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

PICHON,Complainant, vs. ATTY. ARNULFO M. AGLERON, SR.,

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.
CONCHITA A. BALTAZAR, ROLANDO SAN PEDRO, ALICIA EULALIO-RAMOS, SOLEDAD A. FAJARDO AND
ENCARNACION A. FERNANDEZ, vs. ATTY. JUAN B. BAÑEZ,

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.2For 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 15.05,26 18.04,27and
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.
EDMUNDO NAVAREZ, vs. ATTY. MANUEL ABROGAR III,

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. 108675.2 The 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 "Apolonia 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 (½) 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;

2. That oppositor Edmundo Navarez pay the amount of 7.5% of P11,196,675.05 to Manuel Abrogar III;

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.15As 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 certiorari and 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.1âwphi1 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.20

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 ANNULLED and SET ASIDE.

SO ORDERED.
THE LAW FIRM OF LAGUESMA MAGSALIN CONSULTA AND GASTARDO
vs.
THE COMMISSION ON AUDIT and/or REYNALDO A. VILLAR and JUANITO G. ESPINO, JR. in their capacities as
Chairman and Commissioner, respectively

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."62 Respondents 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 10385 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.
FERNANDO W. CHU, vs. ATTY. JOSE C. GUICO, JR.,

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 decision6was 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.
CORAZON M. DALUPAN, Complainant, vs. ATTY. GLENN C. GACOTT

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 Recommendation4 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
Order16 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.
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,
vs. VICTORINO (VIC) T. LACAYA, married to Rosa Legados,

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 action5 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 action9 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.1âwphi1The
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 void35 by 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.
EUGENIO E. CORTEZ, vs. ATTY. HERNANDO P. CORTES,

The instant controversy arose from a Complaint-Affidavit1 filed by complainant Eugenio E. Cortez2 against respondent Atty.
Hernando P. Cortes (Atty. Cortes) for grave misconduct, and violation of the Lawyer's Oath and the Code for Professional
Responsibility.

Complainant alleged that he engaged the services of Atty. Cortes as his counsel in an illegal dismissal case against Philippine
Explosives Corporation (PEC). He further alleged that he and Atty. Cortes had a handshake agreement on a 12% contingency fee
as and by way of attorney's fees.3

Atty. Cortes prosecuted his claims for illegal dismissal which was decided in favor of complainant. The Court of Appeals
affirmed the decision of the National Labor Relations Commissions ordering PEC to pay complaint the total amount of One
million One Hundred Thousand Pesos (₱1, 100,000) m three staggered payments. PEC then issued City Bank Check No.
1000003986 dated March 31, 2005 in the amount of Five Hundred Fifty Thousand Pesos (₱550,000), Check No. 1000003988 in
the amount of Two Hundred Seventy-Five Thousand Pesos (₱275,000) dated April 15, 2005, and Check No. 1000003989 also in
the amount of Two Hundred Seventy-Five Thousand Pesos (₱275,000) dated April 30, 2005, all payable in the name of
complainant.4

Complainant narrated that after the maturity of the first check, he went to China Bank, Southmall Las Pinas with Atty. Cortes
and his wife to open an account to deposit the said check. Atty. Cortes asked complainant to wait outside the bank while he
personally, for and in his behalf, facilitated the opening of the account. After thirty minutes, he was asked to go inside and sign a
joint savings account with Atty. Cortes.5

On April 7, 2005, complainant alleged that when he was about to withdraw the amount of the initial check deposited, Atty.
Cortes arrived with his wife and ordered the bank teller to hold off the transaction. When complainant asked why he did that,
Atty. Cortes answered that 50% of the total awarded claims belongs to him as attorney's fees. When complainant questioned
him, Atty. Cortes became hysterical and imposingly maintained that 50% of the total awarded claims belongs to him.6

Complainant then tried to pacify Atty. Cortes and his wife and offered to pay ₱200,000, and when Atty. Cortes rejected it, he
offered the third check amounting to ₱275,000, but Atty. Cortes still insisted on the 50% of the total award. Complainant was
then forced to endorse the second and third checks to Atty. Cortes, after which he was able to withdraw the proceeds of the first
check. With the help of the lawyers in the Integrated Bar of the Philippines (IBP), complainant was able to have the drawer of
the checks cancel one of the checks endorsed to Atty. Cortes before he was able to encash the same.

Atty. Cortes, in his Answer, admitted that his services were engaged by complainant to pursue the labor claims. He, however,
denied that they agreed on a 12% contingency fee by way of attorney's fees.7

Atty. Cortes claimed that complainant is a relative of his, but considering that the case was to be filed in Pampanga and he
resided in Las Piñas, he would only accept the case on a fifty-fifty sharing arrangement.8

Atty. Cortes alleged that the checks were issued pursuant to the preexecution agreement reached by the parties at the office of
Labor Arbiter Herminio V. Suelo. He and complainant agreed that the amount of the first check be divided fifty-fifty, the whole
of the second check would be the complainant's, and the third check would be his.9

Atty. Cortes further alleged that he had to assist complainant in the opening of an account to deposit the checks. Atty. Cortes had
to convince the bank manager to accept the checks issued in the name of Eugene E. Cortez despite the fact that complainant's
ID's are all in the name of Eugenio E. Cortez.10 He claimed that anyone in his place would have demanded for the holding off of
the transaction because of the base ingratitude, patent deception and treachery of complainant.11

Atty. Cortes posited that the check forms part and parcel of the judgment award to which he had a lien corresponding to his
attorney's fees and complainant should have at least invited him to witness the "harvest of the fruits." 12

Atty. Cortes insisted that the alleged 12% agreement is false, being merely a concoction of Gomplainant’s fertile and unstable
mind. He also pointed out that the fifty-fifty sharing arrangement is not unconscionably high because the complainant was given
the option to hire other lawyers, but still he engaged his services.13

After hearing and submission of position papers, the IBP Commission on Bar Discipline, in a Report and Recommendation
dated April 11, 2007, recommended the six-month suspension of Atty. Cortes. It ruled that a contingent fee arrangement should
generally be in writing, and that contingent fees depend upon an express contract without which the lawyer can only recover on
the basis of quantum meruit. It also pointed out that the Labor Code establishes a limit as to the amount of attorney's fees that a
lawyer may collect or charge his client in labor cases.

The report and recommendation was adopted and approved by the IBP Board of Governors in an August 17, 2007 Resolution:

R E S O L U T I O N NO. XVIII-2007-74

CBD Case No. 05-1482


Eugenio E. Cortez vs.
Atty. Hernando P. Cortes

RESOLVED to ADOPT and APPROVE, as it is hereby ADOPTED and APPROVED the Report and Recommendation of the
Investigating Commissioner of the above-entitled case, herein made part of this Resolution as Annex "A"; and, finding the
recommendation fully supported by the evidence on record and the applicable laws and rules, and for violation of A1iicle 11 (b)
of the Labor Code, Atty. Hernando P. Cortes is hereby SUSPENDED from the practice of law for six (6) months and Ordered to
Return to complainant whatever amount he received in excess of the 10% allowable attorney's fees in labor case (sic).

TOMAS N. PRADO
National Secretary14

A motion for reconsideration15 was filed by Atty. Cortes, which was denied by the IBP Board of Governors.16

The issue, plainly, is whether or not the acts complained of constitute misconduct on the part of Atty. Cortes, which would
subject him to disciplinary action.

We rule in the affirmative.

We have held that a contingent fee arrangement is valid in this jurisdiction. It is generally recognized as valid and binding, but
must be laid down in, an express contract.17 The case of Rayos v. Atty. Hernandez18 discussed the same succinctly, thus:

A contingent fee arrangement is valid in this jurisdiction and is generally recognized as valid and binding but must be
laid down in an express contract. The amount of contingent fee agreed upon by the parties is subject to the stipulation that
counsel will be paid for his legal services only if the suit or litigation prospers. A much higher compensation is allowed as
contingent fee in consideration of the risk that the lawyer may get nothing if the suit fails. Contracts of this nature are permitted
because they redound to the benefit of the poor client and the lawyer especially in cases where the client has meritorious cause of
action, but no means with which to pay for legal services unless he can, with the sanction of law, make a contract for a
contingent fee to be paid out of the proceeds of the litigation. Oftentimes, the contingent fee arrangement is the only means by
which the poor and helpless can seek redress for injuries sustained and have their rights vindicated. 19 (Emphasis Ours)

In this case, We note that the parties did not have an express contract as regards the payment of fees. Complainant alleges that
the contingency fee was fixed at 12% via a handshake agreement, while Atty. Cortes counters that the agreement was 50%.

The IBP Commission on Discipline pointed out that since what respondent handled was merely a labor case, his attorney's foes
should not exceed 10%, the rate allowed under Article 11120 of the Labor Code.

Although we agree that the 50% contingency fee was excessive, We do not agree that the 10% limitation as provided in Article
111 is automatically applicable.

The case of Masmud v. NLRC (First Division), et al., 21 discussed the matter of application of Article 111 of the Labor Code on
attorney's fees:

There are two concepts of attorney's fees. In the ordinary sense, attorney's fees represent the reasonable compensation paid
to a lawyer by his client for the legal services rendered to the latter. On the other hand, in its extraordinary concept,
attorney's fees may be awarded by the court as indemnity for damages to be paid by the losing party to the prevailing
party, such that, in any of the cases provided by law where such award can be made, e.g., those authorized in Article 2208 of the
Civil Code, the amount is payable not to the lawyer but to the client, unless they have agreed that the award shall pertain to the
lawyer as additional compensation or as part thereof.

xxxx

Contrary to Evangelina’s proposition, Article 111 of the Labor Code deals with the extraordinary concept of attorneys
fees.1âwphi1 It regulates the amount recoverable as attorney's fees in the nature of damages sustained by and awarded to
the prevailing party. It may not be used as the standard in fixing the amount payable to the lawyer by his client for the
legal services he rendered.22 (Emphasis Ours)

It would then appear that the contingency fees that Atty. Cortes required is in the ordinary sense as it represents reasonable
compensation for legal services he rendered for complainant. Necessarily, the 10% limitation of the Labor Code would not be
applicable. Beyond the limit fixed by Article 111, such as between the lawyer and the client, the attorney's fees may exceed 10%
on the basis of quantum meriut.23 We, however, are hard-pressed to accept the justification of the 50% contingency fee that Atty.
Cortes is insisting on for being exorbitant.

Generally, the amount of attorney's fees due is that stipulated in the retainer Agreement which is conclusive as to the amount of
the lawyers compensation.1âwphi1 In the absence thereof, the amount of attorney's fees is fixed on the basis of quantum meruit,
i.e., the reasonable worth of the attorneys services.24 Courts may ascertain also if the attorney's fees are found to be excessive,
what is reasonable under the circumstances. In no case, however, must a lawyer be allowed to recover more than what is
reasonable, pursuant to Section 24, Rule 13825 of the Rules of Court.26
Canon 20 of the Code of Professional Responsibility states that "A lawyer shall charge only fair and reasonable fees." Rule
20.01 of the same canon enumerates the following factors which should guide a lawyer in determining his fees:

(a) The time spent and the extent of the services rendered or required;

(b) The novelty and difficulty of the questions involved;

(c) The importance of the subject matter;

(d) The skill demanded;

(e) The probability of losing other employment as a result of acceptance of the proffered case;

(f) The customary charges for similar services and the schedule of fees of the IBP Chapter to which he belongs;

(g) The amount involved in the controversy and the benefits resulting to the client from the service;

(h) The contingency or' certainty of compensation;

(i) The character of the employment, whether occasional or established; and

(j)The professional standing of the lawyer.

Here, as set out by Atty. Cortes himself, the complainant's case was merely grounded on complainant's alleged absence without
leave for the second time and challenging the plant manager, the complainant's immediate superior, to a fist fight. He also
claimed that the travel from his home in Las Piñas City to San Fernando, Pampanga was costly and was an ordeal. We likewise
note that Atty. Cortes admitted that complainant was a close kin of his, and that complainant appealed to his services because,
since his separation from work, he had no visible means of income and had so many mouths to feed. These circumstances cited
by Atty. Cortes to justify the fees; to Our mind, does not exculpate Atty. Cortes, but in fact, makes Us question all the more, the
reasonableness of it.

We believe and so hold that the contingent fee here claimed by Atty. Cortes was, under the facts obtaining in this case, grossly
excessive and unconscionable. The issues involved could hardly be said to be novel and Atty. Cortes in fact already knew that
complainant was already hard up. We have held that lawyering is not a moneymaking venture and lawyers are not
merchants.27 Law advocacy, it has been stressed, is not capital that yields profits.28 The returns it births are simple rewards for a
job done or service rendered. It is a calling that, unlike mercantile pursuits which enjoy a greater deal of freedom from
governmental interference, is impressed with a public interest, for which it is subject to State regulation.29

Here, considering that complainant was amenable to a 12% contingency fee, and which we likewise deem to be the reasonable
worth of the attorney's services rendered by Atty. Cortes under the circumstances, Atty. Cortes is hereby adjudged to return to
complainant the amount he received in excess of 12% of the total award. If the Law has to remain an honorable profession and
has to attain its basic ideal, those enrolled in its ranks should not only master its tenets and principles but should also, by their
lives, accord continuing fidelity to such tenets and principles.30

We, however, find that the recommended suspension of six months is too harsh and considering that Atty. Cortes is nearing
ninety years old and that there was no question that Atty. Cortes was able to get a favorable outcome, a reduction of the
suspension is proper. We then reduce and sanction Atty. Cortes to a three-month suspension from the practice of law.

WHEREFORE, premises considered, respondent Atty. Hernando P. Cortes is found GUILTY of violation of Canon 20 of the
Code of Professional Responsibility and is hereby SUSPENDED from the practice of law for three (3) months, and is ordered to
return to complainant Eugenio E. Cortez the amount he received in excess of the 12% allowable attorney's fees.

SO ORDERED.
CZARINA T. MALVAR, vs.
KRAFT FOOD PHILS., INC. and/or BIENVENIDO BAUTISTA, KRAFT FOODS INTERNATIONAL,

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.59The 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.