A.C. No.

5359 March 10, 2014

ERMELINDA LAD VOA. DE DOMINGUEZ, represented by her Attorney-in-

Fact, VICENTE A. PICHON,Complainant,
vs.
ATTY. ARNULFO M. AGLERON, SR., Respondent.

RESOLUTION

MENDOZA, J.:

Complainant Ermelinda Lad Vda. De Dominguez (complainant) was the widow

of the late Felipe Domiguez who died in a vehicular accident in Caraga, Davao
Oriental, on October 18, 1995, involving a dump truck owned by the
Municipality of Caraga. Aggrieved, complainant decided to file charges against
the Municipality of Caraga and engaged the services of respondent Atty.
Arnulfo M. Agleron, Sr. (Atty. Agleron). On three (3) occasions, Atty. Agleron
requested and received from complainant the following amounts for the
payment of filing fees and sheriffs fees, to wit: (1) June 3, 1996 -₱3,000.00; (2)
June 7, 1996 -Pl,800.00; and September 2, 1996 - ₱5,250.00 or a total of
₱10,050.00. After the lapse of four (4) years, however, no complaint was filed by
Atty. Agleron against the Municipality of Caraga.1

Atty. Agleron admitted that complainant engaged his professional service and
received the amount of ₱10,050.00. He, however, explained that their
agreement was that complainant would pay the filing fees and other incidental
expenses and as soon as the complaint was prepared and ready for filing,
complainant would pay 30% of the agreed attorney’s fees of ₱100,000.00. On
June 7, 1996, after the signing of the complaint, he advised complainant to pay
in full the amount of the filing fee and sheriff’s fees and the 30% of the
attorney’s fee, but complainant failed to do so. Atty. Agleron averred that since
the complaint could not be filed in court, the amount of ₱10,050.00 was
deposited in a bank while awaiting the payment of the balance of the filing fee
and attorney’s fee.2

In reply,3 complainant denied that she did not give the full payment of the filing
fee and asserted that the filing fee at that time amounted only to ₱7,836.60.

In the Report and Recommendation,4 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,5 the Integrated Bar of the Philippines (IBP)
Board of Governors adopted and approved the report and recommendation of
the Investigating Commissioner with modification that Atty. Agleron be
suspended from the practice of law for a period of only one (1) month.

The Court agrees with the recommendation of the IBP Board of Governors
except as to the penalty imposed.

Atty. Agleron violated Rule 18.03 of the Code of Professional Responsibility,

which provides that:

Rule 18.03-A lawyer shall not neglect a legal matter entrusted to him, and his
negligence in connection therewith shall render him liable.

Once a lawyer takes up the cause of his client, he is duty bound to serve his
client with competence, and to attend to his client’s cause with diligence, care
and devotion regardless of whether he accepts it for a fee or for free.6 He owes
fidelity to such cause and must always be mindful of the trust and confidence
reposed on him.7

In the present case, Atty. Agleron admitted his failure to file the complaint
against the Municipality of Caraga, Davao Oriental, despite the fact that it was
already prepared and signed. He attributed his non-filing of the appropriate
charges on the failure of complainant to remit the full payment of the filing fee
and pay the 30% of the attorney's fee. Such justification, however, is not a valid
excuse that would exonerate him from liability. As stated, every case that is
entrusted to a lawyer deserves his full attention whether he accepts this for a
fee or free. Even assuming that complainant had not remitted the full payment
of the filing fee, he should have found a way to speak to his client and inform
him about the insufficiency of the filing fee so he could file the complaint. Atty.
Agleron obviously lacked professionalism in dealing with complainant and
showed incompetence when he failed to file the appropriate charges.1âwphi1

In a number of cases,8 the Court held that a lawyer should never neglect a legal
matter entrusted to him, otherwise his negligence renders him liable for
disciplinary action such as suspension ranging from three months to two
years. In this case, the Court finds the suspension of Atty. Agleron from the
practice of law for a period of three (3) months sufficient.

WHEREFORE, the resolution of the IBP Board of Governors is hereby

AFFIRMED with MODIFICATION. Accordingly, respondent ATTY. ARNULFO M.
AGLERON, SR. is hereby SUSPENDED from the practice of law for a period of
THREE (3) MONTHS, with a stern warning that a repetition of the same or
similar wrongdoing will be dealt with more severely.

Let a copy of this resolution be furnished the Bar Confidant to be included in

the records of the respondent; the Integrated Bar of the Philippines for
distribution to all its chapters; and the Office of the Court Administrator for
dissemination to all courts throughout the country.

SO ORDERED.

A.C. No. 9091 December 11, 2013

CONCHITA A. BALTAZAR, ROLANDO SAN PEDRO, ALICIA EULALIO-

RAMOS, SOLEDAD A. FAJARDO AND ENCARNACION A.
FERNANDEZ, Complainants,
vs.
ATTY. JUAN B. BAÑEZ, Respondent.

RESOLUTION

SERENO, CJ.:

Complainants are the owners of three parcels of land located in Dinalupihan,

Bataan.1 n 4 September 2002, they entered into an agreement, they stood to be
paid ₱35,000.000 for all the lots that would be sold in the subdivision.2For that
purpose, they executed a Pecial Power of Attorney authorizing Fevidal to enter
into all agreements concerning the parcels of land and to sign those
agreements on their behalf.3

Fevidal did not update complainants about the status of the subdivision project
and failed to accout for the titles to the subdivided land.4 Complainants also
found that he had sold a number of parcels to third parties, but that he did not
turn the proceeds over to them. Neither were complainants invited to the
ceremonial opening of the subdivision project.5

Thus, on 23 August 2005, they revoked the Special Power of Attorney they had
previously executed in his favor.6

Complainants subsequently agreed to settle with Fevidal for the amount of

₱10,000,000, but the latter again failed to pay them.7

Complainants engaged the professional services of respondent for the purpose

of assisting them in the preparation of a settlement agreement.8

Instead of drafting a written settlement, respondent encouraged them to

institute actions against Fevidal in order to recover their properties.
Complainants then signed a contract of legal services,9 in which it was agreed
that they would not pay acceptance and appearance fees to respondent, but
that the docket fees would instead be shared by the parties. Under the
contract, complainants would pay respondent 50% of whatever would be
recovered of the properties. In preparation for the filing of an action against
Fevidal, respondent prepared and notarized an Affidavit of Adverse Claim,
seeking to annotate the claim of complainants to at least 195 titles in the
possession of Fevidal.10

A certain Luzviminda Andrade (Andrade) was tasked to submit the Affidavit of

Adverse Claim to the Register of Deeds of Bataan.11

The costs for the annotation of the adverse claim were paid by respondent.
Unknown to him, the adverse claim was held in abeyance, because Fevidal got
wind of it and convinced complainants to agree to another settlement.12

Meanwhile, on behalf of complainants, and after sending Fevidal a demand

letter dated 10 July 2006, respondent filed a complaint for annulment,
cancellation and revalidation of titles, and damages against Fevidal before the
Regional Trial Court (RTC) of Bataan on 13 October 2006.13

Complainants found it hard to wait for the outcome of the action. Thus, they
terminated the services of respondent on 8 June 2007, withdrew their
complaint against Fevidal on 9 June 2007, and finalized their amicable
settlement with him on 5 July 2007.14

Respondent filed a Manifestation and Opposition15 dated 20 July 2007 before

the RTC, alleging that the termination of his services and withdrawal of the
complaint had been done with the intent of defrauding counsel. On the same
date, he filed a Motion for Recording of Attorney’s Charging Lien in the Records
of the Above-Captioned Cases.16

When the RTC granted the withdrawal of the complaint,17 he filed a

Manifestation and Motion for Reconsideration.18

After an exchange of pleadings between respondent and Fevidal, with the latter
denying the former’s allegation of collusion,19 complainants sought the
suspension/disbarment of respondent through a Complaint20 filed before the
Integrated Bar of the Philippines (IBP) on 14 November 2007. Complainants
alleged that they were uneducated and underprivileged, and could not taste the
fruits of their properties because the disposition thereof was "now clothed with
legal problems" brought about by respondent.21

In their complaint, they alleged that respondent had violated Canons

1.01,22 1.03,23 1.04,24 12.02,25 15.05,26 18.04,27and 20.0428 of the Code of
Professional Responsibility. On 14 August 2008, the IBP Commission on Bar
Discipline adopted and approved the Report and Recommendation29 of the
investigating commissioner. It suspended respondent from the practice of law
for a period of one year for entering into a champertous agreement.30
On 26 June 2011, it denied his motion for reconsideration. On 26 November
2012, this Court noted the Indorsement of the IBP Commission on Bar
Discipline, as well as respondent’s second motion for reconsideration. We find
that respondent did not violate any of the canons cited by complainants. In
fact, we have reason to believe that complainants only filed the instant
complaint against him at the prodding of Fevidal.

Respondent cannot be faulted for advising complainants to file an action

against Fevidal to recover their properties, instead of agreeing to a settlement of
₱10,000,000 – a measly amount compared to that in the original agreement,
under which Fevidal undertook to pay complainants the amount of
₱35,000,000. Lawyers have a sworn duty and responsibility to protect the
interest of any prospective client and pursue the ends of justice.31

Any lawyer worth his salt would advise complainants against the abuses of
Fevidal under the circumstances, and we cannot countenance an
administrative complaint against a lawyer only because he performed a duty
imposed on him by his oath. The claim of complainants that they were not
informed of the status of the case is more appropriately laid at their door rather
than at that of respondent. He was never informed that they had held in
abeyance the filing of the adverse claim. Neither was he informed of the
brewing amicable settlement between complainants and Fevidal. We also find it
very hard to believe that while complainants received various amounts as loans
from respondent from August 2006 to June 2007,32 they could not spare even
a few minutes to ask about the status of the case. We shall discuss this more
below. As regards the claim that respondent refused to "patch up" with Fevidal
despite the pleas of complainants, we note the latter’s Sinumpaang Salaysay
dated 24 September 2007, in which they admitted that they could not convince
Fevidal to meet with respondent to agree to a settlement.33

Finally, complainants apparently refer to the motion of respondent for the

recording of his attorney’s charging lien as the "legal problem" preventing them
from enjoying the fruits of their property. Section 26, Rule 138 of the Rules of
Court allows an attorney to intervene in a case to protect his rights concerning
the payment of his compensation. According to the discretion of the court, the
attorney shall have a lien upon all judgments for the payment of money
rendered in a case in which his services have been retained by the client. We
recently upheld the right of counsel to intervene in proceedings for the
recording of their charging lien. In Malvar v. KFPI,34 we granted counsel’s
motion to intervene in the case after petitioner therein terminated his services
without justifiable cause. Furthermore, after finding that petitioner and
respondent had colluded in order to deprive counsel of his fees, we ordered the
parties to jointly and severally pay counsel the stipulated contingent fees.
Thus, the determination of whether respondent is entitled to the charging lien
is based on the discretion of the court before which the lien is presented. The
compensation of lawyers for professional services rendered is subject to the
supervision of the court, not only to guarantee that the fees they charge remain
reasonable and commensurate with the services they have actually rendered,
but to maintain the dignity and integrity of the legal profession as well.35

In any case, an attorney is entitled to be paid reasonable compensation for his

services.36

That he had pursued its payment in the appropriate venue does not make him
liable for disciplinary action.1âwphi1Notwithstanding 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 client’s rights in exchange for some bargain to have
a part of the thing in dispute.37

Such contracts are contrary to public policy38 and are thus void or inexistent.39

They are also contrary to Canon 16.04 of the Code of Professional

Responsibility, which states that lawyers shall not lend money to a client,
except when in the interest of justice, they have to advance necessary expenses
in a legal matter they are handling for the client. A reading of the contract for
legal services40 shows that respondent agreed to pay for at least half of the
expense for the docket fees. He also paid for the whole amount needed for the
recording of complainants’ adverse claim. While lawyers may advance the
necessary expenses in a legal matter they are handling in order to safeguard
their client’s rights, it is imperative that the advances be subject to
reimbrusement.41 The purpose is to avoid a situation in which a lawyer
acquires a personal stake in the clients cause. Regrettably, nowhere in the
contract for legal services is it stated that the expenses of litigation advanced
by respondents shall be subject to reimbursement by complainants.

In addition, respondent gave various amounts as cash advances (bali), gasoline

and transportation allowance to them for the duration of their attorney-client
relationship. In fact, he admits that the cash advances were in the nature of
personal loans that he extended to complainants.42

Clearly, respondent lost sight of his responsibility as a lawyer in balancing the

clients interests with the ethical standards of his profession. Considering the
surrounding circumstances in this case, an admonition shall suffice to remind
him that however dire the needs of the clients, a lawyer must always avoid any
appearance of impropriety to preserve the integrity of the profession.

WHEREFORE, Attorney Juan B. Bañez, Jr. is hereby ADMONISHED for

advancing the litigation expenses in a legal matter her handled for a client
without providing for terms of reimbursement and lending money to his client,
in violation of Canon 16.04 of the Code of Professional Responsibility. He us
sternly warned that a repetition of the same or similar act would be dealt with
more severly.

Let a copy of this Resolution be attached to the personal record of Atty. Bañez,
Jr.

SO ORDERED.

G.R. No. 191641

EDMUNDO NAVAREZ, Petitioner,

vs.
ATTY. MANUEL ABROGAR III, Respondent.

DECISION

BRION, J.:

This is a petition for certiorari under Rule 651 of the Rules of Court, filed from
the October 16, 2009 Decision and the March 12, 2010 Resolution of the Court
of Appeals (CA) in CA-G.R. SP No. 108675.2 The CA dismissed the petition for
certiorari that the present petitioner filed against the January 21, 2009 Order
of the Regional Trial Court (RTC).

ANTECEDENTS

On July 30, 2007, petitioner Edmundo Navarez engaged the services of Abrogar
Valerio Maderazo and Associates Law Offices (the Firm) through the
respondent, Atty. Manuel Abrogar III. The Firm was to represent Navarez in Sp.
Proc. No. Q-05-59112 entitled "Apolonia Quesada, Jr. v. Edmundo Navarez" as
collaborating counsel of Atty. Perfecto Laguio. The case involved the settlement
of the estate of Avelina Quesada-Navarez that was then pending before the
Regional Trial Court (RTC), Branch 83, Quezon City. The pertinent portions of
the Retainer Agreement read:

Our services as collaborating counsel will cover investigation, research and

representation with local banks, concerns regarding deposits (current and
savings) and investment instruments evidenced by certificate of deposits. Our
office may also initiate appropriate civil and/or criminal actions as well as
administrative remedies needed to adjudicate the Estate of Avelina Quesada-
Navarez expeditiously, peacefully and lawfully.

Effective Date: June 2007

Acceptance Fee: P100,000.00 in an installment basis

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

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

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

facsimile, word processing, machine reproduction, and transportation
expenses, as well as per diems and accommodations expenses incurred in
undertaking work for you outside Metro Manila area and other special out-of-
pocket expenses as you may authorized [sic] us to incur (which shall always be
cleared with you in advance) shall be for your account. Xxxx

On September 2, 2008, Navarez filed a Manifestation with the RTC that he was
terminating the services of Atty. Abrogar. On the same day, Navarez also
caused the delivery to Atty. Abrogar of a check in the amount of P220,107.51 –
allegedly equivalent to one half of 7.5% of petitioner’s P11,200,000.00 share in
the estate of his deceased wife less Atty. Abrogar’s cash advances.

On September 9, 2008, Atty. Abrogar manifested that with respect to the

petitioner’s one-half (½) share in the conjugal partnership, the RTC had already
resolved the matter favorably because it had issued a release order for the
petitioner to withdraw the amount. Atty. Abrogar further declared that the Firm
was withdrawing as counsel effective upon the appointment of an
Administrator of the estate from the remaining proceedings for the settlement
of the estate of Avelina Quesada-Navarez.

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

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

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

On January 21, 2009, the RTC issued an order granting the motion and
directed the petitioner to pay Atty. Abrogar’s attorney’s fees. The Order reads:

WHEREFORE, premises considered, it is hereby ordered:

 1. That the attorney’s lien of Manuel Abrogar III conformably with the
Retainer Agreement dated July 30, 2007, be entered into the records of
this case in consonance with Section 37, Rule 138 of the Rules of Court;

2. That oppositor Edmundo Navarez pay the amount of 7.5% of

P11,196,675.05 to Manuel Abrogar III;

3. That the oppositor pay the administrative costs/expenses of

P103,000.00 to the movant; and

4. That the prayers for P100,000.00 as exemplary damages, P200,000.00

as moral damages and for writ of preliminary attachment be denied.

SO ORDERED.

On February 18, 2009, the petitioner filed a Motion for Reconsideration.

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

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

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

The petitioner moved for reconsideration which the CA denied in a Resolution

dated March 12, 2010.

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

On May 5, 2010, the petitioner filed the present petition entitled "Petition for
Review." However, the contents of the petition show that it is a petition for
certiorari under Rule 65 of the Rules of Court.3

THE PETITION

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

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

OUR RULING

We observe that the petitioner used the wrong remedy to challenge the CA’s
decision and resolution. The petitioner filed a petition for certiorari under Rule
65, not a petition for review on certiorari under Rule 45. A special civil action
for certiorari is a remedy of last resort, available only to raise jurisdictional
issues when there is no appeal or any other plain, speedy, and adequate
remedy under the law.

Nonetheless, in the spirit of liberality that pervades the Rules of Court4 and in
the interest of substantial justice,5 this Court has, on appropriate occasions,
treated a petition for certiorari as a petition for review on certiorari, particularly
when: (1) the petition for certiorari was filed within the reglementary period to
file a petition for review on certiorari;6(2) the petition avers errors of
judgment;7 and (3) when there is sufficient reason to justify the relaxation of
the rules.8 Considering that the present petition was filed within the extension
period granted by this Court and avers errors of law and judgment, this Court
deems it proper to treat the present petition for certiorari as a petition for
review on certiorari in order to serve the higher ends of justice.

With the procedural issue out of the way, the remaining issue is whether or not
the CA erred when it held that the RTC acted within its jurisdiction and did not
commit grave abuse of discretion when it ordered the payment of attorney’s
fees.

We find merit in the petition.

An attorney has a right to be paid a fair and reasonable compensation for the
services he has rendered to a client. As a security for his fees, Rule 138,
Section 37 of the Rules of Court grants an attorney an equitable right to a
charging lien over money judgments he has secured in litigation for his client.
For the lien to be enforceable, the attorney must have caused: (1) a statement
of his claim to be entered in the record of the case while the court has
jurisdiction over the case and before the full satisfaction of the judgment;9 and
(2) a written notice of his claim to be delivered to his client and to the adverse
party.

However, the filing of the statement of the claim does not, by itself, legally
determine the amount of the claim when the client disputes the amount or
claims that the amount has been paid.10 In these cases, both the attorney and
the client have a right to be heard and to present evidence in support of their
claims.11 The proper procedure for the court is to ascertain the proper amount
of the lien in a full dress trial before it orders the registration of the charging
lien.12 The necessity of a hearing is obvious and beyond dispute.13

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

The registration of the lien should also be distinguished from the enforcement
of the lien. Registration merely determines the birth of the lien.14 The
enforcement of the lien, on the other hand, can only take place once a final
money judgment has been secured in favor of the client. The enforcement of
the lien is a claim for attorney’s fees that may be prosecuted in the very action
where the attorney rendered his services or in a separate action.

However, a motion for the enforcement of the lien is in the nature of an action
commenced by a lawyer against his clients for attorney’s fees.15As in every
action for a sum of money, the attorney-movant must first pay the prescribed
docket fees before the trial court can acquire jurisdiction to order the payment
of attorney’s fees.

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

Under this situation, the RTC had not yet acquired jurisdiction to enforce the
charging lien because the docket fees had not been paid. The payment of
docket fees is mandatory in all actions, whether separate or an offshoot of a
pending proceeding. In Lacson v. Reyes,16 this Court granted certiorari and
annulled the decision of the trial court granting a "motion for attorney’s fees"
because the attorney did not pay the docket fees. Docket fees must be paid
before a court can lawfully act on a case and grant relief. Therefore, the RTC
acted without or in excess of its jurisdiction when it ordered the payment of the
attorney’s fees.
Lastly, the enforcement of a charging lien can only take place after a final
money judgment has been rendered in favor of the client.17 The lien only
attaches to the money judgment due to the client and is contingent on the final
determination of the main case. Until the money judgment has become final
and executory, enforcement of the lien is premature.

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

The RTC’s issuance of a writ of execution before the lapse of the reglementary
period to appeal from its order is likewise premature.1âwphi1 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.18 Under Rule 39, Section 2 of the Rules
of Court, discretionary execution can only be made before the expiration of the
reglementary period upon a motion of the prevailing party with notice to the
adverse party. Discretionary execution may only issue upon good reasons to be
stated in a special order after due hearing.19

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

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

As our last word, this decision should not be construed as imposing

unnecessary burden on the lawyer in collecting his just fees. But, as in the
exercise of any other right conferred by law, the lawyer - and the courts - must
avail of the proper legal remedies and observe the procedural rules to prevent
the possibility, or even just the perception, of abuse or prejudice.20

WHEREFORE, premises considered, we hereby GRANT the petition. The

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

SO ORDERED.

G.R. No. 185544 January 13, 2015

THE LAW FIRM OF LAGUESMA MAGSALIN CONSULTA AND

GASTARDO, Petitioner,
vs.
THE COMMISSION ON AUDIT and/or REYNALDO A. VILLAR and JUANITO
G. ESPINO, JR. in their capacities as Chairman and Commissioner,
respectively, Respondents.

DECISION

LEONEN, J.:

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

This is a petition1 for certiorari filed pursuant to Rule XI, Section 1 of the 1997
Revised Rules of Procedure of the Commission on Audit. The petition seeks to
annul the decision2 dated September 27, 2007 and resolution3 dated November
5, 2008 of the Commission on Audit, which disallowed the payment of retainer
fees to the law firm of Laguesma Magsalin Consulta and Gastardo for legal
services rendered to Clark Development Corporation.4

Sometime in 2001, officers of Clark Development Corporation,5 a government-

owned and controlled corporation, approached the law firm of Laguesma
Magsalin Consulta and Gastardo for its possible assistance in handling the
corporation’s labor cases.6

Clark Development Corporation, through its legal officers and after the law
firm’s acquiescence, "sought from the Office of the Government Corporate
Counsel [‘OGCC’] its approval for the engagement of [Laguesma Magsalin
Consulta and Gastardo] as external counsel."7

On December 4, 2001, the Office of the Government Corporate Counsel denied

the request.8 Clark Development Corporation then filed a request for
reconsideration.9

On May 20, 2002, the Office of the Government Corporate Counsel, through
Government Corporate Counsel Amado D. Valdez (Government Corporate
Counsel Valdez), reconsidered the request and approved the engagement of
Laguesma Magsalin Consulta and Gastardo.10 It also furnished Clark
Development Corporation a copy of a pro-forma retainership
contract11 containing the suggested terms and conditions of the
retainership.12 It instructed Clark Development Corporation to submit a copy of
the contract to the Office of the Government Corporate Counsel after all the
parties concerned have signed it.13

In the meantime, Laguesma Magsalin Consulta and Gastardo commenced

rendering legal services to Clark Development Corporation. At this point, Clark
Development Corporation had yet to secure the authorization and clearance
from the Office of the Government Corporate Counsel or the concurrence of the
Commission on Audit of the retainership contract. According to the law firm,
Clark Development Corporation’s officers assured the law firm that it was in
the process of securing the approval of the Commission on Audit.14

On June 28, 2002, Clark Development Corporation, through its Board of

Directors, approved Laguesma Magsalin Consulta and Gastardo’s engagement
as private counsel.15 In 2003, it also approved the assignment of additional
labor cases to the law firm.16

On July 13, 2005, Clark Development Corporation requested the Commission

on Audit for concurrence of the retainership contract it executed with
Laguesma Magsalin Consulta and Gastardo.17 According to the law firm, it was
only at this pointwhen Clark Development Corporation informed them that the
Commission on Audit required the clearance and approval of the Office of the
Government Corporate Counsel before it could approve the release of Clark
Development Corporation’s funds to settle the legal fees due to the law firm.18

On August 5, 2005, State Auditor IVElvira G. Punzalan informed Clark

Development Corporation that itsrequest for clearance could not be acted upon
until the Office of the Government Corporate Counsel approves the retainership
contract with finality.19

On August 10, 2005, Clark Development Corporation sent a letterrequest to

the Office of the Government Corporate Counsel for the final approval of the
retainership contract, in compliance with the Commission on Audit’s
requirements.20

On December 22, 2005, GovernmentCorporate Counsel Agnes VST Devanadera

(Government Corporate Counsel Devanadera) denied Clark Development
Corporation’s request for approval on the ground that the proforma
retainership contract given to them was not "based on the premise that the
monthly retainer’s fee and concomitant charges are reasonable and could pass
in audit by COA."21 She found that Clark Development Corporation adopted
instead the law firm’s proposals concerning the payment of a retainer’s fee on a
per case basis without informing the Office of the Government Corporate
Counsel. She, however, ruled that the law firm was entitled to payment under
the principle of quantum meruitand subject to Clark Development Corporation
Board’s approval and the usual government auditing rules and regulations.22

On December 27, 2005, Clark Development Corporation relayed Government

Corporate Counsel Devanadera’s letter to the Commission’s Audit Team Leader,
highlighting the portion on the approval of payment to Laguesma Magsalin
Consulta and Gastardo on the basis of quantum meruit.23

On November 9, 2006, the Commission on Audit’s Office of the General

Counsel, Legal and Adjudication Sector issued a "Third Indorsement"24 denying
Clark Development Corporation’s request for clearance, citing its failure to
secure a prior written concurrence of the Commission on Audit and the
approval with finality of the Office of the Government Corporate Counsel.25 It
also stated that its request for concurrence was made three (3) years after
engaging the legal services of the law firm.26

On December 4, 2006, Laguesma Magsalin Consulta and Gastardo appealed

the "Third Indorsement"to the Commission on Audit. On December 12, 2006,
Clark Development Corporation also filed a motion for reconsideration.27

On September 27, 2007, the Commission on Audit rendered the assailed

decision denying the appeal and motion for reconsideration. It ruled that Clark
Development Corporation violated Commission on Audit Circular No. 98-002
dated June 9, 1998 and Office of the President Memorandum Circular No. 9
dated August 27, 1998 whenit engaged the legal services of Laguesma Magsalin
Consulta and Gastardo without the final approval and written concurrence of
the Commission on Audit.28 It also ruled that it was not the government’s
responsibility to pay the legal fees already incurred by Clark Development
Corporation, but rather by the government officials who violated the
regulations on the matter.29

Clark Development Corporation and Laguesma Magsalin Consulta and

Gastardo separately filed motions for reconsideration,30 which the Commission
on Audit denied in the assailed resolution dated November 5, 2008. The
resolution also disallowed the payment of legal fees to the law firm on the basis
of quantum meruitsince the Commission on Audit Circular No. 86-255
mandates that the engagementof private counsel without prior approval "shall
be a personal liability of the officials concerned."31

Laguesma Magsalin Consulta and Gastardo filed this petition for certiorari on
December 19, 2008.32 Respondents, through the Office of the Solicitor General,
filed their comment33 dated May 7, 2009. The reply34 was filed on September 1,
2009.
The primordial issue to be resolved by this court is whether the Commission on
Audit erred in disallowing the payment of the legal fees to Laguesma Magsalin
Consulta and Gastardo as Clark Development Corporation’s private counsel.

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

Procedural:

1. Whether the petition was filed on time; and

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

Substantive:

1. Whether the Commission on Audit erred in denying Clark

Development Corporation’s requestfor clearance in engaging petitioner as
private counsel;

2. Whether the Commission on Audit correctly cited Polloso v.

Gangan35 and PHIVIDEC Industrial Authority v. Capitol Steel
Corporation36 in support of its denial; and

3. Whether the Commission on Audit erred in ruling that petitioner

should not be paid on the basis of quantum meruitand that any payment
for its legal services should be the personal liability of Clark Development
Corporation’s officials.

Petitioner argues that Pollosoand PHIVIDEC are not applicable to the

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.37 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.38 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 Corporation’s request for reconsideration.39

In their comment,40 respondents argue that petitioner is not a real party-in-

interest to the case.41 They argue that it is Clark Development Corporation, and
not petitioner, who isa real party-in-interest since the subject of the assailed
decision was the denial of the corporation’s request for clearance.42

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 Audit’s concurrence of the retainership contract between
Clark Development Corporation and petitioner.43 They argue that the
retainership contract was not approved with finality by the Office of the
Government Corporate Counsel.44 Further, Polloso and PHIVIDE Care
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."45

In its reply,46 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"47 and that "it deserves to be paid
what is its due as a matter of right."48 Petitioner also reiterates its argument
that Polloso and PHIVIDE Care not applicable to this case since the factual
antecedents are not the same.49

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.50 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 Court51 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
filethe petition only within the period remaining from the notice of judgment.

The difference between Rule 64 and Rule 65 has already been exhaustively
discussed by this court in Pates v. Commission on Elections:52

Rule 64, however, cannot simply be equated to Rule 65 even if it expressly

refers to the latter rule. They exist as separate rules for substantive reasons as
discussed below. Procedurally, the most patent difference between the two –
i.e., the exception that Section 2, Rule 64 refers to – is Section 3 which
provides for a special period for the filing of petitions for certiorari from
decisions or rulings of the COMELEC en banc. The period is 30 days from
notice of the decision or ruling (instead of the 60 days that Rule 65 provides),
with the intervening period used for the filing of any motion for reconsideration
deductible from the originally granted 30 days (instead of the fresh period of 60
days that Rule 65 provides).53 (Emphasis supplied)
In this case, petitioner received the decision of the Commission on Audit on
October 16, 2007.54 It filed a motion for reconsideration on November 6,
2007,55 or after 21 days. It received notice of the denial of its motion on
November 20, 2008.56 The receipt of this notice gave petitioner nine (9) days, or
until November 29, 2008, to file a petition for certiorari. Since November 29,
2008 fell on a Saturday, petitioner could still have filed on the next working
day, or on December 1, 2008. It, however, filed the petition on December 19,
2008,57 which was well beyond the reglementary period.

This petition could have been dismissed outright for being filed out of time.
This court, however, recognizes that there are certain exceptions that allow a
relaxation of the procedural rules. In Barranco v. Commission on the
Settlement of Land Problems:58

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

In Sanchez v. Court of Appeals, the Court restated the reasons which may
provide justification for a court to suspend a strict adherence to procedural
rules, such as: (a) matters of life, liberty, honor or property[,] (b) the existence
of special or compelling circumstances, (c) the merits of the case, (d) a cause
not entirely attributable to the fault or negligence of the party favored by the
suspension of the rules, (e) a lack of any showing that the review sought is
merely frivolous and dilatory, and (f) the other party will not be unjustly
prejudiced thereby.59 (Emphasis supplied)

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

Petitioner is a real party-in-interest

Respondents argue that it is Clark Development Corporation, and not

petitioner, which is the real party-in-interest since the subject of the assailed
decision and resolution was the corporation’s request for clearance to pay
petitioner its legal fees. Respondents argue that any interest petitioner may
have in the case is merely incidental.60This is erroneous.

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

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

Petitioner does not have a "mere incidental interest,"61 and its interest is not
"merely consequential."62 Respondents mistakenly narrow down the issue to
whether they erred in denying Clark Development Corporation’s request for
clearance of the retainership contract.63 In doing so, they argue that the
interested parties are limited only to Clark Development Corporation and
respondents.64

The issue at hand, however, relates to the assailed decision and resolution of
respondents, which disallowed the disbursement of public funds for the
payment of legal fees to petitioner. Respondents admit that legal services were
performed by petitioner for which payment of legal fees are due. The question
that they resolved was which among the parties, the government, or the
officials of Clark Development Corporation were liable.

The net effect of upholding or setting aside the assailed Commission on Audit
rulings would be to either disallow or allow the payment of legal fees to
petitioner. Petitioner, therefore, stands to either be benefited or injured by the
suit, or entitled to its avails. It is a real party-in-interest. Clark Development
Corporation’s Board of Directors, on the other hand, should have been
impleaded inthis case as a necessary party.

A necessary party is defined as "onewho is not indispensable but who ought to

be joined as a party if complete relief is to be accorded as to those already
parties, or for a complete determination or settlement of the claim subject of
the action."65

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

The Commission on Audit did not

commit grave abuse of discretion in
denying the corporation’s request
for clearance to engage the services
of petitioner as private counsel

Book IV, Title III, Chapter 3, Section 10 of the Administrative Code of 1987
provides:
Section. 10. Office of the Government Corporate Counsel. - The Office of the
Government Corporate Counsel (OGCC) shall act as the principal law office of
all government-owned or controlled corporations, their subsidiaries, other
corporate off-springs and government acquired asset corporations and shall
exercise control and supervision over all legal departments or divisions
maintained separately and such powers and functions as are now or may
hereafter be provided by law. In the exercise of such control and supervision,
the Government Corporate Counsel shall promulgate rules and regulations
toeffectively implement the objectives of this Office. (Emphasis supplied)

The Office of the Government Corporate Counsel is mandated by law to provide

legal services to government-owned and controlled corporations such as Clark
Development Corporation.

As a general rule, government-owned and controlled corporations are not

allowed to engage the legal services of private counsels. However, both
respondent and the Office of the President have made issuances that had the
effect of providing certain exceptions to the general rule, thus: Book IV, Title III,
Chapter 3, Section 10 of Executive Order No. 292, otherwise known as the
Administrative Code of 1987, provides that the Office of the Government
Corporate Counsel (OGCC) shall act as the principal law office of all GOCCs,
their subsidiaries, other corporate off-springs, and government acquired asset
corporations. Administrative Order No. 130, issued by the Office of the
President on 19 May 1994, delineating the functions and responsibilities of the
OSG and the OGCC, clarifies that all legal matters pertaining to GOCCs, their
subsidiaries, other corporate off[-]springs, and government acquired asset
corporations shall be exclusively referred to and handled by the OGCC, unless
their respective charters expressly name the OSG as their legal counsel.
Nonetheless, the GOCC may hire the services of a private counsel in
exceptional cases with the written conformity and acquiescence of the
Government Corporate Counsel, and with the concurrence of the Commission
on Audit (COA).66 (Emphasis supplied)

The rules and regulations concerning the engagement of private counsel by

government-owned and controlled corporations is currently provided for by
Commission on Audit Circular No. 86-25567 dated April 2, 1986, and Office of
the President Memorandum Circular No. 9 dated August 27, 1998.

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

states:

Accordingly and pursuant to this Commission's exclusive authority to

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

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

SECTION 1.All legal matters pertainingto government-owned or controlled

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

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

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

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

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

According to these rules and regulations, the general rule is that government-
owned and controlled corporations must refer all their legal matters to the
Office of the Government Corporate Counsel. It is only in "extraordinary or
exceptional circumstances" or "exceptional cases" that it is allowed to engage
the services of private counsels.
Petitioner claims that it was hired by Clark Development Corporation due to
"numerous labor cases which need urgent attention[.]"68 In its request for
reconsideration to the Office of the Government Corporate Counsel, Clark
Development Corporation claims that it was obtaining the services of petitioner
"acting through Atty. Ariston Vicente R. Quirolgico, known expert in the field of
labor law and relations."69

The labor cases petitioner handled were not of a complicated or peculiar nature
that could justify the hiring of a known expert in the field. On the contrary,
these appear to be standard labor cases of illegal dismissal and collective
bargaining agreement negotiations,70 which Clark Development Corporation’s
lawyers or the Office of the Government Corporate Counsel could have
handled.

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

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

When Government Corporate Counsel Valdez granted Clark Development

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

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

After the subject Retainership Agreement shall have been executed between
your corporation and the retained counsel, please submit a copy thereof to our
Office for our information and file.71

Upon Clark Development Corporation’s failure to submit the retainership

contract, the Office of the Government Corporate Counsel denied Clark
Development Corporation’s request for final approval of its legal services
contracts, including that of petitioner. In the letter72 dated December 22, 2005,
Government Corporate Counsel Devanadera informed Clark Development
Corporation that:
[i]t appears, though, that our Pro-Forma Retainership Agreement was not
followed and CDC merely adopted the proposal of aforesaid
retainers/consultants. Also, this Office was never informed that CDC agreed on
payment of retainer’s fee on a per case basis.73

In view of Clark Development Corporation’s failure to secure the final

conformity and acquiescence of the Office of the Government Corporate
Counsel, its retainership contract with petitioner could not have been
considered as authorized.

The concurrence of respondents was also not secured by Clark Development

Corporation priorto hiring petitioner’s services. The corporation only wrote a
letter-request to respondents three (3) years after it had engaged the services of
petitioner as private legal counsel.

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

Respondents, therefore, correctly denied Clark Development Corporation’s

request for clearance in the disbursement of funds to pay petitioner its
standing legal fees.

Polloso v. Ganganand PHIVIDEC

Industrial Authority v. Capitol Steel
Corporationapply in this case

Petitioner argues that Polloso does not apply since the denial was based on the
"absence of a written authority from the OSG or OGCC[.]"74 It also argues that
the PHIVIDEC case does not apply since "the case [was] represented by a
private lawyer whose engagement was secured without the conformity of the
OGCC andthe COA."75 Petitioner argues that, unlike these cases, Clark
Development Corporation was able to obtain the written conformity of the
Office of the Government Corporate Counsel to engage petitioner’s services.

In Polloso, the legal services of Atty. Benemerito A. Satorre were engaged by the
National Power Corporation for its Leyte-Cebu and Leyte Luzon Interconnection
Projects.76 The Commission on Audit disallowed the payment of services to
Atty. Satore on the basis of quantum meruit, citing Commission on Audit
Circular No. 86-255 dated April 2, 1986.77 In upholding the disallowance by
the Commission on Audit, this court ruled:

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

Hence, as the hiring of Atty. Satorre was clearly done without the prior
conformity and acquiescence of the Office of the Solicitor General or the
Government Corporate Counsel, as well as the written concurrence of the
Commission on Audit, the payment of fees to Atty. Satorre was correctly
disallowed in audit by the COA.78

In PHIVIDEC, this court found the engagement by PHIVIDEC Industrial

Authority, a government-owned and controlled corporation, of Atty. Cesilo
Adaza’s legal services to be unauthorized for the corporation’s failure to secure
the written conformity of the Office of the Government Corporate Counsel and
the Commission on Audit.79Citing the provisions of Office of the President
Memorandum Circular No. 9, this court ruled that:

[i]t was only with the enactment of Memorandum Circular No. 9 in 1998 that
an exception to the general prohibition was allowed for the first time since P.D.
No. 1415 was enacted in 1978. However, indispensable conditions precedent
were imposed before any hiring of private lawyer could be effected. First,
private counsel can be hired only in exceptional cases. Second, the GOCC must
first secure the written conformity and acquiescence of the Solicitor General or
the Government Corporate Counsel, as the case may be, before any hiring can
be done. And third, the written concurrence of the COA must also be secured
prior to the hiring.80 (Emphasis supplied)

The same ruling was likewise reiterated in Vargas v. Ignes,81 wherein this court
stated:

Under Section 10, Chapter 3, Title III, Book IV of the Administrative Code
of1987, it is the OGCC which shall act as the principal law office of all GOCCs.
And Section 3 of Memorandum Circular No. 9, issued by President Estrada on
August 27, 1998, enjoins GOCCs to refrain from hiring private lawyers or law
firms to handle their cases and legal matters. But the same Section 3 provides
that in exceptional cases, the written conformity and acquiescence of the
Solicitor General or the Government Corporate Counsel, as the case may be,
and the written concurrence of the COA shall first be secured before the hiring
or employment of a private lawyer or law firm. In Phividec Industrial Authority
v. Capitol Steel Corporation, we listed three (3) indispensable conditions before
a GOCC can hirea private lawyer: (1) private counsel can only be hired in
exceptional cases; (2) the GOCC must first secure the written conformity and
acquiescence of the Solicitor General or the Government Corporate Counsel, as
the case may be; and (3) the written concurrence of the COA must also be
secured.82 (Emphasis supplied) On the basis of Pollosoand PHIVIDEC,
petitioner’s arguments are unmeritorious.

Petitioner fails to understand that Commission on Audit Circular No. 86-255

requires not only the conformity and acquiescence of the Office of the Solicitor
General or Office of the Government Corporate Counsel but also the written
conformity of the Commission on Audit. The hiring of private counsel becomes
unauthorized if it is only the Office of the Government Corporate Counsel that
gives its conformity. The rules and jurisprudence expressly require that the
government-owned and controlled corporation concerned must also secure the
concurrence of respondents.

It is also erroneous for petitioner to assume that it had the conformity and
acquiescence of the Office of the Government Corporate Counsel since
Government Corporate Counsel Valdez’s approval of Clark Development
Corporation’s request was merely conditional on its submission of the
retainership contract. Clark Development Corporation’s failure to submit the
retainership contract resulted in itsfailure to securea final approval.

The Commission on Audit did not

commit grave abuse of discretion in
disallowing the payment to
petitioner on the basis of quantum
meruit

When Government Corporate Counsel Devanadera denied Clark Development

Corporation’s request for final approval of its legal services contracts, she,
however, allowed the payment to petitioner for legal services already rendered
on a quantum meruitbasis.83

Respondents disallowed Clark Development Corporation from paying petitioner

on this basis as the contract between them was executed "in clear violation of
the provisions of COA Circular No. 86-255 and OP Memorandum Circular No.
9[.]"84 It then ruled that the retainership contract between them should be
deemed a private contract for which the officials of Clark Development
Corporation should be liable, citing Section 10385 of Presidential Decree No.
1445, otherwise known as the Government Auditing Code of the Philippines.86
In National Power Corporation v. Heirs of Macabangkit Sangkay, quantum
meruit:87

— literally meaning as much as he deserves — is used as basis for determining

an attorney’s professional fees in the absence of an express agreement. The
recovery ofattorney’s fees on the basis of quantum meruitis a device that
prevents an unscrupulous client from running away with the fruits of the legal
services of counsel without paying for it and also avoids unjust enrichment on
the part of the attorney himself. An attorney must show that he is entitled to
reasonable compensation for the effort in pursuing the client’s cause, taking
into account certain factors in fixing the amount of legal fees.88

Here, the Board of Directors, acting on behalf of Clark Development

Corporation, contracted the services of petitioner, without the necessary prior
approvals required by the rules and regulations for the hiring of private
counsel. Their actions were clearly unauthorized.

It was, thus, erroneous for Government Corporate Counsel Devanadera to bind

Clark Development Corporation, a government entity, to pay petitioner on a
quantum meruit basis for legal services, which were neither approved nor
authorized by the government. Even granting that petitioner ought to be paid
for services rendered, it should not be the government’s liability, but that of the
officials who engaged the services of petitioner without the required
authorization. The amendment of Commission on

Audit Circular No. 86-255 by

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

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

stated that: [a]ccordingly, it is hereby directed that, henceforth, the payment
out of public funds of retainer fees to private law practitioners who are so hired
or employed without the prior written conformity and acquiescence of the
Solicitor General or the Government Corporate Counsel, as the case may be, as
well as the written concurrence of the Commission on Audit shall be disallowed
in audit and the same shall be a personal liability of the officials concerned.
(Emphasis supplied) However, when Commission on Audit Circular No. 86-255
was amended by Commission on Audit Circular No. 98-002 on June 9, 1998, it
failed to retain the liability of the officials who violated the circular.89 This gap
in the law paves the way for both the erring officials of the government owned
and controlled corporations to disclaim any responsibility for the liabilities
owing to private practitioners.

It cannot be denied that petitioner rendered legal services to Clark

Development Corporation.1âwphi1 It assisted the corporation in litigating
numerous labor cases90 during the period of its engagement. It would be an
injustice for petitioner not to be compensated for services rendered even if the
engagement was unauthorized.

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

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

This finds support in Section 103 of the Government Auditing Code of the
Philippines,91 which states:

SEC. 103. General liability for unlawful expenditures. -Expenditures of

government funds or uses of government property in violation of law or
regulations shall be a personal liability of the official or employee found to be
directly responsible therefor.

This court has also previously held in Gumaru v. Quirino State College92 that:

the fee of the lawyer who rendered legal service to the government in lieu of the
OSG or the OGCC is the personal liability of the government official who hired
his services without the prior written conformity of the OSG or the OGCC, as
the case may be.93

WHEREFORE, the petition is DISMISSED without prejudice to petitioner filing

another action against the proper parties.

SO ORDERED.

A.C. No. 10573 January 13, 2015

FERNANDO W. CHU, Complainant,

vs.
ATTY. JOSE C. GUICO, JR., Respondent.

DECISION

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

Antecedents

Chu retained Atty. Guico as counsel to handle the labor disputes involving his
company, CVC San Lorenzo Ruiz Corporation (CVC).1 Atty. Guico’s legal
services included handling a complaint for illegal dismissal brought against
CVC (NLRC Case No. RAB-III-08-9261-05 entitled Kilusan ng Manggagawang
Makabayan (KMM) Katipunan CVC San Lorenzo Ruiz Chapter, Ladivico
Adriano, et al. v. CVC San Lorenzo Ruiz Corp. and Fernando Chu).2 On
September 7, 2006, Labor Arbiter Herminio V. Suelo rendered a decision
adverse to CVC.3 Atty. Guico filed a timely appeal in behalf of CVC.

According to Chu, during a Christmas party held on December 5, 2006 at Atty.

Guico’s residence in Commonwealth, Quezon City, Atty. Guico asked him to
prepare a substantial amount of money to be given to the NLRC Commissioner
handling the appeal to insure a favorable decision.4 On June 10, 2007, Chu
called Atty. Guico to inform him that he had raised ₱300,000.00 for the
purpose. Atty. Guico told him to proceed to his office at No. 48 Times Street,
Quezon City, and togive the money to his assistant, Reynaldo (Nardo)
Manahan. Chu complied, and later on called Atty. Guico to confirm that he had
delivered the money to Nardo. Subsequently, Atty. Guico instructed Chu to
meet him on July 5, 2007 at the UCC Coffee Shop on T. Morato Street, Quezon
City. Atthe UCC Coffee Shop, Atty. Guico handed Chu a copy of an alleged draft
decision of the NLRC in favor of CVC.5 The draft decision6was printed on the
dorsal portion of used paper apparently emanating from the office of Atty.
Guico. On that occasion, the latter told Chu to raise another ₱300,000.00 to
encourage the NLRC Commissioner to issue the decision. But Chu could only
produce ₱280,000.00, which he brought to Atty. Guico’s office on July 10,
2007 accompanied by his son, Christopher Chu, and one Bonifacio Elipane.
However, it was Nardo who received the amount without issuing any receipt.7

Chu followed up on the status of the CVC case with Atty. Guico in December
2007. However, Atty. Guico referred him to Nardo who in turn said that he
would only know the status after Christmas. On January 11, 2008, Chu again
called Nardo, who invited him to lunch at the Ihaw Balot Plaza in Quezon City.
Once there, Chu asked Nardo if the NLRC Commissioner had accepted the
money, but Nardo replied in the negative and simply told Chu to wait. Nardo
assured that the money was still with Atty. Guico who would return it should
the NLRC Commissioner not accept it.8

On January 19, 2009, the NLRC promulgated a decision adverse to CVC.9 Chu
confronted Atty. Guico, who in turn referred Chu to Nardo for the filing of a
motion for reconsideration. After the denial of the motion for reconsideration,
Atty. Guico caused the preparation and filing of an appeal in the Court of
Appeals. Finally, Chu terminated Atty. Guico as legal counsel on May 25,
2009.10

In his position paper,11 Atty. Guico described the administrative complaint as

replete with lies and inconsistencies, and insisted that the charge was only
meant for harassment. He denied demanding and receiving money from Chu, a
denial that Nardo corroborated with his own affidavit.12 He further denied
handing to Chu a draft decision printed on used paper emanating from his
office, surmising that the used paper must have been among those freely lying
around in his office that had been pilfered by Chu’s witnesses in the criminal
complaint he had handled for Chu.13

Findings and Recommendation of the

IBP Board of Governors

IBP Commissioner Cecilio A.C. Villanueva found that Atty. Guico had violated
Rules 1.01 and 1.02, Canon I of the Code of Professional Responsibility for
demanding and receiving ₱580,000.00 from Chu; and recommended the
disbarment of Atty. Guico in view of his act of extortion and misrepresentation
that caused dishonor to and contempt for the legal profession.14

On February 12, 2013, the IBP Board of Governors adopted the findings of IBP
Commissioner Villanueva in its Resolution No. XX-2013-87,15 but modified the
recommended penalty of disbarment to three years suspension, viz.:

RESOLVED to ADOPT and APPROVE, as it is hereby unanimously ADOPTED

and APPROVED, with modification, the Report and Recommendation of the
Investigating Commissioner in the above-entitled case, herein made part of this
Resolution as Annex "A," and finding the recommendation fully supported by
the evidence on record and the applicable laws and rules and considering
Respondent’s violation of Canon 1, Rules 1.01 and 1.02 of the Code of
Professional Responsibility, Atty. Jose C. Guico, Jr. is hereby SUSPENDED
from the practice of law for three (3) years with Warning that a repetition of the
same or similar act shall be dealt with more severely and Ordered to Return the
amount of Five Hundred Eighty Thousand (₱580,000.00) Pesos with legal
interest within thirty (30) days from receipt of notice.

Atty. Guico moved for reconsideration,16 but the IBP Board of Governors denied
his motion for reconsideration on March 23, 2014 in Resolution No. XXI-2014-
173.17

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

Issue
Did Atty. Guico violate the Lawyer’s Oath and Rules 1.01 and 1.02, Canon I of
the Code of Professional Responsibility for demanding and receiving
₱580,000.00 from Chu to guarantee a favorable decision from the NLRC?

Ruling of the Court

In disbarment proceedings, the burden of proof rests on the complainant to

establish respondent attorney’s liability by clear, convincing and satisfactory
evidence. Indeed, this Court has consistently required clearly preponderant
evidence to justify the imposition of either disbarment or suspension as
penalty.18

Chu submitted the affidavits of his witnesses,19 and presented the draft
decision that Atty. Guico had represented to him as having come from the
NLRC. Chu credibly insisted that the draft decision was printed on the dorsal
portion of used paper emanating from Atty. Guico’s office,20 inferring that Atty.
Guico commonly printed documents on used paper in his law office. Despite
denying being the source of the draft decision presented by Chu, Atty. Guico’s
participation in the generation of the draft decision was undeniable. For one,
Atty. Guico impliedly admitted Chu’s insistence by conceding that the used
paper had originated from his office, claiming only that used paper was just
"scattered around his office."21 In that context, Atty. Guico’s attempt to
downplay the sourcing of used paper from his office was futile because he did
not expressly belie the forthright statement of Chu. All that Atty. Guico stated
by way of deflecting the imputation was that the used paper containing the
draft decision could have been easily taken from his office by Chu’s witnesses
in a criminal case that he had handled for Chu,22 pointing out that everything
in his office, except the filing cabinets and his desk, was "open to the public
xxx and just anybody has access to everything found therein."23 In our view,
therefore, Atty. Guico made the implied admission because he was fully aware
that the used paper had unquestionably come from his office.

The testimony of Chu, and the circumstances narrated by Chu and his
witnesses, especially the act of Atty. Guico of presenting to Chu the supposed
draft decision that had been printed on used paper emanating from Atty.
Guico’s office, sufficed to confirm that he had committed the imputed gross
misconduct by demanding and receiving ₱580,000.00 from Chu to obtain a
favorable decision. Atty. Guico offered only his general denial of the allegations
in his defense, but such denial did not overcome the affirmative testimony of
Chu. We cannot but conclude that the production of the draft decision by Atty.
Guico was intended to motivate Chu to raise money to ensure the chances of
obtaining the favorable result in the labor case. As such, Chu discharged his
burden of proof as the complainant to establish his complaint against Atty.
Guico. In this administrative case, a fact may be deemed established if it is
supported by substantial evidence, or that amount of relevant evidence which a
reasonable mind might accept as adequate to justify a conclusion.24
What is the condign penalty for Atty. Guico?

In taking the Lawyer’s Oath, Atty. Guico bound himself to:

x x x maintain allegiance to the Republic of the Philippines; x x x support its

Constitution and obey the laws as well as the legal orders of the duly
constituted authorities therein; x x x do no falsehood, nor consent to the doing
of any in court; x x x delay no man for money or malice x x x. The Code of
Professional Responsibility echoes the Lawyer’s Oath, to wit:

CANON 1 — A lawyer shall uphold the constitution, obey the laws of the land
and promote respect for law and for legal processes.1âwphi1

Rule 1.01 — A lawyer shall not engage in unlawful, dishonest, immoral or

deceitful conduct.

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

The sworn obligation to respect the law and the legal processes under the
Lawyer’s Oath and the Code of Professional Responsibility is a continuing
condition for every lawyer to retain membership in the Legal Profession. To
discharge the obligation, every lawyer should not render any service or give
advice to any client that would involve defiance of the very laws that he was
bound to uphold and obey,25 for he or she was always bound as an attorney to
be law abiding, and thus to uphold the integrity and dignity of the Legal
Profession.26 Verily, he or she must act and comport himself or herself in such
a manner that would promote public confidence in the integrity of the Legal
Profession.27 Any lawyer found to violate this obligation forfeits his or her
privilege to continue such membership in the legal profession.

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

Atty. Guico committed grave misconduct and disgraced the Legal Profession.
Grave misconduct is "improper or wrong conduct, the transgression of some
established and definite rule of action, a forbidden act, a dereliction of duty,
willful in character, and implies a wrongful intent and not mere error of
judgment."28 There is no question that any gross misconduct by an attorney in
his professional or private capacity renders him unfit to manage the affairs of
others, and is a ground for the imposition of the penalty of suspension or
disbarment, because good moral character is an essential qualification for the
admission of an attorney and for the continuance of such privilege.29

Accordingly, the recommendation of the IBP Board of Governors to suspend

him from the practice of law for three (3) years would be too soft a penalty.
Instead, he should be disbarred,30 for he exhibited his unworthiness of
retaining his membership in the legal profession. As the Court has reminded in
Samonte v. Abellana:31

Disciplinary proceedings against lawyers are designed to ensure that whoever

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

Lastly, the recommendation of the IBP Board of Governors that Atty. Guico be
ordered to return the amount of ₱580,000.00 to Chu is well-taken. That
amount was exacted by Atty. Guico from Chu in the guise of serving the latter’s
interest as the client. Although the purpose for the amount was unlawful, it
would be unjust not to require Atty. Guico to fully account for and to return
the money to Chu. It did not matter that this proceeding is administrative in
character, for, as the Court has pointed out in Bayonla v. Reyes:32

Although the Court renders this decision in an administrative proceeding

primarily to exact the ethical responsibility on a member of the Philippine Bar,
the Court’s silence about the respondent lawyer’s legal obligation to restitute
the complainant will be both unfair and inequitable. No victim of gross ethical
misconduct concerning the client’s funds or property should be required to still
litigate in another proceeding what the administrative proceeding has already
established as the respondent’s liability. x x x

ACCORDINGLY, the Court FINDS and DECLARES respondent ATTY. JOSE S.

GUICO, JR. GUILTY of the violation of the Lawyer’s Oath, and Rules 1.01 and
1.02, Canon I of the Code of Professional Responsibility, and DISBARS him
from membership in the Integrated Bar of the Philippines. His name is
ORDERED STRICKEN from the Roll of Attorneys.
Let copies of this Decision be furnished to the Office of the Bar Confidant, to be
appended to Atty. Guico’s personal record as an attorney; to the Integrated Bar
of the Philippines; and to all courts and quasi-judicial offices in the country for
their information and guidance.

SO ORDERED.

A.C. No. 5067 June 29, 2015

CORAZON M. DALUPAN, Complainant,

vs.
ATTY. GLENN C. GACOTT1, Respondent.

DECISION

VILLARAMA, JR., J.:

Before us is a petition for review under Rule 139-B, Section 12 (c) of the Rules
of Court assailing Resolution No. XVII-20072 dated March 17, 2007 and
Resolution No. XIX-201005443 dated October 8, 2010 of the Board of
Governors of the Integrated Bar of the Philippines (IBP) which adopted and
approved the Report and Recommendation4 dated December 12, 2006 of the
Investigating Commissioner of the Commission on Bar Discipline of the IBP.
Although the IBP Board of Governors dismissed the complaint for disbarment
filed against the respondent, it ordered the latter to return the payment of the
attorney’s fee to the complainant in the amount of ₱5,000. This order to return
the attorney’s fee is subject of the present petition.

The salient facts of the case follow:

In her affidavit-complaint5 dated April 20, 1999, the complainant claimed that
she was a defendant in a criminal case for grave slander pending before the
Municipal Trial Court (MTC) of Puerto Princesa City, Palawan. Meanwhile, her
son, Wilmer Dalupan, was also a defendant in a separate criminal case for
grave slander and malicious mischief pending before the same court. In order
to represent the complainant and her son, the complainant engaged the legal
services of the respondent who then charged an acceptance fee of ₱10,000.

On August 20, 1996, the complainant paid the respondent ₱5,000 as initial
payment for his acceptance fee.

On August 27, 1996, the complainant requested the respondent to draft a

Motion to Reduce Bail Bond. However, the respondent allegedly denied the
request and claimed that it was beyond the scope of his retainer services. Thus,
the complainant alleged that she caused a certain Rolly Calbento to draft the
same which was however signed by the respondent.
On January 31, 1997, the complainant paid the respondent the remaining
balance of ₱5,000 for his acceptance fee. When the complainant asked for an
Official Receipt from the respondent, the latter refused saying that there was
no need for the issuance of a receipt. On that same day, the complainant also
paid the respondent ₱500 for his appearance fee in the preliminary conference
and arraignment which occurred on the same day.

Thereafter, the complainant alleged that the respondent neglected his duties as
counsel and failed to attend any of the hearings before the MTC. In view of the
respondent’s repeated absences before the MTC, Judge Jocelyn S. Dilig issued
an Order which appointed a counsel de oficio to represent the complainant.

Aggrieved, the complainant filed the instant complaint for disbarment against
the respondent.

On the other hand, in his comment6, the respondent denied all the allegations
of the complainant.

The respondent allege that the complainant approached him and represented
herself as an indigent party in the following cases for which she sought to
engage the legal services of the respondent: (1) Criminal Case No. 12586,
People of the Philippines v. Corazon Dalupan, et al. for Grave Slander, (2)
Criminal Case No. 12585, People of the Philippines v. Wilmer Dalupan for
Malicious Mischief, (3) I.S. No. 96-1104, Custodio Family v. Cesar Dalupan, et
al. for Frustrated Murder, (4) I.S. No. 97-54, Dalupan Family v. Romulo
Custodio, et al. for Physical Injuries, and (5) I.S. No. 9760 Dalupan Family v.
Romulo Custodio for Frustrated Murder. The respondent agreed to represent
the complainant in the aforementioned cases subject to the payment of an
acceptance fee of ₱5,000 per case and an appearance fee of ₱500 for each court
appearance.

On August 20, 1996, the complainant paid the respondent ₱5,000 for his
acceptance fee.

On August 27, 1996, the respondent filed a Motion for Reduction of Bail in
favor of the complainant before the MTC of Puerto Princesa City. On that same
day, the complainant proceeded to the law office of the respondent and
demanded that the latter negotiate with the MTC judge to ensure the grant of
the Motion of Bail. When the respondent refused the demand of the
complainant, the latter replied at the top of her voice: "Binabayaran kita, bakit
hindi mo ginagawa ang gusto ko?" The respondent answered her with, "Hindi
po lahat ng gusto ninyo ay gagawin ko, sa tama lamang po tayo, abogado po
ninyo ako, hindi ako fixer."7 This irked the complainant who then made verbal
threats that she will replace the respondent with a certain Atty. Roland Pay
who held office nearby. However, when the MTC of Puerto Princesa City
eventually ruled in favor of the complainant and granted the motion, the latter
revoked her threat that she will replace the respondent.

On August 19, 1997, the MTC of Puerto Princesa City issued a Notice of
Hearing to the complainant and her son Wilmer Dalupan which ordered them
to appear before the court on September 9, 1997 in connection with their
criminal cases pending therein. However, the respondent failed to attend the
scheduled hearing as he allegedly failed to receive a copy of the Notice of
Hearing. Thus, in his written explanation dated October 7, 1997, the
respondent attributed his failure to appear before the MTC to the inefficiency of
the process server of the said court.

On October 10, 1997, the complainant told the respondent that she was
terminating the latter’s services on the ground of loss of trust and confidence.
Furthermore, the complainant also told the respondent that she engaged the
services of Atty. Roland Pay to replace the respondent. As a result, on October
30, 1997, the complainant withdrew all her records from the law office of the
respondent.

On January 29, 1998, the MTC of Puerto Princesa City issued an Order which
relieved the respondent of any responsibility in Criminal Case Nos. 12585 and
12586:

Acting on what the counsel of record of all the accused in the above-entitled
cases call "Compliance", where obvious on the face of which is his desire to
withdraw as Counsel, and it appearing that said intention to withdraw is not
only with the full conformity of all the accused but at their own initiative, Atty.
Glenn Gacott is hereby relieved of any responsibility in the further prosecution
of the above-captioned cases.8

In view of the above Order, the respondent argued that he was not guilty of
abandonment or neglect of duty because it was the complainant who willfully
terminated his services even without fault or negligence on his part.

We referred this case to the IBP for its investigation, report, and
recommendation.

On December 12, 2006, Investigating Commissioner Wilfredo E.J.E Reyes

recommended the dismissal of the complaint for disbarment against the
respondent. At the same time, he also recommended that the respondent
return the payment of the attorney’s fee to the complainant in the amount of
₱5,000.9

The Investigating Commissioner opined that the respondent cannot be held

liable for abandonment or neglect of duty because it was the complainant who
discharged the respondent for loss of trust and confidence. This was confirmed
by the act of the complainant in withdrawing all her records from the law office
of the respondent. Furthermore, the Investigating Commissioner said that
absent evidence showing that the respondent committed abandonment or
neglect of duty, the presumption of regularity should prevail in favor of the
respondent.

Although there was no evidence to support the claim of the complainant that
she paid the respondent the remaining balance of ₱5,000 as acceptance fee and
an appearance fee of ₱500 on January 31, 1997, the Investigating
Commissioner gave credence to an Official Receipt dated August 20, 1996
which proved that the complainant indeed paid the respondent an amount of
₱5,000. However, the Investigating Commissioner found that the respondent
did not perform any substantial legal work on behalf of the complainant. For
this reason, and in the interest of justice, the Investigating Commissioner
recommended that the respondent return the amount of ₱5,000 to the
complainant.

On March 17, 2007, the IBP Board of Governors passed Resolution No. XVII-
2007-115 which adopted and approved in toto the Report and
Recommendation of the Investigating Commissioner.

On October 8, 2010, the IBP Board of Governors passed Resolution No. XIX-
2010-544 which denied the Motion for Reconsideration dated July 27, 2007
filed by the respondent.

Hence, the present petition10 which raises the sole issue of whether the
respondent should return the payment of the attorney’s fee to the complainant
in the amount of ₱5,000.

Firstly, the respondent argued that when the MTC of Puerto Princesa City
issued the Order dated January 29, 1998 which relieved the respondent of any
responsibility in Criminal Case Nos. 12585 and 12586, the trial court did not
require the respondent to reimburse the payment of the attorney’s fee to the
complainant. Thus, the IBP Board of Governors exceeded its authority in
ordering the respondent to return such fees to the complainant.

Secondly, the respondent argued that a plain reading of the Official Receipt
dated August 20, 1996 would reveal that the parties intended the payment of
₱5,000 to serve as acceptance fee which is different from attorney’s fee.
According to the respondent, the acceptance fee corresponds to the opportunity
cost incurred by the lawyer for not representing other potential clients due to a
conflict of interest with the present client. Thus, the payment of acceptance fee
to the lawyer does not depend on the latter’s performance of legal services.

Since the complainant failed to file any comment on the petition for review, we
proceed to resolve the sole issue raised, and rule in favor of the respondent.
We find that the respondent did not commit any fault or negligence in the
performance of his obligations under the retainer agreement which was wilfully
terminated by the complainant on the ground of loss of trust and confidence.
As held by the Investigating Commissioner, the evidence on record shows that
the respondent is not liable for abandonment or neglect of duty.

However, we disagree with the conclusion of the Investigating Commissioner

that the respondent should return the payment of the attorney’s fee to the
complainant in the amount of ₱5,000.

Firstly, the Investigating Commissioner seriously erred in referring to the

amount to be returned by the respondent as attorney’s fee. Relevantly, we
agree with the respondent that there is a distinction between attorney’s fee and
acceptance fee.

It is well-settled that attorney’s fee is understood both in its ordinary and

extraordinary concept.11 In its ordinary sense, attorney’s fee refers to the
reasonable compensation paid to a lawyer by his client for legal services
rendered. Meanwhile, in its extraordinary concept, attorney’s fee is awarded by
the court to the successful litigant to be paid by the losing party as indemnity
for damages.12 In the present case, the Investigating Commissioner referred to
the attorney’s fee in its ordinary concept.

On the other hand, acceptance fee refers to the charge imposed by the lawyer
for merely accepting the case. This is because once the lawyer agrees to
represent a client, he is precluded from handling cases of the opposing party
based on the prohibition on conflict of interest. Thus, the incurs an
opportunity cost by merely accepting the case of the client which is therefore
indemnified by the payment of acceptance fee. Since the acceptance fee only
seeks to compensate the lawyer for the lost opportunity, it is not measured by
the nature and extent of the legal services rendered.

In the present case, based on a simple reading of the Official Receipt dated
August 20, 1996, the parties clearly intended the payment of ₱5,000 to serve as
acceptance fee of the respondent, and not attorney’s fee. Moreover, both parties
expressly claimed that they intended such payment as the acceptance fee of
the respondent. Absent any other evidence showing a contrary intention of the
parties, we find that the Investigating Commissioner gravely erred in referring
to the amount to be returned by the respondent as attorney’s fee.

Since the Investigating Commissioner made an erroneous reference to

attorney’s fee, he therefore mistakenly concluded that the respondent should
return the same as he did not perform any substantial legal work on behalf of
the complainant. As previously mentioned, the payment of acceptance fee does
not depend on the nature and extent of the legal services rendered.
Secondly, the respondent did not commit any fault or negligence which would
entail the return of the acceptance fee.

Once a lawyer receives the acceptance fee for his legal services, he is expected
to serve his client with competence, and to attend to his client’s cause with
diligence, care and devotion.13 In Carino v. Atty. De Los Reyes,14 the
respondent lawyer who failed to file a complaint-affidavit before the
prosecutor’s office, returned the ₱10,000 acceptance fee paid to him. Moreover,
he was admonished by the Court to be more careful in the performance of his
duty to his clients. Meanwhile, in Voluntad-Ramirez v. Baustista,15 we ordered
the respondent lawyer to return the ₱14,000 acceptance fee because he did
nothing to advance his client’s cause during the six-month period that he was
engaged as counsel.

In the present case, the complainant alleged that she requested the respondent
to draft a Motion to Reduce Bail Bond which was denied by the
latter.1âwphi1 She also claimed that the respondent failed to attend any of the
hearing before the MTC. Thus, the complainant filed the present complaint for
disbarment on the ground of abandonment or neglect of duty. On the other
hand, the respondent denied the allegation that he failed to draft the Motion to
Reduce Bail Bond and submitted a copy of the MTC Order16 dated August 28,
1996 granting the motion to reduce bail. He also justified his failure to attend
the hearings before the MTC to the failure of the process server to provide him
with a Notice of Hearing.

Other than her bare allegations, the complainant failed to present any evidence
to support her claim that the respondent committed abandonment or neglect of
duty. Thus, we are constrained to affirm the factual findings of the
Investigating Commissioner that the presumption of regularity should prevail
in favor of the respondent. Absent any fault or negligence on the part of the
respondent, we see no legal basis for the order of the Investigating
Commissioner to return the attorney’s fee (acceptance fee) of ₱5,000.

WHEREFORE, premises considered, the petition is hereby GRANTED.

Resolution No. XVII-2007-115 and Resolution No. XIX-2010-544 of the IBP
Board of Governors insofar as they ordered the respondent to return the
attorney’s fee (acceptance fee) to the complainant in the amount of Five
Thousand Pesos (₱5,000) are REVERSED and SET ASIDE.

SO ORDERED.

G.R. No. 173188 January 15, 2014

THE CONJUGAL PARTNERSHIP OF THE SPOUSES VICENTE CADAVEDO

AND BENITA ARCOY-CADAVEDO (both deceased), substituted by their
heirs, namely: HERMINA, PASTORA, Heirs of FRUCTUOSA, Heirs of
RAQUEL, EVANGELINE, VICENTE, JR., and ARMANDO, all surnamed
CADAVEDO, Petitioners,
vs.
VICTORINO (VIC) T. LACAYA, married to Rosa Legados, Respondents.

DECISION

BRION, J.:

We solve in this Rule 45 petition for review on certiorari1 the challenge to the
October 11, 2005 decision2 and the May 9, 2006 resolution3 of the Court of
Appeals (CA) inPetitioners, CA-G.R. CV No. 56948. The CA reversed and set
aside the September 17, 1996 decision4 of the Regional Trial Court (RTC),
Branch 10, of Dipolog City in Civil Case No. 4038, granting in part the
complaint for recovery of possession of property filed by the petitioners, the
Conjugal Partnership of the Spouses Vicente Cadavedo and Benita Arcoy-
Cadavedo against Atty. Victorino (Vic) T. Lacaya, married to Rosa Legados
(collectively, the respondents).

The Factual Antecedents

The Spouses Vicente Cadavedo and Benita Arcoy-Cadavedo (collectively, the

spouses Cadavedo) acquired a homestead grant over a 230,765-square meter
parcel of land known as Lot 5415 (subject lot) located in Gumay, Piñan,
Zamboanga del Norte. They were issued Homestead Patent No. V-15414 on
March 13, 1953andOriginal Certificate of Title No. P-376 on July 2, 1953.On
April30, 1955, the spouses Cadavedo sold the subject lot to the spouses
Vicente Ames and Martha Fernandez (the spouses Ames) Transfer Certificate of
Title (TCT) No. T-4792 was subsequently issued in the name of the spouses
Ames.

The present controversy arose when the spouses Cadavedo filed an

action5 before the RTC(then Court of First Instance) of Zamboanga City against
the spouses Ames for sum of money and/or voiding of contract of sale of
homestead after the latter failed to pay the balance of the purchase price. The
spouses Cadavedo initially engaged the services of Atty. Rosendo Bandal who,
for health reasons, later withdrew from the case; he was substituted by Atty.
Lacaya.

On February 24, 1969, Atty. Lacaya amended the complaint to assert the
nullity of the sale and the issuance of TCT No. T-4792 in the names of the
spouses Ames as gross violation of the public land law. The amended
complaint stated that the spouses Cadavedo hired Atty. Lacaya on a
contingency fee basis. The contingency fee stipulation specifically reads:
10. That due to the above circumstances, the plaintiffs were forced to hire a
lawyer on contingent basis and if they become the prevailing parties in the case
at bar, they will pay the sum of ₱2,000.00 for attorney’s fees.6

In a decision dated February 1, 1972, the RTC upheld the sale of the subject
lot to the spouses Ames. The spouses Cadavedo, thru Atty. Lacaya, appealed
the case to the CA.

On September 18, 1975, and while the appeal before the CAin Civil Case No.
1721was pending, the spouses Ames sold the subject lot to their children. The
spouses Ames’ TCT No. T-4792 was subsequently cancelled and TCT No. T-
25984was issued in their children’s names. On October 11, 1976, the spouses
Ames mortgaged the subject lot with the Development Bank of the Philippines
(DBP) in the names of their children.

On August 13, 1980, the CA issued itsdecision in Civil Case No. 1721,reversing
the decision of the RTC and declaring the deed of sale, transfer of rights, claims
and interest to the spouses Ames null and void ab initio. It directed the
spouses Cadavedo to return the initial payment and ordered the Register of
Deeds to cancel the spouses Ames’ TCT No. T-4792 and to reissue another title
in the name of the spouses Cadavedo. The case eventually reached this Court
via the spouses Ames’ petition for review on certiorari which this Court
dismissed for lack of merit.

Meanwhile, the spouses Ames defaulted in their obligation with the DBP. Thus,
the DBP caused the publication of a notice of foreclosure sale of the subject lot
as covered by TCT No. T-25984(under the name of the spouses Ames’ children).
Atty. Lacaya immediately informed the spouses Cadavedo of the foreclosure
sale and filed an Affidavit of Third Party Claim with the Office of the Provincial
Sheriff on September 14, 1981.

With the finality of the judgment in Civil Case No. 1721,Atty. Lacaya filed on
September 21, 1981 a motion for the issuance of a writ of execution.

On September 23, 1981,and pending the RTC’s resolution of the motion for the
issuance of a writ of execution, the spouses Ames filed a complaint7 before the
RTC against the spouses Cadavedo for Quieting of Title or Enforcement of Civil
Rights due Planters in Good Faith with prayer for Preliminary Injunction. The
spouses Cadavedo, thru Atty. Lacaya, filed a motion to dismiss on the ground
of res judicata and to cancel TCT No. T-25984 (under the name of the spouses
Ames’ children).

On October 16, 1981, the RTC granted the motion for the issuance of a writ of
execution in Civil Case No. 1721,andthe spouses Cadavedo were placed in
possession of the subject lot on October 24, 1981. Atty. Lacaya asked for one-
half of the subject lot as attorney’s fees. He caused the subdivision of the
subject lot into two equal portions, based on area, and selected the more
valuable and productive half for himself; and assigned the other half to the
spouses Cadavedo.

Unsatisfied with the division, Vicente and his sons-in-law entered the portion
assigned to the respondents and ejected them. The latter responded by filing a
counter-suit for forcible entry before the Municipal Trial Court (MTC); the
ejectment case was docketed as Civil Case No. 215. This incident occurred
while Civil Case No. 3352was pending.

On May 13, 1982, Vicente andAtty. Lacaya entered into an amicable settlement
(compromise agreement)8 in Civil Case No. 215 (the ejectment case), re-
adjusting the area and portion obtained by each. Atty. Lacaya acquired
10.5383 hectares pursuant to the agreement. The MTC approved the
compromise agreementin a decision dated June 10, 1982.

Meanwhile, on May 21, 1982, the spouses Cadavedo filed before the RTC an
action against the DBP for Injunction; it was docketed as Civil Case No. 3443
(Cadavedo v. DBP).The RTC subsequently denied the petition, prompting the
spouses Cadavedo to elevate the case to the CAvia a petition for certiorari. The
CA dismissed the petition in its decision of January 31, 1984.

The records do not clearly disclose the proceedings subsequent to the CA

decision in Civil Case No. 3443. However, on August 18, 1988, TCT No.
41051was issued in the name of the spouses Cadavedo concerning the subject
lot.

On August 9, 1988, the spouses Cadavedo filed before the RTC an

action9 against the respondents, assailing the MTC-approved compromise
agreement. The case was docketed as Civil Case No. 4038 and is the root of the
present case. The spouses Cadavedo prayed, among others, that the
respondents be ejected from their one-half portion of the subject lot; that they
be ordered to render an accounting of the produce of this one-half portion from
1981;and that the RTC fix the attorney’s fees on a quantum meruit basis, with
due consideration of the expenses that Atty. Lacaya incurred while handling
the civil cases.

During the pendency of Civil Case No. 4038, the spouses Cadavedo executed a
Deed of Partition of Estate in favor of their eight children. Consequently, TCT
No. 41051 was cancelled and TCT No. 41690 was issued in the names of the
latter. The records are not clear on the proceedings and status of Civil Case No.
3352.

The Ruling of the RTC

In the September 17, 1996 decision10 in Civil Case No. 4038, the RTC declared
the contingent fee of 10.5383 hectares as excessive and unconscionable. The
RTC reduced the land area to 5.2691 hectares and ordered the respondents to
vacate and restore the remaining 5.2692hectares to the spouses Cadavedo.

The RTC noted that, as stated in the amended complaint filed by Atty. Lacaya,
the agreed attorney’s fee on contingent basis was ₱2,000.00. Nevertheless, the
RTC also pointed out that the parties novated this agreement when they
executed the compromise agreement in Civil Case No. 215 (ejectment case),
thereby giving Atty. Lacaya one-half of the subject lot. The RTC added that
Vicente’s decision to give Atty. Lacaya one-half of the subject lot, sans approval
of Benita, was a valid act of administration and binds the conjugal partnership.
The RTC reasoned out that the disposition redounded to the benefit of the
conjugal partnership as it was done precisely to remunerate Atty. Lacaya for
his services to recover the property itself.

These considerations notwithstanding, the RTC considered the one-half portion

of the subject lot, as Atty. Lacaya’s contingent fee,excessive, unreasonable and
unconscionable. The RTC was convinced that the issues involved in Civil Case
No. 1721were not sufficiently difficult and complicated to command such an
excessive award; neither did it require Atty. Lacaya to devote much of his time
or skill, or to perform extensive research.

Finally, the RTC deemed the respondents’ possession, prior to the judgment, of
the excess portion of their share in the subject lot to be in good faith. The
respondents were thus entitled to receive its fruits.

On the spouses Cadavedo’s motion for reconsideration, the RTC modified the
decision in its resolution11 dated December 27, 1996. The RTC ordered the
respondents to account for and deliver the produce and income, valued at
₱7,500.00 per annum, of the 5.2692hectares that the RTC ordered the spouses
Amesto restore to the spouses Cadavedo, from October 10, 1988 until final
restoration of the premises.

The respondents appealed the case before the CA.

The Ruling of the CA

In its decision12 dated October 11, 2005, the CA reversed and set aside the
RTC’s September 17, 1996 decision and maintained the partition and
distribution of the subject lot under the compromise agreement. In so ruling,
the CA noted the following facts: (1) Atty. Lacaya served as the spouses
Cadavedo’s counsel from 1969 until 1988,when the latter filed the present case
against Atty. Lacaya; (2) during the nineteen (19) years of their attorney-client
relationship, Atty. Lacaya represented the spouses Cadavedo in three civil
cases –Civil Case No. 1721, Civil Case No. 3352, and Civil Case No. 3443; (3)
the first civil case lasted for twelve years and even reached this Court, the
second civil case lasted for seven years, while the third civil case lasted for six
years and went all the way to the CA;(4) the spouses Cadavedo and Atty.
Lacaya entered into a compromise agreement concerning the division of the
subject lot where Atty. Lacaya ultimately agreed to acquire a smaller portion;
(5) the MTC approved the compromise agreement; (6) Atty. Lacaya defrayed all
of the litigation expenses in Civil Case No. 1721; and (7) the spouses Cadavedo
expressly recognized that Atty. Lacaya served them in several cases.

Considering these established facts and consistent with Canon 20.01 of the
Code of Professional Responsibility (enumerating the factors that should guide
the determination of the lawyer’s fees), the CA ruled that the time spent and
the extent of the services Atty. Lacaya rendered for the spouses Cadavedo in
the three cases, the probability of him losing other employment resulting from
his engagement, the benefits resulting to the spouses Cadavedo, and the
contingency of his fees justified the compromise agreement and rendered the
agreed fee under the compromise agreement reasonable.

The Petition

In the present petition, the petitioners essentially argue that the CA erred in:
(1) granting the attorney’s fee consisting of one-half or 10.5383 hectares of the
subject lot to Atty. Lacaya, instead of confirming the agreed contingent
attorney’s fees of ₱2,000.00; (2) not holding the respondents accountable for
the produce, harvests and income of the 10.5383-hectare portion (that they
obtained from the spouses Cadavedo) from 1988 up to the present; and (3)
upholding the validity of the purported oral contract between the spouses
Cadavedo and Atty. Lacaya when it was champertous and dealt with property
then still subject of Civil Case No. 1721.13

The petitioners argue that stipulations on a lawyer’s compensation for

professional services, especially those contained in the pleadings filed in
courts, control the amount of the attorney’s fees to which the lawyer shall be
entitled and should prevail over oral agreements. In this case, the spouses
Cadavedo and Atty. Lacaya agreed that the latter’s contingent attorney’s fee
was ₱2,000.00 in cash, not one-half of the subject lot. This agreement was
clearly stipulated in the amended complaint filed in Civil Case No. 1721. Thus,
Atty. Lacaya is bound by the expressly stipulated fee and cannot insist on
unilaterally changing its terms without violating their contract.

The petitioners add that the one-half portion of the subject lot as Atty. Lacaya’s
contingent attorney’s fee is excessive and unreasonable. They highlight the
RTC’s observations and argue that the issues involved in Civil Case No. 1721,
pursuant to which the alleged contingent fee of one-half of the subject lot was
agreed by the parties, were not novel and did not involve difficult questions of
law; neither did the case require much of Atty. Lacaya’s time, skill and effort in
research. They point out that the two subsequent civil cases should not be
considered in determining the reasonable contingent fee to which Atty. Lacaya
should be entitled for his services in Civil Case No. 1721,as those cases had
not yet been instituted at that time. Thus, these cases should not be
considered in fixing the attorney’s fees. The petitioners also claim that the
spouses Cadavedo concluded separate agreements on the expenses and costs
for each of these subsequent cases, and that Atty. Lacaya did not even record
any attorney’s lien in the spouses Cadavedo’s TCT covering the subject lot.

The petitioners further direct the Court’s attention to the fact that Atty.
Lacaya,in taking over the case from Atty. Bandal, agreed to defray all of the
litigation expenses in exchange for one-half of the subject lot should they win
the case. They insist that this agreement is a champertous contract that is
contrary to public policy, prohibited by law for violation of the fiduciary
relationship between a lawyer and a client.

Finally, the petitioners maintain that the compromise agreement in Civil Case
No. 215 (ejectment case) did not novate their original stipulated agreement on
the attorney’s fees. They reason that Civil Case No. 215 did not decide the issue
of attorney’s fees between the spouses Cadavedo and Atty. Lacaya for the
latter’s services in Civil Case No. 1721.

The Case for the Respondents

In their defense,14 the respondents counter that the attorney’s fee stipulated in
the amended complaint was not the agreed fee of Atty. Lacaya for his legal
services. They argue that the questioned stipulation for attorney’s fees was in
the nature of a penalty that, if granted, would inure to the spouses Cadavedo
and not to Atty. Lacaya.

The respondents point out that: (1) both Vicente and Atty. Lacaya caused the
survey and subdivision of the subject lot immediately after the spouses
Cadavedo reacquired its possession with the RTC’s approval of their motion for
execution of judgment in Civil Case No. 1721; (2) Vicente expressly ratified and
confirmed the agreement on the contingent attorney’s fee consisting of one-half
of the subject lot; (3) the MTC in Civil Case No. 215 (ejectment case) approved
the compromise agreement; (4) Vicente is the legally designated administrator
of the conjugal partnership, hence the compromise agreement ratifying the
transfer bound the partnership and could not have been invalidated by the
absence of Benita’s acquiescence; and (5) the compromise agreement merely
inscribed and ratified the earlier oral agreement between the spouses Cadavedo
and Atty. Lacaya which is not contrary to law, morals, good customs, public
order and public policy.

While the case is pending before this Court, Atty. Lacaya died.15 He was
substituted by his wife -Rosa -and their children –Victoriano D.L. Lacaya, Jr.,
Rosevic Lacaya-Ocampo, Reymar L. Lacaya, Marcelito L. Lacaya, Raymundito
L. Lacaya, Laila Lacaya-Matabalan, Marivic Lacaya-Barba, Rosalie L. Lacaya
and Ma. Vic-Vic Lacaya-Camaongay.16

The Court’s Ruling

We resolve to GRANT the petition.

The subject lot was the core of four successive and overlapping cases prior to
the present controversy. In three of these cases, Atty. Lacaya stood as the
spouses Cadavedo’s counsel. For ease of discussion, we summarize these cases
(including the dates and proceedings pertinent to each) as follows:

Civil Case No. 1721 – Cadavedo v. Ames (Sum of money and/or voiding of
contract of sale of homestead), filed on January 10, 1967. The writ of execution
was granted on October 16, 1981.

Civil Case No. 3352 – Ames v. Cadavedo (Quieting of Title and/or Enforcement
of Civil Rights due Planters in Good Faith with Application for Preliminary
injunction), filed on September 23, 1981.

Civil Case No. 3443 – Cadavedo v. DBP (Action for Injunction with Preliminary
Injunction), filed on May 21, 1982.

Civil Case No. 215 –Atty. Lacaya v. Vicente Cadavedo, et. al. (Ejectment Case),
filed between the latter part of 1981 and early part of 1982. The parties
executed the compromise agreement on May 13, 1982.

Civil Case No. 4038 –petitioners v. respondents (the present case).

The agreement on attorney’s fee

consisting of one-half of the subject
lot is void; the petitioners are entitled
to recover possession

The core issue for our resolution is whether the attorney’s fee consisting of one-
half of the subject lot is valid and reasonable, and binds the petitioners. We
rule in the NEGATIVE for the reasons discussed below.

A. The written agreement providing for

a contingent fee of ₱2,000.00 should prevail
over the oral agreement providing for one-
half of the subject lot

The spouses Cadavedo and Atty. Lacaya agreed on a contingent fee of

₱2,000.00 and not, as asserted by the latter, one-half of the subject lot. The
stipulation contained in the amended complaint filed by Atty. Lacaya clearly
stated that the spouses Cadavedo hired the former on a contingency basis; the
Spouses Cadavedo undertook to pay their lawyer ₱2,000.00 as attorney’s fees
should the case be decided in their favor.

Contrary to the respondents’ contention, this stipulation is not in the nature of

a penalty that the court would award the winning party, to be paid by the
losing party. The stipulation is a representation to the court concerning the
agreement between the spouses Cadavedo and Atty. Lacaya, on the latter’s
compensation for his services in the case; it is not the attorney’s fees in the
nature of damages which the former prays from the court as an incident to the
main action.

At this point, we highlight that as observed by both the RTC and the CA and
agreed as well by both parties, the alleged contingent fee agreement consisting
of one-half of the subject lot was not reduced to writing prior to or, at most, at
the start of Atty. Lacaya’s engagement as the spouses Cadavedo’s counsel in
Civil Case No. 1721.An agreement between the lawyer and his client, providing
for the former’s compensation, is subject to the ordinary rules governing
contracts in general. As the rules stand, controversies involving written and
oral agreements on attorney’s fees shall be resolved in favor of the
former.17 Hence, the contingency fee of ₱2,000.00 stipulated in the amended
complaint prevails over the alleged oral contingency fee agreement of one-half
of the subject lot.

B. The contingent fee agreement between

the spouses Cadavedo and Atty. Lacaya,
awarding the latter one-half of the subject
lot, is champertous

Granting arguendo that the spouses Cadavedo and Atty. Lacaya indeed entered
into an oral contingent fee agreement securing to the latter one-half of the
subject lot, the agreement is nevertheless void.

In their account, the respondents insist that Atty. Lacaya agreed to represent
the spouses Cadavedo in Civil Case No. 1721 and assumed the litigation
expenses, without providing for reimbursement, in exchange for a contingency
fee consisting of one-half of the subject lot. This agreement is champertous and
is contrary to public policy.18

Champerty, along with maintenance (of which champerty is an aggravated

form), is a common law doctrine that traces its origin to the medieval
period.19 The doctrine of maintenance was directed "against wanton and in
officious intermeddling in the disputes of others in which the intermeddler has
no interest whatever, and where the assistance rendered is without justification
or excuse."20 Champerty, on the other hand, is characterized by "the receipt of
a share of the proceeds of the litigation by the intermeddler."21 Some common
law court decisions, however, add a second factor in determining champertous
contracts, namely, that the lawyer must also, "at his own expense maintain,
and take all the risks of, the litigation."22

The doctrines of champerty and maintenance were created in response "to

medieval practice of assigning doubtful or fraudulent claims to persons of
wealth and influence in the expectation that such individuals would enjoy
greater success in prosecuting those claims in court, in exchange for which
they would receive an entitlement to the spoils of the litigation."23 "In order to
safeguard the administration of justice, instances of champerty and
maintenance were made subject to criminal and tortuous liability and a
common law rule was developed, striking down champertous agreements and
contracts of maintenance as being unenforceable on the grounds of public
policy."24

In this jurisdiction, we maintain the rules on champerty, as adopted from

American decisions, for public policy considerations.25 As matters currently
stand, any agreement by a lawyer to "conduct the litigation in his own account,
to pay the expenses thereof or to save his client therefrom and to receive as his
fee a portion of the proceeds of the judgment is obnoxious to the law."26 The
rule of the profession that forbids a lawyer from contracting with his client for
part of the thing in litigation in exchange for conducting the case at the
lawyer’s expense is designed to prevent the lawyer from acquiring an interest
between him and his client. To permit these arrangements is to enable the
lawyer to "acquire additional stake in the outcome of the action which might
lead him to consider his own recovery rather than that of his client or to accept
a settlement which might take care of his interest in the verdict to the sacrifice
of that of his client in violation of his duty of undivided fidelity to his client’s
cause."27

In Bautista v. Atty. Gonzales,28 the Court struck down the contingent fee
agreement between therein respondent Atty. Ramon A. Gonzales and his client
for being contrary to public policy. There, the Court held that an
reimbursement of litigation expenses paid by the former is against public
policy, especially if the lawyer has agreed to carry on the action at his expense
in consideration of some bargain to have a part of the thing in dispute. It
violates the fiduciary relationship between the lawyer and his client.29

In addition to its champertous character, the contingent fee arrangement in

this case expressly transgresses the Canons of Professional Ethics and,
impliedly, the Code of Professional Responsibility.30 Under Rule 42 of the
Canons of Professional Ethics, a lawyer may not properly agree with a client
that the lawyer shall pay or beat the expense of litigation.31 The same reasons
discussed above underlie this rule.
C. The attorney’s fee consisting of
one-half of the subject lot is excessive
and unconscionable

We likewise strike down the questioned attorney’s fee and declare it void for
being excessive and unconscionable.1âwphi1The 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 Cadavedo’s counsel in the two
subsequent cases did not and could not otherwise justify an attorney’s fee of
one-half of the subject lot. As assertedby the petitioners, the spouses Cadavedo
and Atty. Lacaya made separate arrangements for the costs and expenses
foreach of these two cases. Thus, the expenses for the two subsequent cases
had been considered and taken cared of Based on these considerations, we
therefore find one-half of the subject lot as attorney’s fee excessive and
unreasonable.

D. Atty. Lacaya’s acquisition of

the one-half portion contravenes
Article 1491 (5) of the Civil Code

Article 1491 (5) of the Civil Code forbids lawyers from acquiring, by purchase or
assignment, the property that has been the subject of litigation in which they
have taken part by virtue of their profession.32 The same proscription is
provided under Rule 10 of the Canons of Professional Ethics.33

A thing is in litigation if there is a contest or litigation over it in court or when it

is subject of the judicial action.34Following this definition, we find that the
subject lot was still in litigation when Atty. Lacaya acquired the disputed one-
half portion. We note in this regard the following established facts:(1)on
September 21, 1981, Atty. Lacaya filed a motion for the issuance of a writ of
execution in Civil Case No. 1721; (2) on September 23, 1981, the spouses Ames
filed Civil Case No. 3352 against the spouses Cadavedo; (3)on October 16,
1981, the RTC granted the motion filed for the issuance of a writ of execution
in Civil Case No. 1721 and the spouses Cadavedo took possession of the
subject lot on October 24, 1981; (4) soon after, the subject lot was surveyed
and subdivided into two equal portions, and Atty. Lacaya took possession of
one of the subdivided portions; and (5) on May 13, 1982, Vicente and Atty.
Lacaya executed the compromise agreement.

From these timelines, whether by virtue of the alleged oral contingent fee
agreement or an agreement subsequently entered into, Atty. Lacaya acquired
the disputed one-half portion (which was after October 24, 1981) while Civil
Case No. 3352 and the motion for the issuance of a writ of execution in Civil
Case No. 1721were already pending before the lower courts. Similarly, the
compromise agreement, including the subsequent judicial approval, was
effected during the pendency of Civil Case No. 3352. In all of these, the
relationship of a lawyer and a client still existed between Atty. Lacaya and the
spouses Cadavedo.

Thus, whether we consider these transactions –the transfer of the disputed

one-half portion and the compromise agreement –independently of each other
or resulting from one another, we find them to be prohibited and void35 by
reason of public policy.36 Under Article 1409 of the Civil Code, contracts which
are contrary to public policy and those expressly prohibited or declared void by
law are considered in existent and void from the beginning.37

What did not escape this Court’s attention is the CA’s failure to note that the
transfer violated the provisions of Article 1491(5) of the Civil Code, although it
recognized the concurrence of the transfer and the execution of the
compromise agreement with the pendency of the two civil cases subsequent to
Civil Case No. 1721.38 In reversing the RTC ruling, the CA gave weight to the
compromise agreement and in so doing, found justification in the unproved
oral contingent fee agreement.

While contingent fee agreements are indeed recognized in this jurisdiction as a

valid exception to the prohibitions under Article 1491(5) of the Civil
Code,39 contrary to the CA’s position, however, this recognition does not apply
to the present case. A contingent fee contract is an agreement in writing where
the fee, often a fixed percentage of what may be recovered in the action, is
made to depend upon the success of the litigation.40 The payment of the
contingent fee is not made during the pendency of the litigation involving the
client’s property but only after the judgment has been rendered in the case
handled by the lawyer.41

In the present case, we reiterate that the transfer or assignment of the disputed
one-half portion to Atty. Lacaya took place while the subject lot was still under
litigation and the lawyer-client relationship still existed between him and the
spouses Cadavedo. Thus, the general prohibition provided under Article 1491
of the Civil Code, rather than the exception provided in jurisprudence, applies.
The CA seriously erred in upholding the compromise agreement on the basis of
the unproved oral contingent fee agreement.
Notably, Atty. Lacaya, in undertaking the spouses Cadavedo’s cause pursuant
to the terms of the alleged oral contingent fee agreement, in effect, became a
co-proprietor having an equal, if not more, stake as the spouses Cadavedo.
Again, this is void by reason of public policy; it undermines the fiduciary
relationship between him and his clients.42

E.The compromise agreement could not

validate the void oral contingent fee
agreement; neither did it supersede the
written contingent fee agreement

The compromise agreement entered into between Vicente and Atty. Lacaya in
Civil Case No. 215 (ejectment case) was intended to ratify and confirm Atty.
Lacaya’s acquisition and possession of the disputed one-half portion which
were made in violation of Article 1491 (5) of the Civil Code. As earlier
discussed, such acquisition is void; the compromise agreement, which had for
its object a void transaction, should be void.

A contract whose cause, object or purpose is contrary to law, morals, good

customs, public order or public policy is in existent and void from the
beginning.43 It can never be ratified44 nor the action or defense for the
declaration of the in existence of the contract prescribe;45 and any contract
directly resulting from such illegal contract is likewise void and in existent.46

Consequently, the compromise agreement did not supersede the written

contingent fee agreement providing for attorney’s fee of ₱2,000.00; neither did
it preclude the petitioners from questioning its validity even though Vicente
might have knowingly and voluntarily acquiesced thereto and although the
MTC approved it in its June 10, 1982 decision in the ejectment case. The MTC
could not have acquired jurisdiction over the subject matter of the void
compromise agreement; its judgment in the ejectment case could not have
attained finality and can thus be attacked at any time. Moreover, an ejectment
case concerns itself only with the issue of possession de facto; it will not
preclude the filing of a separate action for recovery of possession founded on
ownership. Hence, contrary to the CA’s position, the petitioners–in filing the
present action and praying for, among others, the recovery of possession of the
disputed one-half portion and for judicial determination of the reasonable fees
due Atty. Lacaya for his services –were not barred by the compromise
agreement.

Atty. Lacaya is entitled to receive attorney’s fees on a quantum meruit basis

In view of their respective assertions and defenses, the parties, in effect,

impliedly set aside any express stipulation on the attorney’s fees, and the
petitioners, by express contention, submit the reasonableness of such fees to
the court’s discretion. We thus have to fix the attorney’s fees on a quantum
meruit basis.

"Quantum meruit—meaning ‘as much as he deserves’—is used as basis for

determining a lawyer’s professional fees in the absence of a contract x x x
taking into account certain factors in fixing the amount of legal fees."47 "Its
essential requisite is the acceptance of the benefits by one sought to be charged
for the services rendered under circumstances as reasonably to notify him that
the lawyer performing the task was expecting to be paid compensation"48 for it.
The doctrine of quantum meruit is a device to prevent undue enrichment based
on the equitable postulate that it is unjust for a person to retain benefit
without paying for it.49

Under Section 24, Rule 138 of the Rules of Court50 and Canon 20 of the Code
of Professional Responsibility,51factors such as the importance of the subject
matter of the controversy, the time spent and the extent of the services
rendered, the customary charges for similar services, the amount involved in
the controversy and the benefits resulting to the client from the service, to
name a few, are considered in determining the reasonableness of the fees to
which a lawyer is entitled.

In the present case, the following considerations guide this Court in

considering and setting Atty. Lacaya’s fees based on quantum meruit: (1) the
questions involved in these civil cases were not novel and did not require of
Atty. Lacaya considerable effort in terms of time, skill or the performance of
extensive research; (2) Atty. Lacaya rendered legal services for the Spouses
Cadavedo in three civil cases beginning in 1969 until 1988 when the
petitioners filed the instant case; (3) the first of these civil cases (Cadavedo v.
Ames) lasted for twelve years and reaching up to this Court; the second (Ames
v. Cadavedo) lasted for seven years; and the third (Cadavedo and Lacaya v.
DBP) lasted for six years, reaching up to the CA; and (4) the property subject of
these civil cases is of a considerable size of 230,765 square meters or 23.0765
hectares.

All things considered, we hold as fair and equitable the RTC’s considerations in
appreciating the character of the services that Atty. Lacaya rendered in the
three cases, subject to modification on valuation. We believe and so hold that
the respondents are entitled to two (2) hectares (or approximately one-tenth
[1/10] of the subject lot), with the fruits previously received from the disputed
one-half portion, as attorney’s fees. They shall return to the petitioners the
remainder of the disputed one-half portion.

The allotted portion of the subject lot properly recognizes that litigation should
be for the benefit of the client, not the lawyer, particularly in a legal situation
when the law itself holds clear and express protection to the rights of the client
to the disputed property (a homestead lot). Premium consideration, in other
words, is on the rights of the owner, not on the lawyer who only helped the
owner protect his rights. Matters cannot be the other way around; otherwise,
the lawyer does indeed effectively acquire a property right over the disputed
property. If at all, due recognition of parity between a lawyer and a client
should be on the fruits of the disputed property, which in this case, the Court
properly accords.

WHEREFORE, in view of these considerations, we hereby GRANT the petition.

We AFFIRM the decision dated September 17, 1996 and the resolution dated
December 27, 1996of the Regional Trial Court of Dipolog City, Branch 10,in
Civil Case No. 4038, with the MODIFICATION that the respondents, the
spouses Victorino (Vic) T. Lacaya and Rosa Legados, are entitled to two (2)
hectares (or approximately one-tenth [1/10] of the subject lot) as attorney’s
fees. The fruits that the respondents previously received from the disputed one-
half portion shall also form part of the attorney’s fees. We hereby ORDER the
respondents to return to the petitioners the remainder of the 10.5383-hectare
portion of the subject lot that Atty. Vicente Lacaya acquired pursuant to the
compromise agreement.

SO ORDERED.

G.R. No. 183952 September 9, 2013

CZARINA T. MALVAR, Petitioner,

vs.
KRAFT FOOD PHILS., INC. and/or BIENVENIDO BAUTISTA, KRAFT FOODS
INTERNATIONAL, Respondents.

DECISION

BERSAMIN, J.:

Although the practice of law is not a business, an attorney is entitled to be

properly compensated for the professional services rendered for the client, who
is bound by her express agreement to duly compensate the attorney. The client
may not deny her attorney such just compensation.

The Case

The case initially concerned the execution of a final decision of the Court of
Appeals (CA) in a labor litigation, but has mutated into a dispute over
attorney's fees between the winning employee and her attorney after she
entered into a compromise agreement with her employer under circumstances
that the attorney has bewailed as designed to prevent the recovery of just
professional fees.
Antecedents

On August 1, 1988, Kraft Foods (Phils.), Inc. (KFPI) hired Czarina Malvar
(Malvar) as its Corporate Planning Manager. From then on, she gradually rose
from the ranks, becoming in 1996 the Vice President for Finance in the
Southeast Asia Region of Kraft Foods International (KFI),KFPI’s mother
company. On November 29, 1999, respondent Bienvenido S. Bautista, as
Chairman of the Board of KFPI and concurrently the Vice President and Area
Director for Southeast Asia of KFI, sent Malvar a memo directing her to explain
why no administrative sanctions should be imposed on her for possible breach
of trust and confidence and for willful violation of company rules and
regulations. Following the submission of her written explanation, an
investigating body was formed. In due time, she was placed under preventive
suspension with pay. Ultimately, on March 16, 2000, she was served a notice
of termination.

Obviously aggrieved, Malvar filed a complaint for illegal suspension and illegal
dismissal against KFPI and Bautista in the National Labor Relations
Commission (NLRC). In a decision dated April 30, 2001,1 the Labor Arbiter
found and declared her suspension and dismissal illegal, and ordered her
reinstatement, and the payment of her full backwages, inclusive of allowances
and other benefits, plus attorney’s fees.

On October 22, 2001, the NLRC affirmed the decision of the Labor Arbiter but
additionally ruled that Malvar was entitled to "any and all stock options and
bonuses she was entitled to or would have been entitled to had she not been
illegally dismissed from her employment," as well as to moral and exemplary
damages.2

KFPI and Bautista sought the reconsideration of the NLRC’s decision, but the
NLRC denied their motion to that effect.3

Undaunted, KFPI and Bautista assailed the adverse outcome before the CA on
certiorari (CA-G.R. SP No. 69660), contending that the NLRC thereby
committed grave abuse of discretion. However, the petition for certiorari was
dismissed by the CA on December 22, 2004, but with the CA reversing the
order of reinstatement and instead directing the payment of separation pay to
Malvar, and also reducing the amounts awarded as moral and exemplary
damages.4

After the judgment in her favor became final and executory on March14, 2006,
Malvar moved for the issuance of a writ of execution.5 The Executive Labor
Arbiter then referred the case to the Research and Computation Unit (RCU) of
the NLRC for the computation of the monetary awards under the judgment.
The RCU’s computation ultimately arrived at the total sum of ₱41,627,593.75.6
On November 9, 2006, however, Labor Arbiter Jaime M. Reyno issued an
order,7 finding that the RCU’s computation lacked legal basis for including the
salary increases that the decision promulgated in CA-G.R. SP No. 69660 did
not include. Hence, Labor Arbiter Reyno reduced Malvar’s total monetary
award to ₱27,786,378.11, viz:

WHEREFORE, premises considered, in so far as the computation of

complainant’s other benefits and allowances are concerned, the same are in
order. However, insofar as the computation of her backwages and other
monetary benefits (separation pay, unpaid salary for January 1 to 26,
2005,holiday pay, sick leave pay, vacation leave pay, 13th month pay), the
same are hereby recomputed as follows:

1. Separation Pay
8/1/88-1/26/05 = 16 yrs
₱344,575.83 x 16 = 5,513,213.28
2. Unpaid Salary
1/1-26/05 = 87 mos.
₱344,575.83 x 87 = 299,780.97
3. Holiday Pay
4/1/00-1/26/05 = 55 holidays
₱4,134,910/12 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
₱344,575.88/20.83 x 15 days x 6 = 1,488,805.79
Year 2005
₱344,575.83/20.83 x 15/12 x 1 20,677.86 1,509,483.65
6. Vacation Leave Pay
Year 1999 to 2004 = 6 years
₱344,575.88/20.83 x 22 days x 6 = 2,183,581.83
Year 2005
₱344,575.83/20.83 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
Sytian’s 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
Attorney’s 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 April19, 2007,
rendered its decision setting aside Labor Arbiter Reyno’s November 9, 2006
order, and adopting the computation by the RCU.8

In its resolution dated May 31, 2007,9 the NLRC denied the respondents’
motion for reconsideration.

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 37,391,696.06.10

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 NLRC’s 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 NLRC’s decision.11

On April 17, 2008, the CA rendered its decision in CA-G.R. SP No.

99865,12 disposing thusly:

WHEREFORE, premises considered, the herein Petition is GRANTED and the

19 April 2007 Decision of the NLRC and the 31May 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 respondent’s allowances for car maintenance and gasoline are
likewise DELETED unless private respondent proves, by appropriate receipts,
her entitlement thereto.

With respect to the Motion to Exclude the Undisputed Amount of

₱14,252,192.12 from the coverage of the Writ of Preliminary Injunction and to
order its immediate release, the same is hereby GRANTED for reasons stated
therefor, which amount shall be deducted from the amount to be given to
private respondent after proper computation.

As regards the Motions for Reconsideration of the Resolution denying the

Motion for Voluntary Inhibition and the Omnibus Motion dated 30 October
2007, both motions are hereby DENIED for lack of merit.

SO ORDERED.13

Malvar sought reconsideration, but the CA denied her motion on July30,

2008.14

Aggrieved, Malvar appealed to the Court, assailing the CA’s decision.

On December 9, 2010, while her appeal was pending in this Court, Malvar and
the respondents entered into a compromise agreement, the pertinent
dispositive portion of which is quoted as follows:

NOW, THEREFORE, for and in consideration of the covenants and

understanding between the parties herein, the parties hereto have entered into
this Agreement on the following terms and conditions:

1. Simultaneously upon execution of this Agreement in the presence of Ms.

Malvar’s attorney, KFPI shall pay Ms. Malvar the amount of Philippine Pesos
Forty Million (Php 40,000,000.00), which is in addition to the Philippine Pesos
Fourteen Million Two Hundred Fifty-Two Thousand One Hundred Ninety-Two
and Twelve Centavos (Php14,252,192.12) already paid to and received by Ms.
Malvar from KFPI in August2008 (both amounts constituting the "Compromise
Payment").

The Compromise Payment includes full and complete payment and settlement
of Ms. Malvar’s salaries and wages up to the last day of her employment,
allowances, 13th and 14th month pay, cash conversion of her accrued
vacation, sick and emergency leaves, separation pay, retirement pay and such
other benefits, entitlements, claims for stock, stock options or other forms of
equity compensation whether vested or otherwise and claims of any and all
kinds against KFPI and KFI and Altria Group, Inc., their predecessors-in-
interest, their stockholders, officers, directors, agents or successors-in-interest,
affiliates and subsidiaries, up to the last day of the aforesaid cessation of her
employment.

2. In consideration of the Compromise Payment, Ms. Malvar hereby freely and

voluntarily releases and forever discharges KFPI and KFI and Altria Group,
Inc., their predecessors or successors-in-interest, stockholders, officers,
including Mr. Bautista who was impleaded in the Labor Case as a party
respondent, directors, agents or successors-in-interest, affiliates and
subsidiaries from any and all manner of action, cause of action, sum of money,
damages, claims and demands whatsoever in law or in equity which Ms.
Malvar or her heirs, successors and assigns had, or now have against KFPI
and/or KFI and/or Altria Group, Inc., including but not limited to, unpaid
wages, salaries, separation pay, retirement pay, holiday pay, allowances, 13th
and 14th month pay, claims for stock, stock options or other forms of equity
compensation whether vested or otherwise whether arising from her
employment contract, company grant, present and future contractual
commitments, company policies or practices, or otherwise, in connection with
Ms. Malvar’s employment with KFPI.15

xxxx
Thereafter, Malvar filed an undated Motion to Dismiss/Withdraw
Case,16 praying that the appeal be immediately dismissed/withdrawn in view of
the compromise agreement, and that the case be considered closed and
terminated.

Intervention

Before the Court could act on Malvar’s Motion to Dismiss/Withdraw Case, the
Court received on February 15, 2011 a so-called Motion for Intervention to
Protect Attorney’s Rights17 from The Law Firm of Dasal, Llasos and Associates,
through its Of Counsel Retired Supreme Court Associate Justice Josue N.
Bellosillo18 (Intervenor), whereby the Intervenor sought, among others, that
both Malvar and KFPI be held and ordered to pay jointly and severally the
Intervenor’s contingent fees.

The Motion for Intervention relevantly averred:

xxxx

Lawyers, oftentimes, are caricatured as alligators or some other specie of

voracious carnivore; perceived also as leeches sucking dry the blood of their
adversaries, and even their own clients they are sworn to serve and protect! As
we lay down the facts in this case, this popular, rather unpopular, perception
will be shown wrong. This case is a reversal of this perception.

xxxx

Here, it is the lawyer who is eaten up alive by the warring but conspiring
litigants who finally settled their differences without the knowledge, much less,
participation, of Petitioner’s counsel that labored hard and did everything to
champion her cause.

xxxx

This Motion for Intervention will illustrate an aberration from the norm where
the lawyer ends up seeking protection from his client’s and Respondents’
indecent and cunning maneuverings. x x x.

xxxx

On 18 March 2008 Petitioner engaged the professional services of Intervenor x

x x on a contingency basis whereby the former agreed in writing to pay the
latter contingency fees amounting to almost ₱19,600,000.00 (10% of her total
claim of almost ₱196,000,000.00 in connection with her labor case against
Respondents. x x x.
 xxxx

According to their agreement (Annex "A"), Petitioner bound herself to pay

Intervenor contingency fees as follows (a) 10% of ₱14,252, 192.12 upon its
collection; (b) 10% of the remaining balance of ₱41,627,593.75; and (c)10% of
the value of the stock options Petitioner claims to be entitled to, or roughly
₱154,000,000.00 as of April 2008.

xxxx

Intervenor’s efforts resulted in the award and partial release of Petitioner’s

claim amounting to ₱14,252,192.12 out of which Petitioner paid Intervenor
10% or ₱1,425,219.21 as contingency fees pursuant to their engagement
agreement (Annex "A"). Copy of the check payment of Petitioner payable to
Intervenor’s Of Counsel is attached as Annex "C".

xxxx

On 12 September 2008 Intervenor filed an exhaustive Petition for Review with

the Supreme Court containing 70 pages, including its Annexes "A" to "R", or a
total of 419 pages against Respondents to collect on the balance of Petitioner’s
claims amounting to at least ₱27,000,000.00 and ₱154,000,000.00 the latter
representing the estimated value of Petitioner’s stock options as of April 2008.

xxxx

On 15 January 2009 Respondents filed their Comment to the Petition for

Review.

xxxx

On 13 April 2009 Intervenor, in behalf of Petitioner, filed its Reply to the

Comment.

xxxx

All the pleadings in this Petition have already been submitted on time with
nothing more to be done except to await the Resolution of this Honorable Court
which, should the petition be decided in her favor, Petitioner would stand to
gain ₱182,000,000.00, more or less, which victory would be largely through the
efforts of Intervenor.19 (Bold emphasis supplied).

xxxx

It appears that in July 2009, to the Intervenor’s surprise, Malvar

unceremoniously and without any justifiable reason terminated its legal service
and required it to withdraw from the case.20 Hence, on October 5,2009, the
Intervenor reluctantly filed a Manifestation (With Motion to Withdraw as
Counsel for Petitioner),21 in which it spelled out: (a) the terms of and conditions
of the Intervenor’s engagement as counsel; (b) the type of legal services already
rendered by the Intervenor for Malvar; (c) the absence of any legitimate reason
for the termination of their attorney-client relationship; (d) the reluctance of the
Intervenor to withdraw as Malvar’s counsel; and (e) the desire of the Intervenor
to assert and claim its contingent fee notwithstanding its withdrawal as
counsel. The Intervenor prayed that the Court furnish it with copies of
resolutions, decisions and other legal papers issued or to be issued after its
withdrawal as counsel of Malvar in the interest of protecting its interest as her
attorney.

The Intervenor indicated that Malvar’s precipitate action had baffled, shocked
and even embarrassed the Intervenor, because it had done everything legally
possible to serve and protect her interest. It added that it could not recall any
instance of conflict or misunderstanding with her, for, on the contrary, she had
even commended it for its dedication and devotion to her case through her
following letter to Justice Bellosillo, to wit:

July 16, 2008

Justice Josue Belocillo (sic)

Dear Justice,

It is almost morning of July 17 as I write this letter to you. Let me first thank
you for your continued and unrelenting lead, help and support in the case. You
have been our "rock" as far as this case is concerned. Jun and I are forever
grateful to you for all your help. I just thought I’d express to you what is in the
innermost of my heart as we proceed in the case. It has been around four
months now since we met mid-March early this year.

The most important and immediate aspect of the case at this time for me is the
collection of the undisputed amount of Pesos 14million which the Court has
clearly directed and ordered the NLRC to execute. The only impending
constraint for NLRC to execute and collect this amount from the already
garnished amount of Pesos 41 million at Citibank is the MR of Kraft on the
Order of the Court (CA) to execute collection. We need to get a denial of this
motion for NLRC to execute immediately. We already obtained commitment
from NLRC that all it needed to execute collection is the denial of the MR. Jun
and I applaud your initiative and efforts to mediate with Romulo on potential
settlement. However, as I expressed to you in several instances, I have serious
reservations on the willingness of Romulo to settle within reasonable amounts
specifically as it relates to the stock options. Let us continue to pursue this
route vigorously while not setting aside our efforts to influence the CA to DENY
their Motion on the Undisputed amount of Pesos 14million.

At this point, I cannot overemphasize to you our need for funds. We have made
financial commitments that require us to raise some amount. But we can
barely meet our day to day business and personal requirements given our
current situation right now.

Thank you po for your understanding and support.22

According to the Intervenor, it was certain that the compromise agreement was
authored by the respondents to evade a possible loss of ₱182,000,000.00 or
more as a result of the labor litigation, but considering the Intervenor’s interest
in the case as well as its resolve in pursuing Malvar’s interest, they saw the
Intervenor as a major stumbling block to the compromise agreement that it
was then brewing with her. Obviously, the only way to remove the Intervenor
was to have her terminate its services as her legal counsel. This prompted the
Intervenor to bring the matter to the attention of the Court to enable it to
recover in full its compensation based on its written agreement with her,
averring thus:

xxxx

28. Upon execution of the Compromise Agreement and pursuant thereto,

Petitioner immediately received (supposedly) from Respondents₱40,000,000.00.
But despite the settlement between the parties, Petitioner did not pay
Intervenor its just compensation as set forth in their engagement agreement;
instead, she immediately moved to Dismiss/Withdraw the Present Petition.

29. To parties’ minds, with the dismissal by Petitioner of Intervenor as her

counsel, both Petitioner and Respondents probably thought they would be able
to settle the case without any cost to them, with Petitioner saving on
Intervenor’s contingent fees while Respondents able to take advantage of the
absence of Intervenor in determining the settlement price.

30. The parties cannot be any more mistaken. Pursuant to the Second
Paragraph of Section 26, Rule 138, of the Revised Rules of Court quoted in
paragraph 3 hereof, Intervenor is still entitled to recover from Petitioner the full
compensation it deserves as stipulated in its contract.

31. All the elements for the full recovery of Intervenor’s compensation are
present. First, the contract between the Intervenor and Petitioner is reduced
into writing. Second, Intervenor is dismissed without justifiable cause and at
the stage of proceedings where there is nothing more to be done but to await
the Decision or Resolution of the Present Petition.23
 xxxx

In support of the Motion for Intervention, the Intervenor cites the rulings in Aro
v. Nañawa24 and Law Firm of Raymundo A. Armovit v. Court of
Appeals,25 particularly the following passage:

x x x. While We here reaffirm the rule that "the client has an undoubted right
to compromise a suit without the intervention of his lawyer," We hold that
when such compromise is entered into in fraud of the lawyer, with intent to
deprive him of the fees justly due him, the compromise must be subject to the
said fees and that when it is evident that the said fraud is committed in
confabulation with the adverse party who had knowledge of the lawyer’s
contingent interest or such interest appears of record and who would benefit
under such compromise, the better practice is to settle the matter of the
attorney’s fees in the same proceeding, after hearing all the affected parties and
without prejudice to the finality of the compromise agreement in so far as it
does not adversely affect the right of the lawyer.26 x x x.

The Intervenor prays for the following reliefs:

a) Granting the Motion for Intervention to Protect Attorney’s Rights in

favor of the Intervenor;

b) Directing both Petitioner and Respondents jointly and severally to pay

Intervenor its contingent fees;

c) Granting a lien upon all judgments for the payment of money and
executions issued in pursuance of such judgments; and

d) Holding in Abeyance in the meantime the Resolution of the Motion to

Dismiss/Withdraw Case filed by Petitioner and granting the Motion only
after Intervenor has been fully paid its just compensation; and

e) Other reliefs just and equitable.27

Opposing the Motion for Intervention,28 Malvar stresses that there was no truth
to the Intervenor’s claim to defraud it of its professional fees; that the
Intervenor lacked the legal capacity to intervene because it had ceased to exist
after Atty. Marwil N. Llasos resigned from the Intervenor and Atty. Richard B.
Dasal became barred from private practice upon his appointment as head of
the Legal Department of the Small Business Guarantee and Finance
Corporation, a government subsidiary; and that Atty. Llasos and Atty. Dasal
had personally handled her case.

Malvar adds that even assuming, arguendo, that the Intervenor still existed as
a law firm, it was still not entitled to intervene for the following reasons,
namely: firstly, it failed to attend to her multiple pleas and inquiries regarding
the case, as when communications to the Intervenor through text messages
were left unanswered; secondly, maintaining that this was a justifiable cause to
dismiss its services, the Intervenor only heeded her repeated demands to
withdraw from the case when Atty. Dasal was confronted about his
appointment to the government subsidiary; thirdly, it was misleading and
grossly erroneous for the Intervenor to claim that it had rendered to her full
and satisfactory services when the truth was that its participation was strictly
limited to the preparation, finalization and submission of the petition for review
with the Supreme Court; and finally, while the Intervenor withdrew its services
on October 5, 2009, the compromise agreement was executed with the
respondents on December 9,2010 and notarized on December 14, 2010, after
more than a year and two months, dispelling any badge of bad faith on their
end.

On June 21, 2011, the respondents filed their comment to the Intervenor’s
Motion for Intervention.

On November 18, 2011, the Intervenor submitted its position on the

respondent’s comment dated June 21, 2011,29and thereafter the respondents
sent in their reply.30

Issues

The issues for our consideration and determination are two fold, namely: (a)
whether or not Malvar’s motion to dismiss the petition on the ground of the
execution of the compromise agreement was proper; and (b) whether or not the
Motion for Intervention to protect attorney’s rights can prosper, and, if so, how
much could it recover as attorney’s fees.

Ruling of the Court

We shall decide the issues accordingly.

1.

Client’s right to settle litigation

by compromise agreement, and
to terminate counsel; limitations

A compromise agreement is a contract, whereby the parties undertake

reciprocal obligations to avoid litigation, or put an end to one already
commenced.31 The client may enter into a compromise agreement with the
adverse party to terminate the litigation before a judgment is rendered
therein.32 If the compromise agreement is found to be in order and not contrary
to law, morals, good customs and public policy, its judicial approval is in
order.33 A compromise agreement, once approved by final order of the court,
has the force of res judicata between the parties and will not be disturbed
except for vices of consent or forgery.34

A client has an undoubted right to settle her litigation without the intervention
of the attorney, for the former is generally conceded to have exclusive control
over the subject matter of the litigation and may at anytime, if acting in good
faith, settle and adjust the cause of action out of court before judgment, even
without the attorney’s intervention.35 It is important for the client to show,
however, that the compromise agreement does not adversely affect third
persons who are not parties to the agreement.36

By the same token, a client has the absolute right to terminate the attorney-
client relationship at any time with or without cause.37 But this right of the
client is not unlimited because good faith is required in terminating the
relationship. The limitation is based on Article 19 of the Civil Code, which
mandates that "every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith." The right is also subject to the right of the attorney to
be compensated. This is clear from Section 26, Rule 138 of the Rules of Court,
which provides:

Section 26. Change of attorneys. - An attorney may retire at anytime from any
action or special proceeding, by the written consent of his client filed in court.
He may also retire at any time from an action or special proceeding, without
the consent of his client, should the court, on notice to the client and attorney,
and on hearing, determine that he ought to be allowed to retire. In case of
substitution, the name of the attorney newly employed shall be entered on the
docket of the court in place of the former one, and written notice of the change
shall be given to the adverse party.

A client may at any time dismiss his attorney or substitute another in his
place, but if the contract between client and attorney has been reduced to
writing and the dismissal of the attorney was without justifiable cause, he shall
be entitled to recover from the client the full compensation stipulated in the
contract. However, the attorney may, in the discretion of the court, intervene in
the case to protect his rights. For the payment of his compensation the
attorney shall have a lien upon all judgments for the payment of money, and
executions issued in pursuance of such judgment, rendered in the case
wherein his services had been retained by the client. (Bold emphasis supplied)

In fine, it is basic that an attorney is entitled to have and to receive a just and
reasonable compensation for services performed at the special instance and
request of his client. The attorney who has acted in good faith and honesty in
representing and serving the interests of the client should be reasonably
compensated for his service.38
2.

Compromise agreement is to be approved

despite favorable action on the
Intervenor’s Motion for Intervention

On considerations of equity and fairness, the Court disapproves of the

tendencies of clients compromising their cases behind the backs of their
attorneys for the purpose of unreasonably reducing or completely setting to
naught the stipulated contingent fees.39 Thus, the Court grants the Intervenor’s
Motion for Intervention to Protect Attorney’s Rights as a measure of protecting
the Intervenor’s right to its stipulated professional fees that would be denied
under the compromise agreement. The Court does so in the interest of
protecting the rights of the practicing Bar rendering professional services on
contingent fee basis.

Nonetheless, the claim for attorney’s fees does not void or nullify the
compromise agreement between Malvar and the respondents. There being no
obstacles to its approval, the Court approves the compromise agreement. The
Court adds, however, that the Intervenor is not left without a remedy, for the
payment of its adequate and reasonable compensation could not be annulled
by the settlement of the litigation without its participation and conformity. It
remains entitled to the compensation, and its right is safeguarded by the Court
because its members are officers of the Court who are as entitled to judicial
protection against injustice or imposition of fraud committed by the client as
much as the client is against their abuses as her counsel. In other words, the
duty of the Court is not only to ensure that the attorney acts in a proper and
lawful manner, but also to see to it that the attorney is paid his just fees. Even
if the compensation of the attorney is dependent only on winning the litigation,
the subsequent withdrawal of the case upon the client’s initiative would not
deprive the attorney of the legitimate compensation for professional services
rendered.40

The basis of the intervention is the written agreement on contingent fees

contained in the engagement executed on March 19, 2008 between Malvar and
the Intervenor,41 the pertinent portion of which stipulated that the Intervenor
would "collect ten percent (10%) of the amount of Ph₱14,252,192.12 upon its
collection and another ten percent (10%) of the remaining balance of
Ph₱41,627,593.75 upon collection thereof, and also ten percent (10%) of
whatever is the value of the stock option you are entitled to under the
Decision." There is no question that such arrangement was a contingent fee
agreement that was valid in this jurisdiction, provided the fees therein fixed
were reasonable.42

We hold that the contingent fee of 10% of ₱41,627,593.75 and 10% of the value
of the stock option was reasonable. The ₱41,627,593.75 was already awarded
to Malvar by the NLRC but the award became the subject of the appeal in this
Court because the CA reversed the NLRC. Be that as it may, her subsequent
change of mind on the amount sought from the respondents as reflected in the
compromise agreement should not negate or bar the Intervenor’s recovery of
the agreed attorney’s fees.

Considering that in the event of a dispute between the attorney and the client
as to the amount of fees, and the intervention of the courts is sought, the
determination requires that there be evidence to prove the amount of fees and
the extent and value of the services rendered, taking into account the facts
determinative thereof,43 the history of the Intervenor’s legal representation of
Malvar can provide a helpful predicate for resolving the dispute between her
and the Intervenor.

The records reveal that on March 18, 2008, Malvar engaged the professional
services of the Intervenor to represent her in the case of illegal dismissal. At
that time, the case was pending in the CA at the respondents’ instance after
the NLRC had set aside the RCU’s computation of Malvar’s backwages and
monetary benefits, and had upheld the computation arrived at by the NLRC
Computation Unit. On April 17, 2008, the CA set aside the assailed resolution
of the NLRC, and remanded the case to the Labor Arbiter for the computation
of her monetary awards. It was at this juncture that the Intervenor commenced
its legal service, which included the following incidents, namely:

a) Upon the assumption of its professional duties as Malvar’s counsel, a

Motion for Reconsideration of the Decision of the Court of Appeals dated
April 17, 2008 consisting of thirty-eight pages was filed before the Court
of Appeals on May 6, 2008.

b) On June 2, 2009, Intervenors filed a Comment to Respondents’ Motion

for Partial Reconsideration, said Comment consisted 8 pages.

c) In the execution proceedings before Labor Arbiter Jaime Reyno,

Intervenor prepared and filed on Malvar’s behalf an "Ex-Parte Motion to
Release to Complainant the Undisputed amount of ₱14,252,192.12" in
NLRC NCR Case No. 30-07-02716-00.

d) On July 29, 2000, Intervenor prepared and filed before theLabor

Arbiter a Comment to Respondents’ Opposition to the "Ex-Parte Motion
to Release" and a "Motion Reiterating Immediate Implementation of the
Writ of Execution"

e) On August 6, 2008, Intervenor prepared and filed before the Labor

Arbiter Malvar’s Motion Reiterating Motion to Release the Amount of
₱14,252,192.12.44
The decision promulgated on April 17, 200845 and the resolution promulgated
on July 30, 200846 by the CA prompted Malvar to appeal on August 15, 2008
to this Court with the assistance of the Intervenor. All the subsequent
pleadings, including the reply of April 13, 2009,47 were prepared and filed in
Malvar’s behalf by the Intervenor.

Malvar should accept that the practice of law was not limited to the conduct of
cases or litigations in court but embraced also the preparation of pleadings and
other papers incidental to the cases or litigations as well as the management of
such actions and proceedings on behalf of the clients.48 Consequently, fairness
and justice demand that the Intervenor be accorded full recognition as her
counsel who discharged its responsibility for Malvar’s cause to its successful
end.

But, as earlier pointed out, although a client may dismiss her lawyer at any
time, the dismissal must be for a justifiable cause if a written contract between
the lawyer and the client exists.49

Considering the undisputed existence of the written agreement on contingent

fees, the question begging to be answered is: Was the Intervenor dismissed for
a justifiable cause?

We do not think so.

In the absence of the lawyer’s fault, consent or waiver, a client cannot deprive
the lawyer of his just fees already earned in the guise of a justifiable reason.
Here, Malvar not only downplayed the worth of the Intervenor’s legal service to
her but also attempted to camouflage her intent to defraud her lawyer by
offering excuses that were not only inconsistent with her actions but, most
importantly, fell short of being justifiable.

The letter Malvar addressed to Retired Justice Bellosillo, who represented the
Intervenor, debunked her allegations of unsatisfactory legal service because
she thereby lavishly lauded the Intervenor for its dedication and devotion to the
prosecution of her case and to the protection of her interests. Also significant
was that the attorney-client relationship between her and the Intervenor was
not severed upon Atty. Dasal’s appointment to public office and Atty. Llasos’
resignation from the law firm. In other words, the Intervenor remained as her
counsel of record, for, as we held in Rilloraza, Africa, De Ocampo and Africa v.
Eastern Telecommunication Philippines, Inc.,50 a client who employs a law firm
engages the entire law firm; hence, the resignation, retirement or separation
from the law firm of the handling lawyer does not terminate the relationship,
because the law firm is bound to provide a replacement.

The stipulations of the written agreement between Malvar and the Intervenors,
not being contrary to law, morals, public policy, public order or good customs,
were valid and binding on her. They expressly gave rise to the right of the
Intervenor to demand compensation. In a word, she could not simply walk
away from her contractual obligations towards the Intervenor, for Article 1159
of the Civil Code provides that obligations arising from contracts have the force
of law between the parties and should be complied with in good faith.

To be sure, the Intervenor’s withdrawal from the case neither cancelled nor
terminated the written agreement on the contingent attorney’s fees. Nor did the
withdrawal constitute a waiver of the agreement. On the contrary, the
agreement continued between them because the Intervenor’ s Manifestation
(with Motion to Withdraw as Counsel for Petitioner)explicitly called upon the
Court to safeguard its rights under the written agreement, to wit:

WHEREFORE, premises considered, undersigned counsel respectfully pray

that instant Motion to Withdraw as Counsel for Petitioner be granted and their
attorney’s lien pursuant to the written agreement be reflected in the judgment
or decision that may be rendered hereafter conformably with par. 2, Sec. 26,
Rule 138 of the Rules of Court.

Undersigned counsel further requests that they be furnished copy of the

decision, resolutions and other legal processes of this Honorable Court to
enable them to protect their interests.51

Were the respondents also liable?

The respondents would be liable if they were shown to have connived with
Malvar in the execution of the compromise agreement, with the intention of
depriving the Intervenor of its attorney’s fees. Thereby, they would be solidarily
liable with her for the attorney’s fees as stipulated in the written agreement
under the theory that they unfairly and unjustly interfered with the
Intervenor’s professional relationship with Malvar.

The respondents insist that they were not bound by the written agreement, and
should not be held liable under it.1âwphi1

We disagree with the respondents’ insistence. The respondents were complicit

in Malvar’s move to deprive the Intervenor of its duly earned contingent fees.

First of all, the unusual timing of Malvar’s letter terminating the Intervenor’s
legal representation of her, of her Motion to Dismiss/Withdraw Case, and of
the execution of compromise agreement manifested her desire to evade her
legal obligation to pay to the Intervenor its attorney’s fees for the legal services
rendered. The objective of her withdrawal of the case was to release the
respondents from all her claims and causes of action in consideration of the
settlement in the stated amount of ₱40,000.000.00, a sum that was measly
compared to what she was legally entitled to, which, to begin with, already
included the ₱41,627,593.75 and the value of the stock option already awarded
to her. In other words, she thereby waived more than what she was lawfully
expected to receive from the respondents.

Secondly, the respondents suddenly turned around from their strong stance of
berating her demand as offensive to all precepts of justice and fair play and as
a form of unjust enrichment for her to a surprisingly generous surrender to her
demand, allowing to her through their compromise agreement the additional
amount of ₱40,000,000.00 on top of the₱14,252,192.12 already received by her
in August 2008. The softening unavoidably gives the impression that they were
now categorically conceding that Malvar deserved much more. Under those
circumstances, it is plausible to conclude that her termination of the
Intervenor’s services was instigated by their prodding in order to remove the
Intervenor from the picture for being a solid obstruction to the settlement for a
much lower liability, and thereby save for themselves and for her some more
amount.

Thirdly, the compromise agreement was silent on the Intervenor’s contingent

fee, indicating that the objective of the compromise agreement was to secure a
huge discount from its liability towards Malvar.

Finally, contrary to the stipulation in the compromise agreement, only Malvar,

minus the respondents, filed the Motion to Dismiss/Withdraw Case.

At this juncture, the Court notes that the compromise agreement would have
Malvar waive even the substantial stock options already awarded by the
NLRC’s decision,52 which ordered the respondents to pay to her, among others,
the value of the stock options and all other bonuses she was entitled to or
would have been entitled to had she not been illegally dismissed from her
employment. This ruling was affirmed by the CA.53 But the waiver could not
negate the Intervenor’s right to 10% of the value of the stock options she was
legally entitled to under the decisions of the NLRC and the CA, for that right
was expressly stated in the written agreement between her and the Intervenor.
Thus, the Intervenor should be declared entitled to recover full compensation
in accordance with the written agreement because it did not assent to the
waiver of the stock options, and did not waive its right to that part of its
compensation.

These circumstances show that Malvar and the respondents needed an escape
from greater liability towards the Intervenor, and from the possible obstacle to
their plan to settle to pay. It cannot be simply assumed that only Malvar would
be liable towards the Intervenor at that point, considering that the Intervenor,
had it joined the negotiations as her lawyer, would have tenaciously fought all
the way for her to receive literally everything that she was entitled to, especially
the benefits from the stock option. Her rush to settle because of her financial
concerns could have led her to accept the respondents’ offer, which offer could
be further reduced by the Intervenor’s expected demand for compensation.
Thereby, she and the respondents became joint tort-feasors who acted
adversely against the interests of the Intervenor. Joint tort-feasors are those
who command, instigate, promote, encourage, advise, countenance, cooperate
in, aid or abet the commission of a tort, or who approve of it after it is done, if
done for their benefit.54

They are also referred to as those who act together in committing wrong or
whose acts, if independent of each other, unite in causing a single
injury.55 Under Article 2194 of the Civil Code, joint tort-feasors are solidarily
liable for the resulting damage. As regards the extent of their respective
liabilities, the Court said in Far Eastern Shipping Company v. Court of
Appeals:56

x x x. Where several causes producing an injury are concurrent and each is an

efficient cause without which the injury would not have happened, the injury
may be attributed to all or any of the causes and recovery may be had against
any or all of the responsible persons although under the circumstances of the
case, it may appear that one of them was more culpable, and that the duty
owed by them to the injured person was not same. No actor’s negligence ceases
to be a proximate cause merely because it does not exceed the negligence of
other acts. Each wrongdoer is responsible for the entire result and is liable as
though his acts were the sole cause of the injury.

There is no contribution between joint tort-feasors whose liability is solidary

since both of them are liable for the total damage. Where the concurrent or
successive negligent acts or omissions of two or more persons, although acting
independently, are in combination the direct and proximate cause of a single
injury to a third person, it is impossible to determine in what proportion each
contributed to the injury and either of them is responsible for the whole injury.
xxx

Joint tort-feasors are each liable as principals, to the same extent and in the
same manner as if they had performed the wrongful act themselves. It is
likewise not an excuse for any of the joint tort-feasors that individual
participation in the tort was insignificant as compared to that of the other.57 To
stress, joint tort-feasors are not liable pro rata. The damages cannot be
apportioned among them, except by themselves. They cannot insist upon an
apportionment, for the purpose of each paying an aliquot part. They are jointly
and severally liable for the whole amount.58 Thus, as joint tort-feasors, Malvar
and the respondents should be held solidarily liable to the Intervenor. There is
no way of appreciating these circumstances except in this light.

That the value of the stock options that Malvar waived under the compromise
agreement has not been fixed as yet is no hindrance to the implementation of
this decision in favor of the Intervenor. The valuation could be reliably made at
a subsequent time from the finality of this adjudication. It is enough for the
Court to hold the respondents and Malvar solidarily liable for the 10% of that
value of the stock options.

As a final word, it is necessary to state that no court can shirk from enforcing
the contractual stipulations in the manner they have agreed upon and written.
As a rule, the courts, whether trial or appellate, have no power to make or
modify contracts between the parties. Nor can the courts save the parties from
disadvantageous provisions.59The same precepts hold sway when it comes to
enforcing fee arrangements entered into in writing between clients and
attorneys. In the exercise of their supervisory authority over attorneys as
officers of the Court, the courts are bound to respect and protect the attorney’s
lien as a necessary means to preserve the decorum and respectability of the
Law Profession.60 Hence, the Court must thwart any and every effort of clients
already served by their attorneys’ worthy services to deprive them of their hard-
earned compensation. Truly, the duty of the courts is not only to see to it that
attorneys act in a proper and lawful manner, but also to see to it that attorneys
are paid their just and lawful fees.61

WHEREFORE, the Court APPROVES the compromise agreement; GRANTS the

Motion for Intervention to Protect Attorney's Rights; and ORDERS Czarina T.
Malvar and respondents Kraft Food Philippines Inc. and Kraft Foods
International to jointly and severally pay to Intervenor Law Firm, represented
by Retired Associate Justice Josue N. Bellosillo, its stipulated contingent fees of
10% of ₱41,627,593.75, and the further sum equivalent to 10% of the value of
the stock option. No pronouncement on costs of suit.

SO ORDERED.

REBECCA J. PALM, A.C. No. 8242

Complainant,
Present:

PUNO, C.J., Chairperson,

CARPIO,
- versus - CORONA,
LEONARDO-DE CASTRO, and
BERSAMIN, JJ.

ATTY. FELIPE ILEDAN, JR., Promulgated:

Respondent. October 2, 2009
x - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION
CARPIO, J.:

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[1] for disbarment against

respondent before the Integrated Bar of the Philippines (IBP).

In his Answer,[2] 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 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,[3] 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.[4]

In Resolution No. XVII-2006-583[5] 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.[6]

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 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[7] 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.[8] 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.[9] 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.[10] 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.[11] The client must intend the communication to
be confidential.[12]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,[13] 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.[14] 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.[15]

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 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.[16] 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.[17]

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

SO ORDERED.
JESSIE R. DE LEON, A.C. No. 8620
Complainant,
Present:

CARPIO MORALES, Chairperson,

BRION,
-versus - BERSAMIN,
VILLARAMA, JR., and
SERENO, JJ.

ATTY. EDUARDO G. CASTELO, Promulgated:

Respondent.
January 12, 2011
x-----------------------------------------------------------------------------------------x

DECISION

BERSAMIN, J.:

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.[1]

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.[2]

De Leon avers that the respondent committed dishonesty and falsification

as follows:

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

Respondent also committed the crime of Use of Falsified

Documents, by submitting the said falsified Answers in the judicial
proceedings, Civil Case No. 4674MN;

Respondent also made a mockery of the aforesaid judicial

proceedings by representing dead persons therein who, he falsely
made to appear, as contesting the complaints, counter-suing and
cross-suing the adverse parties.
 12. That, as a consequence of the above criminal acts,
complainant respectfully submits that respondent likewise violated:

(a) His Lawyers Oath:

xxx
(b) The Code of Professional Responsibility:[3]
xxx

On June 23, 2010, the Court directed the respondent to comment on

De Leons administrative complaint.[4]

In due course, or on August 2, 2010,[5] the respondent rendered the

following explanations in his comment, to wit:

1. The persons who had engaged him as attorney to represent the

Lim family in Civil Case No. 4674MN were William and Leonardo
Lim, the children of Spouses Lim Hio and Dolores Chu;

2. Upon his (Atty. Castelo) initial queries relevant to the material

allegations of the Governments complaint in Civil Case No.
4674MN, William Lim, the representative of the Lim Family,
informed him:

a. That the Lim family had acquired the properties from

Georgina Flores;

b. That William and Leonardo Lim were already actively

managing the family business, and now co-owned the
properties by virtue of the deed of absolute sale their
parents, Spouses Lim Hio and Dolores Chu, had executed
in their favor; and

c. That because of the execution of the deed of absolute sale,

William and Leonardo Lim had since honestly assumed
that their parents had already caused the transfer of the
TCTs to their names.

3. Considering that William and Leonardo Lim themselves were the

ones who had engaged his services, he (Atty. Castelo)
consequently truthfully stated in the motion seeking an
extension to file responsive pleading dated February 3, 2006 the
fact that it was the family of the defendants that had engaged
him, and that he had then advised the children of the defendants
 to seek the assistance as well of a licensed geodetic surveyor and
engineer;

4. He (Atty. Castelo) prepared the initial pleadings based on his

honest belief that Spouses Lim Hio and Dolores Chu were then
still living. Had he known that they were already deceased, he
would have most welcomed the information and would have
moved to substitute Leonardo and William Lim as defendants for
that reason;

5. He (Atty. Castelo) had no intention to commit either a falsehood

or a falsification, for he in fact submitted the death certificates of
Spouses Lim Hio and Dolores Chu in order to apprise the trial
court of that fact; and

6. The Office of the Prosecutor for Malabon City even dismissed

the criminal complaint for falsification brought against him (Atty.
Castelo) through the resolution dated February 11, 2010. The
same office denied the complainants motion for
reconsideration on May 17, 2010.

On September 3, 2010, the complainant submitted a reply,[6] whereby he

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

The Court usually first refers administrative complaints against members

of the Philippine Bar to the Integrated Bar of the Philippines (IBP) for
investigation and appropriate recommendations. For the present case, however,
we forego the prior referral of the complaint to the IBP, in view of the facts being
uncomplicated and based on the pleadings in Civil Case No. 4674MN. Thus, we
decide the complaint on its merits.
Ruling
 We find that the respondent, as attorney, did not commit any falsehood or
falsification in his pleadings in Civil Case No. 4674MN. Accordingly, we dismiss
the patently frivolous complaint.

I
Attorneys Obligation to tell the truth

All attorneys in the Philippines, including the respondent, have sworn to

the vows embodied in following Lawyers Oath,[7] viz:

I, ___________________, do solemnly swear that I will maintain

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

The Code of Professional Responsibility echoes the Lawyers Oath,

providing:[8]

CANON 1 - A LAWYER SHALL UPHOLD THE CONSTITUTION,

OBEY THE LAWS OF THE LAND AND PROMOTE RESPECT FOR
LAW AND LEGAL PROCESSES.

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.[9] The least they can do in that regard is to refrain from engaging in
any form or manner of unlawful conduct (which broadly includes any act or
omission contrary to law, but does not necessarily imply the element of
criminality even if it is broad enough to include such element).[10]

To all attorneys, truthfulness and honesty have the highest value, for, as
the Court has said in Young v. Batuegas:[11]

A lawyer must be a disciple of truth. He swore upon his

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

Their being officers of the Court extends to attorneys not only the
presumption of regularity in the discharge of their duties, but also the immunity
from liability to others for as long as the performance of their obligations to their
clients does not depart from their character as servants of the Law and as officers
of the Court. In particular, the statements they make in behalf of their clients
that are relevant, pertinent, or material to the subject of inquiry are absolutely
privileged regardless of their defamatory tenor. Such cloak of privilege is
necessary and essential in ensuring the unhindered service to their clients
causes and in protecting the clients confidences. With the cloak of privilege, they
can freely and courageously speak for their clients, verbally or in writing, in the
course of judicial and quasi-judicial proceedings, without running the risk of
incurring criminal prosecution or actions for damages.[12]

Nonetheless, even if they enjoy a number of privileges by reason of their

office and in recognition of the vital role they play in the administration of justice,
attorneys hold the privilege and right to practice law before judicial, quasi-
judicial, or administrative tribunals or offices only during good behavior.[13]

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

On April 17, 2006, the respondent filed an answer with counterclaim and
cross-claim in behalf of Spouses Lim Hio and Dolores Chu, the persons whom
the Government as plaintiff named as defendants in Civil Case No.
4674MN.[14] He alleged therein that:

2. The allegations in paragraph 2 of the complaint are

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

In order to properly and fully protect their rights, ownership

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

22. Plaintiff is barred by the principle of estoppel in bringing this

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

Two years later, or on April 21, 2008, De Leon filed his complaint in
intervention in Civil Case No. 4674MN.[15] He expressly named therein as
defendants vis--vis his intervention not only the Spouses Lim Hio and Dolores
Chu, the original defendants, but also their sons Leonardo Lim, married to Sally
Khoo, and William Lim, married to Sally Lee, the same persons whom the
respondent had already alleged in the answer, supra, to be the transferees
and current owners of the parcels of land.[16]

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 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,[17] stating that spouses Lim Hio
and Dolores Chu xxx are now both deceased, to wit:

xxx
2. The allegations in paragraphs 2 and 3 of the Complaint are
ADMITTED, with the qualification that defendants-spouses
Leonardo Lim and Sally Khoo Lim, William Lim and Sally Lee
Lim are the registered and lawful owners of the subject property
covered by Transfer Certificate of Title No. M-35929, issued by
the Register of Deeds for Malabon City, having long ago acquired
the same from the defendants-spouses Lim Hio and Dolores
Chu, who are now both deceased. Copy of the TCT No. M-35929 is
attached hereto as Annexes 1 and 1-A.The same title has already
been previously submitted to this Honorable Court on December 13,
2006.
xxx
 The respondent subsequently submitted to the RTC a so-
called clarification and submission,[18] in which he again adverted to the deaths
of Spouses Lim Hio and Dolores Chu, as follows:

1. On March 19, 2009, herein movants-defendants Lim filed

before this Honorable Court a Motion for Substitution of Defendants
in the Principal Complaint of the plaintiff Republic of
the Philippines, represented by the DENR;

2. The Motion for Substitution is grounded on the fact that

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

3. Quite plainly, the original principal defendants Lim Hio

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

4. Under the foregoing circumstances and facts, the demise

of defendants Lim Hio and Dolores Chu no longer has any
significant relevance to the instant Motion. To, however, show
the fact of their death, photo copy of their respective death
certificates are attached hereto as Annexes 1 and 2 hereof.

5. The Motion for substitution of Defendants in the Principal

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

6. Simply put, movants-defendants Lim have become the

indispensable defendants in the principal complaint of plaintiff
DENR, being now the registered and lawful owners of the subject
property and the real parties-in-interest in this case. Without them,
no final determination can be had in the Principal complaint.
 7. Significantly, the property of intervenor Jessie de Leon,
which is the subject of his complaint-in-intervention, is identically,
if not similarly, situated as that of herein movants-defendants Lim,
and likewise, may as well be a proper subject of the Principal
Complaint of plaintiff DENR.

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

WHEREFORE, herein movants-defendants Lim most

respectfully submit their Motion for substitution of Defendants in
the Principal Complaint and pray that the same be granted.
xxx

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

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

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

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

According to Justice Cardozo,[19] xxx the fair fame of a lawyer, however

innocent of wrong, is at the mercy of the tongue of ignorance or malice.
Reputation in such a calling is a plant of tender growth, and its bloom, once lost,
is not easily restored.

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

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

WHEREFORE, we dismiss the complaint for disbarment or suspension

filed against Atty. Eduardo G. Castelo for utter lack of merit.
SO ORDERED.