G.R. No. 143044 - Madarang vs. Court of Appeals

Alexander J. Masmud, represented by his counsel Atty. Rolando B. Go, Jr., filed a complaint against First Victory Shipping Services and Angelakos (Hellas) S.A. for non-payment of permanent disability benefits, sickness allowance, moral and exemplary damages, and other claims.
The legal representation was based on a contingent fee agreement whereby Alexander agreed to pay Atty. Go twenty percent (20%) of the total monetary claims if settled or paid, with an additional ten percent (10%) in case of appeal.

On November 21, 2003, the Labor Arbiter (LA) rendered a decision granting Alexander’s monetary claims but dismissed his claim for medical expenses. The decision awarded US$60,000.00 for permanent disability benefits, US$2,348.00 for sickness allowance (converted to Philippine currency), and fixed amounts for moral (P200,000.00) and exemplary (P100,000.00) damages, including attorney’s fees of 10% of the award.
Alexander’s employer appealed the LA decision before the National Labor Relations Commission (NLRC). During the pendency of the NLRC proceedings, Alexander passed away and Evangelina Masmud, his widow, was substituted as complainant after being briefed by Atty. Go.
On April 30, 2004, the NLRC rendered a decision dismissing the employer’s appeal, which was later affirmed following a failed motion for reconsideration on October 26, 2004.

After the NLRC decision became final and executory, the LA granted the execution of the NLRC decision. A motion by Atty. Go led to the garnishment of the employer’s surety bond, with the NLRC Cashier receiving a check amounting to P3,454,079.20.
Evangelina, having received the cash award as substitute complainant, disbursed P680,000.00 to Atty. Go, which corresponded to 20% of the monetary award.
Dissatisfied with the partial payment, Atty. Go filed a motion to record and enforce his attorney’s lien on the remaining balance, alleging that Evangelina had not honored their contingent fee contract which stipulated an additional 10% (or potentially 40% as argued) of the total monetary award.

On February 14, 2005, the LA issued an order granting Atty. Go’s motion, recording a lien for the balance of 20% or specifically P839,587.39 against the monies due to Evangelina, and directing the NLRC Cashier to pay a portion (P677,589.96) to Atty. Go from the deposited amount.
Evangelina questioned this order before the NLRC; however, her appeal was dismissed on January 31, 2006. Subsequently, the case was elevated to the Court of Appeals (CA).
On October 31, 2007, the CA partially granted Evangelina’s petition by declaring that Atty. Go had been fully compensated by the amount already received (P1,347,950.11), hence effectively resolving the dispute concerning his additional fee claim.
A motion for reconsideration by Evangelina was denied by the CA on June 6, 2008, which ultimately led to the petition for review before the Supreme Court.

Evangelina contended that the award of attorney’s fees should be governed by Article 111 of the Labor Code, which mandates a 10% fee in cases of unlawful wage withholding, opposing the contingent fee agreement that stipulated a higher percentage (effectively 40% including contingencies if applicable).
Atty. Go maintained that his compensation should be based on their agreed retainer contract for legal services rendered under the ordinary concept of attorney’s fees and should reflect the risks undertaken with a contingent fee arrangement.

Whether the attorney’s fee arrangement is subject to the application of Article 111 of the Labor Code or whether the agreed contingent fee contract between Atty. Go and Alexander (and subsequently Evangelina) should prevail as the basis for compensation.
Whether the Court of Appeals committed reversible error by upholding Atty. Go’s claim for a higher percentage (up to 40%) of the monetary award as attorney’s fees.
Whether the determination of attorney’s fees should follow the ordinary compensation for legal services, as determined by the parties’ retainer agreement, or if it should be calculated under the extraordinary concept of damages provided for in Article 111 of the Labor Code.
Whether the proper criteria for evaluating the reasonableness and enforceability of contingent fee agreements, including the guidelines under Section 24, Rule 138 of the Rules of Court and the Code of Professional Responsibility, were duly considered.