De Recto vs. Salumbides

An attorney's charging lien established on property in litigation partakes of the nature of a collateral security or a lien on real or personal property, the enforcement of which need not be made in the administration proceedings of a deceased party's estate.

Fred Harden, an American citizen, and Esperanza Perez were married in the Philippines on December 14, 1917, and acquired considerable conjugal properties before separating in 1938. In July 1941, Mrs. Harden retained the late Claro M. Recto as counsel for a contemplated suit against her husband, agreeing inter alia to pay Recto 20% of her share in the conjugal partnership. Jose Salumbides served as Mr. Harden's attorney-in-fact throughout the proceedings. The dispute centered on the enforcement of Recto's charging lien against conjugal assets — specifically, cash dividends on 410,638 Surigao Consolidated Mining Co. shares registered in Salumbides' name but judicially determined to belong to the Hardens — after the conjugal properties had been placed under receivership and after Mr. Harden's death in Canada on May 1, 1959.

Fred Harden, an American citizen, and Esperanza Perez were married in the Philippines on December 14, 1917. They lived together, acquiring considerable conjugal properties, until 1938 when they separated. In July 1941, Mrs. Harden hired the late Claro M. Recto as her counsel in the suit she was contemplating to file against her husband. In their contract, she agreed inter alia to pay Recto 20% of her share in the conjugal partnership. On July 12, 1941, Mrs. Harden, through Recto, filed her complaint for administration and/or accounting of the conjugal properties against Mr. Harden, with Jose Salumbides appearing as Mr. Harden's attorney-in-fact. The war suspended the proceedings. After liberation, the records were reconstituted, and on November 20, 1946, the conjugal properties of the Harden spouses were placed under receivership. On October 31, 1949, the lower court rendered judgment for Mrs. Harden. Mr. Harden appealed to the Supreme Court and then left the Philippines. Mrs. Harden apparently followed her husband, for on January 29, 1952, an amicable settlement was effected between them in Canada, and Recto was instructed to discontinue the proceedings.

On February 20, 1952, Recto filed a motion in the Supreme Court to establish his attorney's charging lien. The Hardens opposed. By resolution dated July 22, 1952, the Court remanded the case to the trial court to determine the amount of Recto's attorney's fees, maintaining the receivership over the conjugal properties while dissolving all other ancillary writs. The lower court, after hearing, held that Recto was entitled to P384,110.97 as counsel fees. Mrs. Harden appealed, and the Supreme Court upheld Recto but modified the amount to P304,110.97. On January 22, 1957, Recto moved for execution. The lower court granted the motion; the Hardens went on certiorari to the Supreme Court, which dismissed the petition on August 2, 1957 for lack of merit. Recto secured an alias writ of execution, which was again questioned on certiorari by the Hardens. On February 10, 1958, the Court upheld Recto once more, enabling him to levy upon the stocks and other properties of the Hardens, the public sales of which realized P100,805.00, leaving a balance of P203,305.97 in Recto's favor.

On July 2, 1958, Recto moved ex parte to levy on other shares of stock owned by the Hardens but registered in the name of Salumbides, including 410,638 shares in the Surigao Consolidated Mining Co. Salumbides opposed, claiming he owned the shares as they were registered in his name. The opposition was denied, and the lower court held that Salumbides did not own the Surigao shares. Salumbides appealed to the Supreme Court, which dismissed the appeal on December 22, 1958 as frivolous. On April 21, 1959, the 410,638 shares were sold at public auction for P147,679.97, leaving an unsatisfied judgment balance of P55,624.00. The next incident concerned the return to the receiver of P20,581.90 in cash dividends from December 14, 1955 to December 14, 1956, received by Salumbides on the same 410,638 Surigao shares. As early as April 4, 1957, Recto had moved that Salumbides be ordered to deliver to the receiver all dividends from the shares under receivership. On July 1, 1957, the lower court issued an order requiring Salumbides to turn over to the receiver all dividends he had already received from the Surigao Consolidated Mining Company, Inc. Salumbides' motion for reconsideration was denied.

On February 10, 1958, Recto moved for a writ of execution to implement the July 1, 1957 order, which was approved on February 21, 1958. Salumbides moved to reconsider, claiming he owned the dividends. On July 30, 1959, the lower court ordered Salumbides to deposit P20,531.90 in the Commercial Bank & Trust Co. Salumbides moved for reconsideration alleging he had spent P45,900.99 as expenses for the Hardens from 1955 to 1957 and sought reimbursement. When this was denied, a second motion for reconsideration was filed, claiming the P20,531.90 had already been disbursed for the Harden family's benefit. On August 29, 1961, the lower court, after hearing and presentation of evidence, denied the second motion, holding that the alleged incurring of expenses was a mere afterthought concocted by Salumbides. Salumbides took preliminary steps to appeal, but on October 7, 1961, the lower court required him to post a P25,000.00 supersedeas bond to prevent execution pending appeal, which compelled him to abandon the intended appeal. On October 23, 1961, he deposited P20,531.90 in compliance with the order. On November 27, 1961, Mrs. Recto, who had been substituted as claimant upon Recto's death on October 2, 1960, moved for full compliance with the July 1, 1957 order, relying on a statement from Surigao Consolidated showing that from April 15, 1950 to July 2, 1955, Salumbides had received cash dividends on the 410,638 shares amounting to P60,797.29. On December 11, 1962, the lower court ordered Salumbides to deposit P30,624.00 for final satisfaction of the judgment balance in Recto's favor. This is the order under appeal, first taken to the Court of Appeals but subsequently certified to the Supreme Court.

• Scope of Turnover Order: Salumbides argued that the order of July 1, 1957 sought to be fully enforced did not include cash dividends received by him before December 14, 1955, since Recto's motion of April 4, 1957 was limited to dividends received after that date.
• Prior Disbursement of Dividends: Salumbides contended that the dividends had already been disbursed by him for the benefit of the Harden family, and that he had incurred P45,900.99 in expenses for the Hardens from 1955 to 1957 for which he must be reimbursed.
• Bar by Prior Judgments: Salumbides relied on the lower court's orders of December 7, 1953 and January 24, 1956, which declared that the receivership did not include future dividends on the shares of stock.
• Prescription: Salumbides invoked extinctive and acquisitive prescription, suggesting a five-year prescriptive period had lapsed.
• Laches: Salumbides asserted laches on the part of the claimant.
• Waiver: Salumbides argued that Recto's demand for the P20,531.00 cash dividends declared from December 14, 1955 to December 14, 1956 constituted a waiver of previous dividends.
• Estate Proceedings: Salumbides insisted that upon Mr. Harden's death in Canada on May 1, 1959, Recto's claim should have been forthwith dismissed and filed in the administration proceedings of Mr. Harden's estate as a money claim under the Rules.

• Scope of Turnover Order: Whether the order of July 1, 1957 requiring Salumbides to turn over dividends included all dividends received by him as of that date, or only those received after December 14, 1955.
• Prior Adjudication of Disbursement Defense: Whether Salumbides' claim that the dividends had already been disbursed for the benefit of the Harden family was a proper subject for further litigation.
• Bar by Prior Judgments: Whether the lower court's earlier orders of December 7, 1953 and January 24, 1956, declaring that receivership did not include future dividends, barred the claim.
• Prescription: Whether the claim for dividends was barred by extinctive or acquisitive prescription.
• Laches: Whether laches applied against the claimant.
• Waiver: Whether Recto's demand for later dividends constituted a waiver of the claim for earlier dividends.
• Estate Proceedings: Whether Recto's claim should have been dismissed upon Mr. Harden's death and filed instead in the administration proceedings of Mr. Harden's estate.

• Scope of Turnover Order: No. The order of July 1, 1957 clearly and unambiguously required Salumbides to turn over "all the dividends that he has already received from the Surigao Consolidated Mining Company, Inc.," encompassing all dividends received as of that date, including those from April 15, 1950 to July 1955.
• Prior Adjudication of Disbursement Defense: No. The disbursement issue had already been raised and argued twice before the lower court and decided adversely to Salumbides in the order of August 29, 1961. Salumbides never pursued his appeal and instead manifested compliance with the order, rendering it final and conclusive.
• Bar by Prior Judgments: No. The more recent order of August 29, 1961 expressly declared the earlier orders of December 7, 1953 and January 24, 1956 erroneous and already superseded and reversed by later court orders of December 14, 1955, July 1, 1957, and February 21, 1958.
• Prescription: No. The prescriptive period, even if five years, had not lapsed. The receiver's letter of May 9, 1953 and claimant's motions of November 4, 1953, December 15, 1955, April 4, 1957, February 10, 1958, and November 27, 1961 seasonably interrupted the prescriptive period. Acquisitive prescription likewise failed because Salumbides possessed the dividends not as owner adverse to the Hardens but as attorney-in-fact of Mr. Harden.
• Laches: No. The same judicial and extrajudicial demands that interrupted prescription negated laches on the claimant's part.
• Waiver: No. Recto's demand for the P20,531.00 dividends was merely an attempt to satisfy his judgment credit from available Harden assets; the failure of later dividends to fully satisfy the judgment did not waive enforcement against earlier dividends. The order of December 14, 1955 expressly stated it "shall not constitute a precedent with respect to the disposition of all dividends whether already declared or to be hereinafter declared."
• Estate Proceedings: No. Recto's claim is not a "money claim" under Section 5, Rule 86 directed against the decedent Mr. Harden; it is founded on a personal obligation of Mr. Harden. Even if it were a money claim, a charging lien established on property in litigation partakes of the nature of a collateral security or lien on real or personal property, the enforcement of which need not be made in administration proceedings.

• Scope of Turnover Order: The dispositive portion of the July 1, 1957 order was unequivocal: it ordered Salumbides to "turn over to the Receiver, Atty. Juan S. Ong all the dividends that he has already received from the Surigao Consolidated Mining Company, Inc." The language "all the dividends" and "already received" clearly included every dividend received by Salumbides as of that date. The Surigao Consolidated statement dated April 5, 1957 confirmed that cash dividends on the 410,638 shares from April 15, 1950 to July 1955 had been delivered to and received by Salumbides. Moreover, the lower court found in its order of August 29, 1961 that Salumbides never appealed the July 1, 1957 order, making it no longer subject to question.

• Prior Adjudication of Disbursement Defense: The disbursement defense had been raised and argued twice before the lower court, which tried and decided it adversely in the order of August 29, 1961. Although Salumbides filed his notice of appeal and appeal bond, the appeal was never pursued. On October 23, 1961, he manifested to the lower court that he had already complied with the order of August 29, 1961, thus making it final and conclusive. The lower court had also found that the alleged incurring of expenses was a mere afterthought concocted by Salumbides.

• Bar by Prior Judgments: The orders of December 7, 1953 and January 24, 1956, upon which Salumbides relied, had been expressly declared erroneous and superseded by the more recent order of August 29, 1961, which stated they were already reversed by the later court orders of December 14, 1955, July 1, 1957, and February 21, 1958. The doctrine of bar by prior judgments therefore could not apply.

• Prescription: Even assuming a five-year prescriptive period applied, it had not lapsed. The dividends in question were declared from April 15, 1950 to July 2, 1955, but the receiver's letter of May 9, 1953 and claimant's motions of November 4, 1953, December 15, 1955, April 4, 1957, February 10, 1958, and November 27, 1961 — all seeking turnover of the dividends — seasonably interrupted the prescriptive period. As to acquisitive prescription, Salumbides could not have acquired the dividends by prescription because he possessed them not in concept of owner, adverse to the Hardens, but as attorney-in-fact of Mr. Harden. He first claimed ownership only in his omnibus opposition dated July 1, 1957, and two years later, on August 24, 1959, in his motion to reconsider, he admitted that the dividends belonged to the Hardens.

• Laches: The same extra-judicial and judicial demands that interrupted prescription — the receiver's letter and the series of motions filed by the claimant — also negated laches, since they demonstrated diligent and seasonable pursuit of the claim.

• Waiver: Recto's demand for the P20,531.00 cash dividends declared from December 14, 1955 to December 14, 1956 did not constitute a waiver of previous dividends. He merely sought to satisfy his judgment credit from among any available Harden assets. Since the later dividends failed to fully satisfy the judgment, Recto could still enforce his valid claim against the earlier dividends. The order of December 14, 1955 was explicit that it "shall not constitute a precedent with respect to the disposition of all dividends whether already declared or to be hereinafter declared."

• Estate Proceedings: Salumbides erroneously assumed that Recto's claim was a "money claim" under Section 5, Rule 86 of the Revised Rules of Court directed against the decedent Mr. Harden. Recto's claim was founded on a personal obligation of Mr. Harden and was neither a claim nor a judgment for money directed against the decedent. Even granting that it were a money claim, the Court had already ruled in Olave vs. Canlas (G.R. No. L-12707, February 28, 1962) that a charging lien established on property in litigation to secure payment of attorney's fees partakes of the nature of a collateral security or of a lien on real or personal property, the enforcement of which need not be made in administration proceedings.

• Attorney's Charging Lien as Collateral Security — A charging lien established on property in litigation to secure payment of attorney's fees partakes of the nature of a collateral security or of a lien on real or personal property. Its enforcement need not be made in the administration proceedings of a deceased party's estate. The Court applied this doctrine to hold that Recto's charging lien could be enforced against the conjugal assets — specifically the Surigao shares and their dividends — without filing a money claim in Mr. Harden's estate proceedings, even after his death during the pendency of the case.

• Possession as Attorney-in-Fact Negates Adverse Possession — A party who holds property as attorney-in-fact of another cannot acquire that property by acquisitive prescription, because his possession is not in the concept of owner adverse to the principal. Salumbides held the Surigao dividends as Mr. Harden's attorney-in-fact, not as owner; he first claimed ownership only in 1957 and even admitted in 1959 that the dividends belonged to the Hardens.

• Interruption of Prescription by Judicial and Extrajudicial Demands — Seasonable judicial and extrajudicial demands interrupt the prescriptive period. The series of motions and letters from 1953 to 1961 seeking turnover of the dividends effectively prevented the running of prescription and negated laches.

• "Recto's claim is founded on a personal obligation of Mr. Harden. But granting that Recto's claim is a money claim against Mr. Harden, that would not help appellant any. We have already ruled that a charging lien established on the property in litigation to secure payment of attorney's fees partakes of the nature of a collateral security or of a lien on real or personal property, the enforcement of which need not be made in the administration proceedings." — This passage articulates the ratio decidendi on the estate-proceedings issue, establishing that a charging lien is enforceable independently of estate administration.

• "Finding the said petition to be well founded this Court hereby orders Jose Salumbides to turn over to the Receiver, Atty. Juan S. Ong all the dividends that he has already received from the Surigao Consolidated Mining Company, Inc." — This is the dispositive portion of the July 1, 1957 order, the interpretation of which was central to the dispute; the Court held that the phrase "all the dividends" unambiguously covered all dividends received by Salumbides as of that date.

• "Salumbides could not acquire the dividends in question by prescription since he possessed them, not in concept of owner, adverse to the Hardens, but rather as attorney-in-fact of Mr. Harden." — This passage defines the principle that possession as attorney-in-fact is not adverse possession and cannot ripen into ownership by prescription.

• Olave vs. Canlas, G.R. No. L-12707, February 28, 1962 — Controlling precedent followed. The Court relied on this case for the proposition that a charging lien on property in litigation partakes of the nature of a collateral security or lien on real or personal property, the enforcement of which need not be made in administration proceedings.
• Harden vs. Harden, G.R. No. L-3687 — Prior related appeal by Mr. Harden from the lower court's judgment in favor of Mrs. Harden.
• In the Matter of the Claim for Attorney's Fees — Recto vs. Harden, G.R. No. L-6897, November 29, 1956 — Prior Supreme Court decision upholding Recto's charging lien but modifying the amount to P304,110.97.
• Harden vs. Bayona, G.R. No. L-12611 — Certiorari petition by the Hardens dismissed for lack of merit on August 2, 1957.
• Harden vs. Bayona, G.R. No. L-13386 — Second certiorari petition by the Hardens, dismissed on February 10, 1958, enabling Recto to levy on Hardens' properties.
• Harden vs. Harden, Recto vs. Salumbides, G.R. No. L-14751 — Salumbides' appeal from the denial of his claim of ownership over the Surigao shares, dismissed as frivolous on December 22, 1958.

• Section 5, Rule 86, Revised Rules of Court — Governs money claims against a decedent's estate in administration proceedings. The Court held that Recto's claim was not a "money claim" under this provision because it was founded on a personal obligation of Mr. Harden and was not a claim or judgment for money directed against the decedent. Even if it were, the charging lien's character as collateral security exempted it from the requirement of filing in estate proceedings.

Reyes, J.B.L., Makalintal, Zaldivar, Sanchez, Castro, Angeles, and Fernando, JJ., concur. Concepcion, C.J. and Dizon, J., are on leave.