Municipality of Pililla, Rizal v.

Court of Appeals

Nature: Petition for review on certiorari of a judgment of the CA

Facts:

The RTC of Tanay, Rizal rendered judgment ordering the Philippine Petroleum
Corporation (PPC) to pay the Municipality of Pililla (municipality) business taxes and other fees.
The judgment was affirmed by the SC and became final and executor. The case was remanded
to the RTC for execution.

In connection with the execution of judgment, Atty. Felix Mendiola filed a motion in
behalf of the municipality for the examination of PPCs gross sales for the purpose of computing
its business taxes. PPC filed a manifestation before the RTC to the effect that Mayor Patenia of
Pililla received from it P11.5M as full satisfaction of the judgment as evidenced by the release
and quit claim documents executed by the said mayor. The RTC issued an order denying Atty.
Mendiolas motionfor examination and execution of judgment.

Atty. Mendiola filed a motion for reconsideration claiming that the total liability amounted
to P24.2M while the amount received by the mayor was only P12.7M. He asserted that the
mayor cannot waive the balance of the judgment over which his law firm had registered two
liens for alleged consultancy services and attorneys fees amounting to more than P12M. The
RTC, however, denied his MR.

A petition for certiorari was filed by Atty. Mendiola which was referred to the CA for
appropriate action. PPC filed a motion questioning the authority of Atty. Mendiola to represent
the municipality. The CA dismissed the petition for having been filed by a private counsel in
violation of the law and jurisprudence but without prejudice to the filing of a similar petition by
the municipality thru the proper provincial or municipal legal officer.

Atty. Mendiola filed a petition before the SC to assail the decision of the CA.

Issue: WON Atty. Mendiola, a private counsel, has authority can file an action in court for and in
behalf of the municipality of Pililla

Held: No. Atty. Mendiola has no authority to file an action in court in behalf and in the name of
the Municipality of Pililla.

1. Private attorneys cannot represent a province or municipality in lawsuits.

Sec. 1683 of the Revised Administrative Code provides that the provincial fiscal shall
represent the province or any municipality or municipal district thereof in any court
except (a) in cases whereof original jurisdiction is vested in the SC or (b) in cases where
the municipality or municipal district is a party adverse to the provincial government or to
some municipality or municipal district in the same province. When the provincial fiscal is
disqualified, a special attorney may be employed by the municipal council.

Hence, only the provincial fiscal or municipal attorney can represent a province or
municipality in their lawsuits. The provision is mandatory. The municipalitys
authority to employ a private lawyer is limited only to situations where the
provincial fiscal is disqualified to represent it. For this exception to apply, the fact
that the provincial fiscal was disqualified must appear on record.

2. The fiscals refusal to represent the municipality is not a legal justification for employing
the services of private counsel.

Unlike a practicing lawyer who has a right to refuse employment, fiscal cannot refuse
to perform his functions on grounds not provided for by law without violating his
oath of office.

Instead of engaging the services of a special attorney, the municipal council should
request the Secretary of Justice to appoint an acting provincial fiscal in place of
the provincial fiscal who has declined to handle and prosecute its case in court.

3. The legality of a private counsels representation can be questioned at any stage of the
proceedings.







G.R. No. 70099 January 7, 1987
MODESTA BORCENA, ANTONIO GIMENO, JR., ESTELA GIMENO, ROLANDO GIMENO,
EDGARDO GlMENO and ANELIA GIMENO, petitioners,
vs.
INTERMEDIATE APPELLATE COURT, HON. CLEMENTE D. PAREDES, ROMULO C. BASA,
LEOVINO LEGASPI and HON. ZOTICO TOLETE respondents.

GUTIERREZ, JR., J .:
The petitioners question the amount which the respondent Court of Appeals and the trial court
ordered to be paid to their former lawyer, as his compensation.
On July 6, 1981, the petitioners engaged the legal services of respondent Gil P. de Guzman under
the following terms and conditions:
Dear Atty. de Guzman:
For purposes of handling our case against Nam Kwang, Socea Bonna, Metropolitan
Waterworks and Sewerage System and other persons who are parties to the total or
partial destruction of some of our road and residential lots at the Memorial Park
Subdivision, Bigti, Norzagaray, Bulacan, we hereby retain and employ the legal
services of your Law Office towards its prosecution. For your services, we hereby
offer you the following schedule:
a) 20% of our total claim, for and as attorney's fees,
b.) 5% of our total claim, for and as representation and miscellaneous expenses;
TOTAL: 25%
which shall be payable to you and may be collected from us anytime after its
complete payment by the said defendants, either solidarily or collectively. It is hereby
understood that apart from this, whatever judgment attorney's fees may be awarded
by the court against said defendants, the same shall accrue to you which shall not
form part of our contingent fee.
We hope that you will handle this case for us.
Very truly yours,
MODESTA BORCENA, ANTONIO GIMENO, JR.
ESTELA GIMENO, ROLANDO GIMENO, EDGARDO
GIMENO, AND ANELIA GIMENO
CONFORME: By:
GIL DE GUZMAN ROLANDO GIMENO
On this same date, respondent de Guzman filed a complaint for damages against the Metropolitan
Waterworks and Sewerage System, (hereinafter caged MWSS) Nam Kwang, Socea Bonna and
Chun Bae Kim, which was docketed as Civil Case No. SM-1208. The pertinent allegations of the
complaint are as follows:
xxx xxx xxx
11. That sometime in February, 1980, or immediately preceding or subsequent
thereto defendants, without any notice and against the will and consent of herein
plaintfffs, entered a portion of said property and bulldozed the fully developed lots,
and committed waste, destruction and depredation thereon, causing all monuments
of title, drainage system subdivision lots, ornamental trees resulting to total wreck to
23 fully developed lots and flood of about 16 lots causing them wanton and
unseconded (sic) damages founded in the
xxx xxx xxx
13. That defendants, despite previous repeated demands from plaintiffs to indemnify
them for damages and losses they have caused the plaintiffs, failed and refused and
still continue to fail and refuse to pay actual and compensatory damages in the
amount of P670,000.00;
xxx xxx xxx
14. That due to the unlawful acts of the defendants violating the rights, plaintiffs, the
latter suffered and still continue to suffer sleepless nights, loss of business standing,
serious anxieties and besmirched reputation assessable as moral damages in the
amount of P30,000.00;
15. That to serve as an example to other would-be defendants similarly situated with
defendants herein plaintiffs are entitled against the defendants corrective and
exemplary damages in the amount of P10,000.00;
16. The plaintiffs in order to protect their rights and interest so unduly abused by
herein defendants are constrained to litigate and to retain the professional services of
counsel in the amount of 20% representing the total claim of plaintiffs against the
defendants, for and as reasonable attorney's fees;
The complaint was later amended by dropping Chun Bae Kim as defendant. Defendants Nam
Kwang and Socea Bonna were subsequently declared in default.
On June 18, 1982, Atty. de Guzman filed a motion for preliminary attachment praying that an order
be issued attaching properties of the defendants amounting to P710,000.00 plus 20% thereof
representing attorney's fees, or a total of P852,000.00. The motion was granted upon plaintiffs'
posting a bond of P852,000.00 issued by a bonding company acceptable to the court.
The MWSS was directed to hold in trust the P852,000.00 payable to Nam Kwang prompting the
plaintiffs to file a motion for them to take custody of the P852,000.00. The motion was denied in the
order dated October 20, 1982.
On December 7, 1982, the court directed the MWSS to turn over the P852,000.00 to the deputy
sheriff and for the latter to deposit the same with the Sta. Maria Municipal Treasury. The court also
ordered that withdrawals must be upon its orders. This order was amended on December 15, 1982
when MWSS was directed to prepare and issue the check in the name of Rolando Gimeno for the
amount of P852,000.00, and to release said check to him upon proper Identification. At the same
time, the deputy sheriff was directed to receive the check from Rolando Gimeno and deposit the
same with the municipal treasurer of Sta. Maria, Bulacan.
In compliance with the court orders, MWSS issued and released-(l) PNB Check No. 070925 in the
amount of P 746,111.71 and (2) PNB Check No. 070928 in the amount of P105,888.29, both dated
December 20, 1982 payable to Rolando Gimeno for deposit with the Municipal Treasurer of Sta.
Maria, Bulacan.
On January 11, 1983, De Guzman filed a manifestation questioning the restriction on the checks that
the same be deposited only with the Municipal Treasurer of Sta. Maria, Bulacan as uncalled for and
contrary to the court's order of December 7, 1982 as modified by the December 15, 1982 order.
On March 17, 1983, Rolando Gimeno on behalf of the other plaintiffs (petitioners herein) and in his
own behalf sent a letter to Atty. de Guzman terminating his services as their counsel. The relevant
portions of the letter read as follows:
xxx xxx xxx
Sir:
We regret to inform you that your services as our Counsel in all our cases and legal
problems are terminated effective immediately.
The decision to terminate your services was engendered by your failure and/or
refusal to return to Mr. Rolando B. Gimeno the PNB Checks for deposit with the
Municipal Treasurer of Sta. Maria, Bulacan, although the same are now almost three
(3) months old and may become stale. Furthermore, transfer of said deposit to a
bank may be asked from the Court so that said money can earn interests.
Undersigned have lost interest earnings on said money for three (2) months now.
Kindly return to Mr. Rolando B. Gimeno all our case records involving all our legal
problems still in your possession; and bin us for your services rendered thus far, and
we assure your goodself you will be amply compensated.
xxx xxx xxx
On March 24, 1983, Atty. Perpetuo L. B. Alonzo entered his appearance as new counsel for the
petitioners.
On March 25, 1983, Atty. de Guzman filed an opposition to Gimeno's ex-parte motion to transfer
deposit of garnished amount. He claimed that he never received the PNB checks, that Gimeno's
affidavit of loss admits having received the checks from MWSS, and that Rolando Gimeno lost them.
Atty. de Guzman also filed his comment stating that he has no objection to the substitution of
counsel provided that the agreed honorarium is complied with, and subject to the attomey's lien.
On April 16, 1983, Atty. de Guzman filed an attorney's lien on the garnished amount of P852,000.00
pursuant to Section 26 of Rule 138. A motion dated April 18, 1983, prayed for the issuance of an
order:
1. Ordering the deposit of PNB Checks Nos. 070925 and 070928 both dated
December 20, 1982 with PNB Branch in Malolos, Bulacan in the name of plaintiff
Rolando Gimeno and movant Atty. Gil de Guzman under the following schedule, to
wit:
(a) Rolando Gimeno, as plaintiff
and attorney-in-fact....................................P532,500.00
(b) Atty. Gilde Guzman, for
his attorney's fees........................................319,500.00
Total...............................................852,000.00
to be withdrawn only upon order of the Court.
2. Upon said deposit, ordering the depository bank to allow movant Atty. Gil de
Guzman to withdraw, deducting from said account the amount of P319,500.00 as his
lawful fees;
3. Allowing the withdrawal of appearance of Atty. Gil de Guzman as counsel of
record for plaintiffs.
4. Granting such further and other reliefs just and equitable.
On May 14, 1983, the petitioners filed a manifestation and motion praying that: (1) the Court
ascertain and fix the fees of Atty. de Guzman to be paid after the judgment award to the petitioners
shall have been satisfied; and (2) that Atty. de Guzman be ordered to deposit in Court the PNB
Checks and to deliver to the petitioners all documents in his possession.
On June 1, 1983, the lower court issued the challenged order declaring the termination of the legal
services of Atty. de Guzman by the petitioners as unjustified. The dispositive portion of the order
reads:
WHEREFORE, in view of all the foregoing, the Court hereby fixes counsel Atty. Gil
de Guzman's attorney's fees in the sum of P177,500.00 as per contract of legal
services plus and apart from 20% of whatever attorney's fees may be finally awarded
to plaintiffs should they ultimately prevail and it is hereby further ordered that:
l) Counsel Atty. Gil de Guzman, should deliver within a Period of 5 days from receipt
hereof PNB checks Nos. 070928 in the sum of P105,888.29 and 070925 in the sum
of P745,111.71 both dated December 20, 1982, to the Branch Clerk of this Court;
2) The Branch Clerk of Court of this Court, upon receipt thereof, shall immediately
deposit said checks in a savings deposit with the Malolos Branch of the Philippine
National Bank in Malolos, Bulacan, in the names of Atty. Gil de Guzman and plaintiff
and attorney-in-fact Rolando Gimeno, and to keep in his custody the savings deposit
book, the deposit to be withdrawable only upon orders of this court;
3) Plaintiffs to pay the sum of P177,500.00 to counsel Atty. Gil de Guzman in
payment of the 25% attorney's fees,
4) Atty. Gil de Guzman upon payment of his 25% attorney's fees by plaintiffs, shall
turn over to the latter all documents and records of the case, and thereafter, to cease
as counsel for plaintiffs; and
5) The P852,000.00 deposit to remain deposited with the depository Bank, until
further orders of this Court, subject to a first lien in favor of Atty. Gil de Guzman on
account of his 20% judgment attomey's fees.
On October 20, 1983, the lower court denied the petitioners' motion for reconsideration and
opposition to the motion for execution pending appeal, and granted the motion for execution pending
appeal.
On November 3, 1983, a writ of execution pending appeal for P177,500.00 attorney's compensation
was issued by the Court.
As stated earlier, the Intermediate Appellate Court denied due course to the petition questioning the
execution pending appeal.
Hence, this petition
The pivotal issue in this case hinges on the amount of compensation to which Atty. Gil de Guzman is
entitled for his legal services to the petitioners in Civil Case No. SM-1208.
The petitioners contend that the attomey's compensation provided for in the contract was neither
fixed nor absolute but was contingent on the outcome of the final judgment. They maintain that "total
claim" in paragraphs "a" and "b" of the contract should be construed in the context of the question
sentence "which shall be payable to you and may be collected from us anytime after its complete
payment by the said defendants, either solidarity or collectively." They also maintain that Atty. Gil de
Guzman was dismissed for a justifiable cause and that the amount of attomey's compensation
granted by the lower court was unconscionable and unreasonable. The petitioners submit that the
compensation of Atty. de Guzman should be determined and fixed on the basis of quantum meruit
Both Sections 24 and 26 of Rule 138 of the Revised Rules of Court cited by the parties apply to the
case at bar. Paragraph 2, Section 26, provides:
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.
while Section 24 states:
An attorney shall be entitled to have and recover from his client no more than a
reasonable compensation for his services, with a view to the importance of the
subject matter of the controversy, the extent of the services rendered, and the
professional standing of the attorney. No court shall be bound by the opinion of
attorneys as expert witnesses as to the proper compensation, but may disregard
such testimony and base its conclusion on its own professional knowledge. A written
contract "for services shall control the amount to be paid therefor unless found by the
court to be unconscionable or unreasonable. " (Emphasis supplied)
The stipulation of attomey's compensation in a contract for professional services can be reduced by
the courts if found unconscionable and unreasonable. We have expired this well-entrenched
principle:
Contracts for attorney's services in this jurisdiction stand upon an entirely different
footing from contracts for the payment of compensation for any other services. By
express provision of section 29 of the Code of Civil Procedure, an attorney is not
entitled in the absence of express contract to recover more than a reasonable
compensation for his services; and even when an express contract is made the court
can ignore it and limit the recovery to reasonable compensation if the amount of the
stipulated fee is found by the court to be unreasonable. This is a very different rule
from that announced in section 1091 of the Civil Code with reference to the obligation
of contracts in general where it is said that such obligation has the force of law
between the contracting parties. ...
Since then this Court has invariably fixed counsel fees on a quantum meruit basis
whenever the fees stipulated appear excessive, unconscionable, or unreasonable,
because a lawyer is primarily a court officer charged with the duty of assisting the
court in administering impartial justice between the parties, and hence, the fees
should be subject to judicial control. Nor should it be ignored that sound public policy
demands that courts disregard stipulations for counsel fees, whenever they appear to
be a source of speculative profit at the expense of the debtor or mortgagor. (See,
Gorospe, et al. v. Gochangco, L-12735, October 30, 1959).lwphl@it (Mambulao Lumber Co.
v. Philippine National Bank, 22 SCRA 359, 371).
The lower court fixed the attorney's compensation of Atty. Gil de Guzman as follows: (1)
P177,500.00 payable immediately and (2) 20% of whatever attorney's fees the petitioners may be
awarded in Civil Case No. SM-1208 as attorney's lien.
Granting that the dismissal of Atty. Gil de Guzman was unjustified, it is obvious that, in the light of
the services rendered, the stipulation of attorney's fees in the contract for legal services becomes
unconscionable and unreasonable. Moreover, we tend to agree with the petitioners that Atty. de
Guzman was dismissed for a justifiable cause. The petitioners contend that Rolando Gimeno
delivered to Atty. de Guzman the PNB checks in the amount of P852,000.00 issued by the MWSS
as a result of the writ of attachment and ordered them to be deposited with the municipal treasurer of
Sta. Maria, Bulacan; that after three months, Atty. de Guzman had not delivered said checks so that
Gimeno decided to take the checks and deposit them himself but Atty. de Guzman denied having
the checks and refused to return them forcing the petitioners to dismiss him. This assertion is given
credence considering the explanation of the petitioners which is borne out by the records, to wit:
xxx xxx xxx
... [T]hat after claiming that he "never and did not receive said checks nor (had them)
in his possession," he finally admitted having possession thereof with a ludicrous
explanation of such possession in his motion dated April 18, 1983 above quoted
wherein he alleged that: "On April 11, 1983, about 4:00 p.m. plaintiff Rolando
Gimeno came to the office of the undersigned counsel and admitted his fault and
turned over PNB Checks Nos. 070925 and 070928 both dated December 20, 1982 in
the total sum of P852,000.00 in the name of Rolando Gimeno as plaintiff and
attorney-in-fact which are now in counsel's possession and custody," after Atty.
Alonzo had filed on April 14,1983 a motion to declare him in contempt of court for
denying and refusing to hand over said cheeks for deposit pursuant to the court's
order of December 15, 1983. Respondent Atty. de Guzman's concreted claim that
Rolando Gimeno turned over the said checks to him on April 11, 1983 is patently
incredible because it is preposterous and utterly untrue, but typically characteristic of
his dealings with petitioners as clients. If petitioner Rolando Gimeno had the checks
and he and his new counsel had been demanding that respondent Atty. de Guzman
hand over said checks in his possession to them so the same can be deposited in
compliance with the court's order and had dismissed him for refusing to do so, why.
will he (Rolando Gimeno) suddenly turn over the checks to respondent Atty. de
Guzman who is no longer his lawyer? ...
Considering that: (1) the stipulation on payment for legal services appears unconscionable and
unreasonable; and (2) Atty. Gil de Guzman was dismissed for justifiable cause, the amount due to
the lawyer should be fixed on aquantum meruit (Mambulao Lumber Co. v. Philippine National
Bank, supra). This Court has stated that:
In determining the compensation of an attorney, the following circumstances should
be considered: the amount and character of the services rendered, the responsibility
imposed; the amount of money or the value of the property affected by the
controversy, or involved in the employment; the skill and experience caged for in the
performance of the service; the professional standing of the attorney; the results
secured; and whether or not the fee is contingent or absolute, it being a recognized
rule that an attorney may properly charge a much larger fee when it is to be
contingent than when it is not. (Delgado v. De la Rama, 43 PhiL 419) ...
Within the period of his employment by the petitioners, Atty. de Guzman filed the complaint, had the
defendants Nam Kwang and Socea Bonna declared in default and finally, on his motion, the lower
court issued the writ of attachment against MWSS. At the time of Atty. de Guzman's termination as
counsel, the case had not gone through pre-trial.
Nothing in the case so far appears complicated and no extra ordinary skill was needed for Atty. de
Guzman to accomplish what he had done in the case before he was terminated. There was no way
of determining at that point how much the petitioners would recover or whether they would even
recover anything.
For these services of Atty. de Guzman, we rule that he is entitled to the amount of P10,000.00 as
reasonable attorney's compensation.
WHEREFORE, the petition is hereby GRANTED. The questioned decision of the then Intermediate
Appellate Court is REVERSED and SET ASIDE. The petitioners are ordered to pay Atty. Gil de
Guzman the amount of TEN THOUSAND PESOS (P10,000.00) as payment for his legal services in
Civil Case No. SM-1208.
SO ORDERED.

G.R. No. 102300. March 17, 1993.
CITIBANK, N.A., petitioner, vs. HON. SEGUNDINO G. CHUA, SANTIAGO M. KAPUNAN and LUIS
L. VICTOR, ASSOCIATE JUSTICES OF THE HON. COURT OF APPEALS, THIRD DIVISION,
MANILA, HON. LEONARDO B. CANARES, Judge of Regional, Trial Court of Cebu, Branch 10, and
SPOUSES CRESENCIO AND ZENAIDA VELEZ, respondents.
SYLLABUS
1. COMMERCIAL LAW; PRIVATE CORPORATIONS; LEVELS OF CONTROL IN CORPORATE
HIERARCHY; BOARD OF DIRECTORS MAY VALIDLY DELEGATE SOME FUNCTIONS TO
INDIVIDUAL OFFICERS OR AGENTS. In the corporate hierarchy, there are three levels of
control: (1) the board of directors, which is responsible for corporate policies and the general
management of the business affairs of the corporation; (2) the officers, who in theory execute the
policies laid down by the board, but in practice often have wide latitude in determining the course of
business operations; and (3) the stockholders who have the residual power over fundamental
corporate changes, like amendments of the articles of incorporation. However, just as a natural
person may authorize another to do certain acts in his behalf, so may the board of directors of a
corporation validly delegate some of its functions to individual officers or agents appointed by it.
2. ID.; ID.; HOW CORPORATE POWERS CONFERRED UPON CORPORATE OFFICERS OR
AGENTS; EXERCISE OF POWERS INCIDENTAL TO EXPRESS POWERS CONFERRED.
Corporate powers may be directly conferred upon corporate officers or agents by statute, the articles
of incorporation, the by-laws or by resolution or other act of the board of directors. In addition, an
officer who is not a director may also appoint other agents when so authorized by the by-laws or by
the board of directors. Such are referred to as express powers. There are also powers incidental to
express powers conferred. It is a fundamental principle in the law of agency that every delegation of
authority, whether general or special, carries with it, unless the contrary be expressed, implied
authority to do all of those acts, naturally and ordinarily done in such cases, which are reasonably
necessary and proper to be done in order to carry into effect the main authority conferred. Since the
by-laws are a source of authority for corporate officers and agents of the corporation, a resolution of
the Board of Directors of Citibank appointing an attorney in fact to represent and bind it during the
pre-trial conference of the case at bar is not necessary because its by-laws allow its officers, the
Executing Officer and the Secretary Pro-Tem, to execute a power of attorney to a designated bank
officer, William W. Ferguson in this case, clothing him with authority to direct and manage corporate
affairs.
3. ID.; ID.; ADOPTION OF BY-LAWS; PROVISION OF SECTION 46 OF CORPORATION CODE
REFERRING TO EFFECTIVITY OF CORPORATE BY-LAWS APPLICABLE ONLY TO DOMESTIC
CORPORATIONS. A corporation can submit its by-laws, prior to incorporation, or within one
month after receipt of official notice of the issuance of its certificate of incorporation by the SEC.
When the third paragraph of the above provision mentions "in all cases", it can only refer to these
two options; i.e., whether adopted prior to incorporation or within one month after incorporation, the
by-laws shall be effective only upon the approval of the SEC. But even more important, said
provision starts with the phrase "Every corporation formed under this Code", which can only refer to
corporations incorporated in the Philippines. Hence, Section 46, in so far as it refers to the effectivity
of corporate by-laws, applies only to domestic corporations and not to foreign corporations.
4. ID.; FOREIGN CORPORATIONS; ISSUANCE OF LICENSE TO TRANSACT BUSINESS IN THE
PHILIPPINES; REQUISITES; GRANT OF LICENSE IN EFFECT APPROVAL BY SEC OF
FOREIGN CORPORATION'S BY-LAWS. Section 125 of the same Code requires that a foreign
corporation applying for a license to transact business in the Philippines must submit, among other
documents, to the SEC, a copy of its articles of incorporation and by-laws, certified in accordance
with law. Unless these documents are submitted, the application cannot be acted upon by the SEC.
In the following section, the Code specifies when the SEC can grant the license applied for. Section
126 provides in part: "SEC. 126. Issuance of a license. If the Securities and Exchange
Commission is satisfied that the applicant has complied with all the requirements of this Code and
other special laws, rules and regulations, the Commission shall issue a license to the applicant to
transact business in the Philippines for the purpose or purposes specified in such license . . ." Since
the SEC will grant a license only when the foreign corporation has complied with all the requirements
of law, it follows that when it decides to issue such license, it is satisfied that the applicant's by-laws,
among the other documents, meet the legal requirements. This, in effect, is an approval of the
foreign corporations by-laws. It may not have been made in express terms, still it is clearly an
approval. Therefore, petitioner bank's by-laws, though originating from a foreign jurisdiction, are valid
and effective in the Philippines.
5. CIVIL LAW; AGENCY; SPECIAL POWER OF ATTORNEY; WHEN POWER OF ATTORNEY
COMPREHENSIVE ENOUGH TO INCLUDE AUTHORITY TO APPEAR AT PRE-TRIAL
CONFERENCE. It is also error on the part of the Court of Appeals to state that the power of
attorney given to the four (4) Citibank employees is not a special power of attorney as required in
paragraph 3, Article 1878 of the Civil Code and Section 1 (a), Rule 20 of the Rules of Court. In the
case of Tropical Homes, Inc. vs. Villaluz, the special power of attorney executed by petitioner bank
therein contained the following pertinent terms "to appear for and in its behalf in the above-
entitled case in all circumstances where its appearance is required and to bind it in all said
instances". The court ruled that: "Although the power of attorney in question does not specifically
mention the authority of petitioner's counsel to appear and bind the petitioner at the pre-trial
conference, the terms of said power of attorney are comprehensive enough as to include the
authority to appear for the petitioner at the pre-trial conference."
6. ID.; ID.; ID.; LEGAL COUNSEL APPOINTED TO REPRESENT BANK IN COURT PURSUANT
TO BY-LAW PROVISION CONSIDERED AN EMPLOYEE FOR A SPECIAL PURPOSE. Attorney
was sufficient under the by-law provision authorizing Ferguson to delegate any of his functions to
any one or more employees of the petitioner bank. A reasonable interpretation of this provision
would include an appointment of a legal counsel to represent the bank in court, for, under the
circumstances, such legal counsel can be considered, and in fact was considered by the petitioner
bank, an employee for a special purpose. Furthermore, Ferguson, who heads the Philippine office
thousands of miles away from its main office in the United States, must be understood to have
sufficient powers to act promptly in order to protect the interests of his principal.
7. REMEDIAL LAW; CIVIL PROCEDURE; PRECIPITATE ORDERS OF DEFAULT FROWNED
UPON BY SUPREME COURT; REASON THEREFOR; WHEN PARTY MAY BE PROPERLY
DEFAULTED. We reiterate the previous admonitions of this Court against "precipitate orders of
default as these have the effect of denying the litigant the chance to be heard. While there are
instances, to be sure, when a party may be properly defaulted, these should be the exceptions
rather than the rule and should be allowed only in clear cases of an obstinate refusal or inordinate
neglect to comply with the orders of the court. Absent such a showing, the party must be given every
reasonable opportunity to present his side and to refute the evidence of the adverse party in
deference to due process of law".
8. LEGAL ETHICS; AUTHORITY OF ATTORNEYS TO BIND CLIENTS. Under Rule 138, Section
23 of the Rules of Court, an attorney has authority to bind his client in any case by an agreement in
relation thereto made in writing, and this authority would include taking appeals and all matters of
ordinary judicial procedure. But he cannot, without special authority, compromise his client's litigation
or receive anything in discharge of a client's claim but the full amount in cash. The special powers of
attorney separately executed by Florencia Tarriela and William W. Ferguson granted to J.P. Garcia
& Associates are very explicit in their terms as to the counsel's authority in the case at bar.
D E C I S I O N
CAMPOS, JR., J p:
Petitioner is a foreign commercial banking corporation duly licensed to do business in the
Philippines. Private respondents, spouses Cresencio and Zenaida Velez, were good clients of
petitioner bank's branch in Cebu until March 14, 1986 when they filed a complaint for specific
performance and damages against it in Civil Case No. CEB-4751 before the Regional Trial Court of
Cebu, Branch 10.
Private respondents alleged in their complaint that the petitioner bank extended to them credit lines
sufficiently secured with real estate and chattel mortgages on equipment. They claim that petitioner
offered them special additional accommodation of Five Million Pesos (P5,000,000.00) to be availed
of in the following manner:
"a. Defendant would and did purchase check or checks from the plaintiffs by exchanging it with
defendant's manager's check on a regular daily basis as reflected in the defendant's own ledger
furnished to plaintiffs;
b. It was further agreed that on the following day, defendant CITIBANK would again purchase from
the plaintiffs, check or checks, by exchanging the same with defendant's manager's check, which
check, however, will be deposited by the plaintiffs with their other banks to cover the check or
checks previously issued by the plaintiffs mentioned above;
c. The same regular and agreed activity would be undertaken by the plaintiffs and defendant
CITIBANK herein every banking day thereafter;" 1
This arrangement started on September 4, 1985 until March 11, 1986, when private respondents
tried to exchange with petitioner bank six checks amounting to P3,095,000.00 but petitioner bank
allegedly refused to continue with the arrangement even after repeated demands. Instead, petitioner
bank suggested to private respondents that the total amount covered by the "arrangement be
restructured to thirty (30) months with prevailing interest rate on the diminishing balance". 2 Private
respondents agreed to such a proposal. Then as a sign of good faith, they issued and delivered a
check for P75,000.00 in favor of petitioner bank which was refused by the latter demanding instead
full payment of the entire amount.
For the failure of petitioner bank to comply with this restructuring agreement private respondents
sued for specific performance and damages.
Petitioner bank has a different version of the business relationship that existed between it and
private respondents. Thus:
". . . starting sometime on September 4 of 1985, he (private respondent Crescencio Velez) deposited
his unfunded personal checks with his current account with the petitioner. But prior to depositing said
checks, he would present his personal checks to a bank officer asking the latter to have his personal
checks immediately credited as if it were a cash deposit and at the same time assuring the bank
officer that his personal checks were fully funded. Having already gained the trust and confidence of
the officers of the bank because of his past transactions, the bank's officer would always
accommodate his request. After his requests are granted which is done by way of the bank officer
affixing his signature on the personal checks, private respondent Cresencio Velez would then
deposit his priorly approved personal checks to his current account and at the same time withdraw
sums of money from said current account by way of petitioner bank's manager's check. Private
respondent would then deposit petitioner bank's manager's check to his various current accounts in
other commercial banks to cover his previously deposited unfunded personal checks with petitioner
bank. Naturally, petitioner bank and its officers never discovered that his personal check deposits
were unfunded. On the contrary, it gave the petitioner bank the false impression that private
respondent's construction business was doing very well and that he was one big client who could be
trusted. This deceptive and criminal scheme he did every banking day without fail from September 4,
1985 up to March 11, 1986. The amounts that he was depositing and withdrawing during this period
(September 4, 1985 to March 11, 1986) progressively became bigger. It started at P46,000.00 on
September 4, 1985 and on March 11, 1986 the amount of deposit and withdrawal already reached
over P3,000,000.00. At this point in time (March 11, 1986), the private respondent Cresencio Velez
presumably already feeling that sooner or later he would be caught and that he already wanted to
cash in on his evil scheme, decided to run away with petitioner's money. On March 11, 1986, he
deposited various unfunded personal checks totalling P3,095,000.00 and requested a bank officer
that the same be credited as cash and after securing the approval of said bank officer, deposited his
various personal checks in the amount of P3,095,000.00 with his current account and at the same
time withdrew the sum of P3,244,000.00 in the form of petitioner's manager's check. Instead of using
the proceeds of his withdrawals to cover his unfunded personal checks, he ran away with petitioner
bank's money. Thus, private respondent Cresencio Velez's personal checks deposited with
petitioner bank on March 11, 1986 in the total aggregate amount of P3,095,000.00 bounced. The
checks bounced after said personal checks were made the substantial basis of his withdrawing the
sum of P3,244,000.00 from his current account with petitioner bank." 3
Subsequently, on August 19, 1986, petitioner bank filed a criminal complaint against private
respondents for violation of Batas Pambansa Blg. 22 (Bouncing Checks Law) and estafa (six counts)
under Article 315 par. 2(d) of the Revised Penal Code. On April 28, 1988, the investigating fiscal
recommended the filing of an information against private respondents for violations of the mentioned
laws.
On June 13, 1989, petitioner bank submitted its answer to the complaint filed by private
respondents. In the Order dated February 20, 1990, the case was set for pre-trial on March 30, 1990
and petitioner bank was directed to submit its pre-trial brief at least 3 days before the pre-trial
conference. Petitioner bank only filed its pre-trial brief on March 30, 1990.
On March 30, 1990, the date of the pre-trial conference, counsel for petitioner bank appeared,
presenting a special power of attorney executed by Citibank officer Florencia Tarriela in favor of
petitioner bank's counsel, the J.P. Garcia & Associates, to represent and bind petitioner bank at the
pre-trial conference of the case at bar.
Inspite of this special power of attorney, counsel for private respondents orally moved to declare
petitioner bank as in default on the ground that the special power of attorney was not executed by
the Board of Directors of Citibank. Petitioner bank was then required to file a written opposition to
this oral motion to declare it as in default. In said opposition petitioner bank attached another special
power of attorney made by William W. Ferguson, Vice President and highest ranking officer of
Citibank, Philippines, constituting and appointing the J.P. Garcia & Associates to represent and bind
the BANK at the pre-trial conference and/or trial of the case of "Cresencio Velez, et al. vs. Citibank,
N.A.". 4 In an Order dated April 23, 1990, respondent judge denied private respondents' oral motion
to declare petitioner bank as in default and set the continuation of the pre-trial conference for May 2,
1990.
On the scheduled pre-trial conference, private respondents reiterated, by way of asking for
reconsideration, their oral motion to declare petitioner bank as in default for its failure to appear
through an authorized agent and that the documents presented are not in accordance with the
requirements of the law. Petitioner bank again filed on May 14, 1990 its opposition thereto, stating as
follows:
". . . While it has been the practice of Citibank to appoint its counsels as its attorney-in-fact in civil
cases because it considers said counsels equivalent to a Citibank employee, yet, in order to avoid
further arguments on the matter, the defendant Citibank will secure another power of attorney from
Mr. William W. Ferguson in favor of its employee/s who will represent the defendant Citibank in the
pre-trial conferences of this case. As soon as the said special power of attorney is secured, the
defendant will present it before this Honorable Court and in pursuance therewith, the defendant
hereby makes a reservation to present such document as soon as available." 5
In compliance with the above promise, petitioner bank filed a manifestation, dated May 23, 1990,
attaching therewith a special power of attorney executed by William W. Ferguson in favor of Citibank
employees to represent and bind Citibank on the pre-trial conference of the case at bar. 6
On August 15, 1990, respondent judge issued an order declaring petitioner bank as in default. This
order, received by petitioner bank on September 27, 1990, cited the following as reason for the
declaration of default:
"Defendant-bank, although a foreign corporation, is bound by Philippine laws when doing and
conducting business in the Philippines (Sec. 129, B.P. Blg. 68), and its corporate powers could only
be exercised by its Board of Directors (Sec. 23, B.P. Blg. 68). The exercise by the Board of Directors
of such power could only be valid if it bears the approval of the majority of the Board (Sec. 25, par. 2,
Corporation Code). The records does not show the requisite document. The alleged authority
(Special Power of Attorney, Annex "A") executed by Mr. William W. Ferguson in favor of the alleged
Citibank employees, assuming the same to be a delegable authority, to represent the defendant in
the pre-trial conference, made no mention of J.P. Garcia & Associates as one of the employees of
the defendant.
It stands to reason therefore, that the defendant-bank has no proper representation during the pre-
trial conference on May 2, 1990 for purposes of Sec. 2, Rule 20 of the Rules of Court." 7
On October 1, 1990, petitioner bank filed a motion for reconsideration of the above order but it was
denied on December 10, 1990.
Petitioner bank then filed a petition for certiorari, prohibition and mandamus with preliminary
injunction and/or temporary restraining order with the Court of Appeals. On June 26, 1991, the Court
of Appeals dismissed the petition on the following grounds:
". . . In the first place, petitioner admitted that it did not and could not present a Board resolution from
the bank's Board of Directors appointing its counsel, Atty. Julius Z. Neri, as its attorney-in-fact to
represent and bind it during the pre-trial conference of this case. This admission is contained on
pages 12 and 13 of the instant petition.
In the second place, the "By-Laws" of petitioner which on its face authorizes (sic) the appointment of
an attorney-in-fact to represent it in any litigation, has not been approved by the Securities and
Exchange Commission, as required by Section 46 of the Corporation Code of the Philippines.
Apparently, the "By-Laws" in question was (sic) approved under the laws of the United States, but
there is no showing that the same was given the required imprimatur by the Securities and
Exchange Commission. Since petitioner is a foreign corporation doing business in the Philippines, it
is bound by all laws, rules and regulations applicable to domestic corporations (Sec. 129,
Corporation Code).
In the third place, no special power of attorney was presented authorizing petitioner's counsel of
record, Atty. Julius Neri and/or J.P. Garcia Associates, to appear for and in behalf of petitioner
during the pre-trial.
What petitioner exhibited to the court a quo was a general power of attorney given to one William W.
Ferguson who in turn executed a power of attorney in favor of five (5) (sic) Citibank employees to act
as attorney-in-fact in Civil Case No. CEB-4751. Yet, during the pre-trial not one of said employees
appeared, except counsel who is not even a bank employee.
Furthermore, even assuming the validity of the power of attorney issued by petitioner in favor of
Ferguson as well as the power of attorney he issued to five (5) (sic) Citibank employees, said power
of attorney has not been shown to be a Special Power of Attorney precisely intended not only to
represent the bank at the pre-trial of the case on a certain date but also to enter into any
compromise as required in paragraph 3, Article 1878 of the Civil Code and Section 1 (a), Rule 20,
Rules of Court." 8
Hence, this instant petition.
Petitioner bank contends that no board resolution was necessary for its legal counsel, Atty. Julius Z.
Neri, or Citibank employees to act as its attorney-in-fact in the case at bar because petitioner bank's
by-laws grant to its Executing Officer and Secretary Pro-Tem the power to delegate to a Citibank
officer, in this case William W. Ferguson, the authority to represent and defend the bank and its
interests.
Furthermore, it contends that the Court of Appeals erred in holding that the by-laws of petitioner
bank cannot be given effect because it did not have the imprimatur of the Securities and Exchange
Commission (SEC) as required by Section 46 of the Corporation Code of the Philippines.
Private respondents refute both contentions. They assail the authority of petitioner bank's legal
counsel to appear at the pre-trial conference on two grounds, namely: first, that the authority did not
come from the Board of Directors which has the exclusive right to exercise corporate powers; and
second, that the authority granted to the Executing Officer in the by-laws was ineffective because the
same were not submitted to, nor approved by, the SEC.
There are thus two issues in this case. First, whether a resolution of the board of directors of a
corporation is always necessary for granting authority to an agent to represent the corporation in
court cases. And second, whether the by-laws of the petitioner foreign corporation which has
previously been granted a license to do business in the Philippines, are effective in this jurisdiction. If
the by-laws are valid and a board resolution is not necessary as petitioner bank claims, then the
declaration of default would have no basis.
In the corporate hierarchy, there are three levels of control: (1) the board of directors, which is
responsible for corporate policies and the general management of the business affairs of the
corporation; (2) the officers, who in theory execute the policies laid down by the board, but in
practice often have wide latitude in determining the course of business operations; and (3) the
stockholders who have the residual power over fundamental corporate changes, like amendments of
the articles of incorporation. However, just as a natural person may authorize another to do certain
acts in his behalf, so may the board of directors of a corporation validly delegate some of its
functions to individual officers or agents appointed by it.
Section 23 of the Corporation Code of the Philippines in part provides:
"SEC. 23. The board of directors or trustees. Unless otherwise provided in this Code, the corporate
powers of all corporations formed under this Code shall be exercised, all business conducted and all
property of such corporations controlled and held by the board of directors or trustees to be elected
from among the holders of stocks, or where there is no stock, from among the members of the
corporation, who shall hold office for one (1) year and until their successors are elected and
qualified.
xxx xxx xxx" (Emphasis supplied).
Thus, although as a general rule, all corporate powers are to be exercised by the board of directors,
exceptions are made where the Code provides otherwise.
Section 25 of said Code provides that the directors of the corporation shall elect its corporate
officers, and further provides as follows:
"SEC. 25. Corporate officers; quorum. . . . The directors or trustees and officers to be elected
shall perform the duties enjoined on them by law and by the by-laws of the corporation . . ."
Furthermore, Section 47 of the same Code enumerates what may be contained in the by-laws,
among which is a provision for the "qualifications, duties and compensation of directors or trustees,
officers and employees". (Emphasis supplied.)
Taking all the above provisions of law together, it is clear that corporate powers may be directly
conferred upon corporate officers or agents by statute, the articles of incorporation, the by-laws or by
resolution or other act of the board of directors. In addition, an officer who is not a director may also
appoint other agents when so authorized by the by-laws or by the board of directors. Such are
referred to as express powers. 9 There are also powers incidental to express powers conferred. It is
a fundamental principle in the law of agency that every delegation of authority, whether general or
special, carries with it, unless the contrary be expressed, implied authority to do all of those acts,
naturally and ordinarily done in such cases, which are reasonably necessary and proper to be done
in order to carry into effect the main authority conferred. 10
Since the by-laws are a source of authority for corporate officers and agents of the corporation, a
resolution of the Board of Directors of Citibank appointing an attorney in fact to represent and bind it
during the pre-trial conference of the case at bar is not necessary because its by-laws allow its
officers, the Executing Officer and the Secretary Pro-Tem, ** to execute a power of attorney to a
designated bank officer, William W. Ferguson in this case, clothing him with authority to direct and
manage corporate affairs. The relevant provision in the general power of attorney granted to him are
as follows:
"A. That the Executing Officer and the Secretary Pro-Tem are of full age, competent to act in the
premises, to me personally known, and that they are authorized to execute this instrument by virtue
of the powers granted to them pursuant to the By-Laws of the Bank and the laws of the United
States of America, and that the Executing Officer said that he, on the one hand, hereby revokes and
cancels any instrument of power of attorney previously executed on behalf of the Bank for use in the
PHILIPPINES, in favor of WILLIAM W. FERGUSON (hereinafter referred to as the "Attorney-in-
fact"), of legal age, a Banker, and now residing in the PHILIPPINES, and that he (the Executing
Officer), on the other hand, does hereby authorize and empower the Attorney-in-fact, acting in the
name or on behalf of the Bank, or any of its Branches, or any interest it or they may have or
represent, said revocation and authorization to be effective as of this date as follows:
xxx xxx xxx
XVII. To represent and defend the Bank and its interest before any and all judges and courts, of all
classes and jurisdictions, in any action, suit or proceeding in which the Bank may be a party or may
be interested in administrative, civil, criminal, contentious or contentious-administrative matters, and
in all kinds of lawsuits, recourses or proceedings of any kind or nature, with complete and absolute
representation of the Bank, whether as plaintiff or defendant, or as an interested party for any reason
whatsoever . . .
xxx xxx xxx
XXI. To substitute or delegate this Power of Attorney in whole or in part in favor of such one or more
employees of the Bank, as he may deem advisable, but without divesting himself of any of the
powers granted to him by this Power of Attorney; and to grant and execute in favor of any one or
more such employees, powers of attorney containing all or such authorizations, as he may deem
advisable. . . " 11
Since paragraph XXI above specifically allows Ferguson to delegate his powers in whole or in part,
there can be no doubt that the special power of attorney in favor, first, of J.P. Garcia & Associates
and later, of the bank's employees, constitutes a valid delegation of Ferguson's express power
(under paragraph XVII above) to represent petitioner bank in the pre-trial conference in the lower
court.
This brings us to the second query: whether petitioner bank's by-laws, which constitute the basis for
Ferguson's special power of attorney in favor of petitioner bank's legal counsel are effective,
considering that petitioner bank has been previously granted a license to do business in the
Philippines.
The Court of Appeals relied on Section 46 of the Corporation Code to support its conclusion that the
by-laws in question are without effect because they were not approved by the SEC. Said section
reads as follows:
"SEC. 46. Adoption of by-laws. Every corporation formed under this Code must, within one (1)
month after receipt of official notice of the issuance of its certificate of incorporation by the Securities
and Exchange Commission, adopt a code of by-laws for its government not inconsistent with this
Code. For the adoption of by-laws by the corporation, the affirmative vote of the stockholders
representing at least a majority of the outstanding capital stock, or of at least a majority of the
members in the case of non-stock corporations, shall be necessary. The by-laws shall be signed by
the stockholders or members voting for them and shall be kept in the principal office of the
corporation, subject to the inspection of the stockholders or members during office hours; and a copy
thereof, duly certified to by a majority of the directors or trustees and countersigned by the secretary
of the corporation, shall be filed with the Securities and Exchange Commission which shall be
attached to the original articles of incorporation.
Notwithstanding the provisions of the preceding paragraph, by-laws may be adopted and filed prior
to incorporation; in such case, such by-laws shall be approved and signed by all the incorporators
and submitted to the Securities and Exchange Commission, together with the articles of
incorporation.
In all cases, by-laws shall be effective only upon the issuance by the Securities and Exchange
Commission of a certification that the by-laws are not inconsistent with this Code."
A careful reading of the above provision would show that a corporation can submit its by-laws, prior
to incorporation, or within one month after receipt of official notice of the issuance of its certificate of
incorporation by the SEC. When the third paragraph of the above provision mentions "in all cases", it
can only refer to these two options; i.e., whether adopted prior to incorporation or within one month
after incorporation, the by-laws shall be effective only upon the approval of the SEC. But even more
important, said provision starts with the phrase "Every corporation formed under this Code", which
can only refer to corporations incorporated in the Philippines. Hence, Section 46, in so far as it refers
to the effectivity of corporate by-laws, applies only to domestic corporations and not to foreign
corporations.
On the other hand, Section 125 of the same Code requires that a foreign corporation applying for a
license to transact business in the Philippines must submit, among other documents, to the SEC, a
copy of its articles of incorporation and by-laws, certified in accordance with law. Unless these
documents are submitted, the application cannot be acted upon by the SEC. In the following section,
the Code specifies when the SEC can grant the license applied for. Section 126 provides in part:
"SEC. 126. Issuance of a license. If the Securities and Exchange Commission is satisfied that the
applicant has complied with all the requirements of this Code and other special laws, rules and
regulations, the Commission shall issue a license to the applicant to transact business in the
Philippines for the purpose or purposes specified in such license . . ."
Since the SEC will grant a license only when the foreign corporation has complied with all the
requirements of law, it follows that when it decides to issue such license, it is satisfied that the
applicant's by-laws, among the other documents, meet the legal requirements. This, in effect, is an
approval of the foreign corporations by-laws. It may not have been made in express terms, still it is
clearly an approval. Therefore, petitioner bank's by-laws, though originating from a foreign
jurisdiction, are valid and effective in the Philippines.
In pursuance of the authority granted to him by petitioner bank's by-laws, its Executing Officer
appointed William W. Ferguson, a resident of the Philippines, as its Attorney-in-Fact empowering the
latter, among other things, to represent petitioner bank in court cases. In turn, William W. Ferguson
executed a power of attorney in favor of J.P. Garcia & Associates (petitioner bank's counsel) to
represent petitioner bank in the pre-trial conference before the lower court. This act of delegation is
explicity authorized by paragraph XXI of his own appointment, which we have previously cited.
It is also error for the Court of Appeals to insist that the special power of attorney, presented by
petitioner bank authorizing its counsel, Atty. Julius Neri and/or J.P. Garcia & Associates, to appear
for and in behalf of petitioner bank during the pre-trial, is not valid. The records do not sustain this
finding. We quote with approval the contention of petitioner bank as it is borne by the records, to wit:
". . . The records of this case would show that at the start, the petitioner, thru counsel, presented a
special power of attorney executed by then Citibank Officer Florencio (sic) J. Tarriela which was
marked as Exhibit "1" in the pre-trial of this case . . . This is precisely the reason why the court
denied, in an Order dated April 23, 1990 . . . the private respondent's oral motion to declare the
defendant in fault. The said special power of attorney executed by Florencio (sic) J. Tarriela was
granted by Mr. Rafael B. Buenaventura, who was then the Senior Vice-President of Citibank and the
highest ranking office of Citibank in the Philippines. Considering that at the time of the presentation
of the said special power of attorney Rafael B. Buenaventura was no longer connected with Citibank,
the petitioner again presented another special power of attorney executed by William W. Ferguson in
favor of J.P. Garcia & Associates, . . .
Finding that the authority of William W. Ferguson to delegate his authority to act for and in behalf of
the bank in any civil suit is limited to individuals who are employees of the bank the petitioner again
on May 23, 1990 presented another special power of attorney dated May 16, 1990 wherein William
W. Ferguson appointed as attorney-in-fact the following employees of petitioner, namely: Roberto
Reyes, Nemesio Solomon, Aimee Yu and Tomas Yap. The said special power of attorney was filed
and presented by the petitioner through its Manifestation filed in the Trial Court on May 23, 1990, . .
." 12
Under Rule 138, Section 23 of the Rules of Court, an attorney has authority to bind his client in any
case by an agreement in relation thereto made in writing, and this authority would include taking
appeals and all matters of ordinary judicial procedure. But he cannot, without special authority,
compromise his client's litigation or receive anything in discharge of a client's claim but the full
amount in cash. The special powers of attorney separately executed by Florencia Tarriela and
William W. Ferguson granted to J.P. Garcia & Associates are very explicit in their terms as to the
counsel's authority in the case at bar. We quote the relevant provisions of the special powers of
attorney showing sufficient compliance with the requirements of Section 23, Rule 138, to wit:
"That the BANK further authorized the said J.P. GARCIA & ASSOCIATES to enter into an amicable
settlement, stipulation of facts and/or compromise agreement with the party or parties involved under
such terms and conditions which the said J.P. GARCIA & ASSOCIATES may deem reasonable
(under parameters previously defined by the principal) and execute and sign said documents as may
be appropriate.
HEREBY GIVING AND GRANTING unto J.P. GARCIA & ASSOCIATES full power and authority
whatsoever requisite necessary or proper to be done in or about the premises, as fully to all intents
and purposes as the BANK might or could lawfully do or cause to be done under and by virtue of
these presents." 13
It is also error on the part of the Court of Appeals to state that the power of attorney given to the four
(4) Citibank employees is not a special power of attorney as required in paragraph 3, Article 1878 of
the Civil Code and Section 1 (a), Rule 20 of the Rules of Court. In the case of Tropical Homes, Inc.
vs. Villaluz, 14 the special power of attorney executed by petitioner bank therein contained the
following pertinent terms "to appear for and in its behalf in the above-entitled case in all
circumstances where its appearance is required and to bind it in all said instances". The court ruled
that:
"Although the power of attorney in question does not specifically mention the authority of petitioner's
counsel to appear and bind the petitioner at the pre-trial conference, the terms of said power of
attorney are comprehensive enough as to include the authority to appear for the petitioner at the pre-
trial conference."
In the same manner, the power of attorney granted to petitioner bank's employees should be
considered a special power of attorney. The relevant portion reads:
"WHEREAS, the Bank is the Defendant in Civil Case No. CEB-4751, entitled "Cresencio Velez, et al.
vs. Citibank, N.A.," pending before the Regional Trial Court of Cebu City, Branch X;
NOW, THEREFORE, under and by virtue of Article XXI of the Power of Attorney executed by the
Bank in favor of the Attorney-in-Fact (Annex "A"), which provision is quoted above, the Attorney-in-
Fact has nominated, designated and appointed, as by these presents he nominates, designates and
appoints, as his substitutes and delegates, with respect to the said Power of Attorney, ROBERTO
REYES, Vice President and/or NEMESIO SOLOMON, JR., Manager, AIMEE YU, Assistant Vice
President and/or TOMAS YAP, Assistant Manager (hereinafter referred to as the "DELEGATES"), all
of legal age, citizens of the Republic of the Philippines and with business address at Citibank Center,
Paseo de Roxas, Makati, Metro Manila, Philippines, the Attorney-in-Fact hereby granting, conferring
and delegating such authorities and binding the Bank in the Pre-Trial Conference and/or Trial of the
abovementioned case, pursuant to Rule 20 of the Revised Rules of Court, to the DELEGATES. The
attorney-in-Fact furthermore hereby ratifying and confirming all that the DELEGATES shall lawfully
do or cause to be done under and by virtue of these presents." 15
From the outset, petitioner bank showed a willingness, if not zeal, in pursuing and defending this
case. It even acceded to private respondent's insistence on the question of proper representation
during the pre-trial by presenting not just one, but three, special powers of attorney. Initially, the
special power of attorney was executed by Florencia Tarriela in favor of J.P. Garcia & Associates,
petitioner bank's counsel. Private respondents insisted that this was not proper authority required by
law. To avoid further argument, a second special power of attorney was presented by petitioner
bank, executed by William W. Fersugon, the highest ranking officer of Citibank in the Philippines, in
favor of its counsel J.P. Garcia & Associates. But since the authority to delegate of William A.
Fersugon in favor of an agent is limited to bank employees, another special power of attorney from
Wiliam W. Fersugon in favor of the Citibank employees was presented. But the respondent trial court
judge disregarded all these and issued the assailed default order. There is nothing to show that
petitioner bank "miserably failed to oblige"; on the contrary, three special powers of attorney manifest
prudence and diligence on petitioner bank's part.
In fact, there was no need for the third power of attorney because we believe that the second power
of attorney was sufficient under the by-law provision authorizing Fersugon to delegate any of his
functions to any one or more employees of the petitioner bank. A reasonable interpretation of this
provision would include an appointment of a legal counsel to represent the bank in court, for, under
the circumstances, such legal counsel can be considered, and in fact was considered by the
petitioner bank, an employee for a special purpose. Furthermore, Fersugon, who heads the
Philippine office thousands of miles away from its main office in the United States, must be
understood to have sufficient powers to act promptly in order to protect the interests of his principal.
We reiterate the previous admonitions of this Court against "precipitate orders of default as these
have the effect of denying the litigant the chance to be heard. While there are instances, to be sure,
when a party may be properly defaulted, these should be the exceptions rather than the rule and
should be allowed only in clear cases of an obstinate refusal or inordinate neglect to comply with the
orders of the court. Absent such a showing, the party must be given every reasonable opportunity to
present his side and to refute the evidence of the adverse party in deference to due process of law".
16
Considering further that petitioner bank has a meritorious defense and that the amount in contest is
substantial, the litigants should be allowed to settle their claims on the arena of the court based on a
trial on the merits rather than on mere technicalities.
WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The decision of the Court
of Appeals dated June 26, 1991 and its resolution denying the motion for reconsideration of
petitioner bank dated September 26, 1991 are both REVERSED and SET ASIDE. The order of
default issued on August 15, 1990 in Civil Case CEB-4751 of the Regional Trial Court of Cebu is
ANNULLED and SET ASIDE and the case is hereby REMANDED to the court of origin for further
proceedings.
SO ORDERED


D E C I S I O N
DAVIDE, JR., J .:
This petition for review on certiorari under Rule 45 of the Rules of Court
questions the propriety of the award for, and the reasonableness of the
amount of, attorney's fees granted in favor of the private respondent by the
Regional Trial Court (RTC) of Makati City, Branch 64,
[1]
in Civil Case No.
612,
[2]
which the Court of Appeals affirmed in its decision
[3]
of 31 March 1995 in
CA-G.R. CV No. 44839.
The undisputed facts are as follows:
On 3 November 1969, the petitioner entered into a Joint Venture
Agreement with Jose, Fidel, and Antonia Carreon. Under the said agreement,
the petitioner undertook to develop, subdivide, administer, and promote the
sale of the parcels of land owned by the Carreons. The proceeds of the sale
of the lots were to be paid to the Philippine National Bank (PNB) for the
landowner's mortgage obligation, and the net profits to be shared by the
contracting parties on a 50-50 basis.
On 4 April 1983, the Carreons and a certain Patricio C. Sarile instituted
before the RTC of Makati City an action against the petitioner for rescission of
the Joint Venture Agreement. They prayed therein that pending the hearing of
the case, a writ of preliminary injunction be issued to enjoin the petitioner from
selling the lots subject of the agreement and that after hearing, the writ be
made permanent; the agreement be rescinded; and the petitioner be ordered
to pay the PNB the stipulated 15% per annum of the outstanding obligation
and to pay the plaintiffs attorney's fees, exemplary damages, expenses of
litigation, and costs of suit. This case was docketed as Civil Case No. 612 at
Branch 64 of the said court.
In its answer, which was prepared and signed by Atty. Apolonio G. Reyes,
the petitioner sought the denial of the writ of preliminary injunction, the
dismissal of the complaint, and payment in its favor of (a) P10 million by way
of actual damages; (b) P5 million by way of return to the petitioner of the
amount advanced to the Carreons, payments to the PNB, and cost of the work
on the subdivision; (c) P100,000.00 by way of exemplary damages; (d) any
and all damages up to the amount of P4,638,420.00 which the petitioner may
suffer under the terms of its Performance Bond in favor of the National
Housing Authority; (e) P50,000.00 as attorney's fees; and (f) costs of suit.
On 9 April 1985, the petitioner engaged the services of private respondent
Atty. Manuel S. Fonacier, Jr.,
[4]
who then entered his appearance in Civil Case
No. 612.
While the said case was pending, or on 24 July 1992, the petitioner,
without the knowledge of the private respondent, entered into a Memorandum
of Agreement (MOA)
[5]
with another land developer, Filstream International,
Inc. (hereinafter Filstream). Under this MOA, the former assigned its rights
and obligations under the Joint Venture Agreement in favor of the latter for a
consideration of P28 million, payable within twenty-four months.
On 31 March 1993, the petitioner terminated the legal services of the
private respondent. At the time the petitioner had already received P7 million
from Filstream.
Upon knowing the existence of the MOA, the private respondent filed in
Civil Case No. 612 an Urgent Motion to Direct Payment of Attorney's Fees
and/or Register Attorney's Charging Lien praying, among other things, that the
petitioner be ordered to pay him the sum of P700,000.00 as his contingent fee
in the case.
[6]

After hearing the motion, the trial court issued an order dated 11 October
1993 directing the petitioner to pay the private respondent the sum
of P600,000.00 as attorney's fees on the basis of quantum meruit.
The trial court justified the award in this manner:
Insofar as material to the resolution of this Motion the records of this case show that
movant Atty. Fonacier became the counsel of defendant Research in May 1985 while
this case has been in progress. (Records, p.770). By this time also, the defendant
Research has been enjoined by the Court from executing Contracts To Sell involving
Saranay Homes Subdivision . . . . (Order dated December 3, 1984, Records pp. 625-
626). However, the said counsel for defendant Research prepared for the latter
various pleadings and represented it in Court (See Records after May 1985). Until his
services were terminated the lawyer client relationship between Atty. Fonacier and
Research was governed by a "contract" embodied in a letter addressed to Atty.
Fonacier on April 19, 1985 [sic], the pertinent portion of which is reproduced below,
as follows . . .
x x x
Soon after said letter, cases were referred to him including this case. In accordance
with their agreement, there were instances that Research gave Atty. Fonacier ten
(10%) percent of the amount received as the latter's attorney's fees pursuant to their
agreement.
The instant case in which defendant is praying to be awarded attorney's fees, is an
action for rescission of the Joint Venture Agreement between plaintiffs, Patricio
Sarile, et al., as owners of a parcel of land and defendant Research & Service Realty,
Inc., as developer of the land. At the time Atty. Fonacier entered his appearance as
counsel for defendant Research, the Court has issued a preliminary injunction against
Research. Thus all developmental and commercial activities of defendant had to
stop. In this regard, Atty. Fonacier did spade work towards persuading the plaintiffs
to agree to the relaxation of the effects of the injunction to pave the way to a
negotiation with a third-party, the Filstream. Atty. Fonancier's efforts were
complemented by the efforts of his counterpart in the plaintiff's side. The third-party
Filstream Inc., became the assignee of defendant Research. In this connection, a
memorandum of agreement was entered into between them. By the terms of
agreement, defendant Research will be receiving from the third party Filstream
International, Inc. (Filstream) the following amount. . . .
x x x
The termination of the legal services of Atty. Fonacier was made definite on March
31, 1993 at which time the Memorandum of Agreement which Research entered into
with Filstream, Inc., has already been effective. By this time also, defendant Research
has already received the first two stipulated consideration of the agreement in the total
sum of Six Million (P6,000,000.00). The necessary and legal consequence of said
"Memorandum of Agreement" is the termination of the case insofar as plaintiff
Patricio Sarile, et al. and defendant Research is concerned. The conclusion of the
Memorandum of Agreement insofar as the cause of Research is concerned, is a legal
victory for defendant Research. What could have been a loss in investment has been
turned to a legal victory. Atty. Fonancier's effort contributed to defendant's victory,
albeit outside the Court which would not have been possible without the legal
maneuvering of a lawyer.
The dismissal of the case before this Court will come in a matter of time considering
that plaintiffs, with the assumption by the third party, Filstream Inc., of what were
supposed to be the obligations to them of defendant Research pursuant to their Joint
Venture Agreement, is no longer interested in pursuing the rescission.
It is a matter of record that Atty. Fonacier is the last of the three lawyers who handled
this case. Moreover it is Atty. Fonacier who contributed to the forging of the
memorandum of agreement as testified to by Atty. Rogel Atienza one of the two
retained counsels of plaintiffs.
Considering the importance which is attached to this case, certainly it would not be
fair for Atty. Fonacier if his attorney's fees in this case would be equated only to the
measly monthly allowance of (P800.00) Pesos and office space and other office
facilities provided by defendant Research. Ten (10%) per cent of the amount which
Research had received from Filstream at the time of the termination of a lawyer-client
relationship between Atty. Fonacier and Research or P600,000.00 will be a just and
equitable compensation for Atty. Fonancier's legal services, by way of quantum
meruit (See Cabildo v. Provincial Treasurer, Ilocos Norte, et al., 54 SCRA 26).
[7]

In its Order
[8]
of 12 January 1994, the trial court denied the petitioner's
motion for reconsideration of the above order.
The petitioner appealed to the Court of Appeals. In its Appellant's
Brief,
[9]
the petitioner alleged that the private respondent was not entitled to
attorney's fees under the retainer contract. Moreover, the private respondent
did not exert any effort to amicably settle the case, nor was he even present
during the negotiations for the settlement of the same. There was, therefore,
no legal and factual justification for the private respondent's "fantastic and
unreasonable claim for attorney's fees of P600,000.00."
On the other hand, the private respondent asserted that he was assured
by the petitioner that non-collection cases were included in the contingent fee
arrangement specified in the retainer contract wherein there was to be
contingent compensation for any award arising from any lawsuit handled by
him. According to him, Civil Case No. 612 was not the only "non-collection"
case he handled for the petitioner. There was a "right of way" dispute where
the petitioner was awarded P50,000.00, and the latter paid him P5,000.00, or
10% of the award as attorney's fees. He thus stressed that since under the
memorandum of agreement the petitioner was to receive P28 million, he
should be entitled to 10% thereof or P2.8 million as attorney's fees.
In its decision
[10]
of 31 March 1995, the Court of Appeals affirmed the
challenged order of the trial court. It ratiocinated as follows:
Movant-appellee, on the other hand, correctly argues that it was the clear intention of
appellant and counsel to compensate the latter for any legal services rendered by him
to the former. Stated otherwise, it was never the intention of the parties in the instant
appeal that counsel's services shall be free or to be rendered ex gratia.
xxx
It must in addition be underscored that the retainer contract of April 9, 1985 is the law
that governs the relationship between appellant and appellee. In fact, the following
provisions squarely and categorically supports the award of P600,000.00 to counsel,
to wit:
Minimal allowance of P800 per month plus contingent fees and collection cases (case
to case basis) aside from the attorney's fee recovered from any law suit.
(Paragraph 3, Retainer Contract)
In an American jurisprudence on this point cited in local annotation on the Canon of
Professional Ethics, it was held that "if a lawyer renders valuable services to one who
receives the benefits thereof, a promise to pay a reasonable value is presumed, unless
such services were intended to be gratuitous" (Young vs. Buere, 78 Cal. Am. 127) In
effect, to compensate a lawyer, we are faced with the pivotal question: "was the legal
services intended to be free or not?" If it is not free, then, appellant must simply
pay. The10% contingent fee of the amount collected and/or to be collected in Civil
Case No. 612 of the lower court, is, to Our mind fair and reasonable. As ruled by the
Supreme Court in the case of Cosmopolitan Insurance Co. vs. Angel Reyes (G.R. L-
20199, Nov. 23, 1965) 15% was even deemed reasonable.
[11]

The petitioner filed a motion for reconsideration
[12]
on the ground among
other things, that the decision is contrary to the evidence, as the trial court
granted the claim for attorney's fees based on quantum meruit, yet, the Court
of Appeals granted the same on a contingent basis which it based on an
erroneous quotation and comprehension of the following provision of the
retainer contract:
Minimal allowance of P800.00 per month plus contingent fees on collection
cases (case to case basis) aside from the attorney's fees recovered from any law
suit. (underscoring ours)
[13]

In its decision, the Court of Appeals substituted the word "on" after "contingent
fees" with the word "and." Under the aforequoted paragraph, the private
respondent was entitled to attorney's fees on contingent basis in collection
cases only. In non collection cases, he was entitled only to the attorney's fees
that might be recovered in the lawsuit.
[14]
Since Civil Case No. 612 is not a
collection case but an action for rescission of a contract, then the aforequoted
paragraph is not applicable as a basis for awarding attorney's fees to the
private respondent.
[15]

Finding nothing new in the motion for reconsideration, the Court of
Appeals denied it in the re-solution
[16]
of 15 February 1996.
The petitioner then came to us via this petition for review wherein it
contends that
I
RESPONDENT COURT OF APPEALS HAD DECIDED THE CASE NOT IN
ACCORD WITH LAW AND THE UNDISPUTED FACTS OF THE CASE.
II
RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION IN AWARDING ON CONTINGENT BASIS RESPONDENT-
APPELLEE'S ATTORNEY'S FEES ON THE BASIS OF A MEMORANDUM
OF AGREEMENT IN WHICH HE HAD NO PARTICIPATION IN THE
NEGOTIATION AND PREPARATION THEREOF.
III
RESPONDENT COURT OF APPEALS GRAVELY ABUSED ITS
DISCRETION IN AWARDING EXCESSIVE AND UNREASONABLE
ATTORNEY'S FEES.
IV
THE TRIAL COURT AND THE RESPONDENT COURT OF APPEALS HAVE
NO JURISDICTION TO SATISFY ATTORNEY'S CHARGING LIEN ON A
SUM OF MONEY THAT THE COURT HAD NO AUTHORITY TO DISPOSE
OF AND OVER WHICH THE TRIAL COURT HAD MADE NO FINAL
ADJUDICATION.
The petitioner's more important argument in support of the first error is the
Court of Appeals' misquotation of the provision in the retainer contract
regarding attorney's fees on contingent basis, which the petitioner had
stressed in its motion for reconsideration. The petitioner maintains that under
the contract, attorney's fees on contingent basis could only be awarded
in collection cases, and Civil Case No. 612 is not a collection case. Hence, the
Court of Appeals erred in affirming the award on that basis, while the trial
court was correct in applying the principle of quantum meruit.
In its second assigned error, the petitioner asserts that the private
respondent admitted in his Urgent Motion to Direct Payment of Attorney's
Fees and/or Register Attorney's Charging Lien that he had not participated in
the negotiations and preparation of the memorandum of agreement, thus:
Despite the dishonest concealment, by the light of Providence coupled with a streak of
good luck, counsel discovered in the first week of March 1993 that the parties had
respectively entered into a meaningful agreement with a third-party as early as July
27, 1992, which in the case of client, case in the form of a "Memorandum of
Agreement" (MOA) . . . .
[17]

The third assigned error is but a logical consequence of the second, and
the petitioner maintains that since the private respondent "did not do anything
spectacular or out of the ordinary" in Civil Case No. 612, "except to ask for the
suspension or postponement of the proceedings thereof from 1985 to 1993,"
the P600,000.00 attorney's fees, whether on contingent basis or quantum
meruit, is excessive and unreasonable.
In the fourth imputed error, the petitioner argues that the memorandum of
agreement was never submitted to the trial court, and the trial court never
made any disposition or adjudication over the proceeds of the said
agreement. What would eventually happen then is the dismissal of Civil Case
No. 612, as the trial court itself had intimated in its challenged
order. Necessarily then, there would be no money adjudication in favor of the
petitioner as the defendant therein. Since such lien is collectible only from an
award of money that a court would adjudicate in a judgment rendered in favor
of the attorney's client pursuant to Section 37, Rule 138 of the Rules of Court,
it would follow that no attorney's charging lien could be validly entered.
We uphold the petitioner, but not necessarily on the strength of it
arguments.
The parties are in agreement that the lawyer-client relationship between
the petitioner and the private respondent, Atty. Manuel S. Fonacier, Jr., was
governed by a retainer contract dated 9 April 1985. The petitioner's
undertakings thereunder are outlined as follows:
I. CORPORAT[ION]:
1. Corporation will provide the following:
a. Office space airconditioned
b. Furnishings, tables, executive chairs, visitor's chair
& steel filing cabinet
c. Telephone facilities and partial secretarial services.
2. Legal service referrals by the corporation to its clients for additional
income of the lawyer.
3. Minimal allowance of P800 per month plus contingent fees on
contingent fees on collection cases (case to case basis) aside from the
attorney's fees recovered from any lawsuit.
4. That in case of legal problems to be attended to outside Metro Manila
and Suburbs, the corporation shall defray expenses for transportation,
lodging and other legal expenses incidental in the case.
[18]

An analysis of the contract clearly shows that it was a general retainer,
since its primary purpose was to secure beforehand the services of the private
respondent for any legal problem which might afterward arise.
[19]
The
fixedretaining fee was P800.00 a month. A retaining fee is a preliminary fee
paid to ensure and secure a lawyer's future services, to remunerate him for
being deprived, by being retained by one party, of the opportunity of rendering
services to the other party and of receiving pay from him. In the absence of
an agreement to the contrary, the retaining fee is neither made nor received in
consideration of the services contemplated; it is apart from what the client has
agreed to pay for the services which he has retained him to perform.
[20]

In the retainer contract in question, there was no intention to make the
retaining fee as the attorney's fees for the services contemplated. This is
evident from the provision allowing additional attorney's fees
in collection cases consisting of (1) a "contingent fee" and (2) whatever the
petitioner might recover as attorney's fees in each case. The latter could only
refer to the attorney's fees which the court might award to the petitioner in
appropriate cases.
While the contract did not mention non-collection cases, it is, nevertheless,
clear therefrom that such cases were not excluded from the retainership, as
borne out by the provision requiring the private respondent to "make
appearances in Court for cases involving the corporation or any allied cases
pertaining to the latter." As to such cases, there was no specific stipulation of
additional attorney's fees. Nevertheless, nothing therein shows that the
private respondent agreed to render professional service in such cases
gratuitously. The absence then of the stipulation of additional attorney's fees
cannot be construed as a bar to the collection of additional attorney's fees
innon-collection cases.
Two basic principles come into play. The first is as stated earlier, viz., that
the retaining fee is neither made nor received in consideration of the services
contemplated unless the contract itself so provides. The second is that,
unless expressly stipulated, rendition of professional services by a lawyer is
for a fee or compensation and is not gratuitous. This is implicit from the
opening clause of Section 24, Rule 138 of the Rules of Court, which states
that "[a]n attorney shall be entitled to have and recover from his client no more
than a reasonable compensation for his services . . .," and by virtue of the
innominate contract of facio ut des (I do and you give), as enunciated by this
Court in Corpus v. Court of Appeals,
[21]
thus:
Moreover, the payment of attorney's fees . . . may also be justified by virtue of the
innominate contract of facio ut des (I do and you give) which is based on the principle
that "no one shall unjustly enrich himself at the expense of another." Innominate
contracts have been elevated to a codal provision in the New Civil Code by providing
under Article 1307 that such contracts shall be regulated by the stipulations of the
parties, by the general provisions or principles of obligations and contracts, by the
rules governing the most analogous nominate contracts, and by the customs of the
people. The rationale of this article was stated in the 1903 case of Perez vs. Pomar (2
Phil. 682).
In Perez v. Pomar,
[22]
this Court stated:
[B]ut whether the plaintiff's services were solicited or whether they were offered to
the defendant for his assistance, inasmuch as these services were accepted and made
use of by the latter, we must consider that there was a tacit and mutual consent as to
the rendition of the services. This gives rise to the obligation upon the person
benefited by the services to make compensation therefor, since the bilateral obligation
to render service as interpreter, on the one hand, and on the other to pay for the
services rendered, is thereby incurred. (Arts. 1088, 1089, and 1262 of the Civil Code).
Accordingly, as to non-collection cases where the petitioner was either a
plaintiff or a defendant, the private respondent could still collect attorney's
fees, apart from his regular retaining fee, on the basis of any-supplemental
agreement or, in its absence, under the principle of quantum meruit. There
was no such supplemental agreement in this case.
We cannot sustain the private respondent's theory that he could collect
attorney's fees on contingent basis because in the other "non-collection"
cases he handled for the petitioner' he was paid on contingent basis at the
rate of 10% of what was awarded to the petitioner. In the first place, Civil
Case No. 612 is still unresolved, and no judgment has yet been rendered in
favor of the petitioner. The amount in the memorandum of agreement could
not be made the basis of a "contingent fee" in the said case for at least three
reasons. First, in his own Urgent Motion to Direct Payment of Attorney's Fees
and/or Register Attorney's Charging Lien, the private respondent based the
contingent fee not only in Civil Case No. 612 but in a "multitude of peripheral
cases," and the contingent fee would become due and collectible only if and
when the petitioner obtains a judgment in his favor in Civil Case No. 612. The
second paragraph of page 3 of the said motion reads as follows:
Hence, from May 1985 and continuously thru the years without interruption and
surviving a series of no less than five (5) changes of Presiding Judges, the
undersigned counsel labored tirelessly in handling the defense of client. In addition to
the instant lawsuit, a multitude of peripheral cases, civil, criminal and administrative,
arising from the non-delivery of titles by client on fully paid lots in the subdivision
project were also filed as a consequence, not only against defendant but also against
its President and Chief Executive Officer (CEO). Needless to state, the undersigned
was designated to handle majority of these cases for both, where he appeared and
conducted trial without any "appearance fees" for more than eight (8) long years
solely relying on the contingent fee in case of recovery in the instant main
case.
[23]
(underscoring supplied for emphasis)
Second, the amount of P28 million, which Filstream agreed to pay the
petitioner, was not a judgment or award in favor of the petitioner in Civil Case
No. 612. It was the consideration of the assignment, transfer, and
conveyance to Filstream of all the petitioner's "rights, interest and participation
embodied and specified in the Joint Venture Agreement (Annex "A") and in all
the eight hundred seventy-five (875) parcels of land comprising the SARANAY
HOMES subdivision. . . ." The plaintiffs in Civil Case No. 612 were not parties
to the memorandum of agreement, and there is no showing that they agreed
to the assignment of the petitioner's rights, interest, and participation in the
Joint Venture Agreement. While paragraph 10 of the memorandum of
agreement provides that the petitioner
shall cause to sign a JOINT MOTION TO DISMISS, together with the
CARREONS regarding Civil Case No. 612 of the Regional Trial Court of Makati
and to further DISMISS, the case filed against PNB docketed as Civil Case No.
6918 of the Regional Trial Court of Makati . . . [and] shall obtain the dismissal of
all cases filed by lot buyers against it now pending with the HLURB
the fact remains that no such motion to dismiss has been filed yet in Civil
Case No. 612, and there is no assurance whatsoever that the plaintiffs therein
will sign a joint motion to dismiss. Third, as correctly posited by the petitioner,
the private respondent had no participation in the negotiations leading to, and
in the preparation of, the memorandum of agreement.
Indisputably then, the private respondent's attorney's fee on "contingent
basis" in Civil Case No. 612 is unwarranted. If at all, he could only be entitled
to attorney's fees on quantum meruit basis as of the expiration of his retainer
contract on 31 March 1993.
Quantum meruit simply means "as much as he deserves."
[24]
In no case,
however, must a lawyer be allowed to recover more than what is reasonable
pursuant to Section 24, Rule 138 of the Rules of Court, which provides:
SEC. 24. Compensation of attorneys, agreement as to fees. An attorney shall
be entitled to have and recover from his client no more than a reasonable
compensation for his services, with a view to the importance of the subject-matter of
the controversy, the extent of the services rendered, and the professional standing of
the attorney. No court shall be bound by the opinion of attorneys as expert witnesses
as to the proper compensation, but may disregard such testimony and base its
conclusion on its own professional knowledge. A written contract for services shall
control the amount to be paid therefor unless found by the court to be unconscionable
or unreasonable.
This Court had earlier declared the following as circumstances to be
considered in determining the reasonableness of a claim for attorney's
fees: (1) the amount and character of the service rendered; (2) labor, time,
and trouble involved; (3) the nature and importance of the litigation or
business in which the services were rendered; (4) the responsibility
imposed; (5) the amount of money or the value of the property affected by the
controversy or involved in the employment; (6) the skill and experience called
for in the performance of the services; (7) the professional character and
social standing of the attorney; (8) the results secured; and (9) whether the
fee is absolute or contingent, it being recognized that an attorney may
properly charge a much larger fee when it is contingent than when it is not.
[25]

Rule 20.1, Canon 20 of the Code of Professional Responsibility
enumerates the following factors which should guide a lawyer in determining
his fees:
(a) The time spent and the extent of the services rendered or
required;
(b) The novelty and difficulty of the questions involved;
(c) The importance of the subject matter;
(d) The skill demanded;
(e) The probability of losing other employment as a result of
acceptance of the proffered case;
(f) The customary charges for similar services and the
schedule of fees of the IBP Chapter to which he belongs;
(g) The amount involved in the controversy and the benefits
resulting to the client from the service;
(h) The contingency or certainty of compensation;
(i) The character of the employment, whether occasional or
established; and
(j) The professional standing of the lawyer.
It was incumbent upon the private respondent to prove the reasonable
amount of attorney's fees, taking into account the foregoing factors or
circumstances. The records before us and the trial court's 11 October 1993
order do not confirm that the private respondent proved by either testimonial
or documentary evidence that the award of P600,000.00 was
reasonable. The private respondent's testimony thereon was crucial. Yet, it
does not appear from the 11 October 1993 order that he took the witness
stand. From the Minutes of the trial court attached to the Rollo of CA-G.R. CV
No. 44839,
[26]
it appears that only Atty. Atienza and Mr. Suazo gave oral
testimony on the motion.
It necessarily follows then that the 11 October 1993 order has insufficient
factual basis, and the trial court committed grave abuse of discretion in
arbitrarily fixing the private respondent's attorney's fees at P600,000.00. The
affirmance of the said order by the Court of Appeals premised on the provision
in the retainer contract regarding contingent fee is thus fatally flawed.
The interest for both the petitioner and the private respondent demands
that the trial court should conduct further proceedings in Civil Case No. 612
relative to the private respondent's motion for the payment of attorney's fees
and, thereafter, fix it in light of Section 24, Rule 138 of the Rules of Court;
Rule 20.1, Canon 20 of the Code of Professional Responsibility; and the
jurisprudentially established guiding principles in determining attorney's fees
onquantum meruit basis.
WHEREFORE, the instant petition is GRANTED. The challenged
Decision of 31 March 1995 of the Court of Appeals in CA-G.R. CV No. 44839
and the Order of 11 October 1993 of the Regional Trial Court of Makati,
Branch 64, in Civil Case No. 612 are hereby SET ASIDE. The trial court is
further DIRECTED to set for further hearing the private respondent's Urgent
Motion to Direct Payment of Attorney's Fees and/or Register Attorney's
Charging Lien and thereafter to fix the private respondent's attorney's fees in
Civil Case No. 612 as of 31 March 1993 when his contract with the petitioner
was effectively terminated, taking into account Section 24, Rule 138 of the
Rules of Court; Rule 20.1, Canon 20 of the Code of Professional
Responsibility; and the jurisprudentially established guiding principles in
determining attorney's fees on quantum meruit basis.
No pronouncement as to costs.
SO ORDERED.



G.R. No. 105818 September 17, 1993
ELOISA, CARLOS, JR., ARCHIMEDES, CAROLINE, and MA. CARLOTA, all surnamed
ARAMBULO, petitioners,
vs.
COURT OF APPEALS and ENGR. DANILO G. FERRERAS, respondents.
Romeo P. Pineda for petitioners.
Casiano C. Sabile for private respondent.

DAVIDE, JR., J .:
Petitioner urge us to review and set aside the Resolution of the respondent Court of Appeals of 11
November 1991
1
in CA-G.R. CV
No. 32348
2
which, for failure to pay the docket fee, considered their appeal "ABANDONED and
DISMISSED, pursuant to Section 1(d), Rule 50, Rules of Court," and its Resolution of 8 June
1992
3
which denied their motion to reconsider the former. They claim that the notice to pay the
docket fee was addressed to an attorney who had already withdrawn his appearance with their
consent.
The pleadings of the parties and the original record of CA-G.R. CV
No. 32348 disclose the undisputed antecedents of this case.
Petitioners and private respondent are parties to a contract for the construction of a 4-storey
dormitory building. Private respondent, as the contractor, filed an action before Branch LXI of the
Regional Trial Court at Angeles City against the petitioners-spouses Carlos S. Arambulo and Eloisa
I. Arambulo to claim the balance of the contract price and the increase in the construction cost due
to additional scope of work done and increase in the cost of materials. The case was docketed as
Civil Case No. 5301. The defendants, through Atty. Romeo P. Pineda, filed an Answer with
Counterclaim. At the pre-trial, the defendants were represented by Atty. Jose Jimenez, Jr., who
submitted a special power of attorney executed by the defendants wherein he was designated as
their attorney. Since then and until he purportedly withdrew as counsel, he appeared at the trial for
the defendants, handled the case, and prepared and signed all pleadings for the latter. Both the
adverse party and the trial court served pleadings and notice on him.
4

The minutes of the trial court for the hearings on 20 September 1988, 19 October 1988, 10
November 1988, 19 January 1989, 11 April 1989, 11 August 1988, 5 October 1989 and 7 December
1990
5
reveal that it was Atty. Jimenez who appeared for the Arambulos, cross-examined the
witnesses for the plaintiff and conducted the direct examinations of Eloisa and Carlos Arambulo. On
7 December 1990, after Atty. Jimenez cross-examined anew the plaintiff's witness, Architect Ernesto
Nasol, the parties agreed to submit the case for decision.
On 30 January 1991, the trial court rendered a decision
6
in favor of the private respondent the
dispositive portion of which reads as follows:
WHEREFORE, by preponderance of evidence, judgment is hereby rendered in favor
of Plaintiff Danilo S. Ferreras, ordering defendant Spouses Carlos S. Arambulo and
Eloisa I. Arambulo to
1) Pay unto said Plaintiff Danilo S. Ferreras the amounts of
a) P365,000.00 representing the balance of the contract price of
P1,700,000.00;
b) P90,333.75 proportionate 1/2 share of defendant-spouses in the
increase in the cost of construction materials; and
c) to pay the costs.
Defendants' counterclaim is DISMISSED.
SO ORDERED.
7

On 7 February 1991, the Arambulos, through Atty. Jimenez, filed their notice of appeal informing the
trial court that they are appealing the decision to the Court of Appeals.
8

On 12 February 1991, Atty. Jimenez filed a Withdrawal of Appearance
9
with the express conformity
of the defendants, while Atty. Pineda entered his Appearance as their new counsel.
10
Copies of the
pleadings were furnished the counsel for the plaintiff. Furthermore, the Summary Index prepared by
one Ramon A. Rosario, Officer-in Charge of the Office of the Clerk of Court of the trial court and
attached to the original record of CA-G.R. CV No. 32348,
11
indicates that the Withdrawal of
Appearance and the Appearance are respectively found on pages 209-210 and 207-208 of the
original record of Civil Case No. 5301.
Thereafter, an order directing the "Clerk of Court/Officer-In-Charge" of the court to elevate the
complete record of the case to the Court of Appeals
12
was issued by the trial court on 4 March 1991.
The Officer-in-Charge of the Office of the Clerk of Court of the trial court transmitted the original
record of Civil Case No. 5301, together with pertinent documents, to the Court of Appeals on 24 April
1991 but which the latter received on 16 May 1991.
13
The appeal was then docketed as CA-G.R. CV
No. 32348.
On 19 June 1991, the Chief of the Judicial Records Division of the Court of Appeals sent Atty.
Jimenez a letter informing him that the original records of the case were being processed and also
requiring him to pay the docketing fee of P400.00 and the additional amount of P20.00 pursuant to
R.A. No. 3870 within fifteen days from receipt thereof.
14
From the return card,
15
it appears that
Atty. Jimenez received this letter on 9 July 1991. No such letter or any notice to pay the aforesaid
amounts was sent to Atty. Romeo Pineda.
On 11 November 1991, the Court of appeals (Third Division) promulgated a Resolution
16
reading as
follows:
For failure to pay the docket fee, the appeal is hereby considered ABANDONED and
DISMISSED, pursuant to Section 1(d), Rule 50, Rules of Court.
A copy of the resolution was furnished to Atty. Jimenez who, per the return card,
17
received it on 21
November 1991.
In a manifestation and motion filed with the Court of Appeals on 21 January 1992, counsel for the
plaintiff-appellee prayed that final judgment be entered into the records in view of the failure of the
appellants "to perfect their appeal" and that the case be remanded to the trial court for execution of
judgment. A copy of the above pleading was sent to Atty. Jimenez.
On 22 January 1992, the Clerk of Court of the Court of Appeals made an entry of judgment in CA-
G.R. CV No. 32348 declaring therein that the Resolution of 11 November 1991 had become final
and executory on 7 December 1991.
18
Copy thereof was again sent to Atty. Jimenez.
No copy of the aforementioned resolution of the Court of Appeals of 11 November 1991 and of the
entry of judgment of 22 January 1992 was ever sent to Atty. Pineda.
The records of Civil Case No. 5301 were remanded to the court of origin on 12 February
1992,
19
where a motion for the issuance of a writ of execution was filed by the private respondent on
27 February 1992,
20
copy of which was furnished only to Atty. Jimenez. The trial court granted the
motion on 3 March 1992.
21
When the sheriff of the trial court attempted to enforce the writ of
execution, the petitioners, through Atty. Pineda, filed a Motion for Reconsideration, Reinstatement of
Appeal, and Acceptance of Docket Fee
22
with the Court of Appeals on 12 March 1992. On the said
date, they also paid the required docket and other legal fees.
23
But the Court of appeals denied the
motion in its Resolution of 8 June 1992
24
on the ground that the Resolution of 11 November 1991
had already become final and the records had been remanded to the trial court after the entry of
judgment was made.
Hence, the instant petition. The petitioners raise this sole assignment of error:
The public respondent committed a grave abuse of discretion amounting to lack of
jurisdiction in dismissing petitioners' appeal for failure to pay docket fee, notstanding [sic]
the gravely defective service of notices, and in denying petitioners' motion for
reconsideration of said Resolution of dismissal.
25

The main thesis of the petitioners as it appears to us from their petition is that since the notice to pay
the docket and other fees was served not on their new counsel, Atty. Pineda, but on Atty. Jimenez
who had already withdrawn as their counsel when the case was still with the trial court, the service of
such notice on the latter was void and did not bind them, consequently, the dismissal of their appeal
deprived them of due process.
The private respondent filed his Comment.
26
He contends therein that Atty. Pineda was the original
counsel for the petitioners and that he never formally withdrew as counsel even after Atty. Jimenez,
who had not made any "formal appearance," "took over the handling of the defense for and in behalf
of defendants Arambulos"; hence, they "gave the impression that they were acting in corroboration
[sic] with each other and since Atty. Jimenez took over the active role as counsel, all pleadings and
notices were coursed through him." Private respondent then concludes that the "alleged withdrawal
of Atty. Jimenez and entry of appearance of Atty. Pineda were of no moment." Moreover, their status
as collaborating "counsels for the defendants" is "borne by the fact that the court has not ruled on
their motions to withdraw and enter appearance respectively."
We gave due course to the petition after the petitioners filed their Reply to the Comment.
The petition, which is more appropriately a special civil action for certiorari under Rule 65 of the
Rules of Court, is partly impressed with merit.
Under the circumstances of this case, we do not hesitate to rule that the public respondent
committed grave abuse of discretion in dismissing the appeal of the Arambulos solely on the basis of
the alleged failure of the petitioners to pay the docket and other fees. As earlier adverted to, the
notice with respect thereto was not furnished to or received by their counsel of record, Atty. Romeo
Pineda.
The rule is that every pleading subsequent to the complaint, every written motion other than one
which may be heard ex parte, and every written notice, appearance, demand, offer of judgment or
similar papers shall be filed with the court, and served upon the parties affected thereby; however,
service upon a party represented by counsel shall be made on his attorneys or one of them, unless
service upon said party himself is ordered by the court.
27
When a party is represented by a counsel
in an action in court, notices of all kinds, including motions and pleadings of all parties and all orders
of the court must be sent to the counsel.
28
Notice to counsel is notice to the client.
29

In the instant case, it is not disputed that the Withdrawal of Appearance of Atty. Jose Jimenez, Jr.
was filed with the trial court on 12 February 1991. Since the withdrawal was with the clients' consent,
no approval thereof by the trial court was required because a court approval is indispensable only if
the withdrawal is without the client's consent. The first paragraph of Section 26 of Rule 138
expressly provides:
Sec. 26. Change of Attorneys. An attorney may retire at any time 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.
Under the first sentence of this section, the retirement is completed once the withdrawal is filed in
court. No further action thereon by the court is needed other than the mechanical act of the clerk of
court of entering the name of the new counsel in the docket and of giving written notice thereof to the
adverse party. The failure of the clerk of court to do either does not affect the validity of the
retirement. The appearance of the new counsel, Atty. Pineda, did not likewise require the approval of
the court. An appearance may be made by simply filing a formal motion, plea or answer, or through
the formal method, viz., by delivering to the clerk of court a written direction ordering him to enter the
appearance of the counsel.
30
The latter method is exactly what Atty. Pineda followed.
We cannot subscribe to the view of the private respondent that the 12 February 1991 withdrawal by
Atty. Jimenez and the appearance of Atty. Pineda were of "no moment" because the former had in
fact never made a formal appearance and the latter, who was originally the counsel of record of the
defendants, had not formally withdrawn as counsel, hence, both attorneys remained as counsel of
the defendants. At its surface, the private respondent's argument appears logical and impressive.
But in truth, it is definitely unpersuasive and fallacious. Atty. Jimenez first appeared at the pre-trial
fully armed with a special power of attorney. Thereafter, he alone signed all pleadings for the
defendants and his appearance for them gained full recognition from the trial court and from the
counsel for the private respondent. He had undoubtedly made a valid appearance for the
defendants.
31

On the other hand, although Atty. Pineda did not formally withdraw before Atty. Jimenez took over
the handling of the case, the execution by the Arambulos of the special power of attorney in favor of
Atty. Jimenez amounted to a dismissal of Atty. Pineda. The latter evidently acceded to his dismissal
when he ceased to appear for the Arambulos. Even the trial court and the counsel for the private
respondent undoubtedly recognized his dismissal when no notice of hearings, orders, judgment and
pleadings were served on him. The dismissal of Atty. Pineda is clearly authorized under the second
paragraph of the aforementioned Section 26 of Rule 138 which reads as follows:
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 . . . .
Of course, nothing can prevent the Arambulos from re-hiring Atty. Pineda as their counsel. The
pleadings do not disclose and no suggestion is made by the private respondent that the withdrawal
of Atty. Jimenez and the re-appearance of Atty. Pineda were done in bad faith to delay the case.
Both the Withdrawal of Appearance of Atty. Jimenez and the Appearance of Atty. Pineda are
undeniably found in the original record of Civil Case No. 5301 and are explicitly referred to in the
Summary Index in the record of CA-G.R. CV No. 32348. And since the withdrawal of Atty. Jimenez
had taken effect upon its filing before the trial court on 12 February 1991, the notice to pay the
docket and other fees sent to him by the Judicial Records Division of the Court of Appeals on 4
March 1991 was thus void or otherwise ineffective. Receipt thereof by him did not operate as notice
to the Arambulos. It is a fact on record that no notice to pay the docket fee was sent to and received
by Atty. Pineda, therefore, the 15-day period to pay the required docket fee did not even commence
to run.
Accordingly, the public respondent Court of Appeals should not have declared the appeal
abandoned and ordered its dismissal solely on the basis of the failure of the petitioners to comply
with the June 1991 notice to pay the docketing and other fees, which was erronuously sent to Atty.
Jimenez.
Nevertheless, the appeal can be dismissed, not on the basis of the respondent Court of Appeals'
error but on a different ground for which Atty. Pineda must answer. As the new counsel for the
petitioners, it was incumbent upon him, consistent with his duty to serve his client with competence
and diligence,
32
to inquire either from the trial court or the appellate court about the status of the
appeal since he had not received any notice to pay the docketing and other fees despite the lapse of
several months from the time he entered his appearance. While he had every reason to expect that
the office of the Clerk of Court of the Court of appeals would faithfully comply with Sections 2(3) and
3; Rule 4 of the Revised Internal Rules of the Court of Appeals on the issuance of notice to the
parties to pay the docketing and other fees, his failure to receive the notice for so long time should
have alarmed him to the possibility that something must have gone awry somewhere. The
justification given in the Motion for Reconsideration, Reinstatement of Appeal, and Acceptance of
Docket Fee that the petitioners "had no reason to be alarmed about the status of the appeal because
of the eruption of Mt. Pinatubo in June 1991, which caused disarray and confusion in Angeles City
and because of defendants-appellants' reliance on the established judicial practice whereby the
proper party is notified of the elevation of the records of the case to this Honorable Court, the receipt
of such records by the latter and the need to pay the corresponding docket fee within the prescribed
period"
33
is flimsy and wholly unacceptable. On the contrary, the eruption of Mt. Pinatubo provided
added reason why they should have verified from the trial court if the records of the case were still
intact or had been destroyed or damaged as a consequence of the eruption.
In the fairly recent case of Mateo vs. Court of Appeals,
34
this Court, speaking through Mme. Justice
Carolina C. Grio-Aquino, made this apt observation:
Indeed, if the appellant does nothing to press his appeal, it may safely be concluded
that he believes that judgment of the trial court to be correct and his appeal aims to
accomplish nothing more than mere delay in the execution of the adverse judgment,
certainly unfair to the appellee who is denied the enjoyment of the fruits of his victory
in the case as long as the appeal is not resolved.
This statement certainly holds true here. Not only did the petitioners and their counsel sleep on their
right, they put nothing in their Motion for Reconsideration, Reinstatement of Appeal, and Acceptance
of Docket Fee that gives a semblance of merit to their appeal other than their general statement that
they "have a meritorious case, and they are confident that they are favored by the evidence, the law,
and jurisprudence,"
35
which they merely reiterated in the instant petition.
36
As we see it then, the
failure of Atty. Pineda and the petitioners to exercise due diligence with respect to the appeal was
either done deliberately to delay the execution of judgment, which we cannot tolerate, or caused by
negligence, in which case the settled rule that the negligence of counsel binds the client
37
should be
applied.
With the foregoing disquisitions, it is no longer necessary to take up the contention of the private
respondent that Atty. Jimenez had the "duty" to inform the Court of Appeals that notices were
erroneously or inadvertently sent to him and to inform the petitioners themselves or Atty. Pineda
about the notices he received.
38
Suffice it to say that if Atty. Jimenez had any duty, it could only be a
moral duty, not a legal or professional one. For all legal intents and purposes, the lawyer-client
relationship between him and the petitioner had been completely severed on 12 February 1991 and
with it the "duty" spoken of by the private respondent ceased to exist. Of course, clients would have
dictated upon him to do that which the private respondent has suggested considering that the notice
he received clearly shows that none was furnished to Atty. Pineda or to the petitioners.
Nevertheless, his failure to do either can by no means prejudice the petitioners.
In the light of the foregoing, the dismissal of the petitioners' appeal in CA-G.R. CV No. 32348 was
justifiable for another reason. Concurrence in the result of the challenged resolutions is inevitable.
WHEREFORE, the instant petition is DENIED.
No costs in this instance.
SO ORDERED.



Metrobank vs. CA
Metropolitan Bank & Trust Company vs. Court of Appeals
G.R. No. 88866 February, 18, 1991
Cruz, J.:

Facts:
Eduardo Gomez opened an account with Golden Savings and deposited 38 treasury
warrants. All warrants were subsequently indorsed by Gloria Castillo as Cashier of Golden
Savings and deposited to its Savings account in Metrobank branch in Calapan, Mindoro. They
were sent for clearance. Meanwhile, Gomez is not allowed to withdraw from his account, later,
however, exasperated over Floria repeated inquiries and also as an accommodation for a
valued client Metrobank decided to allow Golden Savings to withdraw from proceeds of the
warrants. In turn, Golden Savings subsequently allowed Gomez to make withdrawals from his
own account. Metrobank informed Golden Savings that 32 of the warrants had been dishonored
by the Bureau of Treasury and demanded the refund by Golden Savings of the amount it had
previously withdrawn, to make up the deficit in its account. The demand was rejected.
Metrobank then sued Golden Savings.

Issue:
1. Whether or not Metrobank can demand refund agaist Golden Savings with regard to the
amount withdraws to make up with the deficit as a result of the dishonored treasury warrants.
2. Whether or not treasury warrants are negotiable instruments

Held:
No. Metrobank is negligent in giving Golden Savings the impression that the treasury
warrants had been cleared and that, consequently, it was safe to allow Gomez to withdraw.
Without such assurance, Golden Savings would not have allowed the withdrawals. Indeed,
Golden Savings might even have incurred liability for its refusal to return the money that all
appearances belonged to the depositor, who could therefore withdraw it anytime and for any
reason he saw fit.
It was, in fact, to secure the clearance of the treasury warrants that Golden Savings
deposited them to its account with Metrobank. Golden Savings had no clearing facilities of its
own. It relied on Metrobank to determine the validity of the warrants through its own services.
The proceeds of the warrants were withheld from Gomez until Metrobank allowed Golden
Savings itself to withdraw them from its own deposit.
Metrobank cannot contend that by indorsing the warrants in general, Golden Savings assumed
that they were genuine and in all respects what they purport to be, in accordance with Sec. 66 of
NIL. The simple reason that NIL is not applicable to non negotiable instruments, treasury
warrants.

No. The treasury warrants are not negotiable instruments. Clearly stamped on their face is
the word: non negotiable. Moreover, and this is equal significance, it is indicated that they are
payable from a particular fund, to wit, Fund 501. An instrument to be negotiable instrument must
contain an unconditional promise or orders to pay a sum certain in money. As provided by Sec 3
of NIL an unqualified order or promise to pay is unconditional though coupled with: 1
st
, an
indication of a particular fund out of which reimbursement is to be made or a particular account
to be debited with the amount; or 2
nd
, a statement of the transaction which give rise to the
instrument. But an order to promise to pay out of particular fund is not unconditional. The
indication of Fund 501 as the source of the payment to be made on the treasury warrants makes
the order or promise to pay not conditional and the warrants themselves non-negotiable. There
should be no question that the exception on Section 3 of NIL is applicable in the case at bar.




March 23, 1929
In re LUIS B. TAGORDA,
Duran & Lim for respondent.
Attorney-General Jaranilla and Provincial Fiscal Jose for the Government.
MALCOLM, J .:
The respondent, Luis B. Tagorda, a practising attorney and a member of the provincial board of
Isabela, admits that previous to the last general elections he made use of a card written in Spanish
and Ilocano, which, in translation, reads as follows:
LUIS B. TAGORDA
Attorney
Notary Public
CANDIDATE FOR THIRD MEMBER
Province of Isabela
(NOTE. As notary public, he can execute for you a deed of sale for the purchase of land
as required by the cadastral office; can renew lost documents of your animals; can make
your application and final requisites for your homestead; and can execute any kind of
affidavit. As a lawyer, he can help you collect your loans although long overdue, as well as
any complaint for or against you. Come or write to him in his town, Echague, Isabela. He
offers free consultation, and is willing to help and serve the poor.)
The respondent further admits that he is the author of a letter addressed to a lieutenant of barrio in
his home municipality written in Ilocano, which letter, in translation, reads as follows:
ECHAGUE, ISABELA, September 18, 1928
MY DEAR LIEUTENANT: I would like to inform you of the approaching date for our induction
into office as member of the Provincial Board, that is on the 16th of next month. Before my
induction into office I should be very glad to hear your suggestions or recommendations for
the good of the province in general and for your barrio in particular. You can come to my
house at any time here in Echague, to submit to me any kind of suggestion or
recommendation as you may desire.
I also inform you that despite my membership in the Board I will have my residence here in
Echague. I will attend the session of the Board of Ilagan, but will come back home on the
following day here in Echague to live and serve with you as a lawyer and notary public.
Despite my election as member of the Provincial Board, I will exercise my legal profession as
a lawyer and notary public. In case you cannot see me at home on any week day, I assure
you that you can always find me there on every Sunday. I also inform you that I will receive
any work regarding preparations of documents of contract of sales and affidavits to be sworn
to before me as notary public even on Sundays.
I would like you all to be informed of this matter for the reason that some people are in the
belief that my residence as member of the Board will be in Ilagan and that I would then be
disqualified to exercise my profession as lawyer and as notary public. Such is not the case
and I would make it clear that I am free to exercise my profession as formerly and that I will
have my residence here in Echague.
I would request you kind favor to transmit this information to your barrio people in any of your
meetings or social gatherings so that they may be informed of my desire to live and to serve
with you in my capacity as lawyer and notary public. If the people in your locality have not as
yet contracted the services of other lawyers in connection with the registration of their land
titles, I would be willing to handle the work in court and would charge only three pesos for
every registration.
Yours respectfully,
(Sgd.) LUIS TAGORDA
Attorney
Notary Public.
The facts being conceded, it is next in order to write down the applicable legal provisions. Section 21
of the Code of Civil Procedure as originally conceived related to disbarments of members of the bar.
In 1919 at the instigation of the Philippine Bar Association, said codal section was amended by Act
No. 2828 by adding at the end thereof the following: "The practice of soliciting cases at law for the
purpose of gain, either personally or through paid agents or brokers, constitutes malpractice."
The statute as amended conforms in principle to the Canons of Professionals Ethics adopted by the
American Bar Association in 1908 and by the Philippine Bar Association in 1917. Canons 27 and 28
of the Code of Ethics provide:
27. ADVERTISING, DIRECT OR INDIRECT. The most worthy and effective
advertisement possible, even for a young lawyer, and especially with his brother lawyers, is
the establishment of a well-merited reputation for professional capacity and fidelity to trust.
This cannot be forced, but must be the outcome of character and conduct. The publication or
circulation of ordinary simple business cards, being a matter of personal taste or local
custom, and sometimes of convenience, is not per se improper. But solicitation of business
by circulars or advertisements, or by personal communications or interview not warranted by
personal relations, is unprofessional. It is equally unprofessional to procure business by
indirection through touters of any kind, whether allied real estate firms or trust companies
advertising to secure the drawing of deeds or wills or offering retainers in exchange for
executorships or trusteeships to be influenced by the lawyer. Indirect advertisement for
business by furnishing or inspiring newspaper comments concerning the manner of their
conduct, the magnitude of the interest involved, the importance of the lawyer's position, and
all other like self-laudation, defy the traditions and lower the tone of our high calling, and are
intolerable.
28. STIRRING UP LITIGATION, DIRECTLY OR THROUGH AGENTS. It is unprofessional
for a lawyer to volunteer advice to bring a lawsuit, except in rare cases where ties of blood,
relationship or trust make it his duty to do so. Stirring up strife and litigation is not only
unprofessional, but it is indictable at common law. It is disreputable to hunt up defects in
titles or other causes of action and inform thereof in order to the employed to bring suit, or to
breed litigation by seeking out those with claims for personal injuries or those having any
other grounds of action in order to secure them as clients, or to employ agents or runners for
like purposes, or to pay or reward directly or indirectly, those who bring or influence the
bringing of such cases to his office, or to remunerate policemen, court or prison officials,
physicians, hospital attaches or others who may succeed, under the guise of giving
disinterested friendly advice, in influencing the criminal, the sick and the injured, the ignorant
or others, to seek his professional services. A duty to the public and to the profession
devolves upon every member of the bar having knowledge of such practices upon the part of
any practitioner immediately to inform thereof to the end that the offender may be disbarred.
Common barratry consisting of frequently stirring up suits and quarrels between individuals was a
crime at the common law, and one of the penalties for this offense when committed by an attorney
was disbarment. Statutes intended to reach the same evil have been provided in a number of
jurisdictions usually at the instance of the bar itself, and have been upheld as constitutional. The
reason behind statutes of this type is not difficult to discover. The law is a profession and not a
business. The lawyer may not seek or obtain employment by himself or through others for to do so
would be unprofessional. (State vs. Rossman [1909], 53 Wash., 1; 17 Ann. Cas., 625;
Peoplevs. Mac Cabe [1893], 19 L. R. A., 231; 2 R. C. L., 1097.)
It becomes our duty to condemn in no uncertain terms the ugly practice of solicitation of cases by
lawyers. It is destructive of the honor of a great profession. It lowers the standards of that profession.
It works against the confidence of the community in the integrity of the members of the bar. It results
in needless litigation and in incenting to strife otherwise peacefully inclined citizens.
The solicitation of employment by an attorney is a ground for disbarment or suspension. That should
be distinctly understood.
Giving application of the law and the Canons of Ethics to the admitted facts, the respondent stands
convicted of having solicited cases in defiance of the law and those canons. Accordingly, the only
remaining duty of the court is to fix upon the action which should here be taken. The provincial fiscal
of Isabela, with whom joined the representative of the Attorney-General in the oral presentation of
the case, suggests that the respondent be only reprimanded. We think that our action should go
further than this if only to reflect our attitude toward cases of this character of which unfortunately the
respondent's is only one. The commission of offenses of this nature would amply justify permanent
elimination from the bar. But as mitigating, circumstances working in favor of the respondent there
are, first, his intimation that he was unaware of the impropriety of his acts, second, his youth and
inexperience at the bar, and, third, his promise not to commit a similar mistake in the future. A
modest period of suspension would seem to fit the case of the erring attorney. But it should be
distinctly understood that this result is reached in view of the considerations which have influenced
the court to the relatively lenient in this particular instance and should, therefore, not be taken as
indicating that future convictions of practice of this kind will not be dealt with by disbarment.
In view of all the circumstances of this case, the judgment of the court is that the respondent Luis B.
Tagorda be and is hereby suspended from the practice as an attorney-at-law for the period of one
month from April 1, 1929,
Street, Johns, Romualdez, and Villa-Real, JJ., concur.
Johnson, J., reserves his vote.