G.R. No. L-26096 (February 27, 1979)
Topics: Contract for a contingent fee; Persons cannot acquire by purchase even at a public or judicial auction, either in person or through the petition of another
Summary:
Maximo Abarquez hired Atty. Alberto Fernandez to represent him in a civil lawsuit. The case involves the revocation of a contract of sale with right of repurchase. Maximo filed an appeal to the CA after the CFI of Cebu rejected his request.
Art 1491 provides that the following persons cannot acquire by purchase even at a public or judicial auction, either in person or through the petition of another. Justices, judges, prosecuting attorneys, clerks of superior and inferior courts and other employees connected with the administration of justice are subject to this prohibition. There is absolutely no evidence to suggest that Atty. Fernandez manipulated Maximo Abarquez in any way, had committed fraud on him, or had otherwise abused his position. No attorney’s charging lien may be established for the interest or claim. In actuality, he is entitled to more than the petitioner-spouses Larrazabal knowing about the opposing claim.
Doctrines:
Art 1491 provides that the following persons cannot acquire by purchase even at a public or judicial auction, either in person or through the petition of another.
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts and other employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession.
Art 1491 only prohibits the sale or assignment between the lawyer and his client, of property which is the subject of litigation. In other words, for the prohibition to operate, the sale or transfer of the property must take place during the pendency of the litigation involving the property.
Facts:
The opposing claimant for Cebu’s Lots Nos. 5600 and 5602 is Atty. Alberto Fernandez. Maximo Abarquez, the petitioner, hired Fernandez to represent him in a civil lawsuit involving the revocation of a contract of sale with right of repurchase and the recovery of the land for the affected lots against Agripina Abarquez. Maximo filed an appeal to the CA after the CFI of Cebu rejected his request.
Maximo represented himself in the lower court as a pauper and hired Fernandez on a contingency fee basis. Maximo agreed to pay Fernandez for the appeal by pledging to provide half of whatever money he would receive from the two lots should the appeal be successful.
Lots 5600 and 5602 belonged to Maximo’s parents’ inheritance, which was divided up among him and his sister Agripina as heirs. The pacto de retro deed was then revoked by CA, who then decided in Maximo’s favor. Maximo’s adjudged portion was covered by a TCT issued in his name.
Atty. Fernandez waited for Maximo to fulfill his commitment to give half of the reclaimed land as stated in the deal he signed. Maximo offered to sell the entire parcel of land to the petitioner-spouses Larrazabal instead of fulfilling his duty.
By attempting to affix an attorney’s lien on the TCT and notifying the Larrazabal spouses of his claim over a piece of the land, Atty. Fernandez took steps to protect his stake. Maximo transferred 2/3 of the lands to spouses Larrazabal by absolute sale deed despite the adverse claim’s annotation.
Subsequently, spouses Larrazabal sought for the cancellation of the adverse claim on the new TCT. Atty. Fernandez filed the current appeal in an effort to have the petition to cancel the adverse claim rejected.
Issue:
Whether the registration of the adverse claim of Atty. Fernandez was null since his interest was based on a contract for a contingent fee as Maximo’s counsel, prohibited under Art 1491 of the NCC?
Ruling:
NO. A contract for a contingent fee is valid. There was no contract of sale on the property which is the subject of litigation.
Art 1491 provides that the following persons cannot acquire by purchase even at a public or judicial auction, either in person or through the petition of another.
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts and other employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession.
Art 1491 only prohibits the sale or assignment between the lawyer and his client, of property which is the subject of litigation. In other words, for the prohibition to operate, the sale or transfer of the property must take place during the pendency of the litigation involving the property.
Under American Law, the prohibition does not apply to cases where after completion of litigation the lawyer accepts on account of his fee, an interest the assets realized by the litigation. There is a clear distraction between such cases and one in which the lawyer speculates on the outcome of the matter in which he is employed. A contract for a contingent fee is not covered by Article 1491 because the transfer or assignment of the property in litigation takes effect only after the finality of a favorable judgment.
The instant case’s legal costs were incurred by Atty. Fernandez is dependent on the outcome of the appeal and will receive half of any proceeds Maximo might receive from his interest in the contested property. As a result, the payment of the attorneys’ fees, as well as the transfer or assignment of the property at issue, will only happen if the appeal is successful. As a result, the transfer actually occurs after the finality of a positive ruling given on appeal rather than while the dispute over the subject property is still in court.
Under the Canons of Professional Ethics, Canon 10 prohibits a lawyer from purchasing any interest in the subject matter of the litigation which he is conducting. Canon 13, on the other hand, allowed a reasonable contingent fee contract.
There is absolutely no evidence to suggest that Atty. Fernandez had manipulated Maximo Abarquez in any way, had committed fraud on him, or had otherwise abused his position. Additionally, given the dependent nature of the attorney’s fees, the compensation for one-half of the in question lots is neither exorbitant nor unjustifiable.
Due to the validity of the contingent fee agreement, the Attorney received the benefit. Half of the parcels in question belong to Fernandez as an interest or right. Said interest was transferred to Fernandez after the lawsuit was successfully appealed since it was only then that the assignment of the disputed 1/2 of the lots became valid and legally obligatory. No attorney’s charging lien may be established for the interest or claim. The lower court made the right decision by rejecting the request to annotate the attorney’s lien.
A charging lien under Section 37, Rule 138 of the Revised Rules of Court is limited only to money judgments and not to judgments for the annulment of a contract or for delivery of real property as in the instant case. As a registered land interest, the only suitable remedy available to such an interest must be reported by Atty. Fernandez as a counterclaim.
The attorney’s half interest in the aforementioned lots ought to be treated with respect. In actuality, he is entitled to more than the petitioner-spouses Larrazabal. They bought their 2/3 share of the lots in question knowing about the attorney’s opposing claim.
The adverse claim was noted on the previous TCT and later on the new TCT that was given to them. They acted in bad faith because they bought the property knowing about the opposing claim. They are therefore prevented from contesting the accuracy of the opposing assertion.
The SC AFFIRMED the lower court ruling to deny petition for cancellation of adverse claim.