VOL.

515,FEBRUARY12,2007
Rayosvs.Hernandez

517

G.R. No. 169079. February 12, 2007.

RAYOS, petitioner, vs. ATTY. PONCIANO
*

FRANCISCO
respondent.

G.

HERNANDEZ,

Administrative Law; Attorneys; 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.
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. Canon 16 of the Code of
Professional Responsibility provides as follows: CANON 16A lawyer shall hold in trust all
moneys and properties of his client that may come into his possession. Rule 16.01A
lawyer shall account for all money or property collected or received for or from the client.
Same; Same; A lawyers unjustified withholding of money belonging to his client, as in
this case, warrants the imposition of disciplinary action.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. 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 belong_______________
*

THIRD DIVISION.

518

SUPREMECOURTREPORTSANNOTATED

18
Rayosvs.Hernandez
ing to his client, as in this case, warrants the imposition of disciplinary action.
Same; Same; Attorney-Client Relationship; The relationship of attorney and client has
always been rightly regarded as one of special trust and confidencean attorney must
exercise the utmost good faith and fairness in all his relationship vis--vis his client .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
relationshipvis--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.
Attorneys; Attorneys Fees; 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.
We have held that lawyering is not a moneymaking venture and lawyers are not merchants.
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.
Same; Same; 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.A contingent fee arrangement
is valid in this jurisdiction and is generally recognized as valid and binding but must be laid
down in an express contract. 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 ifthe 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. Contracts of
519

VOL.515,FEBRUARY12,2007

51
9

Rayosvs.Hernandez
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. Contingent fee contracts
are subject to the supervision and close scrutiny of the court in order that clients may be
protected from unjust charges. 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.
Same; Same; We also take note respondents efforts in litigating petitioners case for a
long period of 15 yearsthe respondent took risk in representing petitioner on a contingent
fee basisin consideration of the foregoing, a fee of 35% of the amount awarded to petitioner
would be a fair compensation for respondents legal services.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.
Same; Disbarment; Disbarment, therefore, should never be decreed where any lesser
penalty, such as temporary suspension, would accomplish the end desired.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. The court should also exercise a sound discretion in determining
whether
520

SUPREMECOURTREPORTSANNOTATED

20
Rayosvs.Hernandez
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.
Disbarment, therefore, should never be decreed where any lesser penalty, such as
temporary suspension, would accomplish the end desired.

PETITION for review on certiorari of a resolution of the Integrated Bar of the

Philippines.
The facts are stated in the opinion of the Court.
Law Firm of Lapena, Villanueva, Manzano, Ordona and Associates for
petitioner.
Amador C. Dela Merced for respondent.
CHICO-NAZARIO, J.:
This is a Petition for Review 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
1

_______________
1

Rollo, pp. 9-24.

521

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Rayosvs.Hernandez

521

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 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.
On 30 April 1990, however, the complaint was dismissed again by the RTC for
lack of sufficient and credible evidence.
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:
2

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,
plaintiff-appellant, with legal interest from the date when this decision shall have become
final and executory, the following:
1. A.Actual damages of Five Hundred Twenty Thousand Pesos (P520,000.00);
2. B.Moral Damages of Five Hundred Thousand Pesos (P500,000.00); and
3. 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,
_______________
2

Records, Vol. III, p. 66.

Id., at p. 89.

Id., at p. 125.

522

522

SUPREMECOURTREPORTSANNOTATED
Rayosvs.Hernandez
attorneys fees in an amount equivalent to 15% of the total amount awarded.

The case was appealed to this Court, which affirmed the Court of Appeals
Decision. The Decision of the Supreme Court became final and executory on 4
August 1993.
Thus, a Writ of Execution 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 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. 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.
6

_______________
5

Id., at pp. 198-201.

Promulgated 21 May 1993.

Records, Vol. III, pp. 224-226.

Id., at pp. 243-245.

Id., at p. 239.

523

VOL.515,FEBRUARY12,2007
Rayosvs.Hernandez

523

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, 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; 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. Petitioner already received the
10

11

12

_______________
10

Records, Vol. I, pp. 45-49.

11

Records, Vol. III, p. 233.

12

Id., at p. 234.

524

524

SUPREMECOURTREPORTSANNOTATED
Rayosvs.Hernandez

amount of P502,838.79 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, the Court referred the case to the
Commission on Bar Discipline of the IBP for investigation, report and
recommendation.
13

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, 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:
14

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.
_______________
13

Records, Vol. I, p. 75.

14

Rollo, pp. 28-34.

15

Id., at p. 27.

525

VOL.515,FEBRUARY12,2007
Rayosvs.Hernandez

525

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. Canon 16 of
the Code of Professional Responsibility provides as follows:
16

CANON 16A lawyer shall hold in trust all moneys and properties of his client that may
come into his possession.
Rule 16.01A 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. 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.
17

18

_______________

16

Aya v. Bigornia, 57 Phil. 8, 11 (1932).

17

Cabigao v. Rodrigo, 57 Phil. 20, 23 (1932).

18

Sencio v. Atty. Calvadores, 443 Phil. 490, 494; 395 SCRA 393, 396 (2003); Reyes v. Maglaya, 313 Phil.

1, 7; 243 SCRA 214, 219 (1995).

526

526

SUPREMECOURTREPORTSANNOTATED
Rayosvs.Hernandez

It is true that under Canon 16.03 of the Code of Professional Responsibility, an

attorney has the following rights;

Rule 16.03A 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. 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
19

_______________
19

Tanhueco v. De Dumo, A.C. No. 1437, 25 April 1989, 172 SCRA 760, 767.

527

VOL.515,FEBRUARY12,2007
Rayosvs.Hernandez

527

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. 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.
20

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. 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.
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
22

23

_______________
20

Canon 1, CANONS OF PROFESSIONAL ETHICS.

21

Metropolitan Bank & Trust Company v. Court of Appeals , G.R. Nos. 86100-03, 23 January 1990, 181

SCRA 367, 377, citing Canlas v. Court of Appeals, G.R. No. L-77691, 8 August 1988, 164 SCRA 160, 173174.
22

Pineda v. Atty. De Jesus, G.R. No. 155224, 23 August 2006, 499 SCRA 608.

23

Sumaoang v. Judge, RTC, Br. XXXI, Guimba, Nueva Ecija , G.R. No. 78173, 26 October 1992, 215

SCRA 136, 143.

528

528

SUPREMECOURTREPORTSANNOTATED
Rayosvs.Hernandez

(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. 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. 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 ika-6 ng Oktubre 1991.
(SGD)PONCIANOG.HERNANDEZ
(SGD)FRANCISCORAYOS
Abogado
MayUsapin
24

A contingent fee arrangement is valid in this jurisdiction and is generally

recognized as valid and binding but must be laid down in an express contract. The
amount of contingent fee agreed upon by the parties is subject to the stipulation
25

26

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
_______________
24

Records, Vol. I, p. 53.

25

Law Firm of Raymundo A. Armovit v. Court of Appeals, G.R. No. 90983, 27 September 1991, 202

SCRA 16, 24.

26

Corpus v. Court of Appeals, G.R. No. L-40424, 30 June 1980, 98 SCRA 424, 441.

529

VOL.515,FEBRUARY12,2007
Rayosvs.Hernandez

529

may get nothing if the suit fails. 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.
Contingent fee contracts are subject to the supervision and close scrutiny of the
court in order that clients may be protected from unjust charges. 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:
27

28

29

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. (Emphasis supplied.)
_______________
27

Sesbreo v. Court of Appeals , 314 Phil. 884, 893; 245 SCRA 30, 36 (1995).

28

Director of Lands v. Ababa, G.R. No. L-26096, 27 February 1979, 88 SCRA 513, 524.

29

Licudan v. Court of Appeals, G.R. No. 91958, 24 January 1991, 193 SCRA 293, 300; Director of Lands

v. Ababa, Id., at p. 525.

530

530

SUPREMECOURTREPORTSANNOTATED
Rayosvs.Hernandez

The reduction of unreasonable attorneys fees is within the regulatory powers of the
courts. 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.
30

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.
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 stipu32

_______________
30

Radiowealth Finance Co., Inc. v. International Corporate Bank, G.R. Nos. 77042-43, 28 February

1990, 182 SCRA 862, 868.

31

Felices v. Madrilejos, 51 Phil. 24, 33 (1927); Jayme v. Bualan, 58 Phil. 422, 424 (1933).

32

Sesbreo v. Court of Appeals, supra note 27 at p. 894.

531

VOL.515,FEBRUARY12,2007
Rayosvs.Hernandez

531

lated amount unreasonable or unconscionable. 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. 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; and (10) the financial capacity and
economic status of the client have to be taken into account in fixing the
reasonableness of the fee.
Rule 20.1, Canon 20 of the Code of Professional Responsibility enumerates the
following factors which should guide a lawyer in determining his fees:
33

34

35

36

_______________
33

Rule 138, Section 24, REVISED RULES OF COURT; Francisco v. Matias, 119 Phil. 351, 358; 10

SCRA 89, 95 (1964); Lopez v. Pan American World Airways, 123 Phil. 256, 271; 16 SCRA 431, 444 (1966).
34

Sesbreo v. Court of Appeals, supra note 27 at p. 894.

35

Research and Services Realty, Inc. v. Court of Appeals, 334 Phil. 652, 668; 266 SCRA 731, 746 (1997).

36

Taganas v. National Labor Relations Commission, G.R. No. 118746, 7 September 1995, 248 SCRA

133, 137.
532

532

SUPREMECOURTREPORTSANNOTATED
Rayosvs.Hernandez

1. (a)The time spent and the extent of the services rendered or required;
2. (b)The novelty and difficulty of the questions involved;
3. (c)The importance of the subject matter;
4. (d)The skill demanded;
5. (e)The probability of losing other employment as a result of acceptance of the
proffered case;
6. (f)The customary charges for similar services and the schedule of fees of the
IBP Chapter to which he belongs;
7. (g)The amount involved in the controversy and the benefits resulting to the
client from the service;
8. (h)The contingency or certainty of compensation;
9. (i)The character of the employment, whether occasional or established; and
10. (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
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Rayosvs.Hernandez

533

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, especially an aged and necessitous
client, 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, the rate of attorneys fees allowed was 25%; in Law Firm of Raymundo
A. Armovit v. Court of Appeals, the rate allowed was 20%; in Polytrade Corporation
v. Blanco, 25%; in Santiago v. Dimayuga, 20%; in Cosmopolitan Insurance Co., Inc.
v. Reyes, 15%; in Reyes v. Court of Appeals, 15%; and in Social Security
Commission v. Almeda, 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 respon37

38

39

40

41

42

43

44

45

_______________
37

Tanhueco v. De Dumo, supra note 19 at p. 772.

38

Article 24, CIVIL CODE OF THE PHILIPPINES.

39

131 Phil. 374, 386; 22 SCRA 1266, 1277 (1968).

40

Supra note 25 at p. 25.

41

G.R. No. L-27033, 31 October 1969, 30 SCRA 187, 193.

42

113 Phil. 902, 905; 3 SCRA 919, 922 (1961).

43

122 Phil. 648, 651; 15 SCRA 258, 261 (1965).

44

202 Phil. 172, 173; 116 SCRA 607, 609 (1982).

45

G.R. No. L-75428, 14 December 1988, 168 SCRA 474, 481.

534

534

SUPREMECOURTREPORTSANNOTATED
Rayosvs.Hernandez

dents 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.
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. Disbarment, therefore, should never be decreed
where any lesser penalty, such as temporary suspension, would accomplish the end
desired.
In the case of Schulz v. Atty. Flores, 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
46

47

48

49

_______________
46

Po Cham v. Pizarro, A.C. No. 5499, 16 August 2005, 467 SCRA 1, 13.

47

Pineda, Ernesto, Legal and Judicial Ethics (1994 Edition), p. 280.

48

Lim v. Montano, A.C. No. 5653, 27 February 2006, 483 SCRA 192, 202.

49

462 Phil. 601; 417 SCRA 519 (2003).

535

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Rayosvs.Hernandez

535

fees. Also in the case of Tanhueco v. Atty. De Dumo, 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.
WHEREFORE the Court Resolves that:
50

1. 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. 2.Respondent is entitled to attorneys fees in the amount equivalent
to THIRTY-FIVE PERCENT (35%) of the total amount awarded to
petitioner in Civil Case No. SM-951; and
51

3. 3.Respondent is to return the amount of Two Hundred Ninety Thousand One

Hundred Nine Pesos and Twenty-One Centavos (P290,109.21), 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.
52

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.
_______________
50

Supra note 19.

51

P1,060,800.00 as damages and P159,120.00 (15% of P1,060,800.00) as attorneys fees or a total of

P1,219,920.00.
52

35% of P1,219,920.00 is P426,972.00. Since respondent retained P557,961.21 and P159,120.00 and

35% of P1,219,920.00 is P 426,972.00, respondent will return the difference of P290,109.21 to petitioner.
The amount of P557,961.21 and P159,120.00 retained by respondent is actually 59% of the amount due to
petitioner in Civil Case No. 951.
536

536

SUPREMECOURTREPORTSANNOTATED
Rayosvs.Hernandez

SO ORDERED.
Ynares-Santiago (Chairp erson), Austria-Martinezand Callejo, Sr., JJ.,
concur.
Nachura, J., On Leave.
Respondent suspended from practice of law for six (6) months for violation of
attorneys oath and of serious professional misconduct, with warning against
repetition of similar offense; respondent entitled to attorneys fees equivalent to 35%
of total amount awarded; and respondent ordered to return P290,109.21.
Notes.Disbarment should not be decreed where any punishment less severe
such as reprimand, suspension, or finewould accomplish the end desired. (Suzuki
vs. Tiamson, 471 SCRA 129 [2005])
Respondents failure to return the money to complainants upon demand gave rise
to the presumption that he misappropriated it in violation of the trust reposed on
him. (Aldovino vs. Pujalte, Jr., 423 SCRA 135 [2004])
In the course of his professional relationship with his client, a lawyer may receive
money or property for or from his clienthe shall hold such property in trust, and
he is under obligation to make an accounting thereof as required by rule 16.01 of the
Code of Professional Responsibility. (Buado vs. Layag, 436 SCRA 159 [2004])
o0o
537

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