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8/19/2016

G.R.No.L24163

TodayisFriday,August19,2016

RepublicofthePhilippines
SUPREMECOURT
Manila
ENBANC
G.R.No.L24163April28,1969
REGINOB.ARO,petitioner,
vs.
THEHON.ARSENIONAAWA,PresidingJudgeofBranchIV,CourtofFirstInstanceofLaguna,LUIS
MAGTIBAY,PABLOMAGTIBAY,AURELLOMARTINEZ,GREGORIOLONTOK,MARIAMENDOZA,MAXIMO
PORTOandROSARlOANDAYA,respondents.
ReginoB.Aroinhisownbehalfaspetitioner.
EnriqueC.Villanuevaforrespondents.
BARREDO,J.:
Originalpetition:(1)forcertioraritoannultheorderoftheCourtofFirstInstanceofLaguna,datedNovember21,
1964,dismissingitsCivilCaseNo.SC525"withoutprejudicetotherightofAtty.ReginoB.Aro(petitionerherein)
tofileaseparateactionagainstboththeplaintiffsanddefendants(privaterespondentsherein)withrespecttohis
alleged attorney's fees", as well as its order dated January 9, 1965, denying petitioner's motion for
reconsiderationthereofforlackofmeritand(2)formandamustocompelrespondentJudgetotakecognizanceof
petitioner's opposition and countermotion or petition dated November 3, 1964 and to resolve the same on the
merits.
Thereappearstobenodisputeastothefollowingfactsallegedinthepetition:
2.Thattheservicesofhereinpetitioner,aspractisingattorney,wasengagedbyrespondentsLuisMagtibay
andPabloMagtibayfortheprosecutionoftheirclaim,asheirs,intheestateoftheirdeceaseduncleLucio
Magtibay, consisting of properties which were in the possession of the respondents Aurelia
Martinez,1spousesGregorioLontokandMariaMendozaandspousesMaximoPortoandRosarioAndaya.
3. That being without means to prosecute their claim against the persons concerned, respondents Luis
Magtibay and Pablo Magtibay agreed with herein petitioner to avail of his services and entrust the
prosecution of their claim on a contingent basis as shown in the agreement, copy of which is hereto
attachedasAnnex'A'andismadeanintegralparthereof.2
4.Thatbyvirtueofsaidagreement,hereinpetitionertookthenecessarystepstogathertheneededpapers
anddocumentsforthefilingofapetitiontolitigateaspauperandacomplaintintheCourtofFirstInstance
of Laguna, in which respondents Luis Magtibay and Pablo Magtibay were the plaintiffs and the other
respondents,exceptingtherespondentJudge,werethedefendants,....
5.ThatsaidpetitiontolitigateaspauperfiledbyhereinpetitionerforrespondentsLuisMagtibayandPablo
MagtibaywasgrantedbytherespondentJudgeaspertheorderdatedSeptember10,1964,.....
6.Thattoplaintiffs'complaintinCivilCaseNo.SC525,thedefendantsinsaidcaseinterposedamotionto
dismissdatedSeptember29,1964....3
7.Thattothesaidmotiontodismisshereinpetitioner,asattorneyfortheplaintiffs(nowrespondentsLuis
MagtibayandPabloMagtibay)filedanoppositiondatedOctober5,1964.....4
8.Thatafterthehearingofthemotiontodismissfiledbythedefendantsandtheoppositiontheretobythe
plaintiffs,whichfinallytookplaceonOctober24,1964,therespondentJudgeissueditsresolutionororder
datedOctober24,1964,denyingthemotiontodismiss,....5
9.Thatontheverydayofandafterthehearingofthemotiontodismiss,oronOctober24,1964,before
receiptofacopyofthesaidorder(Annex'G'),therewasaconversationwhichtookplacebetweenherein
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petitionerandtheattorneyofthedefendants,Atty.RusticodelosReyes,Jr.,inthecivilcaseandonewho
wasthenactingasasortofspokesmanforthedefendants(ExMayorCordovaofSta.Maria,Laguna)for
the amicable settlement of the case between the plaintiffs 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 in full settlement of their claim, as share in the properties left by their
deceaseduncleLucioMagtibay,ithavingbeenagreedbyhereinpetitionerandAtty.delosReyesandthe
spokesmanofthedefendantsthatforthepurposeofsaidamicablesettlement,theplaintiffsoroneofthem
andhereinpetitionerwouldgotoSta.Maria,Laguna,onOctober23,1964.
10.Thathavinggivennoticetotheplaintiffs(nowrespondentsLuisMagtibayandPabloMagtibay)attheir
givenaddressinCalauag,QuezontocometoCandelariaforthepurposeofgoingtoSta.Maria,Lagunaon
October23,1964,petitionerhadwaitedforsaidplaintiffstogotohisofficeonorbeforesaiddateforthe
engagementmentioned,butduetotheir(plaintiffs')failuretocometoCandelaria,petitionerhadtosenda
telegramtoExMayorCordovanotifyinghimofhis(petitioner's)andplaintiffs'notbeingabletogotoSta.
MariabecauseofthefailureofanyoftheplaintiffstocometoCandelria,....
11. That it was only on October 28, 1964, when herein petitioner received a copy of the order dated
October 24, 1964 (Annex "G") and to his surprise he also received on the said day a second motion to
dismissdatedOctober26,1964togetherwithAnnex"A"ofsaidmotion,whichisentitledKASULATANNG
PAGHAHATIANNALABASSAHUKUMANATPAGPAPALABI,datedOctober23,1964atSta.Cruz,Laguna
andsignedbytheplaintiffsanddefendantAureliaMartinez(thethreebeingnowrespondentsinthiscase),
ithavingbeenmadetoappearinsaidAnnex"A"ofthesecondmotiontodismiss,amongothers,thatthe
plaintiffs and defendant Aurelia Martinez had made an extrajudicial partition of the properties of the
deceasedLucioMagtibayandthesaidAureliaMartinezadjudicatingtotheplaintiffsonefourth()sharein
thepropertiesofthespousesandthreefourth(3/4)shareofthedefendantAureliaMartinez,butmakingit

appearalsothatsaidplaintiffswaivedtheirshareinfavorofAureliaMartinez,...,thruwhichfraudulent
waiver,hereinpetitionerwasdeprivedofhiscontingentfees,agreedupon,asevidencedbyAnnex"A"of
thispetition.6
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14. That petitioner filed by registered mail, on November 4, 1964, his "OPPOSITION TO THE SECOND
MOTION TO DISMISS AND COUNTERMOTION OR PETITION TO SET ASIDE DEED OF
EXTRAJUDICIALPARTITIONANDWAIVERDATEDOCTOBER23,1964ANDTORECORDATTORNEY'S
LIEN",datedNovember3,1964,whereinhe(petitioner)prayed,amongothers,invokingtheprovisionsof
Section5(d)andSection6,Rule135oftheRevisedRulesofCourt,fortheprotectionoftherightsofherein
petitionerasanofficeroftheCourt,towit:
(a)todenythesecondmotiontodismissandgetasideandannulthedeedofextrajudicialpartition
andwaiverdatedOctober23,1964
(b) to fix the compensation of herein counsel in the proportion of onethird (1/3) of the shares of

plaintiffs,ifinland,orintheamountofP1,000.00,ifincash,andtorecordthesameandexpenses
advancedbyhimfortheplaintiffsinthesumofP22.15aslieninfavorofhereinclaimantpetitioner
overthepropertiesinlitigation,particularlyovertheonefourth(1/4)shareoftheplaintiffsinallthe
propertiesofthespouses
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(d)asanalternativetoprayer(a)above,tograntthesecondmotiontodismiss,subjecting,however,
thepropertiesinlitigationandsubjectmattersoftheextrajudicialpartitionandwaivertothelienfor
attorney'sfeesandexpensesinfavorofhereinclaimantpetitioner,afterfixingsaidattorney'sfeesas
prayedforin(b)above.
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15.Thatonthedayffinallysetforthehearingofthesecondmotiontodismiss,aswellasofthecounter
motionorpetition,oronNovember21,1964,becauseoftheinquiriesorinterpellationmadebyrespondent
Judge to herein petitioner as to whether there is a Philippine precedent which allows or directs the
protectionbytheCourtoftherightsofanyofitsofficers(lawyer)againstanycollusionperpetratedbythe
partiesinacasetodefraudorcheatanattorneyofhiscompensationagreeduponbyhimandhisclients,
andhisanswerthatinsofarashisresearcheswereconcerned,hecouldnotfindany,althoughtherearea
numberofcasestothateffectinAmericanjurisdiction,therespondentJudgehadopinedinopencourtthat
theclaimforandthefixingoftheattorney'sfeesshouldbetterbedoneinaseparateactionand,inspiteof
petitioner'smemorandumcitingAmericanauthoritiestotheeffectthat,
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Thoughapartymaywithouttheconsentofhisattorneymoneymakeabonafideadjustmentwiththe
adverse party and dismiss an action or suit before a judgment or a decree has been rendered
thereon,ifitappears,however,thatsuchsettlementwascollosiveandconsummatedpursuanttothe
intentofbothpartiestodefraudtheattorney,thecourtinwhichtheactionwaspendingmayinterfere
toprotecthimasoneofitsofficers,bysettingasidetheorderofdismissal,....(Jacksonvs.Stearns,
48Ore.25,84Pac.798).
...therespondentJudge,insteadofdenyingthesecondmotiontodismissandfixinghisattorney'sfeesin
thesaidcaseandrecordingthesameaslien,...dismissedthecaseandrefusedtogivehereinpetitioner
any kind of immediate protection to safeguard his rights ... in said Civil Case No. SC525 of the Court of
FirstInstanceofLaguna.
16.Thatbytheexpresstermsoftheagreement,Annex"A"ofthispetition,plaintiffsinCivilCaseNo.SC
525 had expressly ceded to herein petitioner onehalf () [later verbally reduced to onethird (1/3) or
P1,000.00]orwhateversharetheywouldgetfromtheestateoftheirdeceaseduncleLucioMagtibay,and
the defendants in said Civil Case had full knowledge of said right of herein petitioner in the properties in
controversy from and after the time they were served with summons and copies of the complaint in said
civilcasebecauseoftheallegationscontainedinpar.10thereof.7[EmphasisbytheCourt]
18. That on December 5, 1964, herein petitioner filed his motion for reconsideration dated December 4,
1664askingforthereconsiderationoftheorderdatedNovember21,1964,....
19. That the motion for reconsideration was denied by the court, thru the respondent Judge, as per the
orderdatedJanuary9,1965,....
Uponthesefacts,petitionertriestomakeoutbeforethisCourtacaseofcertiorariforgraveabuseofdiscretion
onthepartofrespondentJudgeindismissingthecaseonthebasisofthecompromiseagreementoftheparties,
entered into at the back of petitioner notwithstanding the reservation made in his favor to file an action against
bothparties"withrespecttohisallegedattorney'sfees",aswellasacaseofmandamus"toorderandcommand
thesaidrespondentjudge"totakecognizanceofandresolvehisoppositionandcountermotionforthecourtto
fix the compensation he should be paid. Unable to find any local precedent to support his position, he cites
Americanauthoritiesthus:
In the American jurisdiction, it would seem that, even without the specific provisions of the rules of court
cited above, courts had always intervened, in the mere exercise of their inherent powers, to protect
attorneys against collusive agreements or fraudulent settlements entered into by the parties in a case to
cheatattorneysoutoftheircostsoroftheirfees.Thus,itwasheldorhadbeenstatedin:
(a)Coughlinvs.N.Y.Cont.&H.R.R.Co.,71N.Y.443,27Am.Rep.75.
... But since the time of Lord Mansfield, it has been the practice of courts to intervene to protect
attorneysagainstsettlementmadetocheatthemoutoftheircosts.Ifanattorneyhascommencedan
action,andhisclientsettlesitwiththeoppositepartybeforejudgment,collusively,todeprivehimof
his costs, the court will permit the attorney to go on with the suit for the purpose of collecting his
costs. Swain v. Senate, 5 Bos. & Pul. 99 Cole v. Bennett, 6 Price, 15 Moore v. Cook, 13 Id. 473
Talcottv.Bronson,4Paige,501Rusquinv.TheKnickerbockerStageCol.,12Abb.Pr324Wardv.
Syme,9How.Pr.16McDonaldv.Napier,14Ga.89.
Therearemanycaseswherethishadbeenallowedtobedone.Itisimpossibletoascertainprecisely
whenthispracticecommenced,norhoworiginated,noruponwhatprincipleitwasbased.Itwasnot
upontheprincipleofalien,becauseanattorneyhasnolienuponthecauseofasitupontheaction
before judgment for his costs nor was it upon principle that his services had produced the money
paidhisclientuponthesettlement,becausethatcouldnotbeknown,andinfactnomoneymayhave
been paid upon the settlement. So far as I can perceive, it was based upon no principle. It was a
mere arbitrary exercise of power by the courts not arbitrary in the sense that it was unjust or
improper, but in the sense that it was not based upon any right or principle recognized in other
cases.Thepartiesbeingincourt,andasuitcommencedandpending,forthepurposeofprotecting
attorneys who were their officers and subject to their control, the courts invented this practice and
assumed this extraordinary power to defeat attempts to cheat the attorneys out of their costs. The
attorney's fees were fixed in definite sums, easily determined by taxation and this power was
exercisedtosecurethemtheirfees.(pp.7677)
(b)Randallv.VanWagenanetal.,22N.E.361,362.

la w p h i1 .n t

...Butwheresuchsettlementismadecollusivelyforthepurposeofdefraudingtheattorneyoutofhis
costs, courts have been accustomed to intervene, and to protect the attorney by permitting him to
proceed with the suit, and, if he is able to establish a right to recover on the cause of action as it
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originallystood,topermitsuchrecoverytotheextentofhiscostsintheaction.Coughlinv.Railroad
Co.,71N.Y.443,andpagescited.Andthecourtwillsetasideanorderofdiscontinuanceifitstands
intheway.Thisisanadequateremedy,andwethinktheexclusiveremedywherethesuithasbeen
fraudulently settled by the parties before judgment to cheat the attorney out of his costs. We have
found no case of an equitable action to enforce the inchoate right of an attorney, under such
circumstances,andnosuchprecedentought,wethink,tobeestablished.
(c)Jacksonv.Stearns,etal.,43Ore25,84Pac.798.
... Though a party may, without the consent of his attorney, make a bona fide adjustment with the
adverse party, and dismiss an action or suit before a judgment or a decree has been rendered
therein,ifitappears,however,thatsuchsettlementwascollusiveandconsummatedpursuanttothe
intentofbothpartiestodefraudtheattorney,thecourtinwhichtheactionorsuitwaspendingmay
interferetoprotecthim,asoneofitsofficers,bysettingasidetheorderofdismissalandpermitting
himtoproceedinthecauseinthenameofhisclienttofinaldeterminationtoascertainwhatsumof
money, or interest in the subjectmatter, if any, is due him for his services when fully performed.
Jones v. Morgage 99 Am. Dec. 458 Randall v. Van Wagenen (N.Y.) 22 N.E. 361, 12 Am. St. Rep.
828.(p.800)
Before a court will set aside an order dismissing a suit or an action, made upon stipulation of the
parties,withouttheconsentofplaintiff'sattorney,andallowthelattertoproceedwiththecauseinthe
name of his client, to determine the amount of fees due him, it must appear that the defendant
participated in the fraudulent intent to deprive the attorney of his compensation. Courtney v.
McGavock, 25 Wis. 619. When no adequate consideration is given by the defendant for the
settlement and discharge of an action or a suit, the insufficiency of the inducement to the contract
affords evidence of his bad faith. Young v. Dearborn, 27 N.E. 324. It will be remembered that the
complaint alleges that the value of the real property in question is $3,000.00, and that Stearns
executedtoWilsonadeedtothepremisesforanominalconsideration.Thisisasufficientaverment
ofthedefendant'sintenttodeprivetheplaintiffofhiscompensationtherebyimputingtoWilsonbad
faith.(p.800)
(d)Desamanv.ButlerBros.,188Minn.198,136N.W.747.
Wehaverecentlyheldthataclienthasalwaystherighttosettlehiscauseofactionandstoplitigation
atanystageoftheproceeding,subject,however,totherightoftheattorneytoreceivecompensation
forservicesrendered.Burhov.Camichael135N.W.386.Itisthereforecontendedbydefendantthat
a litigant retains the unrestricted right to determine for what amount the cause of action may be
settled, and, having so done, the lien of his attorney for services is measured by the amount
determinedonandactuallysettledfor.Conceding,withoutdeciding,thatthismaybetrueofanytime
priortotherenditionofaverdictintheactionwhichtheattorneyhasbeenemployedtobring,weare
of opinion that after verdict fixing the amount of a plaintiff's cause of action a secret and collusive
compromisebetweenpartieslitigantdoesnotaffecttheamountoftheattorney'slien...butthereinis
alsoclearlyindicatedbyMr.JusticeBrownthat,iftherebefraudandcollusiontodeprivetheattorney
ofhislien,thesettlementwillnotbepermittedtoaccomplishsuchresult.(p.748)
To be sure, these authorities are quite persuasive, but contrary to petitioner's impression, there is already a
precedentsettingdecisionofthisCourthandeddownwaybackin1922inacaseverysimilartohis,thatinRustia
vs.theJudgeoftheCourtofFirstInstanceofBatangas,etal.,44Phil.62.Asitisverybrief,itcanbequotedin
full:
Thisisapetitionforawritofcertiorari,thepetitionerallegingthattherespondentJudgeoftheCourtofFirst
Instanceexceededhisjurisdictionindismissingapendingactionattheinstanceofthepartiesbutwithout
theinterventionoftheattorneyfortheplaintiffinthecase,thehereinpetitioner.
ItappearsfromtherecordthatonJuly31,1921,therespondentJustoPorcuna,forhimselfandonbehalf
ofhiswife,therespondentRosaH.dePorcuna,bymeansofawrittencontract,retainedthepetitionerto
represent them as their lawyer in case No. 1435 then pending in the Court of First Instance of Batangas
and in which Rosa H. de Porcuna was the plaintiff and one Eulalia Magsombol was the defendant. The
contractfixedthepetitioner'sfeeatP200inadvancewithanadditionalcontingentfeeofP1,300.Itwasalso
providedinthecontractthatJustoPorcunashouldnotcompromisetheclaimagainstthedefendantinthe
casewithoutexpressconsentofhislawyer,thehereinpetitioner.
Aftertrial,thepetitionerthenbeingplaintiff'sattorneyofrecord,theCourtofFirstInstance,underdateof
December 24, 1921, rendered judgment in favor of Justo Porcuna and Rosa H. de Porcuna ordering the
defendantEulaliaMagsomboltoreturntothem602piecesofclothorindefaultthereoftopaytothemthe
sum of P3,250. On January 14, 1922, Eulalia Magsombol filed her exception to the judgment and on the
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following day presented a motion for a new trial, which was denied on the 21st of the same month. She
thereupongavenoticeofappealandpresentedabillofexceptionswhichwasapprovedonFebruary20,
1922. On March 2, 1922, and before the transmission of the bill of exceptions to this court, the plaintiffs
presentedthefollowingmotionintheCourtofFirstInstance:
The plaintiffs, without any further intervention of their attorney, now appear before this Honorable
Courtandrespectfullyaver:
That,throughMr.MiguelOlgadotheyalreadysettledthiscasewiththehereindefendant.
That the basis of the compromise is that we, the plaintiffs, finally agree that we should be paid the
amountofeighthundredpesos(P800)intwoinstallmentsP300tobepaidonthissamedate,and
theremainingfivehundredpesos(P500)attheendofMarch,1922.
That we, the plaintiffs, recognize not to have any further rights in this case than to the aforesaid
amount of eight hundred pesos (P800) and that this is the total amount the defendant Eulalia
Magsombol should pay us, and we have no right whatever to any other amount than the
aforementioned.
Thatwehavenotsoldtoanyotherpersonourrightsasplaintiffsinthiscase.
Wherefore,theplaintiffsrespectfullyrequestthedismissalofthiscase,withoutanypronouncement
astocosts,andthattheappealinterposedbythedefendantbefurtherdismissed.
Batangas,Batangas,P.I.,March2,1922.

(Sgd)ROSAH.PORCUNA
Plaintiff

JUSTOM.PORCUNA
Plaintiff
The defendant, through her attorney, Jose Mayo Librea, having signified her assent to the motion, the
Court of First Instance on the same day, March 2, dismissed the action without notice to counsel for the
plaintiffs.
The petitioner alleges that he did not discover the dismissal of the action until April 4, 1922. After an
unsuccessful effort to obtain a reconsideration of the order of dismissal from the trial court, he filed the
presentpetitionforawritofcertiorari.ByresolutiondatedOctober24,1922,thiscourtdeniedthepetition
anduponmotionofthepetitionerweshallnowbrieflystateourreasonsforsuchdenial.
Theburdenofthepetitioner'scontentionis(1)thathe,asattorneyofrecord,wasentitledtonoticeofhis
client'smotiontodismissthecase,and(2)thataftertheapprovalofthebillofexceptionsthelowercourt
hadlostjurisdictionofthecaseandhadnopowertodismissit.Amoment'sreflectionshouldmakeitclear
thatneitherofthesepropositionsistenable.
Both at the common law and under section 32 of the Code of Civil Procedure a client may dismiss his
lawyer at any time or at any stage of the proceedings and there is nothing to prevent a litigant from
appearingbeforethecourttoconducthisownlitigation.(Sec.34,CodeofCivilProcedure.)Theclienthas
alsoanundoubtedrighttocompromiseasuitwithouttheinterventionofhislawyer.
Thoughthereisavalidagreementforthepaymenttotheattorneyofalargeproportionofthesum
recoveredincaseofsuccessthisdoesnotgivetheattorneysuchaninterestinthecauseofaction
thatitpreventsplaintifffromcompromisingthesuit.(4Cyc.990,andauthoritiescitedinNote6see
also Louque vs. Dejan 129 La. 519 Price vs. Western Loan & Savings Co., 19 Am. Cas. 589 and
Note.)
In the present instance the clients did nothing that they did not have a perfect right to do. By appearing
personally and presenting a motion they impliedly dismissed their lawyer. The petitioner's contingent
interests in the judgment rendered did not appear of record. Neither as a party in interest nor as and
attorneywashethereforeentitledtonoticeofthemotion.
Astothesecondpropositionthatthecourtbelowcouldnotdismissthecaseafterthebillofexceptionshad
been approved, it is very true that upon such approval the lower court loses its jurisdiction over all
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contentiousmattersconnectedwiththeissuesinthecase.Butthereisnothingtopreventalloftheparties
byagreementtowithdrawthebillofexceptionswiththeconsentofsaidcourtandresubmitthecasetothe
jurisdictionofthecourt.Thatwasallthatwasdoneinthiscase.Avalidagreementbetweenthepartiestoa
case is the law of the case in everything covered by the agreement. (Civil Code, art. 1091 Compania
GeneraldeTabacosvs.Obed,13Phil.391.)Thepetitionermighthaveprotectedhisinterestsbyentering
anattorney'slienundersection37oftheCodeofCivilProcedure.
Thepetitionforawritofcertiorariwasthereforeproperlydenied.Soordered.
ThedifferenceWeperceive,however,betweenpetitioner'scase,ontheonehand,andthatofAtty.Rustia,inthe
abovedecision,ontheother,isthatinthelatter'scase,neitherthecourtnorthepartyadversetohisclientswere
aware of the exact agreement as to his fees, whereas in the case of petitioner, both the court and the other
partiesknewthetermsofthecontractforprofessionalservicesbetweenpetitionerandhisclients,theMagtibay
brothers, because the written contract therefor, Annex A, was made part of the complaint, and none seriously
disputesitsauthenticity.Besides,thecourthadalreadydismissedthecasewhenAtty.Rustiaraisedthequestion
ofhisfeesbeforethecourtinpetitioner'sinstance,heopposedthemotiontodismissandpleadedwiththecourt
toprotecthisrightsasofficerofthecourtbeforethefirstorderinquestionwasissuedbyrespondentjudge.Were
it not for these differences, We would have inclined towards denying the herein petition in line with the Rustia
rulingthat,inanyevent,certiorariisnottheappropriateremedy,theAmericanauthoritiescitedbypetitionernot
withstanding.
Withal,thereisanotherPhilippinecasewhichUstosustainpetitioner.InthecaseofRectovs.Harden,100Phil.
440,Atty.ClaroM.Rectofoundhimselfpracticallyinthesamesituationaspetitionerherein.AfterAtty.Rectohad
renderedservicestoMrs.EsperanzaP.deHardeninaprotractedsuitagainstherhusbandforthepurposesof
securing an increase of her and her daughter's monthly support, (the spouses were separated), to P10,000.00
and of protecting and preserving her rights in the properties of the conjugal partnership, which suit lasted from
1941to1949,andaftertheCourtofFirstInstanceofManilahadrenderedajudgmentfavorabletoMrs.Harden
acknowledging,interalia,herrightstotheassetsoftheconjugalpartnership,whichturnedouttobeP4,000,000,
andawardingheramonthlysupportofP2,500,practicallyasprayedforinAtty.Recto'spleadings,whilethecase
wasalreadypendingonappealbeforethisCourt,Mrs.Hardenandherhusband,Mr.FredHarden,enteredintoa
compromise of their case, without the knowledge of Atty. Recto, whereby said spouses "purportedly agreed to
settletheirdifferencesinconsiderationofthesumofP5,000paidbyMr.HardentoMrs.Harden,andamonthly
pensionof$500tobepaidbyhimtoher(2)Mr.Hardencreatedatrustfundof$20,000fromwhichsaidmonthly
pension of $500 would be taken and (3) Mr. and Mrs. Harden had mutually released and forever discharged
each other from all actions, debts, duties, accounts, demands and claims to the conjugal partnership, in
considerationofthesumof$1."(p.435)
WhereuponAtty.RectofiledamotionwiththisCourtprayingthat:
a) Pending the resolution of this motion, the receiver appointed herein be authorized to continue holding
the properties above mentioned in his custody in order not to defeat the undersigned's inchoate lien on
them
b)Adaysetasidetoreceivetheevidenceoftheundersignedandthoseoftheplaintiffandthedefendant
FredM.Harden,inordertodeterminetheamountoffeesduetotheundersigned,bytheappointmentofa
refereeorcommissionerforthereceptionofsuchevidence
c)Afterduehearing,theundersignedbedeclaredentitledtothesumofP400,000ashisfeesforservices
renderedinbehalfoftheplaintiffinthiscase,underparagraph3ofthecontract,Annex"A"andtothatend
acharginglienthereforebeestablisheduponthepropertiesabovementioned
d)Andthereceiverbeorderedtopaytotheundersignedthefullamountofthefeestowhichthelatteris
foundtobeentitled.
ThismotionwasobjectedtobyMr.Hardenscounsel,whointurn,movedforthedismissalofthecase,towhich
Atty.Rectoobjected.Underthesecircumstances,thisCourtaccededtoAtty.Recto'sprayerthatthecasebenot
dismissed,thatthereceivershipbemaintainedexceptastocertainpropertiesnotmaterialtomentionhere,and
that the case be remanded to the lower court so that his fees may be determined and ordered paid. Upon the
remand of the case to the lower court, a commissioner was appointed to hear the matter of the amount of the
feesinquestion,andafterthecommissionerhadsubmittedareportrecommendingthepaymenttoAtty.Rectoof
the20,70attorney'sfeesstipulatedinthecontractforhisservices,equivalenttoP369,410.04,thecourtrendered
judgmentasfollows:
Thecontingentfeetowhichtheclaimantisentitledunderparagraph3ofthecontract,ExhibitJJJor20,is
20%ofP1,920,554.85orthesumofP384,110.97.

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WHEREFORE,thisCourtherebyapprovestherecommendationoftheCommissionerwiththeabovestated
modification,andfindsthatAttorneyClaroM.RectoisentitledtothesumofTHREEHUNDREDEIGHTY
FOUR THOUSAND ONE HUNDRED AND TEN PESOS AND NINETYSEVEN CENTAVOS (P384,110.97),
representing 20% of Esperanza P. de Harden's share in the conjugal properties owned by her and her
husband, Fred M. Harden, as contingent fee stipulated in paragraph 3 of the Contract of Professional
Services,ExhibitJJJor20,andthesaidEsperanzaP.deHardenisherebyorderedtopaythesaidamount
abovestated.
OnappealfromthisjudgmenttothisCourt,thesamewasaffirmed,thedecisionstatingpertinentlyinpart:
The last objection is based upon principles of equity, but, pursuant thereto, one who seeks equity must
come with clean hands (Bastida et al. vs. Dy Buncio & Co., 93 Phil. 195 30 C.J.S. 475), and appellants
have not done so, for the circumstances surrounding the case show, to our satisfaction, that their
aforementioned agreements, ostensibly for the settlement of the differences between husband and wife,
were made for the purpose of circumventing or defeating the rights of herein appellee, under his above
quoted contract of services with Mrs. Harden. Indeed, having secured a judgment in her favor,
acknowledging her rights to the assets of the conjugal partnership, which turned out to be worth almost
P4,000,000inadditiontolitisexpensaeinthesumofP175,000,itisinconceivablethatMrs.Hardenwould
havewaivedsuchrights,aswellasthebenefitsofallordersandjudgmentsinherfavor,inconsiderationof
thepaltrysumof$5,000allegedlypaidtoherbyMr.Hardenandtheadditionalsumof$20,000tobepaid
by him ininstallments, at the rate of $500 a month. In fact, no explanation has been given for this moat
unusualavowedsettlementbetweenMr.andMrs.Harden.Onecannotevenconsiderthepossibilityofa
reconciliationbetweenthespouses,thesamebeinginconsistentwiththemonetaryconsiderationforsaid
allegedsettlement.Whatismore,therecordsshowthattherelationsbetweensaidspouseswhichwere
bad indeed, not only in July, 1941, when Mrs. Harden engaged the services of the appellee, but, even,
before,forMr.andMrs.Hardenwereseparatedsince1938hadworsenedconsiderablythereafter,as
evidenced by an action for divorce filed by Mr. Harden in New Jersey, in July 1948, upon the ground of
repeatedactsofinfidelityallegedlycommittedbyMrs.Hardenin1940and1941.
Onthesameconsiderationsofequity,andforthebetterprotectionoflawyers,who,trustinginthegoodfaithof
their clients, render professional services on contingent basis, and so that it may not be said that this Court,
sanctionsinanywaythequestionablepracticeofclientsofcompromisingtheircasesatthebackoftheircounsel
withtheconsequencethatthestipulatedcontingentfeesofthelawyerareeitherunreasonablyreducedoreven
completelyrenderedwithoutbasis,asinthiscasewhereintheclientswaivedthewholeoftheirrightsinfavor
of their opponent after the latter had acknowledged, in effect, the correctness of said clients' contention We
have decided to grant the herein petition, in so far as the rights of petitioner have been prejudiced by the
questioned compromise agreement. While We here reaffirm the rule that "the client has an undoubted right to
compromiseasuitwithouttheinterventionofhislawyer",8Weholdthatwhensuchcompromiseisenteredintoin
fraudofthelawyer,withintenttodeprivehimofthefeesjustlyduehim,thecompromisemustbesubjecttothe
saidfees,andthatwhenitisevidentthatthesaidfraudiscommittedinconfabulationwiththeadversepartywho
hadknowledgeofthelawyer'scontingentinterestorsuchinterestappearsofrecordandwhowouldbenefitunder
suchcompromise,thebetterpracticeistosettlethematteroftheattorney'sfeesinthesameproceeding,after
hearing all the affected parties and without prejudice to the finality of the compromise in so far as it does not
adverselyaffecttherightsofthelawyer.Surely,"theclientcannot,bysetting,compromisingordismissinghissuit
duringitspendency,deprivetheattorneyofhiscompensationfortheagreedamount,unlessthelawyerconsents
tosuchsettlement,compromiseordismissal",(LegalandJudicialEthicsbyMartin,1967Rev.Edp.121)forthe,
attorneyisor"Shallbeentitledtohaveandrecoverfromhisclientareasonablecompensation(notmore)forhis
services, with a view to the importance of the subjectmatter of the controversy, the extent of the services
rendered,andtheprofessionalstandingoftheattorney",(Sec.24,Rule138,onAttorneyandAdmissiontoBar)
albeit, under Canon 12 of the Canons of Professional Ethics, "in fixing fees, it should not be forgotten that the
professionisabranchoftheadministrationofjusticeandnotameremoneygettingtrade."
Trueitisalsothat"aclientmay,atanytime,dismisshisattorneyorsubstituteanotherinhisplace",(Sec.26,Rule
138) but it must be emphasized that the same provision, which is an incorporation of Republic Act 636 into the
RulesofCourt,alsoprovidesthat"ifthecontractbetweenclientandattorneyhadbeenreducedtowritingandthe
dismissal of the attorney was without justifiable cause, he shall be entitled to recover from the client full
compensation..."Inthecaseatbar,byenteringintothecompromiseagreementinquestionandeveninserting
therein a prayer to the court to dismiss their case filed by petitioner, (see footnote 6, ante) petitioner's clients
impliedlydismissedhim.(Rustiavs.theCourt,etc.,supra.) Such implied dismissal appears to Us to have been
made without justifiable cause, none is urged anywhere in the record, and so, the abovequoted provision of
Section26,Rule138applieshere.Thetermsofthecompromiseinquestion,asspelledoutinAnnexAofAnnexI
of the petition, indicate clearly that Aurelia Martinez, the defendant aunt inlaw of petitioner's clients,
acknowledgedthattherightsofsaidclientswerepracticallyasallegedbypetitionerinthecomplainthefiledfor
them. In other words, through the services of petitioner, his clients secured, in effect, a recognition, which had
beenpreviouslydeniedbytheirauntinlaw,thattheywereentitledtoashareintheestateleftbytheiruncle.
We hold that under these circumstances, and since it appears that said clients have no other means to pay
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petitioner,sincetheyinstitutedtheircaseaspaupers,andthattheirauntinlawwasawareofthetermsoftheir
contract of professional services with petitioner', said clients had no right to waive the portion of their such
acknowledged rights in favor of their opponent to the extent that such waiver would prejudice the stipulated
contingentinterestoftheirlawyerandtheirauntinlawhadnorighttoacceptsuchwaiverunqualified.TheCivil
Codeenjoinsthat:
ART. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with
justice,giveeveryonehisdue,andobservehonestyandgoodfaith.
Underthecircumstanceextantintherecord,itisclearthatthecompromiseagreementinquestionfallsshortof
themoralrequirementsofthisquotedarticleoftheCivilCode.Ifforthisreasonalone,itshouldnotbeallowedto
prejudicetherightsofpetitioner.Accordingly,asallofthesecircumstanceswerepresentedtorespondentjudge
beforeheissuedthechallengedorderofdismissalandallthepartieswereheardthereon,itwasincumbentupon
HisHonor,inequityandtoavoidmultiplicityofsuits,particularly,becausetheamountclaimedbypetitionerisonly
P1,000.00,tohavedirectlypasseduponpetitioner'sclaim,andnothavingdoneso,itwouldappearthatthecourt
a quo abused its discretion gravely enough to warrant the writ of certiorari herein prayed for in so far as the
questionedordersprejudicedpetitioner'srighttothefeesfortheprofessionalserviceswhichappeartohavebeen
creditably rendered by him. Respondents allege that the judgment of dismissal in question is already final
because no appeal was taken therefrom, but since We hold that the same was rendered with enough grave
abuse of discretion to warrant the certiorari prayed for, such alleged finality could not have materialized
obviously,petitionercouldnothaveappealed,notbeingapartyinthecase.
IN VIEW OF THE FOREGOING, the orders of the respondent court dated November 21, 1964 and January 9,
1965inCivilCaseNo.SC525areherebysetasideinsofarastheyprejudicethepaymentofpetitioner'sclaimof
attorney's fees in the form of either onethird of the share acknowledged as his clients in the compromise in
questionorP1,000.00,whichshouldconstituteasalienonthesaidshare,inspiteofthewaiverthereofinfavorof
respondent Aurelia Martinez. It is unnecessary to consider the petition for mandamus. Costs against, private
respondents.
Reyes,J.B.L.,Dizon,:Makalintal,Zaldivar,Sanchez,FernandoandTeehankee,JJ.,concur.
Concepcion,C.J.andCastro,J.,areonleave.
Capistrano,J.,tooknopart.
Footnotes
1WidowofthedeceasedLucioMagtibayandauntinlawofpetitioner'sclients.
2Annex A is the written agreement dated July 10, 1964 by which respondent Luis and Pablo Magtibay

contractedtheservicesofpetitionerandunderwhichitwasstipulatedthatpetitionerwouldbeentitledtoa
contingent fee of onehalf of whatever his clients might be awarded either by the court or by extrajudicial
agreement.
3The motion to dismiss was based on the ground that the complaint failed to alleged that earnest efforts

towards compromise had been made, the suit being one between members of the same family, citing
Section1(j)ofRule16.
4Petitioner claimed that the suit was by nephewsinlaw against their auntinlaw and, therefore, not

betweenmembersofthesamefamilywithinthecontemplationoftherulecitedbymovants.
5Petitioner'scontentionindicatedinfootnote4wasupheldbythecourt.
6Paragraph8oftheKasulatancontainsarequesttothecourttodismissthecaseinthefollowingwords:"8.

Matapos maipaliwanag sa amin ang lahat, ay wala na kaming hangad na maghabol pa sa aming mana
kaya't hinihiling namin sa Hukuman ng Unang Dulugan ng Laguna, Sangay IV (Court of First Instance of
Laguna, Branch IV), na putulin na ang aming sakdal na kaso Civil Blg. 525, sapagkat ang nais namin ay
katahimikanatiwasanangusapinsahukuman."
7ThecontractAnnexA,forprofessionalservices,wasalsoannexedtothecomplaintaspartofParagraph

10thereof.
8LaiddowninRustiavs.theCourt,etc.,etal.,supra.

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