MODESTA BORCENA, ANTONIO GIMENO, JR., ESTELA GIMENO ROLANDO GIMENO, EDGARDO GIMENO AND ANELIA GIMENO, PETITIONERS, VS. INTERMEDIATE APPELLATE COURT, HON. CLEMENTE D. PAREDES, RO…

Borcena versus Intermediate Appellate Court

The Case

This is a petition brought by Modesta Borcena, Antonio Gimeno, Junior, Estela Gimeno, Rolando Gimeno, Edgardo Gimeno, and Anelia Gimeno against the Intermediate Appellate Court, Judge Clemente Paredes, and their former counsel, Attorney Gil de Guzman. The petitioners question the amount of attorney's compensation that the trial court and the appellate court ordered them to pay their former lawyer. The case matters because it is the classic statement on the power of courts to reduce a stipulated attorney's fee that is unconscionable or unreasonable, and on the measure of a lawyer's compensation when the client dismisses him for a justifiable cause — the doctrine of quantum meruit, which means compensation for services actually rendered, measured by their reasonable worth.

Procedural History

The petitioners engaged Attorney Gil de Guzman under a written contract of legal services and he filed a complaint for damages on their behalf. After the petitioners terminated his services, the trial court issued an order declaring the termination unjustified and fixing his attorney's fees at 177,500 pesos, payable immediately, plus 20 percent of whatever attorney's fees might be awarded to the petitioners in the main case. The trial court later denied the petitioners' motion for reconsideration and granted execution pending appeal, and a writ of execution was issued for the 177,500 pesos. The petitioners went up to the Intermediate Appellate Court, which denied due course to their petition questioning the execution pending appeal. Hence this petition before the Supreme Court.

Facts

On July 6, 1981, the petitioners retained the legal services of Attorney Gil de Guzman to prosecute their case against Nam Kwang, Socea Bonna, the Metropolitan Waterworks and Sewerage System, and other persons for the destruction of their road and residential lots in a subdivision in Bigti, Norzagaray, Bulacan. The written contract stipulated 20 percent of their total claim as attorney's fees and 5 percent as representation and miscellaneous expenses, or a total of 25 percent, payable after complete payment by the defendants. It was further understood that whatever judgment attorney's fees the court might award against the defendants would accrue to the lawyer and would not form part of the contingent fee.

On the same date, Attorney de Guzman filed the complaint for damages. The defendants Nam Kwang and Socea Bonna were later declared in default. On the lawyer's motion, the trial court issued a writ of preliminary attachment, and the Metropolitan Waterworks and Sewerage System was directed to hold in trust 852,000 pesos payable to Nam Kwang. The court later ordered that checks be issued in the name of Rolando Gimeno and deposited with the municipal treasurer of Santa Maria, Bulacan.

On March 17, 1983, Rolando Gimeno, for himself and the other petitioners, sent Attorney de Guzman a letter terminating his services effective immediately. The stated reason was the lawyer's failure or refusal to return the checks for deposit with the municipal treasurer, although they were almost three months old and might become stale. A new counsel entered his appearance. Attorney de Guzman opposed the transfer of the deposit, claimed at first that he never received the checks, and later admitted possessing them. He filed an attorney's lien on the garnished amount. At the time of his termination, the main case had not yet gone through pre-trial.

Issues

• Whether or not the stipulated attorney's compensation of 25 percent of the total claim is unconscionable and unreasonable, and should be reduced.
• Whether or not Attorney de Guzman was dismissed for a justifiable cause.
• Whether or not his compensation should be fixed on a quantum meruit basis, and in what amount.

Applicable Provisions

Section 26 of Rule 138 of the Revised Rules of Court provides:

A client may at any time dismiss his attorney or substitute another in his place, but if the contract between client and attorney has been reduced to writing and the dismissal of the attorney was without justifiable cause, he shall be entitled to recover from the client the full compensation stipulated in the contract. However, the attorney may, in the discretion of the court, intervene in the case to protect his rights. For the payment of his compensation the attorney shall have a lien upon all judgments for the payment of money, and executions issued in pursuance of such judgment, rendered in the case wherein his services had been retained by the client.

This provision fixes the consequence of a dismissal without justifiable cause and recognizes the attorney's charging lien.

Section 24 of Rule 138 provides:

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.

This is the provision that authorizes the court to disregard a written stipulation when it is unconscionable or unreasonable.

Ruling

On the first issue, the Court held that the stipulation of attorney's compensation in a contract for professional services can be reduced by the courts if found unconscionable and unreasonable. Contracts for attorney's services stand on an entirely different footing from other contracts for compensation, because a lawyer is primarily a court officer charged with assisting the court in administering impartial justice, and his fees are subject to judicial control. Even granting that the dismissal was unjustified, the Court said, it is obvious that in the light of the services rendered the stipulation had become unconscionable and unreasonable.

On the second issue, the Court tended to agree with the petitioners that Attorney de Guzman was dismissed for a justifiable cause. His shifting claims about the checks — first denying receipt, then admitting possession with an explanation the Court found incredible — were borne out by the records and gave credence to the petitioners' account.

On the third issue, because the stipulation was unconscionable and unreasonable and the dismissal was for a justifiable cause, the Court fixed the amount due on a quantum meruit basis. It listed the circumstances to consider: the amount and character of the services rendered, the responsibility imposed, the amount of money or value of the property involved, the skill and experience called for, the professional standing of the attorney, the results secured, and whether the fee is contingent or absolute. Within his employment, the lawyer had filed the complaint, obtained a declaration of default against two defendants, and secured the writ of attachment; the case had not reached pre-trial, nothing appeared complicated, and no extraordinary skill was needed. The Court therefore ruled that he was entitled to 10,000 pesos as reasonable attorney's compensation.

Doctrine

A written contract for attorney's services controls the amount to be paid, unless the court finds it unconscionable or unreasonable, in which case the court may reduce it and limit recovery to reasonable compensation. A client may dismiss his attorney at any time; if the dismissal is without justifiable cause under a written contract, the attorney recovers the full stipulated compensation, but if the dismissal is for a justifiable cause, or the stipulation is unconscionable, the fee is fixed on a quantum meruit basis. In determining that reasonable compensation, courts consider the amount and character of the services rendered, the responsibility imposed, the value of the property involved, the skill and experience required, the professional standing of the attorney, the results secured, and whether the fee is contingent or absolute.

Disposition

The petition was granted; the decision of the Intermediate Appellate Court was reversed and set aside, and the petitioners were ordered to pay Attorney Gil de Guzman 10,000 pesos for his legal services.

Remember This

Memorize the line: a stipulated attorney's fee may be reduced when unconscionable or unreasonable, and on quantum meruit the lawyer recovers only the reasonable worth of the services actually rendered. Examiners use this case on the court's power to control counsel fees and on computing quantum meruit compensation after a justifiable dismissal.