G.R. No. L-47523. April 18, 1941.
LUY LAM & CO., movant-appellant, vs. MERCANTILE BANK OF CHINA, oppositor-appellee.

FACTS

In Civil Case No. 46677 of the Court of First Instance of Manila, Luy Lam & Co. obtained a judgment against The Philippine Chinese Chamber of Commerce of Vigan, Ilocos Sur, Inc., for P2,853.22, which, with interest and costs, totaled P3,364.78. Upon filing the complaint, Luy Lam & Co. secured a preliminary attachment on the defendant’s property. On July 11, 1934, the Sheriff garnished the deposit of P4,200 that the defendant had in the Mercantile Bank of China, which was under liquidation, with the Bank Commissioner as its legal depositary. After the judgment became final, an execution was issued, and on July 17, 1934, the Sheriff again garnished the necessary portion of the P4,200 deposit to cover the judgment amount.
Separately, in Civil Case No. 40704, entitled “In Re: Liquidation of the Mercantile Bank of China,” the Bank Commissioner was in charge of the bank’s assets. The Philippine Chinese Chamber of Commerce of Vigan, Ilocos Sur, Inc., was a creditor claiming the P4,200 deposit. Its attorney, Marcelo Nubla, successfully had the deposit recognized as a preferred credit, though this was later modified by the Supreme Court to an ordinary credit payable pro rata. On September 12, 1934, Nubla filed an attorney’s lien in the liquidation proceedings for 30% of the P4,200 credit as compensation for his professional services. He notified his client but did not notify Luy Lam & Co. or its attorney.
At Luy Lam & Co.’s instance, the court approved the garnishment made on July 11, 1934, and the Bank Commissioner paid Luy Lam & Co. 30% of the P4,200. To collect the remaining balance of P2,104.78, Luy Lam & Co. filed a motion in the liquidation case for payment from the deposit. Nubla opposed, claiming his attorney’s fees were superior and preferential. The court, on October 19, 1938, declared Nubla’s claim preferential, noting that the garnished credit was in custodia legis and Nubla’s lien was recorded five days before the court approved the Sheriff’s garnishment on September 17, 1934. The court also found Nubla’s fees, agreed upon in writing, reasonable. Luy Lam & Co. appealed.

ISSUE

1. Whether Nubla’s attorney’s lien is ineffective and non-preferential for lack of notification to the adverse party as required by Article 37 of the Code of Civil Procedure.
2. Whether the P4,200 deposit or credit was in custodia legis at the time of garnishment.
3. Whether the garnishment took legal effect upon court approval.
4. Whether Luy Lam & Co.’s credit is superior to Nubla’s lien because the garnishment was made before Nubla recorded his lien.
5. Whether Nubla’s claimed fees are unreasonable and excessive.

RULING

1. The deposit was in custodia legis. The Mercantile Bank of China was under liquidation, and the Bank Commissioner, as legal depositary, held all its assets, including the P4,200 deposit. This deposit formed part of the bank’s liabilities and was under the court’s custody through the Commissioner. Therefore, it was in custodia legis when garnished.
2. Nubla was not required to notify Luy Lam & Co. Since the garnishment on the deposit in custodia legis was illegal, Luy Lam & Co. was a stranger to the liquidation proceedings. Thus, Nubla had no obligation to notify them of his attorney’s lien under Article 37.
3. Nubla’s lien has preference. Assuming the garnishment was validly approved by the court on September 17, 1934, its effects could not retroact to July 11, 1934. Nubla recorded his lien on September 12, 1934, five days before the approval. Therefore, even if the garnishment took effect, Nubla’s prior recorded lien enjoys preference.
4. Nubla’s fees are reasonable. The fees, agreed upon in writing between Nubla and his client, constitute just compensation for his services. Luy Lam & Co., not being a party to that agreement, lacks standing to challenge their reasonableness.
The appealed order is affirmed, with costs against Luy Lam & Co.