G.R. No. 169079 . February 12, 2007 . THIRD DIVISION .
lawyer is not entitled to unilaterally appropriate his client’s
CHICO-NAZARIO
FRANCISCO RAYOS, Petitioner,
vs.
ATTY. PONCIANO G. HERNANDEZ, Respondent.
NATURE: Petition for Review of the Resolution of IBP
dismissing Francisco Rayos’ complaint for disbarment
against Atty. Ponciano Hernandez.
FACTS: Atty Hernandez was the counsel of Rayos in a Civil
Case for damages against NAPOCOR. RTC dismissed the
complaint. Upon appeal, CA reversed the RTC decision
and awarded damages in favor of Rayos. SC affirmed the
CA Decision which became final and executory.
NAPOCOR issued a Check in the amount of ₱1,060,800.00
payable to Rayos which was turned over to Atty.
Hernandez as counsel. When Rayos demanded the turn
over of the check, Atty. Hernandez refused and justified
his retention as a means to ensure payment of his
attorney’s fees.
Rayos initiated this complaint for disbarment for Atty.
Hernandez’ failure to return the rest of the award in the
amount of ₱557,961.21.
In his answer Atty. Hernandez alleged that they had a
contract for attorney’s fees on a contingent basis on 40%-
60% sharing of the court award. Atty. Hernandez was
entitled to receive 60% of the award – 40% as attorney’s
fees and 20% as litigation expenses. He asseverated that
he deposited Rayos’ share of the 40% award in a bank
under Rayos’ name.
ISSUE #1: Whether Atty. Hernandez is justified in retaining
the amount awarded to Rayos to assure payment of his
attorney’s fees.
HELD: NO.
Moneys collected by an attorney on a judgment rendered
in favor of his client constitute trust funds and must be
immediately paid over to the client. Canon 16 of the Code
of Professional Responsibility provides that:
CANON 16 - A lawyer shall hold in trust all moneys and
properties of his client that may come into his possession.
Rule 16.01 – A lawyer shall account for all money or
property collected or received for or from the client.
When Atty. Hernandez withheld and refused to deliver the
check, he breached the trust reposed on him. The claim
that Rayos failed to pay his attorney’s fees is not an excuse
for Atty. Hernandez’ failure to deliver the amount. A
money for himself by the mere fact alone that the client
owes him attorney’s fees. The failure of an attorney to
return the client’s money upon demand gives rise to the
presumption that he has misappropriated it for his own
use to the prejudice and violation of the general morality,
as well as of professional ethics; it also impairs public
confidence in the legal profession and deserves
punishment.
It is true that under Canon 16.03 of the Code of
Professional Responsibility, an attorney has the following
rights:
Rule 16.03- A lawyer shall deliver the funds and property
of his client when due or upon demand. However, he shall
have a lien over the funds and may apply so much thereof
as may be necessary to satisfy his lawful fees and
disbursements, giving notice promptly thereafter to his
client. He shall also have a lien to the same extent on all
judgments and executions he has secured for his client as
provided for in the Rules of Court.
But the fact alone that a lawyer has a lien for fees on
moneys in his hands collected for his client, does not
relieve him of his duty to promptly account for the moneys
received; his failure to do so constitutes professional
misconduct. Thus, what respondent should have properly
done was to provide the petitioner with an accounting
before deducting his attorney’s fees and then to turn over
the remaining balance of the award collected.
The relationship of attorney and client has always been
rightly regarded as one of special trust and confidence. An
attorney must exercise the utmost good faith and fairness
in all his relationship vis-à-vis his client. Respondent fell far
short of this standard when he failed to render an
accounting for the amount actually received by him on
behalf of his client and when he refused to turn over any
portion of said amount to his client upon the pretext that
his attorney’s fees had not at all been paid. Respondent
had, in fact, placed his private and personal interest above
that of his client.
Lawyering is not a moneymaking venture and lawyers are
not merchants. Law advocacy, it has been stressed, is not
capital that yields profits. The returns it births are simple
rewards for a job done or service rendered. It is a calling
that, unlike mercantile pursuits which enjoy a greater deal
of freedom from governmental interference, is impressed
with a public interest, for which it is subject to State
regulation.
A lawyer’s compensation for professional services
rendered is subject to the supervision of the court, not just
to guarantee that the fees he charges and receives remain
reasonable and commensurate with the services rendered,
but also to maintain the dignity and integrity of the legal
profession to which he belongs. Upon taking his attorney’s
oath as an officer of the court, a lawyer submits himself to
the authority of the courts to regulate his right to charge
professional fees.
ISSUE #2: Whether a contingent fee comprising of 40% as
attorney’s fees and 20% as litigation expenses is
unreasonable and unconscionable.
HELD: YES.
A contingent fee arrangement is valid in this jurisdiction
and is generally recognized as valid and binding but must
be laid down in an express contract. The amount of
contingent fee agreed upon by the parties is subject to the
stipulation that counsel will be paid for his legal services
only if the suit or litigation prospers. A much higher
compensation is allowed as contingent fee in
consideration of the risk that the lawyer may get nothing if
the suit fails. Contracts of this nature are permitted
because they redound to the benefit of the poor client and
the lawyer "especially in cases where the client has
meritorious cause of action, but no means with which to
pay for legal services unless he can, with the sanction of
law, make a contract for a contingent fee to be paid out of
the proceeds of the litigation. Oftentimes, the contingent
fee arrangement is the only means by which the poor and
helpless can seek redress for injuries sustained and have
their rights vindicated."
Contingent fee contracts are subject to the supervision
and close scrutiny of the court in order that clients may be
protected from unjust charges. Section 13 of the Canons
of Professional Ethics states that "a contract for a
contingent fee, where sanctioned by law, should be
reasonable under all the circumstances of the case
including the risk and uncertainty of the compensation,
but should always be subject to the supervision of a court,
as to its reasonableness." Likewise, Rule 138, Section 24, of
the Rules of Court provides:
SEC. 24. Compensation of attorney’s; agreement as to
fees. - An attorney shall be entitled to have and recover
from his client no more than a reasonable compensation
for his services, with a view to the importance of the
subject matter of the controversy, the extent of the
services rendered, and the professional standing of the
attorney. No court shall be bound by the opinion of
attorneys as expert witnesses as to the proper
compensation, but may disregard such testimony and base
its conclusion on its own professional knowledge. A
written contract for services shall control the amount to be
paid therefor unless found by the court to be
unconscionable or unreasonable.
The reduction of unreasonable attorney’s fees is within the
regulatory powers of the courts. When the courts find that
the stipulated amount is excessive or the contract is
unreasonable, or found to have been marred by fraud,
mistake, undue influence or suppression of facts on the
part of the attorney, public policy demands that said
contract be disregarded to protect the client from
unreasonable exaction.
Stipulated attorney’s fees are unconscionable whenever
the amount is by far so disproportionate compared to the
value of the services rendered as to amount to fraud
perpetrated upon the client.
Generally, the amount of attorney’s fees due is that
stipulated in the retainer agreement which is conclusive as
to the amount of the lawyer’s compensation. A stipulation
on a lawyer’s compensation in a written contract for
professional services ordinarily controls the amount of
fees that the contracting lawyer may be allowed, unless
the court finds such stipulated amount unreasonable or
unconscionable. In the absence thereof, the amount of
attorney’s fees is fixed on the basis of quantum meruit,
i.e., the reasonable worth of the attorney’s services.
Courts may ascertain also if the attorney’s fees are found
to be excessive, what is reasonable under the
circumstances. In no case, however, must a lawyer be
allowed to recover more than what is reasonable,
pursuant to Section 24, Rule 138 of the Rules of Court.
We have identified the circumstances to be considered in
determining the reasonableness of a claim for attorney’s
fees as follows: (1) the amount and character of the
service rendered; (2) labor, time, and trouble involved; (3)
the nature and importance of the litigation or business in
which the services were rendered; (4) the responsibility
imposed; (5) the amount of money or the value of the
property affected by the controversy or involved in the
employment; (6) the skill and experience called for in the
performance of the services; (7) the professional character
and social standing of the attorney; (8) the results secured;
(9) whether the fee is absolute or contingent, it being
recognized that an attorney may properly charge a much
larger fee when it is contingent than when it is not; 35 and
(10) the financial capacity and economic status of the
client have to be taken into account in fixing the
reasonableness of the fee.
Rule 20.1, Canon 20 of the Code of Professional
Responsibility enumerates the following factors which
should guide a lawyer in determining his fees:
(a) The time spent and the extent of the services rendered
or required;
(b) The novelty and difficulty of the questions involved;
(c) The importance of the subject matter;
(d) The skill demanded;
(e) The probability of losing other employment as a result
of acceptance of the proffered case;
excess of what we herein declared as fair and reasonable
attorney’s fees, plus legal interest from date of finality of
this judgment until full payment thereof.

(f) The customary charges for similar services and the

schedule of fees of the IBP Chapter to which he belongs;

(g) The amount involved in the controversy and the

benefits resulting to the client from the service;

(h) The contingency or certainty of compensation;

(i) The character of the employment, whether occasional

or established; and

(j) The professional standing of the lawyer.

The contingent fee claimed was grossly excessive and

unconscionable. Such a fee structure, when considered in
conjunction with the circumstances of this case, also
shows that an unfair advantage was taken of the client and
legal fraud and imposition perpetrated upon him. Lawyers
should not be permitted to get a lion’s share of the
benefits due the poor and the helpless. Contracts for legal
services between the helpless and attorney should be
zealously scrutinized to the end that a fair share of the
benefits be not denied to the former. This Court has the
power to guard a client, especially an aged and necessitous
client, against such a contract.

Since Atty. Hernandez, after all, succeeded in obtaining a

favorable decision for his client in his efforts in litigating
the case for 15 years and he took risk in representing
petitioner on a contingent fee basis, a fee of 35% of the
amount awarded to petitioner would be a fair
compensation for respondent’s legal services.

DISPOSITIVE PORTION:

WHEREFORE the Court Resolves that:

1. Respondent is guilty of violation of the attorney’s oath

and of serious professional misconduct and shall be
SUSPENDED from the practice of law for six (6) months
and WARNED that repetition of the same or similar
offense will be dealt with more severely;

2. Respondent is entitled to attorney’s fees in the amount

equivalent to thirty-five percent (35%) of the total amount
awarded 51 to petitioner in Civil Case No. SM-951; and

3. Respondent is to return the amount of Two Hundred

Ninety Thousand One Hundred Nine Pesos and Twenty-
One Centavos (₱290,109.21), 52 which he retained in