Republic of the Philippines

SUPREME COURT
Manila

EN BANC

A.M. No. 1437 April 25, 1989

HILARIA TANHUECO, complainant,

vs.
JUSTINIANO G. DE DUMO, respondent.

A.M. No. 1683 April 25, 1989

HILARIA TANHUECO, complainant,

vs.
JUSTINIANO G. DE DUMO, respondent.

R E S O L U T I ON

PER CURIAM:

On 24 February 1975, complainant Hilaria Tanhueco filed before the Court a Petition for
Disbarment (docketed as Administrative Case No. 1437) against respondent Justiniano G. de
Dumo for having violated the Canons of Professional Ethics by his (a) refusal to remit to her
money collected by him from debtors of the complainant; and (b) refusal to return documents
entrusted to him as counsel of complainant in certain collection cases.

In his Answer and Counter-Petition 1 filed on 3 April 1975, respondent denied the charges.
Complainant filed a Rejoinder [should be Reply] to Answer with Counter-Petition, on 18 April
1975. By a Resolution 2 dated 16 June 1975, the Court referred this case to the Solicitor
General for investigation, report and recommendation.

A year later, on 25 June 1976, one Jose Florencio N. Tanhueco claiming to be the nephew and
representative of the complainant, addressed a sworn letter complaint to Mrs. Imelda R. Marcos
against the respondent for (a) refusal to remit the money collected by respondent from debtors
of complainant's aunt, Mrs. Hilaria Tanhueco Vda. de David; (b) refusal to return documents
entrusted to him in his capacity as counsel in certain cases; and (c) abandonment of cases in
respect of which his professional services had been engaged. On 24 August 1976, the letter
complaint was forwarded by the then Public Information Assistance Staff, Department of Public
Information, to this Court for appropriate action (and docketed as Administrative Case No.
1683). After respondent had filed his Answer, the Court, by a Resolution 3 dated 9 December
1976, referred this case to then Acting Judicial Consultant Ricardo C. Puno for study, report and
recommendation.
Since Administrative Case No. 1683 and Administrative Case No. 1437 involved the same
parties and the same subject matter, Hon. Ricardo C. Puno referred the former case to the
Office of the Solicitor General for consolidation with the latter one.

The Office of the Solicitor General held two (2) hearings, one on 3 December 1975 and another
on 18 April 1988. In the first hearing, respondent de Dumo was absent although he had been
notified thereof. At the end of the first hearing, continuation of the hearing of the case was set
for 14 January 1976. The records show that the second hearing took place on 18 April 1988 but
do not indicate the reason for the 12-year interregnum. By then, complainant Tanhueco had
died. There was no appearance at the second hearing by complainant Jose Florencio Tanhueco
but respondent de Dumo was then present.

The report of the Solicitor General, dated June 15, 1988 in Administrative Case No. 1437
summarized the evidence for the complainant in the following manner:

EVIDENCE FOR COMPLAINANT

Complainant Hilaria Tanhueco testified that she secured the legal services of
respondent to collect indebtedness from her different debtors. Although she
offered to execute a document evidencing their lawyer-client relationship,
respondent told her that it was not necessary. She nonetheless offered to give
him 15% of what he may be able to collect from the debtors (pp. 4-7. tsn, Dec. 3,
1975).

Complainant also declared that respondent borrowed from her P2,000.00,

Pl,300.00, and P3,000.00 on three separate occasions, but she could not
remember when she gave those amounts. Respondent did not pay those loans
(pp. 8-9, tsn, Id.).

She confirmed that respondent filed cases against her debtors and that one of
them, Constancia Mañosca paid P12,500.00 to respondent. Informed of such
payment by Mañosca herself, complainant confronted respondent but the latter
denied having received payment from any of her debtors. Complainant then
brought the matter to the attention of Malacañang which referred her to Camp
Crame. Notwithstanding subsequent demands of complainant for the money,
respondent had refused to give her the amount (pp. 11 -15, tsn, Id.).

The Solicitor General then summed up the evidence for the respondent in the following terms:

EVIDENCE FOR RESPONDENT

Respondent Atty. Justiniano G. de Dumo testified that complainant indeed

secured his legal services to collect from her debtors, with the agreement that he
gets 50% of what he may be able to collect. He thus filed collection cases against
Tipace Mañosca Morena, Jr., and others, and was able to obtain favorable
judgment in the cases against Mañosca, Tipace, and Leonila Mendoza. The
initial payments made by these judgment-debtors were all given to complainant.
With respect to Mañosca respondent obtained a judgment for P19,000.00
although the debt was only P12,000.00 (pp. 3-9, tsn, April 18, 1988).
 Respondent also declared that complainant, who was then already old and
sickly, was influenced by her debtors, who were also her friends into distrusting
him. Ultimately, because complainant filed a complaint against him with
Malacañang which referred the matter to Camp Crame, he terminated his
relationship with complainant and demanded his attorney's fees equivalent to
50% of what he had collected. Complainant refused to pay him, hence, he did not
also turn over to her the P12,000.00 initial payment of Mañosca which he
considered, or applied, as part payment of his attorney's fee (pp. 9-19, tsn., Id.).
Respondent estimated his attorney's fee due from complainant in the amount of
P17,000.00 (p. 20, tsn, Id.)

Respondent denied having borrowed the amounts of P2,000.00, P1,300.00,

P3,000.00 and P1,000.00, pointing out that complainant did not even have
money to pay him so that he handled the cases for her on contingent basis (p.
17, tsn, Id.) He also denied having received documentary evidence from
complainant. What evidence he had were all gathered by him on his initiative (pp.
4-7, tsn, Id.).

The Solicitor General then set out the following:

FINDINGS

There is in the case at bar clear admissions by both complainant and respondent
of an attorney-client relationship between them, specifically in the collection of
debts owing complainant. Respondent also admitted, in his answer to the
complaint and in his testimony, having received P12,000.00 from indebtor
Constancia Manosca without turning over the amount to his client, complainant
herein, and applying it instead as part of his attorney's fees. It has been held that
the money collected by a lawyer in pursuance of a judgement in favor of his client
held in trust (Aya v. Bigonia,57 Phil.8;Daroy v..Legaspi 65 SCRA 304), and that
the attorney should promptly account for all funds and property received or held
by him for the client's benefit (Daroy v. Legaspi, supra; In re Bamberger, 49 Phil.
962). The circumstance that an attorney has a lien for his attorney's fees on the
money in his hands collected for his client does not relieve him from the
obligation to make a prompt accounting (Domingo l v. Doming[o] G.R. No. 30573,
Oct. 29, 1971; Daroy v. Legaspi, supra). Undoubtedly, respondent's failure to
account for the P12,000.00, representing payment of the judgement debt of
Mañosca constitutes unprofessional conduct and subjects him to disciplinary
action. Nonetheless, it has likewise been recognized that a lawyer is as much
entitled to judicial protection against injustice, imposition or fraud on the part of
his client; and that the attorney is entitled to be paid his just fees. The attorney
should be protected against any attempt on the part of his client to escape
payment of his just compensation (Fernandez v. Bello, 107 Phil. 1140; Albano v.
Coloma, G.R. Adm. Case No. 528, Oct. 11, 1967). This countervailing rule
mitigates the actions of respondent.

As regards the charges that respondent received documents evidencing the

debts to complainant and had refused to return them to the latter, and that
respondent also borrowed some amounts from her, there [is] no competent,
 conclusive evidence to support them. Perforce, such allegations have no factual
basis. (Emphasis supplied)

The Solicitor General then recommended that:

For failure to turn over the amount of P12,000.00 to the complainant, and
applying it as his attorney's fees, respondent Atty. Justiniano G. de Dumo be
severely reprimanded and admonished that repetition of the same or similar
offense will be dealt with more severely.

We find the findings of fact of the Solicitor General supported by the evidence of record. We are,
however, unable to accept his recommendation.

Moneys collected by an attorney on a judgment rendered in favor of his client, constitute trust
funds and must, be immediately paid over to the client. 4 Canon 11 of the Canons of
Professional Ethics 5 then in force, provides as follows:

11. Dealing with trust property.

The lawyer should refrain from any action whereby for his personal benefit or
gain he abuses or takes advantage of the confidence reposed in him by his
client.

Money of the client or collected for the client or other trust property coming into
the possession of the lawyer should be reported and accounted for
promptly and should not under any circumstance be comingled with his own
or be used by him. (Emphasis supplied)

When respondent withheld and refused to deliver the money received by him for his client, the
deceased complainant Hilaria Tanhueco, he breached the trust reposed upon him. The claim of
the respondent that complainant had failed to pay his attorney's fees, is not an excuse for
respondent's failure to deliver any amount to the complainants. 6 It is of course true that under
Section 37 of Rule 138 of the Revised Rules of Court, an attorney has-

a lien upon the funds, documents and papers of his client which have lawfully
come into his possession and may retain the same until his lawful fees and
disbursements have been paid, and may apply such funds to the satisfaction
thereof. He shall also have a lien to the same extent upon all judgments for the
payment of money and executions issued in pursuance of such judgments, which
he has secured in a litigation of his client, from and after the time when he shall
have caused a statement of his claim of such lien to be entered upon the records
of the court rendering such judgment, or issuing such execution, and shall have
caused written notice thereof to be delivered to his client and to the adverse
party; and he shall have the same right and power over such judgments and
executions as his client would have to enforce his lien and secure the payment of
his just fees and disbursements.

The fact that a lawyer has a lien for fees on moneys in his hands collected for his client, does
not relieve him from his duty promptly to account for the moneys received; his failure to do so
constitutes professional misconduct. 7
In the present case, what respondent could have properly done was to make an account with
his client, the complainant, deduct his attorney's fees due in respect of the amount actually
collected by him, and turn over the remaining balance to the complainant. The Court notes that
the services of respondent de Dumo were engaged by the complainant on a number of cases
and that these were on differing stages of completion. Respondent was not entitled to hold on to
the entire amount of P12,000.00 collected by him until all his fees for the other cases had also
been paid and received by him. There was not enough evidence in the record to show how
much money, if any, respondent had in fact previously (i.e., other than the P12,000.00 from
Mañosca) collected for and turned over to complainant (thereby waiving his lien
thereon) without deducting therefrom his claimed contingent fees in respect of such collections.

The relationship of attorney and client has always been rightly regarded as one of special trust
and confidence. An attorney must exercise the utmost good faith and fairness in all his
relationships vis-a-vis his client. Respondent fell far short of this standard when he failed to
render an accounting for the amount actually received by him and when he refused to turn over
any portion of such amount received by him on behalf of his client upon the pretext that his
attorney's fees had not all been paid. Respondent had in fact placed his private and personal
interest above that of his client. Respondent's act constitutes a breach of his lawyer's oath and a
mere reprimand is not an adequate sanction.

There is another aspect to this case which the Court cannot gloss over. Respondent claimed
that he charged complainant, his client, a contingent fee of fifty percent (50%) of the amount
collected by him, plus interest and whatever attorney's fees may be awarded by the trial court
chargeable to the other party. In this jurisdiction, contingent fees are not per se prohibited by
law. 8 But when it is shown that a contract for a contingent fee are obtained by undue influence
exercised by the attorney upon his client or by any fraud or imposition, or that the compensation
is clearly excessive, the Court must and will protect the aggrieved party. 9

From the Answer of respondent de Dumo it appears that in three (3) collection cases filed by
him for the complainant and which were decided in favor of the complainant, the awards totalled
P31,390.00. Respondent asserted that he was entitled to attorney's fees amounting to Pl8,840.
00 out of the aggregate total of P31,390.00:

7. That the understanding between Hilaria Tanhueco and me was a fifty- fifty on
collected principal and interests. The lawyer has the right to charge attorney's
fees to the other party-defendant and that Hilaria Tanhueco shall not interfere nor
be included in the computation.

That of the cases filed, the following made payments:

a. Hilaria Tanhueco vs. Constancia Mañosca

Amount Collectible
(principal).......................................……………………………………
……. P12,000.00

Interest added from May 1972 o Nov/73 at 1% a

month.…………………………………………... P 2,280.00
Attorney's fees charged to the defendant and not to be included in the
computation................ P 4,720.00

TOTAL and Amount specified in the Compromise Agreement and

Subject of the Decision……. P19,000.00

b. Hilaria Tanhueco vs. Melchor Tipace et al.

Principal amount collectible...........……………………………… P7,100.00

Interest at 1 % per month starting June/71 to

Sept./74.....................……………………………... 2,840.00

Attorney's fees charged to the defendant and not included in the

computation.......................... 1,450.00

TOTAL P ll,390.00.

c. Hilaria Tanhueco vs. Estimo

Principal Amount collectible…………………………............... Pl,000.00

SUMMATION OF THE THREE CASES FILED AND AMOUNTS

RECEIVABLE

BY THE UNDERSIGNED INCLUDING ATTORNEY'S FEES:

MAÑOSCA CASE:

Attorney's fees to be paid by Mañosca and not to be included in the

computation…................... P 4,840.00

Fifty per cent on the principal amount collectible plus interests……… P 7,080.00

TOTAL AMOUNT RECEIVABLE P11,920.00

TIPACES CASE:

Attorney's fees to be paid by Tipace and not to be included in the

computation............................. Pl,450.00

Fifty per cent on the principal amount collectible from Tipace plus
interests.................................. 4,970.00

TOTAL AMOUNT
RECEIVABLE……………………………………………………………P6,420.00
 8. The total amount which I ought to receive as attorney's fees under paragraph
seven, sub-paragraph a, b and c is:

Pll,920. 00

P6,420.00

P500. 00

P18,840. 00 TOTAL 10

We note that respondent attorney claimed as his contingent fee the following:

1) fifty percent (50%) of the sum of principal and interest collectible from different
debtors; and

2) attorney's fees charged to the defendant (presumably under promissory notes

or written agreements) and "not to be included in the computation."

Under this scheme, respondent was actually collecting as attorney's fees sixty percent
(60%) or more than half of the total amount due from defendant debtors; indeed, he was
appropriating for himself more than what he was, according to him, to turn over to his client.

We believe and so hold that the contingent fee here claimed was, under the facts
obtaining in this case, grossly excessive and unconscionable. 11 Such a fee structure, when
considered in conjunction with the circumstances of this case, also shows that an unfair
advantage was taken of the client and legal fraud and imposition perpetrated upon her.

The complainant was an old and sickly woman and, in respondent's own words,
"penniless." She was at the time she filed her complaint in 1976, already seventy-six (76) years
old. In her circumstances, and given her understandable desire to realize upon debts owed to
her before death overtook her, she would easily succumb to the demands of respondent
attorney regarding his attorney's fees. It must be stressed that the mere fact that an agreement
had been reached between attorney and client fixing the amount of the attorney's fees, does not
insulate such agreement from review and modification by the Court where the fees clearly
appear to be excessive or unreasonable. In Mambulao Lumber Company v. Philippine National
Bank, et al., 12 this Court stressed:

The principle that courts should reduce stipulated attorney's fees whenever it is
found under the circumstances of the case that the same is unreasonable, is now
deeply rooted in this jurisdiction to entertain any serious objection to it. Thus, this
Court has explained:

But the principle that it may be lawfully stipulated that the legal expenses involved in the
collection of a debt shall be defrayed by the debtor does not imply that such stipulations must be
enforced in accordance with the terms, no matter how injurious or oppressive they may be. The
lawful purpose to be accomplished by such a stipulation is to permit the creditor to receive the
amount due him under his contract without a deduction of the expenses caused by the
delinquency of the debtor. It should not be permitted for him to convert such a stipulation into a
source of speculative profit at the expense of the debtor.

xxx xxx xxx

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

xxx xxx xxx 13

This Court has power to guard a client, 14 especially an aged and necessitous
client, 15 against such a contract. We hold that on a quantum meruit basis, no circumstances of
special difficulty attending the collection cases having been shown by respondent, respondent
attorney's fees should be reduced from sixty percent (60%) to ten percent (15%) of the total
amount (including attorney's fees stipulated as chargeable to the debtors) collected by him on
behalf of his client.

With respect to charges of refusal to return documents entrusted to respondent lawyer

and abandonment of cases in which his services had been engaged, we accept the findings of
the Solicitor General that the evidence of record is not sufficient to prove these allegations.

WHEREFORE, the Court Resolved that:

1. respondent is guilty of violation of the attorneys' oath and of serious professional

misconduct and shall be SUSPENDED from the practice law for six (6) months and WARNED
that repetition of the same or similar offense will be more severely dealt with;

2. the attorney's fees that respondent is entitled to in respect of the collection cases here
involved shall be an amount equivalent to fifteen percent (15%) of the total amount collected by
respondent from the debtors in those cases;

3. respondent shall return forthwith to the estate of complainant Hilaria Tanhueco the
P12,000.00 respondent received on behalf of his client less attorney's fees due to him in respect
of that amount (P l2,000.00 less fifteen percent [15%] thereof) or a net amount of P10,200.00;
and

4. respondent shall return to the estate of complainant Hilaria Tanhueco any documents
and papers received by him from the deceased complainant in connection with the collection
cases for which he was retained. If he has in fact made any other collections from deceased
complainant's debtors, he shall promptly account therefor to complainant's estate and shall be
entitled to receive in respect thereof the fifteen percent (15%) attorney's fees provided for
herein.
 Let a copy of this Resolution be furnished each to the Bar Confidant and spread on the
personal record of respondent attorney, and to the Integrated Bar of the Philippines.

Fernan C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco,
Padilla, Bidin, Sarmiento, Cortes, Griño-Aquino, Medialdea and Regalado, JJ., concur.