G.R. No. L-70099. January 7, 1987.
MODESTA BORCENA, et al., petitioners, vs. INTERMEDIATE APPELLATE COURT, et al., respondents.

FACTS

The petitioners engaged the legal services of Atty. Gil de Guzman under a contingent fee contract stipulating payment of 20% of their total claim as attorney’s fees, plus 5% for expenses, payable after recovery from the defendants. Atty. de Guzman filed a complaint for damages. Through his efforts, a writ of preliminary attachment was issued, leading to the deposit of P852,000.00 with the municipal treasurer. A dispute arose over the custody of the deposited checks. The petitioners, alleging Atty. de Guzman’s refusal to return the checks for proper deposit, terminated his services via letter dated March 17, 1983, before the case reached pre-trial.
Atty. de Guzman then filed a motion with the trial court to enforce the contingent fee contract, claiming his full 25% share from the deposited amount. The trial court granted his motion, ordering the release of the corresponding sum. This was affirmed by the Intermediate Appellate Court. The petitioners elevated the case to the Supreme Court, contesting the awarded amount as excessive.

ISSUE

Whether the contingent fee contract is enforceable to entitle Atty. de Guzman to 25% of the claim, or if compensation should be determined on a quantum meruit basis due to his dismissal for cause.

RULING

The Supreme Court reversed the appellate decision. It ruled that the stipulated contingent fee was unconscionable and unreasonable under the circumstances. The contract was for 25% of the total claim of P710,000.00, which would amount to P177,500.00, a sum grossly disproportionate to the services actually rendered. The Court emphasized that a lawyer’s compensation, especially under a contingent fee arrangement, must be reasonable.
Furthermore, the Court found that Atty. de Guzman was dismissed for justifiable cause due to his conduct regarding the custody of the client’s funds, which created a conflict of interest and justified termination. When a lawyer is dismissed for cause, or when a contingent fee contract is deemed unreasonable, recovery is based on quantum meruit—the reasonable value of services actually rendered. Applying the factors from Delgado v. De la Rama, such as the amount and character of services, skill required, results secured, and professional standing, the Court assessed the work done. Atty. de Guzman had filed the complaint, secured a default declaration against two defendants, and obtained a writ of attachment. However, the case had not proceeded to pre-trial, involved no extraordinary complexity, and the ultimate recovery was still undetermined at the time of dismissal. Consequently, the Court fixed a reasonable compensation of P10,000.00, ordering the petitioners to pay this amount to Atty. de Guzman for his services.