RULE 138

Attorneys and Admission to Bar

Section 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.

Section 37. Attorneys' liens. — An attorney shall have a lien upon the funds, documents
and papers of his client which have lawfully come into his possession and may retain the
same until his lawful fees and disbursements have been paid, and may apply such funds
to the satisfaction thereof. 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 the
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 the caused written
notice thereof to be delivered to his client and to the adverse paty; 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.
CANON 20

A.C. No. 5359 March 10, 2014

ERMELINDA LAD VOA. DE DOMINGUEZ, represented by her Attorney-in-Fact,

VICENTE A. PICHON,Complainant,
vs.
ATTY. ARNULFO M. AGLERON, SR., Respondent.

RESOLUTION

MENDOZA, J.:

Complainant Ermelinda Lad Vda. De Dominguez (complainant) was the widow of the late
Felipe Domiguez who died in a vehicular accident in Caraga, Davao Oriental, on October
18, 1995, involving a dump truck owned by the Municipality of Caraga. Aggrieved,
complainant decided to file charges against the Municipality of Caraga and engaged the
services of respondent Atty. Arnulfo M. Agleron, Sr. (Atty. Agleron). On three (3)
occasions, Atty. Agleron requested and received from complainant the following amounts
for the payment of filing fees and sheriffs fees, to wit: (1) June 3, 1996 -₱3,000.00; (2)
June 7, 1996 -Pl,800.00; and September 2, 1996 - ₱5,250.00 or a total of ₱10,050.00.
After the lapse of four (4) years, however, no complaint was filed by Atty. Agleron against
the Municipality of Caraga.1

Atty. Agleron admitted that complainant engaged his professional service and received
the amount of ₱10,050.00. He, however, explained that their agreement was that
complainant would pay the filing fees and other incidental expenses and as soon as the
complaint was prepared and ready for filing, complainant would pay 30% of the agreed
attorney’s fees of ₱100,000.00. On June 7, 1996, after the signing of the complaint, he
advised complainant to pay in full the amount of the filing fee and sheriff’s fees and the
30% of the attorney’s fee, but complainant failed to do so. Atty. Agleron averred that
since the complaint could not be filed in court, the amount of ₱10,050.00 was deposited
in a bank while awaiting the payment of the balance of the filing fee and attorney’s fee.2

In reply,3 complainant denied that she did not give the full payment of the filing fee and
asserted that the filing fee at that time amounted only to ₱7,836.60.

In the Report and Recommendation,4 dated January 12, 2012, the Investigating
Commissioner found Atty. Agleron to have violated the Code of Professional Responsibility
when he neglected a legal matter entrusted to him, and recommended that he be
suspended from the practice of law for a period of four (4) months.

In its April 16, 2013 Resolution,5 the Integrated Bar of the Philippines (IBP) Board of
Governors adopted and approved the report and recommendation of the Investigating
Commissioner with modification that Atty. Agleron be suspended from the practice of law
for a period of only one (1) month.
The Court agrees with the recommendation of the IBP Board of Governors except as to
the penalty imposed.

Atty. Agleron violated Rule 18.03 of the Code of Professional Responsibility, which provides
that:

Rule 18.03-A lawyer shall not neglect a legal matter entrusted to him, and his negligence
in connection therewith shall render him liable.

Once a lawyer takes up the cause of his client, he is duty bound to serve his client with
competence, and to attend to his client’s cause with diligence, care and devotion
regardless of whether he accepts it for a fee or for free.6 He owes fidelity to such cause
and must always be mindful of the trust and confidence reposed on him.7

In the present case, Atty. Agleron admitted his failure to file the complaint against the
Municipality of Caraga, Davao Oriental, despite the fact that it was already prepared and
signed. He attributed his non-filing of the appropriate charges on the failure of complainant
to remit the full payment of the filing fee and pay the 30% of the attorney's fee. Such
justification, however, is not a valid excuse that would exonerate him from liability. As
stated, every case that is entrusted to a lawyer deserves his full attention whether he
accepts this for a fee or free. Even assuming that complainant had not remitted the full
payment of the filing fee, he should have found a way to speak to his client and inform
him about the insufficiency of the filing fee so he could file the complaint. Atty. Agleron
obviously lacked professionalism in dealing with complainant and showed incompetence
when he failed to file the appropriate charges.1âwphi1

In a number of cases,8 the Court held that a lawyer should never neglect a legal matter
entrusted to him, otherwise his negligence renders him liable for disciplinary action such
as suspension ranging from three months to two years. In this case, the Court finds the
suspension of Atty. Agleron from the practice of law for a period of three (3) months
sufficient.

WHEREFORE, the resolution of the IBP Board of Governors is hereby AFFIRMED with
MODIFICATION. Accordingly, respondent ATTY. ARNULFO M. AGLERON, SR. is hereby
SUSPENDED from the practice of law for a period of THREE (3) MONTHS, with a stern
warning that a repetition of the same or similar wrongdoing will be dealt with more
severely.

Let a copy of this resolution be furnished the Bar Confidant to be included in the records
of the respondent; the Integrated Bar of the Philippines for distribution to all its chapters;
and the Office of the Court Administrator for dissemination to all courts throughout the
country.

SO ORDERED.
A.C. No. 9091 December 11, 2013

CONCHITA A. BALTAZAR, ROLANDO SAN PEDRO, ALICIA EULALIO-RAMOS,

SOLEDAD A. FAJARDO AND ENCARNACION A. FERNANDEZ, Complainants,
vs.
ATTY. JUAN B. BAÑEZ, Respondent.

RESOLUTION

SERENO, CJ.:

Complainants are the owners of three parcels of land located in Dinalupihan, Bataan.1 n 4
September 2002, they entered into an agreement, they stood to be paid ₱35,000.000 for
all the lots that would be sold in the subdivision.2 For that purpose, they executed a Pecial
Power of Attorney authorizing Fevidal to enter into all agreements concerning the parcels
of land and to sign those agreements on their behalf.3

Fevidal did not update complainants about the status of the subdivision project and failed
to accout for the titles to the subdivided land.4 Complainants also found that he had sold
a number of parcels to third parties, but that he did not turn the proceeds over to them.
Neither were complainants invited to the ceremonial opening of the subdivision project.5

Thus, on 23 August 2005, they revoked the Special Power of Attorney they had previously
executed in his favor.6

Complainants subsequently agreed to settle with Fevidal for the amount of ₱10,000,000,
but the latter again failed to pay them.7

Complainants engaged the professional services of respondent for the purpose of assisting
them in the preparation of a settlement agreement.8

Instead of drafting a written settlement, respondent encouraged them to institute actions

against Fevidal in order to recover their properties. Complainants then signed a contract
of legal services,9 in which it was agreed that they would not pay acceptance and
appearance fees to respondent, but that the docket fees would instead be shared by the
parties. Under the contract, complainants would pay respondent 50% of whatever would
be recovered of the properties. In preparation for the filing of an action against Fevidal,
respondent prepared and notarized an Affidavit of Adverse Claim, seeking to annotate the
claim of complainants to at least 195 titles in the possession of Fevidal.10

A certain Luzviminda Andrade (Andrade) was tasked to submit the Affidavit of Adverse
Claim to the Register of Deeds of Bataan.11

The costs for the annotation of the adverse claim were paid by respondent. Unknown to
him, the adverse claim was held in abeyance, because Fevidal got wind of it and convinced
complainants to agree to another settlement.12

Meanwhile, on behalf of complainants, and after sending Fevidal a demand letter dated
10 July 2006, respondent filed a complaint for annulment, cancellation and revalidation of
titles, and damages against Fevidal before the Regional Trial Court (RTC) of Bataan on 13
October 2006.13

Complainants found it hard to wait for the outcome of the action. Thus, they terminated
the services of respondent on 8 June 2007, withdrew their complaint against Fevidal on 9
June 2007, and finalized their amicable settlement with him on 5 July 2007.14

Respondent filed a Manifestation and Opposition15 dated 20 July 2007 before the RTC,
alleging that the termination of his services and withdrawal of the complaint had been
done with the intent of defrauding counsel. On the same date, he filed a Motion for
Recording of Attorney’s Charging Lien in the Records of the Above-Captioned Cases.16

When the RTC granted the withdrawal of the complaint,17 he filed a Manifestation and
Motion for Reconsideration.18

After an exchange of pleadings between respondent and Fevidal, with the latter denying
the former’s allegation of collusion,19 complainants sought the suspension/disbarment of
respondent through a Complaint20 filed before the Integrated Bar of the Philippines (IBP)
on 14 November 2007. Complainants alleged that they were uneducated and
underprivileged, and could not taste the fruits of their properties because the disposition
thereof was "now clothed with legal problems" brought about by respondent.21

In their complaint, they alleged that respondent had violated Canons

1.01,22 1.03,23 1.04,24 12.02,25 15.05,2618.04,27 and 20.0428 of the Code of Professional
Responsibility. On 14 August 2008, the IBP Commission on Bar Discipline adopted and
approved the Report and Recommendation29 of the investigating commissioner. It
suspended respondent from the practice of law for a period of one year for entering into
a champertous agreement.30

On 26 June 2011, it denied his motion for reconsideration. On 26 November 2012, this
Court noted the Indorsement of the IBP Commission on Bar Discipline, as well as
respondent’s second motion for reconsideration. We find that respondent did not violate
any of the canons cited by complainants. In fact, we have reason to believe that
complainants only filed the instant complaint against him at the prodding of Fevidal.

Respondent cannot be faulted for advising complainants to file an action against Fevidal
to recover their properties, instead of agreeing to a settlement of ₱10,000,000 – a measly
amount compared to that in the original agreement, under which Fevidal undertook to pay
complainants the amount of ₱35,000,000. Lawyers have a sworn duty and responsibility
to protect the interest of any prospective client and pursue the ends of justice.31

Any lawyer worth his salt would advise complainants against the abuses of Fevidal under
the circumstances, and we cannot countenance an administrative complaint against a
lawyer only because he performed a duty imposed on him by his oath. The claim of
complainants that they were not informed of the status of the case is more appropriately
laid at their door rather than at that of respondent. He was never informed that they had
held in abeyance the filing of the adverse claim. Neither was he informed of the brewing
amicable settlement between complainants and Fevidal. We also find it very hard to
believe that while complainants received various amounts as loans from respondent from
August 2006 to June 2007,32 they could not spare even a few minutes to ask about the
status of the case. We shall discuss this more below. As regards the claim that respondent
refused to "patch up" with Fevidal despite the pleas of complainants, we note the latter’s
Sinumpaang Salaysay dated 24 September 2007, in which they admitted that they could
not convince Fevidal to meet with respondent to agree to a settlement.33

Finally, complainants apparently refer to the motion of respondent for the recording of his
attorney’s charging lien as the "legal problem" preventing them from enjoying the fruits
of their property. Section 26, Rule 138 of the Rules of Court allows an attorney to intervene
in a case to protect his rights concerning the payment of his compensation. According to
the discretion of the court, the attorney shall have a lien upon all judgments for the
payment of money rendered in a case in which his services have been retained by the
client. We recently upheld the right of counsel to intervene in proceedings for the recording
of their charging lien. In Malvar v. KFPI,34 we granted counsel’s motion to intervene in the
case after petitioner therein terminated his services without justifiable cause.
Furthermore, after finding that petitioner and respondent had colluded in order to deprive
counsel of his fees, we ordered the parties to jointly and severally pay counsel the
stipulated contingent fees. Thus, the determination of whether respondent is entitled to
the charging lien is based on the discretion of the court before which the lien is presented.
The compensation of lawyers for professional services rendered is subject to the
supervision of the court, not only to guarantee that the fees they charge remain
reasonable and commensurate with the services they have actually rendered, but to
maintain the dignity and integrity of the legal profession as well.35

In any case, an attorney is entitled to be paid reasonable compensation for his services.36

That he had pursued its payment in the appropriate venue does not make him liable for
disciplinary action.1âwphi1Notwithstanding the foregoing, respondent is not without fault.
Indeed, we find that the contract for legal services he has executed with complainants is
in the nature of a champertous contract – an agreement whereby an attorney undertakes
to pay the expenses of the proceedings to enforce the client’s rights in exchange for some
bargain to have a part of the thing in dispute.37

Such contracts are contrary to public policy38 and are thus void or inexistent.39

They are also contrary to Canon 16.04 of the Code of Professional Responsibility, which
states that lawyers shall not lend money to a client, except when in the interest of justice,
they have to advance necessary expenses in a legal matter they are handling for the
client. A reading of the contract for legal services40 shows that respondent agreed to pay
for at least half of the expense for the docket fees. He also paid for the whole amount
needed for the recording of complainants’ adverse claim. While lawyers may advance the
necessary expenses in a legal matter they are handling in order to safeguard their client’s
rights, it is imperative that the advances be subject to reimbrusement. 41 The purpose is
to avoid a situation in which a lawyer acquires a personal stake in the clients cause.
Regrettably, nowhere in the contract for legal services is it stated that the expenses of
litigation advanced by respondents shall be subject to reimbursement by complainants.

In addition, respondent gave various amounts as cash advances (bali), gasoline and
transportation allowance to them for the duration of their attorney-client relationship. In
fact, he admits that the cash advances were in the nature of personal loans that he
extended to complainants.42

Clearly, respondent lost sight of his responsibility as a lawyer in balancing the clients
interests with the ethical standards of his profession. Considering the surrounding
circumstances in this case, an admonition shall suffice to remind him that however dire
the needs of the clients, a lawyer must always avoid any appearance of impropriety to
preserve the integrity of the profession.

WHEREFORE, Attorney Juan B. Bañez, Jr. is hereby ADMONISHED for advancing the
litigation expenses in a legal matter her handled for a client without providing for terms
of reimbursement and lending money to his client, in violation of Canon 16.04 of the Code
of Professional Responsibility. He us sternly warned that a repetition of the same or similar
act would be dealt with more severly.

Let a copy of this Resolution be attached to the personal record of Atty. Bañez, Jr.

SO ORDERED.

G.R. No. 191641, September 02, 2015

EDMUNDO NAVAREZ, Petitioner, v. ATTY. MANUEL ABROGAR III, Respondent.

DECISION

BRION, J.:

This is a petition for certiorari under Rule 651 of the Rules of Court, filed from the October
16, 2009 Decision and the March 12, 2010 Resolution of the Court of Appeals (CA) in CA-
G.R. SP No. 108675.2The CA dismissed the petition for certiorari that the present
petitioner filed against the January 21, 2009 Order of the Regional Trial Court (RTC).

ANTECEDENTS

On July 30, 2007, petitioner Edmundo Navarez engaged the services of Abrogar Valerio
Maderazo and Associates Law Offices (the Firm) through the respondent, Atty. Manuel
Abrogar III. The Firm was to represent Navarez in Sp. Proc. No. Q-05-59112 entitled
"Apolonio Quesada, Jr. v. Edmundo Navarez" as collaborating counsel of Atty. Perfecto
Laguio. The case involved the settlement of the estate of Avelina Quesada-Navarez that
was then pending before the Regional Trial Court (RTC), Branch 83, Quezon City. The
pertinent portions of the Retainer Agreement read:
Our services as collaborating counsel will cover investigation, research and
representation with local banks, concerns regarding deposits (current and savings) and
investment instruments evidenced by certificate of deposits. Our office may also initiate
appropriate civil and/or criminal actions as well as administrative remedies needed to
adjudicate the Estate of Avelina Quesada-Navarez expeditiously, peacefully and lawfully.

Effective Date: June 2007

Acceptance Fee: P100,000.00 in an installment basis

Success Fee: 2% of the total money value of your share as co-owner and heir of the
Estate (payable proportionately upon your receipt of any amount)

Appearance Fee: P2,500.00 per Court hearing or administrative meetings and/or other
meetings.

Filing of Motions and/or pleadings at our initiative shall be for your account and you will
be billed accordingly.

OUT-OF-POCKET EXPENSES: Ordinary out-of-pocket expenses such as telex, facsimile,

word processing, machine reproduction, and transportation expenses, as well as per diems
and accommodations expenses incurred in undertaking work for you outside Metro Manila
area and other special out-of-pocket expenses as you may authorized [sic] us to incur
(which shall always be cleared with you in advance) shall be for your account. xxxx
On September 2, 2008, Navarez filed a Manifestation with the RTC that he was terminating
the services of Atty. Abrogar. On the same day, Navarez also caused the delivery to Atty.
Abrogar of a check in the amount of P220,107.51 - allegedly equivalent to one half of
7.5% of petitioner's P11,200,000.00 share in the estate of his deceased wife less Atty.
Abrogar's cash advances.

On September 9, 2008, Atty. Abrogar manifested that with respect to the petitioner's one-
half (1/2) share in the conjugal partnership, the RTC had already resolved the matter
favorably because it had issued a release order for the petitioner to withdraw the amount.
Atty. Abrogar further declared that the Firm was withdrawing as counsel - effective upon
the appointment of an Administrator of the estate - from the remaining proceedings for
the settlement of the estate of Avelina Quesada-Navarez.

On September 22, 2008, the petitioner wrote to Atty. Abrogar offering to pay his
attorney's fees in accordance with their Retainer Agreement minus the latter's cash
advances - an offer that Atty. Abrogar had previously refused in August 2008.

On October 7, 2008, Atty. Abrogar filed a Motion to Enter into the Records his attorney's
lien pursuant to Rule 138, Section 37 of the Rules of Court.

On November 21, 2008, the motion was submitted for resolution without oral arguments.

On January 21, 2009, the RTC issued an order granting the motion and directed the
petitioner to pay Atty. Abrogar's attorney's fees. The Order reads:
WHEREFORE, premises considered, it is hereby ordered:

1. That the attorney's lien of Manuel Abrogar III conformably with the Retainer
Agreement dated July 30, 2007, be entered into the records of this case in
consonance with Section 37, Rule 138 of the Rules of
Court;ChanRoblesVirtualawlibrary

2. That oppositor Edmundo Navarez pay the amount of 7.5% of P11,196,675.05

to Manuel Abrogar III;ChanRoblesVirtualawlibrary
 3. That the oppositor pay the administrative costs/expenses of P103,000.00 to
the movant; and

4. That the prayers for P100,000.00 as exemplary damages, P200,000.00 as

moral damages and for writ of preliminary attachment be denied.

SO ORDERED.
On February 18, 2009, the petitioner filed a Motion for Reconsideration.

On March 17, 2009, the RTC denied the motion for reconsideration and issued a Writ of
Execution of its Order dated January 21, 2009.

The petitioner elevated the case to the CA via a petition for certiorari. He argued that the
RTC committed grave abuse of discretion because: (1) the RTC granted Atty. Abrogar's
claim for attorney's fees despite non-payment of docket fees; (2) the RTC denied him the
opportunity of a full-blown trial to contradict Atty. Abrogar's claims and prove advance
payments; and (3) the RTC issued a writ of execution even before the lapse of the
reglementary period.

In its decision dated October 16, 2009, the CA dismissed the petition and held that the
RTC did not commit grave abuse of discretion.

The petitioner moved for reconsideration which the CA denied in a Resolution dated March
12, 2010.

On April 6, 2010, and April 26, 2010, the petitioner filed his first and second motions for
extension of time to file his petition for review. This Court granted both motions for
extension totaling thirty (30) days (or until May 5, 2010) in the Resolution dated July 26,
2010.

On May 5, 2010, the petitioner filed the present petition entitled "Petition for Review."
However, the contents of the petition show that it is a petition for certiorari under Rule 65
of the Rules of Court.3

THE PETITION

The petitioner argues that the CA gravely erred in dismissing his petition for certiorari that
challenged the RTC ruling ordering the payment of attorney's fees. He maintains his
argument that the RTC committed grave abuse of discretion because: (1) it granted Atty.
Abrogar's claim for attorney's fees despite lack of jurisdiction due to non-payment of
docket fees; (2) it granted the claim for attorney's fees without requiring a fullblown trial
and without considering his advance payments; and (3) it issued the writ of execution
before the lapse of the reglementary period. The petitioner also points out that the CA
nullified the RTC's release order in CA-G.R. SP No. 108734.

In his Comment dated September 8, 2010, Atty. Abrogar adopted the CA's position in its
October 16, 2009 Decision.

OUR RULING
We observe that the petitioner used the wrong remedy to challenge the CA's decision and
resolution. The petitioner filed a petition for certiorari under Rule 65, not a petition for
review on certiorari under Rule 45. A special civil action for certiorari is a remedy of last
resort, available only to raise jurisdictional issues when there is no appeal or any other
plain, speedy, and adequate remedy under the law.

Nonetheless, in the spirit of liberality that pervades the Rules of Court4 and in the interest
of substantial justice,5 this Court has, on appropriate occasions, treated a petition
for certiorari as a petition for review on certiorari, particularly when: (1) the petition
for certiorari was filed within the reglementary period to file a petition for review
on certiorari;6 (2) the petition avers errors of judgment;7 and (3) when there is sufficient
reason to justify the relaxation of the rules.8 Considering that the present petition was
filed within the extension period granted by this Court and avers errors of law and
judgment, this Court deems it proper to treat the present petition for certiorari as a
petition for review on certiorari in order to serve the higher ends of justice.

With the procedural issue out of the way, the remaining issue is whether or not the CA
erred when it held that the RTC acted within its jurisdiction and did not commit grave
abuse of discretion when it ordered the payment of attorney's fees.

We find merit in the petition.

An attorney has a right to be paid a fair and reasonable compensation for the services he
has rendered to a client. As a security for his fees, Rule 138, Section 37 of the Rules of
Court grants an attorney an equitable right to a charging lien over money judgments he
has secured in litigation for his client. For the lien to be enforceable, the attorney must
have caused: (1) a statement of his claim to be entered in the record of the case while
the court has jurisdiction over the case and before the full satisfaction of the
judgment;9 and (2) a written notice of his claim to be delivered to his client and to the
adverse party.

However, the filing of the statement of the claim does not, by itself, legally determine the
amount of the claim when the client disputes the amount or claims that the amount has
been paid.10 In these cases, both the attorney and the client have a right to be heard and
to present evidence in support of their claims.11 The proper procedure for the court is to
ascertain the proper amount of the lien in a full dress trial before it orders the registration
of the charging lien.12 The necessity of a hearing is obvious and beyond dispute.13

In the present case, the RTC ordered the registration of Atty. Abrogar's lien without a
hearing even though the client contested the amount of the lien. The petitioner had the
right to be heard and to present evidence on the true amount of the charging lien. The
RTC acted with grave abuse of discretion because it denied the petitioner his right to be
heard, i.e., the right to due process.

The registration of the lien should also be distinguished from the enforcement of the lien.
Registration merely determines the birth of the lien.14 The enforcement of the lien, on the
other hand, can only take place once a final money judgment has been secured in favor
of the client. The enforcement of the lien is a claim for attorney's fees that may be
prosecuted in the very action where the attorney rendered his services or in a separate
action.

However, a motion for the enforcement of the lien is in the nature of an action commenced
by a lawyer against his clients for attorney's fees.15 As in every action for a sum of money,
the attorney-movant must first pay the prescribed docket fees before the trial court can
acquire jurisdiction to order the payment of attorney's fees.

In this case, Atty. Abrogar only moved for the registration of his lien. He did not pay any
docket fees because he had not yet asked the RTC to enforce his lien. However, the RTC
enforced the lien and ordered the petitioner to pay Atty. Abrogar's attorney's fees and
administrative expenses.

Under this situation, the RTC had not yet acquired jurisdiction to enforce the charging lien
because the docket fees had not been paid. The payment of docket fees is mandatory in
all actions, whether separate or an offshoot of a pending proceeding. In Lacson v.
Reyes,16 this Court granted certiorariand annulled the decision of the trial court granting
a "motion for attorney's fees" because the attorney did not pay the docket fees. Docket
fees must be paid before a court can lawfully act on a case and grant relief. Therefore,
the RTC acted without or in excess of its jurisdiction when it ordered the payment of the
attorney's fees.

Lastly, the enforcement of a charging lien can only take place after a final money judgment
has been rendered in favor of the client.17 The lien only attaches to the money judgment
due to the client and is contingent on the final determination of the main case. Until the
money judgment has become final and executory, enforcement of the lien is premature.

The RTC again abused its discretion in this respect because it prematurely enforced the
lien and issued a writ of execution even before the main case became final; no money
judgment was as yet due to the client to which the lien could have attached itself.
Execution was improper because the enforceability of the lien is contingent on a final and
executory award of money to the client. This Court notes that in CA-G.R. SP No. 108734,
the CA nullified the "award" to which the RTC attached the attorney's lien as there was
nothing due to the petitioner. Thus, enforcement of the lien was premature.

The RTC's issuance of a writ of execution before the lapse of the reglementary period to
appeal from its order is likewise premature. The Order of the RTC dated January 21, 2009,
is an order that finally disposes of the issue on the amount of attorney's fees Atty. Abrogar
is entitled to. The execution of a final order issues as a matter of right upon the expiration
of the reglementary period if no appeal has been perfected.18 Under Rule 39, Section 2 of
the Rules of Court, discretionary execution can only be made before the expiration of the
reglementary period upon a motion of the prevailing party with notice to the adverse
party. Discretionary execution may only issue upon good reasons to be stated in a special
order after due hearing.19

The RTC ordered execution without satisfying the requisites that would have justified
discretionary execution. Atty. Abrogar had not moved for execution and there were no
good reasons to justify the immediate execution of the RTC's order. Clearly, the RTC
gravely abused its discretion when it ordered the execution of its order dated January 21,
2009, before the lapse of the reglementary period.

For these reasons, this Court finds that the CA erred when it held that the RTC did not
commit grave abuse of discretion and acted without jurisdiction.

As our last word, this decision should not be construed as imposing unnecessary burden
on the lawyer in collecting his just fees. But, as in the exercise of any other right conferred
by law, the lawyer - and the courts -must avail of the proper legal remedies and observe
the procedural rules to prevent the possibility, or even just the perception, of abuse or
prejudice.20chanroblesvirtuallawlibrary

WHEREFORE, premises considered, we hereby GRANT the petition. The decision of the
Court of Appeals in CA-G.R. SP No. 108675 dated October 16, 2009, is
hereby REVERSED, and the decision of the Regional Trial Court, Branch 83, Quezon City
in Sp. Proc. No. Q-05-59112 is hereby ANNULLEDand SET ASIDE.

SO ORDERED.chanroblesvirtuallawlibrary
G.R. No. 185544 January 13, 2015

THE LAW FIRM OF LAGUESMA MAGSALIN CONSULTA AND GASTARDO, Petitioner,

vs.
THE COMMISSION ON AUDIT and/or REYNALDO A. VILLAR and JUANITO G.
ESPINO, JR. in their capacities as Chairman and Commissioner,
respectively, Respondents.

DECISION

LEONEN, J.:

When a government entity engages the legal services of private counsel, it must do so
with the necessary authorization required by law; otherwise, its officials bind themselves
to be personally liable for compensating private counsel’s services.

This is a petition1 for certiorari filed pursuant to Rule XI, Section 1 of the 1997 Revised
Rules of Procedure of the Commission on Audit. The petition seeks to annul the
decision2 dated September 27, 2007 and resolution3 dated November 5, 2008 of the
Commission on Audit, which disallowed the payment of retainer fees to the law firm of
Laguesma Magsalin Consulta and Gastardo for legal services rendered to Clark
Development Corporation.4

Sometime in 2001, officers of Clark Development Corporation,5 a government-owned and

controlled corporation, approached the law firm of Laguesma Magsalin Consulta and
Gastardo for its possible assistance in handling the corporation’s labor cases.6

Clark Development Corporation, through its legal officers and after the law firm’s
acquiescence, "sought from the Office of the Government Corporate Counsel [‘OGCC’] its
approval for the engagement of [Laguesma Magsalin Consulta and Gastardo] as external
counsel."7

On December 4, 2001, the Office of the Government Corporate Counsel denied the
request.8 Clark Development Corporation then filed a request for reconsideration.9

On May 20, 2002, the Office of the Government Corporate Counsel, through Government
Corporate Counsel Amado D. Valdez (Government Corporate Counsel Valdez),
reconsidered the request and approved the engagement of Laguesma Magsalin Consulta
and Gastardo.10 It also furnished Clark Development Corporation a copy of a pro-forma
retainership contract11 containing the suggested terms and conditions of the
retainership.12 It instructed Clark Development Corporation to submit a copy of the
contract to the Office of the Government Corporate Counsel after all the parties concerned
have signed it.13

In the meantime, Laguesma Magsalin Consulta and Gastardo commenced rendering legal
services to Clark Development Corporation. At this point, Clark Development Corporation
had yet to secure the authorization and clearance from the Office of the Government
Corporate Counsel or the concurrence of the Commission on Audit of the retainership
contract. According to the law firm, Clark Development Corporation’s officers assured the
law firm that it was in the process of securing the approval of the Commission on Audit.14

On June 28, 2002, Clark Development Corporation, through its Board of Directors,
approved Laguesma Magsalin Consulta and Gastardo’s engagement as private
counsel.15 In 2003, it also approved the assignment of additional labor cases to the law
firm.16

On July 13, 2005, Clark Development Corporation requested the Commission on Audit for
concurrence of the retainership contract it executed with Laguesma Magsalin Consulta and
Gastardo.17 According to the law firm, it was only at this pointwhen Clark Development
Corporation informed them that the Commission on Audit required the clearance and
approval of the Office of the Government Corporate Counsel before it could approve the
release of Clark Development Corporation’s funds to settle the legal fees due to the law
firm.18

On August 5, 2005, State Auditor IVElvira G. Punzalan informed Clark Development

Corporation that itsrequest for clearance could not be acted upon until the Office of the
Government Corporate Counsel approves the retainership contract with finality.19

On August 10, 2005, Clark Development Corporation sent a letterrequest to the Office of
the Government Corporate Counsel for the final approval of the retainership contract, in
compliance with the Commission on Audit’s requirements.20

On December 22, 2005, GovernmentCorporate Counsel Agnes VST Devanadera

(Government Corporate Counsel Devanadera) denied Clark Development Corporation’s
request for approval on the ground that the proforma retainership contract given to them
was not "based on the premise that the monthly retainer’s fee and concomitant charges
are reasonable and could pass in audit by COA."21 She found that Clark Development
Corporation adopted instead the law firm’s proposals concerning the payment of a
retainer’s fee on a per case basis without informing the Office of the Government
Corporate Counsel. She, however, ruled that the law firm was entitled to payment under
the principle of quantum meruitand subject to Clark Development Corporation Board’s
approval and the usual government auditing rules and regulations.22

On December 27, 2005, Clark Development Corporation relayed Government Corporate

Counsel Devanadera’s letter to the Commission’s Audit Team Leader, highlighting the
portion on the approval of payment to Laguesma Magsalin Consulta and Gastardo on the
basis of quantum meruit.23

On November 9, 2006, the Commission on Audit’s Office of the General Counsel, Legal
and Adjudication Sector issued a "Third Indorsement"24 denying Clark Development
Corporation’s request for clearance, citing its failure to secure a prior written concurrence
of the Commission on Audit and the approval with finality of the Office of the Government
Corporate Counsel.25 It also stated that its request for concurrence was made three (3)
years after engaging the legal services of the law firm.26
On December 4, 2006, Laguesma Magsalin Consulta and Gastardo appealed the "Third
Indorsement"to the Commission on Audit. On December 12, 2006, Clark Development
Corporation also filed a motion for reconsideration.27

On September 27, 2007, the Commission on Audit rendered the assailed decision denying
the appeal and motion for reconsideration. It ruled that Clark Development Corporation
violated Commission on Audit Circular No. 98-002 dated June 9, 1998 and Office of the
President Memorandum Circular No. 9 dated August 27, 1998 whenit engaged the legal
services of Laguesma Magsalin Consulta and Gastardo without the final approval and
written concurrence of the Commission on Audit.28 It also ruled that it was not the
government’s responsibility to pay the legal fees already incurred by Clark Development
Corporation, but rather by the government officials who violated the regulations on the
matter.29

Clark Development Corporation and Laguesma Magsalin Consulta and Gastardo separately
filed motions for reconsideration,30 which the Commission on Audit denied in the assailed
resolution dated November 5, 2008. The resolution also disallowed the payment of legal
fees to the law firm on the basis of quantum meruitsince the Commission on Audit Circular
No. 86-255 mandates that the engagementof private counsel without prior approval "shall
be a personal liability of the officials concerned."31

Laguesma Magsalin Consulta and Gastardo filed this petition for certiorari on December
19, 2008.32 Respondents, through the Office of the Solicitor General, filed their
comment33 dated May 7, 2009. The reply34 was filed on September 1, 2009.

The primordial issue to be resolved by this court is whether the Commission on Audit erred
in disallowing the payment of the legal fees to Laguesma Magsalin Consulta and Gastardo
as Clark Development Corporation’s private counsel.

To resolve this issue, however, several procedural and substantive issues must first be
addressed:

Procedural:

1. Whether the petition was filed on time; and

2. Whether petitioner is the real party-in-interest.

Substantive:

1. Whether the Commission on Audit erred in denying Clark Development

Corporation’s requestfor clearance in engaging petitioner as private counsel;

2. Whether the Commission on Audit correctly cited Polloso v. Gangan35 and

PHIVIDEC Industrial Authority v. Capitol Steel Corporation36 in support of its denial;
and
 3. Whether the Commission on Audit erred in ruling that petitioner should not be
paid on the basis of quantum meruitand that any payment for its legal services
should be the personal liability of Clark Development Corporation’s officials.

Petitioner argues that Pollosoand PHIVIDEC are not applicable to the circumstances at
hand because in both cases, the government agency concerned had failed to secure the
approval of both the Office of the Government Corporate Counsel and the Commission on
Audit.37 Petitioner asserts that it was able to secure authorization from the Office of the
Government Corporate Counsel prior to rendering services to Clark Development
Corporation for all but two (2) of the labor cases assigned to it. 38 It argues that the May
20, 2002 letter from Government Corporate Counsel Valdez was tantamount to a grant of
authorization since it granted Clark Development Corporation’s request for
reconsideration.39

In their comment,40 respondents argue that petitioner is not a real party-in-interest to the
case.41 They argue that it is Clark Development Corporation, and not petitioner, who isa
real party-in-interest since the subject of the assailed decision was the denial of the
corporation’s request for clearance.42

Respondents also allege that it was only on July 13, 2005, or three (3) years after the
hiring of petitioner, when Clark Development Corporation requested the Commission on
Audit’s concurrence of the retainership contract between Clark Development Corporation
and petitioner.43 They argue that the retainership contract was not approved with finality
by the Office of the Government Corporate Counsel.44 Further, Polloso and PHIVIDE Care
applicable to this case since both cases involve the "indispensability of [the] prior written
concurrence of both [the Office of the Government Corporate Counsel] and the
[Commission on Audit] before any [government-owned and controlled corporation] can
hire an external counsel."45

In its reply,46 petitioner argues that it is a real party-in-interest since "it rendered its
services to [Clark Development Corporation], which ultimately redounded to the benefit
of the Republic"47 and that "it deserves to be paid what is its due as a matter of
right."48 Petitioner also reiterates its argument that Polloso and PHIVIDE Care not
applicable to this case since the factual antecedents are not the same.49

The petition is denied.

The petition was filed out of time

Petitioner states that it filed this petition under Rule XI, Section 1 of the 1997 Revised
Rules of Procedure of the Commission on Audit.50 The rule states:

RULE XI

JUDICIAL REVIEW SECTION

1. Petition for Certiorari.— Any decision, order or resolution of the Commission may be
brought to the Supreme Court on certiorari by the aggrieved party within thirty (30) days
from receipt of a copy thereof in the manner provided by law, the Rules of Court51 and
these Rules.

This rule is based on Article IX-A, Section 7 of the Constitution, which states:

Section 7. Each Commission shall decide by a majority vote of all its Members, any case
or matter brought before it within sixty days from the date of its submission for decision
or resolution. A case or matter is deemed submitted for decision or resolution upon the
filing of the last pleading, brief, or memorandum required by the rules of the Commission
or by the Commission itself. Unless otherwise provided by this Constitution or by law, any
decision, order, or ruling of each Commission may be brought to the Supreme Court on
certiorari by the aggrieved party within thirty days from receipt of a copy thereof.
(Emphasis supplied)

Ordinarily, a petition for certiorari under Rule 65 of the Rules of Court has a reglementary
period of 60 days from receipt of denial of the motion for reconsideration. The Constitution,
however, specifies that the reglementary period for assailing the decisions, orders, or
rulings of the constitutional commissions is thirty (30) days from receipt of the decision,
order, or ruling. For this reason, a separate rule was enacted in the Rules of Court.

Rule 64 of the Rules of Civil Procedure provides the guidelines for filing a petition for
certiorari under this rule. Section 2 of the rule specifies that "[a] judgment or final order
or resolution of the Commission on Elections and the Commission on Audit may be brought
by the aggrieved party to the Supreme Court on certiorari under Rule 65, except as
hereinafter provided."

The phrase, "except as hereinafter provided," specifies that any petition for certiorari filed
under this rule follows the same requisites as those of Rule 65 except for certain provisions
found only in Rule 64. One of these provisions concerns the time given to file the petition.

Section 3 of Rule 64 of the Rules of Civil Procedure states:

SEC. 3. Time to file petition. — The petition shall be filed within thirty (30) days from
notice of the judgment or final order or resolution sought to be reviewed. The filing of a
motion for new trial or reconsideration of said judgment or final order or resolution, if
allowed under the procedural rules of the Commission concerned, shall interrupt the period
herein fixed. If the motion is denied, the aggrieved party may file the petition within the
remaining period, but which shall not be less than five (5) days in any event, reckoned
from notice of denial.(Emphasis supplied)

Under this rule, a party may file a petition for review on certiorari within 30 days from
notice of the judgment being assailed. The reglementary period includes the time taken
to file the motion for reconsideration and is only interrupted once the motion is filed. If
the motion is denied, the party may filethe petition only within the period remaining from
the notice of judgment.

The difference between Rule 64 and Rule 65 has already been exhaustively discussed by
this court in Pates v. Commission on Elections:52
Rule 64, however, cannot simply be equated to Rule 65 even if it expressly refers to the
latter rule. They exist as separate rules for substantive reasons as discussed below.
Procedurally, the most patent difference between the two – i.e., the exception that Section
2, Rule 64 refers to – is Section 3 which provides for a special period for the filing of
petitions for certiorari from decisions or rulings of the COMELEC en banc. The period is 30
days from notice of the decision or ruling (instead of the 60 days that Rule 65 provides),
with the intervening period used for the filing of any motion for reconsideration deductible
from the originally granted 30 days (instead of the fresh period of 60 days that Rule 65
provides).53 (Emphasis supplied)

In this case, petitioner received the decision of the Commission on Audit on October 16,
2007.54 It filed a motion for reconsideration on November 6, 2007,55 or after 21 days. It
received notice of the denial of its motion on November 20, 2008.56 The receipt of this
notice gave petitioner nine (9) days, or until November 29, 2008, to file a petition for
certiorari. Since November 29, 2008 fell on a Saturday, petitioner could still have filed on
the next working day, or on December 1, 2008. It, however, filed the petition on December
19, 2008,57 which was well beyond the reglementary period.

This petition could have been dismissed outright for being filed out of time. This court,
however, recognizes that there are certain exceptions that allow a relaxation of the
procedural rules. In Barranco v. Commission on the Settlement of Land Problems:58

The Court is fully aware that procedural rules are not to be belittled or simply disregarded
for these prescribed procedures insure an orderly and speedy administration of justice.
However, it is equally true that litigation is not merely a game of technicalities. Law and
jurisprudence grant to courts the prerogative to relax compliance with procedural rules of
even the most mandatory character, mindful of the duty to reconcile both the need to put
an end to litigation speedily and the parties’ right to an opportunity to be heard.

In Sanchez v. Court of Appeals, the Court restated the reasons which may provide
justification for a court to suspend a strict adherence to procedural rules, such as: (a)
matters of life, liberty, honor or property[,] (b) the existence of special or compelling
circumstances, (c) the merits of the case, (d) a cause not entirely attributable to the fault
or negligence of the party favored by the suspension of the rules, (e) a lack of any showing
that the review sought is merely frivolous and dilatory, and (f) the other party will not be
unjustly prejudiced thereby.59(Emphasis supplied)

Considering that the issues in thiscase involve the right of petitioner to receive due
compensation on the one hand and respondents’ duty to prevent the unauthorized
disbursement of public funds on the other, a relaxation of the technical rules is in order.

Petitioner is a real party-in-interest

Respondents argue that it is Clark Development Corporation, and not petitioner, which is
the real party-in-interest since the subject of the assailed decision and resolution was the
corporation’s request for clearance to pay petitioner its legal fees. Respondents argue that
any interest petitioner may have in the case is merely incidental.60This is erroneous.
Petitioner is a real party-in-interest, as defined in Rule 3, Section 2 of the 1997 Rules of
Civil Procedure:

SEC. 2. Parties in interest.— A real party in interest is the party who stands to be benefited
or injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless
otherwise authorized by law or these Rules, every action must be prosecuted or defended
in the name of the real party in interest.

Petitioner does not have a "mere incidental interest,"61 and its interest is not "merely
consequential."62Respondents mistakenly narrow down the issue to whether they erred in
denying Clark Development Corporation’s request for clearance of the retainership
contract.63 In doing so, they argue that the interested parties are limited only to Clark
Development Corporation and respondents.64

The issue at hand, however, relates to the assailed decision and resolution of respondents,
which disallowed the disbursement of public funds for the payment of legal fees to
petitioner. Respondents admit that legal services were performed by petitioner for which
payment of legal fees are due. The question that they resolved was which among the
parties, the government, or the officials of Clark Development Corporation were liable.

The net effect of upholding or setting aside the assailed Commission on Audit rulings would
be to either disallow or allow the payment of legal fees to petitioner. Petitioner, therefore,
stands to either be benefited or injured by the suit, or entitled to its avails. It is a real
party-in-interest. Clark Development Corporation’s Board of Directors, on the other hand,
should have been impleaded inthis case as a necessary party.

A necessary party is defined as "onewho is not indispensable but who ought to be joined
as a party if complete relief is to be accorded as to those already parties, or for a complete
determination or settlement of the claim subject of the action."65

The actions of the Board of Directors precipitated the issues in this case. If the petition is
granted, then the officers are relieved of liability to petitioner. If the rulings of respondents
are upheld, then it is the Board of Directors that will be liable to petitioner. Any relief in
this case would be incomplete without joining the members of the Board of Directors.

The Commission on Audit did not

commit grave abuse of discretion in
denying the corporation’s request
for clearance to engage the services
of petitioner as private counsel

Book IV, Title III, Chapter 3, Section 10 of the Administrative Code of 1987 provides:

Section. 10. Office of the Government Corporate Counsel. - The Office of the Government
Corporate Counsel (OGCC) shall act as the principal law office of all government-owned
or controlled corporations, their subsidiaries, other corporate off-springs and government
acquired asset corporations and shall exercise control and supervision over all legal
departments or divisions maintained separately and such powers and functions as are now
or may hereafter be provided by law. In the exercise of such control and supervision, the
Government Corporate Counsel shall promulgate rules and regulations toeffectively
implement the objectives of this Office. (Emphasis supplied)

The Office of the Government Corporate Counsel is mandated by law to provide legal
services to government-owned and controlled corporations such as Clark Development
Corporation.

As a general rule, government-owned and controlled corporations are not allowed to

engage the legal services of private counsels. However, both respondent and the Office of
the President have made issuances that had the effect of providing certain exceptions to
the general rule, thus: Book IV, Title III, Chapter 3, Section 10 of Executive Order No.
292, otherwise known as the Administrative Code of 1987, provides that the Office of the
Government Corporate Counsel (OGCC) shall act as the principal law office of all GOCCs,
their subsidiaries, other corporate off-springs, and government acquired asset
corporations. Administrative Order No. 130, issued by the Office of the President on 19
May 1994, delineating the functions and responsibilities of the OSG and the OGCC, clarifies
that all legal matters pertaining to GOCCs, their subsidiaries, other corporate off[-]springs,
and government acquired asset corporations shall be exclusively referred to and handled
by the OGCC, unless their respective charters expressly name the OSG as their legal
counsel. Nonetheless, the GOCC may hire the services of a private counsel in exceptional
cases with the written conformity and acquiescence of the Government Corporate Counsel,
and with the concurrence of the Commission on Audit (COA).66 (Emphasis supplied)

The rules and regulations concerning the engagement of private counsel by government-
owned and controlled corporations is currently provided for by Commission on Audit
Circular No. 86-25567 dated April 2, 1986, and Office of the President Memorandum
Circular No. 9 dated August 27, 1998.

Commission on Audit Circular No. 86-255, dated April 2, 1986, as amended, states:

Accordingly and pursuant to this Commission's exclusive authority to promulgate

accounting and auditing rules and regulations, including for the prevention and
disallowance of irregular, unnecessary, excessive, extravagant and/or unconscionable
expenditure or uses of public funds and property (Sec. 2-2, Art. IX-D, Constitutional,
public funds shall not be utilized for payment of the services of a private legal counsel or
law firm to represent government agencies and instrumentalities, including government-
owned or controlled corporations and local government units in court or to render legal
services for them. In the event that such legal services cannot be avoided or isjustified
under extraordinary or exceptional circumstances for government agencies and
instrumentalities, including government-owned or controlled corporations, the written
conformity and acquiescence of the Solicitor General or the Government Corporate
Counsel, as the case maybe, and the written concurrence of the Commission on Audit shall
first be secured before the hiring or employment of a private lawyer or law firm.(Emphasis
supplied)

The Office of the President Memorandum Circular No. 9, on the other hand, states:

SECTION 1.All legal matters pertainingto government-owned or controlled corporations,

their subsidiaries, other corporate offsprings and government acquired asset corporations
(GOCCs) shall be exclusively referred to and handled by the Office of the Government
Corporate Counsel (OGCC).

GOCCs are thereby enjoined from referring their cases and legal matters to the Office of
the Solicitor General unless their respective charters expressly name the Office of the
Solicitor General as their legal counsel.

However, under exceptional circumstances, the OSG may represent the GOCC concerned,
Provided: This is authorized by the President; or by the head of the office concerned and
approved by the President.

SECTION 2. All pending cases of GOCCs being handled by the OSG, and all pending
requests for opinions and contract reviews which have been referred by saidGOCCs to the
OSG, may be retained and acted upon by the OSG; but the latter shall inform the OGCC
of the said pending cases, requests for opinions and contract reviews, if any, to ensure
proper monitoring and coordination.

SECTION 3. GOCCs are likewise enjoined to refrain from hiring private lawyers or law firms
to handle their cases and legal matters. But in exceptional cases, the written conformity
and acquiescence of the Solicitor General or the Government Corporate Counsel, as the
case may be, and the written concurrence of the Commission on Audit shall first be secured
before the hiring or employment of a private lawyer or law firm. (Emphasis supplied)

According to these rules and regulations, the general rule is that government-owned and
controlled corporations must refer all their legal matters to the Office of the Government
Corporate Counsel. It is only in "extraordinary or exceptional circumstances" or
"exceptional cases" that it is allowed to engage the services of private counsels.

Petitioner claims that it was hired by Clark Development Corporation due to "numerous
labor cases which need urgent attention[.]"68 In its request for reconsideration to the
Office of the Government Corporate Counsel, Clark Development Corporation claims that
it was obtaining the services of petitioner "acting through Atty. Ariston Vicente R.
Quirolgico, known expert in the field of labor law and relations."69

The labor cases petitioner handled were not of a complicated or peculiar nature that could
justify the hiring of a known expert in the field. On the contrary, these appear to be
standard labor cases of illegal dismissal and collective bargaining agreement
negotiations,70 which Clark Development Corporation’s lawyers or the Office of the
Government Corporate Counsel could have handled.

Commission on Audit Circular No. 86-255 dated April 2, 1986 and Office of the President
Memorandum Circular No. 9 also require that "before the hiring or employment"of private
counsel, the "written conformity and acquiescence of the [Government Corporate Counsel]
and the written concurrence of the Commissionon Audit shall first be secured. . . ."

In this case, Clark Development Corporation had failed to secure the final approval of the
Office of the Government Corporate Counsel and the written concurrence of respondent
before it engaged the services of petitioner.
When Government Corporate Counsel Valdez granted Clark Development Corporation’s
request for reconsideration, the approval was merely conditional and subject to its
submission of the signed pro-forma retainership contract provided for by the Office of the
Government Corporate Counsel. In the letter dated May 20, 2002, Government Corporate
Counsel Valdez added:

For the better protection of the interests of CDC, we hereby furnish you with a Pro-Forma
Retainership Agreement containing the suggested terms and conditions of the
retainership, which you may adopt for this purpose.

After the subject Retainership Agreement shall have been executed between your
corporation and the retained counsel, please submit a copy thereof to our Office for our
information and file.71

Upon Clark Development Corporation’s failure to submit the retainership contract, the
Office of the Government Corporate Counsel denied Clark Development Corporation’s
request for final approval of its legal services contracts, including that of petitioner. In the
letter72 dated December 22, 2005, Government Corporate Counsel Devanadera informed
Clark Development Corporation that:

[i]t appears, though, that our Pro-Forma Retainership Agreement was not followed and
CDC merely adopted the proposal of aforesaid retainers/consultants. Also, this Office was
never informed that CDC agreed on payment of retainer’s fee on a per case basis.73

In view of Clark Development Corporation’s failure to secure the final conformity and
acquiescence of the Office of the Government Corporate Counsel, its retainership contract
with petitioner could not have been considered as authorized.

The concurrence of respondents was also not secured by Clark Development Corporation
priorto hiring petitioner’s services. The corporation only wrote a letter-request to
respondents three (3) years after it had engaged the services of petitioner as private legal
counsel.

The cases that the private counsel was asked to manage are not beyond the range of
reasonable competence expected from the Office of the Government Corporate Counsel.
Certainly, the issues do not appear to be complex or of substantial national interest to
merit additional counsel. Even so, there was no showing that the delays in the approval
also were due to circumstances not attributable to petitioner nor was there a clear showing
that there was unreasonable delay in any action of the approving authorities. Rather, it
appears that the procurement of the proper authorizations was mere afterthought.

Respondents, therefore, correctly denied Clark Development Corporation’s request for

clearance in the disbursement of funds to pay petitioner its standing legal fees.

Polloso v. Ganganand PHIVIDEC

Industrial Authority v. Capitol Steel
Corporationapply in this case
Petitioner argues that Polloso does not apply since the denial was based on the "absence
of a written authority from the OSG or OGCC[.]"74 It also argues that the PHIVIDEC case
does not apply since "the case [was] represented by a private lawyer whose engagement
was secured without the conformity of the OGCC andthe COA."75 Petitioner argues that,
unlike these cases, Clark Development Corporation was able to obtain the written
conformity of the Office of the Government Corporate Counsel to engage petitioner’s
services.

In Polloso, the legal services of Atty. Benemerito A. Satorre were engaged by the National
Power Corporation for its Leyte-Cebu and Leyte Luzon Interconnection Projects.76 The
Commission on Audit disallowed the payment of services to Atty. Satore on the basis of
quantum meruit, citing Commission on Audit Circular No. 86-255 dated April 2, 1986.77 In
upholding the disallowance by the Commission on Audit, this court ruled:

It bears repeating that the purpose of the circular is to curtail the unauthorized and
unnecessary disbursement of public funds to private lawyers for services rendered to the
government. This is in line with the Commission on Audit’s constitutional mandate to
promulgate accounting and auditing rules and regulations including those for the
prevention and disallowance of irregular, unnecessary, excessive, extravagant or
unconscionable expenditures or uses of government fundsand properties. Having
determined the intent of the law, this Court has the imperative duty to give it effect even
if the policy goes beyond the letter or words of the statute.

Hence, as the hiring of Atty. Satorre was clearly done without the prior conformity and
acquiescence of the Office of the Solicitor General or the Government Corporate Counsel,
as well as the written concurrence of the Commission on Audit, the payment of fees to
Atty. Satorre was correctly disallowed in audit by the COA.78

In PHIVIDEC, this court found the engagement by PHIVIDEC Industrial Authority, a

government-owned and controlled corporation, of Atty. Cesilo Adaza’s legal services to be
unauthorized for the corporation’s failure to secure the written conformity of the Office of
the Government Corporate Counsel and the Commission on Audit.79Citing the provisions
of Office of the President Memorandum Circular No. 9, this court ruled that:

[i]t was only with the enactment of Memorandum Circular No. 9 in 1998 that an exception
to the general prohibition was allowed for the first time since P.D. No. 1415 was enacted
in 1978. However, indispensable conditions precedent were imposed before any hiring of
private lawyer could be effected. First, private counsel can be hired only in exceptional
cases. Second, the GOCC must first secure the written conformity and acquiescence of the
Solicitor General or the Government Corporate Counsel, as the case may be, before any
hiring can be done. And third, the written concurrence of the COA must also be secured
prior to the hiring.80 (Emphasis supplied)

The same ruling was likewise reiterated in Vargas v. Ignes,81 wherein this court stated:

Under Section 10, Chapter 3, Title III, Book IV of the Administrative Code of1987, it is the
OGCC which shall act as the principal law office of all GOCCs. And Section 3 of
Memorandum Circular No. 9, issued by President Estrada on August 27, 1998, enjoins
GOCCs to refrain from hiring private lawyers or law firms to handle their cases and legal
matters. But the same Section 3 provides that in exceptional cases, the written conformity
and acquiescence of the Solicitor General or the Government Corporate Counsel, as the
case may be, and the written concurrence of the COA shall first be secured before the
hiring or employment of a private lawyer or law firm. In Phividec Industrial Authority v.
Capitol Steel Corporation, we listed three (3) indispensable conditions before a GOCC can
hirea private lawyer: (1) private counsel can only be hired in exceptional cases; (2) the
GOCC must first secure the written conformity and acquiescence of the Solicitor General
or the Government Corporate Counsel, as the case may be; and (3) the written
concurrence of the COA must also be secured.82 (Emphasis supplied) On the basis of
Pollosoand PHIVIDEC, petitioner’s arguments are unmeritorious.

Petitioner fails to understand that Commission on Audit Circular No. 86-255 requires not
only the conformity and acquiescence of the Office of the Solicitor General or Office of the
Government Corporate Counsel but also the written conformity of the Commission on
Audit. The hiring of private counsel becomes unauthorized if it is only the Office of the
Government Corporate Counsel that gives its conformity. The rules and jurisprudence
expressly require that the government-owned and controlled corporation concerned must
also secure the concurrence of respondents.

It is also erroneous for petitioner to assume that it had the conformity and acquiescence
of the Office of the Government Corporate Counsel since Government Corporate Counsel
Valdez’s approval of Clark Development Corporation’s request was merely conditional on
its submission of the retainership contract. Clark Development Corporation’s failure to
submit the retainership contract resulted in itsfailure to securea final approval.

The Commission on Audit did not

commit grave abuse of discretion in
disallowing the payment to
petitioner on the basis of quantum
meruit

When Government Corporate Counsel Devanadera denied Clark Development

Corporation’s request for final approval of its legal services contracts, she, however,
allowed the payment to petitioner for legal services already rendered on a quantum
meruitbasis.83

Respondents disallowed Clark Development Corporation from paying petitioner on this

basis as the contract between them was executed "in clear violation of the provisions of
COA Circular No. 86-255 and OP Memorandum Circular No. 9[.]"84 It then ruled that the
retainership contract between them should be deemed a private contract for which the
officials of Clark Development Corporation should be liable, citing Section 103 85 of
Presidential Decree No. 1445, otherwise known as the Government Auditing Code of the
Philippines.86

In National Power Corporation v. Heirs of Macabangkit Sangkay, quantum meruit:87

— literally meaning as much as he deserves — is used as basis for determining an

attorney’s professional fees in the absence of an express agreement. The recovery
ofattorney’s fees on the basis of quantum meruitis a device that prevents an unscrupulous
client from running away with the fruits of the legal services of counsel without paying for
it and also avoids unjust enrichment on the part of the attorney himself. An attorney must
show that he is entitled to reasonable compensation for the effort in pursuing the client’s
cause, taking into account certain factors in fixing the amount of legal fees.88

Here, the Board of Directors, acting on behalf of Clark Development Corporation,

contracted the services of petitioner, without the necessary prior approvals required by
the rules and regulations for the hiring of private counsel. Their actions were clearly
unauthorized.

It was, thus, erroneous for Government Corporate Counsel Devanadera to bind Clark
Development Corporation, a government entity, to pay petitioner on a quantum meruit
basis for legal services, which were neither approved nor authorized by the government.
Even granting that petitioner ought to be paid for services rendered, it should not be the
government’s liability, but that of the officials who engaged the services of petitioner
without the required authorization. The amendment of Commission on

Audit Circular No. 86-255 by

Commission on Audit Circular No.
98-002 created a gap in the law

Commission on Audit Circular No. 86-255 dated April 2, 1986 previously stated that:
[a]ccordingly, it is hereby directed that, henceforth, the payment out of public funds of
retainer fees to private law practitioners who are so hired or employed without the prior
written conformity and acquiescence of the Solicitor General or the Government Corporate
Counsel, as the case may be, as well as the written concurrence of the Commission on
Audit shall be disallowed in audit and the same shall be a personal liability of the officials
concerned. (Emphasis supplied) However, when Commission on Audit Circular No. 86-255
was amended by Commission on Audit Circular No. 98-002 on June 9, 1998, it failed to
retain the liability of the officials who violated the circular.89 This gap in the law paves the
way for both the erring officials of the government owned and controlled corporations to
disclaim any responsibility for the liabilities owing to private practitioners.

It cannot be denied that petitioner rendered legal services to Clark Development

Corporation.1âwphi1 It assisted the corporation in litigating numerous labor
cases90 during the period of its engagement. It would be an injustice for petitioner not to
be compensated for services rendered even if the engagement was unauthorized.

The fulfillment of the requirements of the rules and regulations was Clark Development
Corporation’s responsibility, not petitioner’s. The Board of Directors, by its irresponsible
actions, unjustly procured for themselves petitioner’s legal services without compensation.

To fill the gap created by the amendment of Commission on Audit Circular No. 86-255,
respondents correctly held that the officials of Clark, Development Corporation who
violated the provisions of Circular No. 98-002 and Circular No. 9 should be personally
liable to pay the legal fees of petitioner, as previously provided for in Circular No. 86-255.

This finds support in Section 103 of the Government Auditing Code of the
Philippines,91 which states:
SEC. 103. General liability for unlawful expenditures. -Expenditures of government funds
or uses of government property in violation of law or regulations shall be a personal liability
of the official or employee found to be directly responsible therefor.

This court has also previously held in Gumaru v. Quirino State College92 that:

the fee of the lawyer who rendered legal service to the government in lieu of the OSG or
the OGCC is the personal liability of the government official who hired his services without
the prior written conformity of the OSG or the OGCC, as the case may be.93

WHEREFORE, the petition is DISMISSED without prejudice to petitioner filing another

action against the proper parties.

SO ORDERED.
A.C. No. 10573 January 13, 2015

FERNANDO W. CHU, Complainant,

vs.
ATTY. JOSE C. GUICO, JR., Respondent.

DECISION

PER CURIAM:

Fernando W. Chu invokes the Court's disciplinary authority in resolving this disbarment
complaint against his former lawyer, respondent Atty. Jose C. Guico, Jr., whom he has
accused of gross misconduct.

Antecedents

Chu retained Atty. Guico as counsel to handle the labor disputes involving his company,
CVC San Lorenzo Ruiz Corporation (CVC).1 Atty. Guico’s legal services included handling
a complaint for illegal dismissal brought against CVC (NLRC Case No. RAB-III-08-9261-
05 entitled Kilusan ng Manggagawang Makabayan (KMM) Katipunan CVC San Lorenzo Ruiz
Chapter, Ladivico Adriano, et al. v. CVC San Lorenzo Ruiz Corp. and Fernando Chu). 2 On
September 7, 2006, Labor Arbiter Herminio V. Suelo rendered a decision adverse to
CVC.3 Atty. Guico filed a timely appeal in behalf of CVC.

According to Chu, during a Christmas party held on December 5, 2006 at Atty. Guico’s
residence in Commonwealth, Quezon City, Atty. Guico asked him to prepare a substantial
amount of money to be given to the NLRC Commissioner handling the appeal to insure a
favorable decision.4 On June 10, 2007, Chu called Atty. Guico to inform him that he had
raised ₱300,000.00 for the purpose. Atty. Guico told him to proceed to his office at No.
48 Times Street, Quezon City, and togive the money to his assistant, Reynaldo (Nardo)
Manahan. Chu complied, and later on called Atty. Guico to confirm that he had delivered
the money to Nardo. Subsequently, Atty. Guico instructed Chu to meet him on July 5,
2007 at the UCC Coffee Shop on T. Morato Street, Quezon City. Atthe UCC Coffee Shop,
Atty. Guico handed Chu a copy of an alleged draft decision of the NLRC in favor of
CVC.5 The draft decision6 was printed on the dorsal portion of used paper apparently
emanating from the office of Atty. Guico. On that occasion, the latter told Chu to raise
another ₱300,000.00 to encourage the NLRC Commissioner to issue the decision. But Chu
could only produce ₱280,000.00, which he brought to Atty. Guico’s office on July 10, 2007
accompanied by his son, Christopher Chu, and one Bonifacio Elipane. However, it was
Nardo who received the amount without issuing any receipt.7

Chu followed up on the status of the CVC case with Atty. Guico in December 2007.
However, Atty. Guico referred him to Nardo who in turn said that he would only know the
status after Christmas. On January 11, 2008, Chu again called Nardo, who invited him to
lunch at the Ihaw Balot Plaza in Quezon City. Once there, Chu asked Nardo if the NLRC
Commissioner had accepted the money, but Nardo replied in the negative and simply told
Chu to wait. Nardo assured that the money was still with Atty. Guico who would return it
should the NLRC Commissioner not accept it.8
On January 19, 2009, the NLRC promulgated a decision adverse to CVC.9 Chu confronted
Atty. Guico, who in turn referred Chu to Nardo for the filing of a motion for reconsideration.
After the denial of the motion for reconsideration, Atty. Guico caused the preparation and
filing of an appeal in the Court of Appeals. Finally, Chu terminated Atty. Guico as legal
counsel on May 25, 2009.10

In his position paper,11 Atty. Guico described the administrative complaint as replete with
lies and inconsistencies, and insisted that the charge was only meant for harassment. He
denied demanding and receiving money from Chu, a denial that Nardo corroborated with
his own affidavit.12 He further denied handing to Chu a draft decision printed on used
paper emanating from his office, surmising that the used paper must have been among
those freely lying around in his office that had been pilfered by Chu’s witnesses in the
criminal complaint he had handled for Chu.13

Findings and Recommendation of the

IBP Board of Governors

IBP Commissioner Cecilio A.C. Villanueva found that Atty. Guico had violated Rules 1.01
and 1.02, Canon I of the Code of Professional Responsibility for demanding and receiving
₱580,000.00 from Chu; and recommended the disbarment of Atty. Guico in view of his
act of extortion and misrepresentation that caused dishonor to and contempt for the legal
profession.14

On February 12, 2013, the IBP Board of Governors adopted the findings of IBP
Commissioner Villanueva in its Resolution No. XX-2013-87,15 but modified the
recommended penalty of disbarment to three years suspension, viz.:

RESOLVED to ADOPT and APPROVE, as it is hereby unanimously ADOPTED and APPROVED,

with modification, the Report and Recommendation of the Investigating Commissioner in
the above-entitled case, herein made part of this Resolution as Annex "A," and finding the
recommendation fully supported by the evidence on record and the applicable laws and
rules and considering Respondent’s violation of Canon 1, Rules 1.01 and 1.02 of the Code
of Professional Responsibility, Atty. Jose C. Guico, Jr. is hereby SUSPENDED from the
practice of law for three (3) years with Warning that a repetition of the same or similar
act shall be dealt with more severely and Ordered to Return the amount of Five Hundred
Eighty Thousand (₱580,000.00) Pesos with legal interest within thirty (30) days from
receipt of notice.

Atty. Guico moved for reconsideration,16 but the IBP Board of Governors denied his motion
for reconsideration on March 23, 2014 in Resolution No. XXI-2014-173.17

Neither of the parties brought a petition for review vis-à-vis Resolution No. XX-2013-87
and Resolution No. XXI-2014-173.

Issue

Did Atty. Guico violate the Lawyer’s Oath and Rules 1.01 and 1.02, Canon I of the Code
of Professional Responsibility for demanding and receiving ₱580,000.00 from Chu to
guarantee a favorable decision from the NLRC?
Ruling of the Court

In disbarment proceedings, the burden of proof rests on the complainant to establish

respondent attorney’s liability by clear, convincing and satisfactory evidence. Indeed, this
Court has consistently required clearly preponderant evidence to justify the imposition of
either disbarment or suspension as penalty.18

Chu submitted the affidavits of his witnesses,19 and presented the draft decision that Atty.
Guico had represented to him as having come from the NLRC. Chu credibly insisted that
the draft decision was printed on the dorsal portion of used paper emanating from Atty.
Guico’s office,20 inferring that Atty. Guico commonly printed documents on used paper in
his law office. Despite denying being the source of the draft decision presented by Chu,
Atty. Guico’s participation in the generation of the draft decision was undeniable. For one,
Atty. Guico impliedly admitted Chu’s insistence by conceding that the used paper had
originated from his office, claiming only that used paper was just "scattered around his
office."21 In that context, Atty. Guico’s attempt to downplay the sourcing of used paper
from his office was futile because he did not expressly belie the forthright statement of
Chu. All that Atty. Guico stated by way of deflecting the imputation was that the used
paper containing the draft decision could have been easily taken from his office by Chu’s
witnesses in a criminal case that he had handled for Chu,22 pointing out that everything
in his office, except the filing cabinets and his desk, was "open to the public xxx and just
anybody has access to everything found therein."23 In our view, therefore, Atty. Guico
made the implied admission because he was fully aware that the used paper had
unquestionably come from his office.

The testimony of Chu, and the circumstances narrated by Chu and his witnesses,
especially the act of Atty. Guico of presenting to Chu the supposed draft decision that had
been printed on used paper emanating from Atty. Guico’s office, sufficed to confirm that
he had committed the imputed gross misconduct by demanding and receiving
₱580,000.00 from Chu to obtain a favorable decision. Atty. Guico offered only his general
denial of the allegations in his defense, but such denial did not overcome the affirmative
testimony of Chu. We cannot but conclude that the production of the draft decision by
Atty. Guico was intended to motivate Chu to raise money to ensure the chances of
obtaining the favorable result in the labor case. As such, Chu discharged his burden of
proof as the complainant to establish his complaint against Atty. Guico. In this
administrative case, a fact may be deemed established if it is supported by substantial
evidence, or that amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion.24

What is the condign penalty for Atty. Guico?

In taking the Lawyer’s Oath, Atty. Guico bound himself to:

x x x maintain allegiance to the Republic of the Philippines; x x x support its Constitution

and obey the laws as well as the legal orders of the duly constituted authorities therein;
x x x do no falsehood, nor consent to the doing of any in court; x x x delay no man for
money or malice x x x. The Code of Professional Responsibility echoes the Lawyer’s Oath,
to wit:
CANON 1 — A lawyer shall uphold the constitution, obey the laws of the land and promote
respect for law and for legal processes.1âwphi1

Rule 1.01 — A lawyer shall not engage in unlawful, dishonest, immoral or deceitful
conduct.

Rule 1.02 — A lawyer shall not counsel or abet activities aimed at defiance of the law or
at lessening confidence in the legal system.

The sworn obligation to respect the law and the legal processes under the Lawyer’s Oath
and the Code of Professional Responsibility is a continuing condition for every lawyer to
retain membership in the Legal Profession. To discharge the obligation, every lawyer
should not render any service or give advice to any client that would involve defiance of
the very laws that he was bound to uphold and obey,25 for he or she was always bound
as an attorney to be law abiding, and thus to uphold the integrity and dignity of the Legal
Profession.26 Verily, he or she must act and comport himself or herself in such a manner
that would promote public confidence in the integrity of the Legal Profession.27 Any lawyer
found to violate this obligation forfeits his or her privilege to continue such membership
in the legal profession.

Atty. Guico willingly and wittingly violated the law in appearing to counsel Chu to raise the
large sums of money in order to obtain a favorable decision in the labor case. He thus
violated the law against bribery and corruption. He compounded his violation by actually
using said illegality as his means of obtaining a huge sum from the client that he soon
appropriated for his own personal interest. His acts constituted gross dishonesty and
deceit, and were a flagrant breach of his ethical commitments under the Lawyer’s Oath
not to delay any man for money or malice; and under Rule 1.01 of the Code of Professional
Responsibility that forbade him from engaging in unlawful, dishonest, immoral or deceitful
conduct. His deviant conduct eroded the faith of the people in him as an individual lawyer
as well as in the Legal Profession as a whole. In doing so, he ceased to be a servant of
the law.

Atty. Guico committed grave misconduct and disgraced the Legal Profession. Grave
misconduct is "improper or wrong conduct, the transgression of some established and
definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies
a wrongful intent and not mere error of judgment."28 There is no question that any gross
misconduct by an attorney in his professional or private capacity renders him unfit to
manage the affairs of others, and is a ground for the imposition of the penalty of
suspension or disbarment, because good moral character is an essential qualification for
the admission of an attorney and for the continuance of such privilege.29

Accordingly, the recommendation of the IBP Board of Governors to suspend him from the
practice of law for three (3) years would be too soft a penalty. Instead, he should be
disbarred,30 for he exhibited his unworthiness of retaining his membership in the legal
profession. As the Court has reminded in Samonte v. Abellana:31

Disciplinary proceedings against lawyers are designed to ensure that whoever is granted
the privilege to practice law in this country should remain faithful to the Lawyer’s Oath.
Only thereby can lawyers preserve their fitness to remain as members of the Law
Profession. Any resort to falsehood or deception, including adopting artifices to cover up
one’s misdeeds committed against clients and the rest of the trusting public, evinces an
unworthiness to continue enjoying the privilege to practice law and highlights the unfitness
to remain a member of the Law Profession. It deserves for the guilty lawyer stern
disciplinary sanctions.

Lastly, the recommendation of the IBP Board of Governors that Atty. Guico be ordered to
return the amount of ₱580,000.00 to Chu is well-taken. That amount was exacted by Atty.
Guico from Chu in the guise of serving the latter’s interest as the client. Although the
purpose for the amount was unlawful, it would be unjust not to require Atty. Guico to fully
account for and to return the money to Chu. It did not matter that this proceeding is
administrative in character, for, as the Court has pointed out in Bayonla v. Reyes:32

Although the Court renders this decision in an administrative proceeding primarily to exact
the ethical responsibility on a member of the Philippine Bar, the Court’s silence about the
respondent lawyer’s legal obligation to restitute the complainant will be both unfair and
inequitable. No victim of gross ethical misconduct concerning the client’s funds or property
should be required to still litigate in another proceeding what the administrative
proceeding has already established as the respondent’s liability. x x x

ACCORDINGLY, the Court FINDS and DECLARES respondent ATTY. JOSE S. GUICO, JR.
GUILTY of the violation of the Lawyer’s Oath, and Rules 1.01 and 1.02, Canon I of the
Code of Professional Responsibility, and DISBARS him from membership in the Integrated
Bar of the Philippines. His name is ORDERED STRICKEN from the Roll of Attorneys.

Let copies of this Decision be furnished to the Office of the Bar Confidant, to be appended
to Atty. Guico’s personal record as an attorney; to the Integrated Bar of the Philippines;
and to all courts and quasi-judicial offices in the country for their information and
guidance.

SO ORDERED.
A.C. No. 5067 June 29, 2015

CORAZON M. DALUPAN, Complainant,

vs.
ATTY. GLENN C. GACOTT1, Respondent.

DECISION

VILLARAMA, JR., J.:

Before us is a petition for review under Rule 139-B, Section 12 (c) of the Rules of Court
assailing Resolution No. XVII-20072 dated March 17, 2007 and Resolution No. XIX-
201005443 dated October 8, 2010 of the Board of Governors of the Integrated Bar of the
Philippines (IBP) which adopted and approved the Report and Recommendation 4 dated
December 12, 2006 of the Investigating Commissioner of the Commission on Bar
Discipline of the IBP. Although the IBP Board of Governors dismissed the complaint for
disbarment filed against the respondent, it ordered the latter to return the payment of the
attorney’s fee to the complainant in the amount of ₱5,000. This order to return the
attorney’s fee is subject of the present petition.

The salient facts of the case follow:

In her affidavit-complaint5 dated April 20, 1999, the complainant claimed that she was a
defendant in a criminal case for grave slander pending before the Municipal Trial Court
(MTC) of Puerto Princesa City, Palawan. Meanwhile, her son, Wilmer Dalupan, was also a
defendant in a separate criminal case for grave slander and malicious mischief pending
before the same court. In order to represent the complainant and her son, the complainant
engaged the legal services of the respondent who then charged an acceptance fee of
₱10,000.

On August 20, 1996, the complainant paid the respondent ₱5,000 as initial payment for
his acceptance fee.

On August 27, 1996, the complainant requested the respondent to draft a Motion to
Reduce Bail Bond. However, the respondent allegedly denied the request and claimed that
it was beyond the scope of his retainer services. Thus, the complainant alleged that she
caused a certain Rolly Calbento to draft the same which was however signed by the
respondent.

On January 31, 1997, the complainant paid the respondent the remaining balance of
₱5,000 for his acceptance fee. When the complainant asked for an Official Receipt from
the respondent, the latter refused saying that there was no need for the issuance of a
receipt. On that same day, the complainant also paid the respondent ₱500 for his
appearance fee in the preliminary conference and arraignment which occurred on the
same day.

Thereafter, the complainant alleged that the respondent neglected his duties as counsel
and failed to attend any of the hearings before the MTC. In view of the respondent’s
repeated absences before the MTC, Judge Jocelyn S. Dilig issued an Order which appointed
a counsel de oficio to represent the complainant.

Aggrieved, the complainant filed the instant complaint for disbarment against the
respondent.

On the other hand, in his comment6, the respondent denied all the allegations of the
complainant.

The respondent allege that the complainant approached him and represented herself as
an indigent party in the following cases for which she sought to engage the legal services
of the respondent: (1) Criminal Case No. 12586, People of the Philippines v. Corazon
Dalupan, et al. for Grave Slander, (2) Criminal Case No. 12585, People of the Philippines
v. Wilmer Dalupan for Malicious Mischief, (3) I.S. No. 96-1104, Custodio Family v. Cesar
Dalupan, et al. for Frustrated Murder, (4) I.S. No. 97-54, Dalupan Family v. Romulo
Custodio, et al. for Physical Injuries, and (5) I.S. No. 9760 Dalupan Family v. Romulo
Custodio for Frustrated Murder. The respondent agreed to represent the complainant in
the aforementioned cases subject to the payment of an acceptance fee of ₱5,000 per case
and an appearance fee of ₱500 for each court appearance.

On August 20, 1996, the complainant paid the respondent ₱5,000 for his acceptance fee.

On August 27, 1996, the respondent filed a Motion for Reduction of Bail in favor of the
complainant before the MTC of Puerto Princesa City. On that same day, the complainant
proceeded to the law office of the respondent and demanded that the latter negotiate with
the MTC judge to ensure the grant of the Motion of Bail. When the respondent refused the
demand of the complainant, the latter replied at the top of her voice: "Binabayaran kita,
bakit hindi mo ginagawa ang gusto ko?" The respondent answered her with, "Hindi po
lahat ng gusto ninyo ay gagawin ko, sa tama lamang po tayo, abogado po ninyo ako, hindi
ako fixer."7 This irked the complainant who then made verbal threats that she will replace
the respondent with a certain Atty. Roland Pay who held office nearby. However, when
the MTC of Puerto Princesa City eventually ruled in favor of the complainant and granted
the motion, the latter revoked her threat that she will replace the respondent.

On August 19, 1997, the MTC of Puerto Princesa City issued a Notice of Hearing to the
complainant and her son Wilmer Dalupan which ordered them to appear before the court
on September 9, 1997 in connection with their criminal cases pending therein. However,
the respondent failed to attend the scheduled hearing as he allegedly failed to receive a
copy of the Notice of Hearing. Thus, in his written explanation dated October 7, 1997, the
respondent attributed his failure to appear before the MTC to the inefficiency of the process
server of the said court.

On October 10, 1997, the complainant told the respondent that she was terminating the
latter’s services on the ground of loss of trust and confidence. Furthermore, the
complainant also told the respondent that she engaged the services of Atty. Roland Pay
to replace the respondent. As a result, on October 30, 1997, the complainant withdrew all
her records from the law office of the respondent.
On January 29, 1998, the MTC of Puerto Princesa City issued an Order which relieved the
respondent of any responsibility in Criminal Case Nos. 12585 and 12586:

Acting on what the counsel of record of all the accused in the above-entitled cases call
"Compliance", where obvious on the face of which is his desire to withdraw as Counsel,
and it appearing that said intention to withdraw is not only with the full conformity of all
the accused but at their own initiative, Atty. Glenn Gacott is hereby relieved of any
responsibility in the further prosecution of the above-captioned cases.8

In view of the above Order, the respondent argued that he was not guilty of abandonment
or neglect of duty because it was the complainant who willfully terminated his services
even without fault or negligence on his part.

We referred this case to the IBP for its investigation, report, and recommendation.

On December 12, 2006, Investigating Commissioner Wilfredo E.J.E Reyes recommended

the dismissal of the complaint for disbarment against the respondent. At the same time,
he also recommended that the respondent return the payment of the attorney’s fee to the
complainant in the amount of ₱5,000.9

The Investigating Commissioner opined that the respondent cannot be held liable for
abandonment or neglect of duty because it was the complainant who discharged the
respondent for loss of trust and confidence. This was confirmed by the act of the
complainant in withdrawing all her records from the law office of the respondent.
Furthermore, the Investigating Commissioner said that absent evidence showing that the
respondent committed abandonment or neglect of duty, the presumption of regularity
should prevail in favor of the respondent.

Although there was no evidence to support the claim of the complainant that she paid the
respondent the remaining balance of ₱5,000 as acceptance fee and an appearance fee of
₱500 on January 31, 1997, the Investigating Commissioner gave credence to an Official
Receipt dated August 20, 1996 which proved that the complainant indeed paid the
respondent an amount of ₱5,000. However, the Investigating Commissioner found that
the respondent did not perform any substantial legal work on behalf of the complainant.
For this reason, and in the interest of justice, the Investigating Commissioner
recommended that the respondent return the amount of ₱5,000 to the complainant.

On March 17, 2007, the IBP Board of Governors passed Resolution No. XVII-2007-115
which adopted and approved in toto the Report and Recommendation of the Investigating
Commissioner.

On October 8, 2010, the IBP Board of Governors passed Resolution No. XIX-2010-544
which denied the Motion for Reconsideration dated July 27, 2007 filed by the respondent.

Hence, the present petition10 which raises the sole issue of whether the respondent should
return the payment of the attorney’s fee to the complainant in the amount of ₱5,000.

Firstly, the respondent argued that when the MTC of Puerto Princesa City issued the Order
dated January 29, 1998 which relieved the respondent of any responsibility in Criminal
Case Nos. 12585 and 12586, the trial court did not require the respondent to reimburse
the payment of the attorney’s fee to the complainant. Thus, the IBP Board of Governors
exceeded its authority in ordering the respondent to return such fees to the complainant.

Secondly, the respondent argued that a plain reading of the Official Receipt dated August
20, 1996 would reveal that the parties intended the payment of ₱5,000 to serve as
acceptance fee which is different from attorney’s fee. According to the respondent, the
acceptance fee corresponds to the opportunity cost incurred by the lawyer for not
representing other potential clients due to a conflict of interest with the present client.
Thus, the payment of acceptance fee to the lawyer does not depend on the latter’s
performance of legal services.

Since the complainant failed to file any comment on the petition for review, we proceed
to resolve the sole issue raised, and rule in favor of the respondent.

We find that the respondent did not commit any fault or negligence in the performance of
his obligations under the retainer agreement which was wilfully terminated by the
complainant on the ground of loss of trust and confidence. As held by the Investigating
Commissioner, the evidence on record shows that the respondent is not liable for
abandonment or neglect of duty.

However, we disagree with the conclusion of the Investigating Commissioner that the
respondent should return the payment of the attorney’s fee to the complainant in the
amount of ₱5,000.

Firstly, the Investigating Commissioner seriously erred in referring to the amount to be

returned by the respondent as attorney’s fee. Relevantly, we agree with the respondent
that there is a distinction between attorney’s fee and acceptance fee.

It is well-settled that attorney’s fee is understood both in its ordinary and extraordinary
concept.11 In its ordinary sense, attorney’s fee refers to the reasonable compensation paid
to a lawyer by his client for legal services rendered. Meanwhile, in its extraordinary
concept, attorney’s fee is awarded by the court to the successful litigant to be paid by the
losing party as indemnity for damages.12 In the present case, the Investigating
Commissioner referred to the attorney’s fee in its ordinary concept.

On the other hand, acceptance fee refers to the charge imposed by the lawyer for merely
accepting the case. This is because once the lawyer agrees to represent a client, he is
precluded from handling cases of the opposing party based on the prohibition on conflict
of interest. Thus, the incurs an opportunity cost by merely accepting the case of the client
which is therefore indemnified by the payment of acceptance fee. Since the acceptance
fee only seeks to compensate the lawyer for the lost opportunity, it is not measured by
the nature and extent of the legal services rendered.

In the present case, based on a simple reading of the Official Receipt dated August 20,
1996, the parties clearly intended the payment of ₱5,000 to serve as acceptance fee of
the respondent, and not attorney’s fee. Moreover, both parties expressly claimed that they
intended such payment as the acceptance fee of the respondent. Absent any other
evidence showing a contrary intention of the parties, we find that the Investigating
Commissioner gravely erred in referring to the amount to be returned by the respondent
as attorney’s fee.

Since the Investigating Commissioner made an erroneous reference to attorney’s fee, he

therefore mistakenly concluded that the respondent should return the same as he did not
perform any substantial legal work on behalf of the complainant. As previously mentioned,
the payment of acceptance fee does not depend on the nature and extent of the legal
services rendered.

Secondly, the respondent did not commit any fault or negligence which would entail the
return of the acceptance fee.

Once a lawyer receives the acceptance fee for his legal services, he is expected to serve
his client with competence, and to attend to his client’s cause with diligence, care and
devotion.13 In Carino v. Atty. De Los Reyes,14 the respondent lawyer who failed to file a
complaint-affidavit before the prosecutor’s office, returned the ₱10,000 acceptance fee
paid to him. Moreover, he was admonished by the Court to be more careful in the
performance of his duty to his clients. Meanwhile, in Voluntad-Ramirez v. Baustista,15 we
ordered the respondent lawyer to return the ₱14,000 acceptance fee because he did
nothing to advance his client’s cause during the six-month period that he was engaged as
counsel.

In the present case, the complainant alleged that she requested the respondent to draft
a Motion to Reduce Bail Bond which was denied by the latter.1âwphi1 She also claimed
that the respondent failed to attend any of the hearing before the MTC. Thus, the
complainant filed the present complaint for disbarment on the ground of abandonment or
neglect of duty. On the other hand, the respondent denied the allegation that he failed to
draft the Motion to Reduce Bail Bond and submitted a copy of the MTC Order 16 dated
August 28, 1996 granting the motion to reduce bail. He also justified his failure to attend
the hearings before the MTC to the failure of the process server to provide him with a
Notice of Hearing.

Other than her bare allegations, the complainant failed to present any evidence to support
her claim that the respondent committed abandonment or neglect of duty. Thus, we are
constrained to affirm the factual findings of the Investigating Commissioner that the
presumption of regularity should prevail in favor of the respondent. Absent any fault or
negligence on the part of the respondent, we see no legal basis for the order of the
Investigating Commissioner to return the attorney’s fee (acceptance fee) of ₱5,000.

WHEREFORE, premises considered, the petition is hereby GRANTED. Resolution No. XVII-
2007-115 and Resolution No. XIX-2010-544 of the IBP Board of Governors insofar as they
ordered the respondent to return the attorney’s fee (acceptance fee) to the complainant
in the amount of Five Thousand Pesos (₱5,000) are REVERSED and SET ASIDE.

SO ORDERED.

MARTIN S. VILLARAMA, JR.

Associate Justice
WE CONCUR:
G.R. No. 173188 January 15, 2014

THE CONJUGAL PARTNERSHIP OF THE SPOUSES VICENTE CADAVEDO AND

BENITA ARCOY-CADAVEDO (both deceased), substituted by their heirs, namely:
HERMINA, PASTORA, Heirs of FRUCTUOSA, Heirs of RAQUEL, EVANGELINE,
VICENTE, JR., and ARMANDO, all surnamed CADAVEDO, Petitioners,
vs.
VICTORINO (VIC) T. LACAYA, married to Rosa Legados, Respondents.

DECISION

BRION, J.:

We solve in this Rule 45 petition for review on certiorari1 the challenge to the October 11,
2005 decision2 and the May 9, 2006 resolution3 of the Court of Appeals (CA) inPetitioners,
CA-G.R. CV No. 56948. The CA reversed and set aside the September 17, 1996
decision4 of the Regional Trial Court (RTC), Branch 10, of Dipolog City in Civil Case No.
4038, granting in part the complaint for recovery of possession of property filed by the
petitioners, the Conjugal Partnership of the Spouses Vicente Cadavedo and Benita Arcoy-
Cadavedo against Atty. Victorino (Vic) T. Lacaya, married to Rosa Legados (collectively,
the respondents).

The Factual Antecedents

The Spouses Vicente Cadavedo and Benita Arcoy-Cadavedo (collectively, the spouses
Cadavedo) acquired a homestead grant over a 230,765-square meter parcel of land known
as Lot 5415 (subject lot) located in Gumay, Piñan, Zamboanga del Norte. They were issued
Homestead Patent No. V-15414 on March 13, 1953andOriginal Certificate of Title No. P-
376 on July 2, 1953.On April30, 1955, the spouses Cadavedo sold the subject lot to the
spouses Vicente Ames and Martha Fernandez (the spouses Ames) Transfer Certificate of
Title (TCT) No. T-4792 was subsequently issued in the name of the spouses Ames.

The present controversy arose when the spouses Cadavedo filed an action 5 before the
RTC(then Court of First Instance) of Zamboanga City against the spouses Ames for sum
of money and/or voiding of contract of sale of homestead after the latter failed to pay the
balance of the purchase price. The spouses Cadavedo initially engaged the services of
Atty. Rosendo Bandal who, for health reasons, later withdrew from the case; he was
substituted by Atty. Lacaya.

On February 24, 1969, Atty. Lacaya amended the complaint to assert the nullity of the
sale and the issuance of TCT No. T-4792 in the names of the spouses Ames as gross
violation of the public land law. The amended complaint stated that the spouses Cadavedo
hired Atty. Lacaya on a contingency fee basis. The contingency fee stipulation specifically
reads:

10. That due to the above circumstances, the plaintiffs were forced to hire a lawyer on
contingent basis and if they become the prevailing parties in the case at bar, they will pay
the sum of ₱2,000.00 for attorney’s fees.6
In a decision dated February 1, 1972, the RTC upheld the sale of the subject lot to the
spouses Ames. The spouses Cadavedo, thru Atty. Lacaya, appealed the case to the CA.

On September 18, 1975, and while the appeal before the CAin Civil Case No. 1721was
pending, the spouses Ames sold the subject lot to their children. The spouses Ames’ TCT
No. T-4792 was subsequently cancelled and TCT No. T-25984was issued in their children’s
names. On October 11, 1976, the spouses Ames mortgaged the subject lot with the
Development Bank of the Philippines (DBP) in the names of their children.

On August 13, 1980, the CA issued itsdecision in Civil Case No. 1721,reversing the decision
of the RTC and declaring the deed of sale, transfer of rights, claims and interest to the
spouses Ames null and void ab initio. It directed the spouses Cadavedo to return the initial
payment and ordered the Register of Deeds to cancel the spouses Ames’ TCT No. T-4792
and to reissue another title in the name of the spouses Cadavedo. The case eventually
reached this Court via the spouses Ames’ petition for review on certiorari which this Court
dismissed for lack of merit.

Meanwhile, the spouses Ames defaulted in their obligation with the DBP. Thus, the DBP
caused the publication of a notice of foreclosure sale of the subject lot as covered by TCT
No. T-25984(under the name of the spouses Ames’ children). Atty. Lacaya immediately
informed the spouses Cadavedo of the foreclosure sale and filed an Affidavit of Third Party
Claim with the Office of the Provincial Sheriff on September 14, 1981.

With the finality of the judgment in Civil Case No. 1721,Atty. Lacaya filed on September
21, 1981 a motion for the issuance of a writ of execution.

On September 23, 1981,and pending the RTC’s resolution of the motion for the issuance
of a writ of execution, the spouses Ames filed a complaint7 before the RTC against the
spouses Cadavedo for Quieting of Title or Enforcement of Civil Rights due Planters in Good
Faith with prayer for Preliminary Injunction. The spouses Cadavedo, thru Atty. Lacaya,
filed a motion to dismiss on the ground of res judicata and to cancel TCT No. T-25984
(under the name of the spouses Ames’ children).

On October 16, 1981, the RTC granted the motion for the issuance of a writ of execution
in Civil Case No. 1721,andthe spouses Cadavedo were placed in possession of the subject
lot on October 24, 1981. Atty. Lacaya asked for one-half of the subject lot as attorney’s
fees. He caused the subdivision of the subject lot into two equal portions, based on area,
and selected the more valuable and productive half for himself; and assigned the other
half to the spouses Cadavedo.

Unsatisfied with the division, Vicente and his sons-in-law entered the portion assigned to
the respondents and ejected them. The latter responded by filing a counter-suit for forcible
entry before the Municipal Trial Court (MTC); the ejectment case was docketed as Civil
Case No. 215. This incident occurred while Civil Case No. 3352was pending.

On May 13, 1982, Vicente andAtty. Lacaya entered into an amicable settlement
(compromise agreement)8 in Civil Case No. 215 (the ejectment case), re-adjusting the
area and portion obtained by each. Atty. Lacaya acquired 10.5383 hectares pursuant to
the agreement. The MTC approved the compromise agreementin a decision dated June
10, 1982.

Meanwhile, on May 21, 1982, the spouses Cadavedo filed before the RTC an action against
the DBP for Injunction; it was docketed as Civil Case No. 3443 (Cadavedo v. DBP).The
RTC subsequently denied the petition, prompting the spouses Cadavedo to elevate the
case to the CAvia a petition for certiorari. The CA dismissed the petition in its decision of
January 31, 1984.

The records do not clearly disclose the proceedings subsequent to the CA decision in Civil
Case No. 3443. However, on August 18, 1988, TCT No. 41051was issued in the name of
the spouses Cadavedo concerning the subject lot.

On August 9, 1988, the spouses Cadavedo filed before the RTC an action 9 against the
respondents, assailing the MTC-approved compromise agreement. The case was docketed
as Civil Case No. 4038 and is the root of the present case. The spouses Cadavedo prayed,
among others, that the respondents be ejected from their one-half portion of the subject
lot; that they be ordered to render an accounting of the produce of this one-half portion
from 1981;and that the RTC fix the attorney’s fees on a quantum meruit basis, with due
consideration of the expenses that Atty. Lacaya incurred while handling the civil cases.

During the pendency of Civil Case No. 4038, the spouses Cadavedo executed a Deed of
Partition of Estate in favor of their eight children. Consequently, TCT No. 41051 was
cancelled and TCT No. 41690 was issued in the names of the latter. The records are not
clear on the proceedings and status of Civil Case No. 3352.

The Ruling of the RTC

In the September 17, 1996 decision10 in Civil Case No. 4038, the RTC declared the
contingent fee of 10.5383 hectares as excessive and unconscionable. The RTC reduced
the land area to 5.2691 hectares and ordered the respondents to vacate and restore the
remaining 5.2692hectares to the spouses Cadavedo.

The RTC noted that, as stated in the amended complaint filed by Atty. Lacaya, the agreed
attorney’s fee on contingent basis was ₱2,000.00. Nevertheless, the RTC also pointed out
that the parties novated this agreement when they executed the compromise agreement
in Civil Case No. 215 (ejectment case), thereby giving Atty. Lacaya one-half of the subject
lot. The RTC added that Vicente’s decision to give Atty. Lacaya one-half of the subject lot,
sans approval of Benita, was a valid act of administration and binds the conjugal
partnership. The RTC reasoned out that the disposition redounded to the benefit of the
conjugal partnership as it was done precisely to remunerate Atty. Lacaya for his services
to recover the property itself.

These considerations notwithstanding, the RTC considered the one-half portion of the
subject lot, as Atty. Lacaya’s contingent fee,excessive, unreasonable and unconscionable.
The RTC was convinced that the issues involved in Civil Case No. 1721were not sufficiently
difficult and complicated to command such an excessive award; neither did it require Atty.
Lacaya to devote much of his time or skill, or to perform extensive research.
Finally, the RTC deemed the respondents’ possession, prior to the judgment, of the excess
portion of their share in the subject lot to be in good faith. The respondents were thus
entitled to receive its fruits.

On the spouses Cadavedo’s motion for reconsideration, the RTC modified the decision in
its resolution11 dated December 27, 1996. The RTC ordered the respondents to account
for and deliver the produce and income, valued at ₱7,500.00 per annum, of the
5.2692hectares that the RTC ordered the spouses Amesto restore to the spouses
Cadavedo, from October 10, 1988 until final restoration of the premises.

The respondents appealed the case before the CA.

The Ruling of the CA

In its decision12 dated October 11, 2005, the CA reversed and set aside the RTC’s
September 17, 1996 decision and maintained the partition and distribution of the subject
lot under the compromise agreement. In so ruling, the CA noted the following facts: (1)
Atty. Lacaya served as the spouses Cadavedo’s counsel from 1969 until 1988,when the
latter filed the present case against Atty. Lacaya; (2) during the nineteen (19) years of
their attorney-client relationship, Atty. Lacaya represented the spouses Cadavedo in three
civil cases –Civil Case No. 1721, Civil Case No. 3352, and Civil Case No. 3443; (3) the
first civil case lasted for twelve years and even reached this Court, the second civil case
lasted for seven years, while the third civil case lasted for six years and went all the way
to the CA;(4) the spouses Cadavedo and Atty. Lacaya entered into a compromise
agreement concerning the division of the subject lot where Atty. Lacaya ultimately agreed
to acquire a smaller portion; (5) the MTC approved the compromise agreement; (6) Atty.
Lacaya defrayed all of the litigation expenses in Civil Case No. 1721; and (7) the spouses
Cadavedo expressly recognized that Atty. Lacaya served them in several cases.

Considering these established facts and consistent with Canon 20.01 of the Code of
Professional Responsibility (enumerating the factors that should guide the determination
of the lawyer’s fees), the CA ruled that the time spent and the extent of the services Atty.
Lacaya rendered for the spouses Cadavedo in the three cases, the probability of him losing
other employment resulting from his engagement, the benefits resulting to the spouses
Cadavedo, and the contingency of his fees justified the compromise agreement and
rendered the agreed fee under the compromise agreement reasonable.

The Petition

In the present petition, the petitioners essentially argue that the CA erred in: (1) granting
the attorney’s fee consisting of one-half or 10.5383 hectares of the subject lot to Atty.
Lacaya, instead of confirming the agreed contingent attorney’s fees of ₱2,000.00; (2) not
holding the respondents accountable for the produce, harvests and income of the 10.5383-
hectare portion (that they obtained from the spouses Cadavedo) from 1988 up to the
present; and (3) upholding the validity of the purported oral contract between the spouses
Cadavedo and Atty. Lacaya when it was champertous and dealt with property then still
subject of Civil Case No. 1721.13
The petitioners argue that stipulations on a lawyer’s compensation for professional
services, especially those contained in the pleadings filed in courts, control the amount of
the attorney’s fees to which the lawyer shall be entitled and should prevail over oral
agreements. In this case, the spouses Cadavedo and Atty. Lacaya agreed that the latter’s
contingent attorney’s fee was ₱2,000.00 in cash, not one-half of the subject lot. This
agreement was clearly stipulated in the amended complaint filed in Civil Case No. 1721.
Thus, Atty. Lacaya is bound by the expressly stipulated fee and cannot insist on unilaterally
changing its terms without violating their contract.

The petitioners add that the one-half portion of the subject lot as Atty. Lacaya’s contingent
attorney’s fee is excessive and unreasonable. They highlight the RTC’s observations and
argue that the issues involved in Civil Case No. 1721, pursuant to which the alleged
contingent fee of one-half of the subject lot was agreed by the parties, were not novel and
did not involve difficult questions of law; neither did the case require much of Atty.
Lacaya’s time, skill and effort in research. They point out that the two subsequent civil
cases should not be considered in determining the reasonable contingent fee to which
Atty. Lacaya should be entitled for his services in Civil Case No. 1721,as those cases had
not yet been instituted at that time. Thus, these cases should not be considered in fixing
the attorney’s fees. The petitioners also claim that the spouses Cadavedo concluded
separate agreements on the expenses and costs for each of these subsequent cases, and
that Atty. Lacaya did not even record any attorney’s lien in the spouses Cadavedo’s TCT
covering the subject lot.

The petitioners further direct the Court’s attention to the fact that Atty. Lacaya,in taking
over the case from Atty. Bandal, agreed to defray all of the litigation expenses in exchange
for one-half of the subject lot should they win the case. They insist that this agreement is
a champertous contract that is contrary to public policy, prohibited by law for violation of
the fiduciary relationship between a lawyer and a client.

Finally, the petitioners maintain that the compromise agreement in Civil Case No. 215
(ejectment case) did not novate their original stipulated agreement on the attorney’s fees.
They reason that Civil Case No. 215 did not decide the issue of attorney’s fees between
the spouses Cadavedo and Atty. Lacaya for the latter’s services in Civil Case No. 1721.

The Case for the Respondents

In their defense,14 the respondents counter that the attorney’s fee stipulated in the
amended complaint was not the agreed fee of Atty. Lacaya for his legal services. They
argue that the questioned stipulation for attorney’s fees was in the nature of a penalty
that, if granted, would inure to the spouses Cadavedo and not to Atty. Lacaya.

The respondents point out that: (1) both Vicente and Atty. Lacaya caused the survey and
subdivision of the subject lot immediately after the spouses Cadavedo reacquired its
possession with the RTC’s approval of their motion for execution of judgment in Civil Case
No. 1721; (2) Vicente expressly ratified and confirmed the agreement on the contingent
attorney’s fee consisting of one-half of the subject lot; (3) the MTC in Civil Case No. 215
(ejectment case) approved the compromise agreement; (4) Vicente is the legally
designated administrator of the conjugal partnership, hence the compromise agreement
ratifying the transfer bound the partnership and could not have been invalidated by the
absence of Benita’s acquiescence; and (5) the compromise agreement merely inscribed
and ratified the earlier oral agreement between the spouses Cadavedo and Atty. Lacaya
which is not contrary to law, morals, good customs, public order and public policy.

While the case is pending before this Court, Atty. Lacaya died.15 He was substituted by his
wife -Rosa -and their children –Victoriano D.L. Lacaya, Jr., Rosevic Lacaya-Ocampo,
Reymar L. Lacaya, Marcelito L. Lacaya, Raymundito L. Lacaya, Laila Lacaya-Matabalan,
Marivic Lacaya-Barba, Rosalie L. Lacaya and Ma. Vic-Vic Lacaya-Camaongay.16

The Court’s Ruling

We resolve to GRANT the petition.

The subject lot was the core of four successive and overlapping cases prior to the present
controversy. In three of these cases, Atty. Lacaya stood as the spouses Cadavedo’s
counsel. For ease of discussion, we summarize these cases (including the dates and
proceedings pertinent to each) as follows:

Civil Case No. 1721 – Cadavedo v. Ames (Sum of money and/or voiding of contract of sale
of homestead), filed on January 10, 1967. The writ of execution was granted on October
16, 1981.

Civil Case No. 3352 – Ames v. Cadavedo (Quieting of Title and/or Enforcement of Civil
Rights due Planters in Good Faith with Application for Preliminary injunction), filed on
September 23, 1981.

Civil Case No. 3443 – Cadavedo v. DBP (Action for Injunction with Preliminary Injunction),
filed on May 21, 1982.

Civil Case No. 215 –Atty. Lacaya v. Vicente Cadavedo, et. al. (Ejectment Case), filed
between the latter part of 1981 and early part of 1982. The parties executed the
compromise agreement on May 13, 1982.

Civil Case No. 4038 –petitioners v. respondents (the present case).

The agreement on attorney’s fee

consisting of one-half of the subject
lot is void; the petitioners are entitled
to recover possession

The core issue for our resolution is whether the attorney’s fee consisting of one-half of the
subject lot is valid and reasonable, and binds the petitioners. We rule in the NEGATIVE for
the reasons discussed below.

A. The written agreement providing for

a contingent fee of ₱2,000.00 should prevail
over the oral agreement providing for one-
half of the subject lot
The spouses Cadavedo and Atty. Lacaya agreed on a contingent fee of ₱2,000.00 and not,
as asserted by the latter, one-half of the subject lot. The stipulation contained in the
amended complaint filed by Atty. Lacaya clearly stated that the spouses Cadavedo hired
the former on a contingency basis; the Spouses Cadavedo undertook to pay their lawyer
₱2,000.00 as attorney’s fees should the case be decided in their favor.

Contrary to the respondents’ contention, this stipulation is not in the nature of a penalty
that the court would award the winning party, to be paid by the losing party. The
stipulation is a representation to the court concerning the agreement between the spouses
Cadavedo and Atty. Lacaya, on the latter’s compensation for his services in the case; it is
not the attorney’s fees in the nature of damages which the former prays from the court
as an incident to the main action.

At this point, we highlight that as observed by both the RTC and the CA and agreed as
well by both parties, the alleged contingent fee agreement consisting of one-half of the
subject lot was not reduced to writing prior to or, at most, at the start of Atty. Lacaya’s
engagement as the spouses Cadavedo’s counsel in Civil Case No. 1721.An agreement
between the lawyer and his client, providing for the former’s compensation, is subject to
the ordinary rules governing contracts in general. As the rules stand, controversies
involving written and oral agreements on attorney’s fees shall be resolved in favor of the
former.17 Hence, the contingency fee of ₱2,000.00 stipulated in the amended complaint
prevails over the alleged oral contingency fee agreement of one-half of the subject lot.

B. The contingent fee agreement between

the spouses Cadavedo and Atty. Lacaya,
awarding the latter one-half of the subject
lot, is champertous

Granting arguendo that the spouses Cadavedo and Atty. Lacaya indeed entered into an
oral contingent fee agreement securing to the latter one-half of the subject lot, the
agreement is nevertheless void.

In their account, the respondents insist that Atty. Lacaya agreed to represent the spouses
Cadavedo in Civil Case No. 1721 and assumed the litigation expenses, without providing
for reimbursement, in exchange for a contingency fee consisting of one-half of the subject
lot. This agreement is champertous and is contrary to public policy.18

Champerty, along with maintenance (of which champerty is an aggravated form), is a

common law doctrine that traces its origin to the medieval period.19 The doctrine of
maintenance was directed "against wanton and in officious intermeddling in the disputes
of others in which the intermeddler has no interest whatever, and where the assistance
rendered is without justification or excuse."20 Champerty, on the other hand, is
characterized by "the receipt of a share of the proceeds of the litigation by the
intermeddler."21 Some common law court decisions, however, add a second factor in
determining champertous contracts, namely, that the lawyer must also, "at his own
expense maintain, and take all the risks of, the litigation."22

The doctrines of champerty and maintenance were created in response "to medieval
practice of assigning doubtful or fraudulent claims to persons of wealth and influence in
the expectation that such individuals would enjoy greater success in prosecuting those
claims in court, in exchange for which they would receive an entitlement to the spoils of
the litigation."23 "In order to safeguard the administration of justice, instances of
champerty and maintenance were made subject to criminal and tortuous liability and a
common law rule was developed, striking down champertous agreements and contracts
of maintenance as being unenforceable on the grounds of public policy."24

In this jurisdiction, we maintain the rules on champerty, as adopted from American

decisions, for public policy considerations.25 As matters currently stand, any agreement
by a lawyer to "conduct the litigation in his own account, to pay the expenses thereof or
to save his client therefrom and to receive as his fee a portion of the proceeds of the
judgment is obnoxious to the law."26 The rule of the profession that forbids a lawyer from
contracting with his client for part of the thing in litigation in exchange for conducting the
case at the lawyer’s expense is designed to prevent the lawyer from acquiring an interest
between him and his client. To permit these arrangements is to enable the lawyer to
"acquire additional stake in the outcome of the action which might lead him to consider
his own recovery rather than that of his client or to accept a settlement which might take
care of his interest in the verdict to the sacrifice of that of his client in violation of his duty
of undivided fidelity to his client’s cause."27

In Bautista v. Atty. Gonzales,28 the Court struck down the contingent fee agreement
between therein respondent Atty. Ramon A. Gonzales and his client for being contrary to
public policy. There, the Court held that an reimbursement of litigation expenses paid by
the former is against public policy, especially if the lawyer has agreed to carry on the
action at his expense in consideration of some bargain to have a part of the thing in
dispute. It violates the fiduciary relationship between the lawyer and his client. 29

In addition to its champertous character, the contingent fee arrangement in this case
expressly transgresses the Canons of Professional Ethics and, impliedly, the Code of
Professional Responsibility.30 Under Rule 42 of the Canons of Professional Ethics, a lawyer
may not properly agree with a client that the lawyer shall pay or beat the expense of
litigation.31 The same reasons discussed above underlie this rule.

C. The attorney’s fee consisting of

one-half of the subject lot is excessive
and unconscionable

We likewise strike down the questioned attorney’s fee and declare it void for being
excessive and unconscionable.1âwphi1 The contingent fee of one-half of the subject lot
was allegedly agreed to secure the services of Atty. Lacaya in Civil Case No. 1721.Plainly,
it was intended for only one action as the two other civil cases had not yet been instituted
at that time. While Civil Case No. 1721 took twelve years to be finally resolved, that period
of time, as matters then stood, was not a sufficient reason to justify a large fee in the
absence of any showing that special skills and additional work had been involved. The
issue involved in that case, as observed by the RTC(and with which we agree), was simple
and did not require of Atty. Lacaya extensive skill, effort and research. The issue simply
dealt with the prohibition against the sale of a homestead lot within five years from its
acquisition.
That Atty. Lacaya also served as the spouses Cadavedo’s counsel in the two subsequent
cases did not and could not otherwise justify an attorney’s fee of one-half of the subject
lot. As assertedby the petitioners, the spouses Cadavedo and Atty. Lacaya made separate
arrangements for the costs and expenses foreach of these two cases. Thus, the expenses
for the two subsequent cases had been considered and taken cared of Based on these
considerations, we therefore find one-half of the subject lot as attorney’s fee excessive
and unreasonable.

D. Atty. Lacaya’s acquisition of

the one-half portion contravenes
Article 1491 (5) of the Civil Code

Article 1491 (5) of the Civil Code forbids lawyers from acquiring, by purchase or
assignment, the property that has been the subject of litigation in which they have taken
part by virtue of their profession.32 The same proscription is provided under Rule 10 of the
Canons of Professional Ethics.33

A thing is in litigation if there is a contest or litigation over it in court or when it is subject

of the judicial action.34Following this definition, we find that the subject lot was still in
litigation when Atty. Lacaya acquired the disputed one-half portion. We note in this regard
the following established facts:(1)on September 21, 1981, Atty. Lacaya filed a motion for
the issuance of a writ of execution in Civil Case No. 1721; (2) on September 23, 1981,
the spouses Ames filed Civil Case No. 3352 against the spouses Cadavedo; (3)on October
16, 1981, the RTC granted the motion filed for the issuance of a writ of execution in Civil
Case No. 1721 and the spouses Cadavedo took possession of the subject lot on October
24, 1981; (4) soon after, the subject lot was surveyed and subdivided into two equal
portions, and Atty. Lacaya took possession of one of the subdivided portions; and (5) on
May 13, 1982, Vicente and Atty. Lacaya executed the compromise agreement.

From these timelines, whether by virtue of the alleged oral contingent fee agreement or
an agreement subsequently entered into, Atty. Lacaya acquired the disputed one-half
portion (which was after October 24, 1981) while Civil Case No. 3352 and the motion for
the issuance of a writ of execution in Civil Case No. 1721were already pending before the
lower courts. Similarly, the compromise agreement, including the subsequent judicial
approval, was effected during the pendency of Civil Case No. 3352. In all of these, the
relationship of a lawyer and a client still existed between Atty. Lacaya and the spouses
Cadavedo.

Thus, whether we consider these transactions –the transfer of the disputed one-half
portion and the compromise agreement –independently of each other or resulting from
one another, we find them to be prohibited and void35by reason of public policy.36 Under
Article 1409 of the Civil Code, contracts which are contrary to public policy and those
expressly prohibited or declared void by law are considered in existent and void from the
beginning.37

What did not escape this Court’s attention is the CA’s failure to note that the transfer
violated the provisions of Article 1491(5) of the Civil Code, although it recognized the
concurrence of the transfer and the execution of the compromise agreement with the
pendency of the two civil cases subsequent to Civil Case No. 1721.38 In reversing the RTC
ruling, the CA gave weight to the compromise agreement and in so doing, found
justification in the unproved oral contingent fee agreement.

While contingent fee agreements are indeed recognized in this jurisdiction as a valid
exception to the prohibitions under Article 1491(5) of the Civil Code,39 contrary to the CA’s
position, however, this recognition does not apply to the present case. A contingent fee
contract is an agreement in writing where the fee, often a fixed percentage of what may
be recovered in the action, is made to depend upon the success of the litigation. 40 The
payment of the contingent fee is not made during the pendency of the litigation involving
the client’s property but only after the judgment has been rendered in the case handled
by the lawyer.41

In the present case, we reiterate that the transfer or assignment of the disputed one-half
portion to Atty. Lacaya took place while the subject lot was still under litigation and the
lawyer-client relationship still existed between him and the spouses Cadavedo. Thus, the
general prohibition provided under Article 1491 of the Civil Code, rather than the exception
provided in jurisprudence, applies. The CA seriously erred in upholding the compromise
agreement on the basis of the unproved oral contingent fee agreement.

Notably, Atty. Lacaya, in undertaking the spouses Cadavedo’s cause pursuant to the terms
of the alleged oral contingent fee agreement, in effect, became a co-proprietor having an
equal, if not more, stake as the spouses Cadavedo. Again, this is void by reason of public
policy; it undermines the fiduciary relationship between him and his clients.42

E.The compromise agreement could not

validate the void oral contingent fee
agreement; neither did it supersede the
written contingent fee agreement

The compromise agreement entered into between Vicente and Atty. Lacaya in Civil Case
No. 215 (ejectment case) was intended to ratify and confirm Atty. Lacaya’s acquisition
and possession of the disputed one-half portion which were made in violation of Article
1491 (5) of the Civil Code. As earlier discussed, such acquisition is void; the compromise
agreement, which had for its object a void transaction, should be void.

A contract whose cause, object or purpose is contrary to law, morals, good customs, public
order or public policy is in existent and void from the beginning. 43 It can never be
ratified44 nor the action or defense for the declaration of the in existence of the contract
prescribe;45 and any contract directly resulting from such illegal contract is likewise void
and in existent.46

Consequently, the compromise agreement did not supersede the written contingent fee
agreement providing for attorney’s fee of ₱2,000.00; neither did it preclude the petitioners
from questioning its validity even though Vicente might have knowingly and voluntarily
acquiesced thereto and although the MTC approved it in its June 10, 1982 decision in the
ejectment case. The MTC could not have acquired jurisdiction over the subject matter of
the void compromise agreement; its judgment in the ejectment case could not have
attained finality and can thus be attacked at any time. Moreover, an ejectment case
concerns itself only with the issue of possession de facto; it will not preclude the filing of
a separate action for recovery of possession founded on ownership. Hence, contrary to
the CA’s position, the petitioners–in filing the present action and praying for, among
others, the recovery of possession of the disputed one-half portion and for judicial
determination of the reasonable fees due Atty. Lacaya for his services –were not barred
by the compromise agreement.

Atty. Lacaya is entitled to receive attorney’s fees on a quantum meruit basis

In view of their respective assertions and defenses, the parties, in effect, impliedly set
aside any express stipulation on the attorney’s fees, and the petitioners, by express
contention, submit the reasonableness of such fees to the court’s discretion. We thus have
to fix the attorney’s fees on a quantum meruit basis.

"Quantum meruit—meaning ‘as much as he deserves’—is used as basis for determining a

lawyer’s professional fees in the absence of a contract x x x taking into account certain
factors in fixing the amount of legal fees."47 "Its essential requisite is the acceptance of
the benefits by one sought to be charged for the services rendered under circumstances
as reasonably to notify him that the lawyer performing the task was expecting to be paid
compensation"48 for it. The doctrine of 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.49

Under Section 24, Rule 138 of the Rules of Court50 and Canon 20 of the Code of
Professional Responsibility,51factors such as the importance of the subject matter of the
controversy, the time spent and the extent of the services rendered, the customary
charges for similar services, the amount involved in the controversy and the benefits
resulting to the client from the service, to name a few, are considered in determining the
reasonableness of the fees to which a lawyer is entitled.

In the present case, the following considerations guide this Court in considering and
setting Atty. Lacaya’s fees based on quantum meruit: (1) the questions involved in these
civil cases were not novel and did not require of Atty. Lacaya considerable effort in terms
of time, skill or the performance of extensive research; (2) Atty. Lacaya rendered legal
services for the Spouses Cadavedo in three civil cases beginning in 1969 until 1988 when
the petitioners filed the instant case; (3) the first of these civil cases (Cadavedo v. Ames)
lasted for twelve years and reaching up to this Court; the second (Ames v. Cadavedo)
lasted for seven years; and the third (Cadavedo and Lacaya v. DBP) lasted for six years,
reaching up to the CA; and (4) the property subject of these civil cases is of a considerable
size of 230,765 square meters or 23.0765 hectares.

All things considered, we hold as fair and equitable the RTC’s considerations in
appreciating the character of the services that Atty. Lacaya rendered in the three cases,
subject to modification on valuation. We believe and so hold that the respondents are
entitled to two (2) hectares (or approximately one-tenth [1/10] of the subject lot), with
the fruits previously received from the disputed one-half portion, as attorney’s fees. They
shall return to the petitioners the remainder of the disputed one-half portion.

The allotted portion of the subject lot properly recognizes that litigation should be for the
benefit of the client, not the lawyer, particularly in a legal situation when the law itself
holds clear and express protection to the rights of the client to the disputed property (a
homestead lot). Premium consideration, in other words, is on the rights of the owner, not
on the lawyer who only helped the owner protect his rights. Matters cannot be the other
way around; otherwise, the lawyer does indeed effectively acquire a property right over
the disputed property. If at all, due recognition of parity between a lawyer and a client
should be on the fruits of the disputed property, which in this case, the Court properly
accords.

WHEREFORE, in view of these considerations, we hereby GRANT the petition. We AFFIRM

the decision dated September 17, 1996 and the resolution dated December 27, 1996of
the Regional Trial Court of Dipolog City, Branch 10,in Civil Case No. 4038, with the
MODIFICATION that the respondents, the spouses Victorino (Vic) T. Lacaya and Rosa
Legados, are entitled to two (2) hectares (or approximately one-tenth [1/10] of the
subject lot) as attorney’s fees. The fruits that the respondents previously received from
the disputed one-half portion shall also form part of the attorney’s fees. We hereby ORDER
the respondents to return to the petitioners the remainder of the 10.5383-hectare portion
of the subject lot that Atty. Vicente Lacaya acquired pursuant to the compromise
agreement.

SO ORDERED.
G.R. No. 183952 September 9, 2013

CZARINA T. MALVAR, Petitioner,

vs.
KRAFT FOOD PHILS., INC. and/or BIENVENIDO BAUTISTA, KRAFT FOODS
INTERNATIONAL, Respondents.

DECISION

BERSAMIN, J.:

Although the practice of law is not a business, an attorney is entitled to be properly

compensated for the professional services rendered for the client, who is bound by her
express agreement to duly compensate the attorney. The client may not deny her attorney
such just compensation.

The Case

The case initially concerned the execution of a final decision of the Court of Appeals (CA)
in a labor litigation, but has mutated into a dispute over attorney's fees between the
winning employee and her attorney after she entered into a compromise agreement with
her employer under circumstances that the attorney has bewailed as designed to prevent
the recovery of just professional fees.

Antecedents

On August 1, 1988, Kraft Foods (Phils.), Inc. (KFPI) hired Czarina Malvar (Malvar) as its
Corporate Planning Manager. From then on, she gradually rose from the ranks, becoming
in 1996 the Vice President for Finance in the Southeast Asia Region of Kraft Foods
International (KFI),KFPI’s mother company. On November 29, 1999, respondent
Bienvenido S. Bautista, as Chairman of the Board of KFPI and concurrently the Vice
President and Area Director for Southeast Asia of KFI, sent Malvar a memo directing her
to explain why no administrative sanctions should be imposed on her for possible breach
of trust and confidence and for willful violation of company rules and regulations. Following
the submission of her written explanation, an investigating body was formed. In due time,
she was placed under preventive suspension with pay. Ultimately, on March 16, 2000, she
was served a notice of termination.

Obviously aggrieved, Malvar filed a complaint for illegal suspension and illegal dismissal
against KFPI and Bautista in the National Labor Relations Commission (NLRC). In a
decision dated April 30, 2001,1 the Labor Arbiter found and declared her suspension and
dismissal illegal, and ordered her reinstatement, and the payment of her full backwages,
inclusive of allowances and other benefits, plus attorney’s fees.

On October 22, 2001, the NLRC affirmed the decision of the Labor Arbiter but additionally
ruled that Malvar was entitled to "any and all stock options and bonuses she was entitled
to or would have been entitled to had she not been illegally dismissed from her
employment," as well as to moral and exemplary damages.2
KFPI and Bautista sought the reconsideration of the NLRC’s decision, but the NLRC denied
their motion to that effect.3

Undaunted, KFPI and Bautista assailed the adverse outcome before the CA on certiorari
(CA-G.R. SP No. 69660), contending that the NLRC thereby committed grave abuse of
discretion. However, the petition for certiorari was dismissed by the CA on December 22,
2004, but with the CA reversing the order of reinstatement and instead directing the
payment of separation pay to Malvar, and also reducing the amounts awarded as moral
and exemplary damages.4

After the judgment in her favor became final and executory on March14, 2006, Malvar
moved for the issuance of a writ of execution.5 The Executive Labor Arbiter then referred
the case to the Research and Computation Unit (RCU) of the NLRC for the computation of
the monetary awards under the judgment. The RCU’s computation ultimately arrived at
the total sum of ₱41,627,593.75.6

On November 9, 2006, however, Labor Arbiter Jaime M. Reyno issued an order,7 finding
that the RCU’s computation lacked legal basis for including the salary increases that the
decision promulgated in CA-G.R. SP No. 69660 did not include. Hence, Labor Arbiter Reyno
reduced Malvar’s total monetary award to ₱27,786,378.11, viz:

WHEREFORE, premises considered, in so far as the computation of complainant’s other

benefits and allowances are concerned, the same are in order. However, insofar as the
computation of her backwages and other monetary benefits (separation pay, unpaid salary
for January 1 to 26, 2005,holiday pay, sick leave pay, vacation leave pay, 13th month
pay), the same are hereby recomputed as follows:

1. Separation Pay
8/1/88-1/26/05 = 16 yrs
₱344,575.83 x 16 = 5,513,213.28
2. Unpaid Salary
1/1-26/05 = 87 mos.
₱344,575.83 x 87 = 299,780.97
3. Holiday Pay
4/1/00-1/26/05 = 55 holidays
₱4,134,910/12 mos/20.83 days x 55 days 909,825.77
4. Unpaid 13th month pay for Dec 2000 344,575.83
5. Sick Leave Pay
Year 1999 to 2004 = 6 yrs
₱344,575.88/20.83 x 15 days x 6 = 1,488,805.79
 Year 2005
₱344,575.83/20.83 x 15/12 x 1 20,677.86 1,509,483.65
6. Vacation Leave Pay
Year 1999 to 2004 = 6 years
₱344,575.88/20.83 x 22 days x 6 = 2,183,581.83
Year 2005
₱344,575.83/20.83 x 22/12 x 1 30,327.55 2,213,909.36

10,790,788.86
Backwages (from 3/7/00-4/30/01, award in LA Sytian’s Decision 4,651,773.75
Allowances & Other Benefits:
Management Incentive Plan 7,355,166.58
Cash Dividend on Philip Morris Shares 2,711,646.00
Car Maintenance 381,702.92
Gas Allowance 198,000.00
Entitlement to a Company Driver 438,650.00
Rice Subsidy 58,650.00
Moral Damages 500,000.00
Exemplary Damages 200,000.00
Attorney’s Fees 500,000.00
Entitlement to Philip Sch G Subject to
"Share Option Grant" Market Price

27,786,378.11

SO ORDERED.

Both parties appealed the computation to the NLRC, which, on April19, 2007, rendered its
decision setting aside Labor Arbiter Reyno’s November 9, 2006 order, and adopting the
computation by the RCU.8

In its resolution dated May 31, 2007,9 the NLRC denied the respondents’ motion for
reconsideration.
Malvar filed a second motion for the issuance of a writ of execution to enforce the decision
of the NLRC rendered on April 19, 2007. After the writ of execution was issued, a partial
enforcement as effected by garnishing the respondents’ funds deposited with Citibank
worth 37,391,696.06.10

On July 27, 2007, the respondents went to the CA on certiorari (with prayer for the
issuance of a temporary restraining order (TRO) or writ of preliminary injunction),
assailing the NLRC’s setting aside of the computation by Labor Arbiter Reyno (CA-G.R. SP
No. 99865). The petition mainly argued that the NLRC had gravely abused its discretion
in ruling that: (a) the inclusion of the salary increases and other monetary benefits in the
award to Malvar was final and executory; and (b) the finality of the ruling in CA-G.R. SP
No. 69660 precluded the respondents from challenging the inclusion of the salary
increases and other monetary benefits. The CA issued a TRO, enjoining the NLRC and
Malvar from implementing the NLRC’s decision.11

On April 17, 2008, the CA rendered its decision in CA-G.R. SP No. 99865,12 disposing
thusly:

WHEREFORE, premises considered, the herein Petition is GRANTED and the 19 April 2007
Decision of the NLRC and the 31May 2007 Resolution in NLRC NCR 30-07-02316-00 are
hereby REVERSED and SET ASIDE.

The matter of computation of monetary awards for private respondent is hereby

REMANDED to the Labor Arbiter and he is DIRECTED to recompute the monetary award
due to private respondent based on her salary at the time of her termination, without
including projected salary increases. In computing the said benefits, the Labor Arbiter is
further directed to DISREGARD monetary awards arising from: (a) the management
incentive plan and (b) the share option grant, including cash dividends arising therefrom
without prejudice to the filing of the appropriate remedy by the private respondent in the
proper forum. Private respondent’s allowances for car maintenance and gasoline are
likewise DELETED unless private respondent proves, by appropriate receipts, her
entitlement thereto.

With respect to the Motion to Exclude the Undisputed Amount of ₱14,252,192.12 from the
coverage of the Writ of Preliminary Injunction and to order its immediate release, the
same is hereby GRANTED for reasons stated therefor, which amount shall be deducted
from the amount to be given to private respondent after proper computation.

As regards the Motions for Reconsideration of the Resolution denying the Motion for
Voluntary Inhibition and the Omnibus Motion dated 30 October 2007, both motions are
hereby DENIED for lack of merit.

SO ORDERED.13

Malvar sought reconsideration, but the CA denied her motion on July30, 2008.14

Aggrieved, Malvar appealed to the Court, assailing the CA’s decision.

On December 9, 2010, while her appeal was pending in this Court, Malvar and the
respondents entered into a compromise agreement, the pertinent dispositive portion of
which is quoted as follows:

NOW, THEREFORE, for and in consideration of the covenants and understanding between
the parties herein, the parties hereto have entered into this Agreement on the following
terms and conditions:

1. Simultaneously upon execution of this Agreement in the presence of Ms. Malvar’s

attorney, KFPI shall pay Ms. Malvar the amount of Philippine Pesos Forty Million (Php
40,000,000.00), which is in addition to the Philippine Pesos Fourteen Million Two Hundred
Fifty-Two Thousand One Hundred Ninety-Two and Twelve Centavos (Php14,252,192.12)
already paid to and received by Ms. Malvar from KFPI in August2008 (both amounts
constituting the "Compromise Payment").

The Compromise Payment includes full and complete payment and settlement of Ms.
Malvar’s salaries and wages up to the last day of her employment, allowances, 13th and
14th month pay, cash conversion of her accrued vacation, sick and emergency leaves,
separation pay, retirement pay and such other benefits, entitlements, claims for stock,
stock options or other forms of equity compensation whether vested or otherwise and
claims of any and all kinds against KFPI and KFI and Altria Group, Inc., their predecessors-
in-interest, their stockholders, officers, directors, agents or successors-in-interest,
affiliates and subsidiaries, up to the last day of the aforesaid cessation of her employment.

2. In consideration of the Compromise Payment, Ms. Malvar hereby freely and voluntarily
releases and forever discharges KFPI and KFI and Altria Group, Inc., their predecessors
or successors-in-interest, stockholders, officers, including Mr. Bautista who was impleaded
in the Labor Case as a party respondent, directors, agents or successors-in-interest,
affiliates and subsidiaries from any and all manner of action, cause of action, sum of
money, damages, claims and demands whatsoever in law or in equity which Ms. Malvar
or her heirs, successors and assigns had, or now have against KFPI and/or KFI and/or
Altria Group, Inc., including but not limited to, unpaid wages, salaries, separation pay,
retirement pay, holiday pay, allowances, 13th and 14th month pay, claims for stock, stock
options or other forms of equity compensation whether vested or otherwise whether
arising from her employment contract, company grant, present and future contractual
commitments, company policies or practices, or otherwise, in connection with Ms. Malvar’s
employment with KFPI.15

xxxx

Thereafter, Malvar filed an undated Motion to Dismiss/Withdraw Case,16 praying that the
appeal be immediately dismissed/withdrawn in view of the compromise agreement, and
that the case be considered closed and terminated.

Intervention

Before the Court could act on Malvar’s Motion to Dismiss/Withdraw Case, the Court
received on February 15, 2011 a so-called Motion for Intervention to Protect Attorney’s
Rights17 from The Law Firm of Dasal, Llasos and Associates, through its Of Counsel Retired
Supreme Court Associate Justice Josue N. Bellosillo18 (Intervenor), whereby the
Intervenor sought, among others, that both Malvar and KFPI be held and ordered to pay
jointly and severally the Intervenor’s contingent fees.

The Motion for Intervention relevantly averred:

xxxx

Lawyers, oftentimes, are caricatured as alligators or some other specie of voracious

carnivore; perceived also as leeches sucking dry the blood of their adversaries, and even
their own clients they are sworn to serve and protect! As we lay down the facts in this
case, this popular, rather unpopular, perception will be shown wrong. This case is a
reversal of this perception.

xxxx

Here, it is the lawyer who is eaten up alive by the warring but conspiring litigants who
finally settled their differences without the knowledge, much less, participation, of
Petitioner’s counsel that labored hard and did everything to champion her cause.

xxxx

This Motion for Intervention will illustrate an aberration from the norm where the lawyer
ends up seeking protection from his client’s and Respondents’ indecent and cunning
maneuverings. x x x.

xxxx

On 18 March 2008 Petitioner engaged the professional services of Intervenor x x x on a

contingency basis whereby the former agreed in writing to pay the latter contingency fees
amounting to almost ₱19,600,000.00 (10% of her total claim of almost ₱196,000,000.00
in connection with her labor case against Respondents. x x x.

xxxx

According to their agreement (Annex "A"), Petitioner bound herself to pay Intervenor
contingency fees as follows (a) 10% of ₱14,252, 192.12 upon its collection; (b) 10% of
the remaining balance of ₱41,627,593.75; and (c)10% of the value of the stock options
Petitioner claims to be entitled to, or roughly ₱154,000,000.00 as of April 2008.

xxxx

Intervenor’s efforts resulted in the award and partial release of Petitioner’s claim
amounting to ₱14,252,192.12 out of which Petitioner paid Intervenor 10% or
₱1,425,219.21 as contingency fees pursuant to their engagement agreement (Annex "A").
Copy of the check payment of Petitioner payable to Intervenor’s Of Counsel is attached as
Annex "C".

xxxx
On 12 September 2008 Intervenor filed an exhaustive Petition for Review with the
Supreme Court containing 70 pages, including its Annexes "A" to "R", or a total of 419
pages against Respondents to collect on the balance of Petitioner’s claims amounting to
at least ₱27,000,000.00 and ₱154,000,000.00 the latter representing the estimated value
of Petitioner’s stock options as of April 2008.

xxxx

On 15 January 2009 Respondents filed their Comment to the Petition for Review.

xxxx

On 13 April 2009 Intervenor, in behalf of Petitioner, filed its Reply to the Comment.

xxxx

All the pleadings in this Petition have already been submitted on time with nothing more
to be done except to await the Resolution of this Honorable Court which, should the
petition be decided in her favor, Petitioner would stand to gain ₱182,000,000.00, more or
less, which victory would be largely through the efforts of Intervenor.19 (Bold emphasis
supplied).

xxxx

It appears that in July 2009, to the Intervenor’s surprise, Malvar unceremoniously and
without any justifiable reason terminated its legal service and required it to withdraw from
the case.20 Hence, on October 5,2009, the Intervenor reluctantly filed a Manifestation
(With Motion to Withdraw as Counsel for Petitioner),21 in which it spelled out: (a) the
terms of and conditions of the Intervenor’s engagement as counsel; (b) the type of legal
services already rendered by the Intervenor for Malvar; (c) the absence of any legitimate
reason for the termination of their attorney-client relationship; (d) the reluctance of the
Intervenor to withdraw as Malvar’s counsel; and (e) the desire of the Intervenor to assert
and claim its contingent fee notwithstanding its withdrawal as counsel. The Intervenor
prayed that the Court furnish it with copies of resolutions, decisions and other legal papers
issued or to be issued after its withdrawal as counsel of Malvar in the interest of protecting
its interest as her attorney.

The Intervenor indicated that Malvar’s precipitate action had baffled, shocked and even
embarrassed the Intervenor, because it had done everything legally possible to serve and
protect her interest. It added that it could not recall any instance of conflict or
misunderstanding with her, for, on the contrary, she had even commended it for its
dedication and devotion to her case through her following letter to Justice Bellosillo, to
wit:

July 16, 2008

Justice Josue Belocillo (sic)

Dear Justice,
It is almost morning of July 17 as I write this letter to you. Let me first thank you for your
continued and unrelenting lead, help and support in the case. You have been our "rock"
as far as this case is concerned. Jun and I are forever grateful to you for all your help. I
just thought I’d express to you what is in the innermost of my heart as we proceed in the
case. It has been around four months now since we met mid-March early this year.

The most important and immediate aspect of the case at this time for me is the collection
of the undisputed amount of Pesos 14million which the Court has clearly directed and
ordered the NLRC to execute. The only impending constraint for NLRC to execute and
collect this amount from the already garnished amount of Pesos 41 million at Citibank is
the MR of Kraft on the Order of the Court (CA) to execute collection. We need to get a
denial of this motion for NLRC to execute immediately. We already obtained commitment
from NLRC that all it needed to execute collection is the denial of the MR. Jun and I applaud
your initiative and efforts to mediate with Romulo on potential settlement. However, as I
expressed to you in several instances, I have serious reservations on the willingness of
Romulo to settle within reasonable amounts specifically as it relates to the stock options.
Let us continue to pursue this route vigorously while not setting aside our efforts to
influence the CA to DENY their Motion on the Undisputed amount of Pesos 14million.

At this point, I cannot overemphasize to you our need for funds. We have made financial
commitments that require us to raise some amount. But we can barely meet our day to
day business and personal requirements given our current situation right now.

Thank you po for your understanding and support.22

According to the Intervenor, it was certain that the compromise agreement was authored
by the respondents to evade a possible loss of ₱182,000,000.00 or more as a result of the
labor litigation, but considering the Intervenor’s interest in the case as well as its resolve
in pursuing Malvar’s interest, they saw the Intervenor as a major stumbling block to the
compromise agreement that it was then brewing with her. Obviously, the only way to
remove the Intervenor was to have her terminate its services as her legal counsel. This
prompted the Intervenor to bring the matter to the attention of the Court to enable it to
recover in full its compensation based on its written agreement with her, averring thus:

xxxx

28. Upon execution of the Compromise Agreement and pursuant thereto, Petitioner
immediately received (supposedly) from Respondents₱40,000,000.00. But despite the
settlement between the parties, Petitioner did not pay Intervenor its just compensation
as set forth in their engagement agreement; instead, she immediately moved to
Dismiss/Withdraw the Present Petition.

29. To parties’ minds, with the dismissal by Petitioner of Intervenor as her counsel, both
Petitioner and Respondents probably thought they would be able to settle the case without
any cost to them, with Petitioner saving on Intervenor’s contingent fees while Respondents
able to take advantage of the absence of Intervenor in determining the settlement price.

30. The parties cannot be any more mistaken. Pursuant to the Second Paragraph of
Section 26, Rule 138, of the Revised Rules of Court quoted in paragraph 3 hereof,
Intervenor is still entitled to recover from Petitioner the full compensation it deserves as
stipulated in its contract.

31. All the elements for the full recovery of Intervenor’s compensation are present. First,
the contract between the Intervenor and Petitioner is reduced into writing. Second,
Intervenor is dismissed without justifiable cause and at the stage of proceedings where
there is nothing more to be done but to await the Decision or Resolution of the Present
Petition.23

xxxx

In support of the Motion for Intervention, the Intervenor cites the rulings in Aro v.
Nañawa24 and Law Firm of Raymundo A. Armovit v. Court of Appeals,25 particularly the
following passage:

x x x. While We here reaffirm the rule that "the client has an undoubted right to
compromise a suit without the intervention of his lawyer," We hold 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 that when it is evident
that the said fraud is committed in confabulation with the adverse party who had
knowledge of the lawyer’s contingent interest or such interest appears of record and who
would benefit under such compromise, 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 agreement in so far as it does not adversely
affect the right of the lawyer.26 x x x.

The Intervenor prays for the following reliefs:

a) Granting the Motion for Intervention to Protect Attorney’s Rights in favor of the
Intervenor;

b) Directing both Petitioner and Respondents jointly and severally to pay Intervenor
its contingent fees;

c) Granting a lien upon all judgments for the payment of money and executions
issued in pursuance of such judgments; and

d) Holding in Abeyance in the meantime the Resolution of the Motion to

Dismiss/Withdraw Case filed by Petitioner and granting the Motion only after
Intervenor has been fully paid its just compensation; and

e) Other reliefs just and equitable.27

Opposing the Motion for Intervention,28 Malvar stresses that there was no truth to the
Intervenor’s claim to defraud it of its professional fees; that the Intervenor lacked the
legal capacity to intervene because it had ceased to exist after Atty. Marwil N. Llasos
resigned from the Intervenor and Atty. Richard B. Dasal became barred from private
practice upon his appointment as head of the Legal Department of the Small Business
Guarantee and Finance Corporation, a government subsidiary; and that Atty. Llasos and
Atty. Dasal had personally handled her case.

Malvar adds that even assuming, arguendo, that the Intervenor still existed as a law firm,
it was still not entitled to intervene for the following reasons, namely: firstly, it failed to
attend to her multiple pleas and inquiries regarding the case, as when communications to
the Intervenor through text messages were left unanswered; secondly, maintaining that
this was a justifiable cause to dismiss its services, the Intervenor only heeded her repeated
demands to withdraw from the case when Atty. Dasal was confronted about his
appointment to the government subsidiary; thirdly, it was misleading and grossly
erroneous for the Intervenor to claim that it had rendered to her full and satisfactory
services when the truth was that its participation was strictly limited to the preparation,
finalization and submission of the petition for review with the Supreme Court; and finally,
while the Intervenor withdrew its services on October 5, 2009, the compromise agreement
was executed with the respondents on December 9,2010 and notarized on December 14,
2010, after more than a year and two months, dispelling any badge of bad faith on their
end.

On June 21, 2011, the respondents filed their comment to the Intervenor’s Motion for
Intervention.

On November 18, 2011, the Intervenor submitted its position on the respondent’s
comment dated June 21, 2011,29and thereafter the respondents sent in their reply.30

Issues

The issues for our consideration and determination are two fold, namely: (a) whether or
not Malvar’s motion to dismiss the petition on the ground of the execution of the
compromise agreement was proper; and (b) whether or not the Motion for Intervention
to protect attorney’s rights can prosper, and, if so, how much could it recover as attorney’s
fees.

Ruling of the Court

We shall decide the issues accordingly.

1.

Client’s right to settle litigation

by compromise agreement, and
to terminate counsel; limitations

A compromise agreement is a contract, whereby the parties undertake reciprocal

obligations to avoid litigation, or put an end to one already commenced.31 The client may
enter into a compromise agreement with the adverse party to terminate the litigation
before a judgment is rendered therein.32 If the compromise agreement is found to be in
order and not contrary to law, morals, good customs and public policy, its judicial approval
is in order.33 A compromise agreement, once approved by final order of the court, has the
force of res judicata between the parties and will not be disturbed except for vices of
consent or forgery.34

A client has an undoubted right to settle her litigation without the intervention of the
attorney, for the former is generally conceded to have exclusive control over the subject
matter of the litigation and may at anytime, if acting in good faith, settle and adjust the
cause of action out of court before judgment, even without the attorney’s intervention.35 It
is important for the client to show, however, that the compromise agreement does not
adversely affect third persons who are not parties to the agreement.36

By the same token, a client has the absolute right to terminate the attorney-client
relationship at any time with or without cause.37 But this right of the client is not unlimited
because good faith is required in terminating the relationship. The limitation is based on
Article 19 of the Civil Code, which mandates that "every person must, in the exercise of
his rights and in the performance of his duties, act with justice, give everyone his due,
and observe honesty and good faith." The right is also subject to the right of the attorney
to be compensated. This is clear from Section 26, Rule 138 of the Rules of Court, which
provides:

Section 26. Change of attorneys. - An attorney may retire at anytime from any action or
special proceeding, by the written consent of his client filed in court. He may also retire
at any time from an action or special proceeding, without the consent of his client, should
the court, on notice to the client and attorney, and on hearing, determine that he ought
to be allowed to retire. In case of substitution, the name of the attorney newly employed
shall be entered on the docket of the court in place of the former one, and written notice
of the change shall be given to the adverse party.

A client may at any time dismiss his attorney or substitute another in his place, but if the
contract between client and attorney has been reduced to writing and the dismissal of the
attorney was without justifiable cause, he shall be entitled to recover from the client the
full compensation stipulated in the contract. However, the attorney may, in the discretion
of the court, intervene in the case to protect his rights. For the payment of his
compensation the attorney shall have a lien upon all judgments for the payment of money,
and executions issued in pursuance of such judgment, rendered in the case wherein his
services had been retained by the client. (Bold emphasis supplied)

In fine, it is basic that an attorney is entitled to have and to receive a just and reasonable
compensation for services performed at the special instance and request of his client. The
attorney who has acted in good faith and honesty in representing and serving the interests
of the client should be reasonably compensated for his service.38

2.

Compromise agreement is to be approved

despite favorable action on the
Intervenor’s Motion for Intervention

On considerations of equity and fairness, the Court disapproves of the tendencies of clients
compromising their cases behind the backs of their attorneys for the purpose of
unreasonably reducing or completely setting to naught the stipulated contingent
fees.39 Thus, the Court grants the Intervenor’s Motion for Intervention to Protect
Attorney’s Rights as a measure of protecting the Intervenor’s right to its stipulated
professional fees that would be denied under the compromise agreement. The Court does
so in the interest of protecting the rights of the practicing Bar rendering professional
services on contingent fee basis.

Nonetheless, the claim for attorney’s fees does not void or nullify the compromise
agreement between Malvar and the respondents. There being no obstacles to its approval,
the Court approves the compromise agreement. The Court adds, however, that the
Intervenor is not left without a remedy, for the payment of its adequate and reasonable
compensation could not be annulled by the settlement of the litigation without its
participation and conformity. It remains entitled to the compensation, and its right is
safeguarded by the Court because its members are officers of the Court who are as entitled
to judicial protection against injustice or imposition of fraud committed by the client as
much as the client is against their abuses as her counsel. In other words, the duty of the
Court is not only to ensure that the attorney acts in a proper and lawful manner, but also
to see to it that the attorney is paid his just fees. Even if the compensation of the attorney
is dependent only on winning the litigation, the subsequent withdrawal of the case upon
the client’s initiative would not deprive the attorney of the legitimate compensation for
professional services rendered.40

The basis of the intervention is the written agreement on contingent fees contained in the
engagement executed on March 19, 2008 between Malvar and the Intervenor, 41 the
pertinent portion of which stipulated that the Intervenor would "collect ten percent (10%)
of the amount of Ph₱14,252,192.12 upon its collection and another ten percent (10%) of
the remaining balance of Ph₱41,627,593.75 upon collection thereof, and also ten percent
(10%) of whatever is the value of the stock option you are entitled to under the Decision."
There is no question that such arrangement was a contingent fee agreement that was
valid in this jurisdiction, provided the fees therein fixed were reasonable.42

We hold that the contingent fee of 10% of ₱41,627,593.75 and 10% of the value of the
stock option was reasonable. The ₱41,627,593.75 was already awarded to Malvar by the
NLRC but the award became the subject of the appeal in this Court because the CA
reversed the NLRC. Be that as it may, her subsequent change of mind on the amount
sought from the respondents as reflected in the compromise agreement should not negate
or bar the Intervenor’s recovery of the agreed attorney’s fees.

Considering that in the event of a dispute between the attorney and the client as to the
amount of fees, and the intervention of the courts is sought, the determination requires
that there be evidence to prove the amount of fees and the extent and value of the services
rendered, taking into account the facts determinative thereof,43 the history of the
Intervenor’s legal representation of Malvar can provide a helpful predicate for resolving
the dispute between her and the Intervenor.

The records reveal that on March 18, 2008, Malvar engaged the professional services of
the Intervenor to represent her in the case of illegal dismissal. At that time, the case was
pending in the CA at the respondents’ instance after the NLRC had set aside the RCU’s
computation of Malvar’s backwages and monetary benefits, and had upheld the
computation arrived at by the NLRC Computation Unit. On April 17, 2008, the CA set aside
the assailed resolution of the NLRC, and remanded the case to the Labor Arbiter for the
computation of her monetary awards. It was at this juncture that the Intervenor
commenced its legal service, which included the following incidents, namely:

a) Upon the assumption of its professional duties as Malvar’s counsel, a Motion for
Reconsideration of the Decision of the Court of Appeals dated April 17, 2008
consisting of thirty-eight pages was filed before the Court of Appeals on May 6,
2008.

b) On June 2, 2009, Intervenors filed a Comment to Respondents’ Motion for Partial

Reconsideration, said Comment consisted 8 pages.

c) In the execution proceedings before Labor Arbiter Jaime Reyno, Intervenor

prepared and filed on Malvar’s behalf an "Ex-Parte Motion to Release to Complainant
the Undisputed amount of ₱14,252,192.12" in NLRC NCR Case No. 30-07-02716-
00.

d) On July 29, 2000, Intervenor prepared and filed before theLabor Arbiter a
Comment to Respondents’ Opposition to the "Ex-Parte Motion to Release" and a
"Motion Reiterating Immediate Implementation of the Writ of Execution"

e) On August 6, 2008, Intervenor prepared and filed before the Labor Arbiter
Malvar’s Motion Reiterating Motion to Release the Amount of ₱14,252,192.12.44

The decision promulgated on April 17, 200845 and the resolution promulgated on July 30,
200846 by the CA prompted Malvar to appeal on August 15, 2008 to this Court with the
assistance of the Intervenor. All the subsequent pleadings, including the reply of April 13,
2009,47 were prepared and filed in Malvar’s behalf by the Intervenor.

Malvar should accept that the practice of law was not limited to the conduct of cases or
litigations in court but embraced also the preparation of pleadings and other papers
incidental to the cases or litigations as well as the management of such actions and
proceedings on behalf of the clients.48 Consequently, fairness and justice demand that the
Intervenor be accorded full recognition as her counsel who discharged its responsibility
for Malvar’s cause to its successful end.

But, as earlier pointed out, although a client may dismiss her lawyer at any time, the
dismissal must be for a justifiable cause if a written contract between the lawyer and the
client exists.49

Considering the undisputed existence of the written agreement on contingent fees, the
question begging to be answered is: Was the Intervenor dismissed for a justifiable cause?

We do not think so.

In the absence of the lawyer’s fault, consent or waiver, a client cannot deprive the lawyer
of his just fees already earned in the guise of a justifiable reason. Here, Malvar not only
downplayed the worth of the Intervenor’s legal service to her but also attempted to
camouflage her intent to defraud her lawyer by offering excuses that were not only
inconsistent with her actions but, most importantly, fell short of being justifiable.

The letter Malvar addressed to Retired Justice Bellosillo, who represented the Intervenor,
debunked her allegations of unsatisfactory legal service because she thereby lavishly
lauded the Intervenor for its dedication and devotion to the prosecution of her case and
to the protection of her interests. Also significant was that the attorney-client relationship
between her and the Intervenor was not severed upon Atty. Dasal’s appointment to public
office and Atty. Llasos’ resignation from the law firm. In other words, the Intervenor
remained as her counsel of record, for, as we held in Rilloraza, Africa, De Ocampo and
Africa v. Eastern Telecommunication Philippines, Inc.,50 a client who employs a law firm
engages the entire law firm; hence, the resignation, retirement or separation from the law
firm of the handling lawyer does not terminate the relationship, because the law firm is
bound to provide a replacement.

The stipulations of the written agreement between Malvar and the Intervenors, not being
contrary to law, morals, public policy, public order or good customs, were valid and binding
on her. They expressly gave rise to the right of the Intervenor to demand compensation.
In a word, she could not simply walk away from her contractual obligations towards the
Intervenor, for Article 1159 of the Civil Code provides that obligations arising from
contracts have the force of law between the parties and should be complied with in good
faith.

To be sure, the Intervenor’s withdrawal from the case neither cancelled nor terminated
the written agreement on the contingent attorney’s fees. Nor did the withdrawal constitute
a waiver of the agreement. On the contrary, the agreement continued between them
because the Intervenor’s Manifestation (with Motion to Withdraw as Counsel for
Petitioner)explicitly called upon the Court to safeguard its rights under the written
agreement, to wit:

WHEREFORE, premises considered, undersigned counsel respectfully pray that instant

Motion to Withdraw as Counsel for Petitioner be granted and their attorney’s lien pursuant
to the written agreement be reflected in the judgment or decision that may be rendered
hereafter conformably with par. 2, Sec. 26, Rule 138 of the Rules of Court.

Undersigned counsel further requests that they be furnished copy of the decision,
resolutions and other legal processes of this Honorable Court to enable them to protect
their interests.51

Were the respondents also liable?

The respondents would be liable if they were shown to have connived with Malvar in the
execution of the compromise agreement, with the intention of depriving the Intervenor of
its attorney’s fees. Thereby, they would be solidarily liable with her for the attorney’s fees
as stipulated in the written agreement under the theory that they unfairly and unjustly
interfered with the Intervenor’s professional relationship with Malvar.

The respondents insist that they were not bound by the written agreement, and should
not be held liable under it.1âwphi1
We disagree with the respondents’ insistence. The respondents were complicit in Malvar’s
move to deprive the Intervenor of its duly earned contingent fees.

First of all, the unusual timing of Malvar’s letter terminating the Intervenor’s legal
representation of her, of her Motion to Dismiss/Withdraw Case, and of the execution of
compromise agreement manifested her desire to evade her legal obligation to pay to the
Intervenor its attorney’s fees for the legal services rendered. The objective of her
withdrawal of the case was to release the respondents from all her claims and causes of
action in consideration of the settlement in the stated amount of ₱40,000.000.00, a sum
that was measly compared to what she was legally entitled to, which, to begin with,
already included the ₱41,627,593.75 and the value of the stock option already awarded
to her. In other words, she thereby waived more than what she was lawfully expected to
receive from the respondents.

Secondly, the respondents suddenly turned around from their strong stance of berating
her demand as offensive to all precepts of justice and fair play and as a form of unjust
enrichment for her to a surprisingly generous surrender to her demand, allowing to her
through their compromise agreement the additional amount of ₱40,000,000.00 on top of
the₱14,252,192.12 already received by her in August 2008. The softening unavoidably
gives the impression that they were now categorically conceding that Malvar deserved
much more. Under those circumstances, it is plausible to conclude that her termination of
the Intervenor’s services was instigated by their prodding in order to remove the
Intervenor from the picture for being a solid obstruction to the settlement for a much
lower liability, and thereby save for themselves and for her some more amount.

Thirdly, the compromise agreement was silent on the Intervenor’s contingent fee,
indicating that the objective of the compromise agreement was to secure a huge discount
from its liability towards Malvar.

Finally, contrary to the stipulation in the compromise agreement, only Malvar, minus the
respondents, filed the Motion to Dismiss/Withdraw Case.

At this juncture, the Court notes that the compromise agreement would have Malvar waive
even the substantial stock options already awarded by the NLRC’s decision, 52 which
ordered the respondents to pay to her, among others, the value of the stock options and
all other bonuses she was entitled to or would have been entitled to had she not been
illegally dismissed from her employment. This ruling was affirmed by the CA. 53 But the
waiver could not negate the Intervenor’s right to 10% of the value of the stock options
she was legally entitled to under the decisions of the NLRC and the CA, for that right was
expressly stated in the written agreement between her and the Intervenor. Thus, the
Intervenor should be declared entitled to recover full compensation in accordance with the
written agreement because it did not assent to the waiver of the stock options, and did
not waive its right to that part of its compensation.

These circumstances show that Malvar and the respondents needed an escape from
greater liability towards the Intervenor, and from the possible obstacle to their plan to
settle to pay. It cannot be simply assumed that only Malvar would be liable towards the
Intervenor at that point, considering that the Intervenor, had it joined the negotiations as
her lawyer, would have tenaciously fought all the way for her to receive literally everything
that she was entitled to, especially the benefits from the stock option. Her rush to settle
because of her financial concerns could have led her to accept the respondents’ offer,
which offer could be further reduced by the Intervenor’s expected demand for
compensation. Thereby, she and the respondents became joint tort-feasors who acted
adversely against the interests of the Intervenor. Joint tort-feasors are those who
command, instigate, promote, encourage, advise, countenance, cooperate in, aid or abet
the commission of a tort, or who approve of it after it is done, if done for their benefit.54

They are also referred to as those who act together in committing wrong or whose acts,
if independent of each other, unite in causing a single injury.55 Under Article 2194 of the
Civil Code, joint tort-feasors are solidarily liable for the resulting damage. As regards the
extent of their respective liabilities, the Court said in Far Eastern Shipping Company v.
Court of Appeals:56

x x x. Where several causes producing an injury are concurrent and each is an efficient
cause without which the injury would not have happened, the injury may be attributed to
all or any of the causes and recovery may be had against any or all of the responsible
persons although under the circumstances of the case, it may appear that one of them
was more culpable, and that the duty owed by them to the injured person was not same.
No actor’s negligence ceases to be a proximate cause merely because it does not exceed
the negligence of other acts. Each wrongdoer is responsible for the entire result and is
liable as though his acts were the sole cause of the injury.

There is no contribution between joint tort-feasors whose liability is solidary since both of
them are liable for the total damage. Where the concurrent or successive negligent acts
or omissions of two or more persons, although acting independently, are in combination
the direct and proximate cause of a single injury to a third person, it is impossible to
determine in what proportion each contributed to the injury and either of them is
responsible for the whole injury. x x x

Joint tort-feasors are each liable as principals, to the same extent and in the same manner
as if they had performed the wrongful act themselves. It is likewise not an excuse for any
of the joint tort-feasors that individual participation in the tort was insignificant as
compared to that of the other.57 To stress, joint tort-feasors are not liable pro rata. The
damages cannot be apportioned among them, except by themselves. They cannot insist
upon an apportionment, for the purpose of each paying an aliquot part. They are jointly
and severally liable for the whole amount.58 Thus, as joint tort-feasors, Malvar and the
respondents should be held solidarily liable to the Intervenor. There is no way of
appreciating these circumstances except in this light.

That the value of the stock options that Malvar waived under the compromise agreement
has not been fixed as yet is no hindrance to the implementation of this decision in favor
of the Intervenor. The valuation could be reliably made at a subsequent time from the
finality of this adjudication. It is enough for the Court to hold the respondents and Malvar
solidarily liable for the 10% of that value of the stock options.

As a final word, it is necessary to state that no court can shirk from enforcing the
contractual stipulations in the manner they have agreed upon and written. As a rule, the
courts, whether trial or appellate, have no power to make or modify contracts between
the parties. Nor can the courts save the parties from disadvantageous provisions.59 The
same precepts hold sway when it comes to enforcing fee arrangements entered into in
writing between clients and attorneys. In the exercise of their supervisory authority over
attorneys as officers of the Court, the courts are bound to respect and protect the
attorney’s lien as a necessary means to preserve the decorum and respectability of the
Law Profession.60 Hence, the Court must thwart any and every effort of clients already
served by their attorneys’ worthy services to deprive them of their hard-earned
compensation. Truly, the duty of the courts is not only to see to it that attorneys act in a
proper and lawful manner, but also to see to it that attorneys are paid their just and lawful
fees.61

WHEREFORE, the Court APPROVES the compromise agreement; GRANTS the Motion for
Intervention to Protect Attorney's Rights; and ORDERS Czarina T. Malvar and respondents
Kraft Food Philippines Inc. and Kraft Foods International to jointly and severally pay to
Intervenor Law Firm, represented by Retired Associate Justice Josue N. Bellosillo, its
stipulated contingent fees of 10% of ₱41,627,593.75, and the further sum equivalent to
10% of the value of the stock option. No pronouncement on costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice
CANON 21
REBECCA J. PALM, A.C. No. 8242
Complainant,
Present:

PUNO, C.J., Chairperson,

CARPIO,
- versus - CORONA,
LEONARDO-DE CASTRO, and
BERSAMIN, JJ.

ATTY. FELIPE ILEDAN, JR., Promulgated:

Respondent. October 2, 2009
x - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION

CARPIO, J.:

The Case

The case before the Court is a disbarment proceeding filed by Rebecca J. Palm
(complainant) against Atty. Felipe Iledan, Jr. (respondent) for revealing information
obtained in the course of an attorney-client relationship and for representing an interest
which conflicted with that of his former client, Comtech Worldwide Solutions Philippines,
Inc. (Comtech).

The Antecedent Facts

Complainant is the President of Comtech, a corporation engaged in the business of

computer software development. From February 2003 to November 2003, respondent
served as Comtechs retained corporate counsel for the amount of P6,000 per month as
retainer fee. From September to October 2003, complainant personally met with
respondent to review corporate matters, including potential amendments to the corporate
by-laws. In a meeting held on 1 October 2003, respondent suggested that Comtech
amend its corporate by-laws to allow participation during board meetings, through
teleconference, of members of the Board of Directors who were outside the Philippines.

Prior to the completion of the amendments of the corporate by-laws, complainant became
uncomfortable with the close relationship between respondent and Elda Soledad
(Soledad), a former officer and director of Comtech, who resigned and who was suspected
of releasing unauthorized disbursements of corporate funds. Thus, Comtech decided to
terminate its retainer agreement with respondent effective November 2003.

In a stockholders meeting held on 10 January 2004, respondent attended as proxy for

Gary Harrison (Harrison). Steven C. Palm (Steven) and Deanna L. Palm, members of the
Board of Directors, were present through teleconference. When the meeting was called to
order, respondent objected to the meeting for lack of quorum. Respondent asserted that
Steven and Deanna Palm could not participate in the meeting because the corporate by-
laws had not yet been amended to allow teleconferencing.

On 24 March 2004, Comtechs new counsel sent a demand letter to Soledad to return or
account for the amount of P90,466.10 representing her unauthorized disbursements when
she was the Corporate Treasurer of Comtech. On 22 April 2004, Comtech received
Soledads reply, signed by respondent. In July 2004, due to Soledads failure to comply
with Comtech's written demands, Comtech filed a complaint for Estafa against Soledad
before the Makati Prosecutors Office. In the proceedings before the City Prosecution Office
of Makati, respondent appeared as Soledads counsel.

On 26 January 2005, complainant filed a Complaint[1] for disbarment against respondent

before the Integrated Bar of the Philippines (IBP).

In his Answer,[2] respondent alleged that in January 2002, Soledad consulted him on
process and procedure in acquiring property. In April 2002, Soledad again consulted him
about the legal requirements of putting up a domestic corporation. In February 2003,
Soledad engaged his services as consultant for Comtech. Respondent alleged that from
February to October 2003, neither Soledad nor Palm consulted him on confidential or
privileged matter concerning the operations of the corporation. Respondent further
alleged that he had no access to any record of Comtech.

Respondent admitted that during the months of September and October 2003,
complainant met with him regarding the procedure in amending the corporate by-laws to
allow board members outside the Philippines to participate in board meetings.

Respondent further alleged that Harrison, then Comtech President, appointed him as
proxy during the 10 January 2004 meeting. Respondent alleged that Harrison instructed
him to observe the conduct of the meeting. Respondent admitted that he objected to the
participation of Steven and Deanna Palm because the corporate by-laws had not yet been
properly amended to allow the participation of board members by teleconferencing.
Respondent alleged that there was no conflict of interest when he represented Soledad in
the case for Estafa filed by Comtech. He alleged that Soledad was already a client before
he became a consultant for Comtech. He alleged that the criminal case was not related to
or connected with the limited procedural queries he handled with Comtech.
The IBPs Report and Recommendation

In a Report and Recommendation dated 28 March 2006,[3] the IBP Commission on Bar
Discipline (IBP-CBD) found respondent guilty of violation of Canon 21 of the Code of
Professional Responsibility and of representing interest in conflict with that of Comtech as
his former client.

The IBP-CBD ruled that there was no doubt that respondent was Comtechs retained
counsel from February 2003 to November 2003. The IBP-CBD found that in the course of
the meetings for the intended amendments of Comtechs corporate by-laws, respondent
obtained knowledge about the intended amendment to allow members of the Board of
Directors who were outside the Philippines to participate in board meetings through
teleconferencing. The IBP-CBD noted that respondent knew that the corporate by-laws
have not yet been amended to allow the teleconferencing. Hence, when respondent, as
representative of Harrison, objected to the participation of Steven and Deanna Palm
through teleconferencing on the ground that the corporate by-laws did not allow the
participation, he made use of a privileged information he obtained while he was Comtechs
retained counsel.

The IBP-CBD likewise found that in representing Soledad in a case filed by Comtech,
respondent represented an interest in conflict with that of a former client. The IBP-CBD
ruled that the fact that respondent represented Soledad after the termination of his
professional relationship with Comtech was not an excuse.

The IBP-CBD recommended that respondent be suspended from the practice of law for
one year, thus:

WHEREFORE, premises considered, it is most respectfully recommended that

herein respondent be found guilty of the charges preferred against him and
be suspended from the practice of law for one (1) year.[4]

In Resolution No. XVII-2006-583[5] passed on 15 December 2006, the IBP Board of

Governors adopted and approved the recommendation of the Investigating Commissioner
with modification by suspending respondent from the practice of law for two years.
Respondent filed a motion for reconsideration.[6]

In an undated Recommendation, the IBP Board of Governors First Division found that
respondents motion for reconsideration did not raise any new issue and was just a rehash
of his previous arguments. However, the IBP Board of Governors First Division
recommended that respondent be suspended from the practice of law for only one year.

In Resolution No. XVIII-2008-703 passed on 11 December 2008, the IBP Board of

Governors adopted and approved the recommendation of the IBP Board of Governors First
Division. The IBP Board of Governors denied respondents motion for reconsideration but
reduced his suspension from two years to one year.
The IBP Board of Governors forwarded the present case to this Court as provided under
Section 12(b), Rule 139-B[7] of the Rules of Court.

The Ruling of this Court

We cannot sustain the findings and recommendation of the IBP.

Violation of the Confidentiality

of Lawyer-Client Relationship

Canon 21 of the Code of Professional Responsibility provides:

Canon 21. A lawyer shall preserve the confidence and secrets of his client
even after the attorney-client relationship is terminated. (Emphasis supplied)

We agree with the IBP that in the course of complainants consultations, respondent
obtained the information about the need to amend the corporate by-laws to allow board
members outside the Philippines to participate in board meetings through
teleconferencing. Respondent himself admitted this in his Answer.

However, what transpired on 10 January 2004 was not a board meeting but a stockholders
meeting. Respondent attended the meeting as proxy for Harrison. The physical presence
of a stockholder is not necessary in a stockholders meeting because a member may vote
by proxy unless otherwise provided in the articles of incorporation or by-laws.[8] Hence,
there was no need for Steven and Deanna Palm to participate through teleconferencing
as they could just have sent their proxies to the meeting.
In addition, although the information about the necessity to amend the corporate by-laws
may have been given to respondent, it could not be considered a confidential
information.The amendment, repeal or adoption of new by-laws may be effected by the
board of directors or trustees, by a majority vote thereof, and the owners of at least a
majority of the outstanding capital stock, or at least a majority of members of a non-stock
corporation.[9] It means the stockholders are aware of the proposed amendments to the
by-laws. While the power may be delegated to the board of directors or trustees, there is
nothing in the records to show that a delegation was made in the present case. Further,
whenever any amendment or adoption of new by-laws is made, copies of the amendments
or the new by-laws are filed with the Securities and Exchange Commission (SEC) and
attached to the original articles of incorporation and by-laws.[10] The documents are
public records and could not be considered confidential.

It is settled that the mere relation of attorney and client does not raise a presumption of
confidentiality.[11] The client must intend the communication to be confidential.[12] Since
the proposed amendments must be approved by at least a majority of the
stockholders, and copies of the amended by-laws must be filed with the SEC, the
information could not have been intended to be confidential. Thus, the disclosure
made by respondent during the stockholders meeting could not be considered a violation
of his clients secrets and confidence within the contemplation of Canon 21 of the Code of
Professional Responsibility.

Representing Interest in Conflict

With the Interest of a Former Client

The IBP found respondent guilty of representing an interest in conflict with that of a former
client, in violation of Rule 15.03, Canon 15 of the Code of Professional Responsibility which
provides:

Rule 15.03 - A lawyer shall not represent conflicting interest except by written
consent of all concerned given after a full disclosure of the facts.

We do not agree with the IBP.

In Quiambao v. Bamba,[13] the Court enumerated various tests to determine conflict of

interests. One test of inconsistency of interests is whether the lawyer will be asked to use
against his former client any confidential information acquired through their connection or
previous employment.[14] The Court has ruled that what a lawyer owes his former client
is to maintain inviolate the clients confidence or to refrain from doing anything which will
injuriously affect him in any matter in which he previously represented him.[15]

We find no conflict of interest when respondent represented Soledad in a case filed by

Comtech. The case where respondent represents Soledad is an Estafa case filed by
Comtech against its former officer. There was nothing in the records that would
show that respondent used against Comtech any confidential information
acquired while he was still Comtechs retained counsel. Further, respondent made
the representation after the termination of his retainer agreement with Comtech. A
lawyers immutable duty to a former client does not cover transactions that occurred
beyond the lawyers employment with the client.[16] The intent of the law is to impose upon
the lawyer the duty to protect the clients interests only on matters that he previously
handled for the former client and not for matters that arose after the lawyer-client
relationship has terminated.[17]

WHEREFORE, we DISMISS the complaint against Atty. Felipe Iledan, Jr. for lack of
merit.

SO ORDERED.
 JESSIE R. DE LEON, A.C. No. 8620
Complainant,
Present:

CARPIO MORALES, Chairperson,

BRION,
-versus - BERSAMIN,
VILLARAMA, JR., and
SERENO, JJ.

ATTY. EDUARDO G. CASTELO, Promulgated:

Respondent.
January 12, 2011
x-----------------------------------------------------------------------------------------x

DECISION

BERSAMIN, J.:

This administrative case, which Jessie R. De Leon initiated on April 29, 2010, concerns
respondent attorneys alleged dishonesty and falsification committed in the pleadings he
filed in behalf of the defendants in the civil action in which De Leon intervened.

Antecedents

On January 2, 2006, the Government brought suit for the purpose of correcting the
transfer certificates of title (TCTs) covering two parcels of land located in Malabon City
then registered in the names of defendants Spouses Lim Hio and Dolores Chu due to their
encroaching on a public callejon and on a portion of the Malabon-Navotas River shoreline
to the extent, respectively, of an area of 45 square meters and of about 600 square
meters. The suit, entitled Republic of the Philippines, represented by the Regional
Executive Director, Department of Environment and Natural Resources v. Spouses Lim Hio
and Dolores Chu, Gorgonia Flores, and the Registrar of Deeds of Malabon City, was
docketed as Civil Case No. 4674MN of the Regional Trial Court (RTC), Branch 74,
in Malabon City.[1]

De Leon, having joined Civil Case No. 4674MN as a voluntary intervenor two years
later (April 21, 2008), now accuses the respondent, the counsel of record of the
defendants in Civil Case No. 4674MN, with the serious administrative offenses of
dishonesty and falsification warranting his disbarment or suspension as an attorney. The
respondents sin was allegedly committed by his filing for defendants Spouses Lim Hio and
Dolores Chu of various pleadings (that is, answer with counterclaim and cross-claim in
relation to the main complaint; and answer to the complaint in intervention with
counterclaim and cross-claim) despite said spouses being already deceased at the time of
filing.[2]

De Leon avers that the respondent committed dishonesty and falsification as

follows:

xxx in causing it (to) appear that persons (spouses Lim Hio and Dolores
Chu) have participated in an act or proceeding (the making and filing of the
Answers) when they did not in fact so participate; in fact, they could not have
so participated because they were already dead as of that time, which is
punishable under Article 172, in relation to Article 171, paragraph 2, of the
Revised Penal Code.

Respondent also committed the crime of Use of Falsified Documents, by

submitting the said falsified Answers in the judicial proceedings, Civil Case No.
4674MN;

Respondent also made a mockery of the aforesaid judicial proceedings by

representing dead persons therein who, he falsely made to appear, as
contesting the complaints, counter-suing and cross-suing the adverse parties.

12. That, as a consequence of the above criminal acts, complainant

respectfully submits that respondent likewise violated:

(a) His Lawyers Oath:

xxx
(b) The Code of Professional Responsibility:[3]
xxx

On June 23, 2010, the Court directed the respondent to comment on De Leons
administrative complaint.[4]

In due course, or on August 2, 2010,[5] the respondent rendered the following

explanations in his comment, to wit:

1. The persons who had engaged him as attorney to represent the Lim family
in Civil Case No. 4674MN were William and Leonardo Lim, the children of
Spouses Lim Hio and Dolores Chu;

2. Upon his (Atty. Castelo) initial queries relevant to the material allegations
of the Governments complaint in Civil Case No. 4674MN, William Lim, the
representative of the Lim Family, informed him:
 a. That the Lim family had acquired the properties from Georgina
Flores;

b. That William and Leonardo Lim were already actively managing the
family business, and now co-owned the properties by virtue of
the deed of absolute saletheir parents, Spouses Lim Hio and Dolores
Chu, had executed in their favor; and

c. That because of the execution of the deed of absolute sale, William

and Leonardo Lim had since honestly assumed that their parents had
already caused the transfer of the TCTs to their names.

3. Considering that William and Leonardo Lim themselves were the ones who
had engaged his services, he (Atty. Castelo) consequently truthfully stated
in the motion seeking an extension to file responsive pleading dated
February 3, 2006 the fact that it was the family of the defendants that had
engaged him, and that he had then advised the children of the defendants
to seek the assistance as well of a licensed geodetic surveyor and engineer;

4. He (Atty. Castelo) prepared the initial pleadings based on his honest

belief that Spouses Lim Hio and Dolores Chu were then still living. Had he
known that they were already deceased, he would have most welcomed
the information and would have moved to substitute Leonardo and William
Lim as defendants for that reason;

5. He (Atty. Castelo) had no intention to commit either a falsehood or a

falsification, for he in fact submitted the death certificates of Spouses Lim
Hio and Dolores Chu in order to apprise the trial court of that fact; and

6. The Office of the Prosecutor for Malabon City even dismissed the
criminal complaint for falsification brought against him (Atty. Castelo)
through the resolution dated February 11, 2010. The same office denied
the complainants motion for reconsideration on May 17, 2010.

On September 3, 2010, the complainant submitted a reply,[6] whereby he asserted

that the respondents claim in his comment that he had represented the Lim family was a
deception, because the subject of the complaint against the respondent was his filing of
the answers in behalf of Spouses Lim Hio and Dolores Chu despite their being already
deceased at the time of the filing. The complainant regarded as baseless the justifications
of the Office of the City Prosecutor for Malabon City in dismissing the criminal complaint
against the respondent and in denying his motion for reconsideration.

The Court usually first refers administrative complaints against members of the
Philippine Bar to the Integrated Bar of the Philippines (IBP) for investigation and
appropriate recommendations. For the present case, however, we forego the prior referral
of the complaint to the IBP, in view of the facts being uncomplicated and based on the
pleadings in Civil Case No. 4674MN. Thus, we decide the complaint on its merits.
Ruling

We find that the respondent, as attorney, did not commit any falsehood or
falsification in his pleadings in Civil Case No. 4674MN. Accordingly, we dismiss the patently
frivolous complaint.

I
Attorneys Obligation to tell the truth

All attorneys in the Philippines, including the respondent, have sworn to the vows
embodied in following Lawyers Oath,[7] viz:

I, ___________________, do solemnly swear that I will maintain

allegiance to the Republic of the Philippines; I will support its Constitution and
obey the laws as well as the legal orders of the duly constituted authorities
therein; I will do no falsehood, nor consent to the doing of any in court; I will
not wittingly or willingly promote or sue any groundless, false or unlawful suit,
nor give aid nor consent to the same. I will delay no man for money or malice,
and will conduct myself as a lawyer according to the best of my knowledge
and discretion with all good fidelity as well to the courts as to my clients; and
I impose upon myself this voluntary obligation without any mental reservation
or purpose of evasion. So help me God.

The Code of Professional Responsibility echoes the Lawyers Oath, providing:[8]

CANON 1 - A LAWYER SHALL UPHOLD THE CONSTITUTION, OBEY THE

LAWS OF THE LAND AND PROMOTE RESPECT FOR LAW AND LEGAL
PROCESSES.

Rule 1.01 - A lawyer shall not engage in unlawful, dishonest, immoral or

deceitful conduct.

CANON 10 - A LAWYER OWES CANDOR, FAIRNESS AND GOOD FAITH TO

THE COURT.

Rule 10.01 - A lawyer shall not do any falsehood, nor consent to the doing
of any in Court; nor shall he mislead, or allow the Court to be misled by any
artifice.

The foregoing ordain ethical norms that bind all attorneys, as officers of the Court,
to act with the highest standards of honesty, integrity, and trustworthiness. All attorneys
are thereby enjoined to obey the laws of the land, to refrain from doing any falsehood in
or out of court or from consenting to the doing of any in court, and to conduct themselves
according to the best of their knowledge and discretion with all good fidelity as well to the
courts as to their clients. Being also servants of the Law, attorneys are expected to observe
and maintain the rule of law and to make themselves exemplars worthy of emulation by
others.[9] The least they can do in that regard is to refrain from engaging in any form or
manner of unlawful conduct (which broadly includes any act or omission contrary to law,
but does not necessarily imply the element of criminality even if it is broad enough to
include such element).[10]

To all attorneys, truthfulness and honesty have the highest value, for, as the Court
has said in Young v. Batuegas:[11]

A lawyer must be a disciple of truth. He swore upon his admission to the

Bar that he will do no falsehood nor consent to the doing of any in court and
he shall conduct himself as a lawyer according to the best of his knowledge
and discretion with all good fidelity as well to the courts as to his clients. He
should bear in mind that as an officer of the court his high vocation is to
correctly inform the court upon the law and the facts of the case and to aid it
in doing justice and arriving at correct conclusion. The courts, on the other
hand, are entitled to expect only complete honesty from lawyers appearing
and pleading before them. While a lawyer has the solemn duty to defend his
clients rights and is expected to display the utmost zeal in defense of his
clients cause, his conduct must never be at the expense of truth.

Their being officers of the Court extends to attorneys not only the presumption of
regularity in the discharge of their duties, but also the immunity from liability to others
for as long as the performance of their obligations to their clients does not depart from
their character as servants of the Law and as officers of the Court. In particular, the
statements they make in behalf of their clients that are relevant, pertinent, or material to
the subject of inquiry are absolutely privileged regardless of their defamatory tenor. Such
cloak of privilege is necessary and essential in ensuring the unhindered service to their
clients causes and in protecting the clients confidences. With the cloak of privilege, they
can freely and courageously speak for their clients, verbally or in writing, in the course of
judicial and quasi-judicial proceedings, without running the risk of incurring criminal
prosecution or actions for damages.[12]

Nonetheless, even if they enjoy a number of privileges by reason of their office and
in recognition of the vital role they play in the administration of justice, attorneys hold the
privilege and right to practice law before judicial, quasi-judicial, or administrative tribunals
or offices only during good behavior.[13]
II
Respondent did not violate the Lawyers Oath
and the Code of Professional Responsibility

On April 17, 2006, the respondent filed an answer with counterclaim and cross-
claim in behalf of Spouses Lim Hio and Dolores Chu, the persons whom the Government
as plaintiff named as defendants in Civil Case No. 4674MN.[14] He alleged therein that:

2. The allegations in paragraph 2 of the complaint are ADMITTED. Moreover,

it is hereby made known that defendants spouses Lim Hio and Dolores
Chu had already sold the two (2) parcels of land, together with the
building and improvements thereon, covered by Transfer Certificate
of Title No. (148805) 139876 issued by the Register of Deeds of Rizal,
to Leonardo C. Lim and William C. Lim, of Rms. 501 502 Dolores Bldg.,
Plaza del Conde, Binondo, Manila. Hence, Leonardo Lim and William
Lim are their successors-in-interest and are the present lawful owners
thereof.

In order to properly and fully protect their rights, ownership and

interests, Leonardo C. Lim and William C. Lim shall hereby represent
the defendants-spouses Lim Hio and Dolores Chu as
substitute/representative parties in this action. In this manner, a
complete and expeditious resolution of the issues raised in this case
can be reached without undue delay. A photo copy of the Deed of Absolute
Sale over the subject property, executed by herein defendants-spouses Lim
Hio and Dolores Chu in favor of said Leonardo C. Lim and William C. Lim, is
hereto attached as Annex 1 hereof.
xxx
21. There is improper joinder of parties in the complaint. Consequently,
answering defendants are thus unduly compelled to litigate in a suit regarding
matters and facts as to which they have no knowledge of nor any involvement
or participation in.

22. Plaintiff is barred by the principle of estoppel in bringing this suit, as it was
the one who, by its governmental authority, issued the titles to the subject
property.
This action is barred by the principles of prescription and laches for
plaintiffs unreasonable delay in brining this suit, particularly against defendant
Flores, from whom herein answering defendants acquired the subject property
in good faith and for value. If truly plaintiff has a clear and valid cause of
action on the subject property, it should not have waited thirty (30) years to
bring suit.

Two years later, or on April 21, 2008, De Leon filed his complaint in intervention in
Civil Case No. 4674MN.[15] He expressly named therein as defendants vis--vis his
intervention not only the Spouses Lim Hio and Dolores Chu, the original defendants, but
also their sons Leonardo Lim, married to Sally Khoo, and William Lim, married to Sally
Lee, the same persons whom the respondent had already alleged in the answer, supra, to
be the transferees and current owners of the parcels of land.[16]

The following portions of De Leons complaint in intervention in Civil Case No.

4674MN are relevant, viz:

2. Defendant spouses Lim Hio and Dolores Chu, are Filipino citizens
with addresses at 504 Plaza del Conde, Manila and at 46 C. Arellano
St., San Agustin, Malabon City, where they may be served with
summons and other court processes;

3. Defendant spouses Leonardo Lim and Sally Khoo and defendant

spouses William Lim and Sally Lee are all of legal age and with postal
address at Rms. 501-502 Dolores Bldg., Plaza del Conde, Binondo,
Manila, alleged purchasers of the property in question from
defendant spouses Lim Hio and Dolores Chu;

4. Defendants Registrar of Deeds of Malabon City holds office in Malabon City,

where he may be served with summons and other court processes. He is
charged with the duty, among others, of registering decrees of Land
Registration in Malabon City under the Land Registration Act;
xxx
7. That intervenor Jessie de Leon, is the owner of a parcel of land located
in Malabon City described in TCT no. M-15183 of the Register of Deeds of
Malabon City, photocopy of which is attached to this Complaint as Annex G,
and copy of the location plan of the aforementioned property is attached to
this complaint as Annex H and is made an integral part hereof;

8. That there are now more or less at least 40 squatters on intervenors

property, most of them employees of defendant spouses Lim Hio and Dolores
Chu and defendant spouses Leonardo Lim and Sally Khoo and defendant
spouses William Lim and Sally Lee who had gained access to intervenors
property and built their houses without benefit of any building permits from
the government who had made their access to intervenors property thru a two
panel metal gate more or less 10 meters wide and with an armed guard by
the gate and with permission from defendant spouses Lim Hio and Dolores
Chu and/orand defendant spouses Leonardo Lim and Sally Khoo and
defendant spouses William Lim and Sally Lee illegally entered intervenors
property thru a wooden ladder to go over a 12 foot wall now separating
intervenors property from the former esquinita which is now part of defendant
spouses Lim Hio and Dolores Chus and defendant spouses Leonardo Lim and
Sally Khoos and defendant spouses William Lim and Sally Lees property and
this illegally allowed his employees as well as their relatives and friends
thereof to illegally enter intervenors property through the ladders defendant
 spouses Lim Hio and Dolores Chu installed in their wall and also allowed said
employees and relatives as well as friends to build houses and shacks without
the benefit of any building permit as well as permit to occupy said illegal
buildings;

9. That the enlargement of the properties of spouses Lim Hio and Dolores Chu
had resulted in the closure of street lot no. 3 as described in TCT no. 143828,
spouses Lim Hio and Dolores Chu having titled the street lot no. 3 and placed
a wall at its opening on C. Arellano street, thus closing any exit or egress or
entrance to intervenors property as could be seen from Annex H hereof and
thus preventing intervenor from entering into his property resulted in
preventing intervenor from fully enjoying all the beneficial benefits from his
property;

10. That defendant spouses Lim Hio and Dolores Chu and later on
defendant spouses Leonardo Lim and Sally Khoo and defendant
spouses William Lim and Sally Lee are the only people who could give
permission to allow third parties to enter intervenors property and
their control over intervenors property is enforced through his armed
guard thus exercising illegal beneficial rights over intervenors
property at intervenors loss and expense, thus depriving intervenor
of legitimate income from rents as well as legitimate access to
intervenors propertyand the worst is preventing the Filipino people
from enjoying the Malabon Navotas River and enjoying the right of
access to the natural fruits and products of the Malabon Navotas River
and instead it is defendant spouses Lim Hio and Dolores Chu and
defendant spouses Leonardo Lim and Sally Khoo and defendant
spouses William Lim and Sally Lee using the public property
exclusively to enrich their pockets;
xxx
13. That defendant spouses Lim Hio and Dolores Chu and defendant
spouses Leonardo Lim and Sally Khoo and defendant spouses William
Lim and Sally Lee were confederating, working and helping one
another in their actions to inhibit intervenor Jessie de Leon to gain
access and beneficial benefit from his property;

On July 10, 2008, the respondent, representing all the defendants named in De
Leons complaint in intervention, responded in an answer to the complaint in intervention
with counterclaim and cross-claim,[17] stating that spouses Lim Hio and Dolores Chu xxx
are now both deceased, to wit:

xxx
2. The allegations in paragraphs 2 and 3 of the Complaint are ADMITTED,
with the qualification that defendants-spouses Leonardo Lim and Sally
Khoo Lim, William Lim and Sally Lee Lim are the registered and lawful
owners of the subject property covered by Transfer Certificate of Title
No. M-35929, issued by the Register of Deeds for Malabon City, having
 long ago acquired the same from the defendants-spouses Lim Hio and
Dolores Chu, who are now both deceased. Copy of the TCT No. M-35929
is attached hereto as Annexes 1 and 1-A. The same title has already been
previously submitted to this Honorable Court on December 13, 2006.
xxx

The respondent subsequently submitted to the RTC a so-called clarification and

submission,[18] in which he again adverted to the deaths of Spouses Lim Hio and Dolores
Chu, as follows:

1. On March 19, 2009, herein movants-defendants Lim filed before this

Honorable Court a Motion for Substitution of Defendants in the Principal
Complaint of the plaintiff Republic of the Philippines, represented by the
DENR;

2. The Motion for Substitution is grounded on the fact that the two
(2) parcels of land, with the improvements thereon, which are the
subject matter of the instant case, had long been sold and transferred
by the principal defendants-spouses Lim Hio and Dolores Chu to
herein complaint-in-intervention defendants Leonardo C. Lim and
William C. Lim, by way of a Deed of Absolute Sale, a copy of which is
attached to said Motion as Annex 1 thereof.

3. Quite plainly, the original principal defendants Lim Hio and

Dolores Chu, having sold and conveyed the subject property, have
totally lost any title, claim or legal interest on the property. It is on
this factual ground that this Motion for Substitution is based and
certainly not on the wrong position of Intervenor de Leon that the
same is based on the death of defendants Lim Hio and Dolores Chu.

4. Under the foregoing circumstances and facts, the demise of

defendants Lim Hio and Dolores Chu no longer has any significant
relevance to the instant Motion. To, however, show the fact of their death,
photo copy of their respective death certificates are attached hereto as
Annexes 1 and 2 hereof.

5. The Motion for substitution of Defendants in the Principal Complaint

dated March 18, 2009 shows in detail why there is the clear, legal and
imperative need to now substitute herein movants-defendants Lim for
defendants Lim Hio and Dolores Chu in the said principal complaint.

6. Simply put, movants-defendants Lim have become the indispensable

defendants in the principal complaint of plaintiff DENR, being now the
registered and lawful owners of the subject property and the real parties-in-
interest in this case. Without them, no final determination can be had in the
Principal complaint.
 7. Significantly, the property of intervenor Jessie de Leon, which is the
subject of his complaint-in-intervention, is identically, if not similarly, situated
as that of herein movants-defendants Lim, and likewise, may as well be a
proper subject of the Principal Complaint of plaintiff DENR.

8. Even the plaintiff DENR, itself, concedes the fact that herein movants-
defendants Lim should be substituted as defendants in the principal complaint
as contained in their Manifestation dated June 3, 2009, which has been filed
in this case.

WHEREFORE, herein movants-defendants Lim most respectfully submit

their Motion for substitution of Defendants in the Principal Complaint and pray
that the same be granted.
xxx

Did the respondent violate the letter and spirit of the Lawyers Oath and the Code of
Professional Responsibility in making the averments in the aforequoted pleadings of the
defendants?

A plain reading indicates that the respondent did not misrepresent that Spouses Lim
Hio and Dolores Chu were still living. On the contrary, the respondent directly stated in
the answer to the complaint in intervention with counterclaim and cross-claim, supra, and
in the clarification and submission, supra, that the Spouses Lim Hio and Dolores Chu
were already deceased.

Even granting, for the sake of argument, that any of the respondents pleadings
might have created any impression that the Spouses Lim Hio and Dolores Chu were still
living, we still cannot hold the respondent guilty of any dishonesty or falsification. For one,
the respondent was acting in the interest of the actual owners of the properties when he
filed the answer with counterclaim and cross-claim on April 17, 2006. As such, his
pleadings were privileged and would not occasion any action against him as an attorney.
Secondly, having made clear at the start that the Spouses Lim Hio and Dolores Chu were
no longer the actual owners of the affected properties due to the transfer of ownership
even prior to the institution of the action, and that the actual owners (i.e., Leonardo and
William Lim) needed to be substituted in lieu of said spouses, whether the Spouses Lim
Hio and Dolores Chu were still living or already deceased as of the filing of the pleadings
became immaterial. And, lastly, De Leon could not disclaim knowledge that the Spouses
Lim Hio and Dolores Chu were no longer living. His joining in the action as
a voluntary intervenor charged him with notice of all the other persons interested in the
litigation. He also had an actual awareness of such other persons, as his own complaint in
intervention, supra, bear out in its specific allegations against Leonardo Lim and William
Lim, and their respective spouses. Thus, he could not validly insist that the respondent
committed any dishonesty or falsification in relation to him or to any other party.

III
Good faith must always motivate any complaint
against a Member of the Bar

According to Justice Cardozo,[19] xxx the fair fame of a lawyer, however innocent of
wrong, is at the mercy of the tongue of ignorance or malice. Reputation in such a calling
is a plant of tender growth, and its bloom, once lost, is not easily restored.

A lawyers reputation is, indeed, a very fragile object. The Court, whose officer every
lawyer is, must shield such fragility from mindless assault by the unscrupulous and the
malicious. It can do so, firstly, by quickly cutting down any patently frivolous complaint
against a lawyer; and, secondly, by demanding good faith from whoever brings any
accusation of unethical conduct. A Bar that is insulated from intimidation and harassment
is encouraged to be courageous and fearless, which can then best contribute to the
efficient delivery and proper administration of justice.

The complainant initiated his complaint possibly for the sake of harassing the
respondent, either to vex him for taking the cudgels for his clients in connection with Civil
Case No. 4674MN, or to get even for an imagined wrong in relation to the subject matter
of the pending action, or to accomplish some other dark purpose. The worthlessness of
the accusation apparent from the beginning has impelled us into resolving the complaint
sooner than later.

WHEREFORE, we dismiss the complaint for disbarment or suspension filed against

Atty. Eduardo G. Castelo for utter lack of merit.

SO ORDERED.