Key Takeaway: Attorney’s Liens Must Be Respected in Property Disputes, Even Amid Compromise Agreements

Dimayuga Law Offices v. Titan-Ikeda Construction and Development Corporation, G.R. No. 247724, September 23, 2020

Imagine spending years tirelessly advocating for your client, only to find your rightful compensation threatened by an unexpected compromise agreement. This scenario became a reality for the Dimayuga Law Offices, which found itself embroiled in a legal battle over attorney’s fees in a property dispute. The central question in this case was whether an attorney’s lien on property could be canceled due to a compromise agreement between the client and the opposing party, to which the attorney was not a party.

The case stemmed from a dispute between Primetown Property Group, Inc. and Titan-Ikeda Construction and Development Corporation over condominium units. Dimayuga Law Offices, representing Primetown, secured a favorable judgment, which included an attorney’s lien on certain condominium titles. However, a subsequent compromise agreement between Primetown and Titan-Ikeda led to an attempt to cancel these liens, prompting Dimayuga to appeal to the Supreme Court.

Understanding Attorney’s Liens and Property Rights

An attorney’s lien is a legal right granted to lawyers to secure payment for their services. Under Section 37 of Rule 138 of the Rules of Court, attorneys have two types of liens: a retaining lien on client documents and a charging lien on judgments and executions obtained in litigation. The latter is particularly relevant in this case, as it pertains to the right over property secured through legal action.

“A lien is a charge on property usually for the payment of some debt or obligation,” as defined by the Supreme Court. This means that once an attorney’s lien is properly annotated on a property title, it becomes a burden on that property until it is discharged. This principle is reinforced by Section 59 of Presidential Decree No. 1529, which mandates that encumbrances on registered land must be carried over to new certificates of title unless they are simultaneously released.

For instance, if a lawyer successfully litigates a case resulting in a monetary award, they can secure a lien on the awarded property to ensure payment of their fees. This lien remains effective even if the property is sold or transferred, unless it is explicitly discharged.

The Journey of Dimayuga Law Offices v. Titan-Ikeda

The dispute began when Primetown Property Group, Inc. contracted Titan-Ikeda Construction to work on a 32-storey condominium building. Due to delays and disputes over the project’s completion, Primetown sought to recover overpaid units, leading to a legal battle that reached the Supreme Court. The Court initially ordered Titan-Ikeda to return certain condominium units to Primetown, and Dimayuga Law Offices secured a lien on ten of these units as payment for their legal services.

Despite this, Primetown and Titan-Ikeda later entered into a compromise agreement without Dimayuga’s participation. This agreement included provisions to cancel all liens and adverse claims on the condominium titles, which directly impacted Dimayuga’s rights. Dimayuga filed a motion to intervene and protect its attorney’s rights, but the Regional Trial Court (RTC) initially sided with Titan-Ikeda, leading to an appeal to the Court of Appeals (CA).

The CA dismissed Dimayuga’s petition, arguing that the attorney’s fees should be collected from Primetown, not Titan-Ikeda, as the condominium titles were still registered under Titan-Ikeda’s name. Dimayuga then appealed to the Supreme Court, which ultimately ruled in its favor.

The Supreme Court emphasized the importance of respecting attorney’s liens, stating, “A lawyer is as much entitled to judicial protection against injustice or imposition of fraud on the part of his client as the client is against abuse on the part of his counsel.” The Court further noted that the compromise agreement could not affect the rights of third parties, such as Dimayuga, who were not part of the agreement.

The Court’s decision highlighted that the 10 condominium units subject to the lien had already been sold to Dimayuga as payment for its services. The Court found it unjust to include these units in the compromise agreement, especially since Primetown had admitted to intending to respect Dimayuga’s lien during negotiations.

Implications for Future Cases and Practical Advice

This ruling reaffirms the sanctity of attorney’s liens in property disputes. It serves as a reminder to clients and opposing parties that such liens cannot be easily dismissed through compromise agreements, especially when the attorney has not consented to the agreement.

For businesses and individuals involved in similar disputes, it is crucial to understand the implications of attorney’s liens. If you are a client, ensure that any compromise agreement explicitly addresses your attorney’s rights. For attorneys, it is advisable to closely monitor any negotiations between your client and the opposing party to safeguard your interests.

Key Lessons:

• Attorney’s liens on property are legally binding and must be respected.
• Compromise agreements cannot unilaterally cancel liens without the attorney’s consent.
• Clients and attorneys should communicate clearly about any potential settlements that may affect liens.

Frequently Asked Questions

What is an attorney’s lien?

An attorney’s lien is a legal right that allows lawyers to claim a portion of the property or funds obtained through litigation as payment for their services.

Can a compromise agreement cancel an attorney’s lien?

No, a compromise agreement cannot cancel an attorney’s lien without the attorney’s consent, as the attorney is considered a third party to the agreement.

What should attorneys do to protect their liens?

Attorneys should ensure that their liens are properly annotated on property titles and monitor any negotiations between their clients and opposing parties.

How can clients respect their attorneys’ liens?

Clients should include provisions in any compromise agreement that address the attorney’s lien and ensure their attorney is informed and consents to the agreement.

What happens if a property with an attorney’s lien is sold?

The lien follows the property and must be carried over to the new certificate of title unless it is properly discharged.

What are the implications for property disputes?

This ruling emphasizes the need to respect attorney’s liens in property disputes, ensuring that attorneys are fairly compensated for their services.

How can ASG Law help with property disputes and attorney’s liens?

ASG Law specializes in property law and attorney’s liens. Contact us or email hello@asglawpartners.com to schedule a consultation.