The Supreme Court ruled that attorney’s fees, even when stipulated in a contract, must be reasonable and fair. In this case, the Court reduced the attorney’s fees initially awarded, emphasizing that the amount must be proportionate to the services rendered. This decision underscores the court’s role in protecting clients from excessive charges, ensuring that legal compensation aligns with the actual work performed and the principles of justice, rather than solely adhering to contractual terms. This case serves as a reminder that legal fees are subject to judicial review to prevent unjust enrichment and uphold the integrity of the legal profession.

From Reconveyance to Remuneration: When is a Contingency Fee Unconscionable?

The consolidated cases of Rosario Enriquez Vda. de Santiago v. Atty. Jose A. Suing and Jaime C. Vistar v. Atty. Jose A. Suing, [G.R. NO. 194825], [G.R. NO. 194814] involved a dispute over attorney’s fees arising from a long-resolved reconveyance case. Atty. Suing, who represented Rosario Enriquez Vda. de Santiago (Rosario) in a case against the Government Service Insurance System (GSIS), sought to enforce a contingent fee agreement outlined in a Memorandum of Understanding (MOU). The MOU stipulated that Atty. Suing and his colleagues would receive a significant percentage of the net proceeds from the favorable judgment. However, Rosario contested the fees as unconscionable, leading to a legal battle that reached the Supreme Court. The central legal question was whether the stipulated attorney’s fees were reasonable under the circumstances, or whether they should be reduced based on the principle of quantum meruit, which means “as much as he deserves.”

The roots of the conflict trace back to Civil Case No. 59439, where Rosario’s late husband, Eduardo M. Santiago, initially sought the reconveyance of 91 parcels of land from GSIS. After Eduardo’s death, Rosario continued the legal battle with Atty. Suing as her counsel. A Memorandum of Understanding (MOU) was then executed, outlining the terms of their agreement. Pertinently, the MOU stipulated that:

3. THAT [Atty. Suing, Atty. Reverente] and [Atty. Lachica] agree to render their legal services to [Rosario] on a contingency basis and shall not collect acceptance nor advance legal fees from [Rosario] excepting only as are consisting of out-of-pocket expenses, such as docket fees, sheriff fees and costs of stenographic notes and photocopies or certified true copies of documents and other legal papers;

5. THAT in the [event] [Atty. Suing, Atty. Reverente] and [Atty. Lachica] are able to secure a favorable final and executory judgment from the lower court, [Rosario] shall share and deliver to [Atty. Suing, Atty. Reverente] and [Atty. Lachica] out of the net proceeds and/or net benefits which [Rosario] shall have acquired and/or obtained from the said judgment in the following proportions:

a. To [Atty. Suing and Atty. Reverente] – 35% of the net proceeds and/or net benefits;

b. To [Atty. Lachica] – 30% of the net proceeds and/or net benefits;

The Regional Trial Court (RTC) initially favored Rosario, ordering GSIS to reconvey 78 parcels of land. The case then went through a series of appeals, eventually reaching the Supreme Court, which affirmed the RTC’s decision. Following the final judgment, Atty. Suing sought to enforce his attorney’s lien based on the MOU. However, Rosario contested the fees, arguing they were excessive and unjustified. She discharged Atty. Suing and Atty. Reverente as her counsels, leading to further legal disputes over the appropriate amount of attorney’s fees.

The RTC initially awarded Atty. Suing and Atty. Reverente 6% of the partially executed judgment award, which amounted to P23,989,680.00. Atty. Suing appealed this decision, arguing that he was entitled to 35% as stipulated in the MOU. The Court of Appeals initially sided with the RTC but later reversed its decision, upholding the contingent fee agreement. The appellate court reasoned that Atty. Suing had rendered significant legal services over 12 years, justifying the 35% fee. The case eventually reached the Supreme Court, where the central issue was the reasonableness of the stipulated attorney’s fees. Rosario argued that the fees were unconscionable and that Atty. Suing’s compensation should be based on quantum meruit.

In its analysis, the Supreme Court emphasized that while contingent fee contracts are valid, they are subject to the court’s supervision to protect clients from unjust charges. The Court stated that:

Contingent fee contracts are under the supervision and close scrutiny of the court in order that clients may be protected from unjust charges. Its validity depends in large measure on the reasonableness of the stipulated fees under the circumstances of each case.

The Court further explained that stipulated attorney’s fees are unconscionable when the amount is disproportionate to the value of services rendered, amounting to fraud perpetrated upon the client. In determining the reasonableness of attorney’s fees, the Court considered several factors outlined in Rule 138, Section 24 of the Rules of Court and Canon 20 of the Code of Professional Responsibility. These factors include the time spent, the novelty and difficulty of the questions involved, the importance of the subject matter, and the skill demanded. The Court also considered the professional standing of the lawyer and the benefits resulting to the client from the service.

In this case, the Supreme Court found that the 35% contingent fee award was excessive and unreasonable. While Atty. Suing had provided legal services for approximately 12 years, the Court determined that the services rendered were not extraordinary. The issues involved in the reconveyance case were not novel and did not require extensive research. Additionally, a key witness from GSIS had admitted that the consolidation of the properties was accidental, which significantly aided the case’s progression.

Moreover, the Court found that Rosario was at a disadvantage when the MOU was executed. As a recent widow unfamiliar with litigation, she was vulnerable to the demands of her husband’s lawyers. This disparity in bargaining power further supported the Court’s decision to reduce the attorney’s fees. The Court also referred to Canon 20 of the Code of Professional Responsibility, which states that lawyers must only charge fair and reasonable fees.

The Court ruled that the initial award of 6% of the partially executed judgment, amounting to P23,989,680.00, was fair compensation for Atty. Suing’s services. The Supreme Court ultimately reinstated the Court of Appeals’ original decision, emphasizing that a lawyer’s ideal should be rendering service and securing justice, not merely making money. This decision underscores the judiciary’s role in ensuring that attorney’s fees are reasonable, fair, and proportionate to the services rendered, regardless of contractual agreements. The Supreme Court reiterated that the principle of quantum meruit should guide the determination of reasonable attorney’s fees, preventing undue enrichment and upholding the integrity of the legal profession.

FAQs

What was the key issue in this case?	The key issue was whether the contingent attorney’s fee of 35% stipulated in the Memorandum of Understanding (MOU) was reasonable and enforceable, or whether it should be reduced based on the principle of quantum meruit.
What is quantum meruit?	Quantum meruit is a legal doctrine that means “as much as he deserves.” It is used to determine reasonable compensation for services rendered when there is no express contract or when the agreed-upon fee is deemed unconscionable.
What factors did the court consider in determining the reasonableness of the attorney’s fees?	The court considered factors such as the time spent, the novelty and difficulty of the legal questions, the importance of the subject matter, the skill required, and the benefits resulting to the client. It also factored in the lawyer’s professional standing.
Why did the court find the 35% contingent fee unconscionable?	The court found the fee unconscionable because the services rendered by Atty. Suing were not extraordinary, the legal issues were not novel, and the client was at a disadvantage when the MOU was executed. The court believed the fee was disproportionate to the services provided.
What was the final amount of attorney’s fees awarded to Atty. Suing?	The Supreme Court upheld the initial award of 6% of the partially executed judgment, amounting to P23,989,680.00, as fair compensation for Atty. Suing’s services. This amount was determined based on quantum meruit.
Can a lawyer and client agree to any amount for attorney’s fees?	No, the court has the power to review and reduce attorney’s fees if they are deemed unconscionable or unreasonable, even if there is a written agreement. The court’s power is to protect clients from unjust charges.
What is a contingent fee agreement?	A contingent fee agreement is a contract where the attorney’s fee is dependent on the success of the litigation. The attorney receives a percentage of the recovery if the case is won, and nothing if the case is lost.
Why was the motion to intervene by Jaime Vistar denied?	Jaime Vistar’s motion to intervene was denied because he failed to substantiate his claim as a transferee pendente lite (during the pendency of the case) of Rosario’s rights. The court also noted that it does not recognize the agreement.

This Supreme Court decision reinforces the principle that attorney’s fees must be fair and reasonable, irrespective of contractual agreements. It serves as a critical reminder to both lawyers and clients about the importance of transparency and proportionality in legal compensation. The ruling highlights the judiciary’s role in protecting clients from excessive charges and upholding the integrity of the legal profession.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: ROSARIO ENRIQUEZ VDA. DE SANTIAGO, PETITIONER, VS. ATTY. JOSE A. SUING, RESPONDENT., [G.R. NO. 194825], JAIME C. VISTAR, PETITIONER, VS. ATTY. JOSE A. SUING, RESPONDENT., [G.R. NO. 194814], October 21, 2015