G.R. No. 90983 September 27, 1991
LAW FIRM OF RAYMUNDO A. ARMOVIT, petitioner, vs. COURT OF APPEALS, JUDGE GENARO C. GINES, and BENGSON COMMERCIAL BUILDING, INC., respondents.

FACTS

Petitioner Atty. Raymundo Armovit was engaged as counsel by private respondent Bengson Commercial Building, Inc. to annul an extrajudicial foreclosure by the GSIS. The retainer agreement stipulated an initial P15,000.00 fee plus a contingent fee of twenty percent (20%) of all recoveries. Atty. Armovit successfully obtained a favorable judgment from the trial court, which was affirmed on appeal by the Court of Appeals. The judgment ordered GSIS to restructure the loan and pay rentals of P2,760,000.00 to the private respondent.
During execution, the private respondent informed Atty. Armovit that it had retained new counsel, Atty. Pacifico Yadao, but assured payment of the agreed fees. Atty. Armovit later sought to record an attorney’s charging lien. During the hearing, he withdrew the petition upon manifestation that the parties were amicably settling their differences. The court approved the withdrawal and directed the parties to comply with their obligations. Subsequently, the private respondent delivered only P300,000.00 to Atty. Armovit, not the P552,000.00 (20% of P2,760,000.00). The trial court later issued an order declaring that the P300,000.00 constituted full satisfaction of the attorney’s fees, citing the earlier withdrawal of the lien petition.

ISSUE

Whether Atty. Armovit is entitled to the balance of P252,000.00 based on the contingent fee agreement.

RULING

Yes. The Supreme Court granted the petition and ordered the private respondent to pay the balance. The legal logic is anchored on the validity and enforceability of the contingent fee agreement. The Court found that the withdrawal of the motion to record the attorney’s lien, coupled with the acceptance of P300,000.00, did not constitute a compromise or a waiver of the full claim. The receipt for P300,000.00 was unqualified, but the surrounding circumstances—specifically, Atty. Armovit’s immediate protest and continued demand for the balance—negated any intention to accept it as full payment.
The Court rejected the private respondent’s defenses, including the alleged lack of board approval for the retainer agreement and claims of attorney negligence. The partial payment of P300,000.00 by the corporation itself estopped it from denying the authority of its officers who engaged Atty. Armovit. The Court emphasized that contingent fees are valid and that the 20% rate under the circumstances was not unreasonable given the highly favorable outcome achieved. Initial fees paid during litigation are independent of the contingent fee, which is payable upon successful recovery. The trial court’s order declaring full payment was issued without a proper hearing on the merits of the fee claim and could not bar the enforcement of the valid contingent fee contract.