CANON 20

Section 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. 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.

Section 37. Attorneys' liens. An attorney shall have a lien upon the funds, documents and
papers of his client which have lawfully come into his possession and may retain the same until
his lawful fees and disbursements have been paid, and may apply such funds to the satisfaction
thereof. 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 the 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 the 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.

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Case No. 1
A.C. No. 5359 March 10, 2014
ERMELINDA LAD VOA. DE DOMINGUEZ, represented by her Attorney-in-Fact, VICENTE
A. PICHON, Complainant, vs.
ATTY. ARNULFO M. AGLERON, SR., Respondent.

Complainant Ermelinda Lad Vda. De Dominguez (complainant) was the widow of the late Felipe
Domiguez who died in a vehicular accident in Caraga, Davao Oriental, on October 18, 1995,
involving a dump truck owned by the Municipality of Caraga. Aggrieved, complainant decided to
file charges against the Municipality of Caraga and engaged the services of respondent Atty.
Arnulfo M. Agleron, Sr. (Atty. Agleron). On three (3) occasions, Atty. Agleron requested and
received from complainant the following amounts for the payment of filing fees and sheriffs fees,
to wit: (1) June 3, 1996 -P3,000.00; (2) June 7, 1996 -Pl,800.00; and September 2, 1996 -
P5,250.00 or a total of P10,050.00. After the lapse of four (4) years, however, no complaint was
filed by Atty. Agleron against the Municipality of Caraga.
Atty. Agleron admitted that complainant engaged his professional service and received the
amount of P10,050.00. He, however, explained that their agreement was that complainant would
pay the filing fees and other incidental expenses and as soon as the complaint was prepared and
ready for filing, complainant would pay 30% of the agreed attorneys fees of P100,000.00. On
June 7, 1996, after the signing of the complaint, he advised complainant to pay in full the amount
of the filing fee and sheriffs fees and the 30% of the attorneys fee, but complainant failed to do
so. Atty. Agleron averred that since the complaint could not be filed in court, the amount of
P10,050.00 was deposited in a bank while awaiting the payment of the balance of the filing fee
and attorneys fee.
In reply, complainant denied that she did not give the full payment of the filing fee and asserted
that the filing fee at that time amounted only to P7,836.60.
In the Report and Recommendation, dated January 12, 2012, the Investigating Commissioner
found Atty. Agleron to have violated the Code of Professional Responsibility when he neglected a
legal matter entrusted to him, and recommended that he be suspended from the practice of law
for a period of four (4) months.
In its April 16, 2013 Resolution, the Integrated Bar of the Philippines (IBP) Board of Governors
adopted and approved the report and recommendation of the Investigating Commissioner with
modification that Atty. Agleron be suspended from the practice of law for a period of only one (1)
month.
The Court agrees with the recommendation of the IBP Board of Governors except as to the
penalty imposed.
Atty. Agleron violated Rule 18.03 of the Code of Professional Responsibility, which provides that:
Rule 18.03-A lawyer shall not neglect a legal matter entrusted to him, and his negligence in
connection therewith shall render him liable.
Once a lawyer takes up the cause of his client, he is duty bound to serve his client with
competence, and to attend to his clients cause with diligence, care and devotion regardless of
whether he accepts it for a fee or for free. He owes fidelity to such cause and must always be
mindful of the trust and confidence reposed on him.
In the present case, Atty. Agleron admitted his failure to file the complaint against the
Municipality of Caraga, Davao Oriental, despite the fact that it was already prepared and signed.
He attributed his non-filing of the appropriate charges on the failure of complainant to remit the
full payment of the filing fee and pay the 30% of the attorney's fee. Such justification, however,
is not a valid excuse that would exonerate him from liability. As stated, every case that is
entrusted to a lawyer deserves his full attention whether he accepts this for a fee or free. Even
assuming that complainant had not remitted the full payment of the filing fee, he should have
found a way to speak to his client and inform him about the insufficiency of the filing fee so he
could file the complaint. Atty. Agleron obviously lacked professionalism in dealing with
complainant and showed incompetence when he failed to file the appropriate charges.
In a number of cases, the Court held that a lawyer should never neglect a legal matter entrusted
to him, otherwise his negligence renders him liable for disciplinary action such as suspension
ranging from three months to two years. In this case, the Court finds the suspension of Atty.
Agleron from the practice of law for a period of three (3) months sufficient.
WHEREFORE, the resolution of the IBP Board of Governors is hereby AFFIRMED with
MODIFICATION. Accordingly, respondent ATTY. ARNULFO M. AGLERON, SR. is hereby SUSPENDED
from the practice of law for a period of THREE (3) MONTHS, with a stern warning that a repetition
of the same or similar wrongdoing will be dealt with more severely.
Let a copy of this resolution be furnished the Bar Confidant to be included in the records of the
respondent; the Integrated Bar of the Philippines for distribution to all its chapters; and the Office
of the Court Administrator for dissemination to all courts throughout the country.
SO ORDERED.
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Case No. 2
A.C. No. 9091 December 11, 2013
CONCHITA A. BALTAZAR, ROLANDO SAN PEDRO, ALICIA EULALIO-RAMOS, SOLEDAD A.
FAJARDO AND ENCARNACION A. FERNANDEZ, Complainants, vs. ATTY. JUAN B. BAEZ,
Respondent.

Complainants are the owners of three parcels of land located in Dinalupihan, Bataan. n 4
September 2002, they entered into an agreement, they stood to be paid P35,000.000 for all the
lots that would be sold in the subdivision. For that purpose, they executed a Special Power of
Attorney authorizing Fevidal to enter into all agreements concerning the parcels of land and to
sign those agreements on their behalf.
Fevidal did not update complainants about the status of the subdivision project and failed to
account for the titles to the subdivided land. Complainants also found that he had sold a number
of parcels to third parties, but that he did not turn the proceeds over to them. Neither were
complainants invited to the ceremonial opening of the subdivision project.
Thus, on 23 August 2005, they revoked the Special Power of Attorney they had previously
executed in his favor.
Complainants subsequently agreed to settle with Fevidal for the amount of P10,000,000, but the
latter again failed to pay them.
Complainants engaged the professional services of respondent for the purpose of assisting them
in the preparation of a settlement agreement.
Instead of drafting a written settlement, respondent encouraged them to institute actions against
Fevidal in order to recover their properties. Complainants then signed a contract of legal
services, in which it was agreed that they would not pay acceptance and appearance fees to
respondent, but that the docket fees would instead be shared by the parties. Under the contract,
complainants would pay respondent 50% of whatever would be recovered of the properties. In
preparation for the filing of an action against Fevidal, respondent prepared and notarized an
Affidavit of Adverse Claim, seeking to annotate the claim of complainants to at least 195 titles in
the possession of Fevidal.
A certain Luzviminda Andrade (Andrade) was tasked to submit the Affidavit of Adverse Claim to
the Register of Deeds of Bataan.
The costs for the annotation of the adverse claim were paid by respondent. Unknown to him, the
adverse claim was held in abeyance, because Fevidal got wind of it and convinced complainants
to agree to another settlement.
Meanwhile, on behalf of complainants, and after sending Fevidal a demand letter dated 10 July
2006, respondent filed a complaint for annulment, cancellation and revalidation of titles, and
damages against Fevidal before the Regional Trial Court (RTC) of Bataan on 13 October 2006.
Complainants found it hard to wait for the outcome of the action. Thus, they terminated the
services of respondent on 8 June 2007, withdrew their complaint against Fevidal on 9 June 2007,
and finalized their amicable settlement with him on 5 July 2007.
Respondent filed a Manifestation and Opposition dated 20 July 2007 before the RTC, alleging that
the termination of his services and withdrawal of the complaint had been done with the intent of
defrauding counsel. On the same date, he filed a Motion for Recording of Attorneys Charging
Lien in the Records of the Above-Captioned Cases.
When the RTC granted the withdrawal of the complaint, he filed a Manifestation and Motion for
Reconsideration.
After an exchange of pleadings between respondent and Fevidal, with the latter denying the
formers allegation of collusion, complainants sought the suspension/disbarment of respondent
through a Complaint filed before the Integrated Bar of the Philippines (IBP) on 14 November
2007. Complainants alleged that they were uneducated and underprivileged, and could not taste
the fruits of their properties because the disposition thereof was "now clothed with legal
problems" brought about by respondent.
In their complaint, they alleged that respondent had violated Canons 1.01, 1.03, 1.04, 12.02,
15.05, 18.04, and 20.04 of the Code of Professional Responsibility. On 14 August 2008, the IBP
Commission on Bar Discipline adopted and approved the Report and Recommendation of the
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investigating commissioner. It suspended respondent from the practice of law for a period of one
year for entering into a champertous agreement.
On 26 June 2011, it denied his motion for reconsideration. On 26 November 2012, this Court
noted the Indorsement of the IBP Commission on Bar Discipline, as well as respondents second
motion for reconsideration. We find that respondent did not violate any of the canons cited by
complainants. In fact, we have reason to believe that complainants only filed the instant
complaint against him at the prodding of Fevidal.
Respondent cannot be faulted for advising complainants to file an action against Fevidal to
recover their properties, instead of agreeing to a settlement of P10,000,000 a measly amount
compared to that in the original agreement, under which Fevidal undertook to pay complainants
the amount of P35,000,000. Lawyers have a sworn duty and responsibility to protect the interest
of any prospective client and pursue the ends of justice.
Any lawyer worth his salt would advise complainants against the abuses of Fevidal under the
circumstances, and we cannot countenance an administrative complaint against a lawyer only
because he performed a duty imposed on him by his oath. The claim of complainants that they
were not informed of the status of the case is more appropriately laid at their door rather than at
that of respondent. He was never informed that they had held in abeyance the filing of the
adverse claim. Neither was he informed of the brewing amicable settlement between
complainants and Fevidal. We also find it very hard to believe that while complainants received
various amounts as loans from respondent from August 2006 to June 2007, they could not spare
even a few minutes to ask about the status of the case. We shall discuss this more below. As
regards the claim that respondent refused to "patch up" with Fevidal despite the pleas of
complainants, we note the latters Sinumpaang Salaysay dated 24 September 2007, in which
they admitted that they could not convince Fevidal to meet with respondent to agree to a
settlement.
Finally, complainants apparently refer to the motion of respondent for the recording of his
attorneys charging lien as the "legal problem" preventing them from enjoying the fruits of their
property. Section 26, Rule 138 of the Rules of Court allows an attorney to intervene in a case to
protect his rights concerning the payment of his compensation. According to the discretion of the
court, the attorney shall have a lien upon all judgments for the payment of money rendered in a
case in which his services have been retained by the client. We recently upheld the right of
counsel to intervene in proceedings for the recording of their charging lien. In Malvar v. KFPI, we
granted counsels motion to intervene in the case after petitioner therein terminated his services
without justifiable cause. Furthermore, after finding that petitioner and respondent had colluded
in order to deprive counsel of his fees, we ordered the parties to jointly and severally pay counsel
the stipulated contingent fees. Thus, the determination of whether respondent is entitled to the
charging lien is based on the discretion of the court before which the lien is presented. The
compensation of lawyers for professional services rendered is subject to the supervision of the
court, not only to guarantee that the fees they charge remain reasonable and commensurate
with the services they have actually rendered, but to maintain the dignity and integrity of the
legal profession as well.
In any case, an attorney is entitled to be paid reasonable compensation for his services.
That he had pursued its payment in the appropriate venue does not make him liable for
disciplinary action. Notwithstanding the foregoing, respondent is not without fault. Indeed, we
find that the contract for legal services he has executed with complainants is in the nature of a
champertous contract an agreement whereby an attorney undertakes to pay the expenses of
the proceedings to enforce the clients rights in exchange for some bargain to have a part of the
thing in dispute.
Such contracts are contrary to public policy and are thus void or inexistent.
They are also contrary to Canon 16.04 of the Code of Professional Responsibility, which states
that lawyers shall not lend money to a client, except when in the interest of justice, they have to
advance necessary expenses in a legal matter they are handling for the client. A reading of the
contract for legal services shows that respondent agreed to pay for at least half of the expense
for the docket fees. He also paid for the whole amount needed for the recording of complainants
adverse claim. While lawyers may advance the necessary expenses in a legal matter they are
handling in order to safeguard their clients rights, it is imperative that the advances be subject
to reimbrusement. The purpose is to avoid a situation in which a lawyer acquires a personal
stake in the clients cause. Regrettably, nowhere in the contract for legal services is it stated that
the expenses of litigation advanced by respondents shall be subject to reimbursement by
complainants.
In addition, respondent gave various amounts as cash advances (bali), gasoline and
transportation allowance to them for the duration of their attorney-client relationship. In fact, he
admits that the cash advances were in the nature of personal loans that he extended to
complainants.
Clearly, respondent lost sight of his responsibility as a lawyer in balancing the clients interests
with the ethical standards of his profession. Considering the surrounding circumstances in this
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case, an admonition shall suffice to remind him that however dire the needs of the clients, a
lawyer must always avoid any appearance of impropriety to preserve the integrity of the
profession.
WHEREFORE, Attorney Juan B. Baez, Jr. is hereby ADMONISHED for advancing the litigation
expenses in a legal matter her handled for a client without providing for terms of reimbursement
and lending money to his client, in violation of Canon 16.04 of the Code of Professional
Responsibility. He us sternly warned that a repetition of the same or similar act would be dealt
with more severly.
Let a copy of this Resolution be attached to the personal record of Atty. Baez, Jr.
SO ORDERED.

Case No. 3
G.R. No. 191641, September 02, 2015
EDMUNDO NAVAREZ, Petitioner, v. ATTY. MANUEL ABROGAR III, Respondent.

This is a petition for certiorari under Rule 65 of the Rules of Court, filed from the October 16,
2009 Decision and the March 12, 2010 Resolution of the Court of Appeals ( CA) in CA-G.R. SP No.
108675. The CA dismissed the petition for certiorari that the present petitioner filed against the
January 21, 2009 Order of the Regional Trial Court (RTC).

ANTECEDENTS

On July 30, 2007, petitioner Edmundo Navarez engaged the services of Abrogar Valerio Maderazo
and Associates Law Offices (the Firm) through the respondent, Atty. Manuel Abrogar III. The Firm
was to represent Navarez in Sp. Proc. No. Q-05-59112 entitled "Apolonio Quesada, Jr. v. Edmundo
Navarez" as collaborating counsel of Atty. Perfecto Laguio. The case involved the settlement of
the estate of Avelina Quesada-Navarez that was then pending before the Regional Trial Court
(RTC), Branch 83, Quezon City. The pertinent portions of the Retainer Agreement read:
Our services as collaborating counsel will cover investigation, research and representation
with local banks, concerns regarding deposits (current and savings) and investment instruments
evidenced by certificate of deposits. Our office may also initiate appropriate civil and/or criminal
actions as well as administrative remedies needed to adjudicate the Estate of Avelina Quesada-
Navarez expeditiously, peacefully and lawfully.

Effective Date: June 2007

Acceptance Fee: P100,000.00 in an installment basis
Success Fee: 2% of the total money value of your share as co-owner and heir of the Estate
(payable proportionately upon your receipt of any amount)
Appearance Fee: P2,500.00 per Court hearing or administrative meetings and/or other
meetings.

Filing of Motions and/or pleadings at our initiative shall be for your account and you will be billed
accordingly.

OUT-OF-POCKET EXPENSES: Ordinary out-of-pocket expenses such as telex, facsimile, word

processing, machine reproduction, and transportation expenses, as well as per diems and
accommodations expenses incurred in undertaking work for you outside Metro Manila area and
other special out-of-pocket expenses as you may authorized [sic] us to incur (which shall always
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be cleared with you in advance) shall be for your account. xxxx
On September 2, 2008, Navarez filed a Manifestation with the RTC that he was terminating the
services of Atty. Abrogar. On the same day, Navarez also caused the delivery to Atty. Abrogar of a
check in the amount of P220,107.51 - allegedly equivalent to one half of 7.5% of petitioner's
P11,200,000.00 share in the estate of his deceased wife less Atty. Abrogar's cash advances.

On September 9, 2008, Atty. Abrogar manifested that with respect to the petitioner's one-half
(1/2) share in the conjugal partnership, the RTC had already resolved the matter favorably
because it had issued a release order for the petitioner to withdraw the amount. Atty. Abrogar
further declared that the Firm was withdrawing as counsel - effective upon the appointment of an
Administrator of the estate - from the remaining proceedings for the settlement of the estate of
Avelina Quesada-Navarez.

On September 22, 2008, the petitioner wrote to Atty. Abrogar offering to pay his attorney's fees
in accordance with their Retainer Agreement minus the latter's cash advances - an offer that
Atty. Abrogar had previously refused in August 2008.

On October 7, 2008, Atty. Abrogar filed a Motion to Enter into the Records his attorney's lien
pursuant to Rule 138, Section 37 of the Rules of Court.

On November 21, 2008, the motion was submitted for resolution without oral arguments.

On January 21, 2009, the RTC issued an order granting the motion and directed the petitioner to
pay Atty. Abrogar's attorney's fees. The Order reads:
WHEREFORE, premises considered, it is hereby ordered:
That the attorney's lien of Manuel Abrogar III conformably with the Retainer Agreement dated
July 30, 2007, be entered into the records of this case in consonance with Section 37, Rule 138 of
the Rules of Court;
That oppositor Edmundo Navarez pay the amount of 7.5% of P11,196,675.05 to Manuel Abrogar
III;
That the oppositor pay the administrative costs/expenses of P103,000.00 to the movant; and
That the prayers for P100,000.00 as exemplary damages, P200,000.00 as moral damages and for
writ of preliminary attachment be denied.
SO ORDERED.
On February 18, 2009, the petitioner filed a Motion for Reconsideration.

On March 17, 2009, the RTC denied the motion for reconsideration and issued a Writ of Execution
of its Order dated January 21, 2009.

The petitioner elevated the case to the CA via a petition for certiorari. He argued that the RTC
committed grave abuse of discretion because: (1) the RTC granted Atty. Abrogar's claim for
attorney's fees despite non-payment of docket fees; (2) the RTC denied him the opportunity of a
full-blown trial to contradict Atty. Abrogar's claims and prove advance payments; and (3) the RTC
issued a writ of execution even before the lapse of the reglementary period.

In its decision dated October 16, 2009, the CA dismissed the petition and held that the RTC did
not commit grave abuse of discretion.

The petitioner moved for reconsideration which the CA denied in a Resolution dated March 12,
2010.

On April 6, 2010, and April 26, 2010, the petitioner filed his first and second motions for
extension of time to file his petition for review. This Court granted both motions for extension
totaling thirty (30) days (or until May 5, 2010) in the Resolution dated July 26, 2010.

On May 5, 2010, the petitioner filed the present petition entitled "Petition for Review." However,
the contents of the petition show that it is a petition for certiorari under Rule 65 of the Rules of
Court.

THE PETITION

The petitioner argues that the CA gravely erred in dismissing his petition for certiorari that
challenged the RTC ruling ordering the payment of attorney's fees. He maintains his argument
that the RTC committed grave abuse of discretion because: (1) it granted Atty. Abrogar's claim
for attorney's fees despite lack of jurisdiction due to non-payment of docket fees; (2) it granted
the claim for attorney's fees without requiring a fullblown trial and without considering his
6
advance payments; and (3) it issued the writ of execution before the lapse of the reglementary
period. The petitioner also points out that the CA nullified the RTC's release order in CA-G.R. SP
No. 108734.

In his Comment dated September 8, 2010, Atty. Abrogar adopted the CA's position in its October
16, 2009 Decision.

OUR RULING
We observe that the petitioner used the wrong remedy to challenge the CA's decision and
resolution. The petitioner filed a petition for certiorari under Rule 65, not a petition for review on
certiorari under Rule 45. A special civil action for certiorari is a remedy of last resort, available
only to raise jurisdictional issues when there is no appeal or any other plain, speedy, and
adequate remedy under the law.
Nonetheless, in the spirit of liberality that pervades the Rules of Court and in the interest of
substantial justice, this Court has, on appropriate occasions, treated a petition for certiorari as a
petition for review on certiorari, particularly when: (1) the petition for certiorari was filed within
the reglementary period to file a petition for review on certiorari; (2) the petition avers errors of
judgment; and (3) when there is sufficient reason to justify the relaxation of the rules.
Considering that the present petition was filed within the extension period granted by this Court
and avers errors of law and judgment, this Court deems it proper to treat the present petition for
certiorari as a petition for review on certiorari in order to serve the higher ends of justice.
With the procedural issue out of the way, the remaining issue is whether or not the CA erred
when it held that the RTC acted within its jurisdiction and did not commit grave abuse of
discretion when it ordered the payment of attorney's fees.
We find merit in the petition.
An attorney has a right to be paid a fair and reasonable compensation for the services he has
rendered to a client. As a security for his fees, Rule 138, Section 37 of the Rules of Court grants
an attorney an equitable right to a charging lien over money judgments he has secured in
litigation for his client. For the lien to be enforceable, the attorney must have caused: (1) a
statement of his claim to be entered in the record of the case while the court has jurisdiction
over the case and before the full satisfaction of the judgment; and (2) a written notice of his
claim to be delivered to his client and to the adverse party.
However, the filing of the statement of the claim does not, by itself, legally determine the
amount of the claim when the client disputes the amount or claims that the amount has been
paid. In these cases, both the attorney and the client have a right to be heard and to present
evidence in support of their claims. The proper procedure for the court is to ascertain the proper
amount of the lien in a full dress trial before it orders the registration of the charging lien. The
necessity of a hearing is obvious and beyond dispute.

In the present case, the RTC ordered the registration of Atty. Abrogar's lien without a hearing
even though the client contested the amount of the lien. The petitioner had the right to be heard
and to present evidence on the true amount of the charging lien. The RTC acted with grave abuse
of discretion because it denied the petitioner his right to be heard, i.e., the right to due process.

The registration of the lien should also be distinguished from the enforcement of the lien.
Registration merely determines the birth of the lien. The enforcement of the lien, on the other
hand, can only take place once a final money judgment has been secured in favor of the client.
The enforcement of the lien is a claim for attorney's fees that may be prosecuted in the very
action where the attorney rendered his services or in a separate action.

However, a motion for the enforcement of the lien is in the nature of an action commenced by a
lawyer against his clients for attorney's fees. As in every action for a sum of money, the attorney-
movant must first pay the prescribed docket fees before the trial court can acquire jurisdiction to
order the payment of attorney's fees.

In this case, Atty. Abrogar only moved for the registration of his lien. He did not pay any docket
fees because he had not yet asked the RTC to enforce his lien. However, the RTC enforced the
lien and ordered the petitioner to pay Atty. Abrogar's attorney's fees and administrative
expenses.

Under this situation, the RTC had not yet acquired jurisdiction to enforce the charging lien
because the docket fees had not been paid. The payment of docket fees is mandatory in all
actions, whether separate or an offshoot of a pending proceeding. In Lacson v. Reyes, this Court
granted certiorari and annulled the decision of the trial court granting a "motion for attorney's
fees" because the attorney did not pay the docket fees. Docket fees must be paid before a court
can lawfully act on a case and grant relief. Therefore, the RTC acted without or in excess of its
7
jurisdiction when it ordered the payment of the attorney's fees.

Lastly, the enforcement of a charging lien can only take place after a final money judgment has
been rendered in favor of the client. The lien only attaches to the money judgment due to the
client and is contingent on the final determination of the main case. Until the money judgment
has become final and executory, enforcement of the lien is premature.

The RTC again abused its discretion in this respect because it prematurely enforced the lien and
issued a writ of execution even before the main case became final; no money judgment was as
yet due to the client to which the lien could have attached itself. Execution was improper
because the enforceability of the lien is contingent on a final and executory award of money to
the client. This Court notes that in CA-G.R. SP No. 108734, the CA nullified the "award" to which
the RTC attached the attorney's lien as there was nothing due to the petitioner. Thus,
enforcement of the lien was premature.

The RTC's issuance of a writ of execution before the lapse of the reglementary period to appeal
from its order is likewise premature. The Order of the RTC dated January 21, 2009, is an order
that finally disposes of the issue on the amount of attorney's fees Atty. Abrogar is entitled to. The
execution of a final order issues as a matter of right upon the expiration of the reglementary
period if no appeal has been perfected. Under Rule 39, Section 2 of the Rules of Court,
discretionary execution can only be made before the expiration of the reglementary period upon
a motion of the prevailing party with notice to the adverse party. Discretionary execution may
only issue upon good reasons to be stated in a special order after due hearing.

The RTC ordered execution without satisfying the requisites that would have justified
discretionary execution. Atty. Abrogar had not moved for execution and there were no good
reasons to justify the immediate execution of the RTC's order. Clearly, the RTC gravely abused its
discretion when it ordered the execution of its order dated January 21, 2009, before the lapse of
the reglementary period.

For these reasons, this Court finds that the CA erred when it held that the RTC did not commit
grave abuse of discretion and acted without jurisdiction.

As our last word, this decision should not be construed as imposing unnecessary burden on the
lawyer in collecting his just fees. But, as in the exercise of any other right conferred by law, the
lawyer - and the courts -must avail of the proper legal remedies and observe the procedural rules
to prevent the possibility, or even just the perception, of abuse or prejudice.

WHEREFORE, premises considered, we hereby GRANT the petition. The decision of the Court of
Appeals in CA-G.R. SP No. 108675 dated October 16, 2009, is hereby REVERSED, and the
decision of the Regional Trial Court, Branch 83, Quezon City in Sp. Proc. No. Q-05-59112 is hereby
ANNULLED and SET ASIDE.

SO ORDERED.

Case No. 4
G.R. No. 185544, January 13, 2015
THE LAW FIRM OF LAGUESMA MAGSALIN CONSULTA AND GASTARDO, Petitioner, v. THE
COMMISSION ON AUDIT AND/OR REYNALDO A. VILLAR AND JUANITO G. ESPINO, JR. IN
THEIR CAPACITIES AS CHAIRMAN AND COMMISSIONER, RESPECTIVELY, Respondents.

When a government entity engages the legal services of private counsel, it must do so with the
necessary authorization required by law; otherwise, its officials bind themselves to be personally
liable for compensating private counsels services.

This is a petition for certiorari filed pursuant to Rule XI, Section 1 of the 1997 Revised Rules of
Procedure of the Commission on Audit. The petition seeks to annul the decision dated
September 27, 2007 and resolution dated November 5, 2008 of the Commission on Audit, which
disallowed the payment of retainer fees to the law firm of Laguesma Magsalin Consulta and
Gastardo for legal services rendered to Clark Development Corporation.

Sometime in 2001, officers of Clark Development Corporation, a government-owned and

controlled corporation, approached the law firm of Laguesma Magsalin Consulta and Gastardo for
its possible assistance in handling the corporations labor cases.
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Clark Development Corporation, through its legal officers and after the law firms acquiescence,
sought from the Office of the Government Corporate Counsel [OGCC] its approval for the
engagement of [Laguesma Magsalin Consulta and Gastardo] as external counsel.

On December 4, 2001, the Office of the Government Corporate Counsel denied the request.
Clark Development Corporation then filed a request for reconsideration.

On May 20, 2002, the Office of the Government Corporate Counsel, through Government
Corporate Counsel Amado D. Valdez (Government Corporate Counsel Valdez), reconsidered the
request and approved the engagement of Laguesma Magsalin Consulta and Gastardo. It also
furnished Clark Development Corporation a copy of a pro-forma retainership contract containing
the suggested terms and conditions of the retainership. It instructed Clark Development
Corporation to submit a copy of the contract to the Office of the Government Corporate Counsel
after all the parties concerned have signed it.

In the meantime, Laguesma Magsalin Consulta and Gastardo commenced rendering legal
services to Clark Development Corporation. At this point, Clark Development Corporation had
yet to secure the authorization and clearance from the Office of the Government Corporate
Counsel or the concurrence of the Commission on Audit of the retainership contract. According
to the law firm, Clark Development Corporations officers assured the law firm that it was in the
process of securing the approval of the Commission on Audit.

On June 28, 2002, Clark Development Corporation, through its Board of Directors, approved
Laguesma Magsalin Consulta and Gastardos engagement as private counsel. In 2003, it also
approved the assignment of additional labor cases to the law firm.

On July 13, 2005, Clark Development Corporation requested the Commission on Audit for
concurrence of the retainership contract it executed with Laguesma Magsalin Consulta and
Gastardo. According to the law firm, it was only at this point when Clark Development
Corporation informed them that the Commission on Audit required the clearance and approval of
the Office of the Government Corporate Counsel before it could approve the release of Clark
Development Corporations funds to settle the legal fees due to the law firm.

On August 5, 2005, State Auditor IV Elvira G. Punzalan informed Clark Development Corporation
that its request for clearance could not be acted upon until the Office of the Government
Corporate Counsel approves the retainership contract with finality.

On August 10, 2005, Clark Development Corporation sent a letter-request to the Office of the
Government Corporate Counsel for the final approval of the retainership contract, in compliance
with the Commission on Audits requirements.

On December 22, 2005, Government Corporate Counsel Agnes VST Devanadera (Government
Corporate Counsel Devanadera) denied Clark Development Corporations request for approval on
the ground that the pro-forma retainership contract given to them was not based on the
premise that the monthly retainers fee and concomitant charges are reasonable and could pass
in audit by COA. She found that Clark Development Corporation adopted instead the law firms
proposals concerning the payment of a retainers fee on a per case basis without informing the
Office of the Government Corporate Counsel. She, however, ruled that the law firm was entitled
to payment under the principle of quantum meruit and subject to Clark Development Corporation
Boards approval and the usual government auditing rules and regulations.

On December 27, 2005, Clark Development Corporation relayed Government Corporate Counsel
Devanaderas letter to the Commissions Audit Team Leader, highlighting the portion on the
approval of payment to Laguesma Magsalin Consulta and Gastardo on the basis of quantum
meruit.

On November 9, 2006, the Commission on Audits Office of the General Counsel, Legal and
Adjudication Sector issued a Third Indorsement denying Clark Development Corporations
request for clearance, citing its failure to secure a prior written concurrence of the Commission
on Audit and the approval with finality of the Office of the Government Corporate Counsel. It also
stated that its request for concurrence was made three (3) years after engaging the legal
services of the law firm.

On December 4, 2006, Laguesma Magsalin Consulta and Gastardo appealed the Third
Indorsement to the Commission on Audit. On December 12, 2006, Clark Development
9
 Corporation also filed a motion for reconsideration.

On September 27, 2007, the Commission on Audit rendered the assailed decision denying the
appeal and motion for reconsideration. It ruled that Clark Development Corporation violated
Commission on Audit Circular No. 98-002 dated June 9, 1998 and Office of the President
Memorandum Circular No. 9 dated August 27, 1998 when it engaged the legal services of
Laguesma Magsalin Consulta and Gastardo without the final approval and written concurrence of
the Commission on Audit. It also ruled that it was not the governments responsibility to pay the
legal fees already incurred by Clark Development Corporation, but rather by the government
officials who violated the regulations on the matter.

Clark Development Corporation and Laguesma Magsalin Consulta and Gastardo separately filed
motions for reconsideration, which the Commission on Audit denied in the assailed resolution
dated November 5, 2008. The resolution also disallowed the payment of legal fees to the law
firm on the basis of quantum meruit since the Commission on Audit Circular No. 86-255
mandates that the engagement of private counsel without prior approval shall be a personal
liability of the officials concerned.

Laguesma Magsalin Consulta and Gastardo filed this petition for certiorari on December 19,
2008. Respondents, through the Office of the Solicitor General, filed their comment dated May 7,
2009. The reply was filed on September 1, 2009.

The primordial issue to be resolved by this court is whether the Commission on Audit erred in
disallowing the payment of the legal fees to Laguesma Magsalin Consulta and Gastardo as Clark
Development Corporations private counsel.

To resolve this issue, however, several procedural and substantive issues must first be
addressed:

Procedural:
1 Whether the petition was filed on time; and

2 Whether petitioner is the real party-in-interest.

Substantive:
1 Whether the Commission on Audit erred in denying Clark Development Corporations request for
clearance in engaging petitioner as private counsel;

2 Whether the Commission on Audit correctly cited Polloso v. Gangan and PHIVIDEC Industrial
Authority v. Capitol Steel Corporation in support of its denial; and

3 Whether the Commission on Audit erred in ruling that petitioner should not be paid on the basis
of quantum meruit and that any payment for its legal services should be the personal liability of
Clark Development Corporations officials.

Petitioner argues that Polloso and PHIVIDEC are not applicable to the circumstances at hand
because in both cases, the government agency concerned had failed to secure the approval of
both the Office of the Government Corporate Counsel and the Commission on Audit. Petitioner
asserts that it was able to secure authorization from the Office of the Government Corporate
Counsel prior to rendering services to Clark Development Corporation for all but two (2) of the
labor cases assigned to it. It argues that the May 20, 2002 letter from Government Corporate
Counsel Valdez was tantamount to a grant of authorization since it granted Clark Development
Corporations request for reconsideration.

In their comment, respondents argue that petitioner is not a real party-in-interest to the case.
They argue that it is Clark Development Corporation, and not petitioner, who is a real party-in-
interest since the subject of the assailed decision was the denial of the corporations request for
clearance.

Respondents also allege that it was only on July 13, 2005, or three (3) years after the hiring of
petitioner, when Clark Development Corporation requested the Commission on Audits
concurrence of the retainership contract between Clark Development Corporation and petitioner.
They argue that the retainership contract was not approved with finality by the Office of the
Government Corporate Counsel. Further, Polloso and PHIVIDEC are applicable to this case since
both cases involve the indispensability of [the] prior written concurrence of both [the Office of
the Government Corporate Counsel] and the [Commission on Audit] before any [government-
owned and controlled corporation] can hire an external counsel.
10
In its reply, petitioner argues that it is a real party-in-interest since it rendered its services to
[Clark Development Corporation], which ultimately redounded to the benefit of the Republic and
that it deserves to be paid what is its due as a matter of right. Petitioner also reiterates its
argument that Polloso and PHIVIDEC are not applicable to this case since the factual antecedents
are not the same.

The petition is denied.

The petition was filed out of time

Petitioner states that it filed this petition under Rule XI, Section 1 of the 1997 Revised Rules of
Procedure of the Commission on Audit. The rule states:

RULE XI
JUDICIAL REVIEW

SECTION 1. Petition for Certiorari. Any decision, order or resolution of the Commission may be
brought to the Supreme Court on certiorari by the aggrieved party within thirty (30) days from
receipt of a copy thereof in the manner provided by law, the Rules of Court and these Rules.

This rule is based on Article IX-A, Section 7 of the Constitution, which states:

Section 7. Each Commission shall decide by a majority vote of all its Members, any case or
matter brought before it within sixty days from the date of its submission for decision or
resolution. A case or matter is deemed submitted for decision or resolution upon the filing of the
last pleading, brief, or memorandum required by the rules of the Commission or by the
Commission itself. Unless otherwise provided by this Constitution or by law, any decision, order,
or ruling of each Commission may be brought to the Supreme Court on certiorari by the
aggrieved party within thirty days from receipt of a copy thereof. (Emphasis supplied)

Ordinarily, a petition for certiorari under Rule 65 of the Rules of Court has a reglementary period
of 60 days from receipt of denial of the motion for reconsideration. The Constitution, however,
specifies that the reglementary period for assailing the decisions, orders, or rulings of the
constitutional commissions is thirty (30) days from receipt of the decision, order, or ruling. For
this reason, a separate rule was enacted in the Rules of Court.

Rule 64 of the Rules of Civil Procedure provides the guidelines for filing a petition for certiorari
under this rule. Section 2 of the rule specifies that [a] judgment or final order or resolution of
the Commission on Elections and the Commission on Audit may be brought by the aggrieved
party to the Supreme Court on certiorari under Rule 65, except as hereinafter provided.

The phrase, except as hereinafter provided, specifies that any petition for certiorari filed under
this rule follows the same requisites as those of Rule 65 except for certain provisions found only
in Rule 64. One of these provisions concerns the time given to file the petition.

Section 3 of Rule 64 of the Rules of Civil Procedure states:

SEC. 3. Time to file petition. The petition shall be filed within thirty (30) days from notice of
the judgment or final order or resolution sought to be reviewed. The filing of a motion for new
trial or reconsideration of said judgment or final order or resolution, if allowed under the
procedural rules of the Commission concerned, shall interrupt the period herein fixed. If the
motion is denied, the aggrieved party may file the petition within the remaining period, but
which shall not be less than five (5) days in any event, reckoned from notice of denial. (Emphasis
supplied)

Under this rule, a party may file a petition for review on certiorari within 30 days from notice of
the judgment being assailed. The reglementary period includes the time taken to file the motion
for reconsideration and is only interrupted once the motion is filed. If the motion is denied, the
party may file the petition only within the period remaining from the notice of judgment.

The difference between Rule 64 and Rule 65 has already been exhaustively discussed by this
court in Pates v. Commission on Elections:

Rule 64, however, cannot simply be equated to Rule 65 even if it expressly refers to the latter
rule. They exist as separate rules for substantive reasons as discussed below. Procedurally, the
11
most patent difference between the two i.e., the exception that Section 2, Rule 64 refers to is
Section 3 which provides for a special period for the filing of petitions for certiorari from decisions
or rulings of the COMELEC en banc. The period is 30 days from notice of the decision or ruling
(instead of the 60 days that Rule 65 provides), with the intervening period used for the filing of
any motion for reconsideration deductible from the originally-granted 30 days (instead of the
fresh period of 60 days that Rule 65 provides). (Emphasis supplied)

In this case, petitioner received the decision of the Commission on Audit on October 16, 2007. It
filed a motion for reconsideration on November 6, 2007, or after 21 days. It received notice of
the denial of its motion on November 20, 2008. The receipt of this notice gave petitioner nine (9)
days, or until November 29, 2008, to file a petition for certiorari. Since November 29, 2008 fell
on a Saturday, petitioner could still have filed on the next working day, or on December 1, 2008.
It, however, filed the petition on December 19, 2008, which was well beyond the reglementary
period.

This petition could have been dismissed outright for being filed out of time. This court, however,
recognizes that there are certain exceptions that allow a relaxation of the procedural rules. In
Barranco v. Commission on the Settlement of Land Problems:

The Court is fully aware that procedural rules are not to be belittled or simply disregarded for
these prescribed procedures insure an orderly and speedy administration of justice. However, it
is equally true that litigation is not merely a game of technicalities. Law and jurisprudence grant
to courts the prerogative to relax compliance with procedural rules of even the most mandatory
character, mindful of the duty to reconcile both the need to put an end to litigation speedily and
the parties right to an opportunity to be heard.

In Sanchez v. Court of Appeals, the Court restated the reasons which may provide justification for
a court to suspend a strict adherence to procedural rules, such as: (a) matters of life, liberty,
honor or property[,] (b) the existence of special or compelling circumstances, (c) the merits of
the case, (d) a cause not entirely attributable to the fault or negligence of the party favored by
the suspension of the rules, (e) a lack of any showing that the review sought is merely frivolous
and dilatory, and (f) the other party will not be unjustly prejudiced thereby. (Emphasis supplied)

Considering that the issues in this case involve the right of petitioner to receive due
compensation on the one hand and respondents duty to prevent the unauthorized disbursement
of public funds on the other, a relaxation of the technical rules is in order.

Petitioner is a real party-in-interest

Respondents argue that it is Clark Development Corporation, and not petitioner, which is the real
party-in-interest since the subject of the assailed decision and resolution was the corporations
request for clearance to pay petitioner its legal fees. Respondents argue that any interest
petitioner may have in the case is merely incidental. This is erroneous.

Petitioner is a real party-in-interest, as defined in Rule 3, Section 2 of the 1997 Rules of Civil
Procedure:

SEC. 2. Parties in interest. A real party in interest is the party who stands to be benefited or
injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless
otherwise authorized by law or these Rules, every action must be prosecuted or defended in the
name of the real party in interest.

Petitioner does not have a mere incidental interest, and its interest is not merely
consequential. Respondents mistakenly narrow down the issue to whether they erred in
denying Clark Development Corporations request for clearance of the retainership contract. In
doing so, they argue that the interested parties are limited only to Clark Development
Corporation and respondents.

The issue at hand, however, relates to the assailed decision and resolution of respondents, which
disallowed the disbursement of public funds for the payment of legal fees to petitioner.

Respondents admit that legal services were performed by petitioner for which payment of legal
fees are due. The question that they resolved was which among the parties, the government, or
the officials of Clark Development Corporation were liable.

The net effect of upholding or setting aside the assailed Commission on Audit rulings would be to
12
either disallow or allow the payment of legal fees to petitioner. Petitioner, therefore, stands to
either be benefited or injured by the suit, or entitled to its avails. It is a real party-in-interest.

Clark Development Corporations Board of Directors, on the other hand, should have been
impleaded in this case as a necessary party.

A necessary party is defined as one who is not indispensable but who ought to be joined as a
party if complete relief is to be accorded as to those already parties, or for a complete
determination or settlement of the claim subject of the action.

The actions of the Board of Directors precipitated the issues in this case. If the petition is
granted, then the officers are relieved of liability to petitioner. If the rulings of respondents are
upheld, then it is the Board of Directors that will be liable to petitioner. Any relief in this case
would be incomplete without joining the members of the Board of Directors.

The Commission on Audit did not commit grave abuse of discretion in denying the
corporations request for clearance to engage the services of petitioner as private
counsel

Book IV, Title III, Chapter 3, Section 10 of the Administrative Code of 1987 provides:

Section. 10. Office of the Government Corporate Counsel. - The Office of the Government
Corporate Counsel (OGCC) shall act as the principal law office of all government-owned or
controlled corporations, their subsidiaries, other corporate off-springs and government acquired
asset corporations and shall exercise control and supervision over all legal departments or
divisions maintained separately and such powers and functions as are now or may hereafter be
provided by law. In the exercise of such control and supervision, the Government Corporate
Counsel shall promulgate rules and regulations to effectively implement the objectives of this
Office. (Emphasis supplied)

The Office of the Government Corporate Counsel is mandated by law to provide legal services to
government-owned and controlled corporations such as Clark Development Corporation.

As a general rule, government-owned and controlled corporations are not allowed to engage the
legal services of private counsels. However, both respondent and the Office of the President
have made issuances that had the effect of providing certain exceptions to the general rule,
thus:

Book IV, Title III, Chapter 3, Section 10 of Executive Order No. 292, otherwise known as the
Administrative Code of 1987, provides that the Office of the Government Corporate Counsel
(OGCC) shall act as the principal law office of all GOCCs, their subsidiaries, other corporate off-
springs, and government acquired asset corporations. Administrative Order No. 130, issued by
the Office of the President on 19 May 1994, delineating the functions and responsibilities of the
OSG and the OGCC, clarifies that all legal matters pertaining to GOCCs, their subsidiaries, other
corporate off[-]springs, and government acquired asset corporations shall be exclusively referred
to and handled by the OGCC, unless their respective charters expressly name the OSG as their
legal counsel. Nonetheless, the GOCC may hire the services of a private counsel in exceptional
cases with the written conformity and acquiescence of the Government Corporate Counsel, and
with the concurrence of the Commission on Audit (COA). (Emphasis supplied)

The rules and regulations concerning the engagement of private counsel by government-owned
and controlled corporations is currently provided for by Commission on Audit Circular No. 86-255
dated April 2, 1986, and Office of the President Memorandum Circular No. 9 dated August 27,
1998.

Commission on Audit Circular No. 86-255, dated April 2, 1986, as amended, states:

Accordingly and pursuant to this Commission's exclusive authority to promulgate accounting and
auditing rules and regulations, including for the prevention and disallowance of irregular,
unnecessary, excessive, extravagant and/or unconscionable expenditure or uses of public funds
and property (Sec. 2-2, Art. IX-D, Constitutional, public funds shall not be utilized for payment of
the services of a private legal counsel or law firm to represent government agencies and
instrumentalities, including government-owned or controlled corporations and local government
units in court or to render legal services for them. In the event that such legal services cannot be
avoided or is justified under extraordinary or exceptional circumstances for government agencies
and instrumentalities, including government-owned or controlled corporations, the written
13
conformity and acquiescence of the Solicitor General or the Government Corporate Counsel, as
the case maybe, and the written concurrence of the Commission on Audit shall first be secured
before the hiring or employment of a private lawyer or law firm. (Emphasis supplied)

The Office of the President Memorandum Circular No. 9, on the other hand, states:

SECTION 1. All legal matters pertaining to government-owned or controlled corporations, their

subsidiaries, other corporate off-springs and government acquired asset corporations (GOCCs)
shall be exclusively referred to and handled by the Office of the Government Corporate Counsel
(OGCC).

GOCCs are thereby enjoined from referring their cases and legal matters to the Office of the
Solicitor General unless their respective charters expressly name the Office of the Solicitor
General as their legal counsel.

However, under exceptional circumstances, the OSG may represent the GOCC concerned,
Provided: This is authorized by the President; or by the head of the office concerned and
approved by the President.

SECTION 2. All pending cases of GOCCs being handled by the OSG, and all pending requests for
opinions and contract reviews which have been referred by said GOCCs to the OSG, may be
retained and acted upon by the OSG; but the latter shall inform the OGCC of the said pending
cases, requests for opinions and contract reviews, if any, to ensure proper monitoring and
coordination.

SECTION 3. GOCCs are likewise enjoined to refrain from hiring private lawyers or law firms to
handle their cases and legal matters. But in exceptional cases, the written conformity and
acquiescence of the Solicitor General or the Government Corporate Counsel, as the case may be,
and the written concurrence of the Commission on Audit shall first be secured before the hiring
or employment of a private lawyer or law firm. (Emphasis supplied)

According to these rules and regulations, the general rule is that government-owned and
controlled corporations must refer all their legal matters to the Office of the Government
Corporate Counsel. It is only in extraordinary or exceptional circumstances or exceptional
cases that it is allowed to engage the services of private counsels.

Petitioner claims that it was hired by Clark Development Corporation due to numerous labor
cases which need urgent attention[.] In its request for reconsideration to the Office of the
Government Corporate Counsel, Clark Development Corporation claims that it was obtaining the
services of petitioner acting through Atty. Ariston Vicente R. Quirolgico, known expert in the field
of labor law and relations.

The labor cases petitioner handled were not of a complicated or peculiar nature that could justify
the hiring of a known expert in the field. On the contrary, these appear to be standard labor
cases of illegal dismissal and collective bargaining agreement negotiations, which Clark
Development Corporations lawyers or the Office of the Government Corporate Counsel could
have handled.

Commission on Audit Circular No. 86-255 dated April 2, 1986 and Office of the President
Memorandum Circular No. 9 also require that before the hiring or employment of private
counsel, the written conformity and acquiescence of the [Government Corporate Counsel] and
the written concurrence of the Commission on Audit shall first be secured. . . .

In this case, Clark Development Corporation had failed to secure the final approval of the Office
of the Government Corporate Counsel and the written concurrence of respondent before it
engaged the services of petitioner.

When Government Corporate Counsel Valdez granted Clark Development Corporations request
for reconsideration, the approval was merely conditional and subject to its submission of the
signed pro-forma retainership contract provided for by the Office of the Government Corporate
Counsel. In the letter dated May 20, 2002, Government Corporate Counsel Valdez added:

For the better protection of the interests of CDC, we hereby furnish you with a Pro-Forma
Retainership Agreement containing the suggested terms and conditions of the retainership,
which you may adopt for this purpose.

14
After the subject Retainership Agreement shall have been executed between your corporation
and the retained counsel, please submit a copy thereof to our Office for our information and file.

Upon Clark Development Corporations failure to submit the retainership contract, the Office of
the Government Corporate Counsel denied Clark Development Corporations request for final
approval of its legal services contracts, including that of petitioner. In the letter dated December
22, 2005, Government Corporate Counsel Devanadera informed Clark Development Corporation
that:

[i]t appears, though, that our Pro-Forma Retainership Agreement was not followed and CDC
merely adopted the proposal of aforesaid retainers/consultants. Also, this Office was never
informed that CDC agreed on payment of retainers fee on a per case basis.

In view of Clark Development Corporations failure to secure the final conformity and
acquiescence of the Office of the Government Corporate Counsel, its retainership contract with
petitioner could not have been considered as authorized.

The concurrence of respondents was also not secured by Clark Development Corporation prior to
hiring petitioners services. The corporation only wrote a letter-request to respondents three (3)
years after it had engaged the services of petitioner as private legal counsel.

The cases that the private counsel was asked to manage are not beyond the range of reasonable
competence expected from the Office of the Government Corporate Counsel. Certainly, the
issues do not appear to be complex or of substantial national interest to merit additional
counsel. Even so, there was no showing that the delays in the approval also were due to
circumstances not attributable to petitioner nor was there a clear showing that there was
unreasonable delay in any action of the approving authorities. Rather, it appears that the
procurement of the proper authorizations was mere afterthought.

Respondents, therefore, correctly denied Clark Development Corporations request for clearance
in the disbursement of funds to pay petitioner its standing legal fees.

Polloso v. Gangan and PHIVIDEC

Industrial Authority v. Capitol Steel
Corporation apply in this case

Petitioner argues that Polloso does not apply since the denial was based on the absence of a
written authority from the OSG or OGCC[.] It also argues that the PHIVIDEC case does not apply
since the case [was] represented by a private lawyer whose engagement was secured without
the conformity of the OGCC and the COA. Petitioner argues that, unlike these cases, Clark
Development Corporation was able to obtain the written conformity of the Office of the
Government Corporate Counsel to engage petitioners services.

In Polloso, the legal services of Atty. Benemerito A. Satorre were engaged by the National Power
Corporation for its Leyte-Cebu and Leyte-Luzon Interconnection Projects. The Commission on
Audit disallowed the payment of services to Atty. Satore on the basis of quantum meruit, citing
Commission on Audit Circular No. 86-255 dated April 2, 1986. In upholding the disallowance by
the Commission on Audit, this court ruled:

It bears repeating that the purpose of the circular is to curtail the unauthorized and unnecessary
disbursement of public funds to private lawyers for services rendered to the government. This is
in line with the Commission on Audits constitutional mandate to promulgate accounting and
auditing rules and regulations including those for the prevention and disallowance of irregular,
unnecessary, excessive, extravagant or unconscionable expenditures or uses of government
funds and properties. Having determined the intent of the law, this Court has the imperative duty
to give it effect even if the policy goes beyond the letter or words of the statute.

Hence, as the hiring of Atty. Satorre was clearly done without the prior conformity and
acquiescence of the Office of the Solicitor General or the Government Corporate Counsel, as well
as the written concurrence of the Commission on Audit, the payment of fees to Atty. Satorre was
correctly disallowed in audit by the COA.

In PHIVIDEC, this court found the engagement by PHIVIDEC Industrial Authority, a government-
owned and controlled corporation, of Atty. Cesilo Adazas legal services to be unauthorized for
the corporations failure to secure the written conformity of the Office of the Government
Corporate Counsel and the Commission on Audit. Citing the provisions of Office of the President
15
Memorandum Circular No. 9, this court ruled that:

[i]t was only with the enactment of Memorandum Circular No. 9 in 1998 that an exception to the
general prohibition was allowed for the first time since P.D. No. 1415 was enacted in 1978.
However, indispensable conditions precedent were imposed before any hiring of private lawyer
could be effected. First, private counsel can be hired only in exceptional cases. Second, the
GOCC must first secure the written conformity and acquiescence of the Solicitor General or the
Government Corporate Counsel, as the case may be, before any hiring can be done. And third,
the written concurrence of the COA must also be secured prior to the hiring. (Emphasis supplied)

The same ruling was likewise reiterated in Vargas v. Ignes, wherein this court stated:

Under Section 10, Chapter 3, Title III, Book IV of the Administrative Code of 1987, it is the OGCC
which shall act as the principal law office of all GOCCs. And Section 3 of Memorandum Circular
No. 9, issued by President Estrada on August 27, 1998, enjoins GOCCs to refrain from hiring
private lawyers or law firms to handle their cases and legal matters. But the same Section 3
provides that in exceptional cases, the written conformity and acquiescence of the Solicitor
General or the Government Corporate Counsel, as the case may be, and the written concurrence
of the COA shall first be secured before the hiring or employment of a private lawyer or law firm.
In Phividec Industrial Authority v. Capitol Steel Corporation, we listed three (3) indispensable
conditions before a GOCC can hire a private lawyer: (1) private counsel can only be hired in
exceptional cases; (2) the GOCC must first secure the written conformity and acquiescence of
the Solicitor General or the Government Corporate Counsel, as the case may be; and (3) the
written concurrence of the COA must also be secured. (Emphasis supplied)

On the basis of Polloso and PHIVIDEC, petitioners arguments are unmeritorious.

Petitioner fails to understand that Commission on Audit Circular No. 86-255 requires not only the
conformity and acquiescence of the Office of the Solicitor General or Office of the Government
Corporate Counsel but also the written conformity of the Commission on Audit. The hiring of
private counsel becomes unauthorized if it is only the Office of the Government Corporate
Counsel that gives its conformity. The rules and jurisprudence expressly require that the
government-owned and controlled corporation concerned must also secure the concurrence of
respondents.

It is also erroneous for petitioner to assume that it had the conformity and acquiescence of the
Office of the Government Corporate Counsel since Government Corporate Counsel Valdezs
approval of Clark Development Corporations request was merely conditional on its submission of
the retainership contract. Clark Development Corporations failure to submit the retainership
contract resulted in its failure to secure a final approval.

The Commission on Audit did not commit grave abuse of discretion in disallowing the
payment to petitioner on the basis of quantum meruit

When Government Corporate Counsel Devanadera denied Clark Development Corporations

request for final approval of its legal services contracts, she, however, allowed the payment to
petitioner for legal services already rendered on a quantum meruit basis.

Respondents disallowed Clark Development Corporation from paying petitioner on this basis as
the contract between them was executed in clear violation of the provisions of COA Circular No.
86-255 and OP Memorandum Circular No. 9[.] It then ruled that the retainership contract
between them should be deemed a private contract for which the officials of Clark Development
Corporation should be liable, citing Section 103 of Presidential Decree No. 1445, otherwise known
as the Government Auditing Code of the Philippines.

In National Power Corporation v. Heirs of Macabangkit Sangkay, quantum meruit:

literally meaning as much as he deserves is used as basis for determining an attorneys

professional fees in the absence of an express agreement. The recovery of attorneys fees on the
basis of quantum meruit is a device that prevents an unscrupulous client from running away with
the fruits of the legal services of counsel without paying for it and also avoids unjust enrichment
on the part of the attorney himself. An attorney must show that he is entitled to reasonable
compensation for the effort in pursuing the clients cause, taking into account certain factors in
fixing the amount of legal fees.

Here, the Board of Directors, acting on behalf of Clark Development Corporation, contracted the
16
services of petitioner, without the necessary prior approvals required by the rules and
regulations for the hiring of private counsel. Their actions were clearly unauthorized.

It was, thus, erroneous for Government Corporate Counsel Devanadera to bind Clark
Development Corporation, a government entity, to pay petitioner on a quantum meruit basis for
legal services, which were neither approved nor authorized by the government. Even granting
that petitioner ought to be paid for services rendered, it should not be the governments liability,
but that of the officials who engaged the services of petitioner without the required
authorization.

The amendment of Commission on Audit Circular No. 86-255 by Commission on Audit

Circular No. 98-002 created a gap in the law

Commission on Audit Circular No. 86-255 dated April 2, 1986 previously stated that:

[a]ccordingly, it is hereby directed that, henceforth, the payment out of public funds of retainer
fees to private law practitioners who are so hired or employed without the prior written
conformity and acquiescence of the Solicitor General or the Government Corporate Counsel, as
the case may be, as well as the written concurrence of the Commission on Audit shall be
disallowed in audit and the same shall be a personal liability of the officials concerned.
(Emphasis supplied)

However, when Commission on Audit Circular No. 86-255 was amended by Commission on Audit
Circular No. 98-002 on June 9, 1998, it failed to retain the liability of the officials who violated the
circular. This gap in the law paves the way for both the erring officials of the government-owned
and controlled corporations to disclaim any responsibility for the liabilities owing to private
practitioners.

It cannot be denied that petitioner rendered legal services to Clark Development Corporation. It
assisted the corporation in litigating numerous labor cases during the period of its engagement.
It would be an injustice for petitioner not to be compensated for services rendered even if the
engagement was unauthorized.

The fulfillment of the requirements of the rules and regulations was Clark Development
Corporations responsibility, not petitioners. The Board of Directors, by its irresponsible actions,
unjustly procured for themselves petitioners legal services without compensation.

To fill the gap created by the amendment of Commission on Audit Circular No. 86-255,
respondents correctly held that the officials of Clark Development Corporation who violated the
provisions of Circular No. 98-002 and Circular No. 9 should be personally liable to pay the legal
fees of petitioner, as previously provided for in Circular No. 86-255.

This finds support in Section 103 of the Government Auditing Code of the Philippines, which
states:

SEC. 103. General liability for unlawful expenditures. Expenditures of government funds or uses
of government property in violation of law or regulations shall be a personal liability of the official
or employee found to be directly responsible therefor.

This court has also previously held in Gumaru v. Quirino State College that:

the fee of the lawyer who rendered legal service to the government in lieu of the OSG or the
OGCC is the personal liability of the government official who hired his services without the prior
written conformity of the OSG or the OGCC, as the case may be.

WHEREFORE, the petition is DISMISSED without prejudice to petitioner filing another action
against the proper parties.

SO ORDERED.

17
Case No. 5
A.C. No. 10573, January 13, 2015
FERNANDO W. CHU, Complainant, v. ATTY. JOSE C. GUICO, JR., Respondents.

Fernando W. Chu invokes the Courts disciplinary authority in resolving this disbarment complaint
against his former lawyer, respondent Atty. Jose C. Guico, Jr., whom he has accused of gross
misconduct.

Antecedents

Chu retained Atty. Guico as counsel to handle the labor disputes involving his company, CVC San
Lorenzo Ruiz Corporation (CVC). Atty. Guicos legal services included handling a complaint for
illegal dismissal brought against CVC (NLRC Case No. RAB-III-08-9261-05 entitled Kilusan ng
Manggagawang Makabayan (KMM) Katipunan CVC San Lorenzo Ruiz Chapter, Ladivico Adriano,
et al. v. CVC San Lorenzo Ruiz Corp. and Fernando Chu). On September 7, 2006, Labor Arbiter
Herminio V. Suelo rendered a decision adverse to CVC. Atty. Guico filed a timely appeal in behalf
of CVC.

According to Chu, during a Christmas party held on December 5, 2006 at Atty. Guicos residence
in Commonwealth, Quezon City, Atty. Guico asked him to prepare a substantial amount of money
to be given to the NLRC Commissioner handling the appeal to insure a favorable decision. On
June 10, 2007, Chu called Atty. Guico to inform him that he had raised P300,000.00 for the
purpose. Atty. Guico told him to proceed to his office at No. 48 Times Street, Quezon City, and to
give the money to his assistant, Reynaldo (Nardo) Manahan. Chu complied, and later on called
Atty. Guico to confirm that he had delivered the money to Nardo. Subsequently, Atty. Guico
instructed Chu to meet him on July 5, 2007 at the UCC Coffee Shop on T. Morato Street, Quezon
City. At the UCC Coffee Shop, Atty. Guico handed Chu a copy of an alleged draft decision of the
NLRC in favor of CVC. The draft decision was printed on the dorsal portion of used paper
apparently emanating from the office of Atty. Guico. On that occasion, the latter told Chu to raise
another P300,000.00 to encourage the NLRC Commissioner to issue the decision. But Chu could
only produce P280,000.00, which he brought to Atty. Guicos office on July 10, 2007 accompanied
by his son, Christopher Chu, and one Bonifacio Elipane. However, it was Nardo who received the
amount without issuing any receipt.

Chu followed up on the status of the CVC case with Atty. Guico in December 2007. However, Atty.
Guico referred him to Nardo who in turn said that he would only know the status after Christmas.
On January 11, 2008, Chu again called Nardo, who invited him to lunch at the Ihaw Balot Plaza in
18
Quezon City. Once there, Chu asked Nardo if the NLRC Commissioner had accepted the money,
but Nardo replied in the negative and simply told Chu to wait. Nardo assured that the money was
still with Atty. Guico who would return it should the NLRC Commissioner not accept it.

On January 19, 2009, the NLRC promulgated a decision adverse to CVC. Chu confronted Atty.
Guico, who in turn referred Chu to Nardo for the filing of a motion for reconsideration. After the
denial of the motion for reconsideration, Atty. Guico caused the preparation and filing of an
appeal in the Court of Appeals. Finally, Chu terminated Atty. Guico as legal counsel on May 25,
2009.

In his position paper, Atty. Guico described the administrative complaint as replete with lies and
inconsistencies, and insisted that the charge was only meant for harassment. He denied
demanding and receiving money from Chu, a denial that Nardo corroborated with his own
affidavit. He further denied handing to Chu a draft decision printed on used paper emanating
from his office, surmising that the used paper must have been among those freely lying around
in his office that had been pilfered by Chus witnesses in the criminal complaint he had handled
for Chu.

Findings and Recommendation of the IBP Board of Governors

IBP Commissioner Cecilio A.C. Villanueva found that Atty. Guico had violated Rules 1.01 and 1.02,
Canon I of the Code of Professional Responsibility for demanding and receiving P580,000.00 from
Chu; and recommended the disbarment of Atty. Guico in view of his act of extortion and
misrepresentation that caused dishonor to and contempt for the legal profession.

On February 12, 2013, the IBP Board of Governors adopted the findings of IBP Commissioner
Villanueva in its Resolution No. XX-2013-87, but modified the recommended penalty of
disbarment to three years suspension, viz.:

RESOLVED to ADOPT and APPROVE, as it is hereby unanimously ADOPTED and APPROVED, with
modification, the Report and Recommendation of the Investigating Commissioner in the above-
entitled case, herein made part of this Resolution as Annex A, and finding the recommendation
fully supported by the evidence on record and the applicable laws and rules and considering
Respondents violation of Canon 1, Rules 1.01 and 1.02 of the Code of Professional Responsibility,
Atty. Jose C. Guico, Jr. is hereby SUSPENDED from the practice of law for three (3) years
with Warning that a repetition of the same or similar act shall be dealt with more severely and
Ordered to Return the amount of Five Hundred Eighty Thousand (P580,000.00) Pesos with legal
interest within thirty (30) days from receipt of notice.

Atty. Guico moved for reconsideration, but the IBP Board of Governors denied his motion for
reconsideration on March 23, 2014 in Resolution No. XXI-2014-173.

Neither of the parties brought a petition for review vis--vis Resolution No. XX-2013-87 and
Resolution No. XXI-2014-173.

Issue

Did Atty. Guico violate the Lawyers Oath and Rules 1.01 and 1.02, Canon I of the Code of
Professional Responsibility for demanding and receiving P580,000.00 from Chu to guarantee a
favorable decision from the NLRC?

Ruling of the Court

In disbarment proceedings, the burden of proof rests on the complainant to establish respondent
attorneys liability by clear, convincing and satisfactory evidence. Indeed, this Court has
consistently required clearly preponderant evidence to justify the imposition of either disbarment
or suspension as penalty.

Chu submitted the affidavits of his witnesses, and presented the draft decision that Atty. Guico
had represented to him as having come from the NLRC. Chu credibly insisted that the draft
decision was printed on the dorsal portion of used paper emanating from Atty. Guicos office,
inferring that Atty. Guico commonly printed documents on used paper in his law office. Despite
denying being the source of the draft decision presented by Chu, Atty. Guicos participation in the
generation of the draft decision was undeniable. For one, Atty. Guico impliedly admitted Chus
insistence by conceding that the used paper had originated from his office, claiming only that
used paper was just scattered around his office. In that context, Atty.
19
Guicos attempt to downplay the sourcing of used paper from his office was futile because he did
not expressly belie the forthright statement of Chu. All that Atty. Guico stated by way of
deflecting the imputation was that the used paper containing the draft decision could have been
easily taken from his office by Chus witnesses in a criminal case that he had handled for Chu,
pointing out that everything in his office, except the filing cabinets and his desk, was open to
the public xxx and just anybody has access to everything found therein. In our view, therefore,
Atty. Guico made the implied admission because he was fully aware that the used paper had
unquestionably come from his office.

The testimony of Chu, and the circumstances narrated by Chu and his witnesses, especially the
act of Atty. Guico of presenting to Chu the supposed draft decision that had been printed on used
paper emanating from Atty. Guicos office, sufficed to confirm that he had committed the
imputed gross misconduct by demanding and receiving P580,000.00 from Chu to obtain a
favorable decision. Atty. Guico offered only his general denial of the allegations in his defense,
but such denial did not overcome the affirmative testimony of Chu. We cannot but conclude that
the production of the draft decision by Atty. Guico was intended to motivate Chu to raise money
to ensure the chances of obtaining the favorable result in the labor case. As such, Chu
discharged his burden of proof as the complainant to establish his complaint against Atty. Guico.
In this administrative case, a fact may be deemed established if it is supported by substantial
evidence, or that amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion.

What is the condign penalty for Atty. Guico?

In taking the Lawyers Oath, Atty. Guico bound himself to:

x x x maintain allegiance to the Republic of the Philippines; x x x support its Constitution and
obey the laws as well as the legal orders of the duly constituted authorities therein; x x x do no
falsehood, nor consent to the doing of any in court; x x x delay no man for money or malice x x
x.

The Code of Professional Responsibility echoes the Lawyers Oath, to wit:

CANON 1 A lawyer shall uphold the constitution, obey the laws of the land and promote
respect for law and for legal processes.

Rule 1.01 A lawyer shall not engage in unlawful, dishonest, immoral or deceitful conduct.

Rule 1.02 A lawyer shall not counsel or abet activities aimed at defiance of the law or at
lessening confidence in the legal system.

The sworn obligation to respect the law and the legal processes under the Lawyers Oath and the
Code of Professional Responsibility is a continuing condition for every lawyer to retain
membership in the Legal Profession. To discharge the obligation, every lawyer should not render
any service or give advice to any client that would involve defiance of the very laws that he was
bound to uphold and obey, for he or she was always bound as an attorney to be law abiding, and
thus to uphold the integrity and dignity of the Legal Profession. Verily, he or she must act and
comport himself or herself in such a manner that would promote public confidence in the
integrity of the Legal Profession. Any lawyer found to violate this obligation forfeits his or her
privilege to continue such membership in the legal profession.

Atty. Guico willingly and wittingly violated the law in appearing to counsel Chu to raise the large
sums of money in order to obtain a favorable decision in the labor case. He thus violated the law
against bribery and corruption. He compounded his violation by actually using said illegality as
his means of obtaining a huge sum from the client that he soon appropriated for his own
personal interest. His acts constituted gross dishonesty and deceit, and were a flagrant breach of
his ethical commitments under the Lawyers Oath not to delay any man for money or malice; and
under Rule 1.01 of the Code of Professional Responsibility that forbade him from engaging in
unlawful, dishonest, immoral or deceitful conduct. His deviant conduct eroded the faith of the
people in him as an individual lawyer as well as in the Legal Profession as a whole. In doing so,
he ceased to be a servant of the law.

Atty. Guico committed grave misconduct and disgraced the Legal Profession. Grave misconduct is
improper or wrong conduct, the transgression of some established and definite rule of action, a
forbidden act, a dereliction of duty, willful in character, and implies a wrongful intent and not
20
mere error of judgment. There is no question that any gross misconduct by an attorney in his
professional or private capacity renders him unfit to manage the affairs of others, and is a
ground for the imposition of the penalty of suspension or disbarment, because good moral
character is an essential qualification for the admission of an attorney and for the continuance of
such privilege.

Accordingly, the recommendation of the IBP Board of Governors to suspend him from the
practice of law for three (3) years would be too soft a penalty. Instead, he should be disbarred,
for he exhibited his unworthiness of retaining his membership in the legal profession. As the
Court has reminded in Samonte v. Abellana:

Disciplinary proceedings against lawyers are designed to ensure that whoever is

granted the privilege to practice law in this country should remain faithful to the
Lawyers Oath. Only thereby can lawyers preserve their fitness to remain as members
of the Law Profession. Any resort to falsehood or deception, including adopting
artifices to cover up ones misdeeds committed against clients and the rest of the
trusting public, evinces an unworthiness to continue enjoying the privilege to practice
law and highlights the unfitness to remain a member of the Law Profession. It
deserves for the guilty lawyer stern disciplinary sanctions.

Lastly, the recommendation of the IBP Board of Governors that Atty. Guico be ordered to return
the amount of P580,000.00 to Chu is well-taken. That amount was exacted by Atty. Guico from
Chu in the guise of serving the latters interest as the client. Although the purpose for the
amount was unlawful, it would be unjust not to require Atty. Guico to fully account for and to
return the money to Chu. It did not matter that this proceeding is administrative in character, for,
as the Court has pointed out in Bayonla v. Reyes:

Although the Court renders this decision in an administrative proceeding primarily to exact the
ethical responsibility on a member of the Philippine Bar, the Courts silence about the respondent
lawyers legal obligation to restitute the complainant will be both unfair and inequitable. No
victim of gross ethical misconduct concerning the clients funds or property should be required to
still litigate in another proceeding what the administrative proceeding has already established as
the respondents liability. x x x

ACCORDINGLY, the Court FINDS and DECLARES respondent ATTY. JOSE S. GUICO, JR.
GUILTY of the violation of the Lawyers Oath, and Rules 1.01 and 1.02, Canon I of the Code of
Professional Responsibility, and DISBARS him from membership in the Integrated Bar of the
Philippines. His name is ORDERED STRICKEN from the Roll of Attorneys.

Let copies of this Decision be furnished to the Office of the Bar Confidant, to be appended to Atty.
Guicos personal record as an attorney; to the Integrated Bar of the Philippines; and to all courts
and quasi-judicial offices in the country for their information and guidance.

SO ORDERED.

Case No. 6
G.R. No. 173188 January 15, 2014
THE CONJUGAL PARTNERSHIP OF THE SPOUSES VICENTE CADAVEDO AND BENITA
ARCOY-CADAVEDO (both deceased), substituted by their heirs, namely: HERMINA,
PASTORA, Heirs of FRUCTUOSA, Heirs of RAQUEL, EVANGELINE, VICENTE, JR., and
ARMANDO, all surnamed CADAVEDO, Petitioners, vs. VICTORINO (VIC) T. LACAYA,
married to Rosa Legados, Respondents.

We solve in this Rule 45 petition for review on certiorari the challenge to the October 11, 2005
decision and the May 9, 2006 resolution of the Court of Appeals (CA) in Petitioners, CA-G.R. CV
No. 56948. The CA reversed and set aside the September 17, 1996 decision of the Regional Trial
Court (RTC), Branch 10, of Dipolog City in Civil Case No. 4038, granting in part the complaint for
recovery of possession of property filed by the petitioners, the Conjugal Partnership of the
21
Spouses Vicente Cadavedo and Benita Arcoy-Cadavedo against Atty. Victorino (Vic) T. Lacaya,
married to Rosa Legados (collectively, the respondents).
The Factual Antecedents
The Spouses Vicente Cadavedo and Benita Arcoy-Cadavedo (collectively, the spouses Cadavedo)
acquired a homestead grant over a 230,765-square meter parcel of land known as Lot 5415
(subject lot) located in Gumay, Pian, Zamboanga del Norte. They were issued Homestead Patent
No. V-15414 on March 13, 1953 and Original Certificate of Title No. P-376 on July 2, 1953.On
April30, 1955, the spouses Cadavedo sold the subject lot to the spouses Vicente Ames and
Martha Fernandez (the spouses Ames) Transfer Certificate of Title (TCT) No. T-4792 was
subsequently issued in the name of the spouses Ames.
The present controversy arose when the spouses Cadavedo filed an action before the RTC (then
Court of First Instance) of Zamboanga City against the spouses Ames for sum of money and/or
voiding of contract of sale of homestead after the latter failed to pay the balance of the purchase
price. The spouses Cadavedo initially engaged the services of Atty. Rosendo Bandal who, for
health reasons, later withdrew from the case; he was substituted by Atty. Lacaya.
On February 24, 1969, Atty. Lacaya amended the complaint to assert the nullity of the sale and
the issuance of TCT No. T-4792 in the names of the spouses Ames as gross violation of the public
land law. The amended complaint stated that the spouses Cadavedo hired Atty. Lacaya on a
contingency fee basis. The contingency fee stipulation specifically reads:
10. That due to the above circumstances, the plaintiffs were forced to hire a lawyer on
contingent basis and if they become the prevailing parties in the case at bar, they will pay the
sum of P2,000.00 for attorneys fees.
In a decision dated February 1, 1972, the RTC upheld the sale of the subject lot to the spouses
Ames. The spouses Cadavedo, thru Atty. Lacaya, appealed the case to the CA.
On September 18, 1975, and while the appeal before the CA in Civil Case No. 1721 was pending,
the spouses Ames sold the subject lot to their children. The spouses Ames TCT No. T-4792 was
subsequently cancelled and TCT No. T-25984 was issued in their childrens names. On October
11, 1976, the spouses Ames mortgaged the subject lot with the Development Bank of the
Philippines (DBP) in the names of their children.
On August 13, 1980, the CA issued its decision in Civil Case No. 1721, reversing the decision of
the RTC and declaring the deed of sale, transfer of rights, claims and interest to the spouses
Ames null and void ab initio. It directed the spouses Cadavedo to return the initial payment and
ordered the Register of Deeds to cancel the spouses Ames TCT No. T-4792 and to reissue
another title in the name of the spouses Cadavedo. The case eventually reached this Court via
the spouses Ames petition for review on certiorari which this Court dismissed for lack of merit.
Meanwhile, the spouses Ames defaulted in their obligation with the DBP. Thus, the DBP caused
the publication of a notice of foreclosure sale of the subject lot as covered by TCT No. T-25984
(under the name of the spouses Ames children). Atty. Lacaya immediately informed the spouses
Cadavedo of the foreclosure sale and filed an Affidavit of Third Party Claim with the Office of the
Provincial Sheriff on September 14, 1981.
With the finality of the judgment in Civil Case No. 1721, Atty. Lacaya filed on September 21, 1981
a motion for the issuance of a writ of execution.
On September 23, 1981,and pending the RTCs resolution of the motion for the issuance of a writ
of execution, the spouses Ames filed a complaint before the RTC against the spouses Cadavedo
for Quieting of Title or Enforcement of Civil Rights due Planters in Good Faith with prayer for
Preliminary Injunction. The spouses Cadavedo, thru Atty. Lacaya, filed a motion to dismiss on the
ground of res judicata and to cancel TCT No. T-25984 (under the name of the spouses Ames
children).
On October 16, 1981, the RTC granted the motion for the issuance of a writ of execution in Civil
Case No. 1721,and the spouses Cadavedo were placed in possession of the subject lot on
October 24, 1981. Atty. Lacaya asked for one-half of the subject lot as attorneys fees. He caused
the subdivision of the subject lot into two equal portions, based on area, and selected the more
valuable and productive half for himself; and assigned the other half to the spouses Cadavedo.
Unsatisfied with the division, Vicente and his sons-in-law entered the portion assigned to the
respondents and ejected them. The latter responded by filing a counter-suit for forcible entry
before the Municipal Trial Court (MTC); the ejectment case was docketed as Civil Case No. 215.
This incident occurred while Civil Case No. 3352 was pending.
On May 13, 1982, Vicente and Atty. Lacaya entered into an amicable settlement (compromise
agreement) in Civil Case No. 215 (the ejectment case), re-adjusting the area and portion
obtained by each. Atty. Lacaya acquired 10.5383 hectares pursuant to the agreement. The MTC
approved the compromise agreement in a decision dated June 10, 1982.
Meanwhile, on May 21, 1982, the spouses Cadavedo filed before the RTC an action against the
DBP for Injunction; it was docketed as Civil Case No. 3443 (Cadavedo v. DBP). The RTC
subsequently denied the petition, prompting the spouses Cadavedo to elevate the case to the CA
via a petition for certiorari. The CA dismissed the petition in its decision of January 31, 1984.

22
The records do not clearly disclose the proceedings subsequent to the CA decision in Civil Case
No. 3443. However, on August 18, 1988, TCT No. 41051 was issued in the name of the spouses
Cadavedo concerning the subject lot.
On August 9, 1988, the spouses Cadavedo filed before the RTC an action against the
respondents, assailing the MTC-approved compromise agreement. The case was docketed as
Civil Case No. 4038 and is the root of the present case. The spouses Cadavedo prayed, among
others, that the respondents be ejected from their one-half portion of the subject lot; that they
be ordered to render an accounting of the produce of this one-half portion from 1981; and that
the RTC fix the attorneys fees on a quantum meruit basis, with due consideration of the
expenses that Atty. Lacaya incurred while handling the civil cases.
During the pendency of Civil Case No. 4038, the spouses Cadavedo executed a Deed of Partition
of Estate in favor of their eight children. Consequently, TCT No. 41051 was cancelled and TCT No.
41690 was issued in the names of the latter. The records are not clear on the proceedings and
status of Civil Case No. 3352.
The Ruling of the RTC
In the September 17, 1996 decision in Civil Case No. 4038, the RTC declared the contingent fee
of 10.5383 hectares as excessive and unconscionable. The RTC reduced the land area to 5.2691
hectares and ordered the respondents to vacate and restore the remaining 5.2692 hectares to
the spouses Cadavedo.
The RTC noted that, as stated in the amended complaint filed by Atty. Lacaya, the agreed
attorneys fee on contingent basis was P2,000.00. Nevertheless, the RTC also pointed out that
the parties novated this agreement when they executed the compromise agreement in Civil Case
No. 215 (ejectment case), thereby giving Atty. Lacaya one-half of the subject lot. The RTC added
that Vicentes decision to give Atty. Lacaya one-half of the subject lot, sans approval of Benita,
was a valid act of administration and binds the conjugal partnership. The RTC reasoned out that
the disposition redounded to the benefit of the conjugal partnership as it was done precisely to
remunerate Atty. Lacaya for his services to recover the property itself.
These considerations notwithstanding, the RTC considered the one-half portion of the subject lot,
as Atty. Lacayas contingent fee, excessive, unreasonable and unconscionable. The RTC was
convinced that the issues involved in Civil Case No. 1721 were not sufficiently difficult and
complicated to command such an excessive award; neither did it require Atty. Lacaya to devote
much of his time or skill, or to perform extensive research.
Finally, the RTC deemed the respondents possession, prior to the judgment, of the excess
portion of their share in the subject lot to be in good faith. The respondents were thus entitled to
receive its fruits.
On the spouses Cadavedos motion for reconsideration, the RTC modified the decision in its
resolution dated December 27, 1996. The RTC ordered the respondents to account for and deliver
the produce and income, valued at 7,500.00 per annum, of the 5.2692 hectares that the RTC
ordered the spouses Amesto restore to the spouses Cadavedo, from October 10, 1988 until final
restoration of the premises.
The respondents appealed the case before the CA.
The Ruling of the CA
In its decision dated October 11, 2005, the CA reversed and set aside the RTCs September 17,
1996 decision and maintained the partition and distribution of the subject lot under the
compromise agreement. In so ruling, the CA noted the following facts: (1) Atty. Lacaya served as
the spouses Cadavedos counsel from 1969 until 1988, when the latter filed the present case
against Atty. Lacaya; (2) during the nineteen (19) years of their attorney-client relationship, Atty.
Lacaya represented the spouses Cadavedo in three civil cases Civil Case No. 1721, Civil Case
No. 3352, and Civil Case No. 3443; (3) the first civil case lasted for twelve years and even
reached this Court, the second civil case lasted for seven years, while the third civil case lasted
for six years and went all the way to the CA;(4) the spouses Cadavedo and Atty. Lacaya entered
into a compromise agreement concerning the division of the subject lot where Atty. Lacaya
ultimately agreed to acquire a smaller portion; (5) the MTC approved the compromise
agreement; (6) Atty. Lacaya defrayed all of the litigation expenses in Civil Case No. 1721; and (7)
the spouses Cadavedo expressly recognized that Atty. Lacaya served them in several cases.
Considering these established facts and consistent with Canon 20.01 of the Code of Professional
Responsibility (enumerating the factors that should guide the determination of the lawyers
fees), the CA ruled that the time spent and the extent of the services Atty. Lacaya rendered for
the spouses Cadavedo in the three cases, the probability of him losing other employment
resulting from his engagement, the benefits resulting to the spouses Cadavedo, and the
contingency of his fees justified the compromise agreement and rendered the agreed fee under
the compromise agreement reasonable.
The Petition
In the present petition, the petitioners essentially argue that the CA erred in: (1) granting the
attorneys fee consisting of one-half or 10.5383 hectares of the subject lot to Atty. Lacaya,
instead of confirming the agreed contingent attorneys fees of 2,000.00; (2) not holding the
23
respondents accountable for the produce, harvests and income of the 10.5383-hectare portion
(that they obtained from the spouses Cadavedo) from 1988 up to the present; and (3) upholding
the validity of the purported oral contract between the spouses Cadavedo and Atty. Lacaya when
it was champertous and dealt with property then still subject of Civil Case No. 1721.
The petitioners argue that stipulations on a lawyers compensation for professional services,
especially those contained in the pleadings filed in courts, control the amount of the attorneys
fees to which the lawyer shall be entitled and should prevail over oral agreements. In this case,
the spouses Cadavedo and Atty. Lacaya agreed that the latters contingent attorneys fee was
P2,000.00 in cash, not one-half of the subject lot. This agreement was clearly stipulated in the
amended complaint filed in Civil Case No. 1721. Thus, Atty. Lacaya is bound by the expressly
stipulated fee and cannot insist on unilaterally changing its terms without violating their
contract.
The petitioners add that the one-half portion of the subject lot as Atty. Lacayas contingent
attorneys fee is excessive and unreasonable. They highlight the RTCs observations and argue
that the issues involved in Civil Case No. 1721, pursuant to which the alleged contingent fee of
one-half of the subject lot was agreed by the parties, were not novel and did not involve difficult
questions of law; neither did the case require much of Atty. Lacayas time, skill and effort in
research. They point out that the two subsequent civil cases should not be considered in
determining the reasonable contingent fee to which Atty. Lacaya should be entitled for his
services in Civil Case No. 1721, as those cases had not yet been instituted at that time. Thus,
these cases should not be considered in fixing the attorneys fees. The petitioners also claim that
the spouses Cadavedo concluded separate agreements on the expenses and costs for each of
these subsequent cases, and that Atty. Lacaya did not even record any attorneys lien in the
spouses Cadavedos TCT covering the subject lot.
The petitioners further direct the Courts attention to the fact that Atty. Lacaya, in taking over the
case from Atty. Bandal, agreed to defray all of the litigation expenses in exchange for one-half of
the subject lot should they win the case. They insist that this agreement is a champertous
contract that is contrary to public policy, prohibited by law for violation of the fiduciary
relationship between a lawyer and a client.
Finally, the petitioners maintain that the compromise agreement in Civil Case No. 215 (ejectment
case) did not novate their original stipulated agreement on the attorneys fees. They reason that
Civil Case No. 215 did not decide the issue of attorneys fees between the spouses Cadavedo and
Atty. Lacaya for the latters services in Civil Case No. 1721.
The Case for the Respondents
In their defense, the respondents counter that the attorneys fee stipulated in the amended
complaint was not the agreed fee of Atty. Lacaya for his legal services. They argue that the
questioned stipulation for attorneys fees was in the nature of a penalty that, if granted, would
inure to the spouses Cadavedo and not to Atty. Lacaya.
The respondents point out that: (1) both Vicente and Atty. Lacaya caused the survey and
subdivision of the subject lot immediately after the spouses Cadavedo reacquired its possession
with the RTCs approval of their motion for execution of judgment in Civil Case No. 1721; (2)
Vicente expressly ratified and confirmed the agreement on the contingent attorneys fee
consisting of one-half of the subject lot; (3) the MTC in Civil Case No. 215 (ejectment case)
approved the compromise agreement; (4) Vicente is the legally designated administrator of the
conjugal partnership, hence the compromise agreement ratifying the transfer bound the
partnership and could not have been invalidated by the absence of Benitas acquiescence; and
(5) the compromise agreement merely inscribed and ratified the earlier oral agreement between
the spouses Cadavedo and Atty. Lacaya which is not contrary to law, morals, good customs,
public order and public policy.
While the case is pending before this Court, Atty. Lacaya died. He was substituted by his wife
-Rosa -and their children Victoriano D.L. Lacaya, Jr., Rosevic Lacaya-Ocampo, Reymar L. Lacaya,
Marcelito L. Lacaya, Raymundito L. Lacaya, Laila Lacaya-Matabalan, Marivic Lacaya-Barba,
Rosalie L. Lacaya and Ma. Vic-Vic Lacaya-Camaongay.
The Courts Ruling
We resolve to GRANT the petition.
The subject lot was the core of four successive and overlapping cases prior to the present
controversy. In three of these cases, Atty. Lacaya stood as the spouses Cadavedos counsel. For
ease of discussion, we summarize these cases (including the dates and proceedings pertinent to
each) as follows:
Civil Case No. 1721 Cadavedo v. Ames (Sum of money and/or voiding of contract of sale of
homestead), filed on January 10, 1967. The writ of execution was granted on October 16, 1981.
Civil Case No. 3352 Ames v. Cadavedo (Quieting of Title and/or Enforcement of Civil Rights due
Planters in Good Faith with Application for Preliminary injunction), filed on September 23, 1981.
Civil Case No. 3443 Cadavedo v. DBP (Action for Injunction with Preliminary Injunction), filed on
May 21, 1982.

24
Civil Case No. 215 Atty. Lacaya v. Vicente Cadavedo, et. al. (Ejectment Case), filed between the
latter part of 1981 and early part of 1982. The parties executed the compromise agreement on
May 13, 1982.
Civil Case No. 4038 petitioners v. respondents (the present case).
The agreement on attorneys feeconsisting of one-half of the subjectlot is void; the petitioners
are entitledto recover possession
The core issue for our resolution is whether the attorneys fee consisting of one-half of the
subject lot is valid and reasonable, and binds the petitioners. We rule in the NEGATIVE for the
reasons discussed below.
A. The written agreement providing fora contingent fee of P2,000.00 should prevailover the oral
agreement providing for one-half of the subject lot
The spouses Cadavedo and Atty. Lacaya agreed on a contingent fee of P2,000.00 and not, as
asserted by the latter, one-half of the subject lot. The stipulation contained in the amended
complaint filed by Atty. Lacaya clearly stated that the spouses Cadavedo hired the former on a
contingency basis; the Spouses Cadavedo undertook to pay their lawyer P2,000.00 as attorneys
fees should the case be decided in their favor.
Contrary to the respondents contention, this stipulation is not in the nature of a penalty that the
court would award the winning party, to be paid by the losing party. The stipulation is a
representation to the court concerning the agreement between the spouses Cadavedo and Atty.
Lacaya, on the latters compensation for his services in the case; it is not the attorneys fees in
the nature of damages which the former prays from the court as an incident to the main action.
At this point, we highlight that as observed by both the RTC and the CA and agreed as well by
both parties, the alleged contingent fee agreement consisting of one-half of the subject lot was
not reduced to writing prior to or, at most, at the start of Atty. Lacayas engagement as the
spouses Cadavedos counsel in Civil Case No. 1721. An agreement between the lawyer and his
client, providing for the formers compensation, is subject to the ordinary rules governing
contracts in general. As the rules stand, controversies involving written and oral agreements on
attorneys fees shall be resolved in favor of the former. Hence, the contingency fee of P2,000.00
stipulated in the amended complaint prevails over the alleged oral contingency fee agreement of
one-half of the subject lot.
B. The contingent fee agreement betweenthe spouses Cadavedo and Atty. Lacaya, awarding the
latter one-half of the subjectlot, is champertous
Granting arguendo that the spouses Cadavedo and Atty. Lacaya indeed entered into an oral
contingent fee agreement securing to the latter one-half of the subject lot, the agreement is
nevertheless void.
In their account, the respondents insist that Atty. Lacaya agreed to represent the spouses
Cadavedo in Civil Case No. 1721 and assumed the litigation expenses, without providing for
reimbursement, in exchange for a contingency fee consisting of one-half of the subject lot. This
agreement is champertous and is contrary to public policy.
Champerty, along with maintenance (of which champerty is an aggravated form), is a common
law doctrine that traces its origin to the medieval period. The doctrine of maintenance was
directed "against wanton and in officious intermeddling in the disputes of others in which the
intermeddler has no interest whatever, and where the assistance rendered is without justification
or excuse." Champerty, on the other hand, is characterized by "the receipt of a share of the
proceeds of the litigation by the intermeddler." Some common law court decisions, however, add
a second factor in determining champertous contracts, namely, that the lawyer must also, "at his
own expense maintain, and take all the risks of, the litigation."
The doctrines of champerty and maintenance were created in response "to medieval practice of
assigning doubtful or fraudulent claims to persons of wealth and influence in the expectation that
such individuals would enjoy greater success in prosecuting those claims in court, in exchange
for which they would receive an entitlement to the spoils of the litigation." "In order to safeguard
the administration of justice, instances of champerty and maintenance were made subject to
criminal and tortuous liability and a common law rule was developed, striking down champertous
agreements and contracts of maintenance as being unenforceable on the grounds of public
policy."
In this jurisdiction, we maintain the rules on champerty, as adopted from American decisions, for
public policy considerations. As matters currently stand, any agreement by a lawyer to "conduct
the litigation in his own account, to pay the expenses thereof or to save his client therefrom and
to receive as his fee a portion of the proceeds of the judgment is obnoxious to the law." The rule
of the profession that forbids a lawyer from contracting with his client for part of the thing in
litigation in exchange for conducting the case at the lawyers expense is designed to prevent the
lawyer from acquiring an interest between him and his client. To permit these arrangements is to
enable the lawyer to "acquire additional stake in the outcome of the action which might lead him
to consider his own recovery rather than that of his client or to accept a settlement which might
take care of his interest in the verdict to the sacrifice of that of his client in violation of his duty of
undivided fidelity to his clients cause."
25
In Bautista v. Atty. Gonzales, the Court struck down the contingent fee agreement between
therein respondent Atty. Ramon A. Gonzales and his client for being contrary to public policy.
There, the Court held that an reimbursement of litigation expenses paid by the former is against
public policy, especially if the lawyer has agreed to carry on the action at his expense in
consideration of some bargain to have a part of the thing in dispute. It violates the fiduciary
relationship between the lawyer and his client.
In addition to its champertous character, the contingent fee arrangement in this case expressly
transgresses the Canons of Professional Ethics and, impliedly, the Code of Professional
Responsibility. Under Rule 42 of the Canons of Professional Ethics, a lawyer may not properly
agree with a client that the lawyer shall pay or beat the expense of litigation. The same reasons
discussed above underlie this rule.
C. The attorneys fee consisting ofone-half of the subject lot is excessiveand unconscionable
We likewise strike down the questioned attorneys fee and declare it void for being excessive and
unconscionable. The contingent fee of one-half of the subject lot was allegedly agreed to secure
the services of Atty. Lacaya in Civil Case No. 1721. Plainly, it was intended for only one action as
the two other civil cases had not yet been instituted at that time. While Civil Case No. 1721 took
twelve years to be finally resolved, that period of time, as matters then stood, was not a
sufficient reason to justify a large fee in the absence of any showing that special skills and
additional work had been involved. The issue involved in that case, as observed by the RTC (and
with which we agree), was simple and did not require of Atty. Lacaya extensive skill, effort and
research. The issue simply dealt with the prohibition against the sale of a homestead lot within
five years from its acquisition.
That Atty. Lacaya also served as the spouses Cadavedos counsel in the two subsequent cases
did not and could not otherwise justify an attorneys fee of one-half of the subject lot. As asserted
by the petitioners, the spouses Cadavedo and Atty. Lacaya made separate arrangements for the
costs and expenses for each of these two cases. Thus, the expenses for the two subsequent
cases had been considered and taken cared of Based on these considerations, we therefore find
one-half of the subject lot as attorneys fee excessive and unreasonable.
D. Atty. Lacayas acquisition ofthe one-half portion contravenesArticle 1491 (5) of the Civil Code
Article 1491 (5) of the Civil Code forbids lawyers from acquiring, by purchase or assignment, the
property that has been the subject of litigation in which they have taken part by virtue of their
profession. The same proscription is provided under Rule 10 of the Canons of Professional Ethics.
A thing is in litigation if there is a contest or litigation over it in court or when it is subject of the
judicial action. Following this definition, we find that the subject lot was still in litigation when
Atty. Lacaya acquired the disputed one-half portion. We note in this regard the following
established facts:(1) on September 21, 1981, Atty. Lacaya filed a motion for the issuance of a
writ of execution in Civil Case No. 1721; (2) on September 23, 1981, the spouses Ames filed Civil
Case No. 3352 against the spouses Cadavedo; (3) on October 16, 1981, the RTC granted the
motion filed for the issuance of a writ of execution in Civil Case No. 1721 and the spouses
Cadavedo took possession of the subject lot on October 24, 1981; (4) soon after, the subject lot
was surveyed and subdivided into two equal portions, and Atty. Lacaya took possession of one of
the subdivided portions; and (5) on May 13, 1982, Vicente and Atty. Lacaya executed the
compromise agreement.
From these timelines, whether by virtue of the alleged oral contingent fee agreement or an
agreement subsequently entered into, Atty. Lacaya acquired the disputed one-half portion (which
was after October 24, 1981) while Civil Case No. 3352 and the motion for the issuance of a writ
of execution in Civil Case No. 1721 were already pending before the lower courts. Similarly, the
compromise agreement, including the subsequent judicial approval, was effected during the
pendency of Civil Case No. 3352. In all of these, the relationship of a lawyer and a client still
existed between Atty. Lacaya and the spouses Cadavedo.
Thus, whether we consider these transactions the transfer of the disputed one-half portion and
the compromise agreement independently of each other or resulting from one another, we find
them to be prohibited and void by reason of public policy. Under Article 1409 of the Civil Code,
contracts which are contrary to public policy and those expressly prohibited or declared void by
law are considered in existent and void from the beginning.
What did not escape this Courts attention is the CAs failure to note that the transfer violated
the provisions of Article 1491(5) of the Civil Code, although it recognized the concurrence of the
transfer and the execution of the compromise agreement with the pendency of the two civil
cases subsequent to Civil Case No. 1721. In reversing the RTC ruling, the CA gave weight to the
compromise agreement and in so doing, found justification in the unproved oral contingent fee
agreement.
While contingent fee agreements are indeed recognized in this jurisdiction as a valid exception to
the prohibitions under Article 1491(5) of the Civil Code, contrary to the CAs position, however,
this recognition does not apply to the present case. A contingent fee contract is an agreement in
writing where the fee, often a fixed percentage of what may be recovered in the action, is made
to depend upon the success of the litigation. The payment of the contingent fee is not made
26
during the pendency of the litigation involving the clients property but only after the judgment
has been rendered in the case handled by the lawyer.
In the present case, we reiterate that the transfer or assignment of the disputed one-half portion
to Atty. Lacaya took place while the subject lot was still under litigation and the lawyer-client
relationship still existed between him and the spouses Cadavedo. Thus, the general prohibition
provided under Article 1491 of the Civil Code, rather than the exception provided in
jurisprudence, applies. The CA seriously erred in upholding the compromise agreement on the
basis of the unproved oral contingent fee agreement.
Notably, Atty. Lacaya, in undertaking the spouses Cadavedos cause pursuant to the terms of the
alleged oral contingent fee agreement, in effect, became a co-proprietor having an equal, if not
more, stake as the spouses Cadavedo. Again, this is void by reason of public policy; it
undermines the fiduciary relationship between him and his clients.
E. The compromise agreement could notvalidate the void oral contingent feeagreement; neither
did it supersede thewritten contingent fee agreement
The compromise agreement entered into between Vicente and Atty. Lacaya in Civil Case No. 215
(ejectment case) was intended to ratify and confirm Atty. Lacayas acquisition and possession of
the disputed one-half portion which were made in violation of Article 1491 (5) of the Civil Code.
As earlier discussed, such acquisition is void; the compromise agreement, which had for its
object a void transaction, should be void.
A contract whose cause, object or purpose is contrary to law, morals, good customs, public order
or public policy is in existent and void from the beginning. It can never be ratified nor the action
or defense for the declaration of the in existence of the contract prescribe; and any contract
directly resulting from such illegal contract is likewise void and in existent.
Consequently, the compromise agreement did not supersede the written contingent fee
agreement providing for attorneys fee of P2,000.00; neither did it preclude the petitioners from
questioning its validity even though Vicente might have knowingly and voluntarily acquiesced
thereto and although the MTC approved it in its June 10, 1982 decision in the ejectment case.
The MTC could not have acquired jurisdiction over the subject matter of the void compromise
agreement; its judgment in the ejectment case could not have attained finality and can thus be
attacked at any time. Moreover, an ejectment case concerns itself only with the issue of
possession de facto; it will not preclude the filing of a separate action for recovery of possession
founded on ownership. Hence, contrary to the CAs position, the petitionersin filing the present
action and praying for, among others, the recovery of possession of the disputed one-half portion
and for judicial determination of the reasonable fees due Atty. Lacaya for his services were not
barred by the compromise agreement.
Atty. Lacaya is entitled to receive attorneys fees on a quantum meruit basis
In view of their respective assertions and defenses, the parties, in effect, impliedly set aside any
express stipulation on the attorneys fees, and the petitioners, by express contention, submit the
reasonableness of such fees to the courts discretion. We thus have to fix the attorneys fees on a
quantum meruit basis.
"Quantum meruitmeaning as much as he deservesis used as basis for determining a
lawyers professional fees in the absence of a contract x x x taking into account certain factors in
fixing the amount of legal fees." "Its essential requisite is the acceptance of the benefits by one
sought to be charged for the services rendered under circumstances as reasonably to notify him
that the lawyer performing the task was expecting to be paid compensation" for it. The doctrine
of quantum meruit is a device to prevent undue enrichment based on the equitable postulate
that it is unjust for a person to retain benefit without paying for it.
Under Section 24, Rule 138 of the Rules of Court and Canon 20 of the Code of Professional
Responsibility, factors such as the importance of the subject matter of the controversy, the time
spent and the extent of the services rendered, the customary charges for similar services, the
amount involved in the controversy and the benefits resulting to the client from the service, to
name a few, are considered in determining the reasonableness of the fees to which a lawyer is
entitled.
In the present case, the following considerations guide this Court in considering and setting Atty.
Lacayas fees based on quantum meruit: (1) the questions involved in these civil cases were not
novel and did not require of Atty. Lacaya considerable effort in terms of time, skill or the
performance of extensive research; (2) Atty. Lacaya rendered legal services for the Spouses
Cadavedo in three civil cases beginning in 1969 until 1988 when the petitioners filed the instant
case; (3) the first of these civil cases (Cadavedo v. Ames) lasted for twelve years and reaching up
to this Court; the second (Ames v. Cadavedo) lasted for seven years; and the third (Cadavedo
and Lacaya v. DBP) lasted for six years, reaching up to the CA; and (4) the property subject of
these civil cases is of a considerable size of 230,765 square meters or 23.0765 hectares.
All things considered, we hold as fair and equitable the RTCs considerations in appreciating the
character of the services that Atty. Lacaya rendered in the three cases, subject to modification on
valuation. We believe and so hold that the respondents are entitled to two (2) hectares (or
approximately one-tenth [1/10] of the subject lot), with the fruits previously received from the
27
disputed one-half portion, as attorneys fees. They shall return to the petitioners the remainder of
the disputed one-half portion.
The allotted portion of the subject lot properly recognizes that litigation should be for the benefit
of the client, not the lawyer, particularly in a legal situation when the law itself holds clear and
express protection to the rights of the client to the disputed property (a homestead lot). Premium
consideration, in other words, is on the rights of the owner, not on the lawyer who only helped
the owner protect his rights. Matters cannot be the other way around; otherwise, the lawyer does
indeed effectively acquire a property right over the disputed property. If at all, due recognition of
parity between a lawyer and a client should be on the fruits of the disputed property, which in
this case, the Court properly accords.
WHEREFORE, in view of these considerations, we hereby GRANT the petition. We AFFIRM the
decision dated September 17, 1996 and the resolution dated December 27, 1996 of the Regional
Trial Court of Dipolog City, Branch 10, in Civil Case No. 4038, with the MODIFICATION that the
respondents, the spouses Victorino (Vic) T. Lacaya and Rosa Legados, are entitled to two (2)
hectares (or approximately one-tenth [1/10] of the subject lot) as attorneys fees. The fruits that
the respondents previously received from the disputed one-half portion shall also form part of the
attorneys fees. We hereby ORDER the respondents to return to the petitioners the remainder of
the 10.5383-hectare portion of the subject lot that Atty. Vicente Lacaya acquired pursuant to the
compromise agreement.
SO ORDERED.

Case No. 7
G.R. No. 183952 September 9, 2013
CZARINA T. MALVAR, Petitioner, vs. KRAFT FOOD PHILS., INC. and/or BIENVENIDO
BAUTISTA, KRAFT FOODS INTERNATIONAL, Respondents.

Although the practice of law is not a business, an attorney is entitled to be properly compensated
for the professional services rendered for the client, who is bound by her express agreement to
duly compensate the attorney. The client may not deny her attorney such just compensation.
The Case
The case initially concerned the execution of a final decision of the Court of Appeals (CA) in a
labor litigation, but has mutated into a dispute over attorney's fees between the winning
employee and her attorney after she entered into a compromise agreement with her employer
under circumstances that the attorney has bewailed as designed to prevent the recovery of just
professional fees.
Antecedents
On August 1, 1988, Kraft Foods (Phils.), Inc. (KFPI) hired Czarina Malvar (Malvar) as its Corporate
Planning Manager. From then on, she gradually rose from the ranks, becoming in 1996 the Vice
President for Finance in the Southeast Asia Region of Kraft Foods International (KFI),KFPIs mother
company. On November 29, 1999, respondent Bienvenido S. Bautista, as Chairman of the Board
of KFPI and concurrently the Vice President and Area Director for Southeast Asia of KFI, sent
Malvar a memo directing her to explain why no administrative sanctions should be imposed on
her for possible breach of trust and confidence and for willful violation of company rules and
28
regulations. Following the submission of her written explanation, an investigating body was
formed. In due time, she was placed under preventive suspension with pay. Ultimately, on March
16, 2000, she was served a notice of termination.
Obviously aggrieved, Malvar filed a complaint for illegal suspension and illegal dismissal against
KFPI and Bautista in the National Labor Relations Commission (NLRC). In a decision dated April
30, 2001, the Labor Arbiter found and declared her suspension and dismissal illegal, and ordered
her reinstatement, and the payment of her full backwages, inclusive of allowances and other
benefits, plus attorneys fees.
On October 22, 2001, the NLRC affirmed the decision of the Labor Arbiter but additionally ruled
that Malvar was entitled to "any and all stock options and bonuses she was entitled to or would
have been entitled to had she not been illegally dismissed from her employment," as well as to
moral and exemplary damages.
KFPI and Bautista sought the reconsideration of the NLRCs decision, but the NLRC denied their
motion to that effect.
Undaunted, KFPI and Bautista assailed the adverse outcome before the CA on certiorari (CA-G.R.
SP No. 69660), contending that the NLRC thereby committed grave abuse of discretion. However,
the petition for certiorari was dismissed by the CA on December 22, 2004, but with the CA
reversing the order of reinstatement and instead directing the payment of separation pay to
Malvar, and also reducing the amounts awarded as moral and exemplary damages.
After the judgment in her favor became final and executory on March 14, 2006, Malvar moved for
the issuance of a writ of execution. The Executive Labor Arbiter then referred the case to the
Research and Computation Unit (RCU) of the NLRC for the computation of the monetary awards
under the judgment. The RCUs computation ultimately arrived at the total sum of
P41,627,593.75.
On November 9, 2006, however, Labor Arbiter Jaime M. Reyno issued an order, finding that the
RCUs computation lacked legal basis for including the salary increases that the decision
promulgated in CA-G.R. SP No. 69660 did not include. Hence, Labor Arbiter Reyno reduced
Malvars total monetary award to P27,786,378.11, viz:
WHEREFORE, premises considered, in so far as the computation of complainants other benefits
and allowances are concerned, the same are in order. However, insofar as the computation of her
backwages and other monetary benefits (separation pay, unpaid salary for January 1 to 26, 2005,
holiday pay, sick leave pay, vacation leave pay, 13th month pay), the same are hereby
recomputed as follows:
1 Separation Pay
.
8/1/88-1/26/05 = 16 yrs

P344,575.83 x 16 = 5,513,213.28

2 Unpaid Salary
.
1/1-26/05 = 87 mos.

P344,575.83 x 87 = 299,780.97

3 Holiday Pay
.
4/1/00-1/26/05 = 55 holidays

P4,134,910/12 mos/20.83 days x 55 days 909,825.77

4
Unpaid 13th month pay for Dec 2000 344,575.83
.

5 Sick Leave Pay

.
Year 1999 to 2004 = 6 yrs

P344,575.88/20.83 x 15 days x 6 = 1,488,805.79

Year 2005

P344,575.83/20.83 x 15/12 x 1 20,677.86 1,509,483.65

6 Vacation Leave Pay

.
Year 1999 to 2004 = 6 years

P344,575.88/20.83 x 22 days x 6 = 2,183,581.83

29
 Year 2005

P344,575.83/20.83 x 22/12 x 1 30,327.55 2,213,909.36

10,790,788.86

Backwages (from 3/7/00-4/30/01, award in LA

4,651,773.75
Sytians Decision

Allowances & Other Benefits:

Management Incentive Plan 7,355,166.58

Cash Dividend on Philip Morris Shares 2,711,646.00

Car Maintenance 381,702.92

Gas Allowance 198,000.00

Entitlement to a Company Driver 438,650.00

Rice Subsidy 58,650.00

Moral Damages 500,000.00

Exemplary Damages 200,000.00

Attorneys Fees 500,000.00

Entitlement to Philip Sch G Subject to

"Share Option Grant" Market Price

27,786,378.11
SO ORDERED.
Both parties appealed the computation to the NLRC, which, on April 19, 2007, rendered its
decision setting aside Labor Arbiter Reynos November 9, 2006 order, and adopting the
computation by the RCU.
In its resolution dated May 31, 2007, the NLRC denied the respondents motion for
reconsideration.
Malvar filed a second motion for the issuance of a writ of execution to enforce the decision of the
NLRC rendered on April 19, 2007. After the writ of execution was issued, a partial enforcement as
effected by garnishing the respondents funds deposited with Citibank worth 37,391,696.06.
On July 27, 2007, the respondents went to the CA on certiorari (with prayer for the issuance of a
temporary restraining order (TRO) or writ of preliminary injunction), assailing the NLRCs setting
aside of the computation by Labor Arbiter Reyno (CA-G.R. SP No. 99865). The petition mainly
argued that the NLRC had gravely abused its discretion in ruling that: (a) the inclusion of the
salary increases and other monetary benefits in the award to Malvar was final and executory;
and (b) the finality of the ruling in CA-G.R. SP No. 69660 precluded the respondents from
challenging the inclusion of the salary increases and other monetary benefits. The CA issued a
TRO, enjoining the NLRC and Malvar from implementing the NLRCs decision.
On April 17, 2008, the CA rendered its decision in CA-G.R. SP No. 99865, disposing thusly:
WHEREFORE, premises considered, the herein Petition is GRANTED and the 19 April 2007
Decision of the NLRC and the 31 May 2007 Resolution in NLRC NCR 30-07-02316-00 are hereby
REVERSED and SET ASIDE.
The matter of computation of monetary awards for private respondent is hereby REMANDED to
the Labor Arbiter and he is DIRECTED to recompute the monetary award due to private
respondent based on her salary at the time of her termination, without including projected salary
increases. In computing the said benefits, the Labor Arbiter is further directed to DISREGARD
monetary awards arising from: (a) the management incentive plan and (b) the share option
grant, including cash dividends arising therefrom without prejudice to the filing of the
appropriate remedy by the private respondent in the proper forum. Private respondents
allowances for car maintenance and gasoline are likewise DELETED unless private respondent
proves, by appropriate receipts, her entitlement thereto.
With respect to the Motion to Exclude the Undisputed Amount of P14,252,192.12 from the
coverage of the Writ of Preliminary Injunction and to order its immediate release, the same is

30
hereby GRANTED for reasons stated therefor, which amount shall be deducted from the amount
to be given to private respondent after proper computation.
As regards the Motions for Reconsideration of the Resolution denying the Motion for Voluntary
Inhibition and the Omnibus Motion dated 30 October 2007, both motions are hereby DENIED for
lack of merit.
SO ORDERED.
Malvar sought reconsideration, but the CA denied her motion on July30, 2008.
Aggrieved, Malvar appealed to the Court, assailing the CAs decision.
On December 9, 2010, while her appeal was pending in this Court, Malvar and the respondents
entered into a compromise agreement, the pertinent dispositive portion of which is quoted as
follows:
NOW, THEREFORE, for and in consideration of the covenants and understanding between the
parties herein, the parties hereto have entered into this Agreement on the following terms and
conditions:
1. Simultaneously upon execution of this Agreement in the presence of Ms. Malvars attorney,
KFPI shall pay Ms. Malvar the amount of Philippine Pesos Forty Million (Php 40,000,000.00), which
is in addition to the Philippine Pesos Fourteen Million Two Hundred Fifty-Two Thousand One
Hundred Ninety-Two and Twelve Centavos (Php14,252,192.12) already paid to and received by
Ms. Malvar from KFPI in August2008 (both amounts constituting the "Compromise Payment").
The Compromise Payment includes full and complete payment and settlement of Ms. Malvars
salaries and wages up to the last day of her employment, allowances, 13th and 14th month pay,
cash conversion of her accrued vacation, sick and emergency leaves, separation pay, retirement
pay and such other benefits, entitlements, claims for stock, stock options or other forms of equity
compensation whether vested or otherwise and claims of any and all kinds against KFPI and KFI
and Altria Group, Inc., their predecessors-in-interest, their stockholders, officers, directors,
agents or successors-in-interest, affiliates and subsidiaries, up to the last day of the aforesaid
cessation of her employment.
2. In consideration of the Compromise Payment, Ms. Malvar hereby freely and voluntarily
releases and forever discharges KFPI and KFI and Altria Group, Inc., their predecessors or
successors-in-interest, stockholders, officers, including Mr. Bautista who was impleaded in the
Labor Case as a party respondent, directors, agents or successors-in-interest, affiliates and
subsidiaries from any and all manner of action, cause of action, sum of money, damages, claims
and demands whatsoever in law or in equity which Ms. Malvar or her heirs, successors and
assigns had, or now have against KFPI and/or KFI and/or Altria Group, Inc., including but not
limited to, unpaid wages, salaries, separation pay, retirement pay, holiday pay, allowances, 13th
and 14th month pay, claims for stock, stock options or other forms of equity compensation
whether vested or otherwise whether arising from her employment contract, company grant,
present and future contractual commitments, company policies or practices, or otherwise, in
connection with Ms. Malvars employment with KFPI.
xxxx
Thereafter, Malvar filed an undated Motion to Dismiss/Withdraw Case, praying that the appeal be
immediately dismissed/withdrawn in view of the compromise agreement, and that the case be
considered closed and terminated.
Intervention
Before the Court could act on Malvars Motion to Dismiss/Withdraw Case, the Court received on
February 15, 2011 a so-called Motion for Intervention to Protect Attorneys Rights from The Law
Firm of Dasal, Llasos and Associates, through its Of Counsel Retired Supreme Court Associate
Justice Josue N. Bellosillo (Intervenor), whereby the Intervenor sought, among others, that both
Malvar and KFPI be held and ordered to pay jointly and severally the Intervenors contingent
fees.
The Motion for Intervention relevantly averred:
xxxx
Lawyers, oftentimes, are caricatured as alligators or some other specie of voracious carnivore;
perceived also as leeches sucking dry the blood of their adversaries, and even their own clients
they are sworn to serve and protect! As we lay down the facts in this case, this popular, rather
unpopular, perception will be shown wrong. This case is a reversal of this perception.
xxxx
Here, it is the lawyer who is eaten up alive by the warring but conspiring litigants who finally
settled their differences without the knowledge, much less, participation, of Petitioners counsel
that labored hard and did everything to champion her cause.
xxxx
This Motion for Intervention will illustrate an aberration from the norm where the lawyer ends up
seeking protection from his clients and Respondents indecent and cunning maneuverings. x x x.
xxxx
On 18 March 2008 Petitioner engaged the professional services of Intervenor x x x on a
contingency basis whereby the former agreed in writing to pay the latter contingency fees
31
amounting to almost P19,600,000.00 (10% of her total claim of almost P196,000,000.00 in
connection with her labor case against Respondents. x x x.
xxxx
According to their agreement (Annex "A"), Petitioner bound herself to pay Intervenor contingency
fees as follows (a) 10% of P14,252, 192.12 upon its collection; (b) 10% of the remaining balance
of P41,627,593.75; and (c)10% of the value of the stock options Petitioner claims to be entitled
to, or roughly P154,000,000.00 as of April 2008.
xxxx
Intervenors efforts resulted in the award and partial release of Petitioners claim amounting to
P14,252,192.12 out of which Petitioner paid Intervenor 10% or P1,425,219.21 as contingency
fees pursuant to their engagement agreement (Annex "A"). Copy of the check payment of
Petitioner payable to Intervenors Of Counsel is attached as Annex "C".
xxxx
On 12 September 2008 Intervenor filed an exhaustive Petition for Review with the Supreme Court
containing 70 pages, including its Annexes "A" to "R", or a total of 419 pages against
Respondents to collect on the balance of Petitioners claims amounting to at least
P27,000,000.00 and P154,000,000.00 the latter representing the estimated value of Petitioners
stock options as of April 2008.
xxxx
On 15 January 2009 Respondents filed their Comment to the Petition for Review.
xxxx
On 13 April 2009 Intervenor, in behalf of Petitioner, filed its Reply to the Comment.
xxxx
All the pleadings in this Petition have already been submitted on time with nothing more to be
done except to await the Resolution of this Honorable Court which, should the petition be
decided in her favor, Petitioner would stand to gain P182,000,000.00, more or less, which victory
would be largely through the efforts of Intervenor. (Bold emphasis supplied).
xxxx
It appears that in July 2009, to the Intervenors surprise, Malvar unceremoniously and without
any justifiable reason terminated its legal service and required it to withdraw from the case.
Hence, on October 5,2009, the Intervenor reluctantly filed a Manifestation (With Motion to
Withdraw as Counsel for Petitioner), in which it spelled out: (a) the terms of and conditions of the
Intervenors engagement as counsel; (b) the type of legal services already rendered by the
Intervenor for Malvar; (c) the absence of any legitimate reason for the termination of their
attorney-client relationship; (d) the reluctance of the Intervenor to withdraw as Malvars counsel;
and (e) the desire of the Intervenor to assert and claim its contingent fee notwithstanding its
withdrawal as counsel. The Intervenor prayed that the Court furnish it with copies of resolutions,
decisions and other legal papers issued or to be issued after its withdrawal as counsel of Malvar
in the interest of protecting its interest as her attorney.
The Intervenor indicated that Malvars precipitate action had baffled, shocked and even
embarrassed the Intervenor, because it had done everything legally possible to serve and
protect her interest. It added that it could not recall any instance of conflict or misunderstanding
with her, for, on the contrary, she had even commended it for its dedication and devotion to her
case through her following letter to Justice Bellosillo, to wit:
July 16, 2008
Justice Josue Belocillo (sic)
Dear Justice,
It is almost morning of July 17 as I write this letter to you. Let me first thank you for your
continued and unrelenting lead, help and support in the case. You have been our "rock" as far as
this case is concerned. Jun and I are forever grateful to you for all your help. I just thought Id
express to you what is in the innermost of my heart as we proceed in the case. It has been
around four months now since we met mid-March early this year.
The most important and immediate aspect of the case at this time for me is the collection of the
undisputed amount of Pesos 14 million which the Court has clearly directed and ordered the
NLRC to execute. The only impending constraint for NLRC to execute and collect this amount
from the already garnished amount of Pesos 41 million at Citibank is the MR of Kraft on the Order
of the Court (CA) to execute collection. We need to get a denial of this motion for NLRC to
execute immediately. We already obtained commitment from NLRC that all it needed to execute
collection is the denial of the MR. Jun and I applaud your initiative and efforts to mediate with
Romulo on potential settlement. However, as I expressed to you in several instances, I have
serious reservations on the willingness of Romulo to settle within reasonable amounts specifically
as it relates to the stock options. Let us continue to pursue this route vigorously while not setting
aside our efforts to influence the CA to DENY their Motion on the Undisputed amount of Pesos 14
million.

32
At this point, I cannot overemphasize to you our need for funds. We have made financial
commitments that require us to raise some amount. But we can barely meet our day to day
business and personal requirements given our current situation right now.
Thank you po for your understanding and support.
According to the Intervenor, it was certain that the compromise agreement was authored by the
respondents to evade a possible loss of P182,000,000.00 or more as a result of the labor
litigation, but considering the Intervenors interest in the case as well as its resolve in pursuing
Malvars interest, they saw the Intervenor as a major stumbling block to the compromise
agreement that it was then brewing with her. Obviously, the only way to remove the Intervenor
was to have her terminate its services as her legal counsel. This prompted the Intervenor to
bring the matter to the attention of the Court to enable it to recover in full its compensation
based on its written agreement with her, averring thus:
xxxx
28. Upon execution of the Compromise Agreement and pursuant thereto, Petitioner immediately
received (supposedly) from Respondents P40,000,000.00. But despite the settlement between
the parties, Petitioner did not pay Intervenor its just compensation as set forth in their
engagement agreement; instead, she immediately moved to Dismiss/Withdraw the Present
Petition.
29. To parties minds, with the dismissal by Petitioner of Intervenor as her counsel, both
Petitioner and Respondents probably thought they would be able to settle the case without any
cost to them, with Petitioner saving on Intervenors contingent fees while Respondents able to
take advantage of the absence of Intervenor in determining the settlement price.
30. The parties cannot be any more mistaken. Pursuant to the Second Paragraph of Section 26,
Rule 138, of the Revised Rules of Court quoted in paragraph 3 hereof, Intervenor is still entitled
to recover from Petitioner the full compensation it deserves as stipulated in its contract.
31. All the elements for the full recovery of Intervenors compensation are present. First, the
contract between the Intervenor and Petitioner is reduced into writing. Second, Intervenor is
dismissed without justifiable cause and at the stage of proceedings where there is nothing more
to be done but to await the Decision or Resolution of the Present Petition.
xxxx
In support of the Motion for Intervention, the Intervenor cites the rulings in Aro v. Naawa and
Law Firm of Raymundo A. Armovit v. Court of Appeals, particularly the following passage:
x x x. While We here reaffirm the rule that "the client has an undoubted right to compromise a
suit without the intervention of his lawyer," We hold that when such compromise is entered into
in fraud of the lawyer, with intent to deprive him of the fees justly due him, the compromise
must be subject to the said fees and that when it is evident that the said fraud is committed in
confabulation with the adverse party who had knowledge of the lawyers contingent interest or
such interest appears of record and who would benefit under such compromise, the better
practice is to settle the matter of the attorneys fees in the same proceeding, after hearing all
the affected parties and without prejudice to the finality of the compromise agreement in so far
as it does not adversely affect the right of the lawyer. x x x.
The Intervenor prays for the following reliefs:
a) Granting the Motion for Intervention to Protect Attorneys Rights in favor of the Intervenor;
b) Directing both Petitioner and Respondents jointly and severally to pay Intervenor its
contingent fees;
c) Granting a lien upon all judgments for the payment of money and executions issued in
pursuance of such judgments; and
d) Holding in Abeyance in the meantime the Resolution of the Motion to Dismiss/Withdraw Case
filed by Petitioner and granting the Motion only after Intervenor has been fully paid its just
compensation; and
e) Other reliefs just and equitable.
Opposing the Motion for Intervention, Malvar stresses that there was no truth to the Intervenors
claim to defraud it of its professional fees; that the Intervenor lacked the legal capacity to
intervene because it had ceased to exist after Atty. Marwil N. Llasos resigned from the Intervenor
and Atty. Richard B. Dasal became barred from private practice upon his appointment as head of
the Legal Department of the Small Business Guarantee and Finance Corporation, a government
subsidiary; and that Atty. Llasos and Atty. Dasal had personally handled her case.
Malvar adds that even assuming, arguendo, that the Intervenor still existed as a law firm, it was
still not entitled to intervene for the following reasons, namely: firstly, it failed to attend to her
multiple pleas and inquiries regarding the case, as when communications to the Intervenor
through text messages were left unanswered; secondly, maintaining that this was a justifiable
cause to dismiss its services, the Intervenor only heeded her repeated demands to withdraw
from the case when Atty. Dasal was confronted about his appointment to the government
subsidiary; thirdly, it was misleading and grossly erroneous for the Intervenor to claim that it had
rendered to her full and satisfactory services when the truth was that its participation was strictly
limited to the preparation, finalization and submission of the petition for review with the Supreme
33
Court; and finally, while the Intervenor withdrew its services on October 5, 2009, the compromise
agreement was executed with the respondents on December 9,2010 and notarized on December
14, 2010, after more than a year and two months, dispelling any badge of bad faith on their end.
On June 21, 2011, the respondents filed their comment to the Intervenors Motion for
Intervention.
On November 18, 2011, the Intervenor submitted its position on the respondents comment
dated June 21, 2011, and thereafter the respondents sent in their reply.
Issues
The issues for our consideration and determination are two fold, namely: (a) whether or not
Malvars motion to dismiss the petition on the ground of the execution of the compromise
agreement was proper; and (b) whether or not the Motion for Intervention to protect attorneys
rights can prosper, and, if so, how much could it recover as attorneys fees.
Ruling of the Court
We shall decide the issues accordingly.
1.
Clients right to settle litigation
by compromise agreement, and
to terminate counsel; limitations
A compromise agreement is a contract, whereby the parties undertake reciprocal obligations to
avoid litigation, or put an end to one already commenced. The client may enter into a
compromise agreement with the adverse party to terminate the litigation before a judgment is
rendered therein. If the compromise agreement is found to be in order and not contrary to law,
morals, good customs and public policy, its judicial approval is in order. A compromise
agreement, once approved by final order of the court, has the force of res judicata between the
parties and will not be disturbed except for vices of consent or forgery.
A client has an undoubted right to settle her litigation without the intervention of the attorney,
for the former is generally conceded to have exclusive control over the subject matter of the
litigation and may at anytime, if acting in good faith, settle and adjust the cause of action out of
court before judgment, even without the attorneys intervention. It is important for the client to
show, however, that the compromise agreement does not adversely affect third persons who are
not parties to the agreement.
By the same token, a client has the absolute right to terminate the attorney-client relationship at
any time with or without cause. But this right of the client is not unlimited because good faith is
required in terminating the relationship. The limitation is based on Article 19 of the Civil Code,
which mandates that "every person must, in the exercise of his rights and in the performance of
his duties, act with justice, give everyone his due, and observe honesty and good faith." The
right is also subject to the right of the attorney to be compensated. This is clear from Section 26,
Rule 138 of the Rules of Court, which provides:
Section 26. Change of attorneys. - An attorney may retire at anytime from any action or special
proceeding, by the written consent of his client filed in court. He may also retire at any time from
an action or special proceeding, without the consent of his client, should the court, on notice to
the client and attorney, and on hearing, determine that he ought to be allowed to retire. In case
of substitution, the name of the attorney newly employed shall be entered on the docket of the
court in place of the former one, and written notice of the change shall be given to the adverse
party.
A client may at any time dismiss his attorney or substitute another in his place, but if the
contract between client and attorney has been reduced to writing and the dismissal of the
attorney was without justifiable cause, he shall be entitled to recover from the client the full
compensation stipulated in the contract. However, the attorney may, in the discretion of the
court, intervene in the case to protect his rights. For the payment of his compensation the
attorney shall have a lien upon all judgments for the payment of money, and executions issued
in pursuance of such judgment, rendered in the case wherein his services had been retained by
the client. (Bold emphasis supplied)
In fine, it is basic that an attorney is entitled to have and to receive a just and reasonable
compensation for services performed at the special instance and request of his client. The
attorney who has acted in good faith and honesty in representing and serving the interests of the
client should be reasonably compensated for his service.
2. Compromise agreement is to be approved despite favorable action on the Intervenors Motion
for Intervention
On considerations of equity and fairness, the Court disapproves of the tendencies of clients
compromising their cases behind the backs of their attorneys for the purpose of unreasonably
reducing or completely setting to naught the stipulated contingent fees. Thus, the Court grants
the Intervenors Motion for Intervention to Protect Attorneys Rights as a measure of protecting
the Intervenors right to its stipulated professional fees that would be denied under the
compromise agreement. The Court does so in the interest of protecting the rights of the
practicing Bar rendering professional services on contingent fee basis.
34
Nonetheless, the claim for attorneys fees does not void or nullify the compromise agreement
between Malvar and the respondents. There being no obstacles to its approval, the Court
approves the compromise agreement. The Court adds, however, that the Intervenor is not left
without a remedy, for the payment of its adequate and reasonable compensation could not be
annulled by the settlement of the litigation without its participation and conformity. It remains
entitled to the compensation, and its right is safeguarded by the Court because its members are
officers of the Court who are as entitled to judicial protection against injustice or imposition of
fraud committed by the client as much as the client is against their abuses as her counsel. In
other words, the duty of the Court is not only to ensure that the attorney acts in a proper and
lawful manner, but also to see to it that the attorney is paid his just fees. Even if the
compensation of the attorney is dependent only on winning the litigation, the subsequent
withdrawal of the case upon the clients initiative would not deprive the attorney of the
legitimate compensation for professional services rendered.
The basis of the intervention is the written agreement on contingent fees contained in the
engagement executed on March 19, 2008 between Malvar and the Intervenor, the pertinent
portion of which stipulated that the Intervenor would "collect ten percent (10%) of the amount of
PhP14,252,192.12 upon its collection and another ten percent (10%) of the remaining balance of
PhP41,627,593.75 upon collection thereof, and also ten percent (10%) of whatever is the value of
the stock option you are entitled to under the Decision." There is no question that such
arrangement was a contingent fee agreement that was valid in this jurisdiction, provided the fees
therein fixed were reasonable.
We hold that the contingent fee of 10% of P41,627,593.75 and 10% of the value of the stock
option was reasonable. The P41,627,593.75 was already awarded to Malvar by the NLRC but the
award became the subject of the appeal in this Court because the CA reversed the NLRC. Be that
as it may, her subsequent change of mind on the amount sought from the respondents as
reflected in the compromise agreement should not negate or bar the Intervenors recovery of the
agreed attorneys fees.
Considering that in the event of a dispute between the attorney and the client as to the amount
of fees, and the intervention of the courts is sought, the determination requires that there be
evidence to prove the amount of fees and the extent and value of the services rendered, taking
into account the facts determinative thereof, the history of the Intervenors legal representation
of Malvar can provide a helpful predicate for resolving the dispute between her and the
Intervenor.
The records reveal that on March 18, 2008, Malvar engaged the professional services of the
Intervenor to represent her in the case of illegal dismissal. At that time, the case was pending in
the CA at the respondents instance after the NLRC had set aside the RCUs computation of
Malvars backwages and monetary benefits, and had upheld the computation arrived at by the
NLRC Computation Unit. On April 17, 2008, the CA set aside the assailed resolution of the NLRC,
and remanded the case to the Labor Arbiter for the computation of her monetary awards. It was
at this juncture that the Intervenor commenced its legal service, which included the following
incidents, namely:
a) Upon the assumption of its professional duties as Malvars counsel, a Motion for
Reconsideration of the Decision of the Court of Appeals dated April 17, 2008 consisting of thirty-
eight pages was filed before the Court of Appeals on May 6, 2008.
b) On June 2, 2009, Intervenors filed a Comment to Respondents Motion for Partial
Reconsideration, said Comment consisted 8 pages.
c) In the execution proceedings before Labor Arbiter Jaime Reyno, Intervenor prepared and filed
on Malvars behalf an "Ex-Parte Motion to Release to Complainant the Undisputed amount of
P14,252,192.12" in NLRC NCR Case No. 30-07-02716-00.
d) On July 29, 2000, Intervenor prepared and filed before the Labor Arbiter a Comment to
Respondents Opposition to the "Ex-Parte Motion to Release" and a "Motion Reiterating
Immediate Implementation of the Writ of Execution"
e) On August 6, 2008, Intervenor prepared and filed before the Labor Arbiter Malvars Motion
Reiterating Motion to Release the Amount of P14,252,192.12.
The decision promulgated on April 17, 2008 and the resolution promulgated on July 30, 2008 by
the CA prompted Malvar to appeal on August 15, 2008 to this Court with the assistance of the
Intervenor. All the subsequent pleadings, including the reply of April 13, 2009, were prepared and
filed in Malvars behalf by the Intervenor.
Malvar should accept that the practice of law was not limited to the conduct of cases or
litigations in court but embraced also the preparation of pleadings and other papers incidental to
the cases or litigations as well as the management of such actions and proceedings on behalf of
the clients. Consequently, fairness and justice demand that the Intervenor be accorded full
recognition as her counsel who discharged its responsibility for Malvars cause to its successful
end.
But, as earlier pointed out, although a client may dismiss her lawyer at any time, the dismissal
must be for a justifiable cause if a written contract between the lawyer and the client exists.
35
Considering the undisputed existence of the written agreement on contingent fees, the question
begging to be answered is: Was the Intervenor dismissed for a justifiable cause?
We do not think so.
In the absence of the lawyers fault, consent or waiver, a client cannot deprive the lawyer of his
just fees already earned in the guise of a justifiable reason. Here, Malvar not only downplayed
the worth of the Intervenors legal service to her but also attempted to camouflage her intent to
defraud her lawyer by offering excuses that were not only inconsistent with her actions but, most
importantly, fell short of being justifiable.
The letter Malvar addressed to Retired Justice Bellosillo, who represented the Intervenor,
debunked her allegations of unsatisfactory legal service because she thereby lavishly lauded the
Intervenor for its dedication and devotion to the prosecution of her case and to the protection of
her interests. Also significant was that the attorney-client relationship between her and the
Intervenor was not severed upon Atty. Dasals appointment to public office and Atty. Llasos
resignation from the law firm. In other words, the Intervenor remained as her counsel of record,
for, as we held in Rilloraza, Africa, De Ocampo and Africa v. Eastern Telecommunication
Philippines, Inc., a client who employs a law firm engages the entire law firm; hence, the
resignation, retirement or separation from the law firm of the handling lawyer does not terminate
the relationship, because the law firm is bound to provide a replacement.
The stipulations of the written agreement between Malvar and the Intervenors, not being
contrary to law, morals, public policy, public order or good customs, were valid and binding on
her. They expressly gave rise to the right of the Intervenor to demand compensation. In a word,
she could not simply walk away from her contractual obligations towards the Intervenor, for
Article 1159 of the Civil Code provides that obligations arising from contracts have the force of
law between the parties and should be complied with in good faith.
To be sure, the Intervenors withdrawal from the case neither cancelled nor terminated the
written agreement on the contingent attorneys fees. Nor did the withdrawal constitute a waiver
of the agreement. On the contrary, the agreement continued between them because the
Intervenors Manifestation (with Motion to Withdraw as Counsel for Petitioner) explicitly called
upon the Court to safeguard its rights under the written agreement, to wit:
WHEREFORE, premises considered, undersigned counsel respectfully pray that instant Motion to
Withdraw as Counsel for Petitioner be granted and their attorneys lien pursuant to the written
agreement be reflected in the judgment or decision that may be rendered hereafter conformably
with par. 2, Sec. 26, Rule 138 of the Rules of Court.
Undersigned counsel further requests that they be furnished copy of the decision, resolutions
and other legal processes of this Honorable Court to enable them to protect their interests.
Were the respondents also liable?
The respondents would be liable if they were shown to have connived with Malvar in the
execution of the compromise agreement, with the intention of depriving the Intervenor of its
attorneys fees. Thereby, they would be solidarily liable with her for the attorneys fees as
stipulated in the written agreement under the theory that they unfairly and unjustly interfered
with the Intervenors professional relationship with Malvar.
The respondents insist that they were not bound by the written agreement, and should not be
held liable under it.
We disagree with the respondents insistence. The respondents were complicit in Malvars move
to deprive the Intervenor of its duly earned contingent fees.
First of all, the unusual timing of Malvars letter terminating the Intervenors legal representation
of her, of her Motion to Dismiss/Withdraw Case, and of the execution of compromise agreement
manifested her desire to evade her legal obligation to pay to the Intervenor its attorneys fees for
the legal services rendered. The objective of her withdrawal of the case was to release the
respondents from all her claims and causes of action in consideration of the settlement in the
stated amount of P40,000.000.00, a sum that was measly compared to what she was legally
entitled to, which, to begin with, already included the P41,627,593.75 and the value of the stock
option already awarded to her. In other words, she thereby waived more than what she was
lawfully expected to receive from the respondents.
Secondly, the respondents suddenly turned around from their strong stance of berating her
demand as offensive to all precepts of justice and fair play and as a form of unjust enrichment for
her to a surprisingly generous surrender to her demand, allowing to her through their
compromise agreement the additional amount of P40,000,000.00 on top of the P14,252,192.12
already received by her in August 2008. The softening unavoidably gives the impression that
they were now categorically conceding that Malvar deserved much more. Under those
circumstances, it is plausible to conclude that her termination of the Intervenors services was
instigated by their prodding in order to remove the Intervenor from the picture for being a solid
obstruction to the settlement for a much lower liability, and thereby save for themselves and for
her some more amount.

36
Thirdly, the compromise agreement was silent on the Intervenors contingent fee, indicating that
the objective of the compromise agreement was to secure a huge discount from its liability
towards Malvar.
Finally, contrary to the stipulation in the compromise agreement, only Malvar, minus the
respondents, filed the Motion to Dismiss/Withdraw Case.
At this juncture, the Court notes that the compromise agreement would have Malvar waive even
the substantial stock options already awarded by the NLRCs decision, which ordered the
respondents to pay to her, among others, the value of the stock options and all other bonuses
she was entitled to or would have been entitled to had she not been illegally dismissed from her
employment. This ruling was affirmed by the CA. But the waiver could not negate the
Intervenors right to 10% of the value of the stock options she was legally entitled to under the
decisions of the NLRC and the CA, for that right was expressly stated in the written agreement
between her and the Intervenor. Thus, the Intervenor should be declared entitled to recover full
compensation in accordance with the written agreement because it did not assent to the waiver
of the stock options, and did not waive its right to that part of its compensation.
These circumstances show that Malvar and the respondents needed an escape from greater
liability towards the Intervenor, and from the possible obstacle to their plan to settle to pay. It
cannot be simply assumed that only Malvar would be liable towards the Intervenor at that point,
considering that the Intervenor, had it joined the negotiations as her lawyer, would have
tenaciously fought all the way for her to receive literally everything that she was entitled to,
especially the benefits from the stock option. Her rush to settle because of her financial concerns
could have led her to accept the respondents offer, which offer could be further reduced by the
Intervenors expected demand for compensation. Thereby, she and the respondents became
joint tort-feasors who acted adversely against the interests of the Intervenor. Joint tort-feasors
are those who command, instigate, promote, encourage, advise, countenance, cooperate in, aid
or abet the commission of a tort, or who approve of it after it is done, if done for their benefit.
They are also referred to as those who act together in committing wrong or whose acts, if
independent of each other, unite in causing a single injury. Under Article 2194 of the Civil Code,
joint tort-feasors are solidarily liable for the resulting damage. As regards the extent of their
respective liabilities, the Court said in Far Eastern Shipping Company v. Court of Appeals:
x x x. Where several causes producing an injury are concurrent and each is an efficient cause
without which the injury would not have happened, the injury may be attributed to all or any of
the causes and recovery may be had against any or all of the responsible persons although
under the circumstances of the case, it may appear that one of them was more culpable, and
that the duty owed by them to the injured person was not same. No actors negligence ceases to
be a proximate cause merely because it does not exceed the negligence of other acts. Each
wrongdoer is responsible for the entire result and is liable as though his acts were the sole cause
of the injury.
There is no contribution between joint tort-feasors whose liability is solidary since both of them
are liable for the total damage. Where the concurrent or successive negligent acts or omissions
of two or more persons, although acting independently, are in combination the direct and
proximate cause of a single injury to a third person, it is impossible to determine in what
proportion each contributed to the injury and either of them is responsible for the whole injury. x
xx
Joint tort-feasors are each liable as principals, to the same extent and in the same manner as if
they had performed the wrongful act themselves. It is likewise not an excuse for any of the joint
tort-feasors that individual participation in the tort was insignificant as compared to that of the
other. To stress, joint tort-feasors are not liable pro rata. The damages cannot be apportioned
among them, except by themselves. They cannot insist upon an apportionment, for the purpose
of each paying an aliquot part. They are jointly and severally liable for the whole amount. Thus,
as joint tort-feasors, Malvar and the respondents should be held solidarily liable to the Intervenor.
There is no way of appreciating these circumstances except in this light.
That the value of the stock options that Malvar waived under the compromise agreement has not
been fixed as yet is no hindrance to the implementation of this decision in favor of the
Intervenor. The valuation could be reliably made at a subsequent time from the finality of this
adjudication. It is enough for the Court to hold the respondents and Malvar solidarily liable for the
10% of that value of the stock options.
As a final word, it is necessary to state that no court can shirk from enforcing the contractual
stipulations in the manner they have agreed upon and written. As a rule, the courts, whether trial
or appellate, have no power to make or modify contracts between the parties. Nor can the courts
save the parties from disadvantageous provisions. The same precepts hold sway when it comes
to enforcing fee arrangements entered into in writing between clients and attorneys. In the
exercise of their supervisory authority over attorneys as officers of the Court, the courts are
bound to respect and protect the attorneys lien as a necessary means to preserve the decorum
and respectability of the Law Profession. Hence, the Court must thwart any and every effort of
clients already served by their attorneys worthy services to deprive them of their hard-earned
37
compensation. Truly, the duty of the courts is not only to see to it that attorneys act in a proper
and lawful manner, but also to see to it that attorneys are paid their just and lawful fees.
WHEREFORE, the Court APPROVES the compromise agreement; GRANTS the Motion for
Intervention to Protect Attorney's Rights; and ORDERS Czarina T. Malvar and respondents Kraft
Food Philippines Inc. and Kraft Foods International to jointly and severally pay to Intervenor Law
Firm, represented by Retired Associate Justice Josue N. Bellosillo, its stipulated contingent fees of
10% of P41,627,593.75, and the further sum equivalent to 10% of the value of the stock option.
No pronouncement on costs of suit.
SO ORDERED.

CANON 21
Case No. 1
A.C. No. 8242 (October 2, 2009)
REBECCA J. PALM, Complainant, vs. ATTY. FELIPE ILEDAN, JR., Respondent.

The Case

The case before the Court is a disbarment proceeding filed by Rebecca J. Palm (complainant)
against Atty. Felipe Iledan, Jr. (respondent) for revealing information obtained in the course of an
attorney-client relationship and for representing an interest which conflicted with that of his
former client, Comtech Worldwide Solutions Philippines, Inc. (Comtech).

The Antecedent Facts

Complainant is the President of Comtech, a corporation engaged in the business of computer

software development. From February 2003 to November 2003, respondent served as Comtechs
retained corporate counsel for the amount of P6,000 per month as retainer fee. From September
to October 2003, complainant personally met with respondent to review corporate matters,
including potential amendments to the corporate by-laws. In a meeting held on 1 October 2003,
respondent suggested that Comtech amend its corporate by-laws to allow participation during
board meetings, through teleconference, of members of the Board of Directors who were outside
the Philippines.

Prior to the completion of the amendments of the corporate by-laws, complainant became
uncomfortable with the close relationship between respondent and Elda Soledad (Soledad), a
former officer and director of Comtech, who resigned and who was suspected of releasing
unauthorized disbursements of corporate funds. Thus, Comtech decided to terminate its retainer
agreement with respondent effective November 2003.

In a stockholders meeting held on 10 January 2004, respondent attended as proxy for Gary
Harrison (Harrison). Steven C. Palm (Steven) and Deanna L. Palm, members of the Board of
Directors, were present through teleconference. When the meeting was called to order,
respondent objected to the meeting for lack of quorum. Respondent asserted that Steven and
Deanna Palm could not participate in the meeting because the corporate by-laws had not yet
been amended to allow teleconferencing.

On 24 March 2004, Comtechs new counsel sent a demand letter to Soledad to return or account
for the amount of P90,466.10 representing her unauthorized disbursements when she was the
Corporate Treasurer of Comtech. On 22 April 2004, Comtech received Soledads reply, signed by
respondent. In July 2004, due to Soledads failure to comply with Comtech's written demands,
Comtech filed a complaint for Estafa against Soledad before the Makati Prosecutors Office. In the
proceedings before the City Prosecution Office of Makati, respondent appeared as Soledads
counsel.

On 26 January 2005, complainant filed a Complaint for disbarment against respondent before the
Integrated Bar of the Philippines (IBP).

In his Answer, respondent alleged that in January 2002, Soledad consulted him on process and
procedure in acquiring property. In April 2002, Soledad again consulted him about the legal
38
requirements of putting up a domestic corporation. In February 2003, Soledad engaged his
services as consultant for Comtech. Respondent alleged that from February to October 2003,
neither Soledad nor Palm consulted him on confidential or privileged matter concerning the
operations of the corporation. Respondent further alleged that he had no access to any record of
Comtech.

Respondent admitted that during the months of September and October 2003, complainant met
with him regarding the procedure in amending the corporate by-laws to allow board members
outside the Philippines to participate in board meetings.

Respondent further alleged that Harrison, then Comtech President, appointed him as proxy
during the 10 January 2004 meeting. Respondent alleged that Harrison instructed him to observe
the conduct of the meeting. Respondent admitted that he objected to the participation of Steven
and Deanna Palm because the corporate by-laws had not yet been properly amended to allow
the participation of board members by teleconferencing.

Respondent alleged that there was no conflict of interest when he represented Soledad in the
case for Estafa filed by Comtech. He alleged that Soledad was already a client before he became
a consultant for Comtech. He alleged that the criminal case was not related to or connected with
the limited procedural queries he handled with Comtech.

The IBPs Report and Recommendation

In a Report and Recommendation dated 28 March 2006, the IBP Commission on Bar Discipline
(IBP-CBD) found respondent guilty of violation of Canon 21 of the Code of Professional
Responsibility and of representing interest in conflict with that of Comtech as his former client.

The IBP-CBD ruled that there was no doubt that respondent was Comtechs retained counsel from
February 2003 to November 2003. The IBP-CBD found that in the course of the meetings for the
intended amendments of Comtechs corporate by-laws, respondent obtained knowledge about
the intended amendment to allow members of the Board of Directors who were outside the
Philippines to participate in board meetings through teleconferencing. The IBP-CBD noted that
respondent knew that the corporate by-laws have not yet been amended to allow the
teleconferencing. Hence, when respondent, as representative of Harrison, objected to the
participation of Steven and Deanna Palm through teleconferencing on the ground that the
corporate by-laws did not allow the participation, he made use of a privileged information he
obtained while he was Comtechs retained counsel.

The IBP-CBD likewise found that in representing Soledad in a case filed by Comtech, respondent
represented an interest in conflict with that of a former client. The IBP-CBD ruled that the fact
that respondent represented Soledad after the termination of his professional relationship with
Comtech was not an excuse.

The IBP-CBD recommended that respondent be suspended from the practice of law for one year,
thus:

WHEREFORE, premises considered, it is most respectfully recommended that herein respondent

be found guilty of the charges preferred against him and be suspended from the practice of law
for one (1) year.

In Resolution No. XVII-2006-583 passed on 15 December 2006, the IBP Board of Governors
adopted and approved the recommendation of the Investigating Commissioner with modification
by suspending respondent from the practice of law for two years.

Respondent filed a motion for reconsideration.

In an undated Recommendation, the IBP Board of Governors First Division found that respondents
motion for reconsideration did not raise any new issue and was just a rehash of his previous
arguments. However, the IBP Board of Governors First Division recommended that respondent be
suspended from the practice of law for only one year.

In Resolution No. XVIII-2008-703 passed on 11 December 2008, the IBP Board of Governors
adopted and approved the recommendation of the IBP Board of Governors First Division. The IBP

39
Board of Governors denied respondents motion for reconsideration but reduced his suspension
from two years to one year.
The IBP Board of Governors forwarded the present case to this Court as provided under Section
12(b), Rule 139-B of the Rules of Court.

The Ruling of this Court

We cannot sustain the findings and recommendation of the IBP.

Violation of the Confidentiality of Lawyer-Client Relationship

Canon 21 of the Code of Professional Responsibility provides:

Canon 21. A lawyer shall preserve the confidence and secrets of his client even after the
attorney-client relationship is terminated. (Emphasis supplied)

We agree with the IBP that in the course of complainants consultations, respondent obtained the
information about the need to amend the corporate by-laws to allow board members outside the
Philippines to participate in board meetings through teleconferencing. Respondent himself
admitted this in his Answer.

However, what transpired on 10 January 2004 was not a board meeting but a stockholders
meeting. Respondent attended the meeting as proxy for Harrison. The physical presence of a
stockholder is not necessary in a stockholders meeting because a member may vote by proxy
unless otherwise provided in the articles of incorporation or by-laws. Hence, there was no need
for Steven and Deanna Palm to participate through teleconferencing as they could just have sent
their proxies to the meeting.
In addition, although the information about the necessity to amend the corporate by-laws may
have been given to respondent, it could not be considered a confidential information. The
amendment, repeal or adoption of new by-laws may be effected by the board of directors or
trustees, by a majority vote thereof, and the owners of at least a majority of the outstanding
capital stock, or at least a majority of members of a non-stock corporation. It means the
stockholders are aware of the proposed amendments to the by-laws. While the power may be
delegated to the board of directors or trustees, there is nothing in the records to show that a
delegation was made in the present case. Further, whenever any amendment or adoption of new
by-laws is made, copies of the amendments or the new by-laws are filed with the Securities and
Exchange Commission (SEC) and attached to the original articles of incorporation and by-laws.
The documents are public records and could not be considered confidential.

It is settled that the mere relation of attorney and client does not raise a presumption of
confidentiality. The client must intend the communication to be confidential. Since the
proposed amendments must be approved by at least a majority of the stockholders,
and copies of the amended by-laws must be filed with the SEC, the information could
not have been intended to be confidential. Thus, the disclosure made by respondent during
the stockholders meeting could not be considered a violation of his clients secrets and
confidence within the contemplation of Canon 21 of the Code of Professional Responsibility.

Representing Interest in Conflict With the Interest of a Former Client

The IBP found respondent guilty of representing an interest in conflict with that of a former client,
in violation of Rule 15.03, Canon 15 of the Code of Professional Responsibility which provides:

Rule 15.03 - A lawyer shall not represent conflicting interest except by written consent of all
concerned given after a full disclosure of the facts.

We do not agree with the IBP.

In Quiambao v. Bamba, the Court enumerated various tests to determine conflict of interests.
One test of inconsistency of interests is whether the lawyer will be asked to use against his
former client any confidential information acquired through their connection or previous
employment. The Court has ruled that what a lawyer owes his former client is to maintain
inviolate the clients confidence or to refrain from doing anything which will injuriously affect him
in any matter in which he previously represented him.

We find no conflict of interest when respondent represented Soledad in a case filed by Comtech.
The case where respondent represents Soledad is an Estafa case filed by Comtech against its
40
former officer. There was nothing in the records that would show that respondent used
against Comtech any confidential information acquired while he was still Comtechs
retained counsel. Further, respondent made the representation after the termination of his
retainer agreement with Comtech. A lawyers immutable duty to a former client does not cover
transactions that occurred beyond the lawyers employment with the client. The intent of the law
is to impose upon the lawyer the duty to protect the clients interests only on matters that he
previously handled for the former client and not for matters that arose after the lawyer-client
relationship has terminated.

WHEREFORE, we DISMISS the complaint against Atty. Felipe Iledan, Jr. for lack of merit.

SO ORDERED.

Case No. 2
A.C. No. 8620 (January 12, 2011)
JESSIE R. DE LEON, Complainant, vs. ATTY. EDUARDO G. CASTELO,
Respondent.

This administrative case, which Jessie R. De Leon initiated on April 29, 2010, concerns
respondent attorneys alleged dishonesty and falsification committed in the pleadings he filed in
behalf of the defendants in the civil action in which De Leon intervened.

Antecedents

On January 2, 2006, the Government brought suit for the purpose of correcting the transfer
certificates of title (TCTs) covering two parcels of land located in Malabon City then registered in
the names of defendants Spouses Lim Hio and Dolores Chu due to their encroaching on a public
callejon and on a portion of the Malabon-Navotas River shoreline to the extent, respectively, of
an area of 45 square meters and of about 600 square meters. The suit, entitled Republic of the
Philippines, represented by the Regional Executive Director, Department of Environment and
Natural Resources v. Spouses Lim Hio and Dolores Chu, Gorgonia Flores, and the Registrar of
Deeds of Malabon City, was docketed as Civil Case No. 4674MN of the Regional Trial Court (RTC),
Branch 74, in Malabon City.

De Leon, having joined Civil Case No. 4674MN as a voluntary intervenor two years later (April 21,
2008), now accuses the respondent, the counsel of record of the defendants in Civil Case No.
4674MN, with the serious administrative offenses of dishonesty and falsification warranting his
disbarment or suspension as an attorney. The respondents sin was allegedly committed by his
filing for defendants Spouses Lim Hio and Dolores Chu of various pleadings (that is, answer with
counterclaim and cross-claim in relation to the main complaint; and answer to the complaint in
intervention with counterclaim and cross-claim) despite said spouses being already deceased at
the time of filing.

De Leon avers that the respondent committed dishonesty and falsification as follows:

41
xxx in causing it (to) appear that persons (spouses Lim Hio and Dolores Chu) have participated in
an act or proceeding (the making and filing of the Answers) when they did not in fact so
participate; in fact, they could not have so participated because they were already dead as of
that time, which is punishable under Article 172, in relation to Article 171, paragraph 2, of the
Revised Penal Code.

Respondent also committed the crime of Use of Falsified Documents, by submitting the said
falsified Answers in the judicial proceedings, Civil Case No. 4674MN;

Respondent also made a mockery of the aforesaid judicial proceedings by representing dead
persons therein who, he falsely made to appear, as contesting the complaints, counter-suing and
cross-suing the adverse parties.

12. That, as a consequence of the above criminal acts, complainant respectfully submits that
respondent likewise violated:
a) His Lawyers Oath:
xxx
b) The Code of Professional Responsibility:
xxx
On June 23, 2010, the Court directed the respondent to comment on De Leons administrative
complaint.

In due course, or on August 2, 2010, the respondent rendered the following explanations in his
comment, to wit:

1. The persons who had engaged him as attorney to represent the Lim family in Civil Case No.
4674MN were William and Leonardo Lim, the children of Spouses Lim Hio and Dolores Chu;

2. Upon his (Atty. Castelo) initial queries relevant to the material allegations of the Governments
complaint in Civil Case No. 4674MN, William Lim, the representative of the Lim Family, informed
him:
a. That the Lim family had acquired the properties from Georgina Flores;
b. That William and Leonardo Lim were already actively managing the family business, and now
co-owned the properties by virtue of the deed of absolute sale their parents, Spouses Lim Hio
and Dolores Chu, had executed in their favor; and
c. That because of the execution of the deed of absolute sale, William and Leonardo Lim had
since honestly assumed that their parents had already caused the transfer of the TCTs to their
names.
3. Considering that William and Leonardo Lim themselves were the ones who had engaged his
services, he (Atty. Castelo) consequently truthfully stated in the motion seeking an extension to
file responsive pleading dated February 3, 2006 the fact that it was the family of the defendants
that had engaged him, and that he had then advised the children of the defendants to seek the
assistance as well of a licensed geodetic surveyor and engineer;

4. He (Atty. Castelo) prepared the initial pleadings based on his honest belief that Spouses Lim
Hio and Dolores Chu were then still living. Had he known that they were already deceased, he
would have most welcomed the information and would have moved to substitute Leonardo and
William Lim as defendants for that reason;
5. He (Atty. Castelo) had no intention to commit either a falsehood or a falsification, for he in fact
submitted the death certificates of Spouses Lim Hio and Dolores Chu in order to apprise the trial
court of that fact; and
6. The Office of the Prosecutor for Malabon City even dismissed the criminal complaint for
falsification brought against him (Atty. Castelo) through the resolution dated February 11, 2010.
The same office denied the complainants motion for reconsideration on May 17, 2010.

On September 3, 2010, the complainant submitted a reply, whereby he asserted that the
respondents claim in his comment that he had represented the Lim family was a deception,
because the subject of the complaint against the respondent was his filing of the answers in
behalf of Spouses Lim Hio and Dolores Chu despite their being already deceased at the time of
the filing. The complainant regarded as baseless the justifications of the Office of the City
Prosecutor for Malabon City in dismissing the criminal complaint against the respondent and in
denying his motion for reconsideration.

The Court usually first refers administrative complaints against members of the Philippine Bar to
the Integrated Bar of the Philippines (IBP) for investigation and appropriate recommendations.
42
For the present case, however, we forego the prior referral of the complaint to the IBP, in view of
the facts being uncomplicated and based on the pleadings in Civil Case No. 4674MN. Thus, we
decide the complaint on its merits.

Ruling

We find that the respondent, as attorney, did not commit any falsehood or falsification in his
pleadings in Civil Case No. 4674MN. Accordingly, we dismiss the patently frivolous complaint.

I
Attorneys Obligation to tell the truth

All attorneys in the Philippines, including the respondent, have sworn to the vows embodied in
following Lawyers Oath, viz:

I, ___________________, do solemnly swear that I will maintain allegiance to the Republic of the
Philippines; I will support its Constitution and obey the laws as well as the legal orders of the duly
constituted authorities therein; I will do no falsehood, nor consent to the doing of any in court; I
will not wittingly or willingly promote or sue any groundless, false or unlawful suit, nor give aid
nor consent to the same. I will delay no man for money or malice, and will conduct myself as a
lawyer according to the best of my knowledge and discretion with all good fidelity as well to the
courts as to my clients; and I impose upon myself this voluntary obligation without any mental
reservation or purpose of evasion. So help me God.

The Code of Professional Responsibility echoes the Lawyers Oath, providing:

CANON 1 - A LAWYER SHALL UPHOLD THE CONSTITUTION, OBEY THE LAWS OF THE LAND AND
PROMOTE RESPECT FOR LAW AND LEGAL PROCESSES.

Rule 1.01 - A lawyer shall not engage in unlawful, dishonest, immoral or deceitful conduct.

CANON 10 - A LAWYER OWES CANDOR, FAIRNESS AND GOOD FAITH TO THE COURT.

Rule 10.01 - A lawyer shall not do any falsehood, nor consent to the doing of any in Court; nor
shall he mislead, or allow the Court to be misled by any artifice.

The foregoing ordain ethical norms that bind all attorneys, as officers of the Court, to act with the
highest standards of honesty, integrity, and trustworthiness. All attorneys are thereby enjoined
to obey the laws of the land, to refrain from doing any falsehood in or out of court or from
consenting to the doing of any in court, and to conduct themselves according to the best of their
knowledge and discretion with all good fidelity as well to the courts as to their clients. Being also
servants of the Law, attorneys are expected to observe and maintain the rule of law and to make
themselves exemplars worthy of emulation by others. The least they can do in that regard is to
refrain from engaging in any form or manner of unlawful conduct (which broadly includes any act
or omission contrary to law, but does not necessarily imply the element of criminality even if it is
broad enough to include such element).

To all attorneys, truthfulness and honesty have the highest value, for, as the Court has said in
Young v. Batuegas:

A lawyer must be a disciple of truth. He swore upon his admission to the Bar that he will do no
falsehood nor consent to the doing of any in court and he shall conduct himself as a lawyer
according to the best of his knowledge and discretion with all good fidelity as well to the courts
as to his clients. He should bear in mind that as an officer of the court his high vocation is to
correctly inform the court upon the law and the facts of the case and to aid it in doing justice and
arriving at correct conclusion. The courts, on the other hand, are entitled to expect only complete
honesty from lawyers appearing and pleading before them. While a lawyer has the solemn duty
to defend his clients rights and is expected to display the utmost zeal in defense of his clients
cause, his conduct must never be at the expense of truth.

Their being officers of the Court extends to attorneys not only the presumption of regularity in
the discharge of their duties, but also the immunity from liability to others for as long as the
performance of their obligations to their clients does not depart from their character as servants
of the Law and as officers of the Court. In particular, the statements they make in behalf of their
clients that are relevant, pertinent, or material to the subject of inquiry are absolutely privileged
regardless of their defamatory tenor. Such cloak of privilege is necessary and essential in
43
ensuring the unhindered service to their clients causes and in protecting the clients confidences.
With the cloak of privilege, they can freely and courageously speak for their clients, verbally or in
writing, in the course of judicial and quasi-judicial proceedings, without running the risk of
incurring criminal prosecution or actions for damages.

Nonetheless, even if they enjoy a number of privileges by reason of their office and in recognition
of the vital role they play in the administration of justice, attorneys hold the privilege and right to
practice law before judicial, quasi-judicial, or administrative tribunals or offices only during good
behavior.

II
Respondent did not violate the Lawyers Oath and the Code of Professional
Responsibility

On April 17, 2006, the respondent filed an answer with counterclaim and cross-claim in behalf of
Spouses Lim Hio and Dolores Chu, the persons whom the Government as plaintiff named as
defendants in Civil Case No. 4674MN. He alleged therein that:

2. The allegations in paragraph 2 of the complaint are ADMITTED. Moreover, it is hereby made
known that defendants spouses Lim Hio and Dolores Chu had already sold the two (2)
parcels of land, together with the building and improvements thereon, covered by
Transfer Certificate of Title No. (148805) 139876 issued by the Register of Deeds of
Rizal, to Leonardo C. Lim and William C. Lim, of Rms. 501 502 Dolores Bldg., Plaza del
Conde, Binondo, Manila. Hence, Leonardo Lim and William Lim are their successors-in-
interest and are the present lawful owners thereof.

In order to properly and fully protect their rights, ownership and interests, Leonardo
C. Lim and William C. Lim shall hereby represent the defendants-spouses Lim Hio and
Dolores Chu as substitute/representative parties in this action. In this manner, a
complete and expeditious resolution of the issues raised in this case can be reached
without undue delay. A photo copy of the Deed of Absolute Sale over the subject property,
executed by herein defendants-spouses Lim Hio and Dolores Chu in favor of said Leonardo C. Lim
and William C. Lim, is hereto attached as Annex 1 hereof.
xxx
21. There is improper joinder of parties in the complaint. Consequently, answering defendants
are thus unduly compelled to litigate in a suit regarding matters and facts as to which they have
no knowledge of nor any involvement or participation in.

22. Plaintiff is barred by the principle of estoppel in bringing this suit, as it was the one who, by
its governmental authority, issued the titles to the subject property.

This action is barred by the principles of prescription and laches for plaintiffs unreasonable delay
in brining this suit, particularly against defendant Flores, from whom herein answering
defendants acquired the subject property in good faith and for value. If truly plaintiff has a clear
and valid cause of action on the subject property, it should not have waited thirty (30) years to
bring suit.

Two years later, or on April 21, 2008, De Leon filed his complaint in intervention in Civil Case No.
4674MN. He expressly named therein as defendants vis--vis his intervention not only the
Spouses Lim Hio and Dolores Chu, the original defendants, but also their sons Leonardo Lim,
married to Sally Khoo, and William Lim, married to Sally Lee, the same persons whom the
respondent had already alleged in the answer, supra, to be the transferees and current owners of
the parcels of land.

The following portions of De Leons complaint in intervention in Civil Case No. 4674MN are
relevant, viz:

2. Defendant spouses Lim Hio and Dolores Chu, are Filipino citizens with addresses at
504 Plaza del Conde, Manila and at 46 C. Arellano St., San Agustin, Malabon City,
where they may be served with summons and other court processes;

3. Defendant spouses Leonardo Lim and Sally Khoo and defendant spouses William
Lim and Sally Lee are all of legal age and with postal address at Rms. 501-502 Dolores
44
Bldg., Plaza del Conde, Binondo, Manila, alleged purchasers of the property in
question from defendant spouses Lim Hio and Dolores Chu;

4. Defendants Registrar of Deeds of Malabon City holds office in Malabon City, where he may be
served with summons and other court processes. He is charged with the duty, among others, of
registering decrees of Land Registration in Malabon City under the Land Registration Act;
xxx
7. That intervenor Jessie de Leon, is the owner of a parcel of land located in Malabon City
described in TCT no. M-15183 of the Register of Deeds of Malabon City, photocopy of which is
attached to this Complaint as Annex G, and copy of the location plan of the aforementioned
property is attached to this complaint as Annex H and is made an integral part hereof;

8. That there are now more or less at least 40 squatters on intervenors property, most of them
employees of defendant spouses Lim Hio and Dolores Chu and defendant spouses Leonardo Lim
and Sally Khoo and defendant spouses William Lim and Sally Lee who had gained access to
intervenors property and built their houses without benefit of any building permits from the
government who had made their access to intervenors property thru a two panel metal gate
more or less 10 meters wide and with an armed guard by the gate and with permission from
defendant spouses Lim Hio and Dolores Chu and/or and defendant spouses Leonardo Lim and
Sally Khoo and defendant spouses William Lim and Sally Lee illegally entered intervenors
property thru a wooden ladder to go over a 12 foot wall now separating intervenors property
from the former esquinita which is now part of defendant spouses Lim Hio and Dolores Chus and
defendant spouses Leonardo Lim and Sally Khoos and defendant spouses William Lim and Sally
Lees property and this illegally allowed his employees as well as their relatives and friends
thereof to illegally enter intervenors property through the ladders defendant spouses Lim Hio and
Dolores Chu installed in their wall and also allowed said employees and relatives as well as
friends to build houses and shacks without the benefit of any building permit as well as permit to
occupy said illegal buildings;

9. That the enlargement of the properties of spouses Lim Hio and Dolores Chu had resulted in the
closure of street lot no. 3 as described in TCT no. 143828, spouses Lim Hio and Dolores Chu
having titled the street lot no. 3 and placed a wall at its opening on C. Arellano street, thus
closing any exit or egress or entrance to intervenors property as could be seen from Annex H
hereof and thus preventing intervenor from entering into his property resulted in preventing
intervenor from fully enjoying all the beneficial benefits from his property;

10. That defendant spouses Lim Hio and Dolores Chu and later on defendant spouses
Leonardo Lim and Sally Khoo and defendant spouses William Lim and Sally Lee are
the only people who could give permission to allow third parties to enter intervenors
property and their control over intervenors property is enforced through his armed
guard thus exercising illegal beneficial rights over intervenors property at intervenors
loss and expense, thus depriving intervenor of legitimate income from rents as well
as legitimate access to intervenors property and the worst is preventing the Filipino
people from enjoying the Malabon Navotas River and enjoying the right of access to
the natural fruits and products of the Malabon Navotas River and instead it is
defendant spouses Lim Hio and Dolores Chu and defendant spouses Leonardo Lim and
Sally Khoo and defendant spouses William Lim and Sally Lee using the public property
exclusively to enrich their pockets;
xxx
13. That defendant spouses Lim Hio and Dolores Chu and defendant spouses Leonardo
Lim and Sally Khoo and defendant spouses William Lim and Sally Lee were
confederating, working and helping one another in their actions to inhibit intervenor
Jessie de Leon to gain access and beneficial benefit from his property;

On July 10, 2008, the respondent, representing all the defendants named in De Leons complaint
in intervention, responded in an answer to the complaint in intervention with counterclaim and
cross-claim, stating that spouses Lim Hio and Dolores Chu xxx are now both deceased, to wit:
xxx
2. The allegations in paragraphs 2 and 3 of the Complaint are ADMITTED, with the qualification
that defendants-spouses Leonardo Lim and Sally Khoo Lim, William Lim and Sally Lee
Lim are the registered and lawful owners of the subject property covered by Transfer
Certificate of Title No. M-35929, issued by the Register of Deeds for Malabon City,
having long ago acquired the same from the defendants-spouses Lim Hio and Dolores
Chu, who are now both deceased. Copy of the TCT No. M-35929 is attached hereto as
Annexes 1 and 1-A. The same title has already been previously submitted to this Honorable Court
on December 13, 2006.
45
xxx

The respondent subsequently submitted to the RTC a so-called clarification and submission, in
which he again adverted to the deaths of Spouses Lim Hio and Dolores Chu, as follows:

1. On March 19, 2009, herein movants-defendants Lim filed before this Honorable Court a Motion
for Substitution of Defendants in the Principal Complaint of the plaintiff Republic of the
Philippines, represented by the DENR;

2. The Motion for Substitution is grounded on the fact that the two (2) parcels of land,
with the improvements thereon, which are the subject matter of the instant case, had
long been sold and transferred by the principal defendants-spouses Lim Hio and
Dolores Chu to herein complaint-in-intervention defendants Leonardo C. Lim and
William C. Lim, by way of a Deed of Absolute Sale, a copy of which is attached to said
Motion as Annex 1 thereof.

3. Quite plainly, the original principal defendants Lim Hio and Dolores Chu, having
sold and conveyed the subject property, have totally lost any title, claim or legal
interest on the property. It is on this factual ground that this Motion for Substitution
is based and certainly not on the wrong position of Intervenor de Leon that the same
is based on the death of defendants Lim Hio and Dolores Chu.

4. Under the foregoing circumstances and facts, the demise of defendants Lim Hio and
Dolores Chu no longer has any significant relevance to the instant Motion. To, however,
show the fact of their death, photocopy of their respective death certificates are attached hereto
as Annexes 1 and 2 hereof.

5. The Motion for substitution of Defendants in the Principal Complaint dated March 18, 2009
shows in detail why there is the clear, legal and imperative need to now substitute herein
movants-defendants Lim for defendants Lim Hio and Dolores Chu in the said principal complaint.

6. Simply put, movants-defendants Lim have become the indispensable defendants in the
principal complaint of plaintiff DENR, being now the registered and lawful owners of the subject
property and the real parties-in-interest in this case. Without them, no final determination can be
had in the Principal complaint.

7. Significantly, the property of intervenor Jessie de Leon, which is the subject of his complaint-in-
intervention, is identically, if not similarly, situated as that of herein movants-defendants Lim,
and likewise, may as well be a proper subject of the Principal Complaint of plaintiff DENR.

8. Even the plaintiff DENR, itself, concedes the fact that herein movants-defendants Lim should
be substituted as defendants in the principal complaint as contained in their Manifestation dated
June 3, 2009, which has been filed in this case.

WHEREFORE, herein movants-defendants Lim most respectfully submit their Motion for
substitution of Defendants in the Principal Complaint and pray that the same be granted.
xxx

Did the respondent violate the letter and spirit of the Lawyers Oath and the Code of Professional
Responsibility in making the averments in the aforequoted pleadings of the defendants?

A plain reading indicates that the respondent did not misrepresent that Spouses Lim Hio and
Dolores Chu were still living. On the contrary, the respondent directly stated in the answer to the
complaint in intervention with counterclaim and cross-claim, supra, and in the clarification and
submission, supra, that the Spouses Lim Hio and Dolores Chu were already deceased.

Even granting, for the sake of argument, that any of the respondents pleadings might have
created any impression that the Spouses Lim Hio and Dolores Chu were still living, we still cannot
hold the respondent guilty of any dishonesty or falsification. For one, the respondent was acting
in the interest of the actual owners of the properties when he filed the answer with counterclaim
and cross-claim on April 17, 2006. As such, his pleadings were privileged and would not occasion
any action against him as an attorney. Secondly, having made clear at the start that the Spouses
Lim Hio and Dolores Chu were no longer the actual owners of the affected properties due to the
transfer of ownership even prior to the institution of the action, and that the actual owners ( i.e.,
Leonardo and William Lim) needed to be substituted in lieu of said spouses, whether the Spouses
Lim Hio and Dolores Chu were still living or already deceased as of the filing of the pleadings
46
became immaterial. And, lastly, De Leon could not disclaim knowledge that the Spouses Lim Hio
and Dolores Chu were no longer living. His joining in the action as a voluntary intervenor charged
him with notice of all the other persons interested in the litigation. He also had an actual
awareness of such other persons, as his own complaint in intervention, supra, bear out in its
specific allegations against Leonardo Lim and William Lim, and their respective spouses. Thus, he
could not validly insist that the respondent committed any dishonesty or falsification in relation
to him or to any other party.

III
Good faith must always motivate any complaint against a Member of the Bar

According to Justice Cardozo, xxx the fair fame of a lawyer, however innocent of wrong, is at the
mercy of the tongue of ignorance or malice. Reputation in such a calling is a plant of tender
growth, and its bloom, once lost, is not easily restored.

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

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

WHEREFORE, we dismiss the complaint for disbarment or suspension filed against Atty. Eduardo
G. Castelo for utter lack of merit.

SO ORDERED.

47