Municipal Council of Iloilo vs. Evangelista, et al.

An attorney-in-fact empowered to pay the principal’s debts and to employ lawyers is impliedly authorized to satisfy legal fees by assigning a judgment credit belonging to the principal, and such assignment does not contravene Article 1459(5) of the Civil Code if the lawyer-assignee had no professional participation in the specific litigation that produced the credit.

Tan Ong Sze Vda. de Tan Toco had sued the Municipality of Iloilo to recover compensation for a strip of her land taken for a road-widening project. A final judgment awarded her P42,966.40. Before the Municipality could pay her, multiple claimants asserted rights over the proceeds: Atty. Jose Evangelista claimed a 15% attorney’s lien; the Philippine National Bank asserted a mortgage over the land; and Atty. Antero Soriano claimed the entire credit had been assigned to him by the widow’s attorney-in-fact, Tan Boon Tiong, and that he, in turn, had assigned it to Mauricio Cruz & Co. The Municipality filed an interpleader action to resolve the conflicting claims.

The Underlying Judgment and the Claims: A final and executory judgment in Civil Case No. 3514 entitled Tan Ong Sze Vda. de Tan Toco to recover P42,966.40 from the Municipality of Iloilo as compensation for land taken for road widening. The widow was represented in that case by Attorneys Arroyo and Evangelista, not by Atty. Antero Soriano. After the judgment became final, Atty. Evangelista claimed a lien for professional services, which the trial court fixed at 15% of the judgment with the widow’s consent. The Philippine National Bank also claimed the proceeds on the basis of a mortgage over the expropriated land. Meanwhile, Atty. Antero Soriano asserted that the widow’s credit had been assigned to him, and that he had in turn assigned it to Mauricio Cruz & Co.

The Assignment to Antero Soriano: On September 27, 1927, Tan Boon Tiong, acting as attorney-in-fact for the widow under a power of attorney (Exhibit 5-Cruz), executed a deed of assignment (Exhibit 2-Cruz) transferring to Atty. Antero Soriano all the widow’s credits, rights, and interests under the judgment in Civil Case No. 3514. The assignment was made in consideration of professional services Soriano had rendered to the widow and her co-heirs in other cases — some involving amounts in the hundreds of thousands of pesos and several of which had been appealed to the Supreme Court. The total fees paid to Soriano up to that point (approximately P2,900, and later additional payments) were deemed wholly inadequate relative to the magnitude of the services rendered.

Partial Payments: After the assignment, the Municipality paid P6,000 directly to Atty. Soriano on March 29, 1928, and deposited another P6,000 with the clerk of court on December 18, 1928, which was turned over to Atty. Evangelista in partial satisfaction of his 15% lien (Evangelista waived the remaining P444.69 of his lien in exchange for the other claimants’ agreement not to contest that payment). These payments reduced the judgment balance to P30,966.40, the amount in dispute.

The Lower Court’s Interpleader Judgment: The CFI ruled that the assignment by Tan Boon Tiong to Soriano and the subsequent assignment by Soriano to Mauricio Cruz & Co. were both valid and binding. It ordered the Municipality to deposit the P30,966.40 in a local bank for the disposal of Mauricio Cruz & Co., with legal interest of 6% per annum should the deposit not be made within 90 days of finality.

• Consideration: Whether the assignment to Atty. Antero Soriano was made in consideration of unpaid professional services, or whether his fees had already been fully satisfied.
• Article 1459(5) Prohibition: Whether the assignment violated the prohibition under Article 1459(5) of the Civil Code against a lawyer acquiring rights involved in litigation in which he took part by virtue of his profession.
• Authority of the Attorney-in-Fact: Whether Tan Boon Tiong, as attorney-in-fact, possessed the authority to assign the judgment credit in payment of legal fees, and whether the concurrence of a second, independently appointed attorney-in-fact was necessary to validate the act.

• Consideration: The assignment was supported by valid consideration. The receipts Exhibits 4-A and 4-B showed that the payments of P200 and P500 were made to the law firm “Soriano & Arroyo,” not to Atty. Soriano personally; the lower court correctly rejected them as evidence of personal payment to Soriano. Even considering all payments, the aggregate sum paid to Soriano (approximately P10,000) was grossly inadequate for professional services rendered in multiple cases, several of which reached the Supreme Court and involved hundreds of thousands of pesos. The widow continued making payments to Soriano even after the assignment, confirming that her fees had not been fully settled. The assignment was therefore a genuine payment for services rendered.

• Article 1459(5) Prohibition: No violation occurred. Atty. Antero Soriano did not appear as counsel for the widow in Civil Case No. 3514; the lawyers of record were Arroyo and Evangelista. By the time the assignment was executed, the litigation had already been decided with finality, and only the collection of the judgment remained. No attorney-client relationship existed between Soriano and the widow with respect to that particular case. The prohibition presupposes the lawyer’s professional participation in the very litigation from which the acquired property or rights derive; it does not extend to credit assignments made in payment of services rendered in entirely separate matters.

• Authority of the Attorney-in-Fact: Tan Boon Tiong’s power of attorney (Exhibit 5-Cruz) expressly authorized him to “employ and contract for the services of lawyers upon such conditions as he may deem convenient” and to take charge of actions and defend suits. The authority to engage legal services necessarily implied the authority to pay for them. The assignment of the judgment credit to Soriano in satisfaction of professional fees was a valid mode of exercising that implied power. As for the second attorney-in-fact, Tan Montano, the fact that separate and independent powers of attorney were executed demonstrated the principal’s intention that each agent could act alone; the consent of one was not required to validate the acts of the other, unless joint action was positively shown to be the principal’s intention.

• Implied Authority to Pay Legal Fees by Assignment: An agent or attorney-in-fact empowered to pay the debts of the principal and to employ lawyers to defend the principal’s interests is impliedly empowered to pay the lawyer’s fees for services rendered, and may satisfy those fees by assigning a judgment rendered in favor of the principal. The power to contract for legal services carries with it the power to compensate for them.

• Independent Attorneys-in-Fact: Where a principal appoints two attorneys-in-fact under separate, independent instruments, the consent of one is not necessary to validate the acts of the other, unless it affirmatively appears that the principal intended them to act jointly.

• Scope of Article 1459(5) Prohibition on Lawyers: The prohibition against lawyers acquiring property or rights in litigation in which they take part by virtue of their profession requires a direct professional connection between the lawyer and the specific case that produced the property or right. An attorney who had no participation in the case and who receives an assignment of the judgment credit after the case has been finally decided, in payment of services rendered in other cases, does not fall within the prohibition. The attorney-client relationship must exist in the very litigation whose fruits are assigned.

“The court is of opinion and so holds: (1) That an agent or attorney-in-fact empowered to pay the debts of the principal, and to employ lawyers to defend the latter’s interests, is impliedly empowered to pay the lawyer’s fees for services rendered in the interests of said principal, and may satisfy them by an assignment of a judgment rendered in favor of said principal; (2) that when a person appoints two attorneys-in-fact independently, the consent of the one will not be required to validate the acts of the other unless that appears positively to have been the principal’s intention; and (3) that the assignment of the amount of a judgment made by a person to his attorney, who has not taken any part in the case wherein said judgment was rendered, made in payment of professional services in other cases, does not contravene the prohibition of article 1459, case 5, of the Civil Code.”

• Viuda de Tan Toco vs. Municipal Council of Iloilo, G.R. No. 22617 (not reported) — The prior Supreme Court decision that affirmed the underlying judgment for P42,966.40 in favor of the appellant. Cited only as the source of the final judgment whose proceeds were in dispute.

• Article 1459(5), Civil Code (Old Civil Code, now Article 1491(5) of the present Civil Code) — Prohibits lawyers and solicitors from acquiring, by purchase or assignment, property or rights involved in any litigation in which they take part by virtue of their profession or office. The Court interpreted the provision strictly, requiring that the lawyer have actually participated in the specific case generating the property or right. An assignment of a credit from a concluded case handled by other counsel, given in payment for services in separate litigation, falls outside the prohibition’s scope.

Avanceña, C.J., Johnson, Street, Malcolm, Villamor, Ostrand, Johns, and Romualdez, JJ., concurred.

None.