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X. LAWYER’ S FIDUCIARY OBLIGATIONS

A. EFFECTS OF FIDUCIARY RELATION

[A.C. No. 5019. April 6, 2000]

Judge ADORACION G. ANGELES, complainant, vs. Atty. THOMAS C. UY JR., respondent. 

D E C I S I O N

PANGANIBAN, J.:

Lawyers must promptly account for money or property they receive on behalf of their clients. Failure to do so constitutes professional Misconduct and justifies the imposition of disciplinary sanctions.

The Case and the Facts

In a letter dated February 11, 1999 addressed to the Office of the Chief Justice, Judge Adoracion G. Angeles of the Regional Trial Court of Caloocan City (Branch 121) charged Atty. Thomas C. Uy Jr. with violation of Canon 16 of the Code of Professional Responsibility. Complainant states that respondent's acts, which had earlier been held contemptible in her February 10, 1999 Order,[1] also rendered him administratively liable. In the said Order, she narrated the following facts:

"When the case was called for the second time at 11 :25 o'clock in the morning, the private prosecutor Atty. Thomas C. Uy, Jr. appeared. In open court, accused Norma Trajano manifested that she had already settled in full the civil aspect in Crim. Case No. C-54177 (98) in the total amount of [t]hirty [s]ix [t]housand [f]ive [h]undred (P36,500.00) [p]esos. She further alleged that she paid P20,000.00 directly to the private complainant and the balance of P16,500.00 was delivered to Atty. Thomas C. Uy, Jr., the lawyer of the private complainant and accordingly produced in open court the receipt for such payment signed by no less than the aforesaid lawyer. Indeed, the civil liability of the accused had already been satisfied in full. Miso

"However, the private complainant, Primitiva Malansing [Del Rosario] manifested that she did not receive the amount of [s]ixteen [t]housand [f]ive [h]undred (P16,500.00) [p]esos which was paid to his lawyer Atty. Thomas C. Uy, Jr., thereby constraining this court to direct Atty. Thomas C. Uy to turn over the money to the private complainant which he received in trust for his client. Atty. Uy however argued that his client did not like to accept the money but the assertion of the lawyer was belied by his own client, the herein private complainant, who manifested in open court x x x her willingness to accept the money. The Court again directed Atty. Uy to produce the money but the latter argued that he kept it in his office. Consequently, the Court suspended the proceedings to enable Atty. Uy to get the money from his law office which is located only at the second floor of the same building where this court is located.

"Unfortunately, it is already 12: 15 o'clock past noon but Atty. Uy did not show up anymore and not even his shadow appeared in Court.

"It cannot be denied that the act of Atty. Thomas Uy in deliberately failing to return to the Court [the] proceedings [of which] were suspended just because of

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his representations, mirrors not only an undisguised disobedience of a court order but also manifests his propensity to mock the dignity of the Court. Disgustingly, he deliberately ignored his solemn oath to conduct himself as befitting the status of an officer of the court.

"Indeed, this gross misbehavior of Atty. Uy cannot simply be ignored for it is a raw challenge to the authority of the Court.

"It must also be pointedly emphasized that Atty. Thomas Uy committed a brazen violation of the provisions of Canon 16 of the Code of Professional Responsibility, to wit: Nexâ old

"x x x  x x x    x x x

"Obviously, Atty. Thomas Uy fell short of the duties expected from him as a member of the bar."

In compliance with this Court's March 24, 1999 Resolution, Respondent Uy[2] filed his Comment on June 7, 1999. Denying that he violated Canon 16 of the Code of Professional Responsibility, he explained:

"1). In a criminal case, then pending before the Regional Trial Court, Branch 121 of Kalookan City, Metro Manila, presided by the complainant Honorable Adoracion G. Angeles, entitled 'People of the Philippines vs. Norma Trajano, et., al', Criminal Case No. C-54176-77 (98), Atty. Thomas C. Uy Jr., herein referred to as [r]espondent, was engaged as [p]rivate [p]rosecutor of the complainant therein, Mrs. Primitiva Malansin Del Rosario. At the outset Norma Trajano, accused in said criminal case, expressed her desire and offered to settle the civil aspect of the criminal case against her to which Primitiva Del Rosario acceded. On separate hearings, Norma Trajano made installment payments to Primitiva Del Rosario some of which payments were duly acknowledged by the latter in the presence of [r]espondent;

"2). On a previously cancelled date of hearing of the aforesaid criminal case x x x on December 14, 1998, Norma Trajano went to the office of the [r]espondent at about 8:45 o'clock in the morning, x x x and met Mr. Romeo C. Jamisola Jr., who is acting as [r]espondent's personal secretary and at the same time the liason officer of the law firm De Veyra, Uy and Associates x x x. Mr[.] Romeo Jamisola Jr., is the lone staff of the law firm x x x. Respondent was at that time not in the office as he was attending a hearing before the Regional Trial Court, Branch 122, Kalookan City, Metro Manila. x x xManiâ kx

"3). On the aforesaid date and time (December 14, 1998) at the office of the [r]espondent, Norma Trajano told Mr. Romeo Jamisola Jr. that she will make another partial payment to Primitiva M. Del Rosario because she cannot attend the hearing the following day (8[:]30 o'clock a.m. of December 15, 1999) before Judge Adoracion G.

Angeles due to a conflict of schedule with her [other] case in the Regional Trial Court, Branch 19, Malolos, Bulacan, where she is likewise the accused for [e]stafa[.] Mr. Romeo Jamisola told Norma Trajano to wait for a while as he will fetch [r]espondent at the ground floor in the sala of the Honorable Remigio E. Zari. Respondent, upon being informed of the presence of Norma Trajano in the office of the [r]espondent by Romeo Jamisola Jr. went to his office and Norma Trajano immediately told [r]espondent that she knew that the setting for that day (December 14, 1998) was previously cancelled and that she cannot attend the hearing the following day (8[:]30 o'clock a.m. December 15, 1998) and further told the [r]espondent that she (Norma Trajano) will make another partial payment to Primitiva M. Del Rosario and that she will just leave her payment in the sum of [s]ixteen [t]housand [five hundred] [p]esos (P16,500.00), Philippine [c]urrency, in the office of the [r]espondent. Respondent then told Norma Trajano to inform Primitiva M. Del Rosario first but Norma Trajano replied that she will just call Primitiva [Del Rosario]. Nonetheless, [r]espondent told Romeo Jamisola Jr. to call Primitiva Del Rosario, using the office phone, and let her talk with Norma Trajano, and, if Primitiva Del Rosario agreed [r]espondent instructed Romeo Jamisola Jr., to just prepare a receipt. Respondent, fearing that his case (People vs. Rommel Senadrin et al. above-stated) might have been called in the calendar, immediately left the office and proceeded [at] the sala of the Honorable Remigio E. Zari. Respondent, after the hearing x x x, returned to his office and upon learning that his signature was affixed by Romeo Jamisola Jr. upon the insistence of Norma Trajano scolded Romeo Jamisola Jr. and for his unsuccessful attempt to contact first Primitiva Del Rosario before receiving the sum of money left by Norma Trajano; Maniksâ

"4). The following day [o]n the morning of December 15, 1998 [r]espondent arrived at his office and met Primitiva Del Rosario and her daughter Aurora Del Rosario and immediately the trio appeared before the sala of Judge Adoracion G. Angeles in the hearing of the Norma Trajano case. Returning [to] the office of the [r]espondent after the hearing, Primitiva Del Rosario and Aurora Del Rosario, being earlier informed that on December 14, 1998 Norma Trajano went [to] his office and made partial payment in the sum of P16,500 thru Mr. Romeo Jamisola Jr., the [r]espondent told Mr. Romeo Jamisola to get the money from the filing cabinet and while the money in the envelope [was] being handed over to Primitiva Del Rosario, [the latter] and her daughter x x x, however, told [r]espondent to just let the money in the sum of P16,500.00 be kept at the office of the [r]espondent so that future payments of Norma Trajano will be save[d] in whole and for them to avoid spending the same as what had happened to the past installment payments of Norma Trajano.Respondent then acceded to the request of Primitiva Del Rosario and her daughter and told them that they can get the money anytime they want from the [r]espondent's office. Hence, the money was kept locked [in] the filing cabinet of the

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[r]espondent where he used to keep all his personal file[s]. Manikanä

"5). On December 23, 1998, early before noon, Primitiva Del Rosario and her daughter Aurora Del Rosario, on a prior invitation, attended the Christmas Party of the office of [r]espondent and undersigned counsel. x x x Respondent, after the x x x lunch, instructed Mr. Romeo Jamisola Jr., to give the sum of money (P16,500.00) and for Primitiva Del Rosario to receive the same for fear of a repetition of a burglary incident before, where some cash and minor office appliances of undersigned were lost. Primitiva Del Rosario, however, insisted that said sum of money be kept at the office of the [r]espondent to save in whole the installment payments of Norma Trajano and that [was] the wish of her son Fernando 'Bong' Del Rosario, who is a long time friend and a compadre of the [r]espondent. Respondent, respecting the trust reposed upon him by Primitiva Del Rosario, her daughter Aurora Del Rosario, and son Fernando Del Rosario, acceded to hold in trust the said sum of [s]ixteen [t]housand [f]ive [h]undred (P16,500.00) [p]esos, Philippine [c]urrency, which [was] locked and safely kept [in] the filing cabinet of the [r]espondent until February 12, 1999; x x x;

"6). On February 10, 1999 [during] the hearing of the Norma Trajano case before the Hon. Adoracion G. Angeles, [r]espondent appeared shortly before 10:30 o'clock in the morning, pursuant to a 'Motion to Call Case at 10:30 o'clock in the Morning’ x x x.

"7). When the said Norma Trajano [case] x x x was called on second call at 11[:]25 a.m., [i]n said February 10, 1999 hearing, respondent was first scolded by the Honorable Court (Judge Adoracion G. Angeles) x x x [for] giving more preference to the Metropolitan Trial Court than her Court. Resp[o]ndent, however, beg[ged the] indulgence of the Honorable Court (Judge Adoracion G. Angeles) and explained why [he] first attend[ed] the Mandaluyong hearing of Manny Chua's case, to wit; x x x. Oldmisâ o

"8). That it was during the course of [the] litany of sermon, [i]n that hour, made by the Honorable Court addressed to the [r]espondent that Norma Trajano x x x butted in and informed the Honorable Court (Judge Adoracion G. Angeles) that she will be tendering another partial payment; it was at that moment that Judge Adoracion G. Angeles asked Norma Trajano how much had she paid Primitiva Del Rosario, and, Norma [T]rajano answered that she had already paid P36,500.00 as full payment for one case, and that of the P36,500, P20,000.00 was paid to Primitiva Del Rosario and HESITANTLY said that the P16,500 was paid to the [r]espondent. Judge Angeles then took the receipt from Norma Trajano and had it xeroxed by a personnel of the Court. The carbon duplicate original of the Receipt, dated [D]ecember 14, 1998, showing the receipt by the office of the [r]espondent, through Romeo Jamisola Jr., whose printed [name] was pre[ceded] by the word 'By', indicating that he received the sum of money on behalf of or in

representation of the [r]espondent, is hereto [attached] and marked as ANNEX '5', to form part hereof;

"9). That it was perhaps due to the belief [in] and the immediate impression of Judge Adoracion G. Angeles [of the] answer of Norma Traiano that prompted Judge Angeles to ask, instantaneously in a loud manner, Primitiva Del Rosario ‘IN TAGALOG', the question, 'NATANGGAP MO BA KAY ATTY. UY ANG PERA NA P16,500.00?'. Primitiva Del Rosario, a seventy-year-old, who was shocked by the tone and the manner she was asked by Judge Angeles simply just answered 'HINDI PO, KASI GUSTO [KO] PO NA MABUO ANG PERA'. Primitiva Del Rosario, however, tried to explain her answer 'HINDI PO' and why she did not yet [receive] the money from the [r]espondent by raising her hand but was prevented by Judge Adoracion G. Angeles from further answering by telling Primitiva Del Rosario to stop. With that answer of Primitiva Del Rosario, [r]espondent butted in to explain Primitiva Del Rosario's answer of 'HINDI PO' and her having not yet received the sum of money, subject of the inquisition of Judge Angeles by manifesting to wit; x x x that Primitiva Del Rosario did not get the money when x x x handed the same on December 15, 1998 because she wanted [it] to be save[d] in whole together with the future installment payments of Norma Trajano and to be kept in the office of the [r]espondent as wished by her son Bong Del Rosario; and, that the said sum of money [was] kept in the filing cabinet in the office of the [r]espondent. All explanation[s] of the [r]espondent went to x x x naught as the [r]espondent was cut short by x x x Judge Angeles, [who] in a loud and angry voice orally directed the [r]espondent to get the money from [r]espondent's office and give the same to Primitiva Del Rosario. It was already 11 :45 o'clock in the morning, more or less, an the [r]espondent was given fifteen (15) minutes to comply; [r]espondent requested Judge Angeles to be accompanied by Primitiva Del Rosario and her daughter Aurora Del Rosario but both were ordered to stay in court by Judge Angeles; Ncmâ

"10). Respondent in compliance with the oral order of Judge Angeles immediately proceeded [to] his office but only to find out that Romeo Jamisola Jr., who [held] the only key [to r]esponddnt's filing cabinet, was on errand x x x that morning of February 10, 1999 [for] Atty. Angel B. De Veyra (the Undersigned Counsel) [who had sent him] to the offices of the solicitor general in Makati City, and, the City Prosecutor's Office of Manila to [furnish copies to] both offices; x x x;

"11). Respondent, expecting that Romeo Jamisola Jr. would [arrive] before 12[:]00 noon, x x x waited for Romeo Jamisola Jr. while at the same time called up [his] wife to immediately [come] to his office to spare the sum of P16,500.00 as Romeo Ja[mi]sola may not [arrive] [within] the time allotted by Judge Angeles. The wife of respondent, however, arrived at about 12:25 P .M., more or less, ahead of Romeo Jamisola Jr. and spared [r]espondent the sum of P16,500.00 and [r]espondent immediately went [to] the fourth floor, where the sala of Judge Angeles [was] located but unfortunately the session

3

was already adjourned. Respondent then talked to 'Armand', one 'of the court personnel and is known as the door keeper of the chamber of Judge Angeles, and [requested that he be allowed to go inside the chamber to show [his] compliance, though late. Respondent, however, was told by 'Armand' that Judge Angeles was on her lunch break an that it [was] better for [r]espondent to take his lunch too and return a little later; NcmmisÓ

"12). At about 1:30 o'clock in the afternoon of that day (February 10, 1999) [r]espondent returned [to] the sala of Judge Angeles together with Primitiva Del Rosario and her daughter Aurora Del Rosario, who likewise returned to the court, to seek an audience in [the] chamber [of] Judge Angeles. Said audience with Judge Angeles was desired by Primitiva Del Rosario to let Judge Angeles [witness] the giving of the money to Primitiva Del Rosario. But request[s] for the same, through 'Armand', were twice denied by Judge Angeles because at that time Judge Angeles was being interviewed by several media personnel of some TV stations. The Del [Rosarios], however, left earlier upon knowing that Judge Angeles denied their request for an audience. [They] told [r]espondent that they will be back the following day. It was only when Romeo Jamisola arrived at about 3:00 o'clock, more or less, in the afternoon and went at the fourth floor at the premises of the sala of Judge Angeles and informed the [r]espondent that he carried with him the key to [r]espondent's cabinet and the presence of some [squatter] families of Batasan Hills, Quezon City at the office of the [r]espondent, who has an appointment with the [r]espondent, that the [r]espondent left the premises of the sala of Judge Angeles. [sic] Respondent, at his office ordered Romeo Jamisola Jr. to open the filing cabinet and returned to the premises of the sala of Judge Angeles alone at about 4:00 o'clock P .M. after his meeting with the squatter families. But again, his request to 'Armand' to talk with Judge Angeles, after the media interview, was denied. At about 5:30 o'clock in the afternoon, 'Armand', the court personnel, served the Order, of said date, February 10, 1999 at the office of the [r]espondent;

"13). In the early afternoon of the following day, February 11, 1999, [r]espondent together with Primitiva Del Rosario and her daughter Aurora Del Rosario went again [to] the sala of Judge Angeles x x x to seek an audience with Judge Angeles. Their request x x x w[as] likewise in vain. Primitiva Del Rosario, after the last attempt to seek audience with Judge Angeles and already tired of going [to] and [from] the sala of Judge Angeles, decided on February 12, 1999, to receive the sum of money in the amount of P16,500.00 from the office of the [r]espondent, through, Romeo Jamisola Jr. and executed a Sinumpaang Salaysay. x x x;

"14). The Sinumpaang Salaysay of Primitiva Del Rosario, dated February 16, 1999 as well as the Acknowledgment Receipt, dated February 12, 199[9] was attached to a Manifestation caused to be filed by the [r]espondent on March 3, 1999 when the respondent was confined in Fatima Hospital in Valenzuela City, Metro Manila on March 2, 1999;Scncä m

"15). Learning of the instant administrative case against the [r]espondent, Bong Del Rosario, the son of Primitiva Del Rosario, upon whose wish the subject sum of money was kept at the office of the [r]espondent to save the same in whole as well as the future in[s]tallment payments of Norma Trajano executed a Sinumpaang Salaysay, attesting [to] and confirming the statement of [his] mother Primitiva Del Rosario. x x x"[3]

Stripped of unnecessary verbiage, the Comment contends that the respondent kept the money in his office because that was the alleged wish of both his client and her son. He allegedly informed them of such money and tried to give it to them, but they insisted that he retain it. He further maintained that it was only after Judge Angeles issue the February 10, 1999 Order that his client relented and accepted the money on February 12, 1999.

After the judge filed her Reply on June 30, 1999, this Court referred the case to the Office of the Bar Confidant for report and recommendation. The Court dispensed with the normal referral to the Integrated Bar of the Philippines because the records were complete and the question raised was simple. No further factual investigation was necessary in the premises.

Bar Confidant's Report and Recommendation

Recommending that Atty. Thomas C. Uy Jr .be suspended from the practice of law for one month, the Office of the Bar Confidant in its Report and Recommendation dated December 15, 1999 said: SdaaÓ miso

"x x x [I]t is clear that it is the sworn duty of a member of the bar to be accountable, at all times, for anything which he receives for and in behalf of his client.

"In the case at bar, this Office is more inclined to believe the story of the complainant.

"First, it cannot be disputed that the transcript of stenographic notes is the most reliable record of what indeed transpired (and what words were uttered by the parties involved) on February 10, 1999 at the hearing of Crim. Case No. C-54176-77 (98). Records clearly show that the private complainant in the criminal case, when asked by Judge Angeles as to the whereabouts of the P16,500.00, spontaneously replied that she had no knowledge of the same; in effect saying that Atty. Uy has not given her the subject 16,500.00. If, indeed, Primitiva Del Rosario requested Atty. Uy to keep the money as far back as December 1998, then she should have told the same to Judge Angeles.

"Atty. Uy's allegation that Judge Angeles prevented Primitiva Del Rosario from saying in open court the words 'HINDI PO KASI GUSTO KO PO NA MABUO ANG PERA' does not have any proof as nothing of that sort appears in the transcript of stenographic notes. Atty. Uy has not even bothered to refute the truth of the contents of the stenographic notes, all the more bolstering this Office's opinion that the said notes are accurate and truthful. Sdaad

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"Second, the affidavits executed by Primitiva Del Rosario and her son, Fernando Del Rosario, dated February 16, 1999 and June 7, 1999, respectively, attesting to Atty. Uy's averment that his act of personally keeping the subject P16,500.00 was with and at their request cannot be given much credence to outweigh the arguments of Judge Angeles. The said affidavits, both executed after February 10, 1999, are suspect. Caught by surprise when Judge Angeles inquired of the whereabouts of his client's money, Atty. Uy x x x resorted to seeking the help of his client to corroborate his defense. Being the clients of Atty. Uy, Primitiva Del Rosario and her son could have been persuaded to help extricate their counsel from the latter's predicament.

"In the absence of any contradicting evidence to dispute the allegation that Atty. Uy failed to immediately remit to his client the money due the latter, it is safe to conclude that Atty. Uy has violated his sworn duty to uphold, at all times, the trust and confidence reposed in him by his client(s).

x x x    x x x    x x x

"In the instant case, Atty. Uy, upon receipt of the P16,500.00 from the accused in the criminal case, should have promptly remitted the same to his client, Primitiva Del Rosario. Had Judge Angeles not inquired of the whereabouts of the money, the same would have remained with Atty. Uy, to the prejudice of the latter's client."[4]

This Court's Ruling

We agree with the findings and the recommendation of the Office of the Bar Confidant. Scsä daad

Administrative Liability of Respondent

The relationship between a lawyer and a client is highly fiduciary; it requires a high degree of fidelity and good faith. It is designed "to remove all such temptation and to prevent everything of that kind from being done for the protection of the client."[5]

Thus, Canon 16 of the Code of Professional Responsibility provides that "a lawyer shall hold in trust all moneys and properties of his client that may come into his possession." Furthermore, Rule 16.01 of the Code also states that "a lawyer shall account for all money or property collected or received for or from the client." The Canons of Professional Ethics is even more explicit:

"The lawyer should refrain from any action whereby for his personal benefit or gain he abuses or takes advantage of the confidence reposed in him by his client. SupÓ rema

"Money of the client collected for the client or other trust property coming into the possession of the lawyer should be reported and accounted for promptly and should not

under any circumstances be commingled with his own or be used by him."[6]

In the present case, it is clear that respondent failed to promptly report and account for the P16,500 he had received from Norma Trajano on behalf of his client, Primitiva Del Rosario. Although the amount had been entrusted to respondent on December 14, 1998, his client revealed during the February 10, 1999 hearing that she had not yet received it. Worse, she did not even know where it was.

Respondent maintains that on December 15, 1998 he informed Mrs. Del Rosario about the payment. He further avers that he kept the money up n her instruction, as she had allegedly wanted "future payments x x [to] be saved in whole and for them to avoid spending the same as what had happened to the past installment payments x x x."[7] This assertion allegedly finds support in her answer to the question of Judge Angeles, who had asked her whether she had received the disputed payment: "Hindi po, kasi gusto [ko] po na mabuo ang pera."

The Court is not persuaded. Respondent's assertions are contradicted by the following transcript of stenographic notes:

"Court:          This P16,500, did you turn it over to the private complainant?Atty. Uy:       No your Honor, because she wanted the full amount of the settlement.Court:           Private complainant, is it true that you did not want to accept the money?Mrs. Del Rosario:    Hindi po, sila po ang nagbigayan. JurisäCourt:           Hindi po ibinibigay sa inyo ni Atty. Uy?Mrs. Del Rosario:    Hindi po.

x x x    x x x    x x xCourt:           Nasaan iyong P16,500? Huwag kayong matakot.Mrs. Del Rosario:    Aywan ko po sa kanilang dalawa."[8]

If it were true that Mrs. Del Rosario was informed about the payment and that she entrusted it to respondent, she would have known its whereabouts. That she did not know it showed the falsity of his claim.

It is noteworthy that respondent did not dispute the foregoing transcript although it belied his allegation that Mrs. Del Rosario's express wish was to have the payments in full. Scä juris

Neither are we convinced by the affidavits of Mrs. Del Rosario and her son, both of whom affirmed their intention to have their money in the safekeeping of respondent. It should be stressed that he was her counsel and the compadre of her son. Moreover, the affidavits were executed after the filing of this Complaint. As the Office of the Bar Confidant observed, these considerations militate against the credibility of the affiants. In any event, their affidavits fail to explain adequately why Mrs. Del Rosario, during the hearing on February 10, 1999, did not know where her money was.

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The records do not clearly show whether Attorney Uy had in fact appropriated the said amount; in fact, Mrs, Del Rosario acknowledge that she had received it on February 12, 1999. They do show, however, that respondent failed to promptly report that amount to her. This is clearly a violation of his professional responsibility. Indeed, in Aya v. Bigornia,[9] the Court ruled that money collected by a lawyer in favor of his clients must be immediately turned over to them. In Daroy v. Legaspi,[10] the Court held that "lawyers are bound to promptly account for money or property received by them on behalf of their clients and failure to do so constitutes professional misconduct."

Verily, the question is not necessarily whether the rights of the clients have been prejudiced, but whether the lawyer has adhered to the ethical standards of the bar.[11] In this case, respondent has not done so. Indeed, we agree with the following observation of the Office of the Bar Confidant:

"Keeping the money in his possession without his client's knowledge only provided Atty. Uy the tempting opportunity to appropriate for himself the money belonging to his client. This situation should, at all times, be avoided by members of the bar. Like judges, lawyers must not only be clean; they must also appear clean. This way, the people's faith in the justice system would remain undisturbed."[12]Jurisä sc

In this light, the Court must stress that it has the duty to look into dealings between attorneys and their clients and to guard the latter from any undue consequences resulting from a situation in which they may stand unequal.[13] The present situation calls for the exercise of this duty.

For misappropriating and failing to promptly report and deliver money they received on behalf of their clients, some lawyers have been disbarred[14] and others have been suspended for six months.[15] In the present case, the records merely show that respondent did not promptly report that he received money on behalf of his client. There is no clear evidence of misappropriation. Under the circumstances, we rule that he should be suspended for one month.

WHEREFORE, Atty. Thomas C. Uy Jr .is hereby SUSPENDED for one month. He is warned that a repetition of the same or similar acts will be dealt with more severely.

Let copies of this Decision be served on Atty. Thomas C. Uy Jr. at his given address or any other known one. Copies of this Decision shall also be entered in his record as attorney and served on the IBP, as well as the Court Administrator who shall circulate them to all the courts in the country for their information and guidance.

SO ORDERED.

[A.C. No. 5235. March 22, 2000]

FERNANDO C. CRUZ AND AMELIA CRUZ, complainants, vs. ATTY. ERNESTO C. JACINTO, respondents. Jurisä

R E S O L U T I O N

MELO, J.:

In their sworn complaint, spouses Fernando C. Cruz and Amelia Manimbo Cruz seek the disbarment of Atty. Ernesto C. Jacinto. The Integrated Bar of the Philippines, through Commissioner Jesulito A. Manalo of the Commissioner on Bar discipline, conducted an investigation. Thereafter, he submitted his Findings and Recommendation, thusly:

This is a disbarment case filed by the spouses Fernando and Amelia Cruz against Atty. Ernesto C. Jacinto. This case was filed with the Commission on Bar Discipline last 30 January 1991.

The evidence of the complainants show that sometime in June 1990, Atty. Ernesto Jacinto, lawyer of the couple in an unrelated case, requested the Cruz spouses for a loan in behalf of a certain Concepcion G. Padilla, who he claimed to be an old friend as she was allegedly in need of money. The loan requested was for PhP 285,000.00 payable after 100 days for PhP 360,000 to be secured by a real estate mortgage on a parcel of land located at Quezon City. Scä juris

The spouses, believing and trusting the representations of their lawyer that Padilla was a good risk, authorized him to start preparing all the necessary documents relative to the registration of the Real Estate Mortgage to secure the payment of the loan in favor of the Cruz spouses.

On 4 July 1990, the complainants agreed to the request of Atty. Jacinto and were presented by the latter with a Real Estate Mortgage Contract and a Transfer Certificate of Title No. 127275 in the name of Concepcion G. Padilla. The amount of PhP 285,000.00 was given by the spouses to the respondent in cash (PhP 270,000.00) and a PBCom check no. 713929 for PhP 15,000.00.

Upon maturity of the loan on 15 October 1990, the spouses demanded payment from Concepcion G. Padilla by going to the address given by the respondent but there proved to be no person by that name living therein. When the complainants verified the genuineness of TCT No. 127275 with Register of Deeds of Quezon City, it was certified by the said office to be a fake and spurious title. Further efforts to locate the debtor-mortgagor likewise proved futile. Jurisä sc

In their sworn affidavits given before the National Bureau of Investigation (NBI), the spouses claim that they relied much on the reassurances made by Atty.

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Jacinto as to Concepcion G. Padilla’s credit, considering that he was their lawyer. It was also their trust and confidence in Atty. Jacinto that made them decide to forego meeting the debtor-mortgagor.

The complainants’ evidence also included the sworn statements of Estrella Ermino-Palipada, the secretary of the respondent at the Neri Law Office, and Avegail Payos, a housemaid of Atty. Jacinto. Ms. Palipada stated that:

1. she was the one who prepared the Real Estate Mortgage Contract and the Receipt of the loan upon the instruction of the respondents;

2. she was a witness to the transaction and never once saw the person of Concepcion G. Padilla, the alleged mortgagor; and that

3. she was instructed by Atty. Jacinto to notarize the said contract by signing the name of one Atty. Ricardo Neri.

Avegail Payos, the housemaid of the respondent, in turn stated that she was the one who simulated the signature of one Emmanuel Gimarino, the Deputy Register of Deeds of Quezon City upon the instruction of Atty. Jacinto. This was done to make it appear that the real estate mortgage was registered and the annotation to appear at the back of the TCT as an encumbrance.

On 14 November 1997, a case for Estafa thru Falsification of Public documents under Art. 315 was filed against Atty. Jacinto. He was arrested and detained by the NBI.

The defense of the respondent, on the other hand, was embodied in his Answer with Motion to Dismiss filed with the Commission on Bar Discipline. Therein, he alleged that the criminal information for estafa thru falsification filed against him had already been dismissed because of the voluntary desistance of the complainants. MisjÓ uris

In his version of the facts, Atty. Jacinto averred that while he indeed facilitated the loan agreement between the Cruz spouses and Concepcion G. Padilla, he had no idea that the latter would give a falsified Certificate of Title and use it to obtain a loan. He claimed that he himself was a victim under the circumstances.

Respondent further alleged that he had not been remiss nor negligent in collecting the proceeds of the loan; that in fact, he had even advanced the full payment of the loan due to the complainants from his own savings, even if Concepcion G. Padilla had not yet paid, much less found.

RECOMMENDATIONS

It is every lawyer’s sworn duty to obey the laws of the land to promote respect for law and legal processes. The Code of Professional Responsibility command that he shall not engage in unlawful, dishonest, immoral or deceitful conduct. (Rule 1.01, Code of Professional Responsibility) Jjä lex

In the instant case, there was a clear yet unrebutted allegation in the complaint that the Respondent had ordered his secretary and housemaid to falsify the signatures of the notary public and the Deputy Register of Deeds respectively to make it appear that the real estate mortgage contract was duly registered and thus binding.

While it may be true that the complaint for Estafa thru Falsification filed against the Respondent had been dismissed, the dismissal was because of the complainant’s voluntary desistance and not a finding of innocence. It neither confirms nor denies Respondent’s non-culpability. Furthermore, it is well-settled that disciplinary proceedings are "sui generis", the primary object of which is not so much to punish the individual attorney himself, as to safeguard the administration of justice by protecting the court and the public from the misconduct of lawyers, and to remove from the professions persons whose disregard of their oath have proven them unfit to continue discharging the trust reposed in them as members of the bar. Thus, disciplinary cases may still proceed despite the dismissal of civil and/or criminal cases against a lawyer.

A lawyer who does any unlawful fraudulent or dishonest act may and should be held administratively liable therefor. In the case at bar, the Respondent should not be made an exception. While it may be shown that he indeed advanced the payment due to his erstwhile clients, such will not exempt him from administrative liability. At best it can only mitigate. Respondent is recommended to be suspended for six (6) months from the practice of law.

(Findings and Recommendation, pp. 1-4) NewÓ miso

On February 28, 1998, the Board of Governors of the IBP passed Resolution XIII-97-199 adopting and approving the Findings and Recommendation of the Investigating Commissioner, which reads:

RESOLVED to ADOPT and APPROVE, as it is hereby ADOPTED and APPROVED, the Report and Recommendation of the Investigating Commissioner in the above-entitled case, herein made part of this Resolution/Decision as Annex "A" and, finding the recommendation fully supported by the evidence on record and the applicable laws and rules, respondent Atty.

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Ernesto C. Jacinto is SUSPENDED from the practice of law for six (6) months for his unlawful, fraudulent or dishonest act.

(Notice of resolution [dated Feb. 28, 1998]).

In his Comment and Answer with Motion to Dismiss, respondent averred that complainants have no cause of action against him as the same has been waived, settled, and extinguished on account of the affidavits of voluntary desistance and quitclaim executed by them in the criminal case filed against him. Ncmmis

The assertion must necessarily fail. The practice of law is so intimately affected with public interest that it is both a right and a duty of the State to control and regulate it in order to promote the public welfare. The Constitution vests this power of control and regulation in this Court. Since the practice of law is inseparably connected with the exercise of its judicial power in administration of justice, the Court cannot be divested of its constitutionally ordained prerogative which includes the authority to discipline, suspend or disbar any unfit and unworthy member of the Bar by a mere execution of affidavits of voluntary desistance and quitclaim (par. [5], Sec. 5, 1987 Constitution).

A lawyer may be disciplined or suspended for any misconduct, whether in his professional or private capacity, which shows him to be wanting in moral character, in honesty, in probity and good demeanor, thus rendering unworthy to continue as an officer of the court (Maligsa vs. Cabanting, 272 SCRA 408 [1997]), and the complainants who called the attention of the Court to the attorney’s alleged misconduct are in no sense a party, and have generally no interest in the outcome except as all good citizens may have in the proper administration of justice (Rayos-Ombac vs. Rayos, 285 SCRA 93 [1998]).

Undeniably, respondent represented complainants in the loan transaction. By his own admission, he was the one who negotiated with the borrower, his long-time friend and a former client. He acted not merely as an agent but as a lawyer of complaints, thus, the execution of the real estate mortgage contract, as well as its registration and annotation on the title were entrusted to him. In fact, respondent even received his share in the interest earnings which complainants realized from the transaction. His refusal to recognize any wrongdoing or carelessness by claiming that he is likewise a victim when it was shown that the title to the property, the registration of the real estate mortgage contract, and the annotation thereon were all feigned, will not at all exonerate him. Scncm

As a rule, a lawyer is not barred from dealing with his client but the business transaction must be characterized with utmost honesty and good faith. However, the measure of good faith which an attorney is required to exercise in his dealings with this client is a much higher standard than is required in business dealings where the parties trade at arms length. Business transactions between an attorney and his client are disfavored and discouraged by the policy of the law. Hence, courts carefully watch these transactions to be sure that no

advantage is taken by a lawyer over his client. This rule is founded on public policy for, by virtue of his office, an attorney is in an easy position to take advantage of the credulity and ignorance of his client. Thus, no presumption of innocence or improbability of wrongdoing is considered in an attorney’s favor (Nakpit vs. Valdes, 286 SCRA 758 [1998]). Further, his fidelity to the cause of his client requires him to be evermindful of the responsibilities that should be expected of him.

Verily, a lawyer may not, without being guilty of professional misconduct, act as counsel for a person whose interest conflicts with that of his former client. The reason for the prohibition is found in the relation of attorney and client, which is one of trust and confidence at the highest degree (Maturan vs. Gonzales, 287 SCRA 943 [1998]). Sdaamiso

Respondent utterly failed to perform his duties and responsibilities faithfully and well as to protect the rights and interests of his clients and by his deceitful actuations constituting violations of the Code of Professional Responsibilities must be subjected to disciplinary measures for his own good, as well as for the good of the entire membership of the Bar as a whole.

WHEREFORE, the Court hereby adopts the resolution of the Board of Governors of the Integrated Bar of the Philippines and orders respondent Atty. Ernesto C. Jacinto suspended from the practice of law for six (6) months with the warning that a repetition of the same or similar offense will be dealt with more severely. Sdaad

SO ORDERED.

December 8, 1923VICENTE DIAZ, complainant, vs.RUPERTO KAPUNAN, respondent.

Attorney-General Villa-Real for the Government. Perfecto Gabriel and Rafael Palma for respondent.

MALCOLM, J.:

This action for malpractice brought by Vicente Diaz against Attorney Ruperto Kapunan, has to do with the conduct of Attorney Kapunan during the legal proceedings which followed the business troubles of Vicente Diaz and Secundino de Mendezona, and particularly relates to the conduct of Attorney Kapunan in civil case No. 2098 of the Court of First Instance of Leyte. The ultimate question on which we would concentrate attention concerns the agreement between Diaz and Kapunan at the time of the sale of the property of Mendoza, whereby Kapunan, on the promise of Diaz to pay him P1,000, agreed to desist from further participation in the sale, all in alleged violation of article 1459 of the Civil Code and article 542 of the Penal Code.

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Omitting the irrelevant matter interjected into this case, the principal facts of record are the following:

In 1917, Vicente Diaz and Secundino de Mendezona formed a partnership and entered into extensive business transactions in the Province of Leyte. The capital of the partnership was P380,000. Unfortunately, however, the business failed to prosper, with the result that on liquidation, it was found to have suffered a loss of P67,000. When Diaz and Mendezona came to settle up their affairs, they eventually formulated a document of sale and mortgage in which Mendezona recognized a debt in favor of Diaz in the sum of P80,000 and an additional sum of P10,000 owing to Diaz, laid upon the hacienda "Mapuyo," and to be paid within the term of one year. When the year had expired Mendezona was not to be found and his family was unable to meet the payment. There followed the usual proceedings for foreclosure and sale, which, after considerable delay, resulted in the hacienda's being offered for sale at public auction.

At the time fixed for the sale, December 23, 1922, there appeared Vicente Diaz, accompanied by his lawyer Emilio Benitez, and Attorney Ruperto Kapunan. Luis Velarde, the deputy sheriff of Leyte, is authority for the statement that Kapunan told him that he, Kapunan, was ready to bid on the property up to P16,000 in order to assist the Mendezona family which was in financial straits. At any rate, the bidding was opened by Kapunan offering P12,000 for the property and with Diaz and Kapunan raising the bids until finally Diaz offered P12,500. There the bids stopped on account of Diaz and Kapunan entering into the agreement, of decisive importance, which we next quote in full:

We, Vicente Diaz and Ruperto Kapunan, both being the bidders at the auction held for the sale of the properties of Secundino Mendezona, do hereby agreed that Don Ruperto Kapunan should withdraw his bid and refrain from bidding at the said auction as he does hereby withdraw his bid, and in consideration thereof, the said Mr. Diaz offers him a premium of one thousand pesos (P1,000) which, out of consideration to said Don Vicente Diaz, Mr. Kapunan accepts and has, for this reason, refrained from bidding in competition with said Mr. Diaz.lawphi1.net

Tacloban, Leyte, December 23, 1922.

(Sgd.) "V. DIAZ. (Sgd.) RUPERTO KAPUNAN."

Following the termination of the sheriff's sale, Diaz on December 26, 1922, gave Kapunan P500 of the P1,000 mentioned in the above quoted document. Diaz further followed the usual procedure to take over the property of Mendezona pursuant to his bid of P12,500, which covered the amount of the mortgage with its accumulated interest and with the judicial expenses.

Although it was on December 23, 1922, that Diaz and Kapunan entered into the agreement, Diaz could only wait until January 4, 1923, following, to lay before this court charges against Attorney Kapunan for alleged unprofessional conduct. Undoubtedly, before Kapunan had knowledge of the

disbarment proceedings, on January 10, 1923, he presented a motion in the Court of First Instance of Leyte asking that he be permitted to retain the P500 in question, in part payment of his professional fees. Later, on February 4, 1923, when Kapunan must have had knowledge of the disbarment proceedings, he filed another motion, withdrawing his former motion and asking the court to permit him to turn over the P500 to Diaz, which Judge Causing refused to do on the ground that it was a personal matter. Nevertheless, on July 10, 1923, the clerk of the Court of First Instance of Leyte handed the P500 to Diaz who, in turn, receipted for that amount. lawphil.net

From correspondence, it further is evident that the family of Mendezona was led to believe that the P500 would shortly be sent them. Without doubt, the Mendezona family would have been gratified to receive even the P500 pittance out of the business wreck in Leyte of the senior Mendezona.

During much of the time here mentioned, Kapunan was the attorney of Mendezona. Kapunan was given extensive authority by the letter of Mendezona of April 12, 1919. When Kapunan took part in the sale, it must be assumed that he was bidding in representation of his client and for the benefit of the client.

It remains to be said that following the presentation of the charges against Attorney Kapunan in this court, he was given an opportunity to answer, and the usual investigation of his professional conduct was made by the provincial fiscal of Leyte acting under the supervision of the Attorney-General. From the report of the fiscal, indorsed by the Attorney-General, three charges seem to have been considered. The first two, relating to Kapunan's attempt to represent both the parties in the case, and to molest and disturb Diaz by frivolous motions, the law officer of the Government finds not substantiated; and with this conclusion we fully agree. The third charge is more serious and has to do with Kapunan having intervened in the manner in which he did in the sale of the property of his client Mendezona. The Attorney-General is of the opinion on this point that the facts constitute a flagrant violation of the provisions of article 1459 of the Civil Code and article 542 of the Penal Code. "In view thereof, it is recommended that corrective measures commensurate with the irregularity committed by Attorney Kapunan, be taken against him."

Article 1459 of the Civil Code was held in force in the case of Hernandez vs. Villanueva ([1920], 40 Phil., 775). It provides that the following persons, naming them, "cannot take by purchase, even at a public or judicial auction, either in person or through the mediation of another." The provision contained in the last paragraph of said article is made to include lawyers, with respect to any property or rights involved in any litigation in which they may take party by virtue of their profession and office. We do not believe this article has been infringed by the respondent because he has not purchased property at a public or judicial auction and because his participation in the auction was in representation of his client. It has been held that an execution sale to the attorney of the defendant is not unlawful if made in good faith, with the consent of the client, and without any purpose of defrauding the latter's creditors. (2 R.

9

C. L., 1011; 1 Thornton on Attorneys at Law, pp. 298, 299; Smith vs. Smith [1848], 1 Iowa, 307.)

The more puzzling question relates to the alleged violation by Attorney Kapunan of article 542 of the Penal Code. This article punishes "any person who shall solicit any gift or promise as a consideration for agreeing to refrain from taking part in any public auction." The crime is consummated by the mere act of soliciting a gift or promise for the purpose of abstaining from taking part in the auction. Not permitting our minds to be confused by the varied explanations of Diaz and Kapunan, the document formulated by them and hereinbefore quoted, demonstrates that Kapunan, on the promise of Diaz to pay P1,000, refrained from further participation in the sale of the property of Mendezona, which is exactly the situation covered by article 542 of the Penal Code.

Public policy discountenances combinations or agreements on the part of bidders at execution sales, the objects and effects of which are to stifle competition. The courts will consider an agreement between a judgment creditor and one claiming an interest in the thing about to be sold under an execution, that neither shall bid against the other, as void, unless all parties concerned know of the arrangement and consent thereto. Execution sales should be open to free and full competition, in order to secure the maximum benefit for the debtor. Article 542 of the Penal Code is, therefore, a wise provision even though rarely invoked, and should be used to discourage the stifling of bids at judicial sales. (23 C.J., 647; Packard vs. Bird and Chapman [1870], 40 Cal., 378; 3 Viada, Codigo Penal, 594.)

We conclude that Attorney Kapunan has been guilty of a technical violation of article 542 of the Penal Code. But we cannot adopt the vigorous recommendation of the Attorney-General, for we consider present certain mitigating circumstances which exert an influence in favor of the respondent. In the first place, as disclosed by the judicial records, no reported prosecution under article 542 has been attempted, which is eloquent proof of the practical disuse of this article; and the Spanish jurisprudence, while indicative of the meaning of the article, relies principally on the decisions of the French Court of Cassation. (See Code of Napoleon, arts. 222, 223; decisions of the French Court of Cassation of October 16, 1844, May 15, 1857, and January 8, 1863.) In the next place, the complainant Diaz is equally guilty with the respondent Kapunan. And lastly, Kapunan appears to have been acting in good faith for his client, although adopting an irregular procedure, and although attempting to make tardy restitution of the money received by him.

Our judgment is that Attorney Ruperto Kapunan shall stand reprimanded and that the complainant, Vicente Diaz, shall immediately return to the clerk of the Court of First Instance of Leyte the P500 received by Diaz from the clerk and receipted for by Diaz, and the clerk of court shall transmit the P500 to Secundino de Mendezona or, in case of his absence, to Miss Carmen de Mendezona. Costs shall be taxed in accordance with the provisions of the Code of Civil Procedure. So ordered.

Johnson, Avanceña, Villamor, Ostrand and Johns, JJ., concur.Romualdez, J., took no part.

B. ACCOUNTING OF CLIENT’S FUNDS

[A.C. No. 4083. March 27, 2000]

LEONITO GONATO and PRIMROSE GONATO complainants, vs. ATTY. CESILO A. ADAZA, respondent.

R E S O L U T I O N

MELO, J.: Sclaw

At bar is an administrative complaint for disbarment filed by the complainant spouses Leonito and Primrose Gonato against their former counsel, Atty. Cesilo A. Adaza, charging him with malpractice and violation of trust. Pursuant to Rule 139-B of the Rules of Court and the Resolution of the Court dated December 1, 1993, the present administrative case was referred to the Integrated Bar of the Philippines (IBP) for investigation, report, and recommendation.

It appears that sometime in February, 1993, complainants engaged the services of respondent as their counsel in Civil Case No. 92-263 entitled Goking vs. Yacapin, et al." filed with the Regional Trial Court of Misamis Oriental, wherein complainants were among the defendants in said case. Complainants alleged that respondent demanded from them the sum of P15,980.00 to be used in paying the docket fee and other court fees in connection with the aforementioned case. Said amount was loaned to complainants by a friend, Vic Manzano, who delivered the same to respondent, as evidenced by an acknowledgment receipt dated February 10, 1993 and signed by respondent's secretary, Mayette Salceda. Thereafter, complainants asked for the official receipts evidencing the amount of court fees purportedly paid by respondent. Vic Manzano told complainants that respondent only gave him photocopies of two Republic of the Philippines receipts with numbers 9627143 (Exhibit "C") dated February 11, 1993, in the amount of P15,830.00; and 7447868 (Exhibit "D") also dated February 11, 1993, in the amount of P150.00. Dissatisfied, complainant Primrose Gonato personally went to respondent's law office at least three times, and asked for the original copies of the receipts, but to no avail. Primrose's suspicion grew stronger, and this prompted her to verify the authenticity of said receipts with the office of the Clerk of Court of the Regional Trial Court of Cagayan de Oro City. There, it was discovered that the triplicate original copies of the receipts did not reflect the same amount contained on the photocopies of the receipts given by respondent. Receipt No. 9627143 in the Clerk of Court's Office showed only the amount of P2,470.00 and was Dated May 15, 1992, while that given by respondent bore the amount of P15,830.00. On the other hand, Receipt No. 7447868 per Office of Clerk of Court records revealed the sum of P4,000.00, while that provided by respondent disclosed the sum of P150.00, presumably to conform to the amount paid by complainant which was

10

P15,980.00. Complainants demanded the return of P15,980.00 but respondent refused to do so. Thus, in April, 1993, complainants urged respondent to withdraw as counsel due to loss of trust and confidence.

For his part, respondent lawyer admits that he received from Vic Manzano the amount of P15,980.00 which was initially intended to cover the filing fees, sheriff fees, and U.P. Law Center fees in the filing of counterclaim on behalf of herein complainants. But according to him, after careful study, he realized that the counterclaim is compulsory and not permissive, and so he applied instead the aforesaid sum of P15,980.00 to his acceptance and appearance fees, which fact was even communicated to Vic Manzano, who was complainants' contact or liason person with respondent. Respondent also specifically denied that he caused the delivery of the falsified photocopies of O.R. Nos. 9627143 and 7447868 to complainant spouses. Sclex

In its Resolution dated January 28, 1999, the Board of Governors of the Integrated Bar of the Philippines adopted and approved the Investigating Commissioner's report and recommendation with an amendment that respondent be suspended from the practice of law for three (3) months.

The IBP Commission on Bar Discipline found sufficient evidence to sustain complainants' claim that respondent charged them the amount of P15,980.00 for filing fees when in fact no such fees were due. It rejected respondent's claim that the subject amount was applied to his attorney's fees as this is belied by the statement of account he issued to complainants indubitably showing that complainants were charged of said amount for filing fees.

This Court is in full accord with the findings and recommendation of the IBP that respondent lawyer has sufficiently demonstrated conduct showing his unfitness for the confidence and trust which characterize the attorney-client relationship. His act of requiring complainants to pay an exorbitant amount on the pretext that it was needed for the payment of court fees which were not even substantiated by proper official receipts, constitutes malpractice which is a serious breach of professional duty toward complainants whose trust respondent disregarded and violated. Respondent expressly admitted having received the money, but he persistently refused to return the same despite repeated demands by the complainants. This conduct of the respondent is clearly indicative of lack of integrity and moral soundness, as he was clinging to something which was not his and to which he absolutely had no right. Respondent’s shallow excuse that he applied said money to his attorney's fees is merely an afterthought and cannot justify his refusal to return the same, as this was made without the acquiescence of the complainants. It is settled that the conversion by a lawyer of funds entrusted to him is a gross violation of professional ethics and a betrayal of public confidence in the legal profession (Obia vs. Catimbang, 196 SCRA 23 [1991]). Likewise, respondent offered no solid proof to support his denial that he delivered the two falsified receipts to complainants. Xlaw

Canon 7 of the Code of Professional Responsibility mandates that "a lawyer shall at all times uphold the integrity and dignity of the legal profession." The trust and confidence necessarily reposed by clients require in the lawyer a high standard and appreciation of his duty to them. To this end, nothing should be done by any member of the legal fraternity which might tend to lessen in any degree the confidence of the public in the fidelity, honesty, and integrity of the profession (Marcelo vs. Javier, Sr., 214 SCRA 1 [1992]).

The facts and evidence obtaining in this case glaringly reveal respondent's failure to live up to his duties as a lawyer in consonance with the strictures of his oath and the Code of Professional Responsibility, particularly Canon 16 which provides that "a lawyer shall hold in trust all moneys and properties of his client that may come into his possession." As a member of the Bar, respondent was and is expected to always live up to the standards embodied in said Code particularly Canons 15, 16, 17 and 20, for the relationship between an attorney and his client is highly fiduciary in nature and demands utmost fidelity and good faith (Igual vs. Javier 254 SCRA 416 [1996]). The Court believes that a longer period of suspension than that recommended by the IBP is called for under the circumstances.

WHEREFORE, respondent Atty. Cesilo A. Adaza is hereby suspended from the practice of law for a period of six (6) months from notice, with the warning that a repetition of the same or similar acts will be dealt with more severely. Respondent is further ordered to restitute to complainants the amount of P15,980.00 within 30 days from notice, without prejudice to whatever judicial action he may take to recover his unsatisfied attorney's fees, if any. Let copies of this resolution be furnished all courts in the land, the Integrated Bar of the Philippines, the Office of the Bar Confidant, and let it be spread in respondent's personal record.

SO ORDERED. Xsc

A.C. No. 7418 October 9, 2007

ANDREA BALCE CELAJE, complainant, vs.ATTY. SANTIAGO C. SORIANO, respondent.

R E S O L U T I O N

AUSTRIA-MARTINEZ, J.:

Before this Court is a disbarment case filed against Atty. Santiago C. Soriano (respondent) for gross misconduct.

In the Complaint dated June 1, 2005 filed before the Integrated Bar of the Philippines (IBP), Andrea Balce Celaje (complainant) alleged that respondent asked for money to be put up as an injunction bond, which complainant found out later, however, to be unnecessary as the application for the writ was denied by the trial court. Respondent also asked for money on several occasions allegedly to spend for or to be given to the judge handling their case, Judge Milagros Quijano, of the Regional Trial Court, Iriga City, Branch 36.

11

When complainant approached Judge Quijano and asked whether what respondent was saying was true, Judge Quijano outrightly denied the allegations and advised her to file an administrative case against respondent.1

In his Answer, respondent denied the charges against him and averred that the same were merely concocted by complainant to destroy his character. He also contended that it was complainant who boasted that she is a professional fixer in administrative agencies as well as in the judiciary; and that complainant promised to pay him large amounts of attorney's fees which complainant however did not keep.2

Both parties appeared in the Mandatory Conference and Hearing on January 18, 2006. Thereafter, the case was submitted for decision.3

In the Report and Recommendation dated January 24, 2006, IBP-Commission on Bar Discipline Commissioner Dennis A.B. Funa found respondent guilty of Gross Misconduct in his relations with his client and recommended that respondent be suspended for three years from the practice of law.4

In the Report, Commissioner Funa found that:

During the hearing conducted, Complainant alleged that she has remitted to Respondent, on various dates, amounts of money totaling to more or less P270,000.00.

According to Complainant the amounts given in several instances were all undocumented and not acknowledged in writing.

However, for the alleged amount of P14,000.00 intended for an injunction bond, some documents in writing were made.

x x x x

While the amounts remitted by Complainant to Respondent were never acknowledged in writing and were not documented, due credence must be given to Complainant's allegations especially over the amount of P14,800.00 intended for the injunction. Indeed, there is no ill-motive at all on the part of Complainant to fabricate charges against Respondent. Unfortunately, none of the P270,000.00 given by Complainant to Respondent was ever documented and therefore accuracy of the amounts could not be established and substantiated.

What has been documented only pertains to the unpaid P5,800.00 intended for the injunction bond. However, it has been established that indeed an accumulated amount of P9,000.00 has been remitted by Respondent to Valentina Ramos and only the unpaid P5,800.00 remains unaccounted for by the Respondent.

During the hearing conducted, Complainant reiterated her accusations against the Respondent and expressed that she has been aggrieved and misled by Respondent. According to Complainant, this was made possible because she was not aware of or knowledgeable on legal matters and practices. Respondent has only offered denials to the charges. However,

the circumstances gives credibility to herein Complainant in the absence of any evil motive on her part.

Accordingly, Respondent is clearly guilty of misappropriating his client's funds in the amount of P5,800.00. While other amounts may have been misappropriated, Complainant alleges P270,000.00, the exactness of the amounts could not be established.

Respondent is also guilty of deceiving his client and abusing his client's confidence in requesting for several amounts of money on the pretense that he had to spend for and pay the trial judge.

Respondent is hereby ORDERED to immediately deliver the unaccounted for amount of Five Thousand Eight Hundred Pesos (P5,800.00) to Complainant, submitting a Compliance Report thereon.5

On September 8, 2006, the Board of Governors of the IBP passed a Resolution thus:

RESOLVED to ADOPT and Approve, as it is hereby ADOPTED and APPROVED, with modification, the Report and Recommendation of the Investigating Commissioner of the above-entitled case, herein made part of this Resolution as Annex "A-; and, finding the recommendation fully supported by the evidence on record and the applicable laws and rules, and considering that Respondent is guilty of gross misconduct for misappropriating his client's funds, Atty. Santiago C. Soriano is hereby SUSPENDED from the practice of law for two (2) years and likewise Ordered to immediately deliver that unaccounted amount of P5,800.00 to complainant.6

The IBP transmitted the Notice of Resolution issued by the IBP Board of Governors as well as the records of the case, pursuant to Rule 139-B.7 Then in compliance with the Court's Resolution dated February 20, 2007, the IBP through Director for Discipline Rogelio Vinluan informed the Court that per records of the IBP, no Motion for Reconsideration was filed by either party.

The Court agrees with the IBP Resolution.

The Code of Professional Responsibility (CPR), particularly Canon 16 thereof, mandates that a lawyer shall hold in trust all moneys and properties of his client that may come into his possession. He shall account for all money or property collected or received from his client8 and shall deliver the funds and property of his client when due or upon demand.9

As found by Commissioner Funa, it was established that respondent could not account for P5,800.00 which was part of the sum given by complainant to him for the purpose of filing an injunctive bond. Respondent admitted having received from complainant P17,800.00 on April 19, 2002 for the preliminary injunction10 and admitted to having a balance of P9,000.00 in his promissory note to the Manila Insurance Co., Inc. dated April 23, 2002, which was reduced to P5,800.00 by reason of an additional payment of P4,000.00,11 leaving an amount of P5,800.00 unaccounted for. The affidavit of the insurance agent, Valentina Ramos, dated December 8, 2005

12

also states that even up to said date, respondent had not yet paid the balance of P5,800.00.12

Respondent's failure to return the money to complainant upon demand gave rise to the presumption that he misappropriated it for his own use to the prejudice of, and in violation of the trust reposed in him by his client.13 It is a gross violation of general morality and of professional ethics and impairs public confidence in the legal profession which deserves punishment.14

As the Court has pronounced, when a lawyer receives money from the client for a particular purpose, the lawyer is bound to render an accounting to the client showing that the money was spent for a particular purpose. And if he does not use the money for the intended purpose, the lawyer must immediately return the money to his client.15

The Court has been exacting in its demand for integrity and good moral character of members of the Bar who are expected at all times to uphold the integrity and dignity of the legal profession and refrain from any act or omission which might lessen the trust and confidence reposed by the public in the fidelity, honesty, and integrity of the legal profession. Indeed, membership in the legal profession is a privilege.16 The attorney-client relationship is highly fiduciary in nature. As such, it requires utmost good faith, loyalty, fidelity and disinterestedness on the part of the lawyer.17

In Small v. Banares18 the respondent was suspended for two years for violating Canon 16 of the CPR, particularly for failing to file a case for which the amount of P80,000.00 was given him by his client, and for failing to return the said amount upon demand. Considering that similar circumstances are attendant in this case, the Court finds the Resolution of the IBP imposing on respondent a two-year suspension to be in order.

WHEREFORE, respondent Atty. Santiago C. Soriano is found GUILTY of violating Canon 16 of the Code of Professional Responsibility and is hereby SUSPENDED from the practice of law for a period of two (2) years from notice, with a STERN WARNING that a repetition of the same or similar acts shall be dealt with more severely.

Respondent is further ordered to restitute to his clients through Andrea Balce Celaje, within 30 days from notice, the amount of P5,800.00. Respondent is directed to submit to the Court proof of payment within fifteen days from payment of the full amount.

Let copies of this Resolution be furnished all courts of the land, the Integrated Bar of the Philippines, as well as the Office of the Bar Confidant for their information and guidance, and let it be entered in respondent's record in this Court.

SO ORDERED.

[A.C. CBD No. 167.  March 9, 1999]

ATTY. PRUDENCIO S. PENTICOSTES, complainant, vs. PROSECUTOR DIOSDADO S. IBAÑEZ, respondent.

R E S O L U T I O N

ROMERO, J.:

Sometime in 1989, Encarnacion Pascual, the sister-in-law of Atty. Prudencio S. Penticostes (herein complainant) was sued for non-remittance of SSS payments.  The complaint was docketed as I.S. 89-353 and assigned to Prosecutor Diosdado S. Ibañez (herein respondent) for preliminary investigation.  In the course of the investigation, Encarnacion Pascual gave P1,804.00 to respondent as payment of her Social Security System (SSS) contribution in arrears.  Respondent, however, did not remit the amount to the system.  The fact of non-payment was certified to by the SSS on October 2, 1989.

On November 16, 1990 or over a year later, complainant filed with the Regional Trial Court of Tarlac a complaint for professional misconduct against Ibañez due to the latter’s failure to remit the SSS contributions of his sister-in-law.  The complaint alleged that respondent’s misappropriation of Encarnacion Pascual’s SSS contributions amounted to a violation of his oath as a lawyer.  Seven days later, or on November 23, 1990, respondent paid P1,804.00 to the SSS on behalf of Encarnacion Pascual.

In the meantime, the case was referred to the Integrated Bar of the Philippines-Tarlac Chapter, the court observing that it had no competence to receive evidence on the matter.  Upon receipt of the case, the Tarlac Chapter forwarded the same to IBP’s Commission on Bar Discipline.

In his defense, respondent claimed that his act of accommodating Encarnacion Pascual’s request to make payment to the SSS did not amount to professional misconduct but was rather an act of Christian charity. Furthermore, he claimed that the action was moot and academic, the amount of P1,804.00 having already been paid by him to the SSS.  Lastly, he disclaimed liability on the ground that the acts complained were not done by him in his capacity as a practicing lawyer but on account of his office as a prosecutor.

On September 3, 1998, the Commission recommended that the respondent be reprimanded, with a warning that the commission of the same or similar offense would be dealt with more severely in the future.  On November 5, 1998, the Board of Governors of the Integrated Bar of the Philippines adopted and approved its Commission’s recommendation.

This Court adopts the recommendation of the IBP and finds respondent guilty of professional misconduct.  While there is no doubt that payment of the contested amount had been effected to the SSS on November 23, 1990, it is clear however, that the same was made only after a complaint had been filed against respondent.  Furthermore, the duties of a provincial prosecutor do not include receiving money from persons with official transactions with his office.

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This Court has repeatedly admonished lawyers that a high sense of morality, honesty and fair dealing is expected and required of a member of the bar.  Rule 1.01 of the Code of Professional Responsibility provides that “[a] lawyer shall not engage in unlawful, dishonest, immoral or deceitful conduct.”

It is glaringly clear that respondent’s non-remittance for over one year of the funds coming from Encarnacion Pascual constitutes conduct in gross violation of the above canon.  The belated payment of the same to the SSS does not excuse his misconduct.  While Pascual may not strictly be considered a client of respondent, the rules relating to a lawyer’s handling of funds of a client is applicable.  In Daroy v. Legaspi,[1] this court held that “(t)he relation between an attorney and his client is highly fiduciary in nature...[thus] lawyers are bound to promptly account for money or property received by them on behalf of their clients and failure to do so constitutes professional misconduct.” The failure of respondent to immediately remit the amount to the SSS gives rise to the presumption that he has misappropriated it for his own use.  This is a gross violation of general morality as well as professional ethics; it impairs public confidence in the legal profession and deserves punishment.[2]

Respondent’s claim that he may not be held liable because he committed such acts, not in his capacity as a private lawyer, but as a prosecutor is unavailing.  Canon 6 of the Code of Professional Responsibility provides:

“These canons shall apply to lawyers in government service in the discharge of their official tasks.”

As stated by the IBP Committee that drafted the Code, “a lawyer does not shed his professional obligations upon assuming public office.  In fact, his public office should make him more sensitive to his professional obligations because a lawyer’s disreputable conduct is more likely to be magnified in the public’s eye.[3] Want of moral integrity is to be more severely condemned in a lawyer who holds a responsible public office.[4]

ACCORDINGLY, this Court REPRIMANDS respondent with a STERN WARNING that a commission of the similar offense will be dealt with more severely in the future.

LET copies of this decision be spread in his records and copies be furnished the Department of Justice and the Office of the Bar Confidant.

SO ORDERED.

C. RESTRICTION AGAINST BUYING CLIENTS PROPERTY

G.R. No. L-35702 May 29, 1973

DOMINGO D. RUBIAS, plaintiff-appellant, vs.ISAIAS BATILLER, defendant-appellee.

Gregorio M. Rubias for plaintiff-appellant.

Vicente R. Acsay for defendant-appellee.

TEEHANKEE, J.:

In this appeal certified by the Court of Appeals to this Court as involving purely legal questions, we affirm the dismissal order rendered by the Iloilo court of first instance after pre-trial and submittal of the pertinent documentary exhibits.

Such dismissal was proper, plaintiff having no cause of action, since it was duly established in the record that the application for registration of the land in question filed by Francisco Militante, plaintiff's vendor and predecessor interest, had been dismissed by decision of 1952 of the land registration court as affirmed by final judgment in 1958 of the Court of Appeals and hence, there was no title or right to the land that could be transmitted by the purported sale to plaintiff.

As late as 1964, the Iloilo court of first instance had in another case of ejectment likewise upheld by final judgment defendant's "better right to possess the land in question . having been in the actual possession thereof under a claim of title many years before Francisco Militante sold the land to the plaintiff."

Furthermore, even assuming that Militante had anything to sell, the deed of sale executed in 1956 by him in favor of plaintiff at a time when plaintiff was concededly his counsel of record in the land registration case involving the very land in dispute (ultimately decided adversely against Militante by the Court of Appeals' 1958 judgment affirming the lower court's dismissal of Militante's application for registration) was properly declared inexistent and void by the lower court, as decreed by Article 1409 in relation to Article 1491 of the Civil Code.

The appellate court, in its resolution of certification of 25 July 1972, gave the following backgrounder of the appeal at bar:

On August 31, 1964, plaintiff Domingo D. Rubias, a lawyer, filed a suit to recover the ownership and possession of certain portions of lot under Psu-99791 located in Barrio General Luna, Barotac Viejo, Iloilo which he bought from his father-in-law, Francisco Militante in 1956 against its present occupant defendant, Isaias Batiller, who illegally entered said portions of the lot on two occasions — in 1945 and in 1959. Plaintiff prayed also for damages and attorneys fees. (pp. 1-7, Record on Appeal). In his answer with counter-claim defendant claims the complaint of the plaintiff does not state a cause of action, the truth of the matter being that he and his predecessors-in-interest have always been in actual, open and continuous possession since time immemorial under claim of ownership of the portions of the lot in question and for the alleged malicious institution of the complaint he claims he has suffered moral damages in the amount of P 2,000.00, as well as the sum of P500.00 for attorney's fees. ...

On December 9, 1964, the trial court issued a pre-trial order, after a pre-trial conference between the parties and their counsel which order reads as follows..

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'When this case was called for a pre-trial conference today, the plaintiff appeared assisted by himself and Atty. Gregorio M. Rubias. The defendant also appeared, assisted by his counsel Atty. Vicente R. Acsay.

A. During the pre-trial conference, the parties have agreed that the following facts are attendant in this case and that they will no longer introduced any evidence, testimonial or documentary to prove them:

1. That Francisco Militante claimed ownership of a parcel of land located in the Barrio of General Luna, municipality of Barotac Viejo province of Iloilo, which he caused to be surveyed on July 18-31, 1934, whereby he was issued a plan Psu-99791 (Exhibit "B"). (The land claimed contained an area of 171:3561 hectares.)

2. Before the war with Japan, Francisco Militante filed with the Court of First Instance of Iloilo an application for the registration of the title of the land technically described in psu-99791 (Exh. "B") opposed by the Director of Lands, the Director of Forestry and other oppositors. However, during the war with Japan, the record of the case was lost before it was heard, so after the war Francisco Militante petitioned this court to reconstitute the record of the case. The record was reconstituted on the Court of the First Instance of Iloilo and docketed as Land Case No. R-695, GLRO Rec. No. 54852. The Court of First Instance heard the land registration case on November 14, 1952, and after the trial this court dismissed the application for registration. The appellant, Francisco Militante, appealed from the decision of this Court to the Court of Appeals where the case was docketed as CA-GR No. 13497-R..

3. Pending the disposal of the appeal in CA-GR No. 13497-R and more particularly on June 18, 1956, Francisco Militante sold to the plaintiff, Domingo Rubias the land technically described in psu-99791 (Exh. "A"). The sale was duly recorded in the Office of the Register of Deeds for the province of Iloilo as Entry No. 13609 on July 11, 1960 (Exh. "A-1").

(NOTE: As per deed of sale, Exh. A, what Militante purportedly sold to plaintiff-appellant, his son-in-law, for the sum of P2,000.00 was "a parcel of untitled land having an area Of 144.9072 hectares ... surveyed under Psu 99791 ... (and) subject to the exclusions made by me, under (case) CA-i3497, Land Registration Case No. R-695, G.L.R.O. No. 54852, Court of First Instance of the province of Iloilo. These exclusions referred to portions of the original area of over 171 hectares originally claimed by Militante as applicant, but which he expressly recognized during the trial to pertain to some oppositors, such as the Bureau of Public Works and Bureau of Forestry and several other individual occupants and accordingly withdrew his application over the same. This is expressly made of record in Exh. A, which is the Court of Appeals' decision of 22 September 1958 confirming the land registration court's dismissal of Militante's application for registration.)

4. On September 22,1958 the Court of appeals in CA-G.R. No. 13497-R promulgated its judgment confirming the decision of this Court in Land Case No. R-695, GLRO Rec. No. 54852 which dismissed the application for Registration filed by Francisco Militante (Exh. "I").

5. Domingo Rubias declared the land described in Exh. 'B' for taxation purposes under Tax Dec. No. 8585 (Exh. "C") for 1957; Tax Dec. Nos. 9533 (Exh. "C-1") and 10019 (Exh. "C-3")for the year 1961; Tax Dec. No. 9868 (Exh. "C-2") for the year 1964, paying the land taxes under Tax Dec. No. 8585 and 9533 (Exh. "D", "D-1", "G-6").

6. Francisco Militante immediate predecessor-in-interest of the plaintiff, has also declared the land for taxation purposes under Tax Dec. No. 5172 in 1940 (Exh. "E") for 1945; under Tax Dec. No. T-86 (Exh. "E-1") for 1948; under Tax Dec. No. 7122 (Exh. "2"), and paid the land taxes for 1940 (Exhs. "G" and "G-7"), for 1945 46 (Exh. "G-1") for 1947 (Exh. "G-2"), for 1947 & 1948 (Exh. "G-3"), for 1948 (Exh. "G-4"), and for 1948 and 1949 (Exh. "G-5").

7. Tax Declaration No. 2434 in the name of Liberato Demontaño for the land described therein (Exh. "F") was cancelled by Tax. Dec. No. 5172 of Francisco Militante (Exh. "E"). Liberato Demontaño paid the land tax under Tax Dec. No. 2434 on Dec. 20, 1939 for the years 1938 (50%) and 1959 (Exh. "H").

8. The defendant had declared for taxation purposes Lot No. 2 of the Psu-155241 under Tax Dec. Not. 8583 for 1957 and a portion of Lot No. 2, Psu-155241, for 1945 under Tax Dec. No. 8584 (Exh. "2-A" Tax No. 8583 (Exh. "2") was revised by Tax Dec. No. 9498 in the name of the defendant (Exh. "2-B") and Tax Dec. No. 8584 (Exh. "2-A") was cancelled by Tax Dec. No. 9584 also in the name of the defendant (Exh. "2-C"). The defendant paid the land taxes for Lot 2, Psu-155241, on Nov. 9, 1960 for the years 1945 and 1946, for the year 1950, and for the year 1960 as shown by the certificate of the treasurer (Exh. "3"). The defendant may present to the Court other land taxes receipts for the payment of taxes for this lot.

9. The land claimed by the defendant as his own was surveyed on June 6 and 7,1956, and a plan approved by Director of Land on November 15, 1956 was issued, identified as Psu 155241 (Exh. "5").

10. On April 22, 1960, the plaintiff filed forcible Entry and Detainer case against Isaias Batiller in the Justice of the Peace Court of Barotac Viejo Province of Iloilo (Exh. "4") to which the defendant Isaias Batiller riled his answer on August 29, 1960 (Exh. "4-A"). The Municipal Court of Barotac Viejo after trial, decided the case on May 10, 1961 in favor of the defendant and against the plaintiff (Exh. "4-B"). The plaintiff appealed from the decision of the Municipal Court of Barotac Viejo which was docketed in this Court as Civil Case No. 5750 on June 3, 1961, to which the defendant, Isaias Batiller, on June 13, 1961 filed his answer (Exh. "4-C"). And this Court after the trial. decided the case on November 26, 1964, in favor of the defendant, Isaias Batiller and against the plaintiff (Exh. "4-D").

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(NOTE: As per Exh. 4-B, which is the Iloilo court of first instance decision of 26 November 1964 dismissing plaintiff's therein complaint for ejectment against defendant, the iloilo court expressly found "that plaintiff's complaint is unjustified, intended to harass the defendant" and "that the defendant, Isaias Batiller, has a better right to possess the land in question described in Psu 155241 (Exh. "3"), Isaias Batiller having been in the actual physical possession thereof under a claim of title many years before Francisco Militante sold the land to the plaintiff-hereby dismissing plaintiff's complaint and ordering the plaintiff to pay the defendant attorney's fees ....")

B. During the trial of this case on the merit, the plaintiff will prove by competent evidence the following:

1. That the land he purchased from Francisco Militante under Exh. "A" was formerly owned and possessed by Liberato Demontaño but that on September 6, 1919 the land was sold at public auction by virtue of a judgment in a Civil Case entitled "Edw J. Pflieder plaintiff vs. Liberato Demontaño Francisco Balladeros and Gregorio Yulo, defendants", of which Yap Pongco was the purchaser (Exh. "1-3"). The sale was registered in the Office of the Register of Deeds of Iloilo on August 4, 1920, under Primary Entry No. 69 (Exh. "1"), and a definite Deed of Sale was executed by Constantino A. Canto, provincial Sheriff of Iloilo, on Jan. 19, 1934 in favor of Yap Pongco (Exh. "I"), the sale having been registered in the Office of the Register of Deeds of Iloilo on February 10, 1934 (Exh. "1-1").

2. On September 22, 1934, Yap Pongco sold this land to Francisco Militante as evidenced by a notarial deed (Exh. "J") which was registered in the Registry of Deeds on May 13, 1940 (Exh. "J-1").

3. That plaintiff suffered damages alleged in his complaint.

C. Defendants, on the other hand will prove by competent evidence during the trial of this case the following facts:

1. That lot No. 2 of the Psu-1552 it (Exh. '5') was originally owned and possessed by Felipe Batiller, grandfather of the defendant Basilio Batiller, on the death of the former in 1920, as his sole heir. Isaias Batiller succeeded his father , Basilio Batiller, in the ownership and possession of the land in the year 1930, and since then up to the present, the land remains in the possession of the defendant, his possession being actual, open, public, peaceful and continuous in the concept of an owner, exclusive of any other rights and adverse to all other claimants.

2. That the alleged predecessors in interest of the plaintiff have never been in the actual possession of the land and that they never had any title thereto.

3. That Lot No. 2, Psu 155241, the subject of Free Patent application of the defendant has been approved.

4. The damages suffered by the defendant, as alleged in his counterclaim."' 1

The appellate court further related the developments of the case, as follows:

On August 17, 1965, defendant's counsel manifested in open court that before any trial on the merit of the case could proceed he would file a motion to dismiss plaintiff's complaint which he did, alleging that plaintiff does not have cause of action against him because the property in dispute which he (plaintiff) allegedly bought from his father-in-law, Francisco Militante was the subject matter of LRC No. 695 filed in the CFI of Iloilo, which case was brought on appeal to this Court and docketed as CA-G.R. No. 13497-R in which aforesaid case plaintiff was the counsel on record of his father-in-law, Francisco Militante. Invoking Arts. 1409 and 1491 of the Civil Code which reads:

'Art. 1409. The following contracts are inexistent and void from the beginning:

xxx xxx xxx

(7) Those expressly prohibited by law.

'ART. 1491. The following persons cannot acquire any purchase, even at a public auction, either in person of through the mediation of another: .

xxx xxx xxx

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights of in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring an assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession.'

defendant claims that plaintiff could not have acquired any interest in the property in dispute as the contract he (plaintiff) had with Francisco Militante was inexistent and void. (See pp. 22-31, Record on Appeal). Plaintiff strongly opposed defendant's motion to dismiss claiming that defendant can not invoke Articles 1409 and 1491 of the Civil Code as Article 1422 of the same Code provides that 'The defense of illegality of contracts is not available to third persons whose interests are not directly affected' (See pp. 32-35 Record on Appeal).

On October 18, 1965, the lower court issued an order disclaiming plaintiffs complaint (pp. 42-49, Record on Appeal.) In the aforesaid order of dismissal the lower court practically agreed with defendant's contention that the contract (Exh. A) between plaintiff and Francism Militante was null and void. In due season plaintiff filed a motion for reconsideration (pp. 50-56 Record on Appeal) which was denied by the lower court on January 14, 1966 (p. 57, Record on Appeal).

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Hence, this appeal by plaintiff from the orders of October 18, 1965 and January 14, 1966.

Plaintiff-appellant imputes to the lower court the following errors:

'1. The lower court erred in holding that the contract of sale between the plaintiff-appellant and his father-in-law, Francisco Militante, Sr., now deceased, of the property covered by Plan Psu-99791, (Exh. "A") was void, not voidable because it was made when plaintiff-appellant was the counsel of the latter in the Land Registration case.

'2. The lower court erred in holding that the defendant-appellee is an interested person to question the validity of the contract of sale between plaintiff-appellant and the deceased, Francisco Militante, Sr.

'3. The lower court erred in entertaining the motion to dismiss of the defendant-appellee after he had already filed his answer, and after the termination of the pre-trial, when the said motion to dismiss raised a collateral question.

'4. The lower court erred in dismissing the complaint of the plaintiff-appellant.'

The appellate court concluded that plaintiffs "assignment of errors gives rise to two (2) legal posers — (1) whether or not the contract of sale between appellant and his father-in-law, the late Francisco Militante over the property subject of Plan Psu-99791 was void because it was made when plaintiff was counsel of his father-in-law in a land registration case involving the property in dispute; and (2) whether or not the lower court was correct in entertaining defendant-appellee's motion to dismiss after the latter had already filed his answer and after he (defendant) and plaintiff-appellant had agreed on some matters in a pre-trial conference. Hence, its elevation of the appeal to this Court as involving pure questions of law.

It is at once evident from the foregoing narration that the pre-trial conference held by the trial court at which the parties with their counsel agreed and stipulated on the material and relevant facts and submitted their respective documentary exhibits as referred to in the pre-trial order, supra, 2 practically amounted to a fulldress trial which placed on record all the facts and exhibits necessary for adjudication of the case.

The three points on which plaintiff reserved the presentation of evidence at the-trial dealing with the source of the alleged right and title of Francisco Militante's predecessors, supra, 3 actually are already made of record in the stipulated facts and admitted exhibits. The chain of Militante's alleged title and right to the land as supposedly traced back to Liberato Demontaño was actually asserted by Militante (and his vendee, lawyer and son-in-law, herein plaintiff) in the land registration case and rejected by the Iloilo land registration court which dismissed Militante's application for registration of the land. Such dismissal, as already stated, was affirmed by the final judgment in 1958 of the Court of Appeals. 4

The four points on which defendant on his part reserved the presentation of evidence at the trial dealing with his and his

ancestors' continuous, open, public and peaceful possession in the concept of owner of the land and the Director of Lands' approval of his survey plan thereof, supra, 5 are likewise already duly established facts of record, in the land registration case as well as in the ejectment case wherein the Iloilo court of first instance recognized the superiority of defendant's right to the land as against plaintiff.

No error was therefore committed by the lower court in dismissing plaintiff's complaint upon defendant's motion after the pre-trial.

1. The stipulated facts and exhibits of record indisputably established plaintiff's lack of cause of action and justified the outright dismissal of the complaint. Plaintiff's claim of ownership to the land in question was predicated on the sale thereof for P2,000.00 made in 1956 by his father-in- law, Francisco Militante, in his favor, at a time when Militante's application for registration thereof had already been dismissed by the Iloilo land registration court and was pending appeal in the Court of Appeals.

With the Court of Appeals' 1958 final judgment affirming the dismissal of Militante's application for registration, the lack of any rightful claim or title of Militante to the land was conclusively and decisively judicially determined. Hence, there was no right or title to the land that could be transferred or sold by Militante's purported sale in 1956 in favor of plaintiff.

Manifestly, then plaintiff's complaint against defendant, to be declared absolute owner of the land and to be restored to possession thereof with damages was bereft of any factual or legal basis.

2. No error could be attributed either to the lower court's holding that the purchase by a lawyer of the property in litigation from his client is categorically prohibited by Article 1491, paragraph (5) of the Philippine Civil Code, reproduced supra; 6 and that consequently, plaintiff's purchase of the property in litigation from his client (assuming that his client could sell the same since as already shown above, his client's claim to the property was defeated and rejected) was void and could produce no legal effect, by virtue of Article 1409, paragraph (7) of our Civil Code which provides that contracts "expressly prohibited or declared void by law' are "inexistent and that "(T)hese contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived."

The 1911 case of Wolfson vs. Estate of Martinez 7 relied upon by plaintiff as holding that a sale of property in litigation to the party litigant's lawyer "is not void but voidable at the election of the vendor" was correctly held by the lower court to have been superseded by the later 1929 case of Director of Lands vs. Abagat. 8 In this later case of Abagat, the Court expressly cited two antecedent cases involving the same transaction of purchase of property in litigation by the lawyer which was expressly declared invalid under Article 1459 of the Civil Code of Spain (of which Article 1491 of our Civil Code of the Philippines is the counterpart) upon challenge thereof not by the vendor-client but by the adverse parties

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against whom the lawyer was to enforce his rights as vendee thus acquired.

These two antecedent cases thus cited in Abagat clearly superseded (without so expressly stating the previous ruling in Wolfson:

The spouses, Juan Soriano and Vicente Macaraeg, were the owners of twelve parcels of land. Vicenta Macaraeg died in November, 1909, leaving a large number of collateral heirs but no descendants. Litigation between the surviving husband, Juan Soriano, and the heirs of Vicenta immediately arose, and the herein appellant Sisenando Palarca acted as Soriano's lawyer. On May 2, 1918, Soriano executed a deed for the aforesaid twelve parcels of land in favor of Sisenando Palarca and on the following day, May 3, 1918, Palarca filed an application for the registration of the land in the deed. After hearing, the Court of First Instance declared that the deed was invalid by virtue of the provisions of article 1459 of the Civil Code, which prohibits lawyers and solicitors from purchasing property rights involved in any litigation in which they take part by virtue of their profession. The application for registration was consequently denied, and upon appeal by Palarca to the Supreme Court, the judgement of the lower court was affirmed by a decision promulgated November 16,1925. (G.R. No. 24329, Palarca vs. Director of Lands, not reported.)

In the meantime cadastral case No. 30 of the Province of Tarlac was instituted, and on August 21, 1923, Eleuteria Macaraeg, as administratrix of the estate of Vicente Macaraeg, filed claims for the parcels in question. Buenaventura Lavitoria administrator of the estate of Juan Soriano, did likewise and so did Sisenando Palarca. In a decision dated June 21, 1927, the Court of First Instance, Judge Carballo presiding, rendered judgment in favor of Palarea and ordered the registration of the land in his name. Upon appeal to this court by the administration of the estates of Juan Soriano and Vicente Macaraeg, the judgment of the court below was reversed and the land adjudicated to the two estates as conjugal property of the deceased spouses. (G.R. No. 28226, Director of Lands vs. Abagat, promulgated May 21, 1928, not reported.) 9

In the very case of Abagat itself, the Court, again affirming the invalidity and nullity of the lawyer's purchase of the land in litigation from his client, ordered the issuance of a writ of possession for the return of the land by the lawyer to the adverse parties without reimbursement of the price paid by him and other expenses, and ruled that "the appellant Palarca is a lawyer and is presumed to know the law. He must, therefore, from the beginning, have been well aware of the defect in his title and is, consequently, a possessor in bad faith."

As already stated, Wolfson and Abagat were decided with relation to Article 1459 of the Civil Code of Spain then adopted here, until it was superseded on August 30, 1950 by the Civil Code of the Philippines whose counterpart provision is Article 1491.

Article 1491 of our Civil Code (like Article 1459 of the Spanish Civil Code) prohibits in its six paragraphs certain persons, by reason of the relation of trust or their peculiar control over the property, from acquiring such property in their trust or control either directly or indirectly and "even at a public or judicial auction," as follows: (1) guardians; (2) agents; (3) administrators; (4) public officers and employees; judicial officers and employees, prosecuting attorneys, and lawyers; and (6) others especially disqualified by law.

In Wolfson which involved the sale and assignment of a money judgment by the client to the lawyer, Wolfson, whose right to so purchase the judgment was being challenged by the judgment debtor, the Court, through Justice Moreland, then expressly reserved decision on "whether or not the judgment in question actually falls within the prohibition of the article" and held only that the sale's "voidability can not be asserted by one not a party to the transaction or his representative," citing from Manresa 10 that "(C)onsidering the question from the point of view of the civil law, the view taken by the code, we must limit ourselves to classifying as void all acts done contrary to the express prohibition of the statute. Now then: As the code does not recognize such nullity by the mere operation of law, the nullity of the acts hereinbefore referred to must be asserted by the person having the necessary legal capacity to do so and decreed by a competent court." 11

The reason thus given by Manresa in considering such prohibited acquisitions under Article 1459 of the Spanish Civil Code as merely voidable at the instance and option of the vendor and not void — "that the Code does not recognize such nullity de pleno derecho" — is no longer true and applicable to our own Philippine Civil Code which does recognize the absolute nullity of contracts "whose cause, object, or purpose is contrary to law, morals, good customs, public order or public policy" or which are "expressly prohibited or declared void by law" and declares such contracts "inexistent and void from the beginning." 12

The Supreme Court of Spain and modern authors have likewise veered from Manresa's view of the Spanish codal provision itself. In its sentencia of 11 June 1966, the Supreme Court of Spain ruled that the prohibition of Article 1459 of the Spanish Civil Code is based on public policy, that violation of the prohibition contract cannot be validated by confirmation or ratification, holding that:

... la prohibicion que el articulo 1459 del C.C. establece respecto a los administradores y apoderados, la cual tiene conforme a la doctrina de esta Sala, contendia entre otras, en S. de 27-5-1959, un fundamento de orden moral lugar la violacion de esta a la nulidad de pleno derecho del acto o negocio celebrado, ... y prohibicion legal, afectante orden publico, no cabe con efecto alguno la aludida retification ... 13

The criterion of nullity of such prohibited contracts under Article 1459 of the Spanish Civil Code (Article 1491 of our Civil Code) as a matter of public order and policy as applied by the Supreme Court of Spain to administrators and agents in its above cited decision should certainly apply with greater

18

reason to judges, judicial officers, fiscals and lawyers under paragraph 5 of the codal article.

Citing the same decisions of the Supreme Court of Spain, Gullon Ballesteros, his "Curso de Derecho Civil, (Contratos Especiales)" (Madrid, 1968) p. 18, affirms that, with respect to Article 1459, Spanish Civil Code:.

Que caracter tendra la compra que se realice por estas personas? Porsupuesto no cabe duda de que el caso (art.) 1459, 40 y 50, la nulidad esabsoluta porque el motivo de la prohibicion es de orden publico. 14

Perez Gonzales in such view, stating that "Dado el caracter prohibitivo delprecepto, la consequencia de la infraccion es la nulidad radical y ex lege." 15

Castan, quoting Manresa's own observation that.

"El fundamento do esta prohibicion es clarisimo. No sa trata con este precepto tan solo de guitar la ocasion al fraude; persiguese, ademasel proposito de rodear a las personas que intervienen en la administrcionde justicia de todos los retigios que necesitan pora ejercer su ministerio librandolos de toda suspecha, que aunque fuere in fundada, redundura endescredito de la institucion." 16 arrives at the contrary and now accepted view that "Puede considerace en nuestro derecho inexistente 'o radicalmente nulo el contrato en los siguentes cases: a) ...; b) cuando el contrato se ha celebrado en violacion de una prescripcion 'o prohibicion legal, fundada sobre motivos de orden publico (hipotesis del art. 4 del codigo) ..." 17

It is noteworthy that Caltan's rationale for his conclusion that fundamental consideration of public policy render void and inexistent such expressly prohibited purchase (e.g. by public officers and employees of government property intrusted to them and by justices, judges, fiscals and lawyers of property and rights in litigation and submitted to or handled by them, under Article 1491, paragraphs (4) and (5) of our Civil Code) has been adopted in a new article of our Civil Code, viz, Article 1409 declaring such prohibited contracts as "inexistent and void from the beginning." 18

Indeed, the nullity of such prohibited contracts is definite and permanent and cannot be cured by ratification. The public interest and public policy remain paramount and do not permit of compromise or ratification. In his aspect, the permanent disqualification of public and judicial officers and lawyers grounded on public policy differs from the first three cases of guardians, agents and administrators (Article 1491, Civil Code), as to whose transactions it had been opined that they may be "ratified" by means of and in "the form of a new contact, in which cases its validity shall be determined only by the circumstances at the time the execution of such new contract. The causes of nullity which have ceased to exist cannot impair the validity of the new contract. Thus, the object which was illegal at the time of the first contract, may have already become lawful at the time of the ratification or second contract; or the service which was impossible may have become possible; or the intention which could not be ascertained may have been clarified by the parties. The

ratification or second contract would then be valid from its execution; however, it does not retroact to the date of the first contract." 19

As applied to the case at bar, the lower court therefore properly acted upon defendant-appellant's motion to dismiss on the ground of nullity of plaintiff's alleged purchase of the land, since its juridical effects and plaintiff's alleged cause of action founded thereon were being asserted against defendant-appellant. The principles governing the nullity of such prohibited contracts and judicial declaration of their nullity have been well restated by Tolentino in his treatise on our Civil Code, as follows:

Parties Affected. — Any person may invoke the in existence of the contract whenever juridical effects founded thereon are asserted against him. Thus, if there has been a void transfer of property, the transferor can recover it by the accion reinvindicatoria; and any prossessor may refuse to deliver it to the transferee, who cannot enforce the contract. Creditors may attach property of the debtor which has been alienated by the latter under a void contract; a mortgagee can allege the inexistence of a prior encumbrance; a debtor can assert the nullity of an assignment of credit as a defense to an action by the assignee.

Action On Contract. — Even when the contract is void or inexistent, an action is necessary to declare its inexistence, when it has already been fulfilled. Nobody can take the law into his own hands; hence, the intervention of the competent court is necessary to declare the absolute nullity of the contract and to decree the restitution of what has been given under it. The judgment, however, will retroact to the very day when the contract was entered into.

If the void contract is still fully executory, no party need bring an action to declare its nullity; but if any party should bring an action to enforce it, the other party can simply set up the nullity as a defense. 20

ACCORDINGLY, the order of dismissal appealed from is hereby affirmed, with costs in all instances against plaintiff-appellant. So ordered.

G.R. No. L-26882 April 5, 1978

ROSARIO VDA. DE LAIG, ROMEO, JOSE, NESTOR and BENITO, JR., all surnamed LAIG, minors, assisted by Rosario Vda. de Laig, Their Guardian Ad Litem, petitioners, vs.COURT OF APPEALS, CARMEN VERZO, PETRE GALERO, THE REGISTER OF DEEDS OF CAMARINES NORTE, THE DIRECTOR OF LANDS, AND THE SECRETARY OF AGRICULTURE AND NATURAL RESOURCES, respondents.

Gelasio L. Dimaano for petitioners.

Pedro A. Venida for private respondents.

19

Office of the Solicitor General for respondents The Director of Lands, etc., et al.

MAKASIAR, J.:

Appeal by certiorari from the decision of respondent Court of Appeals which affirmed the judgment of the Court of First Instance of Camarines Norte in Civil Case No. 577 entitled "Rosario Vda. de Laig, et al. vs. Carmen Verzo, et al.," dismissing herein petitioners' complaint for the reconveyance of a parcel of land with damages, and declaring herein respondent Carmen Verzo as the lawful owner of the land in issue.

It appears that on March 27, 1939, one Petre Galero obtained rained from the Bureau of Lands Homestead Patent No. 53-176 covering 219,949 square meters of land located at Barrio Pinagtambangan, Labo, Camarines Norte, for which Original Certificate of Title No. 1097 was issued in Galero's name.

On June 25, 1940, Galero sold the land to a certain Mario Escuta for P300.00. Escuta in turn, sold the same land to Florencio Caramoan in December, 1942, Later, however, Petre Galero, through proper court action, and with Atty. Benito K. Laig — the deceased husband of herein petitioner Rosario Vda. de Laig — as counsel recovered the land, the court having been convinced that its alienation violated Section 118 of the Public Land Act, which reads:

No alienation, transfer, or conveyance of any homestead after five years and before twenty-five years after issuance of title shall be valid without the approval of the Secretary of Agriculture and Commerce, which approval shall not be denied except on constitutional and legal grounds (Sec. 118, CA No. 141, as amended by CA No. 456).

On June 1, 1948, a deed of sale was executed by and between Petre Galero as vendor and Atty. Benito K. Laig as vendee, whereby the former sold to the latter the land in question with its improvements, for P1,500.00 plus attorney's fees due Atty. Laig for his legal services as counsel for Galero in the successful reconveyance case (p. 87, rec.; People vs. Petre Galero, CA-G.R. No. 12043-R). This deed of sale was executed in the house of Carmen Verzo and witnessed by one Claudio Muratalla and Rosario Verzo Villarente (p. 87, back, rec., People vs. Petre Galero, supra), sister of herein respondent Carmen Verzo, who was living with her in the same house at that time.

Original Certificate of Title No. 1097 was delivered by Galero to Atty. Laig (Exh. J and Annex B, p. 6, CA Brief for Petitioners, p. 137, back, rec.).

Unfortunately, vendee Atty. Benito K. Laig failed to solicit the approval of the Secretary of Agriculture and Natural Resources (then Secretary of Agriculture and Commerce), as required by Section 118 of the Public Land Act, as amended. It was only after Atty. Laig's death in 1951 that his wife, herein petitioner Rosario, noticed the deficiency.

On November 5, 1951, herein petitioner Vda. de Laig wrote the then Register of Deeds of Camarines Norte, respondent Baldomero M. Lapak, stating that the disputed parcel of land covered by original Certificate of Title No. 1097 in the same of Petre Galero, had been sold to her late husband, requesting that she be informed of any claim of ownership by other parties so that she could take the necessary steps, and serving notice of her claim over the said property as surviving spouse of the late Atty. Laig and as natural guardian of their children.

On November 12, 1951, Register of Deeds Lapak replied that Original Certificate of Title No. 1097 was still intact and took note of her letter.

On March 29, 1952, petitioner Vda. de Laig filed with the Bureau of Lands an affidavit together with copy of the deed of sale in her husband's favor. Said affidavit stated that she wanted to have the ownership over the land transferred to her husband's name.

On August 14, 1952, the Bureau of Lands forwarded the said affidavit of Vda. de Laig, together with the deed of sale, to the Office of the Secretary of Agriculture and Natural Resources with a recommendation that the said deed of sale be approved as the same does not violate any pertinent provisions of the Public Land Act or the corresponding rules and regulations thereunder promulgated. On the same day, the Office of the Secretary of Agriculture and Natural Resources, thru then Undersecretary Jose S. Camus, approved the deed of sale. And also on the same day, the Office of the Director of Lands, thru Vicente Tordesillas, Chief of the Publication Lands Division, addressed a letter to Atty. Benito Laig informing him of the approval of the deed of sale executed by and between him and Petre Galero.

Meanwhile, however, on July 15, 1952, Petre Galero, with the assistance of Atty. Jose L. Lapak, son of respondent Register of Deeds Baldomero M. Lapak sought in court the issuance of a second owner's duplicate copy of OCT No. 1097, claiming that his first duplicate of said OCT was lost during World War 11.

On July 19, 1952 — or in a span of only four days - a second owner's duplicate copy of OCT No. 1097 was issued by respondent Register of Deeds Baldomero M. Lapak in favor of Petre Galero. And right on that same day, Galero executed in favor of respondent Carmen Verzo a deed of sale of the land in issue for the sum of P600.00. It was claimed that previously, the additional consideration of P500.00 in Japanese war notes was received by Galero from Carmen Verzo, although this amount, or anything to that effect, was not mentioned in the deed of sale executed by and between them.

Upon being informed that the sale necessitates the approval of the Secretary of Agriculture and Natural Resources before it could be registered in the Register of Deeds, herein respondent Carmen Verzo, on July 30, 1952, addressed a letter to the Secretary of Agriculture and Natural Resources, through the Director of Lands, seeking the former's required approval Enclosed in the letter was a copy of the deed of sale in Verzo's

20

favor, and an affidavit that the land in point was sold to Verzo by homestead grantee Petre Galero.

On August 30, 1952, Assistant Director of Lands Zoilo Castrillo forwarded Verzo's papers to the Secretary of Agriculture and Natural Resources and recommended that the sale, not being violative of the pertinent provisions of the Public Land Act nor the rules and regulations promulgated thereunder, be approved.

On September 12, 1952, Acting Secretary of Agriculture Jose S. Camus approved the sale in favor of Carmen Verzo.

On September 27, 1952, the office of the Director of Lands notified Carmen Verzo of such approval. Whereupon, on October 13, 1952, Verzo declared the land in her name for taxation purposes, and since then, had been paying the realty taxes thereon.

On October 14, 1952, the deed of sale in Verzo's favor was registered, and Transfer Certificate of Title No. T-1055, in lieu of OCT No. 1097, which was cancelled, was issued in her name.

On January 26, 1953, petitioner Vda. de Laig, thru counsel, her brother Atty. Dimaano, inquired from the Register of Deeds of Camarines Norte if it was true that OCT No. 1097 in favor of Galero had already been cancelled and a transfer certificate of title had been issued in favor of another person. Respondent Register of Deeds Lapak replied in the affirmative.

In no time at all, petitioners called the attention of the Director of Lands to the existence of two deeds of sale, one in favor of Atty. Benito Laig, and another in favor of Carmen Verzo.

On February 25, 1953, the Director of Lands requested Petre Galero to explain within 30 days such double sale, and ordered the Provincial Land Officer in Daet, Camarines Norte to investigate the matter and immediately submit findings thereon.

On March 12, 1953, in reply to the Director of Land's request, Petre Galero denied having sold the land in issue to Atty. Benito K. Laig.

On March 15, 1953, the Bureau of Lands in Camarines Norte reported to the Director of Lands that second vendee Carmen Verzo had already successfully obtained a transfer certificate of title over the land in question, with the recommendation that the heirs of the first vendee, Benito K. Laig, seek their remedy in court as the status of the property at that stage does not anymore fall within the jurisdiction of the Bureau of Lands.

Petre Galero was charged in Criminal Case No. 533 before the Court of First Instance of Camarines with estafa thru falsification of public documents in connection with the sale in favor of Carmen Verzo of the land in point. Galero was convicted on October 29, 1953, which conviction was later affirmed by the Court of Appeals in People vs. Petre Galero (CA-G.R. No. 12043-R, December 2, 1954).

On April 13, 1954, petitioner Vda. de Laig, together with her minor children, filed the present action, docketed as Civil Case No. 577 in the Court of First Instance of Camarines Norte against respondents Carmen Verzo, Petre Galero, the Director of Lands, the Register of Deeds of Camarines Norte and the Secretary of Agriculture and Natural Resources praying for the annulment of the sale in favor of Carmen Verzo and the cancellation of the second owner's duplicate of Original Certificate of Title No. 1097 and Transfer Certificate of Title No. T-1055 by declaring the first OCT No. 1097 valid and effective or in the alternative, by ordering Carmen Verzo to reconvey the land in question to petitioners, plus P5,000.00 by way of damages.

Sometime in 1958, Galero died while serving his sentence at the National Penitentiary, and was, on November 11, 1958, substituted by his wife, Perpetua Dar, as party defendant (p. 27, ROA; p. 114, rec.).

On November 21, 1961, the trial court, in a decision, dismissed the complaint and declared that the land described in TCT No. 1055 to be rightfully owned by Carmen Verzo. The lower court also found Baldomero M. Lapak, then the Register of Deeds of Camarines Norte, guilty of negligence, but exempted him from any liability; found the Director of Lands and the Secretary of Agriculture and Natural Resources likewise guilty of negligence, but exempted them from any liability on the theory that they are not responsible for the acts of their subordinates; held that the approval of two deeds of sale in favor of two different vendees in a space of less than one month is but a ministerial duty which exculpates the Director of Lands and the Secretary of Agriculture and Natural Resources from liability, and that plaintiffs-appellants slept on their rights in not having the first deed of sale in favor of Atty. Laig registered in the Registry of property, and therefore, have only themselves to blame for losing the land; and exempted Galero from liability (pp. 88-97, ROA; pp. 119-124, rec.).

On April 12, 1962, petitioners appealed the decision of the lower court to the Court of Appeals.

On September 28, 1966 (p. 32, rec.), the Fifth Division of the Court of Appeals, thru Justice Jesus Y. Perez, affirmed the decision of the Court of First Instance of Camarines Norte.

The case unveils a couple of issues to resolve, to wit:

1. Who between petitioner Vda. de Laig and respondent Carmen Verzo should be considered as the rightful owner of the land in question; and

2. Should the respondents register of deeds, Director of Lands and the Secretary of Agriculture and Natural Resources, together with respondent Carmen Verzo, be held liable for damages for approving the sale of one and the same piece of land in favor of two different persons?

I

As in the present case of Rosario Carbonell vs. Hon. Court of Appeals, et al.

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(L-29972, Jan. 26, 1976), the first issue calls for the application of Article 1544, paragraph 2, of the New Civil Code regarding double sale.

The above-said provision reads:

Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith recorded it in the Register of Property (emphasis supplied).

In the Carbonell case, supra, WE held that to be under the protective umbrella of paragraph 2, Article 1544, of the New Civil Code, it is essential that the vendee of the immovable must act in good faith in registering his deed of sale. In other words, good faith must characterize the vendee's act of prior registration.

To this effect was Our ruling in a 1918 case that

The force and effect given by law to an inscription in a public record presupposes the good faith of him who enters such inscription; and rights created by statute, which are predicated upon an inscription in a public registry, do not and cannot accrue under an inscription 'in bad faith,' to the benefit of the person who thus makes the inscription (Leung Yee vs. F.L. Strong Machinery Co. and Williamson, No. 11658, Feb. 15, 1918, 37 Phil. 644, 649).

The records reveal that respondent Carmen Verzo was not in good faith when she facilitated the registration of her deed of sale. The following indicia of bad faith characterized NOT ONLY her act of registering her deed of sale, BUT ALSO her purchase of the disputed realty:

1. At the time of the sale of the land in question by Petre Galero to Atty. Benito K. Laig in 1948, the latter was a boarder of Carmen Verzo in her house. As a matter of fact, Atty. Laig maintained his law office, and received his clients (among whom was Petre Galero) therein [p. 81, t.s.n., session of Aug. 23, 1961 ].

Atty. Benito K. Laig, as her boarder, must have mentioned to Carmen Verzo, his landlady, the land sold to him by Galero. By the same token, Carmen Verzo must have known such sale; because transactions of this sort in the rural areas do not escape the knowledge of persons living under one roof with a party to the document, more especially when there exists between such persons and party the peculiarly intimate relationship of landlady and boarder in a small town.

2. One of the witnesses to the deed of sale executed by and between Atty. Laig and Petre Galero was Rosario Verzo Villarente, Carmen Verzo's very own sister who was at that time living with her in her house, where Atty. Laig then boarded.

Rosario Verzo Villarente, being in the household of her sister Carmen Verzo, must have likewise informed the latter about the deed of sale executed by Petre in favor of Atty. Laig which she signed as witness. A formal act, such as witnessing a deed of sale, is not a common daily experience. Laymen, especially rural folk like Rosario Verzo Villarente, who participate in the

same, ordinarily regard the same as a memorable event. It is not therefore unreasonable to assume that her significant role as an instrumental witness to the deed of sale between Atty. Laig and Petre Galero must have moved Rosario to confide to her sister Carmen the fact of her participation therein.

3. Petre Galero was able to procure another copy of the duplicate of Original Certificate of Title No. 1097 covering the disputed land through the aid of Atty. Jose Lapak who is the son of the respondent register of deeds, Baldomero Lapak, under clearly dubious circumstances. For one, it was done without observing the required formalities of notice and hearing (Sec. 117, Act No. 496). Secondly, it was an over in a record-setting period of ONLY four [41 days. Add to this the fact that respondent register of deeds Baldomero Lapak issued said duplicate of OCT 1097 despite his having received about eight months earlier and taken note on November 12, 1951 of the letter of petitioner Rosario Vda. de Laig inquiring about the status of the title to the questioned land which was purchased by her husband from Petre Galero; and the process, indeed, reeks with an unpleasant scent. If Atty. Jose Lapak were not the son of respondent Baldomero Lapak, the latter as register of deeds would not have facilitated the issuance of the duplicate copy of the title with such "scandalous haste." He should have informed his son, Atty. Lapak, and Petre Galero about the previous inquiry of petitioner as early as November 5, 1951, to which he replied on November 12, 1951 that OCT No. 1097 was still intact.

Moreover, the expeditious disposal of the land in litigation by Petre Galero to Carmen Verzo was done immediately after the death of Atty. Benito Laig, and during the time that his wife Rosario Vda. de Laig, who was residing in faraway Manila, was seeking all legal means to have the title over the property transferred to her name.

Such bad faith on the part of respondent Carmen Verzo and Baldomero Lapak is further underscored by the fact that Atty. Jose Lapak himself (a) was the notary public before whom the deed of sale executed by and between Petre Galero and Carmen Verzo was acknowledged, and (b) was the same lawyer who assisted Carmen Verzo in writing the Director of Lands and the Secretary of Agriculture and Natural Resources, enclosing therewith an affidavit also sworn before said Atty. Lapak, praying that the deed of sale be approved.

This conspiracy among Petre Galero, register of deeds Baldomero Lapak, his son Atty. Jose Lapak, and Carmen Verzo, could not have been known to petitioner Rosario Vda. de Laig, who was then as now, residing in Manila.

4. Carmen Verzo was familiar with the property in dispute and with the previous legal battle over the same. In fact in her special defense (par. 2, p. 47, ROA), she stated that she gave sums of money to Petre Galero to enable him to institute Civil Case No. 164-R-14 entitled "Petre Galero vs. Macario Escuta and Florendo Caramoan," for the recovery of said parcel of land. Knowing that said case was for the reconveyance from defendants therein of the land in issue and that Atty. Laig was the counsel of Petre Galero, Carmen Verzo must have known likewise that a torrens title to the same was existing and intact and the same was delivered by Petre to Atty. Laig as the buyer

22

of the land. And if she inquired from the wife of Atty. Laig, which was incumbent upon her as she was aware of the antecedent circumstances, she would have been told by petitioner Rosario Vda. de Laig that the owner's copy of the original certificate of title was then in her possession Respondent Carmen Verzo could not pretend that she believed that said owner's duplicate was lost during the war because Civil Case No. 164-R-14 involving the land in point was instituted only AFTER the war and the owner 's duplicate copy of the title was intact and returned to Petre after he won in 1948 the suit for reconveyance. She could have also asked about said title the first buyer, Florencio Caramoan, who was ordered by the court to reconvey the land and return the owner's duplicate of the to title.

5. Prior to the sale in her favor, Carmen Verzo knew that the disputed property belongs to Atty. Laig, because whenever Atty. Laig was in Manila, Carmen Verzo attended to said property and communicated with Atty. Laig in Manila about his share of the harvest from the land (pp. 33-34, t.s.n., session of Aug. 4, 1964). How can Carmen Verzo speak of Atty. Laig's share of the harvest without first knowing that the land from where the crop was harvested was owned by Atty. Benito Laig? Bad faith can be demonstrated, not ONLY by direct proof, but also by substantial evidence.

Bad faith is a state of mind indicated by acts and circumstances and is provable by CIRCUMSTANTIAL ... evidence (Zumwalt v. Utilities Ins. Co., 228 S.W. 2d 750, 754, 360 Mo. 362; Words and Phrases Permanent Ed., Vol. 5, p. 261).

Logically, therefore, since, as has already been earlier shown, respondent Carmen Verzo was not a purchaser in good faith, she could never have been a registrant in good faith of the deed of sale of said land in her favor. Consequently, she cannot claim the protection accorded to a registrant in good faith by paragraph 2, Article 1544 of the New Civil Code.

Finally, since there is no valid inscription to speak of in the present case, the applicable provision of law is paragraph 3, Article 1544, New Civil Code (Carbonell vs. Hon. Court of Appeals, supra), which states:

Should there be no insciption, the ownership shall pertain to the person who in good faith was first in the possession; and, in the ab thereat to the person who presents the oldest title, provided there is good faith (emphasis supplied).

In the present case, the fact of Atty. Benito Laig's having been the first possessor in good faith of the property in issue was never disputed by respondent Carmen Verzo.

Moreover, the deed of sale in favor of the late Atty. Benito Laig was executed on June 1, 1948, over 4 years earlier than the deed of sale executed on July 19, 1952 in favor of respondent Carmen Verzo.

It is Our view that the offices of the Secretary of Agriculture and Natural Resources and the Director of Lands should be cleared of any liability. It is not difficult to see that the reason why separate approvals concerning two separate sale of the

same piece of land were had was the fact that two sets of officials took charge of both requests. But no malice can be gleaned from this fact. It should be borne in mind that both officials daily attend to thousands upon thousands of papers. It is also possible that their assistants failed to notice that two deeds of sale covered the same parcel of land or failed to advise these two officials of such fact.

As heretofore indicated, the malicious participation of respondent register of deeds Baldomero Lapak and his son Atty. Lapak is evident.

Knowing of the existence in his records of the original of OCT No. 1097, Baldomero Lapak effected the issuance of the second duplicate of OCT No. 1097 to Petre Galero in just four (4) days, dispensing with the requirements of notice and hearing to interested parties. The law in this regard is Section 109 of Act No. 496, which reads:

If the duplicate certificate is lost or destroyed, or cannot be produced by a grantee, heir, devisee, assignee, or other person applying for the entry of a new certificate to him ..., a suggestion may be filed by the registered owner or other person in interest and registered. The court (the Court of First Instance acting as land registration court) may thereupon, upon the petition of the registered owner or other person in interest, AFTER NOTICE AND HEARING, direct the issue of a new duplicate certificate, which shall contain a memorandum of the fact that it is issued in place of the lost duplicate certificate, but shall in all respects be entitled to like faith and credit as the original duplicate, and shall thereafter be regarded as the original duplicate for all the purposes of this Act (Ocampo vs. Garcia, L-11260, April 29, 1959, 105 Phil. 553).

For his malicious involvement, WE find Baldomero Lapak liable under the following provision of the Land Registration Act:

Whoever fraudulently procures, or assists in fraudulently procuring or is privy to the fraudulent procurement of any certificate of title or owner's duplicate certificate, shall be fined not exceeding five thousand dollars (ten thousand pesos) or imprisoned not exceeding five years, or both, in the discretion of the court (Sec. 117, Act No. 496).

Baldomero Lapak likewise stands liable under Article 27 of the New Civil Code, which states:

Any person suffering material or moral loss because a public servant or employee refuses or neglects, without just cause, to perform his official duty may file an action for damages and other relief against the latter, without prejudice to any disciplinary administrative action that may be taken.

For in essence, his refusal to follow the directive of law (Act No. 496) was a conduct injurious to the petitioner. Thus a chief of police is liable under Article 27 of the New Civil Code for refusal to give assistance to the complainants which was his official duty as an officer of the law (Amarro, et al. vs. Sumanggit, L-14986, July 31, 1962, 5 SCRA 707, 708-9). Similarly, a municipal mayor incurs the same liability for

23

neglecting to perform his official functions (Javellana vs. Tayo, L-18919, Dec. 29, 1962, 6 SCRA 1042, 1051).

WE also find Atty. Jose L. Lapak liable under the abovequoted Section 117 of Act No. 496 (Land Registration Act), for which he should be, not only prosecuted but also, disciplined as a member of the Bar.

Moreover, both Baldomero Lapak and his son Atty. Jose Lapak are likewise civilly liable for failure to observe honesty and good faith in the performance of their duties as public officer and as a member of the Bar (Art. 19, New Civil Code) or for wilfully or negligently causing damage to another (Art. 20, New Civil Code), or for wilfully causing loss or injury to another in a manner that is contrary to morals, good customs and/or public policy (Art. 21, New Civil Code).

WHEREFORE, THE DECISION APPEALED FROM IS HEREBY REVERSED AND

I. THE REGISTER OF DEEDS OF CAMARINES NORTE IS HEREBY DIRECTED

(A) TO CANCEL TCT NO. T-1055; AND

(B) TO ISSUE IN LIEU THEREOF A NEW TRANSFER CERTIFICATE OF TITLE IN FAVOR OF THE HEIRS OF THE LATE BENITO K. LAIG; AND

II. ALL THE RESPONDENTS HEREIN, EXCEPT THE DIRECTOR OF LANDS AND THE SECRETARY OF AGRICULTURE AND NATURAL RESOURCES, ARE HEREBY ORDERED TO PAY JOINTLY AND SEVERALLY PETITIONERS IN THE AMOUNT OF TEN THOUSAND (P10,000.00) PESOS AS MORAL DAMAGES; THE SUM OF FIVE THOUSAND (P5,000.00) PESOS AS ATTORNEY'S FEES; AND THE COSTS:

SO ORDERED.

A.M. No. 2430 August 30, 1990

MAURO P. MANANQUIL, complainant, vs.ATTY. CRISOSTOMO C. VILLEGAS, respondent.Geminiano M. Eleccion for complainant.R E S O L U T I O N

CORTES, J.:

In a verified complaint for disbarment dated July 5, 1982, Mauro P. Mananquil charged respondent Atty. Crisostomo C. Villegas with gross misconduct or malpractice committed while acting as counsel of record of one Felix Leong in the latter's capacity as administrator of the Testate Estate of the late Felomina Zerna in Special Proceedings No. 460 before then Court of First Instance of Negros Occidental. The complainant was appointed special administrator after Felix Leong died.

In compliance with a resolution of this Court, respondent filed his comment to the complaint on January 20, 1983. After

complainant filed his reply, the Court resolved to refer the case to the Solicitor General for investigation, report and recommendation.

In a hearing conducted on May 15, 1985 by the investigating officer assigned to the case, counsel for the complainant proposed that the case be considered on the basis of position papers and memoranda to be submitted by the parties. Respondent agreed. Thus, the investigating officer required the parties to submit their respective position papers and memoranda, with the understanding that with or without the memoranda, the case will be deemed submitted for resolution after the expiration of 30 days. In compliance, both parties submitted their respective position papers; but no memorandum was filed by either party. Thereafter, the case was deemed submitted.

In the pleadings submitted before the Court and the Office of the Solicitor General, complainant alleges that over a period of 20 years, respondent allowed lease contracts to be executed between his client Felix Leong and a partnership HIJOS DE JOSE VILLEGAS, of which respondent is one of the partners, covering several parcels of land of the estate, i.e. Lots Nos. 1124, 1228, 2221, 2402, 3939, 3942 and 3957 of the Tanjay Cadastre, under iniquitous terms and conditions. Moreover, complainant charges that these contracts were made without the approval of the probate court and in violation of Articles 1491 and 1646 of the new Civil Code.

On the basis of the pleadings submitted by the parties, and other pertinent records of the investigation, the Solicitor General submitted his report dated February 21, 1990, finding that respondent committed a breach in the performance of his duties as counsel of administrator Felix Leong when he allowed the renewal of contracts of lease for properties involved in the testate proceedings to be undertaken in favor of HIJOS DE JOSE VILLEGAS without notifying and securing the approval of the probate court. However, the Solicitor General opined that there was no sufficient evidence to warrant a finding that respondent had allowed the properties to be leased in favor of his family partnership at a very low rental or in violation of Articles 1491 and 1646 of the new Civil Code. Thus, the Solicitor General recommended that respondent be suspended from the practice of law for a period of THREE (3) months with a warning that future misconduct on respondent's part will be more severely dealt with [Report and Recommendation of the Solicitor General, pp. 1-10; Rollo, pp. 37-46. Also, Complaint of the Solicitor General, pp. 1-3; Rollo, pp. 47-49].

As gleaned from the record of the case and the report and recommendation of the Solicitor General, the following facts are uncontroverted:

That as early as March 21, 1961, respondent was retained as counsel of record for Felix Leong, one of the heirs of the late Felomina Zerna, who was appointed as administrator of the Testate Estate of the Felomina Zerna in Special No. 460 on May 22, 1961;

That, a lease contract dated August 13, 1963 was executed between Felix Leong and the "Heirs of Jose Villegas"

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represented by respondent's brother-in-law Marcelo Pastrano involving, among others, sugar lands of the estate designated as Lot Nos. 1124, 1228, 2221, 2402, 3939, 3942 and 3957 of the Tanjay Cadastre;

That Felix Leong was designated therein as administrator and "owner, by testamentary disposition, of 5/6 of all said parcels of land";

That, the lifetime of the lease contract was FOUR (4) sugar crop years, with a yearly rental of TEN PERCENT (10%) of the value of the sugar produced from the leased parcels of land;

That, on April 20, 1965, the formal partnership of HIJOS DE JOSE VILLEGAS was formed amongst the heirs of Jose Villegas, of which respondent was a member;

That, on October 18, 1965, another lease contract was executed between Felix Leong and the partnership HIJOS DE JOSE VILLEGAS, containing basically the same terms and conditions as the first contract, with Marcelo Pastrano signing once again as representative of the lessee;

That, on March 14, 1968, after the demise of Marcelo Pastrano, respondent was appointed manager of HIJOS DE JOSE VILLEGAS by the majority of partners;

That, renewals of the lease contract were executed between Felix Leong and HIJOS DE JOSE VILLEGAS on January 13, 1975 and on December 4, 1978, with respondent signing therein as representative of the lessee; and,

That, in the later part of 1980, respondent was replaced by his nephew Geronimo H. Villegas as manager of the family partnership.

Under the above circumstances, the Court finds absolutely no merit to complainant's charge, and the Solicitor General's finding, that respondent committed acts of misconduct in failing to secure the approval of the court in Special Proceedings No. 460 to the various lease contracts executed between Felix Leong and respondent's family partnership.

Pursuant to Section 3 of Rule 84 of the Revised Rules of Court, a judicial executor or administrator has the right to the possession and management of the real as well as the personal estate of the deceased so long as it is necessary for the payment of the debts and the expenses of administration. He may, therefore, exercise acts of administration without special authority from the court having jurisdiction of the estate. For instance, it has long been settled that an administrator has the power to enter into lease contracts involving the properties of the estate even without prior judicial authority and approval [See Ferraris v. Rodas, 65 Phil. 732 (1938); Jocson de Hilado v. Nava, 69 Phil. 1 (1939); San Diego, Sr. v. Hombre, G.R No. L-19265, May 29, 1964, 11 SCRA 165].

Thus, considering that administrator Felix Leong was not required under the law and prevailing jurisprudence to seek prior authority from the probate court in order to validly lease real properties of the estate, respondent, as counsel of Felix

Leong, cannot be taken to task for failing to notify the probate court of the various lease contracts involved herein and to secure its judicial approval thereto.

Nevertheless, contrary to the opinion of the Solicitor General, the Court finds sufficient evidence to hold respondent subject to disciplinary sanction for having, as counsel of record for the administrator in Special Proceedings No. 460, participated in the execution in 1975 and 1978 of renewals of the lease agreement involving properties of the estate in favor of the partnership HIJOS DE JOSE VILLEGAS, of which respondent is a member and in 1968 was appointed managing partner.

By virtue of Article 1646 of the new Civil Code, the persons referred to in Article 1491 are prohibited from leasing, either in person or through the mediation of another, the properties or things mentioned in that article, to wit:

xxx xxx xxx

(1) The guardian, the property of the person or persons who may be under his guardianship;

(2) Agents, the property whose administration or sale may have been intrusted to them, unless the consent of the principal have been given;

(3) Executors and administrators, the property of the estate under administration

(4) Public officers and employees, the property of the State or of any subdivision thereof, or of any government owned or controlled corporation, or institution, the administration of which has been intrusted to them; this provision shall apply to judges and government experts who, in any manner whatsoever, take part in the sale;

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property or rights in litigation or levied upon on execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession.

(6) Any others specially disqualified by law

xxx xxx xxx

[Article 1491 of the new Civil Code; Emphasis supplied.]

The above disqualification imposed on public and judicial officers and lawyers is grounded on public policy considerations which disallow the transactions entered into by them, whether directly or indirectly, in view of the fiduciary relationship involved, or the peculiar control exercised by these individuals over the properties or rights covered [See Rubias v. Batiller, G.R. No. L-35702, May 29, 1973, 51

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SCRA 120; Maharlika Publishing Corporation v. Tagle, G.R. No. 65594, July 9, 1986, 142 SCRA 553; Fornilda v. The Branch 164, RTC Fourth Judicial Region, Pasig, G.R. No. 72306, October 5, 1988, 166 SCRA 281 and January 24, 1989, 169 SCRA 351].

Thus, even if the parties designated as lessees in the assailed lease contracts were the "Heirs of Jose Villegas" and the partnership HIJOS DE JOSE VILLEGAS, and respondent signed merely as an agent of the latter, the Court rules that the lease contracts are covered by the prohibition against any acquisition or lease by a lawyer of properties involved in litigation in which he takes part. To rule otherwise would be to lend a stamp of judicial approval on an arrangement which, in effect, circumvents that which is directly prohibited by law. For, piercing through the legal fiction of separate juridical personality, the Court cannot ignore the obvious implication that respondent as one of the heirs of Jose Villegas and partner, later manager of, in HIJOS DE JOSE VILLEGAS stands to benefit from the contractual relationship created between his client Felix Leong and his family partnership over properties involved in the ongoing testate proceedings.

In his defense, respondent claims that he was neither aware of, nor participated in, the execution of the original lease contract entered into between his client and his family partnership, which was then represented by his brother-in-law Marcelo Pastrano. And although he admits that he participated in the execution of subsequent renewals of the lease contract as managing partner of HIJOS DE JOSE VILLEGAS, he argues that he acted in good faith considering that the heirs of Filomena Zerna consented or acquiesced to the terms and conditions stipulated in the original lease contract. He further contends that pursuant to the ruling of the Court in Tuason v. Tuason [88 Phil. 428 (1951)] the renewal contracts do not fall within the prohibition of Articles 1491 and 1646 since he signed the same as a mere agent of the partnership.

Respondent's contentions do not provide sufficient basis to escape disciplinary action from this Court.

It taxes this Courts imagination that respondent disclaims any knowledge in the execution of the original lease contract between his client and his family partnership represented by his brother-in-law. Be that as it may, it cannot be denied that respondent himself had knowledge of and allowed the subsequent renewals of the lease contract. In fact, he actively participated in the lease contracts dated January 13, 1975 and December 4, 1978 by signing on behalf of the lessee HIJOS DE JOSE VILLEGAS.

Moreover, the claim that the heirs of Filomena Zerna have acquiesced and consented to the assailed lease contracts does not militate against respondent's liability under the rules of professional ethics. The prohibition referred to in Articles 1491 and 1646 of the new Civil Code, as far as lawyers are concerned, is intended to curtail any undue influence of the lawyer upon his client on account of his fiduciary and confidential association [Sotto v. Samson, G.R. No. L-16917, July 31, 1962, 5 SCRA 733]. Thus, the law makes the prohibition absolute and permanent [Rubias v. Batiller, supra]. And in view of Canon 1 of the new Code of Professional

Responsibility and Sections 3 & 27 of Rule 138 of the Revised Rules of Court, whereby lawyers are duty-bound to obey and uphold the laws of the land, participation in the execution of the prohibited contracts such as those referred to in Articles 1491 and 1646 of the new Civil Code has been held to constitute breach of professional ethics on the part of the lawyer for which disciplinary action may be brought against him [See Bautista v. Gonzalez, Adm. Matter No. 1625, February 12, 1990). Accordingly, the Court must reiterate the rule that the claim of good faith is no defense to a lawyer who has failed to adhere faithfully to the legal disqualifications imposed upon him, designed to protect the interests of his client [See In re Ruste, 70 Phil. 243 (1940); Also, Severino v. Severino, 44 Phil. 343 (1923)].

Neither is there merit in respondent's reliance on the case of Tuason v. Tuason [supra.] It cannot be inferred from the statements made by the Court in that case that contracts of sale or lease where the vendee or lessee is a partnership, of which a lawyer is a member, over a property involved in a litigation in which he takes part by virtue of his profession, are not covered by the prohibition under Articles 1491 and 1646.

However, the Court sustains the Solicitor General's holding that there is no sufficient evidence on record to warrant a finding that respondent allowed the properties of the estate of Filomena Zerna involved herein to be leased to his family partnership at very low rental payments. At any rate, it is a matter for the court presiding over Special Proceedings No. 460 to determine whether or not the agreed rental payments made by respondent's family partnership is reasonable compensation for the use and occupancy of the estate properties.

Considering thus the nature of the acts of misconduct committed by respondent, and the facts and circumstances of the case, the Court finds sufficient grounds to suspend respondent from the practice of law for a period of three (3) months.

WHEREFORE, finding that respondent Atty. Crisostomo C. Villegas committed acts of gross misconduct, the Court Resolved to SUSPEND respondent from the practice of law for four (4) months effective from the date of his receipt of this Resolution, with a warning that future misconduct on respondent's part will be more severely dealt with. Let copies of this Resolution be circulated to all courts of the country for their information and guidance, and spread in the personal record of Atty. Villegas.

SO ORDERED.

A.M. No. 3216 March 16, 1992

DOMINGA VELASCO ORDONIO, petitioner, vs.ATTY. JOSEPHINE PALOGAN EDUARTE, respondent.

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R E S O L U T I O NPER CURIAM:

This is a complaint for the disbarment of respondent Atty. Josephine Palogan-Eduarte originally filed with this Court on April 18, 1988. On August 10, 1989, the Commission on Bar Discipline of the Integrated Bar of the Philippines, to which the case was referred for investigation, submitted a report confirming in substance the charge of violation of Art. 1491 of the Civil Code and part of the Oath of Office of a lawyer and recommending the suspension of herein respondent.

The evidence discloses that on July 18, 1983, Antonia Ulibari filed with the RTC, Branch XXII, Cabagan, Isabela, Civil Case No. 391 for annulment of a document (known as Affidavit of Adjudication of the Estate of Felicisimo Velasco and Quitclaim Thereof) against her children. The case was handled by Atty. Henedino Eduarte, herein respondent's husband, until his appointment as RTC judge on October 26, 1984. His wife, Atty. Josephine Palogan-Eduarte, took over. On August 22, 1985, decision in Civil Case No. 391 was rendered in favor of Antonia Ulibari. Except for Dominga Velasco-Ordonio, one of the children of Antonia Ulibari and complainant in the instant case, the rest of the defendants did not appeal. On June 13, 1987, while Civil Case No. 391 was pending appeal in the Court of Appeals, Antonia Ulibari conveyed some parcels of her land to her children in the form of deeds of absolute sale, prepared and notarized by herein respondent. Significantly, on the same day, Antonia Ulibari also conveyed 20 hectares of land to herein respondent and her husband as their Attorney's fees for legal services rendered. All the titles of the lands subject of the deeds of absolute sale and the deed of conveyance however remained in the name of Antonia Ulibari.

On April 4, 1988, Dominga Velasco-Ordonio filed this complaint for disbarment against herein respondent on the basis of an affidavit executed by her mother Antonia Ulibari on March 2, 1988 stating that affiant never conveyed the subject parcel of land to respondent as her attorney's fees and that the deeds of absolute sale executed in favor of her children were not known to her (and that she received no consideration therefor).

On August 10, 1989, the Investigation Commissioner submitted a report finding the charges to be true and recommending a one-year suspension of the respondent from the practice of law.

The first issue to be resolved is whether Antonia Ulibari was defrauded into signing the Deed of Conveyance transferring to her lawyer (herein respondent) the subject parcel of land containing 298,420 square meters as the latter's attorney's fees. It is clear from Antonia Ulibari's affidavit and deposition that she never conveyed the said land to her lawyer as attorney's fees.

Even granting for the sake argument that Antonia Ulibari knowingly and voluntarily conveyed the subject property in favor of the respondent and her husband, the respondent, in causing the execution of the Deed of Conveyance during the pendency of the appeal of the case involving the said property,

has violated Art. 1491 of the Civil Code which prohibits lawyers from "acquiring by assignment property and rights which may be the object of any litigation in which they may take part by virtue of their profession."

In the case at bar, the property (which includes the more than 20 hectares of land allegedly conveyed to the respondent) was already in actual litigation first in the lower court and then in the Court of Appeals. Whether the deed of conveyance was executed at the instance of the client driven by financial necessity or of the lawyers is of no moment (In re: Atty. Melchor E. Ruste, 70 Phil. 243). "In either case, an attorney occupies a vantage position to press upon or dictate his terms to a harrased client, in breach of the rule so amply protective of the confidential relations, which must necessarily exist between attorney and client, and of the rights of both." The act constitutes malpractice, even if the lawyer had purchased the property in litigation. (Hernandez v. Villanueva, 40 Phil. 775; In re: Calderon, 7 Phil. 427). We agree with the Investigating Commissioner's opinion that the prohibition applies when the lawyer has not paid money for it and the property was merely assigned to him in consideration of legal services rendered at a time when the property is still the subject of a pending case.

For having improperly acquired the subject property, under the foregoing circumstances, respondent has violated not only Art. 1491 of the Civil Code but also Rule 10 of the Canons of Professional Ethics which provides that "the lawyer should not purchase any interest in the subject matter of the litigation which he is conducting."

The last issue to be resolved is whether respondent violated any law in preparing and notarizing the deeds of absolute sale in making it appear that there were considerations therefor, when in truth there were none so received by the seller. In her answer, respondent admitted that Antonia Ulibari did not actually sell the parcels of land to her children for the considerations stated in the deeds of sale and that she (respondent) "utilized the form of deed of sale as the most convenient and appropriate document to effect the transfer of the parcels of land to Antonia Ulibari's children in accordance with her wish that said parcels of land be given to them.

In so doing, respondent has manifestly violated that part of her oath as a lawyer that she shall not do any falsehood. Not only that. In preparing the documents which do not reflect the true transaction, respondent has likewise violated Rule 10.01 of the Code of Professional Responsibility which provides:

Rule 10.01. A lawyer shall not do any falsehood, nor consent to the doing of any in court; nor shall be mislead or allow the court to be mislead by any artifice.

ACCORDINGLY, for having violated Article 1491 of the Civil Code, respondent is hereby ordered suspended from the practice of law for a period of six (6) months, and, for having stated falsehoods in the four (4) deeds of absolute sale she prepared and notarized, in violation of the lawyer's oath and Rule 10.01 of the Code of Professional Responsibility, respondent is also ordered suspended from the practice or law for a period of another six (6) months, resulting in a total

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period on one year, effective from the date this judgment becomes final.

SUSPENSION ORDERED.

Melencio-Herrera, Paras, Padilla, Regalado and Nocon, JJ., concur.

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