Case Digest: Director of Lands v. Ababa

 

THE DIRECTOR OF LANDS, petitioner, vs. SILVERETRA ABABA, ET AL., claimants, JUAN LARRAZABAL, MARTA C. DE LARRAZABAL, MAXIMO ABAROQUEZ and ANASTACIA CABIGAS, petitioners-appellants, ALBERTO FERNANDEZ, adverse claimant-appellee
G. R. No. L-29096              |              February 27, 1979

 

FACTS:

Adverse claimant, Atty. Alberto B. Fernandez was retained as counsel by petitioner, Maximo Abarquez, for  case of annulment of a contract of sale with right or repurchase and for recovery of the land which was the subject matter thereof.

Litigating as a pauper in the lower court and engaging the services of his lawyer on a contingent basis, petitioner unable to compensate his lawyer, executed a document whereby he obliged himself to give to his lawyer ½ of whatever he might recover.

However, after obtaining a favorable decision and transfer of ownership of the said lot to his name, Abarquez refused to comply with his obligation and instead offered to sell the entire lot to petitioner-spousess Juan Larrazabal and Marta C. de Larrazabal.

Upon being informed of the intention of the petitioner, adverse claimant immediately took steps to protect his interest. He filed an affidavit of adverse claim with the Register of Deeds of Cebu. By virtue of said affidavit, the adverse claim for ½ of the lots was annotated on Abarquez’s Transfer certificate.

Notwithstanding the annotation of the adverse claim, the Abarquez coveyed 2/3 of the land to the Larrazabals. When the new transfer certificate was issued, the annotation of adverse claim necessarily had to appear on the new transfer certificate of title. This adverse claim became the subject of cancellation proceedings filed by the Larrazabal spouses.  The adverse claimant, Atty. Fernandez, filed his opposition to the petition for cancellation.

ISSUE:

Whether or not the contract for cotingent fee is prohibited by Art. 1491 of the New Civil Code

RULING:

 Article 1491 prohibits only the sale or assignment between the lawyer and his client, of property which is the subject of litigation. “The prohibition in said article applies only to a sale or assignment to the lawyer by his client of the property which is the subject of litigation. In other words, for the prohibition to operate, the sale or assignment of the property must take place during the pendency of the litigation involving the property.”

The prohibition does not apply to “cases where after completion of litigation the lawyer accepts on account of his fee, an interest in the assets realized by litigation.

A contract for a contingent fee is not covered by Article 1491 because the transfer or assignment of the property in litigation takes effect only after the finality of a favorable judgment. In the instant case, the attorney’s fees of Atty. Fernandez, consisting of one-half (1⁄2) of whatever Maximo Abarquez might recover from his share in the lots in question, is contingent upon the success of the appeal. Hence, the payment of the attorney’s fees, that is, the transfer or assignment of one-half (1⁄2) of the property in litigation will take place only if the appeal prospers. Therefore, the transfer actually takes effect after the finality of a favorable judgment rendered on appeal and not during the pendency of the litigation involving the property in question. Consequently, the contract for a contingent fee is not covered by Article 1491.