BASIC LEGAL ETHICS

CHAPTER XIII
COMPENSATION OF ATTORNEY
A. RIGHT TO ATTORNEY’S FEES
Canon 20
“A lawyer shall charge only fair and reasonable fees.”

Two concepts of attorney’s fees:

1. Ordinary attorney's fee – The reasonable compensation paid to a
lawyer by his client for the legal services he has rendered to the latter.

NOTE: The basis for this compensation is the fact of his employment by
and his agreement with the client.
2. Extraordinary attorney's fee – An indemnity for damages ordered by
the court to be paid by the losing party in litigation.

NOTE: The basis for this is any of the cases provided for by law where such
award can be made, such as those authorized in Article 2208 of the Civil
Code, and is payable to the client, NOT to the lawyer unless they have
agreed that the award shall pertain to the lawyer as additional
compensation or as part thereof.
Right to protection of counsel fees
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.
Requisites for right to accrue
The right of a lawyer to a reasonable compensation for his services requires
the existence of an attorney-client relationship and the rendition by the
lawyer of services to the client.

There should be a professional contract, express or implied, between a

lawyer and his client, and the lawyer should have rendered services
pursuant thereto before he may be entitled to counsel fees.
Written agreement
A written agreement is not necessary to establish a client’s obligation to
pay attorney’s fees. A lawyer is entitled to have and receive a just and
reasonable compensation for services at the special instance and request of
his client, and as long as he is honestly and in good faith trying to serve and
represent the interest of his client, the latter is bound to pay him his just
fees.
The client’s obligation to pay attorney’s fees arises from the inanimate
contract of facias ut des (I do and you give) which is based on the principle
that no one shall unjustly enrich himself at the expense of another.
Quantum meruit
If there is no specific contract between the lawyer and the client, the
lawyer is paid on quantum meruit basis, that is, what the lawyer deserves
for his services.

Recovery of attorney’s fees on the basis of quantum meruit is authorized

1) when there is no express contract for payment of attorney’s fees;
2) when although there is a formal contract for attorney’s fees, the fees
stipulated are found unconscionable or unreasonable by the court;
3) when the contract for attorney’s fees is void due to purely formal
defects of execution;
4) when the lawyer, for justifiable cause, was not able to finish the case to
its conclusion;
5) when the lawyer and the client disregard the contract for attorney’s
fees, and
6) when the client dismissed his counsel before the termination of the
case or the latter withdrew therefrom for valid reasons.
A lawyer who rendered professional services without appointment from
the board of directors of a union, although it acknowledged and made use
of his services which redounded to the benefits of the union, is entitled to
attorney’s fees on a quantum meruit basis notwithstanding the absence of
an express authority from the board.
Who is liable for attorney’s fees
The general rule is that only the client who engaged the services of counsel is
liable for the attorney’s fees.
A party who was not privy to the employment contract or who did not
authorize the lawyer’s retainer is not liable for counsel fees. A legatee named
in a will who pleaded for its allowance may not be required to contribute to
the fees of the lawyer who succeeded in having the will disapproved. Nor may
a supposed client be held liable for the fees of a lawyer whose services were
engaged by another on his behalf without his authority.
In other words, there arises no obligation to compensate in the absence of an
express or implied contract.
Note:
There are exceptions to the foregoing rule. Such exceptions rest on the
equitable principle that a person who accepts the benefits of the legal
representation impliedly agrees to pay the lawyer’s services for he may not
unjustly enrich himself at the expense of the lawyer.
Liability of persons benefited by counsel’s
services

General Rule:
A person who had no knowledge of the lawyer’s representation may not be
held liable for attorney’s fees even though such representation redounded
to his benefit.
The objection to the lawyer’s appearance should be raised before and not
after beneficial services shall have been rendered by the lawyer, otherwise
the party who benefited from the lawyer’s representation may be required
to pay counsel fees.
An exception to this rule is the employment of a private lawyer to
represent a government entity by an official who has no authority in law to
do so, since the benefits secured by the legal representation cannot take
the place of the law and will not create an obligation on the part of the
government entity to pay the private lawyer for his services.
Liability of assignee
The assignee may be held liable for counsel fees from out of the proceeds
of a favorable judgment. That obligation gives the assignee the right to
intervene in the matter of fixing the amount of fees which may be a proper
charge against the judgment rendered in the action.
Liability in labor cases
A lawyer who represents a union and its members and with whom he has a
retainer for payment of a fixed percentage of amounts recovered from the
company is entitled to be paid his fees not only by the union members but
by the non-union members as well who derive benefits from his services.
It is but just and fair that the lawyer who represented the struggling
members of the union to secure benefits for all employees be paid his just
fees by all those who received such benefits.
Attorney’s fees in labor cases may not be more than what the law provides
and they may not be checked off from any amount due the employees
without their written consent.
Liability in derivative suits
In derivative suits, the professional services of counsel who instituted the
action upon request of a stockholder are beneficial to the corporation, the
counsel fees may be properly charged against corporate funds. But as any
stockholder may file a derivative suit on behalf of the corporation, any
other stockholder may intervene and oppose the grant of such fees as a
charge against funds of the corporation.
Liability in receivership proceedings
The assets under receivership may be liable for the fees of a lawyer
employed by a receiver to help him in the discharge of his duties.
The attorney’s fees of the counsel for a defendant in a receivership
proceeding are personal obligations of the defendant and may not be paid
out of the funds in the hands of the receiver, unless the services rendered
by the lawyer have redounded to the benefit of the receivership or of the
plaintiff who asked for the appointment of the receiver.
Liability in trusteeship or guardianship
proceedings
A trustee may be indemnified out of the trust estate for his expenses in
rendering and proving his accounts and for the counsel fees in connection
therewith.
The court may determine whether or not a trustee may be allowed
expenses for attorney’s fee and permitted to charge the same against the
trust estate.
The same rule applies in a guardianship proceeding. The property of the
ward may lawfully answer for counsel fees of the lawyer employed by the
guardian. However, no assets of the ward may be spent for attorney’s fees
without the prior approval of the guardianship court.
Liability in estate proceedings
An executor or administrator may employ an attorney to assist him in the
execution of his trust. The professional services are rendered to the
executor or administrator and for that reason, the attorney may not hold
the estate directly liable for his fees; the liability for payment rests on the
executor or administrator who may either seek reimbursement from the
estate if he has already paid them or include them in his account with due
notice to all parties interested.
Then, the estate will answer for the fees of the lawyer whose services are
beneficial to the estate, and if the assets have already been distributed, the
distributes or heirs will have to contribute their share to the counsel fees.
Note:
The attorney’s fees of a lawyer employed by an executor to secure the
approval of a will may, if the lawyer is successful, be properly charged
against the estate. The circumstance that the estate remains irrespective of
whether there is or there is no will does not minimize the importance of the
legal services rendered to the estate.
Who are entitled to or to share in
attorney’s fees
The lawyer who has been engaged by a client is the one entitled to have
and recover no more than a reasonable compensation for his services.
The general rule is that lawyers who jointly represent a common client for a
given fee, in the absence of an agreement as to division of fees, share
equally as they are special partners for a special purpose.
Partners in a law firm share in the profits in accordance with their
partnership agreement even though only one of them actually rendered
the service. On the other hand, the fees of lawyer’s separately employed by
a client to prosecute or defend his cause depend upon their respective fee
arrangements with the client.
Non-lawyer not entitled to fees
The statutory rule that “an attorney shall be entitled to have and recover
from his client no more than a reasonable compensation for his services”
requires the existence of an attorney-client relationship as a condition to
the recovery of attorney’s fees.

General Rule:
Only lawyers are entitled to attorney’s fees. The same cannot be shared
with a non-lawyer. A non-lawyer cannot recover attorney’s fees even if
there is a law authorizing him.
Exceptions:
A lawyer may divide a fee for legal services with persons not licensed to
practice law:
1. A lawyer undertakes to complete the unfinished legal business of a
deceased lawyer;
2. There is a pre-existing agreement with a partner or associate that, upon
the latter’s death, money shall be paid over a reasonable period of time to
his estate or to persons specified in the agreement; and
3. A lawyer or law firm includes non-lawyer employees in retirement plan,
even if the plan is based, in whole or in part, on a profit-sharing agreement.
Restrictions on some lawyers to charge fees
A lawyer who is absolutely disqualified from engaging in the private
practice of law by reason of his government position may neither practice
law nor, should he do so illegally, charge attorney’s fees for such services.
A lawyer as a government official charged with the duty of extending free
legal services to indigent litigants may not collect attorney’s fees from the
litigant without being guilty of misconduct.
While a local sanggunian member who is a lawyer may appear as counsel in
any administrative proceeding involving the local government unit of
which he is an official, he is prohibited from collecting any fee for his
appearance therein.
An executor or administrator is prohibited from charging the estate under
his administration of his professional fees for services rendered by him as a
lawyer. The prohibition is based on the legal maxim that one acting in a
fiduciary capacity must not place himself in such a position as to make his
interests antagonistic with those of his principal.
This principle, even in the absence of an express statutory prohibition, also
operates to restrict the right to or to limit the amount of attorney’s fees
which a lawyer who occupies a fiduciary position may otherwise collect
from his principal for his services as an advocate.
Right of counsel de oficio to fees
A court may require a lawyer to render professional services in favor of an
indigent litigant.
In the absence of a law allowing compensation, the lawyer designated as
counsel de oficio cannot charge the government nor the indigent litigant
for his professional services. His appointment as counsel de oficio neither
violates the constitutional restriction against the taking of property
without remuneration or the due process of law nor imposes upon the
government the obligation to pay him his fees.
Subject to the availability of funds as may be provided by law, the court
may order an attorney employed as counsel de oficio to be compensated in
such sum as the court may reasonably fix, which shall not be less than
thirty pesos in any case nor more than fifty pesos in light felonies; one
hundred pesos in less grave felonies; two hundred pesos in grave felonies
other than capital offenses; and five hundred pesos in capital offenses.
The compensation for counsel de oficio is not intended as a source of
regular income.
Attorney’s conduct affecting his right to fees

A lawyer who defrauds his client or acts in bad faith in his dealings with him
forfeits the right to claim payment for his services. Good morals and public
policy bar him from the portals of justice and negate his right to fees by
reason of his misconduct as a member of the bar.
The adverse result of the litigation does not in itself deprive a lawyer of the
right to claim a reasonable compensation for his services unless such result
is due to the lawyer’s misconduct or the fee stipulated is contingent upon
the favorable outcome of the action.
Thus, the dismissal of the client’s case for failure of his counsel to appear at
the hearing precludes recovery of attorney’s fees even though such failure
is due to excusable negligence because the fact remains that the client lost
the litigation due to the lawyer’s omission. But a mere honest mistake in
the discharge of his duties does not defeat his right to fees.
Withdrawal of counsel from the case
General Rule:
A lawyer lacks the unqualified right to withdraw once he has taken a case. By
his acceptance, he has impliedly stipulated that he will prosecute the case to
conclusion. This is especially true when such withdrawal will work injustice to a
client or frustrate the ends of justice.
Exceptions:
The right of a lawyer to retire from the case before its final adjudication, which
arises only from:
1. The client’s written consent; or
2. By permission of the court after due notice and hearing.
Instances when a lawyer may withdraw his services without the consent of
his client:
1. When the client deliberately fails to pay the fees for the services or fails
to comply with the retainer agreement;
2. When the client pursues an illegal or immoral course of conduct in
connection with the matter he is handling;
3. When the lawyer finds out that he might be appearing for a conflicting
interest;
4. When the mental or physical condition of the lawyer renders it difficult
for him to carry out the employment effectively;
5. Other similar cases;
6. When the client insists that the lawyer pursue conduct in violation of
these canons and rules;
7. When his inability to work with co-counsel will not promote the best
interest of the client; and
8. When the lawyer is elected or appointed to a public office.
Procedure to follow when withdrawal is without client’s consent
1. File a petition for withdrawal in court.
2. 2. Serve a copy of this petition upon his client and the adverse party at
least 3 days before the date set for hearing.

Note:
He should present his petition well in advance of the trial of the action
to enable the client to secure the services of another lawyer.
If the application is filed under circumstances that do not afford a
substitute counsel sufficient time to prepare for trial or that work prejudice
to the client’s cause, the court may deny his application and require him to
conduct the trial.
A lawyer should not presume that the court will grant his petition for
withdrawal. Until his withdrawal shall have been proved, the lawyer
remains counsel of record who is expected by his client as well as by the
court to do what the interests of his client require.
Representation of adverse interests
Effects of representing adverse interests:
1. Disqualification as counsel of new client on petition of former client;
2. Where such is unknown to, and becomes prejudicial to the interests of the
new client, a judgment against such may, on that ground, be set aside;
3. The attorney’s right to fees may be defeated if found to be related to such
conflict and such was objected to by the former client, or if there was a
concealment and prejudice by reason of the attorney’s previous
professional relationship with the opposite party; and
4. A lawyer can be held administratively liable through disciplinary action
and may be held criminally liable for betrayal of trust.
Lawyer’s right unaffected by client’s conduct
In the absence of the lawyer’s fault, a client cannot consent or waiver,
deprive the lawyer of his just fees already earned. While a client has the
right to discharge his lawyer at any time, dismiss or settle his action or even
waive the whole of his interest in favor of the adverse party, he cannot by
taking any such step deprive his lawyer of what is justly due him as
attorney’s fees unless the lawyer, by his action, waives or forfeits his right
thereto.
Attorney’s discharge by client
A client has the right to discharge his attorney at any time with or without a
cause or even against his consent.

1. With just cause – lawyer is not necessarily deprived of his right to be paid
for his services. He may only be deprived of such right if the cause for his
dismissal constitutes in itself a sufficient legal obstacle to recovery.
2. Without just cause
a. No express written agreement as to fees - reasonable value of his services
up to the date of his dismissal (quantum meruit)
b. There is written agreement and the fee stipulated is absolute and
reasonable – full payment of compensation
c. The fee stipulated is contingent
d. If dismissed before the conclusion of the action – reasonable value of his
services (quantum meruit)
e. If contingency occurs or client prevents its occurrence – full amount

Note:
A lawyer should question his discharge otherwise he will only be allowed to
recover on quantum meruit basis.
Limitations on client’s right to discharge the services of his lawyer:
1. When made with justifiable cause, it shall negate the attorney’s right to
full payment of compensation.
2. The attorney may, in the discretion of the court, intervene in the case to
protect his right to fees.
3. A client may not be permitted to abuse his right to discharge his
counsel as an excuse to secure repeated extensions of time to file a
pleading or to indefinitely avoid a trial.
Client’s dismissal of action
A client may dismiss his action even without or against the consent of his
counsel but he may not deprive his counsel of what is due him as attorney’s
fees for services rendered in the absence of waiver on the part of his lawyer.
• If the dismissal of the action is in good faith and is based on an honest belief
that the client has no valid cause, the lawyer may recover only the
reasonable worth of his services, except when the fee is contingent in which
case there will be no recovery.
• If the dismissal of the action by the client is in bad faith and is intended to
defraud the lawyer of his compensation, the lawyer will be entitled to the
full amount stipulated in a valid written contract or a reasonable value of his
services based on quantum meruit.
Client’s compromise of action
A client cannot, by entering into a compromise agreement, deprive his
lawyer of his fees in the absence of waiver on the part of the lawyer. If the
compromise is with the consent of the lawyer, he will be entitled to only a
reasonable value of his services fixed on the basis of quantum meruit.
On the other hand, if the client settles his cause in bad faith or in fraud of
his counsel, the lawyer will be entitled to recover the full amount of fees
stipulated in a valid written contract or, in the absence of such contract, the
reasonable worth of his services.
Note:
For the client has no right to compromise or waive so much of his
acknowledged claim secured through the efforts of his lawyer as would
prejudice the stipulated fee, whether absolute or contingent, and the
adverse party has no right to accept such compromise or waiver
unqualifiedly.
B. CONTRACT FOR ATTORNEY’S
FEES
A contract of professional services may either be oral or in writing. The fee
stipulated may be absolute or contingent; it may be a fixed percentage of
the amount recovered in the action. The contract may call for a down
payment; it may also provide a fee per appearance, per piece of work or on
an hourly basis. It may be a combination of these arrangements.
A written contract generally controls the amount thereof. And in the event
of the lawyer’s dismissal by the client before the conclusion of the litigation
without a justifiable cause, the attorney may be entitled to the full amount
of the fees as stipulated in the written agreement. Without such written
agreement, he may only recover the reasonable worth of his services up to
the date of his dismissal.
Kinds of retainer
1. General Retainer – It is the fee paid to a lawyer to secure his future
services as general counsel for any ordinary legal problem that may
arise in the ordinary business of the client and referred to him for legal
action. The client pays fixed retainer fees, which could be monthly or
otherwise. The fees are paid whether or not there are cases referred to
the lawyer.

2. Special Retainer – It is a fee for a specific or particular case or service

rendered by the lawyer for a client.
Validity of contract
A contract for professional services becomes the law between the parties
when stipulations therein are not contrary to law, good morals, good
customs, public policy or public order. As in any contract, a retainer whose
cause, object or purpose is contrary to law, public policy, morals and good
customs is null and void.
Thus, a contract of professional services entered into by a judge of a
superior court who is disqualified to practice is null and void.
Effect of nullity of contract
The nullity of a contract which results from the illegality of the object
sought to be achieved by the performance of the professional services
precludes a lawyer from recovering his fees for such services.
However, if the nullity of the contract is due to want of authority on the
part of one of the contracting parties or to some irregularity in its formal
execution or to the unreasonable amount of the fees fixed therein, the
lawyer will be entitled to recover what is justly due him for his services on
the basis of quantum meruit.
Effect of unconscionability of amount
Section 24, Rule 138 of the Rules of Court provides that “An attorney shall be
entitled to have and recover from his client no more than a reasonable
compensation for his services,” and “a written contract for services shall control
the amount to be paid therefor unless found by the court to be unconscionable
or unreasonable.”
This provision forms part of and is read into every contract of professional
services.
The unconscionability of the amount of fees stipulated in a professional
contract renders the contract invalid. The circumstance that the client
knowingly entered into such contract does not stop him him from questioning
its validity for estoppel does not validate a contract that is prohibited by law or
is against public policy.
Contingent fee contract
A contract for a contingent fee is an agreement in writing in which the fee,
usually a fixed percentage of what may be recovered in the action, is made
to depend upon the success in the effort to enforce or defend a supposed
right.
In a contingent fee contract, the lawyer gets paid for his services only if he
wins the case for the client unless the client prevents the successful
prosecution or defense of the action, in which case the lawyer will be
entitled to recover on a quantum meruit basis or to the full amount as fixed
in a valid written agreement if the client acted in bad faith.
Contingent fee is a fee that is conditioned on the securing of a favorable
judgment and recovery of money or property and the amount of which
may be on a percentage basis.
A contingent fee contract is under the supervision and scrutiny of the court
to protect clients from unjust charges.
A contingent fee arrangement between a lawyer and his client is not
prohibited by Article 1491(5) of the Civil Code which applies only if the sale
or assignment of the property takes place during the pendency of the
litigation involving the client’s property because the payment of contingent
fee is not made during the pendency of the litigation but only after
judgment has been rendered in the case handled by the lawyer.
This is reinforced by the fact that the Rule 16.03 of the Code of Professional
Responsibility grants a lawyer a lien over funds and property of his client
for payment of his attorney’s fees and reimbursement of his advances.
Validity of contingent fee

A contingent fee is not prohibited by law and is impliedly sanctioned. It is

closely supervised by the court to safeguard the client from unjust charges
or abuse on the part of his counsel. Its validity depends upon the
reasonableness of the amount fixed as contingent fee under the
circumstances of the case.
A contingent fee contract is generally valid and binding, unless it is
obtained by fraud, imposition or suppression of facts, or the fee is so clearly
excessive as to amount to an extortion.
The fraud or suppression of facts may be on the part of a lawyer who,
because of the client’s plight as when he is poor and ignorant takes
advantage of the situation by exacting an excessive fee. It may also be on
the part of a client who, in order to avoid paying his lawyer a legitimate fee,
undervalues the amount of his interests in litigation.
Effect of agreement to pay litigation expenses
The rules of the profession forbid a lawyer from agreeing to pay or bear the
expenses of litigation; he may advance the expenses as a matter of
convenience but subject to reimbursement.
The restriction is designed to prevent a lawyer from acquiring an interest in
the litigation and avoid conflict of interests between him and his client.
An agreement by a lawyer to conduct the litigation on his own account, to
pay the expenses thereof or to save his client therefrom and to receive as
his fee a portion of the proceeds of a judgment is obnoxious to the law.
Such agreement is known as champertry.
Note:
A champertous contract is considered void due to public policy, because
it would make him acquire a stake in the outcome of the litigation which
might lead him to place his own interest above that of the client
Construction of professional contract
In construing a contract of professional services between a lawyer and his
client, the general rule is to adopt such construction as would be more
favorable to the client even if it would work prejudice to the lawyer.
This rule of interpretation rests on the inequality between an attorney, who
knows the technicalities of the law, and a client, who usually is ignorant of
the vagaries of the law. If the ambiguity in the contract is caused by the
lawyer, the obscurity will be resolved against him.
Words inserted by a client in his own handwriting in a contract for
attorney’s fees are to be taken in his favor, the insertion being presumed to
have been made for his benefit.
A contract of professional services, like any ordinary agreement, is
interpreted in accordance with its terms and in favor of the greatest
reciprocity of interest.
C. MEASURE OF COMPENSATION
The amount of attorney’s fees due is that stipulated in the written retainer
agreement which is conclusive as to the amount of the lawyer’s
compensation. Once the lawyer has performed the task assigned to him in
a valid agreement, his compensation shall be determined on the basis of
what he and his client have agreed and not on quantum meruit basis.
Unless both the attorney and the client expressly or impliedly set aside the
contract and submit the question of reasonableness of the amount of fees
for the court to resolve on quantum meruit basis, neither the client who
wishes a reduction of the fee nor the lawyer who desires an increase
thereof may disregard the amount fixed in the contract.
Amount based on quantum meruit
The term quantum meruit means as much as a lawyer deserves.
The lawyer is entitled to receive what he merits for his services, as much as
he has earned. The doctrine of quantum meruit is a device to prevent undue
enrichment based on the equitable postulate that it is unjust for a person
to retain benefit without paying for it.
The court will fix the amount of attorney’s fees on quantum meruit basis in
any of the following instances:
(a) the agreement as to counsel fees is invalid for some reason other than
the illegality of the object of performance;
(b) the amount stipulated in the contract is unconscionable;
(c) no agreement as to fees exists between the parties;
(d) the client rejects the amount fixed in the contract as unconscionable
and is found to be so; and
(e) some act or event has precluded the lawyer from concluding the
litigation without fault on his part; and (f) the client has dismissed his
counsel or the latter has withdrawn from the case for a valid reason.
Where agreement is invalid
The nullity of a professional contract will preclude a lawyer from recovering
his compensation for services rendered only if such invalidity proceeds
from the illegality of the object of performance or of the service
performed.
If the invalidity of the contract is due to a mere formal defect in its
execution, the lawyer may recover the reasonable value of his services on
quantum meruit basis.
Where amount stipulated is unconscionable
What is unconscionable depends upon the circumstances of each case. No
hard and fast rule can be stated that will serve as a guide in determining
with mathematical accuracy what is or what is not reasonable.
The court will fix counsel fees on quantum meruit basis whenever the
amount thereof as stipulated between the parties or as sought to be
recovered by a lawyer for his services is unconscionable.
The term “unconscionable fee” may be defined as that amount which
constitutes an over exaggeration of the worth of the lawyer’s services. The
matter involves basically a question of fact which is essentially for the trial
court to decide.
Where there is no express contract
In the absence of an agreement as to attorney’s fees and the question as to
its amount is raised, the court will fix the amount on quantum meruit basis,
since the absence of an express agreement as to fees will not deprive a
lawyer of his right thereto unless he has agreed to render service
gratuitously.
Where attorney and client disregard contract
A lawyer will only be entitled to the fees fixed in a written agreement even
though his services are worth more than what has been stipulated in the
contract.
If a lawyer presents a claim for more than the amount fixed in the contract
and the client not only rejects such claim but also questions the
reasonableness of the amount fixed therein, both of them are deemed to
have impliedly disregarded the contract and placed themselves in the
position as though there is no express stipulation as to the attorney’s fees.
Where counsel is precluded from
concluding litigation

A lawyer who, without any fault, is prevented by his client from concluding
the litigation, may be entitled to recover his fees merely on quantum meruit
basis in cases where there is no written contract.
The lawyer’s recovery is limited to what is a reasonable value of his services
up to the date of his discharge from the action.
However, if there is a valid written agreement as to fees and the lawyer’s
discharge is unlawful or in bad faith, he will be entitled to the full amount
so agreed.
Factors taken into account
In determining what is fair and reasonable, a lawyer shall be guided by the
following factors (Rule 20.01):

1. Skill demanded;
2. Time spent and the extent of the services rendered or required;
3. Importance of the subject matter;
4. Probability of losing other employment as a result of acceptance of the
proffered case;
5. Professional Standing of the lawyer;
6. Novelty and difficulty of the questions involved;
7. Amount involved in the controversy and the benefits resulting to the
client from the services;
8. Customary Charges for similar services and the schedule of fees of the
IBP chapter to which he belongs;
9. Contingency or certainty of compensation; and
10. Character of the employment, whether occasional or established.
Nature of services
The value of the lawyer’s services is in large measure determined by the
nature, quality and quantity of such services. The lawyer’s services should
not be fragmented and each fragment separately valued. Rather, the
importance and value of his services should be measured and considered as
a whole.
There are services which may not in themselves have noticeable special
merit but when considered in connection with other services to which they
are related, acquire an unquestionable worth and have their impact felt on
the overall result of the litigation.
Skill and standing of attorney
The skill, experience, and standing of a lawyer bear a direct proportion to
the amount of attorney’s fees to which he may be entitled for his services.
He acquires a reputation for professional capacity and fidelity to trust,
evidenced by the quality of his work, and eminent standing in the
community.
A client engages lawyer’s services to prosecute or defend his cause
precisely because of his skill, ability, qualifications and standing in the bar
and in the community. He should accordingly be paid a much higher fee
than an ordinary practitioner, all other things being equal.
The ability, skill and competence of a lawyer must not be measured by his
income. Neither is the length of time a lawyer has practiced a safe criterion
of his ability. The lawyer’s competence and ability must be judged by the
character and quality of his work and services not only in the field of law
but in other fields of public and private endeavors as well. The skill and
standing of the lawyer must be duly proved.
However, the fact that no evidence was presented concerning the lawyer’s
standing does not necessarily rule out a claim for attorney’s fees. The
absence of evidence on this point will only result in such factor not being
considered to enhance or diminish the lawyer’s claims for attorney’s fees.
Value of interest involved
The bigger the size or value of the interest or property involved in a
litigation, the higher the attorney’s fee is. The reason for the rule is that the
higher the stakes, the more the case is hotly litigated and the greater the
efforts the lawyer exerts.

But inverse proportion rule rests on the assumption that the amount of
work required remains the same even though the interest in controversy
exceeds several million pesos.
Loss of opportunity for other employment
The loss of opportunity for other employment on the part of a lawyer who
accepts a retainer is taken into consideration in fixing the amount of the
lawyer’s fee. It is fair that a client should compensate his lawyer for being
deprived of the chance to earn legal fees from others by reason of his
employment as his counsel.
Difficulty of issues involved
Novel or difficult issues involved in a litigation require greater efforts on the
part of a lawyer in terms of preparation, study and research put into the
case, to convince the court as to the soundness of the client’s cause.
In fixing the lawyer’s fees, the court takes into account the novelty or
difficulty of the questions involved in the action as well as the demands on
his part on those questions.
Test case
A test case is usually litigated with energy and diligence even if the actual
amount is insignificant because the resolution of the other actions which
involve large sums of money is made to depend on the favorable outcome
of the test case.
Fairness and justice require that the lawyer’s fees be not limited to a
reasonable proportion of the amount in the test case but on the totality of
the amounts in all the actions dependent upon the result of the test case.
And those who may be benefited by the result of the test case may be
required to contribute a proportionate share to the fees of the lawyer who
prosecuted the test case.
Results secured
The importance to a client of his lawyer’s services depends upon the
successful outcome of the litigation. What the lawyer secures for his client
represents a real benefit to the client. It may be a sum of money for his
client as a plaintiff, or a judgment absolving him from liability as a
defendant in a civil suit or acquitting him as an accused in a criminal action.
More often than not a client in whose favor such result has been secured is
willing to pay what he and his counsel have agreed as to the amount of the
attorney’s fees.
The fact that a lawyer failed to secure for his client what he desires does
not deprive him of the right to recover compensation for his services
except when the fee agreed upon is contingent.
A different rule would mean that every professional fee is a contingent fee,
and for every litigated case only the lawyer from the winning side will get
paid for his services.
Whether fee is contingent
It is a recognized rule that a lawyer may properly charge a higher fee for his
services when the fee is contingent than when it is absolute.
An absolute fee arrangement entitles a lawyer to get paid for his efforts
regardless of the outcome of the litigation; he does not assume any risk or
uncertainty that his compensation will not be paid.
But, a lawyer whose fee is contingent assumes the risk of not getting paid
for his services; he may not even get reimbursement for advances of
litigation expenses if the client is poor.
Capacity of client to pay
The financial ability of a client to pay may also be considered in
determining the amount of fees not to enhance the same above what is
reasonable but to ascertain whether or not the client is able to pay a fair
and just compensation for the services rendered.
It may also be looked into as an incident in determining the importance
and gravity of the interests involved in the litigation.
Statutory limitation as to fees

The legislature, in the exercise of its police power, may by law prescribe the
limit of the amount of attorney’s fees which a lawyer may charge his client.

Article 111, Labor Code

“It shall be unlawful for any person to demand or accept,
in any judicial or administrative proceedings for the recovery of wages,
attorney’s fees which exceed ten percent of the amount of wages recovered.”
 Article 222, Labor Code
“No attorney's fees, negotiation fees or similar charges of any kind
arising from any collective bargaining negotiations or conclusion
of the collective bargaining agreement shall be imposed
on any individual member of the contracting union:
Provided, however, that attorney’s fees may be charged against the union
fund in an amount to be agreed upon by the parties. Any contract, agreement
or arrangement of any sort to the contrary shall be null and void.”
 Art. 203, Labor Code
“No agent, attorney or other person pursuing or in charge of
the preparation or filing of any claim for benefit under this Title
(Employees Compensation and State Insurance Fund)
shall demand or charge for his services any fee,
and any stipulation to the contrary shall be null and void.”
Fees in cases of referral
Rule 20.02
“A lawyer shall, in cases of referral, with the consent of the client,
be entitled to a division of fees in proportion to the
work performed and responsibility assumed.”

This rule makes it improper for a lawyer to receive compensation for merely
recommending another lawyer to his client.
The referral of a client by a lawyer to another lawyer does not entitle the former
to a commission nor to a portion of the attorney's fees. It is only when, in addition
to the referral, he performs legal service or assumes responsibility in the case that
he will be entitled to a fee.
A lawyer shall not receive fee from another
without client’s consent
Rule 20.03
“A lawyer shall not, without the full knowledge and consent of the client,
accept any fee, reward, costs, commission, interest, rebate or forwarding
allowance or other compensation whatsoever related to his professional
employment from anyone other than the client.”

It is intended to secure the fidelity of the lawyer to his client’s cause and to
prevent a situation in which the receipt by him of a rebate or commission
from another with the client’s business may interfere with the full
discharge of his duty to his client.
General Rule:
Fees shall be received from the client only.

Exception:
A lawyer may receive compensation from a person other than his client
when the latter has full knowledge and approval thereof
(Sec. 20 (e), Rule 138).
A lawyer shall avoid controversies with clients
concerning his fees

Rule 20.04
“A lawyer shall avoid controversies with clients concerning his compensation
and shall resort to judicial action only to prevent imposition,
injustice or fraud.”

General Rule:
A lawyer should avoid the filing of any case against a client for the
enforcement of attorney’s fees.
D. PROCEDURE TO RECOVER
FEES
There is an irreconcilable conflict of interests between a client and his
lawyer as to the matter of fees.

That conflict should not interfere with the discharge by the lawyer of his
duty of undivided fidelity to his client’s cause. Nor should it diminish his
zeal in the prosecution or defense of the client’s interests.
Lawyer’s application to pay his fees
Rule 16.03
“A lawyer shall deliver the funds and property of his client when due or upon demand.
However, he shall have a lien over the funds and may apply so much thereof as may be
necessary to satisfy his lawful fees and disbursements, giving notice promptly thereafter
to his client. He shall also have a lien to the same extent on all judgments and executions
he has secured for his client as provided for in the Rules of Court.”
This provision assumes that the client agrees with the lawyer in the amount of
attorney’s fees. In case of a disagreement, or when the client disputes the amount
claimed by the lawyer for being unconscionable, the lawyer should not arbitrarily apply
the funds in his possession to the payment of his fees for it would be violative of the
trust relationship between the attorney and client. The lawyer should, instead, file the
necessary action in court to fix and recover the amount of his fees.
Petition as incident of main action
A lawyer may enforce his right to fees by filing the necessary petition as an
incident of the main action in which his services were rendered only when
something is due the client in the action from which the fee is to be paid or
when the client settles or waives his cause in favor of the adverse party in
fraud of the lawyer’s claim for compensation.

The enforcement of the lawyer’s right to attorney’s fees as an incident of

the main action in which his services were rendered is preferable than in an
independent action as it avoids multiplicity of suit.
Note:
Where a client dismisses his counsel without justifiable cause or settles
or waives his action in bad faith to defeat the lawyer’s right to fees, the
better practice is to decide the matter of compensation in the main action
for the better protection of the lawyer.
Independent civil action
Instances when an independent civil action to recover attorney’s fees is
necessary:
1. Main action is dismissed or nothing is awarded;
2. Court has decided that it has no jurisdiction over the action or has
already lost it;
3. Person liable for attorney’s fees is not a party to the main action;
4. Court reserved to the lawyer the right to file a separate civil suit for
recovery of attorney’s fees;
5. Services for which the lawyer seeks payment are not connected with the
subject litigation; and
6. Judgment debtor has fully paid all of the judgment proceeds to the
judgment creditor and the lawyer has not taken any legal step to have his
fees paid directly to him from the judgment proceeds.
7. Failure to exercise Charging Lien

An independent civil action for recovery of attorney’s fees is subject to the

usual procedural requirements as those applicable to an ordinary suit such as
the payment of filing fees.
Remedies in estate proceedings
The procedure for collection of attorney’s fees in an estate proceeding is
for the lawyer to ask the administrator or executor to pay him his fee.
If the administrator or executor refuses or fails to make payment, the
lawyer has either of two remedies. He may file an independent civil action
against the administrator and should judgment be secured and the latter
pays, the administrator may include the amount so paid in his account filed
with the probate court.
The lawyer may, instead of bringing an independent action, file a petition
with the probate court praying that the court allow his claim and direct the
administrator to pay his fees as expenses of administration.
Note:
A lawyer may enforce his right to fees in the probate court at any time
before the estate proceeding is definitely closed. After the proceeding is
finally terminated and the assets are distributed in favor of the
distributees, the probate court loses, as a general rule, the jurisdiction to
entertain and adjudicate the matter of fees, except when the petition for
allowance of fees is filed before such closure or the distribution of the
assets is made without prejudice to the claim for attorney’s fees.
Court jurisdiction
The court having jurisdiction to try the main action in which the lawyer
rendered services has also jurisdiction to pass upon the question of fees
even though the total sum thereof is less than the jurisdictional amount
cognizable by the court, and continues to have that jurisdiction until the
proceeds of the judgment shall have been delivered to the client.
If the court has no jurisdiction over the subject matter of the main action or
has already lost jurisdiction over it, that court can have no power to award
and fix the attorney’s fees.
However, the lawyer may enforce his claim in a separate civil action.
An independent civil action for recovery of attorney’s fees is subject to the
same jurisdictional requirement as any other ordinary civil suit. But if a
client not only fails to object to the exercise by a court of the jurisdiction to
entertain an action for recovery of attorney’s fees but also asks some
affirmative reliefs he may be estopped, on appeal, to assail the propriety of
the action taken by the trial court in fixing and allowing counsel fees.
Necessity of hearing
A petition for recovery of attorney’s fees, either as a separate civil suit or as
an incident of the main action, has to be prosecuted and the allegations
therein established as any other money claim.
The persons who are entitled to or must pay attorney’s fees have the right
to be heard upon the question of their propriety or amount. There is, thus,
the necessity of a hearing.
These persons have the right to intervene in the action and to be heard as
to the matter of fees.
The burden of proof is upon the lawyer to establish his allegations. He has
the right to substantiate his claim, and a trial court which fixes a smaller
amount of fees than what he seeks to recover solely on the basis of the
records without allowing him to adduce evidence to prove it commits a
reversible error correctable by certiorari.
Defenses
An action for recovery of attorney’s fees is subject to the usual defenses
applicable to an ordinary civil suit, such as want of jurisdiction, res judicata,
prescription of action, nullity of the contract for professional services,
negligence in the discharge of the lawyer’s duties, lack of attorney-client
relationship, payment or unconscionableness of the amount claimed.
Execution
A final award of attorney’s fees may be enforced by execution. The award
may be enforced against any property of the client, including the proceeds
of the judgment secured for the client in the main action.
E. ATTORNEY’S FEES AS
DAMAGES
The attorney’s fee which a court may award to a winning litigant is an item of
damages. It differs from that which a client pays his counsel for the latter’s
professional services.
However, the two concepts have many things in common that a treatment of the
subject is necessary. The award that the court may grant to a successful party by way
of attorney’s fee is an indemnity for damages sustained by him in prosecuting or
defending his cause in court.
The fee as an item of damages belongs to the party litigant and not to his lawyer. It
forms part of his judgment recoveries against the losing party. The client and his
lawyer may, however, agree that whatever attorney’s fee as an element of damages
the court may award shall belong to the lawyer as his compensation or in addition
thereto.
The two concepts of attorney’s fees are similar in other respects. They both
require, as a prerequisite to their grant, the intervention of or the rendition
of professional services by a lawyer.
As a client may not be held liable for counsel fees in favor of his lawyer who
never rendered services, so too may a party be not held liable for attorney’s
fees as damages in favor of the winning party who enforced his rights
without the assistance of counsel.
Moreover, both fees are subject to judicial control and modification. And
the rules governing the determination of their reasonable amount are
applicable in one as in the other.
Fee as damages not recoverable
The general rule is that attorney’s fees in the concept of damages are not
recoverable. An adverse decision does not ipso facto justify their award in
favor of the winning party.
It is not the fact of winning alone but the attendance of any of the special
circumstances and, in the case of a public litigant, the existence of the right
to private counsel that justify the award of attorney’s fees as damages in
favor of the prevailing party.
Exception to the rule
Attorney’s fees in the concept of damages may be awarded in any of the
following circumstances:
1. When there is an agreement;
2. When exemplary damages are awarded;
3. When defendant’s action or omission compelled plaintiff to litigate;
4. In criminal cases of malicious prosecution
a. Plaintiff was acquitted; and
b. The person who charged him knowingly made the false statement of facts or
that the filing was prompted by sinister design to vex him;
5. When the action is clearly unfounded;
6. When defendant acted in gross and evident bad faith;
7. In actions for support;
8. In cases of recovery of wages;
9. In actions for indemnity under workmen’s compensation and
employee’s liability laws;
10. In a separate civil action arising from a crime;
11. When at least double costs are awarded (costs of suit does not include
attorney’s fees);
12. When the court deems it just and equitable; and
13. When a special law so authorizes (NCC, Art. 2208).
Right to private counsel a precondition
To entitle a party to recover attorney’s fees as an item of damages, he must
not only show that the case falls under any of the exceptions that may
warrant the award thereof; he must have employed and, in the case of a
public litigant, must show his right to employ a private counsel as well.
For this reason, a successful litigant who prosecuted his action without the
assistance of counsel is not entitled to the award of attorney’s fees. Nor is a
government official entitled to the award of attorney’s fees for the services
of a private lawyer in prosecuting or defending an action in his official
capacity in the absence of a showing that no government lawyer can
properly represent him.
Award of attorney’s fees discretionary
It is well settled that the award of attorney’s fees in favor of the prevailing party
in a case is essentially discretionary with the trial court.
The decision should state the reason why the award is made, unless the text
thereof plainly shows the case comes within one of the exceptions. If the
reason is stated only in the dispositive portion of the decision, the award of
attorney’s fees will be disallowed on appeal.
In the absence of a showing that the trial court abused its discretion, the grant
of attorney’s fees or the denial thereof may not be disturbed on appeal.
However, the appellate court may, in the exercise of its discretion, award
attorney’s fees or increase or reduce the amount thereof whenever the law and
the circumstances so warrant.
Pleading and practice
The claim for attorney’s fees in the concept of damages and the ground
relied upon must be pleaded. In the absence of such allegation, neither the
trial court nor the appellate court may grant attorney’s fees.
The claim for attorney’s fees must not only be alleged; the existence of the
factual basis and the amount thereof must also be proved. The fact that the
grant of attorney’s fees is discretionary does not dispense with the
necessity of proof even if the party against whom it is asserted has not
denied the claim, except when what is sought is in the nature of liquidated
damages fixed in a valid written agreement.
To merit the award of attorney’s fees as an item of damages, the amount
thereof must be proved and it must be specifically prayed for, not just in
“such other relief and remedy as the court may deem just and equitable.”
For it is settled that the award of attorney’s fees is the exception rather
than the rule; hence, the trial court should make findings of fact and law,
which would bring the case within the exception and justify the award.
-END-