Acquisition of Properties Subject of Litigation

Acquisition of properties
subject of litigation
Problem Areas in Legal Ethics
Arellano University School of Law Arellano Law Foundation
2015-2016
Contingent fee arrangement does not

violate Article 1491 (5) of the Civil Code
Hence, a contract between a lawyer and his client stipulating a
contingent fee is not covered by said prohibition under because
the payment of said fee is not made during the pendency of
the litigation but only after judgment has been rendered in
the case handled by the lawyer. In fact, under the 1988 Code of
Professional Responsibility, a lawyer may have a lien over funds
and property of his client and may apply so much thereof as
may be necessary to satisfy his lawful fees and disbursements. Fabillo and Tana v. IAC G.R. No. L-68838 [1991]
Limitations of contingent fee

As long as the lawyer does not exert undue influence on his
client, that no fraud is committed or imposition applied, or
that the compensation is clearly not excessive as to amount to
extortion, a contract for contingent fee is valid and
enforceable. Moreover, contingent fees were impliedly
sanctioned by No. 13 of the Canons of Professional Ethics which
governed lawyer-client relationships when the contract of services
was entered into between the Fabillo spouses and Murillo. Fabillo and Tana v. IAC G.R. No. L-68838 [1991]
Appearance of impropriety if judge

purchase property after litigation
Finally, while it is true that respondent Judge did not violate paragraph 5,
Article 1491 of the New Civil Code in acquiring by purchase a portion of
Lot 1184-E which was in litigation in his court, it was, however, improper
for him to have acquired the same. He should be reminded of Canon 3
of the Canons of Judicial Ethics which requires that: "A judge's official
conduct should be free from the appearance of impropriety, and his
personal behavior, not only upon the bench and in the performance of
judicial duties, but also in his everyday life, should be beyond reproach."
And as aptly observed by the Investigating Justice: "... it was unwise and
indiscreet on the part of respondent to have purchased or acquired a
portion of a piece of property that was or had been in litigation in
his court and caused it to be transferred to a corporation of which he and
his wife were ranking officers at the time of such transfer. - Macariola v.
Asuncion, A.M. No. 133-J [1982]
The property must be the very subject

of litigation for Article 1491 to apply
It is true that Canon No. 10 of the Canons of Professional Ethics
prohibits the lawyer from purchasing any interest in the
subject-matter of the litigation which he is conducting, and
Article 1491, paragraph 5, of the New Civil Code prohibits him
from acquiring by purchase or assignment the property and rights
which may be the object of any litigation in which he may take part
by virtue of his profession. But in those cases where these
provisions were applied, the rights or properties purchased by
the lawyer were the very subject of the litigation handled by
him. - Guevara v. Calalang, A.M. No. 681 [1982]
Levied property in satisfaction of

damages can be properly acquired by
lawyer
In the case at bar, the lot in which respondent acquired rights by
assignment was not the subject of Civil Case No. 2171 in which he
approved (sic) as counsel for Bernabe Flores and others. The said
case was purely one for damages and did not involve the lot in
question. The lot was simply levied upon on execution after
judgment was rendered in favor of the plaintiffs. Therefore
Article 1491 of the New Civil Code did not apply.
Consequently, respondent had not violated the said provision of
law. - Guevara v. Calalang, A.M. No. 681 [1982]
Cont
It was not professional misconduct or unethical practice for
the respondent to acquire the rights and interests of his client to
the 439 square meter parcel of land subject of the administrative
charges because the land was not involved in the litigation he was
handling. The land was acquired by Bernabe Flores in an execution
sale conducted to satisfy the judgment secured in the course of
Civil Case No. 2171. The case handled by the respondent was for
damages. - Guevara v. Calalang, A.M. No. 681 [1982]
Withdrawal of the amount deposited in

order to pay attorneys fees violates
Article 1491 of the NCC
The withdrawal of the amount deposited in order to pay attorneys fees to

petitioners counsel, Atty. De Guzman, Jr., violates Article 1491 of the Civil
Code which forbids lawyers from acquiring by assignment, property and
rights which are the object of any litigation in which they may take part by
virtue of their profession. Furthermore, Rule 10 of the Canons of
Professional Ethics provides that the lawyer should not purchase any
interest in the subject matter of the litigation which he is conducting.
The assailed transaction falls within the prohibition because the Deed
assigning the amount of P672,900.00 to Atty. De Guzman, Jr., as part of his
attorneys fees was executed during the pendency of this case with the
Court of Appeals. In his Motion to Intervene, Atty. De Guzman, Jr., not
only asserted ownership over said amount, but likewise prayed that the
same be released to him. - Pabugais v. Sahijwani G.R. No. 156846 [2004]
Even if litigant voluntarily assigned the

amount
That petitioner knowingly and voluntarily assigned the subject
amount to his counsel did not remove their agreement within
the ambit of the prohibitory provisions. - Pabugais v. Sahijwani
G.R. No. 156846 [2004]
Assignment of property violates

Article 1491
We agree with the Investigating Commissioner's opinion that the
prohibition applies when the lawyer has not paid money for it and
the property was merely assigned to him in consideration of legal
services rendered at a time when the property is still the subject of
a pending case. - Ordonio v. Atty. Eduarte, A.M. No. 3216 [1992]
10
Prohibition still applies even if lessee is

a separate juridical person
Thus, even if the parties designated as lessees in the assailed lease

contracts were the "Heirs of Jose Villegas" and the partnership HIJOS DE
JOSE VILLEGAS, and respondent signed merely as an agent of the latter,
the Court rules that the lease contracts are covered by the prohibition
against any acquisition or lease by a lawyer of properties involved in
litigation in which he takes part. To rule otherwise would be to lend a
stamp of judicial approval on an arrangement which, in effect,
circumvents that which is directly prohibited by law. For, piercing
through the legal fiction of separate juridical personality, the Court
cannot ignore the obvious implication that respondent as one of the heirs
of Jose Villegas and partner, later manager of, in HIJOS DE JOSE VILLEGAS
stands to benefit from the contractual relationship created between
his client Felix Leong and his family partnership over properties
involved in the ongoing testate proceedings. - Mananquil v. Atty.
Villegas, A.M. No. 93-7-696-0 February 21, 1995
11
Mortgage contract included in the

prohibition
To state that mortgages are not included within the prohibition is
to open the door to an indirect circumvention of that statutory
injunction, acquisition of the property being merely
postponed till eventual foreclosure.
Respondent asserts further that Article 1491[5] does not apply to
judgment creditors of which, he claims, he was one. Under
ordinary circumstances, the argument of respondent could be
considered plausible. Unfortunately, however, as heretofore
explained, the mortgage was executed in violation of Article
1491[5] so that this Article has a direct bearing on this case and
respondent cannot escape its provision. Having violated the same,
he cannot be considered in the general run of a judgment creditor.
- Fornilda, et. al. v. RTC Branch 164, G.R.No. L-72306 [1989]
12
Mere demand for delivery of the

litigated property does not
violate the rule
In the instant case, there was no actual acquisition of the property
in litigation since the respondent only made a written demand for
its delivery which the complainant refused to comply. Mere
demand for delivery of the litigated property does not cause
the transfer of ownership, hence, not a prohibited transaction
within the contemplation of Article 1491. Even assuming arguendo
that such demand for delivery is unethical, respondent's act does
not fall within the purview of Article 1491. - Ramos v. Atty. Ngaseo,
A.C. No. 6210 [2004]
13
Certiorari proceeding still bars

purchase of property under Article 1491
In the case at bar, while it is true that Atty. Arsenio Fer. Cabanting
purchased the lot after finality of judgment, there was still a
pending certiorari proceeding. A thing is said to be in
litigation not only if there is some contest or litigation over it
in court, but also from the moment that it becomes subject to
the judicial action of the judge. - Valencia v. Atty. Cabanting,
A.M. No. 1302, 1391 and 1543 [1991]
14
Thank you for your attention!!
15

Acquisition of Properties Subject of Litigation

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Acquisition of properties

Contingent fee arrangement does not

Limitations of contingent fee

Appearance of impropriety if judge

The property must be the very subject

Levied property in satisfaction of

Withdrawal of the amount deposited in

The withdrawal of the amount deposited in order to pay attorneys fees to

Even if litigant voluntarily assigned the

Assignment of property violates

Prohibition still applies even if lessee is

Thus, even if the parties designated as lessees in the assailed lease

Mortgage contract included in the

Mere demand for delivery of the

Certiorari proceeding still bars

Thank you for your attention!!

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