Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 169079

February 12, 2007

FRANCISCO RAYOS, Petitioner,

vs.
ATTY. PONCIANO G. HERNANDEZ, Respondent.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review 1 of the Resolution dated 12 March 2005 of the Integrated Bar of the
Philippines (IBP), dismissing petitioner Francisco Rayoss complaint for disbarment against
respondent Atty. Ponciano Hernandez.
Respondent was the counsel of petitioner in Civil Case No. SM-951 entitled, "Francisco Rayos v.
NAPOCOR," filed before the Regional Trial Court (RTC), Malolos, Bulacan. The complaint alleged,
among other things, that the National Power Corporation (NAPOCOR) recklessly, imprudently and
negligently opened the three floodgates of the spillway of Angat Dam at midnight of 26 October 1978
until the early morning hours of 27 October 1978, during the occurrence of typhoon "Kading" causing
the release of a great volume of stored water, the resultant swelling and flooding of Angat River, and
the consequent loss of lives of some of petitioners relatives and destruction of his familys properties,
for which he sought damages. Of the 10 members of petitioners family who perished, only four
bodies were recovered and only petitioner and one of his sons, German Rayos, survived.
On 21 December 1979, the complaint was dismissed 2 on the ground that the State cannot be sued
without its consent as the operation and management of Angat Dam, Norzagaray, were governmental
functions. Said dismissal was questioned directly to this Court which set aside the RTC decision and
ordered the reinstatement of the complaint. 3
On 30 April 1990, however, the complaint was dismissed again by the RTC for lack of sufficient and
credible evidence. 4
The case was subsequently appealed to the Court of Appeals, which reversed the RTC decision and
awarded damages in favor of petitioner, the dispositive portion of which reads:
CONFORMABLY TO THE FOREGOING, the joint decision appealed from is hereby REVERSED and
SET ASIDE, and a new one is hereby rendered:
xxxx

2. In Civil Case No. SM-951, ordering defendants-appellees to pay jointly and severally, plaintiffappellant, with legal interest from the date when this decision shall have become final and executory,
the following:
A. Actual damages of Five Hundred Twenty Thousand Pesos (P520,000.00);
B. Moral Damages of Five Hundred Thousand Pesos (P500,000.00); and
C. Litigation Expenses of Ten Thousand Pesos (P10,000.00).
xxxx
In addition, in all the four (4) instant cases, ordering defendants-appellees to pay, jointly and severally,
plaintiffs-appellants, attorneys fees in an amount equivalent to 15% of the total amount awarded. 5
The case was appealed to this Court, which affirmed the Court of Appeals Decision. 6 The Decision of
the Supreme Court became final and executory on 4 August 1993.
Thus, a Writ of Execution 7 was issued by the RTC on 10 December 1993, upon motion filed by
respondent. As a consequence, NAPOCOR issued Check No. 014710 dated 5 January 1994, in the
amount of P1,060,800.00 payable to petitioner. Thereafter, the check was turned over to respondent
as counsel of petitioner. Petitioner demanded the turn over of the check from respondent, but the
latter refused.
On 24 January 1994 , petitioner filed with the RTC a motion 8 to direct respondent to deliver to him
the check issued by NAPOCOR, corresponding to the damages awarded by the Court of Appeals.
Petitioner sought to recover the check in the amount of P1,060,800.00 from respondent, claiming that
respondent had no authority to receive the same as he was already dismissed by petitioner as his
counsel on 21 November 1993. 9 Respondent, on the other hand, justifies his retention as a means to
ensure payment of his attorneys fees.
On 7 April 1994, the RTC issued an Order directing respondent to deliver the check to the Sheriff of
the court who will subsequently deliver it to petitioner. A Writ of Execution was subsequently issued.
Despite the Court Order, respondent refused to surrender the check.
However, on 4 July 1994, respondent deposited the amount of P502,838.79 with Farmers Savings
and Loan Bank, Inc., Norzagaray, Bulacan, in the name of petitioner which was eventually received
by the latter.
Thus, petitioner initiated this complaint for disbarment for the failure of respondent to return the rest of
the award in the amount of P557,961.21.
In his comment, 10 respondent alleged that he handled petitioners case, in Civil Case No. SM-951, for
15 years, from the trial court up to the Supreme Court. On 21 November 1993, he received a letter
from petitioner dismissing him as counsel. Simultaneous thereto, respondent received a letter dated
15 November 1993 from Atty. Jose G. Bruno asking him to comment on the therein attached letter

dated 19 November 1993 of petitioner addressed to NAPOCOR, requesting that the award of
damages granted by the Court of Appeals and affirmed by the Supreme Court be paid to him.
Respondent also averred that petitioner had a verbal contract for attorneys fees on a contingent
basis and that the said contract was only reduced in writing on 6 October 1991, duly signed by both of
them. By virtue of the contract, petitioner and respondent supposedly agreed on a 40%-60% sharing,
respectively, of the court award. Respondent was entitled to receive 60% of the award because
petitioner agreed to pay him 40% of the award as attorneys fees and 20% of the award as litigation
expenses.
Respondent further asseverated that because petitioner dismissed the respondent and refused to
settle his obligation, he deposited the amount of P424,320.00 in a bank in petitioners name under
Account No. 381 (representing petitioners share of 40% of the total award) on 10 May 1994 11 ; and
the amount of P63,648.00 in petitioners name under Account No. 389 (representing petitioners
share of 40% of the P159,120.00 awarded as attorneys fees by the Court of Appeals) on 19 May
1994. 12 Petitioner already received the amount ofP502,838.79 in accordance with the RTC Order
dated 7 April 1994.
Respondent contended that the petitioners complaint was without basis and was meant only to
harass and put him to shame before the residents of Norzagaray, Bulacan.
In a Resolution dated 9 August 1995, 13 the Court referred the case to the Commission on Bar
Discipline of the IBP for investigation, report and recommendation.
A series of hearings were conducted by the Commission on Bar Discipline of the IBP at the IBP
Building, Ortigas Center, Pasig City, from March to September 2001.
On 1 February 2005, Investigating Commissioner Lydia A. Navarro B. Funa submitted her Report and
Recommendation, 14 recommending the dismissal of the case.
Thereafter, the IBP issued its Resolution dated 12 March 2005, approving and adopting the
recommendation of the Investigating Commissioner, thus:
RESOLVED to ADOPT and APPROVE, as it hereby ADOPTED and APPROVED, the Report and
Recommendation of the Investigating Commissioner of the above-entitled case, herein made part of
this Resolution as Annex "A"; and, finding the recommendation fully supported by the evidence on
record and the applicable laws and rules, and considering that the case lacks merit, the same is
hereby DISMISSED. 15
We do not agree in the recommendation of the IBP.
The threshold issue in this petition is: whether respondent is justified in retaining the amount awarded
to petitioner in Civil Case No. SM-951 to assure payment of his attorneys fees.

Moneys collected by an attorney on a judgment rendered in favor of his client constitute trust funds
and must be immediately paid over to the client. 16 Canon 16 of the Code of Professional
Responsibility provides as follows:
CANON 16 - A lawyer shall hold in trust all moneys and properties of his client that may come into his
possession.
Rule 16.01 A lawyer shall account for all money or property collected or received for or from the
client.
In the case at bar, when respondent withheld and refused to deliver the NAPOCOR check
representing the amount awarded by the court in Civil Case No. SM-951, which he received on behalf
of his client (petitioner herein), he breached the trust reposed on him. It is only after an Order was
issued by the RTC ordering the delivery of the check to petitioner that the respondent partially
delivered the amount of P502,838.79 to the former, but still retaining for himself the amount
of P557,961.21 as payment for his attorneys fees. The claim of the respondent that petitioner failed
to pay his attorneys fees is not an excuse for respondents failure to deliver the amount to the
petitioner. A lawyer is not entitled to unilaterally appropriate his clients money for himself by the mere
fact alone that the client owes him attorneys fees. 17 The failure of an attorney to return the clients
money upon demand gives rise to the presumption that he has misappropriated it for his own use to
the prejudice and violation of the general morality, as well as of professional ethics; it also impairs
public confidence in the legal profession and deserves punishment. In short, a lawyers unjustified
withholding of money belonging to his client, as in this case, warrants the imposition of disciplinary
action. 18
It is true that under Canon 16.03 of the Code of Professional Responsibility, an attorney has the
following rights;
Rule 16.03- A lawyer shall deliver the funds and property of his client when due or upon demand.
However, he shall have a lien over the funds and may apply so much thereof as may be necessary to
satisfy his lawful fees and disbursements, giving notice promptly thereafter to his client. He shall also
have a lien to the same extent on all judgments and executions he has secured for his client as
provided for in the Rules of Court. (Emphases supplied.)
But the fact alone that a lawyer has a lien for fees on moneys in his hands collected for his client, as
above-stated, does not relieve him of his duty to promptly account for the moneys received; his failure
to do so constitutes professional misconduct. 19 Thus, what respondent should have properly done in
the case at bar was to provide the petitioner with an accounting before deducting his attorneys fees
and then to turn over the remaining balance of the award collected to petitioner. The Court notes that
respondent represented petitioner from the time of filing of the complaint in Civil Case No. SM-951
before what is now the RTC and of the appeal of the same case to the Court of Appeals and Supreme
Court. But respondent was not justified to hold on the entire amount of award collected by him until
his fees had been paid and received by him.
The relationship of attorney and client has always been rightly regarded as one of special trust and
confidence. An attorney must exercise the utmost good faith and fairness in all his relationship vis--

vis his client. Respondent fell far short of this standard when he failed to render an accounting for the
amount actually received by him on behalf of his client and when he refused to turn over any portion
of said amount to his client upon the pretext that his attorneys fees had not at all been paid.
Respondent had, in fact, placed his private and personal interest above that of his client.
We have held that lawyering is not a moneymaking venture and lawyers are not merchants. 20 Law
advocacy, it has been stressed, is not capital that yields profits. The returns it births are simple
rewards for a job done or service rendered. It is a calling that, unlike mercantile pursuits which enjoy
a greater deal of freedom from governmental interference, is impressed with a public interest, for
which it is subject to State regulation. 21
A lawyer is not merely the defender of his clients cause and a trustee of his clients cause of action
and assets; he is also, and first and foremost, an officer of the court and participates in the
fundamental function of administering justice in society. 22 It follows that a lawyers compensation for
professional services rendered is subject to the supervision of the court, not just to guarantee that the
fees he charges and receives remain reasonable and commensurate with the services rendered, but
also to maintain the dignity and integrity of the legal profession to which he belongs. Upon taking his
attorneys oath as an officer of the court, a lawyer submits himself to the authority of the courts to
regulate his right to charge professional fees. 23
There is another aspect to this case which the Court cannot just gloss over. Respondent claimed that
he charged petitioner, his client, a contingent fee comprising of forty percent (40%) as attorneys fees
and twenty percent (20%) as litigation expenses. The agreement provides:
UNAWAIN NG LAHAT SA PAMAMAGITAN NITO:
Ako, si Francisco Rayos, Sr., Pilipino, may sapat na gulang at ngayon ay naninirahan sa
Pinagbarilan, Baliwag, Bulacan, sa pamamagitan ng kasulatang ito, ay nagpapatunay sa mga
sumusunod:
Na, kaugnay sa aking usapin laban sa NPC at Benjamin Chavez (Rayos vs. NPC, et al.) na ngayon
ay nakabinbin sa Court of Appeals, ako ay nakipagkasundo sa aking abogado, Atty. Ponciano G.
Hernandez, gaya ng sumusunod:
1 Sakaling ipanalo ang aking usapin, ang ano mang aking makukuha ay hahatiin gaya ng
sumusunod: 40% ang para sa akin; 40% ang para kay Atty. Ponciano G. Hernandez; 20% ay ilalabas
bilang gastos sa kaso.
2. Kung matalo ako sa kaso ay wala akong sagutin sa aking abogado.
Sa katunayan ng lahat, ako ay lumagda sa kasunduang ito dito sa Norzagaray, Bulacan ngayong ika6 ng Oktubre 1991.
(SGD)PONCIANO G. HERNANDEZ (SGD)FRANCISCO RAYOS
Abogado May Usapin 24

A contingent fee arrangement is valid in this jurisdiction 25 and is generally recognized as valid and
binding but must be laid down in an express contract. 26 The amount of contingent fee agreed upon
by the parties is subject to the stipulation that counsel will be paid for his legal services only if the suit
or litigation prospers. A much higher compensation is allowed as contingent fee in consideration of
the risk that the lawyer may get nothing if the suit fails. 27 Contracts of this nature are permitted
because they redound to the benefit of the poor client and the lawyer "especially in cases where the
client has meritorious cause of action, but no means with which to pay for legal services unless he
can, with the sanction of law, make a contract for a contingent fee to be paid out of the proceeds of
the litigation. Oftentimes, the contingent fee arrangement is the only means by which the poor and
helpless can seek redress for injuries sustained and have their rights vindicated." 28
Contingent fee contracts are subject to the supervision and close scrutiny of the court in order that
clients may be protected from unjust charges. 29 Section 13 of the Canons of Professional Ethics
states that "a contract for a contingent fee, where sanctioned by law, should be reasonable under all
the circumstances of the case including the risk and uncertainty of the compensation, but should
always be subject to the supervision of a court, as to its reasonableness." Likewise, Rule 138, Section
24, of the Rules of Court provides:
SEC. 24. Compensation of 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. (Underscoring supplied.)
The reduction of unreasonable attorneys fees is within the regulatory powers of the courts. 30 When
the courts find that the stipulated amount is excessive or the contract is unreasonable, or found to
have been marred by fraud, mistake, undue influence or suppression of facts on the part of the
attorney, public policy demands that said contract be disregarded to protect the client from
unreasonable exaction. 31
There is, therefore, now a corollary issue of whether the stipulated attorneys fees are unreasonable
and unconscionable under the circumstances of the case as to warrant a reduction thereof.
Stipulated attorneys fees are unconscionable whenever the amount is by far so disproportionate
compared to the value of the services rendered as to amount to fraud perpetrated upon the client.
This means to say that the amount of the fee contracted for, standing alone and unexplained would
be sufficient to show that an unfair advantage had been taken of the client, or that a legal fraud had
been perpetrated on him. 32
The decree of unconscionability or unreasonableness of a stipulated amount in a contingent fee
contract, will not, however, preclude recovery. It merely justifies the fixing by the court of a reasonable
compensation for the lawyers services.

Generally, the amount of attorneys fees due is that stipulated in the retainer agreement which is
conclusive as to the amount of the lawyers compensation. A stipulation on a lawyers compensation
in a written contract for professional services ordinarily controls the amount of fees that the
contracting lawyer may be allowed, unless the court finds such stipulated amount unreasonable or
unconscionable. 33 In the absence thereof, the amount of attorneys fees is fixed on the basis of
quantum meruit, i.e., the reasonable worth of the attorneys services. Courts may ascertain also if the
attorneys fees are found to be excessive, what is reasonable under the circumstances. 34 In no case,
however, must a lawyer be allowed to recover more than what is reasonable, pursuant to Section 24,
Rule 138 of the Rules of Court.
We have identified the circumstances to be considered in determining the reasonableness of a claim
for attorneys fees as follows: (1) the amount and character of the service rendered; (2) labor, time,
and trouble involved; (3) the nature and importance of the litigation or business in which the services
were rendered; (4) the responsibility imposed; (5) the amount of money or the value of the property
affected by the controversy or involved in the employment; (6) the skill and experience called for in
the performance of the services; (7) the professional character and social standing of the attorney; (8)
the results secured; (9) whether the fee is absolute or contingent, it being recognized that an attorney
may properly charge a much larger fee when it is contingent than when it is not; 35 and (10) the
financial capacity and economic status of the client have to be taken into account in fixing the
reasonableness of the fee. 36
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.
In the case at bar, respondent retained the amount of P557,961.21 out of the P1,060,800.00 award
for damages paid by NAPOCOR to petitioner. Under the said scheme, respondent actually collected

fifty-three percent (53%) or more than half of the total amount due the petitioner; indeed, he
appropriated for himself more than the amount which he had already turned over to and actually
received by his client.
As adverted to above, we note that petitioner was unschooled and frustrated and hopeless with the
tragic loss of his loved ones caused by the inundation of the town of Norzagaray, Bulacan, on 26-27
October 1978 because of the negligent release by NAPOCOR of the water through the spillways of
the Angat Dam. Petitioner also had to face the loss and destruction of his familys properties. Under
such circumstances and given his understandable desire to recover the damages for the loss of his
loved ones and properties, petitioner would easily succumb and readily agree to the demands of
respondent lawyer regarding his attorneys fees.
We believe and so hold that the contingent fee here claimed was, under the facts obtaining in this
case, grossly excessive and unconscionable. Such a fee structure, when considered in conjunction
with the circumstances of this case, also shows that an unfair advantage was taken of the client and
legal fraud and imposition perpetrated upon him. Lawyers should not be permitted to get a lions
share of the benefits due the poor and the helpless. Contracts for legal services between the helpless
and attorney should be zealously scrutinized to the end that a fair share of the benefits be not denied
to the former. This Court has the power to guard a client, 37 especially an aged and necessitous
client, 38 against such a contract.
A survey of existing jurisprudence regarding attorneys fees would reveal the following: in the case of
Amalgamated Laborers Association v. Court of Industrial Relations, 39 the rate of attorneys fees
allowed was 25%; in Law Firm of Raymundo A. Armovit v. Court of Appeals, 40 the rate allowed was
20%; in Polytrade Corporation v. Blanco, 41 25%; in Santiago v. Dimayuga, 42 20%; in Cosmopolitan
Insurance Co., Inc. v. Reyes,43 15%; in Reyes v. Court of Appeals, 44 15%; and in Social Security
Commission v. Almeda, 45 15%.
In the present case, respondent Atty. Hernandez, after all, succeeded in obtaining a favorable
decision for his client, the petitioner. At first, respondent failed to obtain a favorable judgment in the
RTC as the case was dismissed. But on appeal to the Court of Appeals, the RTC Decision was
reversed and petitioner was awarded the amount of P1,060,800.00 as damages and P159,120.00 as
attorneys fees. Said award was sustained by the Supreme Court. We also take note respondents
efforts in litigating petitioners case for a long period of 15 years. Lastly, the respondent took risk in
representing petitioner on a contingent fee basis.
In consideration of the foregoing, a fee of 35% of the amount awarded to petitioner would be a fair
compensation for respondents legal services.
The misconduct of a lawyer, whether in his professional or private capacity, which shows him to be
wanting in moral character, honesty, probity and good demeanor, renders him unworthy to the
privileges which his license and the law confer upon him, may be sanctioned with disbarment or
suspension. 46
The court should also exercise a sound discretion in determining whether a lawyer should be
disbarred or merely suspended. It should bear in mind that admission to the Bar is obtained only after

years of labor and study and the office acquired often becomes the source of great honor and
emolument to its possessor. To most members of the legal profession, it is a means of support for
themselves and their families. To deprive one of such an office is often to decree poverty to the lawyer
and destitution to his family. 47 Disbarment, therefore, should never be decreed where any lesser
penalty, such as temporary suspension, would accomplish the end desired. 48
In the case of Schulz v. Atty. Flores, 49 a lawyer was suspended for six months for not returning his
clients money despite demands, for unjustifiably refusing to return his clients papers, and for
collecting excessive and unreasonable fees. Also in the case of Tanhueco v. Atty. De Dumo, 50 a
lawyer was suspended for a period of six months for failure to return the money received by him on
behalf of his client and for collecting excessive and unconscionable fees.
Guided by our rulings in the abovestated cases, suspension of respondent for six months is justified
in the case at bar.1awphi1.net
WHEREFORE the Court Resolves that:
1. Respondent is guilty of violation of the attorneys oath and of serious professional misconduct and
shall be SUSPENDED from the practice of law for six (6) months and WARNED that repetition of the
same or similar offense will be dealt with more severely;
2. Respondent is entitled to attorneys fees in the amount equivalent to thirty-five percent (35%) of the
total amount awarded 51 to petitioner in Civil Case No. SM-951; and
3. Respondent is to return the amount of Two Hundred Ninety Thousand One Hundred Nine Pesos
and Twenty-One Centavos (P290,109.21), 52 which he retained in excess of what we herein declared
as fair and reasonable attorneys fees, plus legal interest from date of finality of this judgment until full
payment thereof.
Let copies of this Decision be entered in the personal record of respondent as member of the Bar and
furnished the Office of the Bar Confidant, the IBP, and the Court Administrator for circulation to all
courts of the country.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
A.M. No. 1437 April 25, 1989
HILARIA TANHUECO, complainant,
vs.
JUSTINIANO G. DE DUMO, respondent.
A.M. No. 1683 April 25, 1989
HILARIA TANHUECO, complainant,
vs.
JUSTINIANO G. DE DUMO, respondent.
R E S O L U T I ON

PER CURIAM:
On 24 February 1975, complainant Hilaria Tanhueco filed before the Court a Petition for Disbarment
(docketed as Administrative Case No. 1437) against respondent Justiniano G. de Dumo for having
violated the Canons of Professional Ethics by his (a) refusal to remit to her money collected by him
from debtors of the complainant; and (b) refusal to return documents entrusted to him as counsel of
complainant in certain collection cases.
In his Answer and Counter-Petition 1 filed on 3 April 1975, respondent denied the charges.
Complainant filed a Rejoinder [should be Reply] to Answer with Counter-Petition, on 18 April 1975. By
a Resolution 2 dated 16 June 1975, the Court referred this case to the Solicitor General for
investigation, report and recommendation.
A year later, on 25 June 1976, one Jose Florencio N. Tanhueco claiming to be the nephew and
representative of the complainant, addressed a sworn letter complaint to Mrs. Imelda R. Marcos
against the respondent for (a) refusal to remit the money collected by respondent from debtors of
complainant's aunt, Mrs. Hilaria Tanhueco Vda. de David; (b) refusal to return documents entrusted to
him in his capacity as counsel in certain cases; and (c) abandonment of cases in respect of which his
professional services had been engaged. On 24 August 1976, the letter complaint was forwarded by
the then Public Information Assistance Staff, Department of Public Information, to this Court for
appropriate action (and docketed as Administrative Case No. 1683). After respondent had filed his
Answer, the Court, by a Resolution 3 dated 9 December 1976, referred this case to then Acting
Judicial Consultant Ricardo C. Puno for study, report and recommendation.

Since Administrative Case No. 1683 and Administrative Case No. 1437 involved the same parties and
the same subject matter, Hon. Ricardo C. Puno referred the former case to the Office of the Solicitor
General for consolidation with the latter one.
The Office of the Solicitor General held two (2) hearings, one on 3 December 1975 and another on 18
April 1988. In the first hearing, respondent de Dumo was absent although he had been notified
thereof. At the end of the first hearing, continuation of the hearing of the case was set for 14 January
1976. The records show that the second hearing took place on 18 April 1988 but do not indicate the
reason for the 12-year interregnum. By then, complainant Tanhueco had died. There was no
appearance at the second hearing by complainant Jose Florencio Tanhueco but respondent de Dumo
was then present.
The report of the Solicitor General, dated June 15, 1988 in Administrative Case No. 1437 summarized
the evidence for the complainant in the following manner:
EVIDENCE FOR COMPLAINANT
Complainant Hilaria Tanhueco testified that she secured the legal services of
respondent to collect indebtedness from her different debtors. Although she offered to
execute a document evidencing their lawyer-client relationship, respondent told her that
it was not necessary. She nonetheless offered to give him 15% of what he may be able
to collect from the debtors (pp. 4-7. tsn, Dec. 3, 1975).
Complainant also declared that respondent borrowed from her P2,000.00, Pl,300.00,
and P3,000.00 on three separate occasions, but she could not remember when she
gave those amounts. Respondent did not pay those loans (pp. 8-9, tsn, Id.).
She confirmed that respondent filed cases against her debtors and that one of them,
Constancia Maosca paid P12,500.00 to respondent. Informed of such payment by
Maosca herself, complainant confronted respondent but the latter denied having
received payment from any of her debtors. Complainant then brought the matter to the
attention of Malacaang which referred her to Camp Crame. Notwithstanding
subsequent demands of complainant for the money, respondent had refused to give her
the amount (pp. 11 -15, tsn, Id.).
The Solicitor General then summed up the evidence for the respondent in the following terms:
EVIDENCE FOR RESPONDENT
Respondent Atty. Justiniano G. de Dumo testified that complainant indeed secured his
legal services to collect from her debtors, with the agreement that he gets 50% of what
he may be able to collect. He thus filed collection cases against Tipace Maosca
Morena, Jr., and others, and was able to obtain favorable judgment in the cases against
Maosca, Tipace, and Leonila Mendoza. The initial payments made by these judgmentdebtors were all given to complainant. With respect to Maosca respondent obtained a

judgment for P19,000.00 although the debt was only P12,000.00 (pp. 3-9, tsn, April 18,
1988).
Respondent also declared that complainant, who was then already old and sickly, was
influenced by her debtors, who were also her friends into distrusting him. Ultimately,
because complainant filed a complaint against him with Malacaang which referred the
matter to Camp Crame, he terminated his relationship with complainant and demanded
his attorney's fees equivalent to 50% of what he had collected. Complainant refused to
pay him, hence, he did not also turn over to her the P12,000.00 initial payment of
Maosca which he considered, or applied, as part payment of his attorney's fee (pp. 919, tsn., Id.). Respondent estimated his attorney's fee due from complainant in the
amount of P17,000.00 (p. 20, tsn, Id.)
Respondent denied having borrowed the amounts of P2,000.00, P1,300.00, P3,000.00
and P1,000.00, pointing out that complainant did not even have money to pay him so
that he handled the cases for her on contingent basis (p. 17, tsn, Id.) He also denied
having received documentary evidence from complainant. What evidence he had were
all gathered by him on his initiative (pp. 4-7, tsn, Id.).
The Solicitor General then set out the following:
FINDINGS
There is in the case at bar clear admissions by both complainant and respondent of an
attorney-client relationship between them, specifically in the collection of debts owing
complainant. Respondent also admitted, in his answer to the complaint and in his
testimony, having received P12,000.00 from indebtor Constancia Manosca without
turning over the amount to his client, complainant herein, and applying it instead as part
of his attorney's fees. It has been held that the money collected by a lawyer in
pursuance of a judgement in favor of his client held in trust (Aya v. Bigonia,57
Phil.8;Daroy v..Legaspi 65 SCRA 304), and that the attorney should promptly account
for all funds and property received or held by him for the client's benefit (Daroy v.
Legaspi, supra; In re Bamberger, 49 Phil. 962). The circumstance that an attorney has a
lien for his attorney's fees on the money in his hands collected for his client does not
relieve him from the obligation to make a prompt accounting (Domingo l v. Doming[o]
G.R. No. 30573, Oct. 29, 1971; Daroy v. Legaspi, supra). Undoubtedly, respondent's
failure to account for the P12,000.00, representing payment of the judgement debt of
Maosca constitutes unprofessional conduct and subjects him to disciplinary action.
Nonetheless, it has likewise been recognized that a lawyer is as much entitled to judicial
protection against injustice, imposition or fraud on the part of his client; and that the
attorney is entitled to be paid his just fees. The attorney should be protected against any
attempt on the part of his client to escape payment of his just compensation (Fernandez
v. Bello, 107 Phil. 1140; Albano v. Coloma, G.R. Adm. Case No. 528, Oct. 11, 1967).
This countervailing rule mitigates the actions of respondent.

As regards the charges that respondent received documents evidencing the debts to
complainant and had refused to return them to the latter, and that respondent also
borrowed some amounts from her, there [is] no competent, conclusive evidence to
support them. Perforce, such allegations have no factual basis. (Emphasis supplied)
The Solicitor General then recommended that:
For failure to turn over the amount of P12,000.00 to the complainant, and applying it as
his attorney's fees, respondent Atty. Justiniano G. de Dumo be severely reprimanded
and admonished that repetition of the same or similar offense will be dealt with more
severely.
We find the findings of fact of the Solicitor General supported by the evidence of record. We are,
however, unable to accept his recommendation.
Moneys collected by an attorney on a judgment rendered in favor of his client, constitute trust funds
and must, be immediately paid over to the client. 4 Canon 11 of the Canons of Professional
Ethics 5 then in force, provides as follows:
11. Dealing with trust property.
The lawyer should refrain from any action whereby for his personal benefit or gain he
abuses or takes advantage of the confidence reposed in him by his client.
Money of the client or collected for the client or other trust property coming into the
possession of the lawyer should be reported and accounted for promptly and should not
under any circumstance be comingled with his own or be used by him. (Emphasis
supplied)
When respondent withheld and refused to deliver the money received by him for his client, the
deceased complainant Hilaria Tanhueco, he breached the trust reposed upon him.The claim of the
respondent that complainant had failed to pay his attorney's fees, is not an excuse for respondent's
failure to deliver any amount to the complainants. 6 It is of course true that under Section 37 of Rule
138 of the Revised Rules of Court, an attorney hasa lien upon the funds, documents and papers of his client which have lawfully come into
his possession and may retain the same until his lawful fees and disbursements have
been paid, and may apply such funds to the satisfaction thereof. He shall also have a
lien to the same extent upon all judgments for the payment of money and executions
issued in pursuance of such judgments, which he has secured in a litigation of his client,
from and after the time when he shall have caused a statement of his claim of such lien
to be entered upon the records of the court rendering such judgment, or issuing such
execution, and shall have caused written notice thereof to be delivered to his client and
to the adverse party; and he shall have the same right and power over such judgments
and executions as his client would have to enforce his lien and secure the payment of
his just fees and disbursements.

The fact that a lawyer has a lien for fees on moneys in his hands collected for his client, does not
relieve him from his duty promptly to account for the moneys received; his failure to do so constitutes
professional misconduct. 7
In the present case, what respondent could have properly done was to make an account with his
client, the complainant, deduct his attorney's fees due in respect of the amount actually collected by
him, and turn over the remaining balance to the complainant. The Court notes that the services of
respondent de Dumo were engaged by the complainant on a number of cases and that these were on
differing stages of completion. Respondent was not entitled to hold on to the entire amount of
P12,000.00 collected by him until all his fees for the other cases had also been paid and received by
him. There was not enough evidence in the record to show how much money, if any, respondent had
in fact previously (i.e., other than the P12,000.00 from Maosca) collected for and turned over to
complainant (thereby waiving his lien thereon) without deducting therefrom his claimed contingent
fees in respect of such collections.
The relationship of attorney and client has always been rightly regarded as one of special trust and
confidence. An attorney must exercise the utmost good faith and fairness in all his relationships vis-avis his client. Respondent fell far short of this standard when he failed to render an accounting for the
amount actually received by him and when he refused to turn over any portion of such amount
received by him on behalf of his client upon the pretext that his attorney's fees had not all been paid.
Respondent had in fact placed his private and personal interest above that of his client. Respondent's
act constitutes a breach of his lawyer's oath and a mere reprimand is not an adequate sanction.
There is another aspect to this case which the Court cannot gloss over. Respondent claimed that he
charged complainant, his client, a contingent fee of fifty percent (50%) of the amount collected by
him, plus interest and whatever attorney's fees may be awarded by the trial court chargeable to the
other party. In this jurisdiction, contingent fees are not per se prohibited by law. 8 But when it is shown
that a contract for a contingent fee are obtained by undue influence exercised by the attorney upon
his client or by any fraud or imposition, or that the compensation is clearly excessive, the Court must
and will protect the aggrieved party. 9
From the Answer of respondent de Dumo it appears that in three (3) collection cases filed by him for
the complainant and which were decided in favor of the complainant, the awards totalled P31,390.00.
Respondent asserted that he was entitled to attorney's fees amounting to Pl8,840. 00 out of the
aggregate total of P31,390.00:
7. That the understanding between Hilaria Tanhueco and me was a fifty- fifty on
collected principal and interests. The lawyer has the right to charge attorney's fees to
the other party-defendant and that Hilaria Tanhueco shall not interfere nor be included
in the computation.
That of the cases filed, the following made payments:
a. Hilaria Tanhueco vs. Constancia Maosca

Amount Collectible (principal).......................................

. P12,000.00
Interest added from May 1972 o Nov/73 at 1% a month.
... P 2,280.00
Attorney's fees charged to the defendant and not to be included in the
computation................ P 4,720.00
TOTAL and Amount specified in the Compromise Agreement and Subject
of the Decision. P19,000.00
b. Hilaria Tanhueco vs. Melchor Tipace et al.
Principal amount collectible...........
........... P7,100.00
Interest at 1 % per month starting June/71 to Sept./74.....................
... 2,840.00
Attorney's fees charged to the defendant and not included in the
computation.......................... 1,450.00
TOTAL P ll,390.00.
c. Hilaria Tanhueco vs. Estimo
Principal Amount collectible......
..........
..... Pl,000.00
SUMMATION OF THE THREE CASES FILED AND
AMOUNTS RECEIVABLE
BY THE UNDERSIGNED INCLUDING ATTORNEY'S FEES:
MAOSCA CASE:
Attorney's fees to be paid by Maosca and not to be
included in the computation................... P 4,840.00
Fifty per cent on the principal amount collectible plus
interests......................................... . P 7,080.00
TOTAL AMOUNT RECEIVABLE P11,920.00
TIPACES CASE:

Attorney's fees to be paid by Tipace and not to be included in

the computation............................. Pl,450.00
Fifty per cent on the principal amount collectible from Tipace
plus interests.................................. 4,970.00
TOTAL AMOUNT
RECEIVABLE
............. P6,420.00
8. The total amount which I ought to receive as attorney's
fees under paragraph seven, sub-paragraph a, b and c is:
Pll,920. 00
P6,420.00
P500. 00
P18,840. 00 TOTAL 10
We note that respondent attorney claimed as his contingent
fee the following:
1) fifty percent (50%) of the sum of principal
and interest collectible from different debtors;
and
2) attorney's fees charged to the defendant
(presumably under promissory notes or written
agreements) and "not to be included in the
computation."
Under this scheme, respondent was actually collecting as
attorney's fees sixty percent (60%) or more than half of the
total amount due from defendant debtors; indeed, he was
appropriating for himself more than what he was, according
to him, to turn over to his client.
We believe and so hold that the contingent fee here claimed
was, under the facts obtaining in this case, grossly excessive
and unconscionable. 11 Such a fee structure, when
considered in conjunction with the circumstances of this
case, also shows that an unfair advantage was taken of the
client and legal fraud and imposition perpetrated upon her.

The complainant was an old and sickly woman and, in

respondent's own words, "penniless." She was at the time
she filed her complaint in 1976, already seventy-six (76)
years old. In her circumstances, and given her
understandable desire to realize upon debts owed to her
before death overtook her, she would easily succumb to the
demands of respondent attorney regarding his attorney's
fees. It must be stressed that the mere fact that an
agreement had been reached between attorney and client
fixing the amount of the attorney's fees, does not insulate
such agreement from review and modification by the Court
where the fees clearly appear to be excessive or
unreasonable. In Mambulao Lumber Company v. Philippine
National Bank, et al., 12 this Court stressed:
The principle that courts should reduce
stipulated attorney's fees whenever it is found
under the circumstances of the case that the
same is unreasonable, is now deeply rooted in
this jurisdiction to entertain any serious
objection to it. Thus, this Court has explained:
But the principle that it may be lawfully
stipulated that the legal expenses involved in
the collection of a debt shall be defrayed by the
debtor does not imply that such stipulations
must be enforced in accordance with the
terms, no matter how injurious or oppressive
they may be. The lawful purpose to be
accomplished by such a stipulation is to permit
the creditor to receive the amount due him
under his contract without a deduction of the
expenses caused by the delinquency of the
debtor. It should not be permitted for him to
convert such a stipulation into a source of
speculative profit at the expense of the debtor.
xxx xxx xxx
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, supra). And it is not material that
the present action is between attorney and
client.As courts have power to fix the fee as
between attorney and client, it must
necessarily have the right to say whether a
stipulation like this, inserted in a mortgage
contract, is valid (Bachrach vs.
Golingco, supra).
xxx xxx xxx 13
This Court has power to guard a client, 14 especially an
aged and necessitous client, 15against such a contract. We
hold that on a quantum meruit basis, no circumstances of
special difficulty attending the collection cases having been
shown by respondent, respondent attorney's fees should be
reduced from sixty percent (60%) to ten percent (15%) of the
total amount (including attorney's fees stipulated as
chargeable to the debtors) collected by him on behalf of his
client.
With respect to charges of refusal to return documents
entrusted to respondent lawyer and abandonment of cases
in which his services had been engaged, we accept the
findings of the Solicitor General that the evidence of record
is not sufficient to prove these allegations.
WHEREFORE, the Court Resolved that:
1. respondent is guilty of violation of the
attorneys' oath and of serious professional
misconduct and shall be SUSPENDED from
the practice law for six (6) months and
WARNED that repetition of the same or similar
offense will be more severely dealt with;
2. the attorney's fees that respondent is entitled
to in respect of the collection cases here
involved shall be an amount equivalent to

fifteen percent (15%) of the total amount

collected by respondent from the debtors in
those cases;
3. respondent shall return forthwith to the
estate of complainant Hilaria Tanhueco the
P12,000.00 respondent received on behalf of
his client less attorney's fees due to him in
respect of that amount (P l2,000.00 less fifteen
percent [15%] thereof) or a net amount of
P10,200.00; and
4. respondent shall return to the estate of
complainant Hilaria Tanhueco any documents
and papers received by him from the deceased
complainant in connection with the collection
cases for which he was retained. If he has in
fact made any other collections from deceased
complainant's debtors, he shall promptly
account therefor to complainant's estate and
shall be entitled to receive in respect thereof
the fifteen percent (15%) attorney's fees
provided for herein.
Let a copy of this Resolution be furnished each to the Bar
Confidant and spread on the personal record of respondent
attorney, and to the Integrated Bar of the Philippines.
Fernan C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr.,
Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento,
Cortes, Grio-Aquino, Medialdea and Regalado, JJ., concur.

THIRD DIVISION

[A.C. No. 5798. January 20, 2005]

ALEX B. CUETO, complainant, vs. ATTY. JOSE B. JIMENEZ, JR., respondent.

RESOLUTION
CORONA, J.:

Before us is a complaint for disciplinary action against Atty. Jose Jimenez, Jr. filed by
Engr. Alex B. Cueto with the Integrated Bar of the Philippines (IBP), Commission on Bar
Discipline.
[1]

Engr. Alex Cueto alleged that sometime in October 1999 he engaged the services of
respondent as notary public, the latter being the father of the owner of the building subject
of the Construction Agreement to be notarized. He was then accompanied by a certain
Val Rivera, the building administrator of respondents son Jose Jimenez III.
[2]

After notarizing the agreement, respondent demanded P50,000 as notarial fee.

Despite his surprise as to the cost of the notarial service, complainant informed
respondent that he only had P30,000 in cash. Respondent persuaded complainant to pay
the P30,000 and to issue a check for the remaining P20,000. Being unfamiliar with the
cost of notarial services, complainant paid all his cash and issued a Far East Bank check
dated December 28, 1999 for the balance.
[3]

Before the maturity date of the check, complainant requested respondent not to
deposit the same for lack of sufficient funds. He also informed respondent that the latters
son Jose Jimenez III had not yet paid his services as general contractor. Still, respondent
deposited the check which was consequently dishonored for insufficient funds. Meanwhile,
the P2,500,000 check issued by respondents son to complainant as initial payment
pursuant to the Construction Agreement was itself dishonored for having been drawn
against a closed account.
Subsequently, Atty. Jimenez lodged a complaint for violation of BP 22 against Cueto
before the City Prosecutors Office in Angeles City. The criminal case was tried in the
Metropolitan Trial Court of Angeles City, Branch I.
In the meantime, Cueto filed his own administrative complaint against Jimenez on
November 16, 2001. He alleged that Jimenez violated the Code of Professional
Responsibility and Canons of Professional Ethics when he filed the criminal case against
Cueto so he could collect the balance of his notarial fee.

Pursuant to Rule 139-B, Section 6 of the Rules of Court, respondent Jimenez was
required to answer the complaint filed against him. Despite notice, however, respondent
failed to file his answer and to appear before the IBP Commission on Bar Discipline. After
hearing the case ex-parte, the case was deemed submitted for resolution.
[4]

[5]

In its report dated April 21, 2002, the IBP Commission on Bar Discipline found
respondent guilty of violating Canon 20, Rule 20.4 of the Code of Professional
Responsibility and recommended that Atty. Jose B. Jimenez, Jr. be reprimanded.
[6]

On June 29, 2002, the Board of Governors passed a resolution adopting and
approving the report and recommendation of the Investigating Commissioner:
[7]

[8]

RESOLVED to ADOPT and APPROVE, as it is hereby ADOPTED and APPROVED, the Report
and Recommendation of the Investigating Commissioner of the above-entitled case, herein made
part of this Resolution/Decision as Annex A; and, finding the recommendation fully supported by
the evidence on record and the applicable laws and rules, and in view of respondents violation of
Canon 20, Rule 20.4 of the Code of Professional Responsibility, respondent is hereby reprimanded.
Complainants claim that respondents P50,000 notarial fee was exorbitant is
debatable. As confirmed by the IBP, it is a recognized legal practice in real estate
transactions and construction projects to base the amount of notarial fees on the contract
price. Based on the amount demanded by respondent, the fee represented only 1% of the
contract price ofP5,000,000. It cannot be said therefore that respondent notary demanded
more than a reasonable recompense for his service.
We are also convinced that the two contracting parties implicitly agreed on the cost of
Jimenezs notarial service. It was Cuetos responsibility to first inquire how much he was
going to be charged for notarization. And once informed, he was free to accept or reject it,
or negotiate for a lower amount. In this case, complainants concern that the other party to
the construction agreement was the son of respondent notary and that his non-availment
of respondents service might jeopardize the agreement, was purely speculative. There
was no compulsion to avail of respondents service. Moreover, his failure to negotiate the
amount of the fee was an implicit acquiescence to the terms of the notarial service. His
subsequent act of paying in cash and in check all the more proved it.
However, we agree with the IBP that respondents conduct in filing a criminal case for
violation of BP 22 against complainant (when the check representing the P20,000 balance
was dishonored for insufficient funds) was highly improper.
Canon 20, Rule 20.4 of the Code of Professional Responsibility mandates that [a]
lawyer shall avoid controversies with clients concerning his compensation and shall resort

to judicial action only to prevent imposition, injustice or fraud. Likewise, in Canon 14 of

the Canons of Professional Ethics it states that, [c]ontroversies with clients concerning
compensation are to be avoided by the lawyer so far as shall be compatible with his selfrespect and with his right to receive reasonable recompense for his service; and lawsuits
with the clients should be resorted to only to prevent injustice, imposition or fraud.
There was clearly no imposition, injustice or fraud obtaining in this case to justify the
legal action taken by respondent. As borne out by the records, complainant Cueto had
already paid more than half of respondents fee. To resort to a suit to recover the balance
reveals a certain kind of shameful conduct and inconsiderate behavior that clearly
undermines the tenet embodied in Canon 15 that [A] lawyer should observe candor,
fairness and loyalty in all his dealings and transactions with his client. And what can we
say about the failure of respondents son Jose III to pay his own obligation to complainant
Cueto? It in all probability explains why Cueto ran short of funds. Respondent therefore
should have been more tolerant of the delay incurred by complainant Cueto.
We cannot overstress the duty of a lawyer to uphold the integrity and dignity of the
legal profession. He can do this by faithfully performing his duties to society, to the bar, to
the courts and to his clients. He should always remind himself that the legal profession is
imbued with public service. Remuneration is a mere incident.
[9]

Although we acknowledge that every lawyer must be paid what is due to him, he must
never resort to judicial action to recover his fees, in a manner that detracts from the dignity
of the profession.
WHEREFORE, Atty. Jose Jimenez, Jr. is hereby SEVERELY REPRIMANDED for
violating Canon 20, Rule 20.4 of the Code of Professional Responsibility.
SO ORDERED.
Panganiban, (Chairman),
JJ., concur.

Sandoval-Gutierrez,

Carpio-Morales, and Garcia,

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 91958 January 24, 1991

WILFREDO D. LICUDAN and CRISTINA LICUDANCAMPOS, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and ATTY.
TEODORO O. DOMALANTA, respondents.
Arnold V. Guerrero & Associates for petitioners.

Teodoro O. Domalanta for and on his behalf as private

respondent.

GUTIERREZ, JR., J.:

The practice of law is a profession rather than trade.

Courts must guard against the charging of
unconscionable and excessive fees by lawyers for their
services when engaged as counsel. Whether or not the
award of attorney's fees in this case is reasonable, being
in the nature of contingent fees, is the principal issue.
This petition for review on certiorari assails:
1) The Decision of the public respondent dated
September 12, 1989 which dismissed the petitioners'
appeal thereby upholding the reasonableness of the
respondent lawyer's lien as attorney's fees over the
properties of his clients; and
2) The Resolution of the public respondent dated
January 30, 1990 which denied the petitioners' motion
for reconsideration.
The grounds relied upon by the petitioners are as
follows:

The respondent Court, in upholding the

entitlement of private respondent-attorney on the
attorney's fees he claimed, decided the question
in a manner not in accord with law or with the
applicable decisions of this Honorable Tribunal.
The respondent Court, in refusing to review and
determine the propriety, reasonableness and
validity of the attorney's fees claimed by the
private respondent-attorney, departed from the
usual course of judicial proceedings.
The respondent Court, in failing to declare the
attorney's fees claimed by the private
respondent-attorney as unconscionable,
excessive, unreasonable, immoral and unethical,
decided the question in a way not in accord with
law and with applicable decisions of this
Honorable Tribunal. (Petition, pp. 12-13; Rollo,
pp. 16-17)
The following are the antecedent facts pertinent to the
case at bar:
The respondent lawyer was retained as counsel by his
brother-in-law and sister, the now deceased petitioners'
parents, spouses Aurelio and Felicidad Licudan. His

services as counsel pertained to two related civil cases

docketed as Civil Case No. Q-12254 for partition and
Civil Case No. Q-28655 for a sum of money in
connection with the redemption of the property subject
matter of the two cases covered by Transfer Certificate
of Title No. 818 of the Register of Deeds of Quezon City.
In both cases, the respondent lawyer obtained a
judgment in favor of his clients.
On August 13,1979, the respondent lawyer filed a
Petition for Attorney's Lien with Notification to his Clients
which substantially alleged that his clients executed two
written contracts for professional services in his favor
which provided that:
a) The undersigned counsel is entitled to own
97.5 square meters of the plaintiff's share of the
lot in question.
b) The undersigned counsel shall have a
usufructuary right for a period of ten (10) years of
plaintiffs' share of the lot in question.
c) And that all damages accruing to plaintiffs to
be paid by the defendant is for the undersigned
counsel.(Annex "H" of the Petition, Rollo, p. 54)

On September 19, 1979, the trial court handling Civil

Case No. Q-12254 ordered the annotation at the back of
TCT No. 818 of the Register of Deeds of Quezon City of
the respondent lawyer's Contract for Professional
Services dated August 30, 1979 signed by petitioner
Wilfredo Licudan and Aurelio Licudan on his own behalf
and on behalf of his daughter, petitioner Cristina
Licudan-Campos. The said trial court's Order, being one
of two Orders being essentially challenged in this
petition, is reproduced below:
Before the court for consideration is a Petition for
Attorney's Lien filed by Atty. Teodoro D.
Domalanta, counsel for the plaintiff, praying that
his attorney's fees be annotated as a lien at the
back of Transfer Certificate of Title No. 818 of the
Register of Deeds of Quezon City, subject matter
of this case.
For the protection of the plaintiffs, the court
required the plaintiff Aurelio Licudan as well as
his son to appear this morning. Plaintiff Aurelio
Licudan together with his son Wilfredo Licudan,
who appears to be intelligent and in fact he
speaks (the) English language well, appeared.
Both Aurelio and Wilfredo Licudan manifested

that they have freely and voluntarily signed the

Contract for Professional Services, dated August
30, 1979 and notarized before Notary Public
Amado Garrovillas as Doc. No. 32, Page 8, Book
No. XIX, Series of 1979.
Considering the manifestation of plaintiff, Aurelio
Licudan and Alfredo (sic) Licudan that they have
entered freely and voluntarily in the said contract
of professional services, let the same be
annotated at the back of TCT 818 of the Register
of Deeds of Quezon City, upon payment of the
required legal fees. (CA Decision, pp. 7-8; Rollo,
pp. 36-37)
The Contract for Professional Services dated August 30,
1979 differs from the earlier contractual provisions in
that it entitled the respondent lawyer to one-third (1/3) of
the subject property or 90.5 square meters and provided
for usufructuary rights over the entire lot in question in
favor of the respondent lawyer's son, Teodoro M.
Domalanta, Jr. for an agreed consideration. (Annex "J"
of the Petition; Rollo, p. 59)
On July 25, 1985, the respondent lawyer filed a
motion ex parte to amend the Order dated September

19, 1979 so as to conform with an additional

professional fee covering 31 square meters more of the
lot for services rendered in Civil Case No. Q-28655 as
evidenced by a Deed of Absolute Sale dated May 1,
1983 executed by Aurelio Licudan in favor of the
respondent lawyer.
On September 6, 1985, the trial court ordered the
respondent lawyer to submit a subdivision plan in
conformity with his attorney's fees contract under which
one-third (1/3) of the property or 90.5 square meters
was alloted to him.
On September 23, 1985, the respondent lawyer filed a
motion for reconsideration praying for the amendment of
the Order dated September 19, 1979 to conform with the
Deed of Absolute Sale dated May 1, 1983 which was
executed after the annotation of the original attorney's
lien of 90.5 square meters.
On September 30, 1985, the trial court denied the
motion on the ground that the respondent lawyer cannot
collect attorney's fees for other cases in the action for
partition.
On October 4, 1985, the respondent lawyer filed a
second motion for reconsideration of the Order dated

September 6, 1985 explaining that what he sought to be

included in the Order dated September 19, 1979 is the
additional attorney's fees for handling the redemption
case which was but a mere offshoot of the partition case
and further manifesting that the additional 31 square
meters as compensation for the redemption case must
be merged with the 90.5 square meters for the partition
case to enable the said respondent lawyer to comply
with the Order dated September 6,1985 which directed
him to submit a subdivision plan as required.
On October 21, 1985, the trial court issued the second
Order being assailed in this petition. The said Order
reads:
Acting on the "Second Motion for
Reconsideration" filed by Atty. Teodoro
Domalanta and finding the same to be justified,
let an attorney's lien be annotated in the title of
the property for 31 square meters as attorney's
fees of said Atty. Teodoro Domalanta in addition
to the original 90.5 square meters. (CA Decision,
p. 8; Rollo, p. 37)
On August 22, 1986, more than ten (10) months after
the Orders of September 6, 1985 and October 21, 1985

had become final and executory, the petitioners as

substituted heirs of the respondent lawyers' deceased
clients filed a motion to set aside orders on the ground
that the award of professional fees covering 121.5
square meters of the 271.5 square meter lot is
unconscionable and excessive.
After the respondent lawyer filed his Opposition to the
above petitioners' motion, the lower court, on August 29,
1986, finding that the petitioners as substituted plaintiffs
are not in full agreement with the respondent lawyer's
claim for attorney's fees, set aside its Orders dated
September 6, 1985 and October 21, 1985.
On September 16, 1986, the respondent lawyer filed a
motion for reconsideration stressing the fact that the
payment of the professional services was pursuant to a
contract which could no longer be disturbed or set aside
because it has already been implemented and had since
then become final. This motion was denied on October
3, 1986.
On November 15, 1986, the respondent lawyer filed a
motion to set aside the orders dated August 29, 1986
and October 3, 1986 reiterating his position that the
Orders of September 6, 1985 and October 21, 1985

have become final and are already implemented. The

respondent lawyer further asked for the modification of
the October 21, 1985 Order to reflect 60.32 square
meters instead of 31 square meters only since the
stipulation in the Additional Contract for Professional
Services entitled him to 60.32 square meters.
After the petitioners' Opposition to the said motion was
filed, the trial court, on February 26, 1987, rendered an
Order with the following dispositive portion:
WHEREFORE, this Court has no alternative but
to set aside its orders of 29 August 1986 and 3
October 1986 and declare its Orders of 19
September 1979 and 21 October 1985
irrevocably final and executory. (CA Decision, p.
5; Rollo, p. 34)
On Appeal, the Court of Appeals ruled in favor of the
respondent lawyer by dismissing the appeal and the
prayed for writ of preliminary injunction. Their
subsequent motion for reconsideration having been
denied', the petitioners filed the instant petition.
The petitioners fault the respondent Court for its failure
to exercise its inherent power to review and determine
the propriety of the stipulated attorney's fees in favor of

the respondent lawyer and accuse the respondent

lawyer of having committed an unfair advantage or legal
fraud by virtue of the Contract for Professional Services
devised by him after the trial court awarded him
attorney's fees for P1,000.00 only instead of respecting
the trust and confidence of the highest level reposed on
him considering the close blood and affinal relationship
between him and his clients.
The petitioners contend that under the award for
professional services, they may have won the case but
would lose the entire property won in litigation to their
uncle-lawyer. They would be totally deprived of their
house and lot and the recovered damages considering
that of the 271.5 square meters of the subject lot, the
respondent lawyer is claiming 121.5 square meters and
the remaining portion of 150 square meters would also
go to attorney's fees since the said portion pertains to
the lawyer's son by way of usufruct for ten (10) years.
The aforesaid submissions by the petitioners merit our
consideration.
It is a well-entrenched rule that attorney's fees may be
claimed in the very action in which the services in
question have been rendered or as an incident of the

main action. The fees may be properly adjudged after

such litigation is terminated and the subject of recovery
is at the disposition of the court. (see Camacho v. Court
of Appeals, 179 SCRA 604 [1989]; Quirante v.
Intermediate Appellate Court, 169 SCRA 769 [1989]).
It is an equally deeply-rooted rule that contingent fees
are not per se prohibited by law. They are sanctioned by
Canon 13 of the Canons of Professional Ethics and
Canon 20, Rule 20.01 of the recently promulgated Code
of Professional Responsibility. However, as we have
held in the case of Tanhueco v. De Dumo (172 SCRA
760 [1989]):
. . . When it is shown that a contract for a
contingent fee was obtained by undue influence
exercised by the attorney upon his client or by
any fraud or imposition, or that the compensation
is clearly excessive, the Court must and will
protect the aggrieved party. (Ulanday v. Manila
Railroad Co., 45 Phil. 540 [1923]; Grey v. Insular
Lumber Co., 97 Phil. 833 [1955]).
In the case at bar, the respondent lawyer caused the
annotation of his attorney's fees lien in the main action
for partition docketed as Civil Case No. Q-12254 on the

basis of a Contract for Professional Services dated

August 30, 1979. We find reversible error in the Court of
Appeals' holding that:
When the reasonableness of the appellee's lien
as attorney's fees over the properties of his
clients awarded to him by the trial court had not
been questioned by the client, and the said
orders had already become final and executory,
the same could no longer be disturbed, not even
by the court which rendered them (Taada v.
Court of Appeals, 139 SCRA 419). (CA Decision
p. 7; Rollo, p. 36)
On the contrary, we rule that the questioned Orders
dated September 19, 1979 and October 21, 1985 cannot
become final as they pertain to a contract for a
contingent fee which is always subject to the supervision
of the Court with regard to its reasonableness as
unequivocally provided in Section 13 of the Canons of
Professional Ethics which reads:
13. Contingent Fees.
A contract for a contingent fee, where sanctioned
by law, should be reasonable under all the
circumstances of the case including the risk and

uncertainty of the compensation, but

should alwaysbe subject to the supervision of a
court, as to its reasonableness. (Emphasis
supplied).
There is no dispute in the instant case that the attorney's
fees claimed by the respondent lawyer are in the nature
of a contingent fee. There is nothing irregular about the
execution of a written contract for professional services
even after the termination of a case as long as it is
based on a previous agreement on contingent fees by
the parties concerned and as long as the said contract
does not contain stipulations which are contrary to law,
good morals, good customs, public policy or public
order.
Although the Contract for Professional Services dated
August 30, 1979 was apparently voluntarily signed by
the late Aurelio Licudan for himself and on behalf of his
daughter, petitioner Cristina Licudan-Campos and by the
petitioner Wilfredo Licudan who both manifested in open
court that they gave their free and willing consent to the
said contract we cannot allow the said contract to stand
as the law between the parties involved considering that
the rule that in the presence of a contract for
professional services duly executed by the parties

thereto, the same becomes the law between the said

parties is not absolute but admits an exceptionthat the
stipulations therein are not contrary to law, good morals,
good customs, public policy or public order
(see Philippine American Life Insurance Company v.
Pineda, 175 SCRA 416 [1989]; Syjuco v. Court of
Appeals, 172 SCRA 111 [1989]).
Under Canon 20 of the Code of Professional
Responsibility, a lawyer shall charge only fair and
reasonable fees. In determining whether or not the
lawyer fees are fair and reasonable, Rule 20-01 of the
same Code enumerates the factors to be considered in
resolving the said issue. They are as follows:
a) The time spent and the extent of the services
rendered or required;
b) The novelty and difficulty of the questions
involved;
c) The importance of the subject matter;
d) The skill demanded;
e) The probability of losing other employment as
a result of acceptance of the proferred case;

f) The customary charges for similar services

and the schedule of fees of the IBP Chapter to
which he belongs;
g) The amount involved in the controversy and
the benefits resulting to the client from the
service;
h) The contingency or certainty of compensation;
i) The character of the employment, whether
occasional or established; and
j) The professional standing of the lawyer.
A similar provision is contained under Section 24, Rule
138 of the Revised Rules of Court which partly states
that:
Sec. 24. Compensation of attorneys; agreement
as to fees. An attorney shall be entitled to
have and recover from his client no more than a
reasonable compensation for his services, with a
view to the importance of the subject matter of
the controversy, the extent of the services
rendered, and the professional standing of the
attorney. . . . A written contract for services shall
control the amount to be paid therefor unless

found by the court to be unconscionable or

unreasonable.
All that the respondent lawyer handled for his deceased
sister and brother-in-law was a simple case of partition
which necessitated no special skill nor any unusual effort
in its preparation. The subsequent case for redemption
was admittedly but an offshot of the partition case.
Considering the close blood and affinal relationship
between the respondent lawyer and his clients, there is
no doubt that Atty. Domalanta took advantage of the
situation to promote his own personal interests instead
of protecting the legal interests of his clients. A careful
perusal of the provisions of the contract for professional
services in question readily shows that what the
petitioners won was a pyrrhic victory on account of the
fact that despite the successful turnout of the partition
case, they are now practically left with nothing of the
whole subject lot won in the litigation. This is because
aside from the 121.5 square meters awarded to Atty.
Domalanta as attorney's fees, the said contract for
professional services provides that the remaining portion
shall pertain to the respondent lawyer's son by way of
usufruct for ten (10) years. There should never be an
instance where a lawyer gets as attorney's fees the

entire property involved in the litigation. It is

unconscionable for the victor in litigation to lose
everything he won to the fees of his own lawyer.
The respondent lawyer's argument that it is not he but
his son Teodoro M. Domalanta, Jr. who is claiming the
usufructuary right over the remaining portion of the
subject lot is inaccurate. The records show that the
matter of usufruct is tied up with this case since the
basis for the said usufructuary right is the contract for
professional services the reasonableness of which is
being questioned in this petition. We find the ten-year
usufruct over the subject lot part and parcel of the
attorney's fees being claimed by the respondent lawyer.
In resolving the issue of reasonableness of the
attorney's fees, we uphold the time-honoured legal
maxim that a lawyer shall at all times uphold the integrity
and dignity of the legal profession so that his basic ideal
becomes one of rendering service and securing justice,
not money-making. For the worst scenario that can ever
happen to a client is to lose the litigated property to his
lawyer in whom an trust and confidence were bestowed
at the very inception of the legal controversy. We find the
Contract for Professional Services dated August 30,
1979, unconscionable and unreasonable. The amount of

P20,000.00 as attorney's fees, in lieu of the 121.5

square meters awarded to the respondent lawyer and
the ten-year usufructuary right over the remaining
portion of 150 square meters by the respondent lawyer's
son, is, in the opinion of this Court, commensurate to the
services rendered by Atty. Domalanta.
WHEREFORE, IN VIEW OF THE FOREGOING, the
instant petition is GRANTED. The Court of Appeals'
decision of September 12, 1989 is hereby REVERSED
and SET ASIDE. Atty. Domalanta is awarded reasonable
attorney's fees in the amount of P20,000.00.
SO ORDERED.
Fernan, C.J., Feliciano and Bidin, JJ., concur.