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369 Phil. 1


[ G.R. No. 104600, July 02, 1999 ]




The Issue

The basic issue submitted for consideration of the Court is whether or not petitioner is entitled to recover attorney's fees amounting to Twenty Six Million Three Hundred Fifty Thousand Seven Hundred Seventy Nine Pesos and Ninety One Centavos (P26,350,779.91) for handling the case for its client Eastern Telecommunications Philippines, Inc. filed with the Regional Trial Court, Makati, though its services were terminated in midstream and the client directly compromised the case with the adverse party.

The Facts

In giving due course to the petition, we carefully considered the facts attendant to the case. On August 28, 1987, Eastern Telecommunications Philippines, Inc. (ETPI) represented by the law firm San Juan, Africa, Gonzales and San Agustin (SAGA), filed with the Regional Trial Court, Makati, a complaint for recovery of revenue shares against Philippine Long Distance Telephone Company (PLDT). Atty. Francisco D. Rilloraza, a partner of the firm appeared for ETPI.

After ETPI rested its case, it paid SAGA the billed amount of One Hundred Thousand Pesos (P100,000.00). On September 18, 1987, the trial court issued a resolution granting ETPI's application for preliminary restrictive and mandatory injunctions. During this period, SAGA was dissolved and four of the junior partners formed the law firm Rilloraza, Africa, De Ocampo & Africa (RADA), which took over as counsel in the case for ETPI. The latter signed a retainer agreement with counsel dated October 1, 1987.[1]

Petitioners presented the three aspects of the main case in the trial court. First, the traffic revenue shares which ETPI sought to recover from PLDT in accordance with the contract between them. Second, ETPI sought preventive injunctive relief against the PLDT's threats to deny ETPI access to the Philippines international gateway switch. Third, ETPI called this the "foreign correspondentships aspect" where ETPI sought preventive injunctive relief against PLDT's incursions and inducements directed at ETPI's foreign correspondents in Hongkong, Taiwan and Singapore, to break their correspondentship contracts with PLDT, using the threat of denying them access to the international gateway as leverage.

In this connection, ETPI filed with the trial court two urgent motions for restraining order, one on October 30, 1987 and another on November 4, 1987. As the applications were not acted upon, ETPI brought the case up to the Court of Appeals by petition for certiorari.

On June 28, 1988, petitioner received a letter from ETPI signed by E. M. Villanueva, President and Chief Executive Officer. In substance, the letter stated that ETPI was terminating the retainer contract dated October 1, 1987, effective June 30, 1988.

On June 29, 1988, petitioner filed with the Regional Trial Court a notice of attorney's lien, furnishing copies to the plaintiff ETPI, to the signatory of the termination letter and PLDT. On the same date, petitioner additionally sent a letter to ETPI attaching its partial billing statement. In its notice, RADA informed the court that there were negotiations toward a compromise between ETPI and PLDT.

In April 1990, petitioner confirmed that indeed the parties arrived at an amicable settlement and that the same was entered as a judgment. On April 26, 1990, petitioner filed a motion for the enforcement of attorney's lien with the Regional Trial Court of Makati and then appraised the Supreme Court thereof by manifestation.[2] We noted the manifestation in a resolution dated July 23, 1990.

On May 24, 1990, PLDT filed with the trial court a manifestation that it is not a party to nor in any manner involved in the attorney's lien being asserted by Atty. Rilloraza for and in behalf of the law firm,[3] while ETPI filed its opposition thereto on June 11, 1990.

The Lower Court's Ruling

The trial court in its resolution dated September 14, 1990 denied the motion for enforcement of attorney's lien. Thus:
"WHEREFORE, premises considered, the court finds that the Notice of Attorney's Lien filed by the law firm of Rilloraza, Africa, De Ocampo and Africa has no basis in fact and in law, and therefore denies the Motion for Enforcement of Attorney's Lien.


"Makati, Metro Manila, September 4, 1990.


"J u d g e"[4]
On October 10, 1990, petitioner filed with the trial court a notice of appeal from the above-mentioned order to the Supreme Court. On November 6, 1990, ETPI filed a Motion to Dismiss Appeal contending that the case could be brought to the Supreme Court only via a petition for review on certiorari, not by a mere notice of appeal. In an order dated January 16, 1991, the trial court dismissed RADA's appeal.

The trial court said:
"There is no more regular appeal from the Regional Trial Court to the Supreme Court. Under the amendment of Section 17 of the Judiciary Act by R.A. 5440, orders and judgments of the Regional Trial Court may be elevated to the Supreme Court only by petition for review on certiorari.


"Wherefore, premises considered, the order dated September 14, 1990 is hereby reconsidered and set aside. The Notice of Appeal filed by movant RADA is dismissed.


"Given this 16th day of January, 1991, at Makati, Metro Manila.


Hence, on February 9, 1991, petitioner filed a petition for certiorari with the Supreme Court, which we remanded to the Court of Appeals. The latter dismissed the petition in a decision promulgated on November 14, 1991,[6] ruling that the judge committed no abuse of discretion in denying petitioner's motion for enforcement of attorney's lien. Thus:
"We therefore rule that respondent judge committed no abuse of discretion, much less a grave one, in denying petitioner's motion for enforcement of attorney's lien.

"Assuming that respondent judge committed an error in denying petitioner's motion for enforcement of attorney's lien, it cannot be corrected by certiorari.

"WHEREFORE, the writs prayed for are DENIED, and the petition is hereby DISMISSED, with cost against petitioner.



"Associate Justice"


"(s/t) JOSE A. R. MELO "(s/t) EMETERIO C. CUI

"Associate Justice "Associate Justice"[7]


A. The Procedural Aspect

There is nothing sacrosanct about procedural rules, which are liberally construed in order to promote their objectives and assist the parties in obtaining just, speedy and inexpensive determination of every action or proceeding.[8] In an analogous case,[9] we ruled that where the rigid application of the rules would frustrate substantial justice[10], or bar the vindication of a legitimate grievance, the courts are justified in exempting a particular case from the operation of the rules.

In A-One Feeds, Inc. vs. Court of Appeals, we said -
"Litigations should, as much as possible, be decided on the merits and not on technicality. Dismissal of appeals purely on technical grounds is frowned upon, and the rules of procedure ought not to be applied in a very rigid, technical sense, for they are adopted to help secure, not override, substantial justice and thereby defeat their very claims. As has been the constant ruling of this Court, every party litigant should be afforded the amplest opportunity for the proper and just determination of his cause, free from the constraints of technicalities."[11]
A basic legal principle is that no one shall be unjustly enriched at the expense of another.[12] This principle is one of the mainstays of every legal system for centuries and which the Civil Code echoes:
"ART. 22. Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him."[13]
The Code Commission, its report, emphasized that:
"It is most needful that this ancient principle be clearly and specifically consecrated in the proposed Civil Code to the end that in cases not foreseen by the lawmaker, no one may unjustly benefit himself to the prejudice of another. The German Civil Code has a similar provision (Art. 812)."[14]
With this in mind, one could easily understand why, despite technical deficiencies, we resolved to give due course to this petition. More importantly, the case on its face appears to be impressed with merit.

B. The Attorney's Fees

We understand that Atty. Francisco Rilloraza handled the case from its inception until ETPI terminated the law firm's services in 1988. Petitioner's claim for attorney's fees hinges on two grounds: first, the fact that Atty. Rilloraza personally handled the case when he was working for SAGA; and second, the retainer agreement dated October 1, 1987.

We agree that petitioners are entitled to attorneys' fees. We, however, are not convinced with the petitioner's arguments that the services RADA rendered merit the amount they are claiming.

First, petitioner contends that Atty. Rilloraza initiated the filing of the complaint. When a client employs the services of a law firm, he does not employ the services of the lawyer who is assigned to personally handle the case. Rather, he employs the entire law firm. In the event that the counsel appearing for the client resigns, the firm is bound to provide a replacement. Thus, RADA could not claim to have initiated the filing of the complaint considering that ETPI hired SAGA. What is more, on September 17, 1987, ETPI paid SAGA the amount of One Hundred Thousand Pesos (P100,00.00)[15] representing services performed prior to September 17, 1987. SAGA assigned one of its associates, Atty. Francisco Rilloraza, to handle the case for the firm. Although Atty. Rilloraza handled the case personally, he did so for and in behalf of SAGA.

Second, petitioner claims that under the retainer agreement, which provides:
"6.2 B. Court Cases:

Should recourse to judicial action be necessary to effect collection or judicial action be taken by adverse party, our attorney's fees shall be fifteen percent (15%) of the amounts collected or the value of the property acquired or liability saved."[16]
the firm is entitled to the fees agreed upon.

However, the retainer agreement has been terminated. True, Attorney Rilloraza played a vital role during the inception of the case and in the course of the trial. We cannot also ignore the fact that an attorney-client relationship between petitioner and respondent no longer existed during its culmination by amicable agreement. To award the attorneys' fees amounting to 15% of the sum of One Hundred Twenty Five Million Six Hundred Seventy One Thousand Eight Hundred Eighty Six Pesos and Four Centavos (P125,671,886.04) plus Fifty Million Pesos (P50,000,000.00) paid by PLDT to ETPI would be too unconscionable.

"In any case, whether there is an agreement or not, the courts shall fix a reasonable compensation which lawyers may receive for their professional services."[17] "A lawyer has the right to be paid for the legal services he has extended to his client, which compensation must be reasonable."[18] A lawyer would be entitled to receive what he merits for his services. Otherwise stated, the amount must be determined on a quantum meruit basis.

"Quantum meruit, meaning `as much as he deserved' is used as a basis for determining the lawyer's professional fees in the absence of a contract but recoverable by him from his client."[19] Recovery of attorney's fees on the basis of quantum meruit is authorized when (1) there is no express contract for payment of attorney's fees agreed upon between the lawyer and the client; (2) when although there is a formal contract for attorney's fees, the fees stipulated are found unconscionable or unreasonable by the court; and (3) when the contract for attorney's fees is void due to purely formal defects of execution; (4) when the counsel, for justifiable cause, was not able to finish the case to its conclusion; (5) when lawyer and client disregard the contract for attorney's fees.[20]

In fixing a reasonable compensation for the services rendered by a lawyer on the basis of quantum meruit, the elements to be considered are generally (1) the importance of the subject matter in controversy, (2) the extent of services rendered, and (3) the professional standing of the lawyer. A determination of these factors would indispensably require nothing less than a full-blown trial where private respondents can adduce evidence to establish the right to lawful attorney's fees and for petitioner to oppose or refute the same.[21] The trial court has the principal task of fixing the amount of attorney's fees[22]. Hence, the necessity of a hearing is beyond cavil.

C. Charging Lien

Petitioner contends that pursuant to Rule 138 of the Revised Rules of Court, it is entitled to a charging lien. The rule provides:
"Section 37. Attorney's liens. - An attorney shall have 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 judgements 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." (Emphasis supplied)
We do not agree. A charging lien to be enforceable as security for the payment of attorney's fees requires as a condition sine qua non a judgment for money and execution in pursuance of such judgment secured in the main action by the attorney in favor of his client[23]. A charging lien presupposes that the attorney has secured a favorable money judgment for his client.[24] From the facts of the case it would seem that petitioner had no hand in the settlement that occurred, nor did it ever obtain a favorable judgment for ETPI.

ETPI entered into a compromise agreement when it ended the services of petitioner and through the effort of ETPI's new lawyers, the law firm Romulo, Mabanta, Buenaventura, Sayoc and De los Angeles. Whether there was bad faith in the substitution of the lawyers to avoid compliance with the retainer agreement could only be determined after a trial of the case on the merits.

This decision, however, should not be interpreted as to impose upon petitioner any additional burden in collecting its attorney's fees. The petitioner must avail itself of the proper remedy in order to forestall the possibility of any injustice on or unjust enrichment of any of the parties.

The Judgment (Fallo)

ACCORDINGLY, the Court GRANTS the petition, REVERSES the decision of the Court of Appeals in CA-G. R. SP No. 24463 and REMANDS the case to the court of origin for the determination of the amount of attorney's fees to which petitioner is entitled.

No costs.


Davide, Jr., C.J. (Chairman), Kapunan, and Ynares-Santiago, JJ., concur.
Melo, J., no part.

[1] Petition, Annex F, Rollo, pp. 81- 85.

[2] dated July 9, 1990.

[3] Petition, Annex "F", CA Rollo, pp. 72-73.

[4] Petition, Annex "D", Regional Trial Court Order, Rollo, pp. 73-78.

[5] Regional Trial Court Order, Rollo, pp. 79-80.

[6] Penned by Justice Regina G. Ordoñez-Benitez with Justice Jose A.R. Melo (now an Associate Justice of the Supreme Court) and Justice Emeterio C. Cui, concurring.

[7] Court of Appeals decision dated November 14, 1991, Rollo, pp. 51-58.

[8] Nerves vs. Civil Service Commission, 276 SCRA 610.

[9] Nerves vs. Civil Service Commission, supra.

[10] Ibid., citing Blanco vs. Bernabe, 63 Phil. 124.

[11]11 100 SCRA 590.

[12] Corales vs. EEC, 198 Phil. 224.

[13] Art. 22, Civil Code of the Philippines.

[14] Leticia Co vs. PNB, 114 SCRA 842, 864.

[15] Petition, Rollo, pp. 8-48.

[16] Petition, Annex "F", Rollo, p. 83.

[17] Traders Royal Bank Employees Union-Independent vs. National Labor Relations Commission, 269 SCRA 733, 750, citing Panis vs. Yangco, 52 Phil. 499.

[18] Sattar vs. Lopez, 271 SCRA 290, 300-301.

[19] Traders Royal Bank Employees Union-Independent vs. NLRC, supra, at p. 751.

[20] Legal and Judicial Ethics, by Ernesto L. Pineda, 1995 ed., pp. 225-226.

[21] Metropolitan Bank and Trust Company vs. Court of Appeals, 181 SCRA 367.

[22] Ninoy Aquino International Airport Authority vs. Court of Appeals, 272 SCRA 495.

[23] Metropolitan Bank and Trust Company vs. Court of Appeals, supra.

[24] Ibid., citing Ampil vs. Juliano-Agrava, 34 SCRA 370.

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