Rule 85
G.R. No. 127165 May 2, 2006
SALONGA HERNANDEZ & ALLADO, Petitioner,
vs.
OLIVIA SENGCO PASCUAL and THE HONORABLE COURT OF
APPEALS, Respondents.
TINGA, J.:
Facts:
Doña Adela died on 18 August 1987, leaving behind a last will and
testament executed in 1978, designating Olivia Pascual as the
executrix, as well as the principal beneficiary of her estate. The will
also bequeathed several legacies and devises to several individuals
and institutions.
Olivia Pascual then engaged the services of petitioner in connection
with the settlement of the estate of Doña Adela. Their agreement as
to the professional fees due to petitioner is contained in a letter
dated 25 August 1987, signed by Atty. Esteban Salonga in behalf of
petitioner and Olivia Pascual. It is stipulated therein, among others,
that the final professional fee "shall be 3% of the total gross estate
as well as the fruits thereof based on the court approved inventory
of the estate. The 3% final fee shall be payable upon approval by the
court of the agreement for the distribution of the properties to the
court designated heirs of the estate."6
On 26 August 1987, private respondent, represented by petitioner,
commenced a petition for the probate of the last will and testament
of Doña Adela before the Probate Court.
After due trial, on 1 July 1993, the Probate Court rendered a
Decision8 allowing probate of the 1978 Last Will and Testament of
Doña Adela. Letters testamentary were issued to Olivia Pascual.
On 27 July 1993, petitioner filed a Notice of Attorney's Lien
equivalent to three percent (3%) of the total gross estate of the late
Doña Adela S. Pascual.
Accordingly, on 22 November 1993, petitioner filed a Motion to
Annotate Attorney's Lien on Properties of the Estate of Doña Adela
Vda. de Pascual.13
On 26 April 1994, petitioner filed a Motion for Writ of Execution for
the partial execution of petitioner's attorney's lien.
On 2 June 1994, the Probate Court issued the first assailed order
denying the motion for writ of execution.
Through a petition for certiorari and mandamus, petitioner assailed
the order of the Probate Court denying its motion for the immediate
execution, partial or otherwise, of its claim for attorney's fees. The
orders of the RTC were affirmed by the Court of Appeals, effectively
precluding petitioner's attempt to execute on its attorney's lien.
Issue: WON a lawyer who renders legal services to the executor or
administrator of an estate can claim attorney's fees against the
estate instead of the executor or administrator.
Held:
Petitioner correctly cites Occeña v. Marquez29 as providing the
governing rule on that matter as previously settled in the 1905 case
of Escueta v. Sy-Juilliong,30 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.31
We reiterate that as a general rule, it is the executor or
administrator who is primarily liable for attorney's fees due to the
lawyer who rendered legal services for the executor or administrator
in relation to the settlement of the estate. The executor or
administrator may seek reimbursement from the estate for the sums
paid in attorney's fees if it can be shown that the services of the
lawyer redounded to the benefit of the estate.32 However, if the
executor or administrator refuses to pay the attorney's fees, the
lawyer has two modes of recourse. First, the lawyer may file an
action against the executor or administrator, but in his/her personal
capacity and not as administrator or executor. Second, the lawyer
may file a petition in the testate or intestate proceedings, asking the
court to direct the payment of attorney's fees as an expense of
administration. If the second mode is resorted to, it is essential that
notice to all the heirs and interested parties be made so as to enable
these persons to inquire into the value of the services of the lawyer
and on the necessity of his employment.
It may be so that petitioner, in filing this Notice of Attorney's Lien,
initially intended to hold Olivia Pascual, and not Doña Adela's estate,
liable for the attorney's fees. It did identify itself as the lawyer of
Olivia Pascual, and the Probate Court did note that the lien be
satisfied chargeable to the share of the executor. Yet it must also be
noted that such lien, as it is, is only contingent on the final
settlement of the estate of Doña Adela, at such time, since the
Retainer Agreement on which the lien is hinged provides that the
final fee "be payable upon approval by the court of the agreement
for the distribution of the properties to the court designated heirs of
the estate."39 This is also made clear by the order noting the lien,
which qualified that said lien was chargeable only to the share of
Olivia Pascual, hence implying that at the very least, it may be
claimed only after her share to Doña Adela's estate is already
determinate.
In rendering its assailed Decision, the Court of Appeals relied on this
qualification made by the Probate Court that the lien for attorney's
fees was chargeable only to the share of Olivia Pascual. Yet the
Notice of Attorney's Lien only seeks to serve notice of the
pendency of the claim for attorney's fees, and not the payment of
such fees itself. On its own, the Notice of Attorney's Lien cannot
serve as the basis for the Probate Court to authorize the payment
to petitioner of attorney's fees.
On the other hand, Escueta and its kindred cases do explicitly
recognize the recourse for the lawyer to directly make the claim for
attorney's fees against the estate, not the executor or
administrator. The filing of the Notice of Attorney's Lien and the
qualificatory character of the rulings thereon, do not preclude the
resort to the mode of recovery against the estate as authorized by
jurisprudence. Clearly then, we disagree with the opinion of the
Court of Appeals that attorney's fees can be claimed only against
the share of Olivia Pascual.
Moreover, it cannot be escaped that the Retainer Agreement was
entered into between petitioner and Olivia Pascual prior to the filing
of the probate petition, and that at such time, she had no
recognized right to represent the estate of Doña Adela yet. This
circumstance further bolsters our opinion that if petitioner insists on
the judicial enforcement of the Retainer Agreement, its proper
remedy, authorized by law and jurisprudence, would be a personal
action against Olivia Pascual, and not against the estate of Doña
Adela. If this were the recourse pursued by petitioner, and Olivia
Pascual is ultimately held liable under the Retainer Agreement for
attorney's fees, she may nonetheless seek reimbursement from the
estate of Doña Adela if she were able to establish that the attorney's
fees paid to petitioner were necessary administration expenses.
The second or alternative recourse is the direct claim for attorney's
fees against the estate, as authorized under Escueta. The character
of this claim is not contractual in nature, but rather, as a
reimbursement for a necessary expense of administration, and it
will be allowed if it satisfies the criteria for necessary expenses of
administration. Its entitlement can be established by the actual
services rendered by the lawyer necessary to the accomplishment of
the purposes of administration, and not necessarily by the contract
of engagement of the attorney's services.
In any event, whether the claim for attorney's fees was pursued
through a separate suit against Olivia Pascual (in her personal
capacity) for the enforcement of the Retainer Agreement, or against
the estate of Doña Adela as reimbursement for necessary
administration expenses, it remains essential that a hearing be
conducted on the claim. In either case too, the hearing will focus on
the value of the services of the petitioner and the necessity of
engaging petitioner as counsel.
G.R. No. L-50277 February 14, 1980
TESTATE ESTATE OF THE LATE DOMINADOR TUMANG,
MAGDALENA A. TUMANG, administratrix-appellee,
vs.
GUIA T. LAGUIO AND HER MINOR CHILDREN, movants-appellants.
ANTONIO, J.:
Facts:
In Special Proceeding No. 1953 involving the estate of the late
Dominador Tumang and pending before the Court of First Instance
of Pampanga, the widow of the deceased, namely Magdalena A.
Tumang, administratrix and executrix of the will, filed a petition to
declare the testate proceedings definitely terminated and closed
with respect to herself and two of her children — Melba Tumang
Ticzon and Nestor A. Tumang. The petition was opposed by
appellee's daughter, Guia T. Laguio and her children on the ground
that appellee, as administratrix and executrix, had not yet delivered
all properties adjudicated to them.
Resolving the foregoing, the court a quo issued the first questioned
Order on February 5, 1971, stating in part, the following:
Considering the opposition well founded, the
court hereby considers the motion to require
administratrix to render an accounting
untenable, as the final accounting of the
administratrix was already approved and
therefore denies the motion of oppositor and
counter-petitioner dated Jan. 25, 1971. 2
A motion for reconsideration of the foregoing Order was filed by
Guia T. Laguio and her minor children. On August 16, 1971, the
court a quo issued the second questioned Order denying the motion
for reconsideration in the following manner:
After a careful consideration of the grounds
relied upon by the movant counter-petitioner,
this Court resolves to deny the motion for
reconsideration for the reason that in view of
said counter-petitioner's receipt of the cash
dividends in question without first requiring the
administratrix the accounting now being sought
to be rendered for purposes of determining the
correctness of the cash dividends constitutes
already a waiver on her part to question such
correctness of the aforesaid cash dividends. The
counter-petitioner is being assisted by counsel in
the person of her own husband, and who being
well-versed in such legal process, could have
rejected receipt of the said cash dividends on the
shares of stock if the correctness of the same
was at that time being doubted. To say the least,
therefore, the grounds for the motion for
reconsideration are, in the honest opinion of this
Court, unmeritorious, and all the motion, in
effect, is hereby denied. 3
Issue: whether or not the court should have required the executrix
to render an accounting of the cash and stock dividends received
after the approval of her final accounts.
Held:
Section 8 of Rule 85 provides that the "executor or administrator
shall render an account of his administration within one (1) year
from the time of receiving letters testamentary or of
administration ..., and he shall render such further accounts as the
court may require until the estate is wholly settled."
In the instant case, further accounts by the executrix appear to be in
order, in view of the fact that the dividends sought to be accounted
for are not included in the final accounts rendered by the executrix.
It appears that the interests of all the parties will be better served
and the conflict between petitioners and respondent will be
resolved if such additional accounting is made. Further, "it has been
held that an executor or administrator who receives assets of the
estate after he has filed an account should file a supplementary
account thereof, and may be compelled to do so, but that it is only
with respect to matters occuring after the settlement of final
account that representatives will be compelled to file
supplementary account." 4 It is only in a case where the petition to
compel an executor to account after he has accounted and has been
discharged fails to allege that any further sums came into the hands
of the executor, and the executor specifically denies the receipt of
any further sums that the accounting should be denied. 5
There is no question that in the instant case, the fact that the
executrix received funds of the estate after the approval of her final
accounts and before the issuance of an order finally closing the
proceedings is admitted. She must, therefore, account for the same,
in consonance with her duty to account for all the assets of the
decedent's estate which have come into her possession by virtue of
her office. 6 An executor should account for all his receipts and
disbursements since his last accounting. 7
We disagree with the lower court's finding that petitioners, by
receiving the dividends without requiring an accounting, had waived
their right to do so. The duty of an executor or administrator to
render an account is not a mere incident of an administration
proceeding which can be waived or disregarded. It is a duty that has
to be performed and duly acted upon by the court before the
administration is finally ordered closed and terminated, 8 to the end
that no part of the decedent's estate be left unaccounted for. The
fact that the final accounts had been approved does not divest the
court of jurisdiction to require supplemental accounting for, aside
from the initial accounting, the Rules provide that "he shall render
such further accounts as the court may require until the estate is
wholly settled." 9
G.R. No. 86250 February 26, 1990
ALBERTO F. LACSON, EDITHA F. LACSON, ROMEO F. LACSON and
ZENA F. VELASCO, petitioners,
vs.
HON. LUIS R. REYES, in his capacity as presiding judge of Branch 22
of the Regional Trial Court of Cavite, Branch 22, and/or Multiple
Sala, Imus, Cavite, and EPHRAIM J. SERQUINA, respondents.
SARMIENTO, J.:
Facts:
On August 26, 1987, the private respondent, Ephraim Serquina,
petitioned the respondent court for the probate of the last will and
testament of Carmelita Farlin. He also petitioned the court in his
capacity as counsel for the heirs, the herein petitioners, and as
executor under the will.
The petition was not opposed and hence, on November 17, 1987,
the respondent court issued a "certificate of allowance.
On March 14, 1988, Atty. Ephraim Serquina filed a "motion for
attorney's fees" 3 against the petitioners, alleging that the heirs had
agreed to pay, as and for his legal services rendered, the sum of
P68,000.00.
The heirs filed their answer and denied the claim for P68,000.00
alleging that the sum agreed upon was only P7,000.00, a sum they
had allegedly already paid.
Issue: WON a lawyer acting as administrator and executor may be
allowed to collect attorney’s fee.
Held:
It is pointed out that an attorney who is concurrently an executor of
a will is barred from recovering attorney's fees from the estate. The
Rule is specifically as follows:
SEC. 7. What expenses and fees allowed executor
or administrator. Not to charge for services as
attorney. Compensation provided by will controls
unless renounced. — An executor or
administrator shall be allowed the necessary
expenses in the care, management and
settlement of the estate, and for his services,
four pesos per day for the time actually and
necessarily employed, or a commission upon the
value of so much of the estate as comes into his
possession and is finally disposed of by him in
the payment of debts, expenses, legacies, or
distributive shares, or by delivery to heirs or
devisees, of two per centum of the first five
thousand pesos of such value, one per centum of
so much of such value as exceeds five thousand
pesos and does not exceed thirty thousand
pesos, one-half per centum of so much of such
value as exceeds thirty thousand pesos and does
not exceed one hundred thousand pesos, and
one-quarter per centum of so much of such
value as exceeds one hundred thousand pesos.
But in any special case, where the estate is large,
and the settlement has been attended with
great difficulty, and has required a high degree
of capacity on the part of the executor or
administrator, a greater sum may be allowed. If
objection to the fees allowed be taken, the
allowance may be reexamined on appeal.
If there are two or more executors or
administrators, the compensation shall be
apportioned among them by the court according
to the services actually rendered by them
respectively.
When the executor or administrator is an
attorney, he shall not charge against the estate
any professional fees for legal services rendered
by him.
When the deceased by will makes some other
provision for the compensation of his executor,
that provision shall be a full satisfaction for his
services unless by a written instrument filed in
the court he renounces all claim to the
compensation provided by the will. 17
The rule is therefore clear that an administrator or executor may
be allowed fees for the necessary expenses he has incurred as
such, but he may not recover attorney's fees from the estate. His
compensation is fixed by the rule but such a compensation is in the
nature of executor's or administrator's commissions, and never as
attorney's fees. In one case, 18 we held that "a greater sum [other
than that established by the rule] may be allowed 'in any special
case, where the estate is large, and the settlement has been
attended with great difficulty, and has required a high degree of
capacity on the part of the executor or administrator.'" 19 It is also
left to the sound discretion of the court. 20 With respect to
attorney's fees, the rule, as we have seen, disallows them.
Accordingly, to the extent that the trial court set aside the sum of
P65,000.00 as and for Mr. Serquina's attorney's fees, to operate as a
"lien on the subject properties," 21 the trial judge must be said to
have gravely abused its discretion (apart from the fact that it never
acquired jurisdiction, in the first place, to act on said Mr. Serquina's
"motion for attorney's fees").
The next question is quite obvious: Who shoulders attorney's fees?
We have held that a lawyer of an administrator or executor may not
charge the estate for his fees, but rather, his client. 22 Mutatis
mutandis, where the administrator is himself the counsel for the
heirs, it is the latter who must pay therefor.
In that connection, attorney's fees are in the nature of actual
damages, which must be duly proved. 23 They are also subject to
certain standards, to wit: (1) they must be reasonable, 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. 24 In all cases, they must be
addressed in a full-blown trial and not on the bare word of the
parties. 25 And always, they are subject to the moderating hand of
the courts.
The records show that Atty. Ephraim Serquina, as counsel for the
heirs, performed the following:
xxx xxx xxx
estate," 27 to entitle him to a bigger compensation. He did not
exactly achieve anything out of the ordinary.
The records also reveal that Atty. Serquina has already been paid the
sum of P6,000.00. 28 It is our considered opinion that he should be
entitled to P15,000.00 for his efforts on a quantum meruit basis.
Hence, we hold the heirs liable for P9,000.00 more.
Rule 86 Case 1
G.R. No. 147999 February 27, 2004
SUI MAN HUI CHAN and GONZALO CO, petitioners
vs.
HON. COURT OF APPEALS and OSCAR D. MEDALLA, respondents.
QUISUMBING, J.:
Facts:
On March 30, 1999, private respondent Oscar Medalla filed a
complaint before the RTC of Mandaluyong City, for collection of a
sum of money arising from breach of a contract of lease and
damages, against petitioners Sui Man Hui Chan and Gonzalo Co.
Napoleon C. Medalla as lessor and Ramon Chan as lessee entered
into a Lease Contract3 over a hotel building located at No. 29
Abanao Street, Baguio City. Chan would use the leased premises as a
restaurant named "Cypress Inn". Pertinently, the parties agreed on
the following:
1. The period of lease shall be for ten (10) years or from 15
July 1988 to 15 July 1998.

5. That after the order of allowance for probate 2. The payment of the realty taxes due to the government
of the will, the undersigned counsel assisted the on the leased premises shall be for the account of the
heirs to transfer immediately the above- Lessee.
mentioned real estate in their respective names,
from (sic) the payment of estate taxes in the 3. The agreement is binding upon the heirs and/or
Bureau of Internal Revenue to the issuance by successors-in-interest of the Lessor and the Lessee.
the Registry of Deeds of the titles, in order for
the heirs to sell the foregoing real estate of Petitioner Gonzalo Co was employed by Ramon Chan as the general
10,683 sq. cm (which was also the subject of sale manager of "Cypress Inn" and acted as his agent in all his dealings
prior to the death of the testator) to settle with Napoleon Medalla.
testator's obligations and day-to-day subsistence
being (sic) that the heirs, except Zena F. Velasco,
On August 5, 1989, Ramon Chan died. He was survived by his wife,
are not employed neither doing any business; 26
petitioner Sui Man Hui Chan, who continued to operate the
restaurant.
The Court is not persuaded from the facts above that Atty. Serquina
is entitled to the sum claimed by him (P68,000.00) or that awarded
On July 17, 1996, Napoleon Medalla died. Among his heirs is private
by the lower court (P65,000.00). The Court observes that these are
respondent Oscar Medalla, who succeeded him as owner and lessor
acts performed routinely since they form part of what any lawyer
of the leased premises. Petitioners Chan and Co, the latter, in his
worth his salt is expected to do. The will was furthermore not
capacity as agent and general manager, continued to deal with
contested. They are not, so Justice Pedro Tuason wrote, "a case
private respondent Medalla in all transactions pertaining to the
[where] the administrator was able to stop what appeared to be an
contract.
improvident disbursement of a substantial amount without having
to employ outside legal help at an additional expense to the
Petitioners failed to pay the monthly rentals due on the leased
premises. Despite several Statements of Accounts sent by Medalla,
petitioners failed to pay the rentals due but, nonetheless, continued
to use and occupy the leased premises.

Medalla then sent demand letters to petitioners, but the latter still
failed to pay the unpaid rentals. He also found out that petitioners
had not paid the realty taxes due on the leased premises since 1991,
amounting to ₱610,019.11. Medalla then asked petitioners to settle
the unpaid rentals, pay the unpaid real estate taxes, and vacate the
leased premises.

On January 1999, petitioners vacated the premises but without

paying their unpaid rentals and realty taxes. Aggrieved by
petitioners’ refusal to pay the amounts owing, which had reached
₱4,147,901.80 by March 1999, private respondent Medalla
instituted Civil Case No. MC99-666.

Issue: WON any claim for unpaid rentals should be made against the
estate of Ramon Chan pursuant to Section 5, Rule 86 of the Revised
Rules of Court.

Held:

At any rate, we find no merit to petitioners’ contention that they are

not real parties-in-interest since they are not parties nor signatories
to the contract and hence should not have been impleaded as
defendants. It is undeniable that petitioner Chan is an heir of Ramon
Chan and, together with petitioner Co, was a successor-in-interest to
the restaurant business of the late Ramon Chan. Both continued to
operate the business after the death of Ramon. Thus, they are real
parties-in-interest in the case filed by private respondent,
notwithstanding that they are not signatories to the Contract of
Lease.

A lease contract is not essentially personal in character. Thus, the

rights and obligations therein are transmissible to the heirs.11 The
general rule, therefore, is that heirs are bound by contracts entered
into by their predecessors-in-interest except when the rights and
obligations arising therefrom are not transmissible by (1) their
nature, (2) stipulation or (3) provision of law.12 In the subject
Contract of Lease, not only were there no stipulations prohibiting
any transmission of rights, but its very terms and conditions
explicitly provided for the transmission of the rights of the lessor
and of the lessee to their respective heirs and successors. The
contract is the law between the parties. The death of a party does
not excuse nonperformance of a contract, which involves a property
right, and the rights and obligations thereunder pass to the
successors or representatives of the deceased. Similarly,
nonperformance is not excused by the death of the party when the
other party has a property interest in the subject matter of the
contract.13

Finally, as to petitioners’ contention that any claim should have

been filed before the estate proceeding of Ramon Chan pursuant
to Section 5 of Rule 86, the trial court found that the unpaid rentals
sought to be claimed were for the period April 1993 to December
1998. Note that Ramon Chan, the original lessee, died on August 5,
1989. In other words, as the unpaid rentals did not accrue during
the lifetime of Ramon Chan, but well after his death, his estate
might not be held liable for them. Hence, there is no indubitable
basis to apply Section 5, Rule 86, of the Revised Rules of Court as
petitioners urge respondents to do.