Problem Areas in Legal Ethics Unconscionable Attorneys Fees Quantum Meruit
In 1994, Isabel Sugar Company, Inc. (ISCI) sold a parcel of land to Urban Bank, Inc. (UBI). The land was sold for P240 million. As the land was occupied by unauthorized sub-tenants, ISCIs lawyer, Atty. Magdaleno Pea had to negotiate with them for them to relocate. But the said occupants, knowing that the land was already transferred to UBI, refused to recognize Pea. ISCI then communicated with UBI so that the latter may authorize Pea to negotiate with the tenants. Pea had to barricade himself inside the property to keep the tenants out who were forcing their way in especially so that the local cops are now sympathetic to them. Pea then had a phone conversation with Teodoro Borlongan, president of UBI, where Pea explained to him the situation. In said conversation, Pea asked authorization from Borlongan to negotiate with the tenants. Pea also asked that he be paid 10% of the purchase price or (P24 million) for his efforts. Borlongan agreed over the phone on the condition that Pea should be able to settle with the tenants otherwise he forfeits said 10% fee. Pea also asked that said authorization be put into writing. The authorization was put into writing but no mention was made as regards the 10% fee, (in short, that part was not written in the written authorization released by UBI). Pea was able to settle and relocate the tenants. After everything was settled and the property is now formally under the possession of UBI, Pea began sending demands to UBI for the latter to pay him the P24 million fee agreed upon, plus his expenses for the relocation of the tenants and the hiring of security guards or an additional P3 million. But UBI refused to make payment hence Pea filed a complaint for recovery against UBI. The trial court ruled in favor of Pea as it found there indeed was a contract of agency created between and UBI and that Pea is entitled to the 10% fee plus the expenses he incurred including litigation expenses. In sum, the trial court awarded him P28 million. The Court of Appeals however reversed the order of the trial court. It ruled that no agency was formed but for his legal services, Pea is entitled to payment but applying the principle of unjust enrichment and quantum meruit, Pea should only be paid P3 million. ISSUE: Whether or not Atty. Magdaleno Pea is entitled to receive the P28 million. HELD: No. The Supreme Court ruled that said amount is unconscionable. Pea is entitled to payment for compensation for services rendered as agent of Urban Bank, but on the basis of the principles of unjust enrichment and quantum meruit. In the first place, other than the self- serving testimony of Pea, there was no other evidence presented to support his claim that Borlongan agreed to pay him that 10% over the phone. The written authorization later issued merely confirms the power granted him to negotiate with the tenants. The written authorization proved the existence of agency but not the existence of any agreement as to how much Pea should be paid. Absent any such agreement, the principle of quantum meruit should be applied. In this case, Pea is entitled to receive what he merit for his services, or as much as he has earned. In dealing with the tenants, Pea didnt have to perform any extraordinary acts or legal maneuvering. Hence, he is entitled to receive P1.5 million for his legal services. He is also entitled to reimbursement for his expenses in securing the property, to wit, P1.5 million for the security guards he had to hire and another P1.5 million for settling and relocating the 23 tenants. Total of P4.5 million. The Supreme Court emphasized that lawyering is not a business; it is a profession in which duty to public service, not money, is the primary consideration.