BACOLOD MURCIA MILLING COMPANY, INC., PLAINTIFF AND APPELLANT, VS. FIDEL HENARES, AS JUDICIAL ADMINISTRATOR OF THE INTESTATE ESTATE OF THE LATE DON ESTEBAN HENARES, DEFENDANT AN…

Appeal from an order of the Court of First Instance of Negros
Occidental ordering plaintiff to turn over to the Provincial Sheriff
the sum of P4,407.23 representing the amount of attorney’s lien in
favor of Ricardo Nolan.

There is no dispute as to the essential facts. This case began
sometime in November, 1946 when Ricardo Nolan appeared as counsel in an
action for foreclosure of mortgage instituted by the Bacolod-Murcia
Milling Co., Inc. against Fidel Henares, as Judicial Administrator of
the Intestate of the late Esteban Henares. This case was docketed in
the Court of First Instance of Negros Occidental as Civil Case No. 546.
After trial, the Court rendered, on July 11, 1947, its decision, the
dispositive part of which reads:

“WHEREFORE, the Court renders judgment sentencing
the defendant herein as Judicial Administrator of the Intestate Estate
of Esteban Henares to pay unto the plaintiff the amount of P31,405.52
with legal interest at the rate of 6% annually, from the date of the
filing of the complaint until fully paid, plus 10% of the total
indebtedness as attorney’s fees and costs of this litigation, within
ninety (90) days after Executive Order No. 25, as amended by Executive
Order No. 32, known as the Debt Moratorium, shall have been lifted by
His Excellency, the President of the Republic of the Philippines, and
in case of failure by the defendant to effect payment thereof after the
expiration of said period of time, the mortgaged properties shall be
sold in accordance with law and the proceeds of said sale shall be
applied to the payment of said obligation.

“SO ORDERED.”

Years later, on July 7, 1953, Ricardo Nolan filed a notice of
lawyer’s lien with the Court, alleging that he was entitled to 10% of
the amount of the judgment in Civil Case No. 546 as attorney’s fees.
Plaintiff-appellant opposed this notice of lawyers’ lien on the ground
that petitioner Nolan had ceased to be their lawyer; and that
furthermore, it had no record confirming the allegations of Nolan.

On November 13, 1953, a writ of execution was issued in the
foreclosure suit (Civil Case 546) in favor of plaintiff-appellant
Bacolod-Murcia, and in pursuance thereof, the mortgaged properties
covered by the judgment were sold at public auction on July 16, 1954, a
certificate of sale of the same date having been issued by the
Provincial Sheriff in favor of the Bacolod-Murcia, as the successful
bidder.

On September 4, 1954, the sale at public auction was confirmed by
the Court. Four days later, or on September 8, 1954, Ricardo Nolan
petitioned that plaintiff-appellant Bacolod-Murcia be ordered to pay
him the sum of P4,407.23, the amount of his lawyer’s lien.
Plaintiff-appellant again filed an opposition, based mainly on its
argument that the judgment having been satisfied by the sale of the
mortgaged properties (confirmed on September 4, 1954 before the
petition of Nolan), there was no longer any judgment to which the
attorney’s lien asserted by Nolan could legally attach; consequently,
it argued, the lower court had no jurisdiction to entertain the
petition filed by Nolan.

After presentation of evidence for both parties, the trial court
issued an order dated December 24, 1954, the dispositive portion
reading:

“WHEREFORE, the Court hereby orders the plaintiff to
turn over to the Provincial Sheriff of Negros Occidental the sum of
P4,407.23, the amount of petitioner’s lawyer’s lien, from the proceeds
of the Sheriff’s sale, which are in the possession of the said
plaintiff, so that the Sheriff can turn over said amount to the
petitioner.

“SO ORDERED.”

From the above order, plaintiff Bacolod-Murcia appealed1 to the
Court of Appeals; but that Court certified the case to us, because the
appeal raises purely questions of law; and, moreover, because the
jurisdiction of ah inferior court is put in issue.

Reduced to its essence, the appeal of Bacolod-Murcia is based on the
contention, that the petition of Ricardo Nolan of September 8, 19S4,
praying for payment of his attorney’s lien, is beyond the jurisdiction
of the lower court, said petition having been filed only after
the satisfaction of the foreclosure judgment, which for all purposes
terminated the case; this, notwitstanding that on July 7, 1953, long
before the writ of execution was issued in the case, Nolan filed a
notice of lawyer’s lien with the court.

The decisive issue upon which hinges the resolution of this appeal
is whether the satisfaction of the judgment in a foreclosure suit, by
purchase by the judgment creditor in a judicial sale of the property
mortgaged, extinguishes attorney’s lien.

The American precedents (our law on the matter being of American
origin) hold that satisfaction of the judgment, in general, does not by
itself bar or extinguish the attorney’s lien (6 C. J. 797-798, citing
cases). As a matter of fact, if a satisfaction of the judgment had been
in disregard of the attorney’s rights, notice having previously been
given to the judgment debtor, the court may, upon the attorney’s
motion, vacate such satisfaction and enforce judgment for the amount of
the lien (In Re King, 60 NE 1054; Goodrich vs. McDonald, 112 NY 157, 19 NE 649; and Pritchard vs. Fulmer, 2 ALR 474 and cases cited therein). In other words, a satisfaction of the judgment in fraud
of the lien may be vacated even by motion and the attorney will be
allowed to enforce the judgment for the amount of his lien (6 C. J.
797-798, citing Desaman vs. Butler, 114 Minn. 362, 131 NW 463, Northrup to Hayward, 113 NW 701, and other’s).

The American cases holding that i satisfaction of the judgment
extinguishes the lien proceed on the theory that there has been waiver
of the lien either by the attorney’s active conduct (as in Bernabee vs. Holmes, 88 NW 1098, and Goodrich vs. McDonald, 19 NE 649) or by passive omission (as in Pritchard vs. Fulmer, 2 A. L. R.474).

Can it be said that in the case at bar, the attorney waived his lien
by failing to take steps to indicate his desire to preserve his lien?
We think not. He filed a notice of lawyer’s lien on July 7, 1953, which
he served on his client and on the adverse party in the case. He wrote
a letter to the Provincial Sheriff of Negros Occidental before the sale at public auction of the mortgaged property was held, and in which he said:

“You are hereby requested to retain from the
proceeds of the sale of the above-referred to property and turn over to
the undersigned the amount of the lawyer’s lien which is P4,407.23.”

This notice accounts for the annotation made by the Sheriff on the
Certificate of Title in favor of the plaintiff-appellant in the
following tenor:

“Esta venta esta sujeta a la reclamacion de Don Ricardo Nolan sobre sus honorarios en la cantidad de P4,404.63.”

Without resolving the validity of said annotation, which is merely
a confirmation of the information given by Attorney Nolan regarding his
lien, the acts of the latter cannot be construed as a waiver. On the contrary, they indicate that he wanted the same to be preserved.

Turning now to the jurisdiction of the Court below to enforce the
lien after satisfaction of the judgment, in the Philippines, the
attorney’s charging lien is embodied in Section 33, Rule 127 of the
Rules of Court, and attaches—

“Upon all judgments for the payment of money, and
executions issued in pursuance of such judgments, which he (the
attorney) has secured in a litigation of his client.”

When Ricardo Nolan filed his notice of lawyer’s lien on July 7,
1958, such lien properly ‘attached to the judgment for the payment of
money and to all executions that might thereafter be issued in
pursuance of such judgment, in accordance with Section 33, Rule 127,
above-cited. Nolan filed notice of his lien long before the sale of the
mortgaged properties on July 16, 1954, and even before the writ of
execution was issued on November 18, 195S. The court, therefore,
properly acquired jurisdiction to take cognizance of the claim for
attorney’s fees, since an attorney’s lien takes legal effect from and
after the time the attorney concerned caused notice of said lien to be
entered in the record, and served on his client and the adverse party.
(Dahlke vs. Viña, 51 Phil., 707; Macondray and Co., Inc. vs. Jose, 66 Phil., 590; Menzi and Co. vs.
Bastida, 63 Phil., 16). The operative fact that determines the birth of
the lien, it is clear, is the time at which the lawyer caused a
statement of his claim to be entered in the record, and not any other.
That the amount of the attorney’s lien was, at the time, unliquidated,
does not militate against this conclusion, as it has been held that it
is not necessary to the existence of the lien that the amount due the
attorney should be liquidated, although the exact amount of the claim
should be determined before the lien can be enforced (Dahlke vs. Vina, supra).

“An attorney may cause a statement of his claim to
be registered even before the rendition of any judgment) because the
purpose of recording his lien is merely, to establish his right
thereto, as distinguished from the enforcement of the lien Which takes
place only after the judgment is secured in favor of the client.
(Palanca vs. Pecson, 94 Phil., 419; Off. Gaz., 1585.)

When, on July 16, 1954, the sale at public auction was made and the
judgment legally satisfied, Nolan could not have lost his right to
enforce the lien which he had upon the judgment, since he had filed
notice of the lien as far back as July 7, 1953. It was this notice
which conferred on the court the jurisdiction to determine the lien.
Nolan’s subsequent petition on September 8, 1954 was but an incident in
the enforcement of the lien and should not be made the determinative
factor on the question of jurisdiction. Nor did the sale of the
property at public auction extinguish the lien; for, while in this
jurisdiction the lien does not attach to the property in litigation, it
is obvious that it should attach to the proceeds of the judgment for
the payment of money, otherwise, the lien would be meaningless and of
no substance. A judgment for money is only as valuable as the amount
that could be realized therefrom; and to speak of a lien on the
judgment without including therein its proceeds, at least in pecuniary
terms, is to lose perspective in the differentiation of substance and
form.

Moreover, the nature of a charging lien argues that it should attach
to the proceeds of a judgment. Such lien has been regarded as:

“an equitable right to have the fees and costs due
to him for services in a suit secured to him out of the judgment or
recovery in that particular suit * * *. It is based on the natural
equity that the plaintiff should not he allowed to appropriate the
whole of a judgment in his favor without paying thereout for the
services of his attorney in obtaining such judgment.” (6 C. J. 766-767, citing cases)

“The
lien of an attorney upon a judgment of his fees and disbursements in
the cause . . . is properly denominated a lien in the broad sense of
the term, but it has few points of resemblance to the ordinary lien
upon tangible property. It does not depend in any way upon possession,
but crests on the equity of the attorney’s claim, to be repaid out of the proceeds of a judgment“. (Wright vs. Cobleigh, 21 N. H., 339, 341, cited in 6 C. J. 767)

“The attorney’s lien, whether under the statute or at common law, is equitable in its nature.
Even the decisions in this country, which confine its existence and
application to the narrowest limits, always speak of it as an equitable
lien, right or privilege. It is not property in the thing, which gives
a aright of action at law. It is a charge upon the thing which is
protected in equity. Courts of law may recognize it when the res
is in possession of the lienor, and the owner is seeking to deprive him
of such possession. But where the thing is not in possession, and some
affirmative action is required by the attorney, he, like other
claimants, must seek relief in equity. In some instances, a formal suit
should be instituted; in others, an application to the court rendering
the judgment, for the proper order, would be sufficient.” (Fillmore vs. Wells, 10 Colo. 228, 2S6, 15 P. 343, 3 AmSR 667, cited in 6 C. J. 767)

It is well to note that the lien in the present case is not sought
to be enforced as against the debtor but against the attorney’s client,
who received the proceeds of the judgment. There is no reason why it
should not be enforced against said client, since the lien should
attach to the proceeds of the judgment and he received the same without
paying his attorney who was responsible for its recovery. The client,
upon receiving satisfaction without paying his lawyer, held the
proceeds for the judgment in trust for his lawyer to the extent of the
value of his recorded lien, because after the charging lien has
attached, the attorney is, to the extent of said lien, to be regarded
as an equitable assignee of the judgment or funds produced by his
efforts. (Epp. vs. Hinton, 102 Kan. 435; 6 C. J. 766, citing cases.)

Hence, the attorney can enforce his lien in the same case, for
anyway, the trial court acquired jurisdiction over the matter of the
lien when it attached upon the filing of notice of lawyer’s lien on
July 7, 1953, and until the same is settled, the court should be deemed
to have retained its jurisdiction. The tendency of the eases is to have
the attorney’s fees determined and enforced in the same action where
the services were rendered, to avoid multiplicity of suits (Palanca vs. Pecson, supra; Fabie vs. Ngo Boo Soo, 84 Phil., 857). In a case similar to the one at bar (M. E. Grey vs.
Insular Lumber Co., 97 Phil., 833, judgment was entered for plaintiff
for a sum of money. In compliance with the judgment, defendant issued a
check in favor of plaintiff and gave this check to the attorney. The,
lawyer presented a motion with the trial court asking that the
defendant be ordered to issue two checks, one, for the plaintiff, and
another, for his fees. The court determined the lawyer’s fees and
ordered the defendant therein to issue two checks as prayed for by the
attorney. On appeal, this Court remanded the case to the trial court
for the determination of the lawyer’s fees and to give an opportunity
for the plaintiff therein or his representative to appear and contest
the amount claimed, as in the first instance, plaintiff was not
represented. The remand to the trial court to determine the lawyer’s
fees even after the judgment had been satisfied, could only mean that
the court did not thereby lose jurisdiction to entertain the petition
to enforce the Hen.

Indeed, as observed in Goodrich vs. McDonald, supra,

“The lien, as thus established, is not strictly like
any other lien known to the law, because it may exist, although the
attorney has not, and cannot in any proper sense have, possession of
the judgment (recovered. It is a peculiar lien, to be enforced by
peculiar methods. It was a device, invented by the courts for the
protection of attorneys against the knavery of their clients, by
disabling clients from receiving the fruits of recoveries without
paying for the valuable services by which the recoveries were obtained.
The lien was never enforced like other liens.”

Moreover, to hold in the instant case that the lien was extinguished
in the premises is to put a premium and an undue emphasis on tendencies
which are better curbed than encouraged. It would practically require
that an attorney, having secured a judgment for his client for the
payment of money, should not only file his notice of lawyer’s lien and
have the right thereto determined but also apply to the court for
execution of the judgment in order to anticipate a possible duplicity
on the part of said client, thereby subordinating his clients’ interest
to his own. This is conduct which, by ethical considerations, should be
viewed askance; much less, therefore, should it, by legal compulsion,
be given encouragement.

Plaintiff-appellant assigns as another error that the order appealed
from does not contain any statement of the facts and the law on which
it is based. Obviously, this is based on Section 1, Rule 35 of the
Rules of Court, and Section 12, Article VIII of the Constitution. The
contention is untenable, since these provisions have been held to refer
only to decisions on the merits and not to orders of the trial court
resolving incidental matters such as the one at bar (See Soncuya vs. National & Investment Board, 40 Off. Gaz. 6th Sup. 297).

Wherefore, the order appealed from is affirmed. Costs against appellant.

Paras, C. J., Bengzon, Montemayor, Bautista Angelo, Labrador, Concepcion, Barrera, and Gutierrez David, JJ., concur.