G.R. No. 128452 November 16, 1999
Compania Maritima, Inc., El Varadero de Manila, Mindanao Terminal and Brokerage Services, Carlos P. Fernandez, Vicente T. Fernandez, Luis T. Fernandez, and Ramon B. Fernandez, petitioners, vs. Court of Appeals and Exequiel S. Consulta, respondents.

FACTS

Petitioners Compania Maritima, Inc., El Varadero de Manila, and Mindanao Terminal and Brokerage Services engaged the legal services of private respondent Atty. Exequiel S. Consulta for three related cases. These involved an execution case where petitioners’ properties worth P51 million were levied and sold for only P1.235 million, a criminal complaint filed with the Tanodbayan against a sheriff, and a civil action for injunction and annulment of execution. For his services, Atty. Consulta billed petitioners P100,000, P50,000, and P5,000,000 for the respective cases. Petitioners paid only P30,000 and P10,000 for the first two cases and nothing for the third, prompting Atty. Consulta to file a collection suit.
The Regional Trial Court awarded Atty. Consulta attorney’s fees, notably P2,550,000 for the third case (Civil Case No. 86-37196 and its appeals), calculated at 5% of the P51 million value of the saved property, plus additional amounts for the other cases. The Court of Appeals affirmed this decision. Petitioners then elevated the case to the Supreme Court, contesting the reasonableness of the fees and the personal liability of the individual Fernandez petitioners, who were corporate stockholders and directors.

ISSUE

The primary issues were: (1) whether the awarded attorney’s fees were reasonable, and (2) whether the individual corporate stockholders/directors could be held personally liable for these fees.

RULING

The Supreme Court affirmed the award of attorney’s fees but absolved the individual petitioners from personal liability. On the reasonableness of the fees, the Court upheld the findings of the lower courts. It emphasized that the determination of reasonable compensation is primarily a factual matter within the trial court’s discretion, especially when affirmed by the Court of Appeals. The Court found no reason to deviate from this, noting the significant P51 million value of the property involved, the complexity of the legal issues which reached the Supreme Court, the protracted nature of the litigation, and the benefit ultimately obtained by the corporate petitioners through a compromise settlement that saved their assets. Petitioners’ claim of not benefiting was unsubstantiated.
However, the Court reversed the finding of personal liability against the individual Fernandez petitioners. It reiterated the fundamental principle of corporate separate juridical personality. A corporation’s personality is distinct from its stockholders and directors, and the latter are not personally liable for corporate obligations unless the corporate veil is pierced. Piercing requires proof that the corporate fiction is used for fraudulent, unfair, or illegal purposes. The Court of Appeals’ finding of fraud, based merely on the refusal to pay the disputed fees, was erroneous. A dispute over the reasonable amount of fees, prior to judicial determination, cannot by itself constitute the fraud or bad faith necessary to justify disregarding the corporate entity. Thus, only the corporate petitioners were held solidarily liable for the awarded attorney’s fees.