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FIRST DIVISION

G.R. No. 152072             January 31, 2006

ROMEO G. ROXAS and SANTIAGO N. PASTOR, Petitioners,
vs.
ANTONIO DE ZUZUARREGUI, JR., ENRIQUE DE ZUZUARREGUI, PACITA JAVIER, ELIZABETH R. GONZALES, JOSEFINA R. DAZA, ELIAS REYES, NATIVIDAD REYES, TERESITA REYES, JOSE REYES and ANTONIO REYES, Respondents.

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G.R. No. 152104             January 31, 2006

ANTONIO DE ZUZUARREGUI, JR., ENRIQUE DE ZUZUARREGUI, PACITA JAVIER, ELIZABETH R. GONZALES, JOSEFINA R. DAZA, ELIAS REYES, NATIVIDAD REYES, TERESITA REYES, JOSE REYES and ANTONIO REYES, Petitioners,
vs.
THE NATIONAL HOUSING AUTHORITY, JOSE B. H. PEDROSA, ROMEO G. ROXAS and SANTIAGO N. PASTOR, Respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

Before Us are two petitions for review on certiorari¹ which were consolidated per Resolution² of this Court dated 27 November 2002. The petitioners in G.R. No. 152072, Attys. Romeo G. Roxas and Santiago N. Pastor, seek the reversal and annulment of the Decision³ and Resolution⁴ of the Court of Appeals dated 25 June 2001 and 06 February 2002, respectively. The petitioners in G.R. No. 152104, the Zuzuarreguis, on the other hand, pray that the said Decision and Resolution of the Court of Appeals be modified. Said Decision and Resolution reversed and set aside the decision of the Regional Trial Court (RTC), Branch 98, Quezon City, dated 03 January 1994.

THE ANTECEDENTS

The instant cases had their beginnings in 1977 when the National Housing Authority (NHA) filed expropriation proceedings against the Zuzuarreguis, petitioners in G.R. No. 152104, for parcels of land belonging to the latter situated in Antipolo, Rizal, with a total land area of 1,790,570.36 square meters, more or less. This case was lodged before the RTC, Branch 141, Municipality of Makati,⁵ docketed therein as Civil Case No. 26804 entitled, "National Housing Authority v. Pilar Ibañez Vda. De Zuzuarregui, et al."

On 25 May 1983, said case was ordered archived⁶ by Branch 141.

About a month before the aforecited case was ordered archived, the Zuzuarreguis engaged the legal services of Attys. Romeo G. Roxas and Santiago N. Pastor, to represent them in Civil Case No. 26804. This was sealed by a Letter-Agreement dated 22 April 1983, which is partly reproduced hereunder:

April 22, 1983 Mr. Antonio de Zuzuarregui, Jr. Mrs. Pacita Javier (as heir to the late Jose de Zuzuarregui) Mr. Antonio de Zuzuarregui ( as heir to the late Pilar Y. vda. De Zuzuarregui) Dear Sir and Madam: This is to confirm in writing our verbal negotiations for us to represent you in the expropriation proceedings filed by the National Housing Authority against your goodselves before the Court of First Instance of Rizal (now the Regional Trial Court) and docketed as Civil Case No. 26804. Our representation shall also include the areas taken over by the Ministry of Public Works and Highways which now formed part of the Marcos Highway at Antipolo, Rizal. The areas affected are the following: x x x x We shall endeavor to secure the just compensation with the National Housing Authority and other governmental agencies at a price of ELEVEN PESOS (P11.00) or more per square meter. Any lower amount shall not entitle us to any attorney’s fees. At such price of P11.00 per square meter or more our contingent fee[s] is THIRTY PERCENT (30%) of the just compensation. The other terms and conditions of our proposal are: x x x x 5. You are willing to accept NHA 5-year bonds as part payment up to 75% of the total compensation. In the event of your desire to discount the bonds, we shall assist to have them discounted at 75% of its face value. 6. Our lawyer’s fees shall be in the proportion of the cash/bonds ratio of the just compensation. Likewise our fees are subject to 10% withholding tax. x x x x Should the above proposal be acceptable to your goodselves, kindly signify your formal acceptance as (sic) the space hereunder provided. Very truly yours,
(Sgd.) SANTIAGO N. PASTOR Lawyer	(Sgd.) ROMEO G. ROXAS Lawyer
CONFORME:
(Sgd.) ANTONIO DE ZUZUARREGUI, JR.	(Sgd.) PACITA JAVIER
In my behalf and
as heir to the late Pilar Y. vda. De Zuzuarregui	as heir to the late Jose De Zuzuarregui7

A Motion to Set Case for Hearing,⁸ dated 14 February 1984, was filed by Attys. Roxas and Pastor in Civil Case No. 26804, praying that the case be revived and be set for hearing by the court at the earliest date available in its calendar.

The appropriate proceedings thereafter ensued. On 29 October 1984, a Partial Decision was rendered by Branch 141 in Civil Case No. 26804 fixing the just compensation to be paid to the Zuzuarreguis at P30.00 per square meter.

The NHA filed a Motion for Reconsideration⁹ dated 23 November 1984 praying that the Partial Decision be reconsidered and set aside, and a new one rendered lowering the amount of just compensation in accordance with applicable laws. Pending resolution thereof, a Joint Special Power of Attorney was executed by Antonio De Zuzuarregui, Jr., Enrique De Zuzuarregui and Pacita Javier, in favor of Attys. Roxas and Pastor, viz:

JOINT SPECIAL POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That We, ANTONIO DE ZUZUARREGUI, JR., ENRIQUE DE ZUZUARREGUI and PACITA JAVIER, all of legal age, …, do hereby appoint, name and constitute ATTYS. ROMEO G. ROXAS and SANTIAGO PASTOR, to be our true and lawful attorneys to act in our names and on our behalves to do and execute all or any of the following acts and deeds subject to our approval: x x x x (2) To represent us in the negotiations for a compromise with the National Housing Authority for our properties subject of the above case; (3) To negotiate for and in our behalves for the settlement of the just compensation of our properties payable in cash or in bonds; (4) To sign and prepare all papers relative to the preparation of a Compromise Agreement or any papers and communications which shall eventually bear our signatures; and (5) That this Special Power of Attorney is enforce (sic) as long as ATTYS. ROMEO G. ROXAS AND SANTIAGO PASTOR are our lawyers in Civil Case No. 26804 before the Regional Trial Court, Makati, Branch CXLI. HEREBY GIVING AND GRANTING unto our said attorneys full power and authority whatsoever requisite or necessary or proper to be done in or about the premises, as fully to all intents and purposes as we might or could lawfully do if personally present, and hereby ratifying and confirming all that our said attorneys shall do or cause to be done under and by virtue of these presents. IN WITNESS WHEREOF, We have hereunto set our hands this 26th day of August, 1985, in Makati, M. M., Philippines. (Sgd.) ANTONIO DE ZUZUARREGUI, JR.1avvph!l.ne+ (Sgd.) ENRIQUE DE ZUZUARREGUI (Sgd.) PACITA JAVIER10

On 22 November 1985, a Special Power of Attorney was executed by Beatriz Zuzuarregui vda. De Reyes in favor of Attys. Romeo G. Roxas, Santiago Pastor and Basilio H. Toquero, quoted as follows:

SPECIAL POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS: That I, BEATRIZ ZUZUARREGUI VDA. DE REYES, Filipino, of legal age, widow, and a resident of E. Rodriguez Ave., Quezon City, Philippines do hereby appoint, name and constitute ATTYS. ROMEO G. ROXAS, SANTIAGO PASTOR and BASILIO H. TOQUERO, to be my true and lawful attorneys … : 1. To represent me in the negotiation for a Compromise with the National Housing Authority for my properties subject to my approval in CIVIL CASE No. 26804, entitled "National Housing Authority vs. Pilar Ibañez de Zuzuarregui, et al., before the Regional Trial Court, Makati, Branch CXLI; 2. To negotiate for and in my behalf for the settlement of the just compensation of my properties payable in cash or in bond, subject to my approval; 3. To sign and prepare all papers relative to the preparation of a Compromise Agreement or any papers and communications which shall eventually bear my signature; 4. To accept for and in my behalf payments for my properties after the Compromise Agreement is duly approved by the Court, the actual receipts of which payments shall be signed by me. HEREBY GIVING AND GRANTING unto my said attorneys full power and authority whatsoever requisite, necessary or proper … to be done under and by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 22nd day of November 1985, in the City of Manila, Philippines. (Sgd.) BEATRIZ ZUZUARREGUI VDA. DE REYES11

On 10 December 1985, a Letter-Agreement was executed by and between Antonio Zuzuarregui, Jr., Pacita Javier and Enrique De Zuzuarregui, on the one hand, and Attys. Romeo G. Roxas and Santiago Pastor, on the other. The said Letter-Agreement reads:

December 10, 1985

Atty. Romeo G. Roxas
Atty. Santiago Pastor
Makati Executive Center
Salcedo Village, Makati

Dear Atty. Roxas & Atty. Pastor:

This will confirm an amendment to our agreement regarding your attorney’s fees as our lawyers and counsels for the Zuzuarregui’s properties expropriated by National Housing Authority covering ONE HUNDRED SEVENTY-NINE (179) HECTARES, more or less, covered by TCT Nos. 138340, 85633 and 85634 and filed as Civil Case No. 26804.

We hereby confirm and agree that we are willing to accept as final and complete settlement for our 179 hectares expropriated by NHA a price of SEVENTEEN PESOS (P17.00) per square meter, or for a total of THIRTY MILLION FOUR HUNDRED THOUSAND PESOS (P30.4 Million), all payable in NHA Bonds.

We also agree and confirm that for and in consideration of your services as our lawyers and counsels in the said expropriation case, we commit and bind ourselves to pay to you, your heirs or assignees-in-interest, as your contingent attorney’s fees any and all amount in excess of the SEVENTEEN PESOS (P17.00) per square meter payable in NHA bonds as mentioned above.

This Letter Agreement serves also as your authority to collect directly from NHA the amount pertaining to you as your contingent attorney’s fees.

This Letter Agreement hereby amends and supersedes our previous agreement regarding your attorney’s fees as our lawyers and counsels in the above-mentioned expropriation case.

Very truly yours,

(Sgd.) ANTONIO DE ZUZUARREGUI, JR.
In my behalf as heir to the late Pilar I. vda. de Zuzuarregui

(Sgd.)PACITA JAVIER
As heir to the late Jose De Zuzuarregui

(Sgd.)
ENRIQUE DE ZUZUARREGUI

CONFORME:

(Sgd.)ATTY. ROMEO G. ROXAS

(Sgd.)ATTY. SANTIAGO PASTOR¹²

Resolution No. 1174¹³ dated 16 December 1985 was issued by the NHA stating that the Zuzuarregui property would be acquired at a cost of P19.50 per square meter; that the Zuzuarreguis would be paid in NHA Bonds, subject to the availability of funds; and that the yield on the bonds to be paid to the Zuzuarreguis shall be based on the Central Bank rate at the time of payment.

As a result of the aforesaid NHA Resolution, a Compromise Agreement was executed between the Zuzuarreguis and the NHA in Civil Case No. 26804. The Compromise Agreement, stipulated among other things, that the just compensation of the Zuzuarregui properties would be at P19.50 per square meter payable in NHA Bonds. In a Decision dated 20 December 1985, the RTC, Branch 141, Makati, approved the Compromise Agreement submitted by the parties.

On 27 December 1985, the NHA Legal Department, through Atty. Jose B. H. Pedrosa, released to Atty. Romeo G. Roxas, in behalf of the Zuzuarreguis, the amount of P20,000,000.00 in NHA Bearer Bonds as "partial payment for several parcels of land with a total area of 1,790,570.36 square meters located in Antipolo, Rizal."¹⁴ On even date, Atty. Romeo G. Roxas delivered NHA Bonds to Antonio De Zuzuarregui in the amount of P15,000,000.00.¹⁵ On 04 February 1986, the amount of P34,500,000.00 in Bearer Bonds was again released by the NHA to Atty. Romeo G. Roxas in behalf of the Zuzuarreguis.¹⁶ On 14 February 1986, the Zuzuarreguis issued a receipt¹⁷ for receiving the amount of P30,070,000.00. This receipt included the P15,000,000.00 given to them last 27 December 1985. Again on 17 February 1986, the Zuzuarreguis, through Beatriz Zuzuarregui vda. De Reyes, issued another receipt for the amount of P450,000.00 in NHA bonds.¹⁸ The total amount in NHA bonds released to Atty. Romeo G. Roxas in behalf of the Zuzuarreguis amounted to P54,500,000.00. Out of this amount, the records show that the amount turned over to the Zuzuarreguis by Atty. Roxas amounted to P30,520,000.00 in NHA bonds.

Computed at P19.50 per square meter, the 1,790,570.36 square meters property of the Zuzuarreguis was expropriated at a total price of P34,916,122.00. The total amount released by the NHA was P54,500,000.00. The difference of P19,583,878.00 is, undoubtedly, the yield on the bonds.

On 25 August 1987, a letter¹⁹ was sent by the Zuzuarreguis’ new counsel, Jose F. Gonzalez, to Attys. Roxas and Pastor, demanding that the latter deliver to the Zuzuarreguis the yield corresponding to bonds paid by the NHA within a period of 10 days from receipt, under pain of administrative, civil and/or criminal action.

Attys. Roxas and Pastor answered via a letter dated 21 September 1987 explaining their side of the story. They stated therein, among other things, that the amount that they got seems huge from the surface, but it just actually passed their hands, as it did not really go to them.²⁰

On 29 September 1987, a letter²¹ was sent by the Zuzuarreguis through Antonio De Zuzuarregui, Jr., to Attys. Romeo G. Roxas and Santiago N. Pastor, informing the latter that their services as counsels of the Zuzuarreguis (except Betty) in the expropriation proceedings filed by the NHA, docketed as Civil Case No. 26804, was being formally terminated.

Apparently unsatisfied with the explanation of Attys. Roxas and Pastor, the Zuzuarreguis filed a civil action for Sum of Money and Damages on 14 November 1989 before the RTC, Quezon City, Branch 98, docketed as Civil Case No. Q-89-4013, against the NHA, Jose B. H. Pedrosa, Atty. Romeo G. Roxas and Atty. Santiago N. Pastor. The Zuzuarreguis demanded that the yield on the NHA bonds be turned over to them.

After due hearing, a Decision²² in Civil Case No. Q-89-4013 was rendered on 03 January 1994, dismissing the Complaint. The dispositive portion reads:

WHEREFORE, in view of the foregoing consideration[s], judgment is hereby rendered ordering the dismissal of the complaint against all the defendants; and, further ordering plaintiffs, jointly and solidarily, to:

1. Pay each of the defendants Romeo G. Roxas, Santiago Pastor and Jose B. H. Perdosa, the amount of P200,000.00, P200,000.00 and P100,000.00, respectively, as moral damages;

2. Pay each of the defendants Roxas, Pastor and Pedrosa, the amount of P50,000.00, P50,000.00, and P25,000.00, respectively as exemplary damages;

3. Pay attorney’s fees to defendants Roxas and Pastor in the amount of P20,000.00; and

4. Pay the costs of this suit.

A Notice of Appeal²³ dated 10 February 1994 was filed by the Zuzuarreguis. Subsequently, on 26 April 1995, the Zuzuarreguis filed their appeal brief with the Court of Appeals. The case was docketed as CA-G.R. CV No. 45732.

A Decision²⁴ was eventually promulgated by the Fifteenth Division of the Court of Appeals on 25 June 2001, reversing and setting aside the ruling of Branch 98, viz:

Therefore, We find that the amount of P4,476,426.275 is, in the opinion of this Court, commensurate to the services rendered by defendants-appellees. This amount has been arrived at by giving to defendants-appellees P2.50 per square meter of the 1,790,570.51 square meter expropriated properties of herein plaintiffs-appellants.

WHEREFORE, IN VIEW OF THE FOREGOING, the decision dated January 3, 1994 of the Regional Trial Court, National Capital Judicial Region, Branch 98, Quezon City in Civil Case No. 89-4013 entitled "Antonio Zuzuarregui, Jr., et al. versus National Housing Authority, et al." for "Sum of Money and Damages," is hereby REVERSED and SET ASIDE. Defendants-Appellees Roxas and Pastor are hereby ordered to return to plaintiffs-appellants the amount of P12,596,696.425, the balance from the P17,073,122.70, received as yield from NHA bonds after deducting the reasonable attorney’s fees in the amount of P4,476,426.275.²⁵

Attys. Roxas and Pastor filed a Motion for Reconsideration²⁶ on 25 July 2001. The Zuzuarreguis also filed a Motion for Reconsideration²⁷ on 30 July 2001, not having been satisfied with the award, while the NHA and Pedrosa filed their Motions for Reconsideration²⁸ on 03 August 2001.

In a Resolution dated 06 February 2002, the Court of Appeals denied for lack of merit all the Motions for Reconsideration.

On 05 March 2002, Attys. Roxas and Pastor filed a Petition for Review on Certiorari²⁹ assailing the Decision of the Court of Appeals, docketed as G.R. No. 152072. Likewise, on 21 March 2002, the Zuzuarreguis filed their own Petition for Review on Certiorari³⁰ assailing the same Decision, docketed as G.R. No. 152104.1avvph!l.ne+

ASSIGNMENT OF ERRORS

Attys. Roxas and Pastor, petitioners in G.R. No. 152072, assign as errors the following:

I

THE HONORABLE COURT OF APPEALS GRAVELY ERRED ON A QUESTION OF LAW IN HOLDING THAT THE LETTER-AGREEMENT DATED DECEMBER 10, 1985 CANNOT BE ALLOWED TO STAND AS THE LAW BETWEEN THE PARTIES; and

II

THE HONORABLE COURT OF APPEALS GRAVELY ERRED ON A QUESTION OF LAW IN HOLDING THAT DEFENDANTS-APPELLANTS, HEREIN PETITIONERS, CONCEALED TO THE PLAINTIFFS-APPELLEES, HEREIN RESPONDENTS, THE YIELD OF THE NHA BONDS³¹

The Zuzuarreguis, petitioners in G.R. No. 152101, on the other hand, assign as errors the following:

I

THE COURT OF APPEALS ERRED IN AWARDING TO PETITIONERS THE PRINCIPAL AMOUNT OF ONLY P12,596,696.425 AND NOT P17,073,122.70 MAKING A DIFFERENCE OF P4,476,426.28

II

THE RESPONDENTS SHOULD BE HELD LIABLE FOR INTEREST FROM THE DATE OF THE FILING OF THE COMPLAINT UNTIL FULLY PAID

III

THE RESPONDENTS SHOULD BE HELD LIABE FOR MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S FEES

IV

THE RESPONDENTS NHA AND JOSE B.H. PEDROSA ARE JOINTLY AND SEVERALLY LIABLE WITH RESPONDENTS ROXAS AND PASTOR³²

ISSUE FOR RESOLUTION

Drawn from the above assignment of errors, it is patent that the principal issue that must be addressed by this Court is:

WHETHER OR NOT THE LETTER-AGREEMENT DATED 10 DECEMBER 1985, EXECUTED BY THE ZUZUARREGUIS, AND ATTYS. ROXAS AND PASTOR, FIXING THE EXACT AMOUNT THAT MUST GO TO THE FORMER, SHOULD STAND AS LAW BETWEEN THE PARTIES.

THE COURT’S RULING

Attys. Roxas and Pastor, petitioners in G.R. No. 152072, contend in the main that the Zuzuarreguis are only entitled to the amount of P17.00 per square meter for the 1,790,570.36 square meters expropriated by the government. This was, according to them, embodied in the Letter-Agreement dated 10 December 1985, wherein the Zuzuarreguis agreed to accept the price of P17.00 per square meter. Besides, Attys. Roxas and Pastor contend that the price of P17.00 was even way above the P11.00 that the Zuzuarreguis were willing to accept for their properties under the Letter of Engagement executed by the parties earlier on 22 April 1983. Computed at P17.00 per square meter, they stress that the amount that should go to the Zuzuarreguis for their 1,790,570.36 square meters property should be P30,439,696.10, and that in fact the Zuzuarreguis have received P30,520,000.00. The Letter-Agreement dated 10 December 1985 should thus stand as law between the parties. Since this Letter-Agreement, which was "as plain and simple as can be such that there is no need for any further construction," already fixed the amount that would go to the Zuzuarreguis (P17.00 per square meter), then it should be so.

Attys. Roxas and Pastor further assert that the receipts issued by the Zuzuarreguis dated 14 February 1986 and 17 February 1986 indicated that the amounts received by the latter were in "full and final payment" for the subject properties.

The NHA, for its part, insists that there was no conspiracy between Attys. Roxas and Pastor on the one hand, and the NHA and Atty. Pedrosa on the other, on the application of yields from NHA bonds.³³ The Zuzuarreguis, according to the NHA, "miserably failed to substantiate and establish conspiracy" between them.

The Zuzuarreguis, for their part, though they were triumphant in the Court of Appeals, insist that the amounts awarded them were not enough. According to them, the P12,596,696.425 awarded by the Court of Appeals was not correct. They should have been awarded the amount of P17,073,122.70. Quoting the Zuzuarreguis:

Respondents Roxas and Pastor retained for themselves the amount of P3,980,000.00 which represented the agreed attorney’s fees of Roxas and Pastor at P2.50 per square meter. The amount of P20,000,000.00 representing the yield of all the bearer bonds was, in the words of the Court of Appeals, "deliberately hidden" by respondents Roxas and Pastor from petitioners. By mathematical computation, the P20,000,000.00 yield should be proportionately divided at the ratio of P17.00 (petitioners’) and P2.50 (share of respondents Roxas and Pastor). Following this ratio of division, of the P20,000,000.00 yield, P17,073,122.70 should pertain to petitioners and the balance of P2,926,877.30 to respondents Roxas and Pastor. Add this amount to the total of P3,980,000.00 at the agreed rate of P2.50 per square meter, the total attorney’s fees of respondents Roxas and Pastor should be P6,906,877.30, not bad, again in the words of the Court of Appeals, for handling "a simple expropriation case which ended up in a compromise agreement." It was, therefore, in error to still deduct the amount of P4,476,426.28 from petitioners share in the yield in the amount of P17,073,122.70 leaving then only P12,596,696.42.

What was done, however, is that the product of 1,790,570.36 sq m. (area of the expropriated land of petitioners) and P2.50 which is 4,476,426.28 was again deducted from the P17,073,122.70 which is the corresponding share of the petitioners out of the total yield of P20,000,000.00. If this were a criminal case, petitioners were being sentenced twice for the same offense.³⁴

The Zuzuarreguis further insist that legal interest on the amount of P17,073,122.70 be imposed from the date of the filing of the complaint, including moral and exemplary damages, and attorney’s fees.

We sustain the Court of Appeals, but with modification in the computation.

A contract is a meeting of the minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service.³⁵ Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present.³⁶

Under Article 1318 of the Civil Code, there are three essential requisites which must concur in order to give rise to a binding contract: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established.³⁷

All these requisites were present in the execution of the Letter-Agreement.

Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract.³⁸ The Zuzuarreguis, in entering into the Letter-Agreement, fully gave their consent thereto. In fact, it was them (the Zuzuarreguis) who sent the said letter to Attys. Roxas and Pastor, for the purpose of confirming all the matters which they had agreed upon previously. There is absolutely no evidence to show that anybody was forced into entering into the Letter-Agreement. Verily, its existence, due execution and contents were admitted by the Zuzuarreguis themselves.³⁹

The second requisite is the object certain. The objects in this case are twofold. One is the money that will go to the Zuzuarreguis (P17.00 per square meter), and two, the money that will go to Attys. Roxas and Pastor (any and all amount in excess of P17.00 per square meter). There was certainty as to the amount that will go to the Zuzuarreguis, and there was likewise certainty as to what amount will go to Attys. Roxas and Pastor.

The cause is the legal service that was provided by Attys. Roxas and Pastor. In general, cause is the why of the contract or the essential reason which moves the contracting parties to enter into the contract.⁴⁰

It is basic that a contract is the law between the parties.⁴¹ Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. Unless the stipulations in a contract are contrary to law, morals, good customs, public order or public policy, the same are binding as between the parties.⁴²

In Licudan v. Court of Appeals,⁴³ we did not allow the Contract for Professional Services between the counsel and his client to stand as the law between them as the stipulation for the lawyer’s compensation was unconscionable and unreasonable. We said:

Although the Contract for Professional Services dated August 30, 1979 was apparently voluntarily signed by the late Aurelio Licudan for himself and on behalf of his daughter, petitioner Cristina Licudan-Campos and by the petitioner Wilfredo Licudan who both manifested in open court that they gave their free and willing consent to the said contract, we cannot allow the said contract to stand as the law between the parties involved considering that the rule that in the presence of a contract for professional services duly executed by the parties thereto, the same becomes the law between the said parties is not absolute but admits an exception – that the stipulations therein are not contrary to law, good morals, good customs, public policy or public order.⁴⁴

Under the contract in question, Attys. Roxas and Pastor are to receive contingent fees⁴⁵ for their professional services. It is a deeply-rooted rule that contingent fees are not per se prohibited by law. They are sanctioned by Canon 13 of the Canons of Professional Ethics, viz:

13. Contingent Fees. –

A contract for contingent fee, where sanctioned by law, should be reasonable under all the circumstances of the case including the risk and uncertainty of the compensation, but should always be subject to the supervision of a court, as to its reasonableness.

and Canon 20, Rule 20.01 of the Code of Professional Responsibility,⁴⁶ viz:

CANON 20 – A LAWYER SHALL CHARGE ONLY FAIR AND REASONABLE FEES.

Rule 20.01. – A lawyer shall be guided by the following factors in determining his fees:

(a) The time spent and the extent of the services rendered or required;

(b) The novelty and difficulty of the question involved;

(c) The importance of the subject matter;

(d) The skill demanded;

(e) The probability of losing other employment as a result of acceptance of the proffered case;

(f) The customary charges for similar services and the schedule of fees of the IBP chapter to which he belongs;

(g) The amount involved in the controversy and the benefits resulting to the client from the service;

(h) The contingency or certainty of compensation;

(i) The character of the employment, whether occasional or established; and

(j) The professional standing of the lawyer.

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,⁴⁷ such that under Canon 20 of the Code of Professional Responsibility, a lawyer is tasked to charge only fair and reasonable fees.

Indubitably entwined with the lawyer’s duty to charge only reasonable fees is the power of this Court to reduce the amount of attorney’s fees if the same is excessive and unconscionable.⁴⁸ Thus, Section 24, Rule 138 of the Rules of Court partly states:

SEC. 24. Compensation of attorneys; agreement as to fees. – An attorney shall be entitled to have and recover from his client no more than a reasonable compensation for his services, with a view to the importance of the subject matter of the controversy, the extent of the services rendered, and the professional standing of the attorney. x x x. A written contract for services shall control the amount to be paid therefore unless found by the court to be unconscionable or unreasonable.

Attorney’s fees are unconscionable if they affront one’s sense of justice, decency or reasonableness.⁴⁹ It becomes axiomatic therefore, that power to determine the reasonableness or the, unconscionable character of attorney's fees stipulated by the parties is a matter falling within the regulatory prerogative of the courts.⁵⁰

In the instant case, Attys. Roxas and Pastor received an amount which was equal to forty-four percent (44%) of the just compensation paid (including the yield on the bonds) by the NHA to the Zuzuarreguis, or an amount equivalent to P23,980,000.00 of the P54,500,000.00. Considering that there was no full blown hearing in the expropriation case, ending as it did in a Compromise Agreement, the 44% is, undeniably, unconscionable and excessive under the circumstances. Its reduction is, therefore, in order. This is in accordance with our ruling in the earlier case of Tanhueco v. De Dumo⁵¹, where we reduced the amount of attorney’s fees from sixty percent (60%) to fifteen percent (15%), for being excessive and unreasonable.

It is imperative that the contingent fees received by Attys. Roxas and Pastor must be equitably reduced. In the opinion of this Court, the yield that corresponds to the percentage share of the Zuzuarreguis in the P19.50 per square meter just compensation paid by the NHA must be returned by Attys. Roxas and Pastor.1avvph!l.ne+

The yield on the NHA bonds amounted to P19,583,878.00. This amount must therefore be divided between the Zuzuarreguis, on the one hand, and Attys. Roxas and Pastor, on the other. The division must be pro rata. The amount of P17.00 that should go to the Zuzuarreguis represents 87.18% of the P19.50 per square meter just compensation, The P2.50 per square meter that was to go to Attys. Roxas and Pastor, on the other hand, represents 12.82%.

The Zuzuarreguis are entitled to the yield equal to 87.18% of the P19,583,878.00, while Attys. Roxas and Pastor are entitled to 12.82% of said amount. The amount corresponding to 87.17% of P19,583,878.00 is P17,073,224.84. This is the yield that the Zuzuarreguis are entitled to. Attys. Roxas and Pastor, on the other hand, are entitled to P2,510,653.16.

Attys. Roxas and Pastor, in the opinion of this Court, were not shortchanged for their efforts for they would still be earning or actually earned attorney’s fees in the amount of P6,987,078.75 (P4,476,425.59 + P2,510,653.16).

The amount of P17,073,224.84 must therefore be returned by Attys. Roxas and Pastor to the Zuzuarreguis. They can take this out from the yield in the amount of P19,583,878.00 which they have appropriated for themselves.

On the issue of moral and exemplary damages, we cannot award the same for there was no direct showing of bad faith on the part of Attys. Roxas and Pastor, for as we said earlier, contingency fees are not per se prohibited by law. It is only necessary that it be reduced when excessive and unconscionable, which we have already done.

We likewise cannot hold the NHA and Atty. Pedrosa jointly and severally liable to the Zuzuarreguis for there is no evidence to show conspiracy between them.

WHEREFORE, in view of all the foregoing considerations, the Decision and Resolution of the Court of Appeals dated 25 June 2001 and 06 February 2002, respectively, are AFFIRMED but with the MODIFICATION that Attys. Romeo G. Roxas and Santiago N. Pastor are hereby ordered to return to the Zuzuarreguis the amount of P17,073,224.84. No costs.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:

ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson

CONSUELO YNARES-SANTIAGO
Associate Justice

MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice

ROMEO J. CALLEJO, SR.
Associate Justice
1avvph!l.ne+

C E R T I F I C A T I O N

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

ARTEMIO V. PANGANIBAN
Chief Justice

Footnotes

¹ Rollo (G.R. No. 152072), pp. 10-55; Rollo (G.R. No. 152104), pp. 9-23.

² Id. (G.R. No. 152104), p. 356.

³ Id. (G.R. No. 152072), pp. 57-80, penned by Associate Justice Remedios Salazar-Fernando with then Associate Justice later Presiding Justice Romeo A. Brawner and Associate Justice Rebecca De Guia-Salvador, concurring.

⁴ Id. (G.R. No. 152072), pp. 82-83.

⁵ Now City of Makati.

⁶ Folder of Exhibits, p. 79.

⁷ Id., pp. 89-90.

⁸ Id., pp. 57-58.

⁹ Id., pp. 59-64.

¹⁰ Id., pp. 91-92.

¹¹ Id., pp. 54-55.

¹² Id., p. 9.

¹³ Id., p. 10.

¹⁴ Id., p. 15.

¹⁵ Id., p. 45.

¹⁶ Id., p. 16.

¹⁷ Id., p. 49.

¹⁸ CA decision, p. 15.

¹⁹ Folder of Exhibits, pp. 20-21.

²⁰ Id., p. 25.

²¹ Id., p. 46.

²² Rollo (G.R. No. 152072), pp. 84-113.

²³ Records, pp. 404-405.

²⁴ Rollo (G.R. No. 152072), pp. 57-80.

²⁵ CA decision, pp. 23-24.

²⁶ CA rollo, pp. 233-260.

²⁷ Id., pp. 264-270.

²⁸ Id., pp. 272-278.

²⁹ Rollo (G.R. No. 152072), pp. 10-55.

³⁰ Id. (G.R. No. 152104), pp. 9-23.

³¹ Id. (G.R. No. 152072), p. 25.

³² Id. (G.R. No. 152104), pp. 13-17.

³³ Rollo (G.R. No. 152072), p. 257.

³⁴ Petition for Certiorari (G.R. No. 152104), p. 6.

³⁵ Civil Code, Art. 1305.

³⁶ Civil Code, Art. 1356.

³⁷ Paderes v. Court of Appeals, G.R. No. 147075, 15 July 2005, 463 SCRA 504, 521.

³⁸ Civil Code, Art. 1319.

³⁹ Order of the RTC dated 16 March 1990; Main Records, p. 101.

⁴⁰ Jurado, Comments and Jurisprudence on Obligations and Contracts, p. 454, 9th Revised Edition, 1987, citing Manresa, 5th Ed., Bk. 2, pp. 445-446.

⁴¹ Almeda v. Court of Appeals, 326 Phil. 309, 316 (1996); Reta v. National Labor Relations Commission, G.R. No. 112100, 27 May 1994, 232 SCRA 613, 616; City of Manila v. Intermediate Appellate Court, G.R. No. 71159, 15 November 1989, 179 SCRA 428, 436; Bagadiong v. Vda. De Abundo, G.R. No. 75395, 19 September 1988, 165 SCRA 459, 463.

⁴² In Re: Ricardo P. Presbiterio, Sr. v. Court of Appeals, et al., G.R. No. 102432, 21 January 1993, 217 SCRA 372, 373.

⁴³ G.R. No. 91958, 24 January 1991, 193 SCRA 293.

⁴⁴ Licudan v. Court of Appeals, supra, pp. 300-301.

⁴⁵ A contingent fee is a fee charged for a lawyer’s services only if the lawsuit is successful or is favorably settled out of court (Black’s Law Dictionary, p. 315, 7th Edition [1999]).

⁴⁶ Licudan v. Court of Appeals, supra note 43, p. 301.

⁴⁷ Canons of Professional Ethics, Section 13.

⁴⁸ New Sampaguita Builders Construction, Inc. (NSBCI) v. Philippine National Bank, G.R. No. 148753, 30 July 2004, 435 SCRA 565, 592; citing Bachrach Garage and Taxicab Co., Inc. v. Golingco, 39 Phil. 912, 920-921 (1919); Bachrach v. Golingco, 39 Phil. 138, 143-144 (1918); Sangrador v. Spouses Valderrama, G.R. No. L-79552, 29 November 1988, 168 SCRA 215, 229.

⁴⁹ Black’s Law Dictionary, p. 1526, 7th Ed. (1999).

⁵⁰ De Santos v. City of Manila, 150-A Phil. 798, 805 (1972); Kalalo v. Luz, 145 Phil. 152, 174 (1970); Cruz v. Court of Industrial Relations, 118 Phil. 820, 825 (1963).

⁵¹ Adm. Cases Nos. 1437 and 1683, 25 April 1989.

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