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Prompt payment of legal fees, C3S45 CPRA

Section 45, Canon III

SECTION 45. Prompt payment of legal fees. – A lawyer is entitled to prompt payment from the client of attorney’s fees.
Absent an express agreement as to professional fees, a lawyer is entitled to be paid reasonable attorney’s fees in accordance with Canon III, Section 41. (2023 Code of Professional Responsibility and Accountability or CPRA)

1. Prompt payment of legal fees

Under this section, lawyers are “entitled to prompt payment from the client of attorney’s fees.”

a. Quantum meruit

If there is no express agreement or contract regrading professional fees, lawyers are “entitled to be paid reasonable attorney’s fees in accordance with Canon III, Section 41. This is also known as quantum meruit.

Quantum meruit – literally meaning as much as he deserves – is used as basis for determining an attorney’s professional fees in the absence of an express agreement. The recovery of attorney’s fees on the basis of quantum meruit is a device that prevents an unscrupulous client from running away with the fruits of the legal services of counsel without paying for it and also avoids unjust enrichment on the part of the attorney himself. An attorney must show that he is entitled to reasonable compensation for the effort in pursuing the client’s cause, taking into account certain factors in fixing the amount of legal fees. (Villarama v. De Jesus, G.R. No. 217004, 17 April 2017)

The principle of quantum meruit applies if a lawyer is employed without a price agreed upon for his services. In which case, he would be entitled to receive what he merits for his services, as much as he has earned. (Lorenzo v. CA, G.R. No. 85383, August 30, 1990, Per Paras, J.)

The fact that the practice of law is not a business and the attorney plays a vital role in the administration of justice underscores the need to secure him his honorarium lawfully earned as a means to preserve the decorum and respectability of the legal profession. A lawyer is as much entitled to judicial protection against injustice, imposition or fraud on the part of his client as the client against abuse on the part of his counsel. The duty of the court is not alone to see that a lawyer acts in a proper and lawful manner; it is also its duty to see that a lawyer is paid his just fees. With his capital consisting of his brains and with his skill acquired at tremendous cost not only in money but in expenditure of time and energy, he is entitled to the protection of any judicial tribunal against any attempt on the part of his client to escape payment of his just compensation. It would be ironic if after putting forth the best in him to secure justice for his client he himself would not get his due. (Aquino v. Casabar, G.R. No. 191470, January 26, 2015, Per Peralta, J.)

1) Purpose

To avoid unjust enrichment to a party from resulting out of a substantially performed contract, the principle of quantum meruit may be used to determine his compensation in the absence of a written agreement for that purpose. The principle of quantum meruit justifies the payment of the reasonable value of the services rendered by him. (International Hotel Corporation v. Joaquin [2003], supra.)

In the absence of the written agreement, the lawyer’s compensation shall be based on quantum meruit, which means “as much as he deserved.” The determination of attorney’s fees on the basis of quantum meruit is also authorized “when the counsel, for justifiable cause, was not able to finish the case to its conclusion.” Moreover, quantum meruit becomes the basis of recovery of compensation by the attorney where the circumstances of the engagement indicate that it will be contrary to the parties’ expectation to deprive the attorney of all compensation. In this case, since respondent was not able to fulfill one of the conditions provident in the Contract for Legal Services, his attorney’s fees shall be based on quantum meruit. (Villarama v. De Jesus [2017], supra.)

[A]ttorney’s fees on the basis of quantum meruit is a device used to prevent unscrupulous clients from running away with the fruits of the legal services of counsel without paying for it and also avoids unjust enrichment on the part of the attorney himself. (Gow v. De Leon, A.C. No. 12713, September 23, 2020, Per Inting, J.)

2) Not applicable if there is an existing agreement

Where a respondent-lawyer defended the imposition of additional professional fees upon his client which were never mentioned nor agreed upon at the time of the engagement of his services, his argument on quantum meruit was denied. The principle of quantum meruit applies if a lawyer is employed without a price agreed upon for his services. In such a case, he would be entitled to receive what he merits for his services, as much as he has earned. In the present case, the parties had already entered into an agreement as to the attorney’s fees of the respondent, and thus, the principle of quantum meruit does not fully find application because the respondent is already compensated by such agreement. (Miranda v. Carpio, A.C. No. 6281, 26 September 2011)

3) Court may determine fees

Aquino v. Casabar, G.R. No. 191470, January 26, 2015, Per Peralta, J.:

• Ordinarily, We would have left it to the trial court the determination of attorney’s fees based on quantum meruit, however, following the several pronouncements of the Court that it will be just and equitable to now assess and fix the attorney’s fees in order that the resolution thereof would not be needlessly prolonged, this Court, which holds and exercises the power to fix attorney’s fees on quantum meruit basis in the absence of an express written agreement between the attorney and the client, deems it fair to fix petitioner’s attorney’s fees at fifteen percent (15%) of the increase in the just compensation awarded to private respondents.

b. Grounds for quantum meruit

Quantum meruit may apply:

1) When there is an absence of a written agreement and the lawyer has rendered services (Villarama v. De Jesus, G.R. No. 217004, April 17, 2017, Per Peralta, J.);

2) When the counsel, for justifiable cause, was not able to finish the case to its conclusion (Ibid.); or

3) Where the circumstances of the engagement indicate that it will be contrary to the parties’ expectation to deprive the attorney of all compensation (Ibid.);

4) When the attorney-client relationship was terminated through no fault of the lawyers (Gow v. De Leon, A.C. No. 12713, September 23, 2020, Per Inting, J.)

1) Absence of a written agreement and the lawyer has rendered services

Rosario, Jr. v. De Guzman, G.R. No. 191247, July 10, 2013, Per Mendoza, J.:

• Sometime in August 1990, Spouses Pedro and Rosita de Guzman (Spouses de Guzman) engaged the legal services of Atty. Francisco L. Rosario, Jr. (petitioner) as defense counsel in the complaint filed against them by one Loreta A. Chong (Chong) for annulment of contract and recovery of possession with damages involving a parcel of land in Parañaque City, covered by Transfer Certificate of Title (TCT) No. 1292, with an area of 266 square meters, more or less. Petitioner’s legal services commenced from the RTC and ended up in this Court. Spouses de Guzman, represented by petitioner, won their case at all levels. While the case was pending before this Court, Spouses de Guzman died in a vehicular accident. Thereafter, they were substituted by their children, namely: Rosella de Guzman-Bautista, Lellani de Guzman, Arleen de Guzman, and Philip Ryan de Guzman (respondents).

• On September 8, 2009, petitioner filed the Motion to Determine Attorney’s Fees before the RTC. He alleged, among others, that he had a verbal agreement with the deceased Spouses de Guzman that he would get 25% of the market value of the subject land if the complaint filed against them by Chong would be dismissed. Despite the fact that he had successfully represented them, respondents refused his written demand for payment of the contracted attorney’s fees. Petitioner insisted that he was entitled to an amount equivalent to 25% percent of the value of the subject land on the basis of quantum meruit.

• Petitioner unquestionably rendered legal services for respondents’ deceased parents in the civil case for annulment of contract and recovery of possession with damages. He successfully represented Spouses de Guzman from the trial court level in 1990 up to this Court in 2007, for a lengthy period of 17 years. After their tragic death in 2003, petitioner filed a notice of death and a motion for substitution of parties with entry of appearance and motion to resolve the case before this Court. As a consequence of his efforts, the respondents were substituted in the place of their parents and were benefited by the favorable outcome of the case.

• As earlier mentioned, petitioner served as defense counsel for deceased Spouses de Guzman and respondents for almost seventeen (17) years. The Court is certain that it was not an easy task for petitioner to defend his clients’ cause for such a long period of time, considering the heavy and demanding legal workload of petitioner which included the research and preparation of pleadings, the gathering of documentary proof, the court appearances, and the various legal work necessary to the defense of Spouses de Guzman. It cannot be denied that petitioner devoted much time and energy in handling the case for respondents. Given the considerable amount of time spent, the diligent effort exerted by petitioner, and the quality of work shown by him in ensuring the successful defense of his clients, petitioner clearly deserves to be awarded reasonable attorney’s fees for services rendered. Justice and equity dictate that petitioner be paid his professional fee based on quantum meruit.

2) Unable to finish for justifiable cause

Villarama v. De Jesus, G.R. No. 217004, April 17, 2017, Per Peralta, J.:

• The payment of the success fee, as contained in the Contract for Legal Services, is dependent on the fulfillment of two conditions, namely: 1) petitioner retaining possession of the subject property, and 2) the property being titled under the name of petitioner. Clearly, this falls under a contingent fee contract.

• In this case, it is beyond dispute that the first condition stipulated in the Contract for Legal Services, through the services of Atty. De Jesus, petitioner was able to retain possession of the subject property. The second condition, the transfer of title of the property under the name of petitioner, however, is yet to be fulfilled. According to the CA, the second condition has been rendered legally impossible to fulfill or considered manifestly difficult to perform…

• Here, there is no dispute that the legal developments that transpired in the string of cases of Villarama relative to the subject property has rendered the second condition impossible to perform which factor cannot be attributed to Atty. De Jesus. Thus, the condition should be annulled excuse atty. De Jesus from the obligation of fulfilling the same before he could obtain the success fee.

• Upon consideration of the arguments of both parties, this Court finds that the above-reasoning of the CA is erroneous. There is no legal impossibility in the fulfillment of the second condition. There is still a remedy upon which petitioner may be able to transfer the title of the subject property under his name. In fact, respondent admitted in his Comment that there was no legal impossibility and that the only hindrance was the refusal of petitioner to pay Prudential Bank the value of the 30% equity of the property in the amount of ₱1,325,000.00. Although petitioner insists that it has already taken steps in offering Prudential Bank an amount to settle the issue, this still negates the finding of the CA that it is legally impossible for petitioner to transfer the title of the property under his name.

• Be that as it may, the fact still remains that petitioner was already awarded 70% of the subject property by virtue of the RTC’s decision in Civil Case No. 95-973 through the services of Atty. De Jesus. Thus, this Court finds that Atty. De Jesus, as well as every attorney, is entitled to have and receive a just and reasonable compensation for services performed at the special instance and request of his client. Once the attorney has performed the task assigned to him in a valid agreement, his compensation is determined on the basis of what he and the client agreed… In this case, since respondent was not able to fulfill one of the conditions provident in the Contract for Legal Services, his attorney’s fees shall be based on quantum meruit.

• Having established that petitioner is entitled to attorney’s fees and that he filed his claim well within the prescribed period, the proper remedy is to remand the case to the R TC for the determination of the correct amount of attorney’s fees. Such a procedural route, however, would only contribute to the delay of the final disposition of the controversy as any ruling by the trial court on the matter would still be open for questioning before the CA and this Court. In the interest of justice, this Court deems it prudent to suspend the rules and simply resolve the matter at this level.27

• Based on the considerations set forth in Rule 20.01 of the [old Code of Professional Responsibility], this Court rules that the CA was correct in its determination that Atty. De Jesus is entitled to the extent of 50% of the Php1,000,000.00 success fee stipulated in the contract…

3) Contrary to the parties’ expectation

In some cases, the intended lawyer-client engagement from the start may evolve or turn into something that the parties did not expect. If the lawyer or the client do not intend anymore to proceed with the original engagement, then quantum meruit is due to the lawyer for whatever legal services that may have already been rendered.

4) Termination of engagement through no fault of the lawyer

Gow v. De Leon, A.C. No. 12713, September 23, 2020, Per Inting, J.:

• To begin with, complainant’s allegation that he personally delivered, in one occasion, the entire amount of P3,000,000.00 to Atty. De Leon was not substantiated with credible proof. In an effort to lend credence to his claim, complainant presented his own handwritten notes which purportedly show the “purpose of giving [respondents] the P3,000,000.00.” The Court notes, however, that complainant’s personal notes are devoid of any evidentiary weight for being essentially self-serving. Basic is the rule that, mere allegations without proof are disregarded and that charges based on mere speculation cannot be given credence. Undoubtedly, complainant’s bare allegations must be disregarded for being manifestly self-serving and undeserving of any weight in law. Moreover, a perusal of the purported notes clearly indicates that they are simply a “breakdown” of the proposed/estimated cost of expenses provided by Atty. De Leon for the various legal action which complainant wanted to implement at the time. By no stretch of imagination can the Court construe the purported notes to be an acknowledgment by respondents that the alleged amount was indeed paid or delivered to respondents.

• Complainant then implies that respondents intended not to account for whatever money they received because respondents failed to draw up a formal agreement, and that they failed to issue an acknowledgment or official receipt.

• The Court, however, finds complainant’s argument specious.

• For one, a formal agreement is not necessary to establish attorney-client relationship. Thus, its absence does not affect the standing attorney-client relationship between complainant and the respondents.

• For another, considering that the absence of a formal agreement between them does not affect their standing attorney-client relationship, it is with all the more reason that such absence cannot be belatedly used by complainant to support his inordinate claim that respondents “did not want to account for the P3,000,000.00 [that complainant] personally handed to [respondents].” Besides, the Court finds it difficult to believe that complainant, after giving the gargantuan amount of P3,000,000.00, in cash, to Atty. De Leon, did not insist for the issuance of any receipt that would evidence his payment.

• On this note, the Court senses a veneer of truth in respondents’ allegations that complainant refused to sign and document the Retainership Agreement, albeit his conformity thereto, and that complainant preferred cash transactions in all his dealings with respondents in order to avoid leaving document trails for his creditors, because at the time, complainant was being haunted by several creditors and that several cases were already filed against him and his companies.

• It is settled that the Court may deny a litigant relief if his conduct has been inequitable, unfair, and dishonest as to the controversy in issue.

• To be sure, complainant could have easily asked for an acknowledgment or an official receipt from respondents, but it was his intention not to. Thus, complainant has only himself to blame. Furthermore, it has not escaped the attention of the Court that complainant did not disclose the fact: (1) that aside from the three postdated checks, respondents likewise returned the additional amount of P600,000.00; and (2) that respondents submitted to complainant a Reply Letter dated July 28, 2016 clarifying the actual amount they received; complainant tendered no protest and is thereby deemed to have acquiesced thereto.

• Instead, complainant filed the instant complaint on December 12, 2019, or more than three years from the alleged failure to account and return the alleged amount to him. While the ordinary statute of limitations have no bearing in a disbarment proceeding, it is well-entrenched in jurisprudence that an unexplained delay in the filing of the instant complaint creates suspicion on the motive of complainants.38 In this case, no explanation was given by complainant for the unusual delay in the institution of the instant complaint. Worse, complainant submitted a dubious affidavit to support his claim that respondents “failed to deliver the output agreed upon.”

• Also, it was not shown that respondents failed to account for the money which they received from complainant.

• In fact, on March 4, 2015, even before the issuance of the formal demand letter dated March 31, 2015, respondents had already returned P300,000.00 which complainant himself personally acknowledged. Subsequently, respondents issued three postdated checks with the total of only P1,050,000.00 on June 1, 2015, and another P300,000.00 which was received by CFO Deacosta on July 3, 2015. Thus, out of the sum of P2,000,000.00 given by complainant to respondent, the latter was able to return P1,650,000.00.

• As to the remaining balance of P350,000.00, the records show that it was utilized by the respondents for the preparation and filing of the complaint against the former and current officials of the Philippine Reclamation Authority now Public Estates Authority including the expenses for operations, research, leg work and media expense.

• Under the principle of quantum meruit, recovery of attorney’s fees is authorized when the attorney-client relationship was terminated through no fault of the lawyers.

• Evidently, complainant has no basis in asking for the return of an amount which is more than what he actually gave to the respondents.

• While the Court will not hesitate to punish erring lawyers who are shown to have failed to live up to their sworn duties, neither will the Court hesitate to extend its protective arm to lawyers who are at times maliciously charged. Complainant’s failure to discharge its burden of showing that the acts of the respondents truly violated the CPR warrants the dismissal of the instant administrative complaint.

References

Canon III, 2023 Code of Professional Responsibility

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