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[G.R. No. 104908.June 19, 2001]

REPUBLIC OF THE PHILIPPINES vs. SANDIGANBAYAN, et al.

EN BANC

Gentlemen:

Quoted hereunder, for your information, is a resolution of this Court dated JUN 19 2001.

G.R. No. 104908 (Republic of the Philippines vs. Sandiganbayan and Benjamin Romualdez, et al.)

This is a petition for certiorari under Rule 65 of the Rules of Court filed by the petitioner Republic of the Philippines, represented by the Presidential Commission on Good Government (PCGG), to annul and set aside two (2) Resolutions of public respondent Sandiganbayan (Second Division), dated November 12, 1991 and March 31, 1992, in Civil Case No. 0035.The impugned Resolutions approved the payment of attorney's fees to private respondent ATTY. CLEOFE VILLAR-VERZOLA in the amount of P5,440,000.00 from the funds of private respondents PALM AVENUE REALTY AND DEVELOPMENT CORPORATION and PALM AVENUE HOLDINGS CO., INC. (Palm corporations, for short).These funds are sequestered and held under custodia legis by the PCGG pending determination of the real ownership of said corporations.

It appears that the Palm corporations owned more than 16 million Benguet common shares of stock.On April 5, 1986, the PCGG sequestered the funds and assets of the Palm corporations on the suspicion that their beneficial owner is Benjamin "Kokoy" Romuladez and the corporations are part of his ill-gotten wealth.

In September 1986, Atty. Verzola represented the Palm corporations in negotiating with Benguet Corporation for the sale of some pledged Benguet shares owned by Palm corporations.The Palm corporations wanted to sell their shares to Benguet Corporation to pay their bank debts secured by such shares.It was also the intent of Benguet Corporation to purchase the said shares for distribution to its employees.As a result of the negotiation, Atty. Verzola, on behalf of the Palm corporations entered into a Contract of Purchase and Sale with Benguet Corporation involving 9.5M Benguet shares at P29/share.The contract was submitted to the PCGG for approval.Initially, the PCGG disapproved the contract on the ground that the price was too low.Consequently, Atty. Verzola rescinded the contract of sale and notified the PCGG and Benguet Corporation.Nonetheless, Benguet Corporation exerted efforts for reconsideration of the disapproved sale and negotiated directly with the PCGG.Eventually, the PCGG approved the contract at the selling price of P29/share.

On October 18, 1896, the Palm corporations executed a Special Power of Attorney in favor of Atty. Verzola authorizing her to act as their counsel and attorney-in-fact in relation to its Contract to Purchase and Sell with Benguet Corporations and to defend the Palm corporations in all proceedings in which they are named defendants.

On October 20, 1986, each of the Palm corporations issued a Board Resolution providing for Atty. Verzola's fees as follows: (1) a fixed fee of P2M for each case where she represented the interest of Palm Avenue Holdings Co., Inc.; (2) P1M fixed fee for each case where she represented Palm Avenue Realty and Development Corporation; (3) a monthly retainer of P20,000 per corporation effective October 1986; and (4) an amount not more than 5% of whatever benefit/advantage which inured to the corporations by reason of such or her representation, in the form of shares or financial advantage gained.The Palm corporations then executed the correspondent retainer contracts in favor of Atty. Verzola.

On November 3, 1986, Atty. Verzola, on behalf of the Palm corporations, filed a petition for certiorari (G.R. No. 76296) 1 Palm Avenue Realty Development Corporation vs. Presidential Commission on Good Government et al., 153 SCRA 579 (1987). with this Court against the PCGG, Benguet Corporation, et al., assailing the validity of the aforementioned sales contract involving the shares of stocks owned by Palm corporations in Benguet entered into by the PCGG and Benguet Corporation.Atty. Verzola questioned the sale on the ground that the purchase price was grossly unfair for, as of said date, the price of the said stock had already risen to P56 - P58 per share.The petition did not succeed for on August 31, 1987, this Court upheld the contract of sale.

In January 1988, petitioner Republic filed Civil Case No. 0035 2 Annex "H" of Petition, Rollo, pp. 143-202. with public respondent Sandiganbayan (Second Division) entitled: "Republic of the Philippines vs. Benjamin "Kokoy" Romualdez, et al.," for Reconveyance, Reversion, Accounting, Restitution and Damages, to recover the defendants' alleged ill-gotten wealth.Private respondent Atty. Verzola was named one of the defendants in the case.The complaint alleged that Atty. Verzola is one of the dummies of Romualdez when he acquired the controlling shares in Benguet Corporation using a behest loan from the PNB.The shares are registered in the name of private respondents Palm corporations and allegedly Romualdez is the beneficial owner of said corporations.The complaint also alleged that Atty. Verzola allowed herself to be used by Romualdez by becoming one of the members of the corporation held by Romualdez in a scheme to conceal the true ownership and prevent recovery of the assets he illegally obtained.

On September 4, 1991, private respondent Atty. Verzola filed a motion 3 Rollo, pp. 103-104. in Civil Case No. 0035 for public respondent Sandiganbayan to allow her clients, the Palm corporations, to draw from their funds held by the PCGG the amount of over P5M to answer for her attorney's fees for the services she rendered in the negotiation for the sale of their Benguet shares and in filing the petition for certiorari in G.R No. 76296.Atty. Verzola justified the payment of her attorney's fees as per her retainer contracts with the Palm corporations.

Public respondent Sandiganbayan granted Atty. Verzola's motion and upheld the validity of her retainer contract with the Palm corporations.It approved the payment of her fees in the amount of P5,440,000.00 based upon the amount agreed upon in the retainer contract, less the contingent fees.It held that payment of the fees is legal irrespective of whether or not the government benefited from the services rendered as pending the determination of the real ownership of the sequestered corporations, the Palm corporations are still their recognized owners.

Hence, this petition for certiorari under Rule 65, where the following issues are raised:

I

The respondent Sandiganbayan erred in finding Atty. Verzola is entitled to attorney's fees pursuant to her purported contract with the two Palm Avenue companies considering that she is one of the co-defendants of Benjamin "Kokoy" Romualdez in civil case no. 0035 being one of the latter's dummies/nominees/agents or fronts in acquiring and concealing ill-gotten wealth which included the two Palm Avenue companies as shown by Annex "A" of civil case no. 0035.

II

Respondent Sandiganbyan erred in finding that the amount of attorney's fees agreed upon between Atty. Verzola and the two Palm Avenue companies is reasonable, specially if we consider the fact that such a contract is a mere subterfuge or clever scheme among Benjamin Romualdez and his lawyers and agents/dummies in his front corporations to release for themselves by the millions part of their ill-gotten wealth in violation of E.O. No. 2, in the guise of attorney's fees purportedly pursuant of a contract, thus dissipating the sequestered assets of the Palm companies.

III

Respondent Sandiganbayan failed to see the fact that the officers of the two Palm Avenue companies are mere dummies of Benjamin "Kokoy" Romualdez and hence, the payment for Atty. Vezola's attorney's fees must come from their own pockets for the account of Benjamin Romualdez and not from the funds that the PCGG must conserve pending the final outcome of the cases filed against them.

IV

Respondent Sandiganbayan erred in finding that Atty. Verzola's legal services redounded to the benefit of the petitioner because what Atty. Verzola did was to protect the interest of Benjamin Romualdez and his front corporations to the prejudice of the government which incurred heavy expenses in resisting Atty. Verzola's legal maneuverings.

We find no merit in the petition.

Prefatorily, we note that the petitioner failed to send proper notice to the private respondent of its motion for reconsideration of the Sandiganbayan's Resolution approving the payment of attorney's fees.The petition at bar can be dismissed outright based on this procedural laps.However, for the guidance of the Bench and the Bar, the Court deems it best to resolve the merits of this case.

Again, we stress the rule that the sequestration of a corporation does not divest it of its life and the right to continue with the legitimate operation of its business.Sequestration does not deprive a corporation of its incidental power to sue and, pursuant thereto, to hire the services of a lawyer to represent its interests.The PCGG is a mere conservator, not owner, of the sequestered funds and assets of a corporation.Its acts are limited to acts of administration. 4 Bataan Shipyard and Engineering Co., Inc. vs. Presidential Commission on Good Government, 150 SCRA 181 (1987); Republic vs. Sandiganbayan, 221 SCRA 189 (1993).It should not unduly interfere in the operations of the sequestered company except upon a clear showing that the disbursement of funds, payment of debts or the management of its business concerns is for an unlawful or fraudulent purpose that will result in the dissipation of its assets.

In the case at bar, the issue is whether or not Atty. Verzola is entitled to be paid attorney's fees in connection with the legal services she rendered to the Palm corporations.Petitioner contends that respondent Atty. Verzola is one of the dummies of Romualdez and a co-defendants in civil case no. 0035 pending before the Sandiganbayan.Hence, it is urged that she should not be paid attorney's fees in representing the Palm corporations as she did so to protect her interest and that of her co-defendants.Petitioner adds that if the civil case for recovery of ill-gotten wealth is decided in favor of the petitioner and the Sandiganbayan finds that defendants Romualdez and company are the beneficial owners of the Palm corporations, the defendants should be the ones to pay Atty. Verzola's fees.

We agree with the Sandiganbayan that private respondent Atty. Verzola is entitled to the payment of her fees.

First.The retainer contract between the Palm corporations and private respondent Atty. Verzola is valid.Atty. Verzola diligently performed her part of the contract by negotiating for the sale of the Benguet shares of her clients and by filing a petition for certiorari with this Court impugning the subsequent sales contract between the PCGG and Benguet Corporation involving the same shares on the ground of their low valuation.

Second.The fact that Atty. Verzola is one of the defendants in the civil case filed against Romualdez for the recovery of the latter's ill-gotten wealth has no bearing on her right to collect the legal fees due her.The possible civil obligation of Atty. Verzola, as a defendant, for damages and attorney's fees in the pending case for recovery of ill-gotten wealth is separate and distinct from her right to recover the fees for the legal services she rendered in another case.Petitioner's allegation that the retainer contract is a mere scheme devised by the Palm corporations, Atty. Verzola, and by Romualdez and company to dissipate the funds of the corporations has not been substantiated.Without this substantiation, we cannot bar Atty. Verzola from recovering the fees for the legal services she rendered pursuant to a valid contract between her and the Palm corporations as that would have the effect of denying a sequestered corporations the right to engage the service of a counsel to represent its interests.

Third.As to the issued of reasonableness of the fees claimed, the following criteria should be considered: (1) the professional standing of the lawyer; (2) the extent of the services rendered, and (3) the importance of the litigation or business where the services were rendered. 5 Rilloraza, Africa, De Ocampo and Africa vs. Eastern Telecommunications Phils., Inc., 309 SCRA 566 (1999).In granting Atty. Verzola's attorney fees, the Sandiganbayan properly considered her professional standing, her long experience as a legal practitioner and the nature of the legal services she rendered.She negotiated for the sale of 16 million shares of stock of one of the top corporations in the country, the Benguet Corporation.She filed a petition for certiorari with this Court assailing the approval of the sale of these stocks by the PCGG.Although her petition was eventually dismissed, it cannot be said that she had absolutely no basis to impugn the sale.For while we ruled in said case that the PCGG did not act with grave abuse of discretion in approving the questioned sale, this Court also acknowledged that "(t)he possibility that (the PCGG) erred (in eventually approving the contract of sale of said price) cannot, to be sure, be completely diminished.x x x it is entirely possible that a better bargain may have been struck (by the PCGG) with someone else.x x x" The Court, however, held that based on the prevailing circumstances then, the sale was necessary to prevent the auction of the shares which would fetched a lower price therefor.

However, insofar as the extent of services she rendered to the two Palm corporations is concerned, we find that Atty. Verzola's fixed fee of two million pesos with Palm Avenue Holdings Co., Inc. should be reduced.First, we note that Atty. Verzola's contracts with the Palm corporations included a monthly retainer fee of P20,000.00 for each corporation.Second, she represented the two Palm corporations in the same action, involving the same subject matter.It does not appear from the records that the services she rendered to both companies are substantially dissimilar.Third, she was unable to secure a favorable decision in her petition with this Court.Hence, we find no rational basis for granting her a higher fixed fee of two million pesos for the services she rendered to Palm Avenue Holdings Co., Inc.We thus find it equitable to reduce the said amount to one million pesos, the same amount of fixed fee that she charged the other Palm corporation.

IN VIEW WHEREOF, the impugned Resolutions of the Sandiganbyan are AFFIRMED, with the MODIFICATION that the Presidential Commission on Good Government (PCGG) is directed to pay private respondent Atty. Cleofe Villar-Verzola attorney's fees in the total amount of P4,440,000.00 from the funds of the Palm Avenue Realty and Development Corporation and the Palm Avenue Holdings Co., Inc. which are under the custody of the PCGG.No costs.

Very truly yours,

LUZVIMINDA D. PUNO
Clerk of Court

(Sgd.) MA. LUISA D. VILLARAMA

Asst. Clerk of Court


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