THIRD DIVISION

G.R. No. 179892-93 January 30, 2009

ATTY. VICTORIANO V. OROCIO, Petitioner,

vs.
EDMUND P. ANGULUAN, LORNA T. DY and NATIONAL POWER
CORPORATION, Respondents.

DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition1 for Review on Certiorari under Rule 45 of the

Rules of Court seeking to set aside the Resolution2 dated 31 October
2006, Decision3 dated 29 January 2007, and Resolution4 dated 27
September 2007, of the Court of Appeals in CA-G.R. SP Nos. 95786
and 95946.

The facts culled from the records are as follows:

On 26 September 1978, the National Power Corporation Board of

Directors (NAPOCOR Board), pursuant to its specific power and duty
to fix the compensation, allowance and benefits of the NAPOCOR
employees under Section 6(c) of Republic Act No. 6395, as
amended, passed Resolution No. 78-119 approving the grant of a
monthly welfare allowance equivalent to 10% of an employee’s
basic pay to all NAPOCOR employees effective 1 October
1978.5Pursuant thereto, the NAPOCOR Welfare Plan Committee,
renamed and reconstituted later on as the NAPOCOR Welfare Fund
Board of Trustees (NAPOCOR-WFBT), issued and promulgated a
charter for the NAPOCOR Welfare Fund which includes the following
provisions:

ARTICLE VII
TERMINATION/AMENDMENT OF THE PLAN

"Section 1. Termination/Amendment of the Plan – The Board of

Directors may amend, revise, repeal any or all of the provisions
herein contained and/or terminate the Plan, subject to the pertinent
provisions of the Trust Agreement.

Section 2. Payment of Member’s share – In the event of termination

of the Plan, the balance to the credit of each member and the
General Reserve for Employee Benefits shall be paid to the members
in full. The accumulated amount in the General Reserve for
Employee Benefits shall be distributed among the members in the
proportion to the amount outstanding to their credit as of the time of
termination.6

The NAPOCOR Board subsequently passed Resolution No. 82-172

fixing a NAPOCOR employee’s contribution to the NAPOCOR
Welfare Fund in a sum equivalent to 5% of his basic pay.7

Almost two decades thereafter, on 8 June 2001, Congress passed

Republic Act No. 9136, otherwise known as the Electric Power
Industry Reform Act (EPIRA). EPIRA directed the restructuring of the
power industry which includes the reorganization of NAPOCOR.
Following the directive of EPIRA, the NAPOCOR Board passed
Resolution No. 2003-43 on 26 March 2003 abolishing the NAPOCOR
Welfare Fund Department and other departments, and dissolving
the NAPOCOR Welfare Fund upon the effectivity of EPIRA on 26 June
2001.8 Consequently, some of the employees in the NAPOCOR
Welfare Fund Department and in other departments (who were also
members of the NAPOCOR Welfare Fund) resigned, retired or
separated from service. Thereafter, the liquidation and dissolution
process for the NAPOCOR Welfare Fund commenced.

On 11 May 2004, the NAPOCOR-WFBT, with authority from the

Commission on Audit, approved Resolution No. 2004-001 authorizing
the release of ₱184 million (which represented 40% of the liquid
assets of NAPOCOR Welfare Fund in the total amount of ₱462 million
as of 16 April 2004) for distribution to the NAPOCOR Welfare Fund
members who resigned, retired, or separated upon the effectivity of
EPIRA on 26 June 2001 (EPIRA separated members).9
Pursuant to Resolution No. 2004-001, herein respondent Edmund P.
Anguluan (Anguluan), as Ex-Officio Chairman of NAPOCOR-WFBT,
issued a memorandum on 17 May 2004 to implement the release of
₱184 million only to the EPIRA separated members to the exclusion of
the NAPOCOR employees (who were also members of the
NAPOCOR Welfare Fund) who have resigned, retired, or
separated prior to the effectivity of EPIRA (non-EPIRA separated
members).10

This prompted Mrs. Perla A. Segovia (Segovia), former Vice-President

of Human Resources and Administration and former Ex-
Officio Chairman of the NAPOCOR-WFBT, in behalf of the 559 non-
EPIRA separated members and in her own personal capacity, to
write a letter to Mr. Rogelio M. Murga, then NAPOCOR President,
demanding their equal shares in the remaining assets of the
NAPOCOR Welfare Fund and access to information and records
thereof.11

On 13 July 2004, there being no action or response on her letter,

Segovia, together with Mrs. Emma C. Baysic (Baysic), former
President of the NAPOCOR Employees Association and former
member of the NAPOCOR-WFBT, in their personal capacities and on
behalf of the 559 non-EPIRA separated members, filed with the
Quezon City Regional Trial Court (RTC), Branch 217, a Petition
for Mandamus, Accounting and Liquidation with a Prayer for the
Issuance of Temporary Restraining Order and Injunction against
respondents NAPOCOR, the NAPOCOR Board, Anguluan (as
NAPOCOR Vice-President, Human Resources, Administration and
Finance Department) and Lorna T. Dy (as NAPOCOR Senior
Department Manager on Finance).12 The Petition was docketed as
Civil Case No. Q04-53121.

Segovia, Baysic and the 559 non-EPIRA separated members were

represented in Civil Case No. Q04-53121 by petitioner Atty.
Victoriano V. Orocio under a "Legal Retainer Agreement"13 dated 1
September 2004, pertinent portions of which are reproduced below:
SUBJECT: Petition for Mandamus with Damages Temporary
Restraining Order/Injunction, etc. with the Court "NPC RETIREES versus
NPC, NP Board of Directors, et. al. before the RTC Quezon City for the
payment/settlement of their claims for NPC Welfare Fund (P462
Million assets and other assets liquid or non-liquid).

Dear Ms. Segovia and Ms. Baysic:

In connection with the above-stated subject, hereunder are our

terms and conditions, to wit:

1. No acceptance fee;

2. All costs of litigation ([filing] and docket fees, etc.),

miscellaneous and out-of-pocket expenses the prosecution of
said action shall be for the account of the clients;

3. No appearance/meeting fee;

4. Contingency or success fees of fifteen percent (15%) of

whatever amounts/value of assets (liquid and/or non-liquid) are
recovered;

5. This Retainer Agreement serves as Legal Authority for the Law

Firm to receive and/or collect its contingency/success fee
without further demand.

On 22 February 2006, the parties in the above-mentioned case, duly

assisted by their respective counsels, executed a Compromise
Agreement14 whereby they agreed to amicably settle their dispute
under the following terms and conditions:

COMPROMISE AGREEMENT

xxxx

WHEREAS, the parties have agreed to settle the instant case

amicably.
PREMISES CONSIDERED, the parties herein have agreed as follows:

1. Both the NPC EPIRA separated members (those members of

the Welfare Fund affected by the EPIRA law and ceased to be
members of the Welfare Fund anytime from June 26, 2001
[effectivity of the EPIRA LAW] to March 1, 2003 [implementation
of the EPIRA law and date of abolition of the Welfare Fund]) and
NPC non-EPIRA separated members (those who ceased to be
members of the Fund prior to June 26, 2001) are entitled to
"Earnings Differential" of the NPC Welfare Fund;

2. "Corrected Earnings Differential" refers to a benefit which is a

result of re-computation of Member’s Equity Contributions and
Earnings using the correct rates of return vis-à-vis what was
used when they were separated. Period covered by the
discrepancy is from 1989 to 2003. Hence, affected are WF
members separated anytime within the period 1989 to 2003;

xxxx

4. The Corrected Earnings Differential of all affected WF

separated members shall earn 6% legal interest per annum
computed from the separation of the members from service up
to March 31, 2006 for all the non-EPIRA separated members
and May 31, 2006 for the EPIRA separated members;

5. As of March 2006, the estimated Corrected Earnings

Differential for the non-EPIRA separated members is ₱119.196
Million while for the EPIRA separated members is ₱173.589
Million or a total of ₱292.785 Million, inclusive of the 6% legal
interest;

6. In conformity with the Retainer Agreement dated September

1, 2004 between Mrs. Perla A. Segovia, Mrs. Emma Y. Baysic
and Atty. Victoriano V. Orocio; and Irrevocable Special Power
of Attorney dated July 20, 2005 executed by Mrs. Perla A.
Segovia and Mrs. Emma Y. Baysic in favor of Atty. Victoriano V.
Orocio, counsel for petitioners, (copies attached as Annexes
 "A" and "B" respectively), 15% attorney’s fees shall be deducted
from the corresponding Corrected Earnings Differential of those
non-EPIRA separated members who have already executed
the corresponding Special Power of Attorney/Written Authority
for the deduction/payment of said attorney’s fees, and shall be
paid to V.V. Orocio and Associates Law Office, represented by
Atty. Victoriano V. Orocio, as compensation for his legal
services as counsel for the non-EPIRA separated members
subject to deduction of applicable taxes;

xxxx

15. The parties herein shall exert their best effort in order that
the terms and conditions of this agreement are implemented
and complied with in the spirit of fairness, transparency and
equity;

16. This Agreement is not contrary to law, good customs, public

order or public policy and is voluntarily entered into by the
parties of their own free will.15

The parties filed with the RTC the very next day, 23 February 2006, a
Joint Motion before the RTC for the approval of their Compromise
Agreement.16 The RTC rendered a Decision on 3 April 2006 granting
the parties’ Joint Motion and approving the said Compromise
Agreement.17

On 10 April 2006, petitioner filed with the RTC a Motion for Approval
of Charging (Attorney’s) Lien. Petitioner asked the RTC to issue an
order declaring him entitled to collect an amount equivalent to 15%
of the monies due the non-EPIRA separated members as his
attorney’s fees in conformity with the Compromise Agreement.18 In
an Order dated 15 May 2006, the RTC granted petitioner’s motion
and decreed that he is entitled to collect the amount so
demanded.19

On 20 June 2006, petitioner filed with the RTC a Motion for the
Issuance of a Writ of Execution of the RTC Order dated 15 May
2006.20 Respondents opposed the motion on the ground that there
was no stipulation in the Compromise Agreement to the effect that
petitioner is entitled to collect an amount equivalent to 15% of the
monies due the non-EPIRA separated members. Respondents
contended that the amount of ₱119,196,000.00 due the non-EPIRA
separated members under the compromise agreement was a mere
estimate and, as such, cannot be validly used by petitioner as basis
for his claim of 15% attorney’s fees.21

The RTC issued an Order on 25 July 2006 granting petitioner’s

Motion22 and, accordingly, a Writ of Execution of the RTC Order
dated 15 May 2006 was issued on 26 July 2006. Pursuant to the said
Writ of Execution, RTC Branch Sheriff Reynaldo B. Madoloria (Sheriff
Madoloria) issued a Notice of Garnishment to Ms. Aurora Arenas
(Arenas), Assistant Vice-President and Business Manager of the
Philippine National Bank (PNB)-NAPOCOR Extension Office, Diliman,
Quezon City, and to Mr. Emmanuel C. Mendoza (Mendoza), Unit
Head of the Landbank of the Philippines-NAPOCOR Extension Office,
Diliman, Quezon City.23

Respondents filed a Motion for Reconsideration of the RTC Order

dated 25 July 2006.24

On 12 August 2006, Sheriff Madoloria served to Arenas an "Order for

Delivery of Money."25

Respondents Anguluan and Dy filed before the Court of Appeals on

22 August 2006 a Petition for Certiorari under Rule 65 of the Rules of
Court, docketed as CA-G.R. SP No. 95786, assailing the RTC Order
dated 25 July 2006 and praying that a temporary restraining order
and/or a writ of preliminary injunction be issued enjoining the
implementation of the said RTC order.26 Respondent NAPOCOR filed
with the Court of Appeals on the same date another Petition
for Certiorari under Rule 65 of the Rules of Court, docketed as CA-
G.R. SP No. 95946, also challenging the RTC Order dated 25 July 2006
and praying that it be set aside and a temporary restraining order
and/or a writ of preliminary injunction be issued prohibiting the RTC
from enforcing the said order and the corresponding writ of
execution and notice of garnishment.27 Subsequently, respondent
NAPOCOR filed a Motion to Consolidate CA-G.R. SP No. 95946 with
CA-G.R. SP No. 95786 which was granted by the appellate court.28

On 31 October 2006, the Court of Appeals issued a Resolution

granting respondents’ application for a TRO and writ of preliminary
injunction. It enjoined the RTC from implementing its Order dated 25
July 2006 and the corresponding writ of execution and notice of
garnishment during the pendency of CA-G.R. SP No. 95946 and No.
95786. Petitioner filed a motion for reconsideration of the said
resolution.29

On 29 January 2007, the Court of Appeals promulgated its Decision

annulling and setting aside: (1) the RTC Order dated 25 July 2006; (2)
the corresponding Writ of Execution dated 26 July 2006; (3) the
Notice of Garnishment dated 28 July 2006; and (4) Order for Delivery
of Money dated 10 August 2006. It also held that petitioner was
entitled only to an amount of ₱1,000,000.00 as attorney’s fees on the
basis of quantum meruit.

The Court of Appeals held that the amount of ₱17,794,572.70 sought

to be collected by petitioner as attorney’s fees, equivalent to 15% of
the ₱119,196,000.00 estimated corrected earnings differential for
non-EPIRA separated members, was excessive based on the
following reasons: (1) the corrected earnings differential in the
amount of ₱119,196,000.00 due the non-EPIRA separated members
was a mere estimate and was hypothetical. Thus, petitioner was
unjustified in using said amount as basis for his 15% attorney’s
fees; (2) there was hardly any work by petitioner since (a) the
compromise agreement was reached without trial or hearing on the
merits; (b) there was no issue regarding the release and distribution
of the NAPOCOR Welfare Fund to the non-EPIRA separated
members as the enactment of EPIRA, not the efforts of petitioner,
made such distribution possible; (c) there was no issue on how much
each non-EPIRA separated members would receive because the
amount of their respective contribution was duly recorded by the
respondents; (d) respondents have already distributed the corrected
earnings differential to some non-EPIRA separated members, and
have given petitioner his corresponding partial attorney’s fees
amounting to ₱3,512,007.32; (e) most of the non-EPIRA separated
members have not yet received their share under the compromise
agreement but petitioner, who was merely their agent, was already
given partial payment as attorney’s fees; (f) the amount of
₱17,794,572.70 represents "only less than one fourth partial release of
the NAPOCOR Welfare Fund which means that the equivalent of
three-fourths more would be demanded [by petitioner] in the
future;" and (3) the money claim of the non-EPIRA separated
members was settled through a compromise agreement and not
won by petitioner in a trial on the merits.

The Court of Appeals determined that petitioner was entitled only to

an amount of ₱1,000,000.00 as attorney’s fees on the basis
of quantum meruit. However, since petitioner already received
₱3,512,007.32 from respondents as partial payment of his supposed
15% attorney’s fees, it ruled that such amount was more than
sufficient and petitioner was not entitled to claim anymore the
additional amount of ₱14,282,565.38. The fallo of the Decision of the
Court of Appeals reads:

WHEREFORE, premises considered, the assailed July 25, 2006 Order,

the July 26, 2006 Writ of Execution, the July 28, 2006 Notice of
Garnishment, and the August 10, 2006 Order of Delivery of Money
are hereby ANNULLED and SET ASIDE, and a new one is
ordered, CAPPING at ₱3,512,007.32, the amount manifested to have
already been received from the welfare fund as attorneys fees, as
the maximum amount that may be billed or collected as attorneys
fees from the whole welfare fund – which amount is NOTED to have
already exceeded what this court had fixed at ₱1,000,000.00 as the
reasonable amount, on quantum meruit, that may be collected as
attorneys’ fees, pursuant to the guidelines codified in Rule 20.01,
Canon 20 of the Code of Professional Responsibility.30

Petitioner filed a motion for reconsideration of the aforementioned

Decision but this was denied by the Court of Appeals in its Resolution
dated 27 September 2007.31
Hence, petitioner brought the instant petition before us assigning the
following errors:

I.

THE COURT OF APPEALS ERRED IN RULING THAT RESPONDENTS

EDMUND P. ANGULUAN, LORNA T. DY AND NATIONAL POWER
CORPORATION (NPC) ARE ENTITLED TO [PRELIMINARY] INJUNCTION
AS THEY HAVE MATERIAL AND SUBSTANTIAL RIGHTS, WHICH ARE
CLEAR AND UNMISTAKABLE, i.e. RIGHTS OF BEING CLIENTS TO
QUESTION THE REASONABLENESS OF THE ATTORNEY’S FEES OF A
LAWYER. THIS ALLEGED RIGHT IS NON-EXISTENT AND IN FACT
FABRICATED CONSIDERING THAT THE RESPONDENTS ARE NOT THE
CLIENTS AT ALL OF PETITIONER, ATTY. VICTORIANO V. OROCIO;

II.

THE COURT OF APPEALS ERRED IN RULING THAT THE FIFTEEN PERCENT

(15%) CONTINGENCY/SUCCESS FEE OF PETITIONER VICTORIANO V.
OROCIO IS UNCONSCIONABLE AND UNREASONABLE DESPITE THE
UNDISPUTED FACT THAT THE SAID ATTORNEY’S FEES IS AMONG THE
TERMS AND CONDITIONS OF A JUDICIALLY APPROVED COMPROMISE
AGREEMENT AND COURT ORDER APPROVING HIS CHARGING LIEN,
WHICH AGREEMENT AND ORDER HAVE ALREADY BECOME FINAL AND
EXECUTORY.32

In his first assigned error, petitioner assails the Resolution dated 31

October 2006 of the Court of Appeals granting respondents’
application for a writ of preliminary injunction.lawphil.net He claims
that the Court of Appeals issued a writ of preliminary injunction in
favor of respondents because petitioner allegedly violated
respondents’ material and substantial right as petitioner’s clients to
pay only reasonable attorney’s fees. Petitioner asserts that none of
the respondents is his client in the present case; that even
respondents themselves have not alleged or claimed that they are
his clients; that the amount of attorney’s fees he claimed was
chargeable on a portion of the NAPOCOR Welfare Fund due his
clients, the non-EPIRA separated employees; that if anyone would
be injured by his claim of attorney’s fees, it would be his clients, the
non-EPIRA separated employees, and not respondents; that none of
his clients has questioned or complained about the amount of
attorney’s fees he is claiming; that respondents are not the real
parties-in-interest and at most are merely nominal parties-in-interest;
that as mere nominal parties-in-interest, respondents are not entitled
to a writ of preliminary injunction under the Rules of Court; and that
the requisites for the proper issuance of a writ of preliminary
injunction are lacking in the instant case.33

In its Resolution dated 31 October 2006, the Court of Appeals

granted respondents’ application for a writ of preliminary injunction
based on the following reasons:

This Court finds that [herein respondents] have prima

facie established [their] compliance with strict requirements for
issuance of a writ of preliminary injunction in this case. Under the
leading case of Valencia vs. Court of Appeals, 352 SCRA 72 (2001),
the requisites of preliminary injunction are as follows: (a) the invasion
of the right of [herein respondents] is material and substantial; (b) the
right of [herein respondents] is clear and unmistakable; and (c) there
is an urgent and paramount necessity for the writ to prevent serious
irreparable damage to [herein respondents].

The right of [herein respondents] alleged to have been invaded is

that a client has the right to pay only a reasonable amount of
attorney’s fees and only for services actually rendered – which is
clearly and unmistakably available to all clients. What [herein
respondents] are claiming is a material and substantial right. This
Court finds that [herein respondents] have prima facie established
an urgent and paramount necessity for the issuance of the writ of
preliminary injunction prayed for, to avoid irreparable injury to
[herein respondents]. x x x.

As can be gleaned from the foregoing, the basis of the Court of

Appeals in granting the writ was petitioner’s alleged violation or
invasion of respondents’ right, as petitioner’s clients, to pay only a
reasonable amount of attorney’s fees to, and only for services
actually rendered by, petitioner.

The Court of Appeals is clearly mistaken.

It should be made clear that petitioner is the counsel for the non-
EPIRA separated members in the latter’s quest to claim their shares in
the NAPOCOR Welfare Fund. Petitioner was never hired or employed
by respondents as their counsel in the cases at bar. Respondents
themselves do not claim or allege that they are clients of petitioner.
In fact, petitioner is representing the non-EPIRA separated members,
the opposing party to the respondents in the present cases.

Further, the amount of attorney’s fees being claimed by petitioner is

chargeable to the ₱119,196,000.00 corrected earnings differential of
his clients, the non-EPIRA separated members. Respondents have
actually partially distributed such amount to some non-EPIRA
separated members pursuant to the Compromise Agreement. In
other words, the non-EPIRA separated members are the lawful
owners/beneficiaries of the amount from which petitioner’s
attorney’s fees had been and shall be taken.

Hence, if anyone would be injured by petitioner’s claim for

attorney’s fees, it would be his clients, the non-EPIRA separated
members, and not respondents. It appears, however, that none of
the non-EPIRA separated members has questioned or complained
about petitioner’s claim for attorney’s fees.

A preliminary injunction is an order granted at any stage of an

action or proceeding prior to the judgment or final order, requiring a
party or a court, agency or a person to refrain from a particular act
or acts.34 A writ of preliminary injunction is a provisional remedy, an
adjunct to a main suit, as well as a preservative remedy issued to
preserve the status quo of the things subject of the action or the
relations between the parties during the pendency of the suit.35For a
writ of preliminary injunction to issue, the applicant is tasked to
establish and convincingly show the following: (1) a right in esse or a
clear and unmistakable right to be protected; (2) a violation of that
right; and (3) there is an urgent and permanent act and urgent
necessity for the writ to prevent serious damage.36

A clear legal right means one clearly founded on or granted by law

or is enforceable as a matter of law.37 The existence of a right
violated is a prerequisite to the granting of a writ of preliminary
injunction.38 A writ of preliminary injunction will not issue to protect a
right not in esse and which may never arise.39 It may be issued only if
the applicant has clearly shown an actual existing right that should
be protected during the pendency of the principal action.40 In the
absence of a clear legal right, or when the applicant’s right or title is
doubtful or disputed, preliminary injunction is not proper.41

It is evident from the foregoing that respondents do not have a clear

right or right in esse to pay only a reasonable amount of attorney’s
fees to the petitioner because such right belongs solely to
petitioner’s clients, the non-EPIRA separated members. There can be
no violation of a right which does not exist in the first place. Also,
there was no necessity for the writ of preliminary injunction since the
non-EPIRA separated members do not claim any damage or injury
caused by the execution of the RTC Order dated 15 May 2006. Even
assuming that respondents would probably suffer damages as
administrators or custodians of the NAPOCOR Welfare Fund if the writ
of preliminary injunction was not granted, our ruling would still be the
same. We have held that the possibility of irreparable damage
without proof of an actual existing right is not a ground for the
issuance of a writ of preliminary injunction.42Given these
considerations, we hold that the issuance by the Court of Appeals of
a writ of preliminary injunction in favor of respondents in its
Resolution, dated 31 October 2006, was improper.lawphil.net

With regard to his second assigned error, petitioner maintained that

his claim for attorney’s fees equivalent to 15% of the ₱119,196,000.00
estimated corrected earnings differential due the non-EPIRA
separated members was not unreasonable or unconscionable
because such amount was expressly agreed upon in the
Compromise Agreement between the non-EPIRA separated
members and respondents. The Compromise Agreement was
submitted to the RTC for approval through the joint motion of the
non-EPIRA separated members and respondents, and the RTC had
rendered a final and executory decision approving the same. By
virtue of res judicata, the Court of Appeals cannot alter or change
the terms of the Compromise Agreement by prohibiting petitioner
from collecting his stipulated amount of attorney’s fees.43

Petitioner also avers that the amount of ₱17,794,572.70, which is

equivalent to 15% of the ₱119,196,000.00 estimated corrected
earnings differential due the non-EPIRA separated members from the
NAPOCOR Welfare Fund is already the total, not partial, amount he
is claiming as attorney’s fees; that the ₱119,196,000.00 estimated
corrected earnings differential due the non-EPIRA separated
members from the NAPOCOR Welfare Fund is not hypothetical, such
amount having been actually computed and fixed by respondents
themselves without the participation of petitioner and his clients, the
non-EPIRA separated members; that he did a lot of legal work and
utilized his legal skills on discovery procedures to force respondents
to enter into the Compromise Agreement with the non-EPIRA
separated members; that the passage of EPIRA merely paved the
way for the distribution of the remaining assets of the NAPOCOR
Welfare Fund; that if not for his legal work and skills, the non-EPIRA
separated members would not have received their lawful shares in
the remaining assets of the NAPOCOR Welfare Fund; and that his
claim for 15% attorney’s fees is supported by jurisprudence.44

An attorney’s fee, in its ordinary concept, refers to the reasonable

compensation paid to a lawyer for the legal services he has
rendered to a client.45 The client and his lawyer may enter into a
written contract whereby the latter would be paid attorney’s fees
only if the suit or litigation ends favorably to the client. This is called a
contingency fee contract. The amount of attorney’s fees in this
contract may be on a percentage basis, and a much higher
compensation is allowed in consideration of the risk that the lawyer
may get nothing if the suit fails.46 In the case at bar, the non-EPIRA
separated members and petitioner voluntarily entered into a
contingency fee contract whereby petitioner did not receive any
acceptance fee or appearance/meeting fee. The non-EPIRA
separated members expressly agreed to pay petitioner
"contingency or success fees of fifteen percent (15%) of whatever
amount/value of assets (liquid and/or non-liquid)" recovered; and
authorized petitioner’s law firm "to receive and/or collect its
contingency/success fee without further demand."

Contingent fee contracts are permitted in this jurisdiction because

they redound to the benefit of the poor client and the lawyer
"especially in cases where the client has meritorious cause of action,
but no means with which to pay for legal services unless he can, with
the sanction of law, make a contract for a contingent fee to be
paid out of the proceeds of litigation. Oftentimes, the contingent fee
arrangement is the only means by which the poor clients can have
their rights vindicated and upheld." Further, such contracts are
sanctioned by Canon 13 of the Canons of Professional Ethics.47

However, in cases where contingent fees are sanctioned by law, the

same should be reasonable under all the circumstances of the case,
and should always be subject to the supervision of a court, as to its
reasonableness, such that under Canon 20 of the Code of
Professional Responsibility, a lawyer is tasked to charge only fair and
reasonable fees.48

A stipulation on a lawyer’s compensation in a written contract for

professional services ordinarily controls the amount of fees that the
contracting lawyer may be allowed, unless the court finds such
stipulated amount to be unreasonable or unconscionable. If the
stipulated amount for attorney’s fees is excessive, the contract may
be disregarded even if the client expressed their conformity
thereto.49 Attorney’s fees are unconscionable if they affront one’s
sense of justice, decency or reasonableness, or if they are so
disproportionate to the value of the services rendered. In such a
case, courts are empowered to reduce the attorney’s fee or fix a
reasonable amount thereof taking into consideration the
surrounding circumstances and the established parameters.50

The principle of quantum meruit (as much as he deserves) may be a

basis for determining the reasonable amount of attorney’s
fees. 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. It is applicable even if there was
a formal written contract for attorney’s fees as long as the agreed
fee was found by the court to be unconscionable. In fixing a
reasonable compensation for the services rendered by a lawyer on
the basis of quantum meruit, factors such as the time spent, and
extent of services rendered; novelty and difficulty of the questions
involved; importance of the subject matter; skill demanded;
probability of losing other employment as a result of acceptance of
the proferred case; customary charges for similar services; amount
involved in the controversy and the benefits resulting to the client;
certainty of compensation; character of employment; and
professional standing of the lawyer, may be considered.51

It appears that the non-EPIRA separated members chose petitioner

as their counsel because the latter, as former member of the
NAPOCOR-WFBT for two terms or four years, is familiar and
knowledgeable on the operation of the NAPOCOR Welfare
Fund.52 Yet, according to the contingency fee contract agreement
between petitioner and the non-EPIRA separated members,
petitioner received no acceptance fee and appearance/meeting
fee when he took on the non-EPIRA separated members’ case.
Petitioner’s attorney’s fees were absolutely dependent on the
success of non-EPIRA separated members’ claim on the NAPOCOR
Welfare Fund. Despite these circumstances, petitioner worked
diligently in advocating the claims of the non-EPIRA separated
members against respondents as shown by the following: (1)
petitioner took pains in verifying the identity and claim of each of
the 559 non-EPIRA separated members on the NAPOCOR Welfare
Fund; (2) petitioner prepared and filed a well-researched and well-
argued petition with the RTC for the claims of the non-EPIRA
separated members;53 (3) he prepared and presented several
witnesses and numerous pertinent documents before the RTC in
support of their application for the issuance of a temporary
restraining order and/or writ of preliminary injunction against
respondents’ plan to exclude the non-EPIRA separated members
from receiving their shares in the NAPOCOR Welfare Fund; (4) he
participated, as non-EPIRA separated members’ counsel, in the
conduct of several hearings regarding the said application for the
issuance of temporary restraining order and/or writ of preliminary
injunction;54 (5) he obtained a temporary restraining order and a writ
of preliminary injunction from the RTC which enjoined/prohibited
respondents from excluding the non-EPIRA separated members from
their shares in the NAPOCOR Welfare Fund;55 (6) he held numerous
conferences with the non-EPIRA separated members wherein he
apprised the latter of the status of their claims and his legal strategies
pertinent thereto;56 and (7) he exerted utmost efforts which
eventually led to the execution of the Compromise Agreement
between the non-EPIRA separated members and respondents.

By reason of petitioner’s dedication and persistence as can be

gleaned above, respondents finally agreed to settle amicably with
the non-EPIRA separated members as regards the latter’s claim for
shares in the NAPOCOR Welfare Fund by virtue of the Compromise
Agreement.

Undoubtedly, were it not for petitioner’s vigilance and zeal,

respondents would not have executed the Compromise Agreement
with the non-EPIRA separated members. Hence, it is fair to conclude
that petitioner was entitled to a reasonably high compensation.

However, petitioner’s attorney’s fees in the amount of ₱17,794,572.70

or equivalent to 15% of the ₱ 119,196,000.00 corrected earnings
differential of the non-EPIRA separated members should be
equitably reduced.

In NPC Drivers and Mechanics Association (NPC DAMA) v. The

National Power Corporation (NPC),57 we awarded separation pay in
lieu of reinstatement plus backwages to several NPC employees
because they were illegally dismissed by the NPC. The NPC
employees were represented by a certain Atty. Cornelio P. Aldon
(Atty. Aldon) and Atty. Victoriano V. Orocio, (the petitioner in the
instant cases) under a legal retainer agreement which provides: (1)
no acceptance fee; (2) miscellaneous/out of pocket expenses in the
amount of ₱25,000.00; and (3) twenty-five percent (25%) of whatever
amounts/monies are recovered in favor of said NPC personnel
contingent on the success of the case. Atty. Aldon and Atty. Orocio
filed a Motion for Approval of Charging (Attorney’s) Lien pursuant to
the legal retainer agreement. Although we granted the said motion,
we reduced the amount of attorney’s fees which was chargeable
on the monies recoverable by the NPC employees from 25% to 10%
because:

While we duly recognize the right of Atty. Aldon and Atty. Orocio to
a charging lien on the amounts recoverable by petitioners pursuant
to our 26 September 2006 Decision, nevertheless, we deem it proper
to reduce the same. Under Section 24, Rule 138 of the Rules of Court,
a written contract for services shall control the amount to be paid
therefor unless found by the court to be unconscionable or
unreasonable. The amounts which petitioners may recover as the
logical and necessary consequence of our Decision of 26
September 2006, i.e., backwages and separation pay (in lieu of
reinstatement), are essentially the same awards which we grant to
illegally dismissed employees in the private sector. In such cases, our
Labor Code explicitly limits attorney’s fees to a maximum of 10% of
the recovered amount. Considering by analogy the said limit on
attorney’s fees in this case of illegal dismissal of petitioners by
respondent NPC, a government-owned and controlled corporation;
plus the facts that petitioners have suffered deprivation of their
means of livelihood for the last five years; and the fact that this case
was originally filed before us, without any judicial or administrative
proceedings below; as well as the fundamental ethical principle that
the practice of law is a profession and not a commercial enterprise,
we approve in favor of Atty. Aldon and Atty. Orocio a charging lien
of 10% (instead of 25%) on the amounts recoverable by petitioners
from NPC pursuant to our Decision dated 26 September 2006.

The abovementioned case may be reasonably applied by analogy

in the instant case since they have substantially similar
circumstances. In the case before us, although the non-EPIRA
separated members were not illegally dismissed, they were,
nevertheless, separated from work by reason of EPIRA. In addition,
the non-EPIRA separated members had a legal retainer
agreement/contingency fee contract with petitioner as their
counsel.

It should also be emphasized that the practice of law is a profession

not a moneymaking venture. A lawyer is not merely the defender of
his client’s cause and a trustee of his client’s cause of action and
assets; he is also, and first and foremost, an officer of the court and
participates in the fundamental function of administering justice in
society. It follows that a lawyer’s compensation for professional
services rendered is subject to the supervision of the court, not just to
guarantee that the fees he charges and receives remain reasonable
and commensurate with the services rendered, but also to maintain
the dignity and integrity of the legal profession to which he belongs.
Upon taking his attorney’s oath as an officer of the court, a lawyer
submits himself to the authority of the courts to regulate his right to
charge professional fees.58

Thus, taking into account the foregoing circumstances and

recognized principles, the 15% attorney’s fees of petitioner should
be reduced to 10%. As such, petitioner is entitled to collect only, as
attorney’s fees, an amount equivalent to 10% of
the ₱119,196,000.00 or ₱11,919,600.00.

We note, however, that the compromise agreement was partially

implemented in the first week of April 2006 with the payment of
₱23,416,000.00 to some non-EPIRA separated members.59 Petitioner
admitted having already received an amount of ₱3,512,007.32 as his
attorney’s fees on the said partial payment of
₱23,416,000.00.60 Accordingly, the amount of ₱3,512,007.32 received
by petitioner as attorney’s fees should be deducted from the fixed
10% attorney’s fees or the amount of ₱11,919,600.00. Per
computation, petitioner is entitled to recover the amount
of ₱8,407,592.68 as attorney’s fees.

WHEREFORE, premises considered, the Resolution of the Court of

Appeals dated 31 October 2006 in CA-G.R. SP Nos. 95786 and 95946
granting the issuance of a writ of preliminary injunction is
hereby ANNULLED and SET ASIDE. The Decision and Resolution, dated
29 January 2007 and 27 September 2007, respectively, of the Court
of Appeals in CA-G.R. SP Nos. 95786 and 95946 are
hereby AFFIRMED with the MODIFICATION that petitioner is entitled to
recover attorney’s fees in the amount of ₱8,407,592.68 on the
corrected earnings differential of the non-EPIRA separated
members. No costs.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice