Municipal Council of Iloilo vs. Evangelista

An attorney-in-fact with authority to employ counsel and pay debts impliedly has the power to assign judgment credits to pay attorney's fees, and the prohibition against lawyers acquiring rights in litigation under Article 1459(5) of the Civil Code applies only to cases in which the lawyer actually served as counsel.

The case arose from a 1924 judgment awarding P42,966.40 to Tan Ong Sze Vda. de Tan Toco against the Municipality of Iloilo for the expropriation of a strip of land. After the judgment became final, multiple claimants sought the proceeds: the Philippine National Bank (based on a mortgage), Attorney Jose Evangelista (claiming a 15% attorney's lien for services in the expropriation case), and Antero Soriano (claiming through an assignment executed by Tan Buntiong, attorney-in-fact of Tan Toco). The Municipality filed an interpleader action to resolve the conflicting claims.

• On March 20, 1924, the Court of First Instance of Iloilo rendered judgment in Civil Case No. 3514 awarding Tan Ong Sze Vda. de Tan Toco P42,966.40 against the Municipality of Iloilo for the value of expropriated land.
• The Supreme Court affirmed this judgment on November 28, 1924 (G.R. No. 22617).
• After the judgment became final, Attorney Jose Evangelista filed a claim for 15% of the judgment amount as attorney's fees for services rendered in the expropriation case.
• Antero Soriano claimed the amount based on a deed of assignment dated September 27, 1927 (Exhibit 2-Cruz) executed by Tan Buntiong, attorney-in-fact of Tan Toco, assigning all credits, rights, and interests under the judgment to Soriano in payment for professional services.
• Soriano subsequently assigned his rights to Mauricio Cruz & Co., Inc.
• The Philippine National Bank also claimed the amount, alleging the expropriated land had been mortgaged to it.
• The court ordered the Municipality to file an interpleader action (Civil Case No. 7702) to resolve the adverse claims.
• Prior to the interpleader, payments totaling P12,000 were made: P6,000 paid to Soriano on March 29, 1928, and P6,000 delivered to Evangelista on December 18, 1928 (the latter having waived the remaining P444.69 of his claim).
• The balance of P30,966.40 was adjudicated by the lower court to Mauricio Cruz & Co., Inc.
• The appellant contended that Soriano's services had already been paid (P2,900 admitted by the court, plus P700 evidenced by Exhibits 4-A and 4-B), rendering the assignment without consideration and merely intended to facilitate collection due to her difficulties as a Chinese national.
• Exhibits 4-A and 4-B were receipts for P200 and P500, respectively, stamped "Befete Soriano & Arroyo" and signed "Soriano & Arroyo, by A. Soriano," indicating payment to the firm rather than to Soriano personally.
• Post-assignment payments to Soriano were made on March 14, 1928 (Exhibit 5-G) and December 15, 1928 (Exhibit 5-H).
• The power of attorney (Exhibit 5-Cruz) authorized Tan Buntiong to employ lawyers and pay debts, but did not explicitly authorize assignment of credits.
• Another attorney-in-fact, Tan Montano (Exhibit 1-Tan Toco), authorized to pay debts, did not consent to the assignment.

• The assignment to Soriano was not supported by consideration because professional services had already been fully paid (P2,900 + P700 in Exhibits 4-A and 4-B), and was executed merely to facilitate collection due to the appellant's difficulties as a Chinese national.
• The lower court erred in rejecting Exhibits 4-A and 4-B as evidence of payment.
• The assignment violated Article 1459(5) of the Civil Code, which prohibits lawyers from acquiring by assignment property or rights in litigation.
• Tan Buntiong, as attorney-in-fact, lacked authority to assign the judgment credit, as the power of attorney only authorized payment of debts, not assignment of credits.
• The consent of Tan Montano, the other attorney-in-fact, was required to validate the assignment, but was not obtained.
• The lower court erred in upholding the subsequent assignment from Soriano to Mauricio Cruz & Co., Inc., and in adjudicating the balance to the latter.
• The lower court erred in denying the motion for a new trial.

• Exhibits 4-A and 4-B were properly rejected as they evidenced payments to the firm of Soriano & Arroyo, not personally to Antero Soriano, as indicated by the firm stamp and signature.
• The assignment was supported by consideration, evidenced by post-assignment payments and the inadequacy of the total amount paid (P10,000) relative to the value of cases handled by Soriano (hundreds of thousands of pesos).
• Article 1459(5) was inapplicable because Soriano was not counsel in Civil Case No. 3514; the prohibition applies only to litigation in which the lawyer participated.
• Tan Buntiong had implied authority under the power of attorney to employ lawyers and pay debts, which necessarily includes the authority to satisfy legal fees by assignment of credits.
• The appointment of two attorneys-in-fact (Tan Buntiong and Tan Montano) under separate instruments indicated they were not required to act jointly; thus, the consent of one was unnecessary.

• Procedural:
  • Whether the lower court erred in rejecting Exhibits 4-A and 4-B as evidence.
  • Whether the lower court erred in denying the motion for a new trial.
• Substantive Issues:
  • Whether the assignment of the judgment credit to Attorney Antero Soriano was supported by consideration (professional services) or was merely to facilitate collection.
  • Whether the assignment violated Article 1459(5) of the Civil Code prohibiting lawyers from acquiring property or rights in litigation.
  • Whether Tan Buntiong, as attorney-in-fact, possessed the authority to assign the judgment credit.
  • Whether the consent of Tan Montano (the other attorney-in-fact) was required to validate the assignment.

• Procedural:
  • The lower court correctly rejected Exhibits 4-A and 4-B because they were receipts for payments made to the firm of Soriano & Arroyo, not personally to Antero Soriano, as evidenced by the stamp "Befete Soriano & Arroyo" and the signature "Soriano & Arroyo, by A. Soriano."
  • The denial of the motion for a new trial was not erroneous.
• Substantive:
  • The assignment was supported by consideration. The post-assignment payments to Soriano and the inadequacy of the total payments (P10,000) relative to the value of the numerous cases handled (hundreds of thousands of pesos) demonstrate that the assignment was in payment of professional services, not merely to facilitate collection.
  • Article 1459(5) of the Civil Code was not violated because Soriano was not counsel in Civil Case No. 3514 (the source of the judgment); he only handled other cases for the appellant. The prohibition applies only to property or rights "in litigation" before the court where the lawyer serves, meaning litigation in which the lawyer actually participated as counsel.
  • Tan Buntiong had implied authority under the power of attorney (Exhibit 5-Cruz) which empowered him to employ lawyers and pay debts. This authority necessarily includes the power to satisfy legal fees by assignment of judgment credits.
  • The consent of Tan Montano was not required. The issuance of separate powers of attorney to Tan Buntiong and Tan Montano indicates they were appointed independently and were not required to act jointly. Furthermore, the appellant ratified the assignment by continuing to employ Soriano as her counsel after knowledge of the assignment.

• Implied Authority of Attorney-in-Fact — An attorney-in-fact empowered to employ lawyers and pay the principal's debts has implied authority to pay attorney's fees by assignment of judgment credits rendered in favor of the principal.
• Article 1459(5) of the Civil Code (Prohibition on Lawyers Acquiring Rights in Litigation) — The prohibition against lawyers acquiring property or rights in litigation applies only to cases in which the lawyer acted as counsel, not to assignments made in payment for services rendered in unrelated cases.
• Joint Authority of Agents — When a principal appoints two attorneys-in-fact independently without express requirement for joint action, the consent of one is not required to validate the acts of the other.

• "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."
• "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 attention."
• "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) — The prior case where the judgment being assigned was rendered; cited as the source of the credit being assigned and as the basis for the attorney's lien claimed by Evangelista.

• Article 1459(5), Civil Code — Prohibits justices, judges, prosecutors, court officers, and lawyers from acquiring by purchase or assignment property or rights in litigation before the court within whose jurisdiction they perform their duties; cited to determine whether the assignment to Soriano was valid despite his status as a lawyer.

• Avanceña, C.J., Johnson, Street, Malcolm, Villamor, Ostrand, Johns and Romualdez, JJ. — Joined in the unanimous decision affirming the lower court's judgment in its entirety.