VOL.

515, FEBRUARY 12, 2007 517

Rayos vs. Hernandez

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

FRANCISCO RAYOS, petitioner, vs. ATTY. PONCIANO G.

HERNANDEZ, respondent.

Administrative Law; Attorneys; Moneys collected by an attorney on a

judgment rendered in favor of his client constitute trust funds and must be
immediately paid over to the client.—Moneys collected by an attorney on a
judgment rendered in favor of his client constitute trust funds and must be
immediately paid over to the client. Canon 16 of the Code of Professional
Responsibility provides as follows: CANON 16—A lawyer shall hold in
trust all moneys and properties of his client that may come into his
possession. Rule 16.01—A lawyer shall account for all money or property
collected or received for or from the client.

Same; Same; A lawyer’s unjustified withholding of money belonging to

his client, as in this case, warrants the imposition of disciplinary action.—A
lawyer is not entitled to unilaterally appropriate his client’s money for
himself by the mere fact alone that the client owes him attorney’s fees. The
failure of an attorney to return the client’s money upon demand gives rise to
the presumption that he has misappropriated it for his own use to the
prejudice and violation of the general morality, as well as of professional
ethics; it also impairs public confidence in the legal profession and deserves
punishment. In short, a lawyer’s unjustified withholding of money belong-

_______________

* THIRD DIVISION.

518

518 SUPREME COURT REPORTS ANNOTATED

Rayos vs. Hernandez

ing to his client, as in this case, warrants the imposition of disciplinary
action.

Same; Same; Attorney-Client Relationship; The relationship of

attorney and client has always been rightly regarded as one of special trust
and confidence—an attorney must exercise the utmost good faith and
fairness in all his relationship vis-à-vis his client.—The relationship of
attorney and client has always been rightly regarded as one of special trust
and confidence. An attorney must exercise the utmost good faith and
fairness in all his relationship vis-à-vis his client. Respondent fell far short
of this standard when he failed to render an accounting for the amount
actually received by him on behalf of his client and when he refused to turn
over any portion of said amount to his client upon the pretext that his
attorney’s fees had not at all been paid. Respondent had, in fact, placed his
private and personal interest above that of his client.

Attorneys; Attorney’s Fees; It follows that a lawyer’s compensation for

professional services rendered is subject to the supervision of the court, not
just to guarantee that the fees he charges and receives remain reasonable
and commensurate with the services rendered, but also to maintain the
dignity and integrity of the legal profession to which he belongs.—We have
held that lawyering is not a moneymaking venture and lawyers are not
merchants. Law advocacy, it has been stressed, is not capital that yields
profits. The returns it births are simple rewards for a job done or service
rendered. It is a calling that, unlike mercantile pursuits which enjoy a
greater deal of freedom from governmental interference, is impressed with a
public interest, for which it is subject to State regulation.

Same; Same; Section 13 of the Canons of Professional Ethics states

that “a contract for a contingent fee, where sanctioned by law, should be
reasonable under all the circumstances of the case including the risk and
uncertainty of the compensation, but should always be subject to the
supervision of a court as to its reasonableness.”—A contingent fee
arrangement is valid in this jurisdiction and is generally recognized as valid
and binding but must be laid down in an express contract. The amount of
contingent fee agreed upon by the parties is subject to the stipulation that
counsel will be paid for his legal services only if the suit or litigation
prospers. A much higher compensation is allowed as contingent fee in
consideration of the risk that the lawyer may get nothing if the suit fails.
Contracts of

519

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Rayos vs. Hernandez

this nature are permitted because they redound to the benefit of the poor
client and the lawyer “especially in cases where the client has meritorious
cause of action, but no means with which to pay for legal services unless he
can, with the sanction of law, make a contract for a contingent fee to be paid
out of the proceeds of the litigation. Oftentimes, the contingent fee
arrangement is the only means by which the poor and helpless can seek
redress for injuries sustained and have their rights vindicated.” Contingent
fee contracts are subject to the supervision and close scrutiny of the court in
order that clients may be protected from unjust charges. Section 13 of the
Canons of Professional Ethics states that “a contract for a contingent fee,
where sanctioned by law, should be reasonable under all the circumstances
of the case including the risk and uncertainty of the compensation, but
should always be subject to the supervision of a court, as to its
reasonableness.”

Same; Same; We also take note respondent’s efforts in litigating

petitioner’s case for a long period of 15 years—the respondent took risk in
representing petitioner on a contingent fee basis—in consideration of the
foregoing, a fee of 35% of the amount awarded to petitioner would be a fair
compensation for respondent’s legal services.—In the present case,
respondent Atty. Hernandez, after all, succeeded in obtaining a favorable
decision for his client, the petitioner. At first, respondent failed to obtain a
favorable judgment in the RTC as the case was dismissed. But on appeal to
the Court of Appeals, the RTC Decision was reversed and petitioner was
awarded the amount of P1,060,800.00 as damages and P159,120.00 as
attorney’s fees. Said award was sustained by the Supreme Court. We also
take note respondent’s efforts in litigating petitioner’s case for a long period
of 15 years. Lastly, the respondent took risk in representing petitioner on a
contingent fee basis. In consideration of the foregoing, a fee of 35% of the
amount awarded to petitioner would be a fair compensation for respondent’s
legal services.

Same; Disbarment; Disbarment, therefore, should never be decreed

where any lesser penalty, such as temporary suspension, would accomplish
the end desired.—The misconduct of a lawyer, whether in his professional
or private capacity, which shows him to be wanting in moral character,
honesty, probity and good demeanor, renders him unworthy to the privileges
which his license and the law confer upon him, may be sanctioned with
disbarment or suspension. The court should also exercise a sound discretion
in determining whether

520

520 SUPREME COURT REPORTS ANNOTATED

Rayos vs. Hernandez

a lawyer should be disbarred or merely suspended. It should bear in mind
that admission to the Bar is obtained only after years of labor and study and
the office acquired often becomes the source of great honor and emolument
to its possessor. To most members of the legal profession, it is a means of
support for themselves and their families. To deprive one of such an office is
often to decree poverty to the lawyer and destitution to his family.
Disbarment, therefore, should never be decreed where any lesser penalty,
such as temporary suspension, would accomplish the end desired.

PETITION for review on certiorari of a resolution of the Integrated

Bar of the Philippines.
The facts are stated in the opinion of the Court.
          Law Firm of Lapena, Villanueva, Manzano, Ordona and
Associates for petitioner.
     Amador C. Dela Merced for respondent.

CHICO-NAZARIO, J.:
1
This is a Petition for Review of the Resolution dated 12 March
2005 of the Integrated Bar of the Philippines (IBP), dismissing
petitioner Francisco Rayos’s complaint for disbarment against
respondent Atty. Ponciano Hernandez.
Respondent was the counsel of petitioner in Civil Case No. SM-
951 entitled, “Francisco Rayos v. NAPOCOR,” filed before the
Regional Trial Court (RTC), Malolos, Bulacan. The complaint
alleged, among other things, that the National Power Corporation
(NAPOCOR) recklessly, imprudently and negligently opened the
three floodgates of the spillway of Angat Dam at midnight of 26
October 1978 until the early morning hours of 27 October 1978,
during the occurrence of typhoon “Kading” causing the release of a
great volume of stored water, the resultant swelling and flooding of
Angat River, and the consequent loss of lives of some of petitioner’s
relatives and destruction of his family’s properties, for which he
sought

_______________

1 Rollo, pp. 9-24.

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VOL. 515, FEBRUARY 12, 2007 521

Rayos vs. Hernandez

damages. Of the 10 members of petitioner’s family who perished,

only four bodies were recovered and only petitioner and one of his
sons, German Rayos, survived.

2
 2
On 21 December 1979, the complaint was dismissed on the
ground that the State cannot be sued without its consent as the
operation and management of Angat Dam, Norzagaray, were
governmental functions. Said dismissal was questioned directly to
this Court which set aside the 3
RTC decision and ordered the
reinstatement of the complaint.
On 30 April 1990, however, the complaint was dismissed again
4
by the RTC for lack of sufficient and credible evidence.
The case was subsequently appealed to the Court of Appeals,
which reversed the RTC decision and awarded damages in favor of
petitioner, the dispositive portion of which reads:

“CONFORMABLY TO THE FOREGOING, the joint decision appealed

from is hereby REVERSED and SET ASIDE, and a new one is hereby
rendered:
xxxx
2. In Civil Case No. SM-951, ordering defendants-appellees to pay
jointly and severally, plaintiff-appellant, with legal interest from the date
when this decision shall have become final and executory, the following:

A. Actual damages of Five Hundred Twenty Thousand Pesos

(P520,000.00);
B. Moral Damages of Five Hundred Thousand Pesos (P500,000.00);
and
C. Litigation Expenses of Ten Thousand Pesos (P10,000.00).

xxxx
In addition, in all the four (4) instant cases, ordering defendants-
appellees to pay, jointly and severally, plaintiffs-appellants,

_______________

2 Records, Vol. III, p. 66.

3 Id., at p. 89.
4 Id., at p. 125.

522

522 SUPREME COURT REPORTS ANNOTATED

Rayos vs. Hernandez

attorney’s fees in an amount equivalent to 15% of the total amount

5
awarded.”

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

7
 7
Thus, a Writ of Execution was issued by the RTC on 10
December 1993, upon motion filed by respondent. As a
consequence, NAPOCOR issued Check No. 014710 dated 5 January
1994, in the amount of P1,060,800.00 payable to petitioner.
Thereafter, the check was turned over to respondent as counsel of
petitioner. Petitioner demanded the turn over of the check from
respondent, but the latter refused. 8
On 24 January 1994, petitioner filed with the RTC a motion to
direct respondent to deliver to him the check issued by NAPOCOR,
corresponding to the damages awarded by the Court of Appeals.
Petitioner sought to recover the check in the amount of
P1,060,800.00 from respondent, claiming that respondent had no
authority to receive the same as he was already 9
dismissed by
petitioner as his counsel on 21 November 1993. Respondent, on the
other hand, justifies his retention as a means to ensure payment of
his attorney’s fees.
On 7 April 1994, the RTC issued an Order directing respondent
to deliver the check to the Sheriff of the court who will subsequently
deliver it to petitioner. A Writ of Execution was subsequently issued.
Despite the Court Order, respondent refused to surrender the check.
However, on 4 July 1994, respondent deposited the amount of
P502,838.79 with Farmers Savings and Loan Bank, Inc.,
Norzagaray, Bulacan, in the name of petitioner which was eventually
received by the latter.

_______________

5 Id., at pp. 198-201.

6 Promulgated 21 May 1993.
7 Records, Vol. III, pp. 224-226.
8 Id., at pp. 243-245.
9 Id., at p. 239.

523

VOL. 515, FEBRUARY 12, 2007 523

Rayos vs. Hernandez

Thus, petitioner initiated this complaint for disbarment for the

failure of respondent to return the rest of the award in the amount of
P557,961.21. 10
In his comment, respondent alleged that he handled petitioner’s
case, in Civil Case No. SM-951, for 15 years, from the trial court up
to the Supreme Court. On 21 November 1993, he received a letter
from petitioner dismissing him as counsel. Simultaneous thereto,
respondent received a letter dated 15 November 1993 from Atty.
Jose G. Bruno asking him to comment on the therein attached letter
dated 19 November 1993 of petitioner addressed to NAPOCOR,
requesting that the award of damages granted by the Court of
Appeals and affirmed by the Supreme Court be paid to him.
Respondent also averred that petitioner had a verbal contract for
attorney’s fees on a contingent basis and that the said contract was
only reduced in writing on 6 October 1991, duly signed by both of
them. By virtue of the contract, petitioner and respondent
supposedly agreed on a 40%-60% sharing, respectively, of the court
award. Respondent was entitled to receive 60% of the award
because petitioner agreed to pay him 40% of the award as attorney’s
fees and 20% of the award as litigation expenses.
Respondent further asseverated that because petitioner dismissed
the respondent and refused to settle his obligation, he deposited the
amount of P424,320.00 in a bank in petitioner’s name under
Account No. 381 (representing petitioner’s share of 40% of the total
11
award) on 10 May 1994; and the amount of P63,648.00 in
petitioner’s name under Account No. 389 (representing petitioner’s
share of 40% of the P159,120.00 awarded
12
as attorney’s fees by the
Court of Appeals) on 19 May 1994. Petitioner already received the

_______________

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

11 Records, Vol. III, p. 233.
12 Id., at p. 234.

524

524 SUPREME COURT REPORTS ANNOTATED

Rayos vs. Hernandez

amount of P502,838.79 in accordance with the RTC Order dated 7

April 1994.
Respondent contended that the petitioner’s complaint was
without basis and was meant only to harass and put him to shame
before the residents of Norzagaray, Bulacan.13
In a Resolution dated 9 August 1995, the Court referred the
case to the Commission on Bar Discipline of the IBP for
investigation, report and recommendation.
A series of hearings were conducted by the Commission on Bar
Discipline of the IBP at the IBP Building, Ortigas Center, Pasig City,
from March to September 2001.
On 1 February 2005, Investigating Commissioner Lydia A. 14
Navarro B. Funa submitted her Report and Recommendation,
recommending the dismissal of the case.
Thereafter, the IBP issued its Resolution dated 12 March 2005,
approving and adopting the recommendation of the Investigating
Commissioner, thus:
RESOLVED to ADOPT and APPROVE, as it hereby ADOPTED and
APPROVED, the Report and Recommendation of the Investigating
Commissioner of the above-entitled case, herein made part of this
Resolution as Annex “A”; and, finding the recommendation fully supported
by the evidence on record and the applicable laws and rules, and considering
15
that the case lacks merit, the same is hereby DISMISSED.

We do not agree in the recommendation of the IBP. The threshold

issue in this petition is: whether respondent is justified in retaining
the amount awarded to petitioner in Civil Case No. SM-951 to
assure payment of his attorney’s fees.

_______________

13 Records, Vol. I, p. 75.

14 Rollo, pp. 28-34.
15 Id., at p. 27.

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Rayos vs. Hernandez

Moneys collected by an attorney on a judgment rendered in favor of

his client constitute
16
trust funds and must be immediately paid over
to the client. Canon 16 of the Code of Professional Responsibility
provides as follows:

CANON 16—A lawyer shall hold in trust all moneys and properties of his
client that may come into his possession.
Rule 16.01—A lawyer shall account for all money or property collected
or received for or from the client.

In the case at bar, when respondent withheld and refused to deliver

the NAPOCOR check representing the amount awarded by the court
in Civil Case No. SM-951, which he received on behalf of his client
(petitioner herein), he breached the trust reposed on him. It is only
after an Order was issued by the RTC ordering the delivery of the
check to petitioner that the respondent partially delivered the amount
of P502,838.79 to the former, but still retaining for himself the
amount of P557,961.21 as payment for his attorney’s fees. The claim
of the respondent that petitioner failed to pay his attorney’s fees is
not an excuse for respondent’s failure to deliver the amount to the
petitioner. A lawyer is not entitled to unilaterally appropriate his
client’s money for himself 17
by the mere fact alone that the client
owes him attorney’s fees. The failure of an attorney to return the
client’s money upon demand gives rise to the presumption that he
has misappropriated it for his own use to the prejudice and violation
of the general morality, as well as of professional ethics; it also
impairs public confidence in the legal profession and deserves
punishment. In short, a lawyer’s unjustified withholding of money
belonging to his client,
18
as in this case, warrants the imposition of
disciplinary action.

_______________

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

17 Cabigao v. Rodrigo, 57 Phil. 20, 23 (1932).
18 Sencio v. Atty. Calvadores, 443 Phil. 490, 494; 395 SCRA 393, 396 (2003);
Reyes v. Maglaya, 313 Phil. 1, 7; 243 SCRA 214, 219 (1995).

526

526 SUPREME COURT REPORTS ANNOTATED

Rayos vs. Hernandez

It is true that under Canon 16.03 of the Code of Professional

Responsibility, an attorney has the following rights;

“Rule 16.03—A lawyer shall deliver the funds and property of his client
when due or upon demand. However, he shall have a lien over the funds and
may apply so much thereof as may be necessary to satisfy his lawful fees
and disbursements, giving notice promptly thereafter to his client. He shall
also have a lien to the same extent on all judgments and executions he has
secured for his client as provided for in the Rules of Court.” (Emphases
supplied.)

But the fact alone that a lawyer has a lien for fees on moneys in his
hands collected for his client, as above-stated, does not relieve him
of his duty to promptly account for the moneys received; his failure
19
to do so constitutes professional misconduct. Thus, what
respondent should have properly done in the case at bar was to
provide the petitioner with an accounting before deducting his
attorney’s fees and then to turn over the remaining balance of the
award collected to petitioner. The Court notes that respondent
represented petitioner from the time of filing of the complaint in
Civil Case No. SM-951 before what is now the RTC and of the
appeal of the same case to the Court of Appeals and Supreme Court.
But respondent was not justified to hold on the entire amount of
award collected by him until his fees had been paid and received by
him.
The relationship of attorney and client has always been rightly
regarded as one of special trust and confidence. An attorney must
exercise the utmost good faith and fairness in all his relationship vis-
à-vis his client. Respondent fell far short of this standard when he
failed to render an accounting for the amount actually received by
him on behalf of his client and when he refused to turn over any
portion of said amount to his client upon the pretext that his
attorney’s fees had not

_______________

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

527

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Rayos vs. Hernandez

at all been paid. Respondent had, in fact, placed his private and
personal interest above that of his client.
We have held that lawyering
20
is not a moneymaking venture and
lawyers are not merchants. Law advocacy, it has been stressed, is
not capital that yields profits. The returns it births are simple rewards
for a job done or service rendered. It is a calling that, unlike
mercantile pursuits which enjoy a greater deal of freedom from
governmental interference, is impressed 21
with a public interest, for
which it is subject to State regulation.
A lawyer is not merely the defender of his client’s cause and a
trustee of his client’s cause of action and assets; he is also, and first
and foremost, an officer of the court and participates 22
in the
fundamental function of administering justice in society. It follows
that a lawyer’s compensation for professional services rendered is
subject to the supervision of the court, not just to guarantee that the
fees he charges and receives remain reasonable and commensurate
with the services rendered, but also to maintain the dignity and
integrity of the legal profession to which he belongs. Upon taking
his attorney’s oath as an officer of the court, a lawyer submits
himself to the authority
23
of the courts to regulate his right to charge
professional fees.
There is another aspect to this case which the Court cannot just
gloss over. Respondent claimed that he charged petitioner, his client,
a contingent fee comprising of forty percent

_______________

20 Canon 1, CANONS OF PROFESSIONAL ETHICS.

21 Metropolitan Bank & Trust Company v. Court of Appeals , G.R. Nos. 86100-03,
23 January 1990, 181 SCRA 367, 377, citing Canlas v. Court of Appeals, G.R. No. L-
77691, 8 August 1988, 164 SCRA 160, 173-174.
22 Pineda v. Atty. De Jesus, G.R. No. 155224, 23 August 2006, 499 SCRA 608.
23 Sumaoang v. Judge, RTC, Br. XXXI, Guimba, Nueva Ecija , G.R. No. 78173, 26
October 1992, 215 SCRA 136, 143.

528
528 SUPREME COURT REPORTS ANNOTATED
Rayos vs. Hernandez

(40%) as attorney’s fees and twenty percent (20%) as litigation

expenses. The agreement provides:

UNAWAIN NG LAHAT SA PAMAMAGITAN NITO:

Ako, si Francisco Rayos, Sr., Pilipino, may sapat na gulang at ngayon ay

naninirahan sa Pinagbarilan, Baliwag, Bulacan, sa pamamagitan ng
kasulatang ito, ay nagpapatunay sa mga sumusunod:
Na, kaugnay sa aking usapin laban sa NPC at Benjamin Chavez (Rayos
vs. NPC, et al.) na ngayon ay nakabinbin sa Court of Appeals, ako ay
nakipagkasundo sa aking abogado, Atty. Ponciano G. Hernandez, gaya ng
sumusunod:

1. Sakaling ipanalo ang aking usapin, ang ano mang aking makukuha
ay hahatiin gaya ng sumusunod: 40% ang para sa akin; 40% ang
para kay Atty. Ponciano G. Hernandez; 20% ay ilalabas bilang
gastos sa kaso.
2. Kung matalo ako sa kaso ay wala akong sagutin sa aking abogado.

Sa katunayan ng lahat, ako ay lumagda sa kasunduang ito dito sa

Norzagaray, Bulacan ngayong ika-6 ng Oktubre 1991.

(SGD)PONCIANO G. HERNANDEZ (SGD) FRANCISCO RAYOS

24
Abogado May Usapin

25
A contingent fee arrangement is valid in this jurisdiction and is
generally recognized26 as valid and binding but must be laid down in
an express contract. The amount of contingent fee agreed upon by
the parties is subject to the stipulation that counsel will be paid for
his legal services only if the suit or litigation prospers. A much
higher compensation is allowed as contingent fee in consideration of
the risk that the lawyer

_______________

24 Records, Vol. I, p. 53.

25 Law Firm of Raymundo A. Armovit v. Court of Appeals, G.R. No. 90983, 27
September 1991, 202 SCRA 16, 24.
26 Corpus v. Court of Appeals, G.R. No. L-40424, 30 June 1980, 98 SCRA 424,
441.

529

VOL. 515, FEBRUARY 12, 2007 529

Rayos vs. Hernandez
27
 27
may get nothing if the suit fails. Contracts of this nature are
permitted because they redound to the benefit of the poor client and
the lawyer “especially in cases where the client has meritorious
cause of action, but no means with which to pay for legal services
unless he can, with the sanction of law, make a contract for a
contingent fee to be paid out of the proceeds of the litigation.
Oftentimes, the contingent fee arrangement is the only means by
which the poor and helpless can seek redress for injuries sustained
28
and have their rights vindicated.”
Contingent fee contracts are subject to the supervision and close
scrutiny of the court in order that clients may be protected from
29
unjust charges. Section 13 of the Canons of Professional Ethics
states that “a contract for a contingent fee, where sanctioned by law,
should be reasonable under all the circumstances of the case
including the risk and uncertainty of the compensation, but should
always be subject to the supervision of a court, as to its
reasonableness.” Likewise, Rule 138, Section 24, of the Rules of
Court provides:

“SEC. 24. Compensation of attorney’s; agreement as to fees.—An attorney

shall be entitled to have and recover from his client no more than a
reasonable compensation for his services, with a view to the importance of
the subject matter of the controversy, the extent of the services rendered,
and the professional standing of the attorney. No court shall be bound by the
opinion of attorneys as expert witnesses as to the proper compensation, but
may disregard such testimony and base its conclusion on its own
professional knowledge. A written contract for services shall control the
amount to be paid therefor unless found by the court to be unconscionable
or unreasonable.” (Emphasis supplied.)

_______________

27 Sesbreño v. Court of Appeals , 314 Phil. 884, 893; 245 SCRA 30, 36 (1995).
28 Director of Lands v. Ababa, G.R. No. L-26096, 27 February 1979, 88 SCRA
513, 524.
29 Licudan v. Court of Appeals, G.R. No. 91958, 24 January 1991, 193 SCRA 293,
300; Director of Lands v. Ababa, Id., at p. 525.

530

530 SUPREME COURT REPORTS ANNOTATED

Rayos vs. Hernandez

The reduction of unreasonable30 attorney’s fees is within the

regulatory powers of the courts. When the courts find that the
stipulated amount is excessive or the contract is unreasonable, or
found to have been marred by fraud, mistake, undue influence or
suppression of facts on the part of the attorney, public policy
demands that said contract
31
be disregarded to protect the client from
unreasonable exaction.
There is, therefore, now a corollary issue of whether the
stipulated attorney’s fees are unreasonable and unconscionable
under the circumstances of the case as to warrant a reduction
thereof.
Stipulated attorney’s fees are unconscionable whenever the
amount is by far so disproportionate compared to the value of the
services rendered as to amount to fraud perpetrated upon the client.
This means to say that the amount of the fee contracted for, standing
alone and unexplained would be sufficient to show that an unfair
advantage had been32taken of the client, or that a legal fraud had been
perpetrated on him.
The decree of unconscionability or unreasonableness of a
stipulated amount in a contingent fee contract, will not, however,
preclude recovery. It merely justifies the fixing by the court of a
reasonable compensation for the lawyer’s services.
Generally, the amount of attorney’s fees due is that stipulated in
the retainer agreement which is conclusive as to the amount of the
lawyer’s compensation. A stipulation on a lawyer’s compensation in
a written contract for professional services ordinarily controls the
amount of fees that the contracting lawyer may be allowed, unless
the court finds such stipu-

_______________

30 Radiowealth Finance Co., Inc. v. International Corporate Bank, G.R. Nos.

77042-43, 28 February 1990, 182 SCRA 862, 868.
31 Felices v. Madrilejos, 51 Phil. 24, 33 (1927); Jayme v. Bualan, 58 Phil. 422, 424
(1933).
32 Sesbreño v. Court of Appeals, supra note 27 at p. 894.

531

VOL. 515, FEBRUARY 12, 2007 531

Rayos vs. Hernandez

33
lated amount unreasonable or unconscionable. In the absence
thereof, the amount of attorney’s fees is fixed on the basis of
quantum meruit, i.e., the reasonable worth of the attorney’s services.
Courts may ascertain also if the attorney’s fees are 34found to be
excessive, what is reasonable under the circumstances. In no case,
however, must a lawyer be allowed to recover more than what is
reasonable, pursuant to Section 24, Rule 138 of the Rules of Court.
We have identified the circumstances to be considered in
determining the reasonableness of a claim for attorney’s fees as
follows: (1) the amount and character of the service rendered; (2)
labor, time, and trouble involved; (3) the nature and importance of
the litigation or business in which the services were rendered; (4) the
responsibility imposed; (5) the amount of money or the value of the
property affected by the controversy or involved in the employment;
(6) the skill and experience called for in the performance of the
services; (7) the professional character and social standing of the
attorney; (8) the results secured; (9) whether the fee is absolute or
contingent, it being recognized that an attorney may properly charge
35
a much larger fee when it is contingent than when it is not; and
(10) the financial capacity and economic status of the client have to
36
be taken into account in fixing the reasonableness of the fee.
Rule 20.1, Canon 20 of the Code of Professional Responsibility
enumerates the following factors which should guide a lawyer in
determining his fees:

_______________

33 Rule 138, Section 24, REVISED RULES OF COURT; Francisco v. Matias, 119
Phil. 351, 358; 10 SCRA 89, 95 (1964); Lopez v. Pan American World Airways, 123
Phil. 256, 271; 16 SCRA 431, 444 (1966).
34 Sesbreño v. Court of Appeals, supra note 27 at p. 894.
35 Research and Services Realty, Inc. v. Court of Appeals, 334 Phil. 652, 668; 266
SCRA 731, 746 (1997).
36 Taganas v. National Labor Relations Commission, G.R. No. 118746, 7
September 1995, 248 SCRA 133, 137.

532

532 SUPREME COURT REPORTS ANNOTATED

Rayos vs. Hernandez

(a) The time spent and the extent of the services rendered or
required;
(b) The novelty and difficulty of the questions involved;
(c) The importance of the subject matter;
(d) The skill demanded;
(e) The probability of losing other employment as a result of
acceptance of the proffered case;
(f) The customary charges for similar services and the schedule
of fees of the IBP Chapter to which he belongs;
(g) The amount involved in the controversy and the benefits
resulting to the client from the service;
(h) The contingency or certainty of compensation;
(i) The character of the employment, whether occasional or
established; and
(j) The professional standing of the lawyer.
In the case at bar, respondent retained the amount of P557,961.21
out of the P1,060,800.00 award for damages paid by NAPOCOR to
petitioner. Under the said scheme, respondent actually collected
fifty-three percent (53%) or more than half of the total amount due
the petitioner; indeed, he appropriated for himself more than the
amount which he had already turned over to and actually received
by his client.
As adverted to above, we note that petitioner was unschooled and
frustrated and hopeless with the tragic loss of his loved ones caused
by the inundation of the town of Norzagaray, Bulacan, on 26-27
October 1978 because of the negligent release by NAPOCOR of the
water through the spillways of the Angat Dam. Petitioner also had to
face the loss and destruction of his family’s properties. Under such
circumstances and given his understandable desire to recover the
damages for the loss of his loved ones and properties, petitioner
would easily succumb and readily agree to the demands of
respondent lawyer regarding his attorney’s fees.
We believe and so hold that the contingent fee here claimed was,
under the facts obtaining in this case, grossly excessive

533

VOL. 515, FEBRUARY 12, 2007 533

Rayos vs. Hernandez

and unconscionable. Such a fee structure, when considered in

conjunction with the circumstances of this case, also shows that an
unfair advantage was taken of the client and legal fraud and
imposition perpetrated upon him. Lawyers should not be permitted
to get a lion’s share of the benefits due the poor and the helpless.
Contracts for legal services between the helpless and attorney should
be zealously scrutinized to the end that a fair share of the benefits be
not denied
37
to the former. This Court has the power 38
to guard a
client, especially an aged and necessitous client, against such a
contract.
A survey of existing jurisprudence regarding attorney’s fees
would reveal the following: in the case of Amalgamated
39
Laborers’
Association v. Court of Industrial Relations, the rate of attorney’s
fees allowed was 25%; 40
in Law Firm of Raymundo A. Armovit v.
Court of Appeals, the rate allowed was 20%; in Polytrade
41 42
Corporation v. Blanco, 25%; in Santiago v. Dimayuga, 20%; in
43
Cosmopolitan44
Insurance Co., Inc. v. Reyes, 15%; in Reyes v. Court
45
of Appeals, 15%; and in Social Security Commission v. Almeda,
15%.
In the present case, respondent Atty. Hernandez, after all,
succeeded in obtaining a favorable decision for his client, the
petitioner. At first, respondent failed to obtain a favorable judgment
in the RTC as the case was dismissed. But on appeal to the Court of
Appeals, the RTC Decision was reversed and petitioner was awarded
the amount of P1,060,800.00 as damages and P159,120.00 as
attorney’s fees. Said award was sustained by the Supreme Court. We
also take note respon-

_______________

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

38 Article 24, CIVIL CODE OF THE PHILIPPINES.
39 131 Phil. 374, 386; 22 SCRA 1266, 1277 (1968).
40 Supra note 25 at p. 25.
41 G.R. No. L-27033, 31 October 1969, 30 SCRA 187, 193.
42 113 Phil. 902, 905; 3 SCRA 919, 922 (1961).
43 122 Phil. 648, 651; 15 SCRA 258, 261 (1965).
44 202 Phil. 172, 173; 116 SCRA 607, 609 (1982).
45 G.R. No. L-75428, 14 December 1988, 168 SCRA 474, 481.

534

534 SUPREME COURT REPORTS ANNOTATED

Rayos vs. Hernandez

dent’s efforts in litigating petitioner’s case for a long period of 15

years. Lastly, the respondent took risk in representing petitioner on a
contingent fee basis.
In consideration of the foregoing, a fee of 35% of the amount
awarded to petitioner would be a fair compensation for respondent’s
legal services.
The misconduct of a lawyer, whether in his professional or
private capacity, which shows him to be wanting in moral character,
honesty, probity and good demeanor, renders him unworthy to the
privileges which his license and the law confer upon him, may be
46
sanctioned with disbarment or suspension.
The court should also exercise a sound discretion in determining
whether a lawyer should be disbarred or merely suspended. It should
bear in mind that admission to the Bar is obtained only after years of
labor and study and the office acquired often becomes the source of
great honor and emolument to its possessor. To most members of the
legal profession, it is a means of support for themselves and their
families. To deprive one of such an office is47 often to decree poverty
to the lawyer and destitution to his family. Disbarment, therefore,
should never be decreed where any lesser penalty,48
such as temporary
suspension, would accomplish the end desired.
49
In the case of Schulz v. Atty. Flores, a lawyer was suspended for
six months for not returning his client’s money despite demands, for
unjustifiably refusing to return his client’s papers, and for collecting
excessive and unreasonable
_______________

46 Po Cham v. Pizarro, A.C. No. 5499, 16 August 2005, 467 SCRA 1, 13.
47 Pineda, Ernesto, Legal and Judicial Ethics (1994 Edition), p. 280.
48 Lim v. Montano, A.C. No. 5653, 27 February 2006, 483 SCRA 192, 202.
49 462 Phil. 601; 417 SCRA 519 (2003).

535

VOL. 515, FEBRUARY 12, 2007 535

Rayos vs. Hernandez

50
fees. Also in the case of Tanhueco v. Atty. De Dumo, a lawyer was
suspended for a period of six months for failure to return the money
received by him on behalf of his client and for collecting excessive
and unconscionable fees.
Guided by our rulings in the abovestated cases, suspension of
respondent for six months is justified in the case at bar.
WHEREFORE the Court Resolves that:

1. Respondent is guilty of violation of the attorney’s oath and

of serious professional misconduct and shall be
SUSPENDED from the practice of law for six (6) months
and WARNED that repetition of the same or similar offense
will be dealt with more severely;
2. Respondent is entitled to attorney’s fees in the amount
equivalent to THIRTY-FIVE PERCENT (35%) of the total
51
amount awarded to petitioner in Civil Case No. SM-951;
and
3. Respondent is to return the amount of Two Hundred Ninety
Thousand One Hundred52 Nine Pesos and Twenty-One
Centavos (P290,109.21), which he retained in excess of
what we herein declared as fair and reasonable attorney’s
fees, plus legal interest from date of finality of this
judgment until full payment thereof.

Let copies of this Decision be entered in the personal record of

respondent as member of the Bar and furnished the Office of the Bar
Confidant, the IBP, and the Court Administrator for circulation to all
courts of the country.

_______________

50 Supra note 19.

51 P1,060,800.00 as damages and P159,120.00 (15% of P1,060,800.00) as
attorney’s fees or a total of P1,219,920.00.
52 35% of P1,219,920.00 is P426,972.00. Since respondent retained P557,961.21
and P159,120.00 and 35% of P1,219,920.00 is P 426,972.00, respondent will return
 the difference of P290,109.21 to petitioner. The amount of P557,961.21 and
P159,120.00 retained by respondent is actually 59% of the amount due to petitioner in
Civil Case No. 951.

536

536 SUPREME COURT REPORTS ANNOTATED

Rayos vs. Hernandez

SO ORDERED.

          Ynares-Santiago (Chairp erson), Austria-Martinez and

Callejo, Sr., JJ., concur.
     Nachura, J., On Leave.

Respondent suspended from practice of law for six (6) months for
violation of attorney’s oath and of serious professional misconduct,
with warning against repetition of similar offense; respondent
entitled to attorney’s fees equivalent to 35% of total amount
awarded; and respondent ordered to return P290,109.21.

Notes.—Disbarment should not be decreed where any

punishment less severe—such as reprimand, suspension, or fine—
would accomplish the end desired. (Suzuki vs. Tiamson, 471 SCRA
129 [2005])
Respondent’s failure to return the money to complainants upon
demand gave rise to the presumption that he misappropriated it in
violation of the trust reposed on him. (Aldovino vs. Pujalte, Jr., 423
SCRA 135 [2004])
In the course of his professional relationship with his client, a
lawyer may receive money or property for or from his client—he
shall hold such property in trust, and he is under obligation to make
an accounting thereof as required by rule 16.01 of the Code of
Professional Responsibility. (Buado vs. Layag, 436 SCRA 159
[2004])

——o0o——

537

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