A.C. No.

5359 March 10, 2014

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

PICHON,Complainant,
vs.
ATTY. ARNULFO M. AGLERON, SR., Respondent.

RESOLUTION

MENDOZA, J.:

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

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

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

In the Report and Recommendation,4 dated January 12, 2012, the Investigating Commissioner found
Atty. Agleron to have violated the Code of Professional Responsibility when he neglected a legal
matter entrusted to him, and recommended that he be suspended from the practice of law for a
period of four (4) months.

In its April 16, 2013 Resolution,5 the Integrated Bar of the Philippines (IBP) Board of Governors
adopted and approved the report and recommendation of the Investigating Commissioner with
modification that Atty. Agleron be suspended from the practice of law for a period of only one (1)
month.

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

Atty. Agleron violated Rule 18.03 of the Code of Professional Responsibility, which provides that:

Rule 18.03-A lawyer shall not neglect a legal matter entrusted to him, and his negligence in
connection therewith shall render him liable.
Once a lawyer takes up the cause of his client, he is duty bound to serve his client with competence,
and to attend to his client’s cause with diligence, care and devotion regardless of whether he
accepts it for a fee or for free.6 He owes fidelity to such cause and must always be mindful of the
trust and confidence reposed on him.7

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

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

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

Let a copy of this resolution be furnished the Bar Confidant to be included in the records of the
respondent; the Integrated Bar of the Philippines for distribution to all its chapters; and the Office of
the Court Administrator for dissemination to all courts throughout the country.

SO ORDERED.

JOSE CATRAL MENDOZA

Associate Justice

WE CONCUR:

FIRST DIVISION

A.C. No. 9091 December 11, 2013

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

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

RESOLUTION

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

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

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

Complainants subsequently agreed to settle with Fevidal for the amount of ₱10,000,000, but the
latter again failed to pay them.7

Complainants engaged the professional services of respondent for the purpose of assisting them in
the preparation of a settlement agreement.8

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

A certain Luzviminda Andrade (Andrade) was tasked to submit the Affidavit of Adverse Claim to the
Register of Deeds of Bataan.11

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

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

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

Respondent filed a Manifestation and Opposition15 dated 20 July 2007 before the RTC, alleging that
the termination of his services and withdrawal of the complaint had been done with the intent of
defrauding counsel. On the same date, he filed a Motion for Recording of Attorney’s Charging Lien in
the Records of the Above-Captioned Cases.16

When the RTC granted the withdrawal of the complaint,17 he filed a Manifestation and Motion for
Reconsideration.18
After an exchange of pleadings between respondent and Fevidal, with the latter denying the former’s
allegation of collusion,19 complainants sought the suspension/disbarment of respondent through a
Complaint20 filed before the Integrated Bar of the Philippines (IBP) on 14 November 2007.
Complainants alleged that they were uneducated and underprivileged, and could not taste the fruits
of their properties because the disposition thereof was "now clothed with legal problems" brought
about by respondent.21

In their complaint, they alleged that respondent had violated Canons

1.01,22 1.03,23 1.04,24 12.02,25 15.05,26 18.04,27and 20.0428 of the Code of Professional Responsibility.
On 14 August 2008, the IBP Commission on Bar Discipline adopted and approved the Report and
Recommendation29 of the investigating commissioner. It suspended respondent from the practice of
law for a period of one year for entering into a champertous agreement.30

On 26 June 2011, it denied his motion for reconsideration. On 26 November 2012, this Court noted
the Indorsement of the IBP Commission on Bar Discipline, as well as respondent’s second motion
for reconsideration. We find that respondent did not violate any of the canons cited by complainants.
In fact, we have reason to believe that complainants only filed the instant complaint against him at
the prodding of Fevidal.

Respondent cannot be faulted for advising complainants to file an action against Fevidal to recover
their properties, instead of agreeing to a settlement of ₱10,000,000 – a measly amount compared to
that in the original agreement, under which Fevidal undertook to pay complainants the amount of
₱35,000,000. Lawyers have a sworn duty and responsibility to protect the interest of any prospective
client and pursue the ends of justice.31

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

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

In any case, an attorney is entitled to be paid reasonable compensation for his services.36

That he had pursued its payment in the appropriate venue does not make him liable for disciplinary
action. Notwithstanding the foregoing, respondent is not without fault. Indeed, we find that the
1âwphi 1

contract for legal services he has executed with complainants is in the nature of a champertous
contract – an agreement whereby an attorney undertakes to pay the expenses of the proceedings to
enforce the client’s rights in exchange for some bargain to have a part of the thing in dispute.37

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

They are also contrary to Canon 16.04 of the Code of Professional Responsibility, which states that
lawyers shall not lend money to a client, except when in the interest of justice, they have to advance
necessary expenses in a legal matter they are handling for the client. A reading of the contract for
legal services40 shows that respondent agreed to pay for at least half of the expense for the docket
fees. He also paid for the whole amount needed for the recording of complainants’ adverse claim.
While lawyers may advance the necessary expenses in a legal matter they are handling in order to
safeguard their client’s rights, it is imperative that the advances be subject to reimbrusement.41 The
purpose is to avoid a situation in which a lawyer acquires a personal stake in the clients cause.
Regrettably, nowhere in the contract for legal services is it stated that the expenses of litigation
advanced by respondents shall be subject to reimbursement by complainants.

In addition, respondent gave various amounts as cash advances (bali), gasoline and transportation
allowance to them for the duration of their attorney-client relationship. In fact, he admits that the cash
advances were in the nature of personal loans that he extended to complainants.42

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

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

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

SO ORDERED.

MARIA LOURDES P.A. SERENO

Chief Justice, Chairperson

WE CONCUR:

September 2, 2015
G.R. No. 191641

EDMUNDO NAVAREZ, Petitioner,

vs.
ATTY. MANUEL ABROGAR III, Respondent.

DECISION

BRION, J.:

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

ANTECEDENTS

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

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

Effective Date: June 2007

Acceptance Fee: P100,000.00 in an installment basis

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

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

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

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

On September 2, 2008, Navarez filed a Manifestation with the RTC that he was terminating the
services of Atty. Abrogar. On the same day, Navarez also caused the delivery to Atty. Abrogar of a
check in the amount of P220,107.51 – allegedly equivalent to one half of 7.5% of petitioner’s
P11,200,000.00 share in the estate of his deceased wife less Atty. Abrogar’s cash advances.
On September 9, 2008, Atty. Abrogar manifested that with respect to the petitioner’s one-half (½)
share in the conjugal partnership, the RTC had already resolved the matter favorably because it had
issued a release order for the petitioner to withdraw the amount. Atty. Abrogar further declared that
the Firm was withdrawing as counsel effective upon the appointment of an Administrator of the
estate from the remaining proceedings for the settlement of the estate of Avelina Quesada-Navarez.

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

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

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

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

WHEREFORE, premises considered, it is hereby ordered:

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

2. That oppositor Edmundo Navarez pay the amount of 7.5% of P11,196,675.05 to Manuel
Abrogar III;

3. That the oppositor pay the administrative costs/expenses of P103,000.00 to the movant;
and

4. That the prayers for P100,000.00 as exemplary damages, P200,000.00 as moral damages
and for writ of preliminary attachment be denied.

SO ORDERED.

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

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

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

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

The petitioner moved for reconsideration which the CA denied in a Resolution dated March 12,
2010.
On April 6, 2010, and April 26, 2010, the petitioner filed his first and second motions for extension of
time to file his petition for review. This Court granted both motions for extension totaling thirty (30)
days (or until May 5, 2010) in the Resolution dated July 26, 2010.

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

THE PETITION

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

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

OUR RULING

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

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

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

We find merit in the petition.

An attorney has a right to be paid a fair and reasonable compensation for the services he has
rendered to a client. As a security for his fees, Rule 138, Section 37 of the Rules of Court grants an
attorney an equitable right to a charging lien over money judgments he has secured in litigation for
his client. For the lien to be enforceable, the attorney must have caused: (1) a statement of his claim
to be entered in the record of the case while the court has jurisdiction over the case and before the
full satisfaction of the judgment;9 and (2) a written notice of his claim to be delivered to his client and
to the adverse party.
However, the filing of the statement of the claim does not, by itself, legally determine the amount of
the claim when the client disputes the amount or claims that the amount has been paid.10 In these
cases, both the attorney and the client have a right to be heard and to present evidence in support of
their claims.11 The proper procedure for the court is to ascertain the proper amount of the lien in a full
dress trial before it orders the registration of the charging lien.12 The necessity of a hearing is obvious
and beyond dispute.13

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

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

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

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

Under this situation, the RTC had not yet acquired jurisdiction to enforce the charging lien because
the docket fees had not been paid. The payment of docket fees is mandatory in all actions, whether
separate or an offshoot of a pending proceeding. In Lacson v. Reyes,16 this Court granted certiorari
and annulled the decision of the trial court granting a "motion for attorney’s fees" because the
attorney did not pay the docket fees. Docket fees must be paid before a court can lawfully act on a
case and grant relief. Therefore, the RTC acted without or in excess of its jurisdiction when it
ordered the payment of the attorney’s fees.

Lastly, the enforcement of a charging lien can only take place after a final money judgment has been
rendered in favor of the client.17 The lien only attaches to the money judgment due to the client and is
contingent on the final determination of the main case. Until the money judgment has become final
and executory, enforcement of the lien is premature.

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

The RTC’s issuance of a writ of execution before the lapse of the reglementary period to appeal from
its order is likewise premature. The Order of the RTC dated January 21, 2009, is an order that
1âw phi1

finally disposes of the issue on the amount of attorney’s fees Atty. Abrogar is entitled to. The
execution of a final order issues as a matter of right upon the expiration of the reglementary period if
no appeal has been perfected.18 Under Rule 39, Section 2 of the Rules of Court, discretionary
execution can only be made before the expiration of the reglementary period upon a motion of the
prevailing party with notice to the adverse party. Discretionary execution may only issue upon good
reasons to be stated in a special order after due hearing.19

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

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

As our last word, this decision should not be construed as imposing unnecessary burden on the
lawyer in collecting his just fees. But, as in the exercise of any other right conferred by law, the
lawyer - and the courts - must avail of the proper legal remedies and observe the procedural rules to
prevent the possibility, or even just the perception, of abuse or prejudice.20

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

SO ORDERED.

ARTURO D. BRION
Associate Justice

WE CONCUR:

G.R. No. 185544 January 13, 2015

THE LAW FIRM OF LAGUESMA MAGSALIN CONSULTA AND GASTARDO, Petitioner,

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

DECISION

LEONEN, J.:

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

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

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

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

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

On December 4, 2001, the Office of the Government Corporate Counsel denied the request.8 Clark
Development Corporation then filed a request for reconsideration.9

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

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

On June 28, 2002, Clark Development Corporation, through its Board of Directors, approved
Laguesma Magsalin Consulta and Gastardo’s engagement as private counsel.15 In 2003, it also
approved the assignment of additional labor cases to the law firm.16

On July 13, 2005, Clark Development Corporation requested the Commission on Audit for
concurrence of the retainership contract it executed with Laguesma Magsalin Consulta and
Gastardo.17 According to the law firm, it was only at this pointwhen Clark Development Corporation
informed them that the Commission on Audit required the clearance and approval of the Office of the
Government Corporate Counsel before it could approve the release of Clark Development
Corporation’s funds to settle the legal fees due to the law firm.18

On August 5, 2005, State Auditor IVElvira G. Punzalan informed Clark Development Corporation
that itsrequest for clearance could not be acted upon until the Office of the Government Corporate
Counsel approves the retainership contract with finality.19

On August 10, 2005, Clark Development Corporation sent a letterrequest to the Office of the
Government Corporate Counsel for the final approval of the retainership contract, in compliance with
the Commission on Audit’s requirements.20

On December 22, 2005, GovernmentCorporate Counsel Agnes VST Devanadera (Government

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

On December 27, 2005, Clark Development Corporation relayed Government Corporate Counsel
Devanadera’s letter to the Commission’s Audit Team Leader, highlighting the portion on the approval
of payment to Laguesma Magsalin Consulta and Gastardo on the basis of quantum meruit.23

On November 9, 2006, the Commission on Audit’s Office of the General Counsel, Legal and
Adjudication Sector issued a "Third Indorsement"24 denying Clark Development Corporation’s
request for clearance, citing its failure to secure a prior written concurrence of the Commission on
Audit and the approval with finality of the Office of the Government Corporate Counsel.25 It also
stated that its request for concurrence was made three (3) years after engaging the legal services of
the law firm.26

On December 4, 2006, Laguesma Magsalin Consulta and Gastardo appealed the "Third
Indorsement"to the Commission on Audit. On December 12, 2006, Clark Development Corporation
also filed a motion for reconsideration.27

On September 27, 2007, the Commission on Audit rendered the assailed decision denying the
appeal and motion for reconsideration. It ruled that Clark Development Corporation violated
Commission on Audit Circular No. 98-002 dated June 9, 1998 and Office of the President
Memorandum Circular No. 9 dated August 27, 1998 whenit engaged the legal services of Laguesma
Magsalin Consulta and Gastardo without the final approval and written concurrence of the
Commission on Audit.28 It also ruled that it was not the government’s responsibility to pay the legal
fees already incurred by Clark Development Corporation, but rather by the government officials who
violated the regulations on the matter.29

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

Laguesma Magsalin Consulta and Gastardo filed this petition for certiorari on December 19,
2008.32 Respondents, through the Office of the Solicitor General, filed their comment33 dated May 7,
2009. The reply34 was filed on September 1, 2009.

The primordial issue to be resolved by this court is whether the Commission on Audit erred in
disallowing the payment of the legal fees to Laguesma Magsalin Consulta and Gastardo as Clark
Development Corporation’s private counsel.

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

Procedural:

1. Whether the petition was filed on time; and

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

Substantive:

1. Whether the Commission on Audit erred in denying Clark Development Corporation’s

requestfor clearance in engaging petitioner as private counsel;

2. Whether the Commission on Audit correctly cited Polloso v. Gangan35 and PHIVIDEC
Industrial Authority v. Capitol Steel Corporation36 in support of its denial; and

3. Whether the Commission on Audit erred in ruling that petitioner should not be paid on the
basis of quantum meruitand that any payment for its legal services should be the personal
liability of Clark Development Corporation’s officials.

Petitioner argues that Pollosoand PHIVIDEC are not applicable to the circumstances at hand
because in both cases, the government agency concerned had failed to secure the approval of both
the Office of the Government Corporate Counsel and the Commission on Audit.37 Petitioner asserts
that it was able to secure authorization from the Office of the Government Corporate Counsel prior to
rendering services to Clark Development Corporation for all but two (2) of the labor cases assigned
to it.38 It argues that the May 20, 2002 letter from Government Corporate Counsel Valdez was
tantamount to a grant of authorization since it granted Clark Development Corporation’s request for
reconsideration.39

In their comment,40 respondents argue that petitioner is not a real party-in-interest to the case.41 They
argue that it is Clark Development Corporation, and not petitioner, who isa real party-in-interest
since the subject of the assailed decision was the denial of the corporation’s request for clearance.42

Respondents also allege that it was only on July 13, 2005, or three (3) years after the hiring of
petitioner, when Clark Development Corporation requested the Commission on Audit’s concurrence
of the retainership contract between Clark Development Corporation and petitioner.43 They argue that
the retainership contract was not approved with finality by the Office of the Government Corporate
Counsel.44 Further, Polloso and PHIVIDE Care applicable to this case since both cases involve the
"indispensability of [the] prior written concurrence of both [the Office of the Government Corporate
Counsel] and the [Commission on Audit] before any [government-owned and controlled corporation]
can hire an external counsel."45

In its reply,46 petitioner argues that it is a real party-in-interest since "it rendered its services to [Clark
Development Corporation], which ultimately redounded to the benefit of the Republic"47 and that "it
deserves to be paid what is its due as a matter of right."48 Petitioner also reiterates its argument that
Polloso and PHIVIDE Care not applicable to this case since the factual antecedents are not the
same.49

The petition is denied.

The petition was filed out of time

Petitioner states that it filed this petition under Rule XI, Section 1 of the 1997 Revised Rules of
Procedure of the Commission on Audit.50 The rule states:

RULE XI
 JUDICIAL REVIEW SECTION

1. Petition for Certiorari.— Any decision, order or resolution of the Commission may be brought to
the Supreme Court on certiorari by the aggrieved party within thirty (30) days from receipt of a copy
thereof in the manner provided by law, the Rules of Court51 and these Rules.

This rule is based on Article IX-A, Section 7 of the Constitution, which states:

Section 7. Each Commission shall decide by a majority vote of all its Members, any case or matter
brought before it within sixty days from the date of its submission for decision or resolution. A case
or matter is deemed submitted for decision or resolution upon the filing of the last pleading, brief, or
memorandum required by the rules of the Commission or by the Commission itself. Unless
otherwise provided by this Constitution or by law, any decision, order, or ruling of each Commission
may be brought to the Supreme Court on certiorari by the aggrieved party within thirty days from
receipt of a copy thereof. (Emphasis supplied)

Ordinarily, a petition for certiorari under Rule 65 of the Rules of Court has a reglementary period of
60 days from receipt of denial of the motion for reconsideration. The Constitution, however, specifies
that the reglementary period for assailing the decisions, orders, or rulings of the constitutional
commissions is thirty (30) days from receipt of the decision, order, or ruling. For this reason, a
separate rule was enacted in the Rules of Court.

Rule 64 of the Rules of Civil Procedure provides the guidelines for filing a petition for certiorari under
this rule. Section 2 of the rule specifies that "[a] judgment or final order or resolution of the
Commission on Elections and the Commission on Audit may be brought by the aggrieved party to
the Supreme Court on certiorari under Rule 65, except as hereinafter provided."

The phrase, "except as hereinafter provided," specifies that any petition for certiorari filed under this
rule follows the same requisites as those of Rule 65 except for certain provisions found only in Rule
64. One of these provisions concerns the time given to file the petition.

Section 3 of Rule 64 of the Rules of Civil Procedure states:

SEC. 3. Time to file petition. — The petition shall be filed within thirty (30) days from notice of the
judgment or final order or resolution sought to be reviewed. The filing of a motion for new trial or
reconsideration of said judgment or final order or resolution, if allowed under the procedural rules of
the Commission concerned, shall interrupt the period herein fixed. If the motion is denied, the
aggrieved party may file the petition within the remaining period, but which shall not be less than five
(5) days in any event, reckoned from notice of denial.(Emphasis supplied)

Under this rule, a party may file a petition for review on certiorari within 30 days from notice of the
judgment being assailed. The reglementary period includes the time taken to file the motion for
reconsideration and is only interrupted once the motion is filed. If the motion is denied, the party may
filethe petition only within the period remaining from the notice of judgment.

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

Rule 64, however, cannot simply be equated to Rule 65 even if it expressly refers to the latter rule.
They exist as separate rules for substantive reasons as discussed below. Procedurally, the most
patent difference between the two – i.e., the exception that Section 2, Rule 64 refers to – is Section
3 which provides for a special period for the filing of petitions for certiorari from decisions or rulings
of the COMELEC en banc. The period is 30 days from notice of the decision or ruling (instead of the
60 days that Rule 65 provides), with the intervening period used for the filing of any motion for
reconsideration deductible from the originally granted 30 days (instead of the fresh period of 60 days
that Rule 65 provides).53 (Emphasis supplied)

In this case, petitioner received the decision of the Commission on Audit on October 16, 2007.54 It
filed a motion for reconsideration on November 6, 2007,55 or after 21 days. It received notice of the
denial of its motion on November 20, 2008.56 The receipt of this notice gave petitioner nine (9) days,
or until November 29, 2008, to file a petition for certiorari. Since November 29, 2008 fell on a
Saturday, petitioner could still have filed on the next working day, or on December 1, 2008. It,
however, filed the petition on December 19, 2008,57 which was well beyond the reglementary period.

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

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

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

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

Petitioner is a real party-in-interest

Respondents argue that it is Clark Development Corporation, and not petitioner, which is the real
party-in-interest since the subject of the assailed decision and resolution was the corporation’s
request for clearance to pay petitioner its legal fees. Respondents argue that any interest petitioner
may have in the case is merely incidental.60This is erroneous.

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

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

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

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

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

A necessary party is defined as "onewho is not indispensable but who ought to be joined as a party if
complete relief is to be accorded as to those already parties, or for a complete determination or
settlement of the claim subject of the action."65

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

The Commission on Audit did not

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

Book IV, Title III, Chapter 3, Section 10 of the Administrative Code of 1987 provides:

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

The Office of the Government Corporate Counsel is mandated by law to provide legal services to
government-owned and controlled corporations such as Clark Development Corporation.

As a general rule, government-owned and controlled corporations are not allowed to engage the
legal services of private counsels. However, both respondent and the Office of the President have
made issuances that had the effect of providing certain exceptions to the general rule, thus: Book IV,
Title III, Chapter 3, Section 10 of Executive Order No. 292, otherwise known as the Administrative
Code of 1987, provides that the Office of the Government Corporate Counsel (OGCC) shall act as
the principal law office of all GOCCs, their subsidiaries, other corporate off-springs, and government
acquired asset corporations. Administrative Order No. 130, issued by the Office of the President on
19 May 1994, delineating the functions and responsibilities of the OSG and the OGCC, clarifies that
all legal matters pertaining to GOCCs, their subsidiaries, other corporate off[-]springs, and
government acquired asset corporations shall be exclusively referred to and handled by the OGCC,
unless their respective charters expressly name the OSG as their legal counsel. Nonetheless, the
GOCC may hire the services of a private counsel in exceptional cases with the written conformity
and acquiescence of the Government Corporate Counsel, and with the concurrence of the
Commission on Audit (COA).66 (Emphasis supplied)

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

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

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

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

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

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

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

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

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

SECTION 3. GOCCs are likewise enjoined to refrain from hiring private lawyers or law firms to
handle their cases and legal matters. But in exceptional cases, the written conformity and
acquiescence of the Solicitor General or the Government Corporate Counsel, as the case may be,
and the written concurrence of the Commission on Audit shall first be secured before the hiring or
employment of a private lawyer or law firm. (Emphasis supplied)
According to these rules and regulations, the general rule is that government-owned and controlled
corporations must refer all their legal matters to the Office of the Government Corporate Counsel. It
is only in "extraordinary or exceptional circumstances" or "exceptional cases" that it is allowed to
engage the services of private counsels.

Petitioner claims that it was hired by Clark Development Corporation due to "numerous labor cases
which need urgent attention[.]"68 In its request for reconsideration to the Office of the Government
Corporate Counsel, Clark Development Corporation claims that it was obtaining the services of
petitioner "acting through Atty. Ariston Vicente R. Quirolgico, known expert in the field of labor law
and relations."69

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

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

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

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

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

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

Upon Clark Development Corporation’s failure to submit the retainership contract, the Office of the
Government Corporate Counsel denied Clark Development Corporation’s request for final approval
of its legal services contracts, including that of petitioner. In the letter72 dated December 22, 2005,
Government Corporate Counsel Devanadera informed Clark Development Corporation that:

[i]t appears, though, that our Pro-Forma Retainership Agreement was not followed and CDC merely
adopted the proposal of aforesaid retainers/consultants. Also, this Office was never informed that
CDC agreed on payment of retainer’s fee on a per case basis.73

In view of Clark Development Corporation’s failure to secure the final conformity and acquiescence
of the Office of the Government Corporate Counsel, its retainership contract with petitioner could not
have been considered as authorized.
The concurrence of respondents was also not secured by Clark Development Corporation priorto
hiring petitioner’s services. The corporation only wrote a letter-request to respondents three (3)
years after it had engaged the services of petitioner as private legal counsel.

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

Respondents, therefore, correctly denied Clark Development Corporation’s request for clearance in
the disbursement of funds to pay petitioner its standing legal fees.

Polloso v. Ganganand PHIVIDEC

Industrial Authority v. Capitol Steel
Corporationapply in this case

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

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

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

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

In PHIVIDEC, this court found the engagement by PHIVIDEC Industrial Authority, a government-
owned and controlled corporation, of Atty. Cesilo Adaza’s legal services to be unauthorized for the
corporation’s failure to secure the written conformity of the Office of the Government Corporate
Counsel and the Commission on Audit.79Citing the provisions of Office of the President Memorandum
Circular No. 9, this court ruled that:
[i]t was only with the enactment of Memorandum Circular No. 9 in 1998 that an exception to the
general prohibition was allowed for the first time since P.D. No. 1415 was enacted in 1978. However,
indispensable conditions precedent were imposed before any hiring of private lawyer could be
effected. First, private counsel can be hired only in exceptional cases. Second, the GOCC must first
secure the written conformity and acquiescence of the Solicitor General or the Government
Corporate Counsel, as the case may be, before any hiring can be done. And third, the written
concurrence of the COA must also be secured prior to the hiring.80 (Emphasis supplied)

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

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

Petitioner fails to understand that Commission on Audit Circular No. 86-255 requires not only the
conformity and acquiescence of the Office of the Solicitor General or Office of the Government
Corporate Counsel but also the written conformity of the Commission on Audit. The hiring of private
counsel becomes unauthorized if it is only the Office of the Government Corporate Counsel that
gives its conformity. The rules and jurisprudence expressly require that the government-owned and
controlled corporation concerned must also secure the concurrence of respondents.

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

The Commission on Audit did not

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

When Government Corporate Counsel Devanadera denied Clark Development Corporation’s

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

Respondents disallowed Clark Development Corporation from paying petitioner on this basis as the
contract between them was executed "in clear violation of the provisions of COA Circular No. 86-255
and OP Memorandum Circular No. 9[.]"84 It then ruled that the retainership contract between them
should be deemed a private contract for which the officials of Clark Development Corporation should
be liable, citing Section 10385 of Presidential Decree No. 1445, otherwise known as the Government
Auditing Code of the Philippines.86

In National Power Corporation v. Heirs of Macabangkit Sangkay, quantum meruit:87

— literally meaning as much as he deserves — is used as basis for determining an attorney’s

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

Here, the Board of Directors, acting on behalf of Clark Development Corporation, contracted the
services of petitioner, without the necessary prior approvals required by the rules and regulations for
the hiring of private counsel. Their actions were clearly unauthorized.

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

Audit Circular No. 86-255 by

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

Commission on Audit Circular No. 86-255 dated April 2, 1986 previously stated that: [a]ccordingly, it
is hereby directed that, henceforth, the payment out of public funds of retainer fees to private law
practitioners who are so hired or employed without the prior written conformity and acquiescence of
the Solicitor General or the Government Corporate Counsel, as the case may be, as well as the
written concurrence of the Commission on Audit shall be disallowed in audit and the same shall be a
personal liability of the officials concerned. (Emphasis supplied) However, when Commission on
Audit Circular No. 86-255 was amended by Commission on Audit Circular No. 98-002 on June 9,
1998, it failed to retain the liability of the officials who violated the circular.89 This gap in the law paves
the way for both the erring officials of the government owned and controlled corporations to disclaim
any responsibility for the liabilities owing to private practitioners.

It cannot be denied that petitioner rendered legal services to Clark Development Corporation. It 1âwphi 1

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

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

To fill the gap created by the amendment of Commission on Audit Circular No. 86-255, respondents
correctly held that the officials of Clark, Development Corporation who violated the provisions of
Circular No. 98-002 and Circular No. 9 should be personally liable to pay the legal fees of petitioner,
as previously provided for in Circular No. 86-255.
This finds support in Section 103 of the Government Auditing Code of the Philippines,91 which states:

SEC. 103. General liability for unlawful expenditures. -Expenditures of government funds or uses of
government property in violation of law or regulations shall be a personal liability of the official or
employee found to be directly responsible therefor.

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

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

WHEREFORE, the petition is DISMISSED without prejudice to petitioner filing another action against
the proper parties.

SO ORDERED.

MARVIC M.V.F. LEONEN

Associate Justice

WE CONCUR:

A.C. No. 10573 January 13, 2015

FERNANDO W. CHU, Complainant,

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

DECISION

PER CURIAM:

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

Antecedents

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

According to Chu, during a Christmas party held on December 5, 2006 at Atty. Guico’s residence in
Commonwealth, Quezon City, Atty. Guico asked him to prepare a substantial amount of money to be
given to the NLRC Commissioner handling the appeal to insure a favorable decision.4 On June 10,
2007, Chu called Atty. Guico to inform him that he had raised ₱300,000.00 for the purpose. Atty.
Guico told him to proceed to his office at No. 48 Times Street, Quezon City, and togive the money to
his assistant, Reynaldo (Nardo) Manahan. Chu complied, and later on called Atty. Guico to confirm
that he had delivered the money to Nardo. Subsequently, Atty. Guico instructed Chu to meet him on
July 5, 2007 at the UCC Coffee Shop on T. Morato Street, Quezon City. Atthe UCC Coffee Shop,
Atty. Guico handed Chu a copy of an alleged draft decision of the NLRC in favor of CVC.5 The draft
decision6was printed on the dorsal portion of used paper apparently emanating from the office of
Atty. Guico. On that occasion, the latter told Chu to raise another ₱300,000.00 to encourage the
NLRC Commissioner to issue the decision. But Chu could only produce ₱280,000.00, which he
brought to Atty. Guico’s office on July 10, 2007 accompanied by his son, Christopher Chu, and one
Bonifacio Elipane. However, it was Nardo who received the amount without issuing any receipt.7

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

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

In his position paper,11 Atty. Guico described the administrative complaint as replete with lies and
inconsistencies, and insisted that the charge was only meant for harassment. He denied demanding
and receiving money from Chu, a denial that Nardo corroborated with his own affidavit.12 He further
denied handing to Chu a draft decision printed on used paper emanating from his office, surmising
that the used paper must have been among those freely lying around in his office that had been
pilfered by Chu’s witnesses in the criminal complaint he had handled for Chu.13

Findings and Recommendation of the

IBP Board of Governors

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

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

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

with modification, the Report and Recommendation of the Investigating Commissioner in the above-
entitled case, herein made part of this Resolution as Annex "A," and finding the recommendation
fully supported by the evidence on record and the applicable laws and rules and considering
Respondent’s violation of Canon 1, Rules 1.01 and 1.02 of the Code of Professional Responsibility,
Atty. Jose C. Guico, Jr. is hereby SUSPENDED from the practice of law for three (3) years with
Warning that a repetition of the same or similar act shall be dealt with more severely and Ordered to
Return the amount of Five Hundred Eighty Thousand (₱580,000.00) Pesos with legal interest within
thirty (30) days from receipt of notice.
Atty. Guico moved for reconsideration,16 but the IBP Board of Governors denied his motion for
reconsideration on March 23, 2014 in Resolution No. XXI-2014-173.17

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

Issue

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

Ruling of the Court

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

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

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

What is the condign penalty for Atty. Guico?

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

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

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

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

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

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

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

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

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

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

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

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

ACCORDINGLY, the Court FINDS and DECLARES respondent ATTY. JOSE S. GUICO, JR.
GUILTY of the violation of the Lawyer’s Oath, and Rules 1.01 and 1.02, Canon I of the Code of
Professional Responsibility, and DISBARS him from membership in the Integrated Bar of the
Philippines. His name is ORDERED STRICKEN from the Roll of Attorneys.

Let copies of this Decision be furnished to the Office of the Bar Confidant, to be appended to Atty.
Guico’s personal record as an attorney; to the Integrated Bar of the Philippines; and to all courts and
quasi-judicial offices in the country for their information and guidance.

SO ORDERED.

THIRD DIVISION

A.C. No. 5067 June 29, 2015

CORAZON M. DALUPAN, Complainant,

vs.
ATTY. GLENN C. GACOTT1, Respondent.

DECISION

VILLARAMA, JR., J.:

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

The salient facts of the case follow:

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

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

On August 27, 1996, the complainant requested the respondent to draft a Motion to Reduce Bail
Bond. However, the respondent allegedly denied the request and claimed that it was beyond the
scope of his retainer services. Thus, the complainant alleged that she caused a certain Rolly
Calbento to draft the same which was however signed by the respondent.

On January 31, 1997, the complainant paid the respondent the remaining balance of ₱5,000 for his
acceptance fee. When the complainant asked for an Official Receipt from the respondent, the latter
refused saying that there was no need for the issuance of a receipt. On that same day, the
complainant also paid the respondent ₱500 for his appearance fee in the preliminary conference and
arraignment which occurred on the same day.

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

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

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

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

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

On August 27, 1996, the respondent filed a Motion for Reduction of Bail in favor of the complainant
before the MTC of Puerto Princesa City. On that same day, the complainant proceeded to the law
office of the respondent and demanded that the latter negotiate with the MTC judge to ensure the
grant of the Motion of Bail. When the respondent refused the demand of the complainant, the latter
replied at the top of her voice: "Binabayaran kita, bakit hindi mo ginagawa ang gusto ko?" The
respondent answered her with, "Hindi po lahat ng gusto ninyo ay gagawin ko, sa tama lamang po
tayo, abogado po ninyo ako, hindi ako fixer."7 This irked the complainant who then made verbal
threats that she will replace the respondent with a certain Atty. Roland Pay who held office nearby.
However, when the MTC of Puerto Princesa City eventually ruled in favor of the complainant and
granted the motion, the latter revoked her threat that she will replace the respondent.
On August 19, 1997, the MTC of Puerto Princesa City issued a Notice of Hearing to the complainant
and her son Wilmer Dalupan which ordered them to appear before the court on September 9, 1997
in connection with their criminal cases pending therein. However, the respondent failed to attend the
scheduled hearing as he allegedly failed to receive a copy of the Notice of Hearing. Thus, in his
written explanation dated October 7, 1997, the respondent attributed his failure to appear before the
MTC to the inefficiency of the process server of the said court.

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

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

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

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

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

On December 12, 2006, Investigating Commissioner Wilfredo E.J.E Reyes recommended the
dismissal of the complaint for disbarment against the respondent. At the same time, he also
recommended that the respondent return the payment of the attorney’s fee to the complainant in the
amount of ₱5,000.9

The Investigating Commissioner opined that the respondent cannot be held liable for abandonment
or neglect of duty because it was the complainant who discharged the respondent for loss of trust
and confidence. This was confirmed by the act of the complainant in withdrawing all her records from
the law office of the respondent. Furthermore, the Investigating Commissioner said that absent
evidence showing that the respondent committed abandonment or neglect of duty, the presumption
of regularity should prevail in favor of the respondent.

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

On March 17, 2007, the IBP Board of Governors passed Resolution No. XVII-2007-115 which
adopted and approved in toto the Report and Recommendation of the Investigating Commissioner.
On October 8, 2010, the IBP Board of Governors passed Resolution No. XIX-2010-544 which denied
the Motion for Reconsideration dated July 27, 2007 filed by the respondent.

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

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

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

Since the complainant failed to file any comment on the petition for review, we proceed to resolve
the sole issue raised, and rule in favor of the respondent.

We find that the respondent did not commit any fault or negligence in the performance of his
obligations under the retainer agreement which was wilfully terminated by the complainant on the
ground of loss of trust and confidence. As held by the Investigating Commissioner, the evidence on
record shows that the respondent is not liable for abandonment or neglect of duty.

However, we disagree with the conclusion of the Investigating Commissioner that the respondent
should return the payment of the attorney’s fee to the complainant in the amount of ₱5,000.

Firstly, the Investigating Commissioner seriously erred in referring to the amount to be returned by
the respondent as attorney’s fee. Relevantly, we agree with the respondent that there is a distinction
between attorney’s fee and acceptance fee.

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

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

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

Since the Investigating Commissioner made an erroneous reference to attorney’s fee, he therefore
mistakenly concluded that the respondent should return the same as he did not perform any
substantial legal work on behalf of the complainant. As previously mentioned, the payment of
acceptance fee does not depend on the nature and extent of the legal services rendered.

Secondly, the respondent did not commit any fault or negligence which would entail the return of the
acceptance fee.

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

In the present case, the complainant alleged that she requested the respondent to draft a Motion to
Reduce Bail Bond which was denied by the latter. She also claimed that the respondent failed to
1âwphi 1

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

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

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

SO ORDERED.

MARTIN S. VILLARAMA, JR.

Associate Justice

WE CONCUR:

G.R. No. 173188 January 15, 2014

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

DECISION

BRION, J.:

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

The Factual Antecedents

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

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

On February 24, 1969, Atty. Lacaya amended the complaint to assert the nullity of the sale and the
issuance of TCT No. T-4792 in the names of the spouses Ames as gross violation of the public land
law. The amended complaint stated that the spouses Cadavedo hired Atty. Lacaya on a contingency
fee basis. The contingency fee stipulation specifically reads:

10. That due to the above circumstances, the plaintiffs were forced to hire a lawyer on contingent
basis and if they become the prevailing parties in the case at bar, they will pay the sum of ₱2,000.00
for attorney’s fees.6

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

On September 18, 1975, and while the appeal before the CAin Civil Case No. 1721was pending, the
spouses Ames sold the subject lot to their children. The spouses Ames’ TCT No. T-4792 was
subsequently cancelled and TCT No. T-25984was issued in their children’s names. On October 11,
1976, the spouses Ames mortgaged the subject lot with the Development Bank of the Philippines
(DBP) in the names of their children.
On August 13, 1980, the CA issued itsdecision in Civil Case No. 1721,reversing the decision of the
RTC and declaring the deed of sale, transfer of rights, claims and interest to the spouses Ames null
and void ab initio. It directed the spouses Cadavedo to return the initial payment and ordered the
Register of Deeds to cancel the spouses Ames’ TCT No. T-4792 and to reissue another title in the
name of the spouses Cadavedo. The case eventually reached this Court via the spouses Ames’
petition for review on certiorari which this Court dismissed for lack of merit.

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

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

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

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

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

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

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

The records do not clearly disclose the proceedings subsequent to the CA decision in Civil Case No.
3443. However, on August 18, 1988, TCT No. 41051was issued in the name of the spouses
Cadavedo concerning the subject lot.

On August 9, 1988, the spouses Cadavedo filed before the RTC an action9 against the respondents,
assailing the MTC-approved compromise agreement. The case was docketed as Civil Case No.
4038 and is the root of the present case. The spouses Cadavedo prayed, among others, that the
respondents be ejected from their one-half portion of the subject lot; that they be ordered to render
an accounting of the produce of this one-half portion from 1981;and that the RTC fix the attorney’s
fees on a quantum meruit basis, with due consideration of the expenses that Atty. Lacaya incurred
while handling the civil cases.

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

The Ruling of the RTC

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

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

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

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

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

The respondents appealed the case before the CA.

The Ruling of the CA

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

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

The Petition

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

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

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

The petitioners further direct the Court’s attention to the fact that Atty. Lacaya,in taking over the case
from Atty. Bandal, agreed to defray all of the litigation expenses in exchange for one-half of the
subject lot should they win the case. They insist that this agreement is a champertous contract that
is contrary to public policy, prohibited by law for violation of the fiduciary relationship between a
lawyer and a client.
Finally, the petitioners maintain that the compromise agreement in Civil Case No. 215 (ejectment
case) did not novate their original stipulated agreement on the attorney’s fees. They reason that Civil
Case No. 215 did not decide the issue of attorney’s fees between the spouses Cadavedo and Atty.
Lacaya for the latter’s services in Civil Case No. 1721.

The Case for the Respondents

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

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

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

The Court’s Ruling

We resolve to GRANT the petition.

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

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

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

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

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

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

The agreement on attorney’s fee
consisting of one-half of the subject
lot is void; the petitioners are entitled
to recover possession

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

A. The written agreement providing for

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

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

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

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

B. The contingent fee agreement between

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

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

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

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

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

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

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

In addition to its champertous character, the contingent fee arrangement in this case expressly
transgresses the Canons of Professional Ethics and, impliedly, the Code of Professional
Responsibility.30 Under Rule 42 of the Canons of Professional Ethics, a lawyer may not properly
agree with a client that the lawyer shall pay or beat the expense of litigation.31 The same reasons
discussed above underlie this rule.

C. The attorney’s fee consisting of

one-half of the subject lot is excessive
and unconscionable

We likewise strike down the questioned attorney’s fee and declare it void for being excessive and
unconscionable. The contingent fee of one-half of the subject lot was allegedly agreed to secure the
1âwphi 1

services of Atty. Lacaya in Civil Case No. 1721.Plainly, it was intended for only one action as the two
other civil cases had not yet been instituted at that time. While Civil Case No. 1721 took twelve years
to be finally resolved, that period of time, as matters then stood, was not a sufficient reason to justify
a large fee in the absence of any showing that special skills and additional work had been involved.
The issue involved in that case, as observed by the RTC(and with which we agree), was simple and
did not require of Atty. Lacaya extensive skill, effort and research. The issue simply dealt with the
prohibition against the sale of a homestead lot within five years from its acquisition.

That Atty. Lacaya also served as the spouses Cadavedo’s counsel in the two subsequent cases did
not and could not otherwise justify an attorney’s fee of one-half of the subject lot. As assertedby the
petitioners, the spouses Cadavedo and Atty. Lacaya made separate arrangements for the costs and
expenses foreach of these two cases. Thus, the expenses for the two subsequent cases had been
considered and taken cared of Based on these considerations, we therefore find one-half of the
subject lot as attorney’s fee excessive and unreasonable.

D. Atty. Lacaya’s acquisition of

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

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

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

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

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

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

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

In the present case, we reiterate that the transfer or assignment of the disputed one-half portion to
Atty. Lacaya took place while the subject lot was still under litigation and the lawyer-client
relationship still existed between him and the spouses Cadavedo. Thus, the general prohibition
provided under Article 1491 of the Civil Code, rather than the exception provided in jurisprudence,
applies. The CA seriously erred in upholding the compromise agreement on the basis of the
unproved oral contingent fee agreement.

Notably, Atty. Lacaya, in undertaking the spouses Cadavedo’s cause pursuant to the terms of the
alleged oral contingent fee agreement, in effect, became a co-proprietor having an equal, if not
more, stake as the spouses Cadavedo. Again, this is void by reason of public policy; it undermines
the fiduciary relationship between him and his clients.42

E.The compromise agreement could not

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

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

A contract whose cause, object or purpose is contrary to law, morals, good customs, public order or
public policy is in existent and void from the beginning.43 It can never be ratified44 nor the action or
defense for the declaration of the in existence of the contract prescribe;45 and any contract directly
resulting from such illegal contract is likewise void and in existent.46

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

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

In view of their respective assertions and defenses, the parties, in effect, impliedly set aside any
express stipulation on the attorney’s fees, and the petitioners, by express contention, submit the
reasonableness of such fees to the court’s discretion. We thus have to fix the attorney’s fees on a
quantum meruit basis.
"Quantum meruit—meaning ‘as much as he deserves’—is used as basis for determining a lawyer’s
professional fees in the absence of a contract x x x taking into account certain factors in fixing the
amount of legal fees."47 "Its essential requisite is the acceptance of the benefits by one sought to be
charged for the services rendered under circumstances as reasonably to notify him that the lawyer
performing the task was expecting to be paid compensation"48 for it. The doctrine of quantum meruit
is a device to prevent undue enrichment based on the equitable postulate that it is unjust for a
person to retain benefit without paying for it.49

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

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

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

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

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

SO ORDERED.
ARTURO D. BRION
Associate Justice

WE CONCUR:

FIRST DIVISION

G.R. No. 183952 September 9, 2013

CZARINA T. MALVAR, Petitioner,

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

DECISION

BERSAMIN, J.:

Although the practice of law is not a business, an attorney is entitled to be properly compensated for
the professional services rendered for the client, who is bound by her express agreement to duly
compensate the attorney. The client may not deny her attorney such just compensation.

The Case

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

Antecedents

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

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

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

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

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

After the judgment in her favor became final and executory on March14, 2006, Malvar moved for the
issuance of a writ of execution.5 The Executive Labor Arbiter then referred the case to the Research
and Computation Unit (RCU) of the NLRC for the computation of the monetary awards under the
judgment. The RCU’s computation ultimately arrived at the total sum of ₱41,627,593.75.6

On November 9, 2006, however, Labor Arbiter Jaime M. Reyno issued an order,7 finding that the
RCU’s computation lacked legal basis for including the salary increases that the decision
promulgated in CA-G.R. SP No. 69660 did not include. Hence, Labor Arbiter Reyno reduced
Malvar’s total monetary award to ₱27,786,378.11, viz:

WHEREFORE, premises considered, in so far as the computation of complainant’s other benefits

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

1. Separation Pay
8/1/88-1/26/05 = 16 yrs

₱344,575.83 x 16 = 5,513,213.28
2. Unpaid Salary

1/1-26/05 = 87 mos.
₱344,575.83 x 87 = 299,780.97

3. Holiday Pay

4/1/00-1/26/05 = 55 holidays
₱4,134,910/12 mos/20.83 days x 55 days 909,825.77

4. Unpaid 13th month pay for Dec 2000 344,575.83

5. Sick Leave Pay

Year 1999 to 2004 = 6 yrs

₱344,575.88/20.83 x 15 days x 6 = 1,488,805.79

Year 2005
 ₱344,575.83/20.83 x 15/12 x 1 20,677.86 1,509,483.65
6. Vacation Leave Pay
Year 1999 to 2004 = 6 years
₱344,575.88/20.83 x 22 days x 6 = 2,183,581.83

Year 2005

₱344,575.83/20.83 x 22/12 x 1 30,327.55 2,213,909.36

10,790,788.86
Backwages (from 3/7/00-4/30/01, award in LA Sytian’s Decision 4,651,773.75

Allowances & Other Benefits:

Management Incentive Plan 7,355,166.58

Cash Dividend on Philip Morris Shares 2,711,646.00

Car Maintenance 381,702.92

Gas Allowance 198,000.00

Entitlement to a Company Driver 438,650.00

Rice Subsidy 58,650.00

Moral Damages 500,000.00

Exemplary Damages 200,000.00

Attorney’s Fees 500,000.00

Entitlement to Philip Sch G Subject to

"Share Option Grant" Market Price

27,786,378.11

SO ORDERED.

Both parties appealed the computation to the NLRC, which, on April19, 2007, rendered its decision
setting aside Labor Arbiter Reyno’s November 9, 2006 order, and adopting the computation by the
RCU.8

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

Malvar filed a second motion for the issuance of a writ of execution to enforce the decision of the
NLRC rendered on April 19, 2007. After the writ of execution was issued, a partial enforcement as
effected by garnishing the respondents’ funds deposited with Citibank worth 37,391,696.06.10
On July 27, 2007, the respondents went to the CA on certiorari (with prayer for the issuance of a
temporary restraining order (TRO) or writ of preliminary injunction), assailing the NLRC’s setting
aside of the computation by Labor Arbiter Reyno (CA-G.R. SP No. 99865). The petition mainly
argued that the NLRC had gravely abused its discretion in ruling that: (a) the inclusion of the salary
increases and other monetary benefits in the award to Malvar was final and executory; and (b) the
finality of the ruling in CA-G.R. SP No. 69660 precluded the respondents from challenging the
inclusion of the salary increases and other monetary benefits. The CA issued a TRO, enjoining the
NLRC and Malvar from implementing the NLRC’s decision.11

On April 17, 2008, the CA rendered its decision in CA-G.R. SP No. 99865,12 disposing thusly:

WHEREFORE, premises considered, the herein Petition is GRANTED and the 19 April 2007
Decision of the NLRC and the 31May 2007 Resolution in NLRC NCR 30-07-02316-00 are hereby
REVERSED and SET ASIDE.

The matter of computation of monetary awards for private respondent is hereby REMANDED to the
Labor Arbiter and he is DIRECTED to recompute the monetary award due to private respondent
based on her salary at the time of her termination, without including projected salary increases. In
computing the said benefits, the Labor Arbiter is further directed to DISREGARD monetary awards
arising from: (a) the management incentive plan and (b) the share option grant, including cash
dividends arising therefrom without prejudice to the filing of the appropriate remedy by the private
respondent in the proper forum. Private respondent’s allowances for car maintenance and gasoline
are likewise DELETED unless private respondent proves, by appropriate receipts, her entitlement
thereto.

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

As regards the Motions for Reconsideration of the Resolution denying the Motion for Voluntary
Inhibition and the Omnibus Motion dated 30 October 2007, both motions are hereby DENIED for
lack of merit.

SO ORDERED.13

Malvar sought reconsideration, but the CA denied her motion on July30, 2008.14

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

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

NOW, THEREFORE, for and in consideration of the covenants and understanding between the
parties herein, the parties hereto have entered into this Agreement on the following terms and
conditions:

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

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

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

xxxx

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

Intervention

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

The Motion for Intervention relevantly averred:

xxxx

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

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

xxxx

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

xxxx

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

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

xxxx

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

xxxx

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

xxxx

On 12 September 2008 Intervenor filed an exhaustive Petition for Review with the Supreme Court
containing 70 pages, including its Annexes "A" to "R", or a total of 419 pages against Respondents
to collect on the balance of Petitioner’s claims amounting to at least ₱27,000,000.00 and
₱154,000,000.00 the latter representing the estimated value of Petitioner’s stock options as of April
2008.

xxxx

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

xxxx

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

xxxx

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

xxxx

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

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

July 16, 2008

Justice Josue Belocillo (sic)

Dear Justice,

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

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

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

Thank you po for your understanding and support.22

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

xxxx

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

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

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

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

xxxx

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

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

The Intervenor prays for the following reliefs:

a) Granting the Motion for Intervention to Protect Attorney’s Rights in favor of the Intervenor;

b) Directing both Petitioner and Respondents jointly and severally to pay Intervenor its
contingent fees;
 c) Granting a lien upon all judgments for the payment of money and executions issued in
pursuance of such judgments; and

d) Holding in Abeyance in the meantime the Resolution of the Motion to Dismiss/Withdraw

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

e) Other reliefs just and equitable.27

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

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

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

On November 18, 2011, the Intervenor submitted its position on the respondent’s comment dated
June 21, 2011,29and thereafter the respondents sent in their reply.30

Issues

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

Ruling of the Court

We shall decide the issues accordingly.

1.

Client’s right to settle litigation

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

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

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

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

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

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

2.

Compromise agreement is to be approved

despite favorable action on the
Intervenor’s Motion for Intervention

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

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

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

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

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

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

a) Upon the assumption of its professional duties as Malvar’s counsel, a Motion for
Reconsideration of the Decision of the Court of Appeals dated April 17, 2008 consisting of
thirty-eight pages was filed before the Court of Appeals on May 6, 2008.
 b) On June 2, 2009, Intervenors filed a Comment to Respondents’ Motion for Partial
Reconsideration, said Comment consisted 8 pages.

c) In the execution proceedings before Labor Arbiter Jaime Reyno, Intervenor prepared and
filed on Malvar’s behalf an "Ex-Parte Motion to Release to Complainant the Undisputed
amount of ₱14,252,192.12" in NLRC NCR Case No. 30-07-02716-00.

d) On July 29, 2000, Intervenor prepared and filed before theLabor Arbiter a Comment to
Respondents’ Opposition to the "Ex-Parte Motion to Release" and a "Motion Reiterating
Immediate Implementation of the Writ of Execution"

e) On August 6, 2008, Intervenor prepared and filed before the Labor Arbiter Malvar’s Motion
Reiterating Motion to Release the Amount of ₱14,252,192.12.44

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

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

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

Considering the undisputed existence of the written agreement on contingent fees, the question
begging to be answered is: Was the Intervenor dismissed for a justifiable cause?

We do not think so.

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

The letter Malvar addressed to Retired Justice Bellosillo, who represented the Intervenor, debunked
her allegations of unsatisfactory legal service because she thereby lavishly lauded the Intervenor for
its dedication and devotion to the prosecution of her case and to the protection of her interests. Also
significant was that the attorney-client relationship between her and the Intervenor was not severed
upon Atty. Dasal’s appointment to public office and Atty. Llasos’ resignation from the law firm. In
other words, the Intervenor remained as her counsel of record, for, as we held in Rilloraza, Africa,
De Ocampo and Africa v. Eastern Telecommunication Philippines, Inc.,50 a client who employs a law
firm engages the entire law firm; hence, the resignation, retirement or separation from the law firm of
the handling lawyer does not terminate the relationship, because the law firm is bound to provide a
replacement.
The stipulations of the written agreement between Malvar and the Intervenors, not being contrary to
law, morals, public policy, public order or good customs, were valid and binding on her. They
expressly gave rise to the right of the Intervenor to demand compensation. In a word, she could not
simply walk away from her contractual obligations towards the Intervenor, for Article 1159 of the Civil
Code provides that obligations arising from contracts have the force of law between the parties and
should be complied with in good faith.

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

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

Undersigned counsel further requests that they be furnished copy of the decision, resolutions and
other legal processes of this Honorable Court to enable them to protect their interests.51

Were the respondents also liable?

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

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

We disagree with the respondents’ insistence. The respondents were complicit in Malvar’s move to
deprive the Intervenor of its duly earned contingent fees.

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

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

Thirdly, the compromise agreement was silent on the Intervenor’s contingent fee, indicating that the
objective of the compromise agreement was to secure a huge discount from its liability towards
Malvar.

Finally, contrary to the stipulation in the compromise agreement, only Malvar, minus the
respondents, filed the Motion to Dismiss/Withdraw Case.

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

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

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

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

There is no contribution between joint tort-feasors whose liability is solidary since both of them are
liable for the total damage. Where the concurrent or successive negligent acts or omissions of two or
more persons, although acting independently, are in combination the direct and proximate cause of
a single injury to a third person, it is impossible to determine in what proportion each contributed to
the injury and either of them is responsible for the whole injury. x x x
Joint tort-feasors are each liable as principals, to the same extent and in the same manner as if they
had performed the wrongful act themselves. It is likewise not an excuse for any of the joint tort-
feasors that individual participation in the tort was insignificant as compared to that of the other.57 To
stress, joint tort-feasors are not liable pro rata. The damages cannot be apportioned among them,
except by themselves. They cannot insist upon an apportionment, for the purpose of each paying an
aliquot part. They are jointly and severally liable for the whole amount.58 Thus, as joint tort-feasors,
Malvar and the respondents should be held solidarily liable to the Intervenor. There is no way of
appreciating these circumstances except in this light.

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

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

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

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR:

EN BANC

A.C. No. 8243 July 24, 2009

ROLANDO B. PACANA, JR., Complainant,

vs.
ATTY. MARICEL PASCUAL-LOPEZ, Respondent.

DECISION
PER CURIAM:

This case stems from an administrative complaint1 filed by Rolando Pacana, Jr. against Atty. Maricel
Pascual-Lopez charging the latter with flagrant violation of the provisions of the Code of Professional
Responsibility.2 Complainant alleges that respondent committed acts constituting conflict of interest,
dishonesty, influence peddling, and failure to render an accounting of all the money and properties
received by her from complainant.

On January 2, 2002, complainant was the Operations Director for Multitel Communications
Corporation (MCC). MCC is an affiliate company of Multitel International Holdings Corporation
(Multitel). Sometime in July 2002, MCC changed its name to Precedent Communications
Corporation (Precedent).3

According to complainant, in mid-2002, Multitel was besieged by demand letters from its members
and investors because of the failure of its investment schemes. He alleges that he earned the ire of
Multitel investors after becoming the assignee of majority of the shares of stock of Precedent and
after being appointed as trustee of a fund amounting to Thirty Million Pesos (₱30,000,000.00)
deposited at Real Bank.

Distraught, complainant sought the advice of respondent who also happened to be a member of the
Couples for Christ, a religious organization where complainant and his wife were also active
members. From then on, complainant and respondent constantly communicated, with the former
disclosing all his involvement and interests in Precedent and Precedent’s relation with Multitel.
Respondent gave legal advice to complainant and even helped him prepare standard quitclaims for
creditors. In sum, complainant avers that a lawyer-client relationship was established between him
and respondent although no formal document was executed by them at that time. A Retainer
Agreement4 dated January 15, 2003 was proposed by respondent. Complainant, however, did not
sign the said agreement because respondent verbally asked for One Hundred Thousand Pesos
(₱100,000.00) as acceptance fee and a 15% contingency fee upon collection of the overpayment
made by Multitel to Benefon,5 a telecommunications company based in Finland. Complainant found
the proposed fees to be prohibitive and not within his means.6 Hence, the retainer agreement
remained unsigned.7

After a few weeks, complainant was surprised to receive a demand letter from respondent8 asking
for the return and immediate settlement of the funds invested by respondent’s clients in Multitel.
When complainant confronted respondent about the demand letter, the latter explained that she had
to send it so that her clients – defrauded investors of Multitel – would know that she was doing
something for them and assured complainant that there was nothing to worry about.9

Both parties continued to communicate and exchange information regarding the persistent demands
made by Multitel investors against complainant. On these occasions, respondent impressed upon
complainant that she can closely work with officials of the Anti-Money Laundering Council (AMLC),
the Department of Justice (DOJ), the National Bureau of Investigation (NBI), the Bureau of
Immigration and Deportations (BID),10 and the Securities and Exchange Commission (SEC)11 to
resolve complainant’s problems. Respondent also convinced complainant that in order to be
absolved from any liability with respect to the investment scam, he must be able to show to the DOJ
that he was willing to divest any and all of his interests in Precedent including the funds assigned to
him by Multitel.12

Respondent also asked money from complainant allegedly for safekeeping to be used only for his
case whenever necessary. Complainant agreed and gave her an initial amount of ₱900,000.00
which was received by respondent herself.13 Sometime thereafter, complainant again gave
respondent ₱1,000,000.00.14 Said amounts were all part of Precedent’s collections and sales
proceeds which complainant held as assignee of the company’s properties.15

When complainant went to the United States (US), he received several messages from respondent
sent through electronic mail (e-mail) and short messaging system (SMS, or text messages) warning
him not to return to the Philippines because Rosario Baladjay, president of Multitel, was arrested and
that complainant may later on be implicated in Multitel’s failed investment system. Respondent even
said that ten (10) arrest warrants and a hold departure order had been issued against him.
Complainant, thereafter, received several e-mail messages from respondent updating him of the
status of the case against Multitel and promised that she will settle the matter discreetly with
government officials she can closely work with in order to clear complainant’s name.16 In two
separate e-mail messages,17 respondent again asked money from complainant, ₱200,000 of which
was handed by complainant’s wife while respondent was confined in Saint Luke’s Hospital after
giving birth,18 and another ₱700,000 allegedly to be given to the NBI.19

Through respondent’s persistent promises to settle all complainant’s legal problems, respondent was
able to convince complainant who was still in the US to execute a deed of assignment in favor of
respondent allowing the latter to retrieve 178 boxes containing cellular phones and accessories
stored in complainant’s house and inside a warehouse.20 He also signed a blank deed of sale
authorizing respondent to sell his 2002 Isuzu Trooper.21

Sometime in April 2003, wary that respondent may not be able to handle his legal problems,
complainant was advised by his family to hire another lawyer. When respondent knew about this,
she wrote to complainant via e-mail, as follows:

Dear Butchie,

Hi! Ok ka lang? Hope you are fine. Sorry if I shocked you but I had to do it as your friend and lawyer.
The charges are all non-bailable but all the same as the SEC report I told you before. The findings
are the same, i.e. your company was the front for the fraud of Multitel and that funds were provided
you.

I anticipated this, that is why I really pushed for a quitclaim. Rolly is willing to return the Crosswind,
laptap (sic) and [P]alm [P]ilot. Manny Cancio really helped. Anthony na lang. Then, I will need the
accounting of all the funds you received from the sale of the phones, every employees and
directors[’] quitclaim (including yours), the funds transmitted to the clients through me, the funds you
utilized, and whatelse (sic) is still unremitted, every centavo must be accounted for as DOJ and NBI
can have the account opened.

I will also need the P30 M proof of deposit with Real [B]ank and the trust given [to] you. So we can
inform them [that] it was not touched by you.

I have been informed by Efie that your family is looking at hiring Coco Pimentel. I know him very well
as his sister Gwen is my best friend. I have no problem if you hire him but I will be hands off. I work
differently kasi. In this cases (sic), you cannot be highprofile (sic) because it is the clients who will be
sacrificed at the expense of the fame of the lawyer. I have to work quietly and discreetly. No funfare.
Just like what I did for your guys in the SEC. I have to work with people I am comfortable with. Efren
Santos will sign as your lawyer although I will do all the work. He can help with all his connections.
Val’s friend in the NBI is the one is (sic) charge of organized crime who is the entity (sic) who has
your warrant. My law partner was the state prosecutor for financial fraud. Basically we have it
covered in all aspects and all departments. I am just trying to liquidate the phones I have allotted for
you s ana (sic) for your trooper kasi whether we like it or not, we have to give this agencies (sic) to
make our work easier according to Val. The funds with Mickey are already accounted in the quit
claims (sic) as attorneys (sic) fees. I hope he will be able to send it so we have funds to work with.

As for your kids, legally they can stay here but recently, it is the children who (sic) the irate clients
and government officials harass and kidnap to make the individuals they want to come out from
hiding (sic). I do not want that to happen. Things will be really easier on my side.

Please do not worry. Give me 3 months to make it all disappear. But if you hire Coco, I will give him
the free hand to work with your case. Please trust me. I have never let you down, have I? I told you
this will happen but we are ready and prepared. The clients who received the phones will stand by
you and make you the hero in this scandal. I will stand by you always. This is my expertise. TRUST
me! That is all. You have an angel on your side. Always pray though to the best legal mind up there.
You will be ok!

Candy22

On July 4, 2003, contrary to respondent’s advice, complainant returned to the country. On the eve of
his departure from the United States, respondent called up complainant and conveniently informed
him that he has been cleared by the NBI and the BID.23

About a month thereafter, respondent personally met with complainant and his wife and told them
that she has already accumulated ₱12,500,000.00 as attorney’s fees and was willing to give
₱2,000,000.00 to complainant in appreciation for his help. Respondent allegedly told complainant
that without his help, she would not have earned such amount. Overwhelmed and relieved,
complainant accepted respondent’s offer but respondent, later on, changed her mind and told
complainant that she would instead invest the ₱2,000,000.00 on his behalf in a business venture.
Complainant declined and explained to respondent that he and his family needed the money instead
to cover their daily expenses as he was no longer employed. Respondent allegedly agreed, but she
failed to fulfill her promise.24

Respondent even publicly announced in their religious organization that she was able to help settle
the ten (10) warrants of arrest and hold departure order issued against complainant and narrated
how she was able to defend complainant in the said cases.25

By April 2004, however, complainant noticed that respondent was evading him. Respondent would
either refuse to return complainant’s call or would abruptly terminate their telephone conversation,
citing several reasons. This went on for several months.26 In one instance, when complainant asked
respondent for an update on the collection of Benefon’s obligation to Precedent which respondent
had previously taken charge of, respondent arrogantly answered that she was very busy and that
she would read Benefon’s letter only when she found time to do so.

On November 9, 2004, fed up and dismayed with respondent’s arrogance and evasiveness,
complainant wrote respondent a letter formally asking for a full accounting of all the money,
documents and properties given to the latter.27 Respondent rendered an accounting through a letter
dated December 20, 2004.28 When complainant found respondent’s explanation to be inadequate,
he wrote a latter expressing his confusion about the accounting.29Complainant repeated his request
for an audited financial report of all the properties turned over to her; otherwise, he will be
constrained to file the appropriate case against respondent.30 Respondent replied,31 explaining that
all the properties and cash turned over to her by complainant had been returned to her clients who
had money claims against Multitel. In exchange for this, she said that she was able to secure
quitclaim documents clearing complainant from any liability.32 Still unsatisfied, complainant decided
to file an affidavit-complaint33 against respondent before the Commission on Bar Discipline of the
Integrated Bar of the Philippines (IBP) seeking the disbarment of respondent.

In her Answer-Affidavit,34 respondent vehemently denied being the lawyer for Precedent. She
maintained that no formal engagement was executed between her and complainant. She claimed
that she merely helped complainant by providing him with legal advice and assistance because she
personally knew him, since they both belonged to the same religious organization.35 lavvph!1

Respondent insisted that she represented the group of investors of Multitel and that she merely
mediated in the settlement of the claims her clients had against the complainant. She also averred
that the results of the settlement between both parties were fully documented and accounted
for.36 Respondent believes that her act in helping complainant resolve his legal problem did not
violate any ethical standard and was, in fact, in accord with Rule 2.02 of the Code of Professional
Responsibility.37

To bolster her claim that the complaint was without basis, respondent noted that a complaint for
estafa was also filed against her by complainant before the Office of the City Prosecutor in Quezon
City citing the same grounds. The complaint was, however, dismissed by Assistant City Prosecutor
Josephus Joannes H. Asis for insufficiency of evidence.38 Respondent argued that on this basis
alone, the administrative case must also be dismissed.

In her Position Paper,39 respondent also questioned the admissibility of the electronic evidence
submitted by complainant to the IBP’s Commission on Bar Discipline. Respondent maintained that
the e-mail and the text messages allegedly sent by respondent to complainant were of doubtful
authenticity and should be excluded as evidence for failure to conform to the Rules on Electronic
Evidence (A.M. No. 01-7-01-SC).

After due hearing, IBP Investigating Commissioner Patrick M. Velez issued a Report and
Recommendation40 finding that a lawyer-client relationship was established between respondent and
complainant despite the absence of a written contract. The Investigating Commissioner also
declared that respondent violated her duty to be candid, fair and loyal to her client when she allowed
herself to represent conflicting interests and failed to render a full accounting of all the cash and
properties entrusted to her. Based on these grounds, the Investigating Commissioner recommended
her disbarment.

Respondent moved for reconsideration,41 but the IBP Board of Governors issued a
Recommendation42 denying the motion and adopting the findings of the Investigating Commissioner.

The case now comes before this Court for final action.

We affirm the findings of the IBP.

Rule 15.03, Canon 15 of the Code of Professional responsibility provides:

Rule 15.03 – A lawyer shall not represent conflicting interests except by written consent of all
concerned given after full disclosure of the facts.

This prohibition is founded on principles of public policy, good taste43 and, more importantly, upon
necessity. In the course of a lawyer-client relationship, the lawyer learns all the facts connected with
the client’s case, including its weak and strong points. Such knowledge must be considered sacred
and guarded with care. No opportunity must be given to him to take advantage of his client; for if the
confidence is abused, the profession will suffer by the loss thereof.44 It behooves lawyers not only to
keep inviolate the client’s confidence, but also to avoid the appearance of treachery and double ─
dealing for only then can litigants be encouraged to entrust their secrets to their lawyers, which is
paramount in the administration of justice.45 It is for these reasons that we have described the
attorney-client relationship as one of trust and confidence of the highest degree.46

Respondent must have known that her act of constantly and actively communicating with
complainant, who, at that time, was beleaguered with demands from investors of Multitel, eventually
led to the establishment of a lawyer-client relationship. Respondent cannot shield herself from the
inevitable consequences of her actions by simply saying that the assistance she rendered to
complainant was only in the form of "friendly accommodations,"47 precisely because at the time she
was giving assistance to complainant, she was already privy to the cause of the opposing parties
who had been referred to her by the SEC.48

Respondent also tries to disprove the existence of such relationship by arguing that no written
contract for the engagement of her services was ever forged between her and complainant.49 This
argument all the more reveals respondent’s patent ignorance of fundamental laws on contracts and
of basic ethical standards expected from an advocate of justice. The IBP was correct when it said:

The absence of a written contract will not preclude the finding that there was a professional
relationship between the parties. Documentary formalism is not an essential element in the
employment of an attorney; the contract may be express or implied. To establish the relation, it is
sufficient that the advice and assistance of an attorney is sought and received in any matter
pertinent to his profession.50 (Emphasis supplied.) 1awphi1

Given the situation, the most decent and ethical thing which respondent should have done was
either to advise complainant to engage the services of another lawyer since she was already
representing the opposing parties, or to desist from acting as representative of Multitel investors and
stand as counsel for complainant. She cannot be permitted to do both because that would amount to
double-dealing and violate our ethical rules on conflict of interest.

In Hornilla v. Atty. Salunat,51 we explained the concept of conflict of interest, thus:

There is conflict of interest when a lawyer represents inconsistent interests of two or more opposing
parties. The test is "whether or not in behalf of one client, it is the lawyer’s duty to fight for an issue
or claim, but it is his duty to oppose it for the other client. In brief, if he argues for one client, this
argument will be opposed by him when he argues for the other client." This rule covers not only
cases in which confidential communications have been confided, but also those in which no
confidence has been bestowed or will be used. Also, there is conflict of interests if the acceptance of
the new retainer will require the attorney to perform an act which will injuriously affect his first client
in any matter in which he represents him and also whether he will be called upon in his new relation
to use against his first client any knowledge acquired through their connection. Another test of the
inconsistency of interests is whether the acceptance of a new relation will prevent an attorney from
the full discharge of his duty of undivided fidelity and loyalty to his client or invite suspicion of
unfaithfulness or double dealing in the performance thereof.52

Indubitably, respondent took advantage of complainant’s hapless situation, initially, by giving him
legal advice and, later on, by soliciting money and properties from him. Thereafter, respondent
impressed upon complainant that she had acted with utmost sincerity in helping him divest all the
properties entrusted to him in order to absolve him from any liability. But simultaneously, she was
also doing the same thing to impress upon her clients, the party claimants against Multitel, that she
was doing everything to reclaim the money they invested with Multitel. Respondent herself admitted
to complainant that without the latter’s help, she would not have been able to earn as much and that,
as a token of her appreciation, she was willing to share some of her earnings with
complainant.53 Clearly, respondent’s act is shocking, as it not only violated Rule 9.02, Canon 9 of the
Code of Professional Responsibility,54 but also toyed with decency and good taste.

Respondent even had the temerity to boast that no Multitel client had ever complained of
respondent’s unethical behavior.55 This remark indubitably displays respondent’s gross ignorance of
disciplinary procedure in the Bar. As a member of the Bar, she is expected to know that proceedings
for disciplinary actions against any lawyer may be initiated and prosecuted by the IBP Board of
Governors, motu proprio or upon referral by this Court or by the Board of Officers of an IBP
Chapter56 even if no private individual files any administrative complaint.

Upon review, we find no cogent reason to disturb the findings and recommendations of the IBP
Investigating Commissioner, as adopted by the IBP Board of Governors, on the admissibility of the
electronic evidence submitted by complainant. We, accordingly, adopt the same in toto.

Finally, respondent argues that the recommendation of the IBP Board of Governors to disbar her on
the grounds of deceit, malpractice and other gross misconduct, aside from violation of the Lawyer’s
Oath, has been rendered moot and academic by voluntary termination of her IBP membership,
allegedly after she had been placed under the Department of Justice’s Witness Protection
Program.57 Convenient as it may be for respondent to sever her membership in the integrated bar,
this Court cannot allow her to do so without resolving first this administrative case against her.

The resolution of the administrative case filed against respondent is necessary in order to determine
the degree of her culpability and liability to complainant. The case may not be dismissed or rendered
moot and academic by respondent’s act of voluntarily terminating her membership in the Bar
regardless of the reason for doing so. This is because membership in the Bar is a privilege burdened
with conditions.58 The conduct of a lawyer may make him or her civilly, if not criminally, liable to his
client or to third parties, and such liability may be conveniently avoided if this Court were to allow
voluntary termination of membership. Hence, to terminate one’s membership in the Bar voluntarily, it
is imperative that the lawyer first prove that the voluntary withdrawal of membership is not a ploy to
further prejudice the public or to evade liability. No such proof exists in the present case.

WHEREFORE, respondent Attorney Maricel Pascual-Lopez is hereby DISBARRED for representing

conflicting interests and for engaging in unlawful, dishonest and deceitful conduct in violation of her
Lawyer’s Oath and the Code of Professional Responsibility.

Let a copy of this Decision be entered in the respondent’s record as a member of the Bar, and notice
of the same be served on the Integrated Bar of the Philippines, and on the Office of the Court
Administrator for circulation to all courts in the country.

SO ORDERED.

REYNATO S. PUNO
Chief Justice

A.C. No. 8620 January 12, 2011

JESSIE R. DE LEON, Complainant,

vs.
ATTY. EDUARDO G. CASTELO, Respondent.
 DECISION

BERSAMIN, J.:

This administrative case, which Jessie R. De Leon initiated on April 29, 2010, concerns respondent
attorney’s alleged dishonesty and falsification committed in the pleadings he filed in behalf of the
defendants in the civil action in which De Leon intervened.

Antecedents

On January 2, 2006, the Government brought suit for the purpose of correcting the transfer
certificates of title (TCTs) covering two parcels of land located in Malabon City then registered in the
names of defendants Spouses Lim Hio and Dolores Chu due to their encroaching on a public
callejon and on a portion of the Malabon-Navotas River shoreline to the extent, respectively, of an
area of 45 square meters and of about 600 square meters. The suit, entitled Republic of the
Philippines, represented by the Regional Executive Director, Department of Environment and
Natural Resources v. Spouses Lim Hio and Dolores Chu, Gorgonia Flores, and the Registrar of
Deeds of Malabon City, was docketed as Civil Case No. 4674MN of the Regional Trial Court (RTC),
Branch 74, in Malabon City.1

De Leon, having joined Civil Case No. 4674MN as a voluntary intervenor two years later (April 21,
2008), now accuses the respondent, the counsel of record of the defendants in Civil Case No.
4674MN, with the serious administrative offenses of dishonesty and falsification warranting his
disbarment or suspension as an attorney. The respondent’s sin was allegedly committed by his filing
for defendants Spouses Lim Hio and Dolores Chu of various pleadings (that is, answer with
counterclaim and cross-claim in relation to the main complaint; and answer to the complaint in
intervention with counterclaim and cross-claim) despite said spouses being already deceased at the
time of filing.2

De Leon avers that the respondent committed dishonesty and falsification as follows:

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

Respondent also committed the crime of Use of Falsified Documents, by submitting the said falsified
Answers in the judicial proceedings, Civil Case No. 4674MN;

Respondent also made a mockery of the aforesaid judicial proceedings by representing dead
persons therein who, he falsely made to appear, as contesting the complaints, counter-suing and
cross-suing the adverse parties.

12. That, as a consequence of the above criminal acts, complainant respectfully submits that
respondent likewise violated:

(a) His Lawyer’s Oath:

xxx

(b) The Code of Professional Responsibility:3

 xxx

On June 23, 2010, the Court directed the respondent to comment on De Leon’s administrative
complaint.4

In due course, or on August 2, 2010,5 the respondent rendered the following explanations in his
comment, to wit:

1. The persons who had engaged him as attorney to represent the Lim family in Civil Case
No. 4674MN were William and Leonardo Lim, the children of Spouses Lim Hio and Dolores
Chu;

2. Upon his (Atty. Castelo) initial queries relevant to the material allegations of the
Government’s complaint in Civil Case No. 4674MN, William Lim, the representative of the
Lim Family, informed him:

a. That the Lim family had acquired the properties from Georgina Flores;

b. That William and Leonardo Lim were already actively managing the family
business, and now co-owned the properties by virtue of the deed of absolute sale
their parents, Spouses Lim Hio and Dolores Chu, had executed in their favor; and

c. That because of the execution of the deed of absolute sale, William and Leonardo
Lim had since honestly assumed that their parents had already caused the transfer
of the TCTs to their names.

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

4. He (Atty. Castelo) prepared the initial pleadings based on his honest belief that Spouses
Lim Hio and Dolores Chu were then still living. Had he known that they were already
deceased, he would have most welcomed the information and would have moved to
substitute Leonardo and William Lim as defendants for that reason;

5. He (Atty. Castelo) had no intention to commit either a falsehood or a falsification, for he in

fact submitted the death certificates of Spouses Lim Hio and Dolores Chu in order to apprise
the trial court of that fact; and

6. The Office of the Prosecutor for Malabon City even dismissed the criminal complaint for
falsification brought against him (Atty. Castelo) through the resolution dated February 11,
2010. The same office denied the complainant’s motion for reconsideration on May 17, 2010.

On September 3, 2010, the complainant submitted a reply,6 whereby he asserted that the
respondent’s claim in his comment that he had represented the Lim family was a deception, because
the subject of the complaint against the respondent was his filing of the answers in behalf of
Spouses Lim Hio and Dolores Chu despite their being already deceased at the time of the filing. The
complainant regarded as baseless the justifications of the Office of the City Prosecutor for Malabon
City in dismissing the criminal complaint against the respondent and in denying his motion for
reconsideration.

The Court usually first refers administrative complaints against members of the Philippine Bar to the
Integrated Bar of the Philippines (IBP) for investigation and appropriate recommendations. For the
present case, however, we forego the prior referral of the complaint to the IBP, in view of the facts
being uncomplicated and based on the pleadings in Civil Case No. 4674MN. Thus, we decide the
complaint on its merits.

Ruling

We find that the respondent, as attorney, did not commit any falsehood or falsification in his
pleadings in Civil Case No. 4674MN. Accordingly, we dismiss the patently frivolous complaint.

Attorney’s Obligation to tell the truth

All attorneys in the Philippines, including the respondent, have sworn to the vows embodied in
following Lawyer’s Oath,7 viz:

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

The Code of Professional Responsibility echoes the Lawyer’s Oath, providing:8

CANON 1 - A LAWYER SHALL UPHOLD THE CONSTITUTION, OBEY THE LAWS OF THE LAND
AND PROMOTE RESPECT FOR LAW AND LEGAL PROCESSES.

Rule 1.01 - A lawyer shall not engage in unlawful, dishonest, immoral or deceitful conduct.

CANON 10 - A LAWYER OWES CANDOR, FAIRNESS AND GOOD FAITH TO THE COURT.

Rule 10.01 - A lawyer shall not do any falsehood, nor consent to the doing of any in Court; nor shall
he mislead, or allow the Court to be misled by any artifice.

The foregoing ordain ethical norms that bind all attorneys, as officers of the Court, to act with the
highest standards of honesty, integrity, and trustworthiness. All attorneys are thereby enjoined to
obey the laws of the land, to refrain from doing any falsehood in or out of court or from consenting to
the doing of any in court, and to conduct themselves according to the best of their knowledge and
discretion with all good fidelity as well to the courts as to their clients. Being also servants of the
Law, attorneys are expected to observe and maintain the rule of law and to make themselves
exemplars worthy of emulation by others.9 The least they can do in that regard is to refrain from
engaging in any form or manner of unlawful conduct (which broadly includes any act or omission
contrary to law, but does not necessarily imply the element of criminality even if it is broad enough to
include such element).10

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

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

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

Nonetheless, even if they enjoy a number of privileges by reason of their office and in recognition of
the vital role they play in the administration of justice, attorneys hold the privilege and right to
practice law before judicial, quasi-judicial, or administrative tribunals or offices only during good
behavior.13

II

Respondent did not violate the Lawyer’s Oath

and the Code of Professional Responsibility

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

2. The allegations in paragraph 2 of the complaint are ADMITTED. Moreover, it is hereby

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

In order to properly and fully protect their rights, ownership and interests, Leonardo C. Lim
and William C. Lim shall hereby represent the defendants-spouses Lim Hio and Dolores Chu
 as substitute/representative parties in this action. In this manner, a complete and expeditious
resolution of the issues raised in this case can be reached without undue delay. A photo
copy of the Deed of Absolute Sale over the subject property, executed by herein defendants-
spouses Lim Hio and Dolores Chu in favor of said Leonardo C. Lim and William C. Lim, is
hereto attached as Annex "1" hereof.

xxx

21. There is improper joinder of parties in the complaint. Consequently, answering

defendants are thus unduly compelled to litigate in a suit regarding matters and facts as to
which they have no knowledge of nor any involvement or participation in.

22. Plaintiff is barred by the principle of estoppel in bringing this suit, as it was the one who,
by its governmental authority, issued the titles to the subject property.

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

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

The following portions of De Leon’s complaint in intervention in Civil Case No. 4674MN are relevant,
viz:

2. Defendant spouses Lim Hio and Dolores Chu, are Filipino citizens with addresses at 504
Plaza del Conde, Manila and at 46 C. Arellano St., San Agustin, Malabon City, where they
may be served with summons and other court processes;

3. Defendant spouses Leonardo Lim and Sally Khoo and defendant spouses William Lim and
Sally Lee are all of legal age and with postal address at Rms. 501-502 Dolores Bldg., Plaza
del Conde, Binondo, Manila, alleged purchasers of the property in question from defendant
spouses Lim Hio and Dolores Chu;

4. Defendants Registrar of Deeds of Malabon City holds office in Malabon City, where he
may be served with summons and other court processes. He is charged with the duty,
among others, of registering decrees of Land Registration in Malabon City under the Land
Registration Act;

xxx

7. That intervenor Jessie de Leon, is the owner of a parcel of land located in Malabon City
described in TCT no. M-15183 of the Register of Deeds of Malabon City, photocopy of which
is attached to this Complaint as Annex "G", and copy of the location plan of the
aforementioned property is attached to this complaint as Annex "H" and is made an integral
part hereof;
 8. That there are now more or less at least 40 squatters on intervenor’s property, most of
them employees of defendant spouses Lim Hio and Dolores Chu and defendant spouses
Leonardo Lim and Sally Khoo and defendant spouses William Lim and Sally Lee who had
gained access to intervenor’s property and built their houses without benefit of any building
permits from the government who had made their access to intervenor’s property thru a two
panel metal gate more or less 10 meters wide and with an armed guard by the gate and with
permission from defendant spouses Lim Hio and Dolores Chu and/or and defendant spouses
Leonardo Lim and Sally Khoo and defendant spouses William Lim and Sally Lee illegally
entered intervenor’s property thru a wooden ladder to go over a 12 foot wall now separating
intervenor’s property from the former esquinita which is now part of defendant spouses Lim
Hio and Dolores Chu’s and defendant spouses Leonardo Lim and Sally Khoo’s and
defendant spouses William Lim and Sally Lee’s property and this illegally allowed his
employees as well as their relatives and friends thereof to illegally enter intervenor’s property
through the ladders defendant spouses Lim Hio and Dolores Chu installed in their wall and
also allowed said employees and relatives as well as friends to build houses and shacks
without the benefit of any building permit as well as permit to occupy said illegal buildings;

9. That the enlargement of the properties of spouses Lim Hio and Dolores Chu had resulted
in the closure of street lot no. 3 as described in TCT no. 143828, spouses Lim Hio and
Dolores Chu having titled the street lot no. 3 and placed a wall at its opening on C. Arellano
street, thus closing any exit or egress or entrance to intervenor’s property as could be seen
from Annex "H" hereof and thus preventing intervenor from entering into his property resulted
in preventing intervenor from fully enjoying all the beneficial benefits from his property;

10. That defendant spouses Lim Hio and Dolores Chu and later on defendant spouses
Leonardo Lim and Sally Khoo and defendant spouses William Lim and Sally Lee are the only
people who could give permission to allow third parties to enter intervenor’s property and
their control over intervenor’s property is enforced through his armed guard thus exercising
illegal beneficial rights over intervenor’s property at intervenor’s loss and expense, thus
depriving intervenor of legitimate income from rents as well as legitimate access to
intervenor’s property and the worst is preventing the Filipino people from enjoying the
Malabon Navotas River and enjoying the right of access to the natural fruits and products of
the Malabon Navotas River and instead it is defendant spouses Lim Hio and Dolores Chu
and defendant spouses Leonardo Lim and Sally Khoo and defendant spouses William Lim
and Sally Lee using the public property exclusively to enrich their pockets;

xxx

13. That defendant spouses Lim Hio and Dolores Chu and defendant spouses Leonardo Lim
and Sally Khoo and defendant spouses William Lim and Sally Lee were confederating,
working and helping one another in their actions to inhibit intervenor Jessie de Leon to gain
access and beneficial benefit from his property;

On July 10, 2008, the respondent, representing all the defendants named in De Leon’s complaint in
intervention, responded in an answer to the complaint in intervention with counterclaim and cross-
claim,17 stating that "spouses Lim Hio and Dolores Chu xxx are now both deceased," to wit:

xxx

2. The allegations in paragraphs 2 and 3 of the Complaint are ADMITTED, with the qualification that
defendants-spouses Leonardo Lim and Sally Khoo Lim, William Lim and Sally Lee Lim are the
registered and lawful owners of the subject property covered by Transfer Certificate of Title No. M-
35929, issued by the Register of Deeds for Malabon City, having long ago acquired the same from
the defendants-spouses Lim Hio and Dolores Chu, who are now both deceased. Copy of the TCT
No. M-35929 is attached hereto as Annexes "1" and "1-A". The same title has already been
previously submitted to this Honorable Court on December 13, 2006.

xxx

The respondent subsequently submitted to the RTC a so-called clarification and submission,18 in
which he again adverted to the deaths of Spouses Lim Hio and Dolores Chu, as follows:

1. On March 19, 2009, herein movants-defendants Lim filed before this Honorable Court a
Motion for Substitution of Defendants in the Principal Complaint of the plaintiff Republic of
the Philippines, represented by the DENR;

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

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

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

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

6. Simply put, movants-defendants Lim have become the indispensable defendants in the
principal complaint of plaintiff DENR, being now the registered and lawful owners of the
subject property and the real parties-in-interest in this case. Without them, no final
determination can be had in the Principal complaint.

7. Significantly, the property of intervenor Jessie de Leon, which is the subject of his
complaint-in-intervention, is identically, if not similarly, situated as that of herein movants-
defendants Lim, and likewise, may as well be a proper subject of the Principal Complaint of
plaintiff DENR.

8. Even the plaintiff DENR, itself, concedes the fact that herein movants-defendants Lim
should be substituted as defendants in the principal complaint as contained in their
Manifestation dated June 3, 2009, which has been filed in this case.
WHEREFORE, herein movants-defendants Lim most respectfully submit their Motion for substitution
of Defendants in the Principal Complaint and pray that the same be granted.

xxx

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

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

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

III

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

According to Justice Cardozo,19 "xxx the fair fame of a lawyer, however innocent of wrong, is at the
mercy of the tongue of ignorance or malice. Reputation in such a calling is a plant of tender growth,
and its bloom, once lost, is not easily restored."

A lawyer’s reputation is, indeed, a very fragile object. The Court, whose officer every lawyer is, must
shield such fragility from mindless assault by the unscrupulous and the malicious. It can do so,
firstly, by quickly cutting down any patently frivolous complaint against a lawyer; and, secondly, by
demanding good faith from whoever brings any accusation of unethical conduct. A Bar that is
insulated from intimidation and harassment is encouraged to be courageous and fearless, which can
then best contribute to the efficient delivery and proper administration of justice.
1avv phil

The complainant initiated his complaint possibly for the sake of harassing the respondent, either to
vex him for taking the cudgels for his clients in connection with Civil Case No. 4674MN, or to get
even for an imagined wrong in relation to the subject matter of the pending action, or to accomplish
some other dark purpose. The worthlessness of the accusation – apparent from the beginning – has
impelled us into resolving the complaint sooner than later.
WHEREFORE, we dismiss the complaint for disbarment or suspension filed against Atty. Eduardo
G. Castelo for utter lack of merit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

WE CONCUR: