Legal Ethics - Term Paper WIP
Legal Ethics - Term Paper WIP
Legal Ethics - Term Paper WIP
Contingency Fees on
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A Term Paper
Submitted to:
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In Partial Fulfillment of
LAW 126:
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Section:
M7
Table of contents
Introduction
Background
Discussion
Limitations 10
Reasonableness 11
Conclusion 14
Recommendation 16
Bibliography 17
Curriculum Vitae 19
INTRODUCTION
out of court, which requires the application of law, legal procedure, knowledge,
training and experience. In the landmark case of Cayetano v. Monsod, the court cited
Black’s Law Dictionary in defining what the practice of law means, “The rendition of
services requiring the knowledge and the application of legal principles and technique
to serve the interest of another with his consent. It is not limited to appearing in court,
or advising and assisting in the conduct of litigation, but embraces the preparation of
conveyancing, the preparation of legal instruments of all kinds, and the giving of all
legal advice to clients. It embraces all advice to clients and all actions taken for them
in matters connected with the law. An attorney engages in the practice of law by
opposing counsel about pending litigation, and fixing and collecting fees for services
the conduct of case which, however is not the case, since the practice of law also
embraces the preparation of pleading and other papers related to proceedings and
actions in behalf of clients and conveying them before judges and courts.
Also, there is also an engagement in the practice of law when a lawyer holds
himself out to the public and demands compensation for services such as, but not
limited to:
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a. Opinions which involves the sharing of legal knowledge in relation to an
the amount to be collected for a lawyer’s services. These are the standards:
1. That the amount must be reasonable and have bearing on the case;
Reasonableness has always been the key term when talking about payment to
a lawyer. Attorney’s fees are even defined as the reasonable compensation paid to a
percentage of what may be recovered, is made to depend on the success of the action.
Contingent contracts include therein the contingent fee between the client and the
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Article 1491 of the Civil Code item number five (5) states that:
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and
other officers and 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
….
client and a lawyer stipulating a contingent fee is included in such prohibition. The
court ruled in Fabillo v. IAC that no it is not within the ambit of such article. The
reason thereof is the time as to when the payment will be made. Payment between the
parties – the client and the lawyer- is done not during the pendency of the case but
Contingency fee and some rules regarding its application are even mentioned
in Canon 13 of the Canons of Professional Ethics and Canon 20 Rule 20.01 of the
should be reasonable under all the circumstances of the case including the risk and
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court, as to its reasonableness,” is provided in Canon 13 of the Canons of
Professional Ethics.
(a) the time spent and the extent of the service rendered or required;
proffered case;
(f) The customary charges for similar services and the schedule of fees of the
(g) The amount involved in the controversy and the benefits resulting to the
The reason as to the why Contingent Fees are allowed in our jurisdiction has
been cited in many decided cases, discussed in detail in Rayos v. Atty. Hernandez,
that they are permitted because they redound to the benefit of the poor client
especially in cases where the client has a meritorious cause of action but could not
afford the services of a legal counsel. Basically, this is a means for the poor and the
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Since contingent fees are allowed in our laws, the problem now arises as to
up to how much can a lawyer and client agree upon; specifically, how high can the
Contingent fee contracts are often created by the lawyer and the client when the
subject case involves property or a sum of money. Contingent fees are often used by lawyers
Since there are no guidelines imposed on the percentage as to how the contingent
fees are to be imposed, aside from reasonableness, there has always been the problem on
In the case of Rayos v. Hernandez, the respondent claimed that he charged the client
forty per cent (40%) of the total amount awarded to the petitioner. This was ruled by the court
as grossly excessive and unconscionable and was reduced to thirty-five per cent (35%).
In the case of Cortez v. Atty. Cortes, the petitioners proposition was grounded on the
Labor Code. Article 111, Book III of the Code states that “It shall be unlawful for any person
to demand or accept, in any judicial or administrative proceedings for the recovery of wages,
attorney’s fees which exceed ten percent of the amount of wages recovered,” and poised that
the respondent is in violation of this provision for charging 50% as contingent fee. The IBP
Commission on Discipline ruled that the 50% imposition is indeed excessive; however, it did
not agree that the 10% limitation in that provision shall apply in this case citing Masmud v.
NLRC which explains the two types of attorney’s fees – in the ordinary sense and in the
extraordinary concept. The commission stated that the proposition cannot accepted since, to
their words, “Article 111 of the Labor Code deals with the extraordinary concept of attorney’s
fees. It regulates the amount recoverable as attorney's fees in the nature of damages sustained
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by and awarded to the prevailing party. It may not be used as the standard in fixing the
amount payable to the lawyer by his client for the legal services he rendered.” The fees
involved in this case, the contingency fee, is in the ordinary sense since it is merely a
In this case, it was the petitioner who alleged that they had a handshake agreement
on a contingent fee of 12% which was denied by the respondent saying that the only thing
agreed upon is the fact that his service was engaged by complainant to pursue labor claims.
The lawyer even pointed out that a fifty-fifty sharing is not unconscionably high because he
gave the complainant the option to hire other lawyers, but chose him instead. The court
however believed that 50% is indeed excessive and, thus, reached to a decision of reducing
the contingency fee to 12% which is deemed to be the reasonable worth of the legal services
rendered.
In the case of Aquino v. Casabar, the petitioner and the lawyer in this case verbally
agreed to contract for contingent fees equivalent to thirty per cent (30%) of the increase of the
just compensation awarded. The Court deemed it fit that fifteen and not thirty per cent should
Using the three cases, we can say that the percentage used for contingent fees is on a
case-to-case basis and there are no standards or guidelines as to how much would be
considered to be reasonable, but only the criteria that it must not be excessive or
unconscionable.
In our jurisprudence, such issue is faced not only with regard contingent fees but
also for other civil concerns such as when the Usury Law was no longer in effect; that the
judgement that it must not be shocking to the conscience of men or not unconscionable.
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BACKGROUND
Unlike in other profession where there are standards set for specific services,
the practice of law does not come in standard or uniform rates. The fee for legal
a. The number of hours rendered by the lawyer and the scope of work they
The most common lawyer fee is the Consultation Fee which is charged for
the inquiry of professional analysis of a case or even just a situation. This phase where
the client consults with the lawyer is important since this will be the time that latter
will assess if he is fit to handle the case. It will also be the time that the lawyer will
assess how much time, effort, money and other resources are needed plus the
Another type is the Acceptance Fee and as the name suggests, it is the fee for
simply accepting the case. The reason behind this fee is that once the lawyer accepts
the case, he misses the chance to accept other cases and could mean sacrificing a
potential client. According to YKC Law, only a handful charge this one.
Retainer Fee is also another type. As the name suggests also, this is the fee
that would make sure that the lawyer who once represented you, will be available for
you for as long as you need him. This comes in two types; a general retainer and a
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special retainer. Most companies would incur the general retainer fee especially those
who do not have or only has a small-sized legal department. The legal services
usually involved in this type of the arrangement are the general tasks needed by the
company such as drafting of contracts, board resolutions, recording the minutes of the
meeting, and the like. The specialized retainer fee, on the other hand, usually costs
higher since in this arrangement, specific tasks are demanded by the client.
lawyers who usually agree to this fee are those who are confident enough of their
skills and capabilities. This agreement is for the benefit of those who could not afford
the services of a lawyer. In this arrangement, the lawyer gets a certain percentage if
the client gets a favorable judgement and risks not getting any in case he fails to win
the case.
Initial fees and fees paid in the progress of litigation are not part of contingent
fees. In the case of Law firm of Raymundo Armovit v. CA, it was stated that just
because the client has incurred a substantial amount in the initial fees does not justify
that he won’t pay the agreed upon contingency fee; the two are independent from each
other.
When talking about the practice of law, in general, the Constitution provides
that the Supreme Court has the exclusive power. The Integrated Bar of the Philippines
is a State-Organized Bar to unify the entire lawyer population. The power of the
Integrated bar comes from the Supreme Courts power, as provided in Section 13,
practice and procedure in all courts and the admission to the practice of law.
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Primarily, the integrated Bar is designed to improve the position of the Bar as an
instrumentality of justice and the Rule of Law; that the most important purpose of the
In relation therewith, the different IBP Chapters are the ones responsible in
Fees.
In a joint resolution of the Integrated Bar of the Philippines Cebu Province and Cebu
City Chapters, it adopted the 2018 Standard Minimum Attorney’s Fees Schedule. The
resolution adopted the standard minimum fees on services related to: consultation and
acceptance fees which depend on whether the case is civil, criminal administrative or
a special proceeding and as to the court where such case was filed; may it be in the
Municipal Circuit Trial Court, Municipal Trial Court and Municipal Trial Court in
Cities, Regional Trial Court, Court of Appeals or Court of Tax Appeals, Supreme
functions. There are also standards set on Appearance Fees before the courts, before
labor agencies or offices, before the Ombudsman and the DOJ Prosecution office,
Jurisprudence also provides that the Courts have an important role to play
when it comes to Contingent Fees. In Radiowealth Finance Corp. v. ICB, it was held
that the courts can reduce or modify the attorney’s fees if they are unconscionable or
if it is unreasonable, the court may review the same. That duty of the courts was also
upheld in Licudan v. CA; it was stated that they must guard against the charging of
unconscionable and excessive fees by lawyers for their services when engaged as
counsel.
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DISCUSSION
The last paragraph of Article 2208 of the New Civil Code under Actual or
Compensatory Damages states that in all cases, the attorney’s fees and expenses of
litigation must be reasonable. This, so far, is the main guiding principle upon
contingent fees.
Limitations
As a general rule, Contingent Fees agreed to by the client and the lawyer are
allowed. As held in Aquino v. Casabar, the Courts are not just responsible for keeping
an eye and making sure that a lawyer acts in a proper and lawful manner, but also for
making sure that the lawyer is paid his just fees. The contingent fee is somewhat a
lawyer agrees to pay the expenses of the proceedings to enforce the client’s rights.
Canon 42 of the Code of Professional Ethics provides that a lawyer may not properly
agree with a client to pay or bear the expenses of the litigation and a champertous
contract is in violation of such canon. In the case of Bautista v. Gonzales where the
agreement between the lawyer and client involves a 50% contingent fee provided that
the lawyer defrays all expenses for the suit including the court fees. This agreement
was held by the court to be null and void for being champertous. This decision will
still be held even if the lawyer acted in good faith in advancing the expenses of the
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litigation; if such is the case, the expenses shall be subject to reimbursement by the
client.
Another limitation is when the contingent fee agreed upon would tantamount
to giving the property to the lawyer as in the case of Licudan v. CA where the subject
land that is ought to be recovered has an area of 121 square and the contingency is to
be a usufruct of the 91.5 square meters of such land. This agreement was deemed to
be excessive and the court held that it shall never happen that the victor of the
Reasonableness
Article 2208 of the Civil Code provides that attorney’s fees and the like shall
at all times be reasonable. Regarding contingent fee, such rule was even upheld in the
Fee Schedule stating that a contract for contingent fee, where sanctioned by law,
should be reasonable under all circumstances of the case including the risk and
the Court, as to its reasonableness. Meaning, the issue on whether the requirement that
a contingent fee must be reasonable is met will lie on the hands of the courts.
Before going directly to contingent fees, what must be known first are the
attorney’s fees in general. In Lorenzo v. CA, they are as follows: the amount and
character of the services rendered; the nature and importance of the litigation or
business in which the services were rendered; the responsibility imposed; the amount
of money or the value of the property affected by the controversy or involved in the
employment; the skill and experience called for in the performance of the services;
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the professional character and social standing of the attorney; the results secured,
among others. These factors were taken from Section 24 of Rule 138 of the Rules of
Court which talks about the compensation of attorneys and the 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
attorneys as expert witnesses as to the proper compensation, but may disregard such
testimony and base its conclusion on its own professional knowledge. A written
contract for services shall control the amount to be paid therefor unless found by the
question of law. In such cases, the principle of quantum meruit is applied where the
court will rule that the lawyer will be entitled to receive what he merits for his
are:
These elements are not exclusive but are only as additional inputs to rulings
in decided cases. In case that all such elements are met, it will give the lawyer
fees and the petitioner a chance to refute the same. The court further added in this
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case the principle behind reasonableness. That the Law should not be seen as a means
for yielding profit. The compensation is merely a simple reward for job done or a
service rendered. It is impressed with public interest that is why it must be subject to
State regulation.
The determination of attorney’s fee on the basis of quantum meruit has for its
purpose the prevention of a client from running away from his obligation after gaining
the fruits of the case brought about by the rendered legal services. On the part of the
attorney, this is also a mechanism in order to avoid unjust enrichment. The lawyer
must show that he is indeed entitled to reasonable compensation for the efforts that he
has exerted in defending his client’s cause. In the case of Villarama c. De Jesus, Atty.
De Jesus wanted to claim the entire success fee, but the Court ruled that he is only
entitled to fifty per cent (50%) since the goal, which is to transfer the subject party to
the petitioner’s name was not achieved. Basing on his effort and the legal services he
has provided to the petitioner, what was considered to be reasonable is only half of
In Aquino v. Casabar, the reason behind the ruling is that the agreement
between the petitioner and the attorney was done verbally and a contract for
contract, and since there was no express contract in this case, the attorney can only
recover on the basis of quantum meruit. Because of the fact that the contract was
made verbally, there is now no evidence to justify the 30% contingent fee. Basing on
quantum meruit on the account of the service rendered by the attorney, the court held
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If a contingent fee is declared to be unconscionable, it will not be mitigated
by the fact the client did not dispute the fee arrangement as held in a New Jersey case.
Here, a law firm has a common practice of charging forty-five percent (45%) fee and
has said that such practice has been approved by judges in a couple dozen cases. In
the retainer agreement, it was provided that the fee shall be a contingent fee of 45% or
a fee based on the firm’s hourly rate, whichever is greater. The court ruled that the fee
is unconscionable and unreasonable. Such decision was made even though the client
That even if the private complainants withdraws their complaints, the proceeding will
still push through. This is for the reason that disciplinary actions do not just concern
the private complainant but the public and the legal profession as well. As in
contingent fees, the practice of law must always carry with it public interest and the
courts cannot allow that the public be charged with excessive fees for legal services. It
will always be held by the courts that the earning element in the practice of law is
only secondary in nature and only next to the primary purpose which is public service.
CONCLUSION
both the client and the lawyer. Such arrangement gives the lawyer the higher incentive
to do a good job giving a sense of security to the client that he will likely receive
better representation. Many would say that such mechanism paves access to justice
for the individuals who would not be able to access to representation even if they have
a strong cause of action. In the United States, the most common percentage is used on
such fees is 30%. However, anti-contingency fee groups continue to implement caps
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on the fees that lawyers charge. What they fail to discern is that the imposition of caps
prevents smaller cases from being taken. That if, for example, a 10%-cap is imposed,
lawyers will tend to choose cases involving larger amount and would tend to avoid
smaller ones. This would now contradict the main purpose of a contingent fee.
There will be a tendency that a lawyer will impose more than what is
reasonable. Not always, but it is possible that he will be charging more than what his
legal services are worth. And since there no specific laws that imposes the standard
rate for contingent fees, a lawyer is free to charge how much he would want to. It
It has already been established on how the contingent fee be agreed upon;
that there be an express contract. But there is still a lack of guidelines as to how much.
The source of the decision is usually previously decided cases. Since the courts
usually regulate the fees in relation to the type of action and the amount of recovery,
what could be done is to create classes of action with the corresponding range of
amounts involved and from the groups created, percentages shall be assigned. It will
not be easy since there is an unlimited possibility of causes of action; but it might be
possible to create classes of actions that have already been brought to court before.
contingent fee. They would go back and forth on the net amount of recovery or the
gross amount of recovery as basis. But in Texas, they implement a rule that the lawyer
will only be entitled to receive the specified fee up to the extent the client receives
payment. Here, it is made sure that the negative would not be left with a negative
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Going back to main purpose of the contingent fee – which redounds to the
benefit of the poor and the helpless, the rule on making sure that the client be made
only to pay up to the extent of what he receives is in line with such purpose.
RECOMMENDATION
A class containing a cause of action plus a range of the amount involved shall
be formulated; and
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BIBLIOGRAPHY
Books
Albano, E. S., Albano II, E. A., Albano-Pua, M. A., & Albano III, E. A. (2018). Legal
and Judicial Ethics (Bar Reviewer) (2018 ed.). Central Books Supply, Inc.
Aquino, D. C., & Buenaventura, R. U. (2017). Legal Profession. Central Books
Supply, Inc.
Cases
Augusto Aquino v. Hon. Ismael Casabar, et al; G.R. No. 191470, January 26, 2015
Alberto Lacson, et al v. Hon. Luis R. Reyes, et al; G.R. No. 86250, February 26, 1990
Angel Bautista v. Ramon Gonzales; A.M. No. 1625, February 12, 1990
Eugenio Cortez v. Atty. Hernando Cortes; A.C. No. 9119, March 12, 2018
Florencio Fabillo, et al v. Intermediate Appellate Court et al; G.R. No. L-68838,
March 11, 1991
Francisco Rayos v. Atty. Ponciano Hernandez; G.R. No. 169079; February 12, 2007
Law Firm of Raymundo Armovit v. Court of Appeals, et al; G.R. No 154559, October
5, 2011
Radiowealth Finance Co., Inc., et al v. International Corporate bank, et al; G.R. No.
77042-43, February 28, 1990
Ramon Villarama v. Atty. Clodualdo De Jesus; G.R. No. 217004, April 17, 2017
Renato Cayetano v. Christian Monsod, et al.; G.R. No. 100113, September 3, 1991
Severo Lorenzo v. Court of Appeals; G.R. No. 85383, August 30, 1990
Wilfredo Licudan, et al v. Court of Appeals; G.R. No. 91958, January 24, 1991
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Government Websites
Book III – Conditions of employment. (2014, December 11). Bureau of Labor
Relations. https://blr.dole.gov.ph/2014/12/11/book-iii-conditions-of-employment/
Kwa-Zulu Natal Law Society. https://www.lawsoc.co.za/upload/files/Contingency
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CURRICULUM VITAE
Status: Single
: Amado M. Fariola
Education:
Batch Valedictorian
Batch Valedictorian
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: University of Cebu – Banilad
2019-Present
: Accounting Instructor
2019-Present
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