ANDRES SUMAOANG, PETITIONER, VS. HON. JUDGE, REGIONAL TRIAL COURT, BRANCH XXXI, GUIMBA, NUEVA ECIJA AND ATTY. JORGE A. PASCUA, RESPONDENTS.

In the Petition presently before us, Andres Sumaoang seeks to
annul the Decision^[1]
dated 31 August 1982, rendered by the then Court of First Instance (“CFI”) of
Nueva Ecija in Civil Case No. 697-G, which awarded to private respondent Atty.
Jorge A. Pascua the sum of P110,000.00 as attorney’s fees.

On 15 July 1933, the late Sebastian Sumaoang filed with the
Bureau of Lands a homestead
application over Lot No. 3098 of the Cadastral Survey of Santiago, Isabela,
covering an area of 21.3445 hectares. He then took possession of and cultivated the lot. Due to illness and the dangerous conditions
then prevailing in Santiago, Isabela immediately after the second World War, he transferred his residence to his
native town of Sta. Ignacia, Tarlac where he died on 22 August 1952.

Meanwhile, Florencio and Regino, both surnamed Domingo, applied
for a homestead patent over Lot No. 3098 during Sebastian Sumaoang’s
absence. On 11 May 1950, Florencio
Domingo was granted a homestead patent (HP No. V-5218) over the land on the strength
of which the Register of Deeds of Isabela issued Original Certificate of Title
No. T-1201 to him.

To protect their interests over the homestead, petitioner and his
brothers, Vitaliano and Pedro Sumaoang, engaged the services of private
respondent Atty. Jorge A. Pascua, promising him, in a letter dated 17 December
1964^[2]
a contingent fee of “not less
than one-half (1/2)” of the entire homestead, if recovered.

As counsel for the Sumaoangs, Atty. Pascua filed a formal protest
with the Bureau of Lands contesting the legality of the issuance of Homestead
Patent No. V-5218 to Florencio Domingo. On 7 February 1962, the Bureau of Lands rendered a decision^[3]
declaring Homestead Patent No. V-5218 inoperative and ordered that steps be
taken towards the filing of a reversion case with the view to cancelling that
homestead patent and its corresponding certificate of title, and disposing of
the land to petitioner and his brothers — ­as heirs of Sebastian Sumaoang —
should the facts so warrant.

Pursuant to the above decision of the Bureau of Lands, the
Solicitor General filed, on behalf of the Republic of the Philippines, a
reversion case against Florencio and Regino Domingo for the cancellation of
Homestead Patent No. V-5218 and Original
Certificate of Title No. T-1201 before the CFI of Isabela. In that case, Atty. Pascua filed, on behalf
of petitioner and his brothers, a complaint-in­-intervention claiming
preferential rights to the land in favor of his clients.^[4] After trial, the lower court rendered a
decision^[5]
dated 17 February 1971 declaring the homestead patent, as well as the
certificate of title, null and void and ordered the reversion of the land to
the State subject to the rights of petitioner and his brothers. In its dispositive portion, the decision stated
that:

“WHEREFORE, judgment is rendered:

(a) Declaring homestead patent No. V-5218 and
the corresponding Original Certificate of Title No. T-1201 both in favor of the
defendant Florencio Domingo and covering Lot No. 3098, Cad. 211, null and void
and ordering the reversion of the said lot to the State subject to the rights
of the intervenors as the facts may warrant;

(b) Ordering defendant Florencio Domingo to
surrender to the defendant Register of Deeds his owner’s duplicate of said
torrens title or Original Certificate of Title No. T-1201 for cancellation and
any other transfer certificates of title that might have been issued by the
Register of Deeds emanating from Original Certificate of Title No. T-1201;

(c) Ordering the Register of Deeds of Isabela,
upon his receipt of the owner’s duplicate certificate of title to cancel
homestead patent No. V-5218 and the original and duplicate of said Original
Certificate of Title No. T-1201 in the name of Florencio Domingo and any other
transfer certificates of title issued emanating from Original Certificate of
Title No. T-1201;

(d) Ordering the defendant Florencio Domingo to
pay to the intervenors the sum of 160 2/3 cavanes of palsy or the value of
P1,928.00 computed from P12.00 per cavan, per agricultural year since 1953
until this judgment becomes final.”

This decision was affirmed by both the Court of Appeals^[6]
and the Supreme Court.^[7]

The decision became final and executory on 11 February 1973. In 1977, petitioner and his brothers took
possession of Lot No. 3098 and subdivided
it among themselves.

Not having received compensation for his professional services as
counsel, Atty. Pascua filed sometime in 1979 a complaint for collection of
attorney’s fees against his former clients, petitioner and his brothers, before
the CFI of Guimba, Nueva Ecija. The
trial court stated in its judgment dated 31 August 1982 that Atty. Pascua was
entitled only to “the equivalent of one-half of the property — in its peso
valuation” and somehow ordered petitioner and his brothers to pay attorney’s
fees in the amount of P110,000.00. The dispositive portion of this decision
reads as follows:

“WHEREFORE, in view of all the foregoing, judgment is hereby
rendered in favor of the plaintiff, Atty. Jorge A. Pascua, ordering the
defendants Vitaliano, Andres, and Pedro all
surnamed Sumaoang, to jointly and severally pay the sum of One Hundred
Ten Thousand Pesos (P110,000.00) as attorney’s
fee; the sum of One Thousand Five Hundred Pesos (P1,500.00) as attorney’s fee
in the prosecution of the instant case, to pay the cost of the suit.”

The decision of 31 August 1982 of the CFI of Guimba became final and executory. On motion of Atty. Pascua, the trial court
on 22 April 1983 ordered the issuance of a writ of execution. The corresponding writ of execution was
issued by the Branch Clerk of Court on 25 January 1985.^[8] The Deputy Provincial Sheriff then levied
upon and sold at public auction the entire lot of 21.3445 hectares here
involved to Atty. Pascua as the sole and hence the highest bidder, for and in
consideration of P110,000.00 as partial payment
of the judgment obligation.^[9]

Petitioner brought the present Petition^[10]
asking for the nullification of the 31 August 1982 decision of the Guimba CFI,
as well as the writ of execution, the notice of levy and auction sale and the
certificate of sale issued in favor of Atty. Pascua. Petitioner’s cause of action is anchored principally on the
contention that the award of P110,000.00 as attorney’s fees of Atty. Pascua was
unconscionable. Petitioner argues that
the Solicitor General, and not Atty. Pascua, had actively handled the reversion
case and that Atty. Pascua’s participation therein was limited to the filing of
a complaint-in-intervention on behalf of his clients. In the complaint-in-intervention, Atty. Pascua asked for the same
relief as that sought by the Solicitor General, although the former added the
additional prayer that his clients be accorded preferential rights over the
land reverted to the public domain. Petitioner further contended that the contract for legal services
between petitioner and his brothers on the one hand and Atty. Pascua on the
other, provided only for attorney’s fees of P5,000.00, as Atty. Pascua himself
allegedly admitted in the complaint-in-intervention filed in the reversion
case.

Upon the other hand, Atty. Pascua’s principal contentions are
that the award of attorney’s fees by the Guimba CFI in its 31 August 1982
decision was not unconscionable and that that decision had already become final
and executory.

The ordinary rule is that a judgment may be annulled only on
certain defined grounds, lack of jurisdiction, fraud, or illegality.^[11] In the case at bar, petitioner has not
adduced any jurisdictional defects vitiating the judgment assailed; neither has
petitioner shown that the judgment, as such, is in violation of a particular
statute. Petitioner’s allegation that
there was improper venue would not suffice to nullify the decision already
rendered and final.

From the view we take of this case, however, the circumstances
that the Decision of the Guimba CFI of 31 August 1982 became final and
executory and that the jurisdiction of the trial court to render that Decision
has not been successfully assailed, are not decisive.

It is essential to note that the relationship between an attorney
and his client is a fiduciary one. Canon 17 of the Code of Professional Responsibility stresses that “a
lawyer owes fidelity to the cause of his client and he shall be mindful of the
trust and confidence reposed in him.” Canon 16 requires a lawyer to “hold in
trust all monies and properties of his
client that may come into his possession.”^[12]

A lawyer is not merely the defender of his client’s cause and a
trustee of his client in respect of the client’s cause of action and assets; he
is also, and first and foremost, an officer of the court and participates in
the fundamental function of administering justice in society. It follows that a lawyer’s compensation for
professional services rendered are subject to the supervision of the court, not
just to guarantee that the fees he charges and receives remain reasonable and
commensurate with the services rendered, but also to maintain the dignity and
integrity of the legal profession to which he belongs. Upon taking his attorney’s oath as an officer
of the court, a lawyer submits himself to the authority of the courts to
regulate his right to charge professional fees.^[13]

In the instant case, the Court considers that the fees which private
respondent Atty. Pascua received from petitioner and his brothers became
unreasonable and unconscionable in character, not because the original
agreement between Atty. Pascua and his clients was itself unreasonable and
unconscionable but rather as a result of the subsequent dispositions of the
trial court.

The Decision of the trial court shows that respondent Judge
upheld the reasonableness and the lawfulness of the contingent fee contract
between Atty. Pascua and the Sumaoang brothers. Instead, however, of simply awarding Atty. Pascua a one-half (1/2) portion of the
property involved, respondent Judge wound up awarding Atty. Pascua a peso
amount. In other words, respondent
Judge unilaterally and officiously converted the form or medium of compensation
from a one-half (1/2) portion of
the land recovered by petitioner and his brothers through the efforts of Atty.
Pascua, into a peso amount representing, in the mind of the Judge, the value of
that one-half (1/2) portion. In his
decision, respondent Judge said, among other things:

“It is however noted by this Court that plaintiff should only be
awarded the equivalent of one-half
of the property as his lawful attorney’s fee in its peso valuation. The land of the defendants commands a
high price per hectare in
Isabela because NIA had constructed an irrigation canal near it which supplies abundant water supply making it
possible for defendants
to harvest twice a year. Per hectare, the land owned by the defendants now commands P10,000.00
minimum as price”^[14] (Underscoring supplied)

Most charitably viewed, respondent Judge
was apparently laboring under the impression that the land involved had greatly
appreciated in value during the years of litigation. Without requiring or obtaining any third party appraisal of the
actual or fair market value of the 21.3445 hectares involved, respondent Judge
fixed the sum of P110,000.00 as the “equivalent of 1/2 of the property — in
its peso valuation.” Thus, the respondent Judge in fact disregarded the contingent
fee contract between attorney and client, after holding that contract
lawful. Worse, the Judge turned out to
be grossly uninformed about property valuations, especially the valuation of
property sold at public sale in Guimba, Nueva Ecija, and his judgment allowed
Atty. Pascua to acquire the entire parcel of land which had been the subject
matter of the litigation and for the recovery of which, Atty Pascua had been
retained by the Sumaoang brothers. In
brief, Atty. Pascua was able to acquire all the 21.3445 hectares of land
although the respondent court had intended to award him only one-half (1/2)
“the [assumed] value of such land.”

In Licudan v. Court of Appeals,^[15]
this Court said:

“x x x There should never be an instance where a lawyer gets as
attorney’s fees the entire property involved in the litigation. It is unconscionable for the victor in
litigation to lose everything he won to the fees of his own lawyer.

x x x   x x x    x x
x

In resolving the issue of reasonableness
of the attorney’s fees, we uphold the time-honoured legal maxim that a lawyer shall at all times uphold the
integrity and dignity of the legal profession so that his basic ideal becomes
one of rendering service and securing justice, not money-­making. For the worst scenario that can ever
happen to a client is to lose the litigated property to his lawyer in whom all
trust and confidence were bestowed at the very inception of the legal
controversy. x x x” (Underscoring
supplied)

We believe and so hold that respondent Atty. Pascua, under the
circumstances of this case, must be regarded as holding the title of the
property acquired by him at public sale under an implied trust in favor of
petitioner and his brothers, to the extent of one-half (1/2) of that property. Among the species of implied trusts
recognized by our Civil Code is that set forth in Article 1456:

“If property is acquired through mistake or fraud, the person
obtaining it is, by force of law, considered a trustee of an implied trust for
the benefit of the person from whom the property comes.”

The “mistake” or “fraud” that results in
an implied trust being impressed upon the property involved, may be the mistake
or fraud of a third person,
and need not be a mistake or
fraud committed directly by the trustee himself under the implied trust.^[16] Accordingly, in the instant case, an implied
trust was established upon the land acquired by Atty. Pascua even though the
operative mistake was a mistake of respondent trial judge. Respondent Judge may be seen to have
intended to convey only one-half (1/2) of the land involved as attorney’s fees
to Atty. Pascua. Atty. Pascua, however,
took advantage of the Judge’s mistake in order to acquire all the 21.3445
hectares for himself. Atty. Pascua
obviously knew that under his contract with his clients, he was entitled to ask
only for one-half (1/2) of the land. When he purchased the entire land at public auction for P110,000.00
(leaving his clients still owing him P1,500.00), the amount and character of
his attorney’s fees became unreasonable and unconscionable and constituted
unjust enrichment at the expense of his clients.

The conclusion we reach in this case rests not only on Article
1456 of the Civil Code but also on the principles of the general law of trusts
which, through Article 1442 of the Civil Code, have been adopted or
incorporated into our civil law, to the extent that such principles are not
inconsistent with the Civil Code and other statutes and the Rules of Court.

In Roa, Jr. v. Court of Appeals,^[17]
where petitioner had retained property the beneficial ownership of which
belonged to the private respondents, the Supreme Court affirmed the decision of
the Court of Appeals directing petitioner to convey title to that property to
private respondents. The Supreme Court
rested its decision on the principles of the general law of trusts which, the
Court held, included the following general principles embedded in American law
and jurisprudence:

“A constructive trust, otherwise known as a trust ex
maleficio, a trust ex delicto, a trust
de son tort, an involuntary trust, or an implied trust, is a trust by
operation of law which arises contrary to intention and in invitum, against
one who, by fraud, actual or constructive, by duress or abuse of
confidence, by commission of wrong, or by any form of unconscionable conduct,
artifice, concealment, or questionable means, or who in any way against
equity and good conscience, either has obtained or holds the legal right to
property which he ought not, in equity and good conscience, hold and enjoy. It is raised by equity to satisfy the
demands of justice. However, a
constructive trust does not arise on every moral wrong in acquiring or holding
property or on every abuse of confidence in business or other affairs;
ordinarily such a trust arises and will be declared only on wrongful
acquisitions or retentions of property of which equity, in accordance with its
fundamental principles and the traditional exercise of its jurisdiction or in
accordance with statutory provision, takes cognizance. It has been broadly ruled that a breach of confidence, although in
business or social relations, rendering an acquisition or retention of property
by one person unconscionable against another, raises a constructive trust.

And specifically applicable to the case at bar is the doctrine that
‘A constructive trust is substantially an appropriate remedy against unjust
enrichment. It is raised by equity in
respect of property, which has been acquired by fraud, or where, although
acquired originally without fraud, it is against equity that it should be
retained by the person holding it.’

The above principle is not in conflict with the New Civil Code,
Code of Commerce, Rules of Court and special laws. And since We are a court of law and of equity, the case at
bar must be resolved on the general principles of law on constructive trust
which basically rest on equitable considerations in order to satisfy the
demands of justice, morality, conscience and fair dealing and thus protect
the innocent against fraud. As the
respondent court said: ‘It behooves upon the courts to shield fiduciary
relations against every manner of chicanery or detestable design cloaked by
legal technicalities.’”^[18]
(Citations omitted; underscoring partly supplied and partly in the original)

A constructive trust, in general usage in the United States,^[19]
is not based on an expressed intent that it shall exist, or even on an implied
or presumed intent. A constructive
trust is created by a court of equity as a means of affording relief.^[20] Constructive trusts constitute a remedial device “through which
preference of self is made subordinate to loyalty to others.”^[21]  In particular, fraud on the part of the
person holding or detaining the property at stake is not essential in
order that an implied trust may spring into being. In the words of Judge Cardozo, in Beatty v. Guggenheim
Exploration Co.:^[22]

“(w)hen property has been acquired in such circumstances that the
holder of the legal title may not in good conscience retain the beneficial
interest, equity converts him into a trustee.”

The consequences of an implied trust are,
principally, that the implied trustee shall deliver the possession and reconvey
title to the property to the beneficiary of the trust, and to pay to the latter
the fruits and other net profit received from such property during the period
of wrongful or unconscionable holding, and otherwise to adjust the equities
between the trustee holding the legal title and the beneficiaries of the trust.^[23]

Applying the provisions of Article 1456 of the Civil Code and the
foregoing principles of the general law of trusts, we treat the present
so-called “Petition for Annulment of the Decision of the CFI, etc.” as a
“Petition for Reconveyance” and, accordingly, require private respondent Atty.
Pascua to reconvey or cause the reconveyance of one-half (1/2) of the 21.3445
hectares of land here involved, plus one-half (1/2) of all profits (net of
expenses and taxes) which Atty. Pascua may have derived from or in respect of
such land during the time he has held the same, to petitioner and his brothers,
Vitaliano and Pedro Sumaoang.

WHEREFORE, for all the foregoing, and treating the present
Petition as a Petition for Reconveyance of Land, the Court hereby GRANTS the
same. Private respondent Atty. Jorge A.
Pascua is hereby ORDERED to reconvey or cause the reconveyance of one-half
(1/2) of the land here involved, plus one-half (1/2) of the net profits derived
from or in respect of such land during the time it has been held by private
respondent Pascua, to petitioner and petitioner’s brothers, Vitaliano and Pedro
Sumaoang. No pronouncement as to costs.

SO ORDERED.

Nocon and Campos, Jr.,
JJ., concur.

Narvasa, C.J., (Chairman), on
official leave.

Regalado, J., see concurring
opinion.

^[1]
Rollo, pp. 30-34.

^[2]
Record, pp. 57-58.

^[3]
Id., p. 180.

^[4]
Rollo, pp. 19-23; Annex “D” of Petition.

^[5]
Record, pp. 126-155.

^[6]
Rollo, p. 24, Annex “E” of Petition.

^[7]
G.R. No. L-35657, 19 January 1973.

^[8]
Rollo, p. 12; Annex “B” of Petition.

^[9]
Id., pp. 13-18.

^[10]
Id., pp. 3-11.

^[11]
Montinola v. Gonzales, 178 SCRA 677 (1989).

^[12]
Daroy v. Legaspi, 65 SCRA 304 (1975); Imbuido v. Mangonon, 4 SCRA
760 (1962); Aya v.
Bigornia, 57 Phil. 8 (1932).

^[13]
Ramos v. Bidin, 161 SCRA 561 (1988); Gorospe and Sebastian v.
Gochangco, 106 Phil. 425 (1959).

^[14]
Rollo, pp. 33-34.

^[15]
193 SCRA 293 (1991).

^[16]
Laureano v. Stevenson, 45 Phil. 252 (1923); Diaz, et al. v.
Gorricho and Aguado, 103 Phil. 261 (1958).

^[17]
123 SCRA 3 (1983).

^[18]
123 SCRA at 15-16.

^[19]
In Miguel v. Court of Appeals, 29 SCRA 760 (1969), our Supreme Court
declared:

“Since the law of trust has
been more frequently applied in
England and in the United States than in Spain, we may draw freely upon
American precedents in determining the effects of trusts, especially so because
the trusts known to American and English equity jurisprudence are derived from
the fidei commissa of the Roman Law and are based entirely upon
civil law principles. x x x.”

^[20]
See, e.g., International Refugee Organization v. Maryland Drydock
Company, 169 F. 2d 284 (1950); Healy v. Commissioner of Internal
Revenue, 345 US 278 (1953); see, generally, G. Boggert, Trusts (6d), p.
287 (1987).

^[21]
Meinhard v. Salmon, 164 NE 545, 548 (1928) per Cardozo, J.

^[22]
122 N.E. 378 (1919).

^[23]
Dietz v. Dietz, 70 N.W. 2d 281 (1955); Waterbury v. Nicol, 298 P
2d 211 (1956).

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