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PROBLEM AREAS IN LEGAL ETHICS CASES (FULLTEXTS) CONT.

NO. 16 G.R. No. 73722 February 26, 1990 THE COMMISSIONER OF CUSTOMS, petitioner, vs. K.M.K. GANI, INDRAPAL & CO., and the HONORABLE COURT OF TAX APPEALS, respondents. This is a review of the decision of the Court of Tax Appeals disposing as follows: WHEREFORE. the subject ten (10) cartons of articles are hereby released to the carrying airline for immediate transshipment to the country of destination under the terms of the contract of carriage. No costs. SO ORDERED.
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The pertinent facts may be summarized thus: On September 11, 1982, two (2,) containers loaded with 103 cartons of merchandise covered by eleven (11) airway bills of several supposedly Singapore-based consignees arrived at the Manila International Airport on board Philippine Air Lines (PAL) Flight PR 311 from Hongkong. The cargoes were consigned to these different entities: K.M.K. Gani (hereafter referred to as K.M.K.) and Indrapal and Company (hereafter referred to as INDRAPAL), the private respondents in the petition before us; and Sin Hong Lee Trading Co., Ltd., AAR TEE Enterprises, and C. Ratilal all purportedly based in Singapore. While the cargoes were at the Manila International Airport, a "reliable source" tipped off the Bureau of customs that the said cargoes were going to be unloaded in Manila. Forthwith, the Bureau's agency on such matters, the Suspected Cargo and Anti-Narcotics (SCAN), dispatched an agent to verify the information. Upon arriving at the airport, the SCAN agent saw an empty PAL van parked directly alongside the plane's belly from which cargoes were being unloaded. When the SCAN agent asked the van's driver why he was at the site, the driver drove away in his vehicle. The SCAN agent then sequestered the unloaded cargoes. The seized cargoes consisted of 103 cartons "containing Mogadon and Mandrax tablets, Sony T.V. sets 1546R/176R kw, Sony Betamax SL5800, and SL5000, Cassette Stereos with Headphone (ala walkman), Casio Calculators, Pioneer Car Stereos, Yamaha Watches, Eyeglass Frames, Sunglasses, Plastic Utility Bags, Perfumes, etc." These goods were transferred to the International Cargo Terminal under Warrant of Seizure and Detention and thereafter subjected to Seizure and Forfeiture proceedings for "technical smuggling." At the hearing, Atty. Armando S. Padilla entered his appearance for the consignees K.M.K. and INDRAPAL. The records of the case do not show any appearance of the consignees in person. Atty. Padilla moved for the transshipment of the cargoes consigned to his clients. On the other hand, the Solicitor General avers that K.M.K. and INDRAPAL did not present any testimonial or documentary evidence. The, collector of Customs at the then Manila International Airport (MIA), now Ninoy Aquino International Airport (NAIA), ruled for the forfeiture of all the cargoes in the said containers (Seizure Identification No. 4993-82, dated July 14, 1983). Consequently, Atty. Padilla, ostensibly on behalf of his two clients, K.M.K. and INDRAPAL, appealed the order to the Commissioner. of 2 Customs.

The Commissioner of Customs affirmed the finding of the Collector of Customs (Customs Case No. 83-85, January, 3 1984), of the presence of the intention to import the said goods in violation of the Dangerous Drugs Act and 4 Central Bank Circular No. 808 in relation to the Tariff and Customs Code. The Commissioner added the following findings of fact:
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1. There is a direct flight from Hongkong to Singapore, thus making the transit through Manila more expensive, tedious, and circuitous. 2. The articles were grossly misdeclared, considering that Singapore is a free port. 3. The television sets and betamax units seized were of the American standard which is popularly used in Manila, and not of the European standard which is used in Singapore. 4. One of the shippers is a Filipino national with no business connection with her alleged consignee in Singapore. 5. The alleged consignee of the prohibited drugs confiscated has no authority to import Mogadon or Mandrax. Upon these findings, the Commissioner concluded that there was an "intent to unlade" in Manila, thus, an attempt to smuggle goods into the country. Taking exception to these findings, Atty. Armando S. Padilla, again as counsel of the consignees K.M.K. and Indrapal, appealed to the respondent Court of Tax Appeals (CTA). He argued in the CTA that K.M.K. and INDRAPAL were "entitled to the release of their cargoes for transshipment to Singapore so manifested and covered by the Airway bills as in transit, ... contending that the goods were never intended importations into the Philippines and the same suffer none of any affiliating breaches allegedly found attributable to the other shipments under the 6 Customs and related laws." The CTA reversed the decision of the Commissioner of Customs. Hence this petition. The petitioner raises the following errors: 1. THE COURT OF TAX APPEALS ERRED IN ENTERTAINING THE PETITION FOR REVIEW NOTWITHSTANDING HEREIN PRIVATE RESPONDENTS' FAILURE TO ESTABLISH THEIR PERSONALITY TO SUE IN A REPRESENTATIVE CAPACITY. 2. THE COURT OF TAX APPEALS ERRED IN RULING THAT THE SUBJECT GOODS WERE IMPORTATIONS NOT INTENDED FOR THE PHILIPPINES BUT FOR SINGAPORE, THUS, NOT VIOLATING THE LAW ON TECHNICAL SMUGGLING UNDER THE TARIFF AND CUSTOMS CODE. The issues before us are therefore: (1) whether or not the private respondents failed to establish their personality to sue in a representative capacity, hence making their action dismissable, and (2) whether or not the subject goods were importations intended for the Philippines in violation of the Tariff and Customs Code. We answer both questions in the affirmative.

The law is clear: "No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine 7 courts or administrative tribunals on any valid cause of action recognized under Philippine laws." However, the Court in a long line of cases has held that a foreign corporation not engaged in business in the 8 Philippines may not be denied the right to file an action in the Philippine courts for an isolated transaction. Therefore, the issue on whether or not a foreign corporation which does not have a license to engage in business in this country can seek redress in Philippine courts boils down as to whether it is doing business or merely entered into an isolated transaction in the Philippines. The fact that a foreign corporation is not doing business in the Philippines must be disclosed if it desires to sue in Philippine courts under the "isolated transaction rule." Without this disclosure, the court may choose to deny it the 9 right to sue. In the case at bar, the private respondents K.M.K. and INDRAPAL aver that they are "suing upon a singular and isolated transaction." But they failed to prove their legal existence or juridical personality as foreign corporations. Their unverified petition before the respondent Court of Tax Appeals merely stated: 1. That petitioner "K.M.K. Gani" is a single proprietorship doing business in accordance with the laws of Singapore with address at 99 Greenfield Drive, Singapore, Rep. of Singapore, while Petitioner INDRAPAL and COMPANY" is a firm doing business in accordance with the laws of Singapore with office address at 97 High Street, Singapore 0641, Republic of Singapore, and summons as well as other Court process may be served to the undersigned lawyer; 2. That the Petitioner's (sic) are sueing (sic) upon a singular and isolated 10 transaction. We are cognizant of the fact that under the "isolated transaction rule," only foreign corporations and not just any business organization or entity can avail themselves of the privilege of suing before Philippine courts even without a license. Counsel Armando S. Padilla stated before the respondent Court of Tax Appeals that his clients are "suing upon a singular and isolated transaction." But there is no proof to show that K.M.K. and INDRAPAL are indeed what they are represented to be. It has been simply stated by Attorney Padilla that K.M.K. Gani is "a single proprietorship," while INDRAPAL is "a firm," and both are "doing business in accordance with the laws of Singapore ... ," with specified addresses in Singapore. In cases of this nature, these allegations are not sufficient to clothe a claimant of suspected smuggled goods of juridical personality and existence. The "isolated transaction rule" refers only to foreign corporations. Here the petitioners are not foreign corporations. They do not even pretend to be so. The first paragraph of their petition before the Court, containing the allegation of their identities, does not even aver their corporate character. On the contrary, K.M.K. alleges that it is a "single proprietorship" while INDRAPAL hides under the vague identification as a "firm," although both describe themselves with the phrase "doing business in accordance with the laws of Singapore." Absent such proof that the private respondents are corporations (foreign or not), the respondent Court of Tax Appeals should have barred their invocation of the right to sue within Philippine jurisdiction under the "isolated transaction rule" since they do not qualify for the availment of such right. As we had stated before:

But merely to say that a foreign corporation not doing business in the Philippines does not need a license in order to sue in our courts does not completely resolve the issue in the present case. The proposition as stated, refers to the right to sue; the question here refers to pleading and procedure. It should be noted that insofar as the allegations in the complaint have a bearing on appellant's capacity to sue, all that is averred is that they are both foreign corporations existing under the laws of the United States. This averment conjures two alternative possibilities: either they are engaged in business in the Philippines or they are not so engaged. If the first, they must have been duly licensed in order to maintain this suit; if the second, if (sic) the transaction sued upon is singular and isolated, no such license is required. In either case, the qualifying circumstance is an essential part of the element of plaintiffs capacity to sue and must be 11 affirmatively pleaded. In this connection, we note also a fatal defect in the pleadings of the private respondents. There is no allegation as to who is the duly authorized representative or resident agent in our jurisdiction. All we have on record are the pleadings filed by Attorney Armando S. Padilla who represents himself as the counsel for the private respondents. xxx xxx xxx It is incumbent on plaintiff to allege sufficient facts to show that he is concerned with the cause of action averred, and is the party who has suffered injury by reason of the acts of defendant; in other words, it is not enough that he alleges a cause of action existing in favor of someone, but he must show that it exists in favor of himself. The burden should not be placed on defendant to show that plaintiff is not the aggrieved person and that he has sustained no damages. It is also necessary for plaintiff to allege facts showing that the causes of action alleged accrued to him in the capacity in which he sues, and for this purpose it is necessary for someone for one who sues otherwise than in his individual capacity to allege his authority. xxx xxx xxx The plaintiff must show, in his pleading, his right and interest in the subject matter of the suit; and a complaint which does not show that plaintiff has the requisite interest to enable him to 12 maintain his action should be dismissed for insufficiency ... xxx xxx xxx The appearance of Atty, Armando S. Padilla as counsel for the two claimants would not suffice. Generally, a "lawyer is presumed to be properly authorized to represent any cause in which he appears, and no written power 13 of attorney is required to authorize him to appear in court for his client." Nevertheless, although the authority of an attorney to appear for and on behalf of a party may be assumed, it can still be questioned or challenged by the 14 adverse party concerned. The presumption established under the provision of Section 21, Rule 138 of the Revised Rules of Court is 15 disputable. The requirement for the production of authority is essential because the client will be bound by his 16 acquiescence resulting from his knowledge that he was being represented by said attorney. The Solicitor General, representing the petitioner-appellant, not only questions the authority of Atty. Armando S. Padilla to represent the private respondents but also the latter's capacity to sue: ... While it is alleged that the summons and court processes may be served to herein private respondents' counsel who filed the unverified petition before the Court of Tax Appeals, the allegation would be insufficient for the purpose of binding foreign corporations as in the instant

case. To be sure, the admitted absence of special power of attorney in favor of their counsel, the relationship with the latter, if at all, is merely that of a lawyer-client relationship and definitely not one of a principal agent. Such being the case, said counsel cannot bind nor compromise the interest of private respondents as it is possible that the latter may disown the former's representation to avoid civil or criminal liability. In this respect, the Court cannot assume jurisdiction over the person of private respondents, notwithstanding the filing of the unverified petition in question. Apart from the foregoing, Section 4, Rule 8, Revised Rules of Court mandates that facts showing the capacity of a party to sue or be sued; or the authority of a party to sue or be sued in a representative capacity; or the legal existence of an organized association of person (sic) that is made a party, must be averred. In like manner, the rule is settled that in case where the law denies a foreign corporation to maintain a suit unless it has previously complied with certain requirements, then such compliance or exemption therefrom, becomes a necessary averment in the complaint (Atlantic Mutual Inc. Co. v. Cebu Stevedoring Co., Inc. 17 SCRA 1037; vide; Sec. 4, Rule 8, Revised Rules of Court). In the case at bar, apart from merely alleging that private respondents are foreign corporation (sic) and that summons may be served to their counsel, their petition in the Court of Tax Appeals is bereft of any other factual allegation to show their 17 capacity to sue or be sued in a representative capacity in his jurisdiction. The representation and the extent of the authority of Atty. Padilla have thus been expressly challenged. But he ignored such challenge which leads us to the only conclusion that he has no authority to appear for such clients if they exist, which we even doubt. In cases like this, it is the duty of the government officials concerned to require competent proof of the representation and authority of any claimant of any goods coming from abroad and seized by our customs authorities or otherwise appearing to be illegally imported. This desired meticulousness, strictness if you may, should extend to their representatives and counsel. Our government has lost considerable sums of money due to such dubious claims or claimants. Apropos the second issue, suffice it to state that we agree with the findings, already enumerated and discussed at the outset, made by the Collector of Customs in his decision, dated July 14, 1983, which was affirmed and amplified by the decision of the Commissioner of Customs, that those constitute sufficient evidence to support the conclusion that there was an intention to unlade the seized goods in the Philippines instead of its supposed destination, Singapore. There is no need of belaboring them anymore. WHEREFORE, the petition is GRANTED; the decision of the Court of Tax Appeals is SET ASIDE, and the decision of the petitioner is hereby REINSTATED. No costs. SO ORDERED.

NO. 17 G.R. No. 91391 January 24, 1991 FRANCISCO I. CHAVEZ, in his capacity as Solicitor General, petitioner vs. THE HON. SANDIGANBAYAN (First Division) and JUAN PONCE ENRILE, respondents. The petitioner challenges the resolutions dated June 8, 1989 and November 2, 1989 of the Sandiganbayan issued in Civil Case No. 0033 which granted the motion of private respondent Juan Ponce Enrile, one of the defendants in the civil case, to implead the petitioner as additional party defendant in Enrile's counterclaim in the same civil case and denied the petitioner's motion for reconsideration. On July 31, 1987, the Republic of the Philippines, through the Presidential Commission on Good Government (PCGG) with the assistance of Solicitor General Francisco Chavez filed with the respondent Sandiganbayan a complaint docketed as Civil Case No. 0033 against Eduardo Cojuangco, Jr. and Juan Ponce Enrile, among others, for reconveyance, reversion and accounting, restitution and damages. After the denial of his motion to dismiss, respondent Enrile filed his answer with compulsory counterclaim and cross-claim with damages. The Republic filed its reply to the answer and motion to dismiss the counterclaim. The motion was opposed by respondent Enrile. On January 30, 1989, respondent Sandiganbayan issued a resolution, to wit: The resolution of the Motion to Dismiss the Counterclaim against the Plaintiff government is deferred until after trial, the grounds relied upon not appearing to be indubitable. On the matter of the additional parties (Solicitor General Chavez, Ex-PCGG Chairman Diaz, former Commissioners Doromal, Rodrigo, Romero and Bautista), the propriety of impleading them either under Sec. 14, Rule 6 or even under Sec. 12 as third-party defendant requires leave of Court to determine the propriety thereof. No such leave has been sought. Consideration thereof cannot be entertained at this time nor may therefore, the Motion to Dismiss the same be considered. (Rollo, p. 329; Annex "H", Petition) Respondent Enrile then requested leave from the Sandiganbayan to implead the petitioner and the PCGG officials as party defendants for lodging this alleged "harassment suit" against him. The motion was granted in a resolution dated June 8, 1989, to wit: In respect to defendant Juan Ponce Enrile's Manifestation and Motion dated February 23, 1989, praying for leave to implead additional parties to his counterclaim, the Court, finding reason in the aforesaid Manifestation and Motion, grants leave to implead the defendants named in the counterclaim and admits defendant Juan Ponce Enrile's answer with counterclaim. This is without prejudice to the defenses which said defendants may put forth individually or in common, in their personal capacities or otherwise. (Rollo, p. 27)

In a later resolution dated November 2, 1989, respondent Sandiganbayan denied a motion to reconsider the June 8, 1989 resolution. The dispositive portion of the resolution states: WHEREFORE, the Motions for Reconsideration of the Solicitor General and former PCGG officials Ramon Diaz, Quintin Doromal, Orlando Romero, Ramon Rodrigo and Mary Concepcion Bautista are denied, but, considering these motions as in the nature of motions to dismiss counterclaim/answers, resolution of these motions is held in abeyance pending trial on the merits. (Rollo, p. 31) Thereafter, all the PCGG officials filed their answer to the counterclaims invoking their immunity from suits as provided in Section 4 of Executive Order No. 1. Instead of filing an answer, the petitioner comes to this Court assailing the resolutions as rendered with grave abuse of discretion amounting to lack of jurisdiction. The lone issue in this petition is the propriety of impleading the petitioner as additional party defendant in the counterclaim filed by respondent Enrile in Civil Case No. 0033. It may be noted that the private respondent did not limit himself to general averments of malice, recklessness, and bad faith but filed specific charges that then PCGG Chairman Jovito Salonga had already cleared the respondent and yet, knowing the allegations to be false, the petitioner still filed the complaint. This can be gleaned from excerpts found in respondent Enrile's Answer with Compulsory Counterclaim and Cross-Claim: xxx xxx xxx Defendant-in-counterclaim Francisco Chavez was the Solicitor General who assisted the PCGG in filing and maintaining the instant Complaint against Defendant. As the incumbent Solicitor General, he continues to assist the PCGG in prosecuting this case. He is sued in his personal and official capacities. On or about October 1986, the PCGG, speaking through the then Chairman, now Senate President, Hon. Jovito R. Salonga, found and declared that "not one of the documents left by then President and Mrs. Ferdinand E. Marcos including the 2,300-page evidence turned over to the PCGG by the US State Department implicates Enrile." Chairman Salonga stressed that in view of the PCGG's findings, he refused to yield to the "pressure" exerted on him to prosecute Defendant. xxx xxx xxx Notwithstanding the findings of the PCGG that there was absolutely no evidence linking Defendant to the illegal activities of former President and Mrs. Ferdinand E. Marcos, the PCGG, this time composed of Chairman Ramon Diaz, the Commissioners Quintin Doromal, Ramon Rodrigo, Orlando Romero and Mary Concepcion Bautista, filed the Complaint against Defendant, among others, on or about 22 July 1987. Defendant has reasons to believe, and so alleges that Chairman Diaz, and Commissioners Doromal, Rodrigo, Romero and Bautista ordered, authorized, allowed or tolerated the filing of the utterly baseless complaint against Defendant. Solicitor General Francisco Chavez assisted or cooperated in, or induced or instigated, the filing of this harassment suit against Defendant.

In so ordering, authorizing, allowing and tolerating the institution of the action against Defendant, all the aforenamed officers, with malice and in evident bad faith, and with grave abuse of power and in excess of their duty and authority, unjustly and unlawfully obstructed, defeated, violated, impeded or impaired the constitutional rights and liberties of Defendant . . . . (Rollo, pp. 260-262) On the other hand, the petitioner submits that no counter-claim can be filed against him in his capacity as Solicitor General since he is only acting as counsel for the Republic. He cites the case of Borja v. Borja, 101 Phil. 911 [1957] wherein we ruled: . . . The appearance of a lawyer as counsel for a party and his participation in a case as such counsel does not make him a party to the action. The fact that he represents the interests of his client or that he acts in their behalf will not hold him liable for or make him entitled to any award that the Court may adjudicate to the parties, other than his professional fees. The principle that a counterclaim cannot be filed against persons who are acting in representation of another such as trustees in their individual capacities (Chambers v. Cameron, 2 Fed. Rules Service, p. 155; 29 F. Supp. 742) could be applied with more force and effect in the case of a counsel whose participation in the action is merely confined to the preparation of the defense of his client. Appellant, however, asserted that he filed the counterclaim against said lawyer not in his individual capacity but as counsel for the heirs of Quintin de Borja. But as we have already stated that the existence of a lawyer-client relationship does not make the former a party to the action, even this allegation of appellant will not alter the result We have arrived at (at pp. 924-925) Thus, the petitioner argues that since he is simply the lawyer in the case, exercising his duty under the law to assist the Government in the filing and prosecution of all cases pursuant to Section 1, Executive Order No. 14, he cannot be sued in a counterclaim in the same case. Presiding Justice Francis Garchitorena correctly observed that there is no general immunity arising solely from occupying a public office. The general rule is that public officials can be held personally accountable for acts claimed to have been performed in connection with official duties where they have acted ultra vires or where there is a showing of bad faith. We ruled in one case: A number of cases decided by the Court where the municipal mayor alone was held liable for back salaries of, or damages to dismissed municipal employees, to the exclusion of the municipality, are not applicable in this instance. In Salcedo v. Court of Appeals (81 SCRA 408 [1978]) for instance, the municipal mayor was held liable for the back salaries of the Chief of Police he had dismissed, not only because the dismissal was arbitrary but also because the mayor refused to reinstate him in defiance of an order of the Commissioner of Civil Service to reinstate . In Nemenzo v. Sabillano (25 SCRA 1 [1968]), the municipal mayor was held personally liable for dismissing a police corporal who possessed the necessary civil service eligibility, the dismissal being done without justifiable cause and without any administrative investigation. In Rama v. Court of Appeals (G.R. Nos. L-44484, L-44842, L-44591, L-44894, March 16 1987), the governor, vice-governor, members of the Sangguniang Panlalawigan, provincial auditor, provincial treasurer and provincial engineer were ordered to pay jointly and severally in their individual and personal capacity damages to some 200 employees of the province of Cebu who were eased out from their positions because of their party affiliations. (Laganapan v. Asedillo, 154 SCRA 377 [1987])

Moreover, the petitioner's argument that the immunity proviso under Section 4(a) of Executive Order No. 1 also extends to him is not well-taken. A mere invocation of the immunity clause does not ipso facto result in the charges being automatically dropped. In the case of Presidential Commission on Good Government v. Pea (159 SCRA 556 [1988]) then Chief Justice Claudio Teehankee, added a clarification of the immunity accorded PCGG officials under Section 4(a) of Executive Order No. 1 as follows: With respect to the qualifications expressed by Mr. Justice Feliciano in his separate opinion, I just wish to point out two things: First, the main opinion does not claim absolute immunity for the members of the Commission. The cited section of Executive Order No. 1 provides the Commission's members immunity from suit thus: "No civil action shall lie against the Commission or any member thereof for anything done or omitted in the discharge of the task contemplated by this order." No absolute immunity like that sought by Mr. Marcos in his Constitution for himself and his subordinates is herein involved . It is understood that the immunity granted the members of the Commission by virtue of the unimaginable magnitude of its task to recover the plundered wealth and the State's exercise of police power was immunity from liability for damages in the official discharge of the task granted the members of the Commission much in the same manner that judges are immune from suit in the official discharge of the functions of their office . . . " (at pp. 581-582) Justice Florentino P. Feliciano stated in the same case: It may be further submitted, with equal respect, that Section 4 (a) of Executive Order No. 1 was intended merely to restate the general principle of the law of public officers that the PCGG or any member thereof may not be held civilly liable for acts done in the performance of official duty, provided that such member had acted in good faith and within the scene of his lawful authority. It may also be assumed that the Sandiganbayan would have jurisdiction to determine whether the PCGG or any particular official thereof may be held liable in damages to a private person injured by acts of such manner. It would seem constitutionally offensive to suppose that a member or staff member of the PCGG could not be required to testify before the Sandiganbayan or that such members were exempted from complying with orders of this Court. (at pp. 586- 587) Immunity from suit cannot institutionalize irresponsibility and non-accountability nor grant a privileged status not claimed by any other official of the Republic. (id., at page 586) Where the petitioner exceeds his authority as Solicitor General acts in bad faith, or, as contended by the private respondent, "maliciously conspir(es) with the PCGG commissioners in persecuting respondent Enrile by filing against him an evidently baseless suit in derogation of the latter's constitutional rights and liberties" (Rollo, p. 417), there can be no question that a complaint for damages may be filed against him. High position in government does not confer a license to persecute or recklessly injure another. The actions governed by Articles 19, 20, 21, and 32 of the Civil Code on Human Relations may be taken against public officers or private citizens alike. The issue is not the right of respondent Enrile to file an action for damages. He has the right. The issue is whether or not that action must be filed as a compulsory counterclaim in the case filed against him. Under the circumstances of this case, we rule that the charges pressed by respondent Enrile for damages under Article 32 of the Civil Code arising from the filing of an alleged harassment suit with malice and evident bad faith do not constitute a compulsory counterclaim. To vindicate his rights, Senator Enrile has to file a separate and distinct civil action for damages against the Solicitor General.

In the case of Tiu Po v. Bautista, (103 SCRA 388 [1981]), we ruled that damages claimed to have been suffered as a consequence of an action filed against the petitioner must be pleaded in the same action as a compulsory counterclaim. We were referring, however, to a case filed by the private respondent against the petitioners or parties in the litigation. In the present case, the counterclaim was filed against the lawyer, not against the party plaintiff itself. To allow a counterclaim against a lawyer who files a complaint for his clients, who is merely their representative in court and not a plaintiff or complainant in the case would lead to mischievous consequences. A lawyer owes his client entire devotion to his genuine interest, warm zeal in the maintenance and defense of his rights and the exertion of his utmost learning and ability. (See Agpalo, Legal Ethics [1980] p. 147 citing Javier v. Cornejo, 63 Phil. 293 [1936]; In re Tionko, 43 Phil. 191 [1922]; In re: Atty. C. T. Oliva, 103 Phil. 312 [1958]; Lualhati v. Albert, 57 Phil. 86 [1932]; Toguib v. Tomol, Jr., G.R. Adm. Case No. 554, Jan. 3, 1969; People v. Macellones, 49 SCRA 529 [1973]; Tan Kui v. Court of Appeals, 54 SCRA 199 [1973]). A lawyer cannot properly attend to his duties towards his client if, in the same case, he is kept busy defending himself. The problem is particularly perplexing for the Solicitor General. As counsel of the Republic, the Solicitor General has to appear in controversial and politically charged cases. It is not unusual for high officials of the Government to unwittingly use shortcuts in the zealous desire to expedite executive programs or reforms. The Solicitor General cannot look at these cases with indifferent neutrality. His perception of national interest and obedience to instructions from above may compel him to take a stance which to a respondent may appear too personal and biased. It is likewise unreasonable to require Government Prosecutors to defend themselves against counterclaims in the very same cases they are prosecuting. As earlier stated, we do not suggest that a lawyer enjoys a special immunity from damage suits. However, when he acts in the name of a client, he should not be sued on a counterclaim in the very same case he has filed only as counsel and not as a party. Any claim for alleged damages or other causes of action should be filed in an entirely separate and distinct civil action. WHEREFORE, the present petition is GRANTED. The questioned resolutions of the Sandiganbayan are SET ASIDE insofar as they allow the counterclaim filed against the petitioner. SO ORDERED.

NO. 18 G.R. No. 92561 September 12, 1990 SECRETARY OSCAR ORBOS OF THE DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, petitioner, vs. CIVIL SERVICE COMMISSION and NERIO MADARANG, respondents. Once again the extent of the authority of the Civil Service Commission (CSC) to pass upon contested appointments is brought into focus in this petition. The appearance of the Solicitor General on behalf of the petitioner is also questioned. In the course of the reorganization of the Department of Transportation and Communications (DOTC), Guido C. Agon and Alfonso Magnayon were appointed to the positions of Head Telecommunications Engineer, range 74. Nerio Madarang who was also appointed to the position of Supervising Telecommunications Engineer, range 12, questioned the appointments of Agon and Magnayon by filing an appeal with the Reorganization Appeals Board of the DOTC composed of Moises S. Tolentino, Jr. of the Office of the Secretary, as Chairman and Assistant Secretary Rosauro V. Sibal and Graciano L. Sitchon of the Office of the Secretary, as members. In a resolution dated January 9, 1989 the said Reorganization Appeals Board dismissed Madarang's appeal for lack of merit. Hence, he appealed to the public respondent Civil Service Commission (CSC) In its resolution dated August 29, 1989, respondent CSC revoked the appointments of Agon and Magnayon for the contested positions and directed the appointment of Madarang to the said position of Heads Telecommunications 1 Engineer. DOTC Assistant Secretary Sibal sought a reconsideration of the said resolution of the CSC but this was 2 denied in a resolution dated November 2, 1989. On November 21, 1989, Assistant Secretary Sibal filed a manifestation with the CSC stating: The Telecommunications Office through the undersigned, hereby manifests that we received the CSC resolution in CSC Case No. 393 on November 12, 1989 and in compliance thereto, we will convene our Selection and Promotion Board to deliberate on the position of Head Telecommunications Engineer (reclassified to Engineer IV pursuant to National Compensation Circular No. 58 effective July 1, 1989) with qualified candidates including appellant Nerio 3 Madarang. In a letter dated November 27, 1989, respondent Madarang requested the CSC to take appropriate action by implementing its resolutions dated August 29, 1989 and November 2, 1989. In an order dated December 19, 1989, the CSC directed the immediate implementation of its aforementioned 4 resolution insofar as it concerned the appointment of Madarang. Agon and Magnayon filed their separate motions for reconsideration of the aforestated resolutions of the CSC but these were denied by the said commission in a resolution dated January 19, 1990. Hence, this petition for certiorari with prayer for a writ of preliminary injunction or restraining order which was filed by the Solicitor General in behalf of petitioner. On March 29, 1990, the Court required the respondents to comment on the petition within ten (10) days from notice and issued a restraining order enjoining the CSC from enforcing its questioned resolutions until further orders.

The sole issue in this case is whether or not the CSC acted in excess of its jurisdiction or with grave abuse of discretion amounting to lack of jurisdiction when it ordered the appointment of Nerio Madarang to the contested position. While petitioner does not question the aforestated resolutions of the CSC insofar as it disapproved the appointments of Agon and Magnayon to the positions of Head Telecommunications Engineer, petitioner maintains that as the appointing authority, he has the right of choice and discretion to appoint the persons whom he deems 5 fit to the position to be filled. Petitioner emphasizes that when the CSC denied his motion for reconsideration in a resolution dated November 2, 1989, Assistant Secretary Sibal informed the CSC through a manifestation that the DOTC Selection and Promotions Board will be convened to deliberate on the position of Head Telecommunications Engineer, taking into consideration qualified candidates including Nerio Madarang. Nevertheless, the CSC stood pat on its resolution directing the appointment of Nerio Madarang to the contested position. On the other hand, the CSC contends that it was properly exercising a constitutional and legal duty to enforce the merit and fitness principle in the appointment of civil servants and to uphold their equally guaranteed right to be appointed to similar or comparable positions in the reorganized agency consistent with applicable law and 6 issuances of competent authorities. Invoking the following provisions of the Constitution: Section 3 (Article IX [B]). The Civil Service Commission, as the central personnel agency of the Government, shall establish a career service and adopt measures to promote morale, efficiency, integrity, responsiveness, progressiveness, and courtesy in the civil service. It shall strengthen the writ and reward system, integrate all human resources development programs for all levels and ranks, and institutionalize a management climate conducive to public accountability . It shall submit to the President and the Congress an annual report on its personnel programs.' (Emphasis supplied.); Section 19, Book V of Executive Order No. 292 (The Administrative Code of 1987) which provides: Section 19. Recruitment and Selection of Employees (l) Opportunity for government employment shall be open to all qualified citizens, and positive efforts shall be exerted to attract the best qualified to enter the service. Employees shall be selected on the basis of the fitness to perform the duties and assume the responsibilities of the position.; and Section 12 of the same Executive Order: Sec. 12. The Commission shall administer the Civil Service and shall have the following powers and functions: (a) Administer and enforce the constitutional and statutory provision of the said merit systems... (Emphasis supplied.) respondent CSC argues that the primary objective of the CSC system is to promote and establish professionalism by ensuring a high level of morale among the employees and officers in the career civil service. Pursuant to this constitutional mandate, the CSC contends it should see to it that the merit system is applied, enforced and implemented in personnel actions involving appointments affecting all levels and ranks in the civil service at all 7 times. The Court finds the petition to be impressed with merit. Paragraph H, Section 9 of Presidential Decree No. 807, otherwise known as the 'Civil Service Decree of the Philippines," provides:

Section 9. Powers and Function of the Commission. The Commission shall administer the Civil Service and shall have the following powers and functions: xxx xxx xxx (h) Approve all appointments, whether original or promotional, to positions in the civil service, except those of presidential appointees, members of the Armed Forces of the Philippines, police forces, firemen, and jailguards, and disapprove those where the appointees do not possess the appropriate eligibility or required qualifications. An appointment shall take effect immediately upon issue by the appointing authority if the appointee assumes his duties immediately and shall remain effective until it is disapproved by the Commission, if this should take place, without prejudice to the liability of the appointing authority for appointments issued in violation of existing laws or rules: Provided, finally, That the Commission shall keep a record of appointments of all officers and employees in the civil service. All appointments requiring the approval of the Commission as herein provided, shall be submitted to it by the appointing authority within thirty days from issuance, otherwise the appointment becomes ineffective thirty days thereafter. (Emphasis supplied) From the foregoing provision it is clear that the CSC has the power to approve or disapprove an appointment and not the power to make the appointment itself or to direct that such appointment be made by the appointing authority. The CSC can only inquire into the eligibility of the person chosen to fill a vacant position and it finds the 8 person qualified it must so attest. The duty of the CSC is to attest appointments. That function being discharged, 9 its participation in the appointment process ceases. By the same token, should the CSC find that the appointee is not qualified for the position, it has the duty to disapprove the appointment. Thereafter, the responsibility of appointing the qualified person in lieu of the disqualified appointee rests upon the discretion of the appointing authority. The CSC cannot encroach upon such discretion vested solely in the appointing authority. This Court has pronounced in no uncertain terms that the CSC has no authority to revoke an appointment on the ground that another person is more qualified for a particular position. The Court likewise held that the CSC does 10 not have the authority to direct the appointment of a substitute of its choice. Petitioner demonstrated his deference to the resolutions of the CSC disapproving the appointments of Agon and Magnayon. However, in the implementation of said resolutions he decided to convene the DOTC Selection and Promotions Board to deliberate on the person who should be appointed as Head Telecommunications Engineer among qualified candidates including respondent Nerio Madarang. Instead of acknowledging the authority of petitioner to exercise its discretion in the appointment of a replacement, the CSC, in excess of its jurisdiction and with grave abuse of discretion amounting to lack of jurisdiction, directed the appointment of Madarang as the substitute of its choice. This act of the CSC must be struck down. Private respondent Madarang, besides his comment, filed a motion to disqualify the Office of the Solicitor General from appearing for petitioner and to cite petitioner in contempt of court for the filing of the petition. The Solicitor General is the lawyer of the government, its agencies and instrumentalities, and its officials or agents including petitioner and public respondent. This is so provided under Presidential Decree No. 478: SECTION 1. Functions and Organization. (1) The Office of the Solicitor General shall represent the Government of the Philippines, its agencies and instrumentalities and its officials and agents in any litigation, proceeding, investigation or matter requiring the services of a lawyer. .... 10 (Emphasis supplied.) -A

In the discharge of this task the Solicitor General must see to it that the best interest of the government is upheld within the limits set by law. When confronted with a situation where one government office takes an adverse position against another government agency, as in this case, the Solicitor General should not refrain from performing his duty as the lawyer of the government. It is incumbent upon him to present to the court what he considers would legally uphold the best interest of the government although it may run counter to a client's 11 position. In such an instance the government office adversely affected by the position taken by the Solicitor General, if it still believes in the merit of its case, may appear in its own behalf through its legal personnel or representative. In the present case, it appears that after the Solicitor General studied the issues he found merit in the cause of the petitioner based on the applicable law and jurisprudence. Thus, it is his duty to represent the petitioner as he did by filing this petition. He cannot be disqualified from appearing for the petitioner even if in so doing his representation runs against the interests of the CSC. This is not the first time that the Office of the Solicitor General has taken a position adverse to his clients like the CSC, the National Labor Relations Commission, among others, and even the People of the Philippines. In such instances, the Solicitor General nevertheless manifests his opinion and recommendation to the Court which is an invaluable aid in the disposition of the case. On some occasions he begs leave to be excused from intervening in the case, more so, when the client had already filed its own comment different from the stand of the Solicitor General or in a situation when he finds the contention of a private party tenable as against that of the government or any of its agencies. The Solicitor General has recommended the acquittal of the accused in appealed criminal cases. There are cases where a government agency declines the services of the Solicitor General or otherwise fails or refuses to forward the papers of the case to him for appropriate action. The Court finds and so holds that this practice should be stopped. To repeat, the Solicitor General is the lawyer of the government, any of its agents and officials in any litigation, proceeding, investigation or matter requiring the services of a lawyer. The exception is when such officials or agents are being charged criminally or are being civilly sued for damages arising from a 12 felony. His services cannot be lightly rejected, much less ignored by the office or officials concerned. Indeed, the assistance of the Solicitor General should be welcomed by the parties. He should be given full support and cooperation by any agency or official involved in litigation. He should be enabled to faithfully discharge his duties and responsibilities as the government advocate. And he should do no less for his clients. His burden of assisting in the fair and just administration of justice is clear. This Court does not expect the Solicitor General to waver in the performance of his duty. As a matter of fact, the Court appreciates the participation of the Solicitor General in many proceedings and his continued fealty to his assigned task. He should not therefore desist from appearing before this Court even in those cases he finds his opinion inconsistent with the Government or any of its agents he is expected to represent. The Court must be advised of his position just as well. Private respondent Madarang also seeks to hold petitioner in contempt of court on the ground that the petition was filed in order to circumvent or obviate the dismissal of a similar petition in this Court filed by Guido Agon and Alfonso Magnayon. The legal personality of the petitioner to file the petition is also questioned on the ground it was Assistant Secretary Sibal and not the petitioner who issued the contested appointments. The petitioner denies this contention. He asserts that the petition was properly brought in his name as head of the DOTC as what is in issue is the reorganization of the said department. The petitioner does not dispute the disapproval of the appointments of Agon and Magnayon; he only disagrees with the order of the CSC directing the appointment of Madarang to the contested position. The petitioner also alleges that he was not aware of the existence of a separate petition filed in this Court by Agon and Magnayon.

The Court finds the arguments and assertions of petitioner to be well taken. It is true that the records of this Court show that there is such a case docketed as G.R. No. 92064 entitled "Guido Agon, et al., vs. CSC et al." which is a special civil action for certiorari with a prayer for a writ of preliminary injunction. The petition was dismissed for late filing in a resolution dated February 27, 1990. On March 29, 1990 this Court denied with finality the motion for reconsideration filed by the said petitioners there being no compelling reason to warrant the reversal of the questioned resolution. Apparently, the disapproval of the appointments of Agon and Magnayon was the issue in said petition. In the present petition as aforestated, petitioner yields to the disapproval of the appointment of the two, but questions the authority of the CSC to direct the appointment of Madarang to the contested position. WHEREFORE, the petition is GRANTED and the questioned resolutions of the respondent CSC dated August 29, 1989, November 2, 1989 and January 19, 1990 are hereby annulled insofar as they direct the appointment of Nerio Madarang to the contested position. The petitioner is hereby authorized to convene the DOTC Selection and Promotion Board to determine who shall replace Guido Agon and Alfonso Magnayon to the contested position by considering all qualified candidates including Nerio Madarang. The restraining order dated March 29, 1990 is hereby made permanent. No costs. SO ORDERED.

NO. 19 G.R. No. 87977 March 19, 1990 ILUMINADO URBANO and MARCIAL ACAPULCO, petitioners, vs. FRANCISCO I. CHAVEZ, RAMON BARCELONA and AMY LAZARO-JAVIER, respondents. G.R. No. 88578 March 19, 1990 NEMESIO G. CO, petitioner, vs. REGIONAL TRIAL COURT OF PASIG (BRANCH 165), THE OFFICE OF THE SOLICITOR GENERAL and FRANCISCO I. CHAVEZ, respondents. Can the Office of the Solicitor General represent a public officer or employee in the preliminary investigation of a criminal action against him or in a civil action for damages against him? This is the principal issue in these two consolidated Petitions. G.R. No. 87977 Sometime in 1988, the petitioners in G.R. No. 87977, namely, Iluminado Urbano and Marcial Acapulco, instituted a criminal case against Secretary Luis Santos of the Department of Local Government as well as Sectoral Representatives Pacifico Conol and Jason Ocampos, Jr. of the Sangguniang Panlungsod of Tangub City, for alleged violation of the provisions of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act. The complaint against them was filed with the Office of the Ombudsman and was docketed as OSP Case No. 88-02780. The Office of the Solicitor General, through Solicitor General Francisco I. Chavez, Assistant Solicitor General Ramon A. Barcelona and Solicitor Amy C. Lazaro-Javier, entered its appearance as counsel for the said respondents as far as the preliminary investigation of the case is concerned. By way of a special civil action for prohibition filed with this Court, the said petitioners seek to enjoin the Solicitor General and his associates from acting as counsel for the said respondents in the course of the preliminary investigation. The said petitioners submit that in the event that the corresponding information is filed against the said respondents with the Sandiganbayan and a judgment of conviction is rendered by the said court, the appearance of the Office of the Solicitor General on behalf of the said respondents during the preliminary investigation will be in conflict with its role as the appellate counsel of the People of the Philippines. In its Comment filed on June 13, 1989, the Office of the Solicitor General manifested that the issue raised by the petitioners had been squarely resolved in favor of the said Office in Anti-Graft League of the Philippines, Inc. v. 1 2 Hon. Ortega and Solicitor General v. Garrido. G.R. No. 88578 On December 29, 1987, the petitioner in G.R. No. 88578, namely, Nemesio G. Co, filed an Amended Complaint for damages against Solicitor General Francisco I. Chavez, the Businessworld Publishing Corporation, Raul L. Locsin and one John Doe. The Amended Complaint was filed with Branch 165 of the Regional Trial Court in Pasig, Metro Manila and was docketed as Civil Case No. 55379. The Honorable Milagros V. Caguioa was the presiding judge therein. In sum, the Amended Complaint alleged, inter alia, that the defendant Chavez knowingly, willfully and maliciously published and/or caused to be published certain defamatory imputations against the petitioner in an article which

appeared in the December 4, 1987 issue of Business World, a periodical publication in Metro Manila, and that he caused the publication thereof by way of an interview characterized by bad faith and actual malice. The petitioner also alleged that the defamatory remarks impute that he was a close associate of former President Ferdinand Marcos and his daughter Imee Marcos-Manotoc and that he was involved in some anomalous transactions relating to the funds of the national government during the time that President Marcos was in office. It appears that at the time of the publication of the questioned article, Solicitor General Chavez was the counsel of the Presidential Commission on Good Government (PCGG), the government agency responsible for the investigation of alleged graft and corrupt practices relating to the former President, his relatives and his close associates. On February 11, 1988, the private defendants Businessworld Publishing Corporation and Raul L. Locsin filed a joint Motion to Dismiss. On February 12, 1988, the Office of the Solicitor General sought an extension of time to file the required responsive pleading. On March 14, 1988, the said Office filed a Motion to Dismiss on behalf of Solicitor General Chavez. Thereafter, the trial court set the case for oral argument on June 23, 1988. During the scheduled oral argument, the counsel of the petitioner objected to the appearance of the Office of the Solicitor General on behalf of Solicitor General Chavez. The trial court issued an Order suspending the proceedings and instructed the parties to submit their respective positions on the propriety of the appearance of the said Office for the Solicitor General himself. The parties complied with the instructions of the trial court. By way of a Motion seeking the disqualification of the Office of the Solicitor General to act as counsel of Solicitor General Chavez, the petitioner manifested to the trial court that he is suing the Solicitor General in his personal capacity for acts which he committed beyond the scope of his authority and as such he cannot be represented by 3 the said Office in the civil suit instituted with the trial court. On the other hand, the Office of the Solicitor General manifested that the objection raised by the petitioner is an afterthought on account of its belated character, and that this objection notwithstanding, it is authorized to represent any public official even if the said official is sued in his personal capacity pursuant to the unconditional provisions of Presidential Decree No. 478 which defines the functions of the said Office, as well as Executive Order No. 300 issued on July 26, 1987 which made the said office an independent agency under the Office of the 4 President of the Philippines. In support of this contention, the said Office cited the pronouncement of this Court 5 in Anti-Graft League of the Philippines, Inc. The said office also maintained that the cause of action against the Solicitor General is for acts committed by him in his official capacity, i.e., as legal counsel of the PCGG under Executive Order No. 14, series of 1986, and that the assailed actuations of a public official are presumed to have 6 been done in the lawful performance of his duties. In support thereof, the said Office cited the ruling of this Court 7 in Peralta v. Firme. In addition to the arguments above, the Office of the Solicitor General argued that public policy militates against the disqualification of the said Office from representing the Solicitor General in his capacity as a public official because, if it where the other way around, public officials will hesitate to perform their official functions for fear of being haled to court by almost anybody for the purpose of accounting for official acts, not to mention the trouble 8 of having to hire a private lawyer at his own expense in order to defend himself. The petitioner submitted his Reply thereto, alleging therein, among others, that the argument of the Solicitor General is untenable inasmuch as the expression of his views by way of an interview subsequently featured in a newspaper article is not an official function of the Solicitor General and that the jurisprudence cited by the Office 9 of the Solicitor General opposes the position it had taken. In an Order dated November 9, 1988, the trial court denied the Motion of the petitioner for lack of merit. The petitioner sought a reconsideration of the Order. On the other hand, the Office of the Solicitor General opposed
10

the reconsideration sought by the petitioner. The petitioner filed a Reply to the opposition on the part of the 12 13 said Office which, in turn, filed a Rejoinder to the Reply. In another Order dated May 26, 1989, the trial court denied the reconsideration sought by the petitioner. The pertinent portion of the said Order is as follows After a careful study, assessment and dissertation of the grounds, arguments advanced by the parties in their respective pleadings now under consideration, as well as the applicable laws and jurisprudence cited therein, the Court has arrived at the inescapable conclusion, and so holds that the plaintiff failed to satisfactorily convince the Court that the Office of the Solicitor General cannot and/or does not have the authority to represent the defendant Francisco I. Chavez in this case, for the simple reason that it is indisputable that at the time said defendant allegedly made the malicious imputations against the plaintiff, he was then and still is the incumbent Solicitor General, and at the same time the counsel for the Presidential Commission on Good Government 14 or PCGG. Thus, the Order of the trial court dated May 26, 1989 is challenged before this Court on the ground that the same 15 amounts to a grave abuse of discretion amounting to lack of jurisdiction on the part of the trial court. The petitioner now asks the Court to order the Office of the Solicitor General to desist from representing the Solicitor General in the civil suit for damages. On August 21, 1989, the Office of the Solicitor General filed its Comment on the Petition, reiterating therein its 16 position before the trial court. On August 31, 1989, the Court resolved to consider the said Comment as the Answer to the Petition and to give 17 due course to the Petition. Nonetheless, on October 4, 1989, the petitioner filed his Reply to the Comment, 18 reiterating therein his arguments raised before the trial court. The issue raised in G.R. No. 87977 relates to the authority of the Office of the Solicitor General to appear for certain government officials in the course of the preliminary investigation of their case before the Office of the Ombudsman. The issue raised in G.R. No. 88578 pertains to the authority of the said Office to appear for the Solicitor General who was haled to court in a civil suit for damages arising from an alleged defamatory remark which appeared in a newspaper. Both petitioners raise pure questions of law inasmuch as there are no evidentiary matters to be evaluated by this Court. Moreover, if the only issue is whether or not the conclusions of the trial 19 court are in consonance with law and jurisprudence, then the issue is a pure question of law. Thus, the Court resolved to consolidate both Petitions and to treat them as Petitions for certiorari on pure questions of law in 20 accordance with the provisions of the Rules of Court. In due time, both Petitions were deemed submitted for decision. In resolving both Petitions, the Court must take into account the duties and functions of the Office of the Solicitor 21 General. Presidential Decree No. 478 defines such duties and functions, to wit Sec. 1. Functions and Organization. 1) The Office of the Solicitor General shall represent the Government of the Philippines, its agencies and instrumentalities and its officials and agents in any litigation, proceeding, investigation or matter requiring the services of a lawyer. . . (Emphasis supplied) The Office of the Solicitor General submits that on the basis of this provision, it can represent or otherwise defend any public official without any qualification or distinction in any litigation, and that an intepretation thereof to the effect that it is authorized to represent a public official only when the said official is clearly shown to be sued in his official capacity is erroneous. In short, the said Office argues that inasmuch as the law does not make a distinction

11

as to the type of litigation wherein the said Office can enter its appearance as counsel, there should be no 22 distinction made. A similar provision can be found in Section 1661 of the Revised Administrative Code. It reads as follows: "As principal law officer of the Government, the Solicitor General shall have the authority to act for and represent the Government of the Philippine Islands, its officers and agents in any official investigation, proceeding or matter requiring the services of a lawyer." Like the cited provision of Presidential Decree No. 478, this provision does not have any qualifying phrase. The argument of the Office of the Solicitor General as regards Presidential Decree No. 478 seems to apply to this provision as well. Executive Order No. 300, series of 1987 cited by the said Office merely reiterates the provisions of the aforementioned Presidential Decree. In Anti-Graft League of the Philippines, Inc., this Court pointed out that the phrase "official investigation, proceeding or matter requiring the services of a lawyer" found in Section 1661 of the Revised Administrative Code embraces a preliminary investigation in a criminal case initiated against a public official considering that the law makes no qualification as to the nature or character of the "official investigation" contemplated. The Court emphasized, however, that where the investigation results in an information filed against the public official concerned, then that official may no longer be represented by the Office of the Solicitor General and that, accordingly, he will have to get his own private counsel. Thus, this Court held that the Office of the Solicitor General can represent the public official at the preliminary investigation of his case, and that if an information is eventually filed against the said public official, the said Office may no longer represent him in the litigation. This 24 ruling was reiterated in Solicitor General v. Garrido. What is the rationale behind this rule which allows the Office of the Solicitor General to represent a public official during the preliminary investigation of his case, and which prohibits the said office from further representing the said public official when an information is filed against him with the appropriate court? In Anti-Graft League of the Philippines, Inc., this Court stressed that in the performance of their duties, public officials can be subjected to numerous suits, whether ill-founded or not, and that by threats of possible criminal prosecution, parties adversely affected by official action can stay the hand of the public official concerned. The Court observed that there may be hesitancy and diffidence in the execution of their duties if public officials are deterred by the thought that they could be brought to court and face criminal charges. The Court conluded that as an assurance against timidity the Office of the Solicitor General sees to it that the public officials concerned are duly represented by counsel in the preliminary investigation. As to why the public official concerned may no longer be represented by the Office of the Solicitor General, the ostensible reason is this: the said Office may no longer represent him considering that its position as counsel for the accused will be in direct conflict with its responsibilities as the appellate counsel of the People of the Philippines in all criminal cases. The Court believes that the ruling announced in Anti-Graft League of the Philippines, Inc. and reiterated in Garrido should be re-examined in the light of the nature of a suit against a public official. Under the Presidential Decree No. 478 aforecited, the Solicitor General shall represent the Government of the Philippines, its agencies and instrumentalities and its officials and agents in any litigation, proceeding, investigation or matter requiring the services of a lawyer. This is as it should be as he is the principal law officer of the 25 Government. In Anti-Graft League of the Philippines, Inc., this Court interpreted this to embrace "both civil and criminal 26 investigation, proceeding or matter requiring the services of a lawyer. In Garrido, the Court sustained the authority of the Solicitor General to enter his appearance on behalf of public 27 officials charged with violating a penal statute for acts connected with the performance of their official duties.
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It is undisputed that the Office of the Solicitor General is the appellate counsel of the People of the Philippines in all criminal cases. As such, the said Office participates in a criminal case only when the same has reached the appellate courts. It is the office of the city, provincial or state prosecutor, as the case may be, and not the Office of the Solicitor General, which attends to the investigation and the prosecution of criminal cases in the first instance. However, under the doctrine announced in Anti-Graft League of the Philippines, Inc. and Garrido, the Office of the Solicitor General is authorized to enter its appearance as counsel for any public official, against whom a criminal charge had been instituted, during the preliminary investigation stage thereof. Nevertheless, in the same case, this Court held that once an information is filed against the public official, the Office of the Solicitor General can no longer represent the said official in the litigation. The anomaly in this paradigm becomes obvious when, in the event of a judgment of conviction, the case is brought on appeal to the appellate courts. The Office of the Solicitor General, as the appellate counsel of the People of the Philippines, is expected to take a stand against the accused. More often than not, it does. Accordingly, there is a clear conflict of interest here, and one which smacks of ethical considerations, where the Office of the Solicitor General as counsel for the public official, defends the latter in the preliminary investigation stage of the criminal case, and where the same office, as appellate counsel of the People of the Philippines, represents the prosecution when the case is brought on appeal. This anomalous situation could not have been contemplated and allowed by the law, its unconditional terms and provisions notwithstanding. It is a situation which cannot be countenanced by the Court. Otherwise, if the Solicitor General who represents the state on appeal in criminal cases can appear for the accused public official in a preliminary investigation, then by the same token a provincial or city fiscal, his assistant or any government prosecutor who represents the People of the Philippines at the preliminary investigation of a case up to the trial thereof can appear for an accused public official at the preliminary investigation being conducted by another fiscal, prosecutor or municipal judge. The situation would simply be scandalous, to say the least. There is likewise another reason, as earlier discussed, why the Office of the Solicitor General cannot represent an accused in a criminal case. Inasmuch as the State can speak and act only by law, whatever it does say and do must be lawful, and that which is unlawful is not the word or deed of the State, but is the mere wrong or trespass of 28 those individual persons who falsely speak and act in its name. Therefore, the accused public official should not expect the State, through the Office of the Solicitor General, to defend him for a wrongful act which cannot be attributed to the State itself. In the same light, a public official who is sued in a criminal case is actually sued in his personal capacity inasmuch as his principal, the State, can never be the author of a wrongful act, much less commit a crime. Thus, the Court rules that the Office of the Solicitor General is not authorized to represent a public official at any stage of a criminal case. For this reason, the doctrine announced in Anti-Graft League of the Philippines, Inc. v. Hon. Ortega and Solicitor General v. Garrido, and all decided cases affirming the same; in so far as they are inconsistent with this pronouncement, should be deemed abandoned. The principle of stare decisis notwithstanding, it is well-settled that a doctrine which should be abandoned or modified should be abandoned or 29 modified accordingly. After all, more important than anything else is that this Court should be right. This observation should apply as well to a public official who is haled to court on a civil suit for damages arising 30 from a felony allegedly committed by him. Any pecuniary liability he may be held to account for on the occasion of such civil suit is for his own account. The State is not liable for the same. A fortiori, the Office of the Solicitor General likewise has no authority to represent him in such a civil suit for damages. For all these reasons, the argument of the Office of the Solicitor General to the effect that it has the authority to represent or otherwise defend any public official without any qualification or distinction in any litigation pursuant to the unconditional provisions of Presidential Decree No. 478 and the other cited laws is untenable. Applying these principles to the case at bar, the Office of the Solicitor General has no authority to represent Solicitor General Chavez in the civil suit for damages filed against him in the Regional Trial Court arising from allegedly defamatory remarks uttered by him.

The issues raised in these two Petitions have been resolved on the basis of law and jurisprudence as well as the pertinent arguments of the parties concerned. The other points raised by them are irrelevant to the proper disposition of these cases and need not be considered. The Court is aware of the possibility of public officials being haled to court in an endless array of civil suits. With or without this pronouncement, and considering the nature of a public office in the Philippines vis-a-vis the litigious character of most Filipinos as demonstrated by the number of cases filed in the courts daily, this scenario is a fact that must be accepted. The possibility of being brought to court is an occupational hazard of both the public officer and the citizen, in the same way that every occupation has its own hazards to reckon with. This grim reality notwithstanding, public officials should know that nobody is above the law. Of course, there is the Citizens Legal Aid Office of the Department of Justice that may be made to assist in the defense of any such public official. As to respondent Francisco I. Chavez, he may appear in his own defense in his private capacity in the action for damages against him. The services of private counsel may also be availed of. And if it is the intention of the State to protect public officials from alleged harassment suits, then the creation of a separate office of government lawyers for this purpose may be in order. But certainly the Office of the Solicitor General can not assume a responsibility in defense of such public officials beyond its statutory authority. Accordingly, the Court is of the opinion, and so holds that the Office of the Solicitor General is not authorized to represent a public official at any stage of a criminal case or in a civil suit for damages arising from a felony. This pronouncement applies to all public officials and employees in the executive, legislative and judicial branches of the Government. WHEREFORE, in view of the foregoing, the herein Petitions are hereby GRANTED. The Office of the Solicitor General is permanently prohibited from representing the said respondents in OSP Case No. 88-02780 pending in the Office of the Ombudsman and respondent Francisco I. Chavez in Civil Case No. 55379 pending before the Regional Trial Court of Pasig, Metro Manila. No pronouncement as to costs. SO ORDERED.

NO. 20 G.R. No. L-961 September 21, 1949

BLANDINA GAMBOA HILADO, petitioner, vs. JOSE GUTIERREZ DAVID, VICENTE J. FRANCISCO, JACOB ASSAD and SELIM JACOB ASSAD, respondents. It appears that on April 23, 1945, Blandina Gamboa Hilado brought an action against Selim Jacob Assad to annul the sale of several houses and lot executed during the Japanese occupation by Mrs. Hilado's now deceased husband. On May 14, Attorneys Ohnick, Velilla and Balonkita filed an answer on behalf of the defendant; and on June 15, Attorneys Delgado, Dizon, Flores and Rodrigo registered their appearance as counsel for the plaintiff. On October 5, these attorneys filed an amended complaint by including Jacob Assad as party defendant. On January 28, 1946, Attorney Francisco entered his appearance as attorney of record for the defendant in substitution for Attorney Ohnick, Velilla and Balonkita who had withdrawn from the case. On May 29, Attorney Dizon, in the name of his firm, wrote Attorney Francisco urging him to discontinue representing the defendants on the ground that their client had consulted with him about her case, on which occasion, it was alleged, "she turned over the papers" to Attorney Francisco, and the latter sent her a written opinion. Not receiving any answer to this suggestion, Attorney Delgado, Dizon, Flores and Rodrigo on June 3, 1946, filed a formal motion with the court, wherein the case was and is pending, to disqualify Attorney Francisco. Attorney Francisco's letter to plaintiff, mentioned above and identified as Exhibit A, is in full as follows: VICENTE J. FRANCISCO Attorney-at-Law 1462 Estrada, Manila July 13, 1945.

Mrs. Blandina Gamboa Hilado Manila, Philippines My dear Mrs. Hilado: From the papers you submitted to me in connection with civil case No. 70075 of the Court of First Instance of Manila, entitled "Blandina Gamboa Hilado vs. S. J. Assad," I find that the basic facts which brought about the controversy between you and the defendant therein are as follows: (a) That you were the equitable owner of the property described in the complaint, as the same was purchased and/or built with funds exclusively belonging to you, that is to say, the houses and lot pertained to your paraphernal estate; (b) That on May 3, 1943, the legal title to the property was with your husband, Mr. Serafin P. Hilado; and

(c) That the property was sold by Mr. Hilado without your knowledge on the aforesaid date of May 3, 1943. Upon the foregoing facts, I am of the opinion that your action against Mr. Assad will not ordinarily prosper. Mr. Assad had the right to presume that your husband had the legal right to dispose of the property as the transfer certificate of title was in his name. Moreover, the price of P110,000 in Japanese military notes, as of May 3, 1943, does not quite strike me as so grossly inadequate as to warrant the annulment of the sale. I believe, lastly, that the transaction cannot be avoided merely because it was made during the Japanese occupation, nor on the simple allegation that the real purchaser was not a citizen of the Philippines. On his last point, furthermore, I expect that you will have great difficulty in proving that the real purchaser was other than Mr. Assad, considering that death has already sealed your husband's lips and he cannot now testify as to the circumstances of the sale. For the foregoing reasons, I regret to advise you that I cannot appear in the proceedings in your behalf. The records of the case you loaned to me are herewith returned. Yours very truly, (Sgd.) VICENTE J. FRANCISCO VJF/Rag. In his answer to plaintiff's attorneys' complaint, Attorney Francisco alleged that about May, 1945, a real estate broker came to his office in connection with the legal separation of a woman who had been deserted by her husband, and also told him (Francisco) that there was a pending suit brought by Mrs. Hilado against a certain Syrian to annul the sale of a real estate which the deceased Serafin Hilado had made to the Syrian during the Japanese occupation; that this woman asked him if he was willing to accept the case if the Syrian should give it to him; that he told the woman that the sales of real property during the Japanese regime were valid even though it was paid for in Japanese military notes; that this being his opinion, he told his visitor he would have no objection to defending the Syrian; That one month afterwards, Mrs. Hilado came to see him about a suit she had instituted against a certain Syrian to annul the conveyance of a real estate which her husband had made; that according to her the case was in the hands of Attorneys Delgado and Dizon, but she wanted to take it away from them; that as he had known the plaintiff's deceased husband he did not hesitate to tell her frankly that hers was a lost case for the same reason he had told the broker; that Mrs. Hilado retorted that the basis of her action was not that the money paid her husband was Japanese military notes, but that the premises were her private and exclusive property; that she requested him to read the complaint to be convinced that this was the theory of her suit; that he then asked Mrs. Hilado if there was a Torrens title to the property and she answered yes, in the name of her husband; that he told Mrs. Hilado that if the property was registered in her husband's favor, her case would not prosper either; That some days afterward, upon arrival at his law office on Estrada street, he was informed by Attorney Federico Agrava, his assistant, that Mrs. Hilado had dropped in looking for him and that when he, Agrava, learned that Mrs. Hilado's visit concerned legal matters he attended to her and requested her to leave the "expediente" which she was carrying, and she did; that he told Attorney Agrava that the firm should not handle Mrs. Hilado's case and he should return the papers, calling Agrava's attention to what he (Francisco) already had said to Mrs. Hilado; That several days later, the stenographer in his law office, Teofilo Ragodon, showed him a letter which had been dictated in English by Mr. Agrava, returning the "expedients" to Mrs. Hilado; that Ragodon told him (Attorney Francisco) upon Attorney Agrava's request that Agrava thought it more proper to explain to Mrs. Hilado the

reasons why her case was rejected; that he forthwith signed the letter without reading it and without keeping it for a minute in his possession; that he never saw Mrs. Hilado since their last meeting until she talked to him at the Manila Hotel about a proposed extrajudicial settlement of the case; That in January, 1946, Assad was in his office to request him to handle his case stating that his American lawyer had gone to the States and left the case in the hands of other attorneys; that he accepted the retainer and on January 28, 1946, entered his appearance. Attorney Francisco filed an affidavit of stenographer Ragodon in corroboration of his answer. The judge trying the case, Honorable Jose Gutierrez David, later promoted to the Court of Appeals, dismissed the complaint. His Honor believed that no information other than that already alleged in plaintiff's complaint in the main cause was conveyed to Attorney Francisco, and concluded that the intercourse between the plaintiff and the respondent did not attain the point of creating the relation of attorney and client. Stripped of disputed details and collateral matters, this much is undoubted: That Attorney Francisco's law firm mailed to the plaintiff a written opinion over his signature on the merits of her case; that this opinion was reached on the basis of papers she had submitted at his office; that Mrs. Hilado's purpose in submitting those papers was to secure Attorney Francisco's professional services. Granting the facts to be no more than these, we agree with petitioner's counsel that the relation of attorney and client between Attorney Francisco and Mrs. Hilado ensued. The following rules accord with the ethics of the legal profession and meet with our approval: In order to constitute the relation (of attorney and client) a professional one and not merely one of principal and agent, the attorneys must be employed either to give advice upon a legal point, to prosecute or defend an action in court of justice, or to prepare and draft, in legal form such papers as deeds, bills, contracts and the like. (Atkinson vs. Howlett, 11 Ky. Law Rep. (abstract), 364; cited in Vol. 88, A. L. R., p. 6.) To constitute professional employment it is not essential that the client should have employed the attorney professionally on any previous occasion. . . . It is not necessary that any retainer should have been paid, promised, or charged for; neither is it material that the attorney consulted did not afterward undertake the case about which the consultation was had. If a person, in respect to his business affairs or troubles of any kind, consults with his attorney in his professional capacity with the view to obtaining professional advice or assistance, and the attorney voluntarily permits or acquiesces in such consultation, then the professional employment must be regarded as established. . . . (5 Jones Commentaries on Evidence, pp. 4118-4119.) An attorney is employed-that is, he is engaged in his professional capacity as a lawyer or counselor-when he is listening to his client's preliminary statement of his case, or when he is giving advice thereon, just as truly as when he is drawing his client's pleadings, or advocating his client's cause in open court. (Denver Tramway Co. vs. Owens, 20 Colo., 107; 36 P., 848.) Formality is not an essential element of the employment of an attorney. The contract may be express or implied and it is sufficient that the advice and assistance of the attorney is sought and received, in matters pertinent to his profession. An acceptance of the relation is implied on the part of the attorney from his acting in behalf of his client in pursuance of a request by the latter. (7 C. J. S., 848-849; see Hirach Bros. and Co. vs. R. E. Kennington Co., 88 A. L. R., 1.) Section 26 (e), Rule 123 of the Rules of Court provides that "an attorney cannot, without the consent of his client, be examined as to any communication made by the client to him, or his advice given thereon in the course of professional employment;" and section 19 (e) of Rule 127 imposes upon an attorney the duty "to maintain inviolate the confidence, and at every peril to himself, to preserve the secrets of his client." There is no law or

provision in the Rules of Court prohibiting attorneys in express terms from acting on behalf of both parties to a controversy whose interests are opposed to each other, but such prohibition is necessarily implied in the injunctions above quoted. (In re De la Rosa, 27 Phil., 258.) In fact the prohibition derives validity from sources higher than written laws and rules. As has been aptly said in In re Merron, 22 N. M., 252, L.R.A., 1917B, 378, "information so received is sacred to the employment to which it pertains," and "to permit it to be used in the interest of another, or, worse still, in the interest of the adverse party, is to strike at the element of confidence which lies at the basis of, and affords the essential security in, the relation of attorney and client." That only copies of pleadings already filed in court were furnished to Attorney Agrava and that, this being so, no secret communication was transmitted to him by the plaintiff, would not vary the situation even if we should discard Mrs. Hilado's statement that other papers, personal and private in character, were turned in by her. Precedents are at hand to support the doctrine that the mere relation of attorney and client ought to preclude the attorney from accepting the opposite party's retainer in the same litigation regardless of what information was received by him from his first client. The principle which forbids an attorney who has been engaged to represent a client from thereafter appearing on behalf of the client's opponent applies equally even though during the continuance of the employment nothing of a confidential nature was revealed to the attorney by the client. (Christian vs. Waialua Agricultural Co., 30 Hawaii, 553, Footnote 7, C. J. S., 828.) Where it appeared that an attorney, representing one party in litigation, had formerly represented the adverse party with respect to the same matter involved in the litigation, the court need not inquire as to how much knowledge the attorney acquired from his former during that relationship, before refusing to permit the attorney to represent the adverse party. (Brown vs. Miller, 52 App. D. C. 330; 286, F. 994.) In order that a court may prevent an attorney from appearing against a former client, it is unnecessary that the ascertain in detail the extent to which the former client's affairs might have a bearing on the matters involved in the subsequent litigation on the attorney's knowledge thereof. (Boyd vs. Second Judicial Dist. Court, 274 P., 7; 51 Nev., 264.) This rule has been so strictly that it has been held an attorney, on terminating his employment, cannot thereafter act as counsel against his client in the same general matter, even though, while acting for his former client, he acquired no knowledge which could operate to his client's disadvantage in the subsequent adverse employment. (Pierce vs. Palmer [1910], 31 R. I., 432; 77 Atl., 201, Ann. Cas., 1912S, 181.) Communications between attorney and client are, in a great number of litigations, a complicated affair, consisting of entangled relevant and irrelevant, secret and well known facts. In the complexity of what is said in the course of the dealings between an attorney and a client, inquiry of the nature suggested would lead to the revelation, in advance of the trial, of other matters that might only further prejudice the complainant's cause. And the theory would be productive of other un salutary results. To make the passing of confidential communication a condition precedent; i.e., to make the employment conditioned on the scope and character of the knowledge acquired by an attorney in determining his right to change sides, would not enhance the freedom of litigants, which is to be sedulously fostered, to consult with lawyers upon what they believe are their rights in litigation. The condition would of necessity call for an investigation of what information the attorney has received and in what way it is or it is not in conflict with his new position. Litigants would in consequence be wary in going to an attorney, lest by an unfortunate turn of the proceedings, if an investigation be held, the court should accept the attorney's inaccurate version of the facts that came to him. "Now the abstinence from seeking legal advice in a good cause is by hypothesis an evil which is fatal to the administration of justice." (John H. Wigmore's Evidence, 1923, Section 2285, 2290, 2291.)

Hence the necessity of setting down the existence of the bare relationship of attorney and client as the yardstick for testing incompatibility of interests. This stern rule is designed not alone to prevent the dishonest practitioner from fraudulent conduct, but as well to protect the honest lawyer from unfounded suspicion of unprofessional practice. (Strong vs. Int. Bldg., etc.; Ass'n, 183 Ill., 97; 47 L.R.A., 792.) It is founded on principles of public policy, on good taste. As has been said in another case, the question is not necessarily one of the rights of the parties, but as to whether the attorney has adhered to proper professional standard. With these thoughts in mind, it behooves attorneys, like Caesar's wife, not only to keep inviolate the client's confidence, but also to avoid the appearance of treachery and double-dealing. Only thus can litigants be encouraged to entrust their secrets to their attorneys which is of paramount importance in the administration of justice. So without impugning respondent's good faith, we nevertheless can not sanction his taking up the cause of the adversary of the party who had sought and obtained legal advice from his firm; this, not necessarily to prevent any injustice to the plaintiff but to keep above reproach the honor and integrity of the courts and of the bar. Without condemning the respondents conduct as dishonest, corrupt, or fraudulent, we do believe that upon the admitted facts it is highly in expedient. It had the tendency to bring the profession, of which he is a distinguished member, "into public disrepute and suspicion and undermine the integrity of justice." There is in legal practice what called "retaining fee," the purpose of which stems from the realization that the attorney is disabled from acting as counsel for the other side after he has given professional advice to the opposite party, even if he should decline to perform the contemplated services on behalf of the latter. It is to prevent undue hardship on the attorney resulting from the rigid observance of the rule that a separate and independent fee for consultation and advice was conceived and authorized. "A retaining fee is a preliminary fee given to an attorney or counsel to insure and secure his future services, and induce him to act for the client. It is intended to remunerate counsel for being deprived, by being retained by one party, of the opportunity of rendering services to the other and of receiving pay from him, and the payment of such fee, in the absence of an express understanding to the contrary, is neither made nor received in payment of the services contemplated; its payment has no relation to the obligation of the client to pay his attorney for the services which he has retained him to perform." (7 C.J.S., 1019.) The defense that Attorney Agrava wrote the letter Exhibit A and that Attorney Francisco did not take the trouble of reading it, would not take the case out of the interdiction. If this letter was written under the circumstances explained by Attorney Francisco and he was unaware of its contents, the fact remains that his firm did give Mrs. Hilado a formal professional advice from which, as heretofore demonstrated, emerged the relation of attorney and client. This letter binds and estop him in the same manner and to the same degree as if he personally had written it. An information obtained from a client by a member or assistant of a law firm is information imparted to the firm. (6 C. J., 628; 7 C. J. S., 986.) This is not a mere fiction or an arbitrary rule; for such member or assistant, as in our case, not only acts in the name and interest of the firm, but his information, by the nature of his connection with the firm is available to his associates or employers. The rule is all the more to be adhered to where, as in the present instance, the opinion was actually signed by the head of the firm and carries his initials intended to convey the impression that it was dictated by him personally. No progress could be hoped for in "the public policy that the client in consulting his legal adviser ought to be free from apprehension of disclosure of his confidence," if the prohibition were not extended to the attorney's partners, employers or assistants. The fact that petitioner did not object until after four months had passed from the date Attorney Francisco first appeared for the defendants does not operate as a waiver of her right to ask for his disqualification. In one case, objection to the appearance of an attorney was allowed even on appeal as a ground for reversal of the judgment. In that case, in which throughout the conduct of the cause in the court below the attorney had been suffered so to act without objection, the court said: "We are all of the one mind, that the right of the appellee to make his objection has not lapsed by reason of failure to make it sooner; that professional confidence once reposed can never be divested by expiration of professional employment." (Nickels vs. Griffin, 1 Wash. Terr., 374, 321 A. L. R. 1316.)

The complaint that petitioner's remedy is by appeal and not by certiorari deserves scant attention. The courts have summary jurisdiction to protect the rights of the parties and the public from any conduct of attorneys prejudicial to the administration of the justice. The summary jurisdiction of the courts over attorneys is not confined to requiring them to pay over money collected by them but embraces authority to compel them to do whatever specific acts may be incumbent upon them in their capacity of attorneys to perform. The courts from the general principles of equity and policy, will always look into the dealings between attorneys and clients and guard the latter from any undue consequences resulting from a situation in which they may stand unequal. The courts acts on the same principles whether the undertaking is to appear, or, for that matter, not to appear, to answer declaration, etc. (6 C.J., 718 C.J.S., 1005.) This summary remedy against attorneys flows from the facts that they are officers of the court where they practice, forming a part of the machinery of the law for the administration of justice and as such subject to the disciplinary authority of the courts and to its orders and directions with respect to their relations to the court as well as to their clients. (Charest vs. Bishop, 137 Minn., 102; 162, N.W., 1062, Note 26, 7 C. J. S., 1007.) Attorney stand on the same footing as sheriffs and other court officers in respect of matters just mentioned. We conclude therefore that the motion for disqualification should be allowed. It is so ordered, without costs.

NO. 21 G.R. No. 86250 February 26, 1990 ALBERTO F. LACSON, EDITHA F. LACSON, ROMEO F. LACSON and ZENA F. VELASCO, petitioners, vs. HON. LUIS R. REYES, in his capacity as presiding judge of Branch 22 of the Regional Trial Court of Cavite, Branch 22, and/or Multiple Sala, Imus, Cavite, and EPHRAIM J. SERQUINA, respondents. On August 26, 1987, the private respondent, Ephraim Serquina, petitioned the respondent court for the probate of the last will and testament of Carmelita Farlin. His petition was docketed as Sp. Proc. No. 127-87 of the respondent court, entitled "In Re Testate Estate of Carmelita S. Farlin, Ephraim J. Serquina, Petitioner." He also petitioned the court in his capacity as counsel for the heirs, the herein petitioners, and as executor under the will. The petition was not opposed and hence, on November 17, 1987, the respondent court issued a "certificate of 1 allowance," the dispositive part of which reads as follows: WHEREFORE, upon the foregoing, the Court hereby renders certification that subject will and testament is accordingly allowed in accordance with Sec. 13 of Rule 76 of the Rules of Court. SO ORDERED.
2

On March 14, 1988, Atty. Ephraim Serquina filed a "motion for attorney's fees" against the petitioners, alleging that the heirs had agreed to pay, as and for his legal services rendered, the sum of P68,000.00. Thereafter summonses were served upon the heirs "as if it were a complaint against said heirs" directing them to answer the motion. Thereafter, the heirs filed their answer and denied the claim for P68,000.00 alleging that the sum agreed upon was only P7,000.00, a sum they had allegedly already paid. After pre-trial, the respondent court rendered judgment and disposed as follows: In the light of the foregoing, considering the extent of the legal services rendered to the clients, the value of the properties gained by the clients out of said services, the petition for attorney's fees is granted. Judgment is hereby rendered directing the respondent heirs to pay their lawyer the sum of P65,000.00 as true and reasonable attorney's fees which shall be a lien on the subject properties. Cost against the respondent. SO ORDERED.
5 4

On October 21, 1988, eleven days after the heirs received a copy of the decision, the latter filed a notice of appeal. On November 7, 1988, the respondent court issued an order directing the heirs to amend their notice of appeal. On October 27, 1988, the respondent court issued an order "noting" the notice on appeal "appellants [the heirs] 8 having failed to correct or complete the same within the reglementary period to effect an appeal."
7

On November 24, 1988, the respondent court issued yet another order denying the notice of appeal for failure of 9 the heirs to file a record on appeal. Thereafter, Atty. Serquina moved for execution. On December 5, 1988, the respondent court issued an order granting execution.
10

The petitioners submit that the decision, dated October 26, 1988, and the orders, dated October 27, 1988, November 24, 1988, and December 5, 1988, respectively, are nun and void for the following reasons: (1) the respondent court never acquired jurisdiction over the "motion for attorney's fees" for failure on the part of the movant, Ephraim Serquina, to pay docket fees; (2) the respondent court gravely abused its discretion in denying the heirs' notice of appeal for their failure to file a record on appeal; and (3) the respondent court also gravely abused its discretion in awarding attorney's fees contrary to the provisions of Section 7, of Rule 85, of the Rules of Court. Atty. Serquina now defends the challenged acts of the respondent court: (1) his motion was a mere incident to the main proceedings; (2) the respondent court rightly denied the notice of appeal in question for failure of the heirs to submit a record on appeal; and (3) in collecting attorney's fees, he was not acting as executor of Carmelita Farlin's last will and testament because no letters testamentary had in fact been issued. We take these up seriatim. I. Anent docket fees, it has been held prescribed docket fee.
11

that the court acquires jurisdiction over any case only upon payment of the

Although the rule has since been tempered, that is, there must be a clear showing that the party had intended to evade payment and to cheat the courts, it does not excuse him from paying docket fees as soon as it becomes apparent that docket fees are indeed payable. In the case at bar, the "motion for attorney's fees" was clearly in the nature of an action commenced by a lawyer against his clients for attorney's fees. The very decision of the court states: This case is an out-growth from Sp. Proc. No. 127-87 of same Court which was long decided (sic). It resulted from the filing of a petition for attorney's fees by the lawyer of the petitioner's heirs in the case against the latter. Upon the filing of the petition for attorney's fees, the heir- respondents (sic) were accordingly summoned to answer the petition as if it were a complaint against said heirs who retained the 13 petitioner as their lawyer in the said case. In that event, the parties should have known, the respondent court in particular, that docket fees should have been priorly paid before the court could lawfully act on the case, and decide it. It may be true that the claim for attorney's fees was but an incident in the main case, still, it is not an escape valve from the payment of docket fees because as in all actions, whether separate or as an offshoot of a pending proceeding, the payment of docket fees is mandatory.

12

Assuming, therefore, ex gratia argumenti, that Atty. Serquina's demand for attorney's fees in the sum of P68,000.00 is valid, he, Atty. Serquina, should have paid the fees in question before the respondent court could validly try his "motion". II. With respect to the second issue, it has been held that in appeals arising from an incident in a special proceeding, a 14 record on appeal is necessary, otherwise, the appeal faces a dismissal. It has likewise been held, however, that in the interest of justice, an appeal, brought without a record on appeal, may be reinstated under exceptional circumstances. Thus: xxx xxx xxx It is noted, however, that the question presented in this case is one of first impression; that the petitioner acted in honest, if mistaken, interpretation of the applicable law; that the probate court itself believed that the record on appeal was unnecessary; and that the private respondent herself apparently thought so, too, for she did not move to dismiss the appeal and instead impliedly recognized its validity by filing the appellee's brief. In view of these circumstances, and in the interest of justice, the Court feels that the petitioner should be given an opportunity to comply with the above-discussed rules by submitting the required record on appeal as a condition for the revival of the appeal. The issue raised in his appeal may then be fully discussed and, in the light of the briefs already filed by the parties, 15 resolved on the merits by the respondent court. In the instant case, the Court notes the apparent impression by the parties at the outset, that a record on appeal was unnecessary, as evidenced by: (1) the very holding of the respondent court that "[i]t is now easy to appeal as there is no more need for a record on appeal . . . [b]y merely filing a notice of appeal, the appellant can already 16 institute his appeal . . . ;" (2) in its order to amend notice of appeal, it did not require the appellants to submit a record on appeal; and (3) Atty. Serquina interposed no objection to the appeal on that ground. In any event, since we are annulling the decision appealed from, the matter is a dead issue. III. As we have indicated, we are granting certiorari and are annulling the decision appealed from, but there seems to be no reason why we can not dispose of the heirs' appeal in a single proceeding. It is pointed out that an attorney who is concurrently an executor of a will is barred from recovering attorney's fees from the estate. The Rule is specifically as follows: SEC. 7. What expenses and fees allowed executor or administrator. Not to charge for services as attorney. Compensation provided by will controls unless renounced. An executor or administrator shall be allowed the necessary expenses in the care, management and settlement of the estate, and for his services, four pesos per day for the time actually and necessarily employed, or a commission upon the value of so much of the estate as comes into his possession and is finally disposed of by him in the payment of debts, expenses, legacies, or distributive shares, or by delivery to heirs or devisees, of two per centum of the first five thousand pesos of such value, one per centum of so much of such value as exceeds five thousand pesos and does not exceed thirty thousand pesos, one-half per centum of so much of such value as exceeds thirty thousand pesos and does not exceed one hundred thousand pesos, and one-quarter per centum

of so much of such value as exceeds one hundred thousand pesos. But in any special case, where the estate is large, and the settlement has been attended with great difficulty, and has required a high degree of capacity on the part of the executor or administrator, a greater sum may be allowed. If objection to the fees allowed be taken, the allowance may be reexamined on appeal. If there are two or more executors or administrators, the compensation shall be apportioned among them by the court according to the services actually rendered by them respectively. When the executor or administrator is an attorney, he shall not charge against the estate any professional fees for legal services rendered by him. When the deceased by will makes some other provision for the compensation of his executor, that provision shall be a full satisfaction for his services unless by a written instrument filed in the 17 court he renounces all claim to the compensation provided by the will. The rule is therefore clear that an administrator or executor may be allowed fees for the necessary expenses he has incurred as such, but he may not recover attorney's fees from the estate. His compensation is fixed by the rule but such a compensation is in the nature of executor's or administrator's commissions, and never as attorney's 18 fees. In one case, we held that "a greater sum [other than that established by the rule] may be allowed 'in any special case, where the estate is large, and the settlement has been attended with great difficulty, and has 19 required a high degree of capacity on the part of the executor or administrator.'" It is also left to the sound 20 discretion of the court. With respect to attorney's fees, the rule, as we have seen, disallows them. Accordingly, to the extent that the trial court set aside the sum of P65,000.00 as and for Mr. Serquina's attorney's fees, to 21 operate as a "lien on the subject properties," the trial judge must be said to have gravely abused its discretion (apart from the fact that it never acquired jurisdiction, in the first place, to act on said Mr. Serquina's "motion for attorney's fees"). The next question is quite obvious: Who shoulders attorney's fees? We have held that a lawyer of an administrator 22 or executor may not charge the estate for his fees, but rather, his client. Mutatis mutandis, where the administrator is himself the counsel for the heirs, it is the latter who must pay therefor. In that connection, attorney's fees are in the nature of actual damages, which must be duly proved. They are also subject to certain standards, to wit: (1) they must be reasonable, that is to say, they must have a bearing on the importance of the subject matter in controversy; (2) the extent of the services rendered; and (3) the 24 professional standing of the lawyer. In all cases, they must be addressed in a full-blown trial and not on the bare 25 word of the parties. And always, they are subject to the moderating hand of the courts. The records show that Atty. Ephraim Serquina, as counsel for the heirs, performed the following: xxx xxx xxx 5. That after the order of allowance for probate of the will, the undersigned counsel assisted the heirs to transfer immediately the above-mentioned real estate in their respective names, from (sic) the payment of estate taxes in the Bureau of Internal Revenue to the issuance by the Registry of Deeds of the titles, in order for the heirs to sell the foregoing real estate of 10,683 sq. cm (which was also the subject of sale prior to the death of the testator) to settle testator's obligations and day-to-day subsistence being (sic) that the heirs, except Zena F. Velasco, are not 26 employed neither doing any business; The Court is not persuaded from the facts above that Atty. Serquina is entitled to the sum claimed by him (P68,000.00) or that awarded by the lower court (P65,000.00). The Court observes that these are acts performed
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routinely since they form part of what any lawyer worth his salt is expected to do. The will was furthermore not contested. They are not, so Justice Pedro Tuason wrote, "a case [where] the administrator was able to stop what appeared to be an improvident disbursement of a substantial amount without having to employ outside legal help 27 at an additional expense to the estate," to entitle him to a bigger compensation. He did not exactly achieve anything out of the ordinary. The records also reveal that Atty. Serquina has already been paid the sum of P6,000.00. It is our considered opinion that he should be entitled to P15,000.00 for his efforts on a quantum meruit basis. Hence, we hold the heirs liable for P9,000.00 more. WHEREFORE, premises considered, judgment is hereby rendered: (1) GRANTING the petition and making the temporary restraining order issued on January 16, 1989 PERMANENT; and (2) ORDERING the petitioners to PAY the private respondent, Atty. Ephraim Serquina, attorney's fees in the sum of P9,000.00. The said fees shall not be recovered from the estate of Carmelita Farlin. No costs. SO ORDERED.
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NO. 22 G.R. No. 86100-03 January 23, 1990 METROPOLITAN BANK AND TRUST COMPANY, petitioner, vs. THE HONORABLE COURT OF APPEALS and ARTURO ALAFRIZ and ASSOCIATES, respondents. This petition for review on certiorari impugns the decision of the Court of Appeals in CA-G.R. Nos. 08265-08268 affirming the order of Branch 168, Regional Trial Court, National Capital Judicial Region, in Civil Cases Nos. 1912328, 19136 and 19144, fixing attorney's fees and directing herein petitioner Metropolitan Bank and Trust Company (Metrobank, for brevity), as defendant in said civil cases, to pay its attorneys, herein private respondent Arturo Alafriz and Associates, movant therein, the amount of P936,000.00 as attorney's fees on a quantum meruit basis. The records show that from March, 1974 to September, 1983, private respondent handled the above-mentioned civil cases before the then Court of First Instance of Pasig (Branches I, II, VI, X, XIII, XIX, XX AND XXIV) in behalf of 2 petitioner. The civil cases were all for the declaration of nullity of certain deeds of sale, with damages. The antecedental facts which spawned the filing of said actions are undisputed and are hereinunder set forth as found by the trial court and adopted substantially in the decision of respondent court. A certain Celedonio Javier bought seven (7) parcels of land owned by Eustaquio Alejandro, et al., with a total area of about ten (10) hectares. These properties were thereafter mortgaged by Javier with the petitioner to secure a loan obligation of one Felix Angelo Bautista and/or International Hotel Corporation. The obligors having defaulted, petitioner foreclosed the mortgages after which certificates of sale were issued by the provincial sheriff in its favor as purchaser thereof Subsequently, Alejandro, alleging deceit, fraud and misrepresentation committed against him by Javier in the sale of the parcels of land, brought suits against Javier et al., and included petitioner as defendant therein. It was during the pendency of these suits that these parcels of land were sold by petitioner to its sister corporation, Service Leasing Corporation on March 23, 1983 for the purported price of P600,000.00. On the same day, the properties were resold by the latter to Herby Commercial and Construction Corporation for the purported price of P2,500,000.00. Three months later, or on June 7, 1983, Herby mortgaged the same properties with Banco de Oro for P9,200,000.00. The lower court found that private respondent, did not have knowledge of these transfers and transactions. As a consequence of the transfer of said parcels of land to Service Leasing Corporation, petitioner filed an urgent motion for substitution of party on July 28, 1983. Private respondent, on its part, filed on August 16, 1983 a verified motion to enter in the records of the aforesaid civil cases its charging lien, pursuant to Section 37, Rule 138 of the Rules of Court, equivalent to twenty-five percent (25%) of the actual and current market values of the litigated properties as its attorney's fees. Despite due notice, petitioner failed to appear and oppose said motion, as a result of which the lower court granted the same and ordered the, Register of Deeds of Rizal to annotate the attorney's liens on the certificates of title of the parcels of land. Meanwhile, the plaintiffs Alejandro, et al. in the aforesaid civil cases, which had been consolidated and were pending before the Regional Trial Court of Pasig, filed a motion to dismiss their complaints therein, which motion the lower court granted with prejudice in its order dated September 5, 1983. On December 29, 1983, the same court ordered the Register of Deeds to annotate the attorney's liens of private respondent on the derivative titles which cancelled Transfer Certificates of Title Nos. 453093 to 453099 of the original seven (7) parcels of land hereinbefore adverted to. On May 28,1984, private respondent filed a motion to fix its attorney's fees, based on quantum meruit, which motion precipitated an exchange of arguments between the parties. On May 30, 1984, petitioner manifested that
3 1

it had fully paid private respondent; the latter, in turn, countered that the amount of P50,000.00 given by petitioner could not be considered as full payment but merely a cash advance, including the amount of P14,000.00 paid to it on December 15, 1980. It further appears that private respondent attempted to arrange a compromise with petitioner in order to avoid suit, offering a compromise amount of P600,000.00 but the negotiations were unsuccessful. Finally, on October 15,1984, the court a quo issued the order assailed on appeal before respondent court, granting payment of attorney's fees to private respondent, under the following dispositive portion: PREMISES CONSIDERED, the motion is hereby granted and the Metropolitan Bank and Trust 4 Company (METROBANK) and Herby Commercial and Construction Corporation are hereby ordered to pay the movant Arturo Alafriz and Associates the amount of P936,000.00 as its 5 proper, just and reasonable attorney's fees in these cases. On appeal, respondent court affirmed the order of the trial court in its decision promulgated on February 11, 1988. A motion for reconsideration, dated March 3, 1988, was filed by petitioner but the same was denied in a resolution promulgated on November 19, 1988, hence the present recourse. The issues raised and submitted for determination in the present petition may be formulated thus: (1) whether or not private respondent is entitled to the enforcement of its charging lien for payment of its attorney's fees; (2) whether or not a separate civil suit is necessary for the enforcement of such lien and (3) whether or not private respondent is entitled to twenty-five (25%) of the actual and current market values of the litigated properties on a quantum meruit basis. On the first issue, petitioner avers that private respondent has no enforceable attorney's charging lien in the civil cases before the court below because the dismissal of the complaints therein were not, in the words of Section 37, 6 Rule 138, judgments for the payment of money or executions issued in pursuance of such judgments. We agree with petitioner. On the matter of attorney's liens Section 37, Rule 138 provides: . . . He shall also have a lien to the same extent upon all judgments for the payment of money, and executions issued in pursuance of such judgments, which he has secured in a litigation of his client, from and after the time when he shall have caused a statement of his claim of such lien to be entered upon the records of the court rendering such judgment, or issuing such execution, and shall have caused written notice thereof to be delivered to his client and to the adverse party; and he shall have the same right and power over such judgments and executions as his client would have to enforce his lien and secure the payment of his just fees and disbursements. Consequent to such provision, a charging lien, to be enforceable as security for the payment of attorney's fees, requires as a condition sine qua non a judgment for money and execution in pursuance of such judgment secured in the main action by the attorney in favor of his client. A lawyer may enforce his right to fees by filing the necessary petition as an incident in the main action in which his services were rendered when something is due his 7 client in the action from which the fee is to be paid. In the case at bar, the civil cases below were dismissed upon the initiative of the plaintiffs "in view of the frill 8 satisfaction of their claims." The dismissal order neither provided for any money judgment nor made any monetary award to any litigant, much less in favor of petitioner who was a defendant therein. This being so, private respondent's supposed charging lien is, under our rule, without any legal basis. It is flawed by the fact that

there is nothing to generate it and to which it can attach in the same manner as an ordinary lien arises and attaches to real or personal property. In point is Morente vs. Firmalino, cited by petitioner in support of its position. In that case, movant-appellant attorney sought the payment of his fees from his client who was the defendant in a complaint for injunction which was dismissed by the trial court after the approval of an agreement entered into by the litigants. This Court held: . . . The defendant having suffered no actual damage by virtue of the issuance of a preliminary injunction, it follows that no sum can be awarded the defendant for damages. It becomes apparent, too, that no amount having been awarded the defendant, herein appellant's lien could not be enforced. The appellant, could, by appropriate action, collect his fees as attorney. Private respondent would nevertheless insist that the lien attaches to the "proceeds of a judgment of whatever 10 11 nature," relying on the case of Bacolod-Murcia Milling Co. Inc. vs. Henares and some American cases holding that the lien attaches to the judgment recovered by an attorney and the proceeds in whatever form they may be.
12 9

The contention is without merit just as its reliance is misplaced. It is true that there are some American cases holding that the lien attaches even to properties in litigation. However, the statutory rules on which they are based and the factual situations involved therein are neither explained nor may it be said that they are of continuing validity as to be applicable in this jurisdiction. It cannot be gainsaid that legal concepts of foreign origin undergo a number of variegations or nuances upon adoption by other jurisdictions, especially those with variant legal systems. In fact, the same source from which private respondent culled the American cases it cited expressly declares that "in the absence of a statute or of a special agreement providing otherwise, the general rule is that an attorney has no lien on the land of his client, notwithstanding such attorney has, with respect to the land in question, successfully prosecuted a suit to establish the title of his client thereto, recovered title or possession in a suit prosecuted by such client, or defended successfully such client's right and title against an unjust claim or an 13 unwarranted attack," as is the situation in the case at bar. This is an inescapable recognition that a contrary rule obtains in other jurisdictions thereby resulting in doctrinal rulings of converse or modulated import. To repeat, since in our jurisdiction the applicable rule provides that a charging lien attaches only to judgments for money and executions in pursuance of such judgment, then it must be taken in haec verba. The language of the law is clear and unequivocal and, therefore, it must be taken to mean exactly what it says, barring any necessity for 14 elaborate interpretation. Notably, the interpretation, literal as it may appear to be, is not without support in Philippine case law despite the 15 dearth of cases on all fours with the present case. In Caina et al. vs. Victoriano, et al., the Court had the occasion to rule that "the lien of respondent is not of a nature which attaches to the property in litigation but is at most a 16 personal claim enforceable by a writ of execution." In Ampil vs. Juliano-Agrava, et al., the Court once again declared that a charging lien "presupposes that the attorney has secured a favorable money judgment for his client 17 . . ." Further, in Director of Lands vs. Ababa, et al., we held that "(a) charging lien under Section 37, Rule 138 of the Revised Rules of Court is limited only to money judgments and not to judgments for the annulment of a contract or for delivery of real property as in the instant case." Even in the Bacolod-Murcia Milling case, which we previously noted as cited by private respondent, there was an express declaration that "in this jurisdiction, the lien does not attach to the property in litigation." Indeed, an attorney may acquire a lien for his compensation upon money due his client from the adverse party in any action or proceeding in which the attorney is employed, but such lien does not extend to land which is the

subject matter of the litigation. More specifically, an attorney merely defeating recovery against his client as a defendant is not entitled to a lien on the property involved in litigation for fees and the court has no power to fix the fee of an attorney defending the client's title to property already in the client's 19 possession. While a client cannot defeat an attorney's right to his charging lien by dismissing the case, terminating the services 20 of his counsel, waiving his cause or interest in favor of the adverse party or compromising his action, this rule cannot find application here as the termination of the cases below was not at the instance of private respondent's client but of the opposing party. The resolution of the second issue is accordingly subsumed in the preceding discussion which amply demonstrates that private respondent is not entitled to the enforcement of its charging lien. Nonetheless, it bears mention at this juncture that an enforceable charging lien, duly recorded, is within the 21 jurisdiction of the court trying the main case and this jurisdiction subsists until the lien is settled. There is certainly no valid reason why the trial court cannot pass upon a petition to determine attorney's fees if the rule 22 against multiplicity of suits is to be activated. These decisional rules, however, apply only where the charging lien is valid and enforceable under the rules. On the last issue, the Court refrains from resolving the same so as not to preempt or interfere with the authority and adjudicative facility of the proper court to hear and decide the controversy in a proper proceeding which may be brought by private respondent. A petition for recovery of attorney's fees, either as a separate civil suit or as an incident in the main action, has to be prosecuted and the allegations therein established as any other money claim. The persons who are entitled to 23 or who must pay attorney's fees have the right to be heard upon the question of their propriety or amount. Hence, the obvious necessity of a hearing is beyond cavil. Besides, in fixing a reasonable compensation for the services rendered by a lawyer on the basis of quantum meruit, the elements to be considered are generally (1) the importance of the subject matter in controversy, (2) the extent 24 of the services rendered, and (3) the professional standing of the lawyer. These are aside from the several other 25 considerations laid down by this Court in a number of decisions as pointed out by respondent court. A determination of all these factors would indispensably require nothing less than a full-blown trial where private respondent can adduce evidence to establish its right to lawful attorney's fees and for petitioner to oppose or refute the same. Nothing in this decision should, however, be misconstrued as imposing an unnecessary burden on private respondent in collecting the fees to which it may rightfully be entitled. But, as in the exercise of any other right conferred by law, the proper legal remedy should be availed of and the procedural rules duly observed to forestall and obviate the possibility of abuse or prejudice, or what may be misunderstood to be such, often to the undeserved discredit of the legal profession. 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 26 from government interference, is impressed with public interest, for which it is subject to State regulation. ACCORDINGLY, the instant petition for review is hereby GRANTED and the decision of respondent Court of Appeals of February 11, 1988 affirming the order of the trial court is hereby REVERSED and SET ASIDE, without prejudice to such appropriate proceedings as may be brought by private respondent to establish its right to attorney's fees and the amount thereof.

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NO. 23 G.R. No. 85383 August 30, 1990 SEVERO M. LORENZO, petitioner, vs. HON. COURT OF APPEALS,* ESTHER BANEZ, and CHARITY BALDONADO, respondents. On January 19, 1980, petitioner Lorenzo filed Special Proceedings No. 57 in the Municipal Court of Cauayan, Isabela, for the adoption of Charity Baldonado by one Benjamin S. Baldonado who was then a pensioner of the Social Security System of the United States Government. On February 27, 1980, Benjamin S. Baldonado died. Subsequently, on March 5, 1980, the decision was rendered approving the adoption of Charity. In view of said decision, Charity applied for insurance benefits as heir of Benjamin with the Social Security System of United States of America. The claim was, however, denied. Petitioner prepared for Charity a motion for reconsideration but was signed by her guardian, the private respondent Esther Banez. This motion was denied. Private respondent Banez filed a second motion for reconsideration with petitioner signing as her counsel on July 15, 1981. This time, private respondent won. Sometime in May, 1983, private respondent informed petitioner of the approval of Charity's claim which amounted to US$182.00 (P3,891.06 converted to pesos under the current rate) monthly and a threeyear lump sum-monthly pension in arrears. Private respondent Esther Banez gave petitioner P1,000.00 as his professional fee. On June 25, 1983 petitioner sent a letter to private respondent Banez demanding payment of P33,250 as attorney's fees, plus a monthly share of P500.00 from the pension of Charity. Private respondents rejected the demand. Thereupon, petitioner filed a complaint for payment of attorney's fees. The trial court rendered judgment in favor of private respondents. On appeal to the respondent Court of Appeals, it affirmed the lower court's judgment. Hence, this petition. The only issue in this case is whether or not P1,000 is a reasonable amount of compensation to which petitioner is entitled for the legal services he had rendered to the private respondents. Noteworthy are the following facts: (1) petitioner was paid his fees in the Special Proceedings case which ended with the adoption of the minor thereby terminating the client and lawyer relationship; (2) petitioner was paid for his preparation of the first motion for reconsideration with regard to the denial of the claims for insurance benefit which was signed by Charity's guardian, private respondent Banez; and (3) this particular motion was not signed by petitioner as counsel for the private respondents. Petitioner is now asking his fees for his assistance in preparing the second motion for reconsideration. The petition has no merit. The relevant provision of law is Section 24 of Rule 138, to wit: Sec. 24. Compensation of attorneys agreements 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.

Under the aforecited Rule, it is clear that a lawyer has the right to be paid for the legal services he has extended to his client. However, the same provides for a limitation in the fixing of said attorney's fees, that is, it must be just and reasonable. And in determining the reasonableness of attorney's fees, several factors or circumstances must be taken into account, namely: the amount and character of the services rendered; the nature and importance of the litigation or business in which the services were rendered; the responsibility imposed; the amount of money or the value of the property affected by the controversy or involved in the employment; the skill and experience called for in the performance of the services; the professional character and social standing of the attorney; the results secured, among others. We see no reversible error on the part of respondent Court in affirming the lower court's judgment. Said respondent Court: Turning to the present controversy, it is at once apparent that the legal work done by herein plaintiff-appellant, Atty. Severo M. Lorenzo, in preparing the second motion for reconsideration, a two-page letter addressed to the Social Security Administration of the United States of America, dated July 18, 1981 (Exh. "E-1" ), was quite simple in nature. It did not require much time, effort or skill. Certainly, it does not serve to justify a hefty claim to half of the pension due to the defendant minor, or to P32,260.00 plus P500.00 monthly, to be precise, as attorney's fees. The records further disclose that plaintiff-appellant never attended any hearing in connection with the aforementioned motion for reconsideration in regard to the insurance benefits due Charity Baldonado. Then, too, a close perusal of the said motion for reconsideration would reveal that the arguments therein raised by him were merely a reiteration of the points touched upon by the defendants-appellants in their first motion for reconsideration. (p. 21, Rollo) We share likewise the observation made by the trial court in applying Section 1 of Republic Act 145 which actually militates against petitioner's claim. Said law provides: Any person assisting a claimant in the preparation, presentation and prosecution of his claim for benefits under the laws of the United States administered by the United States Veterans Administration who shall directly or indirectly, solicit, contract for, charge or receive, or who shall attempt to solicit, contract for, charge or receive any fee or compensation exceeding twenty pesos, in any claim, or who shall collect his fee before the claim is actually paid to a beneficiary or claimant shall be guilty of an offense and upon conviction thereof shall for every offense be fined not exceeding one thousand pesos or imprisonment not exceeding five years, or both, in the discretion of the court. As aptly put by the trial court: While the defendants' claim was filed with the Social Security Administration of the United States of America, the evidence overwhelmingly shows that said claim is being administered by the United States Veterans Administration. The communications sent by the defendants (Exhs. "1", "E-1" and "C"), as well as those received from the United States Government (Exhs. "2", "3", "5", "7", and "D"), show that the claim of Charity Baldonado was being administered by the United States Veterans Administration. The fact that communications, although pertaining to the Social Security Administration, were coursed through the United States Veterans Administration, merely supports the view that this particular claim of the defendant is being administered by said department. Since under the aforequoted law, the plaintiff is only authorized to exact a fee of P20.00, the plaintiff, therefore, has no cause of action against the defendants for the latter have paid him more than what the law requires. (pp. 22-23, Rollo) The principle of quantum meruit applies if a lawyer is employed without a price agreed upon for his services. In which case, he would be entitled to receive what he merits for his services, as much as he has earned. (Robinol vs.

Montemayor, Adm. Case No. 2180, April 10, 1989). Under the circumstances and on the basis of quantum meruit, the, P1,000 paid to appellant is reasonable compensation for his legal work, there being no agreement on the amount of the fee. PREMISES CONSIDERED, the appealed judgment is hereby AFFIRMED with costs against the petitioner. SO ORDERED.

NO. 24 G.R. No. 71459 July 30, 1986 D. M. CONSUNJI, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, HON. ALCESTIS A. MANGAHAS and APOLINARIO AGBAYANI, respondents. This is a petition for review king to set aside the June 10, 1985 decision of the respondent National Labor Relations Commission which affirmed the award made by respondent Ma. Alcestis A. Mangahas of the Philippine Overseas Employment Administration. Sometime in November 1981, private respondent Apolinario Agbayani was employed by petitioner D. M. Consunji, Inc. as Camp Administrator of its New Istana Construction Project in Brunei with a monthly salary of US$800.00 for a period of two (2) years. As camp administrator, he was responsible for camp security and safety, camp maintenance, employee services, and rest and recreation. Pursuant to his contract of employment, the private respondent left for Brunei on December 20, 1981. While in Brunei, he bought a car which he used for R and R Postal Services and Taman Puri Camp Maintenance. On May 24, 1982, respondent Agbayani was required to return to Manila and report to Mr. Jesus Ferrer, the petitioner's president on the details of a sit down strike that occured in the camp sometime in March and May, 1982. The petitioner provided respondent Agbayani with a one-way ticket back to Manila. On June 1, 1982, after submitting his report, the respondent attempted to confirm his flight back to Brunei but was told that the same had been cancelled. He was likewise informed by the petitioner that a message was received from the Brunei office advising the Manila office to hold Agbayani until further instructions. In that same month, respondent Agbayani, on his own initiative secured a re-entry visa and a return plane ticket back to Brunei. Back in Manila, respondent Agbayani was-detailed with the petitioner company's security department and continued to be paid his overseas salary rate at US$800.00 monthly. On June 26, 1982, the petitioner company terminated Agbayani's services. The termination took effect on June 30, 1982. When the petitioner did not heed Agbayani's demand to pay his salary up to the date of his termination, grant him separation pay, reimburse his re-entry visa fee and plane ticket and ship back to Manila the personal belongings he left in Brunei, including a car he had purchased there, he filed BES Case No. 82-3068 for illegal dismissal with the Philippine Overseas Employment Administration. On October 25, 1984, Ma. Alcestis A. Mangahas rendered a decision in favor of respondent Agbayani, the dispositive portion of which reads: 1. To pay to complainant the sum of US$14,400.00 or its equivalent in Philippine Currency at the time of payment, as salary corresponding to the unexpired portion of his employment contract; 2. To pay complainant the sum of B$27.00 or its equivalent in Philippine Currency at the time of payment as reinbursement of re-entry visa fee; and the sum of B$430.00 or its equivalent in Philippine Currency at the time of payment, as reimbursement of his return plane fare to Brunei;

3. To cause to be brought to the Philippines complainant's personal belongings including his car, or at least, payment to complainant of the cash equivalent thereof either in US Dollar or its equivalent in Philippine Currency as of the time of payment; and 4. To pay to complainant's counsel of record the sum equivalent to 10% of the totality of the judgment award. No other pronouncement. As earlier indicated, the respondent Commission affirmed in toto the said decision on June 10, 1985. The only issue is whether or not respondent Apolinario Agbayani was justifiably dismissed before the expiration of his two (2) years contract with the petitioner. The petitioner submits that respondent Agbayani, as a managerial employee, failed to integrate the various facets of his work as camp administrator and considering his failure to come up to the standard requirements of his position, was justifiably dismissed on that ground when he was still in Brunei. There is no dispute that indeed, respondent Agbayani was a managerial employee. As camp administrator, and later incharge of the implementation of the rest and recreation program of the petitioner's New Istana Construction Project in Brunei, respondent Agbayani was obviously not a rank-and-file employee. A managerial employee is one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees or effectively recommend such managerial actions (Reynolds Philippine Corporation v. Eslava, 1.37 SCRA 259). We agree with the observation of the Solicitor General that: xxxxxxxxx ... Although he did not himself lay down management policies, the memorandum quoted above shows that he could effectively recommend the adoption of such policies by higher management. And, as one in-charge of specific company operations such as its recreation facilities and other services, it is implicit that he was in a position to effectively recommend the hiring and dismissal of employees in these facilities and services. Respondent Agbayani cannot be classified as a rank-and-file employee. His salary alone at US$800 per month argues against this proposition." xxxxxxxxx It is true that as a managerial employee he may be terminated for just cause such as lack of confidence (Reynolds Philippine Corporation v. Eslava, supra). An employer has a much wider discretion in terminating the employment relationship of managerial personnel as compared to rank- and file employees. However, such prerogative of management to dismiss or lay-off an employee must be made without abuse of discretion, for what is at stake is not only the private respondent's position but also his means of livelihood (Remerco Garments Manufacturing v. Minister of Labor and Employment, et al, 135 SCRA 167). The matter of determining whether the grounds for loss of confidence are valid and sufficient cannot be left to the sole discretion of the employer. The rules of fairness and due process still apply. The memorandum dated March 9, 1982, directing respondent Agbayani to give priority to rest and recreation is not evidence of loss of confidence. The memorandum reads:

The urgency of implementing an adequate R and R program for the workers and staff can no longer be disregarded. Senior Management's attention must be focused on this need. In view of the foregoing, these directives are issues: 1. Effective immediately, ASA (respondent Agbayani) shall give top priority to and concentrate on R and R activities. As such he shall be expected to do the following: a) Formulate a comprehensive R and R Program and submit the same to higher management on or before 17 March for review and approval. b) Prepare and submit appropriate budget studies to support the various R and R activities, prior to implementation. c) Management the operations of the Recreational Facilities and the conduct of related activities. DO Implement the approved R and R program. 2. HAC shall provide the necessary direction and supervision to ASA on above subject. 3. To enable ASA to devote sufficient time to R and R activities he shall temporarily relinquish administrative responsibility over security, safety, ramp maintenance, employee services and orientation of incoming personnel to HAC. This arrangement shall remain effective unless subsequently revoked by order of the undersigned. ASA shall however continue to be responsible for barracks assignments and accomodations. 4. To assist ASA in the implementation of R and R Program, Santiago Martinez shall be assigned to him on a full time basis. 5. Victorino Paguirigan, who is presently devoting part of his time to R and R activities shall concentrate on camp maintenance and employee services, under Diego Bisuna. For information and implementation of all concerned. Again, we agree with the following observations of the Solicitor General: The above is at best equivocal since it makes no specific judgment on respondent Agbayani's overall performance of his duties under the employment contract. True, he had been relieved of some of his responsibilities, but this can be read as the company's realization that his skills were better concentrated in an area of high concern rather than dissipated in unimportant tasks. Except for this memorandum, the petitioner did not present any other evidence which satisfactorily shows that respondent Agbayani has been guilty of breach of trust or that it had ample reason to distrust him. If the petitioner had lost its confidence in its manager, it showed a strange and ambiguous way of showing it. A corporation hiring personnel for overseas operations should also be more careful and stringent in testing and qualifying the managers and even employees it recruits for foreign assignments so as to avoid the difficulties incident to summary dismissals.

Loss of confidence in a managerial employee cannot be deemed present where he was given full responsibility in the implementation of the R and R program of the petitioner's New Istana Construction Project in Brunei. In fact, respondent Agbayani was even directed to-(1) formulate a comprehensive Rest and Recreation Program; (2) prepare and submit an appropriate budget studies to support the various R and R activities; and (3) manage the operations of the recreational facilities and the conduct of related activities. In General Bank and Trust Co. v. Court of Appeals (135 SCRA 569), this Court held that: xxx xxx xxx ...However, loss of confidence should not be simulated. It should not be used as a subterfuge for causes which are improper, illegal, or unjustified. Loss of confidence may not be arbitrarily asserted in the face of overwhelming evidence to the contrary. It must be genuine, not a mere afterthought to justify, earlier action taken in bad faith. The petitioner should have been more forthright in dismissing its camp manager. It should have come up with clearer proof of his failure to come up to the standards required of a manager. Since the petitioner failed to substantiate its claim that Agbayani was validly dismissed, he should be awarded his wages corresponding to the unexpired portion of his contract of employment. Considering that respondent Agbayani started working with the petitioner company on December 20, 1981 and his contract was terminated on June 30, 1982, he is entitled to US $14,400.00 corresponding to the eighteen (18) months unexpired term of his contract at a monthly salary of US $800.00. In J. Walter Thompson Co. (Phil.) v. National Labor Relations Commission (126 SCRA 458, this Court awarded the private respondent therein P202,500 (P7.50 x US $31,000.00 x 2 years) equivalent to his salary for the remaining two (2) years of his contractual service with the petitioner therein less P84,700.00 representing the transportation costs incurred by the petitioner in bringing his family and household effects to the country. However, the award ordering the petitioner company to pay respondent Agbayani the sum of B$27.00 as reimbursement of re-entry visa fee and the sum of B$ 430.00 as reimbursement of his return plane fare to Brunei or their equivalent in Philippine currency is not justified. The records show that the petitioner company did not induce, much less, order respondent Agbayani to procure a re-entry visa or a return plane ticket to Brunei. In fact, the petitioner company had nothing to do with these expenses. The records indisputably show that respondent procured a re-entry visa and a return plane ticket back to Brunei on his own initiative. Likewise, the award ordering the petitioner company to reimburse respondent Agbayani the cost of his car or to pay for its shipment to the Philippines is improper. Respondent Agbayani bought the car on his own initiative without the approval and consent of the petitioner company. In fact, respondent Agbayani did not need the same for company purposes as he was one of five (5) managerial employees of the petitioner company with direct access to and use of company vehicles. Finally, considering the simple nature of the litigation wherein legal services were rendered, the fact that, the questions involved are neither novel nor difficult, the quantity and character of the services rendered and the length of time the instant case has been pending, the award of 10% of the totality of the judgment as attorney's fees or roughly P28,800.00 is utterly excessive and unreasonable. Art. 111(b) of the Labor Code is more of a limitation on the amount of attorney's fees which a lawyer may recover in any judicial or administrative proceedings for the recovery of wages and does not preclude us from fixing a lower amount when circumstances warrant it. Indeed, the same should be strictly construed. An award therefore of P4,000.00 is more appropriate and commensurate under the circumstances of this petition.

WHEREFORE, the decision appealed from is hereby MODIFIED in that petitioner D. M. Consunji, Inc. should only be liable to pay respondent Apolinario Agbayani the equivalent of US $14,400.00 in Philippine Currency as salary corresponding to the unexpired portion of his employment contract, and P4,000.00 as attorney's fees. No costs. SO ORDERED.

NO. 25 G.R. No. 91958 January 24, 1991 WILFREDO D. LICUDAN and CRISTINA LICUDAN-CAMPOS, petitioners, vs. THE HONORABLE COURT OF APPEALS and ATTY. TEODORO O. DOMALANTA, respondents. The practice of law is a profession rather than trade. Courts must guard against the charging of unconscionable and excessive fees by lawyers for their services when engaged as counsel. Whether or not the award of attorney's fees in this case is reasonable, being in the nature of contingent fees, is the principal issue. This petition for review on certiorari assails: 1) The Decision of the public respondent dated September 12, 1989 which dismissed the petitioners' appeal thereby upholding the reasonableness of the respondent lawyer's lien as attorney's fees over the properties of his clients; and 2) The Resolution of the public respondent dated January 30, 1990 which denied the petitioners' motion for reconsideration. The grounds relied upon by the petitioners are as follows: The respondent Court, in upholding the entitlement of private respondent-attorney on the attorney's fees he claimed, decided the question in a manner not in accord with law or with the applicable decisions of this Honorable Tribunal. The respondent Court, in refusing to review and determine the propriety, reasonableness and validity of the attorney's fees claimed by the private respondent-attorney, departed from the usual course of judicial proceedings. The respondent Court, in failing to declare the attorney's fees claimed by the private respondentattorney as unconscionable, excessive, unreasonable, immoral and unethical, decided the question in a way not in accord with law and with applicable decisions of this Honorable Tribunal. (Petition, pp. 12-13; Rollo, pp. 16-17) The following are the antecedent facts pertinent to the case at bar: The respondent lawyer was retained as counsel by his brother-in-law and sister, the now deceased petitioners' parents, spouses Aurelio and Felicidad Licudan. His services as counsel pertained to two related civil cases docketed as Civil Case No. Q-12254 for partition and Civil Case No. Q-28655 for a sum of money in connection with the redemption of the property subject matter of the two cases covered by Transfer Certificate of Title No. 818 of the Register of Deeds of Quezon City. In both cases, the respondent lawyer obtained a judgment in favor of his clients. On August 13,1979, the respondent lawyer filed a Petition for Attorney's Lien with Notification to his Clients which substantially alleged that his clients executed two written contracts for professional services in his favor which provided that:

a) The undersigned counsel is entitled to own 97.5 square meters of the plaintiff's share of the lot in question. b) The undersigned counsel shall have a usufructuary right for a period of ten (10) years of plaintiffs' share of the lot in question. c) And that all damages accruing to plaintiffs to be paid by the defendant is for the undersigned counsel.(Annex "H" of the Petition, Rollo, p. 54) On September 19, 1979, the trial court handling Civil Case No. Q-12254 ordered the annotation at the back of TCT No. 818 of the Register of Deeds of Quezon City of the respondent lawyer's Contract for Professional Services dated August 30, 1979 signed by petitioner Wilfredo Licudan and Aurelio Licudan on his own behalf and on behalf of his daughter, petitioner Cristina Licudan-Campos. The said trial court's Order, being one of two Orders being essentially challenged in this petition, is reproduced below: Before the court for consideration is a Petition for Attorney's Lien filed by Atty. Teodoro D. Domalanta, counsel for the plaintiff, praying that his attorney's fees be annotated as a lien at the back of Transfer Certificate of Title No. 818 of the Register of Deeds of Quezon City, subject matter of this case. For the protection of the plaintiffs, the court required the plaintiff Aurelio Licudan as well as his son to appear this morning. Plaintiff Aurelio Licudan together with his son Wilfredo Licudan, who appears to be intelligent and in fact he speaks (the) English language well, appeared. Both Aurelio and Wilfredo Licudan manifested that they have freely and voluntarily signed the Contract for Professional Services, dated August 30, 1979 and notarized before Notary Public Amado Garrovillas as Doc. No. 32, Page 8, Book No. XIX, Series of 1979. Considering the manifestation of plaintiff, Aurelio Licudan and Alfredo (sic) Licudan that they have entered freely and voluntarily in the said contract of professional services, let the same be annotated at the back of TCT 818 of the Register of Deeds of Quezon City, upon payment of the required legal fees. (CA Decision, pp. 7-8; Rollo, pp. 36-37) The Contract for Professional Services dated August 30, 1979 differs from the earlier contractual provisions in that it entitled the respondent lawyer to one-third (1/3) of the subject property or 90.5 square meters and provided for usufructuary rights over the entire lot in question in favor of the respondent lawyer's son, Teodoro M. Domalanta, Jr. for an agreed consideration. (Annex "J" of the Petition; Rollo, p. 59) On July 25, 1985, the respondent lawyer filed a motion ex parte to amend the Order dated September 19, 1979 so as to conform with an additional professional fee covering 31 square meters more of the lot for services rendered in Civil Case No. Q-28655 as evidenced by a Deed of Absolute Sale dated May 1, 1983 executed by Aurelio Licudan in favor of the respondent lawyer. On September 6, 1985, the trial court ordered the respondent lawyer to submit a subdivision plan in conformity with his attorney's fees contract under which one-third (1/3) of the property or 90.5 square meters was alloted to him. On September 23, 1985, the respondent lawyer filed a motion for reconsideration praying for the amendment of the Order dated September 19, 1979 to conform with the Deed of Absolute Sale dated May 1, 1983 which was executed after the annotation of the original attorney's lien of 90.5 square meters.

On September 30, 1985, the trial court denied the motion on the ground that the respondent lawyer cannot collect attorney's fees for other cases in the action for partition. On October 4, 1985, the respondent lawyer filed a second motion for reconsideration of the Order dated September 6, 1985 explaining that what he sought to be included in the Order dated September 19, 1979 is the additional attorney's fees for handling the redemption case which was but a mere offshoot of the partition case and further manifesting that the additional 31 square meters as compensation for the redemption case must be merged with the 90.5 square meters for the partition case to enable the said respondent lawyer to comply with the Order dated September 6,1985 which directed him to submit a subdivision plan as required. On October 21, 1985, the trial court issued the second Order being assailed in this petition. The said Order reads: Acting on the "Second Motion for Reconsideration" filed by Atty. Teodoro Domalanta and finding the same to be justified, let an attorney's lien be annotated in the title of the property for 31 square meters as attorney's fees of said Atty. Teodoro Domalanta in addition to the original 90.5 square meters. (CA Decision, p. 8; Rollo, p. 37) On August 22, 1986, more than ten (10) months after the Orders of September 6, 1985 and October 21, 1985 had become final and executory, the petitioners as substituted heirs of the respondent lawyers' deceased clients filed a motion to set aside orders on the ground that the award of professional fees covering 121.5 square meters of the 271.5 square meter lot is unconscionable and excessive. After the respondent lawyer filed his Opposition to the above petitioners' motion, the lower court, on August 29, 1986, finding that the petitioners as substituted plaintiffs are not in full agreement with the respondent lawyer's claim for attorney's fees, set aside its Orders dated September 6, 1985 and October 21, 1985. On September 16, 1986, the respondent lawyer filed a motion for reconsideration stressing the fact that the payment of the professional services was pursuant to a contract which could no longer be disturbed or set aside because it has already been implemented and had since then become final. This motion was denied on October 3, 1986. On November 15, 1986, the respondent lawyer filed a motion to set aside the orders dated August 29, 1986 and October 3, 1986 reiterating his position that the Orders of September 6, 1985 and October 21, 1985 have become final and are already implemented. The respondent lawyer further asked for the modification of the October 21, 1985 Order to reflect 60.32 square meters instead of 31 square meters only since the stipulation in the Additional Contract for Professional Services entitled him to 60.32 square meters. After the petitioners' Opposition to the said motion was filed, the trial court, on February 26, 1987, rendered an Order with the following dispositive portion: WHEREFORE, this Court has no alternative but to set aside its orders of 29 August 1986 and 3 October 1986 and declare its Orders of 19 September 1979 and 21 October 1985 irrevocably final and executory. (CA Decision, p. 5; Rollo, p. 34) On Appeal, the Court of Appeals ruled in favor of the respondent lawyer by dismissing the appeal and the prayed for writ of preliminary injunction. Their subsequent motion for reconsideration having been denied', the petitioners filed the instant petition. The petitioners fault the respondent Court for its failure to exercise its inherent power to review and determine the propriety of the stipulated attorney's fees in favor of the respondent lawyer and accuse the respondent lawyer of having committed an unfair advantage or legal fraud by virtue of the Contract for Professional Services devised

by him after the trial court awarded him attorney's fees for P1,000.00 only instead of respecting the trust and confidence of the highest level reposed on him considering the close blood and affinal relationship between him and his clients. The petitioners contend that under the award for professional services, they may have won the case but would lose the entire property won in litigation to their uncle-lawyer. They would be totally deprived of their house and lot and the recovered damages considering that of the 271.5 square meters of the subject lot, the respondent lawyer is claiming 121.5 square meters and the remaining portion of 150 square meters would also go to attorney's fees since the said portion pertains to the lawyer's son by way of usufruct for ten (10) years. The aforesaid submissions by the petitioners merit our consideration. It is a well-entrenched rule that attorney's fees may be claimed in the very action in which the services in question have been rendered or as an incident of the main action. The fees may be properly adjudged after such litigation is terminated and the subject of recovery is at the disposition of the court. (see Camacho v. Court of Appeals, 179 SCRA 604 [1989]; Quirante v. Intermediate Appellate Court, 169 SCRA 769 [1989]). It is an equally deeply-rooted rule that contingent fees are not per se prohibited by law. They are sanctioned by Canon 13 of the Canons of Professional Ethics and Canon 20, Rule 20.01 of the recently promulgated Code of Professional Responsibility. However, as we have held in the case of Tanhueco v. De Dumo (172 SCRA 760 [1989]): . . . When it is shown that a contract for a contingent fee was obtained by undue influence exercised by the attorney upon his client or by any fraud or imposition, or that the compensation is clearly excessive, the Court must and will protect the aggrieved party. (Ulanday v. Manila Railroad Co., 45 Phil. 540 [1923]; Grey v. Insular Lumber Co., 97 Phil. 833 [1955]). In the case at bar, the respondent lawyer caused the annotation of his attorney's fees lien in the main action for partition docketed as Civil Case No. Q-12254 on the basis of a Contract for Professional Services dated August 30, 1979. We find reversible error in the Court of Appeals' holding that: When the reasonableness of the appellee's lien as attorney's fees over the properties of his clients awarded to him by the trial court had not been questioned by the client, and the said orders had already become final and executory, the same could no longer be disturbed, not even by the court which rendered them (Taada v. Court of Appeals, 139 SCRA 419). (CA Decision p. 7; Rollo, p. 36) On the contrary, we rule that the questioned Orders dated September 19, 1979 and October 21, 1985 cannot become final as they pertain to a contract for a contingent fee which is always subject to the supervision of the Court with regard to its reasonableness as unequivocally provided in Section 13 of the Canons of Professional Ethics which reads: 13. Contingent Fees. 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. (Emphasis supplied). There is no dispute in the instant case that the attorney's fees claimed by the respondent lawyer are in the nature of a contingent fee. There is nothing irregular about the execution of a written contract for professional services even after the termination of a case as long as it is based on a previous agreement on contingent fees by the

parties concerned and as long as the said contract does not contain stipulations which are contrary to law, good morals, good customs, public policy or public order. Although the Contract for Professional Services dated August 30, 1979 was apparently voluntarily signed by the late Aurelio Licudan for himself and on behalf of his daughter, petitioner Cristina Licudan-Campos and by the petitioner Wilfredo Licudan who both manifested in open court that they gave their free and willing consent to the said contract we cannot allow the said contract to stand as the law between the parties involved considering that the rule that in the presence of a contract for professional services duly executed by the parties thereto, the same becomes the law between the said parties is not absolute but admits an exceptionthat the stipulations therein are not contrary to law, good morals, good customs, public policy or public order ( see Philippine American Life Insurance Company v. Pineda, 175 SCRA 416 [1989]; Syjuco v. Court of Appeals, 172 SCRA 111 [1989]). Under Canon 20 of the Code of Professional Responsibility, a lawyer shall charge only fair and reasonable fees. In determining whether or not the lawyer fees are fair and reasonable, Rule 20-01 of the same Code enumerates the factors to be considered in resolving the said issue. They are as follows: 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 proferred case; f) The customary charges for similar services and the schedule of fees of the IBP Chapter to which he belongs; g) The amount involved in the controversy and the benefits resulting to the client from the service; h) The contingency or certainty of compensation; i) The character of the employment, whether occasional or established; and j) The professional standing of the lawyer. A similar provision is contained under Section 24, Rule 138 of the Revised Rules of Court which partly states that: Sec. 24. Compensation of attorneys; agreement as to fees. An attorney shall be entitled to have and recover from his client no more than a reasonable compensation for his services, with a view to the importance of the subject matter of the controversy, the extent of the services rendered, and the professional standing of the attorney. . . . A written contract for services shall control the amount to be paid therefor unless found by the court to be unconscionable or unreasonable. All that the respondent lawyer handled for his deceased sister and brother-in-law was a simple case of partition which necessitated no special skill nor any unusual effort in its preparation. The subsequent case for redemption was admittedly but an offshot of the partition case. Considering the close blood and affinal relationship between

the respondent lawyer and his clients, there is no doubt that Atty. Domalanta took advantage of the situation to promote his own personal interests instead of protecting the legal interests of his clients. A careful perusal of the provisions of the contract for professional services in question readily shows that what the petitioners won was a pyrrhic victory on account of the fact that despite the successful turnout of the partition case, they are now practically left with nothing of the whole subject lot won in the litigation. This is because aside from the 121.5 square meters awarded to Atty. Domalanta as attorney's fees, the said contract for professional services provides that the remaining portion shall pertain to the respondent lawyer's son by way of usufruct for ten (10) years. There should never be an instance where a lawyer gets as attorney's fees the entire property involved in the litigation. It is unconscionable for the victor in litigation to lose everything he won to the fees of his own lawyer. The respondent lawyer's argument that it is not he but his son Teodoro M. Domalanta, Jr. who is claiming the usufructuary right over the remaining portion of the subject lot is inaccurate. The records show that the matter of usufruct is tied up with this case since the basis for the said usufructuary right is the contract for professional services the reasonableness of which is being questioned in this petition. We find the ten-year usufruct over the subject lot part and parcel of the attorney's fees being claimed by the respondent lawyer. In resolving the issue of reasonableness of the attorney's fees, we uphold the time-honoured legal maxim that a lawyer shall at all times uphold the integrity and dignity of the legal profession so that his basic ideal becomes one of rendering service and securing justice, not money-making. For the worst scenario that can ever happen to a client is to lose the litigated property to his lawyer in whom an trust and confidence were bestowed at the very inception of the legal controversy. We find the Contract for Professional Services dated August 30, 1979, unconscionable and unreasonable. The amount of P20,000.00 as attorney's fees, in lieu of the 121.5 square meters awarded to the respondent lawyer and the ten-year usufructuary right over the remaining portion of 150 square meters by the respondent lawyer's son, is, in the opinion of this Court, commensurate to the services rendered by Atty. Domalanta. WHEREFORE, IN VIEW OF THE FOREGOING, the instant petition is GRANTED. The Court of Appeals' decision of September 12, 1989 is hereby REVERSED and SET ASIDE. Atty. Domalanta is awarded reasonable attorney's fees in the amount of P20,000.00. SO ORDERED.

NO.26 G.R. No. L-68838 March 11, 1991 FLORENCIO FABILLO and JOSEFA TANA (substituted by their heirs Gregorio Fabillo, Roman Fabillo, Cristeta F. Maglinte and Antonio Fabillo), petitioners, vs. THE HONORABLE INTERMEDIATE APPELLATE COURT (Third Civil Case Division) and ALFREDO MURILLO (substituted by his heirs Fiamita M. Murillo, Flor M. Agcaoili and Charito M. Babol), respondents. In the instant petition for review on certiorari, petitioners seek the reversal of the appellate court's decision interpreting in favor of lawyer Alfredo M. Murillo the contract of services entered into between him and his clients, spouses Florencio Fabillo and Josefa Taa. In her last will and testament dated August 16, 1957, Justina Fabillo bequeathed to her brother, Florencio, a house and lot in San Salvador Street, Palo, Leyte which was covered by tax declaration No. 19335, and to her husband, 1 Gregorio D. Brioso, a piece of land in Pugahanay, Palo, Leyte. After Justina's death, Florencio filed a petition for the probate of said will. On June 2, 1962, the probate court approved the project of partition "with the reservation that the ownership of the land declared under Tax Declaration No. 19335 and the house erected thereon be 2 litigated and determined in a separate proceedings." Two years later, Florencio sought the assistance of lawyer Alfredo M. Murillo in recovering the San Salvador property. Acquiescing to render his services, Murillo wrote Florencio the following handwritten letter: Dear Mr. Fabillo: I have instructed my stenographer to prepare the complaint and file the same on Wednesday if you are ready with the filing fee and sheriffs fee of not less than P86.00 including transportation expenses. Considering that Atty. Montilla lost this case and the present action is a revival of a lost case, I trust that you will gladly give me 40% of the money value of the house and lot as a contigent (sic) fee in case of a success. When I come back I shall prepare the contract of services for your signature. Thank you. Cordially yours, (Sgd.) Alfredo M. Murillo 3 Aug. 9, 1964 Thirteen days later, Florencio and Murillo entered into the following contract: CONTRACT OF SERVICES KNOW ALL MEN BY THESE PRESENTS: That I, FLORENCIO FABILLO, married to JOSEFA TANA, of legal age, Filipino citizen and with residence and postal address at Palo, Leyte, was the Petitioner in Special Proceedings No. 843,

entitled "In the Matter of the Testate Estate of the late Justina Fabillo, Florencio Fabillo, Petitioner" of the Court of First Instance of Leyte; That by reason of the Order of the Court of First Instance of Leyte dated June 2, 1962, my claim for the house and lot mentioned in paragraph one (1) of the last will and testament of the late Justina Fabillo, was denied altho the will was probated and allowed by the Court; That acting upon the counsel of Atty. Alfredo M. Murillo, I have cause(d) the preparation and filing of another case, entitled "Florencio Fabillo vs. Gregorio D. Brioso," which was docketed as Civil Case No. 3532 of the Court of First Instance of Leyte; That I have retained and engaged the services of Atty. ALFREDO M. MURILLO, married and of legal age, with residence and postal address at Santa Fe, Leyte to be my lawyer not only in Social Proceedings No. 843 but also in Civil Case No. 3532 under the following terms and conditions; That he will represent me and my heirs, in case of my demise in the two cases until their successful conclusion or until the case is settled to my entire satisfaction; That for and in consideration for his legal services, in the two cases, I hereby promise and bind myself to pay Atty. ALFREDO M. MURILLO, in case of success in any or both cases the sum equivalent to FORTY PER CENTUM (40%) of whatever benefit I may derive from such cases to be implemented as follows: If the house and lot in question is finally awarded to me or a part of the same by virtue of an amicable settlement, and the same is sold, Atty. Murillo, is hereby constituted as Atty. in-fact to sell and convey the said house and lot and he shall be given as his compensation for his services as counsel and as attorney-in-fact the sum equivalent to forty per centum of the purchase price of the house and lot; If the same house and lot is just mortgage(d) to any person, Atty. Murillo shall be given the sum equivalent to forty per centum (40%) of the proceeds of the mortgage; If the house and lot is leased to any person, Atty. Murillo shall be entitled to receive an amount equivalent to 40% (FORTY PER CENTUM) of the rentals of the house and lot, or a part thereof; If the house and lot or a portion thereof is just occupied by the undersigned or his heirs, Atty. Murillo shall have the option of either occupying or leasing to any interested party FORTY PER CENT of the house and lot. Atty. Alfredo M. Murillo shall also be given as part of his compensation for legal services in the two cases FORTY PER CENTUM of whatever damages, which the undersigned can collect in either or both cases, provided, that in case I am awarded attorney's fees, the full amount of attorney's fees shall be given to the said Atty. ALFREDO M. MURILLO; That in the event the house and lot is (sic) not sold and the same is maintained by the undersigned or his heirs, the costs of repairs, maintenance, taxes and insurance premiums shall be for the account of myself or my heirs and Attorney Murillo, in proportion to our rights and interest thereunder that is forty per cent shall be for the account of Atty. Murillo and sixty per cent shall be for my account or my heirs.

IN WITNESS HEREOF, I hereby set unto my signature below this 22nd day of August 1964 at Tacloban City. (Sgd.) FLORENCIO FABILLO (Sgd.) JOSEFA T. FABILLO WITH MY CONFORMITY: (Sgd.) ALFREDO M. MURILLO (Sgd.) ROMAN T. FABILLO (Sgd.) CRISTETA F. MAGLINTE 4 (Witness) (Witness) Pursuant to said contract, Murillo filed for Florencio Fabillo Civil Case No. 3532 against Gregorio D. Brioso to recover the San Salvador property. The case was terminated on October 29, 1964 when the court, upon the parties' joint motion in the nature of a compromise agreement, declared Florencio Fabillo as the lawful owner not only of the San Salvador property but also the Pugahanay parcel of land. Consequently, Murillo proceeded to implement the contract of services between him and Florencio Fabillo by taking possession and exercising rights of ownership over 40% of said properties. He installed a tenant in the Pugahanay property. Sometime in 1966, Florencio Fabillo claimed exclusive right over the two properties and refused to give Murillo his 5 share of their produce. Inasmuch as his demands for his share of the produce of the Pugahanay property were unheeded, Murillo filed on March 23, 1970 in the then Court of First Instance of Leyte a complaint captioned "ownership of a parcel of land, damages and appointment of a receiver" against Florencio Fabillo, his wife Josefa 6 Taa, and their children Ramon (sic) Fabillo and Cristeta F. Maglinte. Murillo prayed that he be declared the lawful owner of forty per cent of the two properties; that defendants be directed to pay him jointly and severally P900.00 per annum from 1966 until he would be given his share of the produce of the land plus P5,000 as consequential damages and P1,000 as attorney's fees, and that defendants be ordered to pay moral and exemplary damages in such amounts as the court might deem just and reasonable. In their answer, the defendants stated that the consent to the contract of services of the Fabillo spouses was vitiated by old age and ailment; that Murillo misled them into believing that Special Proceedings No. 843 on the probate of Justina's will was already terminated when actually it was still pending resolution; and that the contingent fee of 40% of the value of the San Salvador property was excessive, unfair and unconscionable considering the nature of the case, the length of time spent for it, the efforts exerted by Murillo, and his professional standing. They prayed that the contract of services be declared null and void; that Murillo's fee be fixed at 10% of the assessed value of P7,780 of the San Salvador property; that Murillo be ordered to account for the P1,000 rental of the San Salvador property which he withdrew from the court and for the produce of the Pugahanay property from 1965 to 1966; that Murillo be ordered to vacate the portion of the San Salvador property which he had occupied; that the Pugahanay property which was not the subject of either Special Proceedings No. 843 or Civil Case No. 3532 be declared as the exclusive property of Florencio Fabillo, and that Murillo be ordered to pay moral damages and the total amount of P1,000 representing expenses of litigation and attorney's fees. In its decision of December 2, 1975, the lower court ruled that there was insufficient evidence to prove that the Fabillo spouses' consent to the contract was vitiated. It noted that the contract was witnessed by two of their children who appeared to be highly educated. The spouses themselves were old but literate and physically fit.
7

In claiming jurisdiction over the case, the lower court ruled that the complaint being one "to recover real property from the defendant spouses and their heirs or to enforce a lien thereon," the case could be decided independent of the probate proceedings. Ruling that the contract of services did not violate Article 1491 of the Civil Code as said contract stipulated a contingent fee, the court upheld Murillo's claim for "contingent attorney's fees of 40% of the value of recoverable properties." However, the court declared Murillo to be the lawful owner of 40% of both the San Salvador and Pugahanay properties and the improvements thereon. It directed the defendants to pay jointly and severally to Murillo the amount of P1,200 representing 40% of the net produce of the Pugahanay property from 1967 to 1973; entitled Murillo to 40% of the 1974 and 1975 income of the Pugahanay property which was on deposit with a bank, and ordered defendants to pay the costs of the suit. Both parties filed motions for the reconsideration of said decision: Fabillo, insofar as the lower court awarded 40% of the properties to Murillo and the latter insofar as it granted only P1,200 for the produce of the properties from 1967 to 1973. On January 29, 1976, the lower court resolved the motions and modified its decision thus: ACCORDINGLY, the judgment heretofore rendered is modified to read as follows: (a) Declaring the plaintiff as entitled to and the true and lawful owner of forty percent (40%) of the parcels of land and improvements thereon covered by Tax Declaration Nos. 19335 and 6229 described in Paragraph 5 of the complaint; (b) Directing all the defendants to pay jointly and severally to the plaintiff the sum of Two Thousand Four Hundred Fifty Pesos (P2,450.00) representing 40% of the net produce of the Pugahanay property from 1967 to 1973; (c) Declaring the plaintiff entitled to 40% of the 1974 and 1975 income of said riceland now on deposit with the Prudential Bank, Tacloban City, deposited by Mr. Pedro Elona, designated receiver of the property; (d) Ordering the defendants to pay the plaintiff the sum of Three Hundred Pesos (P 300.00) as attorney's fees; and (e) Ordering the defendants to pay the costs of this suit. SO ORDERED. In view of the death of both Florencio and Justina Fabillo during the pendency of the case in the lower court, their children, who substituted them as parties to the case, appealed the decision of the lower court to the then Intermediate Appellate Court. On March 27, 1984, said appellate court affirmed in toto the decision of the lower 8 court. The instant petition for review on certiorari which was interposed by the Fabillo children, was filed shortly after Murillo himself died. His heirs likewise substituted him in this case. The Fabillos herein question the appellate court's interpretation of the contract of services and contend that it is in violation of Article 1491 of the Civil Code. The contract of services did not violate said provision of law. Article 1491 of the Civil Code, specifically paragraph 5 thereof, prohibits lawyers from acquiring by purchase even at a public or judicial auction, properties and rights which are the objects of litigation in which they may take part by virtue of their profession. The said prohibition, however, applies only if the sale or assignment of the property takes place during the pendency of the litigation 9 involving the client's property.

Hence, a contract between a lawyer and his client stipulating a contingent fee is not covered by said prohibition under Article 1491 (5) of the Civil Code because the payment of said fee is not made during the pendency of the litigation but only after judgment has been rendered in the case handled by the lawyer. In fact, under the 1988 Code of Professional Responsibility, a lawyer may have a lien over funds and property of his client and may apply 10 so much thereof as may be necessary to satisfy his lawful fees and disbursements. As long as the lawyer does not exert undue influence on his client, that no fraud is committed or imposition applied, or that the compensation is clearly not excessive as to amount to extortion, a contract for contingent fee 11 is valid and enforceable. Moreover, contingent fees were impliedly sanctioned by No. 13 of the Canons of Professional Ethics which governed lawyer-client relationships when the contract of services was entered into 12 between the Fabillo spouses and Murillo. However, we disagree with the courts below that the contingent fee stipulated between the Fabillo spouses and Murillo is forty percent of the properties subject of the litigation for which Murillo appeared for the Fabillos. A careful scrutiny of the contract shows that the parties intended forty percent of the value of the properties as Murillo's contingent fee. This is borne out by the stipulation that "in case of success of any or both cases," Murillo shall be paid "the sum equivalent to forty per centum of whatever benefit" Fabillo would derive from favorable judgments. The same stipulation was earlier embodied by Murillo in his letter of August 9, 1964 aforequoted. Worth noting are the provisions of the contract which clearly states that in case the properties are sold, mortgaged, or leased, Murillo shall be entitled respectively to 40% of the "purchase price," "proceeds of the mortgage," or "rentals." The contract is vague, however, with respect to a situation wherein the properties are neither sold, mortgaged or leased because Murillo is allowed "to have the option of occupying or leasing to any interested party forty per cent of the house and lot." Had the parties intended that Murillo should become the lawful owner of 40% of the properties, it would have been clearly and unequivocally stipulated in the contract considering that the Fabillos would part with actual portions of their properties and cede the same to Murillo. The ambiguity of said provision, however, should be resolved against Murillo as it was he himself who drafted the 13 contract. This is in consonance with the rule of interpretation that, in construing a contract of professional services between a lawyer and his client, such construction as would be more favorable to the client should be 14 adopted even if it would work prejudice to the lawyer. Rightly so because of the inequality in situation between an attorney who knows the technicalities of the law on the one hand and a client who usually is ignorant of the 15 vagaries of the law on the other hand. Considering the nature of the case, the value of the properties subject matter thereof, the length of time and effort exerted on it by Murillo, we hold that Murillo is entitled to the amount of Three Thousand Pesos (P3,000.00) as reasonable attorney's fees for services rendered in the case which ended on a compromise agreement. In so ruling, we uphold "the time-honored legal maxim that a lawyer shall at all times uphold the integrity and dignity of the legal profession so that his basic ideal becomes one of rendering service and securing justice, not moneymaking. For the worst scenario that can ever happen to a client is to lose the litigated property to his lawyer in 16 whom all trust and confidence were bestowed at the very inception of the legal controversy." WHEREFORE, the decision of the then Intermediate Appellate Court is hereby reversed and set aside and a new one entered (a) ordering the petitioners to pay Atty. Alfredo M. Murillo or his heirs the amount of P3,000.00 as his contingent fee with legal interest from October 29, 1964 when Civil Case No. 3532 was terminated until the amount is fully paid less any and all amounts which Murillo might have received out of the produce or rentals of the Pugahanay and San Salvador properties, and (b) ordering the receiver of said properties to render a complete report and accounting of his receivership to the court below within fifteen (15) days from the finality of this decision. Costs against the private respondent. SO ORDERED.

NO. 27 ( SAME CASE WITH NUMBER 14) G.R. No. 90983 September 27, 1991 LAW FIRM OF RAYMUNDO A. ARMOVIT, petitioner vs. COURT OF APPEALS, JUDGE GENARO C. GINES, Presiding Judge of Branch XXVI, Regional Trial Court, First Judicial Region, San Fernando, La Union, and BENGSON COMMERCIAL BUILDING, INC., respondents. Before the Court is Atty. Raymundo Armovit's claim for attorney's fees against the private respondent. It appears that Atty. Armovit was engaged as counsel for the private respondent in a complaint to have an extrajudicial foreclosure of certain properties by the Government Service Insurance System declared null and void; that the parties allegedly agreed that the private respondent shall pay P15,000.00 as initial compensation and twenty percent in contingent fees; that after trial, the defunct Court of First Instance rendered judgment annulling foreclosure and ordering the Government Service Insurance System to restructure the private respondent's loan; that thereafter, the System appealed; the on appeal, the Court of Appeals affirmed the decision of lower court; and that the Appellate Court's judgment has since attained finality. It also appears that when Atty. Armovit sought execution with the court a quo, he was informed by Romualdo Bengson president of the respondent corporation, that the firm has retained the services of Atty. Pacifico Yadao. He was also informed that the company would pay him the agreed compensation and that Atty. Yadao's fees were

covered by a separate agreement. The private respondent, however, later ignored his billings and over the phone, directed him allegedly not to take part in the execution proceedings. Forthwith, he sought the entry of an attorney's lien in the records of the case. The lower court allegedly refused to make the entry and on the contrary issued an order ordering the Philippine National Bank to "release to the custody of Mr. Romualdo F. Bengzon 1 and/or Atty Pacifico Yadao" the sum of P2,760,000.00 (ordered by the Court of Appeals as rentals payable by the Government Service Insurance System). Atty. Armovit then moved, apparently for the hearing of hi motion to recognize attorney's lien, and thereafter, the trial court. issued an order in the tenor as follows: When this case was called for hearing on the petition to record attorney's charging lien, Attys. Armovit and Aglipay appeared for the petitioners. Atty. Armovit informed the Court that they are withdrawing the petition considering that they are in the process of amicably settling their differences with the plaintiff, which manifestation was confirmed by Atty. Yadao as well as the plaintiffs, Romualdo Bengson and Brenda Bengson, who are present today. In view of this development, the petition to record attorney charging lien, the same being in order and not contrary to law, moral and public policy, as prayed for by Attys. Armovit and Aglipay, it hereby withdrawn. The parties, therefore are hereby directed to co ply faithfully with their respective obligations. SO ORDERED.
2

However, upon the turnover of the money to the private respondent, Mrs. Brenda Bengson (wife of Romualdo Bengzon delivered to Atty. Armovit the sum of P300,000.00 only. Armovit protested and demanded the amount of P552,000.0 twenty percent of P2,760,000.00), for which Mrs. Bengzon made assurances that he will be paid the balance. On November 4, 1988, however, Atty. Armovit received a order emanating from the trial court in the tenor as follows: During the hearing on the petition to record attorney's charge lien on October 11, 1988, Attys. Armovit and Aglipay withdrew their petition to record attorney's charging lien, which was duly approve petition to recordby the Court, after which the Court directed the parties to comp faithfully with their respective obligations. In compliance with the Order of this Court, the plaintiff submitted a pleading denominated as compliance alleging that petition (Atty. Armovit) has already received from the plaintiff the sum P300,000.00, Philippine Currency, as and by way of attorney's fees With the receipt by the petitioner from the plaintiff of this amount, the latter has faithfully complied with its obligation. WHEREFORE, the Order of this Court dated October 11, 1988 approving the withdrawal of the petition to record attorney's charging lien, on motion of the petitioner, is now final. SO ORDERED.
3

Reconsideration having been denied, Atty. Armovit went the Court of Appeals on a petition for certiorari and prohibition.

On August 25, 1989, the Court of Appeals rendered judgment dismissing the petition. Reconsideration having been likewise denied by the Appellate Court, Atty. Armovit instituted the instant appeal. Shortly thereafter, we required the private respondent comment. The private respondent did not materially traverse Atty. Armorvit's chronicle of events but added: that the private respondent hired the petitioner after the Government Service Insurance System had answered and that it was Atty. Benjam Bernardino who prepared the complaint; that for his appearances, Atty. Armovit was paid a total of 5 P108,000.00, not to mention "beach resort accommodations"; that Atty. Armovit did not inform the private respondent that the court had rendered judgment which they would have appealed; that they lost an appeal on account of Atty. Armovit's indiscretion; that the forthwith engaged the services of another lawyer, Atty. Yadao; and that it was the latter who prepared the brief in the Court Appeals (on GSIS's appeal). The private respondent also alleged that it opposed Atty. Armovit's effort to record his attorney's lien on grounds of allege nullity of the retainer agreement, Atty. Armovit's negligence and because of excessive fees demanded. The private respondent also insisted that the retainer agreement was signed by only one of seven directors, and it could no bind the corporation. Atty. Armovit, in any event, had also been allegedly more than sufficiently compensated. The private respondent alleged that Atty. Armovit had bee paid P300,000.00 an amount approved by the court, and an amount he accepted and for which he is allegedly estoppel from claiming a higher amount. The order of the court has the effect of res judicata, the private respondent claimed, as well as a compromise agreement which is immediately executory. The disposition of the Court of Appeals was that since the receipt evidencing payment to Atty. Armovit of the sum 6 P300,000.00 "was without any qualification as 'advance' 'partial' or 'incomplete'," the intention of the parties was that was full payment. The Appellate Court also noted Atty. Armorvit's withdrawal of his motion to record attorney's lien and figured that Atty. Armovit was satisfied with the payment P300,000,00. The only issue is whether or not Atty. Armovit is entitled to the sum of P252,000.00 more, in addition to the sum P300,000.00 already paid him by the private respondent.There is no question that the parties had agreed on a compensation as follows: a) P15,000.00 by way of acceptance and study fee, payable within five (5) days from date; b) 20% contingent fee computed on the value to be recovered b favorable judgment in the cases; and c) the execution and signing of a final retainer agreement complete with all necessary details.
8 7

(While the parties' agreement speaks of "a final retain agreement" to be executed later, it does not appear that the parties did enter into a "final" agreement thereafter.) The private respondent's version however is that while it may be true that the agreed compensation was twenty percent of all recoveries, the parties later agreed on a compromise sum approved allegedly by the trial court, per its Order of October 11, 1988. The Court is inclined to believe that Atty. Armovit never agreed on the compromise sum of P300,000.00. It is true that he did agree to withdraw his motion to annotate attorney's lien, but because the parties were "in the process 9 of amicably settling their differences" and not because Atty. Armovit had agreed to accept a lower amount as full

payment. There is nothing, on top of that, Atty. Armovit's manifestation that would suggest that he was accepting the sum of P300,00.00 as agreed final payment, other than the fact that an agreement was supposedly certain. We quote: ATTY. ARMOVIT: Your Honor, we would like to manifest in Court that we served notice to the counsel of the plaintiff, Bengson Commercial Building, a copy of the petition to record attorney's charging lien, and together with the president of the corporation, Mr. Romualdo Bengson, and his wife, Mrs. Brenda Bengson, we have discussed the problem and we all agreed upon is an earnest one at this time, this representation is withdrawing his petition to record charging lien. ATTY. YADAO: No objection, Your Honor, because we have to agree with Atty. Armovit. I am in 10 full accord with this. There is nothing there that would indicate Atty. Armovit's willingness to accept, in fact, a lower figure in consideration of his withdrawal of his request to enter attorney's lien. What the Court takes his statement to mean is that he was withdrawing his request on the certainty that the private respondent would pay him the money, presumably, under more becoming circumstances. The Court does not therefore see how the private respondent can hold Atty. Armovit to have been in estoppel. The fact that Atty. Armovit did not, after all, accept the sum of P300,000.00 as final compensation is indeed indicated by the behavior of the private respondent, through Mrs. Romualdo Bengson, when she assured Atty. 11 Armovit that the balance was forthcoming. According to Mrs. Bengson, she wished the rest of the Bengsons to witness the final payment and when the occasion was present, wished for a postponement on account of "All 12 Saints Day." The parties never therefore amended their original agreement, and what appears to the Court is a clear effort on the part of a client, with the apparent approval of the trial court, to renege on a valid agreement with its lawyer. The Court believes that the trial court, in accepting the private respondent's "compliance" as a final payment of Atty. Armovit's fees, was guilty of a grave abuse of discretion. The private respondent had nothing with which to comply, and the parties, as manifested by Atty. Armovit, were "in the process [merely] of amicably settling their 13 differences." It is apparent furthermore that the trial judge himself was out to deny Atty. Armovit the agreed compensation. In his order of October 4, 1988, he commanded: The PNB is hereby ordered and directed to release to the custody of Mr. Romualdo F. Bengson and /or Atty. Pacifico Yadao, counsel for the plaintiff, the sum of Two Million Seven Hundred Sixty Thousand Pesos (P2,760,000.00), Philippine Currency for the satisfaction of the rentals of 14 the Bengson Building against the GSIS. in spite of the fact that Atty. Armovit had remained the private respondent's counsel of record. It is fundamental that unless a lawyer has been validly discharged, his authority to act for his client continues and should be 15 recognized by the court.

The fact that the receipt evidencing payment by the private respondent of the amount of P300,000.00 "was 16 without any qualification as 'advance' or 'partial' or 'incomplete'," as the Court of Appeals noted and the Court of Appeals took to mean "full payment", will not weaken Atty. Armovit's demand for the balance. There is nothing in the receipt that will suggest that will suggest that it was full payment either, and the fact that Atty. Armovit accepted it does not mean that he was satisfied that it was final payment. The fact of the matter is that the private respondent had assured him that the balance was forthcoming. The private respondent can not justifiably downplay Atty. Armovit as negligent (for failing to appeal) or his demand for fees excessive (that he had been paid enough). Atty. Armovit, after all, succeeded in obtaining a favorable decision for his client, an although his prayer for various damages were denied, he secceeded in obtaining a substantial award (P1,900,00.00 in unpaid rentals) for his client. On appeal, the Court of Appeals sustained his theory. It should be noted that the private respondent had in fact stood to lose substantial properties on foreclosure Atty. Armovit not only restored to the private respondent its foreclosured properties, he succeeded in having the private respondent's loans restructed and the Government Service Insurance System pay rentals. No client can ask a better result from a lawyer. Obviously, the private respondent's effort to downgrade Atty. Armovit's performance is a wild, if not cheap, shot of a client out to evade its obligations to its lawyer. The fact that Atty. Armovit may have been paid substantially (in initial fees) while the case was dragging is no justification for denying him the full amount under their agreement. It has been held that initial fees and fees paid in the progress of litigation are independent of the 17 contingent fees. That the retainer agreement was never approved by the board of the corporation is also a poor excuse because the fact of the matter is that the private respondent did deliver to Atty. Armovit the sum of P300,000.00 in partial payment, and the private respondent can not now deny him the balance bay alleging lack of authority of the Bengson spouses. Contingent fees are valid in this jurisdiction. It is true that attorney's fees must at all times be reasonable; however, we do not find Atty. Armovit's claim for "twenty percent of all recoveries" to be unreasonable. In the 20 case of Aro v. Naawa, decided in 1969, this Court awarded the agreed fees amid the efforts of the client to deny him fees by terminating his services. In parallel vein, we are upholding Atty. Armovit's claim for P252,000.00 more pursuant to the contingent fee agreement amid the private respondent's own endeavours to evade its obligations. Several times, we have come down hard on erring practitioners. We will not however be slow either, in coming to the rescue of aggrieved brother-lawyers in protecting the integrity of the bar from unscrupulous litigants. WHEREFORE, premises considered, the petition is GRANTED. The private respondent is ORDERED to pay the petitioner the sum of P252,000.00. Costs against the private respondent. IT IS SO ORDERED.
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NO. 28 G.R. Nos. 89971-75 October 17, 1990 CELIA B. CHUA, MARITES P. MARTINEZ and ARACELI A. ELARDO, For Themselves and in Their Capacity as Attorneys-In-Fact of 2,345, Former Daily-Paid Employees of Stanford microsystems. Inc., LUDIVINA L. SABALZA, ADELIZA E. CANTILLO and REMIGIO P. PESTAO, For Themselves and in Their Capacity As Attorneys-In-Fact of 3,244 Former Daily-Paid Employees of Stanford Microsystems, Inc., MARIO A. MENTIL, REMIGIO F. SANTOS and NOEL VILLENA, For Themselves and in Their Capacity As Attorneys-In-Fact of 599 Former Monthly-Paid Employees of Stanford Microsystems Inc., MAXIMO E. DAQUIL, GEORGE T. BARTOLOME and ERNESTO L. CONCEPCION, For Themselves and in Their Capacity As Attorneys-In-Fact of 300 Former Non-Unionized and Confidential Employees of Stanford Microsystems, Inc., and LIQUIDATION COMMITTEE OF STANFORD MICROSYSTEMS, INC., Duly Appointed by the Securities and Exchange Commission, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION LABOR ARBITER DOMINADOR M. CRUZ, Public Respondents, and FERNANDO R.GUMABON, CARMELITA TOLENTINO, RICARTE CABASE, TERESITA ALORAN, ENCARNITA JULIANO, ANITA DAILEG, ERNESTO ALARCON, JOHNNY ARAGON, LEONCIO PIMENTEL, RODOLFO MERCADO, DANIEL ALMAZAN, ORLANDO DE LEON, EDITHA LIMA, MARILYN INES, LINDA ESTABA, NELIA DE BORJA, CECILIA CRUZ, FE RAYALA, ADELIZA MOYA, NATY LAMAN, JANET PONCE, ESTELA ALABASO, MILAGROS CERRA, JOSEPHINE BAYONETA and ANNABELLE SALABIT private respondents.

The instant petition questions the jurisdiction of the National Labor Relations Commission (NLRC) in issuing three (3) resolutions dated October 6, 1988, November 3, 1988 and January 3, 1990 in NLRC Injunction Case No. 1793. The October 6, 1988 resolution denied for lack of merit the petitioners' petition for writ of prohibition to stay further proceedings in the five (5) consolidated labor cases involving the former employees of Stanford Microsystems, Inc. pending with respondent Labor Arbiter Dominador M. Cruz. The November 3, 1988 resolution ordered petitioners' Liquidation Committee of Stanford Microsystems, Inc. to defer the payment of SIX MILLION PESOS (P6,000,000.00) to the former employees of Stanford Microsystems, Inc. The January 3, 1990 resolution, among others directed petitioner Liquidation Committee to deposit with the NLRC the deducted attorney's fees representing ten percent (10%) of the amount due and/or to be paid to the former employees of Stanford Microsystems Inc. In December, 1985, Stanford Microsystems, Inc. (Stanford) a service conductor corporation filed a petition for suspension of payments and appointment of rehabilitation receiver (Annex "A", Petition) with the Securities and Exchange Commission (SEC). The petition was docketed as SEC Case No. 2930. At that time, Stanford had seven (7) secured creditor banks and more or less seven thousand one hundred twenty-four (7,124) employees. On February 5, 1986, the SEC declared Stanford to be in a state of suspension of payments. It issued an order (Annex "B", Petition) appointing Sycip Gorres & Velayo & Co. (SGV) as the rehabilitation receiver. In view of these developments, the former employees of Stanford filed with the Department of Labor and Employment (DOLE) cases for money claims, to wit: (a) STANFORD TECHNICAL AND OFFICE STAFF EMPLOYEES ASSOCIATION (STOSEA)-FFW, THROUGH ITS PRESIDENT, NOEL VILLENA AND FOR AND IN BEHALF OF ITS EIGHT HUNDRED SIXTY SUM (860) MEMBERS, Complainants, v. STANFORD MICROSYSTEMS, INC. AND CRISTINO CONCEPCION, JR., IN HIS CAPACITY AS PRESIDENT AND GENERAL MANAGER, Respondents, NLRCNCR CASE NOS. 1-106-86 AND 1-117-86, filed by herein Petitioners Mario A. Mentil, Noel Villena, and Remigio F. Santos, acting for themselves and as the duly appointed Attorneys-In-Fact of Five Hundred Ninety Nine (599) Monthly-Paid Employees for Stanford, and assigned to Labor Arbiter Ceferina Diosana-for illegal lockout and payment of thirteenth month pay, vacation leave and sick leave benefits and subsidiary seminar fund and recreational activities fund. This case has been decided but execution was suspended upon motion of the complainants; (b) RODOLFO FERNANDEZ, ET AL., Petitioners, v. STANFORD MICROSYSTEMS, INC. , Respondent, NCR CASE NO. 1-294-86, filed by herein Petitioners Rodolfo Fernandez, for himself, Maximo E. Daquil George T. Bartolome and Ernesto L. Concepcion, acting for themselves and as the duly appointed Attorneys-In-Fact of Three Hundred (300) Confidential and Non-Unionized employees of Stanford, and assigned to Labor Arbiter Raymundo R. Valenzuela which case have been archived at the instance of the complainants; (c) STANFORD MICROSYSTEMS, INC. LABOR UNION-FFW Petitioners, v. STANFORD MICROSYSTEMS, INC., Respondent, CASE NO. 1-039-86, filed by herein Petitioners Celia B. Chua, Araceli A. Elardo and Marites P. Martinez, acting for themselves and as the duly appointed Attorneys-In-Fact of Two Thousand Three Hundred Forty Five (2,345) Daily-Paid employees of Stanford, and formerly assigned to Labor Arbiter Benigno C. Villarente, now assigned to Labor Arbiter Alex Arcadio Lopez

which case has been decided but the execution of the decision and the case archived at the instance of the complainants; (d) LUDIVINA L. SABALZA, ADELIZA E. CANTILLO, REMIGIO P. PESTAO, ET AL ., Complainants v. STANFORD MICROSYSTEMS, INC. ET AL., Respondents, CASE NO. 12-4882-86, filed by herein Petitioners Ludivina L. Ssbalza, Adelina E. Cantillo, and Remegio P. Pestao, acting for themselves and as the duly appointed Attorneys-In-Fact of Three Thousand Two Hundred Forty Four (3,244) Daily-Paid employees of Stanford, and formerly assigned to Labor Arbiter Evangeline Lubaton for payment of separation pay, back (strike duration) pay and thirteenth month pay for 1985, cash conversion of vacation leave and sick leave and other money claims. The petitioner Stanford Liquidation Committee has intervened in this case and moved to stay proceedings; (e) SMI LABOR UNION-FFW ET AL., Petitioners v. STANFORD MICROSYSTEMS, INC. Respondent, NCR-NS-3-124-85, CASE NO. 3-753-86, filed by herein Petitioners Ludivina L. Sabalza, Adelina E. Cantillo, and Remigio P. Pestao, acting for themselves and as the duly appointed Attorneys-InFact of Three Thousand Two Hundred Forty Four (3,244) Daily-Paid employees of Stanford, and assigned to Labor Arbiter Dominador M. Cruz for payment of separation pay, back (strike duration) pay and thirteenth month pay for 1985, cash conversion of vacation leave and sick leave, and other money claims. The petitioner Stanford Liquidation Committee has intervened in this case and moved to stay proceedings; (f) LUDIVINA SABALZA, ET AL., Petitioners v. STANFORD MICROSYSTEMS, INC., Respondent, CASE NO. 2-628-86, filed by herein Petitioners Ludivina L. Sabalza, Adeliza E. Cantillo, and Remigio P. Pestao, acting for themselves and as the duly appointed Attorneys-In-Fact of Three Thousand Two Hundred Forty Four (3,244) Daily-Paid employees of Stanford, and assigned to Labor Arbiter Dominador M. Cruz for payment of separation pay, back (strike duration) pay and thirteenth month pay for 1985, cash conversion of vacation leave and sick leave, and other money claims. The petitioner Stanford Liquidation Committee has intervened in this case and moved to stay proceedings; (g) LUDIVINA SABALZA, ET AL., FERNANDO R. GUMABON ET AL., Complainants v. Stanford Microsystems, Inc., Respondent, CASE NO. 11-4543-86, filed by herein Petitioners Ludivina L. Sabalza, Adeliza E. Cantillo, and Remigio P. Pestao, acting for themselves and as the duly appointed Attorneys-In-Fact of Three Thousand Two Hundred Forty Four (3,244) Daily-Paid employees of Stanford, and formerly assigned to Labor Arbiter Armando Polintan for payment of separation pay, back (strike duration) pay and thirteenth month pay for 1985, cash conversion of vacation and sick leave, and other money claims. The petitioner Stanford Liquidation Committee has intervened in this case and moved to stay proceedings; and (h) FERNANDO R. GUMABON ET AL., Petitioners v. STANFORD MICROSYSTEMS, INC., Respondent, CASE NO. 3-803-86, filed by herein Petitioners Mario A. Mentil, Noel Villena, and Remigio F. Santos, acting for themselves and as the duly appointed Attorneys-In-Fact of Five Hundred Ninety Nine (599) Monthly-Paid employees of Stanford, and formerly assigned to Labor Arbiter Martinez

for payment of separation pay, back (strike duration) pay and thirteenth month pay for 1985, cash conversion of vacation leave and sick leave, and other money claims. The petitioner Stanford Liquidation Committee has intervened in this case and moved to stay proceedings . (Petition, pp. 40-43) Except for cases (a), (b) and (c) which were assigned to different labor arbiters, cases (d) to (h) were consolidated and as signed to respondent Labor Arbiter Dominador M. Cruz. The petitioners in case (d) comprise the former daily paid employees of Stanford who were members of the Stanford Microsystems, Inc., Labor Union ("SMILU"). They formed a "Caretaker Committee", and the individual members appointed Ludivina L. Sabalza, Adeliza E. Cantillo and Remigio P. Pestano as Attorneys-In-Fact for the purpose of prosecuting and settling their claims against Stanford, both before the SEC and the DOLE. The Attorneys-In-Fact engaged the services of private respondent, Atty. Vicente Ocampo, to act as their legal counsel. In January, 1987, the SEC disapproved the Rehabilitation Plan submitted by SGV and dismissed Stanford's Petition for Suspension of Payments and Appointment of a Rehabilitation Receiver. (Annex "C', Petition) Subsequently, the SEC ordered Stanford's liquidation. The seven (7) secured creditor banks of Stanford, namely: (a) Philippine Commercial International Bank; (b) Far East Bank and Trust Company; (c) Private Development Corporation of the Philippines; (d) Equitable Banking Corporation; (e) Union Bank of the Philippines; (f) Philippine National Bank; and (g) City Trust Banking Corporation which have an aggregate principal exposure of Two Hundred Thirty One Million Six Hundred Thousand Pesos (P231,600,000.00), and the twelve (12) duly authorized Attorneys-In-Fact of six thousand three hundred forty one (6,341) former employees of Stanford (89% of the total employees) with employees' claims of approximately One Hundred Twenty Five Million Seven Hundred Ten thousand Pesos (P125,710,000.00) reached a mutually acceptable plan for the speedy and orderly liquidation of Stanford. Hence, representatives of the seven (7) secured banks and the employees' Attorneys-In- Fact assisted by their respective counsel held marathon meetings and negotiations in the Office of Director Luna C. Piezas of the DOLE, National Capital Region resulting in the execution of a Memorandum of Agreement dated March 13, 1987 ("MOA", Annex "D", Petition). The MOA was signed by all the parties and duly attested by Director Luna C. Piezas. The principal terms of the MOA are as follows: (a) The Secured Creditor Banks will foreclose their real estate and chattel mortgages; (b) The Secured Creditor Banks will consolidate and retain title to the foreclosed properties in their respective names and contribute the same to a 'Pool of assets' under the control and administration of a Liquidation Committee composed of eleven (11) members, representing the

Secured Creditor Banks, and the Six Thousand Three Hundred Forty One (6,341) former employees of Stanford who authorized the MOA; (c) The MOA Liquidation Committee will sell all the foreclosed properties and distribute the proceeds among the Secured Creditor Banks and the Six Thousand Three Hundred Forty One (6,341) employees. The share of the remaining Seven Hundred Eighty Three (783) employees shall be placed in escrow for their benefit until they claim their share; (d) The sharing formula for the distribution of the sales proceeds principally took into account the principal claims of the claimants; and (e) All suits inconsistent with the MOA shall be withdrawn. (Petition, p. 30) The eleven (11) members of the MOA Liquidation Committee are the following: (a) Philippine Commercial International Bank; (b) Far East Bank and Trust Company; (c) Private Development Corporation of the Philippines; (d) Equitable Banking Corporation; (e) Union Bank of the Philippines; (f) Philippine National Bank; (g) Citytrust Banking Corporation; (h) Celia B. Chua, Araceli A. Elardo and Marites P. Martinez, acting for themselves and as the duly appointed Attorneys-In-Fact of Two Thousand Three Hundred Forty Five (2,345) former daily Paid employees of Stanford; (i) Ludivina L. Sabalza, Adeliza E. Cantillo, and Remigio P. Pestao, acting for themselves and as the duly appointed Attorneys In-Fact of Three Thousand Two Hundred Forty Four (3,244) former Daily-Paid employees of Stanford; (j) Mario A. Mentil, Noel Villena, and Remigio F. Santos, acting for themselves and as the duly appointed Attorneys-In-Fact of Five Hundred Ninety Nine (599) former Monthly-Paid employees of Stanford; and (k) Rodolfo Fernandez, for himself, Maximo E. Daquil, George T. Bartolome and Ernesto L. Concepcion, acting for themselves and as the duly appointed Attorneys-In-Fact of Three Hundred (300) former confidential and Non-Unionized employees of Stanford. (Petition, pp. 30-31) Pursuant to the MOA, the secured creditor banks foreclosed their mortgages, consolidated title over the real properties and contributed the same to the "Pool of Assets." The MOA Liquidation Committee then proceeded with the sale of the foreclosed properties.

It is to be noted that the group of employees whose attorneys-in-fact are Ludivina L. Sabalza, Adeliza E. Cantillo and Remigio P. Pestao were represented in the negotiations leading to the execution of the MOA by new counsel, the Bacungan Larcia Bacungan Law Office. Respondent Atty. Vicente Ocampo's legal services were terminated by the attorneys-in-fact as early as October and November 1986 in view of his refusal to represent the group in the negotiations with the other former Stanford employees and Stanford creditors towards an out-of-court settlement of their claims against Stanford. This termination was confirmed in a letter dated March 9, 1987 (Annex "K", Petition) which was received by Atty. Ocampo on March 11, 1987. The pertinent portion of the termination letter reads: It is with deep regret that we, the regular daily-paid rank-and-file employees of Stanford Microsystems, Inc. (SMI), accept your decision not to represent us in our negotiations, with various creditors of SMI, including former fellow employees, towards an out-of-court settlement of our claims against the company. . . . We, therefore, have no recourse but to engage the services of another counsel in connection with the case now pending before the Ministry of Labor, the Securities and Exchange Commission and other courts or tribunals including the negotiations for an out-of- court settlement of our claims. ... (Petition, p. 44) On October 2, 1987, the SEC en banc issued an order (Annex "E", Petition) appointing the same eleven (11) members of the MOA Liquidation Committee as the permanent SEC Liquidator of Stanford pursuant to Presidential Decree No. 902-A, as amended. Atty. Ocampo claiming to be still the counsel for the group represented by Ludivina L. Sabalza, Adeliza E. Cantillo and Remigio P. Pestao and other former Stanford employees filed a "class suit" for the reconsideration of the October 2, 1987 order. In the hearing en banc held on December 17, 1987, the SEC directed the Stanford Liquidation Committee and Atty. Ocampo to submit the number and names of the former Stanford employees represented by them. On January 22, 1988, the Stanford Liquidation Committee, filed a compliance with the directive (Annex "F", Petition) together with the following documents: (a) Copies of all the Special Powers of Attorney executed by the Six Thousand Three Hundred Forty One (6,341) former employees of Stanford [Eighty Nine Percent (89%) of the total employees] in favor of their Attorneys-In-Fact who signed the MOA; (b) List of the names of all the Six Thousand Three Hundred Forty One (6,341) former employees of Stanford who executed Special Powers of Attorney, which list was prepared by Carlos J. Valdes & Co. on the basis of the special powers of attorney executed (Annex "F-l", but refer to Annex "Cl" of Annex "Q"); (c) Letters-certifications dated 21 January 1988 and 27 January 1988 of Carlos J. Valdes & Co. that based on their verification, Six Thousand Three Hundred Forty One (6,341) former Stanford employees actually executed Special Powers of Attorney in favor of the workers' representatives in the MOA Liquidation Committee and the Stanford Liquidation Committee (Annexes "F-2" and "F-2-A"). (Petition, p. 32) On the other hand, Atty. Ocampo failed to comply with the directive. On October 12, 1988, the SEC en banc denied Atty. Ocampo's motion for reconsideration of the October 2, 1987 order (Annex "E", Petition) and various other motions. It issued an Omnibus Order (Annex "H") approving the MOA and confirming the appointment of the members of the MOA Liquidation Committee as members of the Stanford

Liquidation Committee. In the same order, the SEC clarified that Atty. Ocampo represents only thirty four (34) employees. Actually, Atty. Ocampo represents only twenty five (25) former Stanford employees who are now the private respondents in the instant petition. As regards the money claims filed by the former employees of Stanford, the following events meanwhile transpired: On June 30, 1988, the Stanford Liquidation Committee filed a Manifestation (Annex "L", Petition) with the labor arbiters, including Labor Arbiter Cruz, before whom the labor cases filed against Stanford were pending, advising said labor arbiters of the October 2, 1987 SEC order appointing the Stanford Liquidation Committee as the permanent liquidator of Stanford and of the execution of the MOA among the secured creditor banks and six thousand three hundred forty one (6,341) former employees of Stanford. On September 19, 1988, the petitioners, including the complainants in the consolidated labor cases except the twenty five (25) private respondents represented by Atty. Ocampo, filed a Joint Motion to Stay Proceedings (Annex "M", Petition) praying that the Labor Arbiters stay proceedings in the labor cases pending before them. On the other hand, Atty. Ocampo on behalf of the twenty five (25) private respondents filed an Urgent Petition for Injunction with Prayer for Issuance of a Temporary Restraining Order in the consolidated labor cases pending before respondent Labor Arbiter Cruz. In response to these motions, the Labor Arbiters except respondent Labor Arbiter Cruz issued orders staying proceedings in the cases pending before them. (Annexes, "N", "N-1" and "N-2", Petition). For his part, respondent Labor Arbiter Cruz issued an order dated September 2, 1988 (Annex "O", Petition) the dispositive portion of which reads: WHEREFORE, pursuant to the provisions of Article 218 (e) of the Labor Code, as amended, in relation to Rule XIV, Section 1, paragraph 2, of the Revised Rules of the National Labor Relations Commission, in order to preserve the rights of the parties during the pendency of the cases, the intervenor liquidation Committee of Stanford Microsystems, Inc., its Chairman, Vice-Chairman, members, agents and/or representatives should be, as they are hereby: (1) RESTRAINED from implementing the Memorandum of Agreement dated March 13, 1987 marked as Annex "A" and attached to the record, or from delivering/paying the Six Million Pesos (P6,000,000.00) to the alleged employees/workers representatives, Ludivina Sabalza, Celia Chua, Mario Mentil, and Maximo Daquil, for distribution and payment to the employees and workers concerned in the defunct SMI; and (2) DIRECTED to deposit the amount of SIX MILLION PESOS (P6,000,000.00) with the Cashier of the NLRC Main Office at the Phoenix Building, Intramuros, Manila, immediately upon receipt of this Order, subject to further disposition of the undersigned Labor Arbiter. In view of this restraining order, the petitioners, on October 6, 1988, filed with the National Labor Relations Commission (NLRC) a petition for prohibition/injunction with preliminary injunction and/or temporary restraining order (NLRC Injunction Case No. 1793; Annex "Q", Petition). Attached to the petition was the manifestation of the attorneys-in-fact for the 3,097 former Stanford employees who were not parties to the consolidated labor cases pending before respondent Labor Arbiter Cruz asserting the lack of jurisdiction of Labor Arbiter Cruz. On this same day, October 6, 1988, the NLRC en banc issued the first questioned resolution (Annex "R", Petition) the pertinent portion of which reads:

INJUNCTION CASE NO. 1793 ... Enjoining respondent Labor Arbiter Dominador M. Cruz, private respondents, their attorneys, representatives, agents and any other person acting for and in their behalf from implementing the questioned Order dated September 20, 1988, in NLRC NCR Case No. NS-3-124-85 Case No. 3-753-86, entitled SMI Labor Union-FFW, LUDIVINA SABALZA, et al. Fernando Gumabon, et al. Complainants v. Stanford Microsystems, Inc. Respondent, Liquidation Committee of Stanford Microsystems, Inc., Intervenor, NLRC NCR Case No. 11-4543-86, entitled Ludivina Sabalza, et al., Fernando R. Gumabon, et al., Complainants v. Stanford Microsystems, Inc., Respondent, Liquidation Committee of Stanford Microsystems, Inc., Intervenor, which restrained herein SEC Appointed liquidation Committee of Stanford Microsystems Inc., from implementing the Memorandum of Agreement dated March 13, 1987 in the matter of liquidating the property of the said company and distributing the amount of P6,000,000.00 to the former employees of the same company pursuant to the provisions of the Agreement and, the said amount to be deposited to the Cashier of the Commission, said Order being a patent nullity; and 2) to deny, for lack of merit, the petition for Writ of Prohibition to stay further proceedings in the five (5) cited labor cases involving the former employees of the company pending before the respondent Labor Arbiter. On October 21, 1988, Atty. Ocampo, on behalf of his twenty five (25) clients filed a "Motion For Partial Reconsideration of Resolution of the Respondent NLRC dated October 6, 1988, etc." (Annex "S", Petition) On November 3, 1988, the NLRC issued the second questioned resolution (Annex "T", Petition) the relevant portion of which reads: INJUNCTION CASE NO. 1793 ... However, Petitioner Liquidation Committee of Stanford Microsystems, Inc. its attorneys, representatives, agents and any other person acting for and in its behalf is ordered to hold in abeyance and/or defer the payment of the P6,000,000.00 to the former employees of the said company after the Commission rules on the said Partial Motion for Reconsideration. On November 8, 1988, the petitioners filed a joint opposition/motion for reconsideration (Annex "V", Petition) of the two (2) NLRC resolutions. On November 28, 1988, Atty. Ocampo filed an "Amended Motion for Partial Reconsideration of Resolution dated October 6, 1988 with Memorandum of Agreement ...". (Annex "X", Petition) On December 21, 1988, petitioner Stanford Liquidation Committee filed an "Urgent Motion for Early Resolution with Opposition to Atty. Vicente T. Ocampo's Amended Motion for Partial Reconsideration of Resolution dated October 6, 1988 ...". Atty. Ocampo, in turn filed a "Motion to Cite For Contempt and Urgent Motion To Stop Delivery of Deducted Attorney's Fees To Any Lawyers and To Deposit The Same With the NLRC." (Annex "Z", Petition) On January 3, 1989, the NLRC issued the third questioned resolution (Annex "AA", Petition), to wit: INJUNCTION CASE NO. 1793 ... After deliberation, the Commission sitting en banc, RESOLVED: 1) to require the petitioner SEC Liquidation Committee of Stanford Microsystems, Inc., its Chairman Helen Osias; Co-petitioners Mario A. Mentil; Noel Villena, Remegio (sic) F. Santos, Rodolfo Fernandez; Maximo F. Daquil, George T. Bartolome, Ernesto C. Concepcion, Celia B. Chua, Araceli A. Elardo, Marites P. Martinez, Ludivina L. Sabalza, Adelina E. Cantillo and Remegio (sic) F. Pestao, as well as their respective counsel of record, to answer the respondents' Motion to Cite For Contempt and Urgent Motion To Stop Delivery of Deducted Attorney's Fees To Any Lawyer

And To Deposit The Same With The NLRC and to show cause why they should not be cited in contempt by this Commission within five (5) days from receipt hereof; 2) to direct, as it hereby directs, the said petitioners to strictly comply with the Resolution of this Commission dated November 3, 1988 and, 3) to direct said petitioner SEC Appointed Liquidation Committee and its agents or any person acting in its behalf to deposit to this Committee within five (5) days from receipt of this Resolution, the deducted attorney's fees representing 10% of the amount due and/or to be paid to the former employees of Stanford Microsystems, Inc. (Rollo, p. 54) On January 18 and 24, 1989, the petitioners filed their respective motions for reconsideration (Annex "BB", "BB-1", and "BB-3", Petition) of the aforementioned NLRC resolution. Also on February 10, 1989, petitioner Stanford Liquidation Committee filed a Second Urgent Motion for Early Resolution (Annex "CC", Petition) of the motion and amended motion for partial reconsideration filed by Atty. Ocampo and the motion for reconsideration filed by petitioner Stanford Liquidation Committee. On July 11, 1989, petitioner Stanford Liquidation Committee filed a motion to lift restraining order and/or third urgent motion for early resolution (Annex "DD", Petition). These motions notwithstanding, the NLRC had not acted upon them nor had it resolved the injunction case despite the parties' submission of their respective memoranda prompting the petitioners to file the instant petition. At the time the three questioned NLRC resolutions were issued, the MOA Liquidation Committee was already in the process of distributing money claims to the former employees of Stanford. The petitioners state: xxx xxx xxx 8. As of June 1989, the MOA Liquidation Committee has realized the amount of approximately Forty One Million Four Hundred Twenty Eight Thousand Five Hundred Seventy One and 42/100 Pesos (P41,428,571.42) from net sales proceeds of the properties in the 'Pool of Assets' out of which Fourteen Million Five Hundred Thousand Pesos (P14,500,000.00) should have already been distributed to all the employees of Stanford, whether or not signatories of the MOA. xxx xxx xxx 11. Out of the Fourteen Million Five Hundred Thousand Pesos (P14,500,000.00) which is available and approved for distribution to the former Stanford employees, only Five billion Two Hundred Seventy Two Thousand One Hundred Eighty Six and 17/100 Pesos (P5,272,186.17) has been distributed in the first distribution. 12. The amounts of Seven Hundred Twenty Seven thousand Eight Hundred Thirteen and 83/100 Pesos (P727,813.83) (balance of first distribution), and Eight billion Five Hundred thousand Pesos (P8,500,000.00) (amount for second distribution), for a total of Nine Million Two Hundred Twenty Seven Thousand Eight Hundred Thirteen and 83/100 Pesos (P9,227,813.83) remain undistributed to all the Stanford employees due to respondent NLRC's restraining order issued on 03 November 1988 or more than Ten (10) months ago. 13. There is extreme urgency in allowing the distribution of the foregoing amount to the former Stanford employees considering that: (a) The former Stanford employees, especially the Six thousand Three Hundred Forty One (6,341) employees who signed the MOA in an amicable settlement of

their claims, are unjustly prevented from getting the amounts due them under the MOA, having awaited such distribution since 1985 when Stanford closed; (b) A great number of said employees are jobless and/or underemployed with insufficient incomes; and (c) The highly probable danger of an outbreak of violent unrest due to the unjust and unconscionable delay in distribution brought about by the machinations of Atty. Ocampo. 14. Hence, the instant Petition for certiorari and Prohibition With Prayer for Preliminary Injunction and/or Temporary Restraining Order under Rule 65 of the Rules of Court. (Petition, pp. 25-27) In a resolution dated June 25, 1990 we gave due course to the instant petition. The petitioners aver that the NLRC acted with grave abuse of discretion amounting to lack of jurisdiction and/or without or in excess of its jurisdiction in issuing the three (3) questioned resolutions considering that: I THE SECURITIES AND EXCHANGE COMMISSION HAS ORIGINAL AND EXCLUSIVE JURISDICTION OVER THE LIQUIDATION OF STANFORD MICROSYSTEMS, INC., INCLUDING THE PROCEDURES FOR SETTLING THE MONEY CLAIMS OF FORMER WORKERS AND EMPLOYEES. xxx xxx xxx II THE MEMORANDUM OF AGREEMENT DATED 13 MARCH 1987 IS VALID, FAIR AND REASONABLE AND IS IN ACCORD WITH LAW, MORALS, PUBLIC POLICY AND ESTABLISHED JURISPRUDENCE. xxx xxx xxx III REPUBLIC ACT NO. 6715 ONLY TOOK EFFECT ON 21 MARCH 1989 AND HAS NO RETROACTIVE APPLICATION TO THE INSTANT CASE, SPECIALLY WHERE SUCH APPLICATION WILL ADVERSELY AFFECT VESTED RIGHTS OF REPUBLIC ACT NO. 6715. xxx xxx xxx IV INDUBITABLY, ATTY. VICENTE T. OCAMPO DOES NOT HAVE THE INTEREST OF LABOR AT HEART AS HE HAS CONSISTENTLY AND PERSISTENTLY ATTACKED, DELAYED AND IMPEDED THE LIQUIDATION OF STANFORD MICROSYSTEMS, INC. AND THE DISTRIBUTION OF THE 'LIQUIDATION' PROCEEDS THEREOF TO THE FORMER EMPLOYEES OF STANFORD MlCROSYSTEMS, INC. (Petition, pp. 66, 68-69) xxx xxx xxx

Jurisdiction over liquidation proceedings of insolvent corporations is vested in the Securities and Exchange Commission (SEC) pursuant to Presidential Decree No. 902-A, as amended. On the other hand, jurisdiction over money claims of employees against their employers is vested in the Labor Arbiter whose decision may be appealed to the National Labor Relations Commission (NLRC) pursuant to Article 217 of the Labor Code. Following these allocations of jurisdiction, the Solicitor General states that the jurisdiction problems between the NLRC and the SEC can be reconciled with neither one depriving the other of its jurisdiction. Thus, the Solicitor General opines that this can be achieved by simply allowing the Labor Arbiter and the NLRC to continue with their adjudication of the employees' money claims, subject to the condition that any award they may obtain against Stanford must be filed with the Liquidation Committee as one of the established claims against the debtorcompany." (Rollo, Vol. II, p. 1630) The petitioners, however, maintain that the SEC jurisdiction over the liquidation of Stanford should include the money claims, now pending before respondent Labor Arbiter Dominador Cruz because they refer to claims to be submitted in the course of the liquidation proceedings. An insolvency proceeding is similar to the settlement of a decedent's estate in that it is a proceeding in rem and is binding against the whole world. Therefore, all persons which have interest in the subject matter involved, whether or not they are given notice are equally bound. Thus, "a liquidation of similar import or other equivalent general liquidation must also necessarily be a proceeding in rem so that all other interested persons whether known to the parties or not may be bound by such proceedings ." (Philippine Savings Bank v. Lantin, 124 SCRA 476 [1983]; Emphasis supplied) The rule is that a declaration of bankruptcy or a judicial liquidation must be present before preferences over various money claims may be enforced. Since a liquidation proceeding is a proceeding in rem, all claims of creditors whether preferred or non-preferred, the Identification of the preferred ones and the totality of the employer's asset should be brought into the picture. There can then be an authoritative, fair and binding adjudication. (See Development Bank of the Philippines v. Santos, 171 SCRA 138 [1989]). The money claims of workers pose a special problem of jurisdiction when liquidation proceedings are on-going because of the highly preferred nature given by law to said claims. In these cases, however, the problem poses no particular difficulty because the workers themselves have voluntarily opted to participate in the liquidation proceedings. Their representatives in the MOA Liquidation Committee participated in the discussions and proceedings which led to the orders to distribute payments to the various claimants. The workers themselves oppose the orders of the NLRC which have denied them to speedy receipt of funds they urgently need. It is a grave abuse of discretion on the part of NLRC to raise a technical question of its own jurisdiction when the workers over whom it is raised reject the assertion of that jurisdiction. The NLRC has allowed only 25 out of 7,124 employees and a former counsel trying to claim alleged unpaid fees to delay the immediate payment of the worker's claims. Consequently, the Solicitor General's submission that the money claims of Stanford's former employees pending with respondent Labor Arbiter Dominador M. Cruz should be allowed to continue and that the money awards be later presented to the Stanford Liquidation Committee is not the correct solution. It would only spawn needless controversy, delays, and confusion. Significantly, the money claims were presented after Stanford filed a petition for suspension of payments and appointment of a rehabilitation receiver with the SEC. In other words, the money claims were filed when Stanford was already experiencing financial difficulties. Apparently, the employees filed the cases to enforce money claims which they might not collect in view of Stanford's financial crisis and impending closure. Under these circumstances, and bearing in mind the welfare of the workers and their voluntary choices as to how their claims may be equitably settled to their satisfaction, we rule that such money claims were correctly submitted in the course of the liquidation proceedings at the SEC.

The petitioners themselves (the former employees who were complainants in the money claims cases pending with the different labor arbiters including those with respondent Labor Arbiter Cruz except for the twenty-five private respondents represented by Atty. Ocampo) filed the motion to stay proceedings in the money claim cases with DOLE on the ground that" ... the proceedings in the instant labor cases which refer to the claims of the Stanford employees against Stanford should be stayed and the subject claims be submitted in the course of the liquidation proceedings under the jurisdiction of the SEC." (Petition, p. 77) Significantly, the petitioners point out that all the other labor arbiters except for the respondent Labor Arbiter granted the motion to stay proceedings in the money claims pending before them. Respondent Labor Arbiter Cruz was assigned to handle five (5) consolidated money claims affecting 3,244 former Stanford employees. With this group, were former employees represented by Ludivina L. Sabalza, Adeliza E. Cantillo and Remigio P. Pestao who initially hired the services of Atty. Ocampo. However, because of the questioned NLRC resolution, all the other workers, or around 3,097 former employees who were never covered by the jurisdiction of respondent Labor Arbiter Cruz have also been adversely affected. This brings us to the other issue regarding the effect of the Memorandum of Agreement dated March 13, 1987 (MOA) executed by the seven (7) secured creditor banks of Stanford and the 6,341 former Stanford employees. As earlier stated, at the time Stanford filed a petition for suspension of payments and appointment of rehabilitation receiver with SEC, Stanford had seven (7) secured creditor banks and approximately 7,124 employees. On March 13, 1987, the seven secured creditor banks of Stanford and 6,341 former employees executed a Memorandum of Agreement to speed up the orderly liquidation of Stanford. All the creditor banks and the said employees were represented by their respective counsel in the negotiations which were supervised by Regional Director Luna C. Piezas of the DOLE, National Capital Region. The SEC approved the MOA. In its en banc omnibus order dated October 12, 1988 (Annex "H") the SEC said: The Memorandum of Agreement having been entered into voluntarily and freely by the parties after taking into consideration all existing conditions appears fair and reasonable. This is the only available solution to labor's sharing in the proceeds it appearing that all properties of Stanford had been encumbered by creditor-banks. xxx xxx xxx The Memorandum of Agreement (MOA) was executed by the representatives of the secured creditor-banks and labor on March 13, 1987, prior to the order of dissolution of SMI by this Commission. The MOA was conceived to pursue extrajudicially money claims of the Parties thereto to avoid lengthy litigations. xxx xxx xxx The purpose of the Commission's directive requiring submission of the special powers of attorney is precisely to, see for itself if the laborers are given maximum protection and security in the memorandum of agreement. A reading of its features shows that the agreement is fair and reasonable and to the best interest of labor considering that almost all the properties of SMI were mortgaged to and foreclosed by the secured-creditor banks. Yet under this agreement, the secured-creditor-banks are willing to share to labor 35% of whatever proceeds can be generated from the disposition of the foreclosed properties. xxx xxx xxx

In opposing intervenos's manifesatation opposing submission of alleged updated lists and special powers of attorney, the liquadation committee denies the allegation of fraud employed in securing the consent of six thousand three hundred forty (6,340) employees to represent them in the Memorandum of Agreement. Verily, it is incredible for so many employees to have consented to their misrepresentation; if at all, perhaps a few number can be misled in so doing. Anyway, as correctly pointed out by the liquidation committee, nobody complained to the Commission regarding such fraud and misrepresentation. (Annex "H", pp. 332-341) It is precisely because of the execution of the MOA that the petitioners filed the motion to stay proceedings in the money claims pending before the labor arbiters. Under the scheme of the MOA the following events transpired: xxx xxx xxx 13. Petitioner Stanford Liquidation Committee regularly files report on its activities, as well as those of the MOA Liquidation Committee, with the SEC. For the distribution of the sales proceeds (realized out of the properties contributed to the Pool in accordance with the MOA) to the former Stanford employees, petitioner Stanford Liquidation Committee formulated the following guidelines: (a) The amounts available for distribution under the MOA shall be distributed to: (i) All Six Thousand Three Hundred Forty One (6,341) former employees of Stanford who executed Special Powers of Attorney in favor of the employees' Attorneys-In-Fact who signed the MOA; and (ii) All former employees of Stanford willing to be bound by the MOA by signing the Affidavit of Acceptance/Affirmation [Annex "B" of the Trust Agreement (Annex "I")] upon receipt of his/her 'crossed' cashier's check. (b) The share of the other Seven Hundred Eighty Three (783) Stanford employees (who have not yet signed special powers of attorney) shall be held in escrow for their benefit until they claim the same. (c) Distribution shall be pro rata on the basis of the General List of Employees and their claims, duly audited by Carlos J. Valdes & Co. (d) Authorized deductions for attorney's fees and other expenses shall be deducted and delivered to the appropriate Attorneys-In-Fact. (e) Distribution shall be via 'crossed' cashier's checks issused by Philippine Commercial International Bank, Far East Bank & Trust Company, Equitable Banking Corporation, Citytrust, and Philippine National Bank, payable directly to the individual Stanford employees themselves. (f) The physical distribution of the aforementioned cashier's checks (which shall be on a uniform but staggered basis) shall be the responsibility of the respective Attorneys-In-Fact (Trustees). Accordingly, the respective Attorneys-In-Fact (Trustees) shall announce the venue/s and date/s of actual physical distribution, in coordination with the appropriate banks.

(g) Any two (2) of the following Identification documents shall be required to be presented: (i) Stanford Id (ii) Present Employer's Id (iii) Driver's License (iv) SSS/GSIS Id (v) Passport (vi) Current NBI Id/Certificate (vii) Other acceptable Ids (h) A representative from Carlos J. Valdes & Co. will be present at each distribution center to witness the receipt of the individual 'crossed' cashier's checks and the signing of the Affidavits/Affirmation, by each Stanford employee. (i) Any Stanford employee who is not able to claim his/her cashier's check on his/her designated date may claim the same on the succeeding dates of distribution. Checks which remain unclaimed for three (3) months shall be returned and kept for safekeeping by the Stanford Liquidation Committee. (j) The Attorneys-In-Fact (Trustees) shall submit regular written reports to the Stanford Liquidation Committee relating to the distribution. (k) The Notice of Distribution will be published in the Bulletin Today and the People's Journal, and will be announced over radio and television (DZRH, DZME and DZXL). (14) Further, the duly appointed Attorneys-In-Fact of the Six Thousand Three Hundred Forty One (6,341) former Stanford employees [Eighty Nine Percent (89%) of all Stanford employees], petitioners herein, who authorized the MOA, executed a Trust Agreement dated 12 October 1988 (Annex "I"), as Trustees for the distribution of the individual 'crossed' cashier's checks to the former Stanford employees. 15. In September 1988, petitioner Stanford Liquidation Committee approved an initial distribution of Six Million Pesos (P6,000,000.00) in sales proceeds via 'crossed' cashier's checks payable directly to the former Stanford employees. The share in the sales proceeds of each Stanford employees was based on computation audited by Carlos J. Valdez & Co. (Petition, pp. 36-39) Considering these circumstances, we rule that NLRC committed grave abuse of discretion in refusing to stay the proceedings in the money claims pending before respondent Labor Arbiter Cruz and when it deferred the payment of P6,000,000.00 to the former Stanford employees. We agree with the petitioners that the Memorandum of Agreement dated March 13, 1987 is valid, fair and reasonable, and is in accord with law, morals, public policy and established jurisprudence.

Article XIII of the Constitution (paragraph 3, section 3) provides for voluntary modes of settling labor disputes, to wit: xxx xxx xxx The State shall promote the principle of shared responsibility between workers and employers and the preferential use of voluntary modes in settling disputes, including conciliation and shall enforce their mutual compliance therewith to foster industrial peace. This policy is echoed under Article 227 of the Labor Code which provides: Compromise Agreement.-Any compromise settlement, including those involving labor standard laws, voluntarily agreed upon by the parties with the assistance of the Bureau or the regional office of the Department of Labor, shall be final and binding upon the parties. The National Labor Relations Commission or any court shall not assume jurisdiction over issues involved therein except in case of non-compliance thereof or if there is prima facie evidence that the settlement was obtained through fraud, misrepresentation, or coercion. Recently, in Republic Act 6715, the promotion of the preferential use of voluntary modes of settling labor disputes was again reiterated. In fact, as early as 1963, under the Industrial Peace Act, we have ruled that compromise agreements executed by workers or employees and their employer to settle their differences if done in good faith are Valid and binding among the parties. (Dionela v. Court of Industrial Relations, 8 SCRA 832 [1963]; Pampanga Sugar Development Co., Inc. v. Court of Industrial Relations, 114 SCRA 725 [1982]). Undoubtedly, the MOA was executed in good faith and the employees were duly represented during the negotiations which were supervised by a Regional Director of the DOLE. More important, the rights of the employees were safeguarded and protected not only during the negotiations but also at the implementation of the compromise agreement. However, may a minority of the employees which is equivalent to less than 1% of the total employees (25) represented by Atty. Ocampo prevent the enforcement of the Memorandum of Agreement executed by employees representing about 89% of the total number of employees (6,341 out of a total 7,124 employees; 783 not represented in the negotiations but their shares placed in escrow for their benefit under the MOA)? The answer is in the negative. In the case of Dionela vs. Court of Industrial Relations supra , we ruled: The main question for determination in this case is whether the compromise agreement pursuant to which the complaint in Case No. 598-ULP had, inter alia, been withdrawn and then dismissed is binding upon petitioners herein. The latter maintains that it is not, but the lower court held otherwise, upon the ground that it is an accepted rule under our laws that the will of the majority should prevail over the minority' citing Betting Ushers Union (PLUM) v. Jai-alai, L9330, June 29, 1957 and Jesalva et al. v. Bautista, L-11928 to L-11930, March 24, 1959-and that the action taken by petitioners herein as minority members of the Union 'is contrary to the policy of the Magna Carta of Labor, which promotes the settlement of differences between management and labor by mutual agreement,' and that if said action were tolerated, 'no employer would ever enter into any compromise agreement for the minority members of the Union will always dishonor the terms of the agreement and demand for better terms.' The view thus taken by the lower court is correct. Indeed, otherwise, even collective bargaining

agreements would cease to promote industrial peace and the purpose of Republic Act No. 875 would thus be defeated. As regards the January 3, 1989 NLRC resolution which directed petitioner Stanford Liquidation Committee to deposit with the NLRC the deducted attorney's fees representing 10% of the amount due and/or to be paid to the former employees of Stanford Microsystems, Inc. we agree with the petitioners that such directive was jurisdictionally defective and premature. Such directive is premature because the NLRC, in effect, prematurely and unduly disposed of, resolved and prejudged the contentious issues raised in the Stanford Employees' Injunction case, based on the bare assertions of Atty. Ocampo and his twenty five (25) clients the private respondents herein. The Solicitor General, who agrees with the petitioners that the NLRC resolution is premature aptly observed: ... [A]ny attorney's fee that may be awarded in the aforesaid cases would be assessed from whatever money award is made in favor of the employees. In other words, the attorney's fee is not a Stanford obligation but a lien on the employees' money award. By requiring the Liquidation Committee to make deposit, the NLRC in effect would shift the obligation from the employees to Stanford. (Public respondent's Memorandum, p. 1638) Obviously, the NLRC directive was for the benefit of respondent Atty. Vicente Ocampo who is claiming attorney's fees as counsel of the group of former Stanford employees headed by Ludivina L. Sabalza, Adeliza Cantillo and Remigio P. Pestao. But as stated earlier in this decision, the group terminated the services of Atty. Ocampo when he refused to represent them in the negotiations with the creditors and other former employees of Stanford. This, notwithstanding, Atty. Ocampo insisted on acting as counsel of the group by filing pleadings on their behalf with SEC and NLRC. He opposed the appearance dated June 30, 1988 (Annex "NN", Petition) filed by the Bacungan Larcia Bacungan law offices in the case pending before the SEC and the respondents Labor Arbiter Cruz and NLRC, in substitution of Atty. Ocampo, which appearance bears the conformity of the group. Eventually, however, the SEC found that Atty. Ocampo represented only thirty four (34) employees which is less than 1% of the total Stanford employees. The record shows that Atty. Ocampo filed with the SEC a Notice of Attorney's Lien dated November 11, 1987, to wit: The undersigned counsel, Atty. VICENTE T. OCAMPO LAW OFFICES, hereby file their Notice of Attorney's Lien in the above entitled case and its incidents on their claim for attorney's fees on the contingent basis, in the amount equivalent to twenty five percent (25%) of the back (strike duration) pay or similar benefit, and ten percent (10%) of the cash conversion of the unused vacation and sick leave with pay and 13th month's pay for 1985, separation pay, and other money pay claims or benefits which may be due and payable to the workers and employees of SMI involved herein, and recipients thereof, as a result of the filing and/or prosecution of such actions as are deemed necessary under the premises and/or judgements which may be rendered in their favor, pursuant to the constract of legal services by and between the said attorneys and the said worker and employees represented by the Caretaker Committee, composed of Ludivina L. Sabalza, Adeliza Cantillo, Remegio Pestao, Merian Ocampo, and Leticia Tabora, and Fernando Gumabon. A xerox copy of said contract of legal services is hereby attached as Annex "A" hereof. (Emphasis supplied). (Petition, p. 129) Since the contract for legal services was on. a contingent basis, Atty. Ocampo as counsel can be paid only if he wins the case for the group. As it turned out, however, Atty. Ocampo's services were terminated by the group as early as October and November 1986 when he refused to represent the group in the negotiations with the other creditors of Stanford for an out of court settlement of their claims resulting in the execution of the Memorandum of Agreement. In an earlier case involving Atty. Ocampo, entitled Ocampo v. Lerum (162 SCRA 498 [1988]), we ruled:

The record of the case clearly discloses that The private respondent Atty. Lerum was primarily responsible for negotiating for the PALEA the retroactive wage increases mentioned earlier, to the exclusion of petitioner Atty. Ocampo. PAL could validly deal with the Biangco Faction represented by Atty. Lerum because no court order had been issued restraining PAL from doing so. The record of the case also reveals that Atty. Ocampo tried his best to enjoin the negotiations initiated by Atty. Lerum by questioning the same before the Court of Industrial Relations and even this Court. On the basis of the foregoing observations, We cannot see how Atty. Ocampo could be entitled to any part of the said attorney's fees. The attorney's fees emanated from the retroactive wage increases negotiated by Atty. Lerum. Accordingly, and under the circumstances obtaining in this case, the said attomey's fees should belong to Atty. Lerum to the exclusion of Atty. Ocampo. We, therefore, find no grave abuse of discretion on the part of the public respondents in reaching this conclusion. (at p. 502) Considering that Atty. Ocampo took no part in the negotiations leading to the execution of the Memorandum of Agreement, a compromise agreement among the creditors and former employees of Stanford to liquidate Stanford which we rule as valid, we find no plausible reason for Atty. Ocampo to interfere with its implementation by filing complaints and/or pleadings with the SEC, the Labor Arbiter and the NLRC in his effort to collect attorney's fees not due him. With the foregoing findings, we find no need to discuss the other arguments posed by the petitioners. WHEREFORE, the instant petition is GRANTED. The questioned resolutions dated October 6, 1988, November 3, 1988 and January 3, 1989 of the National Labor Relations Commission are declared NULL and VOID and are hereby SET ASIDE. The Court Orders: 1) Respondent Labor Arbiter Dominador M. Cruz to desist from conducting further proceedings in Case No. 124882-86, Case No. 3-753-86; Case No. 2-6280-86; Case No. 11-4543-86 and Case No. 3-803-86; 2) Respondent National Labor Relations Commission and Labor Arbiter Dominador M. Cruz to desist from interfering in the implementation of the Memorandum of Agreement dated March 13, 1987 in the matter of the liquidation Committee under the jurisdiction of the Securities and Exchange Commission; and 3) Private respondents and Atty. Vicente T. Ocampo and associates, their representatives, agents and any other person assisting them or acting for them and on their behalf to desist from interfering with the implementation of the Memorandum of Agreement, the liquidation of the Stanford Microsystems, Inc., and the exercise by the Stanford Liquidation Committee duly appointed by the Securities and Exchange Commission of its functions. No costs. SO ORDERED.

NO. 29 ( SAME WITH NO 22) G.R. No. 86100-03 January 23, 1990 METROPOLITAN BANK AND TRUST COMPANY, petitioner, vs. THE HONORABLE COURT OF APPEALS and ARTURO ALAFRIZ and ASSOCIATES, respondents. This petition for review on certiorari impugns the decision of the Court of Appeals in CA-G.R. Nos. 08265-08268 affirming the order of Branch 168, Regional Trial Court, National Capital Judicial Region, in Civil Cases Nos. 1912328, 19136 and 19144, fixing attorney's fees and directing herein petitioner Metropolitan Bank and Trust Company (Metrobank, for brevity), as defendant in said civil cases, to pay its attorneys, herein private respondent Arturo Alafriz and Associates, movant therein, the amount of P936,000.00 as attorney's fees on a quantum meruit basis. The records show that from March, 1974 to September, 1983, private respondent handled the above-mentioned civil cases before the then Court of First Instance of Pasig (Branches I, II, VI, X, XIII, XIX, XX AND XXIV) in behalf of 2 petitioner. The civil cases were all for the declaration of nullity of certain deeds of sale, with damages. The antecedental facts which spawned the filing of said actions are undisputed and are hereinunder set forth as found by the trial court and adopted substantially in the decision of respondent court. A certain Celedonio Javier bought seven (7) parcels of land owned by Eustaquio Alejandro, et al., with a total area of about ten (10) hectares. These properties were thereafter mortgaged by Javier with the petitioner to secure a loan obligation of one Felix
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Angelo Bautista and/or International Hotel Corporation. The obligors having defaulted, petitioner foreclosed the mortgages after which certificates of sale were issued by the provincial sheriff in its favor as purchaser thereof Subsequently, Alejandro, alleging deceit, fraud and misrepresentation committed against him by Javier in the sale of the parcels of land, brought suits against Javier et al., and included petitioner as defendant therein. It was during the pendency of these suits that these parcels of land were sold by petitioner to its sister corporation, Service Leasing Corporation on March 23, 1983 for the purported price of P600,000.00. On the same day, the properties were resold by the latter to Herby Commercial and Construction Corporation for the purported price of P2,500,000.00. Three months later, or on June 7, 1983, Herby mortgaged the same properties with Banco de Oro for P9,200,000.00. The lower court found that private respondent, did not have knowledge of these transfers and transactions. As a consequence of the transfer of said parcels of land to Service Leasing Corporation, petitioner filed an urgent motion for substitution of party on July 28, 1983. Private respondent, on its part, filed on August 16, 1983 a verified motion to enter in the records of the aforesaid civil cases its charging lien, pursuant to Section 37, Rule 138 of the Rules of Court, equivalent to twenty-five percent (25%) of the actual and current market values of the litigated properties as its attorney's fees. Despite due notice, petitioner failed to appear and oppose said motion, as a result of which the lower court granted the same and ordered the, Register of Deeds of Rizal to annotate the attorney's liens on the certificates of title of the parcels of land. Meanwhile, the plaintiffs Alejandro, et al. in the aforesaid civil cases, which had been consolidated and were pending before the Regional Trial Court of Pasig, filed a motion to dismiss their complaints therein, which motion the lower court granted with prejudice in its order dated September 5, 1983. On December 29, 1983, the same court ordered the Register of Deeds to annotate the attorney's liens of private respondent on the derivative titles which cancelled Transfer Certificates of Title Nos. 453093 to 453099 of the original seven (7) parcels of land hereinbefore adverted to. On May 28,1984, private respondent filed a motion to fix its attorney's fees, based on quantum meruit, which motion precipitated an exchange of arguments between the parties. On May 30, 1984, petitioner manifested that it had fully paid private respondent; the latter, in turn, countered that the amount of P50,000.00 given by petitioner could not be considered as full payment but merely a cash advance, including the amount of P14,000.00 paid to it on December 15, 1980. It further appears that private respondent attempted to arrange a compromise with petitioner in order to avoid suit, offering a compromise amount of P600,000.00 but the negotiations were unsuccessful. Finally, on October 15,1984, the court a quo issued the order assailed on appeal before respondent court, granting payment of attorney's fees to private respondent, under the following dispositive portion: PREMISES CONSIDERED, the motion is hereby granted and the Metropolitan Bank and Trust 4 Company (METROBANK) and Herby Commercial and Construction Corporation are hereby ordered to pay the movant Arturo Alafriz and Associates the amount of P936,000.00 as its 5 proper, just and reasonable attorney's fees in these cases. On appeal, respondent court affirmed the order of the trial court in its decision promulgated on February 11, 1988. A motion for reconsideration, dated March 3, 1988, was filed by petitioner but the same was denied in a resolution promulgated on November 19, 1988, hence the present recourse. The issues raised and submitted for determination in the present petition may be formulated thus: (1) whether or not private respondent is entitled to the enforcement of its charging lien for payment of its attorney's fees; (2) whether or not a separate civil suit is necessary for the enforcement of such lien and (3) whether or not private

respondent is entitled to twenty-five (25%) of the actual and current market values of the litigated properties on a quantum meruit basis. On the first issue, petitioner avers that private respondent has no enforceable attorney's charging lien in the civil cases before the court below because the dismissal of the complaints therein were not, in the words of Section 37, 6 Rule 138, judgments for the payment of money or executions issued in pursuance of such judgments. We agree with petitioner. On the matter of attorney's liens Section 37, Rule 138 provides: . . . He shall also have a lien to the same extent upon all judgments for the payment of money, and executions issued in pursuance of such judgments, which he has secured in a litigation of his client, from and after the time when he shall have caused a statement of his claim of such lien to be entered upon the records of the court rendering such judgment, or issuing such execution, and shall have caused written notice thereof to be delivered to his client and to the adverse party; and he shall have the same right and power over such judgments and executions as his client would have to enforce his lien and secure the payment of his just fees and disbursements. Consequent to such provision, a charging lien, to be enforceable as security for the payment of attorney's fees, requires as a condition sine qua non a judgment for money and execution in pursuance of such judgment secured in the main action by the attorney in favor of his client. A lawyer may enforce his right to fees by filing the necessary petition as an incident in the main action in which his services were rendered when something is due his 7 client in the action from which the fee is to be paid. In the case at bar, the civil cases below were dismissed upon the initiative of the plaintiffs "in view of the frill 8 satisfaction of their claims." The dismissal order neither provided for any money judgment nor made any monetary award to any litigant, much less in favor of petitioner who was a defendant therein. This being so, private respondent's supposed charging lien is, under our rule, without any legal basis. It is flawed by the fact that there is nothing to generate it and to which it can attach in the same manner as an ordinary lien arises and attaches to real or personal property. In point is Morente vs. Firmalino, cited by petitioner in support of its position. In that case, movant-appellant attorney sought the payment of his fees from his client who was the defendant in a complaint for injunction which was dismissed by the trial court after the approval of an agreement entered into by the litigants. This Court held: . . . The defendant having suffered no actual damage by virtue of the issuance of a preliminary injunction, it follows that no sum can be awarded the defendant for damages. It becomes apparent, too, that no amount having been awarded the defendant, herein appellant's lien could not be enforced. The appellant, could, by appropriate action, collect his fees as attorney. Private respondent would nevertheless insist that the lien attaches to the "proceeds of a judgment of whatever 10 11 nature," relying on the case of Bacolod-Murcia Milling Co. Inc. vs. Henares and some American cases holding that the lien attaches to the judgment recovered by an attorney and the proceeds in whatever form they may be.
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The contention is without merit just as its reliance is misplaced. It is true that there are some American cases holding that the lien attaches even to properties in litigation. However, the statutory rules on which they are based and the factual situations involved therein are neither explained nor may it be said that they are of continuing validity as to be applicable in this jurisdiction. It cannot be gainsaid that legal concepts of foreign origin undergo a

number of variegations or nuances upon adoption by other jurisdictions, especially those with variant legal systems. In fact, the same source from which private respondent culled the American cases it cited expressly declares that "in the absence of a statute or of a special agreement providing otherwise, the general rule is that an attorney has no lien on the land of his client, notwithstanding such attorney has, with respect to the land in question, successfully prosecuted a suit to establish the title of his client thereto, recovered title or possession in a suit prosecuted by such client, or defended successfully such client's right and title against an unjust claim or an 13 unwarranted attack," as is the situation in the case at bar. This is an inescapable recognition that a contrary rule obtains in other jurisdictions thereby resulting in doctrinal rulings of converse or modulated import. To repeat, since in our jurisdiction the applicable rule provides that a charging lien attaches only to judgments for money and executions in pursuance of such judgment, then it must be taken in haec verba. The language of the law is clear and unequivocal and, therefore, it must be taken to mean exactly what it says, barring any necessity for 14 elaborate interpretation. Notably, the interpretation, literal as it may appear to be, is not without support in Philippine case law despite the 15 dearth of cases on all fours with the present case. In Caina et al. vs. Victoriano, et al., the Court had the occasion to rule that "the lien of respondent is not of a nature which attaches to the property in litigation but is at most a 16 personal claim enforceable by a writ of execution." In Ampil vs. Juliano-Agrava, et al., the Court once again declared that a charging lien "presupposes that the attorney has secured a favorable money judgment for his client 17 . . ." Further, in Director of Lands vs. Ababa, et al., we held that "(a) charging lien under Section 37, Rule 138 of the Revised Rules of Court is limited only to money judgments and not to judgments for the annulment of a contract or for delivery of real property as in the instant case." Even in the Bacolod-Murcia Milling case, which we previously noted as cited by private respondent, there was an express declaration that "in this jurisdiction, the lien does not attach to the property in litigation." Indeed, an attorney may acquire a lien for his compensation upon money due his client from the adverse party in any action or proceeding in which the attorney is employed, but such lien does not extend to land which is the 18 subject matter of the litigation. More specifically, an attorney merely defeating recovery against his client as a defendant is not entitled to a lien on the property involved in litigation for fees and the court has no power to fix the fee of an attorney defending the client's title to property already in the client's 19 possession. While a client cannot defeat an attorney's right to his charging lien by dismissing the case, terminating the services 20 of his counsel, waiving his cause or interest in favor of the adverse party or compromising his action, this rule cannot find application here as the termination of the cases below was not at the instance of private respondent's client but of the opposing party. The resolution of the second issue is accordingly subsumed in the preceding discussion which amply demonstrates that private respondent is not entitled to the enforcement of its charging lien. Nonetheless, it bears mention at this juncture that an enforceable charging lien, duly recorded, is within the 21 jurisdiction of the court trying the main case and this jurisdiction subsists until the lien is settled. There is certainly no valid reason why the trial court cannot pass upon a petition to determine attorney's fees if the rule 22 against multiplicity of suits is to be activated. These decisional rules, however, apply only where the charging lien is valid and enforceable under the rules.

On the last issue, the Court refrains from resolving the same so as not to preempt or interfere with the authority and adjudicative facility of the proper court to hear and decide the controversy in a proper proceeding which may be brought by private respondent. A petition for recovery of attorney's fees, either as a separate civil suit or as an incident in the main action, has to be prosecuted and the allegations therein established as any other money claim. The persons who are entitled to 23 or who must pay attorney's fees have the right to be heard upon the question of their propriety or amount. Hence, the obvious necessity of a hearing is beyond cavil. Besides, in fixing a reasonable compensation for the services rendered by a lawyer on the basis of quantum meruit, the elements to be considered are generally (1) the importance of the subject matter in controversy, (2) the extent 24 of the services rendered, and (3) the professional standing of the lawyer. These are aside from the several other 25 considerations laid down by this Court in a number of decisions as pointed out by respondent court. A determination of all these factors would indispensably require nothing less than a full-blown trial where private respondent can adduce evidence to establish its right to lawful attorney's fees and for petitioner to oppose or refute the same. Nothing in this decision should, however, be misconstrued as imposing an unnecessary burden on private respondent in collecting the fees to which it may rightfully be entitled. But, as in the exercise of any other right conferred by law, the proper legal remedy should be availed of and the procedural rules duly observed to forestall and obviate the possibility of abuse or prejudice, or what may be misunderstood to be such, often to the undeserved discredit of the legal profession. 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 26 from government interference, is impressed with public interest, for which it is subject to State regulation. ACCORDINGLY, the instant petition for review is hereby GRANTED and the decision of respondent Court of Appeals of February 11, 1988 affirming the order of the trial court is hereby REVERSED and SET ASIDE, without prejudice to such appropriate proceedings as may be brought by private respondent to establish its right to attorney's fees and the amount thereof. NO. 30 G.R. No. 73886 January 31, 1989 JOHN C. QUIRANTE and DANTE CRUZ, petitioners, vs. THE HONORABLE INTERMEDIATE APPELLATE COURT, MANUEL C. CASASOLA, and ESTRELLITA C. CASASOLA, respondents. This appeal by certiorari seeks to set aside the judgment' of the former Intermediate Appellate Court 2 promulgated on November 6, 1985 in AC-G.R. No. SP-03640, which found the petition for certiorari therein meritorious, thus: Firstly, there is still pending in the Supreme Court a petition which may or may not ultimately result in the granting to the Isasola (sic) family of the total amount of damages given by the respondent Judge. Hence the award of damages confirmed in the two assailed Orders may be premature. Secondly, assuming that the grant of damages to the family is eventually ratified, the alleged confirmation of attorney's fees will not and should not adversely affect the nonsignatories thereto.
1

WHEREFORE, in view of the grave abuse of discretion (amounting to lack of jurisdiction) committed by the respondent Judge, We hereby SET ASIDE his questioned orders of March 20, 3 1984 and May 25, 1984. The restraining order previously issued is made permanent. The challenged decision of respondent court succinctly sets out the factual origin of this case as follows: ... Dr. Indalecio Casasola (father of respondents) had a contract with a building contractor named Norman GUERRERO. The Philippine American General Insurance Co. Inc. (PHILAMGEN, for short) acted as bondsman for GUERRERO. In view of GUERRERO'S failure to perform his part of the contract within the period specified, Dr. Indalecio Casasola, thru his counsel, Atty. John Quirante, sued both GUERRERO and PHILAMGEN before the Court of first Instance of Manila, now the Regional Trial Court (RTC) of Manila for damages, with PHILAMGEN filing a cross-claim against 4 GUERRERO for indemnification. The RTC rendered a decision dated October 16, 1981. ... In said decision, the trial court ruled in favor of the plaintiff by rescinding the contract; ordering GUERRERO and PHILAMGEN to pay the plaintiff actual damages in the amount of P129,430.00, moral damages in the amount of P50,000.00, exemplary damages in the amount of P40,000.00 and attorney's fees in the amount of P30,000.00; ordering Guerrero alone to pay liquidated damages of P300.00 a day from December 15, 1978 to July 16, 1979; 5 and ordering PHILAMGEN to pay the plaintiff the amount of the surety bond equivalent to P120,000.00. A motion 6 for reconsideration filed by PHILAMGEN was denied by the trial court on November 4, 1982. Not satisfied with the decision of the trial court, PHILAMGEN filed a notice of appeal but the same was not given 7 due course because it was allegedly filed out of time. The trial court thereafter issued a writ of execution. A petition was filed in AC-G.R. No. 00202 with the Intermediate Appellate Court for the quashal of the writ of execution and to compel the trial court to give due course to the appeal. The petition was dismissed on May 4, 8 9 1983 so the case was elevated to this Court in G.R. No. 64334. In the meantime, on November 16, 1981, Dr. 10 Casasola died leaving his widow and several children as survivors. On June 18, 1983, herein petitioner Quirante filed a motion in the trial court for the confirmation of his attorney's fees. According to him, there was an oral agreement between him and the late Dr. Casasola with regard to his attorney's fees, which agreement was allegedly confirmed in writing by the widow, Asuncion Vda. de Casasola, and the two daughters of the deceased, namely Mely C. Garcia and Virginia C. Nazareno. Petitioner avers that pursuant to said agreement, the attorney's fees would be computed as follows: A. In case of recovery of the P120,000.00 surety bond, the attorney's fees of the undersigned counsel (Atty. Quirante) shall be P30,000.00. B. In case the Honorable Court awards damages in excess of the P120,000.00 bond, it shall be divided equally between the Heirs of I. Casasola, Atty. John C. Quirante and Atty. Dante Cruz. The trial court granted the motion for confirmation in an order dated March 20, 1984, despite an opposition thereto. It also denied the motion for reconsideration of the order of confirmation in its second order dated May 11 25, 1984. These are the two orders which are assailed in this case. Well settled is the rule that counsel's claim for attorney's fees may be asserted either in the very action in which the services in question have been rendered, or in a separate action. If the first alternative is chosen, the Court may pass upon said claim, even if its amount were less than the minimum prescribed by law for the jurisdiction of said court, upon the theory that the right to recover attorney's fees is but an incident of the case in which the

services of counsel have been rendered ." It also rests on the assumption that the court trying the case is to a certain degree already familiar with the nature and extent of the lawyer's services. The rule against multiplicity of 13 suits will in effect be subserved. What is being claimed here as attorney's fees by petitioners is, however, different from attorney's fees as an item of damages provided for under Article 2208 of the Civil Code, wherein the award is made in favor of the litigant, not of his counsel, and the litigant, not his counsel, is the judgment creditor who may enforce the judgment for 14 attorney's fees by execution. Here, the petitioner's claims are based on an alleged contract for professional services, with them as the creditors and the private respondents as the debtors. In filing the motion for confirmation of attorney's fees, petitioners chose to assert their claims in the same action. This is also a proper remedy under our jurisprudence. Nevertheless, we agree with the respondent court that the confirmation of attorney's fees is premature. As it correctly pointed out, the petition for review on certiorari filed by PHILAMGEN in this Court (G.R. No. 64834) "may or may not ultimately result in the granting to the Isasola (sic) family of the total amount of damages" awarded by the trial court. This especially true in the light of subsequent developments in G.R. No. 64334. In a decision promulgated on May 21, 1987, the Court rendered judgment setting aside the decision of May 4, 1983 of the Intermediate Appellate Court in AC-G.R. No. 00202 and ordering the respondent Regional Trial Court of Manila to certify the appeal of PHILAMGEN from said trial court's decision in Civil Case No. 122920 to the Court of Appeal. Said decision of the Court became final and executory on June 25, 1987. Since the main case from which the petitioner's claims for their fees may arise has not yet become final, the determination of the propriety of said fees and the amount thereof should be held in abeyance. This procedure gains added validity in the light of the rule that the remedy for recovering attorney's fees as an incident of the main action may be availed of only when something is due to the client. Thus, it was ruled that: ... an attorney's fee cannot be determined until after the main litigation has been decided and the subject of recovery is at the disposition of the court. The issue over attorney's fee only arises 15 when something has been recovered from which the fee is to be paid. It is further observed that the supposed contract alleged by petitioners as the basis for their fees provides that the recovery of the amounts claimed is subject to certain contingencies. It is subject to the condition that the fee shall be P30,000.00 in case of recovery of the P120,000.00 surety bond, plus an additional amount in case the award is in excess of said P120,000.00 bond, on the sharing basis hereinbefore stated. With regard to the effect of the alleged confirmation of the attorney's fees by some of the heirs of the deceased. We are of the considered view that the orderly administration of justice dictates that such issue be likewise determined by the court a quo inasmuch as it also necessarily involves the same contingencies in determining the propriety and assessing the extent of recovery of attorney's fees by both petitioners herein. The court below will be in a better position, after the entire case shall have been adjudicated, inclusive of any liability of PHILAMGEN and the respective participations of the heirs of Dr. Casasola in the award, to determine with evidentiary support such matters like the basis for the entitlement in the fees of petitioner Dante Cruz and as to whether the agreement allegedly entered into with the late Dr. Casasola would be binding on all his heirs, as contended by petitioner Quirante. We, therefore, take exception to and reject that portion of the decision of the respondent court which holds that the alleged confirmation to attorney's fees should not adversely affect the non-signatories thereto, since it is also premised on the eventual grant of damages to the Casasola family, hence the same objection of prematurity obtains and such a holding may be pre-emptive of factual and evidentiary matters that may be presented for consideration by the trial court.

12

WHEREFORE, with the foregoing observation, the decision of the respondent court subject of the present recourse is hereby AFFIRMED. SO ORDERED.

NO. 31 G.R. No. L-30712 February 6, 1991 THE REPARATIONS COMMISSION, plaintiff-appellee, vs. THE VISAYAN PACKING CORPORATION and THE FIELDMENS INSURANCE CO., INC., defendants-appellants. This is an appeal originally filed with the Court of Appeals but certified to this Court for disposition since it involves purely questions of law, from the decision of the then Court of First Instance of Manila, * Branch IX, dated June 23, 1964, in Civil Case No. 51712, ordering the defendants-appellants herein to pay, jointly and severally, to the plaintiff-appellee the sum of P124,242.47, with interest at the legal rate from the date of the filing of the complaint until fully paid and denying plaintiff s prayer for attorney's fees. With respect to the cross-claim of Fieldmen's Insurance Co., Inc., the said court ordered Visayan Packing Corporation to pay Fieldmen's Insurance Co., Inc. such amount which the latter may pay to the plaintiff-appellee with interest at 12% per annum until fully paid, and attorney's fees equivalent to 10% of the amount, paid by Fieldmen's Insurance Co., Inc. to the plaintiff-appellee. With costs against the defendants-appellants. As gathered from the records, the antecedent facts of this case are as follows:

Plaintiff Reparations Commission (Repacom, for short) is a government entity created by virtue of Republic Act No. 1789, with offices at the 5th Floor, Development Bank of the Philippines Building No. 2, Port Area, Manila while the defendants, Visayan Packing Corporation (Vispac, for short) and the Fieldmen's Insurance Co., Inc. (FICI, for short) are corporations duly organized and registered under the laws of the Philippines, with offices in Bacolod City, Philippines and Singson Bldg., Plaza Moraga, Manila, respectively. On May 19, 1960, plaintiff Repacom adopted Resolution No. 262 awarding to the defendant Vispac by way of a contract of conditional purchase and sale subsequently executed on November 15, 1960 (Exhibit "A") the following reparations goods with a total F.O.B. value of P1,242,424.67 (Exhibit "A-2"): one (1) Cannery Plant, divested from M/S "Estancia"; two (2) Fishing Boats M/S "SONIA" and M/S "ANA LARES", 75 G.T. and one (1) Fishing Boat M/S "SALVADOR "B"", 100 G.T.; including all its corresponding accessories and appurtenances. These reparations goods were delivered to the defendant Vispac, on May 30, 1960 (Exhibit "A-2"). Attached with said contract and forming part thereof is the questioned Schedule of Installment Payments, herein reproduced, as follows: SCHEDULE OF INSTALLMENT PAYMENTS NAME OF USER VISAYAN PACKING CORPORATION ADDRESS Bacolod City NATURE OF CAPITAL GOODS/SERVICES One (1) Cannery Plant and appurtenances; Two (2) Fishing Vessels, 75 G.T. M/S "SONIA" and M/S "ANA LARES" and one (1) fishing vessel "M/S SALVADOR B", 100 G.T., together with all equipment and appurtenances. DATE OF COMPLETE DELIVERY May 30,1960 TOTAL F.O.B. COST P1,24 2,424.67 AMOUNT OF FIRST INSTALLMENT (10% of FOB COST P1,24,242.47) DUE DATE OF 1ST INSTALLMENT May 30,1962 TERM: Ten (10) EQUAL YEARLY INSTALLMENTS RATE OF INTEREST: THREE PERCENT (3%) PER ANNUM NO. OF DATE DUE AMOUNT INSTALLMENTS 1 May 30, 1963 P131,085.07 2 " " 1964 P131,085.07 3 " " 1965 P131,085.07

4 " " 1966 P131,085.07 5 " " 1967 P131,085.07 6 " " 1968 P131,085.07 7 " " 1969 P131,085.07 8 " " 1970 P131,085.07 9 " " 1971 P131,085.07 10 " " 1972 P131,085.07 MANILA, PHILIPPINES 1960 VISAYAN PACKING CORPORATION REPARATIONS END-USER COMMISSION BY: BY: HERNAN DE LA RAMA RODOLFO MASLOG President & General Manager Chairman (Ibid., Exhibit "A-1", p. 11) Defendant-appellant FICI is impleaded as bondsman for the principal defendant Vispac, under Surety Bond No. 4122 (Exhibit "B") issued by the former on May 30, 1960, to guarantee "faithful observance and compliance by the principal of all its obligations" recited in the Contract of Conditional Purchase and Sale of Reparations Goods (Exhibit "A") and in the annexed Schedule of Payments (Exhibit "A-1 "). On September 27, 1962, Repacom filed a complaint for specific performance with the court a quo against Vispac seeking collection of the amount of P124,242.47 allegedly due on May 30, 1962 as payment of the 1st installment of the reparations goods and impleaded the FICI as defendant. In its answer dated November 8, 1962, Vispac claimed that the Schedule of Payments (Exhibit "A") is vague and ambiguous with respect to the date when the first installment falls due and that by reason thereof, the ambiguity should be construed against Repacom, the party which drafted the contract. Thus, while Repacom maintains that the 1st installment is due on May 30, 1962, Vispac, on the other hand, argues that it is due on May 30, 1963. On January 13, 1964, Repacom and Vispac submitted a "Stipulation of Facts" and both prayed that this case be submitted for decision after their respective memoranda have been filed. FICI joined with this move and request of the principal parties. Pertinent provisions of said Stipulation of Facts are quoted as follows:

paragraph 1 That in order to abbreviate proceeding they have agreed that the transcript of notes taken in Civil Case No. 51713, The Reparations Commission vs. Fieldmen's Insurance Co., Inc., Branch III, CFI, Manila, be submitted as evidence in the above entitled case. This agreement stemmed from the fact that both Civil Case 51712, the case now being litigated and Civil Case No. 51713 mentioned earlier in this paragraph are both collection cases instituted by the Reparations Commission against the defendant, The Visayan Packing Corporation and the Fieldmen's Insurance Co., Inc., based on similar Contracts of Conditional Purchase and Sale, drafted in the usual standard form and containing practically the same standard provisions and stipulations. paragraph 2 That Civil Case No. 51713 has already been decided on March 27, 1963 granting relief for the plaintiff, The Reparations Commission as prayed for, a copy of said decision is hereto attached and marked Annex "A" for purposes of identification and is hereby made an integral part of this Stipulation of Facts. paragraph 3 That Civil Case No. 51712 refers to reparations goods, denominated, one (1) cannery plant, two (2) fishing boats, M/S "Sonia" and M/S "Ana Lares", 100 G.T. including all its corresponding accessories and appurtenances, which is the subject matter of a Contract of Conditional Purchase and Sale dated November 15, 1960 entered into by and between the plaintiff Reparations Commission as Conditional Vendor and the defendant, The Visayan Packing Corporation as Conditional Vendee, the legality and due execution of which is not disputed by the herein parties, a copy of which contract together with its annex "B" were introduced in evidence by plaintiffs as Exhibits "A" and "A-1" respectively and were admitted by the Court without objection on the part of the defendants. That, likewise, there were introduced in evidence and admitted by the Court without objection on the part of the defendants as additional exhibits, Exh. "A-2" (Date of complete delivery as it appears in Annex "B" [May 30, 1960]; Exh. "A-1"; Exh. "A-2", amount due in the sum of P124,242.47; Exh. "A-4", date of first installment as it appears in Annex "B" (Exh. "A-1") and as Exh. "B", FICI Bond No. 4122. On the basis of the said Stipulations of Facts and the pleadings submitted by the parties, the court a quo rendered judgment, the dispositive portion of which reads as follows: IN VIEW OF THE FOREGOING, the Court hereby renders judgment ordering the defendant to pay, jointly and severally, to the plaintiff the sum of P124,242.47 with interest at the legal rate from the date of filing of the complaint until fully paid. The plaintiffs prayer for attorney's fees is denied, inasmuch as there is no showing that the defendants were motivated with bad faith in failing to pay plaintiffs claim. With respect to the cross-claim of defendant Fieldmen's Insurance Co., Inc., the Court hereby orders defendant Visayan Packing Corporation to pay defendant Fieldmen's Insurance Co., Inc., such amount which the latter may pay to the plaintiff by reason of this judgment, with interest at 12% per annum until fully paid, and attorney's fees equivalent to 10% of the amount paid by Fieldmen's Insurance Co., Inc., to the plaintiff. With costs against the defendants. From said decision, Vispac and FICI filed on July 24, 1964 and July 27, 1964, respectively, a motion for reconsideration of the said decision. On August 8, 1 964, the court a quo issued its order denying the said motion.

Feeling aggrieved, Vispac and FICI appealed the case to the Court of Appeals, docketed therein as CA-G.R. No. 34552-R. After the parties have submitted their respective briefs, Repacom on April 28, 1965; Vispac on January 2, 1965; and FICI on January 15, 1965, the case was submitted for decision on September 6, 1965. In a resolution promulgated June 14, 1969, the Court of Appeals ** certified the instant case to this Court for proper disposition for being pure question of law. While Vispac and FICI raised several issues, the focal issue involved in the instant case, as correctly stated by the trial court and the Court of Appeals, is the interpretation of the Schedule of Payments (Exhibit "A-1 "). It is the contention of the Repacom that under the abovequoted Schedule of Payments, the amount of P124,242.47 representing the 1st installment without interest, which is equivalent to 10% of the entire F.O.B. costs, has already become due and demandable on May 30, 1962. However, Vispac and FICI argue that as there are two dates given for the first installment in the said Schedule of Payment, the lst installment should be on May 30, 1963 considering that it was Repacom which prepared the contract and therefore such ambiguity should be taken against the latter which caused the ambiguity. The petition is devoid of merit. Section 12, Republic Act 1789, reads as follows: Section 12 Terms of Sale Capital goods and complimentary services disposed to private parties as provided for in subsection (1) of Section 2 hereof, shall be sold on a cash or credit basis under the rules and regulations as maybe determined by the Commission. Sales on credit basis shall be paid in installments. Provided that the lst installment shall be paid within 24 months after complete delivery of the capital goods and the balance within a period not exceeding 10 years . (Emphasis supplied) As indicated in the Schedule of Payments, Exhibit "A-1", the amount of P124,242.47, now being claimed by the Repacom from Vispac, represents the 1st installment or initial payment without interest as said amount is equivalent to 10% of the total F.O.B. cost of the reparation goods received by Vispac which is P1,242,424.67. Exhibit "A-2" of the Schedule of Payments specifically states the date when the reparations goods in question were delivered which was on May 30, 1960. This particular date was not denied by Vispac as per their Stipulation of Facts. Consequently, as reflected in the Schedule of Payments, Exhibit "A-1 ", the 1st installment without interest in the amount of P124,242.47 representing 10% of the F.O.B. cost of reparations goods, became due and demandable on May 30, 1962, or exactly 24 months from the date of the complete delivery of the reparations goods to Vispac. The rest of the schedule clearly refers to the payment of the balance of the sales on credit which in accordance with law (Section 12, Rep. Act 1789) must be paid within a period not exceeding ten (10) years, and chargeable with interest at 3% per annum. Said schedule of payment for the balance i.e., after payment of the first installment is, in turn, payable in ten (10) equal yearly installments, as follows: Term: Ten (10) equal yearly installments Rate of Interest: Three per cent (3%) per annum No. of Date Due Amount

Installments 1 May 30, 1963 P131,086.07 2 " " 1964 P131,086.07 3 " " 1965 P131,086.07 4 " " 1966 P131,086.07 5 " " 1967 P131,086.07 6 " " 1968 P131,086.07 7 " " 1969 P131,086.07 8 " " 1970 P131,086.07 9 " " 1971 P131,086.07 10 " " 1972 P131,086.07 While it is a statutory and decisional rule in this jurisdiction that the contract is the law between the contracting parties (Art. 1306, Civil Code; Phoenix Assurance Co., Ltd. vs. United States Lines, 22 SCRA 674 [1968]; Phil. American General Insurance v. Mutuc, 61 SCRA 22 [1974]; Herrera v. Petrophil Corporation, 146 SCRA 360 [1986]; Syjuco v. CA, 172 SCRA 111 [1989]), there is a proviso that nothing therein must be contrary to law, morals, good customs public policy, or public order (Art. 1306, Civil Code; Lagunsad v. Soto, 92 SCRA 476 [1979]). To sustain the contention of Vispac and FICI that the 1st installment should be due on May 30, 1963, instead of May 30, 1962. would render the said installment payment unenforceable as it would run counter to the provision of the said law (Section 12, R.A. 1789) which specifically provides that "the 1st installment shall be paid within 24 months after complete delivery of the capital goods", or on May 30, 1962, the complete delivery thereof having been made on May 30, 1960. Finally, it is basic that a contract is what the law defines it to be, and not what it is called by the contracting parties Novesteras v. CA, 149 SCRA 48 [1987]). Having disposed of the main case, discussion of other ancillary issues raised by the appellant Vispac becomes unnecessary. As to the issue of FICI's liability arising from its issuance of Surety Bond No. 4122 dated May 30, 1960, it will be noted that FICI interposed for the first time, on appeal, the defense that Surety Bond No. 4122 has already expired. FICI did not allege any defense to the effect that Surety Bond No. 4122 has already expired either in its answer to the complaint dated October 26, 1962 nor in the entire proceedings below. In fact, it adopted as its own whatever defenses its co-defendant-appellant Vispac may interpose (Rollo, Record on Appeal, FICI, p. 25; p. 44). It is settled jurisprudence that an issue which was neither averred in the complaint nor raised during the trial in the court below cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice and due process Dihiansan v. CA, 153 SCRA 713 [1987]; Anchuelo v. IAC, 147 SCRA 434 [1987]; Dulos Realty & Development Corp. v. CA, 157 SCRA 425 [1988]; Ramos v. IAC, 175 SCRA 70 [1989]; Gevero v. IAC, G.R. 77029, August 30, 1990).

Anent the contention of FICI that the trial court erred in ordering Vispac to pay to FICI attorney's fees equivalent to only 10% of the amount due despite the fact that Vispac bound itself to pay to FICI attorney's fees equivalent to 20% of the total amount due but in no case less than P200.00 as per their Indemnity Agreement (Exhibit "1-FICI"), it has been held that a stipulation regarding the payment of attorney's fees is neither illegal nor immoral and is enforceable as the law between the parties (Santiago v. Dimayuga, 3 SCRA 919 [1961]), as long as such stipulation does not contravene law, good morals, good customs, public order or public policy (Polytrade Corp. v. Blanco, 30 SCRA 187 [1969]; Social Security Commission v. Almeda, 168 SCRA 474 [1988]). Considering, therefore, that the 20% attorney's fees provided under the parties' Indemnity Agreement (Exhibit "1FICI") is not contrary to the existing jurisprudence on the matter *** and is not considered excessive nor unconscionable, the same should be awarded to FICI. WHEREFORE, the decision appealed from is Affirmed with the modification that the amount of the attorney's fees due from Vispac to FICI should be 20% of the amount due as per Indemnity Agreement. SO ORDERED.

NO. 32 G.R. No. 81830 October 1, 1990 RAYMUNDO HIPOLITO, JR., in his capacity as President and Chief Executive of SAN MIGUEL CORPORATION EMPLOYEES UNION (SMCEU) AND RODOLFO DESTURA, Union Treasurer, petitioners, vs. HON. PURA FERRER-CALLEJA, Bureau of Labor Relations Director, Department of Labor and Employment, Manila, HON. EDGARDO DE LA CRUZ, Med-Arbiter, National Capital Region, Department of Labor and Employment, Manila and DANIEL L. BORBON II, respondents. Petitioners impugn the decision of the public respondent Bureau of Labor Relations (BLR) in BLR Case No. A-10354-87 (NCR-OD-M-5-421-87) which affirms the order of the Med-Arbiter declaring as invalid the disqualification/ expulsion of private respondent from the union and modifies the same order by requiring petitioners to return to the union the amount of One Hundred Thirty Thousand Pesos (P130,000.00) previously paid by them to Atty. Raymundo Hipolito III as attorney's fees. Petitioners Hipolito and Destura were the then President and Treasurer, respectively, of San Miguel Corporation Employees Union (SMCEU-PTGWO), a legitimate labor organization composed of monthly salaried employees of

San Miguel Corporation. Private respondent Borbon is employed as a Safety Engineer in the Magnolia Division of the same corporation. Two complaints, docketed as Case Nos. NCR-IRD-C-5-302-87 and NCR-OD-M-5-421-87, were filed with the MedArbiter by private respondent against petitioners in their capacity as union officers of SMCEU-PTGWO Private respondent alleged that the following illegal acts were committed by petitioner Hipolito, as hold-over president of the union: 1. arbitrary, summary and whimsical expulsion of complainant [private respondent] Berbon from union membership without due process and in utter disregard of the procedure provided in the union's constitution and by-laws; 2. illegal appointment of Rodolfo Destura as union treasurer; 3. violation of Article 242 (i), (j) and (k) of the Labor Code; (now Art. 214) 4. unilateral appointment by respondent Hipolito, Jr. of his son, Atty. Raymundo Hipolito III as union counsel without the benefit of an approved Resolution of the Board of Directors and illegal payment of P130,000 for legal fees; and 5. failure of respondent Hipolito, Jr. to reimburse legitimate expenses incurred by complainant prior to and including CBA negotiation period up to April 30, 1987 [Rollo, pp. 44-45]. On September 18, 1987, the Med-Arbiter Edgardo dela Cruz rendered a resolution, the dispositive portion of which reads: Wherefore, premises considered, judgment is rendered as follows: 1. Declaring the disqualification and/or expulsion of complainant Daniel Borbon II invalid and ordering his reinstatement as union member from receipt of this resolution; 2. Declaring respondent Rodolfo Destura as the legally constituted Acting Treasurer; 3. Declaring Atty. Raymundo Hipolito III as not duly appointed by the union's Board of Directors but considers any amount paid as legal, and for services rendered, by an attorney to his client; 4. Denying the claim for reimbursement of complainant for alleged expenses incurred for the union for lack of sufficient evidence; 5. Dismissing the claim of the removal of respondents for lack of substantial and direct evidence. The counterclaim for damages, moral and exemplary, fees in the amounts of P500,000.00; P200,000.00 or P50,000.00 respectively are denied for lack of jurisdiction. SO ORDERED. [Resolution of the Med-Arbiter; Rollo, p. 11].

Private respondent appealed item numbers 2, 3, 4 and 5 of the dispositve portion of the resolution to the BLR, while petitioners appealed item number 1. On January 22, 1988, public respondent BLR Director Pura FerrerCalleja rendered a decision modifying the Med-Arbiter's order as follows: WHEREFORE, premises considered, the ORDER of the Med-Arbiter dated 18 September 1987 is modified to the extent that respondents Raymundo Hipolito, Jr. and Rodolfo Destura are hereby ordered to return to the Union the amount of One Hundred Thirty Thousand Pesos (P130,000.00) that they illegally paid to ATTY. RAYMUNDO HIPOLITO III, as attorney's or professional services fees. SO ORDERED. [Decision of the Director of Bureau of Labor Relations, Annex "B" to the Petition; Rollo, p. 11] Hence, this petition. Private respondent and the Solicitor General filed their respective Comments. Petitioners thereafter filed they Reply. The parties submitted their memoranda, after which the case was deemed submitted. For resolution by the court is whether or not public respondent committed grave abuse of discretion in (1) holding that private respondent was illegally dismissed from the union and (2) in ordering petitioners to return to the union the amount of One Hundred Thirty Thousand Pesos (P130,000.00) which they had previously paid to Atty. Hipolito. With respect to private respondent's removal from the union, petitioners claim that private respondent is not a rank and file employee because he holds the position of safety engineer and as such, exercises supervisory functions in the corporation. Therefore, in accordance with the union's rules which disallow the membership of persons exercising supervisory powers [Article IV, Sections 2 and 9, par. B of the SMCEU constitution and by-laws; Annex "I" to the Petition; Rollo, pp. 68, 73,] private respondent is disqualified to be a union member. The argument is devoid of merit. Public respondent's declaration that private respondent is a rank and file employee is supported by the evidence. First, there is a certification signed by the Assistant Vice-President and Personnel and Administrative Manager of San Miguel Corporation, Magnolia Division [Annex "3" to the Comment; Rollo, p. 118] stating that private respondent occupies a position that is non-supervisory. Second, private respondent's status as a rank and file employee had been recognized in two previous related petitions [G.R. Nos. 82183 and 80141] decided by this Court. Thus, the decision in G.R. No. 80141 incorporated the resolution in G.R. No. 82183 dated May 4, 1988 [Annex "5" to the Comment of Private Respondent; Rollo, p. 121] which in part, states: "that petitioner's petition to disqualify Daniel Borbon from running for office in the union had already been resolved in BLR Case No. 1-354-87 (NCR OD-M-5-421-87) where Borbon was declared a rank and file employee, hence, qualified to join, form or assist in the formation of a labor organization." [SMCEU-PTGWO v. Ferrer-Calleja, G.R. No. 80141, July 5, 1989.] Public respondent, therefore, did not commit grave abuse of discretion when it affirmed the declaration of the Med-Arbiter that private respondent was a rank and file employee and accordingly, his disqualification and/or expulsion from the union was invalid. We now resolve the issue of whether or not public respondent committed grave abuse of discretion when it ordered petitioners to return to the union the amount of P130,000.00 that they previously paid to Atty. Hipolito. In the complaint filed before the Med-Arbiter, the illegal acts allegedly committed by petitioner Hipolito included the unilateral appointment of Atty. Hipolito as union counsel, and the payment to the latter of P130,000.00 as legal fees. According to private respondent, there was no resolution from the union's board of directors either appointing Atty. Hipolito as counsel or authorizing the payment of attorney's fees. Under the SMCEU constitution,

it is the board of directors which has the power to engage the services of a legal counsel and to fix his compensation [Section 2, Article VI; Rollo, pp. 75-76]. The Med-Arbiter found that the union's board did not engage the services of Atty. Hipolito as union counsel, but ruled that the attorney's fees collected, if any, should be considered as payment for services rendered as a professional. On appeal, public respondent BLR upheld the Med-Arbiter's finding that the appointment was made without board authority but declared that since the appointment was ultra vires, it is illegal, and therefore Atty. Hipolito is not entitled to any legal fee. As a consequence, petitioners were ordered to return to the union the amount of P130,000.00 paid to Atty. Hipolito. There is a need to clarify that Atty. Hipolito is not asked to return to the union the money paid him. He is not even a party to this case. It is the petitioners who have been ordered to pay back the union the amount of P130,000.00. ultimately, the order to return the money rests on the premise that the payment by petitioners is a case of illegal disbursement of unionfunds. There is no question that there was no board resolution appointing Atty. Hipolito as union counsel. Petitioners, however, maintain that the absence of a board resolution should not negate the fact that Atty. Hipolito had rendered service to the union for which he deserved remuneration. We sustain petitioners' argument. The record establishes clearly that Atty. Hipolito had acted as union counsel in the negotiation and consummation of the 1986 Collective Bargaining Agreement (CBA) entered into between the San Miguel Corporation management and SMCEU-PTGWO [Rollo, pp. 149-150]. The same parties signed a Memorandum of Agreement which outlined the terms as to wage increase, scope of bargaining unit, and effectivity of the CBA [Rollo, p. 91]. These documents, signed by the members of the board (including private respondent), evidence two occasions where the members of the board clearly recognized the representation of the union by Atty. Hipolito. Thus, while it is true that Atty. Hipolito was not appointed by the board, the facts of the case show that not only did the board itself acknowledge and make use of the services of Atty. Hipolito, but that such services redounded to the benefit of the union [Rollo, pp. 141-148]. Taken together, these circumstances, i.e., that notwithstanding the absence of an express authority from the board, Atty. Hipolito represented the union with the knowledge and acquiescence of the board, and the acceptance of benefits arising from the service rendered, entitle Atty. Hipolito to the reasonable value of his professional services on a quantum meruit basis. In determining the amount of attorney's fees on quantum meruit, the Court invariably takes into account the amount and character of the services rendered, the labor, time and trouble involved, the nature and importance of the activity in which the services were rendered, the responsibility imposed, and the results secured [Delgado v. De la Rama, 43 Phil. 419 (1922); Occena v. Marquez, G.R. No. L-27396, September 30, 1974, 60 SCRA 38]. In this case, We consider the following facts which remain undisputed on the record: Atty. Hipolito served as union counsel in the 1986-1989 CBA. In the process of negotiations, Atty. Hipolito had to travel to different negotiation places and offices [Rollo, p. 131]. For nearly ten months prior to the conclusion of the CBA, pickets were staged and a strike vote had to be taken [Rollo, p. 22, 131]. Upon its conclusion, the CBA extended to each covered employee benefits ranging from a P2,500.00 salary increase across the board to a P2,000.00 mid-year gratuity pay [Rollo, pp. 141-148]. In view of the foregoing, the Court declares the amount of P130,000.00 previously paid to Atty. Hipolito to be reasonable compensation for services rendered. Thus, petitioners' payment of P130,000.00 as legal fees in favor of Atty. Hipolito is deemed a reasonable expenditure of union funds. Accordingly, petitioners need not return the said amount to the union.

WHEREFORE, the decision of the Director of Bureau of Labor Relations in BLR Case No. A-10-354-87 (NCR-OD-M-5421-87) is AFFIRMED insofar as it declares invalid the disqualification/expulsion of private respondent from the union. The portion of the decision which orders petitioners to return to the union the amount of One Hundred Thirty Thousand Pesos (P130,000.00) that they paid to Atty. Raymundo Hipolito III as attorney's or professional services fees is hereby SET ASIDE. SO ORDERED.

NO. 33 G.R. No. 77042-43 February 28, 1990 RADIOWEALTH FINANCE CO., INC., et al., petitioners vs. INTERNATIONAL CORPORATE BANK AND COURT OF APPEALS, respondents. This is a petition for review on certiorari of the joint decision * promulgated on December 22, 1986, by the respondent Court of Appeals in CA-G.R. No. 01063 entitled "International Corporate Bank, plaintiff-appellee vs. Radiowealth, Inc. and Domingo M. Guevara, defendants-appellants" and in CA-G.R. No. 01064 entitled "International Corporate Bank, plaintiff-appellee vs. Radiowealth Finance Company, Inc., Radiowealth, Inc. and D.M.G., Inc., defendants-appellants," the dispositive portion of which reads: WHEREFORE, finding no error in the Order appealed from, the same is hereby affirmed in toto, with costs against the appellants. (Rollo, p. 101). The basic facts appear undisputed and they are as follows:

Sometime in 1978, petitioners Radiowealth, Inc. (RWI) and Radiowealth Finance Company, Inc. (RFC) applied for and obtained credit facilities from private respondent International Corporate Bank (Interbank). Petitioners Domingo Guevara (Guevara, for short) and D.M.G., Inc., acted as sureties to the obligations contracted by RWI and RFC. The obligations of petitioners were accordingly covered and evidenced by promissory notes, trust receipts and agreements. A common stipulation in the covering promissory notes, trust receipts, and continuing surety agreements between the borrowing petitioners and the lending private respondent provided, to wit: In the event of the bringing of any action or suit by you or any default of the undersigned hereunder I/We shall on demand pay you reasonable attorney's fees and other fees and costs of collection, which shall in no cases be less than ten percentum (10 %) of the value of the property and the amount involved by the action or suit. (Rollo, p. 211). From 1978 to 1980, petitioners were not able to comply with their obligations on time with Interbank due to subsequent severe economic and financial reverses. Petitioners thus asked Interbank for a restructuring of their outstanding loans, but the parties were not able to arrive at a mutually acceptable proposition. On December 28, 1979, Interbank, constrained to seek judicial remedy, through its counsel Norberto J. Quisumbing and Associates, lodged before the then Court of First Instance of Manila its first complaint, docketed thereat as Civil Case No. 128744, for collection of sum of money with an application for a writ of preliminary attachment against RWI and Guevara covering the principal sum of P1,585,933.61 plus penalties, service charges, interests, attorney's fees, costs and exemplary damages (Rollo, pp. 31-38). This was followed by another complaint filed on January 9, 1980 before the same trial court against RFC, RWI and D.M.G., Inc., also with an application for a writ of preliminary attachment, docketed as Civil Case No. 128897, for the collection of the principal sum of P2,113,444.58, plus interests, penalties, service charges, attorney's fees, costs and exemplary damages (Rollo, pp. 39-47). Petitioners, however, opted to amicably settle their obligations promptly. They, therefore, did not file any answer nor any responsive pleading to the complaints, and instead entered into a compromise agreement with Interbank shortly about four (4) months later. Said compromise agreement between the parties was embodied in two Motions for Judgment Based on Compromise dated March 21, 1980 (Rollo, pp. 48-55) corresponding to the separate claims in the said two complaints which were accordingly submitted to the court a quo for approval. These motions did not however, cover the payment by the petitioners of Interbank's claims for attorney's fees, costs of collection and expenses of litigation which were left open by the parties for further negotiations. In its decision in Civil Case No. 128744, dated March 28, 1980, the trial court approved the parties' corresponding compromise agreement thereto, with the reservation that "(T)his decision does not terminate this case because matters respecting payment of attorney's fees, costs and collection." Similarly, the trial court, in its decision in Civil Case No. 128897 of even date, also approved the parties' corresponding compromise agreement thereto with the Identical reservation as aforequoted (Rollo, pp. 60-61). Thereafter, further proceedings were conducted by the trial court particularly on the issue of the alleged unreasonableness and unconscionableness of the attorney's fees. It appears from the records of the cases, however, that Atty. Norberto J. Quisumbing, counsel for Interbank, was able to adduce his evidence in support for the attorney's fees due to his said client, while Attys. Reyes and Guevara, counsel for petitioners in the trial court, were not given their request for further hearing against the claimed attorney's fees despite some supervening events as alleged in their motion for reconsideration dated January 29, 1981 (Rollo, pp. 82-84) which was denied in the Order of January 30, 1981 (Rollo, p. 85).

At any rate, the trial court, in its Order dated January 2, 1981, had already reduced Interbank's claim for attorney's fees, from the stipulated 10 % to 8 %, pertinent portions thereof are hereunder quoted, thus: (T)he 'ten per cent' in the foregoing quoted provisions includes attorney's fees, other fees and cost of collection. In paragraph No. 2 of the compromise agreement in Civil Case No. 128744 under which the defendants therein acknowledge their indebtedness of Pl,585,933.61 as of December 28, 1979, it is provided that in paying the same there shall be added to it 16 % per annum as interest, 2 % per annum as service charge, 2 % per month or any fraction thereof as penalty from January 31, 1980. A similar provision is contained in paragraph No. 2 of the compromise agreement filed in Civil Case No.. 128897 under which the defendants therein admitted their indebtedness of P2,113,444.58, payment of which was to commence on or before January 31, 1980. The service charge of 2 % should be deducted from the 10 % already mentioned above, to give the rate of attorney's fees which is 8% in accordance with the provisions already aforequoted. Eight percent (8 %) of l,585,833.61, or P126,824.68 is the attorney's fees in Civil Case No. 128897 sums which ... are not excessive and perhaps acceptable to plaintiff which was willing to have its claim reduced to P73,987.57 had defendants acceded to its offer to compromise attorney's fees and expenses of litigation. PREMISES CONSIDERED, the Court hereby orders the defendants in Civil Case No. 128744 to pay the plaintiff jointly and severally P126,824.68 and the defendants in Civil Case No. 128897 to pay the plaintiff, also jointly and severally, P169,075.56 with interest at 12 % per annum from this date until the same is paid. SO ORDERED. (Rollo, pp. 80-81). Not satisfied with said trial court's order, petitioners appealed the same before the respondent appellate court raising therewith the following assigned errors: A. The lower court erred in not giving the defendants the opportunity to be heard in a hearing set for the purpose of determining the amount of attorney's fees; B. The lower court erred in insisting that the amount of attorney's fees should be governed by the contract signed by the parties; C. The lower court erred in not substantially reducing the amount of attorney's fees. (Rollo, pp. 242-243). The respondent appellate court, however, affirmed in toto the assailed order of the trial court. Hence, the instant petition. Petitioners raise the following issues before this Court: I. Whether or not the reasonableness of attorney's fees in the case at bar is a question of law; II. Whether or not the award of attorney's fees in the case at bar is reasonable; III. Whether or not a contracted stipulation regarding attorney's fees may be disregarded by this Honorable Court;

IV. whether or not attorney's fees require proof (Rollo, p. 243). Deducible from the contentions of the parties, is the sole issue of whether or not the amount equivalent to 8 % of the recovery or sums of money due from the two civil complaints adjudged as attorney's fees by the trial court and affirmed by the respondent appellate court, is fair and reasonable under the peculiar facts and circumstances herein. Corollarily, whether or not the court has discretion to modify the attorney's fees previously agreed upon by the parties under a valid contractual stipulation. Petitioners assert that the sums of P126,824.68 in Civil Case No. 128744 and P169,075.56 in Civil Case No. 128897 or 8 % of the amount involved in the respective suits, adjudged as attorney's fees due to Norberto J. Quisumbing and Associates, counsel of record of the judgment creditor the herein private respondent Interbank, per the order of the trial court, is unreasonable, exhorbitant and unconscionable under the premises considering the following undisputed facts: that said cases were immediately settled with the execution of a compromise agreement after the complaints with prayer for preliminary attachment had been filed by the private respondent against the petitioners in the lower court, and no answer was filed by petitioners; that pursuant to the Compromise Agreement between the parties, petitioner Radiowealth, Inc. has fully paid to Interbank in Civil Case No. 128744 the total amount of P2,867,802.64, while petitioner Radiowealth Finance Co., Inc. (RFC) has fully paid to Interbank in Civil Case No. 128897 the total amount of P3,018,192.52; that of the amounts paid to Interbank, petitioner Radiowealth, Inc., has fully paid the total sum of P118,075.84 as service charge and penalties, while petitioner Radiowealth Finance Co., Inc., had paid the total amount of P135,526.40 as penalties and service charges, all in addition to the interests paid by petitioners to Interbank. Interbank, on the other hand, avers that petitioners have omitted to state certain facts and circumstances, as follows: that the collection suits filed against petitioners involve charges of violation of the trust receipts law for disposing of the goods they had received from Interbank on trust receipts and failing to surrender the proceeds thereof; that Atty. Quisumbing had successfully obtained attachment against their properties; that Atty. Quisumbing succeeded in forcing petitioners to agree in the joint motions for judgment based on compromise to such stipulation which made them fear a default in the payment of the amortizations or installments of the compromise amount; that the principal amount collected from petitioners totalled P3,699,378.19, not counting the interests; that petitioners' obligations to Interbank were not evidenced by one but many letters of credit and trust receipts; that the records were destroyed by fire and had to be reconstituted; that Interbank had already given petitioners very substantial discounts on penalty charges; and, despite clear contractual stipulations, the lower court had already reduced the 10 % stipulated attorney's fees and expenses of litigation to 8 %. As a basic premise, the contention of petitioners that this Court may alter, modify or change even an admittedly valid stipulation between the parties regarding attorney's fees is conceded. The high standards of the legal profession as prescribed by law and the Canons of Professional Ethics regulate if not limit the lawyer's freedom in fixing his professional fees. The moment he takes his oath, ready to undertake his duties first, as a practitioner in the exercise of his profession, and second, as an officer of the court in the administration of justice, the lawyer submits himself to the authority of the court. It becomes axiomatic therefore, that power to determine the reasonableness or the unconscionable character of attorney's fees stipulated by the parties is a matter falling within the regulatory prerogative of the courts (Panay Electric Co., Inc. vs. Court of Appeals, 119 SCRA 456 [1982]; De Santos vs. City of Manila, 45 SCRA 409 [1972]; Rolando vs. Luz, 34 SCRA 337 [1970]; Cruz vs. Court of Industrial Relations, 8 SCRA 826 [1963]). And this Court has consistently ruled that even with the presence of an agreement between the parties, the court may nevertheless reduce attorney's fees though fixed in the contract when the amount thereof appears to be unconscionable or unreasonable (Borcena vs. Intermediate Appellate Court, 147 SCRA 111 [1987]; Mutual Paper Inc. vs. Eastern Scott Paper Co., 110 SCRA 481 [1981]; Gorospe vs. Gochango, 106 Phil. 425 [1959]; Turner vs. Casabar, 65 Phil. 490 [1938]; F.M. Yap Tico & Co. vs. Alejano, 53 Phil. 986 [1929]). For the law recognizes the validity of stipulations included in documents such as negotiable instruments and mortgages with respect to attorney's fees in the form of penalty provided that they are not unreasonable or unconscionable (Philippine Engineering Co. vs. Green, 48 Phil. 466).

There is no mistake, however, that the reasonableness of attorney's fees, though seemingly a matter of fact which takes into account the peculiar circumstances of the case, is a question of law where the facts are not disputed at all. For a question of law does not call for an examination of the probative value of the evidence presented by the parties (Air France vs. Carrascoso, 18 SCRA 155 [1966]), and where the issue is the construction or interpretation to be placed by the appellate court upon documentary evidence, or when a case is submitted upon an agreed statement of facts or where all the facts are stated in the judgment, the question is one of law where the issue is the correctness of the conclusion drawn therefrom (Cunanan vs. Lazatin, 74 Phil. 719 [1944]; Ng Young vs. Villa, 93 Phil. 21 [1953]). In the case at bar, the issues do not call for an examination of the probative value of the evidence because the ultimate facts are admitted by the parties and all the basic facts are stated in the judgment. Nevertheless, a careful review of the records shows that the modified attorney's fees fixed by the trial court and affirmed by the respondent appellate court, appears reasonable and fair under the admitted circumstances of the case. As aptly reasoned out by the said court: We find nothing wrong in the aforegoing disquisition of the lower court. It is to be remembered that attorney's fees provided in contracts as recoverable against the other party and damages are not, strictly speaking, the attorney's fees recoverable as between attorneys and client spoken of and regulated by the Rules of Court. Rather, the attorney's fees here are in the nature of liquidated damages and the stipulations therefor is aptly called a penal clause, So long as such stipulation does not contravene law, morals, or public order, it is strictly binding upon the defendant (Polytrade Corporation vs. Blanco, 30 SCRA 187 [1969]). However: "Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable. For this reason, we do not really have to strictly view the reasonableness of the attorney's fees in the light of such facts as the amount and character of the service rendered, the nature and importance of the litigation, and the professional character and the social standing of the attorney. We do concede, however that these factors may be an aid in the determination of the inequity or unconscionableness of attorney's fees as liquidated damages. (Supra) May the attorney's fees granted by the court be tagged as iniquitous or unconscionable? We give the answer in the negative. The high standing of plaintiffs counsel has not been challenged. In the motion for judgment based on compromise agreement, defendants acknowledged and admitted their default or failure to pay their joint and several obligations or indebtedness arising from the credit facilities which plaintiff extended to defendants and availed of by the latter, the punctual payment of which having been guaranteed and warranted by the other defendants. Having admitted such default in the payment of their obligations, the filing of the action in court and, consequently, the legal services of counsel became imperative and thereby, set into operation the contract clause on the payment of attorney's fees. The complaints are not simple actions for collection. They are accompanied with a prayer for the issuance of a writ of preliminary attachment, and charge defendants with violation of the trust receipts law and they involve several letters of credit and trust receipts. The fact that the compromise agreements were entered into after the complaints were filed against appellants indubitably proves that the legal action taken by counsel for the plaintiff against the defendants contributed in no measure to the early settlement of defendants' obligation.

Considering further that, apart from the reduction and waiver of penalty charges due to the plaintiff to the extent of P79, 191.72, the service charge of 2 % was further deducted by the lower court thereby, reducing the attorney's fees to 8 % the court is of the considered opinion and so holds that given the prestige of plaintiff's counsel, the nature of the action and quality of legal services rendered, the award of attorney's fees in a sum equivalent to 8 % of the judgment which is below the stipulated fees of 10 % could hardly be suggested as iniquitous and unconscionable. On the contrary, it easily falls within the rule of conscionable and reasonable. (Rollo, pp. 100-101). The foregoing disquisition merits our assent. Moreover, even if the so-called supervening event which ought to have been heard in the trial court as alleged in petitioners' motion for reconsideration dated January 29, 1981, i.e., "that supervening events happened from the time the trust receipt agreements were signed in which the defendants agreed to pay 10 % of the amount due as attorney's fees and costs of collection up to the actual filing of the complaint and these events were the payments of interest in the amount of P285,341.27, as interest, P41,507.37 as service charges and P76,568.47 as penalty by Radiowealth, Inc.; that Radiowealth Finance Co., Inc. has paid the amount of P281,940.12 as interest, P38,721.83 as service charges and P96,804.57 as penalty (Rollo, pp. 137-138), were to be considered, they would still be insufficient to justify a further substantial reduction in the adjudged attorney's fees. At any rate, it would be noted that petitioners have not even prayed for a specific reduction as to amount or percentage of the attorney's fees except for their sweeping allegations of unreasonableness, exhorbitance and unconscionableness. WHEREFORE, the assailed decision of the respondent appellate court is Affirmed, with costs de officio. SO ORDERED.

NO. 34 G.R. No. 117438 June 8, 1995 RAUL SESBREO, petitioner, vs. HON, COURT OF APPEALS, and PATRICIA GIAN, SOTERO BRANZUELA, ANDRES C. YPIL, SANTIAGO BACAYO, BRIGIDO COHITMINGAO, VICTORINO DINOY, GUILLERMO MONTEJO and EMILIO RETUBADO, respondents. ROMERO, J.: Of interest to all law practitioners is the issue at bench, namely, whether the Court of Appeals had the authority to reduce the amount of attorney's fees awarded to petitioner Atty. Raul H. Sesbreo, notwithstanding the contract for professional services signed by private respondents. The antecedent facts of the case follow.

Fifty-two employees sued the Province of Cebu and then Governor Rene Espina for reinstatement and backwages. 1 Herein petitioner, Raul H. Sesbreo, replaced the employees' former counsel Atty. Catalino Pacquiao. Thirty-two of the fifty-two employees signed two documents whereby the former agreed to pay petitioner 30% as attorney's fees and 20% as expenses to be taken from their back salaries. On September 12, 1974, the trial court rendered a decision ordering the Province of Cebu to reinstate the petitioning employees and pay them back salaries. Said decision became final and executory after it was affirmed 2 in toto by the Court of Appeals and the petition to review the appellate decision, denied by this Court in 1978. A compromise agreement was entered into by the parties below in April 1979 whereby the former employees waived their right to reinstatement among others. Likewise, pursuant to said compromise agreement, the Province of Cebu released P2,300,000.00 to the petitioning employees through petitioner as "Partial Satisfaction of Judgment." The amount represented back salaries, terminal leave pay and gratuity pay due to the employees. Sometime November and December 1979, ten employees, herein private respondents, filed manifestations before the trial court asserting that they agreed to pay petitioner 40% to be taken only from their back salaries. The lower court issued two orders, with which petitioner complied, requiring him to release P10,000.00 to each of the ten private respondents and to retain 40% of the back salaries pertaining to the latter out of the P2,300,000.00 released to him. On March 28, 1980, the trial court fixed petitioner's attorney's fees at 40% of back salaries, terminal leave, gratuity pay and retirement benefits and 20% as expenses, or a total of 60% of all monies paid to the employees. Private respondents' motion for reconsideration was granted and on June 10, 1980, the trial court modified the award after noting that petitioner's attorney's lien was inadvertently placed as 60% when it should have been only 50%. The dispositive portion of the order reads: WHEREFORE, in view of all the foregoing the order of this Court fixing 60% as attorney's fee[s] of Atty. Sesbreo should be 50% of all monies which the petitioners (Suico, et al.) may receive from the Provincial Government. Obviously not satisfied with the attorney's fees fixed by the trial court, petitioner appealed to the Court of Appeals claiming additional fees for legal services before the Supreme Court, reimbursement for expenses and a clear statement that the fee be likewise taken from retirement pay awarded to his clients. Unfortunately, the 4 respondent appellate court did not agree with him as the generous award was further reduced. The appellate court noted that in this jurisdiction, attorney 's fees are always subject to judicial control and deemed the award of 20% of the back salaries awarded to private respondents as a fair, equitable and reasonable amount of attorney's fee. The decretal portion of the decision reads: WHEREFORE, the questioned order is MODIFIED. The attorney's fees due Atty. Raul Sesbreo is fixed at an amount equivalent to 20% of all back salaries which the Province of Cebu has 5 awarded to herein 10 petitioners. Hence this petition for review where he claims that attorney's fees amounting to 50% of all monies awarded to his clients as contingent fees should be upheld for being consistent with prevailing case law and the contract of professional services between the parties. He adds that since private respondents did not appeal, they are not entitled to affirmative relief other than that granted in the regional trial court.
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We find no reversible error in the decision of the Court of Appeals and vote to deny the petition. Respondent court found that the contract of professional services entered into by the parties authorized petitioner to take a total of 50% from the employees' back salaries only. The trial court, however, fixed the lawyer's fee on the basis of all monies to be awarded to private respondents. Fifty per cent of all monies which private respondents may receive from the provincial government, according to the Court of Appeals, is excessive and unconscionable, not to say, contrary to the contract of professional services. 7 After considering the facts and the nature of the case, as well as the length of time and effort exerted by petitioner, respondent court reduced the amount of attorney's fees due him. It is a settled rule that what a lawyer may charge and receive as attorney's fees is always subject to judicial control. 8 A lawyer is primarily an officer of the court charged with the duty of assisting the court in administering impartial justice between the parties. When he takes his oath, he submits himself to the authority of the court and subjects 9 his professional fees to judicial control. As stated by the Court in the case of Sumaong v. Judge:
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A lawyer is not merely the defender of his client's cause and a trustee of his client in respect of the client's cause of action and assets; he is also, and first and foremost, an officer of the court and participates in the fundamental function of administering justice in society. It follows that a lawyer's compensation for professional services rendered are 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 11 lawyer submits himself to the authority of the courts to regulate his right to professional fees. In the case at bench, the parties entered into a contingent fee contract. The Agreement provides: WE, the undersigned petitioners in the case of POLICRONIO BELACHO, ET AL., VS. RENE ESPINA ET AL., hereby agree to pay Atty. Sesbreo, our lawyer, the following to be taken from our back salaries: 30% as attorney's fees 20% as expenses That we enter into agreement in order to be paid our back salaries as early as possible and so that we may be reinstated as early as possible. 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 12 unreasonable unconscionable. A contingent fee arrangement is valid in this jurisdiction and is generally recognized as valid and binding but 14 must be laid down in an express contract. The amount of contingent fees 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 fees in consideration of the risk that the lawyer may get nothing if the suit fails.
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Contingent fee contracts are under the supervision and close scrutiny of the court in order that clients may be 15 protected from unjust charges. Its validity depends in large measure on the reasonableness of the stipulated 16 fees under the circumstances of each case. When the courts find that the stipulated amount is excessive or the contract is unreasonable or unconscionable, or found to have been marred by fraud, mistake, undue influence or suppression of facts on the part of the attorney, 17 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. This means to say that the amount of the fee contracted for, standing alone and unexplained would be sufficient to show that an unfair 18 advantage had been taken of the client, or that a legal fraud had been perpetrated on him. The decree of unconscionability or unreasonableness of a stipulated amount in a contingent fee contract, will not however, preclude recovery. It merely justifies the court's fixing a reasonable amount for the lawyer's services. Courts may always ascertain, if the attorney's fees are found to be excessive, what is reasonable under the circumstances. Quantum meruit, meaning "as much as he deserves," is used as the basis for determining the lawyer's professional fees in the absence of a contract. Factors such as the time spent and extent of services rendered; novelty and difficulty of the questions involved; importance of the subject matter; skill demanded; probability of losing other employment as a result of acceptance of the proffered case; customary charges for similar services; amount involved in the controversy and the benefits resulting to the client; certainty of compensation; character of employment; and professional standing of the lawyer, are considered in determining 19 his fees. There is nothing irregular about the respondent court's finding that the 50% fee of petitioner is unconscionable As aptly put by the court: It effectively deprives the appellees of a meaningful victory of the suit they have passionately pursued. Balancing the allocation of the monetary award, 50% of all monies to the lawyer and the other 50% to be allocated among all his 52 clients, is too lop-sided in favor of the lawyer. The ratio makes the practice of law a commercial venture, rather than a noble profession. . . . Also, the 52 employees who are the plaintiffs in the aforementioned civil case were dismissed from employment, their means of livelihood. All 52 hired claimant-appellant as counsel so that they could be reinstated and their source of income restored. It would, verily be ironic if the counsel whom they had hired to help would appropriate for himself 50% or even 60% of the total 20 amount collectible by these employees. Here is an instance where the courts should intervene. Considering the nature of the case, which is a labor case, the amount recovered and petitioner's participation in the case, an award of 50% of back salaries of his 52 clients indeed strikes us as excessive. Under the circumstances, a fee of 20% of back salaries would be a fair settlement in this case. In any event, this award pertains only to the ten private respondents herein. Petitioner has already been compensated in the amount of 50% of all monies received, by the rest of his clients in the case below. WHEREFORE, in view of the foregoing, the petition is DENIED and the appealed decision AFFIRMED. SO ORDERED.

NO. 35 G.R. No. 78173 October 26, 1992 ANDRES SUMAOANG, petitioner, vs. HON. JUDGE, REGIONAL TRIAL COURT, BRANCH XXXI, GUIMBA, NUEVA ECIJA and ATTY. JORGE A. PASCUA, respondents. In the Petition presently before us, Andres Sumaoang seeks to annul the Decision dated 31 August 1982, rendered by the then Court of First Instance ("CFI") of Nueva Ecija in Civil Case No. 697-G, which awarded to private respondent Atty. Jorge A. Pascua the sum of P110,000.00 as attorney's fees.
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On 15 July 1933, the late Sebastian Sumaoang filed with the Bureau of Lands a homestead application over Lot No. 3098 of the Cadastral Survey of Santiago, Isabela, covering an area of 21.3445 hectares. He then took possession of and cultivated the lot. Due to illness and the dangerous conditions then prevailing in Santiago, Isabela immediately after the second World War, he transferred his residence to his native town of Sta. Ignacia, Tarlac where he died on 22 August 1952. Meanwhile, Florencio and Regino, both surnamed Domingo applied for a homestead patent over Lot No. 3098 during Sebastian Sumaoang's absence. On 11 may 1950, Florencio Domingo was granted a homestead patent (HP No. V-5218) over the land on the strength of which the Register of Deeds of Isabela issued Original Certificate of Title No. T-1202 to him. To protect their interests over the homestead, petitioner and his brothers, Vitaliano and Pedro Sumaoang, engaged the services of private respondent Atty. Jorge A. Pascua, promising him, in a letter dated 17 December 2 1964 a contingent fee of "not less than one-half (1/2)" of the entire homestead, if recovered. As counsel for the Sumaoangs, Atty. Pascua filed a formal protest with the Bureau of Lands contesting the legality of the issuance of Homestead Patent No. V-5218 to Florencio Domingo. On 7 February 1962, the Bureau of Lands 3 rendered a decision declaring Homestead Patent No. V-5218 inoperative and ordered that steps be taken towards the filing of a reversion case with the view to cancelling that homestead patent and its corresponding certificate of title, and disposing of the land to petitioner and his brothers as heirs of Sebastian Sumaoang should the facts so warrant. Pursuant to the above decision of the Bureau of Lands, the Solicitor General filed, on behalf of the Republic of the Philippines, a reversion case against Florencio and Regino Domingo for the cancellation of Homestead Patent No. V-5218 and Original Certificate of Title No. T-1201 before the CFI of Isabela. In that case, Atty. Pascua filed, on behalf of petitioner and his brothers, a complaint-in-intervention claiming preferential rights to the land in favor of 4 5 his clients. After trial, the lower court rendered a decision dated 17 February 1971 declaring the homestead patent, as well as the certificate of title, null and void and ordered the reversion of the land to the State subject to the rights of petitioner and his brothers. In its dispositive portion, the decision stated that: WHEREFORE, judgment is rendered: (a) Declaring homestead patent No. V-5218 and the corresponding Original Certificate of Title No. T-1201 both in favor of the defendant Florencio Domingo and covering Lot No. 3098, Cad. 211, null and void and ordering the reversion of the said lot to the State subject to the rights of the intervenors as the facts may warrant; (b) Ordering defendant Florencio Domingo to surrender to the defendant Register of Deeds his owner's duplicate of said torrens title or Original Certificate of Title No. T-1201 for cancellation and any other transfer certificates of title that might have been issued by the Register of Deeds emanating from Original Certificate of Title No. T-1201; (c) Ordering the Register of Deeds of Isabela, upon his receipt of the owner's duplicate certificate of title to cancel homestead patent No. V-5218 and the original and duplicate of said Original Certificate of Title No. T-1201 in the name of Florencio Domingo and any other transfer certificates of title issued emanating from Original Certificate of Title No. T-1201; (d) Ordering the defendant Florencio Domingo to pay to the intervenors the sum of 160 2/3 cavanes of palay or the value of P1,928.00 computed from P12.00 per cavan, per agricultural year since 1953 until this judgment becomes final.

This decision was affirmed by both the Court of Appeals and the Supreme Court.

The decision became final and executory on 11 February 1973. In 1977, petitioner and his brothers took possession of Lot No. 3098 and subdivided it among themselves. Not having received compensation for his professional services as counsel, Atty. Pascua filed sometime in 1979 a complaint for collection of attorney's fees against his former clients, petitioner and his brothers, before the CFI of Guimba, Nueva Ecija. The trial court stated in its judgment dated 31 August 1982 that Atty. Pascua was entitled only to "the equivalent of one-half of the property in its peso valuation" and somehow ordered petitioner and his brothers to pay attorney's fees in the amount of P110,000.00. The dispositive portion of this decision reads as follows: WHEREFORE, in view of all the foregoing, judgment is hereby rendered in favor of the plaintiff, Atty. Jorge A. Pascua, ordering the defendants Vitaliano, Andres, and Pedro all surnamed Sumaoang, to jointly and severally pay the sum of One Hundred Ten Pesos (P110,000.00) as attorney's fee; the sum of One Thousand Five Hundred Pesos (P1,500.00) as attorney's fee in the prosecution of the instant case, to pay the cost of the suit. The decision of 31 August 1982 of the CFI of Guimba became final and executory. On motion of Atty. Pascua, the trial court on 22 April 1983 ordered the issuance of a writ of execution. The corresponding writ of execution was 8 issued by the Branch Clerk of Court on 25 January 1985. The Deputy Provincial Sheriff then levied upon and sold at public auction the entire lot of 21.3445 hectares here involved to Atty. Pascua as the sole and hence the highest 9 bidder, for and in consideration of P110,000.00 as partial payment of the judgment obligation. Petitioner brought the present Petition asking for the nullification of the 31 August 1982 decision of the Guimba CFI, as well as the writ of execution, the notice of levy and auction sale and the certificate of sale issued in favor of Atty. Pascua. Petitioner's cause of action is anchored principally on the contention that the award of P110,000.00 as attorney's fees of Atty. Pascua was unconscionable. Petitioner argues that the Solicitor General, and not Atty. Pascua, had actively handled the reversion case and that Atty. Pascua's participation therein was limited to the filing of a complaint-in-intervention on behalf of his clients. In the complaint-in-intervention, Atty. Pascua asked for the same relief as that sought by the Solicitor General, although the former added the additional prayer that his clients be accorded preferential rights over the land reverted to the public domain. Petitioner further contended that the contract for legal services between petitioner and his brothers on the hand and Atty. Pascua on the other, provided only for attorney's fees of P5,000.00, as Atty. Pascua himself allegedly admitted in the complaint-inintervention filed in the reversion case. Upon the other hand, Atty. Pascua's principal contentions are that award of attorney's fees by the Guimba CFI in its 31 August 1982 decision was not unconscionable and that decision had already become final and executory. The ordinary rule is that a judgment may be annulled only on certain defined grounds, lack of jurisdiction, fraud, or 11 illegality. In the case at bar, petitioner has not adduced any jurisdictional defects vitiating the judgment assailed; neither has petitioner shown that the judgment, as such, is in violation of a particular statute. Petitioner's allegation that there was improper venue would not suffice to nullify the decision already rendered and final. From the view we take of this case, however, the circumstances that the Decision of the Guimba CFI of 31 August 1982 became final and executory and that the jurisdiction of the trial court to render that Decision has not been successfully assailed, are not decisive. It is essential to note that the relationship between an attorney and his client is a fiduciary one. Canon 17 of the Code of Professional Responsibility stresses that "a lawyer owes fidelity to the cause of his client and he shall be
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mindful of the trust and confidence reposed in him." Canon 16 requires a lawyer to "hold in trust all monies and 12 properties of his client that may come into his possession. A lawyer it not merely the defender of his client's cause and a trustee of his client in respect of the client's cause of action and assets; he is also, and first and foremost, an officer of the court and participates in the fundamental function of administering justice in society. It follows that a lawyer's compensation for professional services rendered are 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 13 submits himself to the authority of the courts to regulate his right to charge professional fees. In the instant case, the Court considers that the fees which private respondent Atty. Pascua received from petitioner and his brothers became unreasonable and unconscionable in character, not because the original agreement between Atty. Pascua and his clients was itself unreasonable and unconscionable but rather as a result of the subsequent dispositions of the trial court. The Decision of the trial court shows that respondent Judge upheld the reasonableness and the lawfulness of the contingent fee contract between Atty. Pascua and the Sumaoang brothers. Instead, however, of simply awarding Atty. Pascua a one-half (1/2) portion of the property involved, respondent Judge would up awarding Atty. Pascua a peso amount. In other words, respondent Judge unilaterally and officiously converted the form or medium of compensation from the (1/2) portion of the land recovered by petitioner and his brothers through the efforts of Atty. Pascua, into a peso amount representing, in the mind of the Judge, the value of that one-half (1/2) portion. In his decision, respondent Judge said, among other things: It is however noted by this Court that plaintiff should only be awarded the equivalent of one-half of the property as his lawful attorney's fee in its peso valuation. The land of the defendants commands a high price per hectare in Isabela because NIA had constructed an irrigation canal near it which supplies abundant water supply making it possible for defendants to harvest twice a year. Per hectare, the land owned by the defendants now commands P10,000.00 minimum as 14 price. (Emphasis supplied) Most charitably viewed, respondent Judge was apparently laboring under the impression that the land involved had greatly appreciated in value during the years of litigation. Without requiring or obtaining any third party appraisal of the actual or fair market value of the 21.3445 hectares involved, respondent Judge fixed the sum of P110,000.00 as the "equivalent of 1/2 of the property in its peso valuation." Thus, the respondent Judge in fact disregarded the contingent fee contract between attorney and client, after holding that contract lawful. Worse, the Judge turned out to be grossly uninformed about property valuations, especially the valuation of property sold at public sale in Guimba, Nueva Ecija, and his judgment allowed Atty. Pascua to acquire the entire parcel of land which had been the subject matter of the litigation and for the recovery of which, Atty. Pascua had been retained by the Sumaoang brothers. In brief, Atty. Pascua was able to acquire all the 21.3445 hectares of land although the respondent court had intended to award him only one-half (1/2) "the [assumed] value of such land." In Licudan vs. Court of Appeals,
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this Court said:

. . . There should never be an instance where a lawyer gets as attorney's fees the entire property involved in the litigation. It is unconscionable for the victor in litigation to lose everything he won to the fees of his own lawyer. xxx xxx xxx

In resolving the issue of reasonableness of the attorney's fees, we uphold the time-honoured legal maxim that a lawyer shall at all times uphold the integrity and dignity of the legal profession so that his basic ideal becomes one of rendering service and securing justice, not money-making. For the worst scenario that can never happen to a client is to lose the litigated property to his lawyer in whom all trust and confidence were bestowed at the very inception of the legal controversy. . . . (Emphasis supplied) We believe and so hold that respondent Atty. Pascua, under the circumstances of this case, must be regarded as holding the title of the property acquired by him at public sale under an implied trust in favor of petitioner and his brothers, to the extent of one-half (1/2) of that property. Among the species of implied trusts recognized by our Civil Code is that set forth in Article 1456: If property is acquired through mistake or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for the benefit of the person from whom the property comes. The "mistakes" or "fraud" that results in an implied trust being impressed upon the property involved, may be the mistake or fraud of a third person, and need not be a mistake or fraud committed directly by the trustee himself 16 under the implied trust. Accordingly, in the instant case, an implied trust was established upon the land acquired by Atty. Pascua even though the operative mistake was a mistake of respondent trial judge. Respondent Judge may be seen to have intended to convey only one-half (1/2) of the land involved as attorney's fees to Atty. Pascua. Atty. Pascua, however, took advantage of the Judge's mistake in order to acquire all the 21.3445 hectares for himself. Atty. Pascua obviously knew that under his contract with his clients, he was entitled to ask only for one-half (1/2) of the land. When he purchased the entire land at public auction for P110,000.00 (leaving his clients still owing him P1,500.00), the amount and character of his attorney's fees became unreasonable and unconscionable and constituted unjust enrichment at the expense of his clients. The conclusion we reach in this case rests not only on Article 1456 of the Civil Code but also on the principles of the general law of trusts which, through Article 1442 of the Civil Code, have been adopted or incorporated into our civil law, to the extent that such principles are not inconsistent with the Civil Code and other statutes and the Rules of Court. In Roa, Jr. v. Court of Appeals, where petitioner had retained property the beneficial ownership of which belonged to the private respondents, the Supreme Court affirmed the decision of the Court of Appeals directing petitioner to convey title to that property to private respondents. The Supreme Court rested its decision on the principles of the general law of trusts which, the Court held, included the following general principles embedded in American law and jurisprudence: A constructive trust, otherwise known as a trust ex maleficio, a trust ex delicto, a trust de son tort, an involuntary trust, or an implied trust, is a trust by operation of law which arises contrary to intention and in invitum, against one who, by fraud, actual or constructive, by duress or abuse of confidence, by commission of wrong, or by any form of unconscionable conduct, artifice, concealment, or questionable means, or who in any way against equity and good conscience, either has obtained or holds the legal right to property which he ought not, in equity and good conscience, hold and enjoy. It is raised by equity to satisfy the demands of justice. However, a constructive trust does not arise on every moral wrong in acquiring or holding property or on every abuse of confidence in business or other affairs; ordinarily such a trust arises and will be declared only on wrongful acquisitions or retentions of property of which equity, in accordance with its fundamental principles and the traditional exercise of its jurisdiction or in accordance with statutory provision, takes cognizance. It has been broadly ruled that a breach of confidence, although in business or social relations, rendering an acquisition or retention of property by one person unconscionable against another, raises a constructive trust.
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And specifically applicable to the case at bar is the doctrine that "A constructive thrust is substantially an appropriate remedy against unjust enrichment. It is raised by equity in respect of property, which has been acquired by fraud, or where, although acquired originally without fraud, it is against equity that it should be retained by the person holding it." The above principle is not in conflict with the New Civil Code, Code of Commerce, Rules of Court and special laws. And since We are a court of law and of equity, the case at bar must be resolved on the general principles of law on constructive trust which basically rest on equitable considerations in order to satisfy the demands of justice, morality, conscience and fair dealing and thus protect the innocent against fraud. As the respondent court said, "It behooves upon the courts to shield fiduciary relations against every manner of chicanery or detestable design 18 cloaked by legal technicalities." (Citations omitted; Emphasis partly supplied and partly in the original) A constructive trust, in general usage in the United States, is not based on an expressed intent that it shall exist, or even on an implied or presumed intent. A constructive trust is created by a court of equity as a means of 20 affording relief. Constructive trusts constitute a remedial device "through which preference of self is made 21 subordinate to loyalty to others." In particular, fraud on the part of the person holding or detaining the property at stake is not essential in order that an implied trust may spring into being. In other words of Judge Cardozo, in 22 Beatty v. Guggenheim Exploration Co.: [w]hen property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee. The consequences of an implied trust are, principally, that the implied trustee shall deliver the possession and reconvey title to the property to the beneficiary of the trust, and to pay to the latter the fruits and other net profit received from such property during the period of wrongful or unconscionable holding, and otherwise to adjust the 23 equities between the trustee holding the legal title and the beneficiaries of the trust. Applying the provisions of Article 1456 of the Civil Code and the foregoing principles of the general law of trusts, we treat the present so-called "Petition for Annulment of the Decision of the CFI, etc." as a "Petition for Reconveyance" and, accordingly, require private respondent Atty. Pascua to reconvey or cause the reconveyance of one-half (1/2) of the 21.3445 hectares of land here involved, plus one-half (1/2) of all profits (net of expenses and taxes) which Atty. Pascua may have derived from or in respect of such land during the time he has held the same, to petitioner and his brothers, Vitaliano and Pedro Sumaoang. WHEREFORE, for all the foregoing, and treating the present Petition as a Petition for Reconveyance of Land, the Court hereby GRANTS the same. Private respondent Atty. Jorge A. Pascua is hereby ORDERED to reconvey or cause the reconveyance of one-half (1/2) of the land here involved, plus one-half (1/2) of the net profits derived from or in respect of such land during the time it has been held by private respondent Pascua, to petitioner and petitioner's brothers, Vitaliano and Pedro Sumaoang. No pronouncement as to costs. SO ORDERED.
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