The Supreme Court has ruled that while attorneys are entitled to reasonable compensation for their services, courts have the power to reduce stipulated attorney’s fees if they are found to be unconscionable. This decision underscores the court’s role in protecting clients from unfair agreements, especially when a significant disparity exists between the value of services rendered and the fees charged. The ruling serves as a reminder that the determination of reasonable attorney’s fees considers various factors, including the financial capacity of the client and the actual value of the litigated property, ensuring fairness and preventing undue enrichment.

When a ‘Kasunduan’ Becomes a Burden: Can Attorney’s Fees Be Too High?

In Eduardo N. Riguer v. Atty. Edralin S. Mateo, the Supreme Court addressed the issue of attorney’s fees, specifically whether a stipulated fee of P250,000.00 was unconscionable given the circumstances of the case. The petitioner, Riguer, engaged the services of Atty. Mateo to represent him in civil and criminal cases related to a parcel of land. A document called “Kasunduan” was later signed, stipulating additional fees, including P250,000.00 to be paid once the land was sold. When Atty. Mateo demanded payment after a favorable decision, Riguer refused, leading to a legal battle over the attorney’s fees.

The lower courts initially sided with Atty. Mateo, upholding the validity of the “Kasunduan.” However, the Supreme Court, while acknowledging that Riguer failed to prove fraud in the execution of the agreement, ultimately found the stipulated attorney’s fees to be unconscionable. This decision highlights the Court’s power to intervene and ensure fairness in contractual agreements between lawyers and their clients. The Court emphasized that, despite the existence of a written contract, it is not bound to enforce the agreement if the fees are unreasonable or disproportionate to the services rendered.

Building on this principle, the Court referenced Section 24, Rule 138 of the Rules of Court, which states that an attorney is entitled to no more than reasonable compensation for their services, considering the importance of the subject matter, the extent of the services, and the professional standing of the attorney. The Court further cited the case of Rayos v. Atty. Hernandez, elucidating the circumstances to be considered in determining the reasonableness of attorney’s fees. These include the amount and character of the service rendered, the labor, time, and trouble involved, the nature and importance of the litigation, the responsibility imposed, the amount of money or value of the property affected, the skill and experience required, the professional character of the attorney, the results secured, the nature of the fee (absolute or contingent), and the financial capacity of the client.

Applying these standards to the case at hand, the Supreme Court found several factors indicating that the P250,000.00 fee was indeed unconscionable. First, the fee represented almost 50% of the property’s selling price of P600,000.00. Second, Riguer was a farmer of advanced age with limited education. Third, the stipulated fee in the “Kasunduan” primarily covered Atty. Mateo’s services during the appeal, as the initial legal fees for the trial court proceedings had already been settled. Lastly, Atty. Mateo had previously indicated that he believed he was entitled to 10% of the property’s fair market value, which he initially claimed to be around P3 million. The fact that the property was ultimately sold for only P600,000.00 further supported the argument that the fee was excessive.

Atty. Mateo argued that the deed of sale did not accurately reflect the true value of the land, suggesting that it was worth around P3 million. However, the Court rejected this argument, emphasizing that a notarized deed of sale is a public document that carries a presumption of regularity and truthfulness. As explained in Dela Peña v. Avila:

With the material contradictions in the Dela Peria’s evidence, the CA cannot be faulted for upholding the validity of the impugned 4 November 1997 Deed of Absolute Sale. Having been duly notarized, said deed is a public document which carries the evidentiary weight conferred upon it with respect to its due execution. Regarded as evidence of the facts therein expressed in a clear, unequivocal manner, public documents enjoy a presumption of regularity which may only be rebutted by evidence so clear, strong and convincing as to exclude all controversy as to falsity. The burden of proof to overcome said presumptions lies with the party contesting the notarial document like the Dela Peñas who, unfortunately, failed to discharge said onus. Absent clear and convincing evidence to contradict the same, we find that the CA correctly pronounced the Deed of Absolute Sale was valid and binding between Antonia and Gemma.

In the absence of any compelling evidence to the contrary, the Court upheld the validity of the deed of sale and its stated consideration of P600,000.00. This reinforces the importance of presenting solid evidence when challenging the contents of a public document. Moreover, the Court took into account Riguer’s claim that the property’s remote location contributed to its lower value.

Ultimately, the Supreme Court reduced the attorney’s fees from P250,000.00 to P100,000.00, balancing the attorney’s right to just compensation with the client’s right to protection against unconscionable fees. The Court clarified that while lawyers deserve to be fairly compensated for their services, such compensation should not result in the deprivation of the client’s property. The ruling serves as a cautionary tale for attorneys to carefully consider the circumstances of each case and to ensure that their fee agreements are fair and reasonable.

FAQs

What was the key issue in this case?	The central issue was whether the attorney’s fees stipulated in the “Kasunduan” were unconscionable, considering the value of the property involved and the client’s financial situation. The Supreme Court assessed the reasonableness of the fees and its power to modify agreements deemed unfair.
What is a “Kasunduan”?	In this context, “Kasunduan” refers to a written agreement between the client and the attorney that outlines the terms of payment for legal services, including fees and reimbursements. It is a contract that should clearly state the obligations of both parties.
What does “unconscionable” mean in relation to attorney’s fees?	Unconscionable attorney’s fees are those that are excessively disproportionate to the value of the services rendered, indicating that the attorney has taken unfair advantage of the client. Such fees are considered shocking to the conscience and may be reduced by the court.
What factors did the Supreme Court consider in reducing the attorney’s fees?	The Court considered the value of the property, the client’s financial capacity and educational background, the extent of the services rendered, and the attorney’s initial assessment of the property’s value. These factors helped determine whether the stipulated fee was reasonable and fair.
Is a notarized deed of sale considered a reliable document?	Yes, a notarized deed of sale is considered a public document and carries a presumption of regularity and truthfulness regarding its contents. To challenge its validity, one must present clear and convincing evidence to the contrary.
What is the significance of Rule 138 of the Rules of Court in this case?	Rule 138, Section 24 of the Rules of Court provides that an attorney is entitled to reasonable compensation for their services, but also allows courts to review and modify fee agreements that are deemed unconscionable or unreasonable. It gives courts the authority to protect clients from unfair agreements.
Can a court reduce attorney’s fees even if there is a written agreement?	Yes, a court can reduce attorney’s fees even if there is a written agreement, if it finds that the stipulated amount is unconscionable or unreasonable. The court’s power to determine reasonable compensation is a regulatory prerogative.
What evidence is needed to prove fraud in a contract?	To prove fraud in a contract, the evidence must be clear and convincing. Mere allegations are not sufficient; there must be demonstrable proof that one party intentionally deceived the other.

In conclusion, the Supreme Court’s decision in Riguer v. Mateo serves as an important reminder of the ethical obligations of lawyers and the protective role of the courts in ensuring fairness in attorney-client relationships. While attorneys are entitled to just compensation, the courts will not hesitate to intervene when fees are deemed unconscionable, especially when there is a significant disparity in bargaining power between the parties.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: EDUARDO N. RIGUER, PETITIONER, VS. ATTY. EDRALIN S. MATEO, RESPONDENT., G.R. No. 222538, June 21, 2017