FACTS:

This is an appeal from the order of the CFI of Cebu denying the petition for the cancellation of an adverse claim registered by the adverse claimant on the transfer certificate of title of the petitioners. Atty. Fernandez was retained as counsel by petitioner, Maximo Abarquez, in a Civil Case for the annulment of a contract of sale with right of repurchase and for the recovery of the land which was the subject matter thereof. The CA in a decision promulgated on August 27, 1963 reversed the decision of the lower court and annulled the dead of pacto de retro. Appellee Agripina Abarquez filed a motion for reconsideration but the same was denied in a resolution and the judgment became final and executory.

Subsequently, a Transfer Certificate of Title was issued in the name of Maximo Abarquez, married to Anastacia Cabigas, over his adjudged share in Lots Nos. 5600 and 5602 containing an area of 4,085 square meters. These parcels of land later by the subject matter of the adverse claim filed by the claimant.

The case having been resolved and title having been issued to petitioner, adverse claimant waited for petitioner to comply with his obligation under the document executed by him on June 10, 1961 by delivering the one-half (½) portion of the said parcels of land.

Petitioner refused to comply with his obligation and instead offered to sell the whole parcels of land covered by TCT No. 31841 to petitioner-spouses Larrazabal. Upon being informed of the intention of the petitioner, adverse claimant immediately took steps to protect his interest by filing with the trial court a motion to annotate attorney’s lien on TCT No. 31841 on June10, 1965 and by notifying the prospective buyers of his claim over the one-half portion of the parcels of land. By virtue of the petition of mid affidavit the adverse claim for one-half (½) of the lots covered by the June 10, 1961 document was annotated on the said title.

 

ISSUE:

Whether contingent fees are recognized in this jurisdiction, hence the assignment of the one-half (½) portion of the lots to Atty. Fernandez is effective and binding.

 

RULING:

The contract for a contingent fee, being valid, vested in Atty Fernandez an interest or right over the lots in question to the extent of one-half thereof. Said interest became vested in Atty. Fernandez after the case was won on appeal because only then did the assignment of the one-half (½) portion of the lots in question became effective and binding. So that when he filed his affidavit of adverse claim his interest was already an existing one. There was therefore a valid interest in the lots to be registered in favor of Atty. Fernandez adverse to Abarquez.

In the 1967 case of Albano vs. Ramos (20 SCRA 171), the attorney was allowed to recover in a separate action her attorney’s fee of one-third (1/3) of the lands and damages recovered as stipulated in the contingent fee contract. And this Court in the recent case of Rosario Vda de Laig vs. CA, et al., which involved a contingent fee of one-half (½) of the property in question, held that contingent fees are recognized in this i jurisdiction (Canon 13 of the Canons of Professional Ethics adopted by the Philippine Bar association, which contingent fees may be a portion of the property in litigation.

“In resolving now the issue of the validity or nullity for the registration of the adverse claim, Section 110 of the Land Registration Act (Act 496) should be considered. Under d section, an adverse claim maybe registered only by.. Whoever claims any part or interest in registered and adverse to the registered owner, arising subsequent to the date of the of registration … if no other provision is made in this Act for registering the same …Moreover, the interest or claim of Atty. Fernandez in the lots in question arose long after the original petition which took place many years ago.

And, there is no other provision of the Land Registration Act under which the interest or claim may be registered except as an adverse claim under Section 110 thereof. The interest or claim cannot be registered as an attorney’s charging lien. The lower court was correct in denying the motion to annotate the attorney’s lien.

A charging lien under Section 37, Rule 138 of the Revised Rules of Court is limited only to money judgments and not to judgments for the annulment of a contract or for delivery of real property as in the instant case. Said Section provides that:

 

Section 37. An attorney shall have a lien upon the funds, documents and papers of his client which have lawfully come into his possession and may retain the same until his lawful fees and disbursements have been paid, and may apply such funds to the satisfaction thereof. He shall also have a lien to the same extent upon all judgments, for the payment of money, and executions issued in pursuance of such judgments, which he has secured in a litigation of his client … (emphasis supplied).

 

Therefore, as an interest in registered land, the only adequate remedy open to Atty. Fernandez is to register such interest as an adverse claim. Consequently, there being a substantial compliance with Section 110 of Act 496, the registration of the adverse claim is held to be valid. Being valid, its registration should not be cancelled because as we have already stated, “it is only when such claim is found unmeritorious that the registration thereof may be cancelled” (Paz Ty Sin Tei vs. Jose Lee Dy Piao).

The one-half (½) interest of Atty. Fernandez in the lots in question should therefore be respected.

 

Indeed, he has a better right than petitioner-spouses Larrazabal. They purchased their two-thirds (2/3) interest in the lots in question with the knowledge of the adverse claim of Atty. Fernandez. The adverse claim was annotated on the old transfer certificate of title and was later annotated on the new transfer certificate of title issued to them. As held by this Court:

 

The annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property where the registration of such interest or right is not otherwise provided for by the Land Registration Act, and serves as a notice and warning to third parties dealing with said property that someone is claiming an interest on the same or a better right than the registered owner thereof (Sanchez, Jr. vs. Court of Appeals).

Having purchased the property with the knowledge of the adverse claim, they are therefore in bad faith. Consequently, they are estopped from questioning the validity of the adverse claim.