FACTS:

Justina Fabillo bequeathed a house and lot in Palo, Leyte to her brother Florencio Fabillo in her last will and testament dated August 16, 1957. Florencio filed a petition for the probate of the will and the probate court approved the project of partition, but reserved the determination of the ownership of the property covered by tax declaration No. 19335 and the house erected thereon for separate proceedings.

Two years later, Florencio sought the assistance of lawyer Alfredo M. Murillo in recovering the San Salvador property. Murillo agreed to assist and wrote Florencio a letter instructing him to prepare the complaint and pay the filing fee and sheriff's fee. Murillo also stated in the letter that he would be entitled to 40% of the money value of the house and lot if he succeeded in the case.

Thirteen days later, Florencio and Murillo entered into a contract of services, wherein Murillo would represent Florencio in the cases related to the house and lot mentioned in Justina's will. The contract stated that Murillo would be entitled to 40% of whatever benefit Florencio derived from the cases, including the purchase price, mortgage proceeds, rentals, and damages.

Murillo filed a case against Florencio and his family, claiming his share of the produce of the properties as provided in the contract of services. Florencio and his family argued that the contract was vitiated by old age and ailment, and that the contingent fee was excessive, unfair, and unconscionable.

ISSUES:

1. Whether the consent of the Fabillo spouses to the contract of services was vitiated.

2. Whether the contract of services violated Article 1491 of the Civil Code.

RULING:

1. The consent of the Fabillo spouses to the contract of services was not vitiated. The lower court ruled that there was insufficient evidence to prove that their consent was vitiated. It noted that the contract was witnessed by two of their children who appeared to be highly educated. The spouses themselves were old but literate and physically fit.

2. The contract of services did not violate Article 1491 of the Civil Code. The lower court ruled that the contract did not violate Article 1491 as it stipulated a contingent fee, which is not covered by the prohibition in the said provision of law. The court upheld Murillo's claim for contingent attorney's fees of 40% of the value of recoverable properties.

PRINCIPLES:

• Consent to a contract may be considered vitiated if there is evidence to show that the party giving consent did not fully understand the terms of the contract due to factors such as old age or ailment.

• Article 1491 of the Civil Code prohibits lawyers from acquiring properties or rights that are the objects of litigation in which they may take part by virtue of their profession. However, this prohibition does not apply to contracts between lawyers and clients that stipulate contingent fees, as the payment of these fees is made after judgment has been rendered in the case handled by the lawyer.

• 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.

• A contract for a contingent fee is valid and enforceable as long as the lawyer does not exert undue influence, commit fraud or imposition, or charge an excessive amount that amounts to extortion.

• A contract of professional services between a lawyer and his client should be interpreted in favor of the client, particularly when there is ambiguity in the contract.