Question 3, 2018 Legal Ethics Bar Exam


(Question III, Legal and Judicial Ethics, 2018 Bar Exam)

Carina was dismissed by her employer for breach of trust and confidence, and for willful violation of company rules and policies. She filed an action for illegal dismissal claiming that her termination was without legal basis. The Labor Arbiter found that she was illegally dismissed and awarded her the amount of PhP 80 million. On appeal to the National Labor Relations Commission (NLRC), the award was reduced to PhP 40 million as separation pay, plus PhP 5 million for the value of her stock option plans which would have vested if she were not illegally dismissed from her job. Unsatisfied with the NLRC’s decision, she appealed to the Court of Appeals (CA) the amount of monetary award granted by the NLRC. She engaged the services of Casal, Casos and Associates to handle her appeal. Her retainer agreement with Casal, Casos and Associates provided for contingent fees equivalent to 10% of her claim for separation pay and 10% of the value of stock options to be awarded to her.

The CA decision was not favorable to Carina, so she appealed the same to the Supreme Court (the Court). While the case was pending appeal with the Court, Carina entered into a compromise agreement with her employer to terminate the case upon payment to her of the full amount of PhP 40 million, less the PhP 15 million previously paid to her by her employer. Before the compromise agreement was finalized, Carina terminated the services of Casal, Casos and Associates and asked them to withdraw from the case pending before the Court. The parties negotiated the compromise agreement without the participation of their lawyers since the employer imposed the condition that no lawyers should be involved in the compromise negotiation. She, together with her employer, then filed the Compromise Agreement for approval by the Court, and sought the termination of the case, with prejudice.

Casal, Casos and Associates filed a motion to intervene in the case pending with the Court, praying that Carina be ordered to pay them PhP 4 million, representing 10% of the amount received by Carina from her employer in settlement of the case, plus 6% legal interest from the date of filing of the motion for intervention, until fully paid. The intervenors claimed that they were dismissed without justifiable cause prior to the signing of the compromise agreement for the reason that Carina, their client, wanted to evade payment of their legal fees. Carina claimed they were dismissed because Attys. Casal and Casos, who personally handled her case, had resigned from the law firm to join the government, and because of the negligence and failure of her lawyers to attend to her case. In reply, the intervenors said that the engagement was with the law firm and not with individual lawyers. The law firm also presented letters signed by their client commending them for work done well in the case.

(a) May lawyers legally charge their clients based on contingent fees? (2.5%)

(b) Should Casal, Casos and Associates be allowed to intervene in the case pending before the Court in order to collect their fees from Carina? (2.5%)

(c) Can Carina refuse to pay attorneys’ fees on the ground that the lawyers who personally handled her case had already resigned from the law firm with which she had contracted? (2.5%)

(d) May Carina’s employer, defendant in this case, be held solidarily liable with Carina for the payment of the attorneys’ fees of Carina’s lawyers? (2.5%)

(e) May the intervenors collect legal interest in addition to their attorneys’ fees? (2.5%)

Suggested Answer:

(a) Yes. Under the Code of Professional Responsibility and Rules of Court, contingent fees arrangements are recognized and allowed. The contingency or certainty of compensation is even one of the factors in determining fees. Contingent fee contracts are subject to the supervision and close scrutiny of the court in order that clients may be protected from unjust charges. The amount of contingent fees agreed upon by the parties is subject to the stipulation that counsel will be paid for his legal services only if the suit or litigation prospers.

(b) Yes. Answer

Under the Code of Professional Responsibility and jurisprudence, a lawyer is entitled to an attorney’s lien and the same may be asserted in the very action in which the services in question have been rendered. It has been held that a lawyer is as much entitled to judicial protection against injustice, imposition or fraud on the part of his client, particularly against evading payment of attorney’s fees.

In the case at bar, Casal, Casos and Associates (the “Law Firm”) extended legal services to Carina. Accordingly, the Law Firm may assert their claim to attorney’s fees in the very case pending before the Supreme Court. Apply

Thus, Casal, Casos and Associates should be allowed to intervene in the case pending before the Court in order to collect their fees from Carina. Conclusion

(c) No. Answer

Under jurisprudence, when a law firm represents a client, it is the law firm that is engaged as the counsel and not the handling lawyer/s appearing on behalf of the client. Rule

In the case at bar, Carina engaged as her counsel Casal, Casos and Associates (the “Law Firm”), and not the individual lawyers, Attys. Casal and Casos Accordingly, the fact that Attys. Casal and Casos resigned from the Law Firm and joined Government service did not terminate the attorney-client relationship between Carina and the Law Firm . Apply

Thus, Carina cannot refuse to pay attorney’s fees. Conclusion

(d) No. Answer

Under jurisprudence, when an adverse party connives with a client to avoid payment of legal fees to the client’s lawyer, both of them shall be considered as joint tort-feasors and shall be held solidarily liable. Notwithstanding, under the rules of mediation, parties are not prohibited from discussing a compromise agreement without their respective counsels. Under the Code of Professional Responsibility, what is prohibited is for a counsel of one party directly communicating to a party without the latter’s counsel. Rule

In the case at bar, there is no indication that Carina’s employer connived with her to avoid payment of legal fees to Casal, Casos and Associates (the “Law Firm”). While not desirable, the condition imposed by Carina’s employer is not prohibited as parties are allowed to discuss a settlement without their respective counsels. There is also no showing that Carina’s employer exercised any force, threat, intimidation, or undue influence on Carina.

Thus, Carina’s employer may be held solidarily liable with Carina. Conclusion

(e) No. Answer

Under jurisprudence, the imposition of legal interest on the amount payable as attorney’s fees is unwarranted. The Civil Code provision imposing legal interest is a provision of law governing ordinary obligations and contracts. Contracts for attorney’s services in this jurisdiction stands upon an entirely different footing from contracts for the payment of compensation for any other services. Rule

In the case at bar, Casal, Casos and Associates (the “Law Firm”) cannot seek legal interest on the attorney’s fees as it is not covered by the Civil Code provision on interest resulting from a liability based on ordinary contracts. Apply

Thus, the intervenors may not collect legal interest in addition to their attorney’s fees. Conclusion


(Notice: The suggested answers simulate those that a bar examinee may provide, and thus specific citations are not provided. Notwithstanding, in the reviewers, the bar exam question is answered under the appropriate topic which discusses the concepts and principles, as well as provide for specific citations. Accordingly, please refer to it on the reviewer or in the Library.)



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