G.R. No. L-24163. April 28, 1969
REGINO B. ARO, PETITIONER, VS. THE HON. ARSENIO NAÑAWA, PRESIDING JUDGE OF BRANCH IV, COURT OF FIRST INSTANCE OF LAGUNA, LUIS MAGTIBAY, PABLO MAGTIBAY, AURELIA MARTINEZ, GREGORI…
BARREDO, J.:
Original petition: (1) for
certiorari to annul the order of the
Court of First Instance of
Laguna, dated November 21, 1964, dismissing its Civil Case No. SC-525
“without prejudice to the right of Atty. Regino
B. Aro (petitioner herein) to file a separate action
against both the plaintiffs and defendants (private respondents herein) with
respect to his alleged attorney’s fees”, as well as its order dated
January 9, 1965, denying petitioner’s motion for reconsideration thereof for
lack of merit and (2) for mandamus to compel respondent Judge to take cognizance of petitioner’s
opposition and counter-motion or petition dated November 3, 1964 and to resolve
the same on the merits.
There appears to be no dispute as to the following facts alleged
in the petition:
“2. That the services of herein petitioner, as practising attorney, was engaged by respondents Luis Magtibay and Pablo Magtibay for
the prosecution of their claim, as heirs, in the estate of their deceased uncle Lucio
Magtibay, consisting of properties which were in the
possession of the respondents Aurelia Martinez,[1]
spouses Gregorio Lontok and Maria Mendoza and spouses
Maximo Porto and Rosario Andaya.
“3. That being without means to prosecute their
claim against the persons concerned, respondents Luis Magtibay
and Pablo Magtibay agreed with herein petitioner to
avail of his services and entrust the prosecution of their claim on a
contingent basis, as shown in the agreement, copy of which is hereto attached
as Annex ‘A’ and is made an integral part hereof.[2]
“4. That by virtue of said agreement, herein
petitioner took the necessary steps to gather the needed papers and documents
for the filing of a petition to litigate as pauper and a complaint in the Court
of First Instance of Laguna, in which respondents Luis Magtibay
and Pablo Magtibay were the plaintiffs and the other
respondents, excepting the respondent Judge, were the defendants, x x x.
“5. That said petition to litigate as pauper
filed by herein petitioner for respondents Luis Magtibay
and Pablo Magtibay was granted by the respondent
Judge as per the order dated September 10, 1964, x x x.
“6. That to plaintiffs’ complaint in Civil Case
No. SC-525, the defendants in said case interposed a motion to dismiss dated September 29, 1964, x x x.[3]
“7. That to the said motion to dismiss, herein
petitioner, as attorney for the plaintiffs (now respondents Luis Magtibay and Pablo Magtibay)
filed an opposition dated October 5, 1964, x x x.[4]
“8. That after the hearing of the motion to
dismiss filed by the defendants and the opposition thereto by the plaintiffs,
which finally took place on October 24, 1964, the respondent Judge issued its
resolution or order dated October 24, 1964, denying the motion to dismiss, x x x.[5]
“9. That on the very day of and after the
hearing of the motion to dismiss, or on October 24, 1964, before receipt of a
copy of the said order (Annex ‘G’), there was a conversation which took place between herein petitioner and
the attorney of the defendants, Atty. Rustico de los Reyes, Jr., in the civil case and one who was then
acting as a sort of spokesman for the defendants (Ex-Mayor Cordova of Sta.
Maria, Laguna) for the amicable settlement of the case between the plaintiffs
and the defendants to the effect that a certain property of the spouses Lucio Magtibay (deceased) and
respondent Aurelia Martinez, worth P3,000.00, would be given to the plaintiffs
in full settlement of their claim, as share in the properties left by their
deceased uncle Lucio Magtibay,
it having been agreed by herein petitioner and Atty. de los
Reyes and the spokesman of the defendants that for the purpose of said amicable
settlement, the plaintiffs or one of them and herein petitioner would go to
Sta. Maria, Laguna, on October 23, 1964.
“10. That having given notice to the plaintiffs
(now respondents Luis Magtibay and Pablo Magtibay) at their given address in Calauag,
Quezon to come to Candelaria
for the purpose of going to Sta. Maria, Laguna on October 23, 1964, petitioner
had waited for said plaintiffs to go to his office on or before said date for
the engagement mentioned, but due to their (plaintiffs’) failure to come to Candelaria, petitioner had to send a telegram to Ex-Mayor
Cordova notifying him of his (petitioner’s) and plaintiffs’ not being able to
go to Sta. Maria because of the failure of any of the plaintiffs to come to Candelaria, x x x.
“11. That it was only on October 28, 1964, when
herein petitioner received a copy of the order dated October 24, 1964 (Annex
‘G’) and to his surprise he also received on the said day a second motion to
dismiss dated October 26, 1964, together with Annex ‘A’ of said motion, which
is entitled KASULATAN NG PAGHAHATIAN NA LABAS SA HUKUMAN AT PAGPAPALABI, dated
October 23, 1964 at Sta. Cruz, Laguna and signed by the plaintiffs and
defendant Aurelia Martinez (the three being now respondents in this case), it
having been made to appear in said Annex ‘A’ of the second motion to dismiss,
among others, that the plaintiffs and defendant Aurelia Martinez had made an
extrajudicial partition of the properties of the deceased Lucio
Magtibay and the said Aurelia Martinez adjudicating
to the plaintiffs one-fourth (1/4) share in the properties of the spouses and
three-fourth (3/4) share of the defendant Aurelia Martinez, but making it
appear also that said plaintiffs waived their share in favor of Aurelia
Martinez, x x x, thru which
fraudulent waiver, herein petitioner was deprived of his contingent fees, agreed
upon, as evidenced by Annex ‘A’ of this petition.[6]
x x x x x
“14. That petitioner filed by registered mail, on
November 4, 1964, his ‘OPPOSITION TO THE SECOND MOTION TO DISMISS AND
COUNTER-MOTION OR PETITION TO SET ASIDE DEED OF EXTRAJUDICIAL PARTITION AND
WAIVER DATED OCTOBER 23, 1964 AND TO RECORD ATTORNEY’S LIEN’, dated November 3,
1964, wherein he (petitioner) prayed, among others, invoking the provisions of
Section 5(d) and Section 6, Rule 135 of the Revised Rules of Court, for the protection
of the rights of herein petitioner as an officer of the Court, to wit:
‘(a) to deny the second motion to dismiss and set
aside and annul the deed of extrajudicial partition and waiver dated October 23, 1964;
‘(b) to fix the compensation of herein counsel in
the proportion of one-third (1/3) of the shares of plaintiffs, if in land, or
in the amount of P1,000.00, if in cash, and to record the same and expenses advanced by him for
the plaintiffs in the sum of P22.15 as lien in favor of herein claimant-petitioner
over the properties in litigation, particularly over the one-fourth (1/4) share
of the plaintiffs in all the properties of the spouses;
x x x x x x
‘(d) as an alternative to prayer (a) above, to
grant the second motion to dismiss, subjecting,
however, the properties in litigation and subject-matters of the extrajudicial
partition and waiver to the lien for attorney’s fees and expenses in favor of
herein claimant-petitioner, after fixing said attorney’s fees, as prayed for in (b) above.
“x x x x x x x”
“15. That on the day finally set for the hearing of
the second motion to dismiss, as well
as of the counter-motion or petition, or on November 21, 1964, because of the
inquiries or interpellation made by respondent Judge to herein petitioner as to whether there is a Philippine
precedent which allows or directs the protection by the Court of the rights of
any of its officers (lawyer) against any collusion perpetrated by the parties
in a case to defraud or cheat an attorney of his compensation agreed upon by
him and his clients, and his answer that insofar as his researches were
concerned, he could not find any, although there are a number of cases to that
effect in American jurisdiction, the respondent Judge had opined in open court
that the claim for and the fixing of the attorney’s fees should better be done
in a separate action and, in spite of petitioner’s memorandum citing American
authorities to the effect that,
‘Though a party may without the consent of his attorney make a
bona fide adjustment, with the adverse party and dismiss an action or suit
before a judgment or a decree has been rendered thereon, if it appears,
however, that such settlement was collusive and consummated pursuant to the intent
of both parties to defraud the attorney, the court in which the action was
pending may interfere to protect him as one of its officers, by setting aside
the order of dismissal, x x x.’ (Jadson
vs. Stearns, 48 Ore. 25, 84 Pac. 798).
x x x the
respondent Judge, instead of denying the second motion to dismiss and fixing
his attorney’s fees in the said case and recording the same as lien, x x x dismissed the case and
refused to give herein petitioner any kind of immediate protection to
safeguard his rights x x x
in said Civil Case No. SC-525 of the Court of First Instance of Laguna.
“16. That by the express terms of the agreement,
Annex ‘A’ of this petition, plaintiffs in Civil Case No. SC-525 had expressly
ceded to herein petitioner one-half (1/2) [later verbally reduced to
one-third (1/3) or P1,000.00] or whatever share they would get from the
estate of their deceased uncle Lucio Magtibay, and the defendants in said Civil Case had full
knowledge of said right of herein petitioner in the properties in controversy
from and after the time they were served with summons and copies of the
complaint in said civil case – because of the allegations contained in par. 10
thereof.[7]
[Underscoring by the Court]
“18. That on December 5, 1964, herein petitioner
filed his motion for reconsideration dated December 4, 1964 asking for the
reconsideration of the order dated November 21, 1964, x x x
“19. That the motion for
reconsideration was denied by the court, thru the respondent Judge, as per the
order dated January 9, 1965, x x x.”
Upon these facts, petitioner tries to make out before this Court
a case of certiorari for grave abuse
of discretion on the part of respondent Judge in dismissing the case on the
basis of the compromise agreement of the parties, entered into at the back of
petitioner, notwithstanding the reservation made in his favor to file an action
against both parties “with respect to his alleged attorney’s fees”,
as well as a case of mandamus
“to order and command the said respondent judge” to take cognizance
of and resolve his opposition and counter-motion for the court to fix the
compensation he should be paid. Unable
to find any local precedent to support his position, he cites American
authorities thus:
“In the American jurisdiction, it would seem that, even
without the specific provisions of the rules of court cited above, courts had
always intervened, in the mere exercise of their inherent powers, to protect
attorneys against collusive agreements or fraudulent settlements entered into
by the parties in a case to cheat attorneys out of their costs or of their
fees. Thus, it was held or had been
stated in:
“(a) Coughlin vs. N.Y.
Cont. & H.R.R. Co., 71 N.Y. 443, 27 Am. Rep. 75.
‘x x x But since the time of Lord
Mansfield, it has been the practice of courts to intervene to protect attorneys
against settlement made to cheat them out of their costs. If an attorney has commenced an action, and
his client settles it with the opposite party before judgment, collusively, to
deprive him of his costs, the court will permit the attorney to go on with the
suit for the purpose of collecting his costs.
Swain v. Senate, 5 Bos. & Pul. 99; Cole v. Bennett, 6 Price, 15; Moore v. Cook, 13
id. 473; Talcott v. Bronson, 4 Paige, 501; Rusquin v. The Knickerbocker
Stage Col., 12 Abb. Pr. 324; Ward v. Syme, 9 How. Pr.
16; McDonald v. Napier, 14 Ga.
89.
‘There are many cases where this had been allowed to be done. It is impossible to ascertain precisely when
this practice commenced, nor how originated, nor upon what principle it was
based. It was not upon the principle of
a lien, because an attorney has no lien upon the cause of action before
judgment for his costs; nor was it upon the principle that his services had
produced the money paid his client upon the settlement, because that could not
be known, and in fact no money may have been paid upon the settlement. So far as I can perceive, it was based upon
no principle. It was a mere arbitrary
exercise of power by the courts; not arbitrary in the sense that it was unjust or improper, but in the sense that it
was not based upon any right or principle recognized in other cases. The parties being in court, and a suit commenced and pending, for
the purpose of protecting attorneys who were their officers and subject to
their control, the courts invented this practice and assumed this extraordinary
power to defeat attempts to cheat the attorneys out of their costs. The attorney’s fees were fixed in definite
sums, easily determined by taxation and this power was exercised to secure
them their fees.’ (pp. 76-77)
“(b) Randall v. Van Wagenan et al. 22 N.E. 361, 362.
‘x x x But where such settlement is made
collusively for the purpose of defrauding the attorney out of his costs,
courts have been accustomed to intervene, and to protect the attorney by
permitting him to proceed with the suit, and, if he is able to establish a
right to recover on the cause of action as
it originally stood, to permit such recovery to the extent of his costs
in the action. Coughlin v. Railrod Co., 71 N.
Y. 443, and cases cited. And the
court will set aside an order of discontinuance if it stands in the way. This is an adequate remedy, and we think the
exclusive remedy where the suit has been fraudulently settled by the parties
before judgment to cheat the attorney out of his costs. We have found no case of an equitable action
to enforce the inchoate right of an attorney under such circumstances, and no
such precedent ought, we think, to be established.’
“(c) Jackson
v. Stearns, et al., 43 Ore. 25,
84 Pac. 798.
‘x x x Though a party may, without the
consent of his attorney, make a bona fide adjustment with the adverse party,
and dismiss an action or suit before a judgment or a decree has been rendered
therein, if it appears, however, that such settlement was collusive and
consummated pursuant to the intent of both parties to defraud the attorney, the
court in which the action or suit was pending may interfere to protect him, as
one of its officers, by setting aside the order of dismissal and permitting
him to proceed in the cause in the
name of his client to final determination to ascertain what sum of money, or
interest in the subject-matter, if any, is due him for his services when fully
performed. Jones v. Morgan, 99 Am. Dec.
458; Randall v. Van Wagenen (N.Y.) 22 N.E. 361, 12
Am. St. Rep. 828.’ (p. 800)
‘Before a court will set aside an order dismissing a suit or an
action, made upon stipulation of the parties, without the consent of
plaintiff’s attorney, and allow the latter to proceed with the cause in the
name of his client, to determine the amount of fees due him, it must appear
that the defendant participated in the fraudulent intent to deprive the
attorney of his compensation. Courtney
v. McGavock, 25 Wis.
619. When no adequate consideration is
given by the defendant for the settlement and discharge of an action or a suit,
the insufficiency of the inducement to the contract affords evidence of his bad
faith. Young v. Dearborn,
27 N.E. 324. It will be remembered that
the complaint alleges that the value of the real property in question is
$3,000.00, and that Stearns executed to Wilson
a deed to the premises for a nominal consideration. This is a sufficient averment of the
defendant’s intent to deprive the plaintiff of his compensation thereby
imputing to Wilson bad faith.’ (p.
800)
“(d) Desaman v. Butler
Bros., 118 Minn. 198, 136 N.W.
747.
‘We have recently
held that a client has always the right to settle his cause of action and stop
litigation at any stage of the proceeding, subject, however, to the right of
the attorney to receive compensation for services rendered. Burho v. Camichael, 135 N. W. 386.
It is therefore contended by defendant that a litigant retains the
unrestricted right to determine for what amount the cause of action may be
settled, and, having so done, the lien of his attorney for services is measured
by the amount determined on and actually settled for. Conceding, without deciding, that this may be
true at any time prior to the rendition of a verdict in the action which the
attorney has been employed to bring, we are of opinion that after verdict
fixing the amount of a plaintiff’s cause of action a secret and collusive
compromise between parties litigant does not affect the amount of the
attorney’s lien. x x
x; but therein is also clearly indicated by Mr.
Justice Brown that, if there be fraud and collusion to deprive the attorney of
his lien, the settlement will not be permitted to accomplish such result.’ (p.
748)
To be sure, these authorities are quite persuasive, but contrary
to petitioner’s impression, there is already a precedent setting decision of
this Court handed down way back in 1922 in a case very similar to his, that in Rustia vs. the Judge of First Instance of Batangas, et als., 44 Phil. 62.
As it is very brief, it can be
quoted in full:
“This is a petition for a writ of certiorari, the petitioner alleging that the respondent Judge of
the Court of First Instance exceeded his jurisdiction in dismissing a pending
action at the instance of the parties but without the intervention of the
attorney for the plaintiff in the case, the herein petitioner.
“It appears from the record that on July 31, 1921, the
respondent Justo Porcuna,
for himself and on behalf of his wife, the respondent Rosa H. de Porcuna, by means of a written contract, retained the
petitioner to represent them as their lawyer in case No. 1435 then pending in
the Court of First Instance of Batangas and in which
Rosa H. de Porcuna was the plaintiff and one Eulalia Magsombol was the
defendant. The contract fixed the
petitioner’s fee at P200 in advance with an additional contingent fee of
P1,300. It was also provided in the contract that Justo
Porcuna should not compromise the claim against the
defendant in the case without express consent of his lawyer, the herein
petitioner.
“After trial, the petitioner then being plaintiff’s attorney
of record, the Court of First Instance, under date of December 24, 1921,
rendered judgment in favor of Justo Porcuna and Rosa H. de Porcuna
ordering the defendant Eulalia Magsombol
to return to them 602 pieces of cloth or in default thereof to pay to them the
sum of P3,250. On January 14, 1922, Eulalia
Magsombol filed her exception to the judgment and on
the following day presented a motion for a new trial, which was denied on the
21st of the same month. She thereupon
gave notice of appeal and presented a bill of exceptions which was approved on February 20, 1922. On March
2, 1922, and before the transmission of the bill of exceptions to
this court, the plaintiffs presented the following motion in the Court of
First Instance:
‘The plaintiffs, without any further intervention of their
attorney, now appear before this Honorable Court and respectfully aver:
‘That, through Mr. Miguel Olgado, they
already settled this case with the herein defendant.
‘That the basis of the compromise is that we, the plaintiffs,
finally agree that we should be paid the amount of eight hundred pesos (P800)
in two installments; P300 to be paid on this same date, and the remaining five
hundred pesos (P500) at the end of March, 1922.
‘That we, the plaintiffs, recognize not to have any further rights
in this case than to the aforesaid amount of eight hundred pesos (P800) and
that this is the total amount the defendant Eulalia Magsombol should pay us, and we have no right whatever to
any other amount than the aforementioned.
‘That we have not sold to any other person our rights as plaintiffs
in this case.
‘Wherefore, the plaintiffs respectfully request the dismissal of
this case, without any pronouncement as to costs, and that the appeal
interposed by the defendant be further dismissed.
‘Batangas, Batangas,
P.I., March 2, 1922.
‘(Sgd)
ROSA H. PORCUNA
Plaintiff
JUSTO
M. PORCUNA
Plaintiff’
“The defendant, through her attorney, Jose Mayo Librea, having signified her assent to the motion, the
Court of First Instance on the same day,
March 2, dismissed the action without notice to counsel for the plaintiffs.
“The petitioner alleges that he did not discover the dismissal
of the action until April 4, 1922. After an unsuccessful effort to obtain a
reconsideration of the order of dismissal from the trial court, he filed the
present petition for a writ of certiorari. By resolution dated October 24, 1922, this court denied the petition
and upon motion of the petitioner we shall now briefly state our reasons for
such denial.
“The burden of the petitioner’s contention is (1) that he, as
attorney of record, was entitled to notice of his client’s motion to dismiss
the case, and (2) that after the approval of the bill of exceptions the lower
court had lost jurisdiction of the case and had no power to dismiss it. A moment’s reflection should make it clear
that neither of these propositions is tenable.
“Both at the common law and under section 32 of the Code of
Civil Procedure a client may dismiss his lawyer at any time or at any stage of
the proceedings and there is nothing to prevent a litigant from appearing
before the court to conduct his own litigation.
(Sec. 34, Code of Civil Procedure.) The client has also an undoubted
right to compromise a suit without the intervention of his lawyer.
‘Though there is a valid
agreement for the payment to the attorney of a large proportion of the sum
recovered in case of success, this does not give the attorney such an interest
in the cause of action that it prevents plaintiff from compromising the suit.’
(4 Cyc. 990, and authorities cited in Note 6; see
also Louque vs. Dejan, 129 La.
519; Price vs. Western Loan & Savings Co., 19 Am. Cas.
589 and Note.)
“In the present instance the clients did nothing that they
did not have a perfect right to do. By
appearing personally and presenting motion they impliedly dismissed their
lawyer. The petitioner’s contingent
interests in the judgment rendered did
not appear of record. Neither as a party
in interest nor as an attorney was he therefore entitled to notice of the
motion.
“As to the second proposition that the court below could not
dismiss the case after the bill of exceptions had been approved, it is very
true that upon such approval the lower court loses its jurisdiction over all
contentious matters connected with the issues in the case. But there is nothing to prevent all of the parties by agreement to withdraw
the bill of exceptions with the consent of said court and resubmit the case to
the jurisdiction of the court. That was all that was done in this
case. A valid agreement between the
parties to a case is the law of
the case in everything covered by the agreement. (Civil Code, art. 1091; Compaña
General de Tabacos vs. Obed,
13 Phil. 391.) The petitioner might have
protected his interests by entering an attorney’s lien under section 37 of the
Code of Civil Procedure.
“The petition for a writ of certiorari was therefore properly denied. So ordered.”
The difference We perceive, however, between petitioner’s case,
on the one hand, and that of Atty. Rustia, in the
above decision, on the other, is that in the latter’s case, neither the court
nor the party adverse to his clients were aware of the exact agreement as to
his fees, whereas in the case of petitioner, both the court and the other
parties knew the terms of the contract for professional services between
petitioner and his clients, the Magtibay brothers,
because the written contract therefor, Annex A, was
made part of the complaint, and none seriously disputes its authenticity. Besides, the court had already dismissed the
case when Atty. Rustia raised the question of his
fees before the court; in petitioner’s instance, he opposed the motion to
dismiss and pleaded with the court to protect his rights as officer of the
court before the first order in question was issued by respondent judge. Were it not for these differences, We would
have inclined towards denying the herein petition in line with the Rustia ruling, that, in any event, certiorari is not the appropriate remedy, the American authorities
cited by petitioner notwithstanding.
Withal, there is another Philippine case which moves Us to sustain
petitioner. In the case of Recto vs.
Harden, 100 Phil. 440, Atty. Claro M. Recto found
himself practically in the same situation as petitioner herein. After Atty. Recto had rendered services to
Mrs. Esperanza P. de Harden in a protracted suit against her husband for the
purposes of securing an increase of her and her daughter’s monthly support,
(the spouses were separated), to P10,000.00 and of protecting and preserving
her rights in the properties of the conjugal partnership, which suit lasted
from 1941 to 1949, and after the Court of First Instance of Manila had
rendered a judgment favorable to Mrs. Harden acknowledging, inter alia, her rights to the assets of the conjugal
partnership, which turned out to be P4,000,000, and awarding her a monthly support
of P2,500, practically as prayed for in Atty. Recto’s pleadings, while the case
was already pending on appeal before this Court, Mrs. Harden and her husband,
Mr. Fred Harden, entered into a compromise of their case, without the knowledge
of Atty. Recto, whereby said spouses “purportedly agreed to settle their
differences in consideration of the sum of P5,000 paid by Mr. Harden to Mrs.
Harden, and a monthly pension of $500 to be paid by him to her; (2) Mr. Harden
had created a trust fund of $20,000 from which said monthly pension of $500
would be taken; and (3) Mr. and Mrs. Harden had mutually released and forever
discharged each other from all actions, debts, duties, accounts, demands and
claims to the conjugal partnership, in consideration of the sum of $1.”
(p. 435)
Whereupon Atty. Recto filed a motion with this Court praying
that:
“a) Pending the resolution of this motion, the
receiver appointed herein be authorized to continue holding the properties
above mentioned in his custody in order not to defeat the undersigned’s
inchoate lien on them;
“b) A day set aside to receive the evidence of the
undersigned and those of the plaintiff and the defendant Fred M. Harden, in
order to determine the amount of fees due to the undersigned, by the appointment
of a referee or commissioner for the reception of such evidence;
“c) After due hearing, the under signed be
declared entitled to the sum of P400,000 as his fees for services rendered in
behalf of the plaintiff in this case, under paragraph 3 of the contract, Annex
‘A’, and to that end a charging lien therefore be established upon the
properties above-mentioned;
“d) And the receiver be ordered to pay to the
undersigned the full amount of the fees to which the latter is found to be
entitled.”
This motion was objected to by Mr. Harden’s
counsel, who in turn, moved for the dismissal of the case, to which Atty. Recto
objected. Under these circumstances,
this Court acceded to Atty. Rectos prayer that the case be not dismissed, that
the receivership be maintained except as to certain properties not material to
mention here, and that the case be remanded to the lower court so that his fees
may be determined and ordered paid. Upon
the remand of the case to the lower court, a commissioner was appointed to hear
the matter of the amount of the fees in question, and after the commissioner
had submitted a report recommending the payment to Atty. Recto of the 20%
attorney’s fees stipulated in the contract for his services, equivalent to
P369,410.04, the court rendered judgment as follows:
“The contingent fee to which the claimant is entitled under
paragraph 3 of the contract, Exhibit JJJ or 20, is 20% of P1,920,554.85 or the
sum of P384,110.97.
“WHEREFORE, this Court hereby approves the recommendation of
the Commissioner with the above-stated modification, and finds that Attorney Claro M. Recto is entitled to the sum of THREE HUNDRED
EIGHTY-FOUR THOUSAND ONE HUNDRED AND TEN PESOS AND NINETY-SEVEN CENTAVOS
(P384,110.97), representing 20% of Esperanza P. de Harden’s
share in the conjugal properties owned by her and her husband, Fred M. Harden,
as contingent fee stipulated in paragraph 3 of the Contract of Professional
Services, Exhibit JJJ or 20, and the said Esperanza P. de Harden is hereby
ordered to pay the said amount above-stated.”
On appeal from this judgment to this Court, the same was affirmed,
the decision stating pertinently in part:
“The last objection is based upon principles of equity, but,
pursuant thereto, one who seeks equity must come with clean hands (Bastida, et al., vs. Dy Buncio & Co., 93 Phil. 195; 30 C.J.S. 475), and
appellants have not done so, for the circumstances surrounding the case show,
to our satisfaction, that their aforementioned agreements, ostensibly for the
settlement of the differences between husband and wife, were made for the
purpose of circumventing or defeating the rights of herein appellee,
under his above-quoted contract of services with Mrs. Harden. Indeed, having secured a judgment in her favor, acknowledging her rights to the assets of the
conjugal partnership, which turned out to be worth almost P4,000,000 in
addition to litis expensae
in the sum of P175,000, it is
inconceivable that Mrs. Harden would have waived such rights, as well as the
benefits of all orders and judgments in her favor, in consideration of the
paltry sum of $5,000 allegedly paid to her by Mr. Harden and the additional sum
of $20,000 to be paid by him in installments, at the rate of $500
a month. In fact, no explanation has
been given for this most unusual avowed settlement between Mr. and Mrs.
Harden. One can not even consider the
possibility of a reconciliation
between the spouses, the same being inconsistent with the monetary
consideration for said alleged settlement.
What is more, the records show that the relations between said spouses –
which were bad indeed, not only in July, 1941, when Mrs. Harden engaged the
services of the appellee, but, even, before, for Mr.
and Mrs. Harden were separated since 1938 – had worsened considerably
thereafter, as evidenced by an action for divorce filed by Mr. Harden in New
Jersey, in July 1948, upon the ground of repeated acts of infidelity allegedly
committed by Mrs. Harden in 1940 and 1941.”
On the same considerations of equity, and for the better
protection of lawyers, who, trusting in the good faith of their clients, render
professional services on contingent basis, and so that it may not be said that
this Court sanctions in any way the questionable practice of clients of
compromising their cases at the back of their counsel with the consequence that
the stipulated contingent fees of the lawyer are either unreasonably reduced
or even completely rendered without basis, as in this case – wherein the
clients waived the whole of their rights in favor of their opponent after the
latter had acknowledged, in effect, the correctness of said clients’ contention
– We have decided to grant the herein petition, in so far as the rights of
petitioner have been prejudiced by the questioned compromise agreement. While We
here reaffirm the rule that “the client has an undoubted right to
compromise a suit without the intervention of his lawyer”,[8] We hold that when such compromise is
entered into in fraud of the lawyer, with intent to deprive him of the fees
justly due him, the compromise must be subject to the said fees, and that when
it is evident that the said fraud is committed in confabulation with the
adverse party who had knowledge of the lawyer’s contingent interest or such
interest appears of record and who would benefit under such compromise, the
better practice is to settle the matter of the attorney’s fees in the same
proceeding, after hearing all the affected parties and without prejudice to the
finality of the compromise in so far as it does not adversely affect the rights
of the lawyer. Surely, “the client
cannot, by settling, compromising or dismissing his suit during its pendency, deprive the attorney of his compensation for the
agreed amount, unless the lawyer consents to such settlement, compromise or
dismissal”, (Legal and Judicial Ethics by Martin, 1967 Rev. Ed., p. 121)
for the attorney is or “shall be entitled to have and recover from his
client – a reasonable compensation (not more) 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”, (Sec.
24, Rule 138, on Attorney and Admission to Bar) albeit, under Canon 12 of the
Canons of Professional Ethics, “in fixing fees, it should not be forgotten
that the profession is a branch of the administration of justice and not a mere
money-getting trade.”
True it is also that “a
client may, at anytime, dismiss his attorney or substitute another in
his place”, (Sec. 26, Rule 138) but it must be emphasized that the same
provision, which is an incorporation of Republic Act 636 into the Rules of
Court, also provides that “if the contract between client and attorney had
been reduced to writing and the dismissal of the attorney was without
justifiable cause, he shall be entitled to recover from the client full
compensation x x x.”
In the case at bar, by entering into the compromise agreement in question and
even inserting therein a prayer to the court to dismiss their case filed by
petitioner, (see footnote 6, ante) petitioner’s clients impliedly dismissed
him. (Rustia
vs. the Court etc. supra.) Such
implied dismissal appears to Us to have been made without justifiable cause,
none is urged anywhere in the record, and so, the above-quoted provision of
Section 26, Rule 138 applies here. The
terms of the compromise in question, as spelled out in Annex A of Annex I of
the petition, indicate clearly that Aurelia Martinez, the defendant aunt-in-law
of petitioner’s clients, acknowledged that the rights of said clients were
practically as alleged by petitioner in the complaint he filed for them. In other words, through the services of
petitioner, his clients secured, in effect, a recognition, which had been
previously denied by their aunt-in-law, that they were entitled to a 1/4 share
in the estate left by their uncle. We
hold that under these circumstances, and since it appears that said clients
have no other means to pay petitioner, since they instituted their case as
paupers, and that their aunt-in-law was aware of the terms of their contract of
professional services with petitioner, said clients had no right to waive the
portion of their such acknowledged rights in favor of their opponent to the
extent that such waiver would prejudice the stipulated contingent interest of
their lawyer and their aunt-in-law had no right to accept such waiver
unqualifiedly. The Civil Code enjoins
that:
“Art. 19. Every person
must, in the exercise of his rights and in the performance of his duties, act
with justice, give everyone his due, and observe honesty and good faith.”
Under the circumstance extant in the
record, it is clear that the compromise agreement in question falls short of
the moral requirements of this quoted article of the Civil Code. If for this reason alone, it should not be
allowed to prejudice the rights of petitioner.
Accordingly, as all of these circumstances were presented to respondent
judge before he issued the challenged order of dismissal and all the parties
were heard thereon, it was incumbent upon His Honor, in equity and to avoid
multiplicity of suits, particularly, because the amount claimed by petitioner
is only P1,000.00, to have directly passed upon petitioner’s claim, and not
having done so, it would appear that the court a quo abused its
discretion gravely enough to warrant the writ of certiorari herein prayed for in so far as the questioned orders
prejudiced petitioner’s right to the fees for the professional services which
appear to have been creditably rendered by him.
Respondents allege that the judgment of dismissal in question is already
final because no appeal was taken therefrom, but
since We hold that the same was rendered with enough grave abuse of discretion
to warrant the certiorari prayed for,
such alleged finality could not have materialized; obviously, petitioner could
not have appealed, not being a party in the case.
IN VIEW OF THE FOREGOING, the orders of the respondent
court dated November 21, 1964
and January 9, 1965 in Civil
Case No. SC-525 are hereby set aside in so far as they prejudice the payment of
petitioner’s claim of attorney’s fees in the form of either one-third of the
1/4 share acknowledged as his clients in the compromise in question or P1,000.00,
which should constitute as a lien on the said share, in spite of the waiver
thereof in favor of respondent Aurelia Martinez. It is unnecessary to consider the petition
for mandamus. Costs against private respondents.
Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez,
Fernando, and Teehankee,
JJ., concur.
Concepcion, C.J., and Castro, J., on
leave.
Capistrano, J., did not take
part.
[1]
Widow of the deceased Lucio Magtibay
and aunt-in-law of petitioner’s clients.
[2]
Annex A is the written agreement dated July 10, 1964 by which respondent Luis
and Pablo Magtibay contracted the services of
petitioner and under which it was stipulated that petitioner would be entitled
to a contingent fee of one-half of whatever his clients might be awarded either
by the court or by extrajudicial agreement.
[3]
The motion to dismiss was based on the ground that the complaint failed to alleged
that earnest efforts towards compromise had been made, the suit being one
between members of the same family, citing Section 1 (j) of Rule 16.
[4]
Petitioner claimed that the suit was by nephews-in-law against their aunt-in-law
and, therefore, not between members of the same family within the contemplation
of the rule cited by movants.
[5]
Petitioner’s contention indicated in footnote 4 was upheld by the court.
[6]
Paragraph 8 of the Kasulatan contains a request to
the court to dismiss the case in the following words:
“8. Matapos maipaliwanag sa amin ang lahat,
ay wala na kaming hangad na
maghabol pa sa aming mana kaya’t hinihiling namin sa Hukuman
ng Unang Dulugan ng Laguna, Sangay IV (Court of First Instance of Laguna, Branch IV), na putulin na
ang aming sakdal na kaso
Civil Blg. 525, sapagkat ang nais namin
ay katahimikan at iwasan ang usapin sa hukuman.”
[7]
The contract Annex A, for professional services, was also annexed to the
complaint as part of Paragraph 10 thereof.
[8]
Laid down in Rustia vs. the Court, etc., et als., supra.