G.R. No. C.A. No. 8977 ; March 22, 1946
Toribio P. Perez, plaintiff-appellee, vs. Scottish Union and National Insurance Co., defendant; Miguel H. Mitre, appellant.

FACTS

Toribio P. Perez filed a suit to recover attorney’s fees from Miguel H. Mitre and the Scottish Union and National Insurance Co. Perez sought: (1) P6,000 as fees for defending Mitre in a criminal arson case, based on a written contract (Exhibit D) where Mitre agreed to pay this amount from the proceeds of a P12,000 fire insurance policy issued by Scottish Union; and (2) P1,485 as an unpaid balance for fees in four other cases. Mitre acknowledged executing Exhibit D and receiving Perez’s services but contended that: (a) the actual fee for the arson case was only P550, which was fully paid, and Exhibit D was a simulation intended to shield the insurance proceeds from claims due to his criminal liability; (b) the fees in two Court of Appeals cases were P100 each, with P100 already paid; (c) a civil case did not concern him directly as he was only included as the husband of the principal defendant; and (d) an administrative case was part of the arson case. The trial court ruled in favor of Perez, ordering Scottish Union to pay, from the insurance proceeds, first a sales tax to the Collector of Internal Revenue and then P7,640.51 to Perez (covering the P6,000 and adjusted fees for the other cases), with interest and costs. Only Mitre appealed.

ISSUE

1. Whether the written contract (Exhibit D) for a P6,000 attorney’s fee in the arson case is valid and enforceable, or whether it was a simulated agreement.
2. Whether Perez is entitled to recover additional attorney’s fees for the four other cases.
3. Whether the trial court correctly ordered the insurance company to pay the sales tax claim.

RULING

1. Yes, the contract (Exhibit D) is valid and enforceable. The Court rejected Mitre’s claim that the contract was a simulation. Mitre’s argument that it was antedated (signed August 26, 1939, but dated April 10, 1939) to mislead the insurance company did not invalidate the contract between the parties. The Court found Mitre’s disavowal to be an afterthought following his acquittal. The contract’s terms were clear, and it was not structured to cover the entire insurance policy value, undermining the simulation theory. Applying Rule of Court 127, section 22, a written contract for services controls unless unconscionable or unreasonable. The fee of P6,000 was not excessive given the gravity of the arson case (where Mitre faced 10-12 years imprisonment and a large indemnity), the several days of trial, Perez’s competent defense leading to acquittal on appeal, and the contingent nature of the fee (payable only if insurance proceeds were collectible, which depended on Mitre’s acquittal). Mitre’s claims that Perez offered free services due to family relations and a desire for political popularity were unconvincing and inconsistent with his initial payment and continued retention of Perez after conviction.
2. No, Perez is not entitled to recover the additional fees for the four other cases. The Court found the evidence for these fees insufficient. These claims were not included in the original complaint but were raised only in Perez’s reply to Mitre’s answer, suggesting they were an afterthought to counter Mitre’s allegations of payment. The Court held they were not supported by a preponderance of evidence.
3. No, the trial court erred in ordering payment of the sales tax. The Collector of Internal Revenue was not a party to the case, and there was no proof of Mitre’s actual liability for the tax amount. Mitre’s admission referred only to the claim’s presentation, not to the liability itself.
DISPOSITIVE:
The appealed judgment was AFFIRMED in part, sentencing Miguel H. Mitre to pay Perez P6,000 as attorney’s fees in the arson case, with legal interest from the filing of the complaint, and ordering Scottish Union and National Insurance Co. to pay this amount to Perez from the insurance policy proceeds due to Mitre. The judgment was REVERSED in all other respects (regarding the additional fees for the four other cases and the sales tax payment). Costs were imposed on appellant Mitre.