Digest by: Miguel Alleandro Alag Ruling of the RTC: The RTC declared the contingent fee of 10.

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CONJUGAL PARTNERSHIP OF SPS. CADAVEDO v. ATTY. LACAYA hectares as excessive and unconscionable. The RTC reduced the land area
G.R. No. 173188 | January 15, 2014 to 5.2691 hectares and ordered the respondents to vacate and restore
FACTS: the remaining 5.2692 hectares to the spouses Cadavedo.
The Spouses Vicente Cadavedo and Benita Arcoy Cadavedo acquired a
homestead grant over a 230,765-square meter parcel of land known as The RTC noted that, as stated in the amended complaint filed by Atty.
Lot 5415 located in Gumay, Piñan, Zamboanga del Norte. On April 30, Lacaya, the agreed attorney’s fee on contingent basis was P2,000.00.
1955, the spouses Cadavedo sold the subject lot to the spouses Vicente Nevertheless, the RTC also pointed out that the parties novated this
Ames and Martha Fernandez (the spouses Ames) Transfer Certificate of agreement when they executed the compromise agreement in Civil Case
Title (TCT) No. T-4792 was subsequently issued in the name of the No. 215 (ejectment case), thereby giving Atty. Lacaya one-half of the
spouses Ames. subject lot. The RTC added that Vicente’s decision to give Atty. Lacaya
one-half of the subject lot, sans approval of Benita, was a valid act of
The present controversy arose when the spouses Cadavedo filed an administration and binds the conjugal partnership. The RTC reasoned out
action before the RTC (then Court of First Instance) of Zamboanga City that the disposition redounded to the benefit of the conjugal partnership
against the spouses Ames for sum of money and/or voiding of contract of as it was done precisely to remunerate Atty. Lacaya for his services to
sale of homestead after the latter failed to pay the balance of the recover the property itself.
purchase price.
These considerations notwithstanding, the RTC considered the one-half
The spouses Cadavedo initially engaged the services of Atty. Rosendo portion of the subject lot, as Atty. Lacaya’s contingent fee, excessive,
Bandal who, for health reasons, later withdrew from the case; he was unreasonable and unconscionable. The RTC was convinced that the issues
substituted by Atty. Lacaya. involved in Civil Case No. 1721 were not sufficiently difficult and
complicated to command such an excessive award; neither did it require
On February 24, 1969, Atty. Lacaya amended the complaint to assert the Atty. Lacaya to devote much of his time or skill, or to perform extensive
nullity of the sale and the issuance of TCT No. T-4792 in the names of the research.
spouses Ames as gross violation of the public land law.
Ruling of the CA: The CA reversed and set aside the RTC’s September 17,
The amended complaint stated that the spouses Cadavedo hired Atty. 1996 decision and maintained the partition and distribution of the subject
Lacaya on a contingency fee basis. That due to the above circumstances, lot under the compromise agreement. In so ruling, the CA noted the
the plaintiffs were forced to hire a lawyer on contingent basis and if they following facts:
become the prevailing parties in the case at bar, they will pay the sum of 1) Atty. Lacaya served as the spouses Cadavedo’s counsel from
₱2,000.00 for attorney’s fee. 1969 until 1988, when the latter filed the present case against
Atty. Lacaya;
In a decision dated February 1, 1972, the RTC upheld the sale of the 2) during the nineteen (19) years of their attorney-client
subject lot to the spouses Ames. The spouses Cadavedo, thru Atty. relationship, Atty. Lacaya represented the spouses Cadavedo
Lacaya, appealed the case to the CA. in three civil cases – Civil Case No. 1721, Civil Case No. 3352,
and Civil Case No. 3443;
On September 18, 1975, and while the appeal before the CA in Civil Case 3) the first civil case lasted for twelve years and even reached
No. 1721 was pending, the spouses Ames sold the subject lot to their this Court, the second civil case lasted for seven years, while
children. The spouses Ames’ TCT No. T-4792 was subsequently cancelled the third civil case lasted for six years and went all the way to
and TCT No. T25984 was issued in their children’s names. On October 11, the CA;
1976, the spouses Ames mortgaged the subject lot with the Development 4) the spouses Cadavedo and Atty. Lacaya entered into a
Bank of the Philippines (DBP) in the names of their children. compromise agreement concerning the division of the subject
lot where Atty. Lacaya ultimately agreed to acquire a smaller
On August 13, 1980, the CA issued its decision in Civil Case No. 1721, portion;
reversing the decision of the RTC and declaring the deed of sale, transfer 5) the MTC approved the compromise agreement;
of rights, claims and interest to the spouses Ames null and void ab initio. 6) Atty. Lacaya defrayed all of the litigation expenses in Civil Case
No. 1721; and
It directed the spouses Cadavedo to return the initial payment and 7) the spouses Cadavedo expressly recognized that Atty. Lacaya
ordered the Register of Deeds to cancel the spouses Ames’ TCT No. T- served them in several cases.
4792 and to reissue another title in the name of the spouses Cadavedo.
The case eventually reached this Court via the spouses Ames’ petition for Considering these established facts and consistent with Canon 20.01 of
review on certiorari which this Court dismissed for lack of merit. the Code of Professional Responsibility (enumerating the factors that
should guide the determination of the lawyer’s fees), the CA ruled that
With the finality of the judgment in Civil Case No. 1721, Atty. Lacaya filed the time spent and the extent of the services Atty. Lacaya rendered for
on September 21, 1981 a motion for the issuance of a writ of execution. the spouses Cadavedo in the three cases, the probability of him losing
On September 23, 1981, the spouses Ames filed Civil Case No. 3352 other employment resulting from his engagement, the benefits resulting
against the spouses Cadavedo. to the spouses Cadavedo, and the contingency of his fees justified the
compromise agreement and rendered the agreed fee under the
On October 16, 1981, the RTC granted the motion filed for the issuance of compromise agreement reasonable.
a writ of execution in Civil Case No. 1721 and the spouses Cadavedo took
possession of the subject lot on October 24, 1981. Soon after, the subject ISSUE: Whether the attorney’s fee consisting of one-half of the subject lot
lot was surveyed and subdivided into two equal portions, and Atty. is valid and reasonable, and binds the petitioners.
Lacaya asked for one-half of the subject lot as attorney’s fees.
RULING: No.
Atty. Lacaya caused the subdivision of the subject lot into two equal
portions, based on area, and selected the more valuable and productive The agreement on attorney’s fee consisting of one-half of the subject lot
half for himself; and assigned the other half to the spouses Cadavedo. is void; the petitioners are entitled to recover possession

Atty. Lacaya took possession of one of the subdivided portions; and The written agreement providing for a contingent fee of P2,000.00 should
unsatisfied Vicente sought to eject Lacaya (5) on May 13, 1982, Vicente prevail over the oral agreement providing for one-half of the subject lot.
and Atty. Lacaya executed the compromise agreement. This incident
occurred while Civil Case No. 3352 was pending. The spouses Cadavedo and Atty. Lacaya agreed on a contingent fee of
P2,000.00 and not, as asserted by the latter, one-half of the subject lot.
The stipulation contained in the amended complaint filed by Atty. Lacaya courts. Similarly, the compromise agreement, including the subsequent
clearly stated that the spouses Cadavedo hired the former on a judicial approval, was effected during the pendency of Civil Case No.
contingency basis; the Spouses Cadavedo undertook to pay their lawyer 3352. In all of these, the relationship of a lawyer and a client still existed
P2,000.00 as attorney’s fees should the case be decided in their favor. between Atty. Lacaya and the spouses Cadavedo.

At this point, we highlight that as observed by both the RTC and the CA Thus, whether we consider these transactions – the transfer of the
and agreed as well by both parties, the alleged contingent fee agreement disputed one-half portion and the compromise agreement –
consisting of one-half of the subject lot was not reduced to writing prior independently of each other or resulting from one another, we find them
to or, at most, at the start of Atty. Lacaya’s engagement as the spouses to be prohibited and void by reason of public policy. Under Article 1409
Cadavedo’s counsel in Civil Case No. 1721. An agreement between the of the Civil Code, contracts which are contrary to public policy and those
lawyer and his client, providing for the former’s compensation, is subject expressly prohibited or declared void by law are considered inexistent
to the ordinary rules governing contracts in general. As the rules stand, and void from the beginning.
controversies involving written and oral agreements on attorney’s fees
shall be resolved in favor of the former. Hence, the contingency fee of What did not escape this Court’s attention is the CA’s failure to note that
P2,000.00 stipulated in the amended complaint prevails over the the transfer violated the provisions of Article 1491 (5) of the Civil Code,
alleged oral contingency fee agreement of one-half of the subject lot. although it recognized the concurrence of the transfer and the execution
of the compromise agreement with the pendency of the two civil cases
The attorney’s fee consisting of one-half of the subject lot is excessive subsequent to Civil Case No. 1721. In reversing the RTC ruling, the CA
and unconscionable gave weight to the compromise agreement and in so doing, found
justification in the unproved oral contingent fee agreement.
The contingent fee of one-half of the subject lot was allegedly agreed to
secure the services of Atty. Lacaya in Civil Case No. 1721. Plainly, it was While contingent fee agreements are indeed recognized in this
intended for only one action as the two other civil cases had not yet been jurisdiction as a valid exception to the prohibitions under Article 1491 (5)
instituted at that time. While Civil Case No. 1721 took twelve years to be of the Civil Code, contrary to the CA’s position, however, this recognition
finally resolved, that period of time, as matters then stood, was not a does not apply to the present case.
sufficient reason to justify a large fee in the absence of any showing that
special skills and additional work had been involved. The issue involved in A contingent fee contract is an agreement in writing where the fee, often
that case, as observed by the RTC (and with which we agree), was simple a fixed percentage of what may be recovered in the action, is made to
and did not require of Atty. Lacaya extensive skill, effort and research. depend upon the success of the litigation. The payment of the contingent
The issue simply dealt with the prohibition against the sale of a fee is not made during the pendency of the litigation involving the client’s
homestead lot within five years from its acquisition. property but only after the judgment has been rendered in the case
handled by the lawyer.
That Atty. Lacaya also served as the spouses Cadavedo’s counsel in the
two subsequent cases did not and could not otherwise justify an In the present case, we reiterate that the transfer or assignment of the
attorney’s fee of one-half of the subject lot. As asserted by the disputed one-half portion to Atty. Lacaya took place while the subject
petitioners, the spouses Cadavedo and Atty. Lacaya made separate lot was still under litigation and the lawyer-client relationship still
arrangements for the costs and expenses for each of these two cases. existed between him and the spouses Cadavedo. Thus, the general
Thus, the expenses for the two subsequent cases had been considered prohibition provided under Article 1491 of the Civil Code, rather than the
and taken care of. exception provided in jurisprudence, applies. The CA seriously erred in
upholding the compromise agreement on the basis of the unproved oral
Atty. Lacaya’s acquisition of the one-half portion contravenes Article contingent fee agreement.
1491 (5) of the Civil Code
The compromise agreement could not validate the void oral contingent
Article 1491 (5) of the Civil Code forbids lawyers from acquiring, by fee agreement; neither did it supersede the written contingent fee
purchase or assignment, the property that has been the subject of agreement
litigation in which they have taken part by virtue of their profession. The
same proscription is provided under Rule 10 of the Canons of Professional The compromise agreement entered into between Vicente and Atty.
Ethics. Lacaya in Civil Case No. 215 (ejectment case) was intended to ratify and
confirm Atty. Lacaya’s acquisition and possession of the disputed one-half
A thing is in litigation if there is a contest or litigation over it in court or portion which were made in violation of Article 1491 (5) of the Civil Code.
when it is subject of the judicial action. Following this definition, we find As earlier discussed, such acquisition is void; the compromise agreement,
that the subject lot was still in litigation when Atty. Lacaya acquired the which had for its object a void transaction, should be void. Consequently,
disputed one-half portion. We note in this regard the following the compromise agreement did not supersede the written contingent fee
established facts: agreement providing for attorney’s fee of P2,000.00.
1) on September 21, 1981, Atty. Lacaya filed a motion for the
issuance of a writ of execution in Civil Case No. 1721; Atty. Lacaya is entitled to receive attorney’s fees on a quantum meruit
2) on September 23, 1981, the spouses Ames filed Civil Case No. basis
3352 against the spouses Cadavedo;
3) on October 16, 1981, the RTC granted the motion filed for the Quantum meruit — meaning ‘as much as he deserves’ — is used as basis
issuance of a writ of execution in Civil Case No. 1721 and the for determining a lawyer’s professional fees in the absence of a contract.
spouses Cadavedo took possession of the subject lot on
October 24, 1981; In the present case, the following considerations guide this Court in
4) soon after, the subject lot was surveyed and subdivided into considering and setting Atty. Lacaya’s fees based on quantum meruit: (1)
two equal portions, and Atty. Lacaya took possession of one of the questions involved in these civil cases were not novel and did not
the subdivided portions; and require of Atty. Lacaya considerable effort in terms of time, skill or the
5) on May 13, 1982, Vicente and Atty. Lacaya executed the performance of extensive research; (2) Atty. Lacaya rendered legal
compromise agreement. services for the Spouses Cadavedo in three civil cases beginning in 1969
until 1988 when the petitioners filed the instant case; (3) the first of these
From these timelines, whether by virtue of the alleged oral contingent fee civil cases (Cadavedo v. Ames) lasted for twelve years and reaching up to
agreement or an agreement subsequently entered into, Atty. Lacaya this Court; the second (Ames v. Cadavedo) lasted for seven years; and the
acquired the disputed one-half portion (which was after October 24, third (Cadavedo and Lacaya v. DBP) lasted for six years, reaching up to the
1981) while Civil Case No. 3352 and the motion for the issuance of a writ CA; and (4) the property subject of these civil cases is of a considerable
of execution in Civil Case No. 1721 were already pending before the lower size of 230,765 square meters or 23.0765 hectares.