I In the Report and Recommendation,4 dated January 12, 2012, the
Investigating Commissioner found Atty. Agleron to have violated the
A.C. No. 5359 March 10, 2014
ERMELINDA LAD VOA. DE DOMINGUEZ, represented by her
Attorney-in-Fact, VICENTE A. PICHON,Complainant,
vs.
ATTY. ARNULFO M. AGLERON, SR., Respondent.
RESOLUTION
MENDOZA, J.:
Complainant Ermelinda Lad Vda. De Dominguez (complainant) was the
widow of the late Felipe Domiguez who died in a vehicular accident in
Caraga, Davao Oriental, on October 18, 1995, involving a dump truck
owned by the Municipality of Caraga. Aggrieved, complainant decided to
file charges against the Municipality of Caraga and engaged the services
of respondent Atty. Arnulfo M. Agleron, Sr. (Atty. Agleron). On three (3)
occasions, Atty. Agleron requested and received from complainant the
following amounts for the payment of filing fees and sheriffs fees, to wit:
(1) June 3, 1996 -₱3,000.00; (2) June 7, 1996 -Pl,800.00; and September
2, 1996 - ₱5,250.00 or a total of ₱10,050.00. After the lapse of four (4)
years, however, no complaint was filed by Atty. Agleron against the
Municipality of Caraga.1
Atty. Agleron admitted that complainant engaged his professional service
and received the amount of ₱10,050.00. He, however, explained that
their agreement was that complainant would pay the filing fees and other
incidental expenses and as soon as the complaint was prepared and
ready for filing, complainant would pay 30% of the agreed attorney’s fees
of ₱100,000.00. On June 7, 1996, after the signing of the complaint, he
advised complainant to pay in full the amount of the filing fee and sheriff’s
fees and the 30% of the attorney’s fee, but complainant failed to do so.
Atty. Agleron averred that since the complaint could not be filed in court,
the amount of ₱10,050.00 was deposited in a bank while awaiting the
payment of the balance of the filing fee and attorney’s fee.2
In reply,3 complainant denied that she did not give the full payment of the
filing fee and asserted that the filing fee at that time amounted only to
₱7,836.60.
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. 1âw phi 1
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.
II
A.C. No. 9091 December 11, 2013
CONCHITA A. BALTAZAR, ROLANDO SAN PEDRO, ALICIA
EULALIO-RAMOS, SOLEDAD A. FAJARDO AND ENCARNACION A.
FERNANDEZ, Complainants,
vs.
ATTY. JUAN B. BAÑEZ, Respondent.
RESOLUTION
SERENO, CJ.:
Complainants are the owners of three parcels of land located in
Dinalupihan, Bataan.1 n 4 September 2002, they entered into an
agreement, they stood to be paid ₱35,000.000 for all the lots that would
be sold in the subdivision.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. Notwithstanding the foregoing,
1âwphi 1
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.
III
G.R. No. 191641
EDMUNDO NAVAREZ, Petitioner,
vs.
ATTY. MANUEL ABROGAR III, Respondent.
DECISION
BRION, J.:
This is a petition for certiorari under Rule 651 of the Rules of Court, filed
from the October 16, 2009 Decision and the March 12, 2010 Resolution
of the Court of Appeals (CA) in CA-G.R. SP No. 108675.2 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. The
1âwphi1
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.
IV
G.R. No. 185544 January 13, 2015
THE LAW FIRM OF LAGUESMA MAGSALIN CONSULTA AND
GASTARDO, Petitioner,
vs.
THE COMMISSION ON AUDIT and/or REYNALDO A. VILLAR and
JUANITO G. ESPINO, JR. in their capacities as Chairman and
Commissioner, respectively, Respondents.
DECISION
LEONEN, J.:
When a government entity engages the legal services of private counsel,
it must do so with the necessary authorization required by law; otherwise,
its officials bind themselves to be personally liable for compensating
private counsel’s services.
This is a petition1 for certiorari filed pursuant to Rule XI, Section 1 of the
1997 Revised Rules of Procedure of the Commission on Audit. The
petition seeks to annul the decision2 dated September 27, 2007 and
resolution3 dated November 5, 2008 of the Commission on Audit, which
disallowed the payment of retainer fees to the law firm of Laguesma
Magsalin Consulta and Gastardo for legal services rendered to Clark
Development Corporation.4
Sometime in 2001, officers of Clark Development Corporation,5 a
government-owned and controlled corporation, approached the law firm
of Laguesma Magsalin Consulta and Gastardo for its possible assistance
in handling the corporation’s labor cases.6
Clark Development Corporation, through its legal officers and after the
law firm’s acquiescence, "sought from the Office of the Government
Corporate Counsel [‘OGCC’] its approval for the engagement of
[Laguesma Magsalin Consulta and Gastardo] as external counsel."7
On December 4, 2001, the Office of the Government Corporate Counsel
denied the request.8 Clark Development Corporation then filed a request
for reconsideration.9
On May 20, 2002, the Office of the Government Corporate Counsel,
through Government Corporate Counsel Amado D. Valdez (Government
Corporate Counsel Valdez), reconsidered the request and approved the
engagement of Laguesma Magsalin Consulta and Gastardo.10 It also
furnished Clark Development Corporation a copy of a pro-forma
retainership contract11 containing the suggested terms and conditions of
the retainership.12 It instructed Clark Development Corporation to submit a
copy of the contract to the Office of the Government Corporate Counsel
after all the parties concerned have signed it.13
In the meantime, Laguesma Magsalin Consulta and Gastardo
commenced rendering legal services to Clark Development Corporation.
At this point, Clark Development Corporation had yet to secure the
authorization and clearance from the Office of the Government Corporate
Counsel or the concurrence of the Commission on Audit of the
retainership contract. According to the law firm, Clark Development
Corporation’s officers assured the law firm that it was in the process of
securing the approval of the Commission on Audit.14
On June 28, 2002, Clark Development Corporation, through its Board of
Directors, approved Laguesma Magsalin Consulta and Gastardo’s
engagement as private counsel.15 In 2003, it also approved the
assignment of additional labor cases to the law firm.16
On July 13, 2005, Clark Development Corporation requested the
Commission on Audit for concurrence of the retainership contract it
executed with Laguesma Magsalin Consulta and Gastardo.17 According to
the law firm, it was only at this pointwhen Clark Development Corporation
informed them that the Commission on Audit required the clearance and
approval of the Office of the Government Corporate Counsel before it
could approve the release of Clark Development Corporation’s funds to
settle the legal fees due to the law firm.18
On August 5, 2005, State Auditor IVElvira G. Punzalan informed Clark
Development Corporation that itsrequest for clearance could not be acted
upon until the Office of the Government Corporate Counsel approves the
retainership contract with finality.19
On August 10, 2005, Clark Development Corporation sent a letterrequest
to the Office of the Government Corporate Counsel for the final approval
of the retainership contract, in compliance with the Commission on
Audit’s requirements.20
On December 22, 2005, GovernmentCorporate Counsel Agnes VST
Devanadera (Government Corporate Counsel Devanadera) denied Clark
Development Corporation’s request for approval on the ground that the
proforma retainership contract given to them was not "based on the
premise that the monthly retainer’s fee and concomitant charges are
reasonable and could pass in audit by COA."21 She found that Clark
Development Corporation adopted instead the law firm’s proposals
concerning the payment of a retainer’s fee on a per case basis without
informing the Office of the Government Corporate Counsel. She,
however, ruled that the law firm was entitled to payment under the
principle of quantum meruitand subject to Clark Development Corporation
Board’s approval and the usual government auditing rules and
regulations.22
On December 27, 2005, Clark Development Corporation relayed
Government Corporate Counsel Devanadera’s letter to the Commission’s
Audit Team Leader, highlighting the portion on the approval of payment
to Laguesma Magsalin Consulta and Gastardo on the basis of quantum
meruit.23
On November 9, 2006, the Commission on Audit’s Office of the General
Counsel, Legal and Adjudication Sector issued a "Third
Indorsement"24 denying Clark Development Corporation’s request for
clearance, citing its failure to secure a prior written concurrence of the
Commission on Audit and the approval with finality of the Office of the
Government Corporate Counsel.25 It also stated that its request for
concurrence was made three (3) years after engaging the legal services
of the law firm.26
On December 4, 2006, Laguesma Magsalin Consulta and Gastardo
appealed the "Third Indorsement"to the Commission on Audit. On
December 12, 2006, Clark Development Corporation also filed a motion
for reconsideration.27
On September 27, 2007, the Commission on Audit rendered the assailed
decision denying the appeal and motion for reconsideration. It ruled that
Clark Development Corporation violated Commission on Audit Circular
No. 98-002 dated June 9, 1998 and Office of the President Memorandum
Circular No. 9 dated August 27, 1998 whenit engaged the legal services
of Laguesma Magsalin Consulta and Gastardo without the final approval
and written concurrence of the Commission on Audit.28 It also ruled that it
was not the government’s responsibility to pay the legal fees already
incurred by Clark Development Corporation, but rather by the
government officials who violated the regulations on the matter.29
Clark Development Corporation and Laguesma Magsalin Consulta and
Gastardo separately filed motions for reconsideration,30 which the
Commission on Audit denied in the assailed resolution dated November
5, 2008. The resolution also disallowed the payment of legal fees to the
law firm on the basis of quantum meruitsince the Commission on Audit
Circular No. 86-255 mandates that the engagementof private counsel
without prior approval "shall be a personal liability of the officials
concerned."31
Laguesma Magsalin Consulta and Gastardo filed this petition for certiorari
on December 19, 2008.32 Respondents, through the Office of the Solicitor
General, filed their comment33 dated May 7, 2009. The reply34 was filed on
September 1, 2009.
The primordial issue to be resolved by this court is whether the
Commission on Audit erred in disallowing the payment of the legal fees to
Laguesma Magsalin Consulta and Gastardo as Clark Development
Corporation’s private counsel.
To resolve this issue, however, several procedural and substantive
issues must first be addressed:
Procedural:
1. Whether the petition was filed on time; and
2. Whether petitioner is the real party-in-interest.
Substantive:
1. Whether the Commission on Audit erred in denying Clark
Development Corporation’s requestfor clearance in engaging
petitioner as private counsel;
2. Whether the Commission on Audit correctly cited Polloso v.
Gangan35 and PHIVIDEC Industrial Authority v. Capitol Steel
Corporation36 in support of its denial; and
3. Whether the Commission on Audit erred in ruling that petitioner
should not be paid on the basis of quantum meruitand that any
payment for its legal services should be the personal liability of
Clark Development Corporation’s officials.
Petitioner argues that Pollosoand PHIVIDEC are not applicable to the Petitioner states that it filed this petition under Rule XI, Section 1 of the
circumstances at hand because in both cases, the government agency 1997 Revised Rules of Procedure of the Commission on Audit.50 The rule
concerned had failed to secure the approval of both the Office of the states:
Government Corporate Counsel and the Commission on
Audit.37 Petitioner asserts that it was able to secure authorization from the RULE XI
Office of the Government Corporate Counsel prior to rendering services
to Clark Development Corporation for all but two (2) of the labor cases JUDICIAL REVIEW SECTION
assigned to it.38 It argues that the May 20, 2002 letter from Government
Corporate Counsel Valdez was tantamount to a grant of authorization
1. Petition for Certiorari.— Any decision, order or resolution of the
since it granted Clark Development Corporation’s request for
Commission may be brought to the Supreme Court on certiorari by the
reconsideration.39
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.
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
This rule is based on Article IX-A, Section 7 of the Constitution, which
Corporation, and not petitioner, who isa real party-in-interest since the
states:
subject of the assailed decision was the denial of the corporation’s
request for clearance.42
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
Respondents also allege that it was only on July 13, 2005, or three (3)
date of its submission for decision or resolution. A case or matter is
years after the hiring of petitioner, when Clark Development Corporation
deemed submitted for decision or resolution upon the filing of the last
requested the Commission on Audit’s concurrence of the retainership
pleading, brief, or memorandum required by the rules of the Commission
contract between Clark Development Corporation and petitioner.43 They
or by the Commission itself. Unless otherwise provided by this
argue that the retainership contract was not approved with finality by the
Constitution or by law, any decision, order, or ruling of each Commission
Office of the Government Corporate Counsel.44 Further, Polloso and
may be brought to the Supreme Court on certiorari by the aggrieved party
PHIVIDE Care applicable to this case since both cases involve the
within thirty days from receipt of a copy thereof. (Emphasis supplied)
"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 Ordinarily, a petition for certiorari under Rule 65 of the Rules of Court has
external counsel."45 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
In its reply,46 petitioner argues that it is a real party-in-interest since "it
constitutional commissions is thirty (30) days from receipt of the decision,
rendered its services to [Clark Development Corporation], which
order, or ruling. For this reason, a separate rule was enacted in the Rules
ultimately redounded to the benefit of the Republic"47 and that "it deserves
of Court.
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 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
The petition is denied.
and the Commission on Audit may be brought by the aggrieved party to
the Supreme Court on certiorari under Rule 65, except as hereinafter
The petition was filed out of time 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. It assisted the corporation in litigating
1âw phi1
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.
V
A.C. No. 10573 January 13, 2015
FERNANDO W. CHU, Complainant,
vs.
ATTY. JOSE C. GUICO, JR., Respondent.
 DECISION
PER CURIAM:
Fernando W. Chu invokes the Court's disciplinary authority in resolving
this disbarment complaint against his former lawyer, respondent Atty.
Jose C. Guico, Jr., whom he has accused of gross misconduct.
Antecedents
Chu retained Atty. Guico as counsel to handle the labor disputes
involving his company, CVC San Lorenzo Ruiz Corporation (CVC).1 Atty.
Guico’s legal services included handling a complaint for illegal dismissal
brought against CVC (NLRC Case No. RAB-III-08-9261-05 entitled
Kilusan ng Manggagawang Makabayan (KMM) Katipunan CVC San
Lorenzo Ruiz Chapter, Ladivico Adriano, et al. v. CVC San Lorenzo Ruiz
Corp. and Fernando Chu).2 On September 7, 2006, Labor Arbiter
Herminio V. Suelo rendered a decision adverse to CVC.3 Atty. Guico filed
a timely appeal in behalf of CVC.
According to Chu, during a Christmas party held on December 5, 2006 at
Atty. Guico’s residence in Commonwealth, Quezon City, Atty. Guico
asked him to prepare a substantial amount of money to be given to the
NLRC Commissioner handling the appeal to insure a favorable
decision.4 On June 10, 2007, Chu called Atty. Guico to inform him that he
had raised ₱300,000.00 for the purpose. Atty. Guico told him to proceed
to his office at No. 48 Times Street, Quezon City, and togive the money
to his assistant, Reynaldo (Nardo) Manahan. Chu complied, and later on
called Atty. Guico to confirm that he had delivered the money to Nardo.
Subsequently, Atty. Guico instructed Chu to meet him on July 5, 2007 at
the UCC Coffee Shop on T. Morato Street, Quezon City. Atthe UCC
Coffee Shop, Atty. Guico handed Chu a copy of an alleged draft decision
of the NLRC in favor of CVC.5 The draft 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.
 VI
A.C. No. 5067 June 29, 2015
CORAZON M. DALUPAN, Complainant,
vs.
ATTY. GLENN C. GACOTT1, Respondent.
DECISION
VILLARAMA, JR., J.:
Before us is a petition for review under Rule 139-B, Section 12 (c) of the
Rules of Court assailing Resolution No. XVII-20072 dated March 17, 2007
and Resolution No. XIX-201005443 dated October 8, 2010 of the Board of
Governors of the Integrated Bar of the Philippines (IBP) which adopted
and approved the Report and 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. She also claimed that the respondent failed to attend any of
1âw phi 1
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.
VII
G.R. No. 173188 January 15, 2014
THE CONJUGAL PARTNERSHIP OF THE SPOUSES VICENTE
CADAVEDO AND BENITA ARCOY-CADAVEDO (both deceased),
substituted by their heirs, namely: HERMINA, PASTORA, Heirs of
FRUCTUOSA, Heirs of RAQUEL, EVANGELINE, VICENTE, JR., and
ARMANDO, all surnamed CADAVEDO, Petitioners,
vs.
VICTORINO (VIC) T. LACAYA, married to Rosa
Legados, Respondents.
DECISION
BRION, J.:
We solve in this Rule 45 petition for review on certiorari1 the challenge to
the October 11, 2005 decision2 and the May 9, 2006 resolution3 of the
Court of Appeals (CA) inPetitioners, CA-G.R. CV No. 56948. The CA
reversed and set aside the September 17, 1996 decision4 of the Regional
Trial Court (RTC), Branch 10, of Dipolog City in Civil Case No. 4038,
granting in part the complaint for recovery of possession of property filed
by the petitioners, the Conjugal Partnership of the Spouses Vicente
Cadavedo and Benita Arcoy-Cadavedo against Atty. Victorino (Vic) T.
Lacaya, married to Rosa Legados (collectively, the respondents).
The Factual Antecedents
The Spouses Vicente Cadavedo and Benita Arcoy-Cadavedo
(collectively, the spouses Cadavedo) acquired a homestead grant over a
230,765-square meter parcel of land known as Lot 5415 (subject lot)
located in Gumay, Piñan, Zamboanga del Norte. They were issued
Homestead Patent No. V-15414 on March 13, 1953andOriginal
Certificate of Title No. P-376 on July 2, 1953.On April30, 1955, the
spouses Cadavedo sold the subject lot to the spouses Vicente Ames and
Martha Fernandez (the spouses Ames) Transfer Certificate of Title (TCT)
No. T-4792 was subsequently issued in the name of the spouses Ames.
The present controversy arose when the spouses Cadavedo filed an
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 decision dated October 11, 2005, the CA reversed and set aside
12
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. The contingent fee of one-half
1âw phi 1
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.
VIII
G.R. No. 183952 September 9, 2013
CZARINA T. MALVAR, Petitioner,
vs.
KRAFT FOOD PHILS., INC. and/or BIENVENIDO BAUTISTA, KRAFT
FOODS INTERNATIONAL, Respondents.
DECISION
BERSAMIN, J.:
Although the practice of law is not a business, an attorney is entitled to be
properly compensated for the professional services rendered for the
client, who is bound by her express agreement to duly compensate the
attorney. The client may not deny her attorney such just compensation.
The Case
The case initially concerned the execution of a final decision of the Court
of Appeals (CA) in a labor litigation, but has mutated into a dispute over
attorney's fees between the winning employee and her attorney after she
entered into a compromise agreement with her employer under
circumstances that the attorney has bewailed as designed to prevent the
recovery of just professional fees.
Antecedents
On August 1, 1988, Kraft Foods (Phils.), Inc. (KFPI) hired Czarina Malvar
(Malvar) as its Corporate Planning Manager. From then on, she gradually
rose from the ranks, becoming in 1996 the Vice President for Finance in
the Southeast Asia Region of Kraft Foods International (KFI),KFPI’s
mother company. On November 29, 1999, respondent Bienvenido S.
Bautista, as Chairman of the Board of KFPI and concurrently the Vice
President and Area Director for Southeast Asia of KFI, sent Malvar a
memo directing her to explain why no administrative sanctions should be
imposed on her for possible breach of trust and confidence and for willful
violation of company rules and regulations. Following the submission of
her written explanation, an investigating body was formed. In due time,
she was placed under preventive suspension with pay. Ultimately, on
March 16, 2000, she was served a notice of termination.
Obviously aggrieved, Malvar filed a complaint for illegal suspension and
illegal dismissal against KFPI and Bautista in the National Labor
Relations Commission (NLRC). In a decision dated April 30, 2001,1 the
Labor Arbiter found and declared her suspension and dismissal illegal,
and ordered her reinstatement, and the payment of her full backwages,
inclusive of allowances and other benefits, plus attorney’s fees.
On October 22, 2001, the NLRC affirmed the decision of the Labor
Arbiter but additionally ruled that Malvar was entitled to "any and all stock
options and bonuses she was entitled to or would have been entitled to
had she not been illegally dismissed from her employment," as well as to
moral and exemplary damages.2
KFPI and Bautista sought the reconsideration of the NLRC’s decision, but
the NLRC denied their motion to that effect.3
Undaunted, KFPI and Bautista assailed the adverse outcome before the
CA on certiorari (CA-G.R. SP No. 69660), contending that the NLRC
thereby committed grave abuse of discretion. However, the petition for
certiorari was dismissed by the CA on December 22, 2004, but with the
CA reversing the order of reinstatement and instead directing the
payment of separation pay to Malvar, and also reducing the amounts
awarded as moral and exemplary damages.4
After the judgment in her favor became final and executory on March14,
2006, Malvar moved for the issuance of a writ of execution.5 The
Executive Labor Arbiter then referred the case to the Research and
Computation Unit (RCU) of the NLRC for the computation of the
monetary awards under the judgment. The RCU’s computation ultimately
arrived at the total sum of ₱41,627,593.75.6
On November 9, 2006, however, Labor Arbiter Jaime M. Reyno issued an
order,7 finding that the RCU’s computation lacked legal basis for including
the salary increases that the decision promulgated in CA-G.R. SP No.
69660 did not include. Hence, Labor Arbiter Reyno reduced Malvar’s total
monetary award to ₱27,786,378.11, viz:
WHEREFORE, premises considered, in so far as the computation of
complainant’s other benefits and allowances are concerned, the same
are in order. However, insofar as the computation of her backwages and
other monetary benefits (separation pay, unpaid salary for January 1 to
26, 2005,holiday pay, sick leave pay, vacation leave pay, 13th month
pay), the same are hereby recomputed as follows:
1. Separation Pay
8/1/88-1/26/05 = 16 yrs
₱344,575.83 x 16 = 5,513,213.28
2. Unpaid Salary
1/1-26/05 = 87 mos.
₱344,575.83 x 87 = 299,780.97
3. Holiday Pay 27,786,378.11
4/1/00-1/26/05 = 55 holidays
₱4,134,910/12 mos/20.83 days x 55 days 909,825.77 SO ORDERED.

4. Unpaid 13th month pay for Dec 2000
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 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.

₱344,575.83/20.83 x 15/12 x 1 20,677.86 1,509,483.65 Malvar filed a second motion for the issuance of a writ of execution to
6. Vacation Leave Pay enforce the decision of the NLRC rendered on April 19, 2007. After the
writ of execution was issued, a partial enforcement as effected by
Year 1999 to 2004 = 6 years
garnishing the respondents’ funds deposited with Citibank worth
₱344,575.88/20.83 x 22 days x 6 = 2,183,581.83 37,391,696.06.10
Year 2005
On July 27, 2007, the respondents went to the CA on certiorari (with
₱344,575.83/20.83 x 22/12 x 1 30,327.55 2,213,909.36 prayer for the issuance of a temporary restraining order (TRO) or writ of
preliminary injunction), assailing the NLRC’s setting aside of the
10,790,788.86 computation by Labor Arbiter Reyno (CA-G.R. SP No. 99865). The
petition mainly argued that the NLRC had gravely abused its discretion in
Backwages (from 3/7/00-4/30/01, award in LA
4,651,773.75 ruling that: (a) the inclusion of the salary increases and other monetary
Sytian’s Decision
benefits in the award to Malvar was final and executory; and (b) the
Allowances & Other Benefits: finality of the ruling in CA-G.R. SP No. 69660 precluded the respondents
Management Incentive Plan 7,355,166.58 from challenging the inclusion of the salary increases and other monetary
benefits. The CA issued a TRO, enjoining the NLRC and Malvar from
Cash Dividend on Philip Morris Shares 2,711,646.00 implementing the NLRC’s decision.11
Car Maintenance 381,702.92
On April 17, 2008, the CA rendered its decision in CA-G.R. SP No.
Gas Allowance 198,000.00
99865,12 disposing thusly:
Entitlement to a Company Driver 438,650.00
Rice Subsidy 58,650.00 WHEREFORE, premises considered, the herein Petition is GRANTED
and the 19 April 2007 Decision of the NLRC and the 31May 2007
Moral Damages 500,000.00 Resolution in NLRC NCR 30-07-02316-00 are hereby REVERSED and
Exemplary Damages 200,000.00 SET ASIDE.
Attorney’s Fees 500,000.00
The matter of computation of monetary awards for private respondent is
Entitlement to Philip Sch G Subject to hereby REMANDED to the Labor Arbiter and he is DIRECTED to
"Share Option Grant" Market Price 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. 1âw phi 1
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.
CANON 21
I
A.C. No. 8243 July 24, 2009
ROLANDO B. PACANA, JR., Complainant,
vs.
ATTY. MARICEL PASCUAL-LOPEZ, Respondent.
DECISION
PER CURIAM:
This case stems from an administrative complaint1 filed by Rolando
Pacana, Jr. against Atty. Maricel Pascual-Lopez charging the latter with
flagrant violation of the provisions of the Code of Professional
Responsibility.2 Complainant alleges that respondent committed acts
constituting conflict of interest, dishonesty, influence peddling, and failure
to render an accounting of all the money and properties received by her
from complainant.
On January 2, 2002, complainant was the Operations Director for Multitel
Communications Corporation (MCC). MCC is an affiliate company of
Multitel International Holdings Corporation (Multitel). Sometime in July
2002, MCC changed its name to Precedent Communications Corporation
(Precedent).3
According to complainant, in mid-2002, Multitel was besieged by demand
letters from its members and investors because of the failure of its
investment schemes. He alleges that he earned the ire of Multitel
investors after becoming the assignee of majority of the shares of stock
of Precedent and after being appointed as trustee of a fund amounting to
Thirty Million Pesos (₱30,000,000.00) deposited at Real Bank.
Distraught, complainant sought the advice of respondent who also
happened to be a member of the Couples for Christ, a religious
organization where complainant and his wife were also active members.
From then on, complainant and respondent constantly communicated,
with the former disclosing all his involvement and interests in Precedent
and Precedent’s relation with Multitel. Respondent gave legal advice to
complainant and even helped him prepare standard quitclaims for
creditors. In sum, complainant avers that a lawyer-client relationship was
established between him and respondent although no formal document
was executed by them at that time. A Retainer Agreement4 dated January
15, 2003 was proposed by respondent. Complainant, however, did not
sign the said agreement because respondent verbally asked for One
Hundred Thousand Pesos (₱100,000.00) as acceptance fee and a 15%
contingency fee upon collection of the overpayment made by Multitel to
Benefon,5 a telecommunications company based in Finland. Complainant
found the proposed fees to be prohibitive and not within his
means.6 Hence, the retainer agreement remained unsigned.7
After a few weeks, complainant was surprised to receive a demand letter
from respondent8 asking for the return and immediate settlement of the
funds invested by respondent’s clients in Multitel. When complainant
confronted respondent about the demand letter, the latter explained that
she had to send it so that her clients – defrauded investors of Multitel –
would know that she was doing something for them and assured
complainant that there was nothing to worry about.9
Both parties continued to communicate and exchange information
regarding the persistent demands made by Multitel investors against
complainant. On these occasions, respondent impressed upon
complainant that she can closely work with officials of the Anti-Money
Laundering Council (AMLC), the Department of Justice (DOJ), the
National Bureau of Investigation (NBI), the Bureau of Immigration and
Deportations (BID),10 and the Securities and Exchange Commission
(SEC)11 to resolve complainant’s problems. Respondent also convinced
complainant that in order to be absolved from any liability with respect to
the investment scam, he must be able to show to the DOJ that he was
willing to divest any and all of his interests in Precedent including the
funds assigned to him by Multitel.12
Respondent also asked money from complainant allegedly for
safekeeping to be used only for his case whenever necessary.
Complainant agreed and gave her an initial amount of ₱900,000.00 which
was received by respondent herself.13 Sometime thereafter, complainant
again gave respondent ₱1,000,000.00.14 Said amounts were all part of
Precedent’s collections and sales proceeds which complainant held as
assignee of the company’s properties.15
When complainant went to the United States (US), he received several
messages from respondent sent through electronic mail (e-mail) and
short messaging system (SMS, or text messages) warning him not to
return to the Philippines because Rosario Baladjay, president of Multitel,
was arrested and that complainant may later on be implicated in Multitel’s
failed investment system. Respondent even said that ten (10) arrest
warrants and a hold departure order had been issued against him.
Complainant, thereafter, received several e-mail messages from
respondent updating him of the status of the case against Multitel and
promised that she will settle the matter discreetly with government
officials she can closely work with in order to clear complainant’s
name.16 In two separate e-mail messages,17 respondent again asked
money from complainant, ₱200,000 of which was handed by
complainant’s wife while respondent was confined in Saint Luke’s
Hospital after giving birth,18 and another ₱700,000 allegedly to be given
to the NBI.19
Through respondent’s persistent promises to settle all complainant’s legal
problems, respondent was able to convince complainant who was still in
the US to execute a deed of assignment in favor of respondent allowing
the latter to retrieve 178 boxes containing cellular phones and
accessories stored in complainant’s house and inside a warehouse.20 He
also signed a blank deed of sale authorizing respondent to sell his 2002
Isuzu Trooper.21
Sometime in April 2003, wary that respondent may not be able to handle
his legal problems, complainant was advised by his family to hire another
lawyer. When respondent knew about this, she wrote to complainant via
e-mail, as follows:
Dear Butchie,
Hi! Ok ka lang? Hope you are fine. Sorry if I shocked you but I had to do
it as your friend and lawyer. The charges are all non-bailable but all the
same as the SEC report I told you before. The findings are the same, i.e.
your company was the front for the fraud of Multitel and that funds were
provided you.
I anticipated this, that is why I really pushed for a quitclaim. Rolly is willing
to return the Crosswind, laptap (sic) and [P]alm [P]ilot. Manny Cancio
really helped. Anthony na lang. Then, I will need the accounting of all the
funds you received from the sale of the phones, every employees and
directors[’] quitclaim (including yours), the funds transmitted to the clients
through me, the funds you utilized, and whatelse (sic) is still unremitted,
every centavo must be accounted for as DOJ and NBI can have the
account opened.
I will also need the P30 M proof of deposit with Real [B]ank and the trust
given [to] you. So we can inform them [that] it was not touched by you.
I have been informed by Efie that your family is looking at hiring Coco
Pimentel. I know him very well as his sister Gwen is my best friend. I
have no problem if you hire him but I will be hands off. I work differently
kasi. In this cases (sic), you cannot be highprofile (sic) because it is the
clients who will be sacrificed at the expense of the fame of the lawyer. I
have to work quietly and discreetly. No funfare. Just like what I did for
your guys in the SEC. I have to work with people I am comfortable with.
Efren Santos will sign as your lawyer although I will do all the work. He
can help with all his connections. Val’s friend in the NBI is the one is (sic)
charge of organized crime who is the entity (sic) who has your warrant.
My law partner was the state prosecutor for financial fraud. Basically we
have it covered in all aspects and all departments. I am just trying to
liquidate the phones I have allotted for you s ana (sic) for your trooper
kasi whether we like it or not, we have to give this agencies (sic) to make
our work easier according to Val. The funds with Mickey are already
accounted in the quit claims (sic) as attorneys (sic) fees. I hope he will be
able to send it so we have funds to work with.
As for your kids, legally they can stay here but recently, it is the children
who (sic) the irate clients and government officials harass and kidnap to
make the individuals they want to come out from hiding (sic). I do not
want that to happen. Things will be really easier on my side.
Please do not worry. Give me 3 months to make it all disappear. But if
you hire Coco, I will give him the free hand to work with your case.
Please trust me. I have never let you down, have I? I told you this will
happen but we are ready and prepared. The clients who received the
phones will stand by you and make you the hero in this scandal. I will
stand by you always. This is my expertise. TRUST me! That is all. You
have an angel on your side. Always pray though to the best legal mind up
there. You will be ok!
Candy22
On July 4, 2003, contrary to respondent’s advice, complainant returned to
the country. On the eve of his departure from the United States,
respondent called up complainant and conveniently informed him that he
has been cleared by the NBI and the BID.23
About a month thereafter, respondent personally met with complainant
and his wife and told them that she has already accumulated
₱12,500,000.00 as attorney’s fees and was willing to give ₱2,000,000.00
to complainant in appreciation for his help. Respondent allegedly told
complainant that without his help, she would not have earned such
amount. Overwhelmed and relieved, complainant accepted respondent’s
offer but respondent, later on, changed her mind and told complainant
that she would instead invest the ₱2,000,000.00 on his behalf in a
business venture. Complainant declined and explained to respondent that
he and his family needed the money instead to cover their daily expenses
as he was no longer employed. Respondent allegedly agreed, but she
failed to fulfill her promise.24
Respondent even publicly announced in their religious organization that
she was able to help settle the ten (10) warrants of arrest and hold
departure order issued against complainant and narrated how she was
able to defend complainant in the said cases.25
By April 2004, however, complainant noticed that respondent was
evading him. Respondent would either refuse to return complainant’s call
or would abruptly terminate their telephone conversation, citing several
reasons. This went on for several months.26 In one instance, when
complainant asked respondent for an update on the collection of
Benefon’s obligation to Precedent which respondent had previously taken
charge of, respondent arrogantly answered that she was very busy and
that she would read Benefon’s letter only when she found time to do so.
On November 9, 2004, fed up and dismayed with respondent’s arrogance
and evasiveness, complainant wrote respondent a letter formally asking
for a full accounting of all the money, documents and properties given to
the latter.27 Respondent rendered an accounting through a letter dated
December 20, 2004.28 When complainant found respondent’s explanation
to be inadequate, he wrote a latter expressing his confusion about the
accounting.29Complainant repeated his request for an audited financial
report of all the properties turned over to her; otherwise, he will be
constrained to file the appropriate case against
respondent.30 Respondent replied,31 explaining that all the properties and
cash turned over to her by complainant had been returned to her clients
who had money claims against Multitel. In exchange for this, she said
that she was able to secure quitclaim documents clearing complainant
from any liability.32 Still unsatisfied, complainant decided to file an
affidavit-complaint33 against respondent before the Commission on Bar
Discipline of the Integrated Bar of the Philippines (IBP) seeking the
disbarment of respondent.
In her Answer-Affidavit,34 respondent vehemently denied being the lawyer
for Precedent. She maintained that no formal engagement was executed
between her and complainant. She claimed that she merely helped
complainant by providing him with legal advice and assistance because
she personally knew him, since they both belonged to the same religious
organization.35lavvph!1
Respondent insisted that she represented the group of investors of
Multitel and that she merely mediated in the settlement of the claims her
clients had against the complainant. She also averred that the results of
the settlement between both parties were fully documented and
accounted for.36 Respondent believes that her act in helping complainant
resolve his legal problem did not violate any ethical standard and was, in
fact, in accord with Rule 2.02 of the Code of Professional Responsibility.37
To bolster her claim that the complaint was without basis, respondent
noted that a complaint for estafa was also filed against her by
complainant before the Office of the City Prosecutor in Quezon City citing
the same grounds. The complaint was, however, dismissed by Assistant
City Prosecutor Josephus Joannes H. Asis for insufficiency of
evidence.38 Respondent argued that on this basis alone, the
administrative case must also be dismissed.
In her Position Paper,39 respondent also questioned the admissibility of
the electronic evidence submitted by complainant to the IBP’s
Commission on Bar Discipline. Respondent maintained that the e-mail
and the text messages allegedly sent by respondent to complainant were
of doubtful authenticity and should be excluded as evidence for failure to
conform to the Rules on Electronic Evidence (A.M. No. 01-7-01-SC).
After due hearing, IBP Investigating Commissioner Patrick M. Velez
issued a Report and Recommendation40 finding that a lawyer-client
relationship was established between respondent and complainant
despite the absence of a written contract. The Investigating
Commissioner also declared that respondent violated her duty to be
candid, fair and loyal to her client when she allowed herself to represent
conflicting interests and failed to render a full accounting of all the cash
and properties entrusted to her. Based on these grounds, the
Investigating Commissioner recommended her disbarment.
Respondent moved for reconsideration,41 but the IBP Board of Governors
issued a Recommendation42 denying the motion and adopting the
findings of the Investigating Commissioner.
The case now comes before this Court for final action.
We affirm the findings of the IBP.
Rule 15.03, Canon 15 of the Code of Professional responsibility provides:
Rule 15.03 – A lawyer shall not represent conflicting interests except by
written consent of all concerned given after full disclosure of the facts.
This prohibition is founded on principles of public policy, good taste43 and,
more importantly, upon necessity. In the course of a lawyer-client
relationship, the lawyer learns all the facts connected with the client’s
case, including its weak and strong points. Such knowledge must be
considered sacred and guarded with care. No opportunity must be given
to him to take advantage of his client; for if the confidence is abused, the
profession will suffer by the loss thereof.44 It behooves lawyers not only to
keep inviolate the client’s confidence, but also to avoid the appearance of
treachery and double ─ dealing for only then can litigants be encouraged
to entrust their secrets to their lawyers, which is paramount in the
administration of justice.45 It is for these reasons that we have described
the attorney-client relationship as one of trust and confidence of the
highest degree.46
Respondent must have known that her act of constantly and actively
communicating with complainant, who, at that time, was beleaguered with
demands from investors of Multitel, eventually led to the establishment of
a lawyer-client relationship. Respondent cannot shield herself from the
inevitable consequences of her actions by simply saying that the
assistance she rendered to complainant was only in the form of "friendly
accommodations,"47 precisely because at the time she was giving
assistance to complainant, she was already privy to the cause of the
opposing parties who had been referred to her by the SEC.48
Respondent also tries to disprove the existence of such relationship by
arguing that no written contract for the engagement of her services was
ever forged between her and complainant.49 This argument all the more
reveals respondent’s patent ignorance of fundamental laws on contracts
and of basic ethical standards expected from an advocate of justice. The
IBP was correct when it said:
The absence of a written contract will not preclude the finding that there
was a professional relationship between the parties. Documentary
formalism is not an essential element in the employment of an attorney;
the contract may be express or implied. To establish the relation, it is
sufficient that the advice and assistance of an attorney is sought and
received in any matter pertinent to his profession.50 (Emphasis supplied.)
Given the situation, the most decent and ethical thing which respondent
should have done was either to advise complainant to engage the
services of another lawyer since she was already representing the
opposing parties, or to desist from acting as representative of Multitel
investors and stand as counsel for complainant. She cannot be permitted
to do both because that would amount to double-dealing and violate our
ethical rules on conflict of interest.
In Hornilla v. Atty. Salunat,51 we explained the concept of conflict of
interest, thus:
There is conflict of interest when a lawyer represents inconsistent
interests of two or more opposing parties. The test is "whether or not in
behalf of one client, it is the lawyer’s duty to fight for an issue or claim,
but it is his duty to oppose it for the other client. In brief, if he argues for
one client, this argument will be opposed by him when he argues for the
other client." This rule covers not only cases in which confidential
communications have been confided, but also those in which no
confidence has been bestowed or will be used. Also, there is conflict of
interests if the acceptance of the new retainer will require the attorney to
perform an act which will injuriously affect his first client in any matter in
which he represents him and also whether he will be called upon in his
new relation to use against his first client any knowledge acquired
through their connection. Another test of the inconsistency of interests is
whether the acceptance of a new relation will prevent an attorney from
the full discharge of his duty of undivided fidelity and loyalty to his client
or invite suspicion of unfaithfulness or double dealing in the performance
thereof.52
Indubitably, respondent took advantage of complainant’s hapless
situation, initially, by giving him legal advice and, later on, by soliciting
money and properties from him. Thereafter, respondent impressed upon
complainant that she had acted with utmost sincerity in helping him divest
all the properties entrusted to him in order to absolve him from any
liability. But simultaneously, she was also doing the same thing to
impress upon her clients, the party claimants against Multitel, that she
was doing everything to reclaim the money they invested with Multitel.
Respondent herself admitted to complainant that without the latter’s help,
she would not have been able to earn as much and that, as a token of
her appreciation, she was willing to share some of her earnings with
complainant.53 Clearly, respondent’s act is shocking, as it not only
violated Rule 9.02, Canon 9 of the Code of Professional
1aw phi1 Responsibility,54 but also toyed with decency and good taste.
Respondent even had the temerity to boast that no Multitel client had
ever complained of respondent’s unethical behavior.55 This remark
indubitably displays respondent’s gross ignorance of disciplinary
procedure in the Bar. As a member of the Bar, she is expected to know
that proceedings for disciplinary actions against any lawyer may be
initiated and prosecuted by the IBP Board of Governors, motu proprio or
upon referral by this Court or by the Board of Officers of an IBP
Chapter56 even if no private individual files any administrative complaint.
Upon review, we find no cogent reason to disturb the findings and
recommendations of the IBP Investigating Commissioner, as adopted by
the IBP Board of Governors, on the admissibility of the electronic
evidence submitted by complainant. We, accordingly, adopt the same in
toto.
Finally, respondent argues that the recommendation of the IBP Board of
Governors to disbar her on the grounds of deceit, malpractice and other
gross misconduct, aside from violation of the Lawyer’s Oath, has been
rendered moot and academic by voluntary termination of her IBP
membership, allegedly after she had been placed under the Department
of Justice’s Witness Protection Program.57 Convenient as it may be for
respondent to sever her membership in the integrated bar, this Court
cannot allow her to do so without resolving first this administrative case
against her.
The resolution of the administrative case filed against respondent is
necessary in order to determine the degree of her culpability and liability
to complainant. The case may not be dismissed or rendered moot and
academic by respondent’s act of voluntarily terminating her membership
in the Bar regardless of the reason for doing so. This is because
membership in the Bar is a privilege burdened with conditions.58 The
conduct of a lawyer may make him or her civilly, if not criminally, liable to
his client or to third parties, and such liability may be conveniently
avoided if this Court were to allow voluntary termination of membership.
Hence, to terminate one’s membership in the Bar voluntarily, it is
imperative that the lawyer first prove that the voluntary withdrawal of
membership is not a ploy to further prejudice the public or to evade
liability. No such proof exists in the present case.
WHEREFORE, respondent Attorney Maricel Pascual-Lopez is hereby This administrative case, which Jessie R.
DISBARRED for representing conflicting interests and for engaging in
unlawful, dishonest and deceitful conduct in violation of her Lawyer’s De Leon initiated on April 29, 2010, concerns respondent
Oath and the Code of Professional Responsibility. attorneys alleged dishonesty and falsification committed in
Let a copy of this Decision be entered in the respondent’s record as a the pleadings he filed in behalf of the defendants in the civil
member of the Bar, and notice of the same be served on the Integrated action in which De Leon intervened.
Bar of the Philippines, and on the Office of the Court Administrator for
circulation to all courts in the country.
Antecedents
SO ORDERED.

II On January 2, 2006, the Government brought suit for

the purpose of correcting the transfer certificates of title
JESSIE R. DE LEON, A.C. No. 8620 (TCTs) covering two parcels of land located in Malabon City
Complainant,
then registered in the names of defendants Spouses Lim Hio
Present:
and Dolores Chu due to their encroaching on a
CARPIO public callejon and on a portion of the Malabon-Navotas
MORALES, Chairperson, River shoreline to the extent, respectively, of an area of 45
-versus - BRION, square meters and of about 600 square meters. The suit,
BERSAMIN, entitled Republic of the Philippines, represented by the
VILLARAMA, JR., and Regional Executive Director, Department of Environment
SERENO, JJ. and Natural Resources v. Spouses Lim Hio and Dolores Chu,
ATTY. EDUARDO G.
Gorgonia Flores, and the Registrar of Deeds
CASTELO, Promulgated:
of Malabon City, was docketed as Civil Case No. 4674MN of
Respondent.
January 12, 2011 the Regional Trial Court (RTC), Branch 74,
x----------------------------------------------------------------------- in Malabon City.[1]
------------------x
De Leon, having joined Civil Case No. 4674MN as a
DECISION voluntary intervenor two years later (April 21, 2008), now
accuses the respondent, the counsel of record of the
defendants in Civil Case No. 4674MN, with the serious
BERSAMIN, J.: administrative offenses of dishonesty and falsification
warranting his disbarment or suspension as an attorney. The
respondents sin was allegedly committed by his filing for
defendants Spouses Lim Hio and Dolores Chu of various
pleadings (that is, answer with counterclaim and cross-
claim in relation to the main complaint; and answer to the
complaint in intervention with counterclaim and cross-claim)
despite said spouses being already deceased at the time of
filing.[2]
De Leon avers that the respondent committed
dishonesty and falsification as follows:
xxx in causing it (to) appear that persons
(spouses Lim Hio and Dolores Chu) have
participated in an act or proceeding (the making
and filing of the Answers) when they did not in
fact so participate; in fact, they could not have so
participated because they were already dead as of
that time, which is punishable under Article 172,
in relation to Article 171, paragraph 2, of the
Revised Penal Code.
Respondent also committed the crime of Use
of Falsified Documents, by submitting the said
falsified Answers in the judicial proceedings, Civil
Case No. 4674MN;
Respondent also made a mockery of the
aforesaid judicial proceedings by representing
dead persons therein who, he falsely made to
appear, as contesting the complaints, counter-
suing and cross-suing the adverse parties.
12. That, as a consequence of the above
criminal acts, complainant respectfully submits
that respondent likewise violated:
(a) His Lawyers Oath:
xxx
(b) The Code of Professional
[3]
Responsibility:
xxx
On June 23, 2010, the Court directed the respondent to
comment on De Leons administrative complaint.[4]
In due course, or on August 2, 2010,[5] the respondent
rendered the following explanations in his comment, to wit:
1. The persons who had engaged him as attorney
to represent the Lim family in Civil Case No.
4674MN were William and Leonardo Lim,
the children of Spouses Lim Hio and Dolores
Chu;
2. Upon his (Atty. Castelo) initial queries
relevant to the material allegations of the
Governments complaint in Civil Case No.
4674MN, William Lim, the representative of
the Lim Family, informed him:
a. That the Lim family had acquired the
properties from Georgina Flores;
 b. That William and Leonardo Lim were
already actively managing the family
business, and now co-owned the
properties by virtue of the deed of
absolute sale their parents, Spouses
Lim Hio and Dolores Chu, had
executed in their favor; and
c. That because of the execution of
the deed of absolute sale, William and
Leonardo Lim had since honestly
assumed that their parents had already
caused the transfer of the TCTs to their
names.
3. Considering that William and Leonardo Lim
themselves were the ones who had engaged
his services, he (Atty. Castelo) consequently
truthfully stated in the motion seeking an
extension to file responsive pleading dated
February 3, 2006 the fact that it was the
family of the defendants that had engaged
him, and that he had then advised the children
of the defendants to seek the assistance as
well of a licensed geodetic surveyor and
engineer;
4. He (Atty. Castelo) prepared the initial
pleadings based on his honest belief that
Spouses Lim Hio and Dolores Chu were then
still living. Had he known that they were
already deceased, he would have most
welcomed the information and would have
moved to substitute Leonardo and William
Lim as defendants for that reason;
5. He (Atty. Castelo) had no intention to
commit either a falsehood or a falsification,
for he in fact submitted the death certificates
of Spouses Lim Hio and Dolores Chu in order
to apprise the trial court of that fact; and
6. The Office of the Prosecutor
for Malabon City even dismissed the
criminal complaint for falsification brought
against him (Atty. Castelo) through the
resolution dated February 11, 2010. The
same office denied the complainants motion
for reconsideration on May 17, 2010.
On September 3, 2010, the complainant submitted
a reply,[6] whereby he asserted that the respondents claim in
his comment that he had represented the Lim family was a
deception, because the subject of the complaint against the
respondent was his filing of the answers in behalf of Spouses
Lim Hio and Dolores Chu despite their being already
deceased at the time of the filing. The complainant regarded
as baseless the justifications of the Office of the City
Prosecutor for Malabon City in dismissing the criminal
complaint against the respondent and in denying his motion
for reconsideration.
The Court usually first refers administrative complaints
against members of the Philippine Bar to the Integrated Bar
of the Philippines (IBP) for investigation and appropriate
recommendations. For the present case, however, we forego
the prior referral of the complaint to the IBP, in view of the
facts being uncomplicated and based on the pleadings in Civil
Case No. 4674MN. Thus, we decide the complaint on its
merits.
Ruling
We find that the respondent, as attorney, did not
commit any falsehood or falsification in his pleadings in Civil
Case No. 4674MN. Accordingly, we dismiss the patently
frivolous complaint.
I Rule 1.01 - A lawyer shall not engage in
Attorneys Obligation to tell the truth
All attorneys in the Philippines, including the
respondent, have sworn to the vows embodied in
following Lawyers Oath,[7] viz:
I, ___________________, do solemnly
swear that I will maintain allegiance to the
Republic of the Philippines; I will support its
Constitution and obey the laws as well as the legal
orders of the duly constituted authorities therein; I
will do no falsehood, nor consent to the doing of
any in court; I will not wittingly or willingly
promote or sue any groundless, false or unlawful
suit, nor give aid nor consent to the same. I will
delay no man for money or malice, and will
conduct myself as a lawyer according to the best
of my knowledge and discretion with all good
fidelity as well to the courts as to my clients; and I
impose upon myself this voluntary obligation
without any mental reservation or purpose of
evasion. So help me God.
The Code of Professional Responsibility echoes
the Lawyers Oath, providing:[8]
CANON 1 - A LAWYER SHALL UPHOLD
THE CONSTITUTION, OBEY THE LAWS OF
THE LAND AND PROMOTE RESPECT FOR
LAW AND LEGAL PROCESSES.
unlawful, dishonest, immoral or deceitful conduct.
CANON 10 - A LAWYER OWES CANDOR,
FAIRNESS AND GOOD FAITH TO THE
COURT.
Rule 10.01 - A lawyer shall not do any
falsehood, nor consent to the doing of any in
Court; nor shall he mislead, or allow the Court to
be misled by any artifice.
The foregoing ordain ethical norms that bind all
attorneys, as officers of the Court, to act with the highest
standards of honesty, integrity, and trustworthiness. All
attorneys are thereby enjoined to obey the laws of the land, to
refrain from doing any falsehood in or out of court or from
consenting to the doing of any in court, and to conduct
themselves according to the best of their knowledge and
discretion with all good fidelity as well to the courts as to their
clients. Being also servants of the Law, attorneys are expected
to observe and maintain the rule of law and to make
themselves exemplars worthy of emulation by others.[9] The
least they can do in that regard is to refrain from engaging in
any form or manner of unlawful conduct (which broadly
includes any act or omission contrary to law, but does not
necessarily imply the element of criminality even if it is broad
enough to include such element).[10]
To all attorneys, truthfulness and honesty have the
highest value, for, as the Court has said in Young v.
Batuegas:[11]
A lawyer must be a disciple of truth. He
swore upon his admission to the Bar that he will
do no falsehood nor consent to the doing of any in
court and he shall conduct himself as a lawyer
according to the best of his knowledge and
discretion with all good fidelity as well to the
courts as to his clients. He should bear in mind that
as an officer of the court his high vocation is to
correctly inform the court upon the law and the
facts of the case and to aid it in doing justice and
arriving at correct conclusion. The courts, on the
other hand, are entitled to expect only complete
honesty from lawyers appearing and pleading
before them. While a lawyer has the solemn duty
to defend his clients rights and is expected to
display the utmost zeal in defense of his clients
cause, his conduct must never be at the expense of
truth.
Their being officers of the Court extends to attorneys
not only the presumption of regularity in the discharge of their
duties, but also the immunity from liability to others for as
long as the performance of their obligations to their clients
does not depart from their character as servants of the Law
and as officers of the Court. In particular, the statements they
make in behalf of their clients that are relevant, pertinent, or
material to the subject of inquiry are absolutely privileged
regardless of their defamatory tenor. Such cloak of privilege
is necessary and essential in ensuring the unhindered service
to their clients causes and in protecting the clients
confidences. With the cloak of privilege, they can freely and
courageously speak for their clients, verbally or in writing, in
the course of judicial and quasi-judicial proceedings, without
running the risk of incurring criminal prosecution or actions
for damages.[12]
Nonetheless, even if they enjoy a number of privileges
by reason of their office and in recognition of the vital role
they play in the administration of justice, attorneys hold the
privilege and right to practice law before judicial, quasi-
judicial, or administrative tribunals or offices only during
good behavior.[13]
II
Respondent did not violate the Lawyers Oath
and the Code of Professional Responsibility

On April 17, 2006, the respondent filed an answer with
counterclaim and cross-claim in behalf of Spouses Lim Hio
and Dolores Chu, the persons whom the Government as
plaintiff named as defendants in Civil Case No.
4674MN.[14] He alleged therein that:
2. The allegations in paragraph 2 of the complaint
are ADMITTED. Moreover, it is hereby made
known that defendants spouses Lim Hio and
Dolores Chu had already sold the two (2)
parcels of land, together with the building and
improvements thereon, covered by Transfer
Certificate of Title No. (148805) 139876 issued
by the Register of Deeds of Rizal, to Leonardo
C. Lim and William C. Lim, of Rms. 501 502
Dolores Bldg., Plaza del Conde, Binondo,
Manila. Hence, Leonardo Lim and William
Lim are their successors-in-interest and are the
present lawful owners thereof.
In order to properly and fully protect their
rights, ownership and interests, Leonardo C.
Lim and William C. Lim shall hereby represent
the defendants-spouses Lim Hio and Dolores
Chu as substitute/representative parties in this
action. In this manner, a complete and
expeditious resolution of the issues raised in
this case can be reached without undue delay. A
photo copy of the Deed of Absolute Sale over the
subject property, executed by herein defendants-
spouses Lim Hio and Dolores Chu in favor of said
Leonardo C. Lim and William C. Lim, is hereto
attached as Annex 1 hereof.
xxx
21. There is improper joinder of parties in the
complaint. Consequently, answering defendants
are thus unduly compelled to litigate in a suit
regarding matters and facts as to which they have
no knowledge of nor any involvement or
participation in.
22. Plaintiff is barred by the principle of estoppel
in bringing this suit, as it was the one who, by its
governmental authority, issued the titles to the
subject property.
This action is barred by the principles of
prescription and laches for plaintiffs unreasonable
delay in brining this suit, particularly against
defendant Flores, from whom herein answering
defendants acquired the subject property in good
faith and for value. If truly plaintiff has a clear and
valid cause of action on the subject property, it
should not have waited thirty (30) years to bring
suit.
Two years later, or on April 21, 2008, De Leon filed
his complaint in intervention in Civil Case No.
4674MN.[15] He expressly named therein as defendants vis--
vis his intervention not only the Spouses Lim Hio and Dolores
Chu, the original defendants, but also their sons Leonardo
Lim, married to Sally Khoo, and William Lim, married to
Sally Lee, the same persons whom the respondent had already
alleged in the answer, supra, to be the transferees
and current owners of the parcels of land.[16]
 attached to this complaint as Annex H and is made
The following portions of De Leons complaint in an integral part hereof;
intervention in Civil Case No. 4674MN are relevant, viz:
8. That there are now more or less at least 40
squatters on intervenors property, most of them
employees of defendant spouses Lim Hio and
Dolores Chu and defendant spouses Leonardo Lim
2. Defendant spouses Lim Hio and Dolores
and Sally Khoo and defendant spouses William
Chu, are Filipino citizens with addresses at 504
Lim and Sally Lee who had gained access to
Plaza del Conde, Manila and at 46 C. Arellano
intervenors property and built their houses without
St., San Agustin, Malabon City, where they
benefit of any building permits from the
may be served with summons and other court
government who had made their access to
processes;
intervenors property thru a two panel metal gate
more or less 10 meters wide and with an armed
3. Defendant spouses Leonardo Lim and Sally
guard by the gate and with permission from
Khoo and defendant spouses William Lim and
defendant spouses Lim Hio and Dolores Chu
Sally Lee are all of legal age and with postal
and/or and defendant spouses Leonardo Lim and
address at Rms. 501-502 Dolores Bldg., Plaza
Sally Khoo and defendant spouses William Lim
del Conde, Binondo, Manila, alleged
and Sally Lee illegally entered intervenors
purchasers of the property in question from
property thru a wooden ladder to go over a 12 foot
defendant spouses Lim Hio and Dolores Chu;
wall now separating intervenors property from the
former esquinita which is now part of defendant
4. Defendants Registrar of Deeds of Malabon City
spouses Lim Hio and Dolores Chus and defendant
holds office in Malabon City, where he may be
spouses Leonardo Lim and Sally Khoos and
served with summons and other court
defendant spouses William Lim and Sally Lees
processes. He is charged with the duty, among
property and this illegally allowed his employees
others, of registering decrees of Land Registration
as well as their relatives and friends thereof to
in Malabon City under the Land Registration Act;
illegally enter intervenors property through the
xxx
ladders defendant spouses Lim Hio and Dolores
7. That intervenor Jessie de Leon, is the owner of
Chu installed in their wall and also allowed said
a parcel of land located in Malabon City described
employees and relatives as well as friends to build
in TCT no. M-15183 of the Register of Deeds of
houses and shacks without the benefit of any
Malabon City, photocopy of which is attached to
building permit as well as permit to occupy said
this Complaint as Annex G, and copy of the
illegal buildings;
location plan of the aforementioned property is

9. That the enlargement of the properties of
spouses Lim Hio and Dolores Chu had resulted in
the closure of street lot no. 3 as described in TCT
no. 143828, spouses Lim Hio and Dolores Chu
having titled the street lot no. 3 and placed a wall
at its opening on C. Arellano street, thus closing
any exit or egress or entrance to intervenors
property as could be seen from Annex H hereof
and thus preventing intervenor from entering into
his property resulted in preventing intervenor from
fully enjoying all the beneficial benefits from his
property;
10. That defendant spouses Lim Hio and
Dolores Chu and later on defendant spouses
Leonardo Lim and Sally Khoo and defendant
spouses William Lim and Sally Lee are the only
people who could give permission to allow third
parties to enter intervenors property and their
control over intervenors property is enforced
through his armed guard thus exercising illegal
beneficial rights over intervenors property at
intervenors loss and expense, thus depriving
intervenor of legitimate income from rents as
well as legitimate access to intervenors
property and the worst is preventing the
Filipino people from enjoying the Malabon
Navotas River and enjoying the right of access
to the natural fruits and products of the
Malabon Navotas River and instead it is
defendant spouses Lim Hio and Dolores Chu
and defendant spouses Leonardo Lim and Sally
Khoo and defendant spouses William Lim and
Sally Lee using the public property exclusively
to enrich their pockets;
xxx
13. That defendant spouses Lim Hio and
Dolores Chu and defendant spouses Leonardo
Lim and Sally Khoo and defendant spouses
William Lim and Sally Lee were confederating,
working and helping one another in their
actions to inhibit intervenor Jessie de Leon to
gain access and beneficial benefit from his
property;
On July 10, 2008, the respondent, representing all the
defendants named in De Leons complaint in intervention,
responded in an answer to the complaint in intervention with
counterclaim and cross-claim,[17] stating that spouses Lim
Hio and Dolores Chu xxx are now both deceased, to wit:
xxx
2. The allegations in paragraphs 2 and 3 of
the Complaint are ADMITTED, with the
qualification that defendants-spouses Leonardo
Lim and Sally Khoo Lim, William Lim and
Sally Lee Lim are the registered and lawful
owners of the subject property covered by
Transfer Certificate of Title No. M-35929,
issued by the Register of Deeds for Malabon
City, having long ago acquired the same from
the defendants-spouses Lim Hio and Dolores
Chu, who are now both deceased. Copy of the
TCT No. M-35929 is attached hereto as Annexes
1 and 1-A.The same title has already been
 previously submitted to this Honorable Court
on December 13, 2006.
xxx
The respondent subsequently submitted to the RTC a
so-called clarification and submission,[18] in which he again
adverted to the deaths of Spouses Lim Hio and Dolores Chu,
as follows:
1. On March 19, 2009, herein movants-
defendants Lim filed before this Honorable Court
a Motion for Substitution of Defendants in the
Principal Complaint of the plaintiff Republic of
the Philippines, represented by the DENR;
2. The Motion for Substitution is grounded
on the fact that the two (2) parcels of land, with
the improvements thereon, which are the
subject matter of the instant case, had long
been sold and transferred by the principal
defendants-spouses Lim Hio and Dolores Chu
to herein complaint-in-intervention defendants
Leonardo C. Lim and William C. Lim, by way
of a Deed of Absolute Sale, a copy of which is
attached to said Motion as Annex 1 thereof.
3. Quite plainly, the original principal
defendants Lim Hio and Dolores Chu, having
sold and conveyed the subject property, have
totally lost any title, claim or legal interest on
the property. It is on this factual ground that
this Motion for Substitution is based and
certainly not on the wrong position of
Intervenor de Leon that the same is based on
the death of defendants Lim Hio and Dolores
Chu.
4. Under the foregoing circumstances and
facts, the demise of defendants Lim Hio and
Dolores Chu no longer has any significant
relevance to the instant Motion. To, however,
show the fact of their death, photo copy of their
respective death certificates are attached hereto as
Annexes 1 and 2 hereof.
5. The Motion for substitution of Defendants
in the Principal Complaint dated March 18,
2009 shows in detail why there is the clear, legal
and imperative need to now substitute herein
movants-defendants Lim for defendants Lim Hio
and Dolores Chu in the said principal complaint.
6. Simply put, movants-defendants Lim have
become the indispensable defendants in the
principal complaint of plaintiff DENR, being now
the registered and lawful owners of the subject
property and the real parties-in-interest in this
case. Without them, no final determination can be
had in the Principal complaint.
7. Significantly, the property of intervenor
Jessie de Leon, which is the subject of his
complaint-in-intervention, is identically, if not
similarly, situated as that of herein movants-
defendants Lim, and likewise, may as well be a
proper subject of the Principal Complaint of
plaintiff DENR.

8. Even the plaintiff DENR, itself, concedes
the fact that herein movants-defendants Lim
should be substituted as defendants in the principal
complaint as contained in their Manifestation
dated June 3, 2009, which has been filed in this
case.
WHEREFORE, herein movants-defendants
Lim most respectfully submit their Motion for
substitution of Defendants in the Principal
Complaint and pray that the same be granted.
xxx
Did the respondent violate the letter and spirit of
the Lawyers Oath and the Code of Professional
Responsibility in making the averments in the aforequoted
pleadings of the defendants?
A plain reading indicates that the respondent did not
misrepresent that Spouses Lim Hio and Dolores Chu were
still living. On the contrary, the respondent directly stated in
the answer to the complaint in intervention with counterclaim
and cross-claim, supra, and in the clarification and
submission, supra, that the Spouses Lim Hio and Dolores Chu
were already deceased.
Even granting, for the sake of argument, that any of the
respondents pleadings might have created any impression that
the Spouses Lim Hio and Dolores Chu were still living, we
still cannot hold the respondent guilty of any dishonesty or
falsification. For one, the respondent was acting in the interest
of the actual owners of the properties when he filed
the answer with counterclaim and cross-claim on April 17,
2006. As such, his pleadings were privileged and would not
occasion any action against him as an attorney. Secondly,
having made clear at the start that the Spouses Lim Hio and
Dolores Chu were no longer the actual owners of the affected
properties due to the transfer of ownership even prior to the
institution of the action, and that the actual owners (i.e.,
Leonardo and William Lim) needed to be substituted in lieu
of said spouses, whether the Spouses Lim Hio and Dolores
Chu were still living or already deceased as of the filing of the
pleadings became immaterial. And, lastly, De Leon could not
disclaim knowledge that the Spouses Lim Hio and Dolores
Chu were no longer living. His joining in the action as
a voluntary intervenor charged him with notice
of all the other persons interested in the litigation. He also
had an actual awareness of such other persons, as his
own complaint in intervention, supra, bear out in its specific
allegations against Leonardo Lim and William Lim, and their
respective spouses. Thus, he could not validly insist that the
respondent committed any dishonesty or falsification in
relation to him or to any other party.
III
Good faith must always motivate any complaint
against a Member of the Bar
According to Justice Cardozo,[19] xxx the fair fame of a
lawyer, however innocent of wrong, is at the mercy of the
tongue of ignorance or malice. Reputation in such a calling is
a plant of tender growth, and its bloom, once lost, is not easily
restored.

A lawyers reputation is, indeed, a very fragile

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

The complainant initiated his complaint possibly for

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

WHEREFORE, we dismiss the complaint for

disbarment or suspension filed against Atty. Eduardo G.
Castelo for utter lack of merit.

SO ORDERED.