[WITH AMENDED DECISION OF JULY 24, 1962]

Montemayor versus Gutierrez

The Case

This is the case of Montemayor versus Gutierrez, an appeal from an order of the Court of First Instance of Pampanga directing Donata Montemayor, as administratrix of the estate of her late husband Clodualdo Vitug, to pay attorney's fees personally to the heirs of the late Attorney Eduardo D. Gutierrez. The question is who should bear the expenses of administration, specifically counsel's fees for services rendered to the estate: the administratrix out of her own pocket, or the estate and the heirs who have already received their shares. The case matters because it fixes a rule every bar candidate must know — that administration expenses are borne by the estate, and the administrator is personally liable only for malfeasance, maladministration, or violation of duty.

Procedural History

The claim for attorney's fees was first brought before the Court of First Instance of Pampanga. The trial court declared that no claim for attorney's fees could be allowed. On appeal, the Court of Appeals reversed and declared that the administratrix is liable to pay nine thousand six hundred pesos in attorney's fees. In execution of that judgment, the trial court ordered the administratrix to pay the sum personally, with the right to reimbursement from the heirs of her deceased co-sureties. From that order, the administratrix appealed to the Supreme Court. The Supreme Court rendered its decision, and later, on motion for reconsideration by the heirs of Attorney Gutierrez, issued an amended decision modifying the disposition.

Facts

Donata Montemayor was appointed administratrix of the estate of her late husband, Clodualdo Vitug. Before assuming office, she filed an administration bond undertaking, among others, to make a true and complete inventory, to administer the estate according to the rules, to pay and discharge all debts and charges as decreed by the court, to render a true and just account of her administration, and to perform all orders of the court.

As early as August 1933, a project of partition had already been approved, under which the administratrix renounced her rights to the conjugal properties in favor of her children and the children of the deceased by a previous marriage, and the heirs in turn renounced in favor of the widow the private properties of her husband. A house valued at sixteen thousand five hundred pesos, another at two hundred thirty-five pesos with accessories valued at two thousand pesos, and a Fordson tractor were left unpartitioned in the hands of the administratrix for future partition. These personal properties were lost, destroyed, or looted during the Second World War.

Three cases were filed against the administratrix and the heirs for recovery of alleged shares in the real properties already partitioned, and these occasions led the administratrix to employ the services of Attorney Eduardo D. Gutierrez, who served as counsel from June 1946 to December 1953. When the claim for attorney's fees was brought, the bondsmen of the administratrix had already died. It was not questioned that services were rendered on behalf of the estate, and there was no finding or claim that the administratrix was guilty of any malfeasance, mismanagement, or violation of her duties.

Issues

• Whether or not the administratrix may be held personally liable for the attorney's fees for services rendered to the estate, when no funds remain in her possession and no malfeasance or violation of duty is attributed to her.
• Whether or not the attorney's fees should be apportioned among the heirs who have already received their shares of the estate.
• Whether or not the administration bond and the sureties may be held liable for the payment of such fees.

Applicable Provisions

Section 5 of Rule 89 provides:

Sec. 5. If such contingent claim becomes absolute and is presented to the court, or to the executor or administrator, within two years from the time limited for other creditors to present their claims, it may be allowed by the court if not disputed by the executor or administrator, and, if disputed, it may be proved and allowed or disallowed by the court as the facts may warrant. If the contingent claim is allowed, the creditor shall receive payment to the same extent as the other creditors if the estate retained by the executor or administrator is sufficient. But if the claim is not so presented, after having become absolute, within said two years, and allowed, the assets retained in the hands of the executor or administrator, not exhausted in the payment of claims, shall be distributed by the order of the court to the persons entitled to the same; but the assets so distributed may still be applied to the payment of the claim when established, and the creditor may maintain an action against the distributees to recover his debt, and such distributees and their estates shall be liable for the debt in proportion to the estate they have respectively received from the property of the deceased.

This provision allows a creditor to pursue the distributees for a claim established after distribution, which supports charging the fees against the heirs in proportion to their shares.

Section 6 of Rule 89 provides:

Sec. 6. Where devisees, legatees, or heirs have entered into possession of portions of the estate before the debts and expenses have been settled and paid, and have become liable to contribute for the payment of such debts and expenses, the court having jurisdiction of the estate may, by order for that purpose, after hearing, settle the amount of their several liabilities, and order how much and in what manner each person shall contribute, and may issue execution if circumstances require.

This provision expressly makes heirs who have taken possession before debts and expenses are settled liable to contribute, and authorizes the court to apportion their liabilities.

Ruling

On the first issue, the Court held that the claim of the administratrix is well founded. The expenses of administration incurred by an administratrix have to be borne out of the properties under administration, or out of the income derived therefrom. The administratrix can be held personally responsible only for any malfeasance, maladministration, or violation of any of her duties as administratrix. Since no such fault was attributed to her, it would be unfair that she should bear personally the fees of counsel for services rendered to her as administratrix in the course of the administration.

On the second issue, the Court held that the fees should be apportioned among the heirs. The Rules allow an estate to be partitioned even before the termination of the administration proceedings, and the heirs receiving shares should be responsible for the expenses proportionately, in accordance with Sections 5 and 6 of Rule 89.

On the third issue, the Court held that neither the bondsmen nor the bond should be responsible, as there was nothing in the acts of the administratrix that would constitute a violation of the guaranty assumed in the bond. The Court quoted the rule that a surety on an administrator's bond obligates himself only to account for losses occasioned by the failure of the fiduciary to use due diligence, and that a surety is bound only for the faithful administration of the estate, not for the return of money which the administrator in good faith spent and is unable to repay.

On reconsideration, however, the Court modified its ruling. Considering that the attorney's fees were due because the administratrix had contracted the services of counsel, she is indirectly responsible to the heirs of Attorney Gutierrez. The Court therefore declared her responsible, in her capacity as administratrix, for the payment of the fees, with the corresponding duty and right to secure the sums needed from the heirs, who are responsible in proportion to the shares received.

Doctrine

The expenses of administration incurred by an administratrix are borne out of the properties under administration or the income derived therefrom. The administratrix is personally liable only for malfeasance, maladministration, or violation of her duties. Where the estate has been partitioned before the settlement of debts and expenses, the heirs who received shares are liable to contribute proportionately, and the court may settle their several liabilities and issue execution if circumstances require. The administration bond and its sureties answer only for the faithful administration of the estate, not for the return of money honestly spent by the administrator. The administratrix, however, remains the party responsible to the creditor in her capacity as administratrix, with the right to secure reimbursement from the heirs.

Disposition

The original order appealed from was set aside, but on reconsideration the Court modified its decision by declaring the administratrix Donata Montemayor responsible, in her capacity as administratrix, to the heirs of Attorney Eduardo D. Gutierrez for the payment of the fees adjudged due, with the duty and right to secure the sums from the heirs in proportion to the shares they received.

Remember This

Memorize the line: the administratrix is personally liable only for malfeasance, maladministration, or violation of duty; administration expenses come from the estate, and the heirs who received shares must contribute proportionately. Examiners use this case to test the liability of administrators, the liability of sureties on administration bonds, and the rule that partition before settlement of debts does not extinguish the heirs' duty to contribute.