Attorney’s fees and compensation for legal services

CANON 20 – A lawyer shall charge only fair and reasonable fees.

Rules of Court, Rule 138, Sec. 24. Compensation of attorneys. 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 therefore unless found by the court to be unconscionable or unreasonable
Rule 20.01 – A lawyer shall be guided by the following factors in determining his fees:
a) The time spent and the extent of the 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 services;

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.

Kinds of Payment which may be stipulated upon:

1. A fixed or absolute fee which is payable regardless of the result of the case.

2. A contingent fee that is conditioned to the securing of a favorable judgment and recovery of
money or property and the amount of which may be on a percentage basis.

3. A fixed fee payable per appearance.

4. A fixed fee computed by the number of hours spent.

 Attorney’s Fees

1. Ordinary attorney’s fee -the reasonable compensation paid to a lawyer by his client for the legal
services he has rendered to the latter. The basis for this compensation is the fact of his employment
by and his agreement with the client.

2. Extraordinary attorney’s fee – an indemnity for damages ordered by the court to be paid by the
losing party in litigation. The basis for this is any of the cases provided for by law where such award
can be made, such as those authorized in Article 2208 of the Civil Code, and is payable NOT to the
lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as
additional compensation or as part thereof.

Kinds of Retainer Agreements on Attorney’s fees:

1. General Retainer or Retaining Fee – it is the fee paid to a lawyer to secure his future services as
general counsel for any ordinary legal problem that may arise in the ordinary business of the client
and referred to him for legal action;

2. Special Retainer – that is a fee for a specific case or service rendered by the lawyer for a client

Quantum Meruit –it means “as much as he deserves”, and is used as the basis for determining the
lawyer’s professional fees in the absence of a contract, but recoverable by him from his client.
Quantum Meruit is resorted to where:
1. there is no express contract for payment of attorney’s fees agreed upon between the lawyer and
the client;
2. When although there is a formal contract for attorney’s fees, the stipulated fees are found
unconscionable or unreasonable by the court.

3. When the contract for attorney’s fees is void due to purely formal matters or defects of execution

4. When the counsel, for justifiable cause, was not able to finish the case to its conclusion.

5. When lawyer and client disregard the contract for attorney’s fees.

 Skill: length of practice is not a safe criterion of professional ability

Guides in Determining Attorney’s Fees in Quantum Meruit Basis. –

(1) Time spent and Extent of the Services Rendered – A lawyer is justified in fixing higher fees
when the case is so complicated and requires more time and efforts to finish it.
(2) Importance of Subject Matter – The more important the subject matter or the bigger value of
the interest or property in litigation, the higher is the attorney’s fee.
(3) Novelty and Difficulty of Questions Involved – When the questions in a case are novel and
difficult, greater efforts, deeper study and research, are bound to burn the lawyer’s time and stamina
considering that there are no local precedents to rely upon.
(4) Skill demanded of the Lawyer – The totality of the lawyer’s experience provides him the skill
and competence admired in lawyers.
Champertous Contract
One where the lawyer stipulates with his client the prosecution of the case that he will bear all the
expenses for the recovery of things or property being claimed, and the latter pays only upon
successful litigation. Void for being against public policy.
When are attorney’s fees considered as unconscionable?
1. An amount compared to the value of the services is so disproportionate as to shock human
conscience.
2. One in which no man in his right senses, not under delusion, would make on one hand, and which
no fair and honest man would accept on the other.
Rule 20.02. A lawyer shall, in case of referral, with the consent of the client, be entitled to a division
of fees in proportion to the work performed and responsibility assumed.
Rule 20.03. A lawyer shall not, without the full knowledge and consent of the client, accept any fee,
reward, costs, commission, interest, rebate or forwarding allowances or other compensation
whatsoever related to his professional employment from anyone other than the client.
Rule 20.04. A lawyer shall avoid controversies with clients concerning his compensation and shall
resort to judicial action only to prevent imposition, injustice or fraud.
Judicial actions to recover attorney’s fees
(1) File an appropriate motion or petition as an incident in the main action where he rendered legal
services;
(2) File a separate civil action for collection of attorney’s fees. Suits to collect fees should be avoided
and only when the circumstances imperatively require should a lawyer resort to lawsuit to enforce
payment of fees. This is but a logical consequence of the legal profession not primarily being for
economic compensation. [Agpalo]
A.C. No. 9119 March 12, 2018
EUGENIO E. CORTEZ, Complainant vs. ATTY. HERNANDO P. CORTES, Respondent
FACTS:
Eugenio E. Cortez engaged the services of Atty. Cortes as his counsel in an illegal dismissal case
against Philippine Explosives Corporation (PEC). He further alleged that he and Atty. Cortes had a
handshake agreement on a 12% contingency fee as and by way of attorney’s fees. The case was
decided in favor of the complainant. PEC was ordered to pay complainant the total amount of One
Million One Hundred Thousand Pesos (₱1,100,000.00) in three staggered payments. PEC then
issued checks all payable in the name of complainant, as payment. Atty. Cortes however, claimed
that 50% of the total awarded claims belong to him as attorney’s fees. Complainant then offered to
pay ₱200,000.00 and when Atty. Cortes rejected it, he offered the third check amounting to
₱275,000.00 but Atty. Cortes still insisted on the 50% of the total award. A complaint was filed by
Eugenio against respondent Atty. Cortes for grave misconduct, and violation of the Lawyer’s Oath
and the Code for Professional Responsibility. Atty. Cortes insisted that the alleged 12% agreement
is false. He also pointed out that the fifty-fifty sharing arrangement is not unconscionably high
because the complainant was given the option to hire other lawyers, but still he engaged his services
The IBP Commission on Bar Discipline recommended the six-month suspension of Atty. Cortes.
ISSUE: Whether or not the acts complained of constitute misconduct on the part of Atty. Cortes,
which would subject him to disciplinary action.
RULING:
Yes. The Supreme Court held that a contingent fee arrangement is valid in this jurisdiction. It is
generally recognized as valid and binding, but must be laid down in, an express contract.In this
case, The Court noted that the parties did not have an express contract as regards the payment of
fees. Complainant alleges that the contingency fee was fixed at 12% via a handshake agreement;
while Atty. Cortes counters that the agreement was 50%.
The IBP Commission on Discipline pointed out that since what respondent handled was merely a
labor case, his attorney's fees should not exceed 10%, the rate allowed under Article 111 of the
Labor Code.
There are two concepts of attorney's fees. In the ordinary sense, attorney's fees represent the
reasonable compensation paid to a lawyer by his client for the legal services rendered to the
latter. On the other hand, in its extraordinary concept, attorney's fees may be awarded by the
court as indemnity for damages to be paid by the losing party to the prevailing party, such
that, in any of the cases provided by law where such award can be made, e.g., those authorized in
Article 2208 of the Civil Code, the amount is payable not to the lawyer but to the client, unless they
have agreed that the award shall pertain to the lawyer as additional compensation or as part thereof.
(Masmud v. NLRC First Division, et al.
Article 111 of the Labor Code deals with the extraordinary concept of attorney’s fees. It regulates the
amount recoverable as attorney's fees in the nature of damages sustained by and awarded to the
prevailing party. It may not be used as the standard in fixing the amount payable to the lawyer by his
client for the legal services he rendered.
It would then appear that the contingency fees that Atty. Cortes required is in the ordinary sense as it
represents reasonable compensation for legal services he rendered for complainant. Necessarily,
the 10% limitation of the Labor Code would not be applicable.
The contingent fee here claimed by Atty. Cortes was, under the facts obtaining in this case, grossly
excessive and unconscionable. The issues involved could hardly be said to be novel and Atty.
Cortes in fact already knew that complainant was already hard up. The Court reiterated that
lawyering is not a moneymaking venture and lawyers are not merchants.
Here, considering that complainant was amenable to a 12% contingency fee, and which we likewise
deem to be the reasonable worth of the attorney's services rendered by Atty. Cortes under the
circumstances, Atty. Cortes is hereby adjudged to return to complainant the amount he received in
excess of 12% of the total award.
The suspension of six months is too harsh and considering that Atty. Cortes is nearing ninety years old and
that there was no question that Atty. Cortes was able to get a favorable outcome, a reduction of the
suspension is proper. The sanction was reduced to a three-month suspension from the practice of law.