PRIMITIVO SATO, PLAINTIFF AND APPELLANT, VS. SIMEON RALLOS, ET AL., DEFENDANTS AND APPELLEES.

Sato versus Rallos

The Case

This is the case of Sato versus Rallos, a suit for the collection of attorney's fees. The plaintiff, Primitivo Sato, a lawyer and at the time an incumbent Congressman, sued Simeon Rallos in his capacity as administrator and distributee of the Testate Estate of Numeriana Rallos and the Intestate Estate of Victoria Rallos, and later impleaded the other distributees as well. Sato claimed that he had been engaged to secure a reduction of the inheritance taxes assessed against the two estates, and that he succeeded. The case matters to a reviewee because it settles two things at once: the correct procedure for a lawyer to collect his fees from an estate, and the equity principle that no one should enrich himself at another's expense. It is a compact lesson on procedure, quantum meruit, and unjust enrichment, all in one decision.

Procedural History

The complaint was filed in the Court of First Instance of Cebu on September 3, 1955. Sato asked for a writ of attachment of the properties of the estates, which the trial court denied. Simeon Rallos answered, setting up special defenses. Sato then amended his complaint to include Gerundia, Guadalupe, and Genoveva, all surnamed Rallos, as defendants, and these distributees filed separate answers with counterclaims. After Simeon Rallos died, Sato filed a second amended complaint bringing in Juan Borromeo as administrator of the estate of Simeon Rallos, and after Gerundia Rallos died, a third amended complaint brought in Josefina Rallos. This third amended complaint was the basis of the trial on the merits.

Sato finished presenting his evidence, and before the defendants presented theirs, the Intestate Estate of Simeon Rallos moved to dismiss on the ground of lack of cause of action, invoking the rule on the non-survival of claims. The other defendants moved to dismiss on substantially identical grounds. The trial court, in a decision dated July 3, 1959, dismissed the complaint without pronouncement as to costs, holding that the procedure taken was not in accordance with the correct procedure, and suggesting that the claim could be submitted in the pending intestate proceedings of Simeon Rallos. Sato appealed to the Supreme Court, which reversed the dismissal and rendered judgment in his favor.

Facts

Near the closing of the special proceedings for the two estates, Simeon Rallos engaged the services of Primitivo Sato for the purpose of securing a reduction in the assessment of inheritance taxes made by the Collector of Internal Revenue. As of November 15, 1940, the estates had a combined liability of 130,076 pesos and 43 centavos, including surcharges and interest. According to Sato, the compensation was contingent upon the successful reduction of the assessed taxes to an amount less than 30,000 pesos, and had been verbally agreed upon at 20,000 pesos cash and one hectare of any of the commercial and residential lots of the estates, the choice being up to Sato, or the corresponding value thereof.

On February 6, 1951, Sato, then incumbent Congressman of the third district of Cebu, wrote the Collector of Internal Revenue asking for a revision of the assessment. On the same date, the court granted his motion to suspend further action in the testate proceedings until the Bureau of Internal Revenue resolved the petition for revision. About ten months later, on November 15, 1951, inheritance taxes of 22,545 pesos and 47 centavos were paid, a very much reduced amount compared to the original 130,076 pesos and 43 centavos. Because of that payment, the Collector of Internal Revenue moved to dismiss the complaint of intervention he had earlier filed, and the motion was granted.

Demand letters for the settlement of the agreed attorney's fees were served on Simeon Rallos, but no settlement was effected, and so the complaint was filed on September 3, 1955. In his answer, Simeon Rallos admitted that he could not refuse the generous offers of politicians, one of them the plaintiff, but claimed that the offer was made in Sato's capacity as a congressman and politician, not as a lawyer, and that he already had his own lawyers. The other distributees set up lack of cause of action against them, since the services were rendered to Simeon Rallos in his personal capacity, and claimed that the employment of Sato as attorney by the administrator did not have the sanction of the probate court.

Issues

• Whether or not the procedure followed by Sato in filing an ordinary action for attorney's fees against the administrator and the distributees was the correct procedure.
• Whether or not Sato is entitled to attorney's fees despite the fact that the estate had already been distributed and the heirs had received their shares free from any obligation.
• Whether or not Sato rendered the services as a lawyer, and not merely as a congressman offering gratuitous help.

Applicable Provisions

Article 2142 of the Civil Code provides:

Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no one shall be unjustly enriched or benefited at the expense of another.

This is the equity principle the Court invoked to deny the distributees' claim that no award could be made because the estate had already been distributed.

Ruling

On the first issue, the Court held that the procedure followed by Sato was correct. It relied on the rule laid down in the case of Aldamiz versus the Judge of the Court of First Instance of Mindoro, which it quoted:

The correct procedure for the collection of attorney's fees, is for the counsel to request the administrator to make payment and file an action against him in his personal capacity and not as an administrator should he fail to pay. If judgment is rendered against the administrator and he pays, he may include the fees so paid in his account to the Court. The attorney also may, instead of bringing such action, file a petition in the Testate or Intestate Proceeding asking that the Court, after notice to all persons interested, allow his claim and direct the administrator to pay it as an expense of administration.

The Court noted that Sato's complaint was filed not only against the administrator as such and as a distributee, but also against the other distributees, which is more than the legal procedural requirements. The trial court's dismissal on procedural grounds was therefore reversed.

On the second issue, the Court refused to deny Sato his fees merely because the estate had been distributed. In the spirit of Article 2142 of the Civil Code, the Court could not find its way clear to deny the appellant's right to attorney's fees, since no one should unjustly enrich himself at the expense of another.

On the third issue, the Court found no factual support for the claim that Sato offered his services as a congressman and not as a lawyer. Considering the huge value of the properties of the estates, the Court could not justly assume that Sato offered his services for free. The Court also found that Simeon Rallos made implied admissions in his answer that he accepted the offer of services, and that proof of the service was clearly shown by the revised assessment and the payment of 22,545 pesos and 47 centavos as against the original 130,076 pesos and 43 centavos. The benefit derived from such service could not be over-emphasized.

Doctrine

A lawyer who seeks to collect his attorney's fees from an estate has two correct remedies. He may request the administrator to make payment and, should the administrator fail to pay, file an action against him in his personal capacity and not as an administrator. If judgment is rendered against the administrator and he pays, the administrator may include the fees so paid in his account to the court. Alternatively, the lawyer may file a petition in the testate or intestate proceeding asking that the court, after notice to all persons interested, allow his claim and direct the administrator to pay it as an expense of administration. An ordinary action against the administrator and the distributees is more than the legal procedural requirements, and is not a ground for dismissal.

Under Article 2142 of the Civil Code, no one shall be unjustly enriched or benefited at the expense of another. Thus, the fact that an estate has already been distributed and the heirs have received their shares free from any obligation does not bar an award of attorney's fees for services that benefited the estate. The administrator may be ordered to pay the fees and to collect in turn from the distributees their proportionate shares based on their corresponding participation in the estates.

Finally, the Court will not assume that a lawyer rendered his services for free, especially where the value of the estate is huge and the benefit derived from the service is clear. The success of the lawyer in obtaining the required reduction, and the standing he enjoys as a practitioner, are considered in fixing a reasonable compensation.

Disposition

The Supreme Court reversed the decision appealed from and entered another finding Sato entitled to attorney's fees, fixing the sum of 12,500 pesos as reasonable compensation, ordering the administrator of the estate of Simeon Rallos to pay that amount to Sato and to collect in turn from the distributees their proportionate shares, denying the claim for one hectare of land as additional fees, and imposing costs against the appellees in proportionate shares.

Remember This

The single line worth memorizing is that the correct procedure for collecting attorney's fees from an estate is to demand from the administrator and sue him in his personal capacity, or to file a petition in the estate proceedings for allowance as an expense of administration, and that distribution of the estate does not bar recovery under the principle that no one should be unjustly enriched at another's expense. Examiners like to use this case to test the procedural remedies of a lawyer against an estate, and the application of Article 2142 of the Civil Code to attorney's fees.