37 aro v nanawa

7/24/2019 37 aro v nanawa

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EN BANC

[G.R. No. L-24163. April 28, 1969.]

REGINO B. ARO, petitioner, vs. THEHON. ARSENIO NAAWA, PresidingJudge of Branch IV, Court of FirstInstance of Laguna, LUIS MAGTIBAY,PABLO MAGTIBAY, AURELIAMARTINEZ, GREGORIO LONTOK,MARIA MENDOZA, MAXIMO PORTO

and ROSARIO ANDAYA, respondents.

Regino B.Aroin his own behalf as petitioner.

Enrique C .Villanueva for private-respondents.

SYLLABUS

1.ATTORNEY-AT-LAW; ATTORNEY'S FEES;COMPROMISE ENTERED INTO BY CLIENT WITHOUTINTERVENTION OF LAWYER IS SUBJECT TOATTORNEY'S FEES. While We here reaffirm the rulethat "the client has an undoubted right to compromise asuit without the intervention of his lawyer, We hold thatwhen such compromise is entered into in fraud of thelawyer with intent to deprive him of the fees justly due

him, the compromise must be subject to the said fees,and that when it is evident that the said fraud iscommitted in confabulation with the adverse party whohad knowledge of the lawyer's contingent interest or suchinterest appears of record and who would benefit undersuch compromise, the better practice is to settle the


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matter of the attorney's fees in the same proceeding,after hearing all the affected parties and without prejudiceto the finality of the compromise in so far as it does notadversely affect the rights of the lawyer.

2.ID.; ID.; ATTORNEY CANNOT BE DEPRIVED OFCOMPENSATION UNLESS HE CONSENTS TOSETTLEMENT, COMPROMISE OR DISMISSAL OFTHE CASE. The client cannot, by settling,compromising, or dismissing his suit during its pendency,deprive the attorney of his compensation for the agreedamount, unless the lawyer consents to such settlement,

compromise or dismissal, for the attorney is or "shall beentitled to have and recover from his client a reasonablecompensation (not more) for his services, with a view tothe importance of the subject matter of the controversy,the extent of the services rendered, and the professionalstanding of the attorney," albeit, under Canon 12 of theCanon of Professional Ethics, "in fixing fees, it should notbe forgotten that the profession is a branch of theadministration of justice and not a mere money-gettingtrade."

3.ID.; ID.; RECOVERY OF FULL COMPENSATION,REQUISITES. True it is also that "a client may, atanytime, dismiss his attorney or substitute another in hisplace," (Sec. 26, Rule 138) but it must be emphasizedthat the same provision, which is an incorporation of

Republic Act 636 into the Rules of Court, also providesthat "if the contract between client and attorney had beenreduced into writing and the dismissal of the attorney waswithout justifiable cause, he shall be entitled to recoverfrom the client full compensation."


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4.ID.; ID.; ID.; ID.; PETITIONER ENTITLED TO FULLCOMPENSATION IN INSTANT CASE. In the case atbar, by entering into the compromise agreement inquestion and even inserting therein a prayer to the courtto dismiss the case filed by petitioner, petitioner's clientsimpliedly dismissed him. Such implied dismissal appearsto Us to have been made without justifiable cause, noneis urged anywhere in the record, and so Section 26, Rule138 applies here. Hence, petitioner is entitled to recoverthe full compensation.

5.ID.; ID.; CLIENT IN INSTANT CASE HAS NO RIGHT

TO WAIVE PORTION OR THEIR ACKNOWLEDGEDRIGHT TO THE PREJUDICE OF THE LAWYER. Through the services of petitioner, his clients secured, ineffect, a recognition, which had been previously deniedby their aunt-in-law, that they were entitled to a 1/4 sharein the estate left by their uncle. We hold that under thesecircumstances, and since it appears that said clientshave no other means to pay petitioner, since theyinstituted their case as paupers, and that their aunt-in-lawwas aware of the terms of their contract of professionalservices with petitioner, said clients had no right to waivethe portion of their such acknowledged rights in favor oftheir opponent to the extent that such waiver wouldprejudice the stipulated contingent interest of their lawyerand their aunt-in-law had no right to accept such waiver

unqualifiedly.

6.ID.; ID.; ID.; GRAVE ABUSE OF DISCRETION BYTHE COURT A QUO. Considering that petitioner'sclients were able to secure recognition of their right to 1/4share in the estate of their deceased uncle and that their


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case was instituted as paupers and that these werepresented to respondent judge before he issued thechallenged order of dismissal and all the parties wereheard thereon, it was incumbent upon His Honor, inequity and to avoid multiplicity of suits, particularly,because the amount claimed by petitioner is onlyP1,000.00 to have directly passed upon petitioner'sclaim, and not having done so, it would appear that thecourt a quo abused its discretion gravely enough towarrant the writ of certiorari herein prayed for in so far asthe questioned order prejudiced petitioner's right to the

fees for the professional services which appear to havebeen creditably rendered by him.

7.ID.; ID.; ID.; ORDER OF DISMISSAL BYRESPONDENT COURT IS NOT FINAL. Respondentsallege that the judgment of dismissal in question isalready final because no appeal was taken therefrom, butsince We hold that the same was rendered with enoughgrave abuse of discretion to warrant the certiorari prayedfor, such alleged finality could not have materialized;obviously, petitioner could not have appealed, not beinga party in the case.

D E C I S I O N

BARREDO, J p:

Original petition: (1) for certiorari to annul the order of theCourt of First Instance of Laguna, dated November 21,1964, dismissing its Civil Case No. SC-525 "withoutprejudice to the right of Atty. Regino B. Aro (petitioner


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herein) to file a separate action against both the plaintiffsand defendants (private respondents herein) with respectto his alleged attorney's fees," as well as its order datedJanuary 9, 1965, denying petitioner's motion forreconsideration thereof for lack of merit and (2) formandamus to compel respondent Judge to takecognizance of petitioner's opposition and counter-motionor petition dated November 3, 1964 and to resolve thesame on the merits.

There appears to be no dispute as to the following factsalleged in the petition:

"2.That the services of herein petitioner, aspracticing attorney, was engaged byrespondents Luis Magtibay and PabloMagtibay for the prosecution of their claim, asheirs, in the estate of their deceased uncleLucio Magtibay, consisting of propertieswhich were in the possession of the

respondents Aurelia Martinez, 1 spousesGregorio Lontok and Maria Mendoza andspouses Maximo Porto and RosarioAndaya.

"3.That being without means to prosecutetheir claim against the persons concerned,respondents Luis Magtibay and PabloMagtibay agreed with herein petitioner to

avail of his services and entrust theprosecution of their claim on a contingentbasis, as shown in the agreement, copy ofwhich is hereto attached as Annex 'A' and ismade an integral part hereof. 2


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"4.That by virtue of said agreement, hereinpetitioner took the necessary steps to gatherthe needed papers and documents for thefiling of a petition to litigate as pauper and a

complaint in the Court of First Instance ofLaguna, in which respondents Luis Magtibayand Pablo Magtibay were the plaintiffs andthe other respondents, excepting therespondent Judge, were the defendants, . . .

"5.That said petition to litigate as pauper filedby herein petitioner for respondents LuisMagtibay and Pablo Magtibay was granted bythe respondent Judge as per the order datedSeptember 10, 1964, . . .

"6.That to plaintiffs' complaint in Civil CaseNo. SC-525, the defendants in said caseinterposed a motion to dismiss datedSeptember 29, 1964, . . . 3

"7.That to the said motion to dismiss, hereinpetitioner, as attorney for the plaintiffs (nowrespondents Luis Magtibay and PabloMagtibay) filed an opposition dated October5, 1964, . . . 4

"8.That after the hearing of the motion todismiss filed by the defendants and theopposition thereto by the plaintiffs, which

finally took place on October 24, 1964, therespondent Judge issued its resolution ororder dated October 24, 1964, denying themotion to dismiss, . . . 5

"9.That on the very day of and after the


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hearing of the motion to dismiss, or onOctober 24, 1964, before receipt of a copy ofthe said order (Annex 'G'), there was aconversation which took place between

herein petitioner and the attorney of thedefendants, Atty. Rustico de los Reyes, Jr., inthe civil case and one who was then actingas a sort of spokesman for the defendants(Ex-mayor Cordova of Sta. Maria, Laguna)for the amicable settlement of the casebetween the plaintiffs and the defendants tothe effect that a certain property of the

spouses Lucio Magtibay (deceased) andrespondent Aurelia Martinez, worthP3,000.00, would be given to the plaintiffs infull settlement of their claim, as share in theproperties left by their deceased uncle LucioMagtibay, if having been agreed by hereinpetitioner and Atty. de los Reyes and thespokesman of the defendants that for the

purpose of said amicable settlement, theplaintiffs or one of them and herein petitionerwould go to Sta. Maria, Laguna, on October23, 1964.

"10.That having given notice to the plaintiffs(now respondents Luis Magtibay and PabloMagtibay) at their given address in Calauag,Quezon to come to Candelaria for the

purpose of going to Sta. Maria, Laguna onOctober 23, 1964, petitioner had waited forsaid plaintiffs to go to his office on or beforesaid date for the engagement mentioned, butdue to their (plaintiffs') failure to come toCandelaria, petitioner had to send a telegram


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to Ex-Mayor Cordova notifying him of his(petitioner's) and plaintiffs' not being able togo to Sta. Maria because of the failure of anyof the plaintiffs to come to Candelaria,. . .

"11.That it was only on October 28, 1964,when herein petitioner receive a copy of theorder dated October 24, 1964 (Annex 'G')and to his surprise he also received on thesaid day a second motion to dismiss datedOctober 26, 1964, together with Annex 'A' ofsaid motion, which is entitled KASULATANNG PAGHAHATIAN NA LABAS SAHUKUMAN AT PAGPAPALABI, datedOctober 23, 1964 at Sta. Cruz, Laguna andsigned by the plaintiffs and defendant AureliaMartinez (the three being now respondents inthis case), it having been made to appear insaid Annex 'A' of the second motion todismiss, among others, that the plaintiffs anddefendant Aurelia Martinez had made an

extrajudicial partition of the properties of thedeceased Lucio Magtibay and the saidAurelia Martinez adjudicating to the plaintiffsone-fourth (1/4) share in the properties of thespouses and three-fourth (3/4) share of thedefendant Aurelia Martinez, but making itappear also that said plaintiffs waived theirshare in favor of Aurelia Martinez, . . ., thru

which fraudulent waiver, herein petitioner wasdeprived of his contingent fees, agreed upon,as evidenced by Annex 'A' of this petition. 6

xxx xxx xxx


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"14.That petitioner filed by registered mail, onNovember 4, 1964, his 'OPPOSITION TOTHE SECOND MOTION TO DISMISS ANDCOUNTER- MOTION OR PETITION TO SET

ASIDE DEED OF EXTRAJUDICIALPARTITION AND WAIVER DATEDOCTOBER 23, 1964 AND TO RECORDATTORNEY'S LIEN,' dated November 3,1964, wherein he (petitioner) prayed, amongothers, invoking the provisions of Section 5(d)and Section 6, Rule 135 of the Revised Rulesof Court, for the protection of the rights of

herein petitioner as an officer of the Court, towit:

'(a)to deny the second motion todismiss and set aside and annul thedeed of extrajudicial partition andwaiver dated October 23, 1964;

'(b)to fix the compensation of herein

counsel in the proportion of one-third(1/3) of the shares of plaintiffs, if inland, or in the amount of P1,000.00, ifin cash, and to record the same andexpenses advanced by him for theplaintiffs in the sum of P22.15 as lienin favor of herein claimant-petitionerover the properties in litigation,

particularly over the one-fourth (1/4)share of the plaintiffs in all theproperties of the spouses;

xxx xxx xxx

'(d)as an alternative to prayer (a)


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above, to grant the second motion todismiss, subjecting, however, theproperties in litigation and subject-matters of the extrajudicial partition

and waiver to the lien for attorney'sfees and expenses in favor of hereinclaimant- petitioner, after fixing saidattorney's fees, as prayed for in (b)above.

xxx xxx xxx

"15.That on the day finally set for the hearing

of the second motion to dismiss, as well as ofthe counter-motion or petition, or onNovember 21, 1964, because of the inquiriesor interpellation made by respondent Judgeto herein petitioner as to whether there is aPhilippine precedent which allows or directsthe protection by the Court of the rights ofany of its officers (lawyer) against any

collusion perpetrated by the parties in a caseto defraud or cheat an attorney of hiscompensation agreed upon by him and hisclients, and his answer that insofar as hisresearches were concerned, he could not findany, although there are a number of cases tothat effect in American jurisdiction, therespondent Judge had opined in open court

that the claim for and the fixing of theattorney's fees should better be done in aseparate action and, in spite of petitioner'smemorandum citing American authorities tothe effect that,

'Though a party may without the


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consent of his attorney make a bonafideadjustment with the adverse partyand dismiss an action or suit before ajudgment or a decree has been

rendered thereon, if it appears,however, that such settlement wascollusive and consummated pursuantto the intent of both parties to defraudthe attorney, the court in which theaction was pending may interfere toprotect him as one of its officers, bysetting aside the order of dismissal, . .

.' (Jackson vs.Stearns, 48 Ore. 25, 84Pac. 798)

. . . the respondent Judge, instead of denyingthe second motion to dismiss and fixing hisattorney's fees in the said case and recordingthe same as lien, .. dismissed the case andrefused to give herein petitioner any kind ofimmediate protection to safeguard his rights ..

in said Civil Case No. SC-525 of the Court ofFirst Instance of Laguna.

"16.That by the express terms of theagreement, Annex 'A' of this petition, plaintiffsin Civil Case No. SC-525 had expresslyceded to herein petitioner one-half (1/2) [laterverbally reduced to one- third (1/3) or

P1,000.00]or whatever share they would getfrom the estate of their deceased uncle LucioMagtibay, and the defendants in said CivilCase had full knowledge of said right ofherein petitioner in the properties incontroversy from and after the time they were


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served with summons and copies of thecomplaint in said civil case because of theallegations contained in par. 10 thereof. 7[Emphasis supplied]

"18.That on December 5, 1964, hereinpetitioner filed his motion for reconsiderationdated December 4, 1964 asking for thereconsideration of the order dated November21, 1964, . . .

"19.That the motion for reconsideration wasdenied by the court, thru the respondent

Judge, as per the order dated January 9,1965, . . ."

Upon these facts, petitioner tries to make out before thisCourt a case of certiorari for grave abuse of discretion onthe part of respondent Judge in dismissing the case onthe basis of the compromise agreement of the parties,entered into at the back of petitioner, notwithstanding the

reservation made in his favor to file an action againstboth parties "with respect to his alleged attorney's fees,"as well as a case of mandamus "to order and commandthe said respondent judge" to take cognizance of andresolve his opposition and counter- motion for the courtto fix the compensation he should be paid. Unable to findany local precedent to support his position, he citesAmerican authorities thus:

"In the American jurisdiction, it would seemthat, even without the specific provisions ofthe rules of court cited above, courts hadalways intervened, in the mere exercise oftheir inherent powers, to protect attorneys


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against collusive agreements or fraudulentsettlements entered into by the parties in acase to cheat attorneys out of their costs or oftheir fees. Thus, it was held or had been

stated in:

"(a)Coughlin v. N.Y. Cont. & H.R.R. Co., 71N.Y. 443, 27 Am. Rep. 75.

'. . . But since the time of LordMansfield, it has been the practice ofcourts to intervene to protect attorneysagainst settlement made to cheat them

out of their costs. If an attorney hascommenced an action, and his clientsettles it with the opposite party beforejudgment, collusively, to deprive him ofhis costs, the court will permit theattorney to go on with the suit for thepurpose of collecting his costs. Swainv. Senate, 5 Bos. & Pul. 99; Cole v.

Bennett, 6 Price, 15; Moore v. Cook,13 id., 473; Talcott v. Bronson, 4Paige, 501; Rusquin v. TheKnickerbocker Stage Col., 12 Abb. Pr.324; Ward v. Syme, 9 How. Pr. 16;McDonald v.Napier, 14 Ga. 89.

'There are many cases where this hadbeen allowed to be done. It is

impossible to ascertain precisely whenthis practice commenced, nor howoriginated, nor upon what principle itwas based. It was not upon theprinciple of a lien, because an attorneyhas no lien upon the cause of action


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before judgment for his costs; nor wasit upon the principle that his serviceshad produced the money paid hisclient upon the settlement, because

that could not be known, and in fact nomoney may have been paid upon thesettlement. So far as I can perceive, itwas based upon no principle. It was amere arbitrary exercise of power bythe courts; not arbitrary in the sensethat it was unjust or improper, but inthe sense that it was not based upon

any right or principle recognized inother cases. The parties being incourt, and a suit commenced andpending, for the purpose of protectingattorneys who were their officers andsubject to their control, the courtsinvented this practice and assumedthis extraordinary power to defeat

attempts to cheat the attorneys out oftheir costs. The attorney's fees werefixed in definite sums, easilydetermined by taxation and this powerwas exercised to secure them theirfees.' (pp. 76-77)

"(b)Randall v. Van Wagenan et al., 22 N.E.361, 362.

'. . . But where such settlement ismade collusively for the purpose ofdefrauding the attorney out of hiscosts, courts have been accustomedto intervene, and to protect the


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attorney by permitting him to proceedwith the suit, and, if he is able toestablish a right to recover on thecause of action as it originally stood, to

permit such recovery to the extent ofhis costs in the action. Coughlin v.Railroad Co., 71 N.Y. 443, and casescited. And the court will set aside anorder of discontinuance if it stands inthe way. This is an adequate remedy,and we think the exclusive remedywhere the suit has been fraudulently

settled by the parties before judgmentto cheat the attorney out of his costs.We have found no case of anequitable action to enforce theinchoate right of an attorney undersuch circumstances, and no suchprecedent ought, we think, to beestablished.'

"(c)Jackson v.Stearns, et al., 43 Ore. 25, 84Pac. 798.

'. . . Though a party may, without theconsent of his attorney, make a bonafide adjustment with the adverse party,and dismiss an action or suit before ajudgment or a decree has been

rendered therein, if it appears,however, that such settlement wascollusive and consummated pursuantto the intent of both parties to defraudthe attorney, the court in which theaction or suit was pending may


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interfere to protect him, as one of itsofficers, by setting aside the order ofdismissal and permitting him toproceed in the cause in the name of

his client to final determination toascertain what sum of money, orinterest in the subject-matter, if any, isdue him for his services when fullyperformed. Jones v. Morgan, 99 Am.Dec. 458; Randall v. Van Wagenen(N.Y.) 22 N.E. 361, 12 Am. St. Rep.828.' (p. 800)

'Before a court will set aside an orderdismissing a suit or an action, madeupon stipulation of the parties, withoutthe consent of plaintiff's attorney, andallow the latter to proceed with thecause in the name of his client, todetermine the amount of fees due him,it must appear that the defendant

participated in the fraudulent intent todeprive the attorney of hiscompensation. Courtney v. McGavok,25 Wis. 619. When no adequateconsideration is given by thedefendant for the settlement anddischarge of an action or a suit, theinsufficiency of the inducement to the

contract affords evidence of his badfaith. Young v.Dearborn, 27 N.E. 324.It will be remembered that thecomplaint alleges that the value of thereal property in question is $3,000.00,and that Stearns executed to Wilson a


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deed to the premises for a nominalconsideration. This is a sufficientaverment of the defendants intent todeprive the plaintiff of his

compensation thereby imputing toWilson bad faith.' (p. 800).

"(d)Desaman v.Butler Bros., 118 Minn. 198,136 N.W. 747.

'We have recently held that a client

has always the right to settle his causeof action and stop litigation at anystage of the proceeding, subject,however, to the right of the attorney toreceive compensation for servicesrendered. Burho vs. Camichael, 135N.W. 386. It is therefore contended bydefendant that a litigant retains theunrestricted right to determine for whatamount the cause of action may besettled, and, having so done, the lienof his attorney for services ismeasured by the amount determinedon and actually settled for. Conceding,without deciding, that this may be trueat any time prior to the rendition of averdict in the action which the attorney

has been employed to bring, we are ofopinion that after verdict fixing theamount of a plaintiff's cause of actiona secret and collusive compromisebetween parties litigant does not affectthe amount of the attorney's lien..; but


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therein is also clearly indicated by Mr.Justice Brown that, if there be fraudand collusion to deprive the attorney ofhis lien, the settlement will not be

permitted to accomplish such result.'(p. 748).

To be sure, these authorities are quite persuasive, butcontrary to petitioner's impression, there is already aprecedent setting decision of this Court handed downway back in 1922 in a case very similar to his, that inRustia vs. the Judge of First Instance of Batangas, et

als., 44 Phil. 62. As it is very brief, it can be quoted in full:

"This is a petition for a writ of certiorari, thepetitioner alleging that the respondent Judgeof the Court of First Instance exceeded hisjurisdiction in dismissing a pending action atthe instance of the parties but without theintervention of the attorney for the plaintiff inthe case, the herein petitioner.

"It appears from the record that on July 31,1921, the respondent Justo Porcuna, forhimself and on behalf of his wife, therespondent Rosa H. de Porcuna, by meansof a written contract, retained the petitioner torepresent them as their lawyer in case No.1435 then pending in the Court of First

Instance of Batangas and in which Rosa H.de Porcuna was the plaintiff and one EulaliaMagsombol was the defendant. The contractfixed the petitioner's fee at P200 in advancewith an additional contingent fee of P1,300. Itwas also provided in the contract that Justo


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Porcuna should not compromise the claimagainst the defendant in the case withoutexpress consent of his lawyer, the hereinpetitioner.

"After trial, the petitioner then being plaintiff'sattorney of record, the Court of First Instance,under date of December 24, 1921, renderedjudgment in favor of Justo Porcuna and RosaH. de Porcuna ordering the defendant EulaliaMagsombol to return to them 602 pieces ofcloth or in default thereof to pay to them thesum of P3,250. On January 14, 1922, EulaliaMagsombol filed her exception to thejudgment and on the following day presenteda motion for a new trial, which was denied onthe 21st of the same month. She thereupongave notice of appeal and presented a bill ofexceptions which was approved on February20, 1922. On March 2, 1922, and before thetransmission of the bill of exceptions to the

court, the plaintiffs presented the followingmotion in the Court of First Instance:

'The plaintiffs, without any further interventionof their attorney, now appear before thisHonorable Court and respectfully aver:

'That, through Mr. Miguel Olgado, theyalready settled this case with the herein

defendant.

'That the basis of the compromise is that we,the plaintiffs, finally agree that we should bepaid the amount of eight hundred pesos(P800) in two installments; P300 to be paid


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on this same date, and the remaining fivehundred pesos (P500) at the end of March,1922.

'That we, the plaintiffs, recognize not to haveany further rights in this case than to theaforesaid amount of eight hundred pesos(P800) and that this is the total amount thedefendant Eulalia Magsombol should pay us,and we have no right whatever to any otheramount than the aforementioned.

'That we have not sold to any other person

our rights as plaintiffs in this case.

'Wherefore, the plaintiffs respectfully requestthe dismissal of this case, without anypronouncement as to costs, and that theappeal interposed by the defendant be furtherdismissed.

'Batangas, Batangas, P.I., March 2, 1922.

'(Sgd) ROSAH.PORCUNA

Plaintiff

JUSTO M.PORCUNA

Plaintiff'

"The defendant, through her attorney, JoseMayo Librea, having signified her assent tothe motion, the Court of First Instance on thesame day, March 2, dismissed the action


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without notice to counsel for the plaintiffs.

"The petitioner alleges that he did notdiscover the dismissal of the action until April

4, 1922. After an unsuccessful effort to obtaina reconsideration of the order of dismissalfrom the trial court, he filed the presentpetition for a writ of certiorari. By resolutiondated October 24, 1922, this Court deniedthe petition and upon motion of the petitionerwe shall now briefly state our reasons forsuch denial.

"The burden of the petitioner's contention is(1) that he, as attorney of record, was entitledto notice of his client's motion to dismiss thecase, and (2) that after the approval of the billof exceptions the lower court has lostjurisdiction of the case and had no power todismiss it. A moment's reflection should makeit clear that neither of these propositions is

tenable.

"Both at the common law and under Section32 of the Code of Civil Procedure a clientmay dismiss his lawyer at any time or at anystage of the proceedings and there is nothingto prevent a litigant from appearing before thecourt to conduct his own litigation. (Sec. 34,Code of Civil Procedure.) The client has also

an undoubted right to compromise a suitwithout the intervention of his lawyer.

'Though there is a valid agreement forthe payment to the attorney of a largeproportion of the sum recovered in


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case of success, this does not give theattorney such an interest in the causeof action that it prevents plaintiff fromcompromising the suit.' (4 Cyc. 990,

and authorities cited in Note 6; seealso Louque vs. Dejan, 129 La. 519;Price vs.Western Loan & Savings Co.,19 Am. Cas. 589 and Note.).

"In the present instance the clients didnothing that they did not have a perfect rightto do. By appearing personally andpresenting a motion they impliedly dismissedtheir lawyer. The petitioner's contingentinterests in the judgment rendered did notappear of record. Neither as a party ininterest nor as an attorney was he thereforeentitled to notice of the motion.

"As to the second proposition that the courtbelow could not dismiss the case after the bill

of exceptions had been approved, it is verytrue that upon such approval the lower courtloses its jurisdiction over all contentiousmatters connected with the issues in thecase. But there is nothing to prevent all of theparties by agreement to withdraw the bill ofexceptions with the consent of said court andresubmit the case to the jurisdiction of the

court. That was all that was done in this case.A valid agreement between the parties to acase is the law of the case in everythingcovered by the agreement. (Civil Code, Art.1091; Compaa General de Tabacos vs.Obed, 13 Phil. 391.) The petitioner might


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have protected his interests by entering anattorney's lien under Section 37 of the Codeof Civil Procedure.

"The petition for a writ of certiorari wastherefore properly denied. So ordered."

The difference We perceive, however, betweenpetitioner's case, on the one hand, and that of Atty.Rustia, in the above decision, on the other, is that in thelatter's case, neither the court nor the party adverse tohis clients were aware of the exact agreement as to his

fees, whereas in the case of petitioner, both the courtand the other parties knew the terms of the contract forprofessional services between petitioner and his client,the Magtibay brothers, because the written contracttherefor, Annex A, was made part of the complaint, andnone seriously disputes its authenticity. Besides, thecourt had already dismissed the case when Atty. Rustiaraised the question of his fees before the court; in

petitioner's instance, he opposed the motion to dismissand pleaded with the court to protect his rights as officerof the court before the first order in question was issuedby respondent judge. Were it not for these differences,We would have inclined towards denying the hereinpetition in line with the Rustia ruling that, in any event,certiorari is not the appropriate remedy, the Americanauthorities cited by petitioner notwithstanding.

Withal, there is another Philippine case which moves Usto sustain petitioner. In the case of Recto vs. Harden,100 Phil. 440, Atty. Claro M. Recto found himselfpractically in the same situation as petitioner herein. AfterAtty. Recto had rendered services to Mrs. Esperanza P.


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de Harden in a protracted suit against her husband forthe purposes of securing an increase of her and herdaughter's monthly support, (the spouses wereseparated), to P10,000.00 and of protecting andpreserving her rights in the properties of the conjugalpartnership, which suit lasted from 1941 to 1949, andafter the Court of First Instance of Manila had rendered ajudgment favorable to Mrs. Harden acknowledging, interalia, her rights to the assets of the conjugal partnership,which turned out to be P4,000,000, and awarding her amonthly support of P2,500, practically as prayed for in

Atty. Recto's pleadings, while the case was alreadypending on appeal before this Court, Mrs. Harden andher husband, Mr. Fred Harden, entered into acompromise of their case, without the knowledge of Atty.Recto, whereby said spouses "purportedly agreed tosettle their differences in consideration of the sum ofP5,000 paid by Mr. Harden to Mrs. Harden, and amonthly pension of $500 to be paid by him to her; (2) Mr.

Harden had created a trust fund of $20,000 from whichsaid monthly pension of $500 would be taken; and (3)Mr. and Mrs. Harden had mutually released and foreverdischarged each other from all actions, debts, duties,accounts, demands and claims to the conjugalpartnership, in consideration of the sum of $1." (p. 435).

Whereupon Atty. Recto filed a motion with this Courtpraying that:

"a)Pending the resolution of this motion, thereceiver appointed herein be authorized tocontinue holding the properties above


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mentioned in his custody in order not todefeat the undersigned's inchoate lien onthem;

"b)A day set aside to receive the evidence ofthe undersigned and those of the plaintiff andthe defendant Fred M. Harden, in order todetermine the amount of fees due to theundersigned, by the appointment of a refereeor commissioner for the reception of suchevidence;

"c)After due hearing, the undersigned be

declared entitled to the sum of P400,000 ashis fees for services rendered in behalf of theplaintiff in this case, under paragraph 3 of thecontract, Annex 'A', and to that end acharging lien therefore be established uponthe properties above-mentioned;

"d)And the receiver be ordered to pay to theundersigned the full amount of the fees towhich the latter is found to be entitled."

This motion was objected to by Mr. Harden's counsel,who in turn, moved for the dismissal of the case, to whichAtty. Recto objected. Under these circumstances, thisCourt acceded to Atty. Recto's prayer that the case benot dismissed, that the receivership be maintainedexcept as to certain properties not material to mention

here, and that the case be remanded to the lower courtso that his fees may be determined and ordered paid.Upon the remand of the case to the lower court, acommissioner was appointed to hear the matter of theamount of the fees in question, and after the


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commissioner had submitted a report recommending thepayment to Atty. Recto of the 20% attorney's feesstipulated in the contract for his services, equivalent toP369,410.04, the court rendered judgment as follows:

"The contingent fee to which the claimant isentitled under paragraph 3 of the contract,Exhibit JJJ or 20, is 20% of P1,920,554.85 orthe sum of P384,110.97.

"WHEREFORE, this Court hereby approvesthe recommendation of the Commissionerwith the above-stated modification, and findsthat Attorney Claro M. Recto is entitled to thesum of THREE HUNDRED EIGHTY-FOURTHOUSAND ONE HUNDRED AND TENPESOS AND NINETY-SEVEN CENTAVOS(P384,110.97), representing 20% ofEsperanza P. de Harden's share in theconjugal properties owned by her and herhusband, Fred M. Harden, as contingent fee

stipulated in paragraph 3 of the Contract ofProfessional Services, Exhibit JJJ or 20, andthe said Esperanza P. de Harden is herebyordered to pay the said amount above-stated."

On appeal from this judgment to this Court, the samewas affirmed, the decision stating pertinently in part:

"The last objection is based upon principlesof equity, but, pursuant thereto, one whoseeks equity must come with clean hands(Bastida, et al., vs.Dy Buncio & Co., 93 Phil195; 30 C.J.S. 475), and appellants have notdone so, for the circumstances surrounding


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the case show, to our satisfaction, that theiraforementioned agreements, ostensibly forthe settlement of the differences betweenhusband and wife, were made for the

purpose of circumventing or defeating therights of herein appellee, under hisabovequoted contract of services with Mrs.Harden. Indeed, having secured a judgmentin her favor, acknowledging her rights to theassets of the conjugal partnership, whichturned out to be worth almost P4,000,000 inaddition to litis expensae in the sum of

P175,000, it is inconceivable that Mrs.Harden would have waived such rights, aswell as the benefits of all orders andjudgments in her favor, in consideration of thepaltry sum of $5,000 allegedly paid to her byMr. Harden and the additional sum of$20,000 to be paid by him in installments,atthe rate of $500 a month. In fact, no

explanation has been given for this mostunusual avowed settlement between Mr. andMrs. Harden. One can not even consider thepossibility of a reconciliation between thespouses, the same being inconsistent withthe monetary consideration for said allegedsettlement. What is more, the records showthat the relations between said spouses which were bad indeed, not only in July,

1941, when Mrs. Harden engaged theservices of the appellee, but, even, before,for Mr. and Mrs. Harden were separatedsince 1938 had worsened considerablythereafter, as evidenced by an action fordivorce filed by Mr. Harden in New Jersey, in


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July 1943, upon the ground of repeated actsof infidelity allegedly committed by Mrs.Harden in 1940 and 1941."

On the same consideration of equity, and for the betterprotection of lawyers, who, trusting in the good faith oftheir clients, render professional services on contingentbasis, and so that it may not be said that this Courtsanctions in any way the questionable practice of clientsof compromising their cases at the back of their counselwith the consequence that the stipulated contingent feesof the lawyer are either unreasonably reduced or even

completely rendered without basis, as in this case wherein the clients waived the whole of their rights infavor of their opponent after the latter had acknowledged,in effect, the correctness of said clients' contention Wehave decided to grant the herein petition, in so far as therights of petitioner have been prejudiced by thequestioned compromise agreement. While We herereaffirm the rule that "the client has an undoubted right to

compromise a suit without the intervention of his lawyer,"8We hold that when such compromise is entered into infraud of the lawyer, with intent to deprive him of the feesjustly due him, the compromise must be subject to thesaid fees, and that when it is evident that the said fraud iscommitted in confabulation with the adverse party whohad knowledge of the lawyer's contingent interest or suchinterest appears of record and who would benefit undersuch compromise, the better practice is to settle thematter of the attorney's fees in the same proceeding,after hearing all the affected parties and without prejudiceto the finality of the compromise in so far as it does notadversely affect the rights of the lawyer. Surely, "the


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client cannot, by settling, compromising or dismissing hissuit during its pendency, deprive the attorney of hiscompensation for the agreed amount, unless the lawyerconsents to such settlement, compromise or dismissal,"(Legal and Judicial Ethics by Martin, 1967 Rev. Ed., p.121) for the attorney is or "shall be entitled to have andrecover from his client a reasonable compensation(not more) for his services, with a view to the importanceof the subject-matter of the controversy, the extent of theservices rendered, and the professional standing of theattorney," (Sec. 24, Rule 138, on Attorney and Admission

to Bar) albeit, under Canon 12 of the Canons ofProfessional Ethics, "in fixing fees, it should not beforgotten that the profession is a branch of theadministration of justice and not a mere money-gettingtrade."

True it is also that "a client may, at anytime, dismiss hisattorney or substitute another in his place," (Sec. 26,Rule 138) but it must be emphasized that the sameprovision, which is an incorporation of Republic Act 636into the Rules of Court, also provides that "if the contractbetween client and attorney had been reduced to writingand the dismissal of the attorney was without justifiablecause, he shall be entitled to recover from the client fullcompensation . . ." In the case at bar, by entering into thecompromise agreement in question and even inserting

therein a prayer to the court to dismiss their case filed bypetitioner, (see footnote 6, ante) petitioner's clientsimpliedly dismissed him. (Rustia vs. the Court etc.supra.) Such implied dismissal appears to Us to havebeen made without justifiable cause, none is urgedanywhere in the record, and so, the abovequoted


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provision of Section 26, Rule 138 applies here. Theterms of the compromise in question, as spelled out inAnnex A of Annex I of the petition, indicate clearly thatAurelia Martinez, the defendant aunt-in-law of petitioner'sclients, acknowledged that the rights of said clients werepractically as alleged by petitioner in the complaint hefiled for them. In other words, through the services ofpetitioner, his clients secured, in effect, a recognition,which had been previously denied by their aunt-in-law,that they were entitled to a 1/4 share in the estate left bytheir uncle. We hold that under these circumstances, and

since it appears that said clients have no other means topay petitioner, since they instituted their case aspaupers, and that their aunt-in-law was aware of theterms of their contract of professional services withpetitioner, said clients had no right to waive the portion oftheir such acknowledged rights in favor of their opponentto the extent that such waiver would prejudice thestipulated contingent interest of their lawyer and their

aunt-in- law had no right to accept such waiverunqualifiedly. The Civil Code enjoins that:

"ARTICLE 19.Every person must, in theexercise of his rights and in the performanceof his duties, act with justice, give everyonehis due, and observe honesty and goodfaith."

Under the circumstance extant in the record, it is clearthat the compromise agreement in question falls short ofthe moral requirements of this quoted article of the CivilCode. If for this reason alone, it should not be allowed toprejudice the rights of petitioner. Accordingly, as all ofthese circumstances were presented to respondent judge


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before he issued the challenged order of dismissal andall the parties were heard thereon, it was incumbent uponHis Honor, in equity and to avoid multiplicity of suits,particularly, because the amount claimed by petitioner isonly P1,000.00, to have directly passed upon petitioner'sclaim, and not having done so, it would appear that thecourt a quo abused its discretion gravely enough towarrant the writ of certiorari herein prayed for in so far asthe questioned orders prejudiced petitioner's right to thefees for the professional services which appear to havebeen creditably rendered by him. Respondents allege

that the judgment of dismissal in question is already finalbecause no appeal was taken therefrom, but since Wehold that the same was rendered with enough graveabuse of discretion to warrant the certiorari prayed for,such alleged finality could not have materialized;obviously, petitioner could not have appealed, not beinga party in the case.

IN VIEW OF THE FOREGOING, the orders of therespondent court dated November 21, 1964 and January9, 1965 in Civil Case No. SC-525 are hereby set aside inso far as they prejudice the payment of petitioner's claimof attorney's fees in the form of either one-third of the 1/4share acknowledged as his clients in the compromise inquestion or P1,000.00, which should constitute as a lien

on the said share, in spite of the waiver thereof in favor ofrespondent Aurelia Martinez. It is unnecessary toconsider the petition for mandamus. Costs againstprivate respondents.

Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez,


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Fernandoand Teehankee, JJ .,concur.

Concepcion, C .J .,and Castro, J .,are on leave.

Capistrano, J .,did not take part.

Footnotes

1.Widow of the deceased Lucio Magtibay and aunt-in-lawof petitioner's clients.

2.Annex A is the written agreement dated July 10, 1964 by

which respondent Luis and Pablo Magtibaycontracted the services of petitioner and underwhich it was stipulated that petitioner would beentitled to a contingent fee of one-half of whateverhis clients might be awarded either by the court orby extrajudicial agreement.

3.The motion to dismiss was based on the ground that the

complaint failed to alleged that earnest effortstowards compromise had been made, the suit beingone between members of the same family, citingSection 1 (j) of Rule 16.

4.Petitioner claimed that the suit was by nephews-in-lawagainst their aunt-in-law and, therefore, not betweenmembers of the same family within thecontemplation of the rule cited by movants.

5.Petitioner's contention indicated in footnote 4 was upheldby the court.

6.Paragraph 8 of the Kasulatan contains a request to thecourt to dismiss the case in the following words:


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"8.Matapos maipaliwanag sa amin ang lahat, ay wala nakaming hangad na maghabol pa sa aming manakaya't hinihingi namin sa Hukuman ng UnangDulugan ng Laguna, Sangay IV (Court of First

Instance of Laguna, Branch IV), na putulin na angaming sakdal na kaso Civil Blg. 525, sapagkat angnais namin ay katahimikan at iwasan ang usapin sahukuman."

7.The contract Annex A, for professional services, was alsoannexed to the complaint as part of Paragraph 10thereof.

8.Laid down in Rustia vs.The Court, etc., et als., supra.

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