FIRST DIVISION

 
 
ROMEO G. ROXAS and   G.R. No. 152072
SANTIAGO N. PASTOR,  
Petitioners,  
- versus -  
   
ANTONIO DE  
ZUZUARREGUI, JR.,  
ENRIQUE DE ZUZUARREGUI,  
PACITA JAVIER, ELIZABETH  
R. GONZALES, JOSEFINA R.  
DAZA, ELIAS REYES,  
NATIVIDAD REYES,  
TERESITA REYES, JOSE  
REYES and ANTONIO REYES,  
Respondents.  
x---------------------x  
ANTONIO DE  
ZUZUARREGUI, JR.,  
ENRIQUE DE ZUZUARREGUI,  
PACITA JAVIER, ELIZABETH  
R. GONZALES, JOSEFINA R. G.R. No. 152104
DAZA, ELIAS REYES,  
NATIVIDAD REYES,  
TERESITA REYES, JOSE  
REYES and ANTONIO REYES, Present:
Petitioners,  
  PANGANIBAN, CJ.,
-versus- Chairperson,
  YNARES-SANTIAGO,
THE NATIONAL HOUSING AUSTRIA-MARTINEZ,
AUTHORITY, JOSE B. H. CALLEJO, SR.,
PEDROSA, ROMEO G. ROXAS CHICO-NAZARIO, JJ.
and SANTIAGO N. PASTOR,  
Respondents.  
 
 
Promulgated:
 
January 31, 2006
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
 
 
 DECISION
 
 
CHICO-NAZARIO, J.:
 
 
[1]
Before Us are two petitions for review on certiorari which were
[2]
consolidated per Resolution of this Court dated 27 November 2002. The
petitioners in G.R. No. 152072, Attys. Romeo G. Roxas and Santiago N. Pastor, seek
[3] [4]
the reversal and annulment of the Decision and Resolution of the Court of
Appeals dated 25 June 2001 and 06 February 2002, respectively. The petitioners in
G.R. No. 152104, the Zuzuarreguis, on the other hand, pray that the said Decision
and Resolution of the Court of Appeals be modified. Said Decision and Resolution
reversed and set aside the decision of the Regional Trial Court (RTC), Branch 98,
Quezon City, dated 03 January 1994.
 
THE ANTECEDENTS
 
The instant cases had their beginnings in 1977 when the National Housing
Authority (NHA) filed expropriation proceedings against the Zuzuarreguis,
petitioners in G.R. No. 152104, for parcels of land belonging to the latter situated in
Antipolo, Rizal, with a total land area of 1,790,570.36 square meters, more or less.
[5]
This case was lodged before the RTC, Branch 141, Municipality of Makati,
docketed therein as Civil Case No. 26804 entitled, National Housing Authority v.
Pilar Ibaez Vda. De Zuzuarregui, et al.
 
[6]
On 25 May 1983, said case was ordered archived by Branch 141.
 
About a month before the aforecited case was ordered archived, the Zuzuarreguis
engaged the legal services of Attys. Romeo G. Roxas and Santiago N. Pastor, to
represent them in Civil Case No. 26804. This was sealed by a Letter-Agreement
dated 22 April 1983, which is partly reproduced hereunder:
 
April 22, 1983
 
Mr. Antonio de Zuzuarregui, Jr.
Mrs. Pacita Javier (as heir to the
late Jose de Zuzuarregui)
Mr. Antonio de Zuzuarregui ( as heir to
the late Pilar Y. vda. De Zuzuarregui)
 
Dear Sir and Madam:
 
This is to confirm in writing our verbal negotiations for us to represent you in the
expropriation proceedings filed by the National Housing Authority against your
goodselves before the Court of First Instance of Rizal (now the Regional Trial Court)
and docketed as Civil Case No. 26804. Our representation shall also include the areas
taken over by the Ministry of Public Works and Highways which now formed part of
the Marcos Highway at Antipolo, Rizal.
 
The areas affected are the following:
 
xxxx
 
We shall endeavor to secure the just compensation with the National Housing
Authority and other governmental agencies at a price of ELEVEN PESOS (P11.00) or
more per square meter. Any lower amount shall not entitle us to any attorneys fees.
At such price of P11.00 per square meter or more our contingent fee[s] is THIRTY
PERCENT (30%) of the just compensation.
 
The other terms and conditions of our proposal are:
 
xxxx
 
5. You are willing to accept NHA 5-year bonds as part payment up to 75% of the total
compensation. In the event of your desire to discount the bonds, we shall assist to
have them discounted at 75% of its face value.
 
6. Our lawyers fees shall be in the proportion of the cash/bonds ratio of the just
compensation. Likewise our fees are subject to 10% withholding tax.
 
xxxx
 
 
Should the above proposal be acceptable to your goodselves, kindly signify your
formal acceptance as (sic) the space hereunder provided.
 
Very truly yours,
 
(Sgd.) (Sgd.)
SANTIAGO N. PASTOR ROMEO G. ROXAS
Lawyer Lawyer
CONFORME:
(Sgd.) (Sgd.)
ANTONIO DE ZUZUARREGUI, JR. PACITA JAVIER
In my behalf and as heir to As heir to the late
 [7]
The late Pilar Y. vda. De Jose De Zuzuarregui
Zuzuarregui
 
 
[8]
A Motion to Set Case for Hearing, dated 14 February 1984, was filed by
Attys. Roxas and Pastor in Civil Case No. 26804, praying that the case be revived
and be set for hearing by the court at the earliest date available in its calendar.
 
The appropriate proceedings thereafter ensued. On 29 October 1984, a Partial
Decision was rendered by Branch 141 in Civil Case No. 26804 fixing the just
compensation to be paid to the Zuzuarreguis at P30.00 per square meter.
 
[9]
The NHA filed a Motion for Reconsideration dated 23 November 1984 praying
that the Partial Decision be reconsidered and set aside, and a new one rendered
lowering the amount of just compensation in accordance with applicable laws.
Pending resolution thereof, a Joint Special Power of Attorney was executed by
Antonio De Zuzuarregui, Jr., Enrique De Zuzuarregui and Pacita Javier, in favor of
Attys. Roxas and Pastor, viz:
 
JOINT SPECIAL POWER OF ATTORNEY
 
KNOW ALL MEN BY THESE PRESENTS:
 
That We, ANTONIO DE ZUZUARREGUI, JR., ENRIQUE DE ZUZUARREGUI and PACITA
JAVIER, all of legal age, , do hereby appoint, name and constitute ATTYS. ROMEO G.
ROXAS and SANTIAGO PASTOR, to be our true and lawful attorneys to act in our
names and on our behalves to do and execute all or any of the following acts and
deeds subject to our approval:
 
xxxx
 
(2) To represent us in the negotiations for a compromise with the National Housing
Authority for our properties subject of the above case;
 
(3) To negotiate for and in our behalves for the settlement of the just compensation
of our properties payable in cash or in bonds;
 
(4) To sign and prepare all papers relative to the preparation of a Compromise
Agreement or any papers and communications which shall eventually bear our
signatures; and
 
(5) That this Special Power of Attorney is enforce (sic) as long as ATTYS. ROMEO G.
ROXAS AND SANTIAGO PASTOR are our lawyers in Civil Case No. 26804 before the
 Regional Trial Court, Makati, Branch CXLI.
 
HEREBY GIVING AND GRANTING unto our said attorneys full power and authority
whatsoever requisite or necessary or proper to be done in or about the premises, as
fully to all intents and purposes as we might or could lawfully do if personally
present, and hereby ratifying and confirming all that our said attorneys shall do or
cause to be done under and by virtue of these presents.
 
IN WITNESS WHEREOF, We have hereunto set our hands this 26th day of August,
1985, in Makati, M. M., Philippines.
 
 
(Sgd.)
ANTONIO DE ZUZUARREGUI, JR.
 
(Sgd.)
ENRIQUE DE ZUZUARREGUI
 
(Sgd.)
[10]
PACITA JAVIER
 
 
On 22 November 1985, a Special Power of Attorney was executed by Beatriz
Zuzuarregui vda. De Reyes in favor of Attys. Romeo G. Roxas, Santiago Pastor and
Basilio H. Toquero, quoted as follows:
 
SPECIAL POWER OF ATTORNEY
 
KNOW ALL MEN BY THESE PRESENTS:
 
That I, BEATRIZ ZUZUARREGUI VDA. DE REYES, Filipino, of legal age, widow, and a
resident of E. Rodriguez Ave., Quezon City, Philippines do hereby appoint, name and
constitute ATTYS. ROMEO G. ROXAS, SANTIAGO PASTOR and BASILIO H. TOQUERO,
to be my true and lawful attorneys :
 
1. To represent me in the negotiation for a Compromise with the National Housing
Authority for my properties subject to my approval in CIVIL CASE No. 26804,
entitled National Housing Authority vs. Pilar Ibaez de Zuzuarregui, et al., before the
Regional Trial Court, Makati, Branch CXLI;
 
2. To negotiate for and in my behalf for the settlement of the just compensation of
my properties payable in cash or in bond, subject to my approval;
 
3. To sign and prepare all papers relative to the preparation of a Compromise
Agreement or any papers and communications which shall eventually bear my
signature;
 
4. To accept for and in my behalf payments for my properties after the Compromise
Agreement is duly approved by the Court, the actual receipts of which payments
shall be signed by me.
  
HEREBY GIVING AND GRANTING unto my said attorneys full power and
authority whatsoever requisite, necessary or proper to be done under and by virtue
of these presents.
 
IN WITNESS WHEREOF, I have hereunto set my hand this 22nd day of November
1985, in the City of Manila, Philippines.
 
(Sgd.)
BEATRIZ ZUZUARREGUI
[11]
VDA. DE REYES
 
 
On 10 December 1985, a Letter-Agreement was executed by and between Antonio
Zuzuarregui, Jr., Pacita Javier and Enrique De Zuzuarregui, on the one hand, and
Attys. Romeo G. Roxas and Santiago Pastor, on the other. The said Letter-
Agreement reads:
 
December 10, 1985
 
Atty. Romeo G. Roxas
Atty. Santiago Pastor
Makati Executive Center
Salcedo Village, Makati
 
Dear Atty. Roxas & Atty. Pastor:
 
This will confirm an amendment to our agreement regarding your attorneys fees as
our lawyers and counsels for the Zuzuarreguis properties expropriated by National
Housing Authority covering ONE HUNDRED SEVENTY-NINE (179) HECTARES, more
or less, covered by TCT Nos. 138340, 85633 and 85634 and filed as Civil Case No.
26804.
 
We hereby confirm and agree that we are willing to accept as final and complete
settlement for our 179 hectares expropriated by NHA a price of SEVENTEEN PESOS
(P17.00) per square meter, or for a total of THIRTY MILLION FOUR HUNDRED
THOUSAND PESOS (P30.4 Million), all payable in NHA Bonds.
 
We also agree and confirm that for and in consideration of your services as our
lawyers and counsels in the said expropriation case, we commit and bind ourselves
to pay to you, your heirs or assignees-in-interest, as your contingent attorneys fees
any and all amount in excess of the SEVENTEEN PESOS (P17.00) per square meter
payable in NHA bonds as mentioned above.
 
This Letter Agreement serves also as your authority to collect directly from NHA the
amount pertaining to you as your contingent attorneys fees.
 
This Letter Agreement hereby amends and supersedes our previous agreement
regarding your attorneys fees as our lawyers and counsels in the above-mentioned
 expropriation case.
 
 
Very truly yours,
 
(Sgd.) (Sgd.)
ANTONIO DE ZUZUARREGUI, JR. PACITA JAVIER
In my behalf as heir to As heir to the late
the late Pilar I. vda. de Jose De Zuzuarregui
Zuzuarregui
 
(Sgd.)
ENRIQUE DE ZUZUARREGUI
 
CONFORME:
 
(Sgd.) (Sgd.)
[12]
ATTY. ROMEO G. ROXAS ATTY. SANTIAGO PASTOR
 
 
[13]
Resolution No. 1174 dated 16 December 1985 was issued by the NHA stating
that the Zuzuarregui property would be acquired at a cost of P19.50 per square
meter; that the Zuzuarreguis would be paid in NHA Bonds, subject to the
availability of funds; and that the yield on the bonds to be paid to the Zuzuarreguis
shall be based on the Central Bank rate at the time of payment.
 
As a result of the aforesaid NHA Resolution, a Compromise Agreement was
executed between the Zuzuarreguis and the NHA in Civil Case No. 26804. The
Compromise Agreement, stipulated among other things, that the just compensation
of the Zuzuarregui properties would be at P19.50 per square meter payable in NHA
Bonds. In a Decision dated 20 December 1985, the RTC, Branch 141, Makati,
approved the Compromise Agreement submitted by the parties.
 
On 27 December 1985, the NHA Legal Department, through Atty. Jose B. H. Pedrosa,
released to Atty. Romeo G. Roxas, in behalf of the Zuzuarreguis, the amount of
P20,000,000.00 in NHA Bearer Bonds as partial payment for several parcels of land
[14]
with a total area of 1,790,570.36 square meters located in Antipolo, Rizal. On
even date, Atty. Romeo G. Roxas delivered NHA Bonds to Antonio De Zuzuarregui
[15]
in the amount of P15,000,000.00. On 04 February 1986, the amount of
P34,500,000.00 in Bearer Bonds was again released by the NHA to Atty. Romeo G.
 [16]
Roxas in behalf of the Zuzuarreguis. On 14 February 1986, the Zuzuarreguis
[17]
issued a receipt for receiving the amount of P30,070,000.00. This receipt
included the P15,000,000.00 given to them last 27 December 1985. Again on 17
February 1986, the Zuzuarreguis, through Beatriz Zuzuarregui vda. De Reyes,
[18]
issued another receipt for the amount of P450,000.00 in NHA bonds. The total
amount in NHA bonds released to Atty. Romeo G. Roxas in behalf of the
Zuzuarreguis amounted to P54,500,000.00. Out of this amount, the records show
that the amount turned over to the Zuzuarreguis by Atty. Roxas amounted to
P30,520,000.00 in NHA bonds.
 
Computed at P19.50 per square meter, the 1,790,570.36 square meters property of
the Zuzuarreguis was expropriated at a total price of P34,916,122.00. The total
amount released by the NHA was P54,500,000.00. The difference of P19,583,878.00
is, undoubtedly, the yield on the bonds.
 
[19]
On 25 August 1987, a letter was sent by the Zuzuarreguis new counsel, Jose F.
Gonzalez, to Attys. Roxas and Pastor, demanding that the latter deliver to the
Zuzuarreguis the yield corresponding to bonds paid by the NHA within a period of
10 days from receipt, under pain of administrative, civil and/or criminal action.
 
Attys. Roxas and Pastor answered via a letter dated 21 September 1987 explaining
their side of the story. They stated therein, among other things, that the amount
that they got seems huge from the surface, but it just actually passed their hands,
[20]
as it did not really go to them.
 
[21]
On 29 September 1987, a letter was sent by the Zuzuarreguis through Antonio
De Zuzuarregui, Jr., to Attys. Romeo G. Roxas and Santiago N. Pastor, informing the
latter that their services as counsels of the Zuzuarreguis (except Betty) in the
expropriation proceedings filed by the NHA, docketed as Civil Case No. 26804, was
being formally terminated.
 
Apparently unsatisfied with the explanation of Attys. Roxas and Pastor, the
Zuzuarreguis filed a civil action for Sum of Money and Damages on 14 November
1989 before the RTC, Quezon City, Branch 98, docketed as Civil Case No. Q-89-4013,
against the NHA, Jose B. H. Pedrosa, Atty. Romeo G. Roxas and Atty. Santiago N.
Pastor. The Zuzuarreguis demanded that the yield on the NHA bonds be turned
over to them.
 
[22]
After due hearing, a Decision in Civil Case No. Q-89-4013 was rendered on 03
January 1994, dismissing the Complaint. The dispositive portion reads:
 
WHEREFORE, in view of the foregoing consideration[s], judgment is hereby
rendered ordering the dismissal of the complaint against all the defendants; and,
further ordering plaintiffs, jointly and solidarily, to:
 
1.                  Pay each of the defendants Romeo G. Roxas, Santiago Pastor and
Jose B. H. Perdosa, the amount of P200,000.00, P200,000.00 and
P100,000.00, respectively, as moral damages;
 
2.                                  Pay each of the defendants Roxas, Pastor and Pedrosa, the
amount of P50,000.00, P50,000.00, and P25,000.00, respectively as
exemplary damages;
 
3.                                  Pay attorneys fees to defendants Roxas and Pastor in the
amount of P20,000.00; and
 
4.                  Pay the costs of this suit.
 
 
[23]
A Notice of Appeal dated 10 February 1994 was filed by the Zuzuarreguis.
Subsequently, on 26 April 1995, the Zuzuarreguis filed their appeal brief with the
Court of Appeals. The case was docketed as CA-G.R. CV No. 45732.
 
[24]
A Decision was eventually promulgated by the Fifteenth Division of the Court
of Appeals on 25 June 2001, reversing and setting aside the ruling of Branch 98, viz:
 
Therefore, We find that the amount of P4,476,426.275 is, in the opinion of this
Court, commensurate to the services rendered by defendants-appellees. This
amount has been arrived at by giving to defendants-appellees P2.50 per square
meter of the 1,790,570.51 square meter expropriated properties of herein plaintiffs-
appellants.
 
 WHEREFORE, IN VIEW OF THE FOREGOING, the decision dated January 3,
1994 of the Regional Trial Court, National Capital Judicial Region, Branch 98, Quezon
City in Civil Case No. 89-4013 entitled Antonio Zuzuarregui, Jr., et al. versus National
Housing Authority, et al. for Sum of Money and Damages, is hereby REVERSED and
SET ASIDE. Defendants-Appellees Roxas and Pastor are hereby ordered to return to
plaintiffs-appellants the amount of P12,596,696.425, the balance from the
P17,073,122.70, received as yield from NHA bonds after deducting the reasonable
[25]
attorneys fees in the amount of P4,476,426.275.
 
 
[26]
Attys. Roxas and Pastor filed a Motion for Reconsideration on 25 July 2001. The
[27]
Zuzuarreguis also filed a Motion for Reconsideration on 30 July 2001, not
having been satisfied with the award, while the NHA and Pedrosa filed their
[28]
Motions for Reconsideration on 03 August 2001.
 
In a Resolution dated 06 February 2002, the Court of Appeals denied for lack of
merit all the Motions for Reconsideration.
 
On 05 March 2002, Attys. Roxas and Pastor filed a Petition for Review on
[29]
Certiorari assailing the Decision of the Court of Appeals, docketed as G.R. No.
152072. Likewise, on 21 March 2002, the Zuzuarreguis filed their own Petition for
[30]
Review on Certiorari assailing the same Decision, docketed as G.R. No. 152104.
 
ASSIGNMENT OF ERRORS
 
Attys. Roxas and Pastor, petitioners in G.R. No. 152072, assign as errors the
following:
 
I
 
THE HONORABLE COURT OF APPEALS GRAVELY ERRED ON A QUESTION OF LAW
IN HOLDING THAT THE LETTER-AGREEMENT DATED DECEMBER 10, 1985 CANNOT
BE ALLOWED TO STAND AS THE LAW BETWEEN THE PARTIES; and
 
 
 
II
 
 THE HONORABLE COURT OF APPEALS GRAVELY ERRED ON A QUESTION OF LAW
IN HOLDING THAT DEFENDANTS-APPELLANTS, HEREIN PETITIONERS,
CONCEALED TO THE PLAINTIFFS-APPELLEES, HEREIN RESPONDENTS, THE YIELD
[31]
OF THE NHA BONDS
 
 
The Zuzuarreguis, petitioners in G.R. No. 152101, on the other hand, assign as
errors the following:
 
I
 
THE COURT OF APPEALS ERRED IN AWARDING TO PETITIONERS THE PRINCIPAL
AMOUNT OF ONLY P12,596,696.425 AND NOT P17,073,122.70 MAKING A
DIFFERENCE OF P4,476,426.28
 
II
 
THE RESPONDENTS SHOULD BE HELD LIABLE FOR INTEREST FROM THE DATE OF
THE FILING OF THE COMPLAINT UNTIL FULLY PAID
 
III
 
THE RESPONDENTS SHOULD BE HELD LIABE FOR MORAL AND EXEMPLARY
DAMAGES AND ATTORNEYS FEES
 
IV
 
THE RESPONDENTS NHA AND JOSE B.H. PEDROSA ARE JOINTLY AND SEVERALLY
[32]
LIABLE WITH RESPONDENTS ROXAS AND PASTOR
 
 
ISSUE FOR RESOLUTION
 
Drawn from the above assignment of errors, it is patent that the principal issue
that must be addressed by this Court is:
 
WHETHER OR NOT THE LETTER-AGREEMENT DATED 10 DECEMBER 1985,
EXECUTED BY THE ZUZUARREGUIS, AND ATTYS. ROXAS AND PASTOR, FIXING THE
EXACT AMOUNT THAT MUST GO TO THE FORMER, SHOULD STAND AS LAW
BETWEEN THE PARTIES.
 
 
THE COURTS RULING
 
Attys. Roxas and Pastor, petitioners in G.R. No. 152072, contend in the main that
the Zuzuarreguis are only entitled to the amount of P17.00 per square meter for
the 1,790,570.36 square meters expropriated by the government. This was,
according to them, embodied in the Letter-Agreement dated 10 December 1985,
wherein the Zuzuarreguis agreed to accept the price of P17.00 per square meter.
Besides, Attys. Roxas and Pastor contend that the price of P17.00 was even way
above the P11.00 that the Zuzuarreguis were willing to accept for their properties
under the Letter of Engagement executed by the parties earlier on 22 April 1983.
Computed at P17.00 per square meter, they stress that the amount that should go to
the Zuzuarreguis for their 1,790,570.36 square meters property should be
P30,439,696.10, and that in fact the Zuzuarreguis have received P30,520,000.00. The
Letter-Agreement dated 10 December 1985 should thus stand as law between the
parties. Since this Letter-Agreement, which was as plain and simple as can be such
that there is no need for any further construction, already fixed the amount that
would go to the Zuzuarreguis (P17.00 per square meter), then it should be so.
 
Attys. Roxas and Pastor further assert that the receipts issued by the Zuzuarreguis
dated 14 February 1986 and 17 February 1986 indicated that the amounts received
by the latter were in full and final payment for the subject properties.
 
The NHA, for its part, insists that there was no conspiracy between Attys. Roxas
and Pastor on the one hand, and the NHA and Atty. Pedrosa on the other, on the
[33]
application of yields from NHA bonds. The Zuzuarreguis, according to the NHA,
miserably failed to substantiate and establish conspiracy between them.
 
The Zuzuarreguis, for their part, though they were triumphant in the Court of
Appeals, insist that the amounts awarded them were not enough. According to
them, the P12,596,696.425 awarded by the Court of Appeals was not correct. They
should have been awarded the amount of P17,073,122.70. Quoting the
Zuzuarreguis:
 
Respondents Roxas and Pastor retained for themselves the amount of P3,980,000.00
which represented the agreed attorneys fees of Roxas and Pastor at P2.50 per square
meter. The amount of P20,000,000.00 representing the yield of all the bearer bonds
was, in the words of the Court of Appeals, deliberately hidden by respondents Roxas
and Pastor from petitioners. By mathematical computation, the P20,000,000.00 yield
should be proportionately divided at the ratio of P17.00 (petitioners) and P2.50
 (share of respondents Roxas and Pastor). Following this ratio of division, of the
P20,000,000.00 yield, P17,073,122.70 should pertain to petitioners and the balance of
P2,926,877.30 to respondents Roxas and Pastor. Add this amount to the total of
P3,980,000.00 at the agreed rate of P2.50 per square meter, the total attorneys fees of
respondents Roxas and Pastor should be P6,906,877.30, not bad, again in the words
of the Court of Appeals, for handling a simple expropriation case which ended up in
a compromise agreement. It was, therefore, in error to still deduct the amount of
P4,476,426.28 from petitioners share in the yield in the amount of P17,073,122.70
leaving then only P12,596,696.42.
 
What was done, however, is that the product of 1,790,570.36 sq m. (area of the
expropriated land of petitioners) and P2.50 which is 4,476,426.28 was again
deducted from the P17,073,122.70 which is the corresponding share of the
petitioners out of the total yield of P20,000,000.00. If this were a criminal case,
[34]
petitioners were being sentenced twice for the same offense.
 
 
The Zuzuarreguis further insist that legal interest on the amount of P17,073,122.70
be imposed from the date of the filing of the complaint, including moral and
exemplary damages, and attorneys fees.
 
We sustain the Court of Appeals, but with modification in the computation.
 
A contract is a meeting of the minds between two persons whereby one binds
[35]
himself, with respect to the other, to give something or to render some service.
Contracts shall be obligatory, in whatever form they may have been entered into,
[36]
provided all the essential requisites for their validity are present.
 
Under Article 1318 of the Civil Code, there are three essential requisites which
must concur in order to give rise to a binding contract: (1) consent of the
contracting parties; (2) object certain which is the subject matter of the contract;
[37]
and (3) cause of the obligation which is established.
 
All these requisites were present in the execution of the Letter-Agreement.
Consent is manifested by the meeting of the offer and the acceptance upon
[38]
the thing and the cause which are to constitute the contract. The Zuzuarreguis,
in entering into the Letter-Agreement, fully gave their consent thereto. In fact, it
was them (the Zuzuarreguis) who sent the said letter to Attys. Roxas and Pastor, for
the purpose of confirming all the matters which they had agreed upon previously.
There is absolutely no evidence to show that anybody was forced into entering into
the Letter-Agreement. Verily, its existence, due execution and contents were
[39]
admitted by the Zuzuarreguis themselves.
 
The second requisite is the object certain. The objects in this case are twofold. One
is the money that will go to the Zuzuarreguis (P17.00 per square meter), and two,
the money that will go to Attys. Roxas and Pastor (any and all amount in excess of
P17.00 per square meter). There was certainty as to the amount that will go to the
Zuzuarreguis, and there was likewise certainty as to what amount will go to Attys.
Roxas and Pastor.
 
The cause is the legal service that was provided by Attys. Roxas and Pastor. In
general, cause is the why of the contract or the essential reason which moves the
[40]
contracting parties to enter into the contract.
 
[41]
It is basic that a contract is the law between the parties. Obligations arising
from contracts have the force of law between the contracting parties and should be
complied with in good faith. Unless the stipulations in a contract are contrary to
law, morals, good customs, public order or public policy, the same are binding as
[42]
between the parties.
 
[43]
In Licudan v. Court of Appeals, we did not allow the Contract for
Professional Services between the counsel and his client to stand as the law
between them as the stipulation for the lawyers compensation was unconscionable
and unreasonable. We said:
 
Although the Contract for Professional Services dated August 30, 1979 was
apparently voluntarily signed by the late Aurelio Licudan for himself and on behalf
of his daughter, petitioner Cristina Licudan-Campos and by the petitioner Wilfredo
Licudan who both manifested in open court that they gave their free and willing
consent to the said contract, we cannot allow the said contract to stand as the law
between the parties involved considering that the rule that in the presence of a
contract for professional services duly executed by the parties thereto, the same
becomes the law between the said parties is not absolute but admits an exception
 that the stipulations therein are not contrary to law, good morals, good customs,
[44]
public policy or public order.
 
 
Under the contract in question, Attys. Roxas and Pastor are to receive contingent
[45]
fees for their professional services. It is a deeply-rooted rule that contingent
fees are not per se prohibited by law. They are sanctioned by Canon 13 of the
Canons of Professional Ethics, viz:
 
13. Contingent Fees.
 
A contract for 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.
 
 
[46]
and Canon 20, Rule 20.01 of the Code of Professional Responsibility, viz:
 
 
CANON 20 A LAWYER SHALL CHARGE ONLY FAIR AND REASONABLE FEES.
Rule 20.01. A lawyer shall be guided by the following factors in determining his fees:
(a)                The time spent and the extent of the services rendered or required;
(b)               The novelty and difficulty of the question 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.
 
 
However, in cases where contingent fees are sanctioned by law, the same should
be reasonable under all the circumstances of the case, and should always be
[47]
subject to the supervision of a court, as to its reasonableness, such that under
Canon 20 of the Code of Professional Responsibility, a lawyer is tasked to charge
only fair and reasonable fees.
 
 Indubitably entwined with the lawyers duty to charge only reasonable fees is
the power of this Court to reduce the amount of attorneys fees if the same is
[48]
excessive and unconscionable. Thus, Section 24, Rule 138 of the Rules of Court
partly states:
 
SEC. 24. Compensation of attorneys; agreement as to fees. An attorney shall be
entitled to have and recover from his client no more than a reasonable
compensation for his services, with a view to the importance of the subject matter
of the controversy, the extent of the services rendered, and the professional
standing of the attorney. x x x. A written contract for services shall control the
amount to be paid therefore unless found by the court to be unconscionable or
unreasonable.
 
 
Attorneys fees are unconscionable if they affront ones sense of justice,
[49]
decency or reasonableness. It becomes axiomatic therefore, that power to
determine the reasonableness or the, unconscionable character of attorney's fees
stipulated by the parties is a matter falling within the regulatory prerogative of the
[50]
courts.
 
In the instant case, Attys. Roxas and Pastor received an amount which was
equal to forty-four percent (44%) of the just compensation paid (including the yield
on the bonds) by the NHA to the Zuzuarreguis, or an amount equivalent to
P23,980,000.00 of the P54,500,000.00. Considering that there was no full blown
hearing in the expropriation case, ending as it did in a Compromise Agreement, the
44% is, undeniably, unconscionable and excessive under the circumstances. Its
reduction is, therefore, in order. This is in accordance with our ruling in the earlier
[51]
case of Tanhueco v. De Dumo , where we reduced the amount of attorneys fees
from sixty percent (60%) to fifteen percent (15%), for being excessive and
unreasonable.
 
It is imperative that the contingent fees received by Attys. Roxas and Pastor
must be equitably reduced. In the opinion of this Court, the yield that corresponds
to the percentage share of the Zuzuarreguis in the P19.50 per square meter just
compensation paid by the NHA must be returned by Attys. Roxas and Pastor.
 
 The yield on the NHA bonds amounted to P19,583,878.00. This amount must
therefore be divided between the Zuzuarreguis, on the one hand, and Attys. Roxas
and Pastor, on the other. The division must be pro rata. The amount of P17.00 that
should go to the Zuzuarreguis represents 87.18% of the P19.50 per square meter
just compensation, The P2.50 per square meter that was to go to Attys. Roxas and
Pastor, on the other hand, represents 12.82%.
 
The Zuzuarreguis are entitled to the yield equal to 87.18% of the P19,583,878.00,
while Attys. Roxas and Pastor are entitled to 12.82% of said amount. The amount
corresponding to 87.17% of P19,583,878.00 is P17,073,224.84. This is the yield that
the Zuzuarreguis are entitled to. Attys. Roxas and Pastor, on the other hand, are
entitled to P2,510,653.16.
 
Attys. Roxas and Pastor, in the opinion of this Court, were not shortchanged
for their efforts for they would still be earning or actually earned attorneys fees in
the amount of P6,987,078.75 (P4,476,425.59 + P2,510,653.16).
 
The amount of P17,073,224.84 must therefore be returned by Attys. Roxas and
Pastor to the Zuzuarreguis. They can take this out from the yield in the amount of
P19,583,878.00 which they have appropriated for themselves.
 
On the issue of moral and exemplary damages, we cannot award the same for
there was no direct showing of bad faith on the part of Attys. Roxas and Pastor, for
as we said earlier, contingency fees are not per se prohibited by law. It is only
necessary that it be reduced when excessive and unconscionable, which we have
already done.
 
We likewise cannot hold the NHA and Atty. Pedrosa jointly and severally liable to
the Zuzuarreguis for there is no evidence to show conspiracy between them.
 
WHEREFORE, in view of all the foregoing considerations, the Decision and
Resolution of the Court of Appeals dated 25 June 2001 and 06 February 2002,
respectively, are AFFIRMED but with the MODIFICATION that Attys. Romeo G.
Roxas and Santiago N. Pastor are hereby ordered to return to the Zuzuarreguis the
amount of P17,073,224.84. No costs.
 
SO ORDERED.
 
  MINITA V. CHICO-NAZARIO
Associate Justice
 
 
WE CONCUR:
 
 
ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson
 
 
CONSUELO YNARES-SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice Associate Justice
   
   

   

ROMEO J. CALLEJO, SR.

Associate Justice
 
 

CERTIFICATION
 
Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the
conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Courts Division.
 
 
 
  ARTEMIO V. PANGANIBAN
Chief Justice
 
 

[1]
Rollo (G.R. No. 152072), pp. 10-55; Rollo (G.R. No. 152104), pp. 9-23.
[2]
Id. (G.R. No. 152104), p. 356.
[3]
Id. (G.R. No. 152072), pp. 57-80, penned by Associate Justice Remedios Salazar-Fernando with then Associate
Justice later Presiding Justice Romeo A. Brawner and Associate Justice Rebecca De Guia-Salvador,
concurring.
[4]
Id. (G.R. No. 152072), pp. 82-83.
[5]
Now City of Makati.
[6]
Folder of Exhibits, p. 79.
[7]
Id., pp. 89-90.
[8]
Id., pp. 57-58.
[9]
Id., pp. 59-64.
[10]
Id., pp. 91-92.
[11]
Id., pp. 54-55.
[12]
Id., p. 9.
[13]
Id., p. 10.
[14]
Id., p. 15.
[15]
Id., p. 45.
[16]
Id., p. 16.
[17]
Id., p. 49.
[18]
CA decision, p. 15.
[19]
Folder of Exhibits, pp. 20-21.
[20]
Id., p. 25.
[21]
Id., p. 46.
[22]
Rollo (G.R. No. 152072), pp. 84-113.
[23]
Records, pp. 404-405.
[24]
Rollo (G.R. No. 152072), pp. 57-80.
[25]
CA decision, pp. 23-24.
[26]
CA rollo, pp. 233-260.
[27]
Id., pp. 264-270.
[28]
Id., pp. 272-278.
[29]
Rollo (G.R. No. 152072), pp. 10-55.
[30]
Id. (G.R. No. 152104), pp. 9-23.
[31]
Id. (G.R. No. 152072), p. 25.
[32]
Id. (G.R. No. 152104), pp. 13-17.
 
[33]
Rollo (G.R. No. 152072), p. 257.
[34]
Petition for Certiorari (G.R. No. 152104), p. 6.
[35]
CIVIL CODE, Art. 1305.
[36]
CIVIL CODE, Art. 1356.
[37]
Paderes v. Court of Appeals, G.R. No. 147075, 15 July 2005, 463 SCRA 504, 521.
[38]
CIVIL CODE, Art. 1319.
[39]
Order of the RTC dated 16 March 1990; Main Records, p. 101.
[40]
Jurado, COMMENTS AND JURISPRUDENCE ON OBLIGATIONS AND CONTRACTS, p. 454, 9th Revised Edition, 1987,
citing Manresa, 5th Ed., Bk. 2, pp. 445-446.
[41]
Almeda v. Court of Appeals, 326 Phil. 309, 316 (1996); Reta v. National Labor Relations Commission, G.R. No.
112100, 27 May 1994, 232 SCRA 613, 616; City of Manila v. Intermediate Appellate Court, G.R. No. 71159, 15
 November 1989, 179 SCRA 428, 436; Bagadiong v. Vda. De Abundo, G.R. No. 75395, 19 September 1988, 165
SCRA 459, 463.
[42]
In Re: Ricardo P. Presbiterio, Sr. v. Court of Appeals, et al., G.R. No. 102432, 21 January 1993, 217 SCRA 372, 373.
[43]
G.R. No. 91958, 24 January 1991, 193 SCRA 293.
[44]
Licudan v. Court of Appeals, supra, pp. 300-301.
[45]
A contingent fee is a fee charged for a lawyers services only if the lawsuit is successful or is favorably settled out
of court (BLACKS LAW DICTIONARY, p. 315, 7th Edition [1999]).
[46]
Licudan v. Court of Appeals, supra note 43, p. 301.
[47]
CANONS OF PROFESSIONAL ETHICS, Section 13.
[48]
New Sampaguita Builders Construction, Inc. (NSBCI) v. Philippine National Bank, G.R. No. 148753, 30 July 2004,
435 SCRA 565, 592; citing Bachrach Garage and Taxicab Co., Inc. v. Golingco, 39 Phil. 912, 920-921 (1919);
Bachrach v. Golingco, 39 Phil. 138, 143-144 (1918); Sangrador v. Spouses Valderrama, G.R. No. L-79552, 29
November 1988, 168 SCRA 215, 229.
[49]
BLACKS LAW DICTIONARY, p. 1526, 7th Ed. (1999).
[50]
De Santos v. City of Manila, 150-A Phil. 798, 805 (1972); Kalalo v. Luz, 145 Phil. 152, 174 (1970); Cruz v. Court of
Industrial Relations, 118 Phil. 820, 825 (1963).
[51]
Adm. Cases Nos. 1437 and 1683, 25 April 1989.