Lopez v. Hospicio De San Jose

SECOND DIVISION

[G.R. No. 196628. April 18, 2016.]

ATTY. MARCIAL F. LOPEZ, petitioner, vs. HOSPICIO DE SAN JOSE, QUEZON INSTITUTE, SANTO TOMAS UNIVERSITY HOSPITAL, AND UP-PHILIPPINE GENERAL HOSPITAL, respondents.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, Second Division, issued a Resolution dated 18 April 2016 which reads as follows:

"G.R. No. 196628 (Atty. Marcial F. Lopez, petitioner v. Hospicio De San Jose, Quezon Institute, Santo Tomas University Hospital, and UP-Philippine General Hospital, respondents)

This petition for review under Rule 45 of the Rules of Court assails the November 30, 2010 Decision 1 and the April 12, 2011 Resolution 2 of the Court of Appeals (CA) in CA-G.R. CV No. 87578, allowing the partial distribution of the estate of the late Maria Manuel vda. De Biascan (the Estate) and denying petitioner's claim for payment of attorney's fees.

The Antecedents

On August 20, 1992, petitioner Atty. Marcial F. Lopez (Atty. Lopez) filed a petition 3 before the Regional Trial Court of Manila (probate court) for the probate of the Last Will and Testament 4 of the late Maria Manuel Vda. De Biascan and for the issuance of letters testamentary in his favor.

Before the probate court could act on the will, Atty. Lopez filed his Motion for Approval of Partial Accounting and Claims Against Estate 5 and later his Compliance and Motion to Admit/Consider Additional Partial Accounting/Claims, 6 which included attorney's fees pegged at 10% of the gross estate for the services he had rendered for the estate from March 1994 until the termination of the case. He prayed that he be reimbursed of the mentioned expenses out of the assets of the estate.

Respondents Quezon Institute, Hospicio de San Jose, Philippine General Hospital, and University of Santo Tomas Hospital (legatees) filed their Joint Comment 7 on petitioner's partial and full accounting/claims. The legatees collectively agreed with the claim for publication expenses as well as the funeral and burial expenses. They, however, objected to the other claims, including the prayer for payment of attorney's fees for being baseless and/or excessive.

On May 29, 2001, the probate court issued an order, 8 the pertinent portion of which reads:

After careful reading and consideration of the laws and jurisprudence on the matter on hand, this court hereby resolves to APPROVE the claims with regards the funeral, burial and publication expenses chargeable against the estate of the late Maria Manuel vda. De Biascan. But the claims for Attorney's fees (Sec. 7 p (3) R. 85) of the Rules of Court) and all the other claims are hereby DENIED.

SO ORDERED.

[Emphasis Supplied]

Atty. Lopez filed a partial motion for reconsideration 9 of the May 29, 2001 Order but only insofar as it denied the claim for attorney's fees.

In the interim, the probate court issued the Order of Probate, 10 dated August 31, 2001, approving and allowing the Last Will and Testament of the late Maria Manuel vda. De Biascan. The motion to admit additional partial accounting was also approved but only with regard to the funeral, burial and publication expenses. All other claims were denied. The decretal portion of the order reads:

WHEREFORE, the Notarial Last Will and Testament of the late MARIA MANUEL VDA. DE BIASCAN is hereby APPROVED and its ALLOWANCE is GRANTED AND MANDATED.

SO ORDERED. 11

On November 8, 2001, Atty. Lopez filed his motion for the Issuance of Letters Testamentary 12 where he stated: (a) that he had been named by the decedent as her sole executor in her notarial Last Will and Testament who should assume and serve as such without bond; and (b) that he possessed all the qualifications and none of the disqualifications under the law to serve as the executor of the estate.

In its November 12, 2001 Order, 13 the probate court granted the partial distribution of the Estate subject to the conditions agreed upon by the parties. It wrote:

xxx xxx xxx

Each counsel manifested before the Court their respective stand, with regards the purchase price of the Miguelin property, to which this Court issued on October 30, 2001 a clarificatory order.

It should be remembered that during the last hearing, it was agreed that the taxes and other amounts deductible shall only be identified and will be discussed in today's conference.

Counsel for Q.I. manifested that it is the duty of the administrator to pay all the taxes due. However, counsel agreed that the capital gains tax and the broker's commission which is 5% of the purchase price be deducted from the purchase price.

Hospicio de San Jose, UST and the Oppositors, agreed that the surveyor's fee of P12,000.00 should be reimbursed to the broker. Further, the capital gains tax and of the advance payment to the caretaker, should be deducted from the purchase price.

Hence, all the parties present, agreed that there should be a partial distribution subject to the agreed conditions regarding the deductions. The reimbursement with regards the back real estate taxes shall be further discussed by all the parties.

Additionally, Atty. Lopez, being the petitioner should be attending the hearing of this proceeding. In view of his constant absences, this Court has ordered the Officer-In-Charge to execute the necessary Deed of Sale in favor of the buyers, which the legatees and the oppositors are in agreement, cannot be rescinded as there has been substantial execution on the part of the buyer by depositing the amount to the Court.

Legatees further pointed out that there has been no accounting of the estate submitted by the administrator, Atty. Marcial F. Lopez, and the Constancia property and the frontage of the Kalookan property which are part of the estate had been titled in the name and in favor of Atty. Marcial F. Lopez.

The attention of the court was called on the Motion for the Issuance of Letters Testamentary set for today by the movant. Copies of the said motion was sent to other interested parties by registered mail. However, the movant failed to appear today ratiocinating counsel of record has to attend on another case.

This was vehemently opposed by all the counsels, now present and prayed that the said motion be denied [GRANTED].

ACCORDINGLY, as agreed upon by all legatees and oppositors, let there be partial distribution subject to the conditions/restrictions agreed upon by all concerned.

SO ORDERED. 14

[Emphases Supplied]

Aggrieved by the probate court's order, Atty. Lopez filed a motion for reconsideration 15 on February 7, 2002 seeking the nullification of the partial distribution on the ground that it was premature and contrary to rules and jurisprudence. He insisted that no distribution of the estate should be allowed until payment of the obligations, such as expenses of administration, had been made or provided for. Furthermore, he prayed that letters testamentary be issued to him as the named executor of the estate of the decedent.

On May 25, 2006, Atty. Lopez received a copy of the probate court's May 15, 2006 Order, 16 which denied both the (1) partial motion for reconsideration of the May 29, 2001 Order, praying that the claim for attorney's fees be granted; and the (2) motion for reconsideration of the November 12, 2001 Order, praying that the partial distribution of the estate be nullified and that letters testamentary be issued to him as the designated executor of the Estate. IDSEAH

Consequently, Atty. Lopez appealed to the CA.

Ruling of the Court of Appeals

In its November 30, 2010 decision, the CA affirmed the partial distribution of the Estate and the denial of Atty. Lopez's claim for attorney's fees. It, however, ordered the probate court to issue letters testamentary in favor of Atty. Lopez. The fallo of the decision reads in this wise:

WHEREFORE, in view of all the foregoing, the appeal is PARTIALLY GRANTED. Accordingly, the probate court is ordered to issue letters testamentary to petitioner-appellant in accordance with Section 4, Rule 78 of the Rules on Special Proceedings.

The order of denial of the claim for attorney's fees by the probate court is AFFIRMED without prejudice, however, to the availment by petitioner-appellant's counsel of the appropriate procedure to enforce collection of the same.

The order for partial distribution of the estate is likewise UPHELD.

SO ORDERED. 17

In sustaining the propriety of the order with respect to the partial distribution of the proceeds of the sale of the Miguelin property to the legatees, the CA pointed out that a certain portion of the proceeds was deposited in the Land Bank of the Philippines (LBP), which would be made to answer for any expenses and claims against the Estate. The appellate court stated that it was sufficient compliance with the requirement on posting of bond as required in Section 1, Rule 90 of the Rules on Special Procedure. Furthermore, the CA also mentioned that the Miguelin property was just one of the many properties of the decedent. In view of this and considering that the Estate appeared to have left no outstanding obligations, the CA concluded that there were sufficient assets left to account for the claim for expenses of administration. 18

As regards the claim for attorney's fees, the CA upheld its denial. It explained that because Atty. Lopez, despite being a lawyer himself, hired the services of a law firm to assist him in his duties and responsibilities, his counsel should have first exhausted the remedies available, such as to collect his fees directly from the executor or administrator or to file a petition before the probate court for the direct payment from the Estate after the requisite notices to all the parties concerned were made. 19

Not in conformity, Atty. Lopez filed a motion for partial reconsideration of the said decision but the same was denied on the ground that no new, valid and justifiable ground was presented to compel the CA to set aside its earlier ruling. 20

Hence, the present petition for review. 21

ISSUES:

I.

THE COURT OF APPEALS COMMITTED A SERIOUS AND REVERSIBLE ERROR OF LAW WHEN IT AFFIRMED THE PARTIAL DISTRIBUTION OF THE ESTATE OF THE DECEDENT PRIOR TO THE PAYMENT OF EXPENSES CHARGEABLE TO THE ESTATE, WHICH IS CONTRARY TO SECTION 1, RULE 90 OF THE RULES OF COURT.

II.

THE COURT OF APPEALS COMMITTED A SERIOUS AND REVERSIBLE ERROR OF LAW WHEN IT DENIED THE CLAIM FOR ATTORNEY'S FEES.22

Atty. Lopez argues that the partial distribution was contrary to Rule 90, paragraph 2 of Section 1 of the Rules of Court, which provides that no distribution of the estate will be allowed until payment of the obligations such as, debts, funeral charges, inheritance tax, and expenses of administration. It is only after payment of the mentioned obligations and charges that any residue, if any, may be distributed among the heirs. 23

Atty. Lopez conceded that advance distribution is allowed in certain instances but, in this case, it cannot be allowed because the probate court failed to comply with the requirements laid down in Quasha Ancheta Peña and Nolasco Law Office v. LCN Construction Corp. 24(Quasha), where it was stated:

While the awards in favor of petitioner children and widow made in the RTC Order dated 12 June 2003 was not yet a distribution of the residue of the estate, given that there was still a pending claim against the estate, still, they did constitute a partial and advance distribution of the estate. Virtually, the petitioner children and widow were already being awarded shares in the estate, although not all of its obligations had been paid or provided for.

Section 2, Rule 109 of the Revised Rules of Court expressly recognizes advance distribution of the estate, thus:

Section 2. Advance distribution in special proceedings. — Notwithstanding a pending controversy or appeal in proceedings to settle the estate of a decedent, the court may, in its discretion and upon such terms as it may deem proper and just, permit that such part of the estate as may not be affected by the controversy or appeal be distributed among the heirs or legatees, upon compliance with the conditions set forth in Rule 90 of these rules.

The second paragraph of Section 1 of Rule 90 of the Revised Rules of Court allows the distribution of the estate prior to the payment of the obligations mentioned therein, provided that "the distributees, or any of them, gives a bond, in a sum to be fixed by the court, conditioned for the payment of said obligations within such time as the court directs."

In sum, although it is within the discretion of the RTC whether or not to permit the advance distribution of the estate, its exercise of such discretion should be qualified by the following: [1] only part of the estate that is not affected by any pending controversy or appeal may be the subject of advance distribution (Section 2, Rule 109); and [2] the distributees must post a bond, fixed by the court, conditioned for the payment of outstanding obligations of the estate (second paragraph of Section 1, Rule 90). There is no showing that the RTC, in awarding to the petitioner children and widow their shares in the estate prior to the settlement of all its obligations, complied with these two requirements or, at the very least, took the same into consideration. Its Order of 12 June 2003 is completely silent on these matters. It justified its grant of the award in a single sentence which stated that petitioner children and widow had not yet received their respective shares from the estate after all these years. Taking into account that the claim of LCN against the estate of the late Raymond Triviere allegedly amounted to P6,016,570.65, already in excess of the P4,738,558.63 reported total value of the estate, the RTC should have been more prudent in approving the advance distribution of the same. 25 aCIHcD

[Emphases Supplied]

According to Atty. Lopez, Quasha case is applicable because: (a) there are still unsettled claims against the estate which he specifically mentioned in his Motion for Approval of Partial Accounting and Claims Against Estate; and (b) the probate court did not require the distributees/legatees to post a bond for the payment of outstanding obligations of the estate. 26 He posits that the bond requirement cannot be disregarded notwithstanding the probate court's order that a portion of the proceeds be deposited in the LBP. Atty. Lopez claims that there is no assurance that the amount deposited will be sufficient to pay all the claims against the Estate. He explains that if the proceeds of the Estate will be subsequently found insufficient to cover all the claims, it will be left with no recourse against the legatees, which is precisely the situation sought to be avoided by the Rules in requiring the posting of bond. 27 Thus, Atty. Lopez insists that the partial distribution of the Estate is illegal.

Finally, Atty. Lopez reiterates that he is entitled to attorney's fees as an expense of administration of the Estate. He avers that jurisprudence has laid down the rule that the character of a claim for attorney's fees is in the nature of an administration expense and that when the attorney's fees paid are beneficial to the estate and reasonable, as in this case, the administrator is entitled to reimbursement, chargeable to the estate. 28

Respondents' Position

The legatees, collectively counter that, contrary to the position of Atty. Lopez, it is unnecessary to post a bond mentioned under Section 2, Rule 109 in relation with Section 1, Rule 90. Pursuant to the February 21, 2001 order, a portion of the sale proceeds (referring to the sale of the Miguelin property for P3.9 million) has been deposited in the LBP, which has been earmarked for the payment of expenses and claims against the Estate. They assert that the amount set aside adequately complies with the requirement on posting of bond.

Furthermore, the legatees note that the Estate still has more than enough assets to answer for the expenses and obligations in accordance with law. Hence, they insist that the posting of bond is simply unnecessary.

Lastly, the legatees contend that the CA did not err in denying the claim for attorney's fees because the counsel of Atty. Lopez lawyer should have first exhausted the remedies available, to wit: collect directly from Atty. Lopez, or, if Atty. Lopez should refuse, file a petition before the probate court for collection of attorney's fees from the Estate. Unfortunately, neither step was undertaken by the said counsel. AHCETa

The Court's Ruling

The Propriety of the Order of

Section 1, Rule 90 of the 1997 Rules of Court provides:

Section 1. When order for distribution of reside made. — When the debts, funeral charges, and expenses of administration, the allowance to the widow, and inheritance tax, if any, chargeable to the estate in accordance with law, have been paid, the court, on the application of the executor or administrator, or of a person interested in the estate, and after hearing upon notice, shall assign the residue of the estate to the persons entitled to the same, naming them and the proportions, or parts, to which each is entitled, and such persons may demand and recover their respective shares from the executor or administrator, or any other person having the same in his possession. If there is a controversy before the court as to who are the lawful heirs of the deceased person or as the distributive shares to which each person is entitled under the law, the controversy shall be heard and decided as in ordinary cases.

No distribution shall be allowed until the payment of the obligations above mentioned has been made or provided for, unless the distributees, or any of them, give a bond, in a sum to be fixed by the court, conditioned for the payment of said obligations within such time as the court directs.

[Emphasis and Underscoring Supplied]

From the foregoing, the rule is that for a partial distribution of the estate to be allowed, certain conditions should be complied with, namely:

1) that the obligations mentioned in Section 1, Rule 90 of the Rules of Court, viz., the debts, funeral charges, and expenses of administration, the allowance to the widow, and inheritance tax, if any, chargeable to the estate in accordance with law, have been paid; or,

2) that the distributees or any of them, give a bond, in a sum to be fixed by the court, conditioned for the payment of said obligations within such time as the court directs.

As can be gleaned therefrom, where there are existing obligations that are yet to be settled, a partial distribution may be permitted if the distributees post a bond to answer for existing obligations in an amount fixed by the court.

The bond required by the Rules is for the protection not only of the heirs, but also for the benefit of creditors and subsequent claimants who have not agreed to the advances. 29

This bond requirement, however, is not a hard and fast rule. Contrary to the assertion of Atty. Lopez, the posting of bond may be excused in certain cases. In Dael v. IAC, 30 the Court, in granting partial distribution, stated that the estate in question had sufficient assets to ensure an equitable distribution of the inheritance in accordance with law and final judgment in the proceedings. Also, the Court observed that it did not appear that there were unpaid obligations, as contemplated in Rule 90, for which provisions should have been made or a bond required.

In the case at bench, the CA stated that aside from the claim of attorney's fees, it did not appear from the Appellant's Brief that there were other specific unpaid obligations, as contemplated in Rule 90, for which provision should have been made or a bond required. With respect to the denial of "all other claims" in the May 29, 2001 order, it had already become final. It must be pointed out that in his motion for partial reconsideration, Atty. Lopez sought the reconsideration of the said order only insofar as it denied the claim for attorney's fees. As such, with respect to the other claims, the order had already attained finality.

The reliance on Quasha by Atty. Lopez is misplaced because the facts surrounding the latter case differ from the circumstances in the case at bench. In Quasha, there was a pending claim against the estate and the amount thereof exceeded the value of the entire estate. The Court reasoned:

Taking into account that the claim of LCN against the estate of the late Raymond Triviere allegedly amounted to P6,016,570.65, already in excess of the P4,738,558.63 reported total value of the estate, the RTC should have been more prudent in approving the advance distribution of the same. 31

In the case at bench, however, less the partially distributed assets, the value of the remaining properties was still sufficient to answer for the remaining obligations, if any. The CA, thus, explained:

It is worth mentioning that when the said lot was sold and proceeds thereof distributed among the legatees, the latter caused a certain amount of money to be deposited to the Land Bank of the Philippines to answer for any expenses and claims against the estate. WE find this to be sufficient compliance with the requirement on posting of bond, thus, valid. Moreover, it should be noted that the Miguelin property is just one of the properties of the deceased and is substantially smaller than the Caloocan lot. In view thereof and considering further that the estate appears to have left no outstanding obligations, WE believe that there are sufficient assets left to account for the claim for expenses of administration. 32

[Emphasis Supplied]

Petitioner is Not Entitled to his

The Court's pronouncement in Salonga Hernandez & Allado v. Pascual33 is instructive with respect to the claim of attorney's fees against an estate, to wit:

The rule is that when a lawyer has rendered legal services to the executor or administrator to assist him in the execution of his trust, his attorney's fees may be allowed as expenses of administration. The estate is, however, not directly liable for his fees, the liability for payment resting primarily on the executor or administrator. If the administrator had paid the fees, he would be entitled to reimbursement from the estate. The procedure to be followed by counsel in order to collect his fees is to request the administrator to make payment, and should the latter fail to pay, either to (a) file an action against him in his personal capacity, and not as administrator, or (b) file a petition in the testate or intestate proceedings asking the court, after notice to all the heirs and interested parties, to direct the payment of his fees as expenses of administration. Whichever course is adopted, the heirs and other persons interested in the estate will have the right to inquire into the value of the services of the lawyer and on the necessity of his employment. 34

[Emphases Supplied]

In other words, the general rule is that an estate should not be made to shoulder the attorney's fees of the counsel contracted by the executor or administrator. It is the latter who is directly liable to pay the said fee, without prejudice to his right to be reimbursed from the estate if it can be shown that the services of the lawyer redounded to its benefit. 35

In this case, Atty. Lopez, as administrator of the Estate, is seeking reimbursement of the alleged attorney's fees he paid to his retained counsel in an amount equivalent to 10% of the decedent's gross estate as an expense of administration.

Now, the question is: Was Atty. Lopez able to prove that the legal services rendered by his counsel redounded to the benefit of the Estate so as to be entitled to reimbursement?

In this regard, Atty. Lopez failed. His assertions that it was by reason of the effort of his counsel-of-record that the decedent's last will and testament was probated and that it was by their efforts that the Estate was able to enter into a compromise agreement with the illegitimate children of the decedent's late husband, who had earlier opposed the probate of will, 36 are not satisfactory.

The Court notes that this posture cannot just be taken at face value. There was no trial on this point which would have given the legatees the opportunity to make inquiries. Jurisprudence has been consistent that an estate shall be liable for attorney's fees if the legal services were proven to have redounded to its benefit. It is precisely for this reason that heirs and other persons interested in the estate, like the legatees in this case, have the right to inquire into the necessity of the employment of a counsel and the value of his services.

The rules have been the same as early as Escueta v. Sy-Juilliong. 37 If an administrator would be made to pay attorney's fees, he could include the amount so paid as an expense of administration when he would present his final accounting to the court. Another option for the lawyer would be to present a petition in the proceeding relating to the settlement of the estate, asking that the court, after notice to all persons interested, to allow his claim and direct the administrator to pay it as an expense of administration. Whichever course would be adopted, the heirs and other persons interested in the estate would have the right to make inquiry as to the necessity for making the contract and the value of the work performed by the lawyer. 38 What better venue to make this inquiry but in a full blown trial, subject to the moderating hand of the courts, where inquiry can be made as to: (1) the reasonableness, that is to say, they must have a bearing on the importance of the subject matter in controversy; (2) the extent of the services rendered; and (3) the professional standing of the lawyer. 39 ScHADI

Whether the claim for attorney's fees was pursued through a separate suit against the executor or administrator, or against the Estate as reimbursement for necessary administration expenses, it remains essential that a hearing be conducted on the claim focusing on the value of the services and the necessity of the same. 40

It is noted that, significantly, the claim for attorney's fees was only raised by Atty. Lopez in his Motion to Admit/Consider Additional Partial Accounting/Claims. 41 This motion was filed only after he had failed to submit a final accounting within the period required by the probate court. For said reason, the legatees were not able to make any inquires. It must be pointed out that the payment of the said attorney's fees would necessarily diminish the Estate and might effectively diminish the value of the testamentary dispositions made by the decedent. As such, it is imperative that the legatees, as interested persons, be given the opportunity to pose any question and oppositions to such claim.

The claim for reimbursement of attorney's fees, as an expense of administration, is not totally lost. Atty. Lopez can still avail of the appropriate remedy in pursuing his claim.

WHEREFORE, the petition is DENIED. (Brion, J., recused himself from the case due to close association to counsel of party; Reyes, J., designated additional member per Raffle dated 6 April 2016.)

SO ORDERED."

Very truly yours,

 

MA. LOURDES C. PERFECTODivision Clerk of Court

By:

 

(SGD.) TERESITA AQUINO TUAZONDeputy Division Clerk of Court

Footnotes

1. Penned by Associate Justice Priscilla J. Baltazar-Padilla with the concurrence of Associate Justices Fernanda Lampas Peralta and Manuel M. Barios. Rollo, pp. 10-29.

2. Id. at 31-32.

3. Id. at 85-87.

4. Id. at 88-91.

5. Id. at 92-93.

6. Id. at 104-107.

7. Id. at 108-112.

8. Id. at 114.

9. Id. at 115-117.

10. Id. at 119-122.

11. Id. at 121-122.

12. Id. at 123.

13. Id. at 126-127.

14. Id. at 126-127.

15. Id. at 128-133.

16. Id. at 140.

17. Id. at 28-29.

18. Id. at 24-25.

19. Id. at 25-28.

20. Id. at 31-32.

21. Id. at 34-58.

22. Id. at 44.

23. Id. at 46.

24. 585 Phil. 416 (2008).

25. Id. at 430-431.

26. Rollo, p. 48.

27. Id. at 51.

28. Id. at 51-55.

29. Gatmaitan v. Medina, 109 Phil. 108, 115 (1960).

30. 253 Phil. 516, 530 (1989).

31. Quasha Ancheta Peña and Nolasco Law Office v. LCN Construction Corp., supra note 24 at 431.

32. Rollo, pp. 76-77.

33. 522 Phil. 410 (2006). Citing the case of Occeña v. Marquez, 158 Phil. 249 (1974).

34. Id. at 423.

35. Gonzales-Orense v. CA, 246 Phil. 491, 494 (1988).

36. Rollo, pp. 52-53.

37. 5 Phil. 405 (1905).

38. Id. at 408.

39. Lacson v. Reyes, 261 Phil. 876-885 (1990).

40. Salonga Hernandez & Allado v. Pascual, supra note 33, at 432.

41. Rollo, pp. 104-106.