CANON 9: Whether or not Respondent is entitled to the attorney’s fees as granted by the CIR

FACTS:
-

a) Complainant’s Arguments (Amalgamated Laborers, Atty. Carbonell et al. – Win)

- Filed in court a document labelled "Discharge" informing CIR of the discharge, release and
dismissal — thru a union board resolution (attached thereto as Annex A thereof) — of Atty.
Leonardo C. Fernandez as one of the lawyers of the complainants in CIR Case No. 70-ULP-
Cebu, effective February 28, 1963. Thus, Respondent Atty. Fernandez should not receive his
attorney’s fees
-Argued that CIR is bereft of authority to adjudicate contractual disputes over attorneys' fees.
Their reasons: (1) a dispute arising from contracts for attorneys' fees is not a labor dispute and is
not one among the cases ruled to be within CIR's authority; and (2) to consider such a dispute to
be a mere incident to a case over which CIR may validly assume jurisdiction is to disregard the
special and limited nature of said court's jurisdiction.
-Appealed to SC the decision of the CIR

b) Respondent’s Argument’s (CIR and Atty. Fernandez – Lost)

- Argued that the grounds for his discharge specified in the board resolution were "malicious and
motivated by greed and ungratefulness" and that the unjustifiable discharge did not affect the
already stipulated contract for attorneys' fees.
-CIR rendered a decision in his favor granting him the amount of P19,938.81 representing his
attorneys' fees.

ISSUE:
- Whether or not Respondent is entitled to the attorney’s fees as granted by the CIR

RULING:
Conclusion:
- The attorney’s fees in the amount of P19,938.81 as granted by the CIR to Respondent is not
proper. The CIR is ordered to determine the proper amount of attorney’s fees for Respondent and
Petitioner. The complaint is granted
Rule:
-
Application:
- In this case, the present controversy over attorneys' fees is but an epilogue or a tail-end feature
of the main case, CIR No. 70-ULP-Cebu, which undoubtedly is within CIR's jurisdiction. And, it
has been held that "once the Court of Industrial Relations has acquired jurisdiction over a case
under the law of its creation, it retains that jurisdiction until the case is completely decided,
including all the incidents related thereto."
-We strike down the alleged oral agreement that the union president should share in the
attorneys' fees. Canon 34 of Legal Ethics condemns this arrangement in terms clear and explicit.
It says: "No division of fees for legal services is proper, except with another lawyer, based upon
a division of service or responsibility." The union president is not the attorney for the laborers.
He may seek compensation only as such president. An agreement whereby a union president is
allowed to share in attorneys' fees is immoral. Such a contract we emphatically reject. It cannot
be justified
- The stipulated 30% attorneys' fee is excessive and unconscionable. With the exception of
Arsenio Reyes who receives a monthly salary of P175, the other successful complainants were
mere wage earners paid a daily rate of P4.20 to P5.00. 13 Considering the long period of time that
they were illegally and arbitrarily deprived of their just pay, these laborers looked up to the
favorable money judgment as a serum to their pitiful economic malaise. A thirty per cent (30%)
slice therefrom immensely dilutes the palliative ingredient of this judicial antidote.
- An examination of the record of the case will readily show that an award of twenty-five per
cent (25%) attorneys' fees reasonably compensates the whole of the legal services rendered in
CIR Case No. 70-ULP-Cebu. This fee must be shared by petitioner Atty. Carbonell and
respondent Atty. Fernandez. For, after all, they are the counsel of record of the complainants.
Respondent Atty. Fernandez cannot deny this fact. The pleadings filed even at the early stages of
the proceedings reveal the existence of an association between said attorneys. The pleadings
were filed under the name of "Fernandez & Carbonell." This imports a common effort of the
two. It cannot be denied though that most of those pleadings up to judgment were signed for
Fernandez & Carbonell by respondent Fernandez.
Conclusion:
- Thus, the attorney’s fees in the amount of P19,938.81 as granted by the CIR to Respondent is
not proper. The CIR is ordered to determine the proper amount of attorney’s fees for Respondent
and Petitioner. The complaint is granted
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-23467 March 27, 1968

AMALGAMATED LABORERS' ASSOCIATION and/or FELISBERTO M. JAVIER for

himself and as General President,
ATTY. JOSEUR. CARBONELL, ET AL., petitioners,
vs.
HON. COURT OF INDUSTRIAL RELATIONS AND ATTY. LEONARDO C.
FERNANDEZ, respondents.

Jose Ur. Carbonell for and in his own behalf as petitioner.

Leonardo C. Fernandez for and in his own behalf as respondent.

SANCHEZ, J.:

Controversy over attorneys' fees for legal services rendered in CIR Case No. 70-ULP-
Cebu.

The background facts are as follows:

On May 30, 1956, Florentino Arceo and 47 others together with their union, Amalgamated
Laborers' Association, and/or Felisberto Javier, general president of said union, lodged a
complaint 1 in the Court of Industrial Relations (CIR), for unfair labor practices specified in Sec.
4(a) 1, 2, 3 and 4 of the Industrial Peace Act. Made respondents were their former employer,
Binalbagan Sugar Central Company, Inc. (Biscom), Rafael Jalandoni, its president and general
manager; Gonzalo Guillen, its chief engineer and general factory superintendent; and Fraternal
Labor Organization and/or Roberto Poli, its president.

Failing in their attempts to dismiss the complaint (motions to dismiss dated June 30, 1956
and July 6, 1956), 2 respondents Biscom, Jalandoni, and Guillen, on July 9, 1957, answered and
counterclaimed. Respondents Fraternal Labor Union and Poli also filed their answer dated July
12, 1957.

With the issues joined, the case on the merits was heard before a trial commissioner.

At the hearings, only ten of the forty-eight complainant laborers appeared and testified.
Two of these ten were permanent (regular) employees of respondent company; the remaining
eight were seasonal workers. The regular employees were Arsenio Reyes and Fidel Magtubo.
Seasonal workers were Catalino Bangoy, Juan Fernandez, Jose Garlitos, Dionisio Pido, Santiago
Talagtag, Dominador Tangente, Felimon Villaluna and Brigido Casas.
 On November 13, 1962, CIR, thru Associate Judge Arsenio I. Martinez, rendered
judgment, which provides, inter alia, that the two regular employees (Reyes and Magtubo) be
reinstated "to their former positions, without loss of seniority and other benefits which should
have accrued to them had they not been illegally dismissed, with full back wages from the time
of their said dismissals up to the time of their actual reinstatements, minus what they have earned
elsewhere in the meantime" and that the eight seasonal workers "be readmitted to their positions
as seasonal workers of respondent company (Biscom), with back wages as seasonal workers
from the time they were not rehired at the start of the 1955-1956 milling season on October 1,
1955 up to the time they are actually reinstated, less the amount earned elsewhere during the
period of their lay-off."

Respondents Biscom, Jalandoni and Guillen appealed direct to this Court. 3 On March 28,
1963, this Court dismissed the appeal, without costs. Ground: Petitioners therein did not seek
reconsideration of CIR's decision of November 13, 1962. The judgment became final.

Upon the ten complainants' motion to name an official computer to determine the actual
money due them, CIR, on June 4, 1963, directed the Chief Examiner of its Examining Division
to go to the premises of Biscom and compute the back wages due the ten complainants.

On August 9, 1963, the Chief Examiner reported that the total net back wages due the ten
complainants were P79,755.22. Biscom and the complainants moved for reconsideration:
Biscom on August 17, 1963; complainants on September 24, 1963.

In the interim, Atty. Leonardo C. Fernandez (a respondent herein) filed on July 15, 1963 in
the same case — CIR Case No. 70-ULP-Cebu — a "Notice of Attorney's Lien." He alleged
therein that he had been the attorney of record for the laborers in CIR Case No. 70-ULP-Cebu
"since the inception of the preliminary hearings of said case up to the Supreme Court on appeal,
as chief counsel thereof"; that he "had actually rendered legal services to the laborers who are
subject of this present litigation [CIR Case No. 70-ULP-Cebu] since the year 1956, more or
less"; that the laborers "have voluntarily agreed to give [him], representing his attorney's fees on
contingent basis such amounts equivalent to 25% thereof which agreement is evidenced by a
Note"; and that the 25% attorney's fee so contracted is "reasonable and proper taking into
consideration the length of services he rendered and the nature of the work actually performed by
him."

On September 25, 1963, Atty. Fernandez filed an "Amended Notice of Attorney's Lien,"
which in part reads:

3. That the laborers, subject of this present litigation, sometime on February 3, 1956, had
initially voluntarily agreed to give Undersigned Counsel herein, representing his
Attorney's fees on contingent basis, such amounts as equivalent to Thirty Per Cent (30%)
of whatever money claims that may be adjudicated by this Honorable Court, copy of said
Agreement, in the local Visayan dialect and a translation of the same in the English
language are hereto attached as annexes "A" "A-1" hereof;
 4. That subsequently thereafter, when the above-entitled Case was already decided in
their favor, Arsenio Reyes, in behalf of his co-laborers who are also Complainants in this
Case begged from the Undersigned Counsel herein that he reduce his attorney's fees to
Twenty-Five Per Cent (25%) only for the reason that they have to share and satisfy also
Atty. Jose Ur. Carbonell in the equivalent amount of Five Per Cent (5%) although the
latter's actual services rendered was so insignificant thereof;

5. That because of the pleadings of said Arsenio Reyes, who is the President of said
Union, the Undersigned Counsel herein finally agreed and consented that his attorney's
fees be reduced to only Twenty-Five Per Cent (25%) instead of Thirty Per Cent (30%) as
originally agreed upon in 1956.

On October 7, 1963, Atty. Jose Ur. Carbonell (a petitioner herein) filed in court a
document labelled "Discharge" informing CIR of the discharge, release and dismissal — thru a
union board resolution (attached thereto as Annex A thereof) — of Atty. Leonardo C. Fernandez
as one of the lawyers of the complainants in CIR Case No. 70-ULP-Cebu, effective February 28,
1963.

On October 14, 1963, Atty. Fernandez replied. He averred that the grounds for his
discharge specified in the board resolution were "malicious and motivated by greed and
ungratefulness" and that the unjustifiable discharge did not affect the already stipulated contract
for attorneys' fees.

On March 19, 1964, CIR Judge Arsenio I. Martinez resolved Biscom's and complainants'
motions for resonsideration objecting to the Chief Examiner's Report and also respondent
Fernandez' Amended Notice of Attorney's Lien. Judge Martinez' order reads in part:

(b) Respondent company is further directed to deposit the amount representing

25% of P79,755.22 with the Cashier of this Court, as attorney's fees;

xxx xxx xxx

(d) The amount representing attorney's fees to be deposited by the respondent

company is hereby awarded and granted to Atty. Leonardo C. Fernandez, and he may
collect the same from the Cashier of the Court upon the finality of this order, subject to
existing auditing procedures; ....

Biscom complied with the order of deposit. 4

On April 10, 1964, Atty. Carbonell moved to reconsider the March 19, 1964 order with
respect to the award of attorneys' fees. Amongst his grounds are that CIR has no jurisdiction to
determine the matter in question, and that the award of 25% as attorneys' fees to Atty. Fernandez
is excessive, unfair and illegal. This motion was denied on April 28, 1964 by CIR en banc.

On June 9, 1964, a motion for reconsideration of the April 28, 1964 resolution was filed by
Atty. Carbonell. This was amplified by a similar motion filed on June 11, 1964.
 On June 25, 1964, two things happened: First. CIR en banc denied the motion of June 11,
1964. Second. On Atty. Fernandez' motion, Judge Martinez authorized the Cashier of the court to
disburse to Fernandez the amount of P19,938.81 representing attorneys' fees and deducting
therefrom all legal fees incident to such deposit.

Petitioners herein, Atty. Carbonell, Amalgamated Laborers' Association, and the ten
employees, appealed from the June 25, 1964 resolution of CIR, direct to this Court.

1. Petitioners press upon this Court the view that CIR is bereft of authority to adjudicate
contractual disputes over attorneys' fees. Their reasons: (1) a dispute arising from contracts for
attorneys' fees is not a labor dispute and is not one among the cases ruled to be within CIR's
authority; and (2) to consider such a dispute to be a mere incident to a case over which CIR may
validly assume jurisdiction is to disregard the special and limited nature of said court's
jurisdiction.

RULING

These arguments are devoid of merit.

The present controversy over attorneys' fees is but an epilogue or a tail-end feature of the
main case, CIR No. 70-ULP-Cebu, which undoubtedly is within CIR's jurisdiction. And, it has
been held that "once the Court of Industrial Relations has acquired jurisdiction over a case under
the law of its creation, it retains that jurisdiction until the case is completely decided, including
all the incidents related thereto." 5 Expressive of the rule on this point is this —

4. It is well settled that:

A grant of jurisdiction implies the necessary and usual incidental powers

essential to effectuate it, and every regularly constituted court has power to do all
things reasonably necessary for the administration of justice within the scope of
its jurisdiction, and for the enforcement of its judgments and mandates, even
though the court may thus be called upon to decide matters which would not be
within its cognizance as original causes of action.

While a court may be expressly granted the incidental powers necessary to

effectuate its jurisdiction, a grant of jurisdiction, in the absence of prohibitive
legislation, implies the necessary and usual incidental powers essential to
effectuate it (In re Stinger's Estate, 201 P. 693), and, subject to existing laws and
constitutional provisions, every regularly constituted court has power to do all
things that are reasonably necessary for the administration of justice within the
scope of its jurisdiction, and for the enforcement of its judgments and mandates.
So demands, matters, or questions ancillary or incidental to, or growing out of,
the main action, and coming within the above principles, may be taken
cognizance of by the court and determined, since such jurisdiction is in aid of its
authority over the principal matter, even though the Court may thus be, called on
to consider and decide matters, which as original causes of action, would not be
 within its cognizance (Bartholomew vs. Shipe, 251 S.W. 1031), (21 C.J.S. pp.
136-138.)

Thus, in Gomez vs. North Camarines Lumber Co., L-11945, August 18, 1958, and
Serrano vs. Serrano, L-19562, May 23, 1964, we held that the court having jurisdiction
over the main cause of action, may grant the relief incidental thereto, even if they would
otherwise, be outside its competence. 6

To direct that the present dispute be lodged in another court as petitioners advocate would
only result in multiplicity of suits, 7 a situation abhorred by the rules. Thus it is, that usually the
application to fix the attorneys' fees is made before the court which renders the judgment. 8 And,
it has been observed that "[a]n approved procedure, where a charging lien has attached to a
judgment or where money has been paid into court, is for the attorney to file an intervening
petition and have the amount and extent of his lien judicially determined." 9 Appropriately to be
recalled at this point, is the recent ruling in Martinez vs. Union de Maquinistas, 1967A Phild.
142, 144, January 30, 1967, where, speaking thru Mr. Justice Arsenio P. Dizon, explicit
pronouncement was made by this Court that: "We are of the opinion that since the Court of
Industrial Relations obviously had jurisdiction over the main cases, ... it likewise had full
jurisdiction to consider and decide all matters collateral thereto, such as claims for attorney's fees
made by the members of the bar who appeared therein." 10

2. The parties herein join hands in one point - the ten (10) successful complainants in C.I.R
Case No. 70-ULP-Cebu should pay as attorneys' fees 30% of the amount adjudicated by the
court in the latter's favor (P79,755.22).

They are at odds, however, on how to split the fees.

Respondent Atty. Fernandez claims twenty-five per cent (25%) of the 30% attorneys' fees.
He explains that upon the plea of Arsenio Reyes, union president and one of the 10 successful
complainants, he had to reduce his fees to 25% since "they have to share and satisfy also Atty.
Jose Ur. Carbonell in the equivalent amount of Five Per Cent (5%)." Atty. Fernandez exhibited a
contract purportedly dated February 3, 1956 — before the 48 employees have even filed their
complaint in CIR. The stipulated fee is 30% of whatever amount the ten might recover. Strange
enough, this contract was signed only by 8 of the 10 winning claimants. What happened to the
others? Why did not the union intervene in the signing of this contract? Petitioners dispute said
contract. They say that Atty. Fernandez required the ten to sign the contract only after the receipt
of the decision.

Petitioners, on the other hand, contend that the verbal agreement entered into by the union
and its officers thru its President Javier and said two lawyers, Atty. Carbonell and Atty.
Fernandez, is that the 30% attorneys' fees, shall be divided equally ("share and share alike")
amongst Atty. Carbonell, Atty. Fernandez and Felisberto Javier, the union president.

After hearing, CIR Associate Judge Arsenio I. Martinez awarded 25% attorneys' fees to
respondent Atty. Fernandez. CIR noted that "the active conduct and prosecution of the above-
entitled case was done by Atty. Fernandez up to the appeal in the Supreme Court," and that
petitioner Atty. Carbonell manifested that "Atty. Leonardo C. Fernandez was the counsel mainly
responsible for the conduct of the case." It noted, too, that petitioner Atty. Carbonell did not file
any notice of Attorney's Lien.

3. We strike down the alleged oral agreement that the union president should share in the
attorneys' fees. Canon 34 of Legal Ethics condemns this arrangement in terms clear and explicit.
It says: "No division of fees for legal services is proper, except with another lawyer, based upon
a division of service or responsibility."

The union president is not the attorney for the laborers. He may seek compensation only as such
president. An agreement whereby a union president is allowed to share in attorneys' fees is
immoral. Such a contract we emphatically reject. It cannot be justified.

4. A contingent fee contract specifying the percentage of recovery an attorney is to receive

in a suit "should be reasonable under all the circumstances of the case, including the risk and
uncertainty of the compensation, but should always be subject to the supervision of a court, as to
its reasonableness." 11

Lately, we said: 12

The principle that courts should reduce stipulated attorney's fees whenever it is
found under the circumstances of the case that the same is unreasonable, is now deeply
rooted in this jurisdiction....

xxx xxx xxx

Since then this Court has invariably fixed counsel fees on a quantum meruit basis
whenever the fees stipulated appear excessive, unconscionable, or unreasonable, because
a lawyer is primarily a court officer charged with the duty of assisting the court in
administering impartial justice between the parties, and hence, the fees should be subject
to judicial control. Nor should it be ignored that sound public policy demands that courts
disregard stipulations for counsel fees, whenever they appear to be a source of
speculative profit at the expense of the debtor or mortgagor. See, Gorospe, et al. v.
Gochangco, L-12735, October 30, 1959. And it is not material that the present action is
between the debtor and the creditor, and not between attorney and client. As courts have
power to fix the fee as between attorney and client, it must necessarily have the right to
say whether a stipulation like this, inserted in a mortgage contract, is valid. Bachrach v.
Golingco, 39 Phil. 138.

In the instant case, the stipulated 30% attorneys' fee is excessive and unconscionable. With
the exception of Arsenio Reyes who receives a monthly salary of P175, the other successful
complainants were mere wage earners paid a daily rate of P4.20 to P5.00. 13 Considering the long
period of time that they were illegally and arbitrarily deprived of their just pay, these laborers
looked up to the favorable money judgment as a serum to their pitiful economic malaise. A thirty
per cent (30%) slice therefrom immensely dilutes the palliative ingredient of this judicial
antidote.
 The ten complainants involved herein are mere laborers. It is not far-fetched to assume that
they have not reached an educational attainment comparable to that of petitioner Carbonell or
respondent Fernandez who, on the other hand, are lawyers. Because of the inequality of the
situation between laborers and lawyers, courts should go slow in awarding huge sums by way of
attorneys' fees based solely on contracts. 14 For, as in the present case, the real objective of the
CIR judgment in CIR Case No. 70-ULP-Cebu is to benefit the complaint laborers who were
unjustifiedly dismissed from the service. While it is true that laborers should not be allowed to
develop that atavistic proclivity to bite the hands that fed them, still lawyers should not be
permitted to get a lion's share of the benefits due by reason of a worker's labor. What is to be
paid to the laborers is not windfall but a product of the sweat of their brow. Contracts for legal
services between laborer and attorney should then be zealously scrutinized to the end that a fair
share of the benefits be not denied the former.

5. An examination of the record of the case will readily show that an award of twenty-five
per cent (25%) attorneys' fees reasonably compensates the whole of the legal services rendered in
CIR Case No. 70-ULP-Cebu. This fee must be shared by petitioner Atty. Carbonell and
respondent Atty. Fernandez. For, after all, they are the counsel of record of the complainants.
Respondent Atty. Fernandez cannot deny this fact. The pleadings filed even at the early stages of
the proceedings reveal the existence of an association between said attorneys. The pleadings
were filed under the name of "Fernandez & Carbonell." This imports a common effort of the
two. It cannot be denied though that most of those pleadings up to judgment were signed for
Fernandez & Carbonell by respondent Fernandez.

We note that a break-up in the professional tie-up between Attorneys Fernandez and
Carbonell began when petitioner Atty. Carbonell, on November 26, 1962, complained to CIR
that respondent Atty. Fernandez "failed to communicate with him nor to inform him about the
incidents of this case." He there requested that he be furnished "separately copies of the decision
of the court and other pleadings and subsequent orders as well as motions in connection with the
case."

Subsequent pleadings filed in the case unmistakably show the widening rift in their
professional relationship. Thus, on May 23, 1963, a "Motion to Name and Authorize Official
Computer" was filed with CIR. On the same day, a "Motion to Issue Writ of Execution" was also
registered in the same court. Although filed under the name of "Carbonell & Fernandez," these
pleadings were signed solely by petitioner Atty. Carbonell.

On September 16, 1963, an "Opposition to respondent Biscom's Motion for

Reconsideration" was filed by petitioner Atty. Carbonell. On September 24, 1963, he filed a
"Motion for Clarification" of the November 13, 1962 judgment of CIR regarding the basic pay of
Arsenio Reyes and Fidel Magtubo. On September 24, 1963, he also filed a "Motion to
Reconsider Report of Chief Examiner." These, and other pleadings that were filed later were
signed solely by petitioner Atty. Carbonell, not in the name of "Carbonell & Fernandez." While
it was correctly observed by CIR that a good portion of the court battle was fought by respondent
Atty. Fernandez, yet CIR cannot close its eyes to the legal services also rendered by Atty.
Carbonell. For, important and numerous, too, were his services. And, they are not negligible. The
conclusion is inevitable that petitioner Atty. Carbonell must have a share in the twenty-five per
cent (25%) attorneys' fees awarded herein. As to how much, this is a function pertaining to CIR.

6. We note that CIR's cashier was authorized on June 25, 1964 to disburse to Atty.
Leonardo C. Fernandez the sum of P19,938.81 which is 25% of the amount recovered. In the
event payment actually was made, he should be required to return whatever is in excess of the
amount to which he is entitled in line with the opinion expressed herein. 15

IN VIEW OF THE FOREGOING, the award of twenty five per cent (25%) attorneys' fees
solely to respondent Atty. Fernandez contained in CIR's order of March 19, 1964 and affirmed
by said court's en banc resolutions of April 28, 1964 and June 25, 1964, is hereby set aside; and
the case is hereby remanded to the Court of Industrial Relations with instructions to conduct a
hearing on, and determine, the respective shares of Attorney Leonardo C. Fernandez and
Attorney Jose Ur. Carbonell in the amount of P19,938.81 herein awarded as attorneys' fees or
both. No costs. So ordered.

Reyes, J.B.L., Actg. C.J., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Castro, Angeles and
Fernando, JJ., concur.
Concepcion, C.J., is on leave.