Director of Lands vs Ababa, Maximo Abarquez and Sps LarrazabalFacts

Maximo Abarquez was plaintiff in a case for annulment of sale of a parcel of land against his sister Agripina. Since he had neither properties nor money to pay his counsel Atty. Alberto Fernandez, he contracted with the latter for contingent fees as payment for his services. The consideration for such contract was half of the land to be awarded to Abarquez.

Abarquez was able to annul the sale. Thereafter, Atty. Fernandez waited for Abarquez to comply with his obligation under the document executed by him on June 10, 1961 by delivering the one-half (1/2) portion of the said parcels of land.

Abarquez refused to deliver the portion. Instead, he offered 2/3 of the parcel for sale to the Sps. Larrazabal. Atty. Fernandez immediately filed with the trial court a motion to annotate his attorney's lien on the TCT of the property and by notifying the prospective buyers of his claim over the one-half portion of the parcels of land. He also filed an affidavit of adverse claim with the Register of Deeds of Cebu. By virtue of the registration of said affidavit, the adverse claim for one-half (1/2) of the lots covered by the June 10, 1961 document was annotated on the TCT.

Despite these developments, Abarquez still sold 2/3 of the land to the spouses. When the land was sought to be registered, the adverse claim of Atty. Fernandez necessarily had to appear on the new transfer certificate of title. This annotation was subject to a cancellation proceedings filed by the spouses which was denied by the lower court. They appealed the decision immediately to the Supreme Court.The spouses contend that a contract for the contingent fee herein violates Article 1491 (5) of the NCC because it involves an assignment of a property subject of litigation.

Issue

Whether or not the contract for a contingent fee, basis of the interest of Atty. Fernandez, is prohibited by the Article 1491 of the New Civil Code and Canon 10 of the Canons of Professional Ethics.

Held.

No. Article 1491 prohibits only the sale or assignment between the lawyer and his client, of property which is the subject of litigation. In Rosario Vda. de Laig vs. Court of Appeals, "The prohibition in said article applies only to a sale or assignment to the lawyer by his client of the property which is the subject of litigation. In other words, for the prohibition to operate, the sale or assignment of the property must take place during the pendency of the litigation involving the property."

Also, in Albano vs. Ramos, the attorney was allowed to recover in a separate action her attorney's fees of one-third (1/3) of the lands and damages recovered as stipulated in the contingent fee contract.

Thus, 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.

In the instant case, the attorney's fees of Atty. Fernandez, consisting of one-half (1/2) of whatever Abarquez might recover from his share in the lots in question, is contingent upon the success of the appeal. Hence, the payment of the attorney's fees, that is, the transfer or assignment of one-half (1/2) of the property in litigation will take place only if the appeal prospers. Therefore, the transfer actually takes effect after the finality of a favorable judgment rendered on appeal and not during the pendency of the litigation involving the property in question. Consequently, the contract for a contingent fee is not covered by Article 1491.

Neither does the contract violate the Canons of Professional Ethics. Canon 13 of the Canons expressly recognizes contingent fees by way of exception to Canon 10 upon which the spouses relied. While 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, allows a reasonable contingent fee contract, thus: "A contract for a contingent fee where sanctioned by law, should be reasonable under all the circumstances of the case, including the risk and uncertainty of the compensation, but should always be subject to the supervision of a court, as to its reasonableness."

In Rosario Vda. de Laig vs. Court of Appeals, the Court held that contingent fees are recognized in this jurisdiction which contingent fees may be a portion of the property in litigation. Also, a contingent fee contract is always subject to the supervision of the courts with respect to the stipulated amount and may be reduced or nullified. So that in the event that there is any undue influence or fraud in the execution of the contract or that the fee is excessive, the client is not without remedy because the court will amply protect him.Thus, under the provisions of Article 1491 and Canons 10 and 13 of the Canons of Professional Ethics, a contract for a contingent fee is valid. Decision of the lower court affirmed.

Theodore Britanico v Judge Espinosa

Facts

Petitioner met respondent in 1999 when the latter and his wife were selling beach properties. Trusting respondents stature as a judge, petitioner agreed to purchase 6 parcels of land for P 3.5M. Petitioner was able to pay P100,000.00 and the balance was to be paid upon the signing of the deed of sale.

When he was able to examine the deed, Petitioner questioned its propriety since the sellers were all residing abroad. Respondent judge told petitioner to trust him since he was a judge. Upon their second meeting, petitioners requested that the sellers execute a special power of authority to authorize respondent to sell the properties. Respondent judge took offense at his request stating that he was putting his position as judge on the line. They failed to agree on said request and respondent judge left petitioners.

Upon closer scrutiny of the properties' titles, petitioner discovered that the properties were prohibited from being alienated within five years of the issuance of their titles under Commonwealth Act 141. The titles were issued on 1997 while the negotiations and payments were made in 1999; thus, within 2 years from such issuance and was thus forbidden. Petitioner also discovered that the same parcels of land were being sold to different parties.

This prompted petitioners to file this administrative case against respondent judge with the Office of the Court Administrator.

Complainant averred that in spite of the fact that respondent knew of the prohibition on alienation of the properties, respondent still participated in the negotiation of the sale of the properties. Despite knowing the prohibition, respondent even advised the parties to execute an undated deed of absolute sale, to be dated only when the period of prohibition shall have lapsed. Thus, instead of advising against the sale during the prohibited period, respondent pursued it.

Furthermore, respondent assured him of the legality of the transaction and that respondent was placing his capacity as a judge on the line to assure its legality. And only by such assurance did complainant continue to pursue the transaction.

Respondent alleged that during the entire transaction, petitioner was aware of nature of the properties being sold and was given the chance to scrutinize the titles. He, therefore, cannot claim that he was being deceived. He also claimed that he did not know anything about the nature of the subject properties since they belonged to the family of his wife and he was not very particular about them.

Respondent also admits the preparation of the Deed of Absolute Sale. He claims, however, that he made it at the instance of complainant and that such was only a draft and was not intended to formalize the transaction. Respondent also admits that he was present during second meeting.

The OCA found that respondent's act of drafting the Deed of Absolute Sale is highly improper. As a judge, he should know that the transaction being undertaken was highly irregular since the certificates of title of the real properties were issued as Free Patents, making the land subject to the prohibition against sale for a period of five (5) years from their date of issuance. He did not call his wife's attention to the prohibition, but allowed her to continue with the transaction and even accompanied her to the meetings with complainant to discuss the terms of the sale.

A violation of the Code of Judicial Conduct constitutes gross misconduct, which is classified as a serious charge for which the sanction ranges from fine to dismissal from the service. It however recommended that respondent be fined for P20,000.00 for having been found liable for violating Canon 2 of the Code of Judicial Conduct: "A judge should avoid impropriety and the appearance of impropriety in all activities." for the first time.Issue

Is respondent judge liable?

Held

Yes. The sale of the property was prohibited by law. The Original Certificate of Title was a Free Patent which on its face cited Commonwealth Act No. 141 which prohibits alienation of the property within five years of the grant of the patent. The Free Patent was granted on October 21, 1997. Therefore, the negotiations which took place and the down payments which were made in 1999 were well within the prohibited period.

Respondent, being a member of the Judiciary, should have restrained himself from participating in the sale of the properties. In fact, it was incumbent upon him to advise the parties to discontinue the transaction because it was contrary to law. Granting, for the sake of argument, that the deed of sale he prepared was only a draft, it is still an act which pursued the continuance of the sale. Being a judge, he should have taken steps to prevent the sale, or at least he should have informed the parties that the sale was illegal. However, taking into account his degree of involvement in the transaction, and considering further that he made no pecuniary gain, and that this is his first violation, the Court tempered his penalty.Decision of the OCA affirmed.