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Salvador, Cortez, Sevilla, Ayson, Cayanan, Salonga, Dayao, Trinidad

BAR MATTER No. 553 June 17, 1993

ULEP v. THE LEGAL CLINIC, INC.

Ponente: Regalado, J.
Topic: Practice of Law; Advertisements

FACTS OF THE CASE:

Petitioner Mauricio Ulep prayed the court to order Respondent The Legal Clinic, Inc., to cease
and desist from issuing the advertisements on “secret marriages” and “Guam divorce” (shown
below) and to perpetually prohibit persons and any other entity from making advertisements
pertaining to the exercise of the law profession other than those allowed under existing laws.

Advertisements:

Annex A Annex B

SECRET MARRIAGE? GUAM DIVORCE.

P560.00 for a valid marriage.
Info on DIVORCE. ABSENCE. DON PARKINSON
ANNULMENT. VISA
An attorney in Guam is giving FREE BOOKS on Guam Divorce
THE LEGAL CLINIC through The Legal Clinic beginning Monday to Friday during
Please call: 5210767, 5217232, 5222041 office hours.
8:30 am – 6:00 pm
7th flr., Victoria Building, U.N. Ave., Mla. Guam divorce. Annulment of Marriage. Immigration Problems,
Visa Ext. Quote/Non-quote Res. & Special Retiree’s Visa.
Declaration of Absence. Remarriage to Filipina Finacees.
Adoption. Investment in Phi. US/Foreign Visa for Filipina
Spouse/Children.

Call Marivic
THE LEGAL CLINIC
Please call: 5210767, 5217232, 5222041
7th flr., Victoria Building, 429 U.N. Ave., Ermita, Manila
nr. US Embassy

Petitioner argues that the advertisements are “champterous, unethical, demeaning of the law
profession, and destructive of the confidence of the comminoty in the integrity of the members of
the bar.” He further states that, as a member of the bar, “he is ashamed and offended by the said
advertisements.”

On the other hand, Respondent admits that they have caused the publication of the said
advertisements. However, they argue that they are merely rendering “legal support services”
through paralegals “with the use of modern computers and electronic machines.” Further, it was
argued by Respondent that, assuming that these were in fact “legal services”, in view of the U.S.
Supreme Court’s decision on Bates & Van O’Steen v. State Bar of Arizona, the advertisementof
such services should be allowed.

The Court required the following institutions to the submit their respective position papers,
considering the legal implications of the decisions on the legal profession: (1) Integrated Bar of
the Philippines, (2) Philippine Bar Association, (3) Philippine Lawyers’ Association, (4) U.P.
Women Lawyer’s Circle, (5) Women Lawyers Association of the Philippines, and the (6)
Federacion Internacional de Abogadas.

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ISSUE/S:

1. Whether or not the services offered by The Legal Clinic Inc., constitutes the practice of law
2. Whether or not the same can be a proper subject of advertisements

HELD + RATIO

1. Yes. The services rendered/offered by the respondent constitutes the practice of law.

The Court defined the practice of law as “any activity, in or out of court, which requires the
application of law, legal procedures, knowledge, training and experience. To engage in the
practice of law is to perform those acts which are characteristic of the profession. Generally, to
practice law is to give advice or render any kind of service that involves legal knowledge or skill.”
In this case, the Court emphasized that the practice of law is not limited to the conduct of cases
in court. Citing the case of Philippine Lawyers Association v. Agrava, the Court defined the
practice of law “[i]n general, all advice to clients, and all action taken for them in matters connected
with the law” and that which involves “the determination of the trained legal mind of the legal effect
of facts and conditions.”

Respondent’s contention: It merely offers legal support services by “giving ready information
by trained paralegals to laymen and lawyers, which are strictly non-diagnostic, non-advisory x x
x gathering, processing, storage, transmission and reproduction of information and
communication, such as computerized legal research.”

The Court held that all that respondent would do is to look for the law, provide them to their clients,
and stop there, “as if it were merely a bookstore.” It was necessary for the respondent’s lawyers
and so-called paralegals to explain to their clients the meaning of the law and its implications, and
advise the latter on the proper action to be taken. This is what is represented by the
advertisements, which falls within the definition of the “practice of law.” As stated earlier, the fact
that a person or entity does not represent the client in court is immaterial.

Further, its own proprietor, Atty. Rogelio P. Nogales, mentioned in an article “Rx for Legal
Problems” that the purpose and operation of respondent is similar to those in the medical field,
and caters to clients “who cannot afford the services of big law firms.” According to him, the Legal
Clinic performs “treatments” depending on the case, from the simple preparation of a deed of sale
to the litigation in court of estate proceedings.

It was clearly established that the purpose of respondent was to act as a “one-stop shop” for
clients to avail of their different legal services. The Court further stressed that most of the services
offered by respondent are beyond the domain of “parelegals” and that they are within the exclusive
function of lawyers, duly admitted as a member of the bar, in good and regular standing, engaged
in the practice of law. The Court states, “The practice of law is not a lawful business except for
members of the bar who have complied with all the conditions required by statute and the rules
of court. Only those persons are allowed to practice law who, by reason of attainments previously
acquired through education and study, have been recognized by the courts as possessing
profound knowledge of legal science entitling them to advise, counsel with, protect, or defend the
rights claims, or liabilities of their clients, with respect to the construction, interpretation, operation
and effect of law.” Such exlusion serves the ultimate purpose of “protecting the public from being
advised and represented in legal matters by incompetent and unreliable persons over whom the
judicial department can exercise little control.”

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The Court also held that respondent is wrong in adopting the concept of “paralegals” as used in
the United States. Such profession is separate and distinct on its own. Universities and colleges
in the United States offer degrees in paralegal education, which is not present in the Philippnies.
Further, the United States has evolved its public policies to cater to the services of paralegals and
to protect the public. The Philippines continues to adopt the policy of having a restricted and
limited acceptance of “paralegal services.” Allowable services conducted by non-lawyers are
limited in scope and extent by the law granting the same. In the absence of constitutional or
statutory authority, a person who has not been admitted as a lawyer cannot practice law so as to
prevent the miscarriage of justice and hindrance by an unwarranted intrusion of unauthorized and
unskilled persons into the practice of law.

2. No. The advertisements are improper.

The Court held that, under the Code of Professional Responsibility, “a lawyer, in making known
his legal services, shall use only true, hones, fair, dignified, and objective information or statement
of facts.” He must refrain from using any “false, fraudulent, misleading, deceptive, undignified,
self-laudatory, or unfair” statements or claims with regard to his qualifications and his services.

The Court stated, “The standards of the legal profession condemn the lawyer's advertisement of
his talents. A lawyer cannot, without violating the ethics of his profession. advertise his talents or
skill as in a manner similar to a merchant advertising his goods.” Citing the case of Director of
Religious Affairs v. Bayot, the Court emphasized that the practice of law is a profession and not
a trade. It is highly unethical for a lawyer to advertise his talents or skills “as a merchant who
adverstises his wares.” As similarly held in the cited case, the advertisements here in question
constitute improper advertising and solicitation.

The Court further enumerated the “best advertising possible for a lawyer, as follows:

a. A well-merited reputation for professional capacity and fidelity to trust, which must
be earned as the outcome of character and conduct.
b. Publication in reputable law lists, in a manner consistent with the standards of
conduct imposed by the canons, of brief biographical and informative data.
c. Use of an ordinary simple professional card is also permitted. The card may
contain only a statement of his name, the name of the law firm which he is
connected with, address, telephone number and special branch of law practiced.
d. Name listed in a telephone directory but not under a designation of special branch
of law.

The Court finally held that, “to allow the publication of advertisements of the kind used by
respondent would only serve to aggravate what is already a deteriorating public opinion of the
legal profession whose integrity has consistently been under attack lately by media and the
community in general.”

The Court enjoined and restrained The Legal Clinic, Inc.:

1. From causing the publication or dissemination of any advertisement in any form which is of
the same or similar tenor and purpose as Annexes "A" and "B"; and
2. From conducting, directly or indirectly, any activity, operation or transaction proscribed by law
or the Code of Professional Ethics.

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G.R. No. 3593 March 23, 1907

US v. C.W. Ney and Bosque

Ponente: Tracey, J.
Topic: Practice of Law; Advertisements

FACTS:

In the year 1902 this court decided that the defendant, J. Garcia Bosque, was not entitled to admission
to practice law in the Philippine Islands, upon the ground that after the change of sovereignty he had
elected to remain a Spanish subject and as such was not qualified for admission to the bar, and an
order was entered accordingly.

In the year 1904 he made an arrangement with the defendant Ney, a practicing attorney, to carry on
business together, sending out a circular signed "Ney & Bosque," stating that they had established an
office for the general practice of law in all the courts of the Islands and that Bosque would devote
himself especially to consultation and office work relating to Spanish law. The paper was headed "Law
Office — Ney & Bosque. Juan G. Bosque, jurisconsulto español — C.W. Ney, abogado americano."

Since that time the defendant Bosque has not personally appeared in the courts, and with one
exception, occuring through an inadvertance, papers from the office were signed not with the firm
name alone nor with any designation of the firm as attorneys, but with the words "Ney & Bosque —
C.W. Ney, abogado."

On two occasions, one on May 1, 1905, and the other on September 15, 1906, this court refused to
consider petitions so singed with the names of the defendants and the practice being repeated, on the
2nd day of October, 1906, ordered the papers sent to the Attorney-General to take appropriate action
thereon, and he thereupon instituted this proceeding.

ISSUE: Whether or not the defendants are liable for contempt

RULING:

Yes, they are liable for contempt.

Section 232 of the Code of Civil Procedure describes contempt as follows:

1. Disobedience of or resistance to a lawful writ, process, order, judgment, or command of a court, or

injunction granted by a court or judge;

2. Misbehavior of an officer of the court in the performance of his official duties or in his official
transactions.

Where the law defines contempt, the power of the courts is restricted to punishment for acts so defined.

As to the first subdivision of this section, no direct order or command of this court has been disobeyed
or resisted by the defendant Ney. The only order that the defendant Bosque can have disobeyed is

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the one denying him the right to practice law. This order, however, was directly binding upon him,
notwithstanding proceedings taken for its review, and any hope on his part of ultimately reversing it
furnished no excuse for its violation. Even had he been entitled under the statute to practice law without
any license from the court and without an application to it, yet its order made on his own petition. A
mandate of the court, while in force, must be obeyed. The irregular signature to papers, though affixed
by his associate, had his authorization and constitutes a substantial attempt to engage in practice.
Moreover the firm circular in setting forth the establishment of an office for the general practice of law
in all the courts of the Islands, amounted to an assertion of his right and purpose, not effectively
qualified by the addition that he would devote himself to consultation and office work relating to
Spanish law. Spanish law plays an important part in the equipment of a lawyer in the Archipelago,
standing on a different footing from the law of other foreign countries, in regard to which a skilled
person might as a calling, advise without practicing law. The fact stated on the circular that he was a
Spanish lawyer did not amount to a disclaimer of his professional character in the Islands. Independent
of statutory provisions, a foreigner is not by reason of his status disqualified from practicing law.
Consequently the conduct of the defendant Bosque amounts to disobedience of an order made in a
proceeding to which he was a party.

Under the second subdivision of the section cited, Bosque is obviously not answerable, inasmuch as
he was not an officer of the court. On the other hand, under this subdivision, the defendant Ney, as an
admitted attorney, is liable if his conduct amounted to misbehavior. We are of the opinion that it did.
In the offense of Bosque in holding himself out as a general practitioner Ney participated, and for the
improper signature of the pleadings he was chiefly and personally responsible. It is impossible to say
that the signature itself was a violation of the law, and yet hold guiltless the man who repeatedly wrote
it. Moreover we regret to add that his persistent and rash disregard of the rulings of the court has not
commended him to our indulgence, while the offensive character of certain papers recently filed by
him forbids us from presuming on the hope of his voluntarily conforming to the customary standard of
members of the bar.

The judgment of the court is that each of the defendants is fined in the sum of 200 pesos, to be paid
into the office of the clerk of this court within ten days, with the costs de oficio. So ordered.

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G.R. No. 183385. February 13, 2009

Masmud v. NLRC

Ponente: Nachura, J.

FACTS:

In 2003, Evangeline Masmud filed a complaint on behalf of her late husband Alexander against First
Victory Shipping Services for non payment of permanent disability benefits, medical expenses,
sickness allowances, moral and exemplary damages, and attorney’s fees of his late husband
Alexander and then Alexander hire Atty. Go as his counsel. In consideration of Atty. Go’s legal
services, Alexander agreed to pay attorneys fees on a contingent basis, as follows: 20 % of total
monetary claims as settled or paid and an additional 10 % in case of appeal. It was likewise agreed
that any ward of attorney’s fees shall pertain to respondent’s law firm as compensation.

The Labour Arbiter rendered a decision granting the monetary claims of Alexander. However
Alexander’s employer filed an appeal with the NLRC. During the pendency of the proceedings before
the NLRC, Alexander died thereafter Atty. Go substitute Evangelina as complainant. The NLRC denied
the motion of the Alexander’s employer. On appeal before the CA, the decision of the Labour Arbiter
was affirmed with modification. Eventually, the decision of the NLRC became final and executor and
Atty. Go moved for the execution of the NLRC decision, which was granted by the Labour Arbiter. The
surety bond of the employer was garnished and Atty. Go moved for the release of the said amount to
Evangelina. The Labour Arbiter directed the NLRC Cashier to release the amount of P 3, 454, 079. 20
to Evangelina and P 680,000.00 will go to Atty. Go. Dissatisfied, Atty. Go filed a motion to record an
enforce attorneys lien alleging that Evangelina reneged on their contigent fee agreement. Evangelina
paid only the amount of P680,000.00, equivalent to 20% of the award as attorneys fees, thus, leaving
a balance of 10% pertaining to the counsel as attorneys fees.

Evangelina manifested that Atty. Go’s claim for attorneys fees of 40% of the total monetary award was
null and void based on Article 111 of the Labour Code is the law that should govern Atty. Go’s
compensation as her counsel.

ISSUE:

Whether or not Atty. Go’s compensation is under the concept of attorneys fees governed by Section
24, Rule 138 of the Rules of Court or under the extraordinary concept governed by Article 111 of the
Labour Code.

RULING:

Atty. Go’s compensation should be governed by Section 24, Rule 138 of the Rules of Court and not
Article 111 of the Labour Code. The retainer contract between Atty. Go and Evangelina provides for a
contingent fee. The contract shall control in the determination of the amount to be paid, unless found
by the court to be unconscionable or unreasonable. Attorney's fees are unconscionable if they affront
one's sense of justice, decency or reasonableness. The decree of unconscionability or
unreasonableness of a stipulated amount in a contingent fee contract will not preclude recovery. It
merely justifies the fixing by the court of a reasonable compensation for the lawyer's services.

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The criteria found in the Code of Professional Responsibility are also to be considered in assessing
the proper amount of compensation that a lawyer should receive. Canon 20, Rule 20.01 of the said
Code provides:

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.

Contingent fee contracts are subject to the supervision and close scrutiny of the court in order that
clients may be protected from unjust charges. The amount of contingent fees 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 fees because of the risk that
the lawyer may get nothing if the suit fails. The Court finds nothing illegal in the contingent fee contract
between Atty. Go and Evangelina’s husband. The CA committed no error of law when it awarded the
attorneys fees of Atty. Go and allowed him to receive an equivalent of 39% of the monetary award.

The issue of the reasonableness of attorney's fees is a question of fact. Well-settled is the rule that
conclusions and findings of fact of the CA are entitled to great weight on appeal and will not be
disturbed except for strong and cogent reasons which are absent in the case at bench. The findings
of the CA, which are supported by substantial evidence, are almost beyond the power of review by the
Supreme Court.

Considering that Atty. Go successfully represented his client, it is only proper that he should receive
adequate compensation for his efforts. Even as we agree with the reduction of the award of attorney's
fees by the CA, the fact that a lawyer plays a vital role in the administration of justice emphasizes the
need to secure to him his honorarium lawfully earned as a means to preserve the decorum and
respectability of the legal profession. A lawyer is as much entitled to judicial protection against injustice
or imposition of fraud on the part of his client as the client is against abuse on the part of his counsel.
The duty of the court is not alone to ensure that a lawyer acts in a proper and lawful manner, but also

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to see that a lawyer is paid his just fees. With his capital consisting of his brains and with his skill
acquired at tremendous cost not only in money but in expenditure of time and energy, he is entitled to
the protection of any judicial tribunal against any attempt on the part of his client to escape payment
of his just compensation. It would be ironic if after putting forth the best in him to secure justice for his
client, he himself would not get his due.

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54 F 3D 150 April 25, 1995

The Industry Network System, Inc. v Armstrong World Industries, Inc.

FACTS:

Appellant Steven M. Kramer is an attorney who represented The Industry Network System, Inc. and
Elliot Fineman in the underlying litigation, an antitrust case against Armstrong World Industries. After
the first trial, in which his clients prevailed, Mr. Kramer ceased to represent both plaintiffs. Kramer
refused, however, to turn his files over to Network's new attorneys. However, the court ordered Kramer
to give the files to the substitute counsel because failure to do so will place him in contempt of court.

ISSUE:

The issues that culminate in this appeal arise from the severance of that relationship because Kramer
believes he is entitled to a lien to ensure that his fees will be paid and argues that the district court
failed to recognize a lien.

HELD:

Kramer contends that his right to a fee, hence his right to a statutory lien, is for the "hours he spent."
Yet from his own sworn words, his fee is "based upon the contingency agreement.

This contingency agreement, which is signed by both Kramer and Elliot Fineman individually, provides
that Kramer shall receive 36% of any and all sums recovered, whether by settlement or judgment.
Recovery shall be defined as all monies recovered, including damages, treble damages, and counsel
fees paid by defendant pursuant to statute.

In sum, Kramer agreed to represent the debtor-in-possession on "all issues" for a fee that was
contingent upon Fineman's success in the antitrust case and not, as he has argued, based upon a
hourly sum for time spent. Because Fineman recovered nothing, and indeed did not participate in the
second trial, the condition precedent to Kramer's right to a fee--a verdict in the antitrust case in
Fineman's favor--has not occurred, and the entire basis of Kramer's counterclaim lien theory collapses.
On this record he simply is not entitled to either a fee or a lien.

Under New Jersey law, an attorney will lose a retaining lien by voluntarily relinquishing files to
substituted counsel.

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

FRANCISCO RAYOS vs. ATTY. PONCIANO G. HERNANDEZ

Ponente: Chico-Nazario, J.

NATURE: Petition for Review of the Resolution of IBP dismissing Francisco Rayos’ complaint for
disbarment against Atty. Ponciano Hernandez.

FACTS: Atty Hernandez was the counsel of Rayos in a Civil Case for damages against NAPOCOR.
RTC dismissed the complaint. Upon appeal, CA reversed the RTC decision and awarded damages
in favor of Rayos. SC affirmed the CA Decision which became final and executory.

NAPOCOR issued a Check in the amount of ₱1,060,800.00 payable to Rayos which was turned over
to Atty. Hernandez as counsel. When Rayos demanded the turn over of the check, Atty. Hernandez
refused and justified his retention as a means to ensure payment of his attorney’s fees.

Rayos initiated this complaint for disbarment for Atty. Hernandez’ failure to return the rest of the award
in the amount of ₱557,961.21.

In his answer Atty. Hernandez alleged that they had a contract for attorney’s fees on a contingent
basis on 40%-60% sharing of the court award. Atty. Hernandez was entitled to receive 60% of the
award – 40% as attorney’s fees and 20% as litigation expenses. He asseverated that he deposited
Rayos’ share of the 40% award in a bank under Rayos’ name.

ISSUE #1: Whether Atty. Hernandez is justified in retaining the amount awarded to Rayos to assure
payment of his attorney’s fees.

HELD: NO.

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 that:

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.

When Atty. Hernandez withheld and refused to deliver the check, he breached the trust reposed on
him. The claim that Rayos failed to pay his attorney’s fees is not an excuse for Atty. Hernandez’ failure
to deliver the amount. 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.

It is true that under Canon 16.03 of the Code of Professional Responsibility, an attorney has the
following rights:

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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.

But the fact alone that a lawyer has a lien for fees on moneys in his hands collected for his client, does
not relieve him of his duty to promptly account for the moneys received; his failure to do so constitutes
professional misconduct. Thus, what respondent should have properly done 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.

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.

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.

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 of the courts to regulate his right to charge professional fees.

ISSUE #2: Whether a contingent fee comprising of 40% as attorney’s fees and 20% as litigation
expenses is unreasonable and unconscionable.

HELD: YES.

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 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

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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.

The reduction of unreasonable 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 be disregarded to protect the client from unreasonable
exaction.

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.

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 stipulated 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 found to be excessive, what is reasonable under the circumstances. In no case, however,
must a lawyer be allowed to recover more than what is reasonable, pursuant to Section 24, Rule 138
of the Rules of Court.

We have identified the circumstances to be considered in determining the reasonableness of a claim

for 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 a much larger fee when it is contingent than when it is not; 35 and (10) the financial
capacity and economic status of the client have to be taken into account in fixing the reasonableness
of the fee.

Rule 20.1, Canon 20 of the Code of Professional Responsibility enumerates the following factors
which should guide a lawyer in determining his fees:

(a) The time spent and the extent of the services rendered or required;

(b) The novelty and difficulty of the questions involved;

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(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.

The contingent fee claimed was grossly excessive 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 to the former. This Court has the power to guard a client, especially an aged
and necessitous client, against such a contract.

Since Atty. Hernandez, after all, succeeded in obtaining a favorable decision for his client in his efforts
in litigating the case for 15 years and he took risk in representing petitioner on a contingent fee basis,
a fee of 35% of the amount awarded to petitioner would be a fair compensation for respondent’s legal
services.

DISPOSITIVE PORTION:

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 amount awarded 51 to petitioner in Civil Case No. SM-951; and

3. Respondent is to return the amount of Two Hundred Ninety Thousand One Hundred Nine Pesos
and Twenty-One Centavos (₱290,109.21), 52 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

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G.R. No. 155224. August 23, 2006.

PINEDA vs. DE JESUS

Ponente: Corona, J.

FACTS:

Aurora Pineda filed an action for declaration of nullity of marriage against petitioner Vinson
Pineda in the RTC of Pasig City. Petitioner was represented by respondents Attys. Clodualdo de
Jesus, Carlos Ambrosio and Emmanuel Mariano.

Throughout the proceedings, respondent counsels were well-compensated. They, including their
relatives and friends, even availed of free products and treatments from petitioner’s dermatology clinic.
This notwithstanding, they billed petitioner additional legal fees amounting to P16.5 million which the
latter, however, refused to pay. Instead, petitioner issued them several checks totaling P1.12
million5 as "full payment for settlement”.

Still not satisfied, respondents filed in the same trial court7 a motion for payment of lawyers’ fees
for P50 million.

The trial court ordered Pineda to pay P5 million to Atty. de Jesus, P2 million to Atty. Ambrosio and P2
million to Atty. Mariano.

On appeal, the Court of Appeals reduced the amount as follows: P1 million to Atty. de Jesus, P500,000
to Atty. Ambrosio and P500,000 to Atty. Mariano. The motion for reconsideration was denied thus
prompting Pineda for recourse to the Supreme Court.

ISSUE:

Firstly, whether the Pasig RTC, Branch 151 had jurisdiction over the claim for additional legal
fees; and

Second, whether respondents are entitled for additional fees

RULING:

Yes, the PASIC RTC had jurisdiction over the claim for this is where the original suit was filed
(for the declaration of nullity of marriage was filed), had jurisdiction over the motion for the payment of
legal fees. Respondents sought to collect P50 million which was equivalent to 10% of the value of the
properties awarded to petitioner in that case. Clearly, what respondents were demanding was
additional payment for legal services rendered in the same case.

For the second issue, yes, however what they sought for was not what was justly due to them. They
were already adequately paid. Demanding P50 million on top of the generous sums and perks
already given to them was an act of unconscionable greed which is shocking to this Court.
Respondents’ claim for additional legal fees was not justified. They could not charge petitioner a fee
based on percentage, absent an express agreement to that effect. The payments to them in cash,
checks, free products and services from petitioner’s business — all of which were not denied by

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respondents — more than sufficed for the work they did. The "full payment for settlement" should have
discharged petitioner’s obligation to them.

Rule 20.4 of the Code of Professional Responsibility advises lawyers to avoid controversies with
clients concerning their compensation and to resort to judicial action only to prevent imposition,
injustice or fraud. Suits to collect fees should be avoided and should be filed only when circumstances
force lawyers to resort to it

A/N:

Rule 20.4 of the Code of Professional Responsibility

Rule 20.04 - A lawyer shall avoid controversies with clients concerning his compensation and shall
resort to judicial action only to prevent imposition, injustice or fraud.

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Adm. Case No. 5020 December 18, 2001

JUNIO v. GRUPO

Ponente: Mendoza, J.
Topic: Disbarment; Borrowing/lending money to/from a client

FACTS OF THE CASE:

A complaint for disbarment was filed by petitioner Junio against respondent Atty. Grupo for
alleged malpractice and gross misconduct committed by the latter.

Petitioner’s contention: Respondent’s services was engaged by petitioner for the redemption
of a parcel of land, registered under the name of her parents, located at Concepcion, Loay, Bohol.
Petitioner alleged that, in view of the case, petitioner entrusted P25,000.00 to respondent which
is to be used for the redemption of the said property. Respondent received the amount evidenced
by an acknowledgment receipt. It was further argued by petitioner that respondent was not able
to redeem the property which caused the loss of her right to redeem such property.

Petitioner demanded from respondent the return of the money entrusted to him considering that
the latter has failed to redeem the property. However, despite repeated demands, respondent
refused to return the money, without justifiable cause.

Respondent’s answer: Respondent admitted that he received the money from petitioner.
However, he alleges that the property “could not really be redeemed anymore”, and that petitioner
knew such fact because of the latter’s knowledge that the mortgage contract had already expired.
According to respondent, the money entrusted to him was an effort to persuade the mortgagees
to allow petitioner to redeem the land, which subsequently failed.

Upon such failure, respondent claims that he was allowed by petitioner to use the money
entrusted to him in the meantime because of his urgent need to defray his children’s educational
expenses. According to respondent, this was a private request, and not in his professional
capacity. A promissory note was executed by respondent which was then received by petitioner.

Further, respondent alleges that the services was purely gratuitous, and that he did not ask for
any fees, taking into consideration that petitioner served as household helpers for respondent’s
family. Taking this into consideration, he argues that there was no attorney-client relationship
when such agreement (loan) was executed.

ISSUE/S:
1. Whether or not there was an attorney-client relationship between Atty. Grupo and Junio
2. Whether or not Atty. Grupo violated the Code of Professional Responsibility when he
borrowed (loaned) money from petitioner

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HELD + RATIO:

1. Yes. There was an attorney-client relationship between Atty. Grupo and Junio.

Citing the case of Hilado v. David, the Court ruled that, “[t]o constitute professional employment,
it is not essential that the client should have employed the attorney professionally on any previous
occassion.” Further, it is not necessary that any fee was paid, charged, or promised. The Court
further held that “[i]f a person, in respect to his business affairs or troubles of any kind, consults
with his attorney in his professional capacity with the view to obtaining professional advice or
assistance, and the attorney voluntarily permits or acquiesces in such consultation, then the
professional employment must be regarded as established.”

2. Yes. Atty. Grupo is guilty of violating the Code of Professional Responsibility.

It should be noted that the evidence established shows that the respondent was allowed to borrow
the money from petitioner. It was also shown that the money previously entrusted to Atty. Grupo
was later converted into a loan. Thus, Atty. Grupo is not guilty of malversation or embezzlement.

However, Atty. Grupo is still liable for violating Rule 16.04 of the Code of Professional
Responsibility which prohibits lawyers from borrowing money from their clients except when the
client’s interests are protected by the nature of the case or by independent advice. In the case at
bar, respondent’s liability is not only limited to his failure to give security for the loan, but also for
his failure to fulfill such obligation within a reasonable time. This failure, the Court ruled, “only
underscores his blatant disregard of his obligation which reflects on his honesty and candor. A
lawyer is bound to observe candor, fairness, and loyalty in all his dealings and transactions with
his client.”

“WHEREFORE, the Court finds petitioner guilty of violation of Rule 16.04 of the Code of
Professional Responsibility and orders him suspended from the practice of law for a period of one
(1) month and to pay to respondent, within 30 days from notice, the amount of P25,000.00 with
interest at the legal rate, computed from December 12, 1996.”

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G.R. No. L-29184. January 30, 1989.

LEVISTE vs. DEL ROSARIO

Ponente: Grino-Aquino, J.

FACTS:

On, Sept. 7, 1963 Atty. Leviste entered into a written agreement with Del Rosario to appear as her
counsel in a petition for probate of the holographic will of the late Maximina Reselva, the will left a
property at Sales St., Quiapo bequeathed to Del Rosario. It was agreed that Atty. Leviste’s 35% of the
property that Rosa may receive upon the probate of the will.

However, on August 20, 1965 Leviste received a letter from Del Rosario informing that she was
terminating his services due to conflicting interest. This consisted in Leviste’s moral obligation to
protect the interest of his brother-in-law. Gaudencio M. Llanes, whom del Rosario and other parties
and other parties in probate intended to eject as lessee of the property bequeathed under the will.

On Sept. 20, 1965 Atty. Leviste filed a Motion to intervene protect his right to his fees for professional
services. But it was denied on the ground that he had not filed a claim for attorney’s fee nor recorded
his attorney’s lien. Although the motion was denied, he still continued to receive copies of court orders,
pleadings and continue to file his pleadings.

Thereafter, del Rosario waived her rights to the will. The will was later disallowed as only two witnesses
testified as to the handwriting of the testator.

Atty. Leviste filed an appeal bond, notice of appeal and record on appeal. Respondents filed a MTD
on the ground that petitioner is not a party in interest.

Petitioner alleged that he has direct and material interest sought to be revived and asked for
substitution as party-petitioner, in lieu of his former client Ms. Del Rosario.

TC dismissed the petition

CA likewise denied mandamus praying that TC be order to give due course to his appeal.

MR was denied, hence this certiorari alleging that by virtue of his contract of services with del Rosario
he is a creditor of the latter under Article 1052 of the CC.

ISSUE: W/N an Attorney who was engaged on a contingent fee basis may, in order to collect his fees,
prosecute an appeal despite his client’s refusal to appeal the decision of the Trial Court.

HELD: Art. 1052 does not apply. This legal provision protects the creditor of a repudiating heir. Leviste
is not a creditor of del Rosario. The payment of his fees is contingent and dependent upon the
successful probate of the holographic will. Since the petition for probate was dismissed by the LC, the
contingency did not occur. Atty. Leviste is not entitled to his fee.

Furthermore, in Recto vs Harden, the contracts for (contingent attorney fees) neither gives rise, nor
purports to give, to the appellee (lawyer) any right whatsoever, personal or real, in and to her (Mrs.

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Harden) aforesaid share in the conjugal partnership. The amount thereof is simply a basis for the
computation of said fees.

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