G.R. No. L-7777 October 31, 1955
M. E. GREY, deceased substituted by RUTH GREY, as Administratrix of the Estate of the late M. E. GREY, plaintiff-appellee, vs. INSULAR LUMBER COMPANY, defendant-appellant.

FACTS

This case originated from an action to collect a sum of money filed by M. E. Grey against Insular Lumber Company. Upon Grey’s death, Ruth Grey was appointed administratrix of his estate and substituted him as plaintiff. After a final judgment in favor of the plaintiff, the Company issued a check for P88,453.56 payable to “Ruth Grey, in her capacity as administratrix of the Estate of M. E. Grey, deceased,” and delivered it to Atty. Carlos Hilado, counsel for the plaintiff. Atty. Hilado then filed a motion in the trial court, alleging a contingent fee contract with the deceased M. E. Grey for 25% of the judgment amount (P22,113.39). He asked the court to order the Company to cancel the original check and issue two separate checks: one for P66,340.17 to the administratrix and another for P22,113.39 to himself. He notified Atty. Jose A. Strachan, the estate’s attorney, by registered mail and noted that administratrix Ruth Grey resided in the United States. The Company opposed the motion, arguing it had fully complied with its obligation by paying the judgment debt to the administratrix and that Atty. Hilado should file his claim in the probate proceedings. The trial court granted Atty. Hilado’s amended motion, ordering the recording of his attorney’s lien and directing the Company to issue the two checks. The Company appealed this order directly to the Supreme Court.

ISSUE

Whether the trial court erred in ordering the defendant Company to cancel the check issued to the administratrix and issue separate checks to the administratrix and Atty. Hilado for his contingent fee, after the judgment debt had already been paid.

RULING

The Supreme Court set aside the trial court’s order. It held that the defendant Company had fully complied with its legal obligation by paying the total judgment debt via a check payable to the administratrix. Atty. Hilado’s claim for a charging lien was made after this payment. While contingent fees are permitted and a charging lien is protected by law, its payment must be duly established. The estate’s legal representative must be given an opportunity to be heard on the claim—to agree, oppose, or challenge it on grounds such as undue influence, fraud, or excessive compensation. Here, administratrix Ruth Grey, residing abroad, was not afforded sufficient time or opportunity to respond. The funds, though held by Atty. Hilado, are considered part of the estate and in custodia legis, subject to probate court jurisdiction. The case was remanded to the trial court for further proceedings, directing that the motion be set for hearing with sufficient time for proper notification to the administratrix and an opportunity for her to appear and be heard.