FIRST DIVISION

ROMEO G. ROXAS and SANTIAGO N. G.R. No. 152072

PASTOR,
Petitioners,
- versus -

ANTONIO DE ZUZUARREGUI, JR.,

ENRIQUE DE ZUZUARREGUI, PACITA
JAVIER, ELIZABETH R. GONZALES,
JOSEFINA R. DAZA, ELIAS REYES,
NATIVIDAD REYES, TERESITA
REYES, JOSE REYES and ANTONIO
REYES,
Respondents.
x---------------------x
ANTONIO DE ZUZUARREGUI, JR.,
ENRIQUE DE ZUZUARREGUI, PACITA
JAVIER, ELIZABETH R. GONZALES,
JOSEFINA R. DAZA, ELIAS REYES,
NATIVIDAD REYES, TERESITA
REYES, JOSE REYES and ANTONIO
REYES, G.R. No. 152104
Petitioners,

-versus-
Present:
THE NATIONAL HOUSING
AUTHORITY, JOSE B. H. PEDROSA, PANGANIBAN, CJ.,
ROMEO G. ROXAS and SANTIAGO N. Chairperson,
PASTOR, YNARES-SANTIAGO,
Respondents. AUSTRIA-MARTINEZ,
CALLEJO, SR.,
CHICO-NAZARIO, JJ.

Promulgated:

January 31, 2006

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

Before Us are two petitions for review on certiorari[1] which were consolidated per Resolution[2] of this Court
dated 27 November 2002. The petitioners in G.R. No. 152072, Attys. Romeo G. Roxas and Santiago N. Pastor, seek
the reversal and annulment of the Decision[3] and Resolution[4] of the Court of Appeals dated 25 June 2001 and 06
February 2002, respectively. The petitioners in G.R. No. 152104, the Zuzuarreguis, on the other hand, pray that the
said Decision and Resolution of the Court of Appeals be modified. Said Decision and Resolution reversed and set
aside the decision of the Regional Trial Court (RTC), Branch 98, Quezon City, dated 03 January 1994.

THE ANTECEDENTS

The instant cases had their beginnings in 1977 when the National Housing Authority (NHA) filed expropriation
proceedings against the Zuzuarreguis, petitioners in G.R. No. 152104, for parcels of land belonging to the latter
situated in Antipolo, Rizal, with a total land area of 1,790,570.36 square meters, more or less. This case was lodged

Page 1 of 10
before the RTC, Branch 141, Municipality of Makati,[5]docketed therein as Civil Case No. 26804 entitled, National
Housing Authority v. Pilar Ibaez Vda. De Zuzuarregui, et al.

On 25 May 1983, said case was ordered archived[6] by Branch 141.

About a month before the aforecited case was ordered archived, the Zuzuarreguis engaged the legal services of Attys.
Romeo G. Roxas and Santiago N. Pastor, to represent them in Civil Case No. 26804. This was sealed by a Letter-
Agreement dated 22 April 1983, which is partly reproduced hereunder:

April 22, 1983

Mr. Antonio de Zuzuarregui, Jr.

Mrs. Pacita Javier (as heir to the
late Jose de Zuzuarregui)
Mr. Antonio de Zuzuarregui ( as heir to
the late Pilar Y. vda. De Zuzuarregui)

Dear Sir and Madam:

This is to confirm in writing our verbal negotiations for us to represent you in the expropriation
proceedings filed by the National Housing Authority against your goodselves before the Court of
First Instance of Rizal(now the Regional Trial Court) and docketed as Civil Case No. 26804. Our
representation shall also include the areas taken over by the Ministry of Public Works and Highways
which now formed part of the Marcos Highway at Antipolo, Rizal.

The areas affected are the following:

xxxx

We shall endeavor to secure the just compensation with the National Housing Authority and other
governmental agencies at a price of ELEVEN PESOS (P11.00) or more per square meter. Any lower
amount shall not entitle us to any attorneys fees. At such price of P11.00 per square meter or more
our contingent fee[s] is THIRTY PERCENT (30%) of the just compensation.

The other terms and conditions of our proposal are:

xxxx

5. You are willing to accept NHA 5-year bonds as part payment up to 75% of the total compensation.
In the event of your desire to discount the bonds, we shall assist to have them discounted at 75% of
its face value.

6. Our lawyers fees shall be in the proportion of the cash/bonds ratio of the just compensation.
Likewise our fees are subject to 10% withholding tax.

xxxx

Should the above proposal be acceptable to your goodselves, kindly signify your formal acceptance
as (sic) the space hereunder provided.

Very truly yours,

(Sgd.) (Sgd.)
SANTIAGO N. PASTOR ROMEO G. ROXAS
Lawyer Lawyer
CONFORME:
(Sgd.) (Sgd.)
ANTONIO DE ZUZUARREGUI, JR. PACITA JAVIER
In my behalf and as heir to As heir to the late
The late Pilar Y. vda. De Jose De Zuzuarregui[7]

Page 2 of 10
 Zuzuarregui

A Motion to Set Case for Hearing,[8] dated 14 February 1984, was filed by Attys. Roxas and Pastor in Civil
Case No. 26804, praying that the case be revived and be set for hearing by the court at the earliest date available in
its calendar.

The appropriate proceedings thereafter ensued. On 29 October 1984, a Partial Decision was rendered by
Branch 141 in Civil Case No. 26804 fixing the just compensation to be paid to the Zuzuarreguis at P30.00 per square
meter.

The NHA filed a Motion for Reconsideration[9] dated 23 November 1984 praying that the Partial Decision be
reconsidered and set aside, and a new one rendered lowering the amount of just compensation in accordance with
applicable laws. Pending resolution thereof, a Joint Special Power of Attorney was executed by Antonio
De Zuzuarregui, Jr., Enrique De Zuzuarregui and PacitaJavier, in favor of Attys. Roxas and Pastor, viz:

JOINT SPECIAL POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

That We, ANTONIO DE ZUZUARREGUI, JR., ENRIQUE DE ZUZUARREGUI and PACITA

JAVIER, all of legal age, , do hereby appoint, name and constitute ATTYS. ROMEO G. ROXAS
and SANTIAGO PASTOR, to be our true and lawful attorneys to act in our names and on our
behalves to do and execute all or any of the following acts and deeds subject to our approval:

xxxx

(2) To represent us in the negotiations for a compromise with the National Housing Authority for
our properties subject of the above case;

(3) To negotiate for and in our behalves for the settlement of the just compensation of our properties
payable in cash or in bonds;

(4) To sign and prepare all papers relative to the preparation of a Compromise Agreement or any
papers and communications which shall eventually bear our signatures; and

(5) That this Special Power of Attorney is enforce (sic) as long as ATTYS. ROMEO G. ROXAS
AND SANTIAGO PASTOR are our lawyers in Civil Case No. 26804 before the Regional Trial
Court, Makati, Branch CXLI.

HEREBY GIVING AND GRANTING unto our said attorneys full power and authority whatsoever
requisite or necessary or proper to be done in or about the premises, as fully to all intents and
purposes as we might or could lawfully do if personally present, and hereby ratifying and confirming
all that our said attorneys shall do or cause to be done under and by virtue of these presents.

IN WITNESS WHEREOF, We have hereunto set our hands this 26th day of August, 1985, in Makati,
M. M., Philippines.

(Sgd.)
ANTONIO DE ZUZUARREGUI, JR.

(Sgd.)
ENRIQUE DE ZUZUARREGUI

(Sgd.)
PACITA JAVIER[10]

On 22 November 1985, a Special Power of Attorney was executed by Beatriz Zuzuarregui vda. De Reyes in favor of
Attys. Romeo G. Roxas, Santiago Pastor and Basilio H. Toquero, quoted as follows:

SPECIAL POWER OF ATTORNEY

Page 3 of 10
 KNOW ALL MEN BY THESE PRESENTS:

That I, BEATRIZ ZUZUARREGUI VDA. DE REYES, Filipino, of legal age, widow, and a resident
of E. Rodriguez Ave., Quezon City, Philippines do hereby appoint, name and constitute ATTYS.
ROMEO G. ROXAS, SANTIAGO PASTOR and BASILIO H. TOQUERO, to be my true and lawful
attorneys :

1. To represent me in the negotiation for a Compromise with the National Housing Authority for my
properties subject to my approval in CIVIL CASE No. 26804, entitled National Housing Authority
vs. Pilar Ibaez deZuzuarregui, et al., before the Regional Trial Court, Makati, Branch CXLI;

2. To negotiate for and in my behalf for the settlement of the just compensation of my properties
payable in cash or in bond, subject to my approval;

3. To sign and prepare all papers relative to the preparation of a Compromise Agreement or any
papers and communications which shall eventually bear my signature;

4. To accept for and in my behalf payments for my properties after the Compromise Agreement is
duly approved by the Court, the actual receipts of which payments shall be signed by me.

HEREBY GIVING AND GRANTING unto my said attorneys full power and authority
whatsoever requisite, necessary or proper to be done under and by virtue of these presents.

IN WITNESS WHEREOF, I have hereunto set my hand this 22nd day of November 1985, in the City
of Manila, Philippines.

(Sgd.)
BEATRIZ ZUZUARREGUI
VDA. DE REYES[11]

On 10 December 1985, a Letter-Agreement was executed by and between Antonio Zuzuarregui, Jr., Pacita Javier and
Enrique De Zuzuarregui, on the one hand, and Attys. Romeo G. Roxas and Santiago Pastor, on the other. The said
Letter-Agreement reads:

December 10, 1985

Atty. Romeo G. Roxas

Atty. Santiago Pastor
Makati Executive Center
Salcedo Village, Makati

Dear Atty. Roxas & Atty. Pastor:

This will confirm an amendment to our agreement regarding your attorneys fees as our lawyers and
counsels for the Zuzuarreguis properties expropriated by National Housing Authority covering ONE
HUNDRED SEVENTY-NINE (179) HECTARES, more or less, covered by TCT Nos. 138340,
85633 and 85634 and filed as Civil Case No. 26804.

We hereby confirm and agree that we are willing to accept as final and complete settlement for our
179 hectares expropriated by NHA a price of SEVENTEEN PESOS (P17.00) per square meter, or
for a total of THIRTY MILLION FOUR HUNDRED THOUSAND PESOS (P30.4 Million), all
payable in NHA Bonds.

We also agree and confirm that for and in consideration of your services as our lawyers and counsels
in the said expropriation case, we commit and bind ourselves to pay to you, your heirs or assignees-
in-interest, as your contingent attorneys fees any and all amount in excess of the SEVENTEEN
PESOS (P17.00) per square meter payable in NHA bonds as mentioned above.

Page 4 of 10
 This Letter Agreement serves also as your authority to collect directly from NHA the amount
pertaining to you as your contingent attorneys fees.

This Letter Agreement hereby amends and supersedes our previous agreement regarding your
attorneys fees as our lawyers and counsels in the above-mentioned expropriation case.

Very truly yours,

(Sgd.) (Sgd.)
ANTONIO DE ZUZUARREGUI, JR. PACITA JAVIER
In my behalf as heir to As heir to the late
the late Pilar I. vda. de Jose De Zuzuarregui
Zuzuarregui

(Sgd.)
ENRIQUE DE ZUZUARREGUI

CONFORME:

(Sgd.) (Sgd.)
ATTY. ROMEO G. ROXAS ATTY. SANTIAGO PASTOR[12]

Resolution No. 1174[13] dated 16 December 1985 was issued by the NHA stating that the Zuzuarregui property would
be acquired at a cost of P19.50 per square meter; that the Zuzuarreguis would be paid in NHA Bonds, subject to the
availability of funds; and that the yield on the bonds to be paid to the Zuzuarreguis shall be based on the Central Bank
rate at the time of payment.

As a result of the aforesaid NHA Resolution, a Compromise Agreement was executed between the Zuzuarreguis and
the NHA in Civil Case No. 26804. The Compromise Agreement, stipulated among other things, that the just
compensation of the Zuzuarregui properties would be at P19.50 per square meter payable in NHA Bonds. In a
Decision dated 20 December 1985, the RTC, Branch 141, Makati, approved the Compromise Agreement submitted
by the parties.

On 27 December 1985, the NHA Legal Department, through Atty. Jose B. H. Pedrosa, released to Atty. Romeo
G. Roxas, in behalf of the Zuzuarreguis, the amount of P20,000,000.00 in NHA Bearer Bonds as partial payment for
several parcels of land with a total area of 1,790,570.36 square meters located in Antipolo, Rizal.[14] On even date,
Atty. Romeo G. Roxas delivered NHA Bonds to Antonio De Zuzuarregui in the amount of P15,000,000.00.[15] On 04
February 1986, the amount of P34,500,000.00 in Bearer Bonds was again released by the NHA to Atty. Romeo
G. Roxas in behalf of the Zuzuarreguis.[16] On 14 February 1986, the Zuzuarreguis issued a receipt[17] for receiving
the amount of P30,070,000.00. This receipt included the P15,000,000.00 given to them last 27 December 1985. Again
on 17 February 1986, the Zuzuarreguis, through Beatriz Zuzuarregui vda. De Reyes, issued another receipt for the
amount of P450,000.00 in NHA bonds.[18] The total amount in NHA bonds released to Atty. Romeo G. Roxas in
behalf of the Zuzuarreguis amounted to P54,500,000.00. Out of this amount, the records show that the amount turned
over to the Zuzuarreguis by Atty. Roxas amounted to P30,520,000.00 in NHA bonds.

Computed at P19.50 per square meter, the 1,790,570.36 square meters property of the Zuzuarreguis was expropriated
at a total price of P34,916,122.00. The total amount released by the NHA was P54,500,000.00. The difference
of P19,583,878.00 is, undoubtedly, the yield on the bonds.

On 25 August 1987, a letter[19] was sent by the Zuzuarreguis new counsel, Jose F. Gonzalez, to Attys. Roxas and
Pastor, demanding that the latter deliver to the Zuzuarreguis the yield corresponding to bonds paid by the NHA within
a period of 10 days from receipt, under pain of administrative, civil and/or criminal action.

Attys. Roxas and Pastor answered via a letter dated 21 September 1987 explaining their side of the story. They stated
therein, among other things, that the amount that they got seems huge from the surface, but it just actually passed
their hands, as it did not really go to them.[20]

On 29 September 1987, a letter[21] was sent by the Zuzuarreguis through Antonio De Zuzuarregui, Jr., to Attys.
Romeo G. Roxas and Santiago N. Pastor, informing the latter that their services as counsels of

Page 5 of 10
the Zuzuarreguis (except Betty) in the expropriation proceedings filed by the NHA, docketed as Civil Case No. 26804,
was being formally terminated.

Apparently unsatisfied with the explanation of Attys. Roxas and Pastor, the Zuzuarreguis filed a civil action for Sum
of Money and Damages on 14 November 1989 before the RTC, Quezon City, Branch 98, docketed as Civil Case No.
Q-89-4013, against the NHA, Jose B. H. Pedrosa, Atty. Romeo G. Roxas and Atty. Santiago N.
Pastor. The Zuzuarreguis demanded that the yield on the NHA bonds be turned over to them.

After due hearing, a Decision[22] in Civil Case No. Q-89-4013 was rendered on 03 January 1994, dismissing the
Complaint. The dispositive portion reads:

WHEREFORE, in view of the foregoing consideration[s], judgment is hereby rendered

ordering the dismissal of the complaint against all the defendants; and, further ordering plaintiffs,
jointly and solidarily, to:

1. Pay each of the defendants Romeo G. Roxas, Santiago Pastor and Jose
B. H. Perdosa, the amount of P200,000.00, P200,000.00 and P100,000.00,
respectively, as moral damages;

2. Pay each of the defendants Roxas, Pastor and Pedrosa, the amount of
P50,000.00, P50,000.00, and P25,000.00, respectively as exemplary damages;

3. Pay attorneys fees to defendants Roxas and Pastor in the amount of

P20,000.00; and

4. Pay the costs of this suit.

A Notice of Appeal[23] dated 10 February 1994 was filed by the Zuzuarreguis. Subsequently, on 26 April 1995,
the Zuzuarreguis filed their appeal brief with the Court of Appeals. The case was docketed as CA-G.R. CV No. 45732.

A Decision[24] was eventually promulgated by the Fifteenth Division of the Court of Appeals on 25 June 2001,
reversing and setting aside the ruling of Branch 98, viz:

Therefore, We find that the amount of P4,476,426.275 is, in the opinion of this Court,
commensurate to the services rendered by defendants-appellees. This amount has been arrived at by
giving to defendants-appellees P2.50 per square meter of the 1,790,570.51 square meter expropriated
properties of herein plaintiffs-appellants.

WHEREFORE, IN VIEW OF THE FOREGOING, the decision dated January 3, 1994

of the Regional Trial Court, National Capital Judicial Region, Branch 98, Quezon City in Civil Case
No. 89-4013 entitled Antonio Zuzuarregui, Jr., et al. versus National Housing Authority, et al. for
Sum of Money and Damages, is hereby REVERSED and SET ASIDE. Defendants-
Appellees Roxas and Pastor are hereby ordered to return to plaintiffs-appellants the amount of
P12,596,696.425, the balance from the P17,073,122.70, received as yield from NHA bonds after
deducting the reasonable attorneys fees in the amount of P4,476,426.275.[25]

Attys. Roxas and Pastor filed a Motion for Reconsideration[26] on 25 July 2001. The Zuzuarreguis also filed a Motion
for Reconsideration[27] on 30 July 2001, not having been satisfied with the award, while the NHA and Pedrosa filed
their Motions for Reconsideration[28] on 03 August 2001.

In a Resolution dated 06 February 2002, the Court of Appeals denied for lack of merit all the Motions for
Reconsideration.

On 05 March 2002, Attys. Roxas and Pastor filed a Petition for Review on Certiorari[29] assailing the Decision of the
Court of Appeals, docketed as G.R. No. 152072. Likewise, on 21 March 2002, the Zuzuarreguis filed their own
Petition for Review on Certiorari[30] assailing the same Decision, docketed as G.R. No. 152104.

ASSIGNMENT OF ERRORS

Attys. Roxas and Pastor, petitioners in G.R. No. 152072, assign as errors the following:

Page 6 of 10
 I

THE HONORABLE COURT OF APPEALS GRAVELY ERRED ON A QUESTION OF LAW IN

HOLDING THAT THE LETTER-AGREEMENT DATED DECEMBER 10, 1985 CANNOT BE
ALLOWED TO STAND AS THE LAW BETWEEN THE PARTIES; and

II

THE HONORABLE COURT OF APPEALS GRAVELY ERRED ON A QUESTION OF LAW IN

HOLDING THAT DEFENDANTS-APPELLANTS, HEREIN PETITIONERS, CONCEALED TO
THE PLAINTIFFS-APPELLEES, HEREIN RESPONDENTS, THE YIELD OF THE NHA
BONDS[31]

The Zuzuarreguis, petitioners in G.R. No. 152101, on the other hand, assign as errors the following:
I

THE COURT OF APPEALS ERRED IN AWARDING TO PETITIONERS THE PRINCIPAL

AMOUNT OF ONLY P12,596,696.425 AND NOT P17,073,122.70 MAKING A DIFFERENCE
OF P4,476,426.28
II

THE RESPONDENTS SHOULD BE HELD LIABLE FOR INTEREST FROM THE DATE OF
THE FILING OF THE COMPLAINT UNTIL FULLY PAID
III

THE RESPONDENTS SHOULD BE HELD LIABE FOR MORAL AND EXEMPLARY

DAMAGES AND ATTORNEYS FEES
IV

THE RESPONDENTS NHA AND JOSE B.H. PEDROSA ARE JOINTLY AND SEVERALLY
LIABLE WITH RESPONDENTS ROXAS AND PASTOR[32]

ISSUE FOR RESOLUTION

Drawn from the above assignment of errors, it is patent that the principal issue that must be addressed by this Court
is:

WHETHER OR NOT THE LETTER-AGREEMENT DATED 10 DECEMBER 1985, EXECUTED

BY THE ZUZUARREGUIS, AND ATTYS. ROXAS AND PASTOR, FIXING THE EXACT
AMOUNT THAT MUST GO TO THE FORMER, SHOULD STAND AS LAW BETWEEN THE
PARTIES.

THE COURTS RULING

Attys. Roxas and Pastor, petitioners in G.R. No. 152072, contend in the main that the Zuzuarreguis are only entitled
to the amount of P17.00 per square meter for the 1,790,570.36 square meters expropriated by the government. This
was, according to them, embodied in the Letter-Agreement dated 10 December 1985, wherein the Zuzuarreguis
agreed to accept the price of P17.00 per square meter. Besides, Attys. Roxas and Pastor contend that the price
of P17.00 was even way above the P11.00 that the Zuzuarreguis were willing to accept for their properties under the
Letter of Engagement executed by the parties earlier on 22 April 1983. Computed at P17.00 per square meter, they
stress that the amount that should go to the Zuzuarreguis for their 1,790,570.36 square meters property should
be P30,439,696.10, and that in fact the Zuzuarreguis have received P30,520,000.00. The Letter-Agreement dated 10
December 1985 should thus stand as law between the parties. Since this Letter-Agreement, which was as plain and
simple as can be such that there is no need for any further construction, already fixed the amount that would go to the
Zuzuarreguis (P17.00 per square meter), then it should be so.

Attys. Roxas and Pastor further assert that the receipts issued by the Zuzuarreguis dated 14 February 1986 and 17
February 1986 indicated that the amounts received by the latter were in full and final payment for the subject
properties.

Page 7 of 10
The NHA, for its part, insists that there was no conspiracy between Attys. Roxas and Pastor on the one hand, and the
NHA and Atty. Pedrosa on the other, on the application of yields from NHA bonds.[33] The Zuzuarreguis, according
to the NHA, miserably failed to substantiate and establish conspiracy between them.

The Zuzuarreguis, for their part, though they were triumphant in the Court of Appeals, insist that the amounts awarded
them were not enough. According to them, the P12,596,696.425 awarded by the Court of Appeals was not correct.
They should have been awarded the amount of P17,073,122.70. Quoting the Zuzuarreguis:

Respondents Roxas and Pastor retained for themselves the amount of P3,980,000.00 which
represented the agreed attorneys fees of Roxas and Pastor at P2.50 per square meter. The amount
of P20,000,000.00 representing the yield of all the bearer bonds was, in the words of the Court of
Appeals, deliberately hidden by respondents Roxas and Pastor from petitioners. By mathematical
computation, the P20,000,000.00 yield should be proportionately divided at the ratio of P17.00
(petitioners) and P2.50 (share of respondents Roxas and Pastor). Following this ratio of division, of
the P20,000,000.00 yield, P17,073,122.70 should pertain to petitioners and the balance of
P2,926,877.30 to respondents Roxas and Pastor. Add this amount to the total of P3,980,000.00 at
the agreed rate of P2.50 per square meter, the total attorneys fees of respondents Roxas and Pastor
should be P6,906,877.30, not bad, again in the words of the Court of Appeals, for handling a simple
expropriation case which ended up in a compromise agreement. It was, therefore, in error to still
deduct the amount of P4,476,426.28 from petitioners share in the yield in the amount of
P17,073,122.70 leaving then only P12,596,696.42.

What was done, however, is that the product of 1,790,570.36 sq m. (area of the expropriated land of
petitioners) and P2.50 which is 4,476,426.28 was again deducted from the P17,073,122.70 which is
the corresponding share of the petitioners out of the total yield of P20,000,000.00. If this were a
criminal case, petitioners were being sentenced twice for the same offense.[34]

The Zuzuarreguis further insist that legal interest on the amount of P17,073,122.70 be imposed from the date of the
filing of the complaint, including moral and exemplary damages, and attorneys fees.

We sustain the Court of Appeals, but with modification in the computation.

A contract is a meeting of the minds between two persons whereby one binds himself, with respect to the
other, to give something or to render some service.[35] Contracts shall be obligatory, in whatever form they may have
been entered into, provided all the essential requisites for their validity are present.[36]

Under Article 1318 of the Civil Code, there are three essential requisites which must concur in order to give rise to a
binding contract: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract;
and (3) cause of the obligation which is established.[37]

All these requisites were present in the execution of the Letter-Agreement.

Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are
to constitute the contract.[38] The Zuzuarreguis, in entering into the Letter-Agreement, fully gave their consent thereto.
In fact, it was them (the Zuzuarreguis) who sent the said letter to Attys. Roxas and Pastor, for the purpose of
confirming all the matters which they had agreed upon previously. There is absolutely no evidence to show that
anybody was forced into entering into the Letter-Agreement. Verily, its existence, due execution and contents were
admitted by the Zuzuarreguis themselves.[39]

The second requisite is the object certain. The objects in this case are twofold. One is the money that will go to the
Zuzuarreguis (P17.00 per square meter), and two, the money that will go to Attys. Roxas and Pastor (any and all
amount in excess of P17.00 per square meter). There was certainty as to the amount that will go to the Zuzuarreguis,
and there was likewise certainty as to what amount will go to Attys. Roxas and Pastor.

The cause is the legal service that was provided by Attys. Roxas and Pastor. In general, cause is the why of the contract
or the essential reason which moves the contracting parties to enter into the contract.[40]

It is basic that a contract is the law between the parties.[41] Obligations arising from contracts have the force of law
between the contracting parties and should be complied with in good faith. Unless the stipulations in a contract are
contrary to law, morals, good customs, public order or public policy, the same are binding as between the parties.[42]

Page 8 of 10
 In Licudan v. Court of Appeals,[43] we did not allow the Contract for Professional Services between the
counsel and his client to stand as the law between them as the stipulation for the lawyers compensation was
unconscionable and unreasonable. We said:

Although the Contract for Professional Services dated August 30, 1979 was apparently
voluntarily signed by the late Aurelio Licudan for himself and on behalf of his daughter, petitioner
Cristina Licudan-Campos and by the petitioner Wilfredo Licudan who both manifested in open court
that they gave their free and willing consent to the said contract, we cannot allow the said contract
to stand as the law between the parties involved considering that the rule that in the presence of a
contract for professional services duly executed by the parties thereto, the same becomes the law
between the said parties is not absolute but admits an exception that the stipulations therein are not
contrary to law, good morals, good customs, public policy or public order.[44]

Under the contract in question, Attys. Roxas and Pastor are to receive contingent fees[45] for their professional
services. It is a deeply-rooted rule that contingent fees are not per se prohibited by law. They are sanctioned by Canon
13 of the Canons of Professional Ethics, viz:

13. Contingent Fees.

A contract for 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.

and Canon 20, Rule 20.01 of the Code of Professional Responsibility,[46] viz:

CANON 20 A LAWYER SHALL CHARGE ONLY FAIR AND REASONABLE FEES.

Rule 20.01. A lawyer shall be guided by the following factors in determining his fees:
(a) The time spent and the extent of the services rendered or required;
(b) The novelty and difficulty of the question 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.

However, in cases where contingent fees are sanctioned by law, the same should be reasonable under all the
circumstances of the case, and should always be subject to the supervision of a court, as to its reasonableness,[47] such
that under Canon 20 of the Code of Professional Responsibility, a lawyer is tasked to charge only fair and reasonable
fees.

Indubitably entwined with the lawyers duty to charge only reasonable fees is the power of this Court to reduce
the amount of attorneys fees if the same is excessive and unconscionable.[48] Thus, Section 24, Rule 138 of the Rules
of Court partly states:

SEC. 24. Compensation of attorneys; agreement as to fees. An attorney shall be entitled to have and
recover from his client no more than a reasonable compensation for his services, with a view to the
importance of the subject matter of the controversy, the extent of the services rendered, and the
professional standing of the attorney. x x x. A written contract for services shall control the amount
to be paid therefore unless found by the court to be unconscionable or unreasonable.

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 Attorneys fees are unconscionable if they affront ones sense of justice, decency or reasonableness.[49] It
becomes axiomatic therefore, that power to determine the reasonableness or the, unconscionable character of
attorney's fees stipulated by the parties is a matter falling within the regulatory prerogative of the courts.[50]

In the instant case, Attys. Roxas and Pastor received an amount which was equal to forty-four percent (44%)
of the just compensation paid (including the yield on the bonds) by the NHA to the Zuzuarreguis, or an amount
equivalent to P23,980,000.00 of the P54,500,000.00. Considering that there was no full blown hearing in the
expropriation case, ending as it did in a Compromise Agreement, the 44% is, undeniably, unconscionable and
excessive under the circumstances. Its reduction is, therefore, in order. This is in accordance with our ruling in the
earlier case of Tanhueco v. De Dumo[51], where we reduced the amount of attorneys fees from sixty percent (60%) to
fifteen percent (15%), for being excessive and unreasonable.

It is imperative that the contingent fees received by Attys. Roxas and Pastor must be equitably reduced. In
the opinion of this Court, the yield that corresponds to the percentage share of the Zuzuarreguis in the P19.50 per
square meter just compensation paid by the NHA must be returned by Attys. Roxas and Pastor.

The yield on the NHA bonds amounted to P19,583,878.00. This amount must therefore be divided between
the Zuzuarreguis, on the one hand, and Attys. Roxas and Pastor, on the other. The division must be pro rata. The
amount of P17.00 that should go to the Zuzuarreguis represents 87.18% of the P19.50 per square meter just
compensation, The P2.50 per square meter that was to go to Attys. Roxas and Pastor, on the other hand, represents
12.82%.

The Zuzuarreguis are entitled to the yield equal to 87.18% of the P19,583,878.00, while Attys. Roxas and Pastor are
entitled to 12.82% of said amount. The amount corresponding to 87.17% of P19,583,878.00 is P17,073,224.84. This
is the yield that the Zuzuarreguis are entitled to. Attys. Roxas and Pastor, on the other hand, are entitled to
P2,510,653.16.

Attys. Roxas and Pastor, in the opinion of this Court, were not shortchanged for their efforts for they would
still be earning or actually earned attorneys fees in the amount of P6,987,078.75 (P4,476,425.59 + P2,510,653.16).

The amount of P17,073,224.84 must therefore be returned by Attys. Roxas and Pastor to the Zuzuarreguis. They can
take this out from the yield in the amount of P19,583,878.00 which they have appropriated for themselves.

On the issue of moral and exemplary damages, we cannot award the same for there was no direct showing of bad faith
on the part of Attys. Roxas and Pastor, for as we said earlier, contingency fees are not per se prohibited by law. It is
only necessary that it be reduced when excessive and unconscionable, which we have already done.

We likewise cannot hold the NHA and Atty. Pedrosa jointly and severally liable to the Zuzuarreguis for there is no
evidence to show conspiracy between them.

WHEREFORE, in view of all the foregoing considerations, the Decision and Resolution of the Court of Appeals
dated 25 June 2001 and 06 February 2002, respectively, are AFFIRMED but with the MODIFICATION that Attys.
Romeo G. Roxas and Santiago N. Pastor are hereby ordered to return to the Zuzuarreguis the amount of
P17,073,224.84. No costs.

SO ORDERED.

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