A. Define champerty. (3%)
B. Atty. Andy and Atty. Valeriano were classmates in law school. As such, they developed a close friendly relationship. They agreed that they would refer clients to each other, and whoever referred clients would receive a commission or portion of the attorney’s fees. Atty. Andy referred a client to Atty. Valeriano, who charged the client ₱100,000.00 as initial attorney’s fees. Thereafter, Atty. Valeriano sent 15% of ₱100,000.00, or ₱15,000.00, to Atty. Andy as the latter’s referral fee.
Explain if the agreement on the referral fee is ethical. (3%)
Suggested answer only. Not an official answer and not legal advice.
In A, champerty is a void contract where a lawyer pays for litigation expenses for a share of the property in suit. In B, the referral fee agreement is unethical. Under Canon III of the CPRA and settled jurisprudence,
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Quick check
What is a champertous contract in the practice of law?
A champertous contract is an invalid agreement where a lawyer pays all litigation expenses in exchange for a share of the property in suit.
Why are champertous contracts considered void under Philippine law and ethical rules?
Champertous contracts are void for being contrary to public policy because they encourage speculative litigation.
When is a division of attorney's fees between lawyers from different law firms ethically permissible?
Fee division between lawyers not in the same firm is allowed only in proportion to actual services rendered and responsibility assumed.
Is a referral fee agreement where a lawyer receives fifteen percent of legal fees solely for referring a client ethical?
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What fundamental principle prohibits lawyers from charging commercial finder's fees for client referrals?
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1. Champertous Contracts
Under Canon III of the Code of Professional Responsibility and Accountability (CPRA) and settled jurisprudence, a champertous contract is an agreement whereby a lawyer undertakes to carry on a litigation at his own expense in consideration of receiving a specified share of the property or proceeds recovered. Such contracts are void for being contrary to public policy because they encourage speculative litigation and turn lawyers into business partners in lawsuit outcomes.
2. Fee Division
Under the CPRA, a division of attorney's fees between lawyers who are not in the same law firm is permissible only when the division is made in proportion to the actual legal services performed and professional responsibility assumed by each lawyer. A mere referral of a client from one lawyer to another does not justify a fee division or referral commission without active participation or joint responsibility in handling the legal matter.
3. Referral Commissions
Accepting a referral fee or commission solely for recommending a lawyer to a client is strictly unethical. Legal fees represent compensation for professional legal services actually rendered, not finder's fees or commercial referral bonuses. Paying or receiving referral fees degrades the practice of law into a commercial transaction and undermines the fiduciary nature of the attorney-client relationship.