Case #19 (Zosa)

[G.R. No. 169079. February 12, 2007.]

FRANCISCO RAYOS, petitioner,
vs.
ATTY. PONCIANO G. HERNANDEZ,
respondent.
TOPIC: Contingent Fee arrangement
FACTS:
1. Rayos was a client of Atty Hernandez in
Rayos vs NAPOCOR.
The story of the case:
On Oct 26-27, 1978, typhoon Kading hit
Bulacan and concurrently, NAPOCOR
imprudently opened three floodgates of the
spillway of Angat Dam which caused
flooding of Angat River. Consequently, 10
relatives of Rayos died and his familys
properties were destroyed. Rayos sued
NAPOCOR. RTC dismissed the case for
lacking credible evidence. CA reversed the
decision and awarded damages in favor of
Rayos, which was also affirmed by the SC.
Final and executory on Aug 4, 1993. The
awards were as follows:
a. Actual damages - P520, 000
b. Moral damages P500, 000
c. Litigation Expenses P10,000.
2. The check issued by NAPOCOR was
turned over to Atty Hernandez as he was the
counsel of Rayos. Rayos demanded the
check from Atty H but Atty H refused
3. Rayos filed a motion with the RTC to
direct Atty Hernandez to deliver to him the
check. Despite the Court Order, Atty H
refused claiming that it was his means to
ensure payment of his attorneys fees.
4. Atty Hernandez deposited the amount of
P502, 838. 79 to the bank account of Rayos.
5. Rayos filed a disbarment case against Atty

H for his failure to return the remaining

P557, 961. 21.
6. Atty H replied: Rayos allegedly agreed to
a contingent basis fee on a 40%-60% (clientlawyer) sharing:
40% - attorneys fees
20% - litigation expenses
7. The Court referred the case to
Commission on Bar Discipline of IBP for
investigation.
Investigating Commissioner
recommended the DISMISSAL of
the case.
IBP adopted and approved the same.
MAIN ISSUE:
Whether or not the contingent fee agreement
is binding upon Rayos and Atty Hernandez.
DECISION:
YES, but with RESERVATIONS.
CONTINGENT FEE the contingent fee is
the amount agreed upon by the parties
subject to the stipulation that counsel will be
paid for his legal services only if the suit or
litigation prospers.
YES: Contracts of this nature are permitted
because they redound to the benefit of the
poor client and the lawyer especially in
cases where the client has meritorious cause
of action but no means to pay for legal
services, unless he agrees to a contract of
contingent fee. A much higher compensation
is allowed as contingent fee in consideration
of the risk that the lawyer may get nothing if
the suit fails.
RESERVATIONS: Contingent fee contracts
should always be subject to the supervision
of a court as to its reasonableness. When the
courts find that the stipulated amount is
excessive or found to have been marred by

fraud, mistake, undue influence on the part

of the attorney, public policy demands that
said contract be disregarded to protect the
client from unreasonable exaction.
In the case at bar, Atty H collected 53% of
the total amount due to Rayos.
Rayos was unschooled and frustrated
with the loss of his loved ones and
the destruction of his familys
properties. Given these facts, Rayos
would easily succumb to the
demands of Atty H regarding his
attorneys fees.
Taking note also of Atty Hs efforts
in litigating Rayos case for 15 years
and the risk he took in representing
Rayos on a contingent fee basis, a
fee of 35% of the amount awarded to
Rayos would be a fair compensation
for Atty Hs legal services.
Disbarment should never be decreed where
any lesser penalty, such as temporary
suspension, would accomplish the end
desired. Thus, guided by previous rulings of
the Court, Atty Hernandezs SUSPENSION
FOR 6 MONTHS is justified in the case at
bar.
-----------------------------------------------------

NB:
Factors which should guide a lawyer in
determining his fees:
Rule 20.1 of CPR:
a) The time spent and the extent of the
services rendered or required;
b) The novelty and difficulty of the
questions involved;
c) The importance of the subject
matter;
d) The skill demanded;
e) The probability of losing other
employment as a result of acceptance
of the proffered case;
f) The customary charges for similar
services and the schedule of fees of
the IBP Chapter to which he belongs;
g) The amount involved in the
controversy and the benefits
resulting to the client from the
service;
h) The contingency or certainty of
compensation;
i) The character of the employment,
whether occasional or established;
and
j) The professional standing of the
lawyer.