences with the Secretary of Public Works and Communications, the Secretary of the
Interior, the Secretary of Labor and the Insular Auditor, and had otherwise taken steps to secure the
objectives of his clients. The importance, merits and value of professional services of a lawyer are
measured not alone by his work taken separately, but by his work taken as a whole. There are services
which, when taken separately, may not in themselves have any noticeable special merit, but when
considered in connection with the other works and services of the lawyer to which they are related, acquire
an unquestionable value.

Supreme Court Ruling:

The judgment of the Court of Appeals is accordingly modified, without pronouncement regarding costs.
So ordered.

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Case Digests (Cases 24-30)
PALE- Atty. Laja-Otto 5:30pm-8:30

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