Rayos v. Hernandez

10/25/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 515
VOL. 515, FEBRUARY 12, 2007 517

Rayos vs. Hernandez
*
G.R. No. 169079. February 12, 2007.
FRANCISCO RAYOS, petitioner, vs. ATTY. PONCIANO G.

HERNANDEZ, respondent.
Administrative Law; Attorneys; Moneys collected by an

attorney on a judgment rendered in favor of his client constitute
trust funds and must be immediately paid over to the client.—
Moneys collected by an attorney on a judgment rendered in favor
of his client constitute trust funds and must be immediately paid
over to the client. Canon 16 of the Code of Professional
Responsibility provides as follows: CANON 16—A lawyer shall
hold in trust all moneys and properties of his client that may
come into his possession. Rule 16.01—A lawyer shall account for
all money or property collected or received for or from the client.
Same; Same; A lawyer’s unjustified withholding of money

belonging to his client, as in this case, warrants the imposition of
disciplinary action.—A lawyer is not entitled to unilaterally
appropriate his client’s money for himself by the mere fact alone
that the client owes him attorney’s fees. The failure of an attorney
to return the client’s money upon demand gives rise to the
presumption that he has misappropriated it for his own use to the
prejudice and violation of the general morality, as well as of
professional ethics; it also impairs public confidence in the legal
profession and deserves punishment. In short, a lawyer’s
unjustified withholding of money belong-
_______________
* THIRD DIVISION.
518
518 SUPREME COURT REPORTS ANNOTATED
Rayos vs. Hernandez
ing to his client, as in this case, warrants the imposition of

disciplinary action.
http://www.central.com.ph/sfsreader/session/00000166a95ad0cb406a1fbe003600fb002c009e/t/?o=False 1/18
Same; Same; Attorney-Client Relationship; The relationship of

attorney and client has always been rightly regarded as one of
special trust and confidence—an attorney must exercise the utmost
good faith and fairness in all his relationship vis-à-vis his client.—
The relationship of attorney and client has always been rightly
regarded as one of special trust and confidence. An attorney must
exercise the utmost good faith and fairness in all his relationship
vis-à-vis his client. Respondent fell far short of this standard
when he failed to render an accounting for the amount actually
received by him on behalf of his client and when he refused to
turn over any portion of said amount to his client upon the pretext
that his attorney’s fees had not at all been paid. Respondent had,
in fact, placed his private and personal interest above that of his
client.
Attorneys; Attorney’s Fees; It follows that a lawyer’s

compensation for professional services rendered is subject to the
supervision of the court, not just to guarantee that the fees he
charges and receives remain reasonable and commensurate with
the services rendered, but also to maintain the dignity and
integrity of the legal profession to which he belongs.—We have
held that lawyering is not a moneymaking venture and lawyers
are not merchants. Law advocacy, it has been stressed, is not
capital that yields profits. 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.
Same; Same; Section 13 of the Canons of Professional Ethics

states that “a contract for a contingent fee, where sanctioned by
law, should be reasonable under all the circumstances of the case
including the risk and uncertainty of the compensation, but should
always be subject to the supervision of a court as to its
reasonableness.”—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
519
VOL. 515, FEBRUARY 12, 2007 519
Rayos vs. Hernandez
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.” Contingent
fee contracts are subject to the supervision and close scrutiny of
the court in order that clients may be protected from unjust
charges. Section 13 of the Canons of Professional Ethics states
that “a contract for a contingent fee, where sanctioned by law,
should be reasonable under all the circumstances of the case
including the risk and uncertainty of the compensation, but
should always be subject to the supervision of a court, as to its
reasonableness.”
Same; Same; We also take note respondent’s efforts in

litigating petitioner’s case for a long period of 15 years—the
respondent took risk in representing petitioner on a contingent fee
basis—in consideration of the foregoing, a fee of 35% of the amount
awarded to petitioner would be a fair compensation for
respondent’s legal services.—In the present case, respondent Atty.
Hernandez, after all, succeeded in obtaining a favorable decision
for his client, the petitioner. At first, respondent failed to obtain a
favorable judgment in the RTC as the case was dismissed. But on
appeal to the Court of Appeals, the RTC Decision was reversed
and petitioner was awarded the amount of P1,060,800.00 as
damages and P159,120.00 as attorney’s fees. Said award was
sustained by the Supreme Court. We also take note respondent’s
efforts in litigating petitioner’s case for a long period of 15 years.
Lastly, the respondent took risk in representing petitioner on a
contingent fee basis. In consideration of the foregoing, a fee of
35% of the amount awarded to petitioner would be a fair
compensation for respondent’s legal services.
Same; Disbarment; Disbarment, therefore, should never be

decreed where any lesser penalty, such as temporary suspension,
would accomplish the end desired.—The misconduct of a lawyer,
whether in his professional or private capacity, which shows him
to be wanting in moral character, honesty, probity and good
demeanor, renders him unworthy to the privileges which his
license and the law confer upon him, may be sanctioned with
disbarment or suspension. The court should also exercise a sound
discretion in determining whether
520
Rayos vs. Hernandez
a lawyer should be disbarred or merely suspended. It should bear

in mind that admission to the Bar is obtained only after years of
labor and study and the office acquired often becomes the source
of great honor and emolument to its possessor. To most members

of the legal profession, it is a means of support for themselves and
their families. To deprive one of such an office is often to decree
poverty to the lawyer and destitution to his family. Disbarment,
therefore, should never be decreed where any lesser penalty, such
as temporary suspension, would accomplish the end desired.
PETITION for review on certiorari of a resolution of the

Integrated Bar of the Philippines.
The facts are stated in the opinion of the Court.
Law Firm of Lapena, Villanueva, Manzano, Ordona
and Associates for petitioner.
Amador C. Dela Merced for respondent.
CHICO-NAZARIO, J.:
1
This is a Petition for Review of the Resolution dated 12
March 2005 of the Integrated Bar of the Philippines (IBP),
dismissing petitioner Francisco Rayos’s complaint for
disbarment against respondent Atty. Ponciano Hernandez.
Respondent was the counsel of petitioner in Civil Case
No. SM-951 entitled, “Francisco Rayos v. NAPOCOR,” filed
before the Regional Trial Court (RTC), Malolos, Bulacan.
The complaint alleged, among other things, that the
National Power Corporation (NAPOCOR) recklessly,
imprudently and negligently opened the three floodgates of
the spillway of Angat Dam at midnight of 26 October 1978
until the early morning hours of 27 October 1978, during
the occurrence of typhoon “Kading” causing the release of a
great volume of stored water, the resultant swelling and
flooding of Angat River, and the consequent loss of lives of
some of petitioner’s relatives and destruction of his family’s
properties, for which he sought
_______________
1 Rollo, pp. 9-24.
521
VOL. 515, FEBRUARY 12, 2007 521

Rayos vs. Hernandez
damages. Of the 10 members of petitioner’s family who

perished, only four bodies were recovered and only
petitioner and one of his sons, German Rayos, survived.
2
On 21 December 1979, the complaint was dismissed on
the ground that the State cannot be sued without its
consent as the operation and management of Angat Dam,
Norzagaray, were governmental functions. Said dismissal
was questioned directly to this Court which set aside the
RTC decision and ordered the reinstatement of the
3
complaint.
On 30 April 1990, however, the complaint was dismissed

again by the RTC for lack of sufficient and credible
4
evidence.
The case was subsequently appealed to the Court of
Appeals, which reversed the RTC decision and awarded
damages in favor of petitioner, the dispositive portion of
which reads:
“CONFORMABLY TO THE FOREGOING, the joint decision

appealed from is hereby REVERSED and SET ASIDE, and a new
one is hereby rendered:
xxxx
2. In Civil Case No. SM-951, ordering defendants-appellees to
pay jointly and severally, plaintiff-appellant, with legal interest
from the date when this decision shall have become final and
executory, the following:
A. Actual damages of Five Hundred Twenty Thousand Pesos

(P520,000.00);
B. Moral Damages of Five Hundred Thousand Pesos
(P500,000.00); and
C. Litigation Expenses of Ten Thousand Pesos (P10,000.00).
xxxx
In addition, in all the four (4) instant cases, ordering
defendants-appellees to pay, jointly and severally, plaintiffs-
appellants,
_______________
2 Records, Vol. III, p. 66.

3 Id., at p. 89.
4 Id., at p. 125.
522

Rayos vs. Hernandez
attorney’s fees in5 an amount equivalent to 15% of the total

amount awarded.”
The case was appealed to this Court, which affirmed the

6
Court of Appeals Decision. The Decision of the Supreme
Court became final and executory on 4 August 1993.
7
Thus, a Writ of Execution was issued by the RTC on 10
December 1993, upon motion filed by respondent. As a
consequence, NAPOCOR issued Check No. 014710 dated 5
January 1994, in the amount of P1,060,800.00 payable to
petitioner. Thereafter, the check was turned over to
respondent as counsel of petitioner. Petitioner demanded
the turn over of the check from respondent, but the latter
refused.
On 24 January 1994, petitioner filed with the RTC a

8
motion to direct respondent to deliver to him the check
issued by NAPOCOR, corresponding to the damages
awarded by the Court of Appeals. Petitioner sought to
recover the check in the amount of P1,060,800.00 from
respondent, claiming that respondent had no authority to
receive the same as he was already dismissed by petitioner
9
as his counsel on 21 November 1993. Respondent, on the
other hand, justifies his retention as a means to ensure
payment of his attorney’s fees.
On 7 April 1994, the RTC issued an Order directing
respondent to deliver the check to the Sheriff of the court
who will subsequently deliver it to petitioner. A Writ of
Execution was subsequently issued. Despite the Court
Order, respondent refused to surrender the check.
However, on 4 July 1994, respondent deposited the
amount of P502,838.79 with Farmers Savings and Loan
Bank, Inc., Norzagaray, Bulacan, in the name of petitioner
which was eventually received by the latter.
_______________
5 Id., at pp. 198-201.

6 Promulgated 21 May 1993.
7 Records, Vol. III, pp. 224-226.
8 Id., at pp. 243-245.
9 Id., at p. 239.
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VOL. 515, FEBRUARY 12, 2007 523

Rayos vs. Hernandez
Thus, petitioner initiated this complaint for disbarment for

the failure of respondent to return the rest of the award in
the amount of P557,961.21.
10
In his comment, respondent alleged that he handled
petitioner’s case, in Civil Case No. SM-951, for 15 years,
from the trial court up to the Supreme Court. On 21
November 1993, he received a letter from petitioner
dismissing him as counsel. Simultaneous thereto,
respondent received a letter dated 15 November 1993 from
Atty. Jose G. Bruno asking him to comment on the therein
attached letter dated 19 November 1993 of petitioner
addressed to NAPOCOR, requesting that the award of
damages granted by the Court of Appeals and affirmed by
the Supreme Court be paid to him.
Respondent also averred that petitioner had a verbal
contract for attorney’s fees on a contingent basis and that
the said contract was only reduced in writing on 6 October
1991, duly signed by both of them. By virtue of the
contract, petitioner and respondent supposedly agreed on a
40%-60% sharing, respectively, of the court award.
Respondent was entitled to receive 60% of the award

because petitioner agreed to pay him 40% of the award as
attorney’s fees and 20% of the award as litigation expenses.
Respondent further asseverated that because petitioner
dismissed the respondent and refused to settle his
obligation, he deposited the amount of P424,320.00 in a
bank in petitioner’s name under Account No. 381
(representing petitioner’s share of 40% of the total award)
11
on 10 May 1994; and the amount of P63,648.00 in
petitioner’s name under Account No. 389 (representing
petitioner’s share of 40% of the P159,120.00 awarded as
12
attorney’s fees by the Court of Appeals) on 19 May 1994.
Petitioner already received the
_______________
10 Records, Vol. I, pp. 45-49.

11 Records, Vol. III, p. 233.
12 Id., at p. 234.
524

Rayos vs. Hernandez
amount of P502,838.79 in accordance with the RTC Order

dated 7 April 1994.
Respondent contended that the petitioner’s complaint
was without basis and was meant only to harass and put
him to shame before the residents of Norzagaray, Bulacan.
13
In a Resolution dated 9 August 1995, the Court
referred the case to the Commission on Bar Discipline of
the IBP for investigation, report and recommendation.
A series of hearings were conducted by the Commission
on Bar Discipline of the IBP at the IBP Building, Ortigas
Center, Pasig City, from March to September 2001.
On 1 February 2005, Investigating Commissioner Lydia
A. Navarro B. Funa submitted her Report and
14
Recommendation, recommending the dismissal of the
case.
Thereafter, the IBP issued its Resolution dated 12
March 2005, approving and adopting the recommendation
of the Investigating Commissioner, thus:
RESOLVED to ADOPT and APPROVE, as it 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 considering
15
that the case lacks
merit, the same is hereby DISMISSED.
We do not agree in the recommendation of the IBP. The

threshold issue in this petition is: whether respondent is
justified in retaining the amount awarded to petitioner in

Civil Case No. SM-951 to assure payment of his attorney’s
fees.
_______________
13 Records, Vol. I, p. 75.

14 Rollo, pp. 28-34.
15 Id., at p. 27.
525
VOL. 515, FEBRUARY 12, 2007 525

Rayos vs. Hernandez
Moneys collected by an attorney on a judgment rendered in

favor of his client constitute trust funds and must be
16
immediately paid over to the client. Canon 16 of the Code
of Professional Responsibility provides as follows:
CANON 16—A lawyer shall hold in trust all moneys and

properties of his client that may come into his possession.
Rule 16.01—A lawyer shall account for all money or property
collected or received for or from the client.
In the case at bar, when respondent withheld and refused

to deliver the NAPOCOR check representing the amount
awarded by the court in Civil Case No. SM-951, which he
received on behalf of his client (petitioner herein), he
breached the trust reposed on him. It is only after an Order
was issued by the RTC ordering the delivery of the check to
petitioner that the respondent partially delivered the
amount of P502,838.79 to the former, but still retaining for
himself the amount of P557,961.21 as payment for his
attorney’s fees. The claim of the respondent that petitioner
failed to pay his attorney’s fees is not an excuse for
respondent’s failure to deliver the amount to the petitioner.
A lawyer is not entitled to unilaterally appropriate his
client’s money for himself by the mere fact alone that the
17
client owes him attorney’s fees. The failure of an attorney
to return the client’s money upon demand gives rise to the
presumption that he has misappropriated it for his own use
to the prejudice and violation of the general morality, as
well as of professional ethics; it also impairs public
confidence in the legal profession and deserves
punishment. In short, a lawyer’s unjustified withholding of
money belonging to his client, as in this case, warrants the
18
imposition of disciplinary action.
_______________
16 Aya v. Bigornia, 57 Phil. 8, 11 (1932).

17 Cabigao v. Rodrigo, 57 Phil. 20, 23 (1932).
18 Sencio v. Atty. Calvadores, 443 Phil. 490, 494; 395 SCRA 393, 396
(2003); Reyes v. Maglaya, 313 Phil. 1, 7; 243 SCRA 214, 219 (1995).
526

Rayos vs. Hernandez
It is true that under Canon 16.03 of the Code of

Professional Responsibility, an attorney has the following
rights;
“Rule 16.03—A lawyer shall deliver the funds and property of his
client when due or upon demand. However, he shall have a lien
over the funds and may apply so much thereof as may be
necessary to satisfy his lawful fees and disbursements, giving
notice promptly thereafter to his client. He shall also have a lien
to the same extent on all judgments and executions he has
secured for his client as provided for in the Rules of Court.”
(Emphases supplied.)
But the fact alone that a lawyer has a lien for fees on
moneys in his hands collected for his client, as above-
stated, does not relieve him of his duty to promptly account
for the moneys received; his failure to do so constitutes
19
professional misconduct. Thus, what respondent should
have properly done in the case at bar was to provide the
petitioner with an accounting before deducting his
attorney’s fees and then to turn over the remaining balance
of the award collected to petitioner. The Court notes that
respondent represented petitioner from the time of filing of
the complaint in Civil Case No. SM-951 before what is now
the RTC and of the appeal of the same case to the Court of
Appeals and Supreme Court. But respondent was not
justified to hold on the entire amount of award collected by
him until his fees had been paid and received by him.
The relationship of attorney and client has always been
rightly regarded as one of special trust and confidence. An
attorney must exercise the utmost good faith and fairness
in all his relationship vis-à-vis his client. Respondent fell
far short of this standard when he failed to render an
accounting for the amount actually received by him on
behalf of his client and when he refused to turn over any
portion of said amount to his client upon the pretext that
his attorney’s fees had not
_______________
19 Tanhueco v. De Dumo, A.C. No. 1437, 25 April 1989, 172 SCRA 760,
767.
527
VOL. 515, FEBRUARY 12, 2007 527

Rayos vs. Hernandez
at all been paid. Respondent had, in fact, placed his private

and personal interest above that of his client.
We have held that lawyering is not a moneymaking
20
venture and lawyers are not merchants. Law advocacy, it
has been stressed, is not capital that yields profits. 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
21
interest, for which it is subject to State regulation.
A lawyer is not merely the defender of his client’s cause
and a trustee of his client’s cause of action and assets; he is
also, and first and foremost, an officer of the court and
participates in the fundamental function of administering
22
justice in society. It follows that a lawyer’s compensation
for professional services rendered is subject to the
supervision of the court, not just to guarantee that the fees
he charges and receives remain reasonable and
commensurate with the services rendered, but also to
maintain the dignity and integrity of the legal profession to
which he belongs. Upon taking his attorney’s oath as an
officer of the court, a lawyer submits himself to the
authority of the courts to regulate his right to charge
23
professional fees.
There is another aspect to this case which the Court
cannot just gloss over. Respondent claimed that he charged
petitioner, his client, a contingent fee comprising of forty
percent
_______________
20 Canon 1, CANONS OF PROFESSIONAL ETHICS.

21 Metropolitan Bank & Trust Company v. Court of Appeals , G.R. Nos.
86100-03, 23 January 1990, 181 SCRA 367, 377, citing Canlas v. Court of
Appeals, G.R. No. L-77691, 8 August 1988, 164 SCRA 160, 173-174.
22 Pineda v. Atty. De Jesus, G.R. No. 155224, 23 August 2006, 499
SCRA 608.
23 Sumaoang v. Judge, RTC, Br. XXXI, Guimba, Nueva Ecija , G.R. No.
78173, 26 October 1992, 215 SCRA 136, 143.
528

Rayos vs. Hernandez
(40%) as attorney’s fees and twenty percent (20%) as

litigation expenses. The agreement provides:
UNAWAIN NG LAHAT SA PAMAMAGITAN NITO:
Ako, si Francisco Rayos, Sr., Pilipino, may sapat na gulang at

ngayon ay naninirahan sa Pinagbarilan, Baliwag, Bulacan, sa
pamamagitan ng kasulatang ito, ay nagpapatunay sa mga
sumusunod:
Na, kaugnay sa aking usapin laban sa NPC at Benjamin
Chavez (Rayos vs. NPC, et al.) na ngayon ay nakabinbin sa Court
of Appeals, ako ay nakipagkasundo sa aking abogado, Atty.
Ponciano G. Hernandez, gaya ng sumusunod:
1. Sakaling ipanalo ang aking usapin, ang ano mang aking

makukuha ay hahatiin gaya ng sumusunod: 40% ang para
sa akin; 40% ang para kay Atty. Ponciano G. Hernandez;
20% ay ilalabas bilang gastos sa kaso.
2. Kung matalo ako sa kaso ay wala akong sagutin sa aking
abogado.
Sa katunayan ng lahat, ako ay lumagda sa kasunduang ito dito

sa Norzagaray, Bulacan ngayong ika-6 ng Oktubre 1991.
(SGD)PONCIANO G. (SGD) FRANCISCO RAYOS

HERNANDEZ
24
Abogado May Usapin
25
A contingent fee arrangement is valid in this jurisdiction
and is generally recognized as valid and binding but must
26
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
_______________
24 Records, Vol. I, p. 53.

25 Law Firm of Raymundo A. Armovit v. Court of Appeals, G.R. No.
90983, 27 September 1991, 202 SCRA 16, 24.
26 Corpus v. Court of Appeals, G.R. No. L-40424, 30 June 1980, 98
SCRA 424, 441.
529
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Rayos vs. Hernandez
27
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

28
and have their rights vindicated.”
Contingent fee contracts are subject to the supervision
and close scrutiny of the court in order that clients may be
29
protected from unjust charges. Section 13 of the Canons of
Professional Ethics states that “a contract for a contingent
fee, where sanctioned by law, should be reasonable under
all the circumstances of the case including the risk and
uncertainty of the compensation, but should always be
subject to the supervision of a court, as to its
reasonableness.” Likewise, Rule 138, Section 24, of the
Rules of Court provides:
“SEC. 24. Compensation of attorney’s; agreement as to fees.—An

attorney shall be entitled to have and recover from his client no
more than a reasonable compensation for his services, with a view
to the importance of the subject matter of the controversy, the
extent of the services rendered, and the professional standing of
the attorney. No court shall be bound by the opinion of attorneys
as expert witnesses as to the proper compensation, but may
disregard such testimony and base its conclusion on its own
professional knowledge. A written contract for services shall
control the amount to be paid therefor unless found by the court
to be unconscionable or unreasonable.” (Emphasis supplied.)
_______________
27 Sesbreño v. Court of Appeals , 314 Phil. 884, 893; 245 SCRA 30, 36
(1995).
28 Director of Lands v. Ababa, G.R. No. L-26096, 27 February 1979, 88
SCRA 513, 524.
29 Licudan v. Court of Appeals, G.R. No. 91958, 24 January 1991, 193
SCRA 293, 300; Director of Lands v. Ababa, Id., at p. 525.
530

Rayos vs. Hernandez
The reduction of unreasonable attorney’s fees is within the

30
regulatory powers of the courts. When the courts find that
the stipulated amount is excessive or the contract is
unreasonable, or found to have been marred by fraud,
mistake, undue influence or suppression of facts on the
part of the attorney, public policy demands that said
contract be disregarded to protect the client from
31
unreasonable exaction.
There is, therefore, now a corollary issue of whether the
stipulated attorney’s fees are unreasonable and
unconscionable under the circumstances of the case as to
warrant a reduction thereof.
Stipulated attorney’s fees are unconscionable whenever
the amount is by far so disproportionate compared to the
value of the services rendered as to amount to fraud
perpetrated upon the client. This means to say that the

amount of the fee contracted for, standing alone and
unexplained would be sufficient to show that an unfair
advantage had been taken of the client, or that a legal
32
fraud had been perpetrated on him.
The decree of unconscionability or unreasonableness of a
stipulated amount in a contingent fee contract, will not,
however, preclude recovery. It merely justifies the fixing by
the court of a reasonable compensation for the lawyer’s
services.
Generally, the amount of attorney’s fees due is that
stipulated in the retainer agreement which is conclusive as
to the amount of the lawyer’s compensation. A stipulation
on a lawyer’s compensation in a written contract for
professional services ordinarily controls the amount of fees
that the contracting lawyer may be allowed, unless the
court finds such stipu-
_______________
30 Radiowealth Finance Co., Inc. v. International Corporate Bank, G.R.

Nos. 77042-43, 28 February 1990, 182 SCRA 862, 868.
31 Felices v. Madrilejos, 51 Phil. 24, 33 (1927); Jayme v. Bualan, 58
Phil. 422, 424 (1933).
32 Sesbreño v. Court of Appeals, supra note 27 at p. 894.
531
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Rayos vs. Hernandez
33
lated amount unreasonable or unconscionable. 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 attorney’s services. Courts may ascertain also if the
attorney’s fees are found to be excessive, what is reasonable
34
under the circumstances. In no case, however, must a
lawyer be allowed to recover more than what is reasonable,
pursuant to Section 24, Rule 138 of the Rules of Court.
We have identified the circumstances to be considered in
determining the reasonableness of a claim for attorney’s
fees as follows: (1) the amount and character of the service
rendered; (2) labor, time, and trouble involved; (3) the
nature and importance of the litigation or business in
which the services were rendered; (4) the responsibility
imposed; (5) the amount of money or the value of the
property affected by the controversy or involved in the
employment; (6) the skill and experience called for in the
performance of the services; (7) the professional character
and social standing of the attorney; (8) the results secured;
(9) whether the fee is absolute or contingent, it being
recognized that an attorney may properly charge a much
35
larger fee when it is contingent than when it is not; and
(10) the financial capacity and economic status of the client

have to be taken into account in fixing the reasonableness
36
of the fee.
Rule 20.1, Canon 20 of the Code of Professional
Responsibility enumerates the following factors which
should guide a lawyer in determining his fees:
_______________
33 Rule 138, Section 24, REVISED RULES OF COURT; Francisco v.

Matias, 119 Phil. 351, 358; 10 SCRA 89, 95 (1964); Lopez v. Pan American
World Airways, 123 Phil. 256, 271; 16 SCRA 431, 444 (1966).
34 Sesbreño v. Court of Appeals, supra note 27 at p. 894.
35 Research and Services Realty, Inc. v. Court of Appeals, 334 Phil. 652,
668; 266 SCRA 731, 746 (1997).
36 Taganas v. National Labor Relations Commission, G.R. No. 118746,
7 September 1995, 248 SCRA 133, 137.
532

Rayos vs. Hernandez
(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.
In the case at bar, respondent retained the amount of

P557,961.21 out of the P1,060,800.00 award for damages
paid by NAPOCOR to petitioner. Under the said scheme,
respondent actually collected fifty-three percent (53%) or
more than half of the total amount due the petitioner;
indeed, he appropriated for himself more than the amount
which he had already turned over to and actually received
by his client.
As adverted to above, we note that petitioner was
unschooled and frustrated and hopeless with the tragic loss
of his loved ones caused by the inundation of the town of
Norzagaray, Bulacan, on 26-27 October 1978 because of the

negligent release by NAPOCOR of the water through the
spillways of the Angat Dam. Petitioner also had to face the
loss and destruction of his family’s properties. Under such
circumstances and given his understandable desire to
recover the damages for the loss of his loved ones and
properties, petitioner would easily succumb and readily
agree to the demands of respondent lawyer regarding his
attorney’s fees.
We believe and so hold that the contingent fee here
claimed was, under the facts obtaining in this case, grossly
excessive
533
VOL. 515, FEBRUARY 12, 2007 533

Rayos vs. Hernandez
and unconscionable. Such a fee structure, when considered

in conjunction with the circumstances of this case, also
shows that an unfair advantage was taken of the client and
legal fraud and imposition perpetrated upon him. Lawyers
should not be permitted to get a lion’s share of the benefits
due the poor and the helpless. Contracts for legal services
between the helpless and attorney should be zealously
scrutinized to the end that a fair share of the benefits be
not denied to the former. This Court has the power to
37 38
guard a client, especially an aged and necessitous client,
against such a contract.
A survey of existing jurisprudence regarding attorney’s
fees would reveal the following: in the case of Amalgamated
39
Laborers’ Association v. Court of Industrial Relations, the
rate of attorney’s fees allowed was 25%; in Law Firm of
40
Raymundo A. Armovit v. Court of Appeals, the rate
41
allowed was 20%; in Polytrade Corporation v. Blanco,
42
25%; in Santiago v. Dimayuga, 20%; in Cosmopolitan
43
Insurance Co., Inc. v. Reyes, 15%; in Reyes v. Court of
44
Appeals, 15%; and in Social Security Commission v.
45
Almeda, 15%.
In the present case, respondent Atty. Hernandez, after
all, succeeded in obtaining a favorable decision for his
client, the petitioner. At first, respondent failed to obtain a
favorable judgment in the RTC as the case was dismissed.
But on appeal to the Court of Appeals, the RTC Decision
was reversed and petitioner was awarded the amount of
P1,060,800.00 as damages and P159,120.00 as attorney’s
fees. Said award was sustained by the Supreme Court. We
also take note respon-
_______________
37 Tanhueco v. De Dumo, supra note 19 at p. 772.

38 Article 24, CIVIL CODE OF THE PHILIPPINES.
39 131 Phil. 374, 386; 22 SCRA 1266, 1277 (1968).
40 Supra note 25 at p. 25.
41 G.R. No. L-27033, 31 October 1969, 30 SCRA 187, 193.
42 113 Phil. 902, 905; 3 SCRA 919, 922 (1961).
43 122 Phil. 648, 651; 15 SCRA 258, 261 (1965).
44 202 Phil. 172, 173; 116 SCRA 607, 609 (1982).
45 G.R. No. L-75428, 14 December 1988, 168 SCRA 474, 481.
534

Rayos vs. Hernandez
dent’s efforts in litigating petitioner’s case for a long period

of 15 years. Lastly, the respondent took risk in
representing petitioner on a contingent fee basis.
In consideration of the foregoing, a fee of 35% of the
amount awarded to petitioner would be a fair compensation
for respondent’s legal services.
The misconduct of a lawyer, whether in his professional
or private capacity, which shows him to be wanting in
moral character, honesty, probity and good demeanor,
renders him unworthy to the privileges which his license
and the law confer upon him, may be sanctioned with
46
disbarment or suspension.
The court should also exercise a sound discretion in
determining whether a lawyer should be disbarred or
merely suspended. It should bear in mind that admission to
the Bar is obtained only after years of labor and study and
the office acquired often becomes the source of great honor
and emolument to its possessor. To most members of the
legal profession, it is a means of support for themselves and
their families. To deprive one of such an office is often to
47
decree poverty to the lawyer and destitution to his family.
Disbarment, therefore, should never be decreed where any
lesser penalty, such as temporary suspension, would
48
accomplish the end desired.
49
In the case of Schulz v. Atty. Flores, a lawyer was
suspended for six months for not returning his client’s
money despite demands, for unjustifiably refusing to
return his client’s papers, and for collecting excessive and
unreasonable
_______________
46 Po Cham v. Pizarro, A.C. No. 5499, 16 August 2005, 467 SCRA 1, 13.
47 Pineda, Ernesto, Legal and Judicial Ethics (1994 Edition), p. 280.
48 Lim v. Montano, A.C. No. 5653, 27 February 2006, 483 SCRA 192,
202.
49 462 Phil. 601; 417 SCRA 519 (2003).
535
VOL. 515, FEBRUARY 12, 2007 535

Rayos vs. Hernandez
50
fees. Also in the case of Tanhueco v. Atty. De Dumo, a
lawyer was suspended for a period of six months for failure
to return the money received by him on behalf of his client
and for collecting excessive and unconscionable fees.
Guided by our rulings in the abovestated cases,
suspension of respondent for six months is justified in the
case at bar.
WHEREFORE the Court Resolves that:
1. Respondent is guilty of violation of the attorney’s

oath and of serious professional misconduct and
shall be SUSPENDED from the practice of law for
six (6) months and WARNED that repetition of the
same or similar offense will be dealt with more
severely;
2. Respondent is entitled to attorney’s fees in the
amount equivalent to THIRTY-FIVE PERCENT
51
(35%) of the total amount awarded to petitioner in
Civil Case No. SM-951; and
3. Respondent is to return the amount of Two
Hundred Ninety Thousand One Hundred Nine
52
Pesos and Twenty-One Centavos (P290,109.21),
which he retained in excess of what we herein
declared as fair and reasonable attorney’s fees, plus
legal interest from date of finality of this judgment
until full payment thereof.
Let copies of this Decision be entered in the personal record

of respondent as member of the Bar and furnished the
Office of the Bar Confidant, the IBP, and the Court
Administrator for circulation to all courts of the country.
_______________
50 Supra note 19.

51 P1,060,800.00 as damages and P159,120.00 (15% of P1,060,800.00)
as attorney’s fees or a total of P1,219,920.00.
52 35% of P1,219,920.00 is P426,972.00. Since respondent retained
P557,961.21 and P159,120.00 and 35% of P1,219,920.00 is P 426,972.00,
respondent will return the difference of P290,109.21 to petitioner. The
amount of P557,961.21 and P159,120.00 retained by respondent is
actually 59% of the amount due to petitioner in Civil Case No. 951.
536

Rayos vs. Hernandez
SO ORDERED.
Ynares-Santiago (Chairp erson), Austria-Martinez

and Callejo, Sr., JJ., concur.
Nachura, J., On Leave.
Respondent suspended from practice of law for six (6)

months for violation of attorney’s oath and of serious
professional misconduct, with warning against repetition of
similar offense; respondent entitled to attorney’s fees
equivalent to 35% of total amount awarded; and respondent
ordered to return P290,109.21.
Notes.—Disbarment should not be decreed where any

punishment less severe—such as reprimand, suspension, or
fine—would accomplish the end desired. (Suzuki vs.
Tiamson, 471 SCRA 129 [2005])
Respondent’s failure to return the money to
complainants upon demand gave rise to the presumption
that he misappropriated it in violation of the trust reposed
on him. (Aldovino vs. Pujalte, Jr., 423 SCRA 135 [2004])
In the course of his professional relationship with his
client, a lawyer may receive money or property for or from
his client—he shall hold such property in trust, and he is
under obligation to make an accounting thereof as required
by rule 16.01 of the Code of Professional Responsibility.
(Buado vs. Layag, 436 SCRA 159 [2004])
——o0o——
537
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10/25/2018 SUPREME COURT REPORTS ANNOTATED VOLUME 515

VOL. 515, FEBRUARY 12, 2007 517

FRANCISCO RAYOS, petitioner, vs. ATTY. PONCIANO G.

Administrative Law; Attorneys; Moneys collected by an

Same; Same; A lawyer’s unjustified withholding of money

518 SUPREME COURT REPORTS ANNOTATED

Rayos vs. Hernandez

ing to his client, as in this case, warrants the imposition of

Same; Same; Attorney-Client Relationship; The relationship of

Attorneys; Attorney’s Fees; It follows that a lawyer’s

Same; Same; Section 13 of the Canons of Professional Ethics

VOL. 515, FEBRUARY 12, 2007 519

Rayos vs. Hernandez

this nature are permitted because they redound to the benefit of

Same; Same; We also take note respondent’s efforts in

Same; Disbarment; Disbarment, therefore, should never be

520 SUPREME COURT REPORTS ANNOTATED

Rayos vs. Hernandez

a lawyer should be disbarred or merely suspended. It should bear

of great honor and emolument to its possessor. To most members

PETITION for review on certiorari of a resolution of the

1 Rollo, pp. 9-24.

VOL. 515, FEBRUARY 12, 2007 521

damages. Of the 10 members of petitioner’s family who

On 30 April 1990, however, the complaint was dismissed

“CONFORMABLY TO THE FOREGOING, the joint decision

A. Actual damages of Five Hundred Twenty Thousand Pesos

2 Records, Vol. III, p. 66.

522 SUPREME COURT REPORTS ANNOTATED

attorney’s fees in5 an amount equivalent to 15% of the total

The case was appealed to this Court, which affirmed the

On 24 January 1994, petitioner filed with the RTC a

5 Id., at pp. 198-201.

VOL. 515, FEBRUARY 12, 2007 523

Thus, petitioner initiated this complaint for disbarment for

Respondent was entitled to receive 60% of the award

10 Records, Vol. I, pp. 45-49.

524 SUPREME COURT REPORTS ANNOTATED

amount of P502,838.79 in accordance with the RTC Order

RESOLVED to ADOPT and APPROVE, as it hereby ADOPTED

We do not agree in the recommendation of the IBP. The

justified in retaining the amount awarded to petitioner in

13 Records, Vol. I, p. 75.

VOL. 515, FEBRUARY 12, 2007 525

Moneys collected by an attorney on a judgment rendered in

CANON 16—A lawyer shall hold in trust all moneys and

In the case at bar, when respondent withheld and refused

16 Aya v. Bigornia, 57 Phil. 8, 11 (1932).

526 SUPREME COURT REPORTS ANNOTATED

It is true that under Canon 16.03 of the Code of

VOL. 515, FEBRUARY 12, 2007 527

Rayos vs. Hernandez

at all been paid. Respondent had, in fact, placed his private

20 Canon 1, CANONS OF PROFESSIONAL ETHICS.

528 SUPREME COURT REPORTS ANNOTATED

(40%) as attorney’s fees and twenty percent (20%) as

UNAWAIN NG LAHAT SA PAMAMAGITAN NITO:

Ako, si Francisco Rayos, Sr., Pilipino, may sapat na gulang at

1. Sakaling ipanalo ang aking usapin, ang ano mang aking

Sa katunayan ng lahat, ako ay lumagda sa kasunduang ito dito

(SGD)PONCIANO G. (SGD) FRANCISCO RAYOS

24 Records, Vol. I, p. 53.

VOL. 515, FEBRUARY 12, 2007 529