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Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 169298               July 9, 2008

LAW FIRM OF TUNGOL & TIBAYAN, Petitioner,
vs.
COURT OF APPEALS and SPOUSES RENATO M. INGCO & MA. LUISA S. INGCO, Respondents.

D E C I S I O N

QUISUMBING, J.:

This petition for review assails the Decision¹ dated March 17, 2005 of the Court of Appeals in CA-G.R. SP No. 85540, denying, among others, the prayer of petitioner Law Firm of Tungol & Tibayan for a greater sum of contingent attorney’s fees. Said Decision had reversed and set aside the April 30, 2004 Resolution² of the Office of the President, granting the law firm additional attorney’s fees.

The facts are as follows:

Private respondents Renato M. Ingco and Ma. Luisa S. Ingco hired the services of petitioner law firm to enforce delivery of a land title covering a 300-square meter lot in Tivoli Royale Subdivision, Quezon City. Atty. Abelardo M. Tibayan, a partner in said law firm, specified in a letter to respondent Renato Ingco that the graduated attorney’s fees the firm would charge would depend on the circumstances of the case. This agreement was embodied in Atty. Tibayan’s "Case Referral and Acceptance Confirmation,"³ (hereinafter referred to as contract) dated November 9, 1998.

In behalf of the Ingcos, the law firm filed a Complaint⁴ against Villa Crista Monte Realty and Development Corporation, Inc. (Villa Crista) before the Housing and Land Use Regulatory Board (HLURB). The complaint alleged that the Ingcos had paid the contract price of ₱5.1 million for the lot, but Villa Crista did not deliver the title to the Ingcos and refused to execute the final deed of sale in their favor.

After a series of negotiations, Villa Crista entered into a compromise agreement⁵ with the Ingcos to refund ₱4,845,000 with interest, and in case of breach, ₱200,000 liquidated damages. The HLURB approved the compromise and rendered a judgment upon compromise on December 21, 1999. Despite the compromise agreement, however, Villa Crista did not pay the Ingcos. This prompted the HLURB to issue a writ of execution,⁶ ordering the ex-officio sheriff of the Regional Trial Court (RTC) to execute the judgment. The writ required Villa Crista to refund to the spouses Ingco ₱5,081,856; to pay them ₱200,000 liquidated damages; and to seize, garnish or levy any property of Villa Crista to satisfy the judgment.

The ex-officio sheriff levied and auctioned ten lots belonging to Villa Crista.⁷ The spouses bought three of the ten lots at a bid price of ₱7,193,505.56, which includes the ₱5.1 million contract price for the 300- square meter lot, ₱1,350,000 attorney’s fees and other expenses. The sheriff issued final deeds of sale⁸ to the Ingcos after Villa Crista failed to redeem the three lots within the redemption period.

Thereafter, in a Letter⁹ dated August 2, 2001, the Ingcos terminated the law firm’s services. They alleged that they had already paid the law firm ₱1.5 million in attorney’s fees. In a Letter¹⁰ dated August 8, 2001, petitioner’s Atty. Danilo N. Tungol wrote the Ingcos and expressed his surprise at the termination of their firm’s services since, to their knowledge, the spouses were satisfied with its services. Atty. Tungol contended that the spouses terminated the law firm’s services because they merely wanted to escape paying the firm. Atty. Tibayan also wrote the Ingcos a similar letter.¹¹

The law firm eventually also filed with the HLURB a Motion and Statement of Claim for Attorney’s Lien¹² on August 20, 2001, and a Motion to Enforce the Attorney’s Lien¹³ on November 12, 2001. Both motions sought to recover 25% of the excess of the existing prevailing selling price or fair market value of the three levied lots over the total bid price and expenses of ₱7,193,505.56.¹⁴ It also filed a damage suit¹⁵ against its former clients before the RTC.

According to the law firm, the spouses Ingco still owed attorney’s fees of ₱4,506,500 on top of the advance payment of ₱1.5 million. It asserted that as agreed upon in their contract, the law firm shall be entitled to additional attorney’s fees equivalent to 25% of the excess of the price value of the three lots over the total bid price and expenses in case Villa Crista fails to redeem the three lots the spouses bought in the auction sale. Since the lots were not redeemed, the property was consolidated in the name of the spouses. The additional attorney’s fees, according to the law firm, were due because of the additional benefit derived by the spouses since the three lots which Villa Crista failed to redeem were worth more than the bid price and expenses the spouses paid. Allegedly, the three lots measuring 1,378 square meters, were worth ₱17,000 per square meter or ₱23,426,000. Petitioner also claimed that after the consolidation of the titles, it allegedly prepared a motion for titling of the property in the name of the Ingcos, but the latter allegedly took all original copies of the final deeds and subsequently terminated its services.

The Ingcos opposed¹⁶ the aforementioned motions, contending that it terminated the services of the firm because it demanded ₱70,000 for notarial fees. They explained that the three lots would cost only ₱7,500 and not ₱17,000 per square meter, as claimed by the firm.

In an Order¹⁷ dated December 10, 2001, HLURB Arbiter Rowena C. Balasolla, granted the Motion and Statement of Claim for Attorney’s Lien and ordered the annotation of the said attorney’s lien on Transfer Certificates of Title (TCT) Nos. 162238, 162319 and 162350.

The spouses Ingco sought reconsideration of the order but its motion for reconsideration was denied. In an Order¹⁸ dated May 6, 2003, HLURB Arbiter Balasolla also granted the firm’s Motion to Enforce Attorney’s Lien, and ordered the spouses jointly and severally, to pay the firm ₱4,506,500.

The HLURB Board,¹⁹ on appeal, reversed the arbiter’s order. In a Decision²⁰ dated October 8, 2003, the HLURB Board declared that a realized gain of ₱23,426,000 was premature; that the payment of ₱1.5 million was more than sufficient and reasonable compensation; and that the firm was not entitled to an additional compensation of ₱4,506,500.

The firm appealed to the Office of the President. In a Resolution dated April 30, 2004, the Office of the President set aside the HLURB’s decision and affirmed the arbiter’s order. It also denied the spouses’ motion for reconsideration.²¹

On March 17, 2005, the HLURB Regional Director Jesse A. Obligacion issued a writ of execution,²² ordering the Ingcos to pay the firm ₱4,506,500.

On appeal, the Court of Appeals reversed and set aside the Resolution of the Office of the President. The appellate court ruled,

WHEREFORE, premises considered, the petition for review with prayer for injunction is GRANTED. The Resolution and Order dated April 30, 2004 and July 9, 2004, respectively, of the Office of the President in O.P. Case No. 03-J-620 are hereby REVERSED and SET ASIDE and the decision dated October 8, 2003 of the HLURB Board of Commissioners is REINSTATED. The HLURB arbiter concerned is hereby permanently ENJOINED from executing or implementing the orders dated December 10, 2001 and May 6, 2003.

SO ORDERED.²³

Petitioner’s motion for reconsideration with motion for inhibition²⁴ was denied. Hence, this petition via Rule 45 of the Rules of Court.

Petitioner law firm contends that the appellate court committed the following errors:

I.

THE ACT OF RESPONDENT COURT IN INTERPRETING AND MAKING ITS OWN CONSTRUCTION OF THE CLEAR AND UNAMBIGUOUS TERMS OF THE CONTRACT BETWEEN PETITIONER AND PRIVATE RESPONDENT IS NOT IN ACCORD WITH LAW AND APPLICABLE DECISIONS OF THE SUPREME COURT.

II.

[THE] ASSAILED DECISION [,] SOLELY BASED ON RESPONDENT COURT’S INTERPRETA[T]ION AND OWN CONSTRUCTION OF THE CONTRACT, WHICH WAS NEVER RAISED AS AN ISSUE, AMOUNTS TO DEPRIVATION OF PETITIONER’S FUNDAMENTAL RIGHT TO DUE PROCESS.

III.

THE REFUSAL OF THE HONORABLE JUSTICES OF RESPONDENT COURT TO VOLUNTAR[IL]Y INHIBIT THEMSELVES DESPITE [THE] JUSTIFICATIONS PETITIONER RAISED, IS NOT IN ACCORD WITH SECTION 1, RULE 137 OF THE REVISED RULES OF COURT AND DEPARTS FROM THE ACCEPTED AND NORMAL COURSE OF JUDICIAL DISPOSITIONS.²⁵

Simply, the issues for our resolution are: (1) Did the Court of Appeals commit reversible error when it interpreted the allegedly unambiguous terms of the contract? (2) Did the Court of Appeals justices err in refusing to inhibit themselves from the case?

Invoking Article 1370²⁶ of the Civil Code and citing jurisprudence, petitioner argues that the Court of Appeals erred in interpreting a clear and unambiguous contract. It insists that a clearly worded contract leaves no doubt on the intention of the parties, and requires no interpretation but only literal application. It points out that the appellate court and respondents did not even say that the terms of the contract are unclear and ambiguous.²⁷

According to the law firm, the Court of Appeals erred when it concluded that since the subject of the contract was only the lot worth ₱5.1 million, and it was only the delivery of title or refund of its value which petitioner committed to enforce, these should be the only basis for attorney’s fees. Petitioner counters that the contract contained no wording to that effect and the parties had no such intention for otherwise, the contract would have been so worded. Petitioner insists that it is not the province of the courts to amend a contract by construction, nor to make a new contract for the parties, interject material stipulations, nor even to read into the contract words which it did not contain.²⁸

The law firm likewise stressed that the compromise, judgment, execution, levy, sale and finally, consolidation of ownership in favor of private respondents constitute a series of events which petitioner persistently aimed at and worked on. The identification of the three lots was the result of its continuous and tedious search and verifications of the numerous properties of the erring developer, which were traced by petitioner. According to the law firm, after the levy, the developer even attempted to defeat the sale of the three lots by submitting affidavits of adverse claims, but the law firm thwarted the attempt. Petitioner avers there was no truth to the claims of the Ingcos that it was not through the law firm’s efforts that the three lots were recovered because those were acquired through the execution sale. To entertain such premise, says petitioner, would allegedly render nugatory every contract for legal services, and then every counsel, despite his efforts, would not deserve his fees every time execution sale became necessary to enforce judgment.²⁹

In their comment,³⁰ the Ingcos explain that they were in disbelief when petitioner charged them ₱70,000 as notarization fee for the final deeds. They had the same deeds notarized by another lawyer for only ₱900. Further, the law firm would not let them borrow the case files such that their relationship turned sour, prompting them to terminate the services of the firm. They deny gaining any extra material benefit from the auction of the three lots and stress that they even doubt whether any benefit would accrue to them, considering the numerous claims annotated on the titles. The spouses add that the Court of Appeals did not interpret the contract, but applied its literal meaning to the facts of the case in accord with law and jurisprudence.

At this juncture, as to the interpretation of contracts, we invite attention to Article 1370, paragraph 1 of the Civil Code which states that: "If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control. If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former."

Moreover, as we recently held:

A court’s purpose in examining a contract is to interpret the intent of the contracting parties, as objectively manifested by them. The process of interpreting a contract requires the court to make a preliminary inquiry as to whether the contract before it is ambiguous. A contract provision is ambiguous if it is susceptible of two reasonable alternative interpretations. Where the written terms of the contract are not ambiguous and can only be read one way, the court will interpret the contract as a matter of law. If the contract is determined to be ambiguous, then the interpretation of the contract is left to the court, to resolve the ambiguity in the light of the intrinsic evidence.³¹

The Court of Appeals, in this case before us, faced a situation where there were opposing interpretations of the parties as to the meaning and application of the disputed contract.

To the extent here relevant, we find that the contract reads as follows:

Dear Mr. Ingco:

We hereby accept the legal referral you made and confirm our decision and commitment to make legal and/or extrajudicial representations for and in your behalf. In its professional capacity, the firm shall enforce delivery of title covering a lot you purchased at P5,100,000.00 or refund of said amount plus interest, in your favor, by Villa Crista Monte Realty and Development Corporation, Inc. and/or Crisencio Tio.

x x x x

2. In case the firm succeeds to recover upon mere sending of a demand letter, it shall be entitled to five (5%) per cent of the value of property protected/recovered, amount of claim collected or the total interests (including gains) which actually inure to your benefit, as a result of filing of the case, whichever is higher, as its attorney’s fee;

x x x x

5. In case recovery/collection is made by virtue of a final judgment, the firm shall be entitled to an attorney’s fee equivalent to TWENTY FIVE (25%) per cent based on that mentioned above (No. 2) [;]

x x x x

Should you find the foregoing in order, kindly signify your conformity and sign the space herein provided.

Thank you very much for your trust.

Very truly yours,

(SIGNED)
ABELARDO M. TIBAYAN

For the Firm³²

In our own perusal of the contract, we find that the contract did not provide for any other basis for the computation of attorney’s fees other than the value of the property protected/recovered, amount of claim collected, or the total interests including gains which actually inured to the client’s benefit. Proceeds from levy or garnishment was not mentioned. The contract itself, did not include a situation where the buyer-client recovers from levy of real properties. The contract is silent in this regard. If the intention of the parties was to provide for an automatic application of the contract on levy proceeds, both parties could have easily agreed on it.

From the phraseology of its contract with the spouses Ingco, petitioner had only two alternative objectives as their legal tasks, (1) delivery of title or (2) refund of the purchase price.

Items 2 and 5 of the contract envisioned two scenarios: (1) when the law firm recovers by mere demand letter; and (2) when the collection is through final judgment. In case of collection effected through a final judgment, the firm shall be entitled to an attorney’s fee equivalent to 25% of what actually inures to the benefit of the Ingcos, whichever is higher among (a) the value of property protected or recovered; (b) the amount of claim collected; or (c) the total interests inuring to the Ingco’s benefit including gains. The 25% attorney’s fees must be based on what was actually realized and received by the Ingcos. Of the three serially enumerated, only the value of the property sold, bought and recovered actually inured to the benefit of the Ingcos. At this point, however, no money had yet been collected, nor had any interests and gains been verified and realized.

We are in agreement with the appellate court that what the law firm delivered to its clients was the refund of the amount claimed plus interest, stated in the compromise agreement with Villa Crista, not the title to the lot and more so, not the three lots purchased by the spouses at the execution sale.

In our view, the law firm had been adequately paid its lawyer’s fees and is no longer entitled to additional fees on top of the ₱1.5 million it had received. In fact, the 25% attorney’s fees based on the value of the lot, which is ₱5.1 million, multiplied by 25%, will only amount to ₱1,275,000. Thus, the firm had a bonus of ₱225,000, since they received ₱1,500,000 from the clients.

We note that the Ingcos acquired the three lots as the highest bidder at the execution sale, since no one else bid higher. On this point, it can be said that the lots had been acquired not through the recovery efforts of the law firm. Had other persons bidded a higher price, the matter of the three lots would be entirely impertinent here. It is stretching the firm’s contractual rights to say that the three lots acquired in the auction by the Ingcos’ was thru the law firm’s contractual services.

The law firm appears to have extended the following services to the Ingcos: (1) sent three demand letters³³ to the developer; (2) filed a complaint³⁴ against the latter on March 29, 1999; (3) appeared for the Ingcos during the July 29, 1999 pre-trial before the HLURB arbiter;³⁵ (4) filed the joint motion to approve compromise agreement³⁶ between the parties dated October 21, 1999; and (5) attended four preliminary conferences, three of which were reset, and only one called. It took three months from pre-trial to the signing of the compromise agreement on October 1, 1999. There were no long-drawn trials. It was respondent Renato Ingco who actually negotiated in person with the developer. There is no positive evidence shown that the law firm battled for its clients against Villa Crista during the negotiation stage.

As we have ruled previously, courts can fix reasonable compensation which lawyers should receive for their professional services.³⁷ Nothing precludes the appellate courts from reducing the award when it is deemed unconscionable or excessive.³⁸ Further, here we note that when the auction sale of the three lots was made, the attorney-client relationship between petitioner and respondents no longer existed.³⁹ Thus, we cannot include in the attorney’s fees the 25% of the excess of the market value of the lots over the ₱7,193,505.56 paid by the Ingcos in acquiring them.1avvphi1

Incidentally, while the spouses Ingco might have not raised the issue of the interpretation of contract in the trial court, it cannot be said also that the Court of Appeals deprived petitioner its right to be heard when it passed upon the issue. When it interpreted the agreement, the Court of Appeals merely sought to ascertain the meaning attached to the words used in the written contract,⁴⁰ undoubtedly to resolve the opposing contentions of the parties themselves.

On the last issue regarding the inhibition of the justices of the appellate court, aside from being moot and academic, we find that the issue had been adequately addressed by the appellate court. While bias and partiality are recognized as valid reasons for the voluntary inhibition of a judge under Rule 137, Section 1, par. 2,⁴¹ of the Rules of Court, mere suspicion that a judge is partial is not enough. As long as the judge’s opinions were formed in the course of judicial proceedings based on the evidence presented, and on the conduct of the parties as observed by the magistrate in court, such opinions – even if later found to be erroneous – will not prove personal bias or prejudice on the part of the judge. In this case, the law firm has failed to present concrete proof that any or all members of the Court of Appeals’ Second Division had a personal interest in the case, or that their opinions on the case have stemmed from an extrajudicial source. We find no sufficient basis or reason to doubt their fairness and ability to decide this case with the "cold neutrality of an impartial judge."

As the appellate court pointed out, the present case has already been decided. A motion for inhibition can no longer be granted if a decision has already been rendered and the justice or judge sought to be disqualified had duly participated and cast his or her vote without any objection from any source. Clearly, a litigant cannot be permitted to speculate upon the action of the court and to raise objections only after an unfavorable decision has already been rendered.⁴²

WHEREFORE, the instant petition is DENIED. The Decision dated March 17, 2005 of the Court of Appeals in CA-G.R. SP No. 85540, entitled "Spouses Renato M. Ingco and Ma. Luisa S. Ingco v. Law Firm of Tungol and Tibayan," is AFFIRMED. Costs against petitioner.

SO ORDERED.

LEONARDO A. QUISUMBING
Associate Justice

WE CONCUR:

CONCHITA CARPIO MORALES
Associate Justice

DANTE O. TINGA Associate Justice

PRESBITERO J. VELASCO, JR. Associate Justice

ARTURO D. BRION
Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson

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

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice

Footnotes

¹ Rollo, pp. 70-82. Penned by Associate Justice Rosalinda Asuncion-Vicente, with Associate Justices Godardo A. Jacinto and Bienvenido L. Reyes concurring.

² Id. at 271-277.

³ Id. at 122-123.

⁴ Id. at 279-293. Dated March 29, 1999.

⁵ Id. at 322-323, 326-327.

⁶ Id. at 328-330.

⁷ Id. at 331-334.

⁸ Id. at 339-344.

⁹ Id. at 130.

¹⁰ Id. at 131-132.

¹¹ Id. at 133-134.

¹² Id. at 345-352.

¹³ Id. at 374-382.

¹⁴ Covered by Transfer Certificates of Title Nos. N-162238, N-162319 and N-162350 of the Registry of Deeds of Quezon City.

¹⁵ Rollo, pp. 565-576.

¹⁶ Id. at 353-357.

¹⁷ Id. at 136-141.

¹⁸ Id. at 387-393.

¹⁹ Through Commissioner Teresita A. Desierto and Ex-Officio Commissioners Jose C. Calida of DOJ and Fortunato R. Abrenilla of NEDA.

²⁰ Rollo, pp. 394-400.

²¹ Id. at 278.

²² Id. at 429-431.

²³ Id. at 81-82.

²⁴ Id. at 409-425.

²⁵ Id. at 21-22.

²⁶ ART. 1370. If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control.

If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over the former.

²⁷ Petrophil Corporation v. Court of Appeals, G.R. No. 122796, December 10, 2001, 371 SCRA 702, 708; Sea-Land Service, Inc. v. Court of Appeals, G.R. No. 126212, March 2, 2000, 327 SCRA 135, 143; Heirs of Juan San Andres v. Rodriguez, G.R. No. 135634, May 31, 2000, 332 SCRA 769, 783.

²⁸ Rollo, p. 28.

²⁹ Id. at 32-33.

³⁰ Id. at 435-466.

³¹ Abad v. Goldloop Properties, Inc., G.R. No. 168108, April 13, 2007, 521 SCRA 131, 144.

³² Rollo, pp. 122-123.

³³ Id. at 467-469.

³⁴ Id. at 470-484.

³⁵ Id. at 488.

³⁶ Id. at 491-492.

³⁷ Traders Royal Bank Employees Union-Independent v. NLRC, G.R. No. 120592, March 14, 1997, 269 SCRA 733, 750.

³⁸ Brahm Industries, Inc. v. NLRC, G.R. No. 118853, October 16, 1997, 280 SCRA 828, 839.

³⁹ See Rilloraza, Africa, De Ocampo and Africa v. Eastern Telecommunications Phils., Inc., G.R. No. 104600, July 2, 1999, 309 SCRA 566, 575.

⁴⁰ See Huibonhoa v. Court of Appeals, G.R. Nos. 95897 and 102604, December 14, 1999, 320 SCRA 625, 646; National Irrigation Administration v. Gamit, G.R. No. 85869, November 6, 1992, 215 SCRA 436, 450.

⁴¹ SECTION 1. Disqualification of judges. – . . .

A judge may, in the exercise of his sound discretion, disqualify himself from sitting in a case, for just or valid reasons other than those mentioned above.

⁴² Rollo, p. 88.

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