Monday, November 14, 2011

Attorney's Fees - G.R. No. 145817

G.R. No. 145817

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Peña is entitled to payment for compensation for services rendered as agent of Urban Bank, but on the basis of the principles of unjust enrichment andquantum meruit, and not on the purported oral contract.

The Court finds that Peña should be paid for services rendered under the agency relationship that existed between him and Urban Bank based on the civil law principle against unjust enrichment, but the amount of payment he is entitled to should be made, again, under the principle against unjust enrichment and on the basis of quantum meruit.

In a contract of agency, agents bind themselves to render some service or to do something in representation or on behalf of the principal, with the consent or authority of the latter.[250] The basis of the civil law relationship of agency is representation, [251] the elements of which include the following: (a) the relationship is established by the parties’ consent, express or implied; (b) the object is the execution of a juridical act in relation to a third person; (c) agents act as representatives and not for themselves; and (d) agents act within the scope of their authority.[252]

Whether or not an agency has been created is determined by the fact that one is representing and acting for another.[253] The law makes no presumption of agency; proving its existence, nature and extent is incumbent upon the person alleging it.[254]

With respect to the status of Atty. Peña’s relationship with Urban Bank, the trial and the appellate courts made conflicting findings that shall be reconciled by the Court. On one end, the appellate court made a definitive ruling that no agency relationship existed at all between Peña and the bank, despite the services performed by Peña with respect to the Pasay property purchased by the bank. Although the Court of Appeals ruled against an award of agent’s compensation, it still saw fit to award Peña with Ph3,000,000 for expenses incurred for his efforts in clearing the Pasay property of tenants.[255] On the other extreme, the trial court heavily relied on the sole telephone conversation between Peña and Urban Bank’s President to establish that the principal-agent relationship created between them included an agreement to pay Peña the huge amount of PhP24,000,000. In its defense, Urban Bank insisted that Peña was never an agent of the bank, but an agent of ISCI, since the latter, as seller of the Pasay property committed to transferring it free from tenants. Meanwhile, Peña argues on the basis of his successful and peaceful ejectment of the sub-tenants, who previously occupied the Pasay property.

Based on the evidence on records and the proceedings below, the Court concludes that Urban Bank constituted Atty. Peña as its agent to secure possession of the Pasay property. This conclusion, however, is not determinative of the basis of the amount of payment that must be made to him by the bank. The context in which the agency was created lays the basis for the amount of compensation Atty. Peña is entitled to.

The transactional history and context of the sale between ISCI and Urban Bank of the Pasay property, and Atty. Peña’s participation in the transfer of possession thereof to Urban Bank provide crucial linkages that establish the nature of the relationship between the lawyer and the landowner-bank.

The evidence reveals that at the time that the Contract to Sell was executed on 15 November 1994, and even when the Deed of Absolute Sale was executed two weeks later on 29 November 1994, as far as Urban Bank was concerned, Peña was nowhere in the picture. All discussions and correspondences were between the President and Corporate Secretary of Urban Bank, on one hand, and the President of ISCI, on the other. The title to the Pasay property was transferred to Urban Bank on 5 December 1994. Interestingly, Peña testifies that it was only on 19 December 1994 that he learned that the land had already been sold by ISCI to Urban Bank, notwithstanding the fact that Peña was a director of ISCI. Peña was not asked to render any service for Urban Bank, neither did he perform any service for Urban Bank at that point.

ISCI undertook in the Contract to Sell, to physically deliver the property to Urban Bank, within 60 days from 29 November 1994,[256] under conditions of “full and actual possession and control ..., free from tenants, occupants, squatters or other structures or from any liens, encumbrances, easements or any other obstruction or impediment to the free use and occupancy by the buyer of the subject Property or its exercise of the rights to ownership over the subject Property....”[257] To guarantee this undertaking, ISCI agreed to the escrow provision where PhP25,000,000 (which is a little over 10% of the value of the Pasay property) would be withheld by Urban Bank from the total contract price until there is full compliance with this undertaking.

Apparently to ensure that ISCI is able to deliver the property physically clean to Urban Bank, it was ISCI’s president, Enrique Montilla who directed on 26 November 1994 one of its directors, Peña, to immediately recover and take possession of the property upon expiration of the contract of lease on 29 November 1994.[258] Peña thus first came into the picture as a director of ISCI who was constituted as its agent to recover the Pasay property against the lessee as well as the sub-tenants who were occupying the property in violation of the lease agreement.[259] He was able to obtain possession of the property from the lessee on the following day, but the unauthorized sub-tenants refused to vacate the property.

It was only on 7 December 1994, that Urban Bank was informed of the services that Peña was rendering for ISCI. The faxed letter from ISCI’s Marilyn Ong reads:

Atty. Magdaleno M. Peña, who has been assigned by Isabela Sugar Company, Inc., to take charge of inspecting the tenants would like to request an authority similar to this from the Bank, as new owners. Can you please issue something like this today as he needs this.[260]

Two days later, on 9 December 1994, ISCI sent Urban Bank another letter that reads:

Dear Mr. Borlongan, I would like to request for an authorization from Urban Bank as per attached immediately – as the tenants are questioning the authority of the people there who are helping us to take over possession of the property. (Emphasis supplied)[261]

It is clear from the above that ISCI was asking Urban Bank for help to comply with ISCI’s own contractual obligation with the bank under the terms of the sale of the Pasay property. Urban Bank could have ignored the request, since it was exclusively the obligation of ISCI, as the seller, to deliver a clean property to Urban Bank without any help from the latter.

A full-bodied and confident interpretation of the contracts between ISCI and Urban Bank should have led the latter to inform the unauthorized sub-tenants that under its obligation as seller to Urban Bank, it was under duty and had continuing authority to recover clean possession of the property, despite the transfer of title. Yet, what unauthorized sub-tenant, especially in the kind of operations being conducted within the Pasay property, would care to listen or even understand such argument?

Urban Bank thus chose to cooperate with ISCI without realizing the kind of trouble that it would reap in the process. In an apparent attempt to allow the efforts of ISCI to secure the property to succeed, it recognized Peña’s role in helping ISCI, but stopped short of granting him authority to act on its behalf. In response to the two written requests of ISCI, Urban Bank sent this letter to Peña on 15 December 1994:

This is to advise you that we have noted the engagement of your services by Isabela Sugar Company to recover possession of the Roxas Boulevard property formerly covered by TCT No. 5382, effective November 29, 1994. It is understood that your services have been contracted by and your principal remains to be the Isabela Sugar Company, which as seller of the property and under the terms of our Contract to Sell dated November 29, 1994, has committed to deliver the full and actual possession of the said property to the buyer, Urban Bank, within the stipulated period. [262] (Emphasis supplied)

Up to this point, it is unmistakable that Urban Bank was staying clear from making any contractual commitment to Peña and conveyed its sense that whatever responsibilities arose in retaining Peña were to be shouldered by ISCI.

According to the RTC-Bago City, in the reversed Decision, Atty. Peña only knew of the sale between ISCI and Urban Bank at the time the RTC-Pasay City recalled the TRO and issued a break-open order:

“… when information reached the (Pasay City) judge that the Pasay property had already been transferred by ISCI to Urban Bank, the trial court recalled the TRO and issued a break-open order for the property. According to Peña, it was the first time that he was apprised of the sale of the land by ISCI and of the transfer of its title in favor of the bank.”[263]

There is something contradictory between some of the trial court’s factual findings and Peña’s claim that it was only on 19 December 1994 that he first learned of the sale of the property to Urban Bank. It is difficult to believe Peña on this point considering: (1) that he was a board director of ISCI and a sale of this significant and valuable property of ISCI requires the approval of the board of directors of ISCI; and (2) that ISCI twice requested Urban Bank for authority to be issued in his favor (07 and 9 December 1994), 12 and 10 days before 19 December 1994, since it would be contrary to human experience for Peña not to have been informed by an officer of ISCI beforehand that a request for authority for him was being sent to Urban Bank.

The sequence of fast-moving developments, edged with a sense of panic, with respect to the decision of the RTC-Pasay City to recall the temporary restraining order and issue a break-open order on 19 December 1994 in the First Injunction Complaint, is highly enlightening to this Court.

First, Peña allegedly called up the president of ISCI, Montilla, who, according to Peña, confirmed to him that the Pasay property had indeed been sold to Urban Bank.

Second, Peña allegedly told Montilla that he (Peña) would be withdrawing his guards from the property because of the break-open order from the RTC-Pasay City.

Third, Montilla requested Peña to suspend the withdrawal of the guards while ISCI gets in touch with Urban Bank.

Fourth, apparently in view of Montilla’s efforts, Bejasa, an officer of Urban Bank called Peña and according to the latter, told him that Urban Bank would continue retaining his services and for him to please continue with his effort to secure the property.

Fifth, this statement of Bejasa was not enough for Peña and he insisted that he be enabled to talk with no less than the President of Urban Bank, Borlongan. At this point, Bejasa gave him the phone number of Borlongan.

Sixth, immediately after the conversation with Bejasa, Peña calls Borlongan and tells Borlongan that violence might erupt in the property because the Pasay City policemen, who were sympathetic to the tenants, were threatening to force their way through the property.

At this point, if indeed this conversation took place, which Borlongan contests, what would have been the response of Borlongan? Any prudent president of a bank, which has just purchased a PhP240,000,000 property plagued by unauthorized and unruly sub-tenants of the previous owner, would have sought to continue the possession of ISCI, thru Peña, and he would have agreed to the reasonable requests of Peña. Borlongan could also have said that the problem of having the sub-tenants ejected is completely ISCI’s and ISCI should resolve the matter on its own that without bothering the bank, with all its other problems. But the specter of violence, especially as night was approaching in a newly-bought property of Urban Bank, was not something that any publicly-listed bank would want publicized. To the extent that the violence could be prevented by the president of Urban Bank, it is expected that he would opt to have it prevented.

But could such response embrace the following legal consequences as Peña claims to have arisen from the telephone conversation with Borlongan: (1) A contract of agency was created between Peña and Urban Bank whereby Borlongan agreed to retain the services of Peña directly; (2) This contract of agency was to be embodied in a written letter of authority from Urban Bank; and (3) The agency fee of Peña was to be 10% of the market value as “attorney’s fees and compensation” and reimbursement of all expenses of Peña from the time he took over the land until possession is turned over to Urban Bank.

This Court concludes that the legal consequences described in statements (1) and (2) above indeed took place and that the facts support them. However, the evidence does not support Peña’s claim that Urban Bank agreed to “attorney’s fees and compensation” of 10% of the market value of the property.

Urban Bank’s letter dated 19 December 1994 confirmed in no uncertain terms Peña’s designation as its authorized representative to secure and maintain possession of the Pasay property against the tenants. Under the terms of the letter, petitioner-respondent bank confirmed his engagement (a) “to hold and maintain possession” of the Pasay property; (b) “to protect the same from former tenants, occupants or any other person who are threatening to return to the said property and/or interfere with your possession of the said property for and in our behalf”; and (c) to represent the bank in any instituted court action intended to prevent any intruder from entering or staying in the premises.[264]

These three express directives of petitioner-respondent bank’s letter admits of no other construction than that a specific and special authority was given to Peña to act on behalf of the bank with respect to the latter’s claims of ownership over the property against the tenants. Having stipulated on the due execution and genuineness of the letter during pretrial,[265] the bank is bound by the terms thereof and is subject to the necessary consequences of Peña’s reliance thereon. No amount of denial can overcome the presumption that we give this letter – that it means what it says.

In any case, the subsequent actions of Urban Bank resulted in the ratification of Peña’s authority as an agent acting on its behalf with respect to the Pasay property. By ratification, even an unauthorized act of an agent becomes an authorized act of the principal.[266]

Both sides readily admit that it was Peña who was responsible for clearing the property of the tenants and other occupants, and who turned over possession of the Pasay property to petitioner-respondent bank.[267] When the latter received full and actual possession of the property from him, it did not protest or refute his authority as an agent to do so. Neither did Urban Bank contest Peña’s occupation of the premises, or his installation of security guards at the site, starting from the expiry of the lease until the property was turned over to the bank, by which time it had already been vested with ownership thereof. Furthermore, when Peña filed the Second Injunction Complaint in the RTC-Makati City under the name of petitioner-respondent bank, the latter did not interpose any objection or move to dismiss the complaint on the basis of his lack of authority to represent its interest as the owner of the property. When he successfully negotiated with the tenants regarding their departure from its Pasay property, still no protest was heard from it. After possession was turned over to the bank, the tenants accepted PhP1,500,000 from Peña, in “full and final settlement” of their claims against Urban Bank, and not against ISCI.[268]

In all these instances, petitioner-respondent bank did not repudiate the actions of Peña, even if it was fully aware of his representations to third parties on its behalf as owner of the Pasay property. Its tacit acquiescence to his dealings with respect to the Pasay property and the tenants spoke of its intent to ratify his actions, as if these were its own. Even assuming arguendothat it issued no written authority, and that the oral contract was not substantially established, the bank duly ratified his acts as its agent by its acquiescence and acceptance of the benefits, namely, the peaceful turnover of possession of the property free from sub-tenants.

Even if, however, Peña was constituted as the agent of Urban Bank, it does not necessarily preclude that a third party would be liable for the payment of the agency fee of Peña. Nor does it preclude the legal fact that Peña while an agent of Urban Bank, was also an agent of ISCI, and that his agency from the latter never terminated. This is because the authority given to Peña by both ISCI and Urban Bank was common – to secure the clean possession of the property so that it may be turned over to Urban Bank. This is an ordinary legal phenomenon – that an agent would be an agent for the purpose of pursuing a shared goal so that the common objective of a transferor and a new transferee would be met.

Indeed, the Civil Code expressly acknowledged instances when two or more principals have granted a power of attorney to an agent for a common transaction.[269] The agency relationship between an agent and two principals may even be considered extinguished if the object or the purpose of the agency is accomplished.[270] In this case, Peña’s services as an agent of both ISCI and Urban Bank were engaged for one shared purpose or transaction, which was to deliver the property free from unauthorized sub-tenants to the new owner – a task that Peña was able to achieve and is entitled to receive payment for.

That the agency between ISCI and Peña continued, that ISCI is to shoulder the agency fee and reimbursement for costs of Peña, and that Urban Bank never agreed to pay him a 10% agency fee is established and supported by the following:

First, the initial agency relationship between ISCI and Peña persisted. No proof was ever offered that the letter of 26 November 1994 of Mr. Montilla of ISCI to Peña, for the latter “to immediately recover and take possession of the property upon expiration of the contract of lease on 29 November 1994” was terminated. It is axiomatic that the appointment of a new agent for the same business or transaction revokes the previous agency from the day on which notice thereof was given to the former agent.[271] If it is true that the agency relationship was to be borne by Urban Bank alone, Peña should have demonstrated that his previous agency relationship with ISCI is incompatible with his new relationship with Urban Bank, and was thus terminated.

Second, instead, what is on the record is that ISCI confirmed the continuation of this agency between Peña and itself and committed to pay for the services of Peña, in its letter to Urban Bank dated 19 December 1994 which reads:

In line with our warranties as the Seller of the said property and our undertaking to deliver to you the full and actual possession and control of said property, free from tenants, occupants or squatters and from any obstruction or impediment to the free use and occupancy of the property by Urban Bank, we have engaged the services of Atty. Magdaleno M. Peña to hold and maintain possession of the property and to prevent the former tenants or occupants from entering or returning to the premises. In view of the transfer of the ownership of the property to Urban Bank, it may be necessary for Urban Bank to appoint Atty. Peña likewise as its authorized representative for purposes of holding/maintaining continued possession of the said property and to represent Urban Bank in any court action that may be instituted for the abovementioned purposes.

It is understood that any attorney’s fees, cost of litigation and any other charges or expenses that may be incurred relative to the exercise by Atty. Peña of his abovementioned duties shall be for the account of Isabela Sugar Company and any loss or damage that may be incurred to third parties shall be answerable by Isabela Sugar Company.[272] (Emphasis supplied)

Third, Peña has never shown any written confirmation of his 10% agency fee, whether in a note, letter, memorandum or board resolution of Urban Bank. An agency fee amounting to PhP24,000,000 is not a trifling amount, and corporations do not grant their presidents unilateral authority to bind the corporation to such an amount, especially not a banking corporation which is closely supervised by the BSP for being a business seriously imbued with public interest. There is nothing on record except the self-serving testimony of Peña that Borlongan agreed to pay him this amount in the controverted telephone conversation.

Fourth, while ordinarily, uncontradicted testimony will be accorded its full weight, we cannot grant full probative value to the testimony of Peña for the following reasons: (a) Peña is not a credible witness for testifying that he only learned of the sale of the property of 19 December 1994 when the acts of ISCI, of Urban Bank and his own up to that point all indicated that he must have known about the sale to Urban Bank; and (b) it is incredible that Urban Bank will agree to add another PhP24,000,000 to the cost of the property by agreeing to the agency fee demanded by Peña. No prudent and reasonable person would agree to expose his corporation to a new liability of PhP24,000,000 even if, in this case, a refusal would lead to the Pasay City policemen and unauthorized sub-tenants entering the guarded property and would possibly erupt in violence.

Peña’s account of an oral agreement with Urban Bank for the payment of PhP24,000,000 is just too much for any court to believe. Whatever may be the agreement between Peña and ISCI for compensation is not before this Court. This is not to say, however, that Urban Bank has no liability to Peña. It has. Payment to him is required because the Civil Code demands that no one should be unjustly enriched at the expense of another. This payment is to be measured by the standards of quantum meruit.

Amount of Compensation

Agency is presumed to be for compensation. But because in this case we find no evidence that Urban Bank agreed to pay Peña a specific amount or percentage of amount for his services, we turn to the principle against unjust enrichment and on the basis of quantum meruit.

Since there was no written agreement with respect to the compensation due and owed to Atty. Peña under the letter dated 19 December 1994, the Court will resort to determining the amount based on the well-established rules on quantum meruit.

Agency is presumed to be for compensation.[273] Unless the contrary intent is shown, a person who acts as an agent does so with the expectation of payment according to the agreement and to the services rendered or results effected.[274] We find that the agency of Peña comprised of services ordinarily performed by a lawyer who is tasked with the job of ensuring clean possession by the owner of a property. We thus measure what he is entitled to for the legal services rendered.

A stipulation on a lawyer’s compensation in a written contract for professional services ordinarily controls the amount of fees that the contracting lawyer may be allowed to collect, unless the court finds the amount to be unconscionable.[275] In the absence of a written contract for professional services, the attorney’s fees are fixed on the basis of quantum meruit,[276] i.e., the reasonable worth of the attorney’s services.[277] When an agent performs services for a principal at the latter’s request, the law will normally imply a promise on the part of the principal to pay for the reasonable worth of those services.[278] The intent of a principal to compensate the agent for services performed on behalf of the former will be inferred from the principal’s request for the agents.[279]

In this instance, no extra-ordinary skills employing advanced legal training nor sophisticated legal maneuvering were required to be employed in ejecting 23 sub-tenants who have no lease contract with the property owner, and whose only authority to enter the premises was unlawfully given by a former tenant whose own tenancy has clearly expired. The 23 sub-tenants operated beer houses and nightclubs, ordinary retail establishments for which no sophisticated structure prevented easy entry. After Peña succeeded in locking the gate of the compound, the sub-tenants would open the padlock and resume their businesses at night. Indeed, it appears that only security guards, chains and padlocks were needed to keep them out. It was only the alleged connivance of Pasay City policemen that Peña’s ability to retain the possession was rendered insecure. And how much did it take Peña to enter into a settlement agreement with them and make all these problems go away? By Peña’s own account, PhP1,500,000 only. That means that each tenant received an average of PhP65,217.40 only. Surely, the legal services of Peña cannot be much more than what the sub-tenants were willing to settle for in the first place. We therefore award him the equivalent amount of PhP1,500,000 for the legal and other related services he rendered to eject the illegally staying tenants of Urban Bank’s property.

The Court of Appeals correctly reversed the trial court and found it to have acted with grave abuse of discretion in granting astounding monetary awards amounting to a total of PhP28,500,000 without any basis.[280] For the lower court to have latched on to the self-serving claims of a telephone agreement as sufficient support for extending a multi-million peso award is highly irregular. Absent any clear basis for the amount of the lawyer’s compensation, the trial court should have instinctively resorted to quantum meruit, instead of insisting on a figure with circumstantial and spurious justification.

We cannot also agree with the Decision penned by Judge Edgardo L. Catilo characterizing Pena’s 10% fee as believable because it is nearly congruent to the PhP25 Million retention money held in escrow for ISCI until a clean physical and legal turn-over of the property is effected:

We now come to the reasonableness of the compensation prayed for by the plaintiff which is 10% of the current market value which defendants claim to be preposterous and glaringly excessive. Plaintiff [Peña] testified that defendant Borlongan agreed to such an amount and this has not been denied by Ted Borlongan. The term “current market value of the property” is hereby interpreted by the court to mean the current market value of the property at the time the contract was entered into. To interpret it in accordance with the submission of the plaintiff that it is the current market value of the property at the time payment is made would be preposterous. The only evidence on record where the court can determine the market value of the property at the time the contract of agency was entered into between plaintiff and defendant is the consideration stated in the sales agreement between Isabela Sugar Company, Inc. and Urban bank which is P241,612,000.00. Ten percent of this amount is a reasonable compensation of the services rendered by the plaintiff considering the “no cure, no pay” arrangement between the parties and the risks which plaintiff had to undertake.[281]

In the first place, the Decision of Judge Catilo makes Peña’s demand of an agency fee of PhP24 Million, an additional burden on Urban Bank. The Decision does not make the retention money responsible for the same, or acquit Urban Bank of any liability to ISCI if it pays the PhP24 Million directly to Pena instead of ISCI. In the second place, the amount of money that is retained by transferees of property transactions while the transferor is undertaking acts to ensure a clean and peaceful transfer to the transferee does not normally approximate a one-to-one relationship to the services of ejecting unwanted occupants. They may be inclusive of other costs, and not only legal costs, with enough allowances for contingencies, and may take into consideration other liabilities as well. The amount can even be entirely arbitrary, and may have been caused by the practice followed by Urban Bank as advised by its officers and lawyers or by industry practice in cases where an expensive property has some tenancy problems. In other words, Judge Catilo’s statement is a non sequitur, is contrary to normal human experience, and sounds like an argument being made to fit Peña’s demand for a shocking pay-out.

In any case, 10% of the purchase price of the Pasay property – a staggering PhP24,161,200 – is an unconscionable amount, which we find reason to reduce. Neither will the Court accede to the settlement offer of Peña to Urban Bank of at least PhP38,000,000 for alleged legal expenses incurred during the course of the proceedings,[282] an amount that he has not substantiated at any time.

Lawyering is not a business; it is a profession in which duty to public service, not money, is the primary consideration.[283] The principle ofquantum meruit applies if lawyers are employed without a price agreed upon for their services, in which case they would be entitled to receive what they merit for their services, or as much as they have earned.[284] In fixing a reasonable compensation for the services rendered by a lawyer on the basis of quantum meruit, one may consider factors such as the time spent and extent of services rendered; novelty and difficulty of the questions involved; importance of the subject matter; skill demanded; probability of losing other employment as a result of acceptance of the proffered case; customary charges for similar services; amount involved in the controversy and the resulting benefits for the client; certainty of compensation; character of employment; and professional standing of the lawyer.[285]

Hence, the Court affirms the appellate court’s award of PhP3,000,000 to Peña, for expenses incurred corresponding to the performance of his services. An additional award of PhP1,500,000 is granted to him for the services he performed as a lawyer in securing the rights of Urban Bank as owner of the Pasay property.

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