Case Summary (G.R. No. 68838)
Background of the Estate and Probate Proceeding
Justina Fabillo’s 1957 will bequeathed to her brother Florencio a house and lot in San Salvador Street, Palo, Leyte (Tax Dec. No. 19335) and to her husband Gregorio Brioso a parcel in Pugahanay, Palo. After her death, the probate court approved partition on June 2, 1962, reserving ownership of the San Salvador property for separate litigation.
Engagement of Legal Counsel
In August 1964 Florencio retained Atty. Alfredo M. Murillo to revive Special Proceedings No. 843 and prosecute Civil Case No. 3532 versus Gregorio Brioso. A handwritten letter proposed a 40% contingent fee “of the money value of the house and lot” upon success.
Contract of Services
On August 22, 1964 the parties formalized a contract stipulating that Murillo would represent Florencio and his heirs in both proceedings until conclusion. Compensation: 40% of any “benefit” from the cases, specified as 40% of purchase price if sold; 40% of mortgage proceeds; 40% of rentals; option to occupy or lease 40% of the property; plus 40% of damages or attorney’s fees awarded.
Settlement of Civil Case No. 3532
On October 29, 1964 the CFI approved a compromise granting Florencio ownership of both contested parcels. Murillo then took possession and asserted 40% ownership over the lands, leasing the Pugahanay parcel.
Breakdown in Relations and Subsequent Suit
In 1966 the Fabillos repudiated Murillo’s share. On March 23, 1970 Murillo sued for declaration of 40% ownership over both properties, annual produce (P900/year from 1966), P5,000 consequential damages, and P1,000 attorney’s fees.
Trial Court Ruling (1975–1976)
The CFI found no vitiation of consent, exercised jurisdiction independently of probate, and held the contingent‐fee contract valid under Civil Code Art. 1491(5). It declared Murillo owner of 40% of both parcels, awarded P2,450 (produce 1967–1973) plus 40% of 1974–1975 income, P300 attorney’s fees, and costs.
Intermediate Appellate Court Decision (1984)
The IAC affirmed the trial court in toto, upholding the contract’s interpretation and the award.
Issue on Contract Interpretation
Petitioners argued that Art. 1491 prohibits acquisition of client property by a lawyer and that the 40% fee was unconscionable. They maintained the contract gave Murillo an ownership interest rather than a fee equivalent to the property’s value.
Legal Framework
Under Civil Code Art. 1491(5), a lawyer may not purchase client property during pending litigation. Contingent fees are permissible so long as payment occurs post‐judgment, with no undue influence, fraud, or extortion. The 1988 Code of Professional Responsibility further allows a lawyer’s lien on client funds to satisfy lawful fees.
Supreme Court Analysis
- Art. 1491(5) bars purchase of client property mid‐litigation, but contingent fees paid after judgment do not constitute such purchase.
- No evidence of undue influence or unconscionability; contingent fee agreements are
Case Syllabus (G.R. No. 68838)
Procedural History
- 1957: Justina Fabillo’s last will bequeaths to Florencio Fabillo a house and lot in San Salvador Street, Palo, Leyte (Tax Declaration No. 19335) and to Gregorio D. Brioso a parcel in Pugahanay, Palo, Leyte.
- 1962: Probate court approves her will and partition project, reserving ownership of Tax Declaration No. 19335 for separate litigation.
- August 9, 1964: Lawyer Alfredo M. Murillo writes Florencio proposing to file a new complaint for a contingent fee of 40% of the money value of the recovered property.
- August 22, 1964: Florencio and Josefa execute a written contract of services engaging Murillo to handle Special Proceedings No. 843 and Civil Case No. 3532, binding themselves to pay 40% of “whatever benefit” they derive from the cases.
- October 29, 1964: Civil Case No. 3532 ends in compromise; Florencio is declared owner of both San Salvador and Pugahanay properties.
- 1966: Murillo takes possession of 40% interest, installs a tenant on the Pugahanay parcel; Florencio denies him his share of produce.
- March 23, 1970: Murillo files Civil Case No. 4434 for declaratory relief of 40% ownership, damages, and appointment of a receiver against the Fabillo spouses and their heirs.
- December 2, 1975: Court of First Instance rules that the 40% contingent fee is valid, declares Murillo owner of 40% of both parcels, awards produce and income shares, attorney’s fees, and costs.
- January 29, 1976: On reconsideration, the CFI modifies awards: P2,450 for 1967–1973 produce, 1974–1975 income share, P300 attorney’s fees, and costs.
- March 27, 1984: Intermediate Appellate Court affirms the modified CFI decision in toto.
- March 11, 1991: Supreme Court grants certiorari, reverses IAC decision, and enters new judgment.
Facts
- The Fabillo spouses seek Murillo’s legal assistance to recover the San Salvador property after probati