TRADERS ROYAL BANK EMPLOYEES UNION-INDEPENDENT, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION AND EMMANUEL NOEL A. CRUZ, RESPONDENTS.

Traders Royal Bank Employees Union versus National Labor Relations Commission

The Case

This is a petition for certiorari brought by the Traders Royal Bank Employees Union against the National Labor Relations Commission and Attorney Emmanuel Noel A. Cruz, head of the E.N.A. Cruz and Associates law firm. The union asks the Supreme Court to annul the resolutions of the labor commission which affirmed an award of attorney's fees in favor of the law firm, computed at ten percent of the holiday pay differential recovered by the union's members. The case matters because it draws the line between the two concepts of attorney's fees, ordinary and extraordinary, and because it explains why a lawyer may claim his professional fees even after the principal judgment has become final and executory.

Procedural History

The controversy began before Labor Arbiter Oswald Lorenzo, who, on motion of the law firm, issued an order directing the union to pay attorney's fees of seventeen thousand five hundred seventy four pesos and forty three centavos, or ten percent of the one hundred seventy five thousand seven hundred ninety four pesos and thirty two centavos awarded as holiday pay differential. The union appealed to the National Labor Relations Commission. The First Division of the commission affirmed the labor arbiter's order. The union's motion for reconsideration was denied, hence the petition before the Supreme Court.

Facts

On February 26, 1987, the union and the law firm entered into a retainer agreement under which the union obligated itself to pay a monthly retainer fee of three thousand pesos in consideration of the firm's undertaking to render the services enumerated in the contract. During the existence of that agreement, the union referred to the law firm the claims of its members for holiday, mid-year and year-end bonuses against the Traders Royal Bank. The complaint was certified by the Secretary of Labor to the National Labor Relations Commission, and the commission rendered a decision in favor of the employees, awarding them holiday pay differential, mid-year bonus differential, and year-end bonus differential.

The bank challenged that decision before the Supreme Court, which modified it by deleting the awards of mid-year and year-end bonus differentials while affirming the award of holiday pay differential. The bank voluntarily complied and determined the holiday pay differential to be one hundred seventy five thousand seven hundred ninety four pesos and thirty two centavos, which the union never contested. After receiving the decision, the law firm notified the union, the bank management and the commission of its right to enforce its attorney's lien over the award. It then filed a motion for the determination of its attorney's fees, praying that ten percent of the award be declared as its fees and that the union be ordered to remit the amount. The bank did not oppose the motion, as the claim was directed against the union.

The labor arbiter granted the motion. The union appealed to the commission, which affirmed, and denied the union's motion for reconsideration. The union then came to the Supreme Court, contending that the commission acted without jurisdiction in modifying a final and executory judgment, and that the retainer fee already covered all attorney's fees due to the law firm.

Issues

• Whether or not the National Labor Relations Commission acted without jurisdiction in awarding attorney's fees after the main judgment had been reviewed and partially affirmed by the Supreme Court, thereby modifying a final and executory judgment.
• Whether or not the monthly retainer fee of three thousand pesos already covered the law firm's services, so that the additional award of attorney's fees was improper.
• Whether or not the law firm waived its right to additional compensation because no separate agreement was reached prior to the performance of the special services.

Applicable Provisions

Article 2208 of the Civil Code is the basis for the extraordinary concept of attorney's fees, which the Court distinguishes from the ordinary concept:

In its extraordinary concept, an attorney's fee is an indemnity for damages ordered by the court to be paid by the losing party in a litigation.

This distinction bears on the case because the fees demanded by the law firm were of the ordinary kind, compensation paid by the client, not damages chargeable to the adverse party.

The Court also grounds the award on the quasi-contract that arises to prevent unjust enrichment:

Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another.

This provision supplies the obligation to pay where no agreement on the special fees was reached.

Finally, the retainer agreement itself, in its fee structure, provides:

Any and all Attorney's Fees collected from the adverse party by virtue of a successful litigation shall belong exclusively to the Law Firm.

This stipulation confirms that the monthly retainer was not the full measure of the firm's compensation.

Ruling

On the first issue, the Court held that the commission did not modify the final judgment. No claim for attorney's fees was pending before the commission or before the Supreme Court when they ruled, and courts generally rule only on issues and claims presented to them. The claim for fees is an adjunctive episode of the main action, and a claim for attorney's fees may be asserted either in the very action in which the services were rendered or in a separate action. The Court explained that the remedy of claiming fees as an incident of the main action may be availed of only when something is due to the client, and that the determination of the fees must await the finality of the main case, otherwise it would be premature.

On the second issue, the Court distinguished a general retainer from a special retainer. The three thousand peso monthly fee was a general retainer, a compensation for lost opportunities, paid for the firm's commitment to render the enumerated services, not for services actually performed. The Court held that the retainer agreement could not control the measure of remuneration for the firm's actual services, and that the failure to agree on special fees did not absolve the union of civil liability.

On the third issue, the Court found no waiver. There was no showing that the firm unequivocally opted to waive the additional charges, and its prompt notice of charging lien and motion to determine fees belied any intent to renounce compensation. Instead, a quasi-contract arose from the firm's lawful, voluntary and unilateral prosecution of the union's cause, and the union benefited from the award obtained in its favor.

Doctrine

Attorney's fees have two concepts. In the ordinary concept, they are reasonable compensation paid by the client to the lawyer, based on employment and agreement. In the extraordinary concept, they are an indemnity for damages paid by the losing party, based on the cases authorized by law, and payable to the client unless otherwise agreed. A general retainer is a fee to secure future services and is compensation for lost opportunities; a special retainer is a fee for a specific case or special service. A claim for attorney's fees may be filed in the main action or in a separate action, but when filed as an incident of the main action, its determination must await the finality of the main case. Where no agreement fixes the compensation for special services, a quasi-contract arises to prevent unjust enrichment, and the client remains liable for reasonable remuneration.

Disposition

The Supreme Court denied the petition and upheld the award of attorney's fees in favor of the law firm.

Remember This

Memorize the line that a general retainer is compensation for lost opportunities, while a special retainer is a fee for a specific case, and that a claim for attorney's fees may be pursued even after the main judgment becomes final. Examiners use this case to test the distinction between the ordinary and extraordinary concepts of attorney's fees and the rules on when a lawyer may claim his fees.