Basic Legal Ethics

Canon 14- Duty to render legal service to the needy

-Santiago vs Fojas AC No. 4103 9/7/1995 2

Canon 15- Duty of candor, fairness and loyalty to the client

-Northwestern Univ., Inc vs Arquillo AC No. 6632 8/2/2005 4 -Artezuela vs Maderazo AC No. 4354 4/22/2002 5 -PNB vs Cedo AC No. 3701 3/28/1995 8 -Regala vs Sandiganbayan GR#105938 9/20/1996 10

Canon 16- Duty to be a trustee of client’s moneys & properties

-Unity Fishing vs Atty. Macalino AC No. 4566 12/10/2004 17 -Junio vs Atty. Grupo AC No. 5020 12/18/2001 21 -Pelmoka vs judge Diaz, Jr. AC No. 2662-CFI 11/25/82 23 -Lemoine vs Balon, Jr. AC No. 5829 10/28/2003 25

Canon 17- Duty of fidelity to the cause of the client

-Rosacia vs Atty. Bulalacao AC No. 3754 10/2/1995 28 -Lorenzana Food Corp. vs Daria AC No. 2736 5/27/1991 29

Canon 18- Duty to serve with competence and due diligence

-Adarne vs Aldaba AC No. 801 6/27/1978 31 -Reyes vs Vitan AC No. 5835 4/15/2005 32

Canon 19- Duty to serve only within the bounds of law

-Gonzales vs Sabacajan AC No. 4380 10/13/1995 34

Canon 20- Duty to charge only fair and reasonable fees

-Leviste vs CA GR#L-29184 1/30/1989 35 -Licudan vs CA GR# 91958 1/24/1991 37 -Retuya vs Gordiuz AC No. 1388 3/28/1980 40 -Ramos vs Ngaseo AC No. 6210 12/9/2004 41 -Director of Lands vs Ababa GR#L-26096 2/23/1979 43

Canon 21- Duty to Preserve the client’s confidence & secrets

-Suntay vs Suntay AC No. 1890 8/7/2002 48

Canon 22- Duty to withdraw services only for good cause & upon notice

-Montano vs IBP AM No. 4215 5/21/2001 50 -Canoy vs Ortiz AC No. 5485 3/16/2005 53

Republic of the PhilippinesSUPREME COURTManila

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FIRST DIVISION

A.C. No. 4103 September 7, 1995

VERONICA S. SANTIAGO, BENJAMIN Q. HONTIVEROS, MR. SOCORRO F. MANAS, and TRINIDAD NORDISTA, complainants, vs.ATTY. AMADO R. FOJAS, respondent.

DAVIDE JR., J.:

In their letter of 8 September 1993, the complainants, former clients of the respondent, pray that the latter be disbarred for "malpractice, neglect and other offenses which may be discovered during the actual investigation of this complaint." They attached thereto an Affidavit of Merit wherein they specifically allege:

1. That we are Defendants-Appellates [sic] in the Court of Appeals Case No. CA-G.N. CV No. 38153 of which to our surprise lost unnecessarily the aforesaid Petition [sic]. A close perusal of the case reveals the serious misconduct of our attorney on record, Atty. Amado Fojas tantamount to malpractice and negligence in the performance of his duty obligation to us, to defend us in the aforesaid case. That the said attorney without informing us the reason why and riding high on the trust and confidence we repose on him either abandoned, failed to act accordingly, or seriously neglected to answer the civil complaint against us in the sala of Judge Teresita Capulong Case No. 3526-V-91 Val. Metro Manila so that we were deduced [sic] in default.

2. That under false pretenses Atty. Fojas assured us that everything was in order. That he had already answered the complaint so that in spite of the incessant demand for him to give us a copy he continued to deny same to us. Only to disclose later that he never answered it after all because according to him he was a very busy man. Please refer to Court of Appeals decision dated August 17, 1993.

3. That because of Atty. Amado Foja's neglect and malpractice of law we lost the Judge Capulong case and our appeal to the Court of Appeals. So that it is only proper that Atty. Fojas be disciplined and disbarred in the practice of his profession.

In his Comment, the respondent admits his "mistake" in failing to file the complainants' answer in Civil Case No. 3526-V-91, but he alleges that it was cured by his filing of a motion for reconsideration, which was unfortunately denied by the court. He asserts that Civil Case No. 3526-V-91 was a "losing cause" for the complainants because it was based on the expulsion of the plaintiff therein from the Far Eastern University Faculty Association (FEUFA) which was declared unlawful in the final decision in NCR-OD-M-90-10-050. Thus, "[t]he unfavorable judgment in the Regional Trial Court is not imputable to [his] mistake but rather imputable to the merits of the case, i.e., the decision in the Expulsion case wherein defendants (complainants herein) illegally removed from the union (FEUFA) membership Mr. Paulino Salvador. . . ." He further claims that the complainants filed this case to harass him because he refused to share his attorney's fees in the main labor case he had handled for them. The respondent then prays for the dismissal of this complaint for utter lack of merit, since his failure to file the answer was cured and, even granting for the sake of argument that such failure amounted to negligence, it cannot warrant his disbarment or suspension from the practice of the law profession.

The complainants filed a Reply to the respondent's Comment.

Issues having been joined, we required the parties to inform us whether they were willing to submit this case for decision on the basis of the pleadings they have filed. In their separate compliance, both manifested in the affirmative.

The facts in this case are not disputed.

Complainants Veronica Santiago, Benjamin Hontiveros, Ma. Socorro Manas, and Trinidad Nordista were the President, Vice-President, Treasurer, and Auditor, respectively, of the FEUFA. They allegedly expelled from the union Paulino Salvador. The latter then commenced with the Department of Labor and Employment (DOLE) a complaint (NCR-OD-M-90-10-050) to declare illegal his expulsion from the union.

In his resolution of 22 November 1990, Med-Arbiter Tomas Falconitin declared illegal Salvador's expulsion and directed the union and all its officers to reinstate Salvador's name in the roll of union members with all the rights and privileges appurtenant thereto. This resolution was affirmed in toto by the Secretary of Labor and Employment.

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Subsequently, Paulino Salvador filed with the Regional Trial Court (RTC) of Valenzuela, Metro Manila, Branch 172, a complaint against the complainants herein for actual, moral, and exemplary damages and attorney's fees, under Articles 19, 20, and 21 of the Civil Code. The case was docketed as Civil Case No. 3526-V-91.

As the complainants' counsel, the respondent filed a motion to dismiss the said case on grounds of (1) res judicata by virtue of the final decision of the Med-Arbiter in NCR-OD-M-90-10-050 and (2) lack of jurisdiction, since what was involved was an intra-union issue cognizable by the DOLE. Later, he filed a supplemental motion to dismiss.

The trial court, per Judge Teresita Dizon-Capulong, granted the motion and ordered the dismissal of the case. Upon Salvador's motion for reconsideration, however, it reconsidered the order of dismissal, reinstated the case, and required the complainants herein to file their answer within a nonextendible period of fifteen days from notice.

Instead of filing an answer, the respondent filed a motion for reconsideration and dismissal of the case. This motion having been denied, the respondent filed with this Court a petition for certiorari, which was later referred to the Court of Appeals and docketed therein as CA-G.R. SP No. 25834.

Although that petition and his subsequent motion for reconsideration were both denied, the respondent still did not file the complainants' answer in Civil Case No. 3526-V-91. Hence, upon plaintiff Salvador's motion, the complainants were declared in default, and Salvador was authorized to present his evidence ex-parte.

The respondent then filed a motion to set aside the order of default and to stop the ex-parte reception of evidence before the Clerk of Court, but to no avail.

Thereafter, the trial court rendered a decision ordering the complainants herein to pay, jointly and severally, plaintiff Salvador the amounts of P200,000.00 as moral damages; P50,000.00 as exemplary damages or corrective damages; and P65,000.00 as attorney's fees; plus cost of suit.

The complainants, still assisted by the respondent, elevated the case to the Court of Appeals, which, however, affirmed in toto the decision of the trial court.

The respondent asserts that he was about to appeal the said decision to this Court, but his services as counsel for the complainants and for the union were illegally and unilaterally terminated by complainant Veronica Santiago.

The core issue that presents itself is whether the respondent committed culpable negligence, as would warrant disciplinary action, in failing to file for the complainants an answer in Civil Case No. 3526-V-91 for which reason the latter were declared in default and judgment was rendered against them on the basis of the plaintiff's evidence, which was received ex-parte.

It is axiomatic that no lawyer is obliged to act either as adviser or advocate for every person who may wish to become his client. He has the right to decline employment, 1 subject, however, to Canon 14 of the Code of Professional Responsibility. Once he agrees to take up the cause of a client, the lawyer owes fidelity to such cause and must always be mindful of the trust and confidence reposed in him. 2 He must serve the client with competence and diligence, 3 and champion the latter's cause with wholehearted fidelity, care, and devotion. 4 Elsewise stated, he owes entire devotion to the interest of the client, warm zeal in the maintenance and defense of his client's rights, and the exertion of his utmost learning and ability to the end that nothing be taken or withheld from his client, save by the rules of law, legally applied. 5 This simply means that his client is entitled to the benefit of any and every remedy and defense that is authorized by the law of the land and he may expect his lawyer to assert every such remedy or defense. 6 If much is demanded from an attorney, it is because the entrusted privilege to practice law carries with it the correlative duties not only to the client but also to the court, to the bar, and to the public. A lawyer who performs his duty with diligence and candor not only protects the interest of his client; he also serves the ends of justice, does honor to the bar, and helps maintain the respect of the community to the legal profession. 7

The respondent admits that it was his duty to file an answer in Civil Case No. 3526-V-91. He justifies his failure to do so in this wise:

[I]n his overzealousness to question the Denial Order of the trial court, 8 [he] instead, thru honest mistake and excusable neglect, filed a PETITION FOR CERTIORARI with the Honorable Court, docketed as G.R. No. 100983. . . .

And, when the Court of Appeals, to which G.R. No. 100983 was referred, dismissed the petition, he again "inadvertently" failed to file an answer "[d]ue to honest mistake and because of his overzealousness as stated earlier. . . . "

In their Reply, the complainants allege that his failure to file an answer was not an honest mistake but was "deliberate, malicious and calculated to place them on the legal disadvantage, to their damage and prejudice" for, as admitted by him in his motion to set aside the order of default, his failure to do so was "due to volume and

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pressure of legal work." 9 In short, the complainants want to impress upon this Court that the respondent has given inconsistent reasons to justify his failure to file an answer.

We agree with the complainants. In his motion for reconsideration of the default order, the respondent explained his non-filing of the required answer by impliedly invoking forgetfulness occasioned by a large volume and pressure of legal work, while in his Comment in this case he attributes it to honest mistake and excusable neglect due to his overzealousness to question the denial order of the trial court.

Certainly, "overzealousness" on the one hand and "volume and pressure of legal work" on the other are two distinct and separate causes or grounds. The first presupposes the respondent's full and continuing awareness of his duty to file an answer which, nevertheless, he subordinated to his conviction that the trial court had committed a reversible error or grave abuse of discretion in issuing an order reconsidering its previous order of dismissal of Salvador's complaint and in denying the motion to reconsider the said order. The second ground is purely based on forgetfulness because of his other commitments.

Whether it be the first or the second ground, the fact remains that the respondent did not comply with his duty to file an answer in Civil Case No. 3526-V-91. His lack of diligence was compounded by his erroneous belief that the trial court committed such error or grave abuse of discretion and by his continued refusal to file an answer even after he received the Court of Appeals' decision in the certiorari case. There is no showing whatsoever that he further assailed the said decision before this Court in a petition for review under Rule 45 of the Rules of Court to prove his claim of overzealousness to challenge the trial court's order. Neither was it shown that he alleged in his motion to lift the order of default that the complainants had a meritorious defense. 10 And, in his appeal from the judgment by default, he did not even raise as one of the errors of the trial court either the impropriety of the order of default or the court's grave abuse of discretion in denying his motion to lift that order.

Pressure and large volume of legal work provide no excuse for the respondent's inability to exercise due diligence in the performance of his duty to file an answer. Every case a lawyer accepts deserves his full attention, diligence, skill, and competence, regardless of its importance and whether he accepts it for a fee or for free.

All told, the respondent committed a breach of Canon 18 of the Code of Professional Responsibility which requires him to serve his clients, the complainants herein, with diligence and, more specifically, Rule 18.03 thereof which provides: "A

lawyer shall not neglect a legal matter entrusted to him, and his negligence in connection therewith shall render him liable."

The respondent's negligence is not excused by his claim that Civil Case No. 3526-V-91 was in fact a "losing cause" for the complainants since the claims therein for damages were based on the final decision of the Med-Arbiter declaring the complainants' act of expelling Salvador from the union to be illegal. This claim is a mere afterthought which hardly persuades us. If indeed the respondent was so convinced of the futility of any defense therein, he should have seasonably informed the complainants thereof. Rule 15.05, Canon 15 of the Code of Professional Responsibility expressly provides:

A lawyer, when advising his client, shall give a candid and honest opinion on the merits and probable results of the client's case, neither overstating nor understanding the prospects of the case.

Then too, if he were unconvinced of any defense, we are unable to understand why he took all the trouble of filing a motion to dismiss on the grounds of res   judicata and lack of jurisdiction and of questioning the adverse ruling thereon initially with this Court and then with the Court of Appeals, unless, of course, he meant all of these to simply delay the disposition of the civil case. Finally, the complainants were not entirely without any valid or justifiable defense. They could prove that the plaintiff was not entitled to all the damages sought by him or that if he were so, they could ask for a reduction of the amounts thereof.

We do not therefore hesitate to rule that the respondent is not free from any blame for the sad fate of the complainants. He is liable for inexcusable negligence.

WHEREFORE, ATTY. AMADO R. FOJAS is hereby REPRIMANDED and ADMONISHED to be, henceforth, more careful in the performance of his duty to his clients.

SO ORDERED.

Republic of the PhilippinesSUPREME COURT

EN BANC

A.C. No. 6632. August 2, 2005

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NORTHWESTERN UNIVERSITY, INC., and BEN A. NICOLAS, Complainant, vs.Atty. MACARIO D. ARQUILLO, Respondent.

D E C I S I O N

PANGANIBAN, J.:

Representing conflicting interests is prohibited by the Code of Professional Responsibility. Unless all the affected clients’ written consent is given after a full disclosure of all relevant facts, attorneys guilty of representing conflicting interests shall as a rule be sanctioned with suspension from the practice of law.

The Case and the Facts

This administrative case stems from a sworn Letter-Complaint1 filed with the Integrated Bar of the Philippines-Commission on Bar Discipline (IBP-CBD) by Ben A. Nicolas, acting for himself and on behalf of Northwestern University, Inc. In that Letter-Complaint, Atty. Macario D. Arquillo was charged with deceit, malpractice, gross misconduct and/or violation of his oath as attorney by representing conflicting interests. The material averments of the Complaint are summarized by the IBP-CBD as follows:

"Herein [c]omplainants, Northwestern University, Inc. and Mr. Ben A. Nicolas, accuses (sic) herein [r]espondent, Atty. Macario D. Arquillo, of engaging in conflicting interest in a case before the National Labor Relations Commission, Regional Arbitration Branch No. 1, San Fernando, La Union.

"Complainant alleges that in a consolidated case, herein [r]espondent appeared and acted as counsels for both complainants (eight out of the eighteen complainants therein) and respondent (one out of the ten respondents therein).

"In a consolidation of NLRC Cases [Nos.] 1-05-1086-97, 1-05-1087-97, 1-05-1088-97, 1-05-1091-97, 1-05-1092-97, 1-05-1097-97, 1-05-1109-97, 1-05-1096-97 ("consolidated cases"), herein [r]espondent appeared as counsel for complainants therein, Teresita A. Velasco, Gervacio A. Velasco, Mariel S. Hernando, Virginio C. Rasos, Bonifacio S. Blas, Ronald A. Daoang, Luzviminda T. Urcio and Araceli Quimoyog. In the very same consolidated case, [r]espondent was also the counsel of one of the respondents therein, Jose G. Castro.

"Complainants, as their evidence, submitted the Motion to Dismiss dated August 12, 1997 filed by Jose G. Castro, represented by his counsel, herein [r]espondent filed

before the NLRC of San Fernando, La Union. Sixteen (16) days later or on August 28, 1997, [r]espondent filed a Complainant’s   Consolidated   Position   Paper, this time representing some of the complainants in the very same consolidated case."2 (Citations omitted)

Respondent failed to file his Answer to the Complaint despite a June 24 1998 Order3 of the IBP-CBD directing him to do so. Even after receiving five notices, he failed to appear in any of the scheduled hearings. Consequently, he was deemed to have waived his right to participate in the proceedings. Thereafter, the complainants were ordered to submit their verified position paper with supporting documents, after which the case was to be deemed submitted for decision.4 In their Manifestation5 dated August 30, 2004, they said that they would no longer file a position paper. They agreed to submit the case for decision on the basis of their Letter-Affidavit dated March 16, 1998, together with all the accompanying documents.

Report and Recommendation of the IBP

In his Report,6 Commissioner Dennis B. Funa found respondent guilty of violating the conflict-of-interests rule under the Code of Professional Responsibility. Thus, the former recommended the latter’s suspension from the practice of law for a period of six (6) months.

In Resolution No. XVI-2004-415 dated October 7, 2004, the Board of Governors of the IBP adopted the Report and Recommendation of Commissioner Funa, with the modification that the period of suspension was increased to two (2) years.

On December 12, 2004, the Resolution and the records of the case were transmitted to this Court for final action, pursuant to Section 12(b) of Rule 139-B of the Rules of Court. On January 20, 2005, respondent filed a Motion for Reconsideration to set aside Resolution No. XVI-2004-415. The IBP denied the Motion.

The Court’s Ruling

We agree with the findings of the IBP Board of Governors, but reduce the recommended period of suspension to one year.

Administrative Liability of Respondent

The Code of Professional Responsibility requires lawyers to observe candor, fairness and loyalty in all their dealings and transactions with their clients.7 Corollary to this

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duty, lawyers shall not represent conflicting interests, except with all the concerned clients’ written consent, given after a full disclosure of the facts.8

When a lawyer represents two or more opposing parties, there is a conflict of interests, the existence of which is determined by three separate tests: (1) when, in representation of one client, a lawyer is required to fight for an issue or claim, but is also duty-bound to oppose it for another client; (2) when the acceptance of the new retainer will require an attorney to perform an act that may injuriously affect the first client or, when called upon in a new relation, to use against the first one any knowledge acquired through their professional connection; or (3) when the acceptance of a new relation would prevent the full discharge of an attorney’s duty to give undivided fidelity and loyalty to the client or would invite suspicion of unfaithfulness or double dealing in the performance of that duty.9

In the present case, Atty. Macario D. Arquillo, as counsel for Respondent Jose C. Castro in NLRC Case Nos. I-05-1083-97 to I-05-1109-97, filed a Motion to Dismiss those cases. Shortly thereafter, a position paper was filed by Atty. Arquillo as counsel for several complainants in consolidated NLRC Case Nos. I-05-1087-97, I-05-1088-97, I-05-1091-97, I-05-1092-97, I-05-1096-97, I-05-1097-97, and I-05-1109-97. All the cases in the second set were included in the first one, for which he had filed the subject Motion to Dismiss. Furthermore, in his position paper for the complainants, Atty. Arquillo protected his other client, Respondent Jose C. Castro, in these words:

"3. More than lack of valid cause for the dismissal of complainants, respondents, except Atty. Jose C. Castroand Atty. Ernesto B. Asuncion, should be made accountable for not according complainants their right to due process."10

In his two-page Motion for Reconsideration, Atty. Arquillo claims that there was no conflict of interest in his representation of both the respondent and the complainants in the same consolidated cases, because all of them were allegedly on the same side. Attaching to the Motion the Decision of Labor Arbiter Norma C. Olegario on the consolidated NLRC cases, Atty. Arquillo theorizes that her judgment absolved Castro of personal liability for the illegal dismissal of the complainants; this fact allegedly showed that there was no conflict in the interests of all the parties concerned.

This Court does not agree. Atty. Arquillo’s acts cannot be justified by the fact that, in the end, Castro was proven to be not personally liable for the claims of the dismissed employees. Having agreed to represent one of the opposing parties first, the lawyer should have known that there was an obvious conflict of interests, regardless of his alleged belief that they were all on the same side. It cannot be denied that the dismissed employees were the complainants in the same cases in

which Castro was one of the respondents. Indeed, Commissioner Funa correctly enounced:

"As counsel for complainants, [r]espondent had the duty to oppose the Motion to Dismiss filed by Jose G. Castro. But under the circumstance, it would be impossible since [r]espondent is also the counsel of Jose G. Castro. And it appears that it was [r]espondent who prepared the Motion to Dismiss, which he should be opposing [a]s counsel of Jose G. Castro, Respondent had the duty to prove the Complaint wrong. But Respondent cannot do this because he is the counsel for the complainants. Here   lies   the   inconsistency.  The  inconsistency of interests is very clear.

"Thus it has been noted

‘The attorney in that situation will not be able to pursue, with vigor and zeal, the client’s claim against the other and to properly represent the latter in the unrelated action, or, if he can do so, he cannot avoid being suspected by the defeated client of disloyalty or partiality in favor of the successful client. The foregoing considerations will strongly tend to deprive the relation of attorney and client of those special elements which make it one of trust and confidence[.]’ (Legal Ethics, Agpalo, p. 230, 4th ed.; In re De la Rosa, 21 Phil. 258)"11

An attorney cannot represent adverse interests. It is a hornbook doctrine grounded on public policy that a lawyer’s representation of both sides of an issue is highly improper. The proscription applies when the conflicting interests arise with respect to the same general matter, however slight such conflict may be. It applies even when the attorney acts from honest intentions or in good faith.12

The IBP Board of Governors recommended that respondent be suspended from the practice of law for two years. Considering, however, prior rulings in cases also involving attorneys representing conflicting interests, we reduce the suspension to one (1) year.13

WHEREFORE, Atty. Macario D. Arquillo is found GUILTY of misconduct and is hereby SUSPENDED from the practice of law for a period of one (1) year effective upon his receipt of this Decision, with a warning that a similar infraction shall be dealt with more severely in the future.

SO ORDERED.

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Republic of the PhilippinesSUPREME COURTBaguio City

FIRST DIVISION

A.C. No. 4354 April 22, 2002

LOLITA ARTEZUELA, complainant, vs.ATTY. RICARTE B. MADERAZO, respondent.

PUNO, J.:

For his failure to meet the exacting standards of professional ethics, the Board of Governors of the Integrated Bar of the Philippines (IBP) in its Resolution of May 2, 2000 recommended the suspension from the practice of law of respondent Atty. Ricarte B. Maderazo for the period of six (6) months, with a stern warning that repetition of the same act will be dealt with more severely. Respondent allegedly represented conflicting interests in violation of Canon 6 of the Code of Professional Ethics, and Canon 15 and Rule 15.03 of the Code of Professional Responsibility.1

By way of a Motion for Reconsideration,2 respondent now comes before this Court to challenge the basis of the IBP's resolution, and prays for its reversal.

The factual antecedents of the case are as follows: On or about 3:00 in the early morning of December 24, 1992, Allan Echavia had a vehicular accident at Caduman St., corner H. Abellana St., Mandaue City. At the time of the accident, Echavia was driving a Ford Telstar car owned by a Japanese national named Hirometsi Kiyami, but was registered in the name of his brother-in-law, Jun Anthony Villapez. The car rammed into a small carinderia owned by complainant Lolita Artezuela.3

The destruction of the complainant's carinderia caused the cessation of the operation of her small business, resulting to her financial dislocation. She incurred debts from her relatives and due to financial constraints, stopped sending her two children to college.4

Complainant engaged the services of the respondent in filing a damage suit against Echavia, Villapez and one Bernardo Sia.5 Docketed as Civil Case No. 13666, the case was assigned to Branch 14 of the Regional Trial Court of Cebu. An Amended Complaint was thereafter filed, impleading Echavia, Kiyami and Villapez, and dropping Sia as a party-defendant.6 For his services, complainant paid the

respondent the amount of Ten Thousand Pesos (P10,000.00) as attorney's fees and Two Thousand Pesos (P2,000.00) as filing fee.7 However, the case was dismissed on March 22, 1994, allegedly upon the instance of the complainant and her husband.8

Because of the dismissal of Civil Case No. 13666, complainant filed a civil case for damages against the respondent. It was docketed as CEB-18552 and assigned to Branch 57, Regional Trial Court of Cebu City. The case was dismissed on June 12, 2001.9

On November 24, 1994, Artezuela filed before this Court a verified complaint for disbarment against the respondent. She alleged that respondent grossly neglected his duties as a lawyer and failed to represent her interests with zeal and enthusiasm. According to her, when Civil Case No. 13666 was scheduled for pre-trial conference on August 20, 1993, respondent asked for its postponement although all the parties were present. Notwithstanding complainant's persistent and repeated follow-up, respondent did not do anything to keep the case moving. He withdrew as counsel without obtaining complainant's consent.10

Complainant also claimed that respondent engaged in activities inimical to her interests. While acting as her counsel, respondent prepared Echavia's Answer to the Amended Complaint. The said document was even printed in respondent's office. Complainant further averred that it was respondent who sought the dismissal of the case, misleading the trial court into thinking that the dismissal was with her consent.11

Respondent denied the complainant's allegations and averred that he conscientiously did his part as the complainant's lawyer in Civil Case No. 13666. He withdrew as counsel because the complainant was uncooperative and refused to confer with him. He also gave several notices to the complainant and made known his intention before he filed his Manifestation to withdraw as counsel. Because of the severed relationship, the lower court, after holding a conference, decided to grant respondent's manifestation and advised the complainant to secure the services of a new lawyer. Complainant, however, refused and instead, sought the dismissal of the case.12

Respondent alleged that he sought the postponement of the Pre-Trial Conference scheduled on August 20, 1993 so that he could file the Amended Complaint. He admitted that Echavia's Answer to the Amended Complaint was printed in his office but denied having prepared the document and having acted as counsel of Echavia. He claimed that complainant requested him to prepare Echavia's Answer but he declined. Echavia, however, went back to his office and asked respondent's secretary to print the document. Respondent intimated that the complainant and

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Echavia have fabricated the accusations against him to compel him to pay the amount ofP500,000.00.13

This Court referred the complaint to the Integrated Bar of the Philippines (IBP). The IBP-Visayas Regional Committee on Bar Discipline formed an Investigating Committee to hear the disbarment complaint.

On October 6, 1999, Commissioner Gabriel T. Ingles issued a Report finding the respondent guilty of representing conflicting interests, in violation of Canon 15 and Rule 15.03 of the Code of Professional Responsibility, as well as, of Canon 6 of the Code of Professional Ethics. He recommended that the respondent be suspended from the practice of law for a period of one (1) year.14 Commissioner Ingles did not rule on the other issues.

As aforesaid, the Board of Governors of the Integrated Bar of the Philippines upheld the findings of the Committee with modification only as to the penalty.

Seeking reconsideration of the IBP's resolution, respondent contends that the Investigating Committee did not conduct trial; hence, he was not able to confront and examine the witnesses against him. He argues that the Investigating Committee's finding that he represented Echavia is contrary to court records and the complainant's own testimony in CEB-18552. He also casts doubt on the credibility of the Investigating Committee to render just and fair recommendations considering that the Investigating Commissioner and the respondent are counsel-adversaries in another case, Civil Case No. R-33277. Finally, he questions the imposition of a six-month suspension, which he claims to be harsh considering that his private practice is his only source of income.15

After carefully examining the records, as well as the applicable laws and jurisprudence on the matter, this Court is inclined to uphold the IBP's resolution.1âwphi1.nêt

In administrative cases, the requirement of notice and hearing does not connote full adversarial proceedings, as "actual adversarial proceedings become necessary only for clarification or when there is a need to propound searching questions to witnesses who give vague testimonies."16 Due process is fulfilled when the parties were given reasonable opportunity to be heard and to submit evidence in support of their arguments.17

In the case at bar, records show that respondent repeatedly sought the postponement of the hearings, prompting the Investigating Commissioner to

receive complainant's evidence ex parte and to set the case for resolution after the parties have submitted their respective memorandum. Hence:

"The records show that this is already the third postponement filed by respondent namely December 12, 1996 (sic), January 3, 1996 and April 1, 1996.

The Commission for the last time, will cancel today's hearing and can no longer tolerate any further postponement. Notify respondent by telegram for the hearing for (sic) April 22, 1996 at 2:00 P.M. Said hearing is intransferable in character.

In the meantime, complainant affirmed her complaint and likewise her witness, Allan Echavia, also affirmed the contents of his affidavit and further stated that he had executed the same and understood the contents thereof."18

It is by his own negligence that the respondent was deemed to have waived his right to cross-examine the complainant and her witness. He cannot belatedly ask this Court to grant new trial after he has squandered his opportunity to exercise his right.

Respondent's contention that the finding of the Investigating Committee was contrary to the records and the complainant's own admission in CEB-18552 is without merit. It is true that Atty. Aviola was Echavia's counsel-of-record in Civil Case No. 13666 as evidenced by the certification from the clerk of court, 19 and as admitted by the complainant in CEB-18552, viz:

"ATTY. MADERAZO: (To witness- ON CROSS)

Q: Madam witness, you mentioned that the defendant in this case was the counsel of Allan Echavia as early as August 20, 1993, wherein you learned for the first time of this fact when you say he is counsel of Allan Echavia. (sic) You mean he is the counsel of record of Allan Echavia in the Civil Case before Judge Dacudao? Is that what you mean?

A: What I learned was that Atty. Alviola was the counsel of Allan Echavia in the case before Judge Dacudao but I heard Atty. Maderazo telling Allan Echavia not to admit that Atty. Maderazo is appearing for me because he will be the one to coordinate with Allan's case.

Q: So it is clear that the defendant in this case is not the counsel of record of Allan Echavia. It was Atty. Alviola stated by you now?

8

A: Atty. Maderazo was not Allan Echavia's counsel but it was Atty. Alviola who was the counsel of record of Allan Echavia."20

Nevertheless, the issue in this case is not whether the respondent also acted as the counsel-of-record of Echavia. Rather, it is whether or not he had a direct hand in the preparation of Echavia's Answer to the Amended Complaint.

To be guilty of representing conflicting interests, a counsel-of-record of one party need not also be counsel-of-record of the adverse party. He does not have to publicly hold himself as the counsel of the adverse party, nor make his efforts to advance the adverse party's conflicting interests of record--- although these circumstances are the most obvious and satisfactory proof of the charge. It is enough that the counsel of one party had a hand in the preparation of the pleading of the other party, claiming adverse and conflicting interests with that of his original client. To require that he also be counsel-of-record of the adverse party would punish only the most obvious form of deceit and reward, with impunity, the highest form of disloyalty.

Canon 6 of the Code of Professional Ethics states:

"It is the duty of a lawyer at the time of the retainer to disclose to the client the circumstances of his relations to the parties and any interest in or in connection with the controversy, which might influence the client in the selection of the counsel.

"It is unprofessional to represent conflicting interests, except by express consent of all concerned given after a full disclosure of the facts. Within the meaning of this Canon, a lawyer represents conflicting interests when in behalf of one of the clients, it is his duty to contend for that which duty to another client requires him to oppose." (emphasis supplied)

An attorney owes his client undivided allegiance. Because of the highly fiduciary nature of the attorney-client relationship, sound public policy dictates that a lawyer be prohibited from representing conflicting interests or discharging inconsistent duties. He may not, without being guilty of professional misconduct, act as counsel for a person whose interest conflicts with that of his present or former client. Indeed, good faith and honest intention on the part of the erring lawyer does not make this rule inoperative.21 The lawyer is an officer of the court and his actions are governed by the uncompromising rules of professional ethics. Thus:

"The relations of attorney and client is founded on principles of public policy, on good taste. The question is not necessarily one of the rights of the parties, but as to

whether the attorney has adhered to proper professional standard. With these thoughts in mind, it behooves attorneys, like Ceasar's wife, not only to keep inviolate the client's confidence, but also to avoid the appearance of treachery and double-dealing. Only thus can litigants be encouraged to entrust their secrets to their attorneys which is of paramount importance in the administration of justice."22

The professional obligation of the lawyer to give his undivided attention and zeal for his client's cause is likewise demanded in the Code of Professional Responsibility. Inherently disadvantageous to his client's cause, representation by the lawyer of conflicting interests requires disclosure of all facts and consent of all the parties involved. Thus:

"CANON 15- All lawyers shall observe candor, fairness and loyalty in all his dealings and transactions with his clients.

xxx

Rule 15.03- A lawyer shall not represent conflicting interests except by written consent of all concerned given after a full disclosure of the facts."

While the Resolution of the IBP is purely recommendatory, we find no reason to reverse the same. In disciplinary proceedings against members of the bar, only clear preponderance of evidence is required to establish liability. As long as the evidence presented by complainant or that taken judicial notice of by the Court is more convincing and worthy of belief than that which is offered in opposition thereto, the imposition of disciplinary sanction is justified.23

A perusal of Echavia's Answer to the Amended Complaint shows that it indeed conflicts with the complainant's claims. It reads:

"1. The allegations (sic) in Paragraph One (1) of the Complaint is admitted in so far as it pertains to the personal circumstance and residence of the answering defendant. The rest of the allegations in Paragraph One (1), and all the allegations in Paragraph Two (2) , THREE (3), FOUR (4), FIVE (5), SIX (6), ELEVEN (11), TWELVE (12), and FOURTEEN (14), of the Complaint are DENIED for lack of knowledge sufficient to form a belief as to the truth of such allegations."24

By way of prayer, Echavia states:

"WHEREFORE, it is respectfully prayed that after hearing, judgment be rendered dismissing plaintiff's complaint."25

9

Anent the authorship by the respondent of the document quoted above, the Investigating Committee found the testimonies of the complainant and Echavia credible as opposed to respondent's bare denial. As pointed out by Echavia, he was approached by Atty. Maderazo, introduced himself as his lawyer and after some sessions in the latter's office, asked him to return and sign a document which he later identified as the Answer to the Amended Complaint.

The Investigating Committee found respondent's defense weak. Respondent did not bother to present his secretary as witness, nor obtain her affidavit to prove his allegations. Instead, he offered a convenient excuse--- that he cannot anymore locate his secretary.

Respondent argued that it was the complainant who asked him to prepare Echavia's Answer to the Amended Complaint, after reaching an agreement whereby Echavia would testify in favor of the complainant. After he declined the request, he claimed that it was the complainant who prepared the document and asked his secretary to print the same. But as shown, Echavia's Answer to the Amended Complaint was in no way favorable to the complainant.

With the dismissal of Civil Case No. 13666, Echavia is practically off the hook. We cannot find any reason why Echavia would commit perjury and entangle himself, once again, with the law. He does not stand to profit at all by accusing the respondent falsely.

Furthermore, considering complainant's stature and lack of legal education, we can not see how she could have prepared Echavia's Answer to the Amended Complaint and device a legal maneuver as complicated as the present case.

Respondent's attack on the credibility of Investigating Commissioner Ingles to render an impartial decision, having been an adversary in Civil Case No. R-33277, does not convince us to grant new trial. This is the first time that respondent questions the membership of Commissioner Ingles in the Investigating Committee. If respondent really believed in good faith that Commissioner Ingles would be biased and prejudiced, he should have asked for the latter's inhibition at the first instance. Moreover, we could not find any hint of irregularity, bias or prejudice in the conduct of the investigation that would lead us to set it aside.

Finally, we remind the respondent that the practice of law is not a property right but a mere privilege, and as such, must bow to the inherent regulatory power of the Court to exact compliance with the lawyer's public responsibilities.26 The suspension of the respondent's privilege to practice law may result to financial woes. But as the guardian of the legal profession, we are constrained to balance this concern with

the injury he caused to the very same profession he vowed to uphold with honesty and fairness.1âwphi1.nêt

IN VIEW WHEREOF, the Resolution of the IBP finding the respondent guilty of violating Canon 6 of the Code of Professional Ethics, and Canon 15 and Rule 15.03 of the Code of Professional Responsibility is affirmed. Respondent is suspended from the practice of law for six (6) months with a stern warning that a similar act in the future shall be dealt with more severely.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

EN BANC

A.C. No. 3701 March 28, 1995

PHILIPPINE NATIONAL BANK, complainant, vs.ATTY. TELESFORO S. CEDO, respondent.

R E S O L U T I O N

BIDIN, J.:

10

In a verified letter-complaint dated August 15, 1991, complainant Philippine National Bank charged respondent Atty. Telesforo S. Cedo, former Asst. Vice-President of the Asset Management Group of complainant bank with violation of Canon 6, Rule 6.03 of the Code of Professional Responsibility, thus:

A lawyer shall not, after leaving government service, accept engagement or employment in connection with any matter in which he had intervened while in said service.

by appearing as counsel for individuals who had transactions with complainant bank in which respondent during his employment with aforesaid bank, had intervened.

Complainant averred that while respondent was still in its employ, he participated in arranging the sale of steel sheets (denominated as Lots 54-M and 55-M) in favor of Milagros Ong Siy for P200,000. He even "noted" the gate passes issued by his subordinate, Mr. Emmanuel Elefan, in favor of Mrs. Ong Siy authorizing the pull-out of the steel sheets from the DMC Man Division Compound. When a civil action arose out of this transaction between Mrs. Ong Siy and complainant bank before the Regional Trial Court of Makati, Branch 146, respondent who had since left the employ of complainant bank, appeared as one of the counsels of Mrs. Ong Siy.

Similarly, when the same transaction became the subject of an administrative case filed by complainant bank against his former subordinate Emmanuel Elefan, for grave misconduct and dishonesty, respondent appeared as counsel for Elefan only to be later disqualified by the Civil Service Commission.

Moreover, while respondent was still the Asst. Vice President of complainant’s Asset Management Group, he intervened in the handling of the loan account of the spouses Ponciano and Eufemia Almeda with complainant bank by writing demand letters to the couple. When a civil action ensued between complainant bank and the Almeda spouses as a result of this loan account, the latter were represented by the law firm "Cedo, Ferrer, Maynigo & Associates" of which respondent is one of the Senior Partners.

In his Comment on the complaint, respondent admitted that he appeared as counsel for Mrs. Ong Siy but only with respect to the execution pending appeal of the RTC decision. He alleged that he did not participate in the litigation of the case before the trial court. With respect to the case of the Almeda spouses, respondent alleged that he never appeared as counsel for them. He contended that while the law firm "Cedo Ferrer, Maynigo & Associates" is designated as counsel of record, the case is actually handled only by Atty. Pedro Ferrer. Respondent averred that he did not enter into a general partnership with Atty. Pedro Ferrer nor with the other

lawyers named therein. They are only using the aforesaid name to designate a law firm maintained by lawyers, who although not partners, maintain one office as well as one clerical and supporting staff. Each one of them handles their own cases independently and individually receives the revenues therefrom which are not shared among them.

In the resolution of this Court dated January 27, 1992, this case was referred to the Integrated Bar of the Philippines (IBP), for investigation, report and recommendation.

During the investigation conducted by the IBP, it was discovered that respondent was previously fined by this Court in the amount of P1,000.00 in connection with G.R. No. 94456 entitled "Milagros Ong Siy vs. Hon. Salvador Tensuan, et al." for forum shopping, where respondent appeared as counsel for petitioner Milagros Ong Siy "through the law firm of Cedo Ferrer Maynigo and Associates."

The IBP further found that the charges herein against respondent were fully substantiated. Respondent's averment that the law firm handling the case of the Almeda spouses is not a partnership deserves scant consideration in the light of the attestation of complainant's counsel, Atty. Pedro Singson, that in one of the hearings of the Almeda spouses' case, respondent attended the same with his partner Atty. Ferrer, and although he did not enter his appearance, he was practically dictating to Atty. Ferrer what to say and argue before the court. Furthermore, during the hearing of the application for a writ of injunction in the same case, respondent impliedly admitted being the partner of Atty. Ferrer, when it was made of record that respondent was working in the same office as Atty. Ferrer.

Moreover, the IBP noted that assuming the alleged set-up of the firm is true, it is in itself a violation of the Code of Professional Responsibility (Rule 15.02) since the client’s secrets and confidential records and information are exposed to the other lawyers and staff members at all times.

From the foregoing, the IBP found a deliberate intent on the part of respondent to devise ways and means to attract as clients former borrowers of complainant bank since he was in the best position to see the legal weaknesses of his former employer, a convincing factor for the said clients to seek his professional service. In sum, the IBP saw a deliberate sacrifice by respondent of his ethics in consideration of the money he expected to earn.

The IBP thus recommended the suspension of respondent from the practice of law for 3 years.

11

The records show that after the Board of Governors of the IBP had, on October 4, 1994, submitted to this Court its Report and recommendation in this case, respondent filed a Motion for Reconsideration dated October 25, 1994 of the recommendation contained in the said Report with the IBP Board of Governors. On December 12, 1994, respondent also filed another "Motion to Set Hearing" before this Court, the aforesaid Motion for Reconsideration. In resolving this case, the Court took into consideration the aforesaid pleadings.

In addition to the findings of the IBP, this Court finds this occasion appropriate to emphasize the paramount importance of avoiding the representation of conflicting interests. In the similar case of Pasay Law and Conscience Union, Inc. vs. Paz, (95 SCRA 24 [1980]) where a former Legal Officer and Legal Prosecutor of PARGO who participated in the investigation of the Anti-Graft case against Mayor Pablo Cuneta later on acted as counsel for the said Mayor in the same anti-graft case, this Court, citing Nombrado vs. Hernandez (26 SCRA 13 119681) ruled:

The Solicitor General is of the opinion, and we find no reason to disagree with him, that even if respondent did not use against his client any information or evidence acquired by him as counsel it cannot be denied that he did become privy to information regarding the ownership of the parcel of land which was later litigated in the forcible entry case, for it was the dispute over the land that triggered the mauling incident which gave rise to the criminal action for physical injuries. This Court's remarks in Hilado vs. David, 84 Phil. 571, are apropos:

"Communications between attorney and client are, in a great number of litigations, a complicated affair, consisting of entangled relevant and irrelevant, secret and well-known facts. In the complexity of what is said in the course of dealings between an attorney and client, inquiry of the nature suggested would lead to the revelation, in advance of the trial, of other matters that might only further prejudice the complainant's cause."

Whatever may be said as to whether or not respondent utilized against his former client information given to him in a professional capacity, the mere fact of their previous relationship should have precluded him from appearing as counsel for the other side in the forcible entry case. In the case ofHilado vs.  David,  supra, this Tribunal further said:

Hence the necessity of setting the existence of the bare relationship of attorney and client as the yardstick for testing incompatibility of interests. This stern rule is designed not alone to prevent the dishonest practitioner from fraudulent conduct, but as well to protect the honest lawyer from unfounded suspicion of unprofessional practice. . . . It is founded on principles of public policy, of good taste. As has been said in another case, the question is not necessarily one of the

rights of the parties, but as to whether the attorney has adhered to proper professional standard. With these thoughts in mind, it behooves attorney, like Caesar's wife, not only to keep inviolate the client's confidence, but also to avoid the appearance of treachery and double dealing. Only thus can litigants. be encouraged to entrust their secrets to their attorneys which is of paramount importance in the administration of justice.

The foregoing disquisition on conflicting interest applies with equal force and effect to respondent in the case at bar. Having been an executive of complainant bank, respondent now seeks to litigate as counsel for the opposite side, a case against his former employer involving a transaction which he formerly handled while still an employee of complainant, in violation of Canon 6 of the Canons of Professional Ethics on adverse influence and conflicting interests, to wit:

It is unprofessional to represent conflicting interests, except by express conflicting consent of all concerned given after a full disclosure of the facts. Within the meaning of this canon, a lawyer represents conflicting interest when, in behalf on one client, it is his duty to contend for that which duty to another client requires him to oppose.

ACCORDINGLY, this Court resolves to SUSPEND respondent ATTY. TELESFORO S. CEDO from the practice of law for THREE (3) YEARS, effective immediately.

Let copies of this resolution be furnished the Integrated Bar of the Philippines and all courts in Metro Manila.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

EN BANC

G.R. No. 105938 September 20, 1996

TEODORO R. REGALA, EDGARDO J. ANGARA, AVELINO V. CRUZ, JOSE C. CONCEPCION, ROGELIO A. VINLUAN, VICTOR P. LAZATIN and EDUARDO U. ESCUETA, petitioners, vs.

12

THE HONORABLE SANDIGANBAYAN, First Division, REPUBLIC OF THE PHILIPPINES, ACTING THROUGH THE PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, and RAUL S. ROCO, respondents.

G.R. No. 108113 September 20, 1996

PARAJA G. HAYUDINI, petitioner, vs.THE SANDIGANBAYAN and THE REPUBLIC OF THE PHILIPPINES, respondents.

KAPUNAN, J.:

These case touch the very cornerstone of every State's judicial system, upon which the workings of the contentious and adversarial system in the Philippine legal process are based — the sanctity of fiduciary duty in the client-lawyer relationship. The fiduciary duty of a counsel and advocate is also what makes the law profession a unique position of trust and confidence, which distinguishes it from any other calling. In this instance, we have no recourse but to uphold and strengthen the mantle of protection accorded to the confidentiality that proceeds from the performance of the lawyer's duty to his client.

The facts of the case are undisputed.

The matters raised herein are an offshoot of the institution of the Complaint on July 31, 1987 before the Sandiganbayan by the Republic of the Philippines, through the Presidential Commission on Good Government against Eduardo M. Cojuangco, Jr., as one of the principal defendants, for the recovery of alleged ill-gotten wealth, which includes shares of stocks in the named corporations in PCGG Case No. 33 (Civil Case No. 0033), entitled "Republic of the Philippines versus Eduardo Cojuangco, et al." 1

Among the dependants named in the case are herein petitioners Teodoro Regala, Edgardo J. Angara, Avelino V. Cruz, Jose C. Concepcion, Rogelio A. Vinluan, Victor P. Lazatin, Eduardo U. Escueta and Paraja G. Hayudini, and herein private respondent Raul S. Roco, who all were then partners of the law firm Angara, Abello, Concepcion, Regala and Cruz Law Offices (hereinafter referred to as the ACCRA Law Firm). ACCRA Law Firm performed legal services for its clients, which included, among others, the organization and acquisition of business associations and/or organizations, with the correlative and incidental services where its members acted as incorporators, or simply, as stockholders. More specifically, in the performance

of these services, the members of the law firm delivered to its client documents which substantiate the client's equity holdings, i.e., stock certificates endorsed in blank representing the shares registered in the client's name, and a blank deed of trust or assignment covering said shares. In the course of their dealings with their clients, the members of the law firm acquire information relative to the assets of clients as well as their personal and business circumstances. As members of the ACCRA Law Firm, petitioners and private respondent Raul Roco admit that they assisted in the organization and acquisition of the companies included in Civil Case No. 0033, and in keeping with the office practice, ACCRA lawyers acted as nominees-stockholders of the said corporations involved in sequestration proceedings. 2

On August 20, 1991, respondent Presidential Commission on Good Government (hereinafter referred to as respondent PCGG) filed a "Motion to Admit Third Amended Complaint" and "Third Amended Complaint" which excluded private respondent Raul S. Roco from the complaint in PCGG Case No. 33 as party-defendant. 3Respondent PCGG based its exclusion of private respondent Roco as party-defendant on his undertaking that he will reveal the identity of the principal/s for whom he acted as nominee/stockholder in the companies involved in PCGG Case No. 33. 4

Petitioners were included in the Third Amended Complaint on the strength of the following allegations:

14. Defendants Eduardo Cojuangco, Jr., Edgardo J. Angara, Jose C. Concepcion, Teodoro Regala, Avelino V. Cruz, Rogelio A. Vinluan, Eduardo U. Escueta, Paraja G. Hayudini and Raul Roco of the Angara Concepcion Cruz Regala and Abello law offices (ACCRA) plotted, devised, schemed conspired and confederated with each other in setting up, through the use of the coconut levy funds, the financial and corporate framework and structures that led to the establishment of UCPB, UNICOM, COCOLIFE, COCOMARK, CIC, and more than twenty other coconut levy funded corporations, including the acquisition of San Miguel Corporation shares and its institutionalization through presidential directives of the coconut monopoly. Through insidious means and machinations, ACCRA, being the wholly-owned investment arm, ACCRA Investments Corporation, became the holder of approximately fifteen million shares representing roughly 3.3% of the total outstanding capital stock of UCPB as of 31 March 1987. This ranks ACCRA Investments Corporation number 44 among the top 100 biggest stockholders of UCPB which has approximately 1,400,000 shareholders. On the other hand, corporate books show the name Edgardo J. Angara as holding approximately3,744 shares as of February, 1984. 5

13

In their answer to the Expanded Amended Complaint, petitioners ACCRA lawyers alleged that:

4.4 Defendants-ACCRA lawyers' participation in the acts with which their codefendants are charged, was in furtherance of legitimate lawyering.

4.4.1 In the course of rendering professional and legal services to clients, defendants-ACCRA lawyers, Jose C. Concepcion, Teodoro D. Regala, Rogelio A. Vinluan and Eduardo U. Escueta, became holders of shares of stock in the corporations listed under their respective names in Annex "A" of the expanded Amended Complaint as incorporating or acquiring stockholders only and, as such, they do not claim any proprietary interest in the said shares of stock.

4.5 Defendant ACCRA-lawyer Avelino V. Cruz was one of the incorporators in 1976 of Mermaid Marketing Corporation, which was organized for legitimate business purposes not related to the allegations of the expanded Amended Complaint. However, he has long ago transferred any material interest therein and therefore denies that the "shares" appearing in his name in Annex "A" of the expanded Amended Complaint are his assets. 6

Petitioner Paraja Hayudini, who had separated from ACCRA law firm, filed a separate answer denying the allegations in the complaint implicating him in the alleged ill-gotten wealth. 7

Petitioners ACCRA lawyers subsequently filed their "COMMENT AND/OR OPPOSITION" dated October 8, 1991 with Counter-Motion that respondent PCGG similarly grant the same treatment to them (exclusion as parties-defendants) as accorded private respondent Roco. 8 The Counter-Motion for dropping petitioners from the complaint was duly set for hearing on October 18, 1991 in accordance with the requirements of Rule 15 of the Rules of Court.

In its "Comment," respondent PCGG set the following conditions precedent for the exclusion of petitioners, namely: (a) the disclosure of the identity of its clients; (b) submission of documents substantiating the lawyer-client relationship; and (c) the submission of the deeds of assignments petitioners executed in favor of its client covering their respective shareholdings. 9

Consequently, respondent PCGG presented supposed proof to substantiate compliance by private respondent Roco of the conditions precedent to warrant the latter's exclusion as party-defendant in PCGG Case No. 33, to wit: (a) Letter to respondent PCGG of the counsel of respondent Roco dated May 24, 1989

reiterating a previous request for reinvestigation by the PCGG in PCGG Case No. 33; (b) Affidavit dated March 8, 1989 executed by private respondent Roco as Attachment to the letter aforestated in (a); and (c) Letter of the Roco, Bunag, and Kapunan Law Offices dated September 21, 1988 to the respondent PCGG in behalf of private respondent Roco originally requesting the reinvestigation and/or re-examination of the evidence of the PCGG against Roco in its Complaint in PCGG Case No. 33. 10

It is noteworthy that during said proceedings, private respondent Roco did not refute petitioners' contention that he did actually not reveal the identity of the client involved in PCGG Case No. 33, nor had he undertaken to reveal the identity of the client for whom he acted as nominee-stockholder. 11

On March 18, 1992, respondent Sandiganbayan promulgated the Resolution, herein questioned, denying the exclusion of petitioners in PCGG Case No. 33, for their refusal to comply with the conditions required by respondent PCGG. It held:

xxx xxx xxx

ACCRA lawyers may take the heroic stance of not revealing the identity of the client for whom they have acted, i.e. their principal, and that will be their choice. But until they do identify their clients, considerations of whether or not the privilege claimed by the ACCRA lawyers exists cannot even begin to be debated. The ACCRA lawyers cannot excuse themselves from the consequences of their acts until they have begun to establish the basis for recognizing the privilege; the existence andidentity of the client.

This is what appears to be the cause for which they have been impleaded by the PCGG as defendants herein.

5. The PCGG is satisfied that defendant Roco has demonstrated his agency and that Roco has apparently identified his principal, which revelation could show the lack of cause against him. This in turn has allowed the PCGG to exercise its power both under the rules of Agency and under Section 5 of E.O. No. 14-A in relation to the Supreme Court's ruling in Republic v. Sandiganbayan (173 SCRA 72).

The PCGG has apparently offered to the ACCRA lawyers the same conditions availed of by Roco; full disclosure in exchange for exclusion from these proceedings (par. 7, PCGG's COMMENT dated November 4, 1991). The ACCRA lawyers have preferred not to make the disclosures required by the PCGG.

14

The ACCRA lawyers cannot, therefore, begrudge the PCGG for keeping them as party defendants. In the same vein, they cannot compel the PCGG to be accorded the same treatment accorded to Roco.

Neither can this Court.

WHEREFORE, the Counter Motion dated October 8, 1991 filed by the ACCRA lawyers and joined in by Atty. Paraja G. Hayudini for the same treatment by the PCGG as accorded to Raul S. Roco is DENIED for lack of merit. 12

ACCRA lawyers moved for a reconsideration of the above resolution but the same was denied by the respondent Sandiganbayan. Hence, the ACCRA lawyers filed the petition for certiorari, docketed as G.R. No. 105938, invoking the following grounds:

I

The Honorable Sandiganbayan gravely abused its discretion in subjecting petitioners ACCRA lawyers who undisputably acted as lawyers in serving as nominee-stockholders, to the strict application of the law of agency.

II

The Honorable Sandiganbayan committed grave abuse of discretion in not considering petitioners ACCRA lawyers and Mr. Roco as similarly situated and, therefore, deserving of equal treatment.

1. There is absolutely no evidence that Mr. Roco had revealed, or had undertaken to reveal, the identities of the client(s) for whom he acted as nominee-stockholder.

2. Even assuming that Mr. Roco had revealed, or had undertaken to reveal, the identities of the client(s), the disclosure does not constitute a substantial distinction as would make the classification reasonable under the equal protection clause.

3. Respondent Sandiganbayan sanctioned favoritism and undue preference in favor of Mr. Roco in violation of the equal protection clause.

III

The Honorable Sandiganbayan committed grave abuse of discretion in not holding that, under the facts of this case, the attorney-client privilege prohibits petitioners ACCRA lawyers from revealing the identity of their client(s) and the other information requested by the PCGG.

1. Under the peculiar facts of this case, the attorney-client privilege includes the identity of the client(s).

2. The factual disclosures required by the PCGG are not limited to the identity of petitioners ACCRA lawyers' alleged client(s) but extend to other privileged matters.

IV

The Honorable Sandiganbayan committed grave abuse of discretion in not requiring that the dropping of party-defendants by the PCGG must be based on reasonable and just grounds and with due consideration to the constitutional right of petitioners ACCRA lawyers to the equal protection of the law.

Petitioner Paraja G. Hayudini, likewise, filed his own motion for reconsideration of the March 18, 1991 resolution which was denied by respondent Sandiganbayan. Thus, he filed a separate petition for certiorari, docketed as G.R. No. 108113, assailing respondent Sandiganbayan's resolution on essentially the same grounds averred by petitioners in G.R. No. 105938.

Petitioners contend that the exclusion of respondent Roco as party-defendant in PCGG Case No. 33 grants him a favorable treatment, on the pretext of his alleged undertaking to divulge the identity of his client, giving him an advantage over them who are in the same footing as partners in the ACCRA law firm. Petitioners further argue that even granting that such an undertaking has been assumed by private respondent Roco, they are prohibited from revealing the identity of their principal under their sworn mandate and fiduciary duty as lawyers to uphold at all times the confidentiality of information obtained during such lawyer-client relationship.

Respondent PCGG, through its counsel, refutes petitioners' contention, alleging that the revelation of the identity of the client is not within the ambit of the lawyer-client confidentiality privilege, nor are the documents it required (deeds of assignment) protected, because they are evidence of nominee status. 13

In his comment, respondent Roco asseverates that respondent PCGG acted correctly in excluding him as party-defendant because he "(Roco) has not filed an Answer. PCGG had  therefore   the   right   to  dismiss  Civil  Case  No.0033 as   to  Roco 'without an order of court by filing a notice of dismissal'," 14 and he has undertaken to identify his principal. 15

Petitioners' contentions are impressed with merit.

I

15

It is quite apparent that petitioners were impleaded by the PCGG as co-defendants to force them to disclose the identity of their clients. Clearly, respondent PCGG is not after petitioners but the "bigger fish" as they say in street parlance. This ploy is quite clear from the PCGG's willingness to cut a deal with petitioners — the names of their clients in exchange for exclusion from the complaint. The statement of the Sandiganbayan in its questioned resolution dated March 18, 1992 is explicit:

ACCRA lawyers may take the heroic stance of not revealing the identity of the client for whom they have acted, i.e, their principal, and that will be their choice. But until they do identify their clients, considerations of whether or not the privilege claimed by the ACCRA lawyers exists cannot even begin to be debated. The ACCRA lawyers cannot excuse themselves from the consequences of their acts until they have begun to establish the basis for recognizing the privilege; the existence and identity of the client.

This is what appears to be the cause for which they have been impleaded by the PCGG as defendants herein. (Emphasis ours)

In a closely related case, Civil Case No. 0110 of the Sandiganbayan, Third Division, entitled "Primavera Farms, Inc., et al. vs. Presidential Commission on Good Government" respondent PCGG, through counsel Mario Ongkiko, manifested at the hearing on December 5, 1991 that the PCGG wanted to establish through the ACCRA that their "so called client is Mr. Eduardo Cojuangco;" that "it was Mr. Eduardo Cojuangco who furnished all the monies to those subscription payments in corporations included in Annex "A" of the Third Amended Complaint; that the ACCRA lawyers executed deeds of trust and deeds of assignment, some in the name of particular persons; some in blank.

We quote Atty. Ongkiko:

ATTY. ONGKIKO:

With the permission of this Hon. Court. I propose to establish through these ACCRA lawyers that, one, their so-called client is Mr. Eduardo Cojuangco. Second, it was Mr. Eduardo Cojuangco who furnished all the monies to these subscription payments of these corporations who are now the petitioners in this case. Third, that these lawyers executed deeds of trust, some in the name of a particular person, some in blank. Now, these blank deeds are important to our claim that some of the shares are actually being held by the nominees for the late President Marcos. Fourth, they also executed deeds of assignment and some of these assignments have also blank assignees. Again, this is important to our claim that some of the shares are for Mr. Conjuangco and some are for Mr. Marcos. Fifth, that most of thes

e corporations are really just paper corporations. Why do we say that? One: There are no really fixed sets of officers, no fixed sets of directors at the time of incorporation and even up to 1986, which is the crucial year. And not only that, they have no permits from the municipal authorities in Makati. Next, actually all their addresses now are care of Villareal Law Office. They really have no address on records. These are some of the principal things that we would ask of these nominees stockholders, as they called themselves. 16

It would seem that petitioners are merely standing in for their clients as defendants in the complaint. Petitioners are being prosecuted solely on the basis of activities and services performed in the course of their duties as lawyers. Quite obviously, petitioners' inclusion as co-defendants in the complaint is merely being used as leverage to compel them to name their clients and consequently to enable the PCGG to nail these clients. Such being the case, respondent PCGG has no valid cause of action as against petitioners and should exclude them from the Third Amended Complaint.

II

The nature of lawyer-client relationship is premised on the Roman Law concepts of locatio conductio operarum(contract of lease of services) where one person lets his services and another hires them without reference to the object of which the services are to be performed, wherein lawyers' services may be compensated by honorariumor for hire, 17 and mandato (contract of agency) wherein a friend on whom reliance could be placed makes a contract in his name, but gives up all that he gained by the contract to the person who requested him. 18 But the lawyer-client relationship is more than that of the principal-agent and lessor-lessee.

In modern day perception of the lawyer-client relationship, an attorney is more than a mere agent or servant, because he possesses special powers of trust and confidence reposed on him by his client. 19 A lawyer is also as independent as the judge of the court, thus his powers are entirely different from and superior to those of an ordinary agent.20 Moreover, an attorney also occupies what may be considered as a "quasi-judicial office" since he is in fact an officer of the Court 21 and exercises his judgment in the choice of courses of action to be taken favorable to his client.

Thus, in the creation of lawyer-client relationship, there are rules, ethical conduct and duties that breathe life into it, among those, the fiduciary duty to his client which is of a very delicate, exacting and confidential character, requiring a very high degree of fidelity and good faith, 22 that is required by reason of necessity and public interest 23based on the hypothesis that abstinence from seeking legal advice in a good cause is an evil which is fatal to the administration of justice. 24

16

It is also the strict sense of fidelity of a lawyer to his client that distinguishes him from any other professional in society. This conception is entrenched and embodies centuries of established and stable tradition. 25 In Stockton   v. Ford, 26 the U. S. Supreme Court held:

There are few of the business relations of life involving a higher trust and confidence than that of attorney and client, or generally speaking, one more honorably and faithfully discharged; few more anxiously guarded by the law, or governed by the sterner principles of morality and justice; and it is the duty of the court to administer them in a corresponding spirit, and to be watchful and industrious, to see that confidence thus reposed shall not be used to the detriment or prejudice of the rights of the party bestowing it. 27

In our jurisdiction, this privilege takes off from the old Code of Civil Procedure enacted by the Philippine Commission on August 7, 1901. Section 383 of the Code specifically "forbids counsel, without authority of his client to reveal any communication made by the client to him or his advice given thereon in the course of professional employment." 28 Passed on into various provisions of the Rules of Court, the attorney-client privilege, as currently worded provides:

Sec. 24. Disqualification by reason of privileged communication. — The following persons cannot testify as to matters learned in confidence in the following cases:

xxx xxx xxx

An attorney cannot, without the consent of his client, be examined as to any communication made by the client to him, or his advice given thereon in the course of, or with a view to, professional employment, can an attorney's secretary, stenographer, or clerk be examined, without the consent of the client and his employer, concerning any fact the knowledge of which has been acquired in such capacity. 29

Further, Rule 138 of the Rules of Court states:

Sec. 20. It is the duty of an attorney: (e) to maintain inviolate the confidence, and at every peril to himself, to preserve the secrets of his client, and to accept no compensation in connection with his client's business except from him or with his knowledge and approval.

This duty is explicitly mandated in Canon 17 of the Code of Professional Responsibility which provides that:

Canon 17. A lawyer owes fidelity to the cause of his client and he shall be mindful of the trust and confidence reposed in him.

Canon 15 of the Canons of Professional Ethics also demands a lawyer's fidelity to client:

The lawyers owes "entire devotion to the interest of the client, warm zeal in the maintenance and defense of his rights and the exertion of his utmost learning and ability," to the end that nothing be taken or be withheld from him, save by the rules of law, legally applied. No fear of judicial disfavor or public popularity should restrain him from the full discharge of his duty. In the judicial forum the client is entitled to the benefit of any and every remedy and defense that is authorized by the law of the land, and he may expect his lawyer to assert every such remedy or defense. But it is steadfastly to be borne in mind that the great trust of the lawyer is to be performed within and not without the bounds of the law. The office of attorney does not permit, much less does it demand of him for any client, violation of law or any manner of fraud or chicanery. He must obey his own conscience and not that of his client.

Considerations favoring confidentially in lawyer-client relationships are many and serve several constitutional and policy concerns. In the constitutional sphere, the privilege gives flesh to one of the most sacrosanct rights available to the accused, the right to counsel. If a client were made to choose between legal representation without effective communication and disclosure and legal representation with all his secrets revealed then he might be compelled, in some instances, to either opt to stay away from the judicial system or to lose the right to counsel. If the price of disclosure is too high, or if it amounts to self incrimination, then the flow of information would be curtailed thereby rendering the right practically nugatory. The threat this represents against another sacrosanct individual right, the right to be presumed innocent is at once self-evident.

Encouraging full disclosure to a lawyer by one seeking legal services opens the door to a whole spectrum of legal options which would otherwise be circumscribed by limited information engendered by a fear of disclosure. An effective lawyer-client relationship is largely dependent upon the degree of confidence which exists between lawyer and client which in turn requires a situation which encourages a dynamic and fruitful exchange and flow of information. It necessarily follows that in order to attain effective representation, the lawyer must invoke the privilege not as a matter of option but as a matter of duty and professional responsibility.

The question now arises whether or not this duty may be asserted in refusing to disclose the name of petitioners' client(s) in the case at bar. Under the facts and circumstances obtaining in the instant case, the answer must be in the affirmative.

17

As a matter of public policy, a client's identity should not be shrouded in mystery 30 Under this premise, the general rule in our jurisdiction as well as in the United States is that a lawyer may not invoke the privilege and refuse to divulge the name or identity of this client. 31

The reasons advanced for the general rule are well established.

First, the court has a right to know that the client whose privileged information is sought to be protected is flesh and blood.

Second, the privilege begins to exist only after the attorney-client relationship has been established. The attorney-client privilege does not attach until there is a client.

Third, the privilege generally pertains to the subject matter of the relationship.

Finally, due process considerations require that the opposing party should, as a general rule, know his adversary. "A party suing or sued is entitled to know who his opponent is." 32 He cannot be obliged to grope in the dark against unknown forces. 33

Notwithstanding these considerations, the general rule is however qualified by some important exceptions.

1) Client identity is privileged where a strong probability exists that revealing the client's name would implicate that client in the very activity for which he sought the lawyer's advice.

In Ex-Parte Enzor, 34 a state supreme court reversed a lower court order requiring a lawyer to divulge the name of her client on the ground that the subject matter of the relationship was so closely related to the issue of the client's identity that the privilege actually attached to both. In Enzor, the unidentified client, an election official, informed his attorney in confidence that he had been offered a bribe to violate election laws or that he had accepted a bribe to that end. In her testimony, the attorney revealed that she had advised her client to count the votes correctly, but averred that she could not remember whether her client had been, in fact, bribed. The lawyer was cited for contempt for her refusal to reveal his client's identity before a grand jury. Reversing the lower court's contempt orders, the state supreme court held that under the circumstances of the case, and under the exceptions described above, even the name of the client was privileged.

U .S. v. Hodge and Zweig, 35 involved the same exception, i.e. that client identity is privileged in those instances where a strong probability exists that the disclosure of

the client's identity would implicate the client in the very criminal activity for which the lawyer's legal advice was obtained.

The Hodge case involved federal grand jury proceedings inquiring into the activities of the "Sandino Gang," a gang involved in the illegal importation of drugs in the United States. The respondents, law partners, represented key witnesses and suspects including the leader of the gang, Joe Sandino.

In connection with a tax investigation in November of 1973, the IRS issued summons to Hodge and Zweig, requiring them to produce documents and information regarding payment received by Sandino on behalf of any other person, and vice versa. The lawyers refused to divulge the names. The Ninth Circuit of the United States Court of Appeals, upholding non-disclosure under the facts and circumstances of the case, held:

A client's identity and the nature of that client's fee arrangements may be privileged where the person invoking the privilege can show that a strong probability exists that disclosure of such information would implicate that client in the very criminal activity for which legal advice was soughtBaird v. Koerner, 279 F. 2d at 680. While in Baird Owe enunciated this rule as a matter of California law, the rule also reflects federal law. Appellants contend that the Baird exception applies to this case.

The Baird exception is entirely consonant with the principal policy behind the attorney-client privilege. "In order to promote freedom of consultation of legal advisors by clients, the apprehension of compelled disclosure from the legal advisors must be removed; hence, the law must prohibit such disclosure except on the client's consent." 8 J. Wigmore, supra sec. 2291, at 545. In furtherance of this policy, the client's identity and the nature of his fee arrangements are, in exceptional cases, protected as confidential communications. 36

2) Where disclosure would open the client to civil liability; his identity is privileged. For instance, the peculiar facts and circumstances of Neugass   v. Terminal   Cab Corporation, 37 prompted the New York Supreme Court to allow a lawyer's claim to the effect that he could not reveal the name of his client because this would expose the latter to civil litigation.

In the said case, Neugass, the plaintiff, suffered injury when the taxicab she was riding, owned by respondent corporation, collided with a second taxicab, whose owner was unknown. Plaintiff brought action both against defendant corporation and the owner of the second cab, identified in the information only as John Doe. It turned out that when the attorney of defendant corporation appeared on preliminary examination, the fact was somehow revealed that the lawyer came to

18

know the name of the owner of the second cab when a man, a client of the insurance company, prior to the institution of legal action, came to him and reported that he was involved in a car accident. It was apparent under the circumstances that the man was the owner of the second cab. The state supreme court held that the reports were clearly made to the lawyer in his professional capacity. The court said:

That his employment came about through the fact that the insurance company had hired him to defend its policyholders seems immaterial. The attorney is such cases is clearly the attorney for the policyholder when the policyholder goes to him to report an occurrence contemplating that it would be used in an action or claim against him. 38

xxx xxx xxx

All communications made by a client to his counsel, for the purpose of professional advice or assistance, are privileged, whether they relate to a suit pending or contemplated, or to any other matter proper for such advice or aid; . . . And whenever the communication made, relates to a matter so connected with the employment as attorney or counsel as to afford presumption that it was the ground of the address by the client, then it is privileged from disclosure. . .

It appears . . . that the name and address of the owner of the second cab came to the attorney in this case as a confidential communication. His client is not seeking to use the courts, and his address cannot be disclosed on that theory, nor is the present action pending against him as service of the summons on him has not been effected. The objections on which the court reserved decision are sustained. 39

In the case of Matter  of   Shawmut  Mining  Company, 40 the lawyer involved was required by a lower court to disclose whether he represented certain clients in a certain transaction. The purpose of the court's request was to determine whether the unnamed persons as interested parties were connected with the purchase of properties involved in the action. The lawyer refused and brought the question to the State Supreme Court. Upholding the lawyer's refusal to divulge the names of his clients the court held:

If it can compel the witness to state, as directed by the order appealed from, that he represented certain persons in the purchase or sale of these mines, it has made progress in establishing by such evidence their version of the litigation. As already suggested, such testimony by the witness would compel him to disclose not only that he was attorney for certain people, but that, as the result of communications made to him in the course of such employment as such attorney, he knew that they

were interested in certain transactions. We feel sure that under such conditions no case has ever gone to the length of compelling an attorney, at the instance of a hostile litigant, to disclose not only his retainer, but the nature of the transactions to which it related, when such information could be made the basis of a suit against his client. 41

3) Where the government's lawyers have no case against an attorney's client unless, by revealing the client's name, the said name would furnish the only link that would form the chain of testimony necessary to convict an individual of a crime, the client's name is privileged.

In Baird vs. Korner, 42 a lawyer was consulted by the accountants and the lawyer of certain undisclosed taxpayers regarding steps to be taken to place the undisclosed taxpayers in a favorable position in case criminal charges were brought against them by the U.S. Internal Revenue Service (IRS).

It appeared that the taxpayers' returns of previous years were probably incorrect and the taxes understated. The clients themselves were unsure about whether or not they violated tax laws and sought advice from Baird on the hypothetical possibility that they had. No investigation was then being undertaken by the IRS of the taxpayers. Subsequently, the attorney of the taxpayers delivered to Baird the sum of $12, 706.85, which had been previously assessed as the tax due, and another amount of money representing his fee for the advice given. Baird then sent a check for $12,706.85 to the IRS in Baltimore, Maryland, with a note explaining the payment, but without naming his clients. The IRS demanded that Baird identify the lawyers, accountants, and other clients involved. Baird refused on the ground that he did not know their names, and declined to name the attorney and accountants because this constituted privileged communication. A petition was filed for the enforcement of the IRS summons. For Baird's repeated refusal to name his clients he was found guilty of civil contempt. The Ninth Circuit Court of Appeals held that, a lawyer could not be forced to reveal the names of clients who employed him to pay sums of money to the government voluntarily in settlement of undetermined income taxes, unsued on, and with no government audit or investigation into that client's income tax liability pending. The court emphasized the exception that a client's name is privileged when so much has been revealed concerning the legal services rendered that the disclosure of the client's identity exposes him to possible investigation and sanction by government agencies. The Court held:

The facts of the instant case bring it squarely within that exception to the general rule. Here money was received by the government, paid by persons who thereby admitted they had not paid a sufficient amount in income taxes some one or more years in the past. The names of the clients are useful to the government for but one purpose — to ascertain which taxpayers think they were delinquent, so that it may

19

check the records for that one year or several years. The voluntary nature of the payment indicates a belief by the taxpayers that more taxes or interest or penalties are due than the sum previously paid, if any. It indicates a feeling of guilt for nonpayment of taxes, though whether it is criminal guilt is undisclosed. But it may well be the link that could form the chain of testimony necessary to convict an individual of a federal crime. Certainly the payment and the feeling of guilt are the reasons the attorney here involved was employed — to advise his clients what, under the circumstances, should be done. 43

Apart from these principal exceptions, there exist other situations which could qualify as exceptions to the general rule.

For example, the content of any client communication to a lawyer lies within the privilege if it is relevant to the subject matter of the legal problem on which the client seeks legal assistance. 44 Moreover, where the nature of the attorney-client relationship has been previously disclosed and it is the identity which is intended to be confidential, the identity of the client has been held to be privileged, since such revelation would otherwise result in disclosure of the entire transaction. 45

Summarizing these exceptions, information relating to the identity of a client may fall within the ambit of the privilege when the client's name itself has an independent significance, such that disclosure would then reveal client confidences. 46

The circumstances involving the engagement of lawyers in the case at bench, therefore, clearly reveal that the instant case falls under at least two exceptions to the general rule. First, disclosure of the alleged client's name would lead to establish said client's connection with the very fact in issue of the case, which is privileged information, because the privilege, as stated earlier, protects the subject matter or the substance (without which there would be not attorney-client relationship).

The link between the alleged criminal offense and the legal advice or legal service sought was duly establishes in the case at bar, by no less than the PCGG itself. The key lies in the three specific conditions laid down by the PCGG which constitutes petitioners' ticket to non-prosecution should they accede thereto:

(a) the disclosure of the identity of its clients;

(b) submission of documents substantiating the lawyer-client relationship; and

(c) the submission of the deeds of assignment petitioners executed in favor of their clients covering their respective shareholdings.

From these conditions, particularly the third, we can readily deduce that the clients indeed consulted the petitioners, in their capacity as lawyers, regarding the financial and corporate structure, framework and set-up of the corporations in question. In turn, petitioners gave their professional advice in the form of, among others, the aforementioned deeds of assignment covering their client's shareholdings.

There is no question that the preparation of the aforestated documents was part and parcel of petitioners' legal service to their clients. More important, it constituted an integral part of their duties as lawyers. Petitioners, therefore, have a legitimate fear that identifying their clients would implicate them in the very activity for which legal advice had been sought, i.e., the alleged accumulation of ill-gotten wealth in the aforementioned corporations.

Furthermore, under the third main exception, revelation of the client's name would obviously provide the necessary link for the prosecution to build its case, where none otherwise exists. It is the link, in the words of Baird, "that would inevitably form the chain of testimony necessary to convict the (client) of a . . . crime." 47

An important distinction must be made between a case where a client takes on the services of an attorney for illicit purposes, seeking advice about how to go around the law for the purpose of committing illegal activities and a case where a client thinks he might have previously committed something illegal and consults his attorney about it. The first case clearly does not fall within the privilege because the same cannot be invoked for purposes illegal. The second case falls within the exception because whether or not the act for which the client sought advice turns out to be illegal, his name cannot be used or disclosed if the disclosure leads to evidence, not yet in the hands of the prosecution, which might lead to possible action against him.

These cases may be readily distinguished, because the privilege cannot be invoked or used as a shield for an illegal act, as in the first example; while the prosecution may not have a case against the client in the second example and cannot use the attorney client relationship to build up a case against the latter. The reason for the first rule is that it is not within the professional character of a lawyer to give advice on the commission of a crime.48 The reason for the second has been stated in the cases above discussed and are founded on the same policy grounds for which the attorney-client privilege, in general, exists.

20

In Matter of  Shawmut Mining Co., supra, the appellate court therein stated that "under such conditions no case has ever yet gone to the length of compelling an attorney, at the instance of a hostile litigant, to disclose not only his retainer, but the nature of the transactions to which it related, when such information could be made the basis of a suit against his client." 49 "Communications made to an attorney in the course of any personal employment, relating to the subject thereof, and which may be supposed to be drawn out in consequence of the relation in which the parties stand to each other, are under the seal of confidence and entitled to protection as privileged communications." 50 Where the communicated information, which clearly falls within the privilege, would suggest possible criminal activity but there would be not much in the information known to the prosecution which would sustain a charge except that revealing the name of the client would open up other privileged information which would substantiate the prosecution's suspicions, then the client's identity is so inextricably linked to the subject matter itself that it falls within the protection. The Baird exception, applicable to the instant case, is consonant with the principal policy behind the privilege, i.e., that for the purpose of promoting freedom of consultation of legal advisors by clients, apprehension of compelled disclosure from attorneys must be eliminated. This exception has likewise been sustained in In   re   Grand   Jury   Proceedings 51 and Tillotson v. Boughner. 52 What these cases unanimously seek to avoid is the exploitation of the general rule in what may amount to a fishing expedition by the prosecution.

There are, after all, alternative source of information available to the prosecutor which do not depend on utilizing a defendant's counsel as a convenient and readily available source of information in the building of a case against the latter. Compelling disclosure of the client's name in circumstances such as the one which exists in the case at bench amounts to sanctioning fishing expeditions by lazy prosecutors and litigants which we cannot and will not countenance. When the nature of the transaction would be revealed by disclosure of an attorney's retainer, such retainer is obviously protected by the privilege. 53 It follows that petitioner attorneys in the instant case owe their client(s) a duty and an obligation not to disclose the latter's identity which in turn requires them to invoke the privilege.

In fine, the crux of petitioners' objections ultimately hinges on their expectation that if the prosecution has a case against their clients, the latter's case should be built upon evidence painstakingly gathered by them from their own sources and not from compelled testimony requiring them to reveal the name of their clients, information which unavoidably reveals much about the nature of the transaction which may or may not be illegal. The logical nexus between name and nature of transaction is so intimate in this case the it would be difficult to simply dissociate one from the other. In this sense, the name is as much "communication" as information revealed directly about the transaction in question itself, a communication which is clearly and distinctly privileged. A lawyer cannot reveal

such communication without exposing himself to charges of violating a principle which forms the bulwark of the entire attorney-client relationship.

The uberrimei fidei relationship between a lawyer and his client therefore imposes a strict liability for negligence on the former. The ethical duties owing to the client, including confidentiality, loyalty, competence, diligence as well as the responsibility to keep clients informed and protect their rights to make decisions have been zealously sustained. In Milbank,   Tweed,   Hadley   and   McCloy   v. Boon, 54 the US Second District Court rejected the plea of the petitioner law firm that it breached its fiduciary duty to its client by helping the latter's former agent in closing a deal for the agent's benefit only after its client hesitated in proceeding with the transaction, thus causing no harm to its client. The Court instead ruled that breaches of a fiduciary relationship in any context comprise a special breed of cases that often loosen normally stringent requirements of causation and damages, and found in favor of the client.

To the same effect is the ruling in Searcy, Denney, Scarola, Barnhart, and Shipley P.A. v. Scheller 55 requiring strict obligation of lawyers vis-a-vis clients. In this case, a contingent fee lawyer was fired shortly before the end of completion of his work, and sought payment quantum meruit of work done. The court, however, found that the lawyer was fired for cause after he sought to pressure his client into signing a new fee agreement while settlement negotiations were at a critical stage. While the client found a new lawyer during the interregnum, events forced the client to settle for less than what was originally offered. Reiterating the principle of fiduciary duty of lawyers to clients in Meinhard   v. Salmon 56 famously attributed to Justice Benjamin Cardozo that "Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior," the US Court found that the lawyer involved was fired for cause, thus deserved no attorney's fees at all.

The utmost zeal given by Courts to the protection of the lawyer-client confidentiality privilege and lawyer's loyalty to his client is evident in the duration of the protection, which exists not only during the relationship, but extends even after the termination of the relationship. 57

Such are the unrelenting duties required by lawyers vis-a-vis their clients because the law, which the lawyers are sworn to uphold, in the words of Oliver Wendell Holmes, 58 ". . . is an exacting goddess, demanding of her votaries in intellectual and moral discipline." The Court, no less, is not prepared to accept respondents' position without denigrating the noble profession that is lawyering, so extolled by Justice Holmes in this wise:

Every calling is great when greatly pursued. But what other gives such scope to realize the spontaneous energy of one's soul? In what other does one plunge so

21

deep in the stream of life — so share its passions its battles, its despair, its triumphs, both as witness and actor? . . . But that is not all. What a subject is this in which we are united — this abstraction called the Law, wherein as in a magic mirror, we see reflected, not only in our lives, but the lives of all men that have been. When I think on this majestic theme my eyes dazzle. If we are to speak of the law as our mistress, we who are here know that she is a mistress only to be won with sustained and lonely passion — only to be won by straining all the faculties by which man is likened to God.

We have no choice but to uphold petitioners' right not to reveal the identity of their clients under pain of the breach of fiduciary duty owing to their clients, because the facts of the instant case clearly fall within recognized exceptions to the rule that the client's name is not privileged information.

If we were to sustain respondent PCGG that the lawyer-client confidential privilege under the circumstances obtaining here does not cover the identity of the client, then it would expose the lawyers themselves to possible litigation by their clients in view of the strict fiduciary responsibility imposed on them in the exercise of their duties.

The complaint in Civil Case No. 0033 alleged that the defendants therein, including herein petitioners and Eduardo Cojuangco, Jr. conspired with each other in setting up through the use of coconut levy funds the financial and corporate framework and structures that led to the establishment of UCPB, UNICOM and others and that through insidious means and machinations, ACCRA, using its wholly-owned investment arm, ACCRA Investment Corporation, became the holder of approximately fifteen million shares representing roughly 3.3% of the total capital stock of UCPB as of 31 March 1987. The PCGG wanted to establish through the ACCRA lawyers that Mr. Cojuangco is their client and it was Cojuangco who furnished all the monies to the subscription payment; hence, petitioners acted as dummies, nominees and/or agents by allowing themselves, among others, to be used as instrument in accumulating ill-gotten wealth through government concessions, etc., which acts constitute gross abuse of official position and authority, flagrant breach of public trust, unjust enrichment, violation of the Constitution and laws of the Republic of the Philippines.

By compelling petitioners, not only to reveal the identity of their clients, but worse, to submit to the PCGG documents substantiating the client-lawyer relationship, as well as deeds of assignment petitioners executed in favor of its clients covering their respective shareholdings, the PCGG would exact from petitioners a link "that would inevitably form the chain of testimony necessary to convict the (client) of a crime."

III

In response to petitioners' last assignment of error, respondents alleged that the private respondent was dropped as party defendant not only because of his admission that he acted merely as a nominee but also because of his undertaking to testify to such facts and circumstances "as the interest of truth may require, which includes . . . the identity of the principal." 59

First, as to the bare statement that private respondent merely acted as a lawyer and nominee, a statement made in his out-of-court settlement with the PCGG, it is sufficient to state that petitioners have likewise made the same claim not merely out-of-court but also in the Answer to plaintiff's Expanded Amended Complaint, signed by counsel, claiming that their acts were made in furtherance of "legitimate lawyering." 60Being "similarly situated" in this regard, public respondents must show that there exist other conditions and circumstances which would warrant their treating the private respondent differently from petitioners in the case at bench in order to evade a violation of the equal protection clause of the Constitution.

To this end, public respondents contend that the primary consideration behind their decision to sustain the PCGG's dropping of private respondent as a defendant was his promise to disclose the identities of the clients in question. However, respondents failed to show — and absolute nothing exists in the records of the case at bar — that private respondent actually revealed the identity of his client(s) to the PCGG. Since the undertaking happens to be the leitmotif of the entire arrangement between Mr. Roco and the PCGG, an undertaking which is so material as to have justified PCGG's special treatment exempting the private respondent from prosecution, respondent Sandiganbayan should have required proof of the undertaking more substantial than a "bare assertion" that private respondent did indeed comply with the undertaking. Instead, as manifested by the PCGG, only three documents were submitted for the purpose, two of which were mere requests for re-investigation and one simply disclosed certain clients which petitioners (ACCRA lawyers) were themselves willing to reveal. These were clients to whom both petitioners and private respondent rendered legal services while all of them were partners at ACCRA, and were not the clients which the PCGG wanted disclosed for the alleged questioned transactions. 61

To justify the dropping of the private respondent from the case or the filing of the suit in the respondent court without him, therefore, the PCGG should conclusively show that Mr. Roco was treated as species apart from the rest of the ACCRA lawyers on the basis of a classification which made substantial distinctions based on real differences. No such substantial distinctions exist from the records of the case at bench, in violation of the equal protection clause.

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The equal protection clause is a guarantee which provides a wall of protection against uneven application of status and regulations. In the broader sense, the guarantee operates against uneven application of legal norms sothat all persons under similar circumstances would be accorded the same treatment. 62 Those who fall within a particular class ought to be treated alike not only as to privileges granted but also as to the liabilities imposed.

. . . What is required under this constitutional guarantee is the uniform operation of legal norms so that all persons under similar circumstances would be accorded the same treatment both in the privileges conferred and the liabilities imposed. As was noted in a recent decision: "Favoritism and undue preference cannot be allowed. For the principle is that equal protection and security shall be given to every person under circumstances, which if not identical are analogous. If law be looked upon in terms of burden or charges, those that fall within a class should be treated in the same fashion, whatever restrictions cast on some in the group equally binding the rest. 63

We find that the condition precedent required by the respondent PCGG of the petitioners for their exclusion as parties-defendants in PCGG Case No. 33 violates the lawyer-client confidentiality privilege. The condition also constitutes a transgression by respondents Sandiganbayan and PCGG of the equal protection clause of the Constitution. 64 It is grossly unfair to exempt one similarly situated litigant from prosecution without allowing the same exemption to the others. Moreover, the PCGG's demand not only touches upon the question of the identity of their clients but also on documents related to the suspected transactions, not only in violation of the attorney-client privilege but also of the constitutional right against self-incrimination. Whichever way one looks at it, this is a fishing expedition, a free ride at the expense of such rights.

An argument is advanced that the invocation by petitioners of the privilege of attorney-client confidentiality at this stage of the proceedings is premature and that they should wait until they are called to testify and examine as witnesses as to matters learned in confidence before they can raise their objections. But petitioners are not mere witnesses. They are co-principals in the case for recovery of alleged ill-gotten wealth. They have made their position clear from the very beginning that they are not willing to testify and they cannot be compelled to testify in view of their constitutional right against self-incrimination and of their fundamental legal right to maintain inviolate the privilege of attorney-client confidentiality.

It is clear then that the case against petitioners should never be allowed to take its full course in the Sandiganbayan. Petitioners should not be made to suffer the effects of further litigation when it is obvious that their inclusion in the complaint arose from a privileged attorney-client relationship and as a means of coercing

them to disclose the identities of their clients. To allow the case to continue with respect to them when this Court could nip the problem in the bud at this early opportunity would be to sanction an unjust situation which we should not here countenance. The case hangs as a real and palpable threat, a proverbial Sword of Damocles over petitioners' heads. It should not be allowed to continue a day longer.

While we are aware of respondent PCGG's legal mandate to recover ill-gotten wealth, we will not sanction acts which violate the equal protection guarantee and the right against self-incrimination and subvert the lawyer-client confidentiality privilege.

WHEREFORE, IN VIEW OF THE FOREGOING, the Resolutions of respondent Sandiganbayan (First Division) promulgated on March 18, 1992 and May 21, 1992 are hereby ANNULLED and SET ASIDE. Respondent Sandiganbayan is further ordered to exclude petitioners Teodoro D. Regala, Edgardo J. Angara, Avelino V. Cruz, Jose C. Concepcion, Victor P. Lazatin, Eduardo U. Escueta and Paraja G. Hayuduni as parties-defendants in SB Civil Case No. 0033 entitled "Republic of the Philippines v. Eduardo Cojuangco, Jr., et al."

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

THIRD DIVISION

A.C. No. 4566 December 10, 2004

UNITY FISHING DEVELOPMENT CORPORATION, complainant, vs.ATTY. DANILO G. MACALINO, respondent.

R E S O L U T I O N

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GARCIA, J.:

Under consideration is this petition by way of a complaint for disbarment filed by Unity Fishing Development Corporation against Atty. Danilo Macalino for having violated Canon 16 of the Code of Professional Responsibility.

In its resolution of June 26, 1996, the Court required respondent to comment on the complaint within ten (10) days from notice.1

On July 26, 1996, respondent filed a motion for extension of thirty (30) days within which to file comment,2 which motion was granted by the Court in its resolution of August 21, 1996.3

On August 26, 1996, respondent filed another motion for extension, this time for an additional period of fifteen (15) days.4 The motion was similarly granted by the Court in its resolution of October 7, 1996.5

Still, on September 19, 1996, respondent filed a third and "last extension of time to file comment".6 Again, this was granted by the Court via its resolution of November 27, 1996.7

Unfortunately, no comment was ever filed by respondent.

Hence, and taking note of complainant’s "Motion to Conduct Further Proceedings", filed on March 23, 1998,8 the Court, in its resolution of April 27, 1998,9 referred the case to the Integrated Bar of the Philippines (IBP), for investigation, report and recommendation.

Acting on the referral, the IBP Commission on Bar Discipline designated Atty. Cesar R. Dulay as investigating commissioner.

It appears, however, that even while the case was already under formal investigation, respondent displayed the same attitude of lack of concern. As reported by Atty. Dulay:

The Commission issued a notice setting the case for hearing on October 8, 1998, at which hearing complainant represented by its legal counsel and respondent appeared. Again, respondent asked for fifteen days from October 8, 1998 to file his Answer. Complainant also asked the same period within which to file his reply.

On November 5, 1998, respondent filed an urgent motion for extension of time to file answer.

On November 9, 1998, respondent again filed an urgent motion for last extension of time or a period of fifteen (15) days from November 15, 1998 to file answer, which was granted by the Commission.

Since the respondent has not filed his answer as required by the Honorable Supreme Court and the Commission, the case was again set for hearing on November 9, 1999.

On said date, only the counsel for complainant appeared. Respondent was absent. However, records show the notice sent to him was returned unserved with the annotation "Moved." Records also show that respondent has not filed his answer and again he was given a last chance to file his answer within ten (10) days from receipt of the Order dated November 9, 1999 and the hearing of the case was reset to December 9, 1999.

On December 9, 1999, only counsel for complainant appeared and moved that respondent’s right to file answer be deemed waived and that complainant be allowed to file Memorandum after which, the case shall be deemed submitted for resolution.

On December 14, 1999, respondent again filed an Urgent Motion for Extension of fifteen (15) days from December 4, 1999 within which to file his answer.

On January 7, 2000, the complainant filed a Memorandum, a copy of which was furnished to respondent and which was not controverted by respondent.

All told, respondent filed six (6) motions for extension of time to file Answer and up to this time, which is almost seven (7) years from the time the Honorable Supreme Court required respondent to file his answer to the complaint, respondent has not filed any answer,10

on account of which the investigating commissioner considered the case as "now ready for resolution".11

Thereafter, the investigating commissioner submitted his Report. Dated January 20, 2003,12 the Report recites the factual background of the case and the commissioner’s discussion and findings thereon, thus:

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"Frabal Fishing and Ice Plant Corporation (hereinafter, Frabal) was the owner of a parcel of land located along Ramon Magsaysay Boulevard, Sta. Mesa, Manila which was leased to Wheels Distributors, Inc. (hereinafter, Wheels), an authorized dealer of cars and motor vehicles of various make;

A dispute arose between Frabal and Wheels regarding the terms and conditions of the lease contract. The dispute eventually led to a lawsuit. Frabal hired the services of respondent Atty. Danilo G. Macalino as counsel for the purpose of representing its interest in the said lawsuit;

Frabal merged and was absorbed by Petitioner corporation on February 12, 1991, with the former conveying, assigning and transferring all its business assets and liabilities to the latter, including all judicial and extra-judicial claims. Hence, Petitioner was substituted in lieu of Frabal in the former’s lawsuit with Wheels;

As Petitioner’s legal counsel, Respondent advised Petitioner to severe all contractual relationship with Wheels as a step towards eventually evicting the latter from the property they were occupying;

Hence, upon advice of Respondent, the contract of lease between Frabal and Wheels was terminated. Respondent likewise advised Petitioner to return the guarantee deposit equivalent to two (2) months rental or the amount of P50,000.00 to Wheels;

On March 2, 1988, Petitioner prepared Metrobank Check No. MB350288 dated March 8, 1988 for the amount of P50,000.00. The check was crossed and made payable to the Wheels Distributors, Inc. (Annex "A").

Respondent volunteered to bring the check to the office of Wheels himself and to make them accept it. Hence, on March 3, 1988, Respondent sent his representative to Petitioner’s office to get the said check;

Respondent’s representative duly received the said check from Petitioner, as proof of which he signed Check Voucher No. 3-012 (Annex "B");

Thereafter, Respondent represented to Petitioner that he was able to deliver the check to Wheels Distributors, Inc.;

The suit between Petitioner and Wheels continued for several years. In the meantime, Petitioner changed counsels, replacing Respondent with someone else;

Finally, sometime in May 1994, the suit ended in amicable settlement. In the process of negotiating the terms and conditions of the settlement, Wheels informed Petitioner that it never received therefund (sic) guarantee deposit in the amount of P50,000.00;

Petitioner was shocked to learn this piece of information from Wheels Distributors as all along Respondent had represented to Petitioner that Wheels has already received the guarantee deposit of P50,000.00;

Petitioner searched its files for the subject check. After locating the check, Petitioner noted that at the back of the check was a rubber stamp marking indicating that it was deposited with the United Savings Bank Head Office on May 13, 1988 to Account No. CA-483-3. United Savings Bank has since been acquired by the United Coconut Planters Bank (UCPB) and is now known as UCPB Savings Bank;

Petitioner checked with Wheels Distributors from whom it later learned that the latter never maintained an account with the United Savings Bank, now the UCPB Savings Bank;

Petitioner wrote to Respondent on May 19, 1994 to explain why the check in issue never reached Wheels Distributors and how it was endorsed and encashed despite the fact that it was a crossed check (Copy of said letter is Annex "C");

Despite receipt of said letter, however, Respondent never responded nor attempted to explain his side to what strongly appears to be a gross misappropriation of the money for his own personal use;

Hence, Petitioner was constrained to institute an action for damages against Respondent Danilo G. Macalino as well as UCPB Savings Bank with the Regional Trial Court of Malabon, Branch 72 where the same is now docketed as Civil Case No. 2382-MN;

That Respondent misappropriated the amount of P50,000.00 for his own personal use cannot be denied. An employee of UCPB in the person of Eduardo Estremadura testified in the aforestated case for damages that Respondent Atty. Danilo G. Macalino was the one maintaining Account No. CA-483-37 at UCPB, to which the crossed check payable to Wheels was deposited (TSN, p. 8, Aug. 24, 1995, copy of the TSN is Annex "D");

The Metrobank Check No. MB350288 dated March 8, 1988 for the amount of P50,000.00 was deposited to Respondent’s account is further shown in United Savings Bank Current Account Deposit Slip accomplished by Respondent when he

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deposited said check with United Savings Bank on May 13, 1988 (Copy of said deposit slip is Annex "E").

DISCUSSION AND FINDINGS:

Respondent Atty. Danilo G. Macalino was given all the opportunity to answer and present his defenses to the complaint. Regrettably, the records show that despite the orders of the Supreme Court and this Commission respondent has not taken any step to verify and inquire as to the status of the complaint against him. Almost three years since the submission of the complainant’s memorandum, respondent has not reacted nor made any move to protect himself and answer the complaint. Due process consists in being given the opportunity to be heard and we believe that in this case respondent has been given all the opportunity to be heard.

On the basis of the above, the investigating commissioner concluded his Report with the following -

RECOMMENDATION

WHEREFORE, it is respectfully recommended that respondent be suspended from the practice of law for two (2) years and be ordered to account to complainant the amount of P50,000.00. Respondent should be warned that a similar offense will merit a more severe penalty.13

On June 21, 2003, the IBP Board of Governors passed Resolution No. XV-2003-341,14 adopting and approving the report and recommendation of the investigating commissioner with a modification as to the penalty, to wit:

RESOLVED to ADOPT and APPROVE, as it is hereby ADOPTED, the Report and Recommendation of the Investigating Commissioner of 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, with modification as to the penalty to conform to the evidence, and considering respondent’s failure to account for the funds received by him in trust from complainant in gross violation of Canon 16 of the Code of Professional Responsibility, as well as for respondent’s lax, remiss and untroubled attitude in this case, Atty. Danilo G. Macalino is hereby SUSPENDED from the practice of law for one (1) year and Ordered to account to complainant the amount of P50,000.00 with a Warning that a similar offense will merit a more severe penalty.

This resolution is now before us for confirmation.

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".15 So it is that the Code of Professional Responsibility provides:

CANON 16 - A LAWYER SHALL HOLD IN TRUST ALL MONEYS AND PROPERTIES OF HIS CLIENT THAT MAY COME INTO HIS POSSESSION.

Rule 16.01 - A lawyer shall account for all money or property collected or received for or from the client.

Rule 16.02 - A lawyer shall keep the funds of each client separate and apart from his own and those of others kept by him.

Rule 16.03 - A lawyer shall deliver the funds and property of his client when due or upon demand. However, he shall have a lien over the funds and may apply so much thereof as may be necessary to satisfy his lawful fees and disbursements, giving notice promptly thereafter to his client. He shall also have a lien to the same extent on all judgments and executions he has secured for his client as provided for in the Rules of Court.

The Canon of Professional Ethics is even more explicit when it states:

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

Money of the client or 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. (par. 11)

Here, we are in full accord with the findings, conclusion and recommendation of the IBP Board of Governors that respondent misappropriated the money entrusted to him and which he failed to account for to his client despite demand therefor.

Respondent’s failure to rebut complainant’s evidence clearly reveals his failure to live up to his duties as a lawyer in consonance with the lawyer’s oath and the Code of Professional Responsibility. His repeated failure without any valid reason to comply with the orders of the Court requiring him to comment on the complaint lends credence to the allegations thereof and manifests his tacit admission of the same. As aptly found by Commissioner Dulay, the following uncontroverted facts as supported by the annexes of the complaint had been established:

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"1. that Metrobank Check No. MB350288 in the amount of P50,000.00 payable to Wheels Distributors (Annex ‘A’ of Petition) was prepared by Frabal Fishing & Ice Plant Corporation (Annex ‘B’ Petition) and released to respondent’s representative;

2. that the said Metrobank Check No. [MB350288] was deposited to Account No. 0110004833 under Account Name Danilo G. Macalino at the United Savings Bank (Annex "E" of Petition);

3. that on 19 May 1994 complainant wrote a letter to respondent (Annex ‘C’ of Petition) advising the latter that the Metrobank Check intended for Wheel Distributors, Inc. was not received by them (Wheels Distributors) yet it was endorsed and encashed. Respondent was therefore requested to explain how the particular check was encashed. Respondent received the letter on May 23, 1994 (Annex ‘C-3’ of Petition) and the records do not show that respondent replied to the latter requiring him to explain; and

4. that complainant filed a civil case against UCPB Savings Bank, and Danilo Macalino before the Regional Trial Court of Malabon, Metro Manila docketed as Civil Case No. 2382-MN (Annex ‘D’ of Petition) and at the hearing of said case on August 24, 1995, witness Eduardo Estremadura, a bookeeper of UCPB Bank positively testified that Danilo G. Macalino was the maintainer of Account No. CA-483-3 of the UCPB Savings Bank, Legaspi Branch (page 8 & 9 Annex ‘D’, TSN of hearing of Civil Case No. 2382-MN) and that Check No. 350288 was deposited to the Account of Danilo G. Macalino under CA-483-3 on May 13, 1988 (page 9 of Annex ‘D’, TSN of hearing); and was credited to the account of Danilo G. Macalino (page 12 of Annex ‘D’, TSN of hearing of Civil Case No. 2382-MN)"16,

from which established facts, the investigating commissioner made the following conclusions:

"1. that Metrobank Check No. 350288 in the amount of P50,000.00 which was intended for Wheels Distributors, Inc. was deposited and the amount credited to Account No. 483-3 of respondent Danilo G. Macalino with the UCPB Savings Bank.

2. that respondent when required by the complainant to explain and account for the amount of P50,000.00 caused by Metrobank Check No. 350288 which was not intended for him failed to reply and give any accounting of such funds to complainant".17

Respondent’s wanton failure to make an accounting and to return to his client the amount entrusted to him upon demand give rise to the presumption that he misappropriated it, in violation of the trust and confidence reposed on him. His act

of holding on to complainant’s money without its acquiescence is conduct indicative of lack of integrity and propriety.18 A lawyer, under his oath, pledges himself not to delay any man for money and is bound to conduct himself with all good fidelity to his client.19

It is clear, therefore, that respondent, by depositing the check in his own account and subsequently deceiving his client into believing that he delivered the same to Wheels is undoubtedly guilty of deceit, malpractice, gross misconduct and unethical behavior. He caused dishonor, not merely to himself but to the noble profession to which he belongs. For, it cannot be denied that the respect of litigants to the profession is inexorably diminished whenever a member of the Bar betrays their trust and confidence.20 Like judges, lawyers must not only be clean; they must also appear clean. This way, the people’s faith in the justice system remains undisturbed.21

What is more, respondent’s repeated failures to comply with the orders of the Court requiring him to comment on the complaint indicate a high degree of irresponsibility on his part.

We have no hesitance, then, in confirming the resolution passed by the IBP Board of Governors suspending respondent from the practice of law for one (1) year. We could have taken a more drastic action against respondent, but considering that he has no prior administrative record, it is our sentiment that the recommended penalty serves the purpose of protecting the interest of the public and the legal profession. After all, in Espiritu vs. Cabredo,22 we imposed the same penalty on an attorney who similarly failed to account the money received from his client and to restitute it without any reason.

WHEREFORE, Atty. Danilo G. Macalino is hereby declared guilty of violation of Canon 16 of the Code of Professional Responsibility, for his failure to immediately return and deliver the funds of his former client upon demand, and is hereby SUSPENDED from the practice of law for a period of one (1) year effective immediately, with a STERN WARNING that a repetition of the same or similar acts shall be dealt with more severely. He is likewise ordered to return the sum of P50,000 to complainant within ten (10) hereof.

Let copies of the Resolution be entered into respondent’s record as an attorney and be furnished the Integrated Bar of the Philippines (IBP) and all the courts in the country for their information and guidance.

SO ORDERED.

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Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

Adm. Case No. 5020 December 18, 2001

ROSARIO JUNIO, complainant, vs.ATTY. SALVADOR M. GRUPO, respondent.

MENDOZA, J.:

This is a complaint for disbarment filed against Atty. Salvador M. Grupo for malpractice and gross misconduct.

Complainant Rosario N. Junio alleged that —

3. Sometime in 1995, [she] engaged the services of [respondent], then a private practitioner, for the redemption of a parcel of land covered by Transfer Certificate of Title No. 20394 registered in the name of her parents, spouses Rogelio and Rufina Nietes, and located at Concepcion, Loay, Bohol.

4. On 21 August 1995, [complainant] entrusted to [respondent] the amount of P25,000.00 in cash to be used in the redemption of the aforesaid property. Respondent received the said amount as evidenced by an acknowledgment receipt, a copy of which is being hereto attached as Annex "A".

5. Notwithstanding the foregoing and for no valid reason, respondent did not redeem the property; as a result of which the right of redemption was lost and the property was eventually forfeited.

6. Because of respondent's failure to redeem the property, complainant had demanded [the] return of the money which she entrusted to the former for the above-stated purpose.

7. Despite repeated demands made by the complainant and without justifiable cause, respondent has continuously refused to refund the money entrusted to him.1

In his Answer, petitioner admitted receiving the amount in question for the purpose for which it was given. However, he alleged that —

6. The subject land for which the money of complainant was initially intended to be applied could really not be redeemed anymore . .;

7. Complainant knew the mortgage agreement between her parents and the mortgage-owner had already expired, and what respondent was trying to do was a sort of [a] desperate, last-ditch attempt to persuade the said mortgagee to relent and give back the land to the mortgagors with the tender of redemption; but at this point, the mortgagee simply would not budge anymore. For one reason or another, he would no longer accept the sum offered;

8. By the time that complainant was to return to Manila, it was already a foregone matter that respondent's efforts did not succeed. And so, when transaction failed, respondent requested the complainant that he be allowed, in the meantime, to avail of the money because he had an urgent need for some money himself to help defray his children's educational expenses. It was really a personal request, a private matter between respondent and complainant, thus, respondent executed a promissory note for the amount, a copy of which is probably still in the possession of the complainant.

9. . . . [T]he family of the complainant and that of the respondent were very close and intimate with each other. Complainant, as well as two of her sisters, had served respondent's family as household helpers for many years when they were still in Manila, and during all those times they were treated with respect, affection, and equality. They were considered practically part of respondent's own family.

That is why, when complainant requested . . . assistance regarding the problem of the mortgaged property which complainant wanted to redeem, respondent had no second-thoughts in extending a lending hand . . . .

Respondent did not ask for any fee. His services were purely gratuitous; his acts [were] on his own and by his own. It was more than pro bono; it was not even for charity; it was simply an act of a friend for a friend. It was just lamentably unfortunate that his efforts failed.

xxx xxx xxx

Of course, respondent accepts his fault, because, indeed, there were occasions when complainant's sisters came to respondent to ask for the payment in behalf of complainant, and he could not produce the money because the circumstances

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somehow, did not allow it. [I]t does not mean that respondent will not pay, or that he is that morally depraved as to wilfully and deliberately re[nege] in his obligation towards the complainant.2

Complainant filed a reply denying that respondent informed her of his failure to redeem the property and that respondent requested her to instead lend the money to him.3

The case was thereafter referred to the Integrated Bar of the Philippines (IBP) for investigation, report, and recommendation. However, while two hearings were set for this purpose, both were postponed at the instance of respondent. For this reason, on August 28, 2000, complainant asked the Investigating Commissioner4 to consider the case submitted for decision on the basis of the pleadings theretofore filed. Respondent was required to comment on complainant's motion, but he failed to do so. Consequently, the case was considered submitted for resolution.

In his report, dated January 5, 2001, the Investigating Commissioner found respondent liable for violation of Rule 16.04 of the Code of Professional Responsibility which forbids lawyers from borrowing money from their clients unless the latter's interests are "protected by the nature of the case or by independent advice." The Investigating Commissioner found that respondent failed to pay his client's money. However, in view of respondent's admission of liability and "plea for magnanimity," the Investigating Commissioner recommended that respondent be simply reprimanded and ordered to pay the amount of P25,000.00 loan plus interest at the legal rate.

In its Resolution No. XIV-2001-183, dated April 29, 2001, the IBP Board of Governors adopted and approved the Investigating Commissioner's findings. However, it ordered —

[R]espondent . . . suspended indefinitely from the practice of law for the commission of an act which falls short of the standard of the norm of conduct required of every attorney and . . . ordered [him] to return to the complainant the amount of P25,000.00 plus interest at the legal rate from the time the said amount was misappropriated, until full payment; provided that the total suspension shall be at least one (1) year from the date of said full payment

On July 4, 2001, respondent filed a motion for reconsideration alleging that —

(a) there was no actual hearing of the case wherein respondent could have fully ventilated and defended his position;

(b) the subject Resolution gravely modified the Report and Recommendation of the Trial Commissioner, Hon. Pedro Magpayo, Jr., . . . such that the resultant sanctions that are ordered imposed are too leonine, unjust and cruel;

(c) that the factual circumstances attending the matter which gave rise to the complaint were not rightly or fairly appreciated.5

He argues that the Court should adopt the report and recommendation of the IBP Investigating Commissioner.

In its resolution of August 15, 2001, the Court resolved to treat respondent's motion for reconsideration as a petition for review of IBP Resolution No. XIV 2001-183 and required complainant to comment on the petition.

In her comment, complainant states that her primary interest is to recover the amount of P25,000.00 with interest and that she is leaving it to the Court to decide whether respondent deserves the penalty recommended by the IBP.6

The Court resolves to partially grant the petition. In his report and recommendation, Investigating Commissioner Magpayo, Jr. made the following findings:

In his Answer, the respondent ADMITS all the allegations in paragraph 4 of the complaint which avers:

4. On 21 August 1995, complainant entrusted to respondent the amount of P25,000.00 in cash to be used in the redemption of the aforesaid property (parcel of land covered by TCT No. 20394 registered in the name of complainant's parents located at Concepcion, Loay, Bohol). Respondent received the said amount as evidenced by an acknowledgment receipt (Annex A).

By way of confession and avoidance, the respondent, . . . however, contended that when the mortgagee refused to accept the sum tendered as the period of redemption had already expired, he requested the complainant to allow him in the meantime to use the money for his children's educational expenses[,] to which request the complainant allegedly acceded and respondent even executed a promissory note (please see 4th par. of Annex "B" of complaint).

Respondent takes further refuge in the intimate and close relationship existing between himself and the complainant's family on the basis of which his legal services were purely gratuitous or "simply an act of a friend for a friend" with "no consideration involved." Unfortunately, his efforts to redeem the foreclosed

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property, as already stated, did not produce the desired result because the mortgagee "would not budge anymore" and "would not accept the sum offered."

Thus, the respondent concluded that there was, strictly speaking, no attorney-client [relationship] existing between them. Rather, right from the start[,] everything was sort of personal, he added.

Granting to the respondent the benefit of the doubt, we shall assume that there was in reality a loan in the amount of P25,000.00. This is likewise confirmed by the execution of a promissory note on 12 December 1996 by the respondent who "undertook to pay Mrs. Junio on or before January 1997" (Annex B of complaint). Moreover, the demand letter of 12 March 1998 (Annex B) mentions of "reimbursement of the sum received" and interest of "24% per annum until fully paid" giving the impression that the funds previously intended to be used for the repurchase of a certain property (Annex A of complaint) was converted into a loan with the consent of the complainant who gave way to the request of the respondent "to help defray his children's educational expenses" (par. 8 of Answer).

Be that as it may, the duty and obligation to repay the loan remains unshaken. Having utilized the sum to fulfill his "urgent need for some money," it is but just and proper that he return the amount borrowed together with interest.

Five (5) years had already passed since respondent retained the cash for his own personal use. But notwithstanding the same and his firm promise "to pay Mrs. Junio on or before January 1997" he has not demonstrated any volition to settle his obligation to his creditor[,] although admittedly "there w[ere] occasions when complainant's sister came to respondent to ask for the payment in behalf of complainant," worse, "the passage of time made respondent somehow forgot about the obligation."

A lawyer shall not borrow money from his client unless the client's interests are fully protected by the nature of the case or by independent advice (Rule 16.04, Code of Professional Responsibility). This rule is intended to prevent the lawyer from taking advantage of his influence over the client.

This rule is especially significant in the instant case where the respondent enjoys an immense ascendancy over the complainant who, "as well as two of his sisters, had served respondent's family as household helpers for many years."

Having gained dominance over the complainant by virtue of such long relation of master and servant, the respondent took advantage of his influence by not returning the money entrusted to him. Instead, he imposed his will on the

complainant and borrowed her funds without giving adequate security therefor and mindless of the interest of the complainant

In the light of the foregoing, . . . respondent has committed an act which falls short of the standard of the norm of conduct required of every attorney. If an ordinary borrower of money is required by the law to repay the loan failing which he may be subjected to court action, it is more so in the case of a lawyer whose conduct serves as an example.7

It would indeed appear from the records of the case that respondent was allowed to borrow the money previously entrusted to him by complainant for the purpose of securing the redemption of the property belonging to complainant's parents. Respondent, however, did not give adequate security for the loan and subsequently failed to settle his obligation. Although complainant denied having loaned the money to respondent, the fact is that complainant accepted the promissory note given her by respondent on December 12,1996. In effect, complainant consented to and ratified respondent's use of the money. It is noteworthy that complainant did not attach this promissory note to her complaint nor explain the circumstances surrounding its execution. She only mentioned it in her demand letter of March 12, 1998 (Annex B), in which she referred to respondent's undertaking to pay her the P25,000.00 on or before January 1997. Under the circumstances and in view of complainant's failure to deny the promissory note, the Court is constrained to give credence to respondent's claims that the money previously entrusted to him by complainant was later converted into a loan.

Respondent's liability is thus not for misappropriation or embezzlement but for violation of Rule 16.04 of the Code of Professional Responsibility which forbids lawyers from borrowing money from their clients unless the latter's interests are protected by the nature of the case or by independent advice. In this case, respondent's liability is compounded by the fact that not only did he not give any security for the payment of the amount loaned to him but that he has also refused to pay the said amount. His claim that he could not pay the loan "because circumstances . . . did not allow it" and that, because of the passage of time, "he somehow forgot about his obligation" only underscores his blatant disregard of his obligation which reflects on his honesty and candor. A lawyer is bound to observe candor, fairness, and loyalty in all his dealings and transactions with his client.8

Respondent claims that complainant is a close personal friend and that in helping redeem the property of complainant's parents, he did not act as a lawyer but as a friend, hence there is no client-attorney relationship between them. This contention has no merit. As explained in Hilado v. David,9

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To constitute professional employment it is not essential that the client should have employed the attorney professionally on any previous occasion . . .   It   is   not necessary   that   any   retainer   should   have   been   paid.   promised,   or   charged   for; neither is it material that the attorney consulted did not afterward undertake the case about which the consultation was had. If a person, in respect to his business affairs or troubles of any kind, consults with his attorney in his professional capacity with   the   view   to   obtaining   professional   advice   or   assistance,   and   the   attorney voluntarily   permits   or   acquiesces   in   such   consultation,   then   the   professional employment must be regarded as established . . .

Considering the foregoing, the Investigating Commissioner's recommendation to impose on respondent the penalty of reprimand and restitution of the amount loaned by him is clearly inadequate. On the other hand, the penalty of indefinite suspension with restitution imposed by the IBP Board of Governors is too harsh in view of respondent's apparent lack of intent to defraud complainant and of the fact that this appears to be his first administrative transgression. It is the penalty imposed in Igual   v.   Javier10 which applies to this case. In that case, this Court ordered the respondent suspended for one month from the practice of law and directed him to pay the amount given him by his clients within 30 days from notice for his failure to return the money in question notwithstanding his admission that he did not use the money for the filing of the appellee's brief, as agreed by them, because of an alleged quarrel with his clients.

Anent petitioner's allegation regarding the lack of hearing during the IBP investigation, suffice it to say that he waived such right when he failed to comment on petitioner's motion to submit the case for resolution on the basis of the pleadings theretofore filed despite due notice to him, not to mention the fact that it was he who had requested the postponement of the two hearings scheduled by the Investigating Commissioner.

WHEREFORE, the Court finds petitioner guilty of violation of Rule 16.04 of the Code of Professional Responsibility and orders him suspended from the practice of law for a period of one (1) month and to pay to respondent, within 30 days from notice, the amount of P25,000.00 with interest at the legal rate, computed from December 12, 1996.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

A.M. No. 2662-CFI November 25, 1982 FLAVIANO A. PELMOKA, complainant, vs.FELIX T. DIAZ, JR., Court of First Instance of Nueva Ecija, Branch IV, respondent.

ABAD SANTOS, J.:

In a verified complaint dated December 4, 1981, Flaviano A. Pelmoka charged Judge Felix T. Diaz, Jr. of the Court of First Instance of Nueva Ecija and Attorneys Facundo T. Bautista and Inocencio B. Garampil, Sr. with serious misconduct in connection with Civil Case No. 279-G, entitled Eustacio Nepomuceno, et al. vs. Ester Garampil, et al.

The charge against Judge Diaz is for gross ignorance of the law and judicial proceedings; failure to protect the complainant's charging lien as one of the lawyers who intervened in the aforementioned civil case; and partiality, bias prejudice or malicious motive.

This decision concerns Judge Diaz only who was required to file an answer to the complaint. The answer denies the allegations of the complaint with a prayer that it be dismissed. The complainant filed a reply to the answer and issues having been joined, it was ascertained that the case could be decided on the basis of the documentary evidence submitted without resorting to a formal hearing.

The Rollo of the case reveals, according to Deputy Court Administrator Romeo D. Mendoza, the following:

Civil Case No. 279-G was a case for partition and reconveyance filed with the CFI of Nueva Ecija, Branch IV, on March 4, 1972, long before respondent judge was appointed to the Bench. When the respondent judge inherited the case in 1976, there were many side issues and/or incidents pending to be resolved, among which were: (a) Motion to exclude defendant Ester Garampil as an heir of the late Leon Arguelles; and (b) Motion for appointment of commissioners to partition the properties, both filed by herein complainant. Respondent judge issued an order denying the motion of the plaintiffs for exclusion of defendant Ester Garampil as heir so as to avoid the piecemeal adjudication of the issues raised in the case. (p. 74.) The motion of the plaintiffs for the appointment of commissioners was likewise denied by respondent judge for the reason that there was then pending before the

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Court of Appeals, an appeal involving the same parties and the same properties whereby the legality of a Deed of Donation concerning the same properties being litigated, is the very issue to be resolved. (p. 75.) It was for this reason that respondent judge held in abeyance the trial of Civil Case No. 279-G pending termination of the appeal before the Court of Appeals. (p. 80.)

On May 4, 1981, a Motion to set the case for conference among the parties, was filed by defendants Serranos, Rigors and Garcias who were represented by Atty. Facundo T. Bautista. After a hearing on the aforesaid motion was held, the defendants moved for the approval of the "Compromise Agreement" dated July 1, 1981, which was signed by all the parties to the case (except defendant Ester Garampil), as well as by all the lawyers of the said parties, namely, complainant himself, representing the plaintiffs, Atty. Facundo Bautista, representing the defendants, and Atty. Inocencio Garampil, representing defendant Ester Garampil. (pp. 89-94.) The parties agreed that they would partition the properties being litigated in the manner specified in the "Compromise Agreement" and that they would be separately responsible for the payment of the fees of their respective lawyers. On September 21, 1981, the respondent judge issued a decision approving the said compromise agreement on July 1, 1981. (pp. 97-100.)

Defendant Ester Garampil thereafter filed a motion to deposit in court, the purchase price of a commercial property in the amount of P250,000.00 in order that the proceeds thereof may be disposed of in accordance with the approved compromise agreement. Complainant then filed a motion for the payment of his professional fee in the amount of P57,519.00, (pp. 104-105.) which was later raised to P79,186.00 in two subsequent motions of the complainant. (pp. 113-119.)

On October 22, 1981, defendant Ester Garampil filed a motion for the withdrawal of the sum of P20,060.00 (p.109.) from the amount deposited with the court, representing partial payment of her share in the estate pursuant to the expressed agreement of the heirs of the deceased contained in the compromise agreement, which motion was granted by the respondent judge. (p.110.) The other parties thereafter moved to withdraw their respective shares in the cash deposit with the court, and on the basis of the said motions, respondent judge issued the Order dated October 30, 1981, allowing the defendants to withdraw their shares; (p.120.) and the Order dated November 20, 1981, granting the request of the other parties for the withdrawal of their respective shares. (pp. 135-137.)

In his complaint, complainant charged respondent judge with gross ignorance of the law and judicial proceedings committed in the following manner: (a) unduly delaying the disposition of Civil Case No. 279-G when respondent judge denied plaintiffs' motion for the appointment of commissioners to partition the properties; (b) not resolving plaintiffs' motion to exclude defendant Ester Garampil as heir of

deceased Leon Arguelles despite early pronouncement of Judge Placido Ramos, respondent judge's predecessor, that Ester Garampil is not an heir of the deceased; (c) approving the compromise agreement of partition entered into by all the parties; (d) allowing Ester Garampil to withdraw the amount of P20,000.00 from the cash deposit, with the court, considering that she is not an heir of the deceased; and (e) ignoring complainant's motion for payment of his fees out of the money deposited with the court.

The complainant further alleged that the respondent judge failed to protect his charging lien for his attorney's fees when he allowed plaintiffs to withdraw their share from the said deposit. He likewise charged respondent judge with bias and partiality when he allowed all the parties to withdraw their respective shares while the complainant was not allowed to do the same in so far as his charging lien is concerned.

Respondent judge, in his Answer dated January 13, 1982, (pp. 62-71.) denied all the charges in the complaint. The respondent judge alleged that Civil Case No. 279-G was a case for reconveyance and partition of the estate of deceased Leon Arguelles which had been heard and tried by no less than four (4) judges before him. When he inherited the case in 1976, there were several side issues and/or incidents pending to be resolved and while all these side issues were pending before the court a quo, an appeal involving the same parties and the same properties being litigated, was then pending before the Court of Appeals. It was for this reason that the respondent judge denied complainant's motion for appointment of a commissioner as well as his motion to exclude defendant Ester Garampil as an heir.

Respondent judge also stated that he allowed the parties, including defendant Ester Garampil who is not a compulsory heir, to withdraw their respective shares from the cash portion of the estate in order to implement the compromise agreement entered into by all the parties and their respective lawyers.

With respect to the charge of the complainant that the respondent judge failed to protect his charging lien or f& attorney's fees, the respondent judge explained that he did not grant complainant's motion for payment of his professional fees because he could not ascertain the exact amount of complainant's just, reasonable and fair fee, considering that his claim of P79,186.00 was contested by the plaintiffs as being exorbitant.

Deputy Court Administrator Mendoza has assessed the charges against Judge Diaz in the light of the record as follows:

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The respondent judge cannot be faulted for dismissing complainant's motion for appointment of commissioners as well as his motion to exclude defendant Ester Garampil as an heir. The respondent judge had to dismiss the said motions to avoid piecemeal adjudication of the issues raised before him. In fact, respondent judge even suspended the trial of the case until after the Court of Appeals shall have resolved the issue pending before it which involved the same parties and the same properties being litigated.

The respondent judge was likewise justified in granting the motion of the parties to withdraw their respective shares from the cash portion of the estate. The respondent judge only implemented the compromise agreement entered into by all the parties and signed by all their respective lawyers including complainant herein. With respect to complainant's professional fees, it was specified in the compromise agreement that the parties would be separately responsible for the payment of the fees of their respective lawyers. Since the plaintiffs (complainant's clients), refused to pay complainant's claim for attorney's fee in the amount of P79,186.00 on the ground that the same is exorbitant, the remedy of the complainant is to file a separate action for recovery of his fees where the parties win be afforded the chance to prove their respective claims and defenses.

In the case of Bongco vs. Judge Serapio, (Adm. Matter No. 1804-CAR, Feb. 28, 1980.) this Court held that where it does not appear from the facts in an administrative complaint that the assailed judicial acts of respondent judge were corrupt or inspired by an intention to violate the law, or were done in persistent disregard of well known legal rules, the complaint should be dismissed for lack of merit.

The assessment is well taken except in respect of the failure of the respondent to protect the complainant's right to collect his professional fees.

The respondent should not have allowed the clients of the complainant to withdraw their shares from the cash deposit without extending ample protection to the latter's claim. This error was compounded by his order allowing even Ester Garampil to withdraw her share when she did not sign the compromise agreement of July 1, 1981.

It was grossly unfair for the respondent to leave the complainant holding an empty bag, so to speak, after he had rendered his professional services as counsel to the plaintiffs. True it is that the compromise agreement stipulates that the parties shall be separately responsible for the payment of the fees for their respective lawyers; nevertheless, the respondent should not have improvidently allowed the clients of the complainant to withdraw their shares without first determining his reasonable fees.

A lawyer has the right to claim the fruits of his labor. He has the equitable right to be paid his fees out of the judgment which he has obtained from a court of justice. Any allegation of exorbitant or excessive fees should have been resolved by the respondent Judge on the basis of quantum meruit. Or the respondent could have inquired from the plaintiffs what they considered as reasonable attorney's fees for the services of complainant, direct the payment of such "reasonable amount" as partial payment of his attorney's fees, and set for hearing the disputed difference between the claim of the complainant and the amount considered reasonable by the plaintiffs.

WHEREFORE, for his failure to protect the complainant's charging lien, the respondent is hereby reprimanded.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

EN BANC

A.C. No. 5829 October 28, 2003

DANIEL LEMOINE, complainant, vs.ATTY. AMADEO E. BALON, JR., respondent.

D E C I S I O N

PER CURIAM:

On December 17, 1999, complainant Daniel Lemoine, a French national, filed a verified complaint1 against respondent Atty. Amadeo E. Balon, Jr., for estafa and misconduct before the Integrated Bar of the Philippines. The case, docketed as CBD Case No. 99-679, was referred by the Commission on Bar Discipline to an Investigator for investigation, report and recommendation.

The facts that spawned the filing of the complaint are as follows:

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In early 1998, complainant filed a car insurance claim with the Metropolitan Insurance Company (Metropolitan Insurance), the insurer of his vehicle which was lost. As complainant encountered problems in pursuing his claim which was initially rejected,2 his friend, a certain Jesus "Jess" Garcia (Garcia), arranged for the engagement of respondent’s services.

By letter3 of October 21, 1998 addressed to Elde Management, Inc., "ATTN: Mr. Daniel Lemoine," under whose care complainant could be reached, respondent advised complainant, whom he had not before met, that for his legal services he was charging "25% of the actual amount being recovered. . . payable upon successful recovery;" an advance payment of P50,000.00 "to be charged [to complainant] to be deducted from whatever amount [would] be successfully collected;" P1,000.00 "as appearance and conference fee for each and every court hearings, conferences outside our law office and meetings before the Office of the Insurance Commission which will be also charged to our 25% recovery fee;" and legal expenses "such as but not limited to filing fee, messengerial and postage expenses . . . and other miscellaneous but related expenses," to be charged to complainant’s account which would be reimbursed upon presentation of statement of account.

The letter-proposal of respondent regarding attorney’s fees does not bear complainant’s conformity, he not having agreed therewith.

It appears that Metropolitan Insurance finally offered to settle complainant’s claim, for by letter4 of December 9,1998 addressed to it, respondent confirmed his acceptance of its offer to settle the claim of complainant "in an ex-gratia basis of 75% of his policy coverage which is therefore FIVE HUNDRED TWENTY FIVE THOUSAND (P525,000.00) PESOS."

A day or a few days before December 23, 1998 when complainant left for France,5 he, on the advice of respondent, signed an already prepared undated Special Power of Attorney6 authorizing respondent and/or Garcia to bring any action against Metropolitan Insurance for the satisfaction of complainant’s claim as well as to "negotiate, sign, compromise[,] encash and receive payment" from it. The Special Power of Attorney was later dated December 23, 1998 on which same date Metropolitan Insurance issued a Chinabank Check No. 841172 payable to complainant in the amount of P525,000.00 as full settlement of the claim.7 The check was received by respondent.

In the meantime, complainant returned to the Philippines in early January 1999 but left again on the 24th of the same month.8 On inquiry about the status of his claim, Garcia echoed to complainant what respondent had written him (Garcia) in respondent’s letter9 of March 26, 1999 that the claim was still pending with

Metropolitan Insurance and that it was still subject of negotiations in which Metropolitan Insurance offered to settle it forP350,000.00 representing fifty percent thereof. In the same letter to Garcia, respondent suggested the acceptance of the offer of settlement to avoid a protracted litigation.

On December 6, 1999, on complainant’s personal visit to the office of Metropolitan Insurance, he was informed that his claim had long been settled via a December 23, 1998 check given to respondent the year before.10Complainant lost no time in going to the law office of respondent who was not around, however, but whom he was able to talk by telephone during which he demanded that he turn over the proceeds of his claim.11

Respondent thereupon faxed to complainant a December 7, 1999 letter12 wherein he acknowledged having in his possession the proceeds of the encashed check which he retained, however, as attorney’s lien pending complainant’s payment of his attorney’s fee, equivalent to fifty percent (50%) of entire amount collected. In the same letter, respondent protested what he branded as the "uncivilized and unprofessional behavior" complainant "reportedly demonstrated" at respondent’s office. Respondent winded up his letter as follows, quoted verbatim:

We would like to make it clear that we cannot give you the aforesaid amount until and unless our attorney’s fees will be forthwith agreed and settled. In the same manner, should you be barbaric and uncivilized with your approached, we will not hesitate to make a proper representation with the Bureau of Immigration and Deportation for the authenticity of your visa, Department of Labor and Employment for your working status, Bureau of Internal Revenue for your taxation compliance and the National Bureau of Investigation [with] which we have a good network...

While it [is your] prerogative to file a legal action against us, it is also our prerogative to file a case against you. We will rather suggest if you could request your lawyer to just confer with us for the peaceful settlement of this matter. (Underscoring and emphasis supplied)

As despite written demands,13 respondent refused to turn over the proceeds of the insurance claim and to acknowledge the unreasonableness of the attorney’s fees he was demanding, complainant instituted the administrative action at bar on December 17, 1999.

In his Complaint-Affidavit, complainant alleged that "[i]t appears that there was ‘irregularity’ with the check," it having been issued payable to him, but "and/or AMADEO BALON" was therein intercalated after his (complainant’s) name.141awphi1.nét

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Maintaining that respondent was entitled to only P50,000.00 in attorney’s fees,15 complainant decried respondent’s continued possession of the proceeds of his claim16and his misrepresentations that the recovery thereof was fraught with difficulties.17

In his Counter-Affidavit 18 of February 18, 2000 , respondent asserted that his continued retention of the proceeds of complainant’s claim is in lawful exercise of his lien for unpaid attorney’s fees. He expressed readiness, however, to account for and turn them over once he got paid fifty percent (50%) thereof, he citing the so called contingent fee billing method of "no cure, no pay" adopted by practicing lawyers in the insurance industry as the basis of the amount of his attorney’s fees,19 which to him was justified in the absence of an attorney-client contract between him and complainant, the latter having rejected respondent’s letter-proposal of October 21, 1998.20

Respondent also highlighted the value of the time and efforts he extended in pursuing complainant’s claim and the expenses he incurred in connection therewith. He went on to assert that his inability to contact complainant whose whereabouts he did not know prompted him to encash the check and keep the proceeds thereof in conformity with the Special Power of Attorney executed in his favor.21

During the hearings conducted by the IBP Investigator, complainant echoed his allegations in his Complaint-Affidavit and stressed that he turned down as unreasonable respondent’s proposal in his October 21, 1998 letter that he be paid 25% of the actual amount collected for his legal services.22 And he presented documentary evidence, including the March 26, 1999 letter of respondent informing his co-attorney-in-fact Garcia of the supposedly still unrecovered claim and suggesting acceptance of the purported offer of Metropolitan Insurance to settle complainant’s claim at P350,000.00.

Explaining how his above-mentioned March 26, 1999 letter to Garcia came about, respondent declared that it was made upon Garcia’s request, intended for a certain Joel Ramiscal (Ramiscal) who was said to be Garcia’s business partner.23

Respondent later submitted a June 13, 2001 Supplement 24 to his Counter- Affidavit reiterating his explanation that it was on Garcia’s express request that he wrote the March 26, 1999 letter, which was directed to the fax number of Ramiscal.1ªvvphi1.nét

Additionally, respondent declared that in the first week of May 1999, on the representation of Garcia that he had talked to complainant about respondent’s

retention of fifty percent (50%) of the insurance proceeds for professional fees less expenses,25 he gave Garcia, on a staggered basis, the total amount of P233,000.00 which, so respondent averred, is the amount of insurance claim complainant is entitled to receive less attorney’s fees and expenses.26 Thus, respondent claimed that he gave Garcia the amount of P30,000.00 on May 31, 1999 at Dulcinea Restaurant in Greenbelt, Makati; the amounts of P50,000.00, P20,000.00 and P30,000.00 on different occasions at his (respondent’s) former address through his executive secretary Sally I. Leonardo; the amount of P20,000.00 at the office of his (respondent’s) former employer Commonwealth Insurance Company through his subordinate Glen V. Roxas; and several other payments at Dulcinea, and at Manila Intercontinental Hotel’s coffee shop sometime in October 1999. 27 Respondent submitted the separate sworn statements of Leonardo and Roxas.28

Explaining why no written memorandum of the turn over of various payments to Garcia was made, respondent alleged that there was no need therefor since he very well knew Garcia who is a co-Rotarian and co-attorney-in-fact and whom he really dealt with regarding complainant’s claim.29

Respondent furthermore declared that he rejected complainant’s offer to pay him P50,000.00 for his services, insisting that since there had been no clear-cut agreement on his professional fees and it was through him that Metropolitan Insurance favorably reconsidered its initial rejection of complainant’s claim, he is entitled to a contingent fee of 50% of the net proceeds thereof.30

Finally, respondent declared that he, in connection with his follow-up of the insurance claim, incurred representation expenses of P35,000.00, entertainment and other representation expenses on various occasions of P10,000.00, and transportation and gasoline expenses and parking fees of P5,000.00;31 and that his retention of complainant’s money was justified in light of his apprehension that complainant, being an alien without a valid working permit in the Philippines, might leave the country anytime without settling his professional fees.32

The Investigating Commissioner, by Report and Recommendation33 of October 26, 2001, found respondent guilty of misconduct and recommended that he be disbarred and directed to immediately turn over to complainant the sum of P475,000.00 representing the amount of the P525,000.00 insurance claim less respondent’s professional fees of P50,000.00, as proposed by complainant.

The Board of Govenors of the Integrated Bar of the Philippines, acting on the Investigator’s Report, issued Resolution No. XV-2002-40134 on August 3,2002, reading:

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RESOLVED to ADOPT and APPROVE, as it is hereby ADOPTED and APPROVED, the Report and Recommendation of the Investigating Commissioner of 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, with modification, and considering respondent’s dishonesty which amounted to grave misconduct and grossly unethical behavior which caused dishonor, not merely to respondent but the noble profession to which he belongs, Respondent is hereby SUSPENDED from the practice of law for six (6) monthswith the directive to turn over the amount of Five Hundred Twenty Five Thousand (P525,000.00) Pesos to the complainant without prejudice to respondent’s right to claim attorney’s fees which he may collect in the proper forum. (Underscoring supplied)

The records of the case are before this Court for final action.

Respondent, by a Motion for Reconsideration35 filed with this Court, assails the Investigating Commissioner’s Report and Recommendation as not supported by clear, convincing and satisfactory proof. He prays for the reopening of the case and its remand to the Investigator so that Garcia can personally appear for his (respondent’s) confrontation.

There is no need for a reopening of the case. The facts material to its resolution are either admitted or documented.

This Court is in full accord with the findings of the IBP Investigator that respondent violated the following provisions of the Code of Professional Responsibility, to wit:

RULE 1.01 - A lawyer shall not engage in unlawful, dishonest, immoral or deceitful conduct.

xxx

CANON 15 - A lawyer shall observe candor, fairness and loyalty in all his dealings and transactions with his clients.

RULE 15.06 - A lawyer shall not state or imply that he is able to influence any public official, tribunal or legislative body.

xxx

CANON 16 - A lawyer shall hold in trust all moneys and properties of his client that may come into his possession.

RULE 16.01 - A lawyer shall account for all money or property collected or received for or from the client.

RULE 16.02 - A lawyer shall keep the funds of each client separate and apart from his own and those of others kept by him.

RULE 16.03 - A lawyer shall deliver the funds and property of his client when due or upon demand. However, he shall have a lien over the funds and may apply so much thereof as may be necessary to satisfy his lawful fees and disbursements, giving notice promptly thereafter to his client. He shall also have a lien to the same extent on all judgments and executions he has secured for his client as provided for in the Rules of Court.

xxx

CANON 17 - A lawyer owes fidelity to the cause of his client and he shall be mindful of the trust and confidence in him.

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RULE 18.04 - A lawyer shall keep the client informed of the status of his case and shall respond within a reasonable time to the client’s request for information.

xxx

RULE 21.02 - A lawyer shall not, to the disadvantage of his client, use information acquired in the course of employment, nor shall he use the same to his advantage or that of a third person, unless the client with full knowledge of the circumstances consents thereto.

Specifically with respect to above-quoted provision of Canon 16 of the Code of Professional Responsibility, the Filipino lawyer’s principal source of ethical rules, which Canon 16 bears on the principal complaint of complainant, a lawyer must hold in trust all moneys and properties of his client that he may come to possess. This commandment entails certain specific acts to be done by a lawyer such as rendering an accounting of all money or property received for or from the client36 as well as delivery of the funds or property to the client when due or upon demand.37 Respondent breached this Canon when after he received the proceeds of complainant’s insurance claim, he did not report it to complainant, who had a given address in Makati, or to his co-attorney-in-fact Garcia who was his contact with respect to complainant.

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In fact, long after respondent received the December 23, 1998 check for P525,000.00 he, by his letter of March 26, 1999 to Garcia, had even the temerity to state that the claim was still pending and recommend "acceptance of the 50% offer . . . which is P350,000.00 pesos." His explanation that he prepared and sent this letter on Garcia’s express request is nauseating. A lawyer, like respondent, would not and should not commit prevarication, documented at that, on the mere request of a friend.

By respondent’s failure to promptly account for the funds he received and held for the benefit of his client, he committed professional misconduct.38 Such misconduct is reprehensible at a greater degree, for it was obviously done on purpose through the employment of deceit to the prejudice of complainant who was kept in the dark about the release of the check, until he himself discovered the same, and has to date been deprived of the use of the proceeds thereof.

A lawyer who practices or utilizes deceit in his dealings with his client not only violates his duty of fidelity, loyalty and devotion to the client’s cause but also degrades himself and besmirches the fair name of an honorable profession.39

That respondent had a lien on complainant’s funds for his attorney’s fees did not relieve him of his duty to account for it.40 The lawyer’s continuing exercise of his retaining lien presupposes that the client agrees with the amount of attorney’s fees to be charged. In case of disagreement or when the client contests that amount for being unconscionable, however, the lawyer must not arbitrarily apply the funds in his possession to the payment of his fees.41 He can file, if he still deems it desirable, the necessary action or proper motion with the proper court to fix the amount of such fees.42

In respondent’s case, he never had the slightest attempt to bring the matter of his compensation for judicial determination so that his and complainant’s sharp disagreement thereon could have been put to an end. Instead, respondent stubbornly and in bad faith held on to complainant’s funds with the obvious aim of forcing complainant to agree to the amount of attorney’s fees sought. This is an appalling abuse by respondent of the exercise of an attorney’s retaining lien which by no means is an absolute right and cannot at all justify inordinate delay in the delivery of money and property to his client when due or upon demand.

Respondent was, before receiving the check, proposing a 25% attorney’s fees. After he received the check and after complainant had discovered its release to him, he was already asking for 50%, objection to which complainant communicated to him. Why respondent had to doubly increase his fees after the lapse of about one year when all the while he has been in custody of the proceeds

of the check defies comprehension. At any rate, it smacks of opportunism, to say the least.

As for respondent’s claim in his June 2001 Supplement to his Counter-Affidavit that he had on several occasions from May 1999 to October 1999 already delivered a total of P233,000.00 out of the insurance proceeds to Garcia in trust for complainant, this does not persuade, for it is bereft of any written memorandum thereof. It is difficult to believe that a lawyer like respondent could have entrusted such total amount of money to Garcia without documenting it, especially at a time when, as respondent alleged, he and Garcia were not in good terms.43 Not only that. As stated earlier, respondent’s Counter-Affidavit of February 18, 2000 and his December 7, 1999 letter to complainant unequivocally contained his express admission that the total amount of P525,000.00 was in his custody. Such illogical, futile attempt to exculpate himself only aggravates his misconduct. Respondent’s claim discredited, the affidavits of Leonardo and Roxas who, acting allegedly for him, purportedly gave Garcia some amounts forming part of the P233,000.00 are thus highly suspect and merit no consideration.

The proven ancillary charges against respondent reinforce the gravity of his professional misconduct.

The intercalation of respondent’s name to the Chinabank check that was issued payable solely in favor ofcomplainant as twice certified by Metropolitan Insurance44 is clearly a brazen act of falsification of a commercial document which respondent resorted to in order to encash the check.

Respondent’s threat in his December 7, 1999 letter to expose complainant to possible sanctions from certain government agencies with which he bragged to have a "good network" reflects lack of character, self-respect, and justness.

It bears noting that for close to five long years respondent has been in possession of complainant’s funds in the amount of over half a million pesos. The deceptions and lies that he peddled to conceal, until its discovery by complainant after about a year, his receipt of the funds and his tenacious custody thereof in a grossly oppressive manner point to his lack of good moral character. Worse, by respondent’s turnaround in his Supplement to his Counter-Affidavit that he already delivered to complainant’s friend Garcia the amount of P233,000.00 which, so respondent claims, is all that complainant is entitled to, he in effect has declared that he has nothing more to turn over to complainant. Such incredible position is tantamount to a refusal to remit complainant’s funds, and gives rise to the conclusion that he has misappropriated them.45

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In fine, by respondent’s questioned acts, he has shown that he is no longer fit to remain a member of the noble profession that is the law.

WHEREFORE, respondent Atty. Amadeo E. Balon, Jr., is found GUILTY of malpractice, deceit and gross misconduct in the practice of his profession as a lawyer and he is hereby DISBARRED. The Office of the Clerk of Court is directed to strike out his name from the Roll of Attorneys and to inform all courts and the Integrated Bar of the Philippines of this Decision.

Respondent is ordered to turn over to complainant, Daniel Lemoine, the amount of P525,000.00 within thirty (30) days from notice, without prejudice to whatever judicial action he may take to recover his attorney’s fees and purported expenses incurred in securing the release thereof from Metropolitan Insurance.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

A.C. No. 3745 October 2, 1995

CYNTHIA B. ROSACIA, complainant, vs.ATTY. BENJAMIN B. BULALACAO, respondent.

R E S O L U T I O N

FRANCISCO, J.:

Complainant Cynthia B. Rosacia, president of Tacma, Phils., Inc., a duly registered corporation, filed a complaint for disbarment dated October 25, 1991, against herein respondent Atty. Benjamin B. Bulalacao. Acting on the complaint, the Court

in a resolution dated February 24, 1992, resolved to refer the case to the Integrated Bar of the Philippines (IBP) for investigation, report and recommendation. Commissioner Victor C. Fernandez, the IBP investigating commissioner, found that respondent breached his oath of office and accordingly recommended respondent's suspension from the practice of law for three (3) months. 1 In a resolution dated July 30, 1994, the IBP Board of Governors resolved to adopt and approve the commissioner's report and recommendation. 2

As found by the IBP, the undisputed facts are as follows:

On June 1, 1990, by virtue of a written Agreement (Exh. "3-a"), respondent Atty. Benjamin B. Bulalacao was hired as retained counsel of a corporation by the name of Tacma Phils., Inc.

On October 31, 1990, the lawyer-client relationship between the respondent and Tacma Phils., Inc. was severed as shown by another agreement of even date (Exh. "3-b").

On July, 1991, or after almost nine (9) months from the date respondent's retainer agreement with Tacma, Phils., Inc. was terminated, several employees of the corporation consulted the respondent for the purpose of filing an action for illegal dismissal. Thereafter, he agreed to handle the case for the said employees as against Tacma, Phils., Inc. by filing a complaint before the National Labor Relations Commission, and appearing in their behalf. 3

The sole issue to be addressed is whether or not respondent breached his oath of office for representing the employees of his former client, Tacma, Phils., Inc., after the termination of their attorney-client relationship. We agree with the findings of the IBP that respondent breached his oath of office. Respondent does not now dispute this. In fact, in his motion for reconsideration, respondent admitted that he "did commit an act bordering on grave misconduct, if not outright violation of his attorney's oath". 4 However, respondent is pleading for the Court's compassion and leniency to reduce the IBP recommended three months suspension to either fine or admonition with the following proffered grounds: that he is relatively new in the profession having been admitted to the Philippine Bar on April 10, 1990 at the age of 46 when the complained conduct was committed on August 1991; that he is of humble beginnings and his suspension will deprive his family of its only source of livelihood he being the sole bread winner in the family; that he has fully realized his mistake and the gravity of his offense for which he is fully repentant; that he has severed his attorney-client relationship with the employees of Tacma, Phils., Inc. by inhibiting himself and withdrawing his appearance as counsel in the labor case against Tacma, Phils., Inc.; and that he pledges not to commit the same mistake and

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to henceforth strictly adhere to the professional standards set forth by the Code of Professional Responsibility.

The Court reiterates that an attorney owes loyalty to his client not only in the case in which he has represented him but also after the relation of attorney and client has terminated as it is not good practice to permit him afterwards to defend in another case other person against his former client under the pretext that the case is distinct from, and independent of the former case. 5 It behooves respondent not only to keep inviolate the client's confidence, but also to avoid the appearance of treachery and double dealing for only then can litigants be encouraged to entrust their secrets to their attorneys which is of paramount importance in the administration of justice. 6 The relation of attorney and client is one of confidence and trust in the highest degree. 7 A lawyer owes fidelity to the cause of his client and he ought to be mindful of the trust and confidence reposed in him. 8 An attorney not only becomes familiar with all the facts connected with his client's cause, but also learns from his client the weak and strong points of the case. No opportunity must be given attorneys to take advantage of the secrets of clients obtained while the confidential relation of attorney and client exists. Otherwise, the legal profession will suffer by the loss of the confidence of the people. 9

Respondent's plea for leniency cannot be granted. We note that respondent is new in the profession as he was just admitted to the Philippine Bar on April 10, 1990, when the breach of his oath of office occurred more than a year after. Having just hurdled the bar examinations which included an examination in legal ethics, surely the precepts of the Code of Professional Responsibility to keep inviolate the client's trust and confidence even after the attorney-client relation is terminated 10 must have been still fresh in his mind. A lawyer starting to establish his stature in the legal profession must start right and dutifully abide by the norms of conduct of the profession. This will ineluctably redound to his benefit and to the upliftment of the legal profession as well.

ACCORDINGLY, respondent is hereby SUSPENDED from the practice of law for three months. Let this resolution be attached to respondent's record in the Office of the Bar Confidant and copies thereof furnished to all courts and to the Integrated Bar of the Philippines.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

A.C. No. 2736 May 27, 1991

LORENZANA FOOD CORPORATION represented by Mr. SOLOMON U. LORENZANA, JR., as its President and General Manager, and/or Mrs. ELIZABETH L. DIAZ, as its Vice-President, petitioners,

vs.

ATTY. FRANCISCO L. DARIA, respondent.

Jose Feliciano Loy, Jr. for petitioners.

R E S O L U T I O N

PER CURIAM:p

The respondent lawyer, Atty. Francisco L. Daria, is administratively charged 1 on two counts, to wit:

1. Negligence and

2. Betrayal of his former client's confidences.

A verified complaint dated February 22, 1985 was filed by Lorenzana Food Corporation LFC, hereinafter), and received by the Court on February 25, 1985. 2

The Court, on June 10, 1985, resolved to refer this case to the Office of the Solicitor General for investigation, report, and recommendation.

After proper proceedings, the Office of the Solicitor General submitted its "Report and Recommendation," dated February 21, 1990 and received by the Court on February 26, 1990.

From the findings made by the Solicitor General, the pertinent facts may be summarized as follows:

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Respondent Francisco L. Daria is charged with negligence and betrayal of his former client's confidences. The following facts are in connection with the charge of negligence:

Respondent was hired by complainant Lorenzana Food Corporation (LFC) on January 8, 1981 as its legal counsel and was designated as its personnel manager six months later (tsn. pp. 6-7, Dec. 9, 1985). On May 23, 1983, LFC employee, Violeta Hanopol, filed a complaint for illegal dismissal and other monetary claims against complainant before the Ministry (now Department) of Labor and Employment (MOLE). On May 30, 1983, summons was served on the parties with the requirement that position papers be submitted (Exh. G).

During the initial hearing on June 13, 1973 * (sic) Hanopol and respondent tried to explore the possibility of an amicable settlement. Since no agreement was reached the hearing was reset to June 17, 1983. On the pretext that Hanopol was supposed to go to his office on that date respondent failed to appear for the second setting (tsn. pp. 14-15, Dec. 9, 1985). So, the Labor Arbiter was constrained to further reset the hearing to June 28, 1983. Respondent received on June 23, 1983 the Order for the resetting to June 1983 (Exh. J).

In the meantime, on June 20, 1983, respondent received an Order in another labor case, setting the hearing therein also on June 28, 1983 (Exh. H-6). Faced with a conflicting schedule, respondent decided to move to postpone the hearing in the Hanopol case. However, instead of filing a written motion for postponement, he opted to call, through his secretary, the Office of the Labor Arbiter to move for postponement (Exh. H-5; tsn. p. 16, Dec. 9, 1985). Respondent's telephone message apparently failed to reach the Labor Arbiter, because at the hearing on June 28, 1983, he considered the case submitted for decision on the basis of Hanopol's complaint and affidavit (Exh. G-1). Respondent had not submitted a position paper.

After a month, on July 29, 1983, the Labor Arbiter issued a Decision directing LFC to pay Hanopol the total sum of P6,469.60 in labor benefits, on the basis of Hanopol's evidence alone.

Respondent Daria appealed the Decision to the National Labor Relations Commission (NLRC) on August 23, 1983 (Exh. 4). The case was remanded to the Labor Arbiter for further proceedings. The case was set for hearing on June 25, 1984 and July 12, 1984 wherein attempts for an amicable settlement still proved futile. The Labor Arbiter set two more dates for hearing: July 27, 1984 and August 8, 1984 (tsn. pp. 21-22, Dec. 9, 1985).

In the meantime, the middle of June 1984, respondent signified to management his intention to resign. In the light of this development, management hired Atty. Rogelio Udarbe to take his place on July 16, 1984, the effective date of his resignation (Exh. 2). Respondent endorsed the cases of complainant to Atty. Udarbe (tsn. pp. 23-25, Dec. 9, 1985).

During the hearings in the Hanopol case on July 27, 1984 and August 8, 1984, no one appeared for complainant. So, on August 15, 1984, Hanopol filed a "Manifestation and Motion" praying that the earlier Decision of the Labor Arbiter dated July 29, 1983 be revived. (Exh. 5).

On September 1, 1984, Atty. Jose Loy, Jr. was hired by complainant LFC vice Atty. Udarbe and he immediately came across the abovementioned "Manifestation and Motion". On September 5, 1984, he filed an Opposition (Exh. 6) thereto, and on September 19, 1984, he followed this up with a position paper for LFC (Exh. 7). However, the Labor Arbiter had already revived his earlier Decision dated July 29, 1983 in another Decision dated September 4, 1984, thereby prompting Atty. Loy to appeal the latter Decision (Exh. 3). In a resolution dated May 9, 1985, the NLRC ordered anew the remand of the case for further proceedings (Exh. 8).

In connection with the other charge of betrayal by respondent of his former client's confidences, the following facts appear on record:

While respondent was still connected with complainant, its general manager, Sebastian Cortes, issued a memorandum dated February 28, 1984 (Exh. C) to its employee, Roberto San Juan, requiring him to submit a written explanation for his alleged double liquidation and unliquidated cash advances. Another memorandum dated March 15, 1984 (Exh. D) was issued this time by complainant's internal auditor, Rosario L. Bernardo, addressed to complainant's president, summing up San Juan's unliquidated advances amounting to P9,351.15. Respondent was furnished a copy of this memorandum (Exh. D-3). The executive committee, to which respondent belongs, investigated San Juan on his unliquidated advances. On account of the gravity of the charge, respondent placed San Juan under preventive suspension, per his letter to him dated April 25, 1984 (Exh. E).

On September 20, 1984, when respondent had already resigned, complainant sent a demand letter to San Juan requiring him to restitute the amount of P9,351.15 (Exh. N-2). Since he failed to pay the amount demanded, a complaint for estafa was lodged against him before the Office of the Provincial Fiscal. San Juan thereafter resigned and sought the assistance of respondent in the preparation of his counteraffidavit in January 1985 (tsn. p. 35, Nov. 5, 1985). Respondent prepared San Juan's counteraffidavit and signed it (Exh. F). San Juan then submitted his counteraffidavit to the Office of the Provincial Fiscal (tsn. p. 42, Nov. 5, 1985). 3

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xxx xxx xxx

For failure to appear in two consecutive hearings and to submit a position paper in the Hanopol case which resulted in complainant LFC's default and judgment against it by the Labor Arbiter, the respondent is faulted for negligence. The respondent avers that Hanopol should have seen him in his office to work out a compromise agreement, on the scheduled day of the second hearing, June 17, 1983, but did not. 4

It is the finding of the Solicitor General that this excuse by the respondent is not borne by the Constancia 5 setting the case for hearing. The Constancia clearly states: "By agreement of the parties, case reset to June 17, 1983 at 2:00 p.m. as previously scheduled." 6 Since it was signed by both Hanopol and the respondent, the Solicitor General argues that the respondent's explanation is manifestly unsatisfactory.

With regard to his second non-appearance for the hearing on June 2, 1983, the respondent justified his absence by claiming that he had another hearing on the same date and that he told his secretary to call up the Office of the Labor Arbiter to have the hearing of the Hanopol case postponed. 7 The Solicitor General avers:

. . . It is submitted that respondent's actuation was not warranted by the circumstances. As it turned out, the telephone request apparently did not reach the Labor Arbiter, thereby constraining him to declare complainant in default and render judgment against it. 8

In an effort to extricate himself from this charge, the respondent submits that since he was able to persuade the National Labor Relations Commission (NLRC) on appeal to set aside the Decision of the Labor Arbiter and to remand the case for further proceedings, then the charge of negligence should be considered moot and academic already. 9 We find this submission not meritorious. Instead, we agree ,with the position of the Solicitor General:

Respondent's plea is untenable. The setting aside of the adverse Decision of the Labor Arbiter cannot obliterate the effects of respondent's negligence. Indeed, had respondent attended the two scheduled hearings and filed the required position paper, then at least, there would have been no delay in the resolution of the case, which, perhaps, would have been in favor of complainant. The delay, by itself, was prejudicial to complainant because it deprived successor-counsel Atty. Loy of time which he should be devoting to other cases of complainant. In fact he had to prepare complainant's position paper which respondent should have done earlier (Exh. 7). 10

From the foregoing, it is manifest that the respondent is indeed guilty of negligence, a clear violation of the Code of Professional Responsibility: 11

CANON 18 — A LAWYER SHALL SERVE HIS CLIENT WITH COMPETENCE AND DILIGENCE

Rule 18.03 — A lawyer shall not neglect a legal matter entrusted to him and his negligence in connection therewith shall render him liable.

The other accusation against the respondent by the Solicitor General was that he had betrayed complainant LFC's confidences in violation of the then Canon 37 of the old Canons of Professional Ethics, to wit:

It is the duty of a lawyer to preserve his client's confidences. This duty outlasts the lawyer's employment, and extends as well to his employee's and neither of them should accept employment which involves or may involve the disclosure or use of these confidences, either for the private advantages of the client, without his knowledge and consent, and even though there are other available sources of such information. A lawyer should not continue employment when he discovers that this obligation prevents the performance of his full duty to his former or to his new client.

xxx xxx xxx

Superseded by the Code of Professional Responsibility, the appropriate Canon now is:

CANON 17 — A LAWYER OWES FIDELITY TO THE CAUSE OF HIS CLIENT AND HE SHALL BE MINDFUL OF THE TRUST AND CONFIDENCE REPOSED IN HIM.

The Solicitor General further found that the respondent assisted Roberto San Juan in the preparation of the counter-affidavit, 12 submitted in defense of the latter in the accusation of estafa filed against San Juan by LFC As a matter of fact, the respondent signed the jurat of the San Juan counter-affidavit he (respondent) helped prepare. It is also a fact that the respondent investigated this same charge of estafa while he was still the lawyer of the complainant and San Juan still likewise an employee of LFC

Again, we concur with the findings and evaluation of the Office of the Solicitor General:

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. . . Respondent, however, tried to extricate himself from his predicament by testifying that the counteraffidavit was prepared by a lawyer-friend, Atty. Joselito R. Enriquez, who had his (respondent's) name typed on it; that after reading it, he called up Atty. Enriquez so that he will delete his name and signature thereon; that he instructed San Juan to bring the counteraffidavit to Atty. Enriquez so that he will delete his name and signature, but San Juan did not obey him; and that San Juan filed the counteraffidavit with the office of the Provincial Fiscal with his name and signature still on it (tsn. pp. 47-51, Dec. 9, 1985).

It is submitted that, apart from being a mere afterthought, respondent's explanation is incredible. His foregoing testimony is not reflected in his comment on the complaint . . . 13

We are convinced that the respondent had betrayed the confidences of the complainant, his former client.

. . . An attorney owes loyalty to his client not only in the case in which he has represented him but also after the relation of attorney and client has terminated, and it is not a good practice to permit him afterwards to defend in another case other persons against his former client under the pretext that the case is distinct from and independent of the former case. 14

WHEREFORE, premises considered, the respondent is found guilty of both the charge of negligence, a transgression of Rule 18.03, Canon 18, and the charge of betrayal of his former client's confidences, in violation of Canon 17 of the Code of Professional Responsibility.

The respondent is hereby SUSPENDED from the practice of law for a period of six (6) months.

Let this Decision be entered in the personal records of the respondent and copies thereof furnished to all courts and IBP chapters.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

A.M. No. 801 June 27, 1978

CESARIO ADARNE, complainant, vs.ATTY. DAMIAN V. ALDABA, respondent.

CONCEPCION JR., J.:

Administrative action against the respondent attorney for gross negligence and misconduct, for failure to give his entire devotion to the interest of his client, warm zeal in the . maintenance and defense of his rights, and exertion of his utmost learning and ability in the prosecution and defense of his client, and for not taking steps to protect the interests of his client in the face of an adverse decision.

The record shows that sometime in 1958, Raymunda Cumpio and her husband, Rufo Cumpio, filed an action for forcible entry against herein complaint Cesario Adarne, Aning Arante, and Miguel Inokando with the Justice of the Peace of Alang-alang Leyte. The case was docketed in the said court as Civil Case No. 96. Atty. Isauro Marmita represented the defendants who raised the issue of ownership of the land in question. After hearing the parties, the Justice of the Peace dismissed the complaint for lack of jurisdiction. Consequently, the plaintiffs therein appealed to the Court of First Instance of Leyte and the case was assigned to Branch VI of Carigara, where it was docketed as Civil Case No. 556. Resolving the issue interposed by the appellants, the Judge of the Court of First Instance found that the Justice of the Peace Court has jurisdiction over the case and returned the same to the lower court for trial on the merits. After trial on the merits, the Justice of the Peace again dismissed the case and the plaintiffs again appealed to the Court of First Instance of Leyte where the case was docketed anew as Civil Case No, 632. Attys. Arturo Mirales and Generoso Casimpan filed the answer for the defendants. 1

At the hearing of the case on August 7, 1961, the herein complainant Cesario Adarne, one of the defendants in the aforementioned Civil Case No. 632, noting that his attorneys had not yet arrived, prevailed upon the respondent Atty. Damian Aldaba, who was then present in court to attend the trial of an electoral case, to appear as counsel for them and ask for the Postponement of the trial. The respondent, who is a third degree cousin of the complainant, agreed, and entered a special appearance. Upon noticing that the plaintiffs and their counsel were not also present in court, the respondent, instead of asking for a postponement, moved for the dismissal of the case. "is motion was granted and the case was again dismissed. Thereafter, the plaintiff filed a motion for the reconsideration of the order, 2 to

42

which the respondent filed an opposition in behalf of the defendants, 3 and the motion was denied. 4 Whereupon, the plaintiffs appealed to the Court of Appeals. After appropriate. proceedings, the appellee court set aside the order of dismissal and remanded the case to the lower court for further proceedings.

At the hearing of the case on October 23, 1964 before the Court of First Instance of Leyte, the respondent was again prevailed upon by the complainant to appear in his behalf. The respondent entered a "special appearance" for the complainant and thereafter argued that the interest of justice would best be served of the defendants were allowed to file an action for quieting of title and the case heard jointly with the pending action for forcible entry. Finding merit in the argument, the court ordered the defendant Cesario Adarne to file an action for quieting of title within one (1) week and the plaintiffs to answer the same within the reglementary period, after which both cases would be tried jointly. The hearing was deferred until after the filing of the action for quieting of title. 5

On June 17, 1965, the court declared the defendants in default for their failure to appeal at the hearing set for that day and directed the plaintiffs to present evidence to support their claim. 6 On September 17, 1965, the court rendered a decision and a writ of execution was issued thereafter. 7

Because of this, Cesario Adarne filed the present complaint against the respondent Atty. Damian V. Aldaba on August 3, 1967, praying:

Dahil dito, isinusumbong ko po ang aking Abogado ng "Mal practice" pabaya at pahamak sa kliente at sinisingil ko po siya ng pinsala katumbas sa sinisingil sa kin ng akin kalaban. O kaya lakarin niya na mapigil and decision ng Hukom sa C.F.I. at ulitin and hearing sa Forcible Entry. Kung hindi niya magagawa ito, ipinauubaya ko na po sa kataas taasan Hukoman and paglapat ng parusa. Sapagkat kung hindi p susugpo-in and masamang gawa naito ng mga ibang abogado na nabibili, — lalala and sakit naito sa profession ng mga abogado, at lilikha ng maraming api, at habang naghahari and pang-aapi, lalaganap and kriminalidad ng walang tigil, at walang katahimikan ang ating Demukrasya, at kung magkakagayon ang mga mamamayan at — sapilitan sa kumunista sasamba.

The respondent denied that he ever had any agreement with the complainant with respect to the handling of the latter's case in the Court of First Instance of Leyte, Carigara Branch, except for the "special appearance" that he entered for the complainant on August 7, 1961 and October 23, 1964, in view of the non-availability of the complainant's lawyers on said dates.

The case referred to the Solicitor General for investigation, report and recommendation, 8 after which a complaint for the disbarment of the respondent attorney was filed. 9

The judgment by default rendered against the complainant cannot be attributed to the respondent attorney. The blame lies with the complainant for having engaged the services of several lawyers to handle his case without formally withdrawing the authority he had given to them to appear in his behalf as to place the responsibility upon the respondent. To add to the confusion, the complainant had also requested the clerk of court of the Court of First Instance of Leyte that he (complainant) be furnished with summons and subpoena accorded to him. 10 He also filed a motion by himself, 11 thus implying that he was handling his case personally.

It appears that there have been three changes made of the attorneys for the complainant in the forcible entry case. The complainant was originally represented by Atty. Isauro Marmita who, upon his appointment to the Department of Labor, engaged Atty. de Veyra to take his place. 12 Then came Atty. Arturo Mirales and later, Atty. Generoso Casimpan. However, no formalities whatever were observed in those changes such that the respondent entered a "special appearance" for the complainant in order that he could ask for the dismissal of the case for the failure of the adverse party to prosecute. The rule followed on matters of substitution of attorneys as laid down by this Court is that no substitution of attorneys will be allowed unless there be filed: (1) a written application for such substitution; (2) the written consent of the client; (3) the written consent of the attorney substituted; and (4) in case such written consent can not be secured, there must be filed with the application proof of service of notice of such motion upon the attorney to be substituted, in the manner prescribed by the rules. Unless the foregoing formalities are complied with, substitution will not be permitted, and the attorney who properly appeared last in the cause, before such application for substitution, will be regarded as the attorney of record and will be held responsible for the proper conduct of the cause. 13

Besides, the respondent honestly believed that he had appeared for the complainant only for a special purpose and that the complainant had agreed to contact his attorney of record to handle his case after the hearing of October 23, 1964, so that he did nothing more about it. 14 It was neither gross negligence nor omission to have entertained such belief. An attorney is not bound to exercise extraordinary diligence, but only a reasonable degree of care and skill, having reference to the character of the business he undertakes to do. Prone to err like any other human being, he is not answerable for every error or mistake, and will be protected as long as he acts honestly and in good faith to the best of his skill and knowledge.

43

It is well settled that in disbarment proceedings, the burden of proof rests upon the complainant and for the Court to exercise its disciplinary powers, the case against the respondent attorney must be established by convincing proof. In the instant case, there is no sufficient proof to warrant the disbarment of the respondent attorney. Neither is there culpable malpractice to justify his suspension.

WHEREFORE, the present administrative complaint is hereby DISMISSED.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

THIRD DIVISION

A.C. No. 5835 April 15, 2005

CARLOS B. REYES, Complainant, vs.ATTY. JEREMIAS R. VITAN, respondent.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

A lawyer shall serve his client with competence and diligence1 and never neglect a legal matter entrusted to him and his negligence in connection therewith shall render him liable. Indeed, it is his sworn duty not to delay no man for money or malice; and to conduct himself in a proper manner not only to his client, but also to the court, the legal profession and society at large.2

This is an administrative complaint for disbarment filed by Carlos Reyes against Atty. Jeremias Vitan for gross negligence.

The complaint alleges that sometime in June 2001, complainant Carlos Reyes hired the services of respondent Atty. Jeremias Vitan for the purpose of filing the appropriate complaint or charge against his sister-in-law, Estelita Reyes, and the latter's niece, Julieta P. Alegonza; that both women refused to abide with the Decision of Judge Juan C. Nabong, Jr., of the Regional Trial Court, Branch 32, Manila,

in Civil Case No. 99-92657 ordering the partition of the properties left by complainant's brother Damaso B. Reyes; and that respondent, after receiving the amount of P17,000.00, did not take any action on complainant's case.

We referred the complaint to the Integrated Bar of the Philippines for investigation, report and recommendation. IBP Commissioner Lydia A. Navarro issued several orders to respondent directing him to file his answer to the complaint, but he failed to do so. He only sent his secretary to represent him during the proceedings.

On April 18, 2001,3 IBP Commissioner Navarro submitted to the IBP Board of Governors her Report and Recommendation quoted as follows:

"x x x. After going over the evidence on record, the undersigned noted that respondent ignored all the Orders issued by this Commission and neither did he comply with any of those Orders. Respondent even failed to submit the responsive pleadings he himself requested in his motion and only sent his assistant secretary to represent him in the scheduled hearings of this case. Up to and until the present, no pleadings was submitted despite respondent's allegations that he was collating evidence to prove his side of the case.

It was complainant who submitted the supposed letters of the respondent Estelita Reyes and Juliet Alegonza but there were no proofs when they sent and when the same were received by the addressee.

Likewise, the complaint submitted by the complainant was only a format in the sense that it was not signed by the respondent; the RTC Branch No. was left blank; there was no Civil Case No. and there was no proof that said pleading was filed which amounts only to a mere scrap of paper and not a pleading or authenticated document in the legal parlance.

As it is, nothing had been done by the respondent for the complainant as his client for the legal fees he collected which was paid by the complainant as reflected in the receipts issued by the respondent in handwritten forms and signed by him.

Respondent not only violated Rule 18.03 and 18.04 of Cannon 18 of the Code of Professional Responsibility for having neglected a legal matter entrusted to him and did not inform complainant the status of his case but also disregarded the orders of the Commission without reasons which amounted to utter disrespect of authority and unethical conduct in the practice of his profession, thus, should be sanctioned.

Wherefore, in view of the foregoing, the undersigned respectfully recommends that the respondent be suspended from the practice of his profession for a period of two

44

(2) years from receipt hereof; and refund to the complainant the amount of P17,000.00 paid to him for not having extended his legal services to the complainant on a lawyer-client relationship within six (6) months from receipt hereof."

On August 3, 2002, the IBP Board of Governors passed Resolution No. XV-2002-406 adopting and approving the above Report and Recommendation of IBP Commissioner Navarro.

When respondent accepted the amount of P17,000.00 from complainant, it was understood that he agreed to take up the latter's case and that an attorney-client relationship between them was established. From then on, it was expected of him to serve his client, herein complainant, with competence and attend to his cause with fidelity, care and devotion.

The act of receiving money as acceptance fee for legal services in handling complainant's case and subsequently failing to render such services is a clear violation of Canon 18 of the Code of Professional Responsibility which provides that a lawyer shall serve his client with competence and diligence. More specifically, Rule 18.03 states:

"Rule 18.03. A lawyer shall not neglect a legal matter entrusted to him, and his negligence in connection therewith shall render him liable."

A member of the legal profession owes his client entire devotion to his genuine interest, warm zeal in the maintenance and defense of his rights.4 An attorney is expected to exert his best efforts and ability to preserve his client's cause, for the unwavering loyalty displayed to his client likewise serves the ends of justice. Verily, the entrusted privilege to practice law carries with it the corresponding duties, not only to the client, but also to the court, to the bar and to the public.

In Santos   vs.   Lazaro,5 we held that Rule 18.03 of the Code   of Professional Responsibility, above-quoted, is a basic postulate in legal ethics. Indeed, when a lawyer takes a client's cause, he covenants that he will exercise due diligence in protecting his rights. The failure to exercise that degree of vigilance and attention expected of a good father of a family makes such lawyer unworthy of the trust reposed in him by his client and makes him answerable not just to his client but also to the legal profession, the courts and society.6

Significantly, respondent also violated his oath as a lawyer, which declares in part, that he will not delay any man for money or malice and will conduct himself as a

lawyer according to the best of his knowledge and discretion, with all good fidelity as well to the courts as to his client.

However, the recommended penalty by the IBP is too harsh. Jurisprudence shows that lighter sanctions have been imposed for violations of this nature, taking into consideration the gravity of the offense and the necessity of preserving the integrity of the legal profession.

The facts of Sencio vs.  Calvadores7 bear a striking similarity to the present case. Respondent lawyer in Senciodid not return the money to complainant despite demand following his failure to file the case. During the proceedings before the IBP, respondent did not file his answer to the complaint nor appeared during the hearing notwithstanding his receipt of notices. We found him guilty of violation of the lawyer's oath, malpractice and gross misconduct and suspended him for six (6) months, and ordered to return to his client the amount of P12,000.00 with interest at 12% per annum from the date of the promulgation of our Resolution until the return of the amount.

In Garcia vs. Manuel,8 we suspended respondent lawyer from the practice of law for six (6) months and ordered him to render an accounting of all monies he received from the complainant. We found him guilty of gross misconduct.

WHEREFORE, respondent Atty. Jeremias R. Vitan is hereby declared guilty of violation of Canon 18 of the Code of Professional Responsibility and is SUSPENDED from the practice of law for a period of six (6) months effective upon notice of this Decision. He is ordered to return to complainant within five (5) days from notice the sum ofP17,000.00 with interest of 12% per annum from the date of the promulgation of this Decision until the full amount shall have been returned.

Let a copy of this Decision be furnished the Court Administrator for distribution to all courts of the land, the IBP, the Office of the Bar Confidant, and entered into respondent's personal records as an attorney and as a member of the Philippine Bar.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

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SECOND DIVISION

A.C. No. 4380 October 13, 1995

NICANOR GONZALES and SALUD B. PANTANOSAS, complainants, vs.ATTY. MIGUEL SABACAJAN, respondent.

REGALADO, J.:

This resolves the administrative case filed by Nicanor Gonzales and Salud B. Pantanosas against Atty. Miguel Sabacajan on February 14, 1995, 1 the verified complaint wherefor alleges:

xxx xxx xxx

4. That sometime in October, 1994, complainants were informed by the Register of Deeds of Cagayan de Oro City that the complainants' owner's duplicate of title covering their lands, Transfer Certificate of Title Nos. T-91736 and T-91735 were entrusted to the office secretary of the respondent who in torn entrusted the same to respondent;

5. That respondent admitted and confirmed to the complainants that their titles are in his custody and has even shown the same (to) the complainant Salud B. Pantanosas but when demanded (sic) to deliver the said titles to the complainant in a formal demand letter, marked as ANNEX "A," respondent refused and continues to refuse without any justification to give their titles (and) when confronted, respondent challenged the complainants to file any case in any court even in the Honorable Supreme Court;

6. That respondent's dare or challeng(e) is a manifestation of his arrogance taking undue advantage of his legal profession over the simplicity, innocence and ignorance of the complainants, one of whom is his blood relative, his aunt, for which complainants shudder with mental anguish;

7. That due to his challeng(e), the complainants sent a letter to the Honorable Supreme Court for enlightenment, copy of which is attached as ANNEX "B", for

which the Honorable Supreme Court required 19 legible copies of a verified complaint;

8. That in spite of repeated demands, request(s) and pleas towards (sic) respondent, respondent still fail(ed) and stubbornly refused without justification to surrender the said titles to the rightful owners, the complainants here(in), which act is tantamount to willful and malicious defiance of legal and moral obligations emanating from his professional capacity as a lawyer who had sworn to uphold law and justice, to the prejudice and damage of the complainants; 2

xxx xxx xxx

On March 22, 1995, the Court required respondent to comment on the foregoing complaint. In his unverified "Answer" thereto, respondent admitted having met Salud Pantanosas but claims that, to his recollection, "Nicanor Gonzales/Serdan" has never been to his office. Respondent likewise denied that he challenged anyone to file a case in any court, much less the Supreme Court. He also claims that he referred complainant Pantanosas to his client, Mr. Samto M. Uy of Iponan, Cagayan de Oro City, for whom he worked out the segregation of the titles, two of which are the subject of the instant case. 3

Respondent likewise denies complainants' allegation that he is arrogant, in contrast to the innocence, simplicity and ignorance of said complainants. He contends that the truth of the matter is that complainants have been charged with a number of criminal and civil complaints before different courts. He also asserts that he was holding the certificates of title in behalf of his client, Samto M. Uy. 4

Atty. Sabacajan stresses, by way of defense, that "the instant action was chosen precisely to browbeat him into delivering the Certificates of Title to them without said certificates passing the hands of Mr. Samto Uy with whom the complainants have some monetary obligations." 5

In its resolution dated June 26, 1995, 6 for internal administrative purposes the Court referred this case to the Office of the Bar Confidant for the corresponding evaluation, report and recommendation.

From the foregoing proceedings taken on this matter, the Court finds that respondent admitted having taken possession of the certificates of title of complainants but refused to surrender the same despite demands made by the latter. It follows, therefore, that it was incumbent upon him to show that he was legally justified in doing so. Instead, all he did was to inform this Court that "his

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obligation to deliver the certificates to Mr. Samto Uy excludes the delivery of said certificates to anyone else." 7

Respondent attached some certifications to his "Answer" to support his contention that complainants are notorious characters. However, the certifications indicate that most of the cases stated therein, especially those involving fraud, have been dismissed. With respect to those still pending, there is no indication as to the identity of the party who instituted the same, aside from the consideration that the remedy thereon is judicial in nature. At any rate, these aspersions on the character of complainants have no bearing on the misconduct of respondent charged in the present case.

Respondent likewise submitted xerox copies of certain certificates of title in an effort to explain why he kept the certificates of title of complainants, that is, supposedly for the purpose of subdividing the property. However, an examination of the same does not show any connection thereof to respondent's claim. In fact, the two sets of certificates of title appear to be entirely different from each other.

As a lawyer, respondent should know that there are lawful remedies provided by law to protect the interests of his client. The records do not show that he or his client have availed of said remedies, instead of merely resorting to unexplained, if not curt, refusals to accommodate the requests of complainants. Also, he cannot be unaware of the imposable sanctions on a counsel who resorts to unlawful means that would cause injustice to the adversaries of his client.

The Court accordingly finds that respondent has not exercised the good faith and diligence required of lawyers in handling the legal affairs of their clients. If complainants did have the alleged monetary obligations to his client, that does not warrant his summarily confiscating their certificates of title since there is no showing in the records that the same were given as collaterals to secure the payment of a debt. Neither is there any intimation that there is a court order authorizing him to take and retain custody of said certificates of title.

Apparently, respondent has disregarded Canon 15, Rule 15.07 of the Code of Professional Responsibility which provides that a lawyer shall impress upon his client the need for compliance with the laws and principles of fairness. Instead, he unjustly refused to give to complainants their certificates of titles supposedly to enforce payment of their alleged financial obligations to his client and presumably to impress the latter of his power to do so.

Canon 19, Rule 19.01 ordains that a lawyer shall employ only fair and honest means to attain the lawful objectives of his client and shall not present, participate in

presenting, or threaten to present unfounded charges to obtain an improper advantage in any case or proceeding. Respondent has closely skirted this proscription, if he has not in fact transgressed the same.

On the foregoing considerations, the Court desires and directs that respondent should forthwith return the certificates of title of complainants. To ensure the same, he should be placed under suspension until he presents to the Court proof of receipt by complainants of their respective copies of Certificates of Title Nos. T-91735 and T-91736 or a judicial order or document authorizing or justifying the retention of possession thereof by respondent or his aforenamed client.

WHEREFORE, Atty. Miguel Sabacajan is hereby SUSPENDED from the practice of law until he can duly show to this Court that the disputed certificates of title have been returned to and the receipt thereof duly acknowledged by complainants, or can present a judicial order or appropriate legal authority justifying the possession by him or his client of said certificates. He is further WARNED that a repetition of the same or similar or any other administrative misconduct will be punished more severely.

Let a copy of this resolution be spread on the personal records of respondent and have copies thereof furnished to the Integrated Bar of the Philippines and duly circularized to all courts in the country.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

FIRST DIVISION

G.R. No. L-29184 January 30, 1989

BENEDICTO LEVISTE, petitioner, vs.THE COURT OF APPEALS, HON. JUDGE LUIS B. REYES, COURT OF FIRST INSTANCE

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OF MANILA, ROSA DEL ROSARIO, RITA BANU, CARMEN DE GUZMAN-MARQUEZ, JESUS R. DE GUZMAN, RAMON R. DE GUZMAN, JACINTO R. DE GUZMAN and ANTONIO R. DE GUZMAN, respondents.

Benedicto Leviste for and in his own behalf.

Gatchalian, Ignacio & Associates for respondents de Guzman.

GRIÑO-AQUINO, J.:

The issue in this case is whether or not an attorney who was engaged on a contingent fee basis may, in order to collect his fees, prosecute an appeal despite his client's refusal to appeal the decision of the trial court.

On September 7, 1963, the petitioner, a practicing attorney, entered into a written agreement with the private respondent Rosa del Rosario to appear as her counsel in a petition for probate of the holographic will of the late Maxima C. Reselva. Under the will, a piece of real property at Sales Street, Quiapo, Manila, was bequeathed to Del Rosario. It was agreed that petitioner's contigent fee would be thirty-five per cent (35%) of the property that Rosa may receive upon the probate of the will (Annex "A", p. 59, Rollo).

In accordance with their agreement, Leviste performed the following services as Del Rosario's counsel:

(1) Thoroughly researched and studied the law on probate and succession;

(2) Looked for and interviewed witnesses, and took their affidavits;

(3) Filed the petition for. probate is Special Proceeding No. 58325;

(4) Made the proper publications;

(5) Presented at the trial the following witnesses:

a) Eleuterio de Jesus

b) Lucita de Jesus

c) Purita L. Llanes

d) Rita Banu

e) Jesus Lulod.

On August 20, 1965, Leviste received a letter from Ms. Del Rosario, informing him that she was terminating his services as her counsel due to "conflicting interest." This consisted, according to the letter, in petitioner's moral obligation to protect the interest of his brother-in-law, Gaudencio M. Llanes, whom Del Rosario and the other parties in the probate proceeding intended to eject as lessee of the property which was bequeathed to Del Rosario under the will (Annex "B", p. 60, Rollo).

On September 20, 1965, petitioner filed a "Motion to Intervene to Protect His Rights to Fees for Professional Services." (Annex "B", p. 60, Rollo.)

In an order dated November 12, 1965 the trial court denied his motion on the ground that he had "not filed a claim for attorney's fees nor recorded his attorney's lien." (p. 3, Rollo.)

On November 23, 1965, petitioner filed a "Formal Statement of Claim for Attorney's Fees and Recording of Attorney's Lien,' which was noted in the court's order of December 20, 1965 (Annexes "D" and "E", pp. 63 & 64, Rollo).

Although the order denying his motion to intervene had become final, petitioner continued to receive copies of the court's orders, as well the pleadings of the other parties in the case. He also continued to file pleadings. The case was submitted for decision without the respondents' evidence.

On November 23, 1966, Del Rosario and Rita Banu, the special administratrix-legatee, filed a "Motion To Withdraw Petition for Probate" alleging that Del Rosario waived her rights to the devise in her favor and agreed that the De Guzman brothers and sisters who opposed her petition for probate, shall inherit all the properties left by the decedent. (Annex "F", p. 65, Rollo.)

In an order of April 13, 1967 the trial court denied the motion to withdraw the petition for being contrary to public policy (Annex "G", pp. 66-67, Rollo).

Nonetheless, on August 28, 1967, the court disallowed the will, holding that the legal requirements for its validity were not satisfied as only two witnesses testified that the will and the testatrix's signature were in the handwriting of Maxima Reselva.

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The petitioner filed an appeal bond, notice of appeal, and record on appeal. The private respondents filed a motion to dismiss the appeal on the ground that petitioner was not a party in interest.

The petitioner opposed the motion to dismiss his appeal, claiming that he has a direct and material interest in the decision sought to be reviewed. He also asked that he be substituted as party-petitioner, in lieu of his former client, Ms. Del Rosario.

On March 28, 1968, the trial judge dismissed the appeal and denied petitioner's motion for substitution.

The petitioner filed in the Court of Appeals a petition for mandamus (CA-G.R. No. 41248) praying that the trial court be ordered to give due course to his appeal and to grant his motion for substitution.

On May 22, 1968, the Court of Appeals dismissed the petition for being insufficient in form and substance as the petitioner did not appear to be the proper party to appeal the decision in Special Proceeding No. 58325 (Annex 1, p. 77, Rollo).

Upon the denial of his motion for reconsideration, petitioner appealed by certiorari to this Court, assigning the following errors against the Court of Appeals' resolution:

1. The Court of Appeals erred in finding that the petitioner appears not to be the proper party to appeal the decision in Sp. Proc. No. 58325 of the Court of First Instance of Manila.

2. Assuming the petitioner's right of appeal is doubtful, the Court of Appeals erred in dismissing his petition for mandamus; and

3. The Court of Appeals erred in not reversing the decision in Sp. Proc. No. 58325 denying the probate of the holographic will of the late Maxima C. Reselva, said decision being patently erroneous.

Under his first assignment of error, petitioner argues that by virtue of his contract of services with Del Rosario, he is a creditor of the latter, and that under Article 1052 of the Civil Code which provides:

ART. 1052. If the heir repudiates the inheritance to the prejudice of his own creditors, the latter may petition the court to authorize them to accept it in the name of the heir.

The acceptance shall benefit the creditors only to an extent sufficient to cover the amount of their credits. The excess, should there be any, shall in no case pertain to the renouncer, but shall be adjudicated to the persons to whom, in accordance with the rules established in this Code, it may belong.

he has a right to accept for his client Del Rosario to the extent of 35% thereof the devise in her favor (which she in effect repudiated) to protect his contigent attorney's fees.

The argument is devoid of merit. Article 1052 of the Civil Code does not apply to this case. That legal provision protects the creditor of a repudiating heir. Petitioner is not a creditor of Rosa del Rosario. The payment of his fees is contingent and dependent upon the successful probate of the holographic will. Since the petition for probate was dismissed by the lower court, the contingency did not occur. Attorney Leviste is not entitled to his fee.

Furthermore, Article 1052 presupposes that the obligor is an heir. Rosa del Rosario is not a legal heir of the late Maxima C. Reselva. Upon the dismissal of her petition for probate of the decedent's will, she lost her right to inherit any part of the latter's estate. There is nothing for the petitioner to accept in her name.

This Court had ruled in the case of Recto  vs.  Harden, 100 Phil. 1427, that "the contract (for contingent attorney's fees) neither gives, nor purports to give, to the appellee (lawyer) any right whatsoever, personal or real, in and to her (Mrs. Harden's) aforesaid share in the conjugal partnership. The amount thereof is simply a basis for thecomputation of said fees."

The Court of Appeals did not err in dismissing the petition for mandamus, for while it is true that, as contended by the petitioner, public policy favors the probate of a will, it does not necessarily follow that every will that is presented for probate, should be allowed. The law lays down procedures which should be observed and requisites that should be satisfied before a will may be probated. Those procedures and requirements were not followed in this case resulting in the disallowance of the will. There being no valid will, the motion to withdraw the probate petition was inconsequential.

Petitioner was not a party to the probate proceeding in the lower court. He had no direct interest in the probate of the will. His only interest in the estate is an indirect interest as former counsel for a prospective heir. In Paras vs. Narciso, 35 Phil. 244, We had occassion to rule that one who is only indirectly interested in a will may not interfere in its probate. Thus:

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... the reason for the rule excluding strangers from contesting the will, is not that thereby the court maybe prevented from learning facts which would justify or necessitate a denial of probate, but rather that the courts and the litigants should not be molested by the intervention in the proceedings of persons with no interest in the estate which would entitle them to be heard with relation thereto. (Paras vs. Narciso, 35 Phil. 244, 246.)

Similary, in Morente vs. Firmalino, 40 O.G. 21st Supp. 1, We held:

We are of the opinion that the lower court did not err in holding that notice of an attorney's lien did not entitle the attorney-appellant to subrogate himself in lieu of his client. It only gives him the right to collect a certain amount for his services in case his client is awarded a certain sum by the court.

WHEREFORE, the petition for certiorari is denied for lack of merit. Costs against the petitioner.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

THIRD DIVISION

G.R. No. 91958 January 24, 1991

WILFREDO D. LICUDAN and CRISTINA LICUDAN-CAMPOS, petitioners, vs.THE HONORABLE COURT OF APPEALS and ATTY. TEODORO O. DOMALANTA, respondents.

Arnold V. Guerrero & Associates for petitioners.

Teodoro O. Domalanta for and on his behalf as private respondent.

GUTIERREZ, JR., J.:p

The practice of law is a profession rather than trade. Courts must guard against the charging of unconscionable and excessive fees by lawyers for their services when engaged as counsel. Whether or not the award of attorney's fees in this case is reasonable, being in the nature of contingent fees, is the principal issue.

This petition for review on certiorari assails:

1) The Decision of the public respondent dated September 12, 1989 which dismissed the petitioners' appeal thereby upholding the reasonableness of the respondent lawyer's lien as attorney's fees over the properties of his clients; and

2) The Resolution of the public respondent dated January 30, 1990 which denied the petitioners' motion for reconsideration.

The grounds relied upon by the petitioners are as follows:

The respondent Court, in upholding the entitlement of private respondent-attorney on the attorney's fees he claimed, decided the question in a manner not in accord with law or with the applicable decisions of this Honorable Tribunal.

The respondent Court, in refusing to review and determine the propriety, reasonableness and validity of the attorney's fees claimed by the private respondent-attorney, departed from the usual course of judicial proceedings.

The respondent Court, in failing to declare the attorney's fees claimed by the private respondent-attorney as unconscionable, excessive, unreasonable, immoral and unethical, decided the question in a way not in accord with law and with applicable decisions of this Honorable Tribunal. (Petition, pp. 12-13; Rollo, pp. 16-17)

The following are the antecedent facts pertinent to the case at bar:

The respondent lawyer was retained as counsel by his brother-in-law and sister, the now deceased petitioners' parents, spouses Aurelio and Felicidad Licudan. His services as counsel pertained to two related civil cases docketed as Civil Case No. Q-12254 for partition and Civil Case No. Q-28655 for a sum of money in connection with the redemption of the property subject matter of the two cases covered by Transfer Certificate of Title No. 818 of the Register of Deeds of Quezon City. In both cases, the respondent lawyer obtained a judgment in favor of his clients.

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On August 13,1979, the respondent lawyer filed a Petition for Attorney's Lien with Notification to his Clients which substantially alleged that his clients executed two written contracts for professional services in his favor which provided that:

a) The undersigned counsel is entitled to own 97.5 square meters of the plaintiff's share of the lot in question.

b) The undersigned counsel shall have a usufructuary right for a period of ten (10) years of plaintiffs' share of the lot in question.

c) And that all damages accruing to plaintiffs to be paid by the defendant is for the undersigned counsel.(Annex "H" of the Petition, Rollo, p. 54)

On September 19, 1979, the trial court handling Civil Case No. Q-12254 ordered the annotation at the back of TCT No. 818 of the Register of Deeds of Quezon City of the respondent lawyer's Contract for Professional Services dated August 30, 1979 signed by petitioner Wilfredo Licudan and Aurelio Licudan on his own behalf and on behalf of his daughter, petitioner Cristina Licudan-Campos. The said trial court's Order, being one of two Orders being essentially challenged in this petition, is reproduced below:

Before the court for consideration is a Petition for Attorney's Lien filed by Atty. Teodoro D. Domalanta, counsel for the plaintiff, praying that his attorney's fees be annotated as a lien at the back of Transfer Certificate of Title No. 818 of the Register of Deeds of Quezon City, subject matter of this case.

For the protection of the plaintiffs, the court required the plaintiff Aurelio Licudan as well as his son to appear this morning. Plaintiff Aurelio Licudan together with his son Wilfredo Licudan, who appears to be intelligent and in fact he speaks (the) English language well, appeared. Both Aurelio and Wilfredo Licudan manifested that they have freely and voluntarily signed the Contract for Professional Services, dated August 30, 1979 and notarized before Notary Public Amado Garrovillas as Doc. No. 32, Page 8, Book No. XIX, Series of 1979.

Considering the manifestation of plaintiff, Aurelio Licudan and Alfredo (sic) Licudan that they have entered freely and voluntarily in the said contract of professional services, let the same be annotated at the back of TCT 818 of the Register of Deeds of Quezon City, upon payment of the required legal fees. (CA Decision, pp. 7-8; Rollo, pp. 36-37)

The Contract for Professional Services dated August 30, 1979 differs from the earlier contractual provisions in that it entitled the respondent lawyer to one-third (1/3) of

the subject property or 90.5 square meters and provided for usufructuary rights over the entire lot in question in favor of the respondent lawyer's son, Teodoro M. Domalanta, Jr. for an agreed consideration. (Annex "J" of the Petition; Rollo, p. 59)

On July 25, 1985, the respondent lawyer filed a motion ex parte to amend the Order dated September 19, 1979 so as to conform with an additional professional fee covering 31 square meters more of the lot for services rendered in Civil Case No. Q-28655 as evidenced by a Deed of Absolute Sale dated May 1, 1983 executed by Aurelio Licudan in favor of the respondent lawyer.

On September 6, 1985, the trial court ordered the respondent lawyer to submit a subdivision plan in conformity with his attorney's fees contract under which one-third (1/3) of the property or 90.5 square meters was alloted to him.

On September 23, 1985, the respondent lawyer filed a motion for reconsideration praying for the amendment of the Order dated September 19, 1979 to conform with the Deed of Absolute Sale dated May 1, 1983 which was executed after the annotation of the original attorney's lien of 90.5 square meters.

On September 30, 1985, the trial court denied the motion on the ground that the respondent lawyer cannot collect attorney's fees for other cases in the action for partition.

On October 4, 1985, the respondent lawyer filed a second motion for reconsideration of the Order dated September 6, 1985 explaining that what he sought to be included in the Order dated September 19, 1979 is the additional attorney's fees for handling the redemption case which was but a mere offshoot of the partition case and further manifesting that the additional 31 square meters as compensation for the redemption case must be merged with the 90.5 square meters for the partition case to enable the said respondent lawyer to comply with the Order dated September 6,1985 which directed him to submit a subdivision plan as required.

On October 21, 1985, the trial court issued the second Order being assailed in this petition. The said Order reads:

Acting on the "Second Motion for Reconsideration" filed by Atty. Teodoro Domalanta and finding the same to be justified, let an attorney's lien be annotated in the title of the property for 31 square meters as attorney's fees of said Atty. Teodoro Domalanta in addition to the original 90.5 square meters. (CA Decision, p. 8; Rollo, p. 37)

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On August 22, 1986, more than ten (10) months after the Orders of September 6, 1985 and October 21, 1985 had become final and executory, the petitioners as substituted heirs of the respondent lawyers' deceased clients filed a motion to set aside orders on the ground that the award of professional fees covering 121.5 square meters of the 271.5 square meter lot is unconscionable and excessive.

After the respondent lawyer filed his Opposition to the above petitioners' motion, the lower court, on August 29, 1986, finding that the petitioners as substituted plaintiffs are not in full agreement with the respondent lawyer's claim for attorney's fees, set aside its Orders dated September 6, 1985 and October 21, 1985.

On September 16, 1986, the respondent lawyer filed a motion for reconsideration stressing the fact that the payment of the professional services was pursuant to a contract which could no longer be disturbed or set aside because it has already been implemented and had since then become final. This motion was denied on October 3, 1986.

On November 15, 1986, the respondent lawyer filed a motion to set aside the orders dated August 29, 1986 and October 3, 1986 reiterating his position that the Orders of September 6, 1985 and October 21, 1985 have become final and are already implemented. The respondent lawyer further asked for the modification of the October 21, 1985 Order to reflect 60.32 square meters instead of 31 square meters only since the stipulation in the Additional Contract for Professional Services entitled him to 60.32 square meters.

After the petitioners' Opposition to the said motion was filed, the trial court, on February 26, 1987, rendered an Order with the following dispositive portion:

WHEREFORE, this Court has no alternative but to set aside its orders of 29 August 1986 and 3 October 1986 and declare its Orders of 19 September 1979 and 21 October 1985 irrevocably final and executory. (CA Decision, p. 5; Rollo, p. 34)

On Appeal, the Court of Appeals ruled in favor of the respondent lawyer by dismissing the appeal and the prayed for writ of preliminary injunction. Their subsequent motion for reconsideration having been denied', the petitioners filed the instant petition.

The petitioners fault the respondent Court for its failure to exercise its inherent power to review and determine the propriety of the stipulated attorney's fees in favor of the respondent lawyer and accuse the respondent lawyer of having committed an unfair advantage or legal fraud by virtue of the Contract for Professional Services devised by him after the trial court awarded him attorney's

fees for P1,000.00 only instead of respecting the trust and confidence of the highest level reposed on him considering the close blood and affinal relationship between him and his clients.

The petitioners contend that under the award for professional services, they may have won the case but would lose the entire property won in litigation to their uncle-lawyer. They would be totally deprived of their house and lot and the recovered damages considering that of the 271.5 square meters of the subject lot, the respondent lawyer is claiming 121.5 square meters and the remaining portion of 150 square meters would also go to attorney's fees since the said portion pertains to the lawyer's son by way of usufruct for ten (10) years.

The aforesaid submissions by the petitioners merit our consideration.

It is a well-entrenched rule that attorney's fees may be claimed in the very action in which the services in question have been rendered or as an incident of the main action. The fees may be properly adjudged after such litigation is terminated and the subject of recovery is at the disposition of the court. (see Camacho v. Court of Appeals, 179 SCRA 604 [1989]; Quirante v. Intermediate Appellate Court, 169 SCRA 769 [1989]).

It is an equally deeply-rooted rule that contingent fees are not  per se prohibited by law. They are sanctioned by Canon 13 of the Canons of Professional Ethics and Canon 20, Rule 20.01 of the recently promulgated Code of Professional Responsibility. However, as we have held in the case of Tanhueco v. De Dumo (172 SCRA 760 [1989]):

. . . When it is shown that a contract for a contingent fee was obtained by undue influence exercised by the attorney upon his client or by any fraud or imposition, or that the compensation is clearly excessive, the Court must and will protect the aggrieved party. (Ulanday v. Manila Railroad Co., 45 Phil. 540 [1923]; Grey v. Insular Lumber Co., 97 Phil. 833 [1955]).

In the case at bar, the respondent lawyer caused the annotation of his attorney's fees lien in the main action for partition docketed as Civil Case No. Q-12254 on the basis of a Contract for Professional Services dated August 30, 1979. We find reversible error in the Court of Appeals' holding that:

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When the reasonableness of the appellee's lien as attorney's fees over the properties of his clients awarded to him by the trial court had not been questioned by the client, and the said orders had already become final and executory, the same could no longer be disturbed, not even by the court which rendered them (Tañada v. Court of Appeals, 139 SCRA 419). (CA Decision p. 7; Rollo, p. 36)

On the contrary, we rule that the questioned Orders dated September 19, 1979 and October 21, 1985 cannot become final as they pertain to a contract for a contingent fee which is always subject to the supervision of the Court with regard to its reasonableness as unequivocally provided in Section 13 of the Canons of Professional Ethics which reads:

13. Contingent Fees.—

A contract for a contingent fee, where sanctioned by law, should be reasonable under all the circumstances of the case including the risk and uncertainty of the compensation, but should alwaysbe subject to the supervision of a court, as to its reasonableness. (Emphasis supplied).

There is no dispute in the instant case that the attorney's fees claimed by the respondent lawyer are in the nature of a contingent fee. There is nothing irregular about the execution of a written contract for professional services even after the termination of a case as long as it is based on a previous agreement on contingent fees by the parties concerned and as long as the said contract does not contain stipulations which are contrary to law, good morals, good customs, public policy or public order.

Although the Contract for Professional Services dated August 30, 1979 was apparently voluntarily signed by the late Aurelio Licudan for himself and on behalf of his daughter, petitioner Cristina Licudan-Campos and by the petitioner Wilfredo Licudan who both manifested in open court that they gave their free and willing consent to the said contract we cannot allow the said contract to stand as the law between the parties involved considering that the rule that in the presence of a contract for professional services duly executed by the parties thereto, the same becomes the law between the said parties is not absolute but admits an exception—that the stipulations therein are not contrary to law, good morals, good customs, public policy or public order (see Philippine American Life Insurance Company v. Pineda, 175 SCRA 416 [1989]; Syjuco v. Court of Appeals, 172 SCRA 111 [1989]).

Under Canon 20 of the Code of Professional Responsibility, a lawyer shall charge only fair and reasonable fees. In determining whether or not the lawyer fees are fair

and reasonable, Rule 20-01 of the same Code enumerates the factors to be considered in resolving the said issue. They are as follows:

a) The time spent and the extent of the services rendered or required;

b) The novelty and difficulty of the questions involved;

c) The importance of the subject matter;

d) The skill demanded;

e) The probability of losing other employment as a result of acceptance of the proferred case;

f) The customary charges for similar services and the schedule of fees of the IBP Chapter to which he belongs;

g) The amount involved in the controversy and the benefits resulting to the client from the service;

h) The contingency or certainty of compensation;

i) The character of the employment, whether occasional or established; and

j) The professional standing of the lawyer.

A similar provision is contained under Section 24, Rule 138 of the Revised Rules of Court which partly states that:

Sec. 24. Compensation of attorneys; agreement as to fees. — An attorney shall be entitled to have and recover from his client no more than a reasonable compensation for his services, with a view to the importance of the subject matter of the controversy, the extent of the services rendered, and the professional standing of the attorney. . . . A written contract for services shall control the amount to be paid therefor unless found by the court to be unconscionable or unreasonable.

All that the respondent lawyer handled for his deceased sister and brother-in-law was a simple case of partition which necessitated no special skill nor any unusual effort in its preparation. The subsequent case for redemption was admittedly but an offshot of the partition case. Considering the close blood and affinal relationship

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between the respondent lawyer and his clients, there is no doubt that Atty. Domalanta took advantage of the situation to promote his own personal interests instead of protecting the legal interests of his clients. A careful perusal of the provisions of the contract for professional services in question readily shows that what the petitioners won was a pyrrhic victory on account of the fact that despite the successful turnout of the partition case, they are now practically left with nothing of the whole subject lot won in the litigation. This is because aside from the 121.5 square meters awarded to Atty. Domalanta as attorney's fees, the said contract for professional services provides that the remaining portion shall pertain to the respondent lawyer's son by way of usufruct for ten (10) years. There should never be an instance where a lawyer gets as attorney's fees the entire property involved in the litigation. It is unconscionable for the victor in litigation to lose everything he won to the fees of his own lawyer.

The respondent lawyer's argument that it is not he but his son Teodoro M. Domalanta, Jr. who is claiming the usufructuary right over the remaining portion of the subject lot is inaccurate. The records show that the matter of usufruct is tied up with this case since the basis for the said usufructuary right is the contract for professional services the reasonableness of which is being questioned in this petition. We find the ten-year usufruct over the subject lot part and parcel of the attorney's fees being claimed by the respondent lawyer.

In resolving the issue of reasonableness of the attorney's fees, we uphold the time-honoured legal maxim that a lawyer shall at all times uphold the integrity and dignity of the legal profession so that his basic ideal becomes one of rendering service and securing justice, not money-making. For the worst scenario that can ever happen to a client is to lose the litigated property to his lawyer in whom an trust and confidence were bestowed at the very inception of the legal controversy. We find the Contract for Professional Services dated August 30, 1979, unconscionable and unreasonable. The amount of P20,000.00 as attorney's fees, in lieu of the 121.5 square meters awarded to the respondent lawyer and the ten-year usufructuary right over the remaining portion of 150 square meters by the respondent lawyer's son, is, in the opinion of this Court, commensurate to the services rendered by Atty. Domalanta.

WHEREFORE, IN VIEW OF THE FOREGOING, the instant petition is GRANTED. The Court of Appeals' decision of September 12, 1989 is hereby REVERSED and SET ASIDE. Atty. Domalanta is awarded reasonable attorney's fees in the amount of P20,000.00.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

A.M. No. 1388 March 28, 1980

ANA F. RETUYA, complainant, vs.ATTY. IÑEGO A. GORDUIZ, respondent.

AQUINO, J:

This disbarment case is linked to Administrative Case No. 1431-MJ which was filed by Ana F. Retuya against Municipal Judge Paulo A. Equipilag of Maasin, Leyte and which was decided on July 16, 1979 (Retuya vs. Equipilag). The facts of that case, which also gave rise to this disbarment case, are as follows:

Ana F. Retuya, a widow with four minor children, filed a claim for workmen's compensation against Eastern Shipping Lines, Inc., the employer of her husband who died in 1968. In a decision dated December 4, 1970 the Workmen's Compensation Unit at Tacloban City awarded to Ana the sum of P8,792.10 consisting of (a) P6,000 as compensation benefits, (b) P2,292.10 for medical and hospitalization expenses, (c) P200 as burial expenses and (d) P300 as attorney's fees of Atty. Iñego Gorduiz (Case No. 9728).

The employer appealed. During the pendency of the appeal, the employer proposed to compromise the claim by paying P4,396.05 or only one-half of the total award. Ana accepted the proposal and directed that the amount be remitted to Fiscal Mamerto Daclan through the Philippine National Bank's branch at Maasin, Southern Leyte.

The employer paid the reduced award on November 16, 1972. Ana sent to the employer the receipt and release signed by her with a covering letter dated December 19, 1972 wherein she explained that her lawyer, Gorduiz, did not sign the joint motion to dismiss the claim because he wanted twenty percent of the award as his attorney's fees. She was willing to give him ten percent.

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After she had cashed the check for P4,396.05, she was not able to contact Gorduiz and pay his fee. Then, unexpectedly, in February, 1973, she was served with a warrant of arrest issued in Criminal Case No. R-2362 of the municipal court of Maasin. To avoid detention, she had to post bail in the sum of one thousand pesos.

It turned out that on January 12, 1973 Atty. Gorduiz executed an affidavit stating that Ana had misappropriated his attorney's fees amounting to three hundred pesos and that he had demanded payment of the amount from her but, she refused to make payment and. instead, she went to Cebu and starved there for a long time.

On the basis of that affidavit, the acting chief of police filed against Ana a complaint for estafa in the municipal court of Maasin. After posting bail, she filed a motion to quash wherein she explained that she did not pay the fees of Atty. Gorduiz because he was demanding one-third of the award: that when she did not accede to his demand, he lowered his claim to eight hundred pesos, and that she bargained for six hundred fifty pesos but he refused to accept that amount. Ana averred that the estafa case was filed just to harass her.

Judge Paulo A. Equipilag denied the motion to quash. He granted the motion of Atty. Gorduiz requiring Ana to produce a copy of the decision awarding her workmen's compensation for her husband's death.

The estafa case was not tried. Atty. Erasmo M. Diola, as lawyer of Ana, offered to Atty. Gorduiz the sum of five hundred pesos as settlement of the case. The offer was accepted.

On November 22, 1973, the acting child of police filed a motion to dismiss the case on the basis of the affidavit of Atty. Gorduiz ex. executed on that date stating that the prosecution witnesses had allegedly become hostile and that he was no longer interested in further prosecuting the case. Also, on that day, Judge Equipilag dismissed the case.

In spite of the dismissal of the estafa case Ana F. Retuya felt aggrieved by the proceedings therein. In a complaint dated July 24, 1974 but filed in this Court on October 30, 1974, she asked for the disbarment or suspension of Atty. Gorduiz and Judge Equipilag. The disbarment case against Gorduiz was referred to the Solicitor General.

The case against Judge Equipilag was investigated by the Judge of the Court of First Instance of Southern Leyte.

This Court found that there was no justification for suspending respondent Judge. However, he was admonished to be more prudent and circumspect in the discharge of his duties so as to obviate the suspicion that, for an ulterior motive, he wall in cahoots with the offended party in a criminal case for the purpose of using the strong arm of the law that the accused in an oppressive and vindictive manner.

The Solicitor General asked the provincial fiscal of Southern Leyte to investigate the case against Gorduiz. The fiscal in her report of July 8, 1975 recommended the of the case.

The Solicitor General disagreeing with that recommendation, filed in this Court against Gorduiz a complaint wherein he prayed that Gorduiz be suspended for six months because the latter, in filing the estafa case, had promoted a groundless suit against his client.

Ana F. Retuya testified before the investigation Fiscal that in December, 1972 she was willing to pay Gorduiz six hundred fifty pesos as his attorney's few but he demanded a bigger amount.He lodged a complaint for estafa against her and was arrests She had to post bail in the sum of one thousand pesos. As already stated above, the estafa case was later dismissed when Ana paid Gorduiz sum of five hundred pesos.

In his testimony before the investigating fiscal and this Court's legal officer, respondent Gorduiz denied that he demanded as attorney's fees an amount higher than three hundred pesos. He explained that he filed the estafa cam because after Ana had received payment of the award, she did not turn over to him the attorney's fees of three hundred pesos in spite of her promises to pay the same and his demands for payment (Exh. 7 and 8).

Gorduiz declared that Ana filed the disbarment case against him in order that she could evade the payment of his attorney's fees in the other cases which he had handled for her. It was also possible that someone who had a score to settle with Gorduiz had instigated the filing of this case against him.

He further declared that he filed the estafa case because he thought that Ana had absconded when she stayed in Cebu City for a long time (23-24 tsn, June 26, 1979). He claimed that he spent one hundred pesos of his own money in gathering evidence which was presented in the workmen's compensation case. He had also advanced around two hundred pesos to cover the expenses in the other cases which he had handled for Ana.

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After reflecting on the conflicting contentions of the parties, the Court finds that there is justification for suspending the respondent.

Respondent acted precipitately in filing a criminal action against his client for the supposed misappropriation of his attomey's fees. It is not altogether clear that his client had swindled him and, therefore, there is some basis for concluding that, contrary to his lawyer's oath, he had filed a suit against her and had harassed and embarrassed her.

Paragraph 14 of the Canons of Legal Ethics prescribes that "controversies with clients concerning compensation are to be avoided by the lawyer so far as shall be compatible with his self- respect and with his right to receive reasonable recompense for his services; and lawsuits with clients should be resorted to only to prevent injustice, imposition or fraud."

WHEREFORE, the respondent is from the practice of law for a period of six months counted from notice of this decision. A copy of this decision should be attached to his record in the Bar Confidant's office.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

FIRST DIVISION

A.C. No. 6210 December 9, 2004

FEDERICO N. RAMOS, complainant, vs.ATTY. PATRICIO A. NGASEO, respondent.

D E C I S I O N

YNARES-SANTIAGO, J.:

This is a complaint for suspension of respondent Atty. Patricio A. Ngaseo for violation of the Code of Professional Responsibility and Article 1491 of the Civil Code by demanding from his client, complainant Federico N. Ramos, the delivery of 1,000 square meters of land, a litigated property, as payment for his appearance fees.

The facts as narrated by the complainant are as follows:

Sometime in 1998, complainant Federico Ramos went to respondent Atty. Patricio Ngaseo's Makati office to engage his services as counsel in a case1 involving a piece of land in San Carlos, Pangasinan. Respondent agreed to handle the case for an acceptance fee of P20,000.00, appearance fee of P1,000.00 per hearing and the cost of meals, transportation and other incidental expenses. Complainant alleges that he did not promise to pay the respondent 1,000 sq. m. of land as appearance fees.2

On September 16, 1999, complainant went to the respondent's office to inquire about the status of the case. Respondent informed him that the decision was adverse to them because a congressman exerted pressure upon the trial judge. Respondent however assured him that they could still appeal the adverse judgment and asked for the additional amount of P3,850.00 and another P2,000.00 on September 26, 2000 as allowance for research made.3

Although an appeal was filed, complainant however charges the respondent of purposely failing to submit a copy of the summons and copy of the assailed decision. Subsequently, complainant learned that the respondent filed the notice of appeal 3 days after the lapse of the reglementary period.

On January 29, 2003, complainant received a demand-letter from the respondent asking for the delivery of the 1,000 sq. m. piece of land which he allegedly promised as payment for respondent's appearance fee. In the same letter, respondent also threatened to file a case in court if the complainant would not confer with him and settle the matter within 30 days.

Respondent alleged that sometime in the late 1997, a former client, Federico Ramos and his brother, Dionisio, went to his Makati office to engage his professional services in connection with a 2-hectare parcel of land situated in San

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Carlos, Pangasinan which the complainant's family lost 7 years earlier through an execution sale in favor of one Alfredo T. Castro. Complainant, who was deaf and could only speak conversational Tagalog haltingly, was assisted by his brother Dionisio. They came all the way from Pangasinan because no lawyer in San Carlos City was willing to handle the case. Complainant, through Dionisio, avers that he has consulted 2 local lawyers but did not engage their services because they were demanding exorbitant fees. One local lawyer was willing to handle the case for at least one-half of the land involved as his attorney's fee, plus cash expenses, while the other asked for ¼ of the land in addition to a large sum of money. Respondent agreed to handle the case for an acceptance fee of P60,000.00 plus an appearance fee of P3,000.00 per hearing. Complainant told him that he would consult his siblings on the matter.

Six months later, i.e., in April 1998, complainant, assisted by one Jose Castillo, went to respondent's office to discuss the legal fees. Complainant, through Castillo, told respondent that he was willing to pay an acceptance fee of P40,000.00, P20,000.00 of which shall be paid upon engagement and the remaining P20,000.00 to be paid after their treasure hunt operations in Nueva Viscaya were terminated. Further, complainant offered, in lieu of P3,000.00 per appearance, 1,000 sq. m. of land from the land subject matter of the case, if they win, or from another piece of property, if they lose. In addition, complainant also offered to defray the expenses for transportation, meals and other incidental expenses. Respondent accepted the complainant's offer.

Respondent claims that after the trial court dismissed Civil Case No. SCC 2128, he filed a timely notice of appeal and thereafter moved to be discharged as counsel because he had colon cancer. Complainant, now assisted by one Johnny Ramos, implored respondent to continue handling the case, with an offer to double the 1,000 sq. m. piece of land earlier promised and the remaining balance of P20,000.00 acceptance fee. Johnny Ramos made a written commitment and gave respondent's secretary P2,000.00 of the P3,850.00 expenses for the preparation of the appellant's brief.

On July 18, 2001, the Court of Appeals rendered a favorable decision ordering the return of the disputed 2-hectare land to the complainant and his siblings. The said decision became final and executory on January 18, 2002. Since then complainant allegedly failed to contact respondent, which compelled him to send a demand letter on January 29, 2003.

On February 14, 2003, complainant filed a complaint before the IBP charging his former counsel, respondent Atty. Ngaseo, of violation of the Code of Professional Responsibility for demanding the delivery of 1,000 sq. m. parcel of land which was the subject of litigation.

In a report dated July 18, 2003, IBP Commissioner Rebecca Villanueva-Maala found the respondent guilty of grave misconduct and conduct unbecoming of a lawyer in violation of the Code of Professional Responsibility and recommended that he be suspended from the practice of law for 1 year.4

On August 30, 2003, the IBP Board of Governors passed Resolution No. XVI-2003-47 the full text of which reads:5

RESOLVED to ADOPT and APPROVE, as it is hereby ADOPTED and APPROVED, the Report and Recommendation of the Investigating Commissioner of 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, with modification, and considering that respondent have violated the Code of Professional Responsibility for grave misconduct and conduct unbecoming of a lawyer Atty. Patricio A. Ngaseo is hereby SUSPENDED from the practice of law for six (6) months.

On December 11, 2003, respondent filed a petition for review assailing IBP Resolution No. XVI-2003-47 for having been issued without or in excess of jurisdiction.6

Respondent argues that he did not violate Article 1491 of the Civil Code because when he demanded the delivery of the 1,000 sq. m. of land which was offered and promised to him in lieu of the appearance fees, the case has been terminated, when the appellate court ordered the return of the 2-hectare parcel of land to the family of the complainant.

Respondent further contends that he can collect the unpaid appearance fee even without a written contract on the basis of the principle of quantum meruit. He claims that his acceptance and appearance fees are reasonable because a Makati based legal practitioner, would not handle a case for an acceptance fee of only P20,000.00 and P1,000.00 per court appearance.

Under Article 1491(5) of the Civil Code, lawyers are prohibited from acquiring either by purchase or assignment the property or rights involved which are the object of the litigation in which they intervene by virtue of their profession.7 The prohibition on purchase is all embracing to include not only sales to private individuals but also public or judicial sales. The rationale advanced for the prohibition is that public policy disallows the transactions in view of the fiduciary relationship involved, i.e., the relation of trust and confidence and the peculiar control exercised by these persons.8 It is founded on public policy because, by virtue of his office, an attorney may easily take advantage of the credulity and ignorance of his client and unduly

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enrich himself at the expense of his client.9However, the said prohibition applies only if the sale or assignment of the property takes place during the pendency of the litigation involving the client's property. Consequently, where the property is acquired after the termination of the case, no violation of paragraph 5, Article 1491 of the Civil Code attaches.

Invariably, in all cases where Article 1491 was violated, the illegal transaction was consummated with the actual transfer of the litigated property either by purchase or assignment in favor of the prohibited individual. In Biascan v. Lopez, respondent was found guilty of serious misconduct and suspended for 6 months from the practice of law when he registered a deed of assignment in his favor and caused the transfer of title over the part of the estate despite pendency of Special Proceedings No. 98037 involving the subject property.10 In the consolidated administrative cases of Valencia   v.   Cabanting,11 the Court suspended respondent Atty. Arsenio Fer Cabanting for six (6) months from the practice of law when he purchased his client's property which was still the subject of a pending certiorari proceeding.

In the instant case, there was no actual acquisition of the property in litigation since the respondent only made a written demand for its delivery which the complainant refused to comply. Mere demand for delivery of the litigated property does not cause the transfer of ownership, hence, not a prohibited transaction within the contemplation of Article 1491. Even assuming arguendo that such demand for delivery is unethical, respondent's act does not fall within the purview of Article 1491. The letter of demand dated January 29, 2003 was made long after the judgment in Civil Case No. SCC-2128 became final and executory on January 18, 2002.

We note that the report of the IBP Commissioner, as adopted by the IBP Board of Governors in its Resolution No. XVI-2003-47, does not clearly specify which acts of the respondent constitute gross misconduct or what provisions of the Code of Professional Responsibility have been violated. We find the recommended penalty of suspension for 6 months too harsh and not proportionate to the offense committed by the respondent. The power to disbar or suspend must be exercised with great caution. Only in a clear case of misconduct that seriously affects the standing and character of the lawyer as an officer of the Court and member of the bar will disbarment or suspension be imposed as a penalty.12 All considered, a reprimand is deemed sufficient and reasonable.

WHEREFORE, in view of the foregoing, respondent Atty. Patricio A. Ngaseo is found guilty of conduct unbecoming a member of the legal profession in violation of Rule 20.04 of Canon 20 of the Code of Professional Responsibility. He is REPRIMANDED with a warning that repetition of the same act will be dealt with more severely.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

FIRST DIVISION

G.R. No. L-26096 February 27, 1979

THE DIRECTOR OF LANDS, petitioner, vs.SILVERETRA ABABA, ET AL., claimants, JUAN LARRAZABAL, MARTA C. DE LARRAZABAL, MAXIMO ABAROQUEZ and ANASTACIA CABIGAS, petitioners-appellants, ALBERTO FERNANDEZ, adverse claimant-appellee.

Juanito Ll. Abao for petitioners-appellants.

Alberto R Fernandez in his own behalf.

MAKASIAR, J.:

This is an appeal from the order of the Court of First Instance of Cebu dated March 19, 1966 denying the petition for the cancellation of an adverse claim registered by the adverse claimant on the transfer certificate of title of the petitioners.

The adverse claimant, Atty. Alberto B. Fernandez was retained as counsel by petitioner, Maximo Abarquez, in Civil Case No. R-6573 of the Court of First Instance of Cebu, entitled "Maximo Abarquez vs. Agripina Abarquez", for the annulment of a contract of sale with right of repurchase and for the recovery of the land which was the subject matter thereof. The Court of First Instance of Cebu rendered a decision

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on May 29, 1961 adverse to the petitioner and so he appealed to the Court of Appeals.

Litigating as a pauper in the lower court and engaging the services of his lawyer on a contingent basis, petitioner, liable to compensate his lawyer whom he also retained for his appeal executed a document on June 10, 1961 in the Cebuano-Visayan dialect whereby he obliged himself to give to his lawyer one-half (1/2) of whatever he might recover from Lots 5600 and 5602 should the appeal prosper. The contents of the document as translated are as follows:

AGREEMENT

KNOW ALL MEN BY THESE PRESENTS:

That I, MAXIMO ABARQUEZ, Plaintiff in Case No. R-6573 of the Court of First Instance of Cebu, make known through this agreement that for the services rendered by Atty. Alberto B. Fernandez who is my lawyer in this case, if the appeal is won up to the Supreme Court, I Promise and will guarantee that I win give to said lawyer one-half (1/2) of what I may recover from the estate of my father in Lots No. 5600 and 5602 which are located at Bulacao Pardo, City of Cebu. That with respect to any money which may be adjudged to me from Agripina Abarquez, except 'Attorney's Fees', the same shall pertain to me and not to said lawyer.

IN WITNESS WHEREOF, I have caused my right thumb. mark to be affixed hereto this 10th of June, 1961, at the City of Cebu.

THUMBMARKMAXIMO ABARQUEZ

(p. 5, Petitioner-Appellant's Brief, p. 26, rec.)

The real Property sought to be recovered in Civil Case No. R6573 was actually the share of the petitioner in Lots 5600 and 5602, which were part of the estate of his deceased parents and which were partitioned the heirs which included petitioner Maximo Abarquez and his elder sister Agripina Abarquez, the defendant in said civil case.

This partition was made pursuant to a project of partition approved by the Court which provided am other that Lots Nos. 5600 and 5602 were to be divided into

three equal Parts, one third of which shall be given to Maximo Abarquez. However, Agripina Abarquez the share of her brother stating that the latter executed an instrument of pacto de retroprior to the partition conveying to her any or all rights in the estate of their parents. Petitioner discovered later that the claim of his sister over his share was based on an instrument he was believe all along to be a mere acknowledgment of the receipt of P700.00 which his sister gave to him as a consideration for g care of their father during the latter's illness and never an instrument of pacto de retro. Hence, he instituted an action to annul the alleged instrument of pacto de retro.

The Court of Appeals in a decision promulgated on August 27, 1963 reversed the decision of the lower court and annulled the dead of pacto  de   retro. Appellee Agripina Abarquez filed a motion for reconsideration but the same was denied in a resolution dated January 7, 1964 (p. 66, Record on Appeal; p. 13, Rec.) and the judgment became final and executory on January 22,1964.

Subsequently, Transfer Certificate of Title No. 31841 was issued on May 19,1965 in the name of Maximo Abarquez, married to Anastacia Cabigas, over his adjudged share in Lots Nos. 5600 and 5602 containing an area of 4,085 square meters (p. 110, ROA; p. 13, rec.). These parcels of land later by the subject matter of the adverse claim filed by the claimant.

The case having been resolved and title having been issued to petitioner, adverse claimant waited for petitioner to comply with ha obligation under the document executed by him on June 10, 1961 by delivering the one-half (½) portion of the said parcels of land.

Petitioner refused to comply with his obligation and instead offered to sell the whole parcels of land covered by TCT No. 31841 to petitioner-spouses Juan Larrazabal and Marta C. de Larrazabal. Upon being informed of the intention of the petitioner, adverse t claimant immediately took stops to protect his interest by filing with the trial court a motion to annotate Ins attorney's lien on TCT No. 31841 on June 10, 1965 and by notifying the prospective buyers of his claim over the one-half portion of the parcels of land.

Realizing later that the motion to annotate attorney's lien was a wrong remedy, as it was not within the purview of Section 37, rule 138 of the Revised Rule of Court, but before the same was by the trial court, adverse t by an affidavit of adverse claim on July 19, 1965 with the Register of Deeds of Cebu (p. 14, ROA; p. 13, rec.). By virtue of the petition of mid affidavit the adverse claim for one-half (½) of the lots covered by the June 10, 1961 document was annotated on TCT No. 31841.

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Notwithstanding the annotation of the adverse claim, petitioner-spouse Maximo Abarquez and Anastacia Cabigas conveyed by deed of absolute sale on July 29, 1965 two-thirds (2/3) of the lands covered by TCT No. 31841 to petitioner-spouses Juan Larrazabal and Marta C. de Larrazabal. When the new transfer certificate of title No. 32996 was issued, the annotation of adverse claim on TCT No. 31841 necessarily had to appear on the new transfer certificate of title. This adverse claim on TCT No. 32996 became the subject of cancellation proceedings filed by herein petitioner-spouses on March 7, 1966 with the Court of First Instance of Cebu (p. 2 ROA; p. 13, rec.). The adverse claimant, Atty. Alberto B. Fernandez, filed his opposition to the petition for cancellation on March 18, 1966 (p. 20, ROA; p. 13 rec.). The trial court resolved the issue on March 19, 1966, when it declared that:

...the petition to cancel the adverse claim should be denied. The admission by the petitioners that the lawyers (Attys. Fernandez and Batiguin) are entitled to only one-third of the lot described in Transfer Certificate of Title No. 32966 is the best proof of the authority to maintain said adverse claim (p. 57, ROA; p. 13, rec.).

Petitioner-spouses decided to appeal the order of dismissal to this Court and correspondingly filed the notice of appeal on April 1, 1966 with the trial court. On April 2, 1966, petitioner-spouses filed the appeal bond and subsequently filed the record on appeal on April 6, 1966. The records of the case were forwarded to this Court through the Land Registration Commission of Manila and were received by this Court on May 5, 1966.

Counsel for the petitioner-spouses filed the printed record on appeal on July 12, 1966. Required to file the appellants' brief, counsel filed one on August 29, 1966 while that of the appellee was filed on October 1, 1966 after having been granted an extension to file his brief.

The case was submitted for decision on December 1, 1966. Counsel for the petitioners filed a motion to expunge appellees' brief on December 8, 1966 for having been filed beyond the reglementary period, but the same was denied by this Court in a resolution dated February 13, 1967.

The pivotal issue to be resolved in the instant case is the validity or nullity of the registration of the adverse claim of Atty. Fernandez, resolution of which in turn hinges on the question of whether or not the contract for a contingent fee, basis of the interest of Atty. Fernandez, is prohibited by the Article 1491 of the New Civil Code and Canon 13 of the Canons of Professional Ethics.

Petitioners contend that a contract for a contingent fee violates Article 1491 because it involves an assignment of a property subject of litigation. That article provides:

Article 1491. The following persons cannot acquire by purchase even at a public or judicial auction, either in person or through the petition of another.

xxx xxx xxx

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior and other o and employees connected with the administration of justice, the property and rights 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   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 (Emphasis supplied).

This contention is without merit. Article 1491 prohibits only the sale or assignment between the lawyer and his client, of property which is the subject of litigation. As WE have already stated. "The prohibition in said article a only to applies stated: " The prohibition in said article applies only to a sale or assignment to the lawyer by his client of the property which is the subject of litigation. In other words, for the prohibition to operate, the sale or t of the property must take place during the pendency of the litigation involving the property" (Rosario Vda. de Laig vs. Court of Appeals, et al., L-26882, November 21, 1978).

Likewise, under American Law, the prohibition does not apply to "cases where after completion of litigation the lawyer accepts on account of his fee, an interest the assets realized by the litigation" (Drinker, Henry S., Legal Ethics, p. 100 [1953], citing App. A, 280; N.Y. Ciu 714). "There is a clear distraction between such cases and one in which the lawyer speculates on the outcome of the matter in which he is employed" (Drinker, supra, p. 100 citing A.B.A. Op. 279).

A contract for a contingent fee is not covered by Article 1491 because the tranfer or assignment of the property in litigation takes effect only after the finality of a favorable judgment. In the instant case, the attorney's fees of Atty. Fernandez, consisting of one-half (1/2) of whatever Maximo Abarquez might recover from his share in the lots in question, is contingent upon the success of the appeal. Hence,

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the payment of the attorney's fees, that is, the transfer or assignment of one-half (1/2) of the property in litigation will take place only if the appeal prospers. Therefore, the tranfer actually takes effect after the finality of a favorable judgment rendered on appeal and not during the pendency of the litigation involving the property in question. Consequently, the contract for a contingent fee is not covered by Article 1491.

While Spanish civilists differ in their views on the above issue — whether or not a contingent fee contract (quota litis agreement) is covered by Article 1491 — with Manresa advancing that it is covered, thus:

Se ha discutido si en la incapacidad de Ion Procumdam y Abogados asta o el pecto de quota litis. Consiste este, como es sabido, en la estipulacion de que el Abogado o el Procurador ban de hacer suyos una parte alicuota de In cona que se li m la son es favorable. Con es te concepto a la vista, es para nosortros que el articulo que comentamos no menciona ese pacto; pero como la incapacidad de los Abogados y Procuradores se extinede al acto de adquirir por cesion; y la efectividad del pacto dequota litis implica necesariamente una cesion, estimamos que con solo el num. 5 del articulo 1459 podria con exito la nulidad de ese pacto tradicionalmente considerado como ilicito.

xxx xxx xxx

Debe tenerse tambien en cuenta, respecto del ultimo parrafo del articulo 1459, la sentencia del Tribunal Supreme de 25 Enero de 1902, que delcara que si bien el procurador no puede adquirir para si los bienes, en cuanto a los cuales tiene incapacidad, puede adquirirlos para otra persona en quien no concurra incapacidad alguna (Manresa, Comentarios al Codigo Civil Español, Tomo X, p. 110 [4a ed., 1931] emphasis supplied).

Castan, maintaining that it is not covered, opines thus;

C. Prohibiciones impuestas a las personas encargadas, mas o menos directamente, de la administracion de justicia.—El mismo art. 1,459 del Codigo civil prohibe a los Magistrados, Jueces, individuos del Minesterio fiscal, Secretarios de Tribunales y Juzgados y Oficiales de Justicia adquirir por compra (aunque sea en subasta publica o judicial, por si ni por persona alguna intermedia). 'Los bienes y derechos que estuviesen en litigio ante

el Tribunal en cuya jurisdicion on teritorio ejercieran sus respectivas funciones, extendiendo se esta prohibicion al acto de adquirir por cesion', y siendo tambien extensiva ' Alos Abogados y Procuradores respecto a los bienes y derecho que fueran objeto del un litigio en que intervengan pos su profession y oficio.'

El fundamento de esta prohibicion es clarismo. No solo se trata—dice Manresa—de quitar la ocasion al fraude; persiguese, ademas, el proposito de rodear a las personas que intervienen en la administracion de justicia de todos los prestigios que necesitan para ejercer su ministerio, librando los de toda sospecha, que, aunque fuere infundada, redundaria en descredito de la institucion.

Por no dor lugar a recelos de ninguna clase, admite el Codigo (en el apartado penutimo del art. 1.459) algunos casos en que, por excepcion, no se aplica el pricipio prohibitivo de que venimos hablando. Tales son los de que se trate de acciones hereditarias entre coheredero, de cesion en pago de creditos, o de garantia de los bienes que posean los funcionarios de justicia.

Algunos autores (Goyena, Manresa, Valverde) creen que en la prohibicion del art. 1.459 esta comprendido el pacto de quota   litis (o sea el convenio por el cual se concede al Abogado o Procurador, para el caso de obtener sentencia favorable una parte alicuota de la cosa o cantidad que se litiga), porque dicho pacto supone la venta o cesion de una parte de la cosa o drecho que es objecto del litigio. Pero Mucius Scaevola oberva, conrazon, que en el repetido pacto no hay propiamente caso de compraventa ni de cesion de derechos, y bastan para estimario nulo otros preceptos del Codigo como los relativos a la ilicitud de la causa (Castan, Derecho Civil Espñol, Tomo 4, pp. 68-69, [9a ed., 1956], emphasis supplied).

The Supreme Court of Spain, in its sentencia of 12 November 1917, has ruled that Article 1459 of the Spanish Civil Code (Article 1491 of our Civil Code) does not apply to a contract for a contingent fee because it is not contrary to morals or to law, holding that:

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... que no es susceptible de aplicarse el precepto contenido en el num. 5 del art. 1.459 a un contrato en el que se restrigen los honorarios de un Abogado a un tanto por ciento de lo que se obtuviera en el litigio, cosa no repudiada por la moral ni por la ley (Tolentino, Civil Code of the Philippines, p. 35, Vol. V [1959]; Castan, supra; Manresa, supra).

In the Philippines, among the Filipino commentators, only Justice Capistrano ventured to state his view on the said issue, thus:

The incapacity to purchase or acquire by assignment, which the law also extends to lawyers with t to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession, also covers contracts for professional services quota   litis. Such contracts, however, have been declared valid by the Supreme Court" (Capistrano, Civil Code of the Philippines, p. 44, Vol. IV [1951]).

Dr. Tolentino merely restated the views of Castan and Manresa as well as the state of jurisprudence in Spain, as follows:

Attorneys-at-law—Some writers, like Goyena, Manresa and Valverde believe that this article covers quota litis agreements, under which a lawyer is to be given an aliquot part of the property or amount in litigation if he should win the case for his client. Scaevola and Castan, however, believe that such a contract does not involve a sale or assignment of right but it may be void under other articles of the Code, such as those referring to illicit cause- On the other hand the Spanish Supreme Court has held that this article is not applicable to a contract which limits the fees of a lawyer   to   a   certain   percentage   of   what   may   be   recovered   in litigation, as this  is not contrary to moral or to law. (Tolentino, Civil Code of the Philippines, p. 35, Vol. V [1959]; Castan, supra, Emphasis supplied).

Petitioners her contend that a contract for a contingent fee violates the Canons of Professional Ethics. this is likewise without merit This posture of petitioners overlooked Canon 13 of the Canons which expressly contingent fees by way of exception to Canon 10 upon which petitioners relied. For while Canon 10 prohibits a lawyer from purchasing ...any interest in the subject matter of the litigation which he is conducting", Canon 13, on the other hand, allowed a reasonable contingent fee contract, thus: "A contract for a con. tangent fee where sanctioned by law, should be reasonable under all the circumstances of the ca including the risk and

uncertainty of the compensation, but should always be subject to the supervision of a court, as to its reasonableness." As pointed out by an authority on Legal Ethics:

Every lawyer is intensely interested in the successful outcome of his case, not only as affecting his reputation, but also his compensation. Canon   13   specifically   permits   the   lawyer   to contract   for   a   con   tangent   fee   which   of   itself,   negatives   the thought that the Canons preclude the lawyer's having a stake in his litigation. As pointed out by Professor Cheatham on page 170 n. of his Case Book, there is an inescapable conflict of interest between lawyer and client in the matter of fees. Nor despite some statements to the con in Committee opinions, is it believed that, particularly in view of Canon 13, Canon 10 precludes in every case an arrangement to make the lawyer's fee payable only out of the results   of   the   litigation.   The   distinction   is   between   buying   an interest   in   the   litigation   as   a   speculation   which   Canon   10 condemns and agreeing,  in a case which the lawyer undertakes primarily in his professional capacity, to accept his compensation contingent on the outcome (Drinker, Henry S Legal Ethics, p. 99, [1953], Emphasis supplied).

These Canons of Professional Ethics have already received "judicial recognition by being cited and applied by the Supreme Court of the Philippines in its opinion" Malcolm, Legal and Judicial Ethics, p. 9 [1949]). And they have likewise been considered sources of Legal Ethics. More importantly, the American Bar Association, through Chairman Howe of the Ethics Committee, opined that "The Canons of Professional Ethics are legislative expressions of professional opinion ABA Op. 37 [1912])" [See footnote 25, Drinker, Legal Ethics, p. 27]. Therefore, the Canons have some binding effect

Likewise, it must be noted that this Court has already recognized this type of a contract as early as the case ofUlanday vs. Manila Railroad Co. (45 PhiL 540 [1923]), where WE held that "contingent fees are not prohibited in the Philippines, and since impliedly sanctioned by law 'Should be under the supervision of the court in order that clients may be protected from unjust charges' (Canons of Profession 1 Ethics)". The same doctrine was subsequently reiterated in Grey vs. Insular Lumber Co. (97 PhiL 833 [1955]) and Recto vs. Harden (100 PhiL 427 [1956]).

In the 1967 case of Albano  vs.  Ramos (20 SCRA 171 [19671), the attorney was allowed to recover in a separate action her attomey's fee of one-third (1/3) of the lands and damages recovered as stipulated in the contingent fee contract. And this Court in the recent case of Rosario Vda de Laig vs. Court of Appeals, et al. (supra), which involved a contingent fee of one-half (½) of the property in question, held

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than ,contingent fees are recognized in this i jurisdiction (Canon 13 of the Canons of Professional Ethics adopted by the Philippine Bar association in 1917 [Appendix B, Revised Rules of Court)), which contingent fees may be a portion of the property in litigation."

Contracts of this nature are permitted because they redound to the benefit of the poor client and the lawyer "especially in cases where the client has meritorious cause of action, but no means with which to pay for legal services unless he can, with the sanction of law, make a contract for a contingent fee to be paid out of the proceeds of the litigation" (Francisco, Legal Ethics, p. 294 [1949], citing Lipscomb vs. Adams 91 S.W. 1046, 1048 [1949]). Oftentimes, contingent fees are the only means by which the poor and helpless can redress for injuries sustained and have their rights vindicated. Thus:

The   reason   for  allowing   compensation  for  professional   services based  on   contingent   fees   is   that   if   a   person   could   not   secure counsel by a promise of large fees in case of success, to be derived from the subject matter of the suit, it would often place the poor in such a condition as to amount to a practical denial of justice. It not infrequently happens that person are injured through the negligence or willful misconduct of others, but by reason of poverty are unable to employ counsel to assert their rights. In such event their only means of redress lies in gratuitous service, which is rarely given, or in their ability to find some one who will conduct the case for a contingent fee. That relations of this king are  often  abused  by   speculative  attorneys  or   that   suits  of   this character   are   turned   into   a   sort   of   commercial   traffic   by   the lawyer, does not destroy the beneficial result to one who is so poor to employ counsel (id, at p. 293, citing Warvelle, Legal Ethics, p. 92, Emphasis supplied).

Justice George Malcolm, writing on contingent fees, also stated that:

... the system of contingent compensation has the merit of affording to certain classes of persons the opportunity to procure the prosecution of their claims which otherwise would be beyond their means. In   many   cases   in   the   United   States   and   the Philippines,   the   contingent   fee   is   socially   necessary (Malcolm, Legal and Judicial Ethics, p. 55 [1949], emphasis supplied).

Stressing further the importance of contingent fees, Professor Max Radin of the University of California, said that:

The contingent fee certainly increases the possibility that vexatious and unfounded suits will be brought. On the other hand, it   makes   possible   the   enforcement   of   legitimate   claims which otherwise would be abandoned because of the poverty of the   claimants.   Of   these   two   possibilities,   the   social   advantage seems clearly on the side of the contingent fee. It may in fact be added by way of reply to the first objection that vexations and unfounded suits have been brought by men who could and did pay substantial attorney's fees for that purpose (Radin, Contingent Fees in California, 28 Cal. L. Rev. 587, 589 [1940], emphasis supplied).

Finally, a contingent fee contract is always subject to the supervision of the courts with respect to the stipulated amount and may be reduced or nullified. So that in the event that there is any undue influence or fraud in the execution of the contract or that the fee is excessive, the client is not without remedy because the court will amply protect him. As held in the case of Grey vs. Insular Lumber Co., supra, citing the case of Ulanday vs. Manila Railroad Co., supra:

Where it is shown that the contract for a contingent fee was obtained by any undue influence of the attorney over the client, or by any fraud or imposition, or that the compensation is so clearly excessive as to amount to extortion, the court win in a proper case protect the aggrieved party.

In the present case, there is no iota of proof to show that Atty. Fernandez had exerted any undue influence or had Perpetrated fraud on, or had in any manner taken advantage of his client, Maximo Abarquez. And, the compensation of one-half of the lots in question is not excessive nor unconscionable considering the contingent nature of the attorney's fees.

With these considerations, WE find that the contract for a contingent fee in question is not violative of the Canons of Professional Ethics. Consequently, both under the provisions of Article 1491 and Canons 10 and 13 of the Canons of Profession Ethics, a contract for a contingent fee is valid

In resolving now the issue of the validity or nullity for the registration of the adverse claim, Section 110 of the Land Registration Act (Act 496) should be considered. Under d section, an adverse claim may be registered only by..

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Whoever claims any part or interest in registered land adverse to the registered owner, arising subsequent to the date of the o registration ... if no other provision is made in this Act for registering the same ...

The contract for a contingent fee, being valid, vested in Atty Fernandez an interest or right over the lots in question to the extent of one-half thereof. Said interest became vested in Atty. Fernandez after the case was won on appeal because only then did the assignment of the one-half (½) portion of the lots in question became effective and binding. So that when he filed his affidavit of adverse claim his interest was already an existing one. There was therefore a valid interest in the lots to be registered in favor of Atty. Fernandez adverse to Mo Abarquez.

Moreover, the interest or claim of Atty. Fernandez in the lots in question arose long after the original petition which took place many years ago. And, there is no other provision of the Land Registration Act under which the interest or claim may be registered except as an adverse claim under Section 110 thereof. The interest or claim cannot be registered as an attorney's charging lien. The lower court was correct in denying the motion to annotate the attomey's lien. A charging lien under Section 37, Rule 138 of the Revised Rules of Court is limited only to money judgments and not to judgments for the annulment of a contract or for delivery of real property as in the instant case. Said Section provides that:

Section 37. An attorney shall have a lien upon the funds, documents and papers of his client which have lawfully come into his oppossession and may retain the same until his lawful fees and disbursements have been paid, and may apply such funds to the satisfaction thereof. He shall also have a lien to the same extent upon all   judgments,   for  the payment of  money,  and executions issued in pursuance of such judgments, which he has secured in a litigation of his client ... (emphasis supplied).

Therefore, as an interest in registered land, the only adequate remedy open to Atty. Fernandez is to register such interest as an adverse claim. Consequently, there being a substantial compliance with Section 110 of Act 496, the registration of the adverse claim is held to be valid. Being valid, its registration should not be cancelled because as WE have already stated, "it is only when such claim is found unmeritorious that the registration thereof may be cancelled" (Paz Ty Sin Tei vs. Jose Lee Dy Piao 103 Phil. 867 [1958]).

The one-half (½) interest of Atty. Fernandez in the lots in question should therefore be respected. Indeed, he has a better right than petitioner-spouses, Juan Larrazabal and Marta C. de Larrazabal. They purchased their two-thirds (2/3) interest in the

lots in question with the knowledge of the adverse claim of Atty. Fernandez. The adverse claim was annotated on the old transfer certificate of title and was later annotated on the new transfer certificate of title issued to them. As held by this Court:

The annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property where the registration of such interest or right is not otherwise provided for by the Land Registration Act, and serves as a notice and warning to third parties dealing with said property that someone is claiming an interest on the same or a better right than the registered owner thereof (Sanchez, Jr. vs. Court of Appeals, 69 SCRA 332 [1976]; Paz Ty Sin Tei vs. Jose Le Dy Piao supra).

Having purchased the property with the knowledge of the adverse claim, they are therefore in bad faith. Consequently, they are estopped from questioning the validity of the adverse claim.

WHEREFORE, THE DECISION OF THE LOWER COURT DENYING THE PETITION FOR THE CANCELLATION OF THE ADVERSE CLAIM SHOULD BE, AS IT IS HEREBY AFFIRMED, WITH COSTS AGAINST PETITIONER-APPELLANTS JUAN LARRAZABAL AND MARTA C. DE LARRAZABAL.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

EN BANC

A.C. No. 1890 August 7, 2002

FEDERICO C. SUNTAY, complainant, vs.ATTY. RAFAEL G. SUNTAY, respondent.

D E C I S I O N

BELLOSILLO, J.:

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This Complaint for disbarment was filed by Federico C. Suntay against his nephew, Atty. Rafael G. Suntay, alleging that respondent was his legal counsel, adviser and confidant who was privy to all his legal, financial and political affairs from 1956 to 1964. However, since they parted ways because of politics and respondent's overweening political ambitions in 1964, respondent had been filing complaints and cases against complainant, making use of confidential information gained while their attorney-client relationship existed, and otherwise harassing him at every turn.

Complainant enumerated the following cases filed by respondent to harass him: (a) Civil Case No. 4306-M1 for injunction and damages in 1975, "Carlos Panganiban v. Dr.   Federico   Suntay," where respondent appeared as counsel for the plaintiff involving fishponds which respondent had previously helped to administer; (b) Civil Case No. 4726-M,2 "Narciso Lopez v. Federico Suntay," in 1970 where respondent appeared as counsel for the plaintiff to determine the real contract between the parties likewise involving the two (2) fishponds which respondent had previously helped to administer; (c) Civil Case No. 112764,3 "Magno  Dinglasan  v.   Federico Suntay," for damages where respondent appeared as counsel for the plaintiff; and, (d) I.S. No. 77-1523, "Magno Dinglasan v. Federico Suntay," for false testimony and grave oral defamation before the Office of the Provincial Fiscal of Bulacan involving complainant's same testimony subject of the complaint for damages in Civil Case No. 112764.

In addition, complainant alleged that respondent relentlessly pursued a case against him for violation of PD No. 2964 for the alleged disappearance of two (2) creeks traversing complainant's fishpond in Bulacan covered by TCT No. T-15674. Complainant alleged that respondent's possession and examination of the TCT and the blueprint plan of the property while he was still counsel for complainant provided him with the information that there used to be two (2) creeks traversing the fishpond, and that since respondent helped in the administration of the fishpond, he also came to know that the two (2) creeks had disappeared.

Required to answer the charges respondent filed a "Motion to Order Complainant to   Specify   His   Charges" alleging that complainant failed to specify the alleged "confidential information or intelligence" gained by him while the attorney-client relationship existed but which he allegedly used against complainant when the relationship terminated. Complainant filed his Comments thereon as required in our Resolution of 26 July 1978. Thereafter this case was referred to the Office of the Solicitor General (OSG) for investigation, report, and recommendation in our Resolution dated 23 October 1978.

After almost four (4) years the OSG submitted its Report   and Recommendation dated 14 October 1982 enumerating the following findings against respondent, to wit:

The evidence presented by complainant which was largely unrebutted by respondent establish two counts of malpractice against respondent, one count of violating the confidentiality of client-lawyer relationship and one count of engaging in unethical conduct.

1. Respondent committed malpractice when he represented Magno Dinglasan in the case for false testimony and grave oral defamation filed by Magno Dinglasan against complainant before the Office of the Provincial Fiscal of Bulacan (I.S. No. 77-1523).

The case stemmed from the testimony given by complainant on December 21, 1976, before the Court of First Instance of Bulacan in Civil Case No. 3930-M. When asked why Magno Dinglasan had testified against him in that case, complainant stated that he once declined the demand of Magno Dinglasan, a former official of the Bureau of Internal Revenue, for P150,000.00 as consideration for the destruction of complainant’s record in the Bureau.

On account of that testimony, Magno Dinglasan charged complainant on July 29, 1977 with the crime of false testimony and grave oral defamation (Exhibits G and G-1). During the preliminary investigation of the case by the Office of the Provincial Fiscal of Bulacan, respondent acted as counsel for Magno Dinglasan. When the case was dismissed by the Office of the Provincial Fiscal of Bulacan and it was elevated to the Ministry of Justice on appeal, respondent continued to be the lawyer of Magno Dinglasan.

Complainant testified in this disbarment proceeding that he consulted respondent, who was then his counsel, about the demand made in 1957 or 1958 by Magno Dinglasan for P150,000.00 as consideration for the destruction of complainant’s record in the Bureau of Internal Revenue. Respondent’s advice was for complainant to disregard the demand as it was improper. Later, when Magno Dinglasan reduced the amount to P50,000.00, complainant again consulted respondent. Respondent likewise advised complainant not to heed the demand (pp. 61-62, tsn, May 21, 1981).

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Respondent’s representation of Magno Dinglasan in I.S. No. 77-1523 constitutes malpractice (Section 27, Rule 138, Rules of Court) for respondent was previously the lawyer of complainant and respondent was consulted by complainant regarding the very matter which was the subject of the case. By serving as the lawyer of Magno Dinglasan, in I.S. No. 77-1523, respondent thus represented an interest which conflicted with the interest of his former client.

2. Respondent again committed malpractice when he served as lawyer of Magno Dinglasan in Civil Case No. 112764 before the Court of First Instance of Manila.

Civil Case No. 112764 was an action for damages filed by Magno Dinglasan against complainant based, among others, on the same testimony that complainant gave on December 21, 1976 before the Court of First Instance of Bulacan in Civil Case No. 3930-M.

For the same reasons set forth above, respondent’s representation of Magno Dinglasan in Civil Case No. 112764 constitutes malpractice as thereby he represented conflicting interests.

3. In filing a charge against complainant for alleged illegal destruction of dikes, respondent violated the confidentiality of information obtained out of a client-lawyer relationship.

In his capacity as lawyer of complainant from 1956 to 1964, respondent had the following functions:

"Witness

"A: He was my lawyer from 1956 from the time he passed the bar up to sometime in 1964 and my legal adviser on political matters and legal matters.

"ATTY. AQUINO:

"Q: As your lawyer from 1956 to 1964, will you kindly inform the Honorable Hearing Officer what was the nature of the work of Atty. Suntay?

"A: He handled my cases on the titling of our properties. He served as my legal counsel in the Hagonoy Rural Bank of which my family is the majority stockholders. He used to help me manage my fishpond. He is our legal adviser on legal matters. He is our confidant. We have no secrets between us. He has complete access in our papers (tsn, May 21, 1981)

Complainant owned several fishponds in Bulacan, among them, the fishpond covered by Transfer Certificate of Title No. T-15674. This fishpond was previously traversed by two creeks, Sapang Malalim and Sapang Caluang. The existence of the creeks is shown by the certificate of title and the blue print plan of the fishpond. In the certificate of title, the fishpond is bounded on the north and northeast by Sapang Caluang and on the west by Sapang Malalim (please see Exhibit 6).

In a letter dated March 17, 1973, respondent reported the disappearance of the two creeks to the authorities. The Chief State Prosecutor referred the letter to the Office of the Provincial Fiscal of Bulacan. The Office of the Provincial Fiscal of Bulacan required the Public Works to conduct a re-survey. (Exhibit 6).

In 1974, the Ministry of Public Works conducted a relocation survey of the fishpond.1âwphi1 The relocation survey disclosed that there were no more creeks traversing the fishpond. Sapang Malalim and Sapang Caluang had disappeared.

Respondent was requested to file a formal complaint with supporting affidavits, for violation of Presidential Decree No. 296. Respondent did so and the complaint was docketed as I.S. No. 74-193. (Exhibit 6)

From the foregoing facts, it is clear that respondent made use of the information he gained while he was the lawyer of complainant as basis for his complaint for the building of illegal dikes. His possession and examination of Transfer Certificate of Title No. T-15674 and the blueprint plan provided him the information that there used to be two creeks traversing the fishpond covered by the title. Since he helped in the administration of the fishpond, he also came to know that the two creeks had disappeared. Thus, he gained the data which became the basis of his complaint when he was a lawyer and part administrator of complainant. Under the circumstances, there is a violation of professional confidence.

4. The evidence also establishes the commission of unethical conduct by respondent for serving as lawyer of Panganiban and Lopez x x x and for himself filing criminal charges against complainant which were later dismissed. The cases wherein respondent served as lawyer for the adversary of complainant or filed by respondent himself against complainant are the following:

1. Carlos Panganiban v. Federico Suntay, Civil Case No. 4306-M, CFI, Branch VII, Malolos, Bulacan;

2. Narciso Lopez v. Federico Suntay, Civil Case No. 4726-M, CFI, Branch II, Malolos, Bulacan;

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3. Magno Dinglasan v. Federico Suntay, I.S. No. 77-1523, Office of the Provincial Fiscal of Bulacan;

4. Magno Dinglasan v. Federico Suntay, Civil Case No. 112764, CFI, Branch XX, Manila; and

5. Rafael G. Suntay and Magno Dinglasan v. Federico C. Suntay, I.S. No. 74-193, Office of the Provincial Fiscal of Bulacan, for violation of P.D. 296.

While there may be validity to respondent’s contention that it is not improper for a lawyer to file a case against a former client, especially when the professional relationship had ended several years before, yet under the over-all circumstances of the case at bar it can not be said that respondent acted ethically. Complainant was not a mere client of respondent. He is an uncle and a political benefactor. The parties for whom respondent filed cases against complainant were former friends or associates of complainant whom respondent met when he was serving as the lawyer and general adviser of complainant. The cases filed by respondent were about properties which respondent had something to do with as counsel and administrator of complainant.

x x x x

IN VIEW OF THE FOREGOING, undersigned respectfully submit that the evidence establishes commission by respondent of malpractice for violating the confidentiality of client-lawyer relationship and engaging in unethical conduct x x x x5

Resolution of this case was delayed despite receipt of the foregoing Report  and Recommendation in view of theOmnibus Motion to Remand Case to the Office of the Solicitor General;  Motion to Disqualify Solicitor Rogelio Dancel to Act on this Case and Motion to Suspend Period to File Answer dated 18 January 1983 filed by respondent principally accusing handling Solicitor Dancel of having given unwarranted advantage and preference to the complainant in the investigation of the case.

After several pleadings on the issue were filed by both respondent and Solicitor Rogelio Dancel, the Court in itsResolution dated 22 August 1983 denied respondent's motion to disqualify Solicitor Dancel and required the OSG to proceed with the investigation of this case.1âwphi1 However, no further proceedings were conducted by the OSG until the records of the case together with other cases were turned over to the Integrated Bar of the Philippines (IBP) on 19 May 1988.

After almost three (3) years from the time the records of this case were turned over to it, the IBP Commission on Bar Discipline submitted to this Court on 11 May 2001 Resolution   No.   XIV-2001-169 adopting and approving theReport   and Recommendation of the Investigating Commissioner finding respondent guilty as charged. The IBP recommended that respondent Atty. Suntay be suspended from the practice of law for two (2) years for immoral conduct. In so recommending the Investigating Commissioner adopted in toto the findings of the OSG in itsReport and Recommendation dated 14 October 1982. In our Resolution of 5 September 2001 we noted the foregoing IBP Resolution. However, in view of the penalty involved, this case was referred to the Court En   Bancfor final action pursuant to our Resolution dated 18 January 2000, Sec. 2, par. (b), in A.M. No. 99-12-08-SC.6

After a review of the records of this case, the Court finds the IBP Recommendation to be well taken. As found by both the OSG and the IBP Investigating Commissioner, respondent Atty. Rafael G. Suntay acted as counsel for clients in cases involving subject matters regarding which he had either been previously consulted by complainant or which he had previously helped complainant to administer as the latter's counsel and confidant from 1956 to 1964. Thus in Civil Cases Nos. 4306-M and 4726-M respondent acted as counsel for estranged business associates of complainant, namely, Carlos Panganiban and Narciso Lopez, the subject matter of which were the two (2) fishponds which respondent had previously helped to administer.

On the other hand, I.S. No. 77-1523 for false testimony and grave oral defamation before the Office of the Provincial Fiscal of Bulacan, and Civil Case No. 112764 for damages before the then Court of First Instance of Manila, were filed in behalf of Magno Dinglasan, a former Bureau of Internal Revenue (BIR) official, regarding whose alleged demand for P150,000.00 from complainant in exchange for the destruction of the latter's record in the BIR, respondent had previously advised complainant to disregard. Civil Case No. 117624 and I.S. No. 77-1523 were precisely filed against complainant because the latter had previously testified on the alleged demand made by Dinglasan. Although respondent denied that there was ever such a demand made by Dinglasan, the point is that his word on the matter, i.e., whether there was in fact such a demand, would carry much weight against complainant considering that he was the latter's counsel in 1957 or 1958 when the alleged demand was made. In addition, respondent initiated the prosecution of complainant in I.S. No. 74-193 for violation of P.D. No. 2967 for the disappearance of the two (2) creeks, namely, Sapang Malalim and Sapang Caluang, previously traversing complainant's fishpond in Bulacan covered by TCT No. T-15674 by using information obtained while he was in possession of the certificate of title and the blueprint plan of the property.

As the Code of Professional Responsibility provides:

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Rule 21.01. - A lawyer shall not reveal the confidences or secrets of his client except:

a) When authorized by the client after acquainting him of the consequences of the disclosure;

b) When required by law;

c) When necessary to collect his fees or to defend himself, his employees or associates or by judicial action.

Rule 21.01. - A lawyer shall not, to the disadvantage of his client, use information acquired in the course of employment, nor shall he use the same to his own advantage or that of a third person, unless the client with full knowledge of the circumstances consents thereto.

A lawyer shall preserve the confidences and secrets of his clients even after termination of the attorney-client relation.8 As his defense to the charges, respondent averred that complainant failed to specify the alleged confidential information used against him. Such a defense is unavailing to help respondent's cause for as succinctly explained in Hilado v. David - 9

Communications between attorney and client are, in a great number of litigations, a complicated affair, consisting of entangled relevant and irrelevant, secret and well known facts. In the complexity of what is said in the course of the dealings between an attorney and a client, inquiry of the nature suggested would lead to the revelation, in advance of the trial, of other matters that might only further prejudice the complainant’s cause. And the theory would be productive of other unsalutary results. To make the passing of confidential communication a condition precedent, i.e., to make the employment conditioned on the scope and character of the knowledge acquired by an attorney in determining his right to change sides, would not enhance the freedom of litigants, which is to be sedulously fostered, to consult with lawyers upon what they believe are their rights in litigation. The condition would of necessity call for an investigation of what information the attorney has received and in what way it is or it is not in conflict with his new position. Litigants would in consequence be wary in going to an attorney, lest by an unfortunate turn of the proceeding, if an investigation be held, the court should accept the attorney’s inaccurate version of the facts that came to him x x x x

Hence, the necessity of setting down the existence of the bare relationship of attorney and client as the yardstick for testing incompatibility of interests. This stern rule is designed not alone to prevent the dishonest practitioner from fraudulent

conduct, but as well to protect the honest lawyer from unfounded suspicion of unprofessional practice x x x x It is founded on principles of public policy, on good taste x x x x [T]he question is not necessarily one of the rights of the parties, but as to whether the attorney has adhered to proper professional standard. With these thoughts in mind, it behooves attorneys, like Caesar’s wife, not only to keep inviolate the client’s confidence, but also to avoid the appearance of treachery and double-dealing. Only thus can litigants be encouraged to entrust their secrets to their attorneys which is of paramount importance in the administration of justice.

WHEREFORE, in view of the foregoing, IBP Resolution No. XIV-2001-169 dated 29 April 2001 is adopted and approved. For violating the confidentiality of lawyer-client relationship and for unethical conduct, respondent Atty. Rafael G. Suntay is SUSPENDED from the practice of law for two (2) years effective upon the finality hereof.

Let copies of this Decision be furnished the Office of the Bar Confidant, the Integrated Bar of the Philippines and all courts throughout the country.

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

FIRST DIVISION

A.C. No. 4215 May 21, 2001

FELICISIMO M. MONTANO, complainant, vs.INTEGRATED BAR OF THE PHILIPPINES and Atty. JUAN S. DEALCA, respondents.

KAPUNAN, J.:

In a verified complaint filed before this Court on March 9, 1994, complaint Felicisimo M. Montano charged Atty. Juan Dealca with misconduct and prays that he be "sternly dealt with administratively." The complaint1 is summarized as follows:

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1. On November 14, 1992, the complainant hired the services of Atty. Juan S. Dealca as his counsel in collaboration with Atty. Ronando L. Gerona in a case pending before the Court of Appeals docketed as CA-G.R. CV No. 3767 wherein the complainant was the plaintiff-appellant.

2. The parties agreed upon attorney's fees in the amount of P15,000.00 fifty percent (50%) of which was payable upon acceptance of the case and the remaining balance upon the termination of the case. Accordingly, complainant paid respondent the amount of P7,500.00 representing 50% of the attorney's fee.

3. Thereafter, even before respondent counsel had prepared the appellant's brief and contrary to their agreement that the remaining balance be payable after the termination of the case, Atty. Dealca demanded an additional payment from complainant obliged by paying the amount of P4,000.00.

4. Prior to the filing of the appellant's brief, respondent counsel again demanded payment of the remaining balance of P3,500.00. When complainant was unable to do so, respondent lawyer withdraw his appearance as complainant's counsel without his prior knowledge and/or conformity. Returning the case folder to the complainant, respondent counsel attached a Note dated February 28, 1993,2 stating:

28 February 1994

Pepe and Del Montano,

For breaking your promise, since you do not want to fulfill your end of the bargain, here's your reward:Henceforth, you lawyer for yourselves. Here are your papers.

Johnny

Complainant claimed that such conduct by respondent counsel exceeded the ethical standards of the law profession and prays that the latter be sternly dealt with administratively. Complainant later on filed motions praying for the imposition of the maximum penalty of disbarment.

After respondent counsel filed his comment on the complaint, the Court in the Resolution of August 1, 1994, referred the case of the Integrated Bar of the Philippines (IBP) for investigation, report and recommendation.

The Investigating Commissioner found respondent counsel guilty of unprofessional conduct and recommended that he be "severely reprimanded." However, in a Resolution3 by the IBP Board of Governors on July 26, 1997, it was resolved that the penalty recommended by the Investigating Commissioner meted to respondent be amended to "three (3) months suspension from the practice of law for having been found guilty of misconduct, which eroded the public confidence regarding his duty as a lawyer."

Respondent counsel sought reconsideration of the aforementioned resolution of the IBP, alleging that the latter misapprehended the facts and that, in any case, he did not deserve the penalty imposed. The true facts, according to him, are the following.

1. Complainant is being represented by Atty. Ronando L. Gerona in his case on appeal;

2. Due to the ailment of Atty. Gerona's daughter, he could not prepare and submit complainant's appellant's brief on time;

3. Complainant wen to the respondent to do just that, i.e., prepare and submit his appellant's brief on time at the agreed fee of P15,000.00, 50% down and 50% upon its completion;

4. Working overtime, respondent was able to finish the appellant's brief ahead of its deadline, so he advised the complainant about its completion with the request that the remaining balance of P7,500.00 be paid. Complainant paid P4,000.00 only, promising to pay the P3,500.00 "tomorrow" or on "later particular date." Please take note that, at this juncture, there was already a breach of the agreement on complainant's part.

5. When that "tomorrow" or on a "later particular date" came, respondent, thru a messenger, requested the complainant to pay the P3,500.00 as promised but word was sent that he will again pay "tomorrow" or on a "later date." This promise-non-payment cycle went on repeatedly until the last day of the filing of the brief. Please take note again that it was not the respondent but the complainant who sets the date when he will pay, yet he fails to pay as promised;

6. Even without being paid completely, respondent, of his own free will and accord, filed complainant's brief on time;

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7. After the brief was filed, respondent tried to collect from the complainant the remaining balance of P3,500.00, but the latter made himself scare. As the records would show, such P3,500.00 remains unpaid until now;

8. Sensing that something was amiss, respondent sent the February 28, 1993 note and case folder to the complainant, hoping that the latter would see personally the former about it to settle the matter between them;

9. However, instead of seeing the respondent, complainant filed this case;

10. Respondent was constrained to file his withdrawal with the Court of Appeals because of this case to avoid further misunderstanding since he was the one who signed the appellant's brief although Atty. Gerona was his counsel of record. Such withdrawal was accordingly granted by the appellate court;

xxx xxx xxx.4

Respondent counsel further averred that complainant's refusal to pay the agreed lawyer's fees, measly as it was, was deliberate and in bad faith; hence, his withdrawal as counsel was "just, ethical and proper." Respondent counsel concluded that not only was the penalty of suspension harsh for his act of merely trying to collect payment for his services rendered, but it indirectly would punish his family since he was the sole breadwinner with children in school and his wife terminally ill with cancer.

In its Resolution No. XIII-97-129 dated October 25, 1997, the IBP denied Atty. Dealca's motion for reconsideration, to wit:

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RESOLVED TO DENY Atty. Dealca's Motion For Reconsideration of the Board's Decision in the above-entitled case there being no substantive reason to reverse the finding therein. Moreover, the motion is improperly laid the remedy of the respondent is to file the appropriate pleading with the Supreme Court within fifteen (15) days from receipt of notice of said Decision pursuant to Sec. 12 [c] of Rule 139-B.5

On December 10, 1997, this Court noted the following pleadings filed in the present complaint,

(a) notice and a copy of Resolution No. XII-97-154 dated July 26, 1997 of the Integrated Bar of the Philippines amending the recommendation of the

Investigating Commissioner of reprimand to three (3) months suspension of respondent from the practice of law for having been found guilty of misconduct which eroded the public confidence regarding his duty as a lawyer;

(a) complainant's motion praying for the imposition of the maximum penalty of disbarment;

(b) motion   dated   September   15,   1997   of   respondent   for   reconsideration   of   the aforesaid resolution of July 26, 1997;

(c) comment/opposition of respondent praying that the motion for the imposition of the maximum penalty be denied;

(d) comment of complainant praying that the penalty of three (3) months suspension from the practice of law as recommended by the Integrated Bar of the Philippines pursuant to resolution No. XII-97-154 be raised to a heavier penalty;

(e) comment/manifestation/opposition of complainant praying that the respondent be disbarred; and

(g) rejoinder of respondent praying that this case be dismissed for being baseless.6

and referred the same to the IBP for evaluation and report.

In compliance therewith, on March 28, 1998, the IBP issued Resolution No. XIII-98-42 referring the above-entitled case to Commissioner Vibar for evaluation, report and recommendation "in view of the Motion for Reconsideration granted by the Supreme Court."

The Investigating Commissioner, after referring the case, recommended that his original recommendation of the imposition of the penalty of reprimand be maintained, noting that respondent counsel had served the IBP well as President of the Sorsogon Chapter.7 Accordingly, on February 23, 1999, the IBP Board of Governors, issued the following resolution:

RESOLUTION NO. XIII-99-48

xxx

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,

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finding the recommendation fully supported by the evidence on record and the applicable laws and rules, the Motion for Reconsideration be granted and that the penalty of REPRIMAND earlier recommended by the Investigating Commissioner be imposed on Atty. Juan S. Dealca.8

Complainant asked the IBP to reconsider the foregoing resolution but the motion was denied.9

On April 10, 2000, complainant filed with this Court a petition for review on certiorari in connection with Administrative Case No. 4215 against the IBP and respondent counsel averring that the IBP Board of Governors committed grave abuse of discretion when it overturned its earlier resolution and granted respondent counsel's motion for reconsideration on February 23, 1999. He claimed that the earlier resolution denying the motion for reconsideration issued on October 25, 1997 had already become final and executory; hence, any further action or motion subsequent to such final and executory judgment shall be null and void.

When the Court issued the resolution of December 10, 1997 treating the several pleadings filed in the present complaint, it should be noted that the IBP resolution denying respondent's motion for reconsideration (Resolution No. XIII-97-129) dated October 25, 1997, for some reason, had not yet reached this Court. As of that date, the only IBP resolution attached to the records of the case was Resolution No. XII-97-54 amending the administrative sanction from reprimand to three months suspension. Hence, at the time the pleadings were referred back to the IBP in the same resolution, the Court was not aware that the IBP had already disposed of the motion for reconsideration filed by respondent counsel.

Thus, when the IBP was informed of the said Court resolution, it construed the same as granting Atty. Dealca's motion for reconsideration and as an order for IBP to conduct a re-evaluation of the case. The IBP assumed that its resolution of October 25, 1997 was already considered by this Court when it referred the case back to the IBP. It failed to notice that its resolution denying the motion for reconsideration was not among those pleadings and resolution referred back to it.

Hence, on the strength of this Court's resolution which it had inadvertently misconstrued, the IBP conducted a re-evaluation of the case and came up with the assailed resolution now sought to be reversed. The Court holds that the error is not attributable to the IBP. It is regrettable that the procedural infirmity alleged by complainant actually arose from a mere oversight which was attributable to neither party.

Going into the merits, we affirm the findings made by the IBP that complainant engaged the services of respondent lawyer only for the preparation and submission of the appellant's brief and the attorney's fees was payable upon the completion and submission of the appellant's brief and not upon the termination of the case.

There is sufficient evidence which indicates complainant's willingness to pay the attorney's fees. AS agreed upon, complainant paid half of the fees in the amount of P7,500.00 upon acceptance of the case. And while the remaining balance was not yet due as it was agreed to be paid only upon the completion and submission of the brief, complainant nonetheless delivered to respondent lawyer P4,000.00 as the latter demanded. This, notwithstanding, Atty. Dealca withdrew his appearance simply because of complainant's failure to pay the remaining balance of P3,500.00 which does not appear to be deliberate. The situation was aggravated by respondent counsel's note to complainant withdrawing as counsel which was couched in impolite and insulting language.10

Given the above circumstances, was Atty. Dealca's conduct just and proper?

We find Atty. Dealca's conduct unbecoming of a member of the legal profession. Under Canon 22 of the Code of Professional Responsibility, a lawyer shall withdraw his services only for good cause and upon notice appropriate in the circumstances. Although he may withdraw his services when the client deliberately fails to pay the fees for the services,11 under the circumstances of the present case, Atty. Dealca's withdrawal was unjustified as complainant did not deliberately fail to pay him the attorney's fees. In fact, complainant exerted honest efforts to fulfill his obligation. Respondent's contemptuous conduct does not speak well of a member of the bar considering that the amount owing to him was only P3,500.00. rule 20.4 of Canon 20, mandates that a lawyer shall avoid controversies with clients concerning his compensation and shall resort to judicial action only to prevent imposition, injustice or fraud. Sadly, for not so large a sum owed to him by complainant, respondent lawyer failed to act in accordance with the demands of the Code.

The Court, however, does not agree with complainant's contention that the maximum penalty of disbarment should be imposed on respondent lawyer. The power to disbar must be exercised with great caution. Only in a clear case of misconduct that seriously affects the standing and character of the lawyer as an officer of the Court and member of the bar will disbarment be imposed as a penalty. It should never be decreed where a lesser penalty, such as temporary suspension, would accomplish the end desired.12 In the present case, reprimand is deemed sufficient.

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WHEREFORE, in view of the foregoing, respondent Atty. Juan S. Dealca is REPRIMANDED with a warning that repetition of the same act will be dealt with more severely.1âwphi1.nêt

SO ORDERED.

Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

A.C. No. 5485 March 16, 2005

ELMER CANOY, Complainant, vs.ATTY. JOSE MAX ORTIZ, respondent.

D E C I S I O N

TINGA, J.:

There are no good reasons that would justify a lawyer virtually abandoning the cause of the client in the midst of litigation without even informing the client of the fact or cause of desertion. That the lawyer forsook his legal practice on account of what might be perceived as a higher calling, election to public office, does not mitigate the dereliction of professional duty. Suspension from the practice is the usual penalty, and there is no reason to deviate from the norm in this case.

A Complaint1 dated 10 April 2001 was filed with the Office of the Bar Confidant by Elmer Canoy (Canoy) accusing Atty. Jose Max Ortiz (Atty. Ortiz) of misconduct and malpractice. It was alleged that Canoy filed a complaint for illegal dismissal against his former employer, Coca Cola Bottlers Philippines. The complaint was filed with the National Labor Relations Commission (NLRC) Regional Arbitration Board VI in Bacolod City.2 Atty. Ortiz appeared as counsel for Canoy in this proceeding. In 1998, the labor arbiter hearing the complaint ordered the parties to submit their respective position papers. Canoy submitted all the necessary documents and records to Atty. Ortiz for the preparation of the position paper. Thereafter, he made several unfruitful visits to the office of Atty. Ortiz to follow-up the progress of the case. After a final visit at the office of Atty. Ortiz in April of 2000, during which

Canoy was told to come back as his lawyer was not present, Canoy decided to follow-up the case himself with the NLRC. He was shocked to learn that his complaint was actually dismissed way back in 1998, for failure to prosecute, the parties not having submitted their position papers.3 The dismissal was without prejudice. Canoy alleged that Atty. Ortiz had never communicated to him about the status of the case, much less the fact that he failed to submit the position paper.

The Comment4 filed by Atty. Ortiz is the epitome of self-hagiography. He informs the Court that since commencing his law practice in 1987, he has mostly catered to indigent and low-income clients, at considerable financial sacrifice to himself. Atty. Ortiz claims that for more than ten years, his law office was a virtual adjunct of the Public Attorney's Office with its steady stream of non-paying clients in the "hundreds or thousands."5 At the same time, he hosted a legal assistance show on the radio, catering to far-flung municipalities and reaching "the people who need legal advice and assistance."6 Atty. Ortiz pursued on with this lifestyle until his election as Councilor of Bacolod City, a victory which he generously attributes to the help "of the same people whom he had helped by way of legal assistance before."7

Canoy was among those low-income clients whom Atty. Ortiz deigned to represent. The lawyer was apparently confident that the illegal dismissal case would eventually be resolved by way of compromise. He claims having prepared the position paper of Canoy, but before he could submit the same, the Labor Arbiter had already issued the order dismissing the case.8 Atty. Ortiz admits though that the period within which to file the position paper had already lapsed. He attributes this failure to timely file the position paper to the fact that after his election as Councilor of Bacolod City, "he was frankly preoccupied with both his functions as a local government official and as a practicing lawyer." Eventually, "his desire to help was beyond physical limitations," and he withdrew from his other cases and his "free legal services."9

According to Atty. Ortiz, "Mr. Canoy should have at least understood that during all that time, he was free to visit or call the office and be entertained by the secretary as [he] would normally report to the office in the afternoon as he had to attend to court trials and report to the Sanggunian office."10 He states that it was his policy to inform clients that they should be the ones to follow-up their cases with his office, as it would be "too difficult and a financial burden to attend making follow-ups with hundreds of clients, mostly indigents" with only two office personnel.11

Nonetheless, Atty. Ortiz notes that the dismissal of Canoy's complaint was without prejudice, thus the prescriptive period had been tolled. He claims not being able to remember whether he immediately informed Canoy of the dismissal of the case, though as far as he could recall, Canoy had conveyed a message to him that he had a lawyer to handle the case, thus his office did not insist on refiling the same.12

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The matter was referred to the Integrated Bar of the Philippines (IBP) for investigation, report and recommendation.13 Canoy eventually submitted a motion withdrawing the complaint, but this was not favorably acted upon by the IBP in view of the rule that the investigation of a case shall not be interrupted or terminated by reason of withdrawal of the charges.14 Eventually, the investigating commissioner concluded that "clearly, the records show that [Atty. Ortiz] failed to exercise that degree of competence and diligence required of him in prosecuting his clients' (sic) claim," and recommended that Atty. Ortiz be reprimanded.15 The IBP Commission on Discipline adopted the recommendation, with the slight modification that Atty. Ortiz be likewise warned that a repetition of the same negligence shall be dealt with more severely in the future.

The Court is sensitive to the difficulties in obtaining legal representation for indigent or low-income litigants. Apart from the heroic efforts of government entities such as the Public Attorney's Office, groups such as the IBP National Committee on Legal Aid and the Office of Legal Aid of the UP College of Law have likewise been at the forefront in the quest to provide legal representation for those who could not otherwise afford the services of lawyers. The efforts of private practitioners who assist in this goal are especially commendable, owing to their sacrifice in time and resources beyond the call of duty and without expectation of pecuniary reward.

Yet, the problem of under-representation of indigent or low-income clients is just as grievous as that of non-representation. Admirable as the apparent focus of Atty. Ortiz's legal practice may have been, his particular representation of Canoy in the latter's illegal dismissal case leaves much to be desired.

Several of the canons and rules in the Code of Professional Responsibility guard against the sort of conduct displayed by Atty. Ortiz with respect to the handling of Canoy's case.

CANON 17–A LAWYER OWES FIDELITY TO THE CAUSE OF HIS CLIENT AND HE SHALL BE MINDFUL OF THE TRUST AND CONFIDENCE REPOSED IN HIM.

CANON 18–A LAWYER SHALL SERVE HIS CLIENT WITH COMPETENCE AND DILIGENCE.

. . .

Rule 18.03–A lawyer shall not neglect a legal matter entrusted to him, and his negligence in connection therewith shall render him liable.

Rule 18.04–A lawyer shall keep the client informed of the status of his case and shall respond within a reasonable time to the client's request for information.

. . .

CANON 22–A LAWYER SHALL WITHDRAW HIS SERVICES ONLY FOR GOOD CAUSE AND UPON NOTICE APPROPRIATE IN THE CIRCUMSTANCES.

. . .

Rule 22.02 – A lawyer who withdraws or is discharged shall, subject to a retainer lien, immediately turn over all papers and property to which the client is entitled, and shall cooperate with his successor in the orderly transfer of the matter, including all information necessary for the proper handling of the matter.

Atty. Ortiz should have filed the position paper on time, owing to his duty as counsel of Canoy to attend to this legal matter entrusted to him. His failure to do so constitutes a violation of Rule 18.03 of the Code of Professional Responsibility.

Once he agrees to take up the cause of a client, a lawyer owes fidelity to such cause and must always be mindful of the trust and confidence reposed in him. He must serve the client with competence and diligence and champion the latter's cause with wholehearted fidelity, care and devotion. Elsewise stated, he owes entire devotion to the interest of the client, warm zeal in the maintenance and defense of his client's rights, and the exertion of his utmost learning and ability to the end that nothing be taken or withheld from his client, save by the rules of law, legally applied. This simply means that his client is entitled to the benefit of any and every remedy and defense that is authorized by the law of the land and he may expect his lawyer to assert every such remedy or defense. If much is demanded from an attorney, it is because the entrusted privilege to practice law carries with it the correlative duties not only to the client but also to the court, to the bar and to the public. A lawyer who performs his duty with diligence and candor not only protects the interest of his client; he also serves the ends of justice, does honor to the bar and helps maintain the respect of the community to the legal profession.16

If indeed Atty. Ortiz's schedule, workload, or physical condition was such that he would not be able to make a timely filing, he should have informed Canoy of such fact. The relationship of lawyer-client being one of confidence, there is ever present the need for the client to be adequately and fully informed of the developments of the case and should not be left in the dark as to the mode and manner in which his/her interests are being defended.17

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There could have been remedies undertaken to this inability of Atty. Ortiz to file on time the position paper had Canoy been told of such fact, such as a request for more time to file the position paper, or maybe even the hiring of collaborating counsel or substitution of Atty. Ortiz as counsel. Since Atty. Ortiz did not exercise the necessary degree of care by either filing the position paper on time or informing Canoy that the paper could not be submitted seasonably, the ignominy of having the complaint dismissed for failure to prosecute could not be avoided.

That the case was dismissed without prejudice, thus allowing Canoy to refile the case, hardly serves to mitigate the liability of Atty. Ortiz, as the failure to file the position paper is per se a violation of Rule 18.03.18

Neither is the Court mollified by the circumstance of Atty. Ortiz's election as a City Councilor of Bacolod City, as his adoption of these additional duties does not exonerate him of his negligent behavior. The Code of Professional Responsibility does allow a lawyer to withdraw his legal services if the lawyer is elected or appointed to a public office.19 Statutes expressly prohibit the occupant of particular public offices from engaging in the practice of law, such as governors and mayors,20 and in such instance, the attorney-client relationship is terminated.21 However, city councilors are allowed to practice their profession or engage in any occupation except during session hours, and in the case of lawyers such as Atty. Ortiz, subject to certain prohibitions which are not relevant to this case.22 In such case, the lawyer nevertheless has the choice to withdraw his/her services.23 Still, the severance of the relation of attorney-client is not effective until a notice of discharge by the client or a manifestation clearly indicating that purpose is filed with the court or tribunal, and a copy thereof served upon the adverse party, and until then, the lawyer continues to be counsel in the case.24

Assuming that Atty. Ortiz was justified in terminating his services, he, however, cannot just do so and leave complainant in the cold unprotected.25 Indeed, Rule 22.02 requires that a lawyer who withdraws or is discharged shall, subject to a lien, immediately turn over all papers and property to which the client is entitled, and shall cooperate with his successor in the orderly transfer of the matter. Atty. Ortiz claims that the reason why he took no further action on the case was that he was informed that Canoy had acquired the services of another counsel. Assuming that were true, there was no apparent coordination between Atty. Ortiz and this new counsel.

In fact, it took nearly two years before Canoy had learned that the position paper had not been filed and that the case had been dismissed. This was highly irresponsible of Atty. Ortiz, much more so considering that Canoy was one of the indigent clients whom Atty. Ortiz proudly claims as his favored clientele. It does not escape the Court's attention that Atty. Ortiz faults Canoy for not adequately

following up the case with his office.26 He cannot now shift the blame to complainant for failing to inquire about the status of the case, since, as stated above, it was his duty as lawyer to inform his clients of the status of cases entrusted to him.27

The appropriate sanction is within the sound discretion of this Court. In cases of similar nature, the penalty imposed by the Court consisted of either a reprimand, a fine of five hundred pesos with warning, suspension of three months, six months, and even disbarment in aggravated cases.28 Given the circumstances, the Court finds the penalty recommended by the IBP too lenient and instead suspends Atty. Ortiz from the practice of law for one (1) month. The graver penalty of suspension is warranted in lieu of an admonition or a reprimand considering that Atty. Ortiz's undisputed negligence in failing to timely file the position paper was compounded by his failure to inform Canoy of such fact, and the successive dismissal of the complaint.

Lawyers who devote their professional practice in representing litigants who could ill afford legal services deserve commendation. However, this mantle of public service will not deliver the lawyer, no matter how well-meaning, from the consequences of negligent acts. It is not enough to say that all pauper litigants should be assured of legal representation. They deserve quality representation as well.

WHEREFORE, respondent Atty. Jose Max S. Ortiz is ordered SUSPENDED from the practice of law for one (1) month from notice, with the warning that a repetition of the same negligence will be dealt with more severely. Let a copy of this decision be attached to respondent's personal record in the Office of the Bar Confidant and copies be furnished to all chapters of the Integrated Bar of the Philippines and to all the courts in the land.

SO ORDERED.

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