G.R. No. L-26540. December 28, 1981
MUTUAL PAPER INC., PETITIONER, VS. EASTERN SCOTT PAPER COMPANY, RESPONDENT.
MELENCIO-HERRERA, J.:
For consideration in this
Petition is the reasonableness of the award in respondent’s favor of
attorney’s fees in the amount of P20,000.00.
Respondent Eastern Scott
Paper Company filed on November 24, 1962, with the Court of First Instance of
Rizal, Quezon City, Branch IX, an action against petitioner Mutual Paper Inc.,
for the collection of the sum of P782,566.58, which represents the unpaid value
of various quantities of paper and paper products in the total amount of
P4,271,572.04 sold by respondent to petitioner from July 3, 1961 to February
17, 1962 on a thirty-day-credit basis. The Court appointed a receiver, ex-parte, as prayed for by
respondent in its Complaint, to preserve and administer the properties of
petitioner corporation, which had shortened its corporate existence to May 31,
1962.
On April 15, 1963, or
during the pendency of the action, petitioner paid respondent the amount of
P280,000.00.
On July 3, 1963, petitioner confessed judgment
to the recomputed unpaid balance
of P398,902.00. On the same day, the Court ruled:
“Considering that the defendant (petitioner herein) has confessed
judgment to the unpaid balance of P398,902.00, let judgment be entered against
the defendant for the said amount of P398,902.00, with interest at 6% from the
date of filing until fully paid, without pronouncement as to attorney’s fees
and costs.”
Respondent moved to
reconsider the non-award of attorney’s fees, invoking the stipulation in the
purchase orders, invoices and delivery receipts providing for the payment of
25% of the amount due as attorney’s fees in case of litigation to enforce
collection, and Article 2208 of the Civil Code, which allows payment of
attorney’s fees in instances where a party has been compelled to file an action
to protect its interests. Petitioner
opposed reconsideration and offered instead to pay the costs in the amount of
P1,500.00 and nominal attorney’s fees of P3,000.00 for the filing of the
complaint.
On January 3, 1964, the
trial Court ruled:
“Resolving the motion for reconsideration filed by plaintiff
corporation (respondent herein) dated July 10, 1963, in which said plaintiff
prays the Court that the decision of this Court dated July 3, 1963 be
reconsidered and defendant be ordered to pay plaintiff 10% of the amount due
for attorney’s fees and to pay the costs of the suit, considering the nature
of the services rendered by counsel for plaintiff and the amount involved in
the case, and considering further the fact that plaintiff is willing to condone
payment of the interest due, the Court hereby reconsiders and amends its
decision of July 3, 1963, and hereby orders defendant to pay plaintiff the sum
of P20,000.00 for attorney’s fees, and the additional sum of P1,520.00 as
costs, the sum total to be free
of any interest whatsoever.”
Petitioner sought
reconsideration contending that the award of attorney’s fees was exhorbitant
since counsel’s services were limited to the mere filing of the complaint
without any actual trial on the merits. Respondent opposed the Motion. The Court denied reconsideration.
Petitioner appealed to
the Court of Appeals, which affirmed the appealed judgment, stating:
“We believe that the amount of P20,000.00 thus awarded by the
lower court as attorney’s fees is not unreasonable. While it is true that this case was determined by virtue of a
confession of judgment made by the defendant, yet it should be noted that the
services of plaintiff’s counsel did not only constitute in the filing of the
complaint but also in the securing of a receiver, in appearing in courts and in
discussing the possibility of settling the case amicably with the other
party. The social standing of the
counsel is also another factor that we consider in the determination of the reasonableness of his attorney’s
fees. It should also be stated in this
connection that the original claim was for P782,566.58 which was subsequently
reduced to P398,902.00 by virtue of the confession of judgment. Likewise the condonation of interest by the
plaintiff is a very strong factor to arrive at a conclusion that the award of
P20,000.00 made by the lower court is reasonable.
WHEREFORE, finding no reversible error in the judgment appealed
from the same is hereby affirmed, with costs against appellant.”
Dissatisfied, petitioner
filed the present Petition for Review assigning the following errors to
respondent Court:
I
“The Court of Appeals committed an error of law in not holding
that there was neither factual nor legal basis for the application of the factors
generally considered by courts in determining the reasonableness of attorney’s
fees.
II
The Court of Appeals committed
an error of law in not holding that under the undisputed facts of this
case, the award by way of attorney’s fees of P20,000.00 is unreasonable and
unjustified, considering petitioner’s admission of the indebtedness to respondent.
III
The Court of Appeals committed an error of law in not holding that
for the professional services of respondent’s counsel, they were in law and in
equity entitled only to the sum of P3,000.00 voluntarily offered by petitioner.
IV
The Court of Appeals committed an error of law in not modifying the decision of the trial court by holding
petitioner liable only to the
sum of P3,000.00.”
The only issue is the
reasonableness of the award of P20,000.00 as attorney’s fees.
To be borne in mind is
the fact that the attorney’s fees herein litigated are not those recoverable as
between lawyer and client. Such factors
as the extent and character of the services rendered, the nature and importance
of the litigation, and the professional character and social standing of the
attorney are not, strictly speaking, controlling, although they may aid in
determining reasonableness.[1] Rather, the attorney’s fees involved are
those agreed upon between two contracting parties in the event of litigation
between them. They are in the nature of
liquidated damages.
Under the provisions of
Section 24, Rule 138, a written contract for services shall control the amount
to be paid unless found by the Court to be unconscionable or unreasonable. And under Article 2227 of the Civil Code,
“liquidated damages, whether intended as an indemnity or a penalty, shall
be equitably reduced if they are iniquitous or unconscionable.”
May the attorney’s fees
awarded of P20,000.00 be characterized as unconscionable or unreasonable? We opine in the negative.
Respondent was compelled
to litigate or incur expenses to protect its interests.[2] Petitioner corporation was dissolved on May
24, 1962. That prompted respondent to
bring the collection suit on November 24, 1962 and ask for the
appointment of a receiver. Petitioner
filed its Answer averring in its affirmative and special defenses that it was
relieved from any obligation to respondent. However, it relented and made a partial payment on April 15, 1963 and
confessed judgment on July 3, 1963. Obviously, the institution of the action hastened the settlement of
petitioner’s obligation which, however, took almost eleven months before
initial payment was made, and more than one year before the balance, at a
reduced amount, was admitted.
In the purchase orders
and invoices in the case at bar, lawyer’s fees and expenses of litigation were
fixed at 25% of the amount due. The
amount claimed in the Complaint was P50,000.00. Technically, even if the judgment had been reduced by
compromise between the parties, the amount sued for was P782,566.58, 25% of
which would amount to P195,641.64. Even
on the proposition that the amount claimed had been reduced to P398,902.00, 25%
thereof would be P99,725.50. This
amount is the controlling obligation, which can be reduced if found to be
unconscionable or unreasonable.
The trial Court and the
Court of Appeals found that 25% attorney’s fees based on the amount sued for
was quite unreasonable so that they reduced it to P20,000.00. This is approximately five (5%) percent of
P398,902.00, the amount that petitioner had confessed. That reduction is essentially discretionary
with the trial Court[3] and, in the absence of any abuse of
discretion, we are not inclined to disturb the same.
WHEREFORE, the
judgment appealed from is hereby affirmed and the Petition dismissed.
SO ORDERED.
Teehankee, (Chairman), Makasiar, Fernandez, Guerrero, and Plana, JJ., concur.
[1]
Polytrade Corporation vs. Blanco, 30 SCRA 187 (1969).
[2]
Art. 2208, Civil Code.
[3]
Lopez vs. Gonzaga, 10 SCRA 167 (1964); De Santos vs. City of Manila, 45 SCRA 409 (1972).