G.R. No. 137680 - Concept Placement Resources Inc. vs. Funk

On June 25, 1994, Concept Placement Resources, Inc. (petitioner) engaged the legal services of Atty. Richard V. Funk (respondent).
On July 1, 1994, the parties executed a retainer contract. The contract stipulated that respondent would be paid a regular retainer fee for various legal services, except for litigation, quasi-judicial, and administrative proceedings, which would be subject to separate billings.

Isidro A. Felosopo filed a complaint for illegal dismissal against petitioner with the Philippine Overseas Employment Administration (POEA), docketed as POEA Case No. 94-08-2370.
Petitioner referred the labor case to respondent for legal action. Respondent, as counsel for petitioner, filed an answer with counterclaim, seeking P30,000.00 in damages and P60,000.00 in attorney’s fees.

On March 1, 1995, while the labor case was still pending, petitioner terminated its retainer agreement with respondent. Despite this, respondent continued to handle the case.

On October 30, 1995, the POEA rendered a Decision dismissing Felosopo’s complaint with prejudice. However, the POEA did not rule on petitioner’s counterclaim for damages and attorney’s fees. The Decision became final and executory.

On December 8, 1995, respondent advised petitioner of the POEA’s favorable Decision and requested payment of his attorney’s fees.
Petitioner rejected the request, citing the following reasons:

Respondent filed a complaint for sum of money (attorney’s fees) and damages against petitioner in the Metropolitan Trial Court (MTC), docketed as Civil Case No. 51552.
During pre-trial, the MTC declared petitioner in default and allowed respondent to present evidence ex-parte.
On October 27, 1996, the MTC rendered a Decision ordering petitioner to pay respondent P50,000.00 as attorney’s fees.

Petitioner appealed to the Regional Trial Court (RTC), which reversed the MTC Decision. The RTC held that the dismissal of the labor case carried with it the dismissal of the counterclaim for attorney’s fees, constituting res judicata.

Respondent filed a petition for review with the Court of Appeals, which reversed the RTC Decision and affirmed the MTC Decision, sustaining the award of P50,000.00 in attorney’s fees.

Whether an allegation in a pleading drafted by counsel on behalf of his client in a labor case can be used as the sole basis for a collection suit by counsel in the absence of a written contract.
Whether there is a distinction between the principle of res judicata per se and the principle that the dismissal of the main case carries with it the dismissal of the compulsory counterclaim, and whether such dismissal constitutes res judicata with respect to the compulsory counterclaim.