Malvar v. Kraft Food Phils.
REITERATIONFacts
The Antecedents: Czarina T. Malvar (Malvar), hired by Kraft Foods (Phils.), Inc. (KFPI), was dismissed on March 16, 2000. She filed a complaint for illegal suspension and illegal dismissal against KFPI and Bienvenido S. Bautista. The Labor Arbiter and the National Labor Relations Commission (NLRC) found her dismissal illegal and ordered reinstatement with backwages, damages, and attorney's fees. The Court of Appeals (CA) affirmed the illegality but modified the award, ordering separation pay instead of reinstatement and reducing damages. Procedural History: After the CA decision became final, Malvar sought execution. The NLRC's Research and Computation Unit (RCU) computed the award at ₱41,627,593.75. Labor Arbiter Jaime M. Reyno reduced this to ₱27,786,378.11. The NLRC, however, reinstated the RCU's computation. The CA, on certiorari, reversed the NLRC and remanded the case to the Labor Arbiter for recomputation, excluding projected salary increases and certain other benefits. Malvar appealed to the Supreme Court. The Petition: While Malvar's appeal was pending, she entered into a compromise agreement with KFPI and Kraft Foods International (KFI) for ₱40,000,000.00, in addition to ₱14,252,192.12 already paid. Malvar then filed a motion to dismiss/withdraw the case. Subsequently, the law firm representing Malvar (Intervenor) filed a Motion for Intervention to Protect Attorney's Rights, seeking payment of its contingent fees based on their written agreement. Malvar opposed the intervention, citing the compromise agreement and alleging justifiable causes for terminating the law firm. The respondents also commented on the motion for intervention.
Issue(s)
Whether Malvar's motion to dismiss the petition on the ground of the execution of the compromise agreement was proper. Whether the Motion for Intervention to protect attorney's rights can prosper, and if so, how much could it recover as attorney's fees.
Ruling
The Supreme Court approved the compromise agreement between Malvar and the respondents. However, it granted the Motion for Intervention filed by Malvar's law firm, ordering Malvar and the respondents jointly and severally to pay the Intervenor its stipulated contingent fees.
Ratio Decidendi
On the propriety of Malvar's motion to dismiss: The Court held that while a client has the right to compromise litigation and terminate counsel, this right must be exercised in good faith and cannot be used to defraud an attorney of earned fees. The Court found that Malvar's actions, including the timing of the termination of her counsel and the compromise agreement, indicated an intent to evade her legal obligation to pay attorney's fees. Therefore, her motion to dismiss, which would prejudice the attorney's rights, was not proper without addressing the attorney's claim. On the Motion for Intervention to protect attorney's rights: The Court ruled that the motion for intervention could prosper. It reiterated that a client has the absolute right to terminate the attorney-client relationship, but this right is limited by the requirement of good faith. Since Malvar had a written contract with her attorneys, her dismissal without justifiable cause entitled the attorneys to recover their full compensation. The Court found no justifiable cause for Malvar's termination of the law firm, especially in light of her prior commendation of their services. The Court also found the respondents complicit in Malvar's scheme to deprive the Intervenor of its fees, making them jointly and severally liable as joint tort-feasors.
Main Doctrine
A client's right to compromise litigation or terminate counsel is not absolute and must be exercised in good faith, without intent to defraud the attorney of earned fees. In cases of unjustified termination or compromise designed to deprive the attorney of compensation, the attorney is entitled to recover fees, and the client and the adverse party may be held jointly and severally liable as joint tort-feasors.