HILARIA TANHUECO, COMPLAINANT, VS. JUSTINIANO G. DE DUMO, RESPONDENT.

On 24 February 1975, complainant Hilaria
Tanhueco filed before the Court a Petition for
Disbarment (docketed as Administrative Case No. 1437) against respondent Justiniano G. de Dumo for having
violated the Canons of Professional Ethics by his (a) refusal to remit to her
money collected by him from debtors of the complainant; and (b) refusal to
return documents entrusted to him as counsel of complainant in certain
collection cases.

In his Answer and Counter-Petition^[1]
filed on 3 April 1975,
respondent denied the charges. 
Complainant filed a Rejoinder [should be Reply] to Answer with
Counter-Petition, on 18 April 1975.  By a Resolution^[2]
dated 16 June 1975, the
Court referred this case to the Solicitor General for investigation, report and
recommendation.

A year later, on 25 June
1976, one Jose Florencio N. Tanhueco, claiming to be the nephew and representative of
the complainant, addressed a sworn letter complaint to Mrs. Imelda R. Marcos
against the respondent for (a) refusal to remit the money collected by respondent
from debtors of complainant’s aunt, Mrs. Hilaria Tanhueco Vda. de David; (b)  refusal to return documents entrusted to him
in his capacity as counsel in certain cases; and (c) abandonment of cases in
respect of which his professional services had been engaged.  On 24
August 1976, the letter complaint was forwarded by the then Public
Information Assistance Staff, Department of Public Information, to this Court
for appropriate action (and docketed as Administrative Case No. 1683).  After respondent had filed his Answer, the
Court, by a Resolution^[3]
dated 9 December 1976,
referred this case to then Acting Judicial Consultant Ricardo C. Puno for study, report and recommendation.

Since Administrative Case No. 1683 and Administrative Case No.
1437 involved the same parties and the same subject matter, Hon. Ricardo C. Puno referred the former case to the Office of the
Solicitor General for consolidation with the latter one.

The Office of the Solicitor General held two (2) hearings, one on
3 December 1975 and another
on 18 April 1988.  In the first hearing, respondent de Dumo was absent although he had been notified thereof.  At the end of the first hearing, continuation
of the hearing of the case was set for 14
January 1976.  The records
show that the second hearing took place on 18 April 1988
but do not indicate the reason for the 12-year interregnum.  By then, complainant Tanhueco
had died.  There was no appearance at the
second hearing by complainant
Jose Florencio Tanhueco but
respondent de Dumo was then present.

The report of the Solicitor General, dated June 15, 1988 in Administrative Case No. 1437
summarized the evidence for the complainant in the following manner:

“EVIDENCE FOR COMPLAINANT

Complainant Hilaria Tanhueco testified that she secured the legal services
of respondent to collect indebtedness from her different debtors.  Although she offered to execute a document
evidencing their lawyer-client relationship, respondent told her that it was
not necessary.  She nonetheless offered
to give him 15% of what he may be able to collect from the debtors (pp. 4-7, tsn, Dec. 3, 1975).

Complainant also declared that respondent borrowed from her
P2,000.00, P1,300.00, and P3,000.00 on three separate occasions, but she could
not remember when she gave those amounts. 
Respondent did not pay those loans (pp. 8-9, tsn,
id.)

She confirmed that respondent filed cases against her debtors and
that one of them, Constancia Mañosca,
paid P12,500.00 to respondent.  Informed
of such payment by Manosca herself, complainant confronted
respondent but the later denied having received payment from any of her
debtors.  Complainant then brought the
matter to the attention of Malacañang which referred
her to Camp Crame.  Notwithstanding subsequent demands of
complainant for the money, respondent had refused to give her the amount (pp.
11-15, tsn, id.).”

The Solicitor General then summed up the evidence for the
respondent in the following terms:

“EVIDENCE FOR RESPONDENT

Respondent Atty. Justiniano G. de Dumo testified that complainant indeed secured his legal services to collect from her debtors,
with the agreement that he gets 50% of what he may be able to collect.  He thus filed collection cases against Tipace, Mañosca, Morena. Jr., and others, and was able to obtain favorable
judgment in the cases against Mañosca, Tipace and Leonila Mendoza.  The initial payments made by these
judgment-debtors were all given to complainant. 
With respect to Mañosca, respondent obtained a judgment for P19,000.00
although the debt was only P12,000.00 (pp. 3-9, tsn, April
18, 1988).

Respondent also declared
that complainant, who was then already old and sickly, was influenced by her
debtors, who were also her friends, into distrusting him.  Ultimately, because complainant filed a
complaint against him with Malacañang which referred
the matter to Camp Crame, he terminated his relationship with
complainant and demanded his attorney’s fees equivalent to 50% of what he had
collected.  Complainant refused to pay
him, hence, he did not also turn over to her the P12,000.00 initial payment of Mañosca, which he considered, or applied, as part payment
of his attorney’s fee (pp. 9-19, tsn, id.)  Respondent estimated his attorney’s fee due
from complainant in the amount of P17,000.00 (p. 20, tsn,
id.)

Respondent denied having borrowed the amounts of P2,000.00,
P1,300.00. P3,000.00 and P1,000.00, pointing
out that complainant did not even have money to pay him so that he handled the
cases for her on contingent basis (p. 17, tsn, id.)
He also denied having received documentary evidence from complainant.  What evidence he had were all gathered by him
on his initiative (pp. 4-7, tsn, id.).”

The Solicitor General then set out the following

“F I N
D I N G S

There is in the case at bar clear admissions by both complainant
and respondent of an attorney-client relationship between them,
specifically in the collection of debts owing complainant.  Respondent also admitted, in his answer to
the complaint and in his testimony, having received  P12,000.00 from judgment-debtor Constancia  Mañosca, without turning over the amount to his  client, complainant  herein, and applying it instead as part of
his attorney’s fees.  It has been
held that the money collected by a lawyer in pursuance of a judgment in favor
of his client is held in trust (Aya v. Bigonia, 57 Phil., 8; Daroy v. Legaspi, 65 SCRA 304), and that the attorney should
promptly account for all funds and property received or held by him for the
client’s benefit (Daroy v. Legaspi,
supra; In re Bamberger, 49 Phil. 962). 
The circumstance that an attorney has a lien for his attorney’s fees on
the money in his hands collected for his client does not relieve him from the
obligation to make a prompt accounting (Doming[o] v. Doming[o], G.R. No. 30573,
Oct. 29, 1971; Daroy v. Legaspi,
supra).  Undoubtedly,
respondent’s failure to account for the P12,000.00 representing payment of the
judgment debt of Mañosca constitutes unprofessional
conduct and subjects him to disciplinary action.  Nonetheless, it has likewise been recognized
that a lawyer is as much entitled to judicial protection against injustice,
imposition or fraud on the part of his client; and that the attorney is
entitled to be paid his just fees.  The
attorney should be protected against any attempt on the part of his client to
escape payment of his just compensation (Fernandez v. Bello,
107 Phil. 1140; Albano v. Coloma, G.R. Adm. Case No.
528, Oct. 11, 1967).  This countervailing
rule mitigates the actions of respondent.

As regards the charges that respondent received documents
evidencing the debts to complainant and had refused to return them to the
latter, and that respondent also borrowed some amounts from her, there [is] no
competent, conclusive evidence to support
them.  Perforce, such allegations
have no factual basis.” (Underscoring supplied)

The Solicitor General then recommended that:

“For failure to turn over the amount of P12,000.00 to the
complainant, and applying it as his
attorney’s fees, respondent Atty. Justiniano
G. de Dumo be severely reprimanded and admonished
that repetition of the same or similar offense will be dealt with more
severely.”

We find the findings of fact of the Solicitor General supported
by the evidence of record.  We are,
however, unable to accept his
recommendation.

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.^[4]
Canon 11 of the Canons of Professional Ethics^[5]
then in force, provides as follows:

“11.  Dealing with
trust property.

The lawyer should refrain from any action whereby for his personal
benefit or gain he abuses or takes advantage of the confidence reposed in him
by his client.

Money of the client or collected for the client or other
trust property coming into the possession of the lawyer should be
reported and accounted for promptly and should not under any
circumstances be co-mingled with his own or be used by him.”
(Underscoring supplied)

When respondent withheld and refused to
deliver the money received by him for his client, the deceased complainant Hilaria Tanhueco, he breached the
trust reposed upon him.  The claim of the
respondent that complainant had failed to pay his attorney’s fees, is not an
excuse for respondent’s failure to deliver any amount to the complainant.^[6]
It is of course true that under Section 37 of Rule 138 of the Revised Rules of Court, an attorney has —

“a lien upon the funds documents and
papers of his client which have lawfully come into his possession and may
retain the same until his lawful fees and disbursements have been paid, and may
apply such funds to the satisfaction thereof. 
He shall also have a lien
to the same extent upon all judgments for the payment of money, and executions
issued in pursuance of such judgments which he has secured in a litigation of
his client, from and after the time when he shall have caused a statement of
his claim of such lien to be entered upon the records of the court rendering
such judgment, or issuing such execution, and shall have caused written notice
thereof to be delivered to his client and to the adverse party; and he shall
have the same right and power over such judgments and executions as his client
would have to enforce his lien and secure the payment of his just fees and
disbursements.”

The fact that a lawyer has a lien for
fees on moneys in his hands collected for his client, does not relieve him from
his duty promptly to account for the moneys received; his failure to do so constitutes professional
misconduct.^[7]

In the present case, what respondent could have properly done was
to make an accounting with his client, the complainant, deduct his
attorney’s fees due in respect of the amount actually collected by him, and
turn over the remaining balance to the complainant.  The Court notes that the services of
respondent de Dumo
were engaged by the complainant on a number of cases and that these were on differing
stages of completion.  Respondent was not entitled to hold on to the
entire amount of P12,000.00 collected
by him until all his fees for the other cases had also been paid and received by him.  There
was not enough evidence in the
record to show how much money, if
any, respondent had in fact previously (i.e., other than the
P12,000.00 from Mañosca) collected for and turned
over to complainant (thereby waiving his lien thereon) without deducting
therefrom his claimed contingent fees in respect of
such collections.

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 relationships vis–a–vis
his client.  Respondent fell far short of
this standard when he failed to render an accounting for the amount actually
received by him and when he refused to turn over any portion of such amount
received by him on behalf of his client upon the pretext that his attorney’s
fees had not all been paid.  Respondent
had in fact placed his private and personal interest above that of his client.  Respondent’s act constitutes a breach of his
lawyer’s oath and a mere reprimand is not an adequate sanction.

There is another aspect to this case which the Court cannot gloss
over.  Respondent claimed that he charged
complainant, his client, a contingent fee of fifty percent (50%) of the amount
collected by him, plus interest and whatever attorney’s fees may be awarded by
the trial court chargeable to the other party. 
In this jurisdiction, contingent fees are not per se
prohibited by law.^[8]
But when it is shown that a contract for a contingent fee was obtained by undue
influence exercised by the attorney upon his client or by any fraud or
imposition or that the compensation is clearly excessive, the Court must and
will protect the aggrieved party.^[9]

From the Answer of respondent de Dumo,
it appears that in three (3) collection cases filed by him for the complainant
and which were decided in favor
of the complainant, the awards totalled
P31,390.00.  Respondent asserted that he
was entitled to attorney’s fees amounting to P18,840.00 out of the aggregate
total of P31,390.00:

“7.  That the understanding
between Hilaria Tanhueco
and me was a fifty-fifty on collected principal and interests.  The lawyer has the right to charge
attorney’s fees to the other party–defendant
and that Hilaria Tanhueco
shall not interfere nor be included in the computation.

That of the cases filed, the following made payments:

a.  ‘Hilaria
Tanhueco vs. Constancia Manosca’

Amount
Collectible (principal)……… P12,000.00

Interest added from May 1972

to Nov/73 at 1%
a month…………….. P  2,280.00

Attorney’s fees charged to the

defendant and not to be included

in the computation……………………… P  4,720.00

TOTAL and Amount specified in      P19,000.00

the Compromise Agreement and

Subject of the Decision.

b.  ‘Hilaria
Tanhueco vs. Melchor Tipace et al.’

Principal
amount collectible………… P
7,100.00

Interest at 1% per month

starting June/71
to Sept./74 ………..    2,840.00

Attorney’s fees charged to

the defendant and not

included in the computation…………   1,450.00

T O T A L                             P11,390.00.”

c.  ‘Hilaria
Tanhueco vs. Estimo’

Principal Amount collectible………… 1,000.00

SUMMATION OF THE THREE CASES FILED AND AMOUNTS RECEIVABLE BY THE
UNDERSIGNED INCLUDING ATTORNEY’S FEES:

MANOSCA CASE:

Attorney’s fees to
be paid by

Manosca and
not to be included

in the computation………………………             P 4,840.00

Fifty
per cent on the

principal amount collectible

plus interests……………………………..                7,080.00

TOTAL
AMOUNT RECEIVABLE       P11,920.00

TIPACE’S CASE:

Attorney’s fees to be paid by

Tipace and not to be included

in the
computation………………………             P1,450.00

Fifty
per cent on the principal

amount
collectible from Tipace

plus interests……………………………..                4,970.00

TOTAL AMOUNT RECEIVABLE        P6,420.00

8. The total amount which I
ought to receive as attorney’s fees under paragraph seven, sub-paragraph
a, b and c is:

P11,920.00

6,420.00

       500.00.

 P18,840.00      TOTAL”^[10]

We note that respondent attorney claimed
as his contingent fee the following:

1)   fifty percent (50%) of the sum of principal
and interest collectible from different debtors; and

2)   attorney’s fees charged to the defendant
(presumably under promissory notes or written agreements) and “not to be
included in the computation.”

Under this scheme, respondent was
actually collecting as attorney’s fees sixty percent (60%) or more than half of
the total amount due from defendant debtors; indeed, he was appropriating for
himself more than what he was according to him to turn over to his client.

We believe and so hold that the contingent fee here claimed was,
under the facts obtaining in this case, grossly excessive and unconscionable.^[11]
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 her.

The complainant was an old and
sickly woman and, in respondent’s own words, “penniless.” She
was at the time she filed her complaint in 1976, already seventy-six (76) years
old.  In her circumstances, and given her
understandable desire to realize upon debts owed to her before death overtook
her, she would easily succumb to the demands of respondent attorney regarding
his attorney’s fees.  It must be stressed
that the mere fact that an agreement had been reached between attorney and
client fixing the amount of the attorney’s fees, does not insulate such
agreement from review and modification by the Court where the fees clearly appear to be excessive or
unreasonable.  In Mambulao
Lumber Company v. Philippine National Bank, et al.,^[12]
this Court stressed:

“The principle that courts should reduce stipulated
attorney’s fees whenever it is found under the circumstances of the case that
the same is unreasonable, is now deeply rooted in this jurisdiction to
entertain any serious objection to it. 
Thus, this Court has explained:

‘But the principle that it may be lawfully stipulated that the
legal expenses involved in the collection of a debt shall be defrayed by the
debtor does not imply that such stipulations must be enforced in accordance
with the terms, no matter how injurious or oppressive they may be.  The lawful purpose to be accomplished by such
a stipulation is to permit the creditor to receive the amount due him under his
contract without a deduction of the expenses caused by the delinquency of the
debtor.  It should not be permitted for
him to convert such a stipulation into a source of speculative profit at the
expense of the debtor.

xxx         xxx       xxx.’

Since then this Court has invariably
fixed counsel fees on a quantum meruit basis whenever
the fees stipulated appear excessive, unconscionable, or unreasonable,
because a lawyer is primarily a court officer charged with the duty of
assisting the court in administering impartial justice between the parties, and
hence, the fees should be subject to judicial control.  Nor should it be ignored that sound public
policy demands that courts disregard stipulations for counsel fees, whenever
they appear to be a source of speculative profit at the expense of the debtor
or mortgagor (See, Gorospe, et al. v. Gochangco, supra). 
And it is not material that the present action is between attorney and
client.  As courts have power to fix
the fee as between attorney and client, it must necessarily have the right
to say whether a stipulation like this, inserted in a mortgage contract, is
valid (Bachrach vs. Golingco,
supra).

x x
x  x x x     x x x.”^[13]

This Court has power to guard a client,^[14]
especially an aged and necessitous client,^[15]
against such a contract.  We hold that on a quantum meruit basis, no circumstances of special
difficulty attending the collection cases having been shown by respondent,
respondent attorney’s fees should be reduced from sixty percent (60%) to
fifteen percent (15%) of the total amount (including attorney’s fees stipulated
as chargeable to the debtors) collected by him on behalf of his client.

With respect to charges of refusal to return documents entrusted to respondent lawyer and
abandonment of cases in which his services had been engaged we accept the
findings of the Solicitor General that the evidence of record is not sufficient
to prove these allegations.

WHEREFORE, the Court Resolved that:

1.   respondent is guilty of violation of the attorneys’ 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 more severely
dealt with;

2.   the attorney’s fees that respondent is
entitled to in respect of the collection cases here involved shall be an amount
equivalent to fifteen percent (15%) of the total amount collected by respondent
from the debtors in those cases:

3.   respondent shall return forthwith to the
estate of complainant Hilaria Tanhueco,
the P12,000.00 respondent received on behalf of his client less attorney’s fees
due to him in respect of that amount (P12,000,00 less fifteen percent [15%]
thereof) or a net amount of P10,200.00; and

4.   respondent shall return to the estate of
complainant Hilaria Tanhueco
any documents and papers received by him from the deceased complainant in
connection with the collection cases for which he was retained.  If he has in fact made any other collections
from deceased complainant’s debtors, he shall promptly account therefor to complainant’s estate and shall be entitled to
receive in respect thereof the fifteen percent (15%) attorney’s fees provided
for herein.

Let a copy of this Resolution be furnished each to the Bar
Confidant and spread on the personal record of respondent attorney, and to the
Integrated Bar of the Philippines.

Fernan, C.J., Narvasa,
Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco,
Padilla, Bidin, Sarmiento,
Cortes, Griño-Aquino, Medialdea,
and Regalado,
JJ., concur.

^[1]
In said Answer and Counter-Petition, respondent also charged Atty. Jose Beltran Sotto, counsel for
complainant, with malpractice, considering that Atty. Sotto allegedly acted as
lawyer of the opposing party in a previous litigation against Hilaria Tanhueco.  In a Resolution dated 21 May 1978, in
Administrative Case No. 1437 (Rollo, p 28), this Court ruled that the
complaint against Atty. Jose Beltran Sotto cannot be the subject of a
Counter-Petition but only of a separate complaint in due form.  ‘The prayer to prohibit Atty. Sotto from
appearing on behalf of the complainant, was likewise denied.

^[2]
Rollo of Adm. Case No. 1437, p. 41.

^[3]
Rollo of Adm. Case No. 1683, p. 33.

^[4]
Aya v. Bigornia, 57
Phil. 8 (1932).

^[5]
Adopted by the Philippine Bar Association in
1917.

^[6]
In In re W.H. Booram. 39
Phil. 247 (1918), this Court ruled that the attorney who received an account of
P265.17 for collection, and collects one-half of the (P132.58), and leaves the
balance uncollected and present a statement to his client, claiming all the
money collected as his fees for the work done in that case, is guilty of
unprofessional conduct and should be suspended from the practice of law.

^[7]
In re Bamberger, 49 Phil. 962 (1924); Daroy v.
Legaspi. 65 SCRA 304 (1975).

^[8]
See Canon 13; Canons of Professional Ethics, in force at the time here
material.  Under Canon 20 and Rule 20.01 of
the new Code of Professional Responsibility, the contingent character of
attorney’s fees may be taken into account in assessing the fairness and
reasonableness of such fees.

^[9]
Ulanday v. Manila Railroad Co., 45 Phil. 540
(1923); Grey v. Insular Lumber Co., 97 Phil. 833 (1955).

^[10]
Rollo of Adm. Case No. 1437, pp. 15-16: underscoring supplied.

^[11]
Cf. Amalgamated Laborers’ Association, et al. v. Court of Industrial
Relations, 22 SCRA 1266 (1968); and Quitoriano, et
al. v. Centeno, 59 Phil. 646 (1934).

^[12]
130 Phil. 366 (1968).

^[13]
130 Phil. at 381, 382; underscoring supplied.

^[14]
Virginia M. Ramos. v. Hon. Judge Abdulwahid A.
Bidin, etc., G.R. No. 53650, Rosaura
P. Jaldon v. Hon. Judge Abdulwahid
A. Bidin, etc., et al., G.R. No. 55460, promulgated
28 May 1988.

^[15]
Article 24, Civil Code of the Philippines.