SECOND DIVISION

G.R. No. 77439 August 24, 1989

DONALD DEE petitioner,

vs.
COURT OF APPEALS and AMELITO MUTUC, respondents.

Tanjuatco, Oreta & Tanjuatco for petitioner.

Amelito R. Mutuc for and in his own behalf

REGALADO, J.:

Petitioner assails the resolution of respondent court, dated

February 12,1987, reinstating its decision promulgated on May 9,
1986 in AC-G.R. CV No. 04242 wherein it affirmed the decision of
the that court holding that the services rendered by private
respondent was on a professional, and not on a gratis et amore
basis and ordering petitioner to pay private respondent the sum of
P50,000.00 as the balance of the latter's legal fee therefor.

The records show that sometime in January, 1981, petitioner and

his father went to the residence of private respondent,
accompanied by the latter's cousin, to seek his advice regarding
the problem of the alleged indebtedness of petitioner's brother,
Dewey Dee, to Caesar's Palace, a well-known gambling casino at
Las Vegas, Nevada, U.S.A. Petitioner's father was apprehensive
over the safety of his son, Dewey, having heard of a link between
the mafia and Caesar's Palace and the possibility that his son may
be harmed at the instance of the latter. 1

Private respondent assured petitioner and his father that he would

inquire into the matter, after which his services were reportedly
contracted for P100,000. 00. From his residence, private
respondent called up Caesar's Palace and, thereafter, several long
distance telephone calls and two trips to Las Vegas by him elicited
the information that Dewey Dee's outstanding account was around
$1,000,000.00. Further investigations, however, revealed that said
account had actually been incurred by Ramon Sy, with Dewey Dee
Case 1 merely signing for the chits. Private respondent communicated said
1 Legal Ethics
information to petitioner's a father and also assured him that
Caesar's Palace was not in any way linked to the mafia.2
In June, 1981, private respondent personally talked with the
president of Caesar's Palace at Las Vegas, Nevada. He advised the
president that for the sake and in the interest of the casino it would
be better to make Ramon Sy answer for the indebtedness. The
president told him that if he could convince Ramon Sy to
acknowledge the obligation, Dewey Dee would be exculpated from
liability for the account. Upon private respondent's return to
Manila, he conferred with Ramon Sy and the latter was convinced
to acknowledge the indebtedness. In August, 1981, private
respondent brought to Caesar's Palace the letter of Ramon Sy
owning the debt and asking for a discount. Thereafter, the account
of Dewey Dee was cleared and the casino never bothered him. 3
Having thus settled the account of petitioner's brother, private
respondent sent several demand letters to petitioner demanding
the balance of P50,000.00 as attorney's fees. Petitioner, however,
ignored said letters. On October 4, 1982, private respondent filed a
complaint against petitioner in the Regional Trial Court of Makati,
Branch CXXXVI, for the collection of attorney's fees and refund of
transport fare and other expenses.4
Private respondent claimed that petitioner formally engaged his
services for a fee of P100,000.00 and that the services he rendered
were professional services which a lawyer renders to a client.
Petitioner, however, denied the existence of any professional
relationship of attorney and client between him and private
respondent. He admits that he and his father visited private
respondent for advice on the matter of Dewey Dee's gambling
account. However, he insists that such visit was merely an informal
one and that private respondent had not been specifically
contracted to handle the problem. On the contrary, respondent
Mutuc had allegedly volunteered his services "as a friend of
defendant's family" to see what he could do about the situation. As
for the P50,000.00 inceptively given to private respondent,
petitioner claims that it was not in the nature of attomey's fees but
merely "pocket money" solicited by the former for his trips to Las
Vegas and the said amount of P50,000.00 was already sufficient
remuneration for his strictly voluntary services.
2 Legal Ethics
After trial, the court a quo rendered judgment ordering herein
petitioner to pay private respondent the sum of P50,000.00 with
interest thereon at the legal rate from the filing of the complaint on
October 4, 1982 and to pay the costs. All other claims therein of
private respondent and the counterclaim of petitioner were
dismissed. 5 On appeal, said judgment was affirmed by the then
Intermediate Appellate Court on May 9, 1986. 6
Petitioner, in due time, filed a motion for reconsideration
contending that the Appellate Court overlooked two important and
decisive factors, to wit: (1) At the time private respondent was
ostensibly rendering services to petitioner and his father, he was
actually working "in the interest" and "to the advantage" of
Caesar's Palace of which he was an agent and a consultant, hence
the interests of the casino and private respondent were united in
their objective to collect from the debtor; and (2) Private
respondent is not justified in claiming that he rendered legal
services to petitioner and his father in view of the conflicting
interests involved.
In its resolution of July 31, 1986, respondent court reconsidered its
decision and held that the sum of P50,000.00 already paid by
petitioner to private respondent was commensurate to the services
he rendered, considering that at the time he was acting as counsel
for petitioner he was also acting as the collecting agent and
consultant of, and receiving compensation from, Caesar's Palace.7
However, upon a motion for reconsideration thereafter filed by
private respondent, the present respondent Court of Appeals
issued another resolution, dated February 12, 1987, reinstating the
aforesaid decision of May 9, 1986.8
Petitioner is now before us seeking a writ of certiorari to overturn
the latter resolution.
It is necessary, however, to first clear the air of the questions
arising from the change of stand of the First Civil Cases Division of
the former Intermediate Appellate Court when, acting on the
representations in petitioner's undated motion for reconsideration
supposedly filed on May 28,1986, it promulgated its July 31, 1986
resolution reconsidering the decision it had rendered in AC-G.R. CV
No. 04242. Said resolution was, as earlier noted, set aside by the
Twelfth Division of the reorganized Court of Appeals which, at the
same time, reinstated the aforesaid decision.
Because of its clarificatory relevance to some issues belatedly
raised by petitioner, which issues should have been disregarded 9
but were nevertheless auspiciously discussed therein, at the risk of
seeming prolixity we quote hereunder the salient portions of the
assailed resolution which demonstrate that it was not conceived in
error.
The reason for then IAC's action is that it deemed the P50,000.00
plaintiff-appellee had previously received from defendant-appellant
as adequate compensation for the services rendered by am for
defendant-appellant, considering that at the time plaintiff-appellee
was acting as counsel for defendant-appellant, he was also acting
as the collecting agent and consultant of, and receiving
compensation from Caesar's Palace in Las Vegas, Nevada, the
entity with whom defendant-appellant was having a problem and
for which he had engaged the services of plaintiff-appellee. The
crux of the matter, therefore, is whether or not the evidence on
record justifies this finding of the IAC.
Plaintiff-appellee maintains that his professional services to
defendant-appellant were rendered between the months of July
and September of 1981, while his employment as collection agent
and consultant of Caesar's Palace covered the period from
December 1981 to October 1982. This positive testimony of
plaintiff-appellee, however, was disregarded by the IAC for the
following reasons:
1. In August l983, plaintiff-appellee testified that he was a
representative of Caesar's Palace in the Philippines 'about two or
three years ago.' From this the IAC concluded that the period
covers the time plaintiff-appellee rendered professional services to
defendant-appellant.
We do not think that IAC's conclusion is necessarily correct. When
plaintiff-appellee gave the period 'about two or three years ago,' he
was merely stating an approximation. Considering that plaintiff-
appellee was testifying in August 1983, and his employment with
3 Legal Ethics
Caesar's Palace began in December 1981, the stated difference of
two years is relatively correct. . . .
2. The plaintiff appellee had testified that he was working for the
sake,' 'in the interest,' and 'to the advantage' of Caesar's Palace. x
x x "We detect nothing from the above which would support IAC's
conclusion that plaintiff-appellee was then in the employ of
Caesar's Palace. What is gathered is that plaintiff-appellee was
simply fulfilling a condition which plaintiff-appellee had proposed
to, and was accepted by, Caesar's Palace, for the release of Dewey
Dee from his obligation to Caesar's Palace.
3. Caesar's Palace would not have listened to, and acted upon, the
advice of plaintiff-appellee if he were no longer its consultant and
alter ego.
Why not? We are witnesses to many successful negotiations
between contending parties whose representing lawyers were not
and were never in the employ of the opposite party. The art of
negotiation is precisely one of the essential tools of a good
practitioner, and mastery of the art takes into account the
circumstance that one may be negotiating, among others, with a
person who may not only be a complete stranger but antagonistic
as well. The fact that plaintiff-appellee was able to secure a
favorable concession from Caesar's Palace for defendant-appellant
does not justify the conclusion that it could have been secured only
because of plaintiff-appellee's professional relationship with
Caesar's Palace. It could have been attributable more to plaintiff-
appellee's stature as a former ambassador of the Philippines to the
United States, his personality, and his negotiating technique.
Assuming, however, that plaintiff-appellee was employed by
Caesar's Palace during the time that he was rendering professional
services for defendant-appellant, this would not automatically
mean the denial of additional attorney's fees to plaintiff appellee.
The main reason why the IAC denied plaintiff-appellee additional
compensation was because the latter was allegedly receiving
compensation from Caesar's Palace, and, therefore, the amount of
P50,000.00 plaintiff-appellee had previously received from
defendant-appellant is 'reasonable and commensurate. This
conclusion, however, can only be justified if the fact and amount of
remuneration had been established. These were not proven at all.
No proof was presented as to the nature of plaintiff-appellee's
remuneration, and the mode or manner in which it was paid.. . .10
Both the lower court and the appellate court concur in their
findings that there was a lawyer-client relationship between
petitioner and private respondent Mutuc. We find no reason to
interfere with this factual finding. There may be instances when
there is doubt as to whether an attorney-client relationship has
been created. The issue may be raised in the trial court, but once
the trial court and the Court of Appeals have found that there was
such a relationship the Supreme Court cannot disturb such finding
of fact, 11 absent cogent reasons therefor.
The puerile claim is advanced that there was no attorney-client
relationship between petitioner and private respondent for lack of a
written contract to that effect. The absence of a written contract
will not preclude the finding that there was a professional
relationship which merits attorney's fees for professional services
rendered. Documentary formalism is not an essential element in
the employment of an attorney; the contract may be express or
implied. To establish the relation, it is sufficient that the advice and
assistance of an attorney is sought and received in any matter
pertinent to his profession. An acceptance of the relation is implied
on the part of the attorney from his acting on behalf of his client in
pursuance of a request from the latter.12
There is no question that professional services were actually
rendered by private respondent to petitioner and his family.
Through his efforts, the account of petitioner's brother, Dewey
Dee, with Caesar's Palace was assumed by Ramon Sy and
petitioner and his family were further freed from the apprehension
that Dewey might be harmed or even killed by the so-called mafia.
For such services, respondent Mutuc is indubitably entitled to
receive a reasonable compensation and this right cannot be
concluded by petitioner's pretension that at the time private
respondent rendered such services to petitioner and his family, the
former was also the Philippine consultant of Caesar's Palace.
On the first aspect, the evidence of record shows that the services
of respondent Mutuc were engaged by the petitioner for the
4 Legal Ethics
purposes hereinbefore discussed. The previous partial payments
totalling P50,000.00 made by petitioner to respondent Mutuc and
the tenor of the demand letters sent by said private respondent to
petitioner, the receipt thereof being acknowledged by petitioner,
ineluctably prove three facts, viz: that petitioner hired the services
of private respondent Mutuc; that there was a prior agreement as
to the amount of attorney's fees to be given to the latter; and
there was still a balance due and payable on said fees. The
duplicate original copy of the initial receipt issued and signed in
this connection by private respondent reads:
RECEIVED from Mr. Donald Dee, for professional services rendered,
the sum of THIRTY THOUSAND PESOS (P30,000.00) as partial
payment, leaving a balance of SEVENTY THOUSAND PESOS
(P70,000.00), payable on demand.
Makati, Metro Manila, July 25,1981.13
Thereafter, several demand letters for payment of his fees, dated
August 6, 1981, December 2, 1981, January 29, 1982, March 7,
1982, and September 7, 1982 were sent by private respondent to
petitioner, 14 all to no avail.
On the second objection, aside from the facts stated in the
aforequoted resolution of respondent Court of Appeals, it is also
not completely accurate to judge private respondent's position by
petitioner's assumption that the interests of Caesar's Palace were
adverse to those of Dewey Dee. True, the casino was a creditor but
that fact was not contested or opposed by Dewey Dee, since the
latter, as verifications revealed, was not the debtor. Hence, private
respondent's representations in behalf of petitioner were not in
resistance to the casino's claim but were actually geared toward
proving that fact by establishing the liability of the true debtor,
Ramon Sy, from whom payment was ultimately and correctly
exacted. 15
Even assuming that the imputed conflict of interests obtained,
private respondent's role therein was not ethically or legally
indefensible. Generally, an attorney is prohibited from representing
parties with contending positions. However, at a certain stage of
the controversy before it reaches the court, a lawyer may
represent conflicting interests with the consent of the parties.16 A
common representation may work to the advantage of said parties
since a mutual lawyer, with honest motivations and impartially
cognizant of the parties' disparate positions, may well be better
situated to work out an acceptable settlement of their differences,
being free of partisan inclinations and acting with the cooperation
and confidence of said parties.

Here, even indulging petitioner in his theory that private

respondent was during the period in question an agent of Caesar's
Palace, petitioner was not unaware thereof, hence he actually
consented to and cannot now decry the dual representation that he
postulates. This knowledge he admits, thus:

It is a fair question to ask why, of all the lawyers in the land, it was
the private respondent who was singled out by the petitioner's
father for consultation in regard to an apparent problem, then
pending in Caesar's Palace. The testimony of Arthur Alejandrino,
cousin to private respondent, and the admission of the private
respondent himself supply the answer. Alejandrino testified that
private respondent was the representative of Caesar's Palace in the
Philippines (p. 23, t.s.n., Nov. 29, 1983).lâwphî1.ñèt Private
respondent testified that he was such representative tasked by the
casino to collect the gambling losses incurred by Filipinos in Las Case 2
Vegas. (p. 5, t.s.n., Sept. 21, 1983). 17
EN BANC
A lawyer is entitled to have and receive the just and reasonable
compensation for services rendered at the special instance and A.C. No. 6705 March 31, 2006
request of his client and as long as he is honestly and in good faith
trying to serve and represent the interests of his client, the latter is RUTHIE LIM-SANTIAGO, Complainant,
bound to pay his just fees.18 vs.
ATTY. CARLOS B. SAGUCIO, Respondent.
WHEREFORE, the resolution of respondent Court of Appeals, dated
February 12,1987, reinstating its original decision of May 9, 1986 is DECISION
hereby AFFIRMED, with costs against l petitioner.
CARPIO, J.:
SO ORDERED.
The Case
Melencio-Herrera, (Chairperson), Paras, Padilla and Sarmiento, JJ.,
concur. This is a disbarment complaint against Atty. Carlos B. Sagucio for
violating Rule 15.03 of the Code of Professional Responsibility and
5 Legal Ethics
for defying the prohibition against private practice of law while
working as government prosecutor.
The Facts
Ruthie Lim-Santiago ("complainant") is the daughter of Alfonso Lim
and Special Administratrix of his estate. 1 Alfonso Lim is a
stockholder and the former President of Taggat Industries, Inc. 2
Atty. Carlos B. Sagucio ("respondent") was the former Personnel
Manager and Retained Counsel of Taggat Industries, Inc. 3 until his
appointment as Assistant Provincial Prosecutor of Tuguegarao,
Cagayan in 1992. 4
Taggat Industries, Inc. ("Taggat") is a domestic corporation
engaged in the operation of timber concessions from the
government. The Presidential Commission on Good Government
sequestered it sometime in 1986, 5 and its operations ceased in
1997. 6
Sometime in July 1997, 21 employees of Taggat ("Taggat
employees") filed a criminal complaint entitled "Jesus Tagorda, Jr.
et al. v. Ruthie Lim-Santiago," docketed as I.S. No. 97-240
("criminal complaint"). 7 Taggat employees alleged that
complainant, who took over the management and control of Taggat
after the death of her father, withheld payment of their salaries
and wages without valid cause from 1 April 1996 to 15 July 1997. 8
Respondent, as Assistant Provincial Prosecutor, was assigned to
conduct the preliminary investigation. 9 He resolved the criminal
complaint by recommending the filing of 651 Informations 10 for
violation of Article 288 11 in relation to Article 116 12 of the Labor
Code of the Philippines. 13
Complainant now charges respondent with the following violations:
1. Rule 15.03 of the Code of Professional Responsibility
Complainant contends that respondent is guilty of representing
conflicting interests. Respondent, being the former Personnel
Manager and Retained Counsel of Taggat, knew the operations of
6 Legal Ethics
Taggat very well. Respondent should have inhibited himself from
hearing, investigating and deciding the case filed by Taggat
employees. 14 Furthermore, complainant claims that respondent
instigated the filing of the cases and even harassed and threatened
Taggat employees to accede and sign an affidavit to support the
complaint. 15
2. Engaging in the private practice of law while working as a
government prosecutor
Complainant also contends that respondent is guilty of engaging in
the private practice of law while working as a government
prosecutor. Complainant presented evidence to prove that
respondent received P10,000 as retainer’s fee for the months of
January and February 1995, 16 another P10,000 for the months of
April and May 1995, 17 and P5,000 for the month of April 1996. 18
Complainant seeks the disbarment of respondent for violating Rule
15.03 of the Code of Professional Responsibility and for defying the
prohibition against private practice of law while working as
government prosecutor.
Respondent refutes complainant’s allegations and counters that
complainant was merely aggrieved by the resolution of the criminal
complaint which was adverse and contrary to her expectation. 19
Respondent claims that when the criminal complaint was filed,
respondent had resigned from Taggat for more than five years. 20
Respondent asserts that he no longer owed his undivided loyalty to
Taggat. 21 Respondent argues that it was his sworn duty to
conduct the necessary preliminary investigation. 22 Respondent
contends that complainant failed to establish lack of impartiality
when he performed his duty. 23 Respondent points out that
complainant did not file a motion to inhibit respondent from
hearing the criminal complaint 24 but instead complainant
voluntarily executed and filed her counter-affidavit without mental
reservation. 25
Respondent states that complainant’s reason in not filing a motion
to inhibit was her impression that respondent would exonerate her
from the charges filed as gleaned from complainant’s statement
during the hearing conducted on 12 February 1999:
xxx
Q. (Atty. Dabu). What do you mean you didn’t think he would do it,
Madam Witness?
A. Because he is supposed to be my father’s friend and he was
working with my Dad and he was supposed to be trusted by my
father. And he came to me and told me he gonna help me. x x x.
26
Respondent also asserts that no conflicting interests exist because
he was not representing Taggat employees or complainant.
Respondent claims he was merely performing his official duty as
Assistant Provincial Prosecutor. 27 Respondent argues that
complainant failed to establish that respondent’s act was tainted
with personal interest, malice and bad faith. 28
Respondent denies complainant’s allegations that he instigated the
filing of the cases, threatened and harassed Taggat employees.
Respondent claims that this accusation is bereft of proof because
complainant failed to mention the names of the employees or
present them for cross-examination. 29
Respondent does not dispute his receipt, after his appointment as
government prosecutor, of retainer fees from complainant but
claims that it was only on a case-to-case basis and it ceased in
1996. 30 Respondent contends that the fees were paid for his
consultancy services and not for representation. Respondent
submits that consultation is not the same as representation and
that rendering consultancy services is not prohibited. 31
Respondent, in his Reply-Memorandum, states:
x x x [I]f ever Taggat paid him certain amounts, these were paid
voluntarily by Taggat without the respondent’s asking, intended as
token consultancy fees on a case-to-case basis and not as or for
retainer fees. These payments do not at all show or translate as a
specie of ‘conflict of interest’. Moreover, these consultations had no
7 Legal Ethics
relation to, or connection with, the above-mentioned labor
complaints filed by former Taggat employees. 32
Respondent insists that complainant’s evidence failed to prove that
when the criminal complaint was filed with the Office of the
Provincial Prosecutor of Cagayan, respondent was still the retained
counsel or legal consultant. 33
While this disbarment case was pending, the Resolution and Order
issued by respondent to file 651 Informations against complainant
was reversed and set aside by Regional State Prosecutor of
Cagayan Rodolfo B. Cadelina last 4 January 1999. 34 Hence, the
criminal complaint was dismissed. 35
The IBP’s Report and Recommendation
The Integrated Bar of the Philippines’ Investigating Commissioner
Ma. Carmina M. Alejandro-Abbas ("IBP Commissioner Abbas")
heard the case 36 and allowed the parties to submit their
respective memoranda. 37 Due to IBP Commissioner Abbas’
resignation, the case was reassigned to Commissioner Dennis A.B.
Funa ("IBP Commissioner Funa"). 38
After the parties filed their memoranda and motion to resolve the
case, the IBP Board of Governors issued Resolution No. XVI-2004-
479 ("IBP Resolution") dated 4 November 2004 adopting with
modification 39 IBP Commissioner Funa’s Report and
Recommendation ("Report") finding respondent guilty of conflict of
interests, failure to safeguard a former client’s interest, and
violating the prohibition against the private practice of law while
being a government prosecutor. The IBP Board of Governors
recommended the imposition of a penalty of three years
suspension from the practice of law. The Report reads:
Now the issue here is whether being a former lawyer of Taggat
conflicts with his role as Assistant Provincial Prosecutor in deciding
I.S. No. 97-240. A determination of this issue will require the test
of whether the matter in I.S. No. 97-240 will conflict with his
former position of Personnel Manager and Legal Counsel of Taggat.
I.S. No. 97-240 was filed for "Violation of Labor Code" (see
Resolution of the Provincial Prosecutors Office, Annex "B" of
Complaint). Herein Complainant, Ruthie Lim-Santiago, was being
accused as having the "management and control" of Taggat (p. 2,
Resolution of the Prov. Pros. Office, supra).
Clearly, as a former Personnel Manager and Legal Counsel of
Taggat, herein Respondent undoubtedly handled the personnel and
labor concerns of Taggat. Respondent, undoubtedly dealt with and
related with the employees of Taggat. Therefore, Respondent
undoubtedly dealt with and related with complainants in I.S. No.
97-240. The issues, therefore, in I.S. No. 97-240, are very much
familiar with Respondent. While the issues of unpaid salaries
pertain to the periods 1996-1997, the mechanics and personalities
in that case are very much familiar with Respondent.
A lawyer owes something to a former client. Herein Respondent
owes to Taggat, a former client, the duty to "maintain inviolate the
client’s confidence or to refrain from doing anything which will
injuriously affect him in any matter in which he previously
represented him" (Natam v. Capule, 91 Phil. 640; p. 231, Agpalo,
Legal Ethics, 4th ed.)
Respondent argues that as Assistant Provincial Prosecutor, he does
not represent any client or any interest except justice. It should
not be forgotten, however, that a lawyer has an immutable duty to
a former client with respect to matters that he previously handled
for that former client. In this case, matters relating to personnel,
labor policies, and labor relations that he previously handled as
Personnel Manager and Legal Counsel of Taggat. I.S. No. 97-240
was for "Violation of the Labor Code." Here lies the conflict.
Perhaps it would have been different had I.S. No. 97-240 not been
labor-related, or if Respondent had not been a Personnel Manager
concurrently as Legal Counsel. But as it is, I.S. No. 97-240 is labor-
related and Respondent was a former Personnel Manager of
Taggat.
xxxx
While Respondent ceased his relations with Taggat in 1992 and the
unpaid salaries being sought in I.S. No. 97-240 were of the years
8 Legal Ethics
1996 and 1997, the employees and management involved are the
very personalities he dealt with as Personnel Manager and Legal
Counsel of Taggat. Respondent dealt with these persons in his
fiduciary relations with Taggat. Moreover, he was an employee of
the corporation and part of its management.
xxxx
As to the propriety of receiving "Retainer Fees" or "consultancy
fees" from herein Complainant while being an Assistant Provincial
Prosecutor, and for rendering legal consultancy work while being
an Assistant Provincial Prosecutor, this matter had long been
settled. Government prosecutors are prohibited to engage in the
private practice of law (see Legal and Judicial Ethics, Ernesto
Pineda, 1994 ed., p. 20; People v. Villanueva, 14 SCRA 109;
Aquino v. Blanco 70 Phil. 647). The act of being a legal consultant
is a practice of law. To engage in the practice of law is to do any of
those acts that are characteristic of the legal profession (In re:
David, 93 Phil. 461). It covers any activity, in or out of court,
which required the application of law, legal principles, practice or
procedures and calls for legal knowledge, training and experience
(PLA v. Agrava, 105 Phil. 173; People v. Villanueva, 14 SCRA 111;
Cayetano v. Monsod, 201 SCRA 210).
Respondent clearly violated this prohibition.
As for the secondary accusations of harassing certain employees of
Taggat and instigating the filing of criminal complaints, we find the
evidence insufficient.
Accordingly, Respondent should be found guilty of conflict of
interest, failure to safeguard a former client’s interest, and
violating the prohibition against the private practice of law while
being a government prosecutor. 40
The IBP Board of Governors forwarded the Report to the Court as
provided under Section 12(b), Rule 139-B 41 of the Rules of Court.
The Ruling of the Court
The Court exonerates respondent from the charge of violation of
Rule 15.03 of the Code of Professional Responsibility ("Code").
However, the Court finds respondent liable for violation of Rule
1.01, Canon 1 of the Code of Professional Responsibility against
unlawful conduct. 42 Respondent committed unlawful conduct
when he violated Section 7(b)(2) of the Code of Conduct and
Ethical Standards for Public Officials and Employees or Republic Act
No. 6713 ("RA 6713").
Canon 6 provides that the Code "shall apply to lawyers in
government service in the discharge of their official duties." 43 A
government lawyer is thus bound by the prohibition "not [to]
represent conflicting interests." 44 However, this rule is subject to
certain limitations. The prohibition to represent conflicting interests
does not apply when no conflict of interest exists, when a written
consent of all concerned is given after a full disclosure of the facts
or when no true attorney-client relationship exists. 45 Moreover,
considering the serious consequence of the disbarment or
suspension of a member of the Bar, clear preponderant evidence is
necessary to justify the imposition of the administrative penalty. 46
Respondent is also mandated under Rule 1.01 of Canon 1 not to
engage in "unlawful x x x conduct." Unlawful conduct includes
violation of the statutory prohibition on a government employee to
"engage in the private practice of [his] profession unless
authorized by the Constitution or law, provided, that such practice
will not conflict or tend to conflict with [his] official functions." 47
Complainant’s evidence failed to substantiate the claim that
respondent represented conflicting interests
In Quiambao v. Bamba, 48 the Court enumerated various tests to
determine conflict of interests. One test of inconsistency of
interests is whether the lawyer will be asked to use against his
former client any confidential information acquired through their
connection or previous employment. 49 In essence, what a lawyer
owes his former client is to maintain inviolate the client’s
confidence or to refrain from doing anything which will injuriously
affect him in any matter in which he previously represented him.
50
9 Legal Ethics
In the present case, we find no conflict of interests when
respondent handled the preliminary investigation of the criminal
complaint filed by Taggat employees in 1997. The issue in the
criminal complaint pertains to non-payment of wages that occurred
from 1 April 1996 to 15 July 1997. Clearly, respondent was no
longer connected with Taggat during that period since he resigned
sometime in 1992.
In order to charge respondent for representing conflicting interests,
evidence must be presented to prove that respondent used against
Taggat, his former client, any confidential information acquired
through his previous employment. The only established
participation respondent had with respect to the criminal complaint
is that he was the one who conducted the preliminary
investigation. On that basis alone, it does not necessarily follow
that respondent used any confidential information from his
previous employment with complainant or Taggat in resolving the
criminal complaint.
The fact alone that respondent was the former Personnel Manager
and Retained Counsel of Taggat and the case he resolved as
government prosecutor was labor-related is not a sufficient basis to
charge respondent for representing conflicting interests. A lawyer’s
immutable duty to a former client does not cover transactions that
occurred beyond the lawyer’s employment with the client. The
intent of the law is to impose upon the lawyer the duty to protect
the client’s interests only on matters that he previously handled for
the former client and not for matters that arose after the lawyer-
client relationship has terminated.
Further, complainant failed to present a single iota of evidence to
prove her allegations. Thus, respondent is not guilty of violating
Rule 15.03 of the Code.
Respondent engaged in the private practice of law while working as
a government prosecutor
The Court has defined the practice of law broadly as –
x x x any activity, in or out of court, which requires the application
of law, legal procedure, knowledge, training and experience. "To
engage in the practice of law is to perform those acts which are
characteristics of the profession. Generally, to practice law is to
give notice or render any kind of service, which device or service
requires the use in any degree of legal knowledge or skill." 51
"Private practice of law" contemplates a succession of acts of the
same nature habitually or customarily holding one’s self to the
public as a lawyer. 52
Respondent argues that he only rendered consultancy services to
Taggat intermittently and he was not a retained counsel of Taggat
from 1995 to 1996 as alleged. This argument is without merit
because the law does not distinguish between consultancy services
and retainer agreement. For as long as respondent performed acts
that are usually rendered by lawyers with the use of their legal
knowledge, the same falls within the ambit of the term "practice of
law."
Nonetheless, respondent admitted that he rendered his legal
services to complainant while working as a government prosecutor.
Even the receipts he signed stated that the payments by Taggat
were for "Retainer’s fee." 53 Thus, as correctly pointed out by
complainant, respondent clearly violated the prohibition in RA
6713.
However, violations of RA 6713 are not subject to disciplinary
action under the Code of Professional Responsibility unless the
violations also constitute infractions of specific provisions of the
Code of Professional Responsibility. Certainly, the IBP has no
jurisdiction to investigate violations of RA 6713 – the Code of
Conduct and Ethical Standards for Public Officials and Employees –
unless the acts involved also transgress provisions of the Code of
Professional Responsibility.
Here, respondent’s violation of RA 6713 also constitutes a violation
of Rule 1.01 of Canon 1, which mandates that "[a] lawyer shall not
engage in unlawful, dishonest, immoral or deceitful conduct."
Respondent’s admission that he received from Taggat fees for legal
services while serving as a government prosecutor is an unlawful
conduct, which constitutes a violation of Rule 1.01.
10 Legal Ethics
Respondent admitted that complainant also charged him with
unlawful conduct when respondent stated in his Demurrer to
Evidence:
In this instant case, the complainant prays that the respondent be
permanently and indefinitely suspended or disbarred from the
practice of the law profession and his name removed from the Roll
of Attorneys on the following grounds:
xxxx
d) that respondent manifested gross misconduct and gross
violation of his oath of office and in his dealings with the public. 54
On the Appropriate Penalty on Respondent
The appropriate penalty on an errant lawyer depends on the
exercise of sound judicial discretion based on the surrounding
facts. 55
Under Civil Service Law and rules, the penalty for government
employees engaging in unauthorized private practice of profession
is suspension for six months and one day to one year. 56 We find
this penalty appropriate for respondent’s violation in this case of
Rule 1.01, Canon 1 of the Code of Professional Responsibility.
WHEREFORE, we find respondent Atty. Carlos B. Sagucio GUILTY of
violation of Rule 1.01, Canon 1 of the Code of Professional
Responsibility. Accordingly, we SUSPEND respondent Atty. Carlos
B. Sagucio from the practice of law for SIX MONTHS effective upon
finality of this Decision.
Let copies of this Decision be furnished the Office of the Bar
Confidant to be appended to respondent’s personal record as an
attorney, the Integrated Bar of the Philippines, the Department of
Justice, and all courts in the country for their information and
guidance.
SO ORDERED.
ANTONIO T. CARPIO
Associate Justice
Case 3
A.C. No. 6424 March 4, 2005
10 21 Taggat employees filed their Affidavits alleging that complainant failed to pay them 31
quincenas of their salaries and wages, thus 651 Informations were recommended for filing.
CONSORCIA S. ROLLON, Complainant,
11 Article 288 of the Labor Code of the Philippines provides: "Penalties. – Except as otherwise vs.
provided in this Code, or unless the acts complained of hinges on a question of interpretation or
implementation of ambiguous provisions of an existing collective bargaining agreement, any Atty. CAMILO NARAVAL, respondent.
violation of the provisions of this Code declared to be unlawful or penal in nature shall be
punished with a fine of not less than One Thousand Pesos (P1,000.00) nor more than Ten
Thousand Pesos (P10,000.00), or imprisonment of not less than three months nor more than
DECISION
three years, or both such fine and imprisonment at the discretion of the court. x x x."
PANGANIBAN, J.:
12 Article 116 of the Labor Code of the Philippines provides: "Withholding of wages and
kickbacks prohibited. – It shall be unlawful for any person directly or indirectly, to withhold any
amount from the wages of a worker or induce him to give up any part of his wages by force, Lawyers owe fidelity to their clients. The latter’s money or other
stealth, intimidation, threat or by any other means whatsoever without the worker’s consent."
property coming into the former’s possession should be deemed to
39 The IBP Commissioner imposed a penalty of three months suspension from the practice of be held in trust and should not under any circumstance be
law.
commingled with the lawyers’ own; much less, used by them.
41 Section 12(b), Rule 139-B of the Rules of Court provides: Failure to observe these ethical principles constitutes professional
misconduct and justifies the imposition of disciplinary sanctions.
SEC. 12. Review and decision by the Board of Governors. —

(b) If the Board, by the vote of a majority of its total membership, determines that the
respondent should be suspended from the practice of law or disbarred, it shall issue a resolution
setting forth its findings and recommendations which, together with the whole record of the
case, shall forthwith be transmitted to the Supreme Court for final action.
42 Rule 1.01, Canon 1 of the Code of Professional Responsibility provides:
Rule 1.01. – A lawyer shall not engage in unlawful, dishonest, immoral or deceitful conduct.
43 Code of Professional Responsibility, Canon 6.
44 Code of Professional Responsibility, Rule 15.03.
46 Berbano v. Barcelona, A.C. No. 6084, 3 September 2003, 410 SCRA 258.
47 RA 6713, Section 7(b)(2).
48 A.C. No. 6708, 25 August 2005, 468 SCRA 1.
The Case and the Facts
Before us is a letter-complaint against Atty. Camilo Naraval, filed
by Consorcia S. Rollon with the Davao City Chapter of the
Integrated Bar of the Philippines (IBP) on November 29, 2001. The
Affidavit1 submitted by complainant alleges the following:
"Sometime in October of 2000, I went to the office of Atty. Camilo
F. Naraval together with my son, Freddie Rollon, to seek his
assistance in a case filed against me before the Municipal Trial
Court in Cities Branch 6, Davao City entitled ‘Rosita Julaton vs.
Consorcia S. Rollon’ for Collection of Sum of Money with Prayer for
Attachment;

50 Pormento, Sr. v. Pontevedra, A.C. No. 5128, 31 March 2005, 454 SCRA 167, 178.
51 Cayetano v. Monsod, G.R. No. 100113, 3 September 1991, 201 SCRA 210, 214.
52 Borja, Sr. v. Sulyap, Inc., 447 Phil. 750, 759 (2003).
55 Endaya v. Oca, A.C. No. 3967, 3 September 2003, 410 SCRA 244, 255.
56 Omnibus Rules Implementing Book V of Executive Order No. 292 and Other Pertinent Civil
Service Laws as mandated by Section 12 of RA 6713.
"After going over the documents I brought with me pertaining to
the said case, Atty. Naraval agreed to be my lawyer and I was
required to pay the amount of Eight Thousand Pesos (Php
8,000.00) for the filing and partial service fee, which amount was
paid by me on October 18, 2000, a copy of the Official Receipt is
hereto attached as Annex ‘A’ to form part hereof;

11 Legal Ethics
"As per the instruction of Atty. Naraval, my son, Freddie, returned
to his office the following week to make follow-up on said case.
However, I was informed later by my son Freddie that Atty.
Naraval was not able to act on my case because the latter was so
busy. Even after several follow-ups were made with Atty. Naraval,
still there was no action done on our case;
"Sometime in November 29, 2001, I decided to withdraw the
amount I paid to Atty. Naraval, because of the latter’s failure to
comply with our mutual agreement that he will assist me in the
above-mentioned case;
"My son Freddie Rollon went to Atty. Naraval’s office that same day
to inform Atty. Naraval of our decision to withdraw the amount I
have paid and to retrieve my documents pertaining to said case.
Unfortunately, despite our several follow-ups, Atty. Naraval always
said that he cannot return the documents because they were in
their house, and that he could not give us back the amount we
paid him (Php 8,000.00) because he has no money;
"Having failed to obtain any response, I decided to refer the matter
to Atty. Ramon Edison Batacan, IBP President of Davao City and to
Atty. Pedro Castillo, the Commissioner on Bar D[i]scipline;
xxx xxx x x x."
In an Order dated March 12, 2002,2 the IBP Commission on Bar
Discipline (CBD), through Director Victor C. Fernandez, directed
respondent to submit his answer to the Complaint. The same
directive was reiterated in the CBD’s May 31, 2002 Order3 issued
through Commissioner Jovy C. Bernabe. Respondent did not file
any answer despite his receipt of the Orders.4
Not having heard from him despite adequate notice, the CBD
proceeded with the investigation ex parte. Its Order5 dated
November 11, 2002, issued through Commissioner Bernabe,
required complainant to submit her position paper within ten days
from receipt thereof, after which the case was to be deemed
submitted for resolution.
12 Legal Ethics
The CBD received complainant’s Position Paper6 on December 10,
2002.
Report of the Investigating Commissioner
In his Report and Recommendation dated October 16, 2003,
Investigating Commissioner Acerey C. Pacheco recommended that
respondent be suspended from the practice of law for one (1) year
for neglect of duty and/or violation of Canons 15 and 18 of the
Code of Professional Responsibility. The Report reads in part as
follows:
"Canon 18 of the Code of Professional Responsibility requires every
lawyer to serve his client with utmost dedication, competence and
diligence. He must not neglect a legal matter entrusted to him, and
his negligence in this regard renders him administratively liable x x
x.
"In the case at bar, the deplorable conduct of the respondent in
misrepresenting to the complainant that he will render legal
services to her, and after receiving certain amount from the latter
as payment for ‘filing fee and service fee’ did nothing in return, has
caused unnecessary dishonor to the bar. By his own conduct the
respect of the community to the legal profession, of which he
swore to protect, has been tarnished.
xxx xxx xxx
"In fact, complainant claimed to have been shortchanged by the
respondent when he failed to properly appraised her of the status
of her case which she later on found to have become final and
executory. Apparently, the civil suit between Rosita Julaton and the
complainant have been decided against the latter and which
judgment has long become final and executory. However, despite
full knowledge by the respondent of such finality based on the
documents furnished to him, respondent withheld such vital
information and did not properly appraise the complainant. Thus,
respondent violated the mandate in Canon 15 x x x."7
IBP Board of Governors’ Resolution
On February 27, 2004, the IBP Board of Governors issued
Resolution No. XVI-2004-64 upholding the above-quoted Report.
The Board recommended the suspension of respondent from the
practice of law for two (2) years for violation of Rules 15 and 18 of
the Code of Professional Responsibility and the restitution of
complainant’s P8,000.
The Court’s Ruling
We agree with the Resolution of the IBP Board of Governors.
Respondent’s Administrative Liability
Ordinarily, lawyers are not obliged to act either as advisers or as
advocates of any person who may wish to become their client.8
They may decline employment and refuse to accept representation,
if they are not in a position to carry it out effectively or
competently.9 But once they agree to handle a case, attorneys are
required by the Canons of Professional Responsibility to undertake
the task with zeal, care and utmost devotion.10
Acceptance of money from a client establishes an attorney-client
relationship and gives rise to the duty of fidelity to the client’s
cause.11 Every case accepted by a lawyer deserves full attention,
diligence, skill and competence, regardless of importance.12 The
Code of Professional Responsibility clearly states:
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 his client informed of the status of
his case and shall respond within a reasonable time to the client’s
request for information.
13 Legal Ethics
Hence, practising lawyers may accept only as many cases as they
can efficiently handle.13 Otherwise, their clients would be
prejudiced. Once lawyers agree to handle a case, they should
undertake the task with dedication and care. If they do any less,
then they fail their lawyer’s oath.14
The circumstances of this case indubitably show that after
receiving the amount of P8,000 as filing and partial service fee,
respondent failed to render any legal service in relation to the case
of complainant. His continuous inaction despite repeated followups
from her reveals his cavalier attitude and appalling indifference
toward his client’s cause, in brazen disregard of his duties as a
lawyer. Not only that. Despite her repeated demands, he also
unjustifiably failed to return to her the files of the case that had
been entrusted to him. To top it all, he kept the money she had
likewise entrusted to him.
Furthermore, after going through her papers, respondent should
have given her a candid, honest opinion on the merits and the
status of the case. Apparently, the civil suit between Rosita Julaton
and complainant had been decided against the latter. In fact, the
judgment had long become final and executory. But he withheld
such vital information from complainant. Instead, he demanded
P8,000 as "filing and service fee" and thereby gave her hope that
her case would be acted upon.
Rule 15.05 of the Code of Professional Responsibility requires that
lawyers give their candid and best opinion to their clients on the
merit or lack of merit of the case, neither overstating nor
understating their evaluation thereof. Knowing whether a case
would have some prospect of success is not only a function, but
also an obligation on the part of lawyers.15 If they find that their
client’s cause is defenseless, then it is their bounden duty to advise
the latter to acquiesce and submit, rather than to traverse the
incontrovertible.16 The failure of respondent to fulfill this basic
undertaking constitutes a violation of his duty to "observe candor,
fairness and loyalty in all his dealings and transactions with his
clients."17
Likewise, as earlier pointed out, respondent persistently refused to
return the money of complainant despite her repeated demands.
His conduct was clearly indicative of lack of integrity and moral
soundness; he was clinging to something that did not belong to
him, and that he absolutely had no right to keep or use.18
Lawyers are deemed to hold in trust their client’s money and
property that may come into their possession.19 As respondent
obviously did nothing on the case of complainant, the amount she
had given -- as evidenced by the receipt issued by his law office --
was never applied to the filing fee. His failure to return her money
upon demand gave rise to the presumption that he had converted
it to his own use and thereby betrayed the trust she had reposed in
him.20 His failure to do so constituted a gross violation of
professional ethics and a betrayal of public confidence in the legal
profession.21
The Code exacts from lawyers not only a firm respect for law, legal
processes and the courts,22 but also mandates the utmost degree
of fidelity and good faith in dealing with the moneys entrusted to
them pursuant to their fiduciary relationship.23 Respondent clearly
fell short of the demands required of him as a member of the bar.
His inability to properly discharge his duty to his client makes him
answerable not just to her, but also to this Court, to the legal
profession, and to the general public.24 Given the crucial
importance of his role in the administration of justice, his
misconduct diminished the confidence of the public in the integrity
and dignity of the profession.25
WHEREFORE, Atty. Camilo Naraval is found GUILTY of violating
Rule 15.05 and Canons 16, 17 and 18 of the Code of Professional
Responsibility and is hereby SUSPENDED from the practice of law
for a period of two (2) years, effective upon his receipt of this
Decision. Furthermore, he is ORDERED TO RESTITUTE, within thirty
(30) days from notice of this Decision, complainant’s eight
thousand pesos (P8,000), plus interest thereon, at the rate of six
percent per annum, from October 18, 2000, until fully paid. Let
copies of this Decision be furnished all courts, the Office of the Bar
Confidant, as well as the National Office and the Davao City
Chapter of the Integrated Bar of the Philippines.
SO ORDERED.
14 Legal Ethics
Davide, Jr., C.J., Puno, Quisumbing, Ynares-Santiago, Sandoval-
Gutierrez, Carpio, Austria-Martinez, Corona, Callejo, Sr., Azcuna,
Tinga, Chico-Nazario, and Garcia, JJ., concur.
Carpio-Morales, J., on leave.
Footnotes
4 The March 12, 2002 Order was received on March 27, 2002; and the
May 31, 2002 Order, on June 6, 2002. See Registry Return Receipt
attached to the Orders.
7 Report and Recommendation filed on June 3, 2004, pp. 5-7.
8 Cuizon v. Macalino, AC No. 4334, July 7, 2004; De Juan v. Baria III, AC
No. 5817, May 27, 2004.
9 See Rule 18.01, Code of Professional Responsibility, which provides in
part. "A lawyer shall not undertake a legal service which he knows or
should know that he is not qualified to render. x x x."
10 Fernandez v. Cabrera II, AC No. 5623, December 11, 2003.
11 Pariñas v. Paguinto, AC No. 6297, July 13, 2004; Fernandez v. Cabrera
II, supra; Emiliano Court Townhouses Homeowners Association v.
Dioneda, 399 SCRA 296, March 20, 2003.
12 Schulz v. Flores, AC No. 4219, December 8, 2003 (citing In re: Atty.
David Briones, 415 Phil. 203, August 15, 2001; Santiago v. Fojas, 248
SCRA 68, September 7, 1995).
13 Pariñas v. Paguinto, supra; Moton v. Atty. Cadiao, 377 Phil. 1,
November 24, 1999.
14 The Lawyer’s Oath declares in part: "x x x I will delay no man for
money or malice, and will conduct myself as a lawyer according to the best
of my knowledge and discretion with all good fidelity as well to the courts
as to my clients; and I impose upon myself this voluntary obligation
without any mental reservation or purpose of evasion. So help me God."
See §3, Rule 138, Rules of Court.
15 Agpalo, Legal Ethics (1992, 5th ed.), p. 152.
16 Castañeda v. Ago, 65 SCRA 505, July 30, 1975.
17 Canon 15, Code of Professional Responsibility.

18 See Igual v. Javier, 324 Phil. 698, March 7, 1996.

19 Canon 16, Code of Professional Responsibility; Barnachea v. Quiocho,

399 SCRA 1, March 11, 2003.

20 Schulz v. Flores, supra; Barnachea v. Quiocho, supra; Sipin-Nabor v.

Atty. Baterina, 412 Phil. 419, June 28, 2001.

21 Barnachea v. Quiocho, supra; Burbe v. Magulta, 383 SCRA 276, June

10, 2002; Sipin-Nabor v. Atty. Baterina, supra; Gonato v. Adaza, 385 Phil.
426, March 27, 2000.

22 "CANON 1 – A lawyer shall uphold the constitution, obey the laws of the
land and promote respect for law and for legal processes."

23 Berbano v. Barcelona, 410 SCRA 258, September 3, 2003; Igual v.

Javier, supra.

24 Emiliano Court Townhouses Homeowners Association v. Dioneda,

supra.

25 Grande v. De Silva, 407 SCRA 310, July 29, 2003.

Case 4

THIRD DIVISION

[Adm. Matter No. MTJ-95-1063. August 9, 1996.]

ALFONSO C. CHOA, Complainant, v. JUDGE ROBERTO S.

CHIONGSON, Respondent.

SYLLABUS

1. LEGAL ETHICS; LAWYER; HIS RESPONSIBILITY TO HIS

CLIENTS; MUST BE DONE WITHIN THE BOUNDS OF REASON AND
COMMON SENSE. — While a lawyer owes absolute fidelity to the
cause of his client, full devotion to his genuine interest, and warm
zeal in the maintenance and defense of his rights, as well as the
exertion of his utmost learning and ability, he must do so only
15 Legal Ethics
within the bounds of the law. He must give a candid and honest
opinion on the merits and probable results of his client’s case with
the end in view of promoting respect for the law and legal
processes, and counsel or maintain such actions or proceedings
only as appear to him to be just, and such defenses only as he
believes to honestly debatable under the law. He must always
remind himself of the oath he took upon admission to the Bar that
he "will not wittingly or willingly promote or sue any groundless,
false or unlawful suit nor give aid nor consent to the same" ; and
that he "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] clients." Needless to state, the lawyer’s fidelity to
his client must not be pursued at the expenses of truth and the
administration of justice, and it must be done within the bounds of
reason and common sense. A lawyer’s responsibility to protect and
advance the interests of his client does not warrant a course of
action propelled by ill motives and malicious intentions against the
other party. As an officer of the court and its indispensable partner
in the sacred task of administering justice, graver responsibility is
imposed upon a lawyer than any other to uphold the integrity of
the courts and to show respect to its officers.
2. ID.; ID.; HIS RIGHT TO CRITICIZE THE COURTS; MUST BE
EXERCISED RESPONSIBLY. — It does not however, follow that just
because a lawyer is an officer of the court, he cannot criticize the
courts. That is his right as a citizen, and it is even his duty as an
officer of the court to avail of such right. Nevertheless. such a right
is not without limit. The right to criticize, which is, guaranteed by
the freedom of speech and of expression in the Bill of Rights of the
Constitution, must be exercised responsibly, for every right carries
with it a corresponding obligation. Freedom is not freedom from
responsibility, but freedom with responsibility. Any criticism against
a judge made in the guise of an administrative complaint which is
clearly unfounded and impelled by ulterior motive will not excuse
the lawyer responsible therefor under his duty of fidelity to his
client. As we stated in Ng v. Alfaro, 238 SCRA 486, 491-492
[1994], lawyers, as officers of the court, should not encourage
groundless administrative cases against court officers and
employees. The time of the latter should not be wasted in
answering or defending groundless complaints; every minute of it
is precious and must be reserved for the enhancement of public
16 Legal Ethics
service. Our precious time too should not be diverted to such
cases.
RESOLUTION
DAVIDE, JR., J.:
In the resolution of 9 February 1996, this Court dismissed the
instant complaint for want of merit and directed Atty. Raymundo A.
Quiroz, counsel for the complainant, to show cause within fifteen
days from notice why he should not be disciplinary dealt with for
his apparent failure to comply with the duties and responsibilities
of a member of the Bar. Such duties and responsibilities were
noted in the following paragraph of the resolution:chanrob1es
virtual 1aw library
Atty. Raymundo A. Quiroz, counsel for the complainant, must have
been aware of the utter lack of merit of the charges against the
Respondent. As a Member of the Philippine Bar he is bound: (1) by
his oath, not to, wittingly or willingly, promote or sue any
groundless, false, or unlawful suit nor give aid nor consent to the
same; (2) by Section 20(c), Rule 138 of the Rules of Court, to
counsel or maintain such actions or proceedings only as appear to
him to be just; and (3) to uphold the Code of Professional
Responsibility. It was incumbent upon him to give a candid and
honest opinion on the merits and probable results of the
complainant’s case (Rule 15.05, Canon 15, Code of Professional
Responsibility) with the end in view of promoting respect for the
law and legal processes (Canon 1, Id.). He should, therefore, be
required to show cause why no disciplinary action should be taken
against him for his apparent failure to observe the foregoing duties
and responsibilities.
Atty. Quiroz received a copy of the foregoing resolution on 16
February 1996, and on 2 March 1996, he filed a Motion for
Extension of Time wherein he prayed that he be given an extension
of six days from 2 March 1996 — the expiry date of the original
period to file his compliance to the show-cause order — within
which to file his compliance to or motion for reconsideration of the
resolution.

In the resolution of 25 march 1996, this Court granted Atty.
Quiroz’s motion but only insofar as the filing of his compliance was
concerned, as clearly shown in the notice of the resolution sent to
him reading as follows:chanrob1es virtual 1aw library
Quoted hereunder, for your information, is a resolution of the Third
Division of this Court dated MAR. 25, 1996:chanrob1es virtual 1aw
library
Administrative Matter MTJ-95-1063 (Alfonso C. Choa v. Judge
Roberto S. Chiongson, etc.) — The first motion of Atty. Raymundo
A. Quiroz, counsel for complainant, for extension of six (6) days
form March 2, 1996 or until March 8, 1996 within which to file
compliance with the resolution of February 9, 1996 which directed
him to show cause, why he should not be disciplinary dealt with for
his apparent failure to comply with his duties and responsibilities,
is GRANTED, with WARNING that no further extension will be
given.
It appears that on 8 March 1996 Atty. Quiroz filed with the Office
of the Court Administrator a pleading entitled Compliance/Motion
for Reconsideration. This pleading is more of a motion for
reconsideration. It was filed on the last day of the period he
solicited in his motion for extension. Since the resolution of 25
March 1996 granted only an extension of the period to submit his
compliance, it necessarily follows that the motion for
reconsideration was filed beyond the reglementary period. It bears
stressing that paragraph 5 of this Court’s en banc resolution of 7
April 1988 provides that, as a general policy, no motion for
extension of time to file a motion reconsideration shall be granted
after the Court has rendered its judgment. Accordingly, the motion
for reconsideration must forthwith be DENIED for having been filed
late. In any event, it has no merit whatsoever except, perhaps, as
to its sophistry.
The only issue then left is the sufficiency and adequacy of his
explanation which is, nevertheless, inexorably linked to the motion
for reconsideration. Atty. Quiroz asserts that he never had the
intention to prosecute or sue any groundless, false, or unlawful suit
or to file the instant complaint in addition to the appeal or in lieu
17 Legal Ethics
thereof; that he assisted the complainant in the honest belief that
the latter has really a cause of action against the respondent; and
that he "was not ventilating in the instant case the complainant’s
grievances relative to the respondent’s judgment finding [the
complainant] guilty of perjury but was only raising the matter to
show that indeed the respondent was biased because of such next-
door-neighbor relationship."cralaw virtua1aw library
These explanations deserve scant consideration. The claim of
"honest belief," which amounts to a claim of good faith, fails to
convince us in light of what follows.
Nothing is further from the truth than the claim of Atty. Quiroz that
he "was not ventilating in the instant case the complainant’s
grievances relative to the respondent’s judgment finding [the
complainant] guilty of perjury but was only raising the matter to
show that indeed the respondent was biased because of such next-
door-neighbor relationship." He was in fact, attacking the judgment
of conviction by asserting that the trial court’s only recourse was to
acquit the complainant because (a) the allegations in the
information do not constitute the offense of perjury; (b) the
complainant’s petition for naturalization, which was the basis for
the charge of perjury, having been withdrawn with finality, had
become functus officio, i.e., as if the petition was not filed at all,
and, therefore, whatever false statement contained therein was no
longer required by law and had ceased to be on a material matter;
(c) the respondent had admitted in evidence exhibits which are
obviously inadmissible; and (d) the respondent had sentenced the
complainant with the penalty higher than that provided by law
without applying the Indeterminate Sentence Law.
The upshot of these allegations is that the complainant’s (Mr.
Choa’s) conviction of the crime of perjury is baseless or unfounded
in law and in fact and is nothing but the product of the
respondent’s prejudice against Mr. Choa because the respondent
happens to be a "next-door neighbor" of Mr. Choa’s wife, the
private complainant in the perjury case. Considering that Mr. Choa
seasonably appealed from the judgment of conviction. Atty. Quiroz
knew or ought to know that all the matters which he may find
relevant or material for the reversal of the judgment and the
consequent acquittal of his client, Mr. Choa, may be raised with the
appellate court, and that this Court, not being the venue for such
appeal, cannot resolve the appeal even by way of an administrative
complaint against the judge who convicted Mr. Choa.
If Atty. Quiroz then assisted Mr. Choa in the preparation of this
case, he had nothing in mind but to harass the respondent Judge
and to unduly influence the course of the appeal in the criminal
case by injecting into the mind of the appellate judge that, indeed,
something was definitely wrong with the appealed decision because
the ponente thereof is now facing a serious administrative
complaint arising from his improper conduct therein. It might even
be said that the filing of this case was to send a signal to the
appellate judge in the criminal case that an affirmance of the
challenged decision would clearly be erroneous, if not equally
baseless and unfounded as that of the trial court below.
While a lawyer owes absolute fidelity to the cause of his client, full
devotion to his genuine interest, and warm zeal in the maintenance
and defense of his rights, as well as the exertion of his utmost
learning and ability, 1 he must do so only within the bounds of the
law. 2 He must give a candid and honest opinion on the merits and
probable results of his client’s case 3 with the end in view of
promoting respect for the law and legal processes, 4 and counsel
or maintain such actions or proceedings only as appear to him to
be just, and such defenses only as he believes to be honestly
debatable under the law. 5 He must always remind himself of the
oath he took upon admission to the Bar that he "will not wittingly
or willingly promote or sue any groundless, false or unlawful suit
nor give aid nor consent to the same" ; and that he "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]
clients." Needless to state, the lawyer’s fidelity to his client must
not be pursued at the expense of truth and the administration of
justice, 6 and it must be done within the bounds of reason and
common sense. 7 A lawyer’s responsibility to protect and advance
the interests of his client does not warrant a course of action
propelled by ill motives and malicious intentions against the other
party. 8
As an officer of the court and its indispensable partner in the
sacred task of administering justice, graver responsibility is
18 Legal Ethics
imposed upon a lawyer than any other to uphold the integrity of
the courts and to show respect to its officers. This does not mean,
however, that a lawyer cannot criticize a judge. As we stated in
Tiongco v. Hon. Aguilar: 9
It does not, however, follow that just because a lawyer is an officer
of the court, he cannot criticize the courts. That is his right as a
citizen, and it is even his duty as an officer of the court to avail of
such right. Thus, in In Re: Almacen (31 SCRA 562, 579-580
[1970]), this Court explicitly declared:chanrob1es virtual 1aw
library
Hence, as a citizen and as officer of the court, a lawyer is expected
not only to exercise the right, but also to consider it his duty to
avail of such right. No law may abridge this right. Nor is he
"professionally answerable to a scrutiny into the official conduct of
the judges, which would not expose him to legal animadversion as
a citizen." (Case of Austin, 28 Am Dec. 657, 665).
Above all others, the members of the bar have the best
opportunity to become conversant with the character and efficiency
of our judges. No class is less likely to abuse the privilege, or no
other class has as great an interest in the preservation of an able
upright bench. (State Board of Examiners in Law v. Hart, 116 N.W.
212, 216).
To curtail the right of a lawyer to be critical of the foibles of the
courts and judges is to seal the lips of those in the best position to
give advice and who might consider it their duty to speak
disparagingly. "Under such a rule," so far as the bar is concerned,
"the merits of a sitting judge may be rehearsed, but as to his
demerits there must be profound silence." (State v. Circuit Court
[72 N.W. 196]).
Nevertheless, such a right is not without limit. For, as this Court
warned in Almacen:chanrob1es virtual 1aw library
But it is a cardinal condition of all such criticism that it shall be
bona fide, and shall not spill over the walls of decency and
propriety. A wide chasm exists between fair criticism, on the one
hand, and abuse and slander of courts and the judges thereof, on
the other. Intemperate and unfair criticism is a gross violation of
the duty of respect to courts. It is such a misconduct, that subjects
a lawyer to disciplinary action.
x x x manifestly baseless, and malicious statement in pleadings or in a
The lawyer’s duty to render respectful subordination to the courts
is essential to the orderly administration of justice. Hence, in the
assertion of their clients’ rights, lawyers — even those gifted with
superior intellect — are enjoined to rein up their tempers.
Elsewise stated, the right to criticize, which is guaranteed by the
freedom of speech and of expression in the Bill of Rights of the
Constitution, must be exercised responsibly, for every rights
carries with it a corresponding obligation. Freedom is not freedom
from responsibility, but freedom with responsibility. In Zaldivar v.
Gonzales (166 SCRA 316, 353-354 [1988]), it was
held:chanrob1es virtual 1aw library
Respondent Gonzales is entitled to the constitutional guarantee of
free speech. No one seeks to deny him that right, lest of all this
Court. What respondent seems unaware of is that freedom of
speech and of expression, like all constitutional freedoms, is not
absolute and that freedom of expression needs an occasion to be
adjusted to and accommodated with the requirements of equally
important public interests. One of these fundamental public
interests is the maintenance of the integrity and orderly functioning
of the administration of justice. There is no antimor between free
expression and the integrity of the system of administering justice.
For the protection and maintenance of freedom of expression itself
can be secured only within the context of a functioning an orderly
system of dispensing justice, within the context, in other words, of
viable independent institutions for delivery of justice which are
accepted by the general community.
Proscribed then are, inter alia, the use of unnecessary language
which jeopardizes high esteem in courts, creates or promotes
distrust a judicial administration (Rheem, supra), or tends
necessarily to undermine the confidence of people in the integrity
of the members of this Court and to degrade the administration of
19 Legal Ethics
justice by this Court (In re: Sotto, 82 Phil. 595 [1949]); or of
offensive and abusive language (In re: Rafael Climaco, 55 SCRA
107 [1974]) or abrasive and offensive language (Yangson v.
Salandanan, 68 SCRA 42 [1975]; or of disrespectful, offensive,
letter addressed to the judge (Baja v. Macandog, 158 SCRA
[1988], citing the resolution of 19 January 1988 in Phil. Public
Schools Teachers Association v. Quisumbing, G.R. No. 76180, and
Ceniza v. Sebastian, 130 SCRA 295 [1984]); or of disparaging,
intemperate, and uncalled-for remarks (Sangalang v. Intermediate
Appellate Court, 177 SCRA 87 [1989].
Any criticism against a judge made in the guise of an
administrative complaint which is clearly unfounded and impelled
by ulterior motive will not excuse the lawyer responsible therefor
under his duty of fidelity to his client. As we stated in Ng v. Alfaro,
10 lawyers, as officers of the court, should not encourage
groundless administrative cases against court officers and
employees. The time of the latter should not be wasted in
answering or defending groundless complaints; every minute of it
is precious and must be reserved for the enhancement of public
service. Our precious time too should not be diverted to such
cases.
We find the explanation of Atty. Quiroz to be unsatisfactory.
WHEREFORE, we hereby impose upon ATTY. RAYMUNDO A.
QUIROZ a FINE in the amount of Five Thousand Pesos (P5,000.00)
to be paid within five (5) days from notice hereof. He is further
WARNED that a commission of the same or similar acts in the
future shall be dealt with more severely.
SO ORDERED.
Narvasa, C.J., Melo, Francisco and Panganiban, JJ., concur.
Endnotes:
1. Suarez v. Court of Appeals, 220 SCRA 274, 279 [1993], citing
Canon 17, Code of Professional Responsibility, and RUBEN E.
AGPALO, Legal Ethics, 157.
2. Canon 19, Code of Professional Responsibility.
Case 5

EN BANC

A. M. No. P-03-1690 - April 4, 2003

(formerly A.M. OCA IPI No. 00-956-P)

JUDGE ESTRELLITA M. PAAS, Petitioner, vs. EDGAR E. ALMARVEZ,

Respondent.

x-----------------------------x

A. M. No. MTJ-01-1363 - April 4, 2003

EDGAR E. ALMARVEZ, Petitioner, v. JUDGE ESTRELLITA M. PAAS,

Respondent.

x-----------------------------x

A. M. No. 01-12-02-SC - April 4, 2003

IN RE: USE BY ATTY. RENERIO G. PAAS AS AN OFFICE IN HIS

PRIVATE PRACTICE OF HIS PROFESSION THE OFFICE OF HIS
WIFE, PASAY CITY METC JUDGE ESTRELLITA M. PAAS.

CARPIO MORALES, J.:

Pasay City Metropolitan Trial Court (MeTC), Branch 44 Presiding

Judge Estrellita M. Paas administratively charged Court Aide/Utility
Worker Edgar E. Almarvez with "discourtesy, disrespect,
insubordination, neglect in performing his duties, disloyalty,
solicitation of monetary consideration and gross violation of the
Civil Service Law." The case was docketed as A.M. OCA IPI No. 00-
956-P.
\
In her complaint, Judge Paas alleged that Almarvez is discourteous
to his co-employees, lawyers and party litigants; has failed to
maintain the cleanliness in and around the court premises despite
order to do so, thus amounting to insubordination; was, and on
20 Legal Ethics
several instances, habitually absent from work or made it appear
that he reported for work by signing the logbook in the morning,
only to stay out of the office the whole day; asked from detention
prisoners P100.00 to P200.00 before he released to them their
Release Orders; asked for amounts in excess of what was
necessary for the purchase of stamps and pocketed the difference;
once failed to mail printed matter on July 11, 2000 and kept for his
own use the amount given to him for the purpose; and divulged
confidential information to litigants in advance of its authorized
release date for a monetary consideration, thus giving undue
advantage or favor to the paying party, in violation of Rep. Act No.
3019 (The Anti-Graft and Corrupt Practices Act).1
Pasay City MeTC Branch 44 Clerk of Court Pedro C. Doctolero, Jr.,
by his Affidavit,2 and members of the court staff,3 by a Joint
Affidavit, attested that Almarvez failed to maintain the cleanliness
in and around the court premises, and had shown discourtesy in
dealing with Judge Paas and his co-employees. Doctolero's affidavit
also corroborated Judge Paas' allegation that Almarvez would
merely sign the logbook in the morning and thereafter stay out of
the office.
Pasay City Postmaster Emma Z. Espiritu, by Certification dated
August 2, 2000,4 attested that the alleged printed matter intended
to be mailed on July 11, 2000 was not included in the list of
registered mails posted in the Pasay City Post Office on said date.
Jail Escort Russel S. Hernandez and Jail Officer II Rosendo
Macabasag, both assigned to the Pasay City Jail, by their
respective affidavits,5 attested that on several occasions, they saw
Almarvez receive from detention prisoners P100.00 to P200.00 in
consideration of the release of their Release Orders.
Almarvez, by Answer of September 25, 2000,6 denied Judge Paas'
charges, and alleged that the real reason why Judge Paas filed the
case against him was because she suspected him of helping her
husband, Atty. Renerio G. Paas, conceal his marital indiscretions;
since she failed to elicit any information from him, she resorted to
calling him names and other forms of harassment; on September
6, 2000, she hurled at him the following invectives before the other
employees of the court: "Walang kuwenta, ahas ka, driver lang
21 Legal Ethics
kita, pinaasenso kita, walang utang na loob, pinagtatakpan mo pa
ang asawa ko, ulupong;" and she insisted that he sign a prepared
resignation letter, a copy of which he was not able to keep.
Almarvez added that he had been subjected by Judge Paas to the
following incidents of oppression and abuse of authority: On July
28, 2000, he was called by the Judge to her chambers where she
berated him as follows: "Sinungaling ka, ang dami mong alam,
hindi ka nagsasabi ng totoo sa akin, gago, tanga, pirmahan mo
itong resignation letter, kung hindi kakasuhan kita ng estafa at
falsification;" the next day, the Judge, on seeing him, told him
"Bakit ka nandiyan, mag-leave ka sa Lunes;" and on July 31, 2000,
the Judge called him again to her chambers and told him "Ang
kapal ng mukha mo, pumasok ka pa dito, gago, kaya kita ipinasok
dito dahil driver kita."
Continuing, Almarvez claimed that on July 31, 2000, he reported
the foregoing incidents to Pasay City MeTC Executive Judge Maria
Cancino Erum who advised him to report the same to the Office of
the Clerk of Court; and on August 1, 2000, he executed a sworn
statement-complaint7 against Judge Paas and went to the Office of
the Court Administrator (OCA) to file it, but he was advised to try
to talk the matter over with her who then told him that they should
forget all about it.
On the merits of the charges, Almarvez denied ever requesting for
money in exchange for the release of court orders and alleged that
both Hernandez and Macabasag executed their respective affidavits
because Judge Paas was a principal sponsor at their respective
weddings; Hernandez was in fact indebted to the Judge for helping
him cover-up the escape of a detainee under his charge; the
court's mail matters were always sealed whenever he received
them for mailing and he never tampered with their contents; the
alleged unmailed printed matter was actually posted on June 28,
2000, not on July 11, 2000, via ordinary instead of registered mail,
because the money given to him for the purpose was insufficient;
and on the days when he was out of the office, he was actually
performing personal errands for the judge and her husband, Atty.
Paas, who treated him as their personal driver and messenger.
As further proof of Judge Paas' oppressive behavior towards him,
Almarvez claimed that she ordered him to undergo a drug test per
Memorandum dated September 7, 2000,8 even if he had no history
of drug abuse on a periodic or continuous basis as shown by the
test results of his examination.9
The Court treated respondent's Answer as a counter-complaint
against Judge Paas and docketed it as A.M. No. MTJ-01-1363.
The two administrative cases were consolidated and referred for
evaluation to the OCA, which assigned them to Executive Judge
Vicente L. Yap of Pasay City RTC, Branch 114 for investigation.
In a separate case for inhibition of Judge Paas in a criminal case, it
was revealed that Judge Paas' husband, private practitioner Atty.
Paas, was using his wife's office as his office address in his law
practice, in support of which were submitted copies of a Notice of
Appeal signed by Atty. Paas, notices from Pasay City RTC Branch
109 and from the Supreme Court with respect to the case of People
vs. Louie Manabat, et al. (GR Nos. 140536-37) which indicated
Atty. Paas' address to be Room 203, Hall of Justice, Pasay City,10
the office assigned to Pasay City MeTC, Branch 44.
Pursuant to Sec. 1 of Rule 139-B11 of the Rules of Court which
allows the Supreme Court to motu proprio initiate proceedings for
the discipline of attorneys, this Court resolved to docket the matter
as A.M. No. 01-12-02-SC and to consolidate it with A.M. OCA IPI
No. 00-956-P and AM No. MTJ-01-1363.
In compliance with the December 4, 2001 Resolution12 of the
Court en banc, Judge and Atty. Paas submitted their January 16,
2002 Joint Affidavit13 wherein they vehemently denied the charge
that the latter was using Room 203 of the Pasay City Hall of Justice
as his office address, they claiming that Atty. Paas actually holds
office at 410 Natividad Building, Escolta, Manila with his partner
Atty. Herenio Martinez; Atty. Paas would visit his wife at her office
only when he has a hearing before the Pasay City courts or
Prosecutor's Office, or when he lunches with or fetches her, or
when he is a guest during special occasions such as Christmas
party and her birthday which are celebrated therein; and Judge
Paas would never consent nor tolerate the use of the court for any
22 Legal Ethics
personal activities. Attached to the Joint Affidavit were the
separate sworn statements of Atty. Paas' law partner Atty. Herenio
E. Martinez14 and secretary Nilda L. Gatdula15 attesting that he is
holding office at the above-said address in Escolta, and the Joint
Affidavit of the Pasay City MeTC Branch 44 court personnel16
attesting that Atty. Paas' visits to the court are neither routine nor
daily occurrences, and he never used the court in the practice of
his profession.
On January 24, 2002, Judge Paas executed a Supplemental
Affidavit17 wherein she admitted that Atty. Paas did use her office
as his return address for notices and orders in Crim. Case Nos. 98-
1197 to 98-1198, "People vs. Louie Manabat y Valencia and
Raymond dela Cruz y Salita," (now docketed in this Court as G.R.
Nos. 140536-37), lodged at the Pasay City RTC, Branch 109, but
only to ensure and facilitate delivery of those notices, but after the
cases were terminated, all notices were sent to his office address in
Escolta.
By Resolution of February 12, 2002,18 the Court referred the
matter to the OCA for evaluation, report and recommendation.
After the completion of his investigation of A.M. OCA IPI No. 00-
956-P and A.M. No. MTJ-01-1363, Judge Yap submitted his
Report/Recommendation dated February 28, 2002.19
On March 11, 2002, the OCA submitted its Report on A.M. No. 01-
12-02-SC dated March 1, 2002.20
I. OCA Findings and Recommendations
A. On the charges against Almarvez:
The OCA, for lack of evidence, recommended the dismissal of the
charges against Almarvez of exacting money from detainees,
violating confidentiality of official communication, absence without
official leave, discourtesy and insubordination. Given Almarvez'
unsatisfactory performance ratings for three rating periods
covering January to June 2000,21 July to December 2000,22 and
January to April 2001,23 however, the OCA recommended that he
be duly penalized for inefficiency in the performance of his official
duties with One (1) Month suspension without pay, instead of
dismissal as warranted under Memorandum Circular No. 12, s.
1994, his supervisor having failed to observe the procedure
thereunder for dropping of employees from the rolls, which
procedure is quoted at the later portion of this decision.
B. On the charges against Judge Paas:
With respect to the complaint of Almarvez against Judge Paas, the
OCA, for lack of supporting evidence, recommended the dismissal
of the charges of maltreatment, harassment and verbal abuse. It
found, however, that Judge Paas "had used her administrative
power of supervision and control over court personnel for her
personal pride, prejudice and pettiness"24 when she issued her
September 7, 2000 Memorandum ordering Alvarez to undergo a
drug test after she had already filed an administrative case against
him. It thus concluded that, in all probability, the purpose of Judge
Paas in ordering Almarvez to undergo a drug test was to fish for
evidence to support the administrative case she had already filed
against him.
Accordingly, the OCA recommended that Judge Paas be found
guilty of simple misconduct in office, and be penalized with
reprimand with a warning that a repetition of the same or similar
acts shall be dealt with more severely.
II. This Court's Findings:
A. On the charges against Almarvez:
Indeed, this Court finds that there is no sufficient evidence to
support the charge of violation of confidentiality of official
communication against Almarvez. The charge against Almarvez in
Judge Paas' complaint-affidavit which reads:
That said ALMARVEZ being in charge of the mails had divulged
informations which is confidential in nature to party litigants in
advance of its authorized release date before the release of Court
Order and Decision for consideration of a sum of money thus giving
undue advantage or favor to the paying party detrimental to the
due administration of justice.25
23 Legal Ethics
in fact lacks particularity. It is devoid of material details to enable
Almarvez to intelligently meet the same.
As for the charges of neglect of duty, discourtesy and
insubordination which were echoed in the affidavits of court
personnel, they are also too general to support a conviction and
are contrary to what is reflected in his performance rating that he
cooperated willingly, even wholeheartedly, with his fellow
employees.
On the charge of violation of Rep. Act No. 3019 (Anti-Graft and
Corrupt Practices Act): Absent any evidence to support the charge,
the affiants jail officers who claimed to have witnessed Almarvez
receive money from detention prisoners in exchange for the
release of their Release Orders not having been presented, hence,
their claim remains hearsay, Almarvez' categorical denial and
counter-allegation that these affiants executed their affidavits only
out of fear of or favor to Judge Paas gain light.
As for the charge that Almarvez would merely sign the logbook and
would thereafter leave the office, again Judge Paas failed to
present the affiant-Clerk of Court Atty. Pedro C. Doctolero, Jr.
While she submitted in evidence a copy of her October 6, 2000
memorandum26 requiring Almarvez to explain why he was not in
the office on September 8, 11, and 13, and October 5, 2000,
despite his affixing of his signature in the logbook on those dates
indicating that he reported for work, Almarvez satisfactorily
explained that on September 8, 11, and 13, 2000, he submitted
himself to drug testing as required by her in her September 7,
200027 memorandum, which explanation is supported by the
September 14, 2000 letter of Dr. Rosendo P. Saulog, Medical
Specialist II of the Dangerous Drug Board.28 As to his
whereabouts on October 5, 2000, Almarvez' explanation that he
was actually present in the morning but left in the afternoon for the
Supreme Court29 was not controverted.
On the charge of inefficiency, this Court concurs with the following
findings of the OCA that he should be faulted therefor:
The performance ratings of respondent Almarvez for three (3)
rating periods covering January to June 2000, July to December
2000 and January to April 2001 evidently shows that he failed to
perform his official duties. The fact that respondent Almarvez never
disputed the performance ratings given him is tantamount to an
implied acceptance thereof pursuant to Sec. 5 Rule IX Book V of
Executive Order No. 292, quoted as follows:
"Sec. 5. An employee who expresses dissatisfaction with the rating
given him may appeal through the established Grievance Procedure
of the Department or Agency within fifteen (15) days after receipt
of his copy of his performance rating. Failure to file an appeal
within the prescribed period shall be deemed a waiver of such
right."
The performance ratings of respondent for the said periods are
valid grounds to drop him from the Rolls. However, considering
that his superior/supervisor failed to comply with the requirements
set forth in Memorandum Circular No. 12, Series of 1994 of the
Civil Service Commission, which is hereunder quoted, and that he
was able to make up and cure his inefficiency after he was given
the opportunity to improve his performance in his detail to Branch
11, MeTC, Manila, as shown by his performance rating for the
period April to June 2001 with a "very satisfactory" rating,
dropping him from the roll will no longer be appropriate30
(Emphasis and italics supplied.)
Par. 2.2 of CSC Memorandum Circular No. 12, s. 1994 referred to
in the above-quoted findings of the OCA reads:
2.2 Unsatisfactory or Poor Performance.
(a) An official or employee who is given two (2) consecutive
unsatisfactory ratings may be dropped from the rolls after due
notice. Notice shall mean that the officer or employee concerned is
informed in writing of his unsatisfactory performance for a
semester and is sufficiently warned that a succeeding
unsatisfactory performance shall warrant his separation from the
service. Such notice shall be given not later than 30 days from the
end of the semester and shall contain sufficient information which
24 Legal Ethics
shall enable the employee to prepare an explanation. (Emphasis
and italics supplied.)
The suspension of Almarvez for One (1) Month without pay, as
recommended by the OCA, is thus in order.
B. On the charges against Judge Paas:
Regarding the charges of abuse of authority and oppression against
Judge Paas, Almarvez failed to substantiate the same.
Judge Paas' order for Almarvez to undergo a drug test is not an
unlawful order. Per Civil Service Commission Memorandum Circular
No. 34, s. 1997, public employees are required to undergo a drug
test prior to employment to determine if they are drug-free. To be
drug-free is not merely a pre-employment prerequisite but is a
continuing requirement to ensure the highest degree of
productivity of the civil service. However, considering that the
order was issued after Judge Paas filed the administrative case
against Almarvez, it elicits the suspicion that it was only a fishing
expedition against him. This is conduct unbecoming of a member
of the judiciary, for which Judge Paas should be duly reprimanded.
C. On the charges against Judge Paas and Atty. Paas:
By Judge Paas' own admission in her January 24, 2002
Supplemental Affidavit,31 she was aware that her husband Atty.
Paas was using her office to receive court notices and orders in a
case lodged in a Pasay court. As the OCA puts it, "[w]hile the same
appears to be innocuous, it could be interpreted as a subtle way of
sending a message that Atty. Paas is the husband of a judge in the
same building and should be given special treatment by other
judges or court personnel."32
The following are instructive in the disposition of these charges
against the judge and her spouse, Atty. Paas:
SC Administrative Circular No. 01-99, "Enhancing the Dignity of
Courts as Temples of Justice and Promoting Respect for their
Officials and Employers" reads:
As courts are temples of justice, their dignity and sanctity must, at
all times be preserved and enhanced. In inspiring public respect for
the justice system, court officials and employees must:
1. In general: (a) avoid committing any act which would constitute
grounds for disciplinary action under, as the case may be, the
Canons of Judicial Ethics, Code of Judicial Conduct; and Section 46,
Chapter 7, Subtitle A, Title I, Book V of the Administrative Code of
1987 (Executive Order No. 292); and (b) faithfully comply with the
norms of conduct and perform the duties prescribed in the Code of
Conduct and Ethical Standards for Public Officials and Employees
(R.A. No. 6713);
2. Zealously guard the public trust character of their offices;
xxx - xxx - xxx
6. Never use their offices as a residence or for any other purpose
than for court or judicial functions. (Emphasis and italics supplied.)
Canon 2 of the Code of Judicial Conduct provides that "A judge
should avoid impropriety and the appearance of impropriety in all
activities." Specifically, Rule 2.03 thereof provides that:
Rule 2.03. A judge shall not allow family, social, or other
relationships to influence judicial conduct or judgment. The
prestige of judicial office shall not be used or lent to advance the
private interests of others, nor convey or permit others to convey
the impression that they are in a special position to influence the
judge. (Emphasis supplied.)
SC Circular No. 3-92,33 dated August 31, 1992, of this Court
reads:
SUBJECT: PROHIBITION AGAINST USE OF HALLS OF JUSTICE FOR
RESIDENTIAL OR COMMERCIAL PURPOSES
All judges and court personnel are hereby reminded that the Halls
of Justice may be used only for purposes directly related to the
functioning and operation of the courts of justice, and may not be
devoted to any other use, least of all as residential quarters of the
25 Legal Ethics
judges or court personnel, or for carrying on therein any trade or
profession.
Attention is drawn to A.M. No. RTJ-89-327 (Nellie Kelly Austria vs.
Judge Singuat Guerra), a case involving unauthorized and improper
use of the court's premises for dwelling purposes by respondent
and his family, in which the Court, by Resolution dated October 17,
1991, found respondent Judge guilty of irresponsible and improper
conduct prejudicial to the efficient administration of justice and
best interest of the service, and imposed on him the penalty of
SEVERE CENSURE, the Court declaring that such use of the court's
premises inevitably degrades the honor and dignity of the court in
addition to exposing judicial records to danger of loss or damage.
(emphasis supplied.)
By allowing her husband to use the address of her court in
pleadings before other courts, Judge Paas indeed "allowed [him] to
ride on her prestige for purposes of advancing his private interest,
in violation of the Code of Judicial Conduct"34 and of the above-
stated Supreme Court circulars, which violation is classified as a
less serious charge under the Rules of Court35 and is punishable
under the same Rule.36
A judge's official conduct should indeed be free from the
appearance of impropriety; and his behavior not only in the
performance of judicial duties, but also in his everyday life should
be beyond reproach. This is premised on the truism that a Judge's
official life cannot simply be detached or separated from his
personal existence and that upon a Judge's attributes depend the
public perception of the Judiciary.37
On his part, Atty. Paas was guilty of using a fraudulent, misleading,
and deceptive address that had no purpose other than to try to
impress either the court in which his cases are lodged, or his client,
that he has close ties to a member of the juiciary, in violation of
the following rules of the Code of Professional Responsibility:
CANON 3 A LAWYER IN MAKING KNOWN HIS LEGAL SERVICES
SHALL USE ONLY TRUE, HONEST, FAIR, DIGNIFIED AND
OBJECTIVE INFORMATION OR STATEMENT OF FACTS.
Rule 3.01. A lawyer shall not use or permit the use of any false,
fraudulent, misleading, deceptive, undignified, self-laudatory or
unfair statement or claim regarding his qualifications or legal
services.
CANON 10 A LAWYER OWES CANDOR, FAIRNESS AND GOOD
FAITH TO THE COURT.
Rule 10.01 A lawyer shall not do any falsehood, nor consent to the
doing of any in Court; nor shall he mislead, or allow the Court to
be misled by any artifice.
CANON 13 A LAWYER SHALL RELY UPON THE MERITS OF HIS
CAUSE AND REFRAIN FROM ANY IMPROPRIETY WHICH TENDS TO
INFLUENCE, OR GIVES THE APPEARANCE OF INFLUENCING THE
COURT.
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.
The need for relying on the merits of a lawyer's case, instead of
banking on his relationship with a member of the bench which
tends to influence or gives the appearance of influencing the court,
cannot be overemphasized. It is unprofessional and dishonorable,
to say the least, to misuse a public office to enhance a lawyer's
prestige. Public confidence in law and lawyers may be eroded by
such reprehensible and improper conduct.
This Court does not subscribe to the proffered excuse that
expediency and a desire to ensure receipt of court orders and
notices prompted Atty. Paas and Judge Paas to allow him to have
his court notices sent to office of Judge Paas, especially given the
fact that for his other cases, Atty. Paas used his office address but
there is no showing that he failed to receive the notices sent to
that address. While a lawyer should make the necessary
arrangements to ensure that he is properly informed of any court
action, these should not violate his lawyer's oath or the Code of
26 Legal Ethics
Professional Responsibility, nor provide an opportunity for a
member of the judiciary to breach his or her responsibilities under
Supreme Court circulars and the Code of Judicial Conduct.
WHEREFORE, this Court finds:
(1) In A.M. OCA IPI No. 00-956-P, respondent Edgar E. Almarvez
GUILTY of inefficiency and is hereby SUSPENDED for One (1)
Month without pay;
(2) In A.M. No. MTJ-01-1363, respondent, Judge Estrellita M. Paas
GUILTY of conduct unbecoming of a member of the judiciary and is
hereby REPRIMANDED, with warning that repetition of the same or
similar acts shall be dealt with more severely;
(3) In A.M. No. 01-12-02-SC,
(a) Judge Paas GUILTY of violating SC Administrative Circular No.
01-99, SC Circular No. 3-92 and Canon 2, Rule 2.03 of the Code of
Judicial Conduct and is hereby ordered to pay a FINE of TWELVE
THOUSAND PESOS (P12,000.00), with warning that repetition of
the same or similar acts shall be dealt with more severely; and
(b) Atty. Renerio Paas GUILTY of SIMPLE MISCONDUCT and is
hereby SUSPENDED from the practice of law for a period of THREE
(3) MONTHS, with warning that repetition of the same or similar
act shall be dealt with more severely.
This Decision shall take effect immediately.
Let copies of this Decision be furnished the Office of the Bar
Confidant, Integrated Bar of the Philippines, and appended to
respondents' personal record.
SO ORDERED.
Davide, Jr., C .J ., Bellosillo, Puno, Vitug, Mendoza, Panganiban,
Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-
Martinez, Corona, Callejo, Sr. and Azcuna, JJ ., concur.
Endnotes:
1 A.M. OCA IPI 00-956-P Rollo at 24.
10 A.M. No. 01-12-02-SC Rollo at 36.
11 As provided in Sections 1314 of Rule 139-B, Rules of Court, in
proceedings initiated motu proprio by the Supreme Court or in
other proceedings when the interest of justice so requires, the
Supreme Court may refer the case for investigation to the Solicitor
General or to any officer of the Supreme Court or judge of a lower
court x x x x Based upon the evidence adduced at the
investigation, the Solicitor General or other Investigator designated
by the Supreme Court shall submit to the Supreme Court a report
containing his findings of fact and recommendations together with
the record and all the evidence presented in the investigation for
the final action of the Supreme Court (Emphasis supplied). See
Bautista vs. Gonzales, A.M. No. 1625, February 12, 1990, 182
SCRA 151, 158.
12 A.M. No. 01-12-02-SC Rollo at 9.
19 A.M. OCA IPI No. 00-956-P Rollo at 271280.
20 A.M. No. 01-12-02-SC Rollo at 3739.
21 A.M. OCA IPI No. 00-956-P at 118119.
24 OCA Recommendation, A.M. No. OCA IPI No. 00-956-P Rollo at
308.
30 OCA Recommendation, A.M. No. OCA IPI No. 00-956-P Rollo at
307308.
31 A.M. No. 01-12-02-SC Rollo at 29.
32 OCA Recommendation, A.M. No. 01-12-02-SC Rollo at 38.
33 See Bautista vs. Costelo, Jr., A.M. No. P-94-1043, February 28,
1996, 254 SCRA 148, 157.
27 Legal Ethics
34 OCA Recommendation, AM No. 01-12-02-SC Rollo at 38.
35 Rule 140, Sec. 4 (4). This was amended on September 11,
2001 by A.M. No. 01-8-10-SC, "Discipline of Judges of Regular and
Special Courts and Justices of the Court of Appeals and
Sandiganbayan."
36 Rule 140, Sec. 10B.
37 Balderama vs. Judge Alagar, A.M. No. RTJ-99-1449, January 18,
2002, at 11 (citations omitted).
Case 6
THIRD DIVISION
[ G.R. No. 148753, July 30, 2004 ]
NEW SAMPAGUITA BUILDERS CONSTRUCTION, INC. (NSBCI) AND
SPOUSES EDUARDO R. DEE AND ARCELITA M. DEE, PETITIONERS,
VS. PHILIPPINE NATIONAL BANK, RESPONDENT.
DECISION
PANGANIBAN, J.:
Courts have the authority to strike down or to modify provisions in
promissory notes that grant the lenders unrestrained power to
increase interest rates, penalties and other charges at the latter's
sole discretion and without giving prior notice to and securing the
consent of the borrowers. This unilateral authority is anathema to
the mutuality of contracts and enable lenders to take undue
advantage of borrowers. Although the Usury Law has been
effectively repealed, courts may still reduce iniquitous or
unconscionable rates charged for the use of money. Furthermore,
excessive interests, penalties and other charges not revealed in
disclosure statements issued by banks, even if stipulated in the
promissory notes, cannot be given effect under the Truth in
Lending Act.
\ 2) NEA-Liberty farm;
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of
Court, seeking to nullify the June 20, 2001 Decision[2] of the Court
of Appeals[3] (CA) in CA-GR CV No. 55231. The decretal portion of
the assailed Decision reads as follows:
"WHEREFORE, the decision of the Regional Trial Court of Dagupan
City, Branch 40 dated December 28, 1995 is REVERSED and SET
ASIDE. The foreclosure proceedings of the mortgaged properties of
defendants-appellees[4] and the February 26, 1992 auction sale are
declared legal and valid and said defendants-appellees are ordered
to pay plaintiff-appellant PNB,[5] jointly and severally[,] the amount
of deficiency that will be computed by the trial court based on the
original penalty of 6% per annum as explicitly stated in the loan
documents and to pay attorney's fees in an amount equivalent to x
x x 1% of the total amount due and the costs of suit and expenses
of litigation."[6]
The Facts
The facts are narrated by the CA as follows:
"On February 11, 1989, Board Resolution No. 05, Series of 1989
was approved by [Petitioner] NSBCI [1)] authorizing the company
to x x x apply for or secure a commercial loan with the PNB in an
aggregate amount of P8.0M, under such terms agreed by the Bank
and the NSBCI, using or mortgaging the real estate properties
registered in the name of its President and Chairman of the Board
[Petitioner] Eduardo R. Dee as collateral; [and] 2) authorizing
[petitioner-spouses] to secure the loan and to sign any [and all]
documents which may be required by [Respondent] PNB[,] and
that [petitioner-spouses] shall act as sureties or co-obligors who
shall be jointly and severally liable with [Petitioner] NSBCI for the
payment of any [and all] obligations.
"On August 15, 1989, Resolution No. 77 was approved by granting
the request of [Respondent] PNB thru its Board NSBCI for an P8
Million loan broken down into a revolving credit line of P7.7M and
an unadvised line of P0.3M for additional operating and working
capital[7] to mobilize its various construction projects, namely:
28 Legal Ethics
'1) MWSS Watermain;
3) Olongapo City Pag-Asa Public Market;
4) Renovation of COA-NCR Buildings 1, 2 and 9;
Dupels, Inc., Extensive prawn farm
5)
development project;
6) Banawe Hotel Phase II;
7) Clark Air Base -- Barracks and Buildings; and
Others: EDSA Lighting, Roxas Blvd. Painting
8)
NEA Sapang Palay and Angeles City.'
"The loan of [Petitioner] NSBCI was secured by a first mortgage on
the following: a) three (3) parcels of residential land located at
Mangaldan, Pangasinan with total land area of 1,214 square
meters[,] including improvements thereon and registered under
TCT Nos. 128449, 126071, and 126072 of the Registry of Deeds of
Pangasinan; b) six (6) parcels of residential land situated at San
Fabian, Pangasinan with total area of 1,767 square meters[,]
including improvements thereon and covered by TCT Nos. 144006,
144005, 120458, 120890, 144161[,] and 121127 of the Registry of
Deeds of Pangasinan; and c) a residential lot and improvements
thereon located at Mangaldan, Pangasinan with an area of 4,437
square meters and covered by TCT No. 140378 of the Registry of
Deeds of Pangasinan.
"The loan was further secured by the joint and several signatures
of [Petitioners] Eduardo Dee and Arcelita Marquez Dee, who signed
as accommodation-mortgagors since all the collaterals were owned
by them and registered in their names.
"Moreover [Petitioner] NSBCI executed the following documents,
viz: a) promissory note dated June 29, 1989 in the amount
of P5,000,000.00 with due date on October 27, 1989; [b)]
promissory note dated September 1, 1989 in the amount
of P2,700,000.00 with due date on December 30, 1989; and c)
promissory note dated September 6, 1989 in the amount
of P300,000.00 with maturity date on January 4, 1990.
"In addition, [petitioner] corporation also signed the Credit
Agreement dated August 31, 1989 relating to the 'revolving credit
line' of P7.7 Million x x x and the Credit Agreement dated
September 5, 1989 to support the 'unadvised line' of P300,000.00.

"On August 31, 1989, [petitioner-spouses] executed a 'Joint and
Solidary Agreement' (JSA) in favor of [Respondent] PNB
'unconditionally and irrevocably binding themselves to be jointly
and severally liable with the borrower for the payment of all sums
due and payable to the Bank under the Credit Document.'
"Later on, [Petitioner] NSBCI failed to comply with its obligations
under the promissory notes.
"On June 18, 1991, [Petitioner] Eduardo R. Dee on behalf of
[Petitioner] NSBCI sent a letter to the Branch Manager of the PNB
Dagupan Branch requesting for a 90-day extension for the
payment of interests and restructuring of its loan for another term.
"Subsequently, NSBCI tendered payment to [Respondent] PNB [of]
three (3) checks aggregating P1,000,000.00, namely 1) check no.
316004 dated August 8, 1991 in the amount of P200,000.00; 2)
check no. 03499997 dated August 8, 1991 in the amount
of P650,000.00; and 3) check no. 03499998 dated August 15,
1991 in the amount of P150,000.00.[8]
"In a meeting held on August 12, 1991, [Respondent] PNB's
representative[,] Mr. Rolly Cruzabra, was informed by [Petitioner]
Eduardo Dee of his intention to remit to [Respondent] PNB post-
dated checks covering interests, penalties and part of the loan
principals of his due account.
"On August 22, 1991, [Respondent] bank's Crispin Carcamo wrote
[Petitioner] Eduardo Dee[,] informing him that [Petitioner] NSBCI's
proposal [was] acceptable[,] provided the total payment should
be P4,128,968.29 that [would] cover the amount of P1,019,231.33
as principal, P3,056,058.03 as interests and penalties[,]
and P53,678.93 for insurance[,] with the issuance of post-dated
checks to be dated not later than November 29, 1991.
"On September 6, 1991, [Petitioner] Eduardo Dee wrote the PNB
Branch Manager reiterating his proposals for the settlement of
[Petitioner] NSBCI's past due loan account amounting
to P7,019,231.33.
29 Legal Ethics
"[Petitioner] Eduardo Dee later tendered four (4) post-dated
Interbank checks aggregating P1,111,306.67 in favor of
[Respondent] PNB, viz:
'Check No. Date Amount
03500087 Sept. 29, 1991 P277,826.70
03500088 Oct. 29, 1991 P277,826.70
03500089 Nov. 29, 1991 P277,826.70
03500090 Dec. 20, 1991 P277,826.57'
"Upon presentment[,] however, x x x check nos. 03500087 and
03500088 dated September 29 and October 29, 1991 were
dishonored by the drawee bank and returned due [to] a 'stop
payment' order from [petitioners].
"On November 12, 1991, PNB's Mr. Carcamo wrote [Petitioner]
Eduardo Dee informing him that unless the dishonored checks
[were] made good, said PNB branch 'shall recall its
recommendation to the Head Office for the restructuring of the
loan account and refer the matter to its legal counsel for legal
action.['] [Petitioners] did not heed [respondent's] warning and as
a result[,] the PNB Dagupan Branch sent demand letters to
[Petitioner] NSBCI at its office address at 1611 ERDC Building, E.
Rodriguez Sr. Avenue, Quezon City[,] asking it to settle its past
due loan account.
"[Petitioners] nevertheless failed to pay their loan obligations
within the [timeframe] given them and as a result, [Respondent]
PNB filed with the Provincial Sheriff of Pangasinan at Lingayen a
Petition for Sale under Act 3135, as amended[,] and Presidential
Decree No. 385 dated January 30, 1992.
"The notice of extra-judicial sale of the mortgaged properties
relating to said PNB's [P]etition for [S]ale was published in the
February 8, 15 and 22, 1992 issues of the Weekly Guardian,
allegedly a newspaper of general circulation in the Province of
Pangasinan, including the cities of Dagupan and San Carlos. In
addition[,] copies of the notice were posted in three (3) public
places[,] and copies thereof furnished [Petitioner] NSBCI at 1611
[ERDC Building,] E. Rodriguez Sr. Avenue, Quezon City, [and at]
555 Shaw Blvd., Mandaluyong[, Metro Manila;] and [Petitioner]
Sps. Eduardo and Arcelita Dee at 213 Wilson St., San Juan, Metro
Manila.
"On February 26, 1992, the Provincial Deputy Sheriff Cresencio F.
Ferrer of Lingayen, Pangasinan foreclosed the real estate mortgage
and sold at public auction the mortgaged properties of [petitioner-
spouses,] with [Respondent] PNB being declared the highest bidder
for the amount of P10,334,000.00.
"On March 2, 1992, copies of the Sheriff's Certificate of Sale were
sent by registered mail to [petitioner] corporation's address at
1611 [ERDC Building,] E. Rodriguez Sr. Avenue, Quezon City and
[petitioner-spouses'] address at 213 Wilson St., San Juan, Metro
Manila.
"On April 6, 1992, the PNB Dagupan Branch Manager sent a letter
to [petitioners] at their address at 1611 [ERDC Building,] E.
Rodriguez Sr. Avenue, Quezon City[,] informing them that the
properties securing their loan account [had] been sold at public
auction, that the Sheriff's Certificate of Sale had been registered
with the Registry of Deeds of Pangasinan on March 13, 1992[,] and
that a period of one (1) year therefrom [was] granted to them
within which to redeem their properties.
"[Petitioners] failed to redeem their properties within the one-year
redemption period[,] and so [Respondent] PNB executed a [D]eed
of [A]bsolute [S]ale consolidating title to the properties in its
name. TCT Nos. 189935 to 189944 were later issued to [Petitioner]
PNB by the Registry of Deeds of Pangasinan.
"On August 4, 1992, [Respondent] PNB informed [Petitioner]
NSBCI that the proceeds of the sale conducted on February 26,
1992 were not sufficient to cover its total claim amounting
to P12,506,476.43[,] and thus demanded from the latter the
deficiency of P2,172,476.43 plus interest and other charges[,] until
the amount [was] fully paid.
"[Petitioners] refused to pay the above deficiency claim which
compelled [Respondent] PNB to institute the instant [C]omplaint
for the collection of its deficiency claim.
30 Legal Ethics
"Finding that the PNB debt relief package automatically [granted]
to [Petitioner] NSBCI the benefits under the program, the court a
quo ruled in favor of [petitioners] in its Decision dated December
28, 1995, the fallo of which reads:
'In view of the foregoing, the Court believes and so holds that the
[respondent] has no cause of action against the [petitioners].
'WHEREFORE, the case is hereby DISMISSED, without costs.'"[9]
On appeal, respondent assailed the trial court's Decision dismissing
its deficiency claim on the mortgage debt. It also challenged the
ruling of the lower court that Petitioner NSBCI's loan account was
bloated, and that the inadequacy of the bid price was sufficient to
set aside the auction sale.
Ruling of the Court of Appeals
Reversing the trial court, the CA held that Petitioner NSBCI did not
avail itself of respondent's debt relief package (DRP) or take steps
to comply with the conditions for qualifying under the program.
The appellate court also ruled that entitlement to the program was
not a matter of right, because such entitlement was still subject to
the approval of higher bank authorities, based on their assessment
of the borrower's repayment capability and satisfaction of other
requirements.
As to the misapplication of loan payments, the CA held that the
subsidiary ledgers of NSBCI's loan accounts with respondent
reflected all the loan proceeds as well as the partial payments that
had been applied either to the principal or to the interests,
penalties and other charges. Having been made in the ordinary and
usual course of the banking business of respondent, its entries
were presumed accurate, regular and fair under Section 5(q) of
Rule 131 of the Rules of Court. Petitioners failed to rebut this
presumption.
The increases in the interest rates on NSBCI's loan were also held
to be authorized by law and the Monetary Board and -- like the
increases in penalty rates -- voluntarily and freely agreed upon by
the parties in the Credit Agreements they executed. Thus, these
increases were binding upon petitioners.

However, after considering that two to three of Petitioner NSBCI's
projects covered by the loan were affected by the economic
slowdown in the areas near the military bases in the cities of
Angeles and Olongapo, the appellate court annulled and deleted
the adjustment in penalty from 6 percent to 36 percent per annum.
Not only did respondent fail to demonstrate the existence of
market forces and economic conditions that would justify such
increases; it could also have treated petitioners' request for
restructuring as a request for availment of the DRP. Consequently,
the original penalty rate of 6 percent per annum was used to
compute the deficiency claim.
The auction sale could not be set aside on the basis of the
inadequacy of the auction price, because in sales made at public
auction, the owner is given the right to redeem the mortgaged
properties; the lower the bid price, the easier it is to effect
redemption or to sell such right. The bid price of P10,334,000.00
vis-à-vis respondent's claim of P12,506,476.43 was found to be
neither shocking nor unconscionable.
The attorney's fees were also reduced by the appellate court from
10 percent to 1 percent of the total indebtedness. First, there was
no extreme difficulty in an extrajudicial foreclosure of a real estate
mortgage, as this proceeding was merely administrative in nature
and did not involve a court litigation contesting the proceedings
prior to the auction sale. Second, the attorney's fees were
exclusive of all stipulated costs and fees. Third, such fees were in
the nature of liquidated damages that did not inure to respondent's
salaried counsel.
Respondent was also declared to have the unquestioned right to
foreclose the Real Estate Mortgage. It was allowed to recover any
deficiency in the mortgage account not realized in the foreclosure
sale, since petitioner-spouses had agreed to be solidarily liable for
all sums due and payable to respondent.
Finally, the appellate court concluded that the extrajudicial
foreclosure proceedings and auction sale were valid for the
following reasons: (1) personal notice to the mortgagors, although
unnecessary, was actually made; (2) the notice of extrajudicial sale
31 Legal Ethics
was duly published and posted; (3) the extrajudicial sale was
conducted through the deputy sheriff, under the direction of the
clerk of court who was concurrently the ex-oficio provincial sheriff
and acting as agent of respondent; (4) the sale was conducted
within the province where the mortgaged properties were located;
and (5) such sale was not shown to have been attended by fraud.
Hence this Petition.[10]
Issues
Petitioners submit the following issues for our consideration:
"I
Whether or not the Honorable Court of Appeals correctly ruled that
petitioners did not avail of PNB's debt relief package and were not
entitled thereto as a matter of right.
"II
Whether or not petitioners have adduced sufficient and convincing
evidence to overthrow the presumption of regularity and
correctness of the PNB entries in the subsidiary ledgers of the loan
accounts of petitioners.
"III
Whether or not the Honorable Court of Appeals seriously erred in
not holding that the Respondent PNB bloated the loan account of
petitioner corporation by imposing interests, penalties and
attorney's fees without legal, valid and equitable justification.
"IV
Whether or not the auction price at which the mortgaged
properties was sold was disproportionate to their actual fair
mortgage value.
"V
Whether or not Respondent PNB is not entitled to recover the
deficiency in the mortgage account not realized in the foreclosure
sale, considering that:
A. Petitioners are merely guarantors of the mortgage debt of
petitioner corporation which has a separate personality from
the [petitioner-spouses].
B.
C. The joint and solidary agreement executed by [petitioner-
spouses] are contracts of adhesion not binding on them;
D.
E. The NSBCI Board Resolution is not valid and binding on
[petitioner-spouses] because they were compelled to
execute the said Resolution[;] otherwise[,] Respondent PNB
would not grant petitioner corporation the loan;
F.
G. The Respondent PNB had already in its possession the
properties of the [petitioner-spouses] which served as a
collateral to the loan obligation of petitioner corporation[,]
and to still allow Respondent PNB to recover the deficiency
claim amounting to a very substantial amount of P2.1
million would constitute unjust enrichment on the part of
Respondent PNB.
"VI
Whether or not the extrajudicial foreclosure proceedings and
auction sale, including all subsequent proceedings[,] are null and
void for non-compliance with jurisdictional and other mandatory
requirements; whether or not the petition for extrajudicial
foreclosure of mortgage was filed prematurely; and whether or not
the finding of fraud by the trial court is amply supported by the
evidence on record."[11]
The foregoing may be summed up into two main issues: first,
whether the loan accounts are bloated; and second, whether the
extrajudicial foreclosure and subsequent claim for deficiency are
32 Legal Ethics
valid and proper.
The Court's Ruling
The Petition is partly meritorious.
First Main Issue:
Bloated Loan Accounts
At the outset, it must be stressed that only questions of law[12] may
be raised in a petition for review on certiorari under Rule 45 of the
Rules of Court. As a rule, questions of fact cannot be the subject of
this mode of appeal,[13] for "[t]he Supreme Court is not a trier of
facts."[14] As exceptions to this rule, however, factual findings of the
CA may be reviewed on appeal[15] when, inter alia, the factual
inferences are manifestly mistaken;[16] the judgment is based on a
misapprehension of facts;[17] or the CA manifestly overlooked
certain relevant and undisputed facts that, if properly considered,
would justify a different legal conclusion.[18] In the present case,
these exceptions exist in various instances, thus prompting us to
take cognizance of factual issues and to decide upon them in the
interest of justice and in the exercise of our sound discretion. [19]
Indeed, Petitioner NSBCI's loan accounts with respondent appear
to be bloated with some iniquitous imposition of interests,
penalties, other charges and attorney's fees. To demonstrate this
point, the Court shall take up one by one the promissory notes, the
credit agreements and the disclosure statements.
Increases in Interest Baseless
Promissory Notes. In each drawdown, the Promissory Notes
specified the interest rate to be charged: 19.5 percent in the first,
and 21.5 percent in the second and again in the third. However, a
uniform clause therein permitted respondent to increase the rate
"within the limits allowed by law at any time depending on
whatever policy it may adopt in the future x x x,"[20] without even
giving prior notice to petitioners. The Court holds that petitioners'
accessory duty to pay interest[21] did not give respondent
unrestrained freedom to charge any rate other than that which was
agreed upon. No interest shall be due, unless expressly stipulated
in writing.[22] It would be the zenith of farcicality to specify and
agree upon rates that could be subsequently upgraded at whim by
only one party to the agreement.
The "unilateral determination and imposition" [23] of increased rates
is "violative of the principle of mutuality of contracts ordained in
Article 1308[24] of the Civil Code."[25] One-sided impositions do not
have the force of law between the parties, because such
impositions are not based on the parties' essential equality.
Although escalation clauses[26] are valid in maintaining fiscal
stability and retaining the value of money on long-term contracts,
[27]
giving respondent an unbridled right to adjust the interest
independently and upwardly would completely take away from
petitioners the "right to assent to an important modification in their
agreement"[28] and would also negate the element of mutuality in
their contracts. The clause cited earlier made the fulfillment of the
contracts "dependent exclusively upon the uncontrolled will" [29] of
respondent and was therefore void. Besides, the pro forma
promissory notes have the character of a contract d'adhésion,
[30]
"where the parties do not bargain on equal footing, the weaker
party's [the debtor's] participation being reduced to the alternative
'to take it or leave it.'"[31]
"While the Usury Law[32] ceiling on interest rates was lifted by
[Central Bank] Circular No. 905,[33] nothing in the said Circular
grants lenders carte blanche authority to raise interest rates to
levels which will either enslave their borrowers or lead to a
hemorrhaging of their assets."[34] In fact, we have declared nearly
ten years ago that neither this Circular nor PD 1684, which further
amended the Usury Law, "authorized either party to unilaterally
raise the interest rate without the other's consent." [35]
Moreover, a similar case eight years ago pointed out to the same
respondent (PNB) that borrowing signified a capital transfusion
from lending institutions to businesses and industries and was done
for the purpose of stimulating their growth; yet respondent's
continued "unilateral and lopsided policy"[36] of increasing interest
rates "without the prior assent"[37] of the borrower not only defeats
this purpose, but also deviates from this pronouncement. Although
such increases are not usurious, since the "Usury Law is now
33 Legal Ethics
legally inexistent"[38] -- the interest ranging from 26 percent to 35
percent in the statements of account[39] -- "must be equitably
reduced for being iniquitous, unconscionable and
exorbitant."[40] Rates found to be iniquitous or unconscionable are
void, as if it there were no express contract thereon.[41] Above all, it
is undoubtedly against public policy to charge excessively for the
use of money.[42]
It cannot be argued that assent to the increases can be implied
either from the June 18, 1991 request of petitioners for loan
restructuring or from their lack of response to the statements of
account sent by respondent. Such request does not indicate any
agreement to an interest increase; there can be no implied waiver
of a right when there is no clear, unequivocal and decisive act
showing such purpose.[43] Besides, the statements were not letters
of information sent to secure their conformity; and even if we were
to presume these as an offer, there was no acceptance. No one
receiving a proposal to modify a loan contract, especially interest --
a vital component -- is "obliged to answer the proposal." [44]
Furthermore, respondent did not follow the stipulation in the
Promissory Notes providing for the automatic conversion of the
portion that remained unpaid after 730 days -- or two years from
date of original release --into a medium-term loan, subject to the
applicable interest rate to be applied from the dates of original
release.[45]
In the first,[46] second[47] and third[48] Promissory Notes, the amount
that remained unpaid as of October 27, 1989, December 1989 and
January 4, 1990 -- their respective due dates -- should have been
automatically converted by respondent into medium-term loans on
June 30, 1991, September 2, 1991, and September 7, 1991,
respectively. And on this unpaid amount should have been imposed
the same interest rate charged by respondent on other medium-
term loans; and the rate applied from June 29, 1989, September 1,
1989 and September 6, 1989 -- their respective original release
--until paid. But these steps were not taken. Aside from sending
demand letters, respondent did not at all exercise its option to
enforce collection as of these Notes' due dates. Neither did it renew
or extend the account.
In these three Promissory Notes, evidently, no complaint for
collection was filed with the courts. It was not until January 30,
1992 that a Petition for Sale of the mortgaged properties was filed
-- with the provincial sheriff, instead.[49] Moreover, respondent did
not supply the interest rate to be charged on medium-term loans
granted by automatic conversion. Because of this deficiency, we
shall use the legal rate of 12 percent per annum on loans and
forbearance of money, as provided for by CB Circular 416.[50]
Credit Agreements. Aside from the promissory notes, another main
document involved in the principal obligation is the set of credit
agreements executed and their annexes.
The first Credit Agreement[51] dated June 19, 1989 -- although
offered and admitted in evidence, and even referred to in the first
Promissory Note -- cannot be given weight.
First, it was not signed by respondent through its branch manager.
[52]
Apparently it was surreptitiously acknowledged before
respondent's counsel, who unflinchingly declared that it had been
signed by the parties on every page, although respondent's
signature does not appear thereon.[53]
[54]
Second, it was objected to by petitioners, contrary to the trial
court's findings.[55] However, it was not the Agreement, but the
revolving credit line[56] of P5,000,000, that expired one year from
the Agreement's date of implementation.[57]
Third, there was no attached annex that contained the General
Conditions.[58] Even the Acknowledgment did not allude to its
existence.[59] Thus, no terms or conditions could be added to the
Agreement other than those already stated therein.
Since the first Credit Agreement cannot be given weight, the
interest rate on the first availment pegged at 3 percent over and
above respondent's prime rate[60] on the date of such
availment[61] has no bearing at all on the loan. After the first Note's
due date, the rate of 19 percent agreed upon should continue to be
applied on the availment, until its automatic conversion to a
medium-term loan.
34 Legal Ethics
The second Credit Agreement[62] dated August 31, 1989, provided
for interest -- respondent's prime rate, plus the applicable
spread[63] in effect as of the date of each availment,[64] on a
revolving credit line of P7,700,000[65] -- but did not state any
provision on its increase or decrease.[66] Consequently, petitioners
could not be made to bear interest more than such prime rate plus
spread. The Court gives weight to this second Credit Agreement for
the following reasons.
First, this document submitted by respondent was admitted by
petitioners.[67] Again, contrary to their assertion, it was not the
Agreement -- but the credit line -- that expired one year from the
Agreement's date of implementation.[68] Thus, the terms and
conditions continued to apply, even if drawdowns could no longer
be made.
Second, there was no 7-page annex[69] offered in evidence that
contained the General Conditions,[70] notwithstanding the
Acknowledgment of its existence by respondent's counsel. Thus, no
terms or conditions could be appended to the Agreement other
than those specified therein.
Third, the 12-page General Conditions[71] offered and admitted in
evidence had no probative value. There was no reference to it in
the Acknowledgment of the Agreement; neither was respondent's
signature on any of the pages thereof. Thus, the General
Conditions' stipulations on interest adjustment, [72] whether on a
fixed or a floating scheme, had no effect whatsoever on the
Agreement. Contrary to the trial court's findings,[73] the General
Condition were correctly objected to by petitioners.[74] The rate of
21.5 percent agreed upon in the second Note thus continued to
apply to the second availment, until its automatic conversion into a
medium-term loan.
The third Credit Agreement[75] dated September 5, 1989, provided
for the same rate of interest as that in the second Agreement. This
rate was to be applied to availments of an unadvised line
of P300,000. Since there was no mention in the third Agreement,
either, of any stipulation on increases or decreases[76] in interest,
there would be no basis for imposing amounts higher than the
prime rate plus spread. Again, the 21.5 percent rate agreed upon
would continue to apply to the third availment indicated in the third
Note, until such amount was automatically converted into a
medium-term loan.
The Court also finds that, first, although this document was
admitted by petitioners,[77] it was the credit line that expired one
year from the implementation of the Agreement.[78] The terms and
conditions therein continued to apply, even if availments could no
longer be drawn after expiry.
Second, there was again no 7-page annex[79] offered that contained
the General Conditions,[80] regardless of the Acknowledgment by
the same respondent's counsel affirming its existence. Thus, the
terms and conditions in this Agreement relating to interest cannot
be expanded beyond that which was already laid down by the
parties.
Disclosure Statements. In the present case, the Disclosure
Statements[81] furnished by respondent set forth the same interest
rates as those respectively indicated in the Promissory Notes.
Although no method of computation was provided showing how
such rates were arrived at, we will nevertheless take up the
Statements seriatim in order to determine the applicable rates
clearly.
As to the first Disclosure Statement on Loan/Credit
Transaction[82] dated June 13, 1989, we hold that the 19.5 percent
effective interest rate per annum[83] would indeed apply to the first
availment or drawdown evidenced by the first Promissory Note. Not
only was this Statement issued prior to the consummation of such
availment or drawdown, but the rate shown therein can also be
considered equivalent to 3 percent over and above respondent's
prime rate in effect. Besides, respondent mentioned no other rate
that it considered to be the prime rate chargeable to petitioners.
Even if we disregarded the related Credit Agreement, we assume
that this private transaction between the parties was fair and
regular,[84] and that the ordinary course of business was followed.
[85]
As to the second Disclosure Statement on Loan/Credit
Transaction[86] dated September 2, 1989, we hold that the 21.5
35 Legal Ethics
percent effective interest rate per annum[87] would definitely apply
to the second availment or drawdown evidenced by the second
Promissory Note. Incidentally, this Statement was issued only after
the consummation of its related availment or drawdown, yet such
rate can be deemed equivalent to the prime rate plus spread, as
stipulated in the corresponding Credit Agreement. Again, we
presume that this private transaction was fair and regular, and that
the ordinary course of business was followed. That the related
Promissory Note was pre-signed would also bolster petitioners'
claim although, under cross-examination Efren Pozon -- Assistant
Department Manager I[88] of PNB, Dagupan Branch -- testified that
the Disclosure Statements were the basis for preparing the Notes.
[89]
As to the third Disclosure Statement on Loan/Credit
Transaction[90] dated September 6, 1989, we hold that the same
21.5 percent effective interest rate per annum[91] would apply to
the third availment or drawdown evidenced by the third Promissory
Note. This Statement was made available to petitioner-spouses,
only after the related Credit Agreement had been executed, but
simultaneously with the consummation of the Statement's related
availment or drawdown. Nonetheless, the rate herein should still be
regarded as equivalent to the prime rate plus spread, under the
similar presumption that this private transaction was fair and
regular and that the ordinary course of business was followed.
In sum, the three disclosure statements, as well as the two credit
agreements considered by this Court, did not provide for any
increase in the specified interest rates. Thus, none would now be
permitted. When cross-examined, Julia Ang-Lopez, Finance
Account Analyst II of PNB, Dagupan Branch, even testified that the
bases for computing such rates were those sent by the head office
from time to time, and not those indicated in the notes or
disclosure statements.[92]
In addition to the preceding discussion, it is then useless to belabor
the point that the increase in rates violates the
impairment[93] clause of the Constitution,[94] because the sole
purpose of this provision is to safeguard the integrity of valid
contractual agreements against unwarranted interference by the
State[95] in the form of laws. Private individuals' intrusions on
interest rates is governed by statutory enactments like the Civil
Code.
Penalty, or Increases
Thereof, Unjustified
No penalty charges or increases thereof appear either in the
Disclosure Statements[96] or in any of the clauses in the second and
the third Credit Agreements[97] earlier discussed. While a standard
penalty charge of 6 percent per annum has been imposed on the
amounts stated in all three Promissory Notes still remaining unpaid
or unrenewed when they fell due,[98] there is no stipulation therein
that would justify any increase in that charges. The effect,
therefore, when the borrower is not clearly informed of the
Disclosure Statements -- prior to the consummation of the
availment or drawdown -- is that the lender will have no right to
collect upon such charge[99] or increases thereof, even if stipulated
in the Notes. The time is now ripe to give teeth to the often
ignored forty-one-year old "Truth in Lending Act" [100] and thus
transform it from a snivelling paper tiger to a growling financial
watchdog of hapless borrowers.
Besides, we have earlier said that the Notes are contracts of
adhesion; although not invalid per se, any apparent ambiguity in
the loan contracts -- taken as a whole -- shall be strictly construed
against respondent who caused it.[101] Worse, in the statements of
account, the penalty rate has again been unilaterally increased by
respondent to 36 percent without petitioners' consent. As a result
of its move, such liquidated damages intended as a penalty shall
be equitably reduced by the Court to zilch[102] for being iniquitous
or unconscionable.[103]
Although the first Disclosure Statement was furnished Petitioner
NSBCI prior to the execution of the transaction, it is not a contract
that can be modified by the related Promissory Note, but a mere
statement in writing that reflects the true and effective cost of
loans from respondent. Novation can never be presumed,[104] and
the animus novandi "must appear by express agreement of the
parties, or by their acts that are too clear and unequivocal to be
mistaken."[105] To allow novation will surely flout the "policy of the
State to protect its citizens from a lack of awareness of the true
36 Legal Ethics
cost of credit."[106]
With greater reason should such penalty charges be indicated in
the second and third Disclosure Statements, yet none can be found
therein. While the charges are issued after the respective
availment or drawdown, the disclosure statements are given
simultaneously therewith. Obviously, novation still does not apply.
Other Charges Unwarranted
In like manner, the other charges imposed by respondent are not
warranted. No particular values or rates of service charge are
indicated in the Promissory Notes or Credit Agreements, and no
total value or even the breakdown figures of such non-finance
charge are specified in the Disclosure Statements. Moreover, the
provision in the Mortgage that requires the payment of insurance
and other charges is neither made part of nor reflected in such
Notes, Agreements, or Statements.[107]
Attorney's Fees Equitably Reduced
We affirm the equitable reduction in attorney's fees.[108] These are
not an integral part of the cost of borrowing, but arise only when
collecting upon the Notes becomes necessary. The purpose of
these fees is not to give respondent a larger compensation for the
loan than the law already allows, but to protect it against any
future loss or damage by being compelled to retain counsel in-
house or not -- to institute judicial proceedings for the collection of
its credit.[109] Courts have has the power[110] to determine their
reasonableness[111] based on quantum meruit[112] and to
reduce[113] the amount thereof if excessive.[114]
In addition, the disqualification argument in the Affidavit of
Publication raised by petitioners no longer holds water, inasmuch
as Act 496[115] has repealed the Spanish Notarial Law.[116] In the
same vein, their engagement of their counsel in another capacity
concurrent with the practice of law is not prohibited, so long as the
roles being assumed by such counsel is made clear to the client.
[117]
The only reason for this clarification requirement is that certain
ethical considerations operative in one profession may not be so in
the other.[118]

Debt Relief Package
Not Availed Of
We also affirm the CA's disquisition on the debt relief package
(DRP).
Respondent's Circular is not an outright grant of assistance or
extension of payment,[119] but a mere offer subject to specific terms
and conditions.
Petitioner NSBCI failed to establish satisfactorily that it had been
seriously and directly affected by the economic slowdown in the
peripheral areas of the then US military bases. Its allegations,
devoid of any verification, cannot lead to a supportable conclusion.
In fact, for short-term loans, there is still a need to conduct a
thorough review of the borrower's repayment possibilities. [120]
Neither has Petitioner NSBCI shown enough margin of equity,
[121]
based on the latest loan value of hard collaterals, [122] to be
eligible for the package. Additional accommodations on an
unsecured basis may be granted only when regular payment
amortizations have been established, or when the merits of the
credit application would so justify.[123]
The branch manager's recommendation to restructure or extend a
total outstanding loan not exceeding P8,000,000 is not final, but
subject to the approval of respondent's Branches Department
Credit Committee, chaired by its executive vice-president.[124] Aside
from being further conditioned on other pertinent policies of
respondent,[125] such approval nevertheless needs to be reported to
its Board of Directors for confirmation.[126] In fact, under the
General Banking Law of 2000,[127] banks shall grant loans and other
credit accommodations only in amounts and for periods of time
essential to the effective completion of operations to be financed,
"consistent with safe and sound banking practices."[128] The
Monetary Board -- then and now -- still prescribes, by regulation,
the conditions and limitations under which banks may grant
extensions or renewals of their loans and other credit
accommodations.[129]
37 Legal Ethics
Entries in Subsidiary Ledgers
Regular and Correct
Contrary to petitioners' assertions, the subsidiary ledgers of
respondent properly reflected all entries pertaining to Petitioner
NSBCI's loan accounts. In accordance with the Generally Accepted
Accounting Principles (GAAP) for the Banking Industry, [130] all
interests accrued or earned on such loans, except those that were
restructured and non-accruing,[131] have been periodically taken
into income.[132] Without a doubt, the subsidiary ledgers in a
manual accounting system are mere private documents[133] that
support and are controlled by the general ledger.[134] Such ledgers
are neither foolproof nor standard in format, but are periodically
subject to audit. Besides, we go by the presumption that the
recording of private transactions has been fair and regular, and
that the ordinary course of business has been followed.
Second Main Issue:
Extrajudicial Foreclosure Valid, But
Deficiency Claims Excessive
Respondent aptly exercised its option to "foreclose the
mortgage,"[135] after petitioners had failed to pay all the Notes in
full when they fell due.[136] The extrajudicial sale and subsequent
proceedings are therefore valid, but the alleged deficiency claim
cannot be recovered.
Auction Price Adequate
In the accessory contract[137] of real mortgage,[138] in which
immovable property or real rights thereto are used as
security[139] for the fulfillment of the principal loan obligation,
[140]
the bid price may be lower than the property's fair market
value.[141] In fact, the loan value itself is only 70 percent of the
appraised value.[142] As correctly emphasized by the appellate
court, a low bid price will make it easier[143] for the owner to effect
redemption[144] by subsequently reacquiring the property or by
selling the right to redeem and thus recover alleged losses.
Besides, the public auction sale has been regularly and fairly
conducted,[145] there has been ample authority to effect the sale,
[146]
and the Certificates of Title can be relied upon. No personal
notice[147] is even required,[148] because an extrajudicial foreclosure
is an action in rem, requiring only notice by publication and
posting, in order to bind parties interested in the foreclosed
property.[149]
As no redemption[150] was exercised within one year after the date
of registration of the Certificate of Sale with the Registry of Deeds,
[151]
respondent -- being the highest bidder -- has the right to a writ
of possession, the final process that will consummate the
extrajudicial foreclosure. On the other hand, petitioner-spouses,
who are mortgagors herein, shall lose all their rights to the
property.[152]
No Deficiency Claim Receivable
After the foreclosure and sale of the mortgaged property, the Real
Estate Mortgage is extinguished. Although the mortgagors, being
third persons, are not liable for any deficiency in the absence of a
contrary stipulation,[153] the action for recovery of such amount --
being clearly sureties to the principal obligation -- may still be
directed against them.[154] However, respondent may impose only
the stipulated interest rates of 19.5 percent and 21.5 percent on
the respective availments -- subject to the 12 percent legal rate
revision upon automatic conversion into medium-term loans -- plus
1 percent attorney's fees, without additional charges on penalty,
insurance or any increases thereof.
Accordingly, the excessive interest rates in the Statements of
Account sent to petitioners are reduced to 19.5 percent and 21.5
percent, as stipulated in the Promissory Notes; upon loan
conversion, these rates are further reduced to the legal rate of 12
percent. Payments made by petitioners are pro-rated, the charges
on penalty and insurance eliminated, and the resulting total unpaid
principal and interest of P6,582,077.70 as of the date of public
auction is then subjected to 1 percent attorney's fees. The total
outstanding obligation is compared to the bid price. On the basis of
these rates and the comparison made, the deficiency claim
receivable amounting to P2,172,476.43 in fact vanishes. Instead,
there is an overpayment by more than P3 million, as shown in the
following Schedules:
38 Legal Ethics
-omit- (search for it! Hahaha)
In the preparation of the above-mentioned schedules, these basic
legal principles were followed:
First, the payments were applied to debts that were already due.
[155]
Thus, when the first payment was made and applied on
January 5, 1990, all Promissory Notes were already due.
Second, payments of the principal were not made until the
interests had been covered.[156] For instance, the first payment on
January 15, 1990 had initially been applied to all interests due on
the notes, before deductions were made from their respective
principal amounts. The resulting decrease in interest balances
served as the bases for subsequent pro-ratings.
Third, payments were proportionately applied to all interests that
were due and of the same nature and burden.[157] This legal
principle was the rationale for the pro-rated computations shown
on Schedule 4.
Fourth, since there was no stipulation on capitalization, no interests
due and unpaid were added to the principal; hence, such interests
did not earn any additional interest.[158]The simple -- not
compounded -- method of interest calculation [159] was used on all
Notes until the date of public auction.
In fine, under solutio indebiti[160] or payment by mistake,[161] there
is no deficiency receivable in favor of PNB, but rather an excess
claim or surplus[162] payable by respondent; this excess should
immediately be returned to petitioner-spouses or their assigns --
not to mention the buildings and improvements[163] on and the
fruits of the property -- to the end that no one may be unjustly
enriched or benefited at the expense of another.[164] Such surplus is
in the amount of P3,686,101.52, computed as follows:
Total unpaid principal
and interest on the
promissory notes as
of February 26,
1992:
Drawdown on June that respondent might incur or sustain in connection with the credit
P 4,037,204.1
29, 1989 documents,[173] only the interest was imposed under the pertinent
0
(Schedule 1) Credit Agreements. Moreover, the relevant Promissory Notes had
Drawdown on to be resorted to for proper valuation of the interests charged.
September 1, 1989 2,289,040.38
(Schedule 2) Third, although the JSA, as a contract of adhesion, should be
Drawdown on taken contra proferentum against the party who may have caused
September 6, 1989 255,833.22 any ambiguity therein, no such ambiguity was found. Petitioner-
(Schedule 3) spouses, who agreed to be accommodation mortgagors,[174] can no
6,582,077.70 longer be held individually liable for the entire onerous
Add: 1% attorney's obligation[175] because, as it turned out, it was respondent that
65,820.78
fees still owed them.
Total outstanding
6,647,898.48
obligation To summarize, to give full force to the Truth in Lending Act, only
Less: Bid price 10,334,000.00 the interest rates of 19.5 percent and 21.5 percent stipulated in
P 3,686,101.5 the Promissory Notes may be imposed by respondent on the
Excess
2 respective availments. After 730 days, the portions remaining
unpaid are automatically converted into medium-term loans at the
Joint and Solidary Agreement. Contrary to the contention of the legal rate of 12 percent. In all instances, the simple method of
petitioner-spouses, their Joint and Solidary Agreement (JSA) interest computation is followed. Payments made by petitioners are
[165]
was indubitably a surety, not a guaranty.[166] They consented to applied and pro-rated according to basic legal principles. Charges
be jointly and severally liable with Petitioner NSBCI -- the borrower on penalty and insurance are eliminated, and 1 percent attorney's
-- not only for the payment of all sums due and payable in favor of fees imposed upon the total unpaid balance of the principal and
respondent, but also for the faithful and prompt performance of all interest as of the date of public auction. The P2 million deficiency
the terms and conditions thereof.[167] Additionally, the corporate claim therefore vanishes, and a refund of P3,686,101.52 arises.
secretary of Petitioner NSBCI certified as early as February 23,
1989, that the spouses should act as such surety.[168] But, their WHEREFORE, this Petition is hereby PARTLY GRANTED. The
solidary liability should be carefully studied, not sweepingly Decision of the Court of Appeals is AFFIRMED, with
assumed to cover all availments instantly. the MODIFICATION that PNB is ORDERED to refund the sum
of P3,686,101.52 representing the overcollection computed above,
First, the JSA was executed on August 31, 1989. As correctly plus interest thereon at the legal rate of six percent (6%) per
adverted to by petitioners,[169] it covered only the Promissory Notes annum from the filing of the Complaint until the finality of this
of P2,700,000 and P300,000 made after that date. The terms of a Decision. After this Decision becomes final and executory, the
contract of suretyship undeniably determine the surety's applicable rate shall be twelve percent (12%) per annum until its
liability[170] and cannot extend beyond what is stipulated therein. satisfaction. No costs.
[171]
Yet, the total amount petitioner-spouses agreed to be held
liable for was P7,700,000; by the time the JSA was executed, the SO ORDERED.
first Promissory Note was still unpaid and was thus brought within
the JSA's ambit.[172] Sandoval-Gutierrez, and Carpio-Morales, JJ., concur.
Corona, J., on leave.
Second, while the JSA included all costs, charges and expenses
39 Legal Ethics

Case 7
SECOND DIVISION
[ADM. CASE NO. 6542. September 30, 2005]
(Formerly CBD Case No. 03-1053)
MARIA CIELO B. SUZUKI, represented by her sister Maria Teresa B.
Gabuco, Complainant, v. ATTY. ERWIN L. TIAMSON, Respondent.
RESOLUTION
AUSTRIA-MARTINEZ, J.:
In an Administrative Complaint1 dated January 7, 2003 filed with
the Commission on Bar Discipline (CBD) of the Integrated Bar of
the Philippines (IBP), Maria Cielo B. Suzuki, represented by her
sister, Maria Teresa B. Gabuco, charged Atty. Erwin L. Tiamson
with fraud, dishonesty and misrepresentation and for violation of
Canons 1 and 17 of the Code of Professional Responsibility.
Praying for the disbarment of herein respondent, complainant
alleges that on August 31, 2002, she entered into contracts of sale
and real estate mortgage with several persons, namely Arthur
Tumilty, Benjamin Commandante, Jr., Mark S. Commandante, and
Mary Jane S. Commandante, wherein she bought from them a
house and lot located at No. 2002, Purple Road, Camella Homes II,
Talon 2, Las Piñas City, and covered by Transfer Certificate of
Title (TCT) No. T-83217, issued by the Register of Deeds of Las
Piñas City, and subsequently mortgaged the same property in
favor of the sellers as security for the payment of the said
property; the sale and mortgage transactions were facilitated by
respondent who is the counsel of Mr. Tumilty; the sellers executed
40 Legal Ethics
a Special Power of Attorney authorizing respondent as their
attorney-in-fact and empowering him to receive payments from
complainant; respondent received in behalf of the sellers the
amount of P500,000.00 as partial consideration for the contract of
sale; respondent committed to register the documents of sale and
mortgage with the Register of Deeds of Las Piñas City but asked
from and was given by complainant P80,000.00 as the latter's
share in the expenses for registration; with the end in view of
having the subject documents registered and the title to the
property transferred in the name of complainant, respondent
retained in his possession the subject deeds of absolute sale and
mortgage as well as the owner's copy of the title; however,
respondent never registered the said documents and did not cause
the transfer of the title over the subject property in the name of
complainant; respondent is guilty of fraud, misrepresentation,
dishonesty and estafa which are grounds for his disbarment.2
In his Answer dated February 18, 2003, respondent denied the
allegations of complainant. He put up affirmative defenses
contending that sometime in August 2002, he was engaged by Mr.
Tumilty, his friend and neighbor, to help him in the documentation
of the sale of his house and lot to complainant; Mr. Tumilty
informed respondent that he and the complainant agreed that the
payment of the purchase price for the property shall be made
through installment; respondent was also informed that
complainant, at that time, was residing in Japan and that she was
being represented by her agent, a certain Jenny Matira; when
respondent communicated with Ms. Matira to discuss the
documentation of the contract, the latter referred him to their
lawyer, Atty. Lorenzo Tejada; respondent and Atty. Tejada met and
subsequently arrived at a compromise wherein it was agreed that
complainant will execute a promissory note in favor of Mr. Tumilty
covering her obligation under the contract of sale; thereafter, Mr.
Tumilty will execute a deed of sale in favor of complainant;
complainant, in turn, will execute a real estate mortgage contract
in favor of Mr. Tumilty as security for the payment of her
obligation; it was further agreed that after the new TCT in the
name of complainant is released, the latter shall execute another
contract of real estate mortgage covering the same property;
subsequently, the above-mentioned documents were executed with
the exception of the second real estate mortgage contract;
respondent admits having received P250,000.00 in cash and
P250,000.00 in check from the representatives of complainant but
he does not admit that this is part of the partial payment for the
real property sold; instead, he contends that the said amount was
part of an internal agreement between complainant and a certain
Ms. Suzuki, who is her agent's mother-in-law residing in Japan;
respondent also admits receipt of P80,000.00 as complainant's
share in the expenses for registration; respondent contends that
immediately after the sale, he submitted the sale documents to the
Bureau of Internal Revenue (BIR) and paid the capital gains tax,
documentary stamp tax and other taxes which enabled him to get
from the BIR a Certificate Authorizing Registration (CAR);
sometime in September 2002, representatives of complainant
approached respondent asking him to give them the new TCT
covering the subject property in the name of complainant;
respondent informed them that the transfer of the property in
complainant's name is still being processed and even if respondent
secures a new TCT in the name of complainant, he cannot give
complainant the owner's duplicate copy until and unless the
purchase price for the subject property has been fully paid and the
real estate mortgage cancelled; several days after, the same
persons returned to respondent's office and insisted on getting the
owner's duplicate copy of the new TCT but respondent refused for
the same reasons mentioned above; nonetheless, respondent
handed to herein complainant's representative Gabuco the
documents evidencing the sale, real estate mortgage, a special
power of attorney dated August 31, 2002 as well as the keys to the
house subject of the sale; respondent was later informed by
complainant's agent, Jenny Matira that she is now unsure if
complainant will execute a new real estate mortgage contract
much less pay the remaining balance of the purchase price;
sometime in October 2002, respondent received a letter from a
certain Atty. Federico Ricafort demanding rescission of the sale
with damages on the ground that he defrauded complainant;
respondent was also asked to release the owner's copy of the new
TCT; as a consequence, respondent deferred the processing of a
new title over the subject property in the name of complainant
because he has no longer any assurance that complainant will
comply with her obligation to pay the remaining balance of the
purchase price; respondent contends that he is merely performing
41 Legal Ethics
his duty to protect the interest of his client by refusing to register
the contract of sale with the Register of Deeds of Las Piñas.3
Complainant filed her Reply to respondent's Comment contending
that she was not, in fact, represented by a lawyer during the
transaction and documentation of the subject contracts of sale and
real estate mortgage; the partial payments she made in the
amount of P1,352,500.00 were not deducted and reflected in the
deeds of sale and mortgage; respondent does not acknowledge
these payments and insists on the payment of the original
purchase price of P2,150,000.00.4
In an order dated February 10, 2004, Commissioner Lydia A.
Navarro of the IBP-CBD required the parties to submit their
respective verified position papers attaching thereto documentary
evidence and duly verified affidavits of witnesses, if any, after
which the case shall be submitted for resolution.5
Complainant and respondent submitted their Position Papers,
respectively.6 Both parties also submitted their Reply to the
opposing party's Position Paper.7
In her Report and Recommendation dated March 18, 2004,
Commissioner Navarro found that respondent has no intention of
defrauding complainant; instead, he is only performing his duty of
protecting his client's interest when he held in abeyance the
processing of the papers for the transfer of the title over the
property in complainant's name. Consequently, Commissioner
Navarro recommended the dismissal of the complaint against
respondent.8
On June 26, 2004, the Board of Governors of the IBP passed
Resolution No. XVI-2004-260 finding the recommendation of
Commissioner Navarro fully supported by evidence on record and
the applicable laws and rules and, considering that the complaint
lacks merit, resolved to adopt and approve the Report and
Recommendation of Commissioner Navarro.9
On October 6, 2004, this Court issued a Resolution which noted
Resolution No. XVI-2004-260 of the Board of Governors of the IBP
and considered the instant case closed and terminated.10

On September 8, 2004, complainant filed a Motion for
Reconsideration of IBP Resolution No. XVI-2004-260.
In its Resolution dated October 7, 2004, the IBP Board of
Governors denied complainant's motion for reconsideration on the
ground that the Board has no more jurisdiction to consider and
resolve said motion as it has already endorsed the case to this
Court.11
On March 30, 2005, this Court issued another Resolution requiring
respondent to file his Comment on complainant's motion for
reconsideration.12 Respondent filed his comment on May 3,
2005.13
The issue in the present case is whether respondent is guilty of
fraud, misrepresentation and dishonesty or of any improper act or
conduct which violates his sworn duty as a lawyer in connection
with his dealings with herein complainant or with any of the latter's
representatives relative to the sale of the subject properties.
Complainant contends that respondent is guilty of dishonesty and
misconduct for two main reasons. First, despite having received the
amount of P80,000.00 from complainant as the latter's share in the
registration of the deed of sale of the subject property, respondent
failed to register the same; worse, he did not pay the capital gains
tax, documentary stamp tax and all other taxes or fees due
thereon. Second, respondent does not want to recognize and
deduct from the original purchase price the advance payments
made by complainant amounting to more than P1,000,000.00.
As to the first charge, this Court notes that respondent has
submitted a photocopy of a CAR issued by the BIR to prove that he
already paid the capital gains tax and documentary stamp tax due
on the sale of the subject property, amounting to a total sum of
P177,980.83; and that the BIR had already authorized the
concerned Register of Deeds to effect the transfer of the said
property.14
However, despite such authority, respondent did not register the
deed of sale over the subject property. Respondent asserts that his
42 Legal Ethics
only motive in refusing to register the deed of sale is to protect the
interest of his client. Nonetheless, this Court notes that his client's
interest is amply protected by the real estate mortgage executed
by complainant. In fact, contrary to what respondent insists, we
see no need to execute anew a different mortgage contract after
the title over the property has been transferred in the name of
complainant since the original contract of mortgage contains
provisions stating that said contract shall be annotated at the back
of the new TCT covering the subject property which shall be issued
in the name of complainant.15 The same mortgage contract also
states that it shall not be affected by the cancellation of the
existing TCT in the name of Mr. Tumilty and the other co-
owners.16 We find these provisions as sufficient security to protect
the interest of respondent's client.
Besides, respondent himself admitted that based on their
agreement with complainant, the condition for the transfer of title
over the subject property in the name of complainant is for the
latter to execute a real estate mortgage and a promissory note.17
Complainant had already complied with these conditions.18 Hence,
it is only fair and just that respondent register the deed of sale
over the subject property and have the title to this property
transferred in the name of complainant.
As to the second charge, complainant presented documents to
prove her contention that respondent's client received certain
amounts from complainant which have been considered as partial
payments for the subject properties sold. Except for the payment
made in September 5, 2003,19 all the other payments were given
prior to the execution of the deed of sale on August 31, 2002.20
Complainant contends that all the advance payments she made
should have been credited in her favor by deducting the same from
the purchase price agreed upon as appearing in the deeds of sale
and mortgage.
In his Comment to complainant's motion for reconsideration of
Resolution No. XVI-2004-260 of the IBP-CBD, respondent claims
that the amount of P500,000.00 he received from complainant, as
evidenced by Annex "D"21 of the complaint, does not form part of
the agreed purchase price for the subject properties and, therefore,
should not be deducted therefrom.22 Respondent contends that
this amount (P500,000.00) was paid by complainant as part of an
internal arrangement or agreement between her and a certain Milet
Wakatsuki who appears to be her agent's mother-in-law residing in
Japan.23 As to the other amounts which complainant claims to
have paid, respondent insists that he has no knowledge of these
payments as evidence shows that these sums have been given
directly to his client, Mr. Tumilty.
We are not fully convinced by respondent's explanations.
With respect to the photocopies of receipts for a total amount of
P724,990.00, representative of the alleged partial payments of the
purchase price for the subject property marked as Annexes "C-1,"
"C-2," "C-3," "D-1" and "D-2" of the complaint, we find that
complainant failed to prove that respondent intervened or had
knowledge of these payments as to render him liable for fraud,
dishonesty or misrepresentation for his failure to deduct these
payments from the deeds of sale and mortgage over the subject
property. As stated earlier, all these payments, except that
evidenced by Annex "C-1," were made prior to the execution of the
deeds of sale and mortgage over the subject property. There is no
showing that respondent had knowledge of these payments at the
time of the execution of the deeds of sale and mortgage that could
have prompted him to reflect these payments on the said deed. In
addition, respondent was not the one who received these
payments. Annexes "C-1," "C-2" and "C-3" show that the
payments were received by Ms. Wakatsuki while Annexes "D-1"
and "D-2" show that the sums of money were received by
respondent's client, Mr. Tumilty. Moreover, Annexes "C-2" and "C-
3" did not specifically state if the payments were indeed given as
consideration for the subject property. Hence, respondent cannot
be faulted if he refuses to consider the amounts of money
evidenced by the above-cited documents as partial payments for
the subject property.
However, as to the amount of P500,000.00, it is clear from the
acknowledgment receipt marked as Annex "D" of the complaint
that the sum of money was given to respondent as payment for the
subject property. As stated earlier, respondent admits having
received the money from complainant but claims that the said
amount does not form part of the purchase price; instead, it was
43 Legal Ethics
paid by complainant in consideration of her arrangement or
agreement with Ms. Wakatsuki. However, respondent did not
substantiate his allegation. He did not even explain or elaborate his
assertion. If there is indeed an arrangement, what kind of
arrangement was it? And if the arrangement is between
complainant and Wakatsuki, why did respondent receive the
money? There is no showing that he is authorized by Wakatsuki to
act as her attorney. On the contrary, respondent received the
money and he does not deny that he signed the acknowledgment
receipt for and in behalf of his client, Mr. Tumilty. Hence, based on
the evidence presented in the instant case, respondent's refusal to
acknowledge complainant's payment of P500,000.00 as part of the
purchase price for the subject property is simply not warranted.
Canon 19 of the Code of Professional Responsibility enjoins a
lawyer to represent his client with zeal. However, the same Canon
provides that a lawyer's performance of his duties towards his
client must be within the bounds of the law. Rule 19.01 of the
same Canon requires, among others, that a lawyer shall employ
only fair and honest means to attain the lawful objectives of his
client. Canon 15, Rule 15.07 also obliges lawyers to impress upon
their clients compliance with the laws and the principle of fairness.
To permit lawyers to resort to unscrupulous practices for the
protection of the supposed rights of their clients is to defeat one of
the purposes of the state - the administration of justice.24 While
lawyers owe their entire devotion to the interest of their clients and
zeal in the defense of their client's right, they should not forget
that they are, first and foremost, officers of the court, bound to
exert every effort to assist in the speedy and efficient
administration of justice.25 Respondent failed to live up to this
expectation.
Complainant prays for the disbarment of respondent. However, it
must be stressed that disbarment is the most severe form of
disciplinary sanction, and, as such, the power to disbar must
always be exercised with great caution for only the most
imperative reasons and in clear cases of misconduct affecting the
standing and moral character of the lawyer as an officer of the
court and a member of the bar.26 Accordingly, disbarment should
not be decreed where any punishment less severe - such as a
reprimand, suspension, or fine - would accomplish the end
desired.27 Considering that there is no evidence to prove that
respondent misappropriated the sum of P500,000.00 he received
from complainant as partial payment for the subject property, as
well as the P80,000.00 complainant gave him as her share in the
expenses for the registration of the subject deed of sale, we find it
fit to reprimand respondent for his acts of unfairly dealing with
complainant.
Finally, it must be emphasized that the issues of whether or not
complainant had indeed made payments amounting to an
aggregate sum of P1,352,500.00; if these payments were made,
whether they were intended as part of the purchase price for the
subject property; and, whether these payments should be properly
deducted from the original purchase price of P2,150,000.00, are
matters that should be properly resolved in a judicial proceeding
separate and distinct from the present case. The settled rule is that
criminal and civil cases are altogether different from administrative
matters, such that the disposition in the first two will not inevitably
govern the third and vice versa.28 In this light, we refer to this
Court's ruling in Berbano v. Barcelona,29 citing In re Almacen,30
where it was held that:
Hence, our only concern in the instant case is the determination of
respondent's administrative liability and our findings herein should
not in any way be treated as having any material bearing on any
other judicial action which the parties may choose to file against
each other.
WHEREFORE, respondent is hereby REPRIMANDED for violating
Rule 19.01, Canon 19 of the Code of Professional Responsibility,
with a WARNING that a commission of the same or similar acts in
the future shall be dealt with more severely.
SO ORDERED.
Puno, (Chairman), Callejo, Sr., Tinga, and Chico-Nazario, JJ.,
concur.
Endnotes:
24 Agpalo, Legal Ethics, 4th Edition, 1989, p. 159, citing Re Macy, 196 P1095, 14 ALR 848 (1921); People ex
rel. Atty. Gen. v. Beattie, 137 Ill. 553, 27 NE 1103.
25 Ramos v. Pallugna, A.C. No. 5908, October 25, 2004, 441 SCRA 220, 227.
26 Amaya v. Tecson, A.C. No. 5996, February 7, 2005, 450 SCRA 510, 516.

Disciplinary proceedings against lawyers are sui generis. Neither 27 Ibid.

purely civil nor purely criminal, they do not involve a trial of an
action or a suit, but rather investigations by the Court into the
conduct of one of its officers. Not being intended to inflict
punishment, [they are] in no sense a criminal prosecution.
Accordingly, there is neither a plaintiff nor a prosecutor therein.
28 Gatchalian Promotion Talents Pool, Inc. v. Naldoza, A.C. No. 4017, September 29, 1999, 315 SCRA 406.
29 A.C. No. 6084, September 3, 2003, 410 SCRA 258.
30 No. L-27654, February 18, 1970, 31 SCRA 562.
31 Berbano v. Barcelona, supra, p. 264.

[They] may be initiated by the Court motu propio. Public interest is

[their] primary objective, and the real question for determination is
whether or not the attorney is still a fit person to be allowed the
privileges as such. Hence, in the exercise of its disciplinary powers,
the Court merely calls upon a member of the Bar to account for his
actuations as an officer of the Court with the end in view of
preserving the purity of the legal profession and the proper and
honest administration of justice by purging the profession of
members who by their misconduct have prove[n] themselves no
longer worthy to be entrusted with the duties and responsibilities
pertaining to the office of an attorney.31

44 Legal Ethics
 while respondent is a Deputy Executive Director IV of the
Commission on Higher Education (CHED).1

Complainant's husband filed Civil Case No. 40537 entitled "Ruben

G. Mercado v. Rosa C. Francisco," for annulment of their marriage
with the Regional Trial Court (RTC) of Pasig City. This annulment
case had been dismissed by the trial court, and the dismissal
became final and executory on July 15, 1992.2

In August 1992, Atty. Anastacio P. de Leon, counsel of

complainant, died. On February 7, 1994, respondent entered his
appearance before the trial court as collaborating counsel for
complainant.3

On March 16, 1994, respondent filed his Notice of Substitution of

Counsel,4 informing the RTC of Pasig City that he has been
Case 8 appointed as counsel for the complainant, in substitution of Atty.
de Leon.
SECOND DIVISION
It also appears that on April 13, 1999, respondent filed a criminal
[A.C. NO. 5108 : May 26, 2005] action against complainant before the Office of the City Prosecutor,
Pasig City, entitled "Atty. Julito Vitriolo, et al. v. Rose Dela Cruz F.
ROSA F. MERCADO, Complainant, v. ATTY. JULITO D. VITRIOLO, Mercado," and docketed as I.S. No. PSG 99-9823, for violation of
Respondent. Articles 171 and 172 (falsification of public document) of the
Revised Penal Code.5 Respondent alleged that complainant made
DECISION false entries in the Certificates of Live Birth of her children,
Angelica and Katelyn Anne. More specifically, complainant allegedly
PUNO, J.: indicated in said Certificates of Live Birth that she is married to a
certain Ferdinand Fernandez, and that their marriage was
Rosa F. Mercado filed the instant administrative complaint against solemnized on April 11, 1979, when in truth, she is legally married
Atty. Julito D. Vitriolo, seeking his disbarment from the practice of to Ruben G. Mercado and their marriage took place on April 11,
law. The complainant alleged that respondent maliciously instituted 1978.
a criminal case for falsification of public document against her, a
former client, based on confidential information gained from their Complainant denied the accusations of respondent against her. She
attorney-client relationship. denied using any other name than "Rosa F. Mercado." She also
insisted that she has gotten married only once, on April 11, 1978,
Let us first hearken to the facts. to Ruben G. Mercado.

Complainant is a Senior Education Program Specialist of the In addition, complainant Mercado cited other charges against
Standards Development Division, Office of Programs and Standards respondent that are pending before or decided upon by other
tribunals - (1) libel suit before the Office of the City Prosecutor,
45 Legal Ethics
Pasig City;6 (2) administrative case for dishonesty, grave
misconduct, conduct prejudicial to the best interest of the service,
pursuit of private business, vocation or profession without the
permission required by Civil Service rules and regulations, and
violations of the "Anti-Graft and Corrupt Practices Act," before the
then Presidential Commission Against Graft and Corruption;7 (3)
complaint for dishonesty, grave misconduct, and conduct
prejudicial to the best interest of the service before the Office of
the Ombudsman, where he was found guilty of misconduct and
meted out the penalty of one month suspension without pay;8 and,
(4) the Information for violation of Section 7(b)(2) of Republic Act
No. 6713, as amended, otherwise known as the Code of Conduct
and Ethical Standards for Public Officials and Employees before the
Sandiganbayan.9
Complainant Mercado alleged that said criminal complaint for
falsification of public document (I.S. No. PSG 99-9823) disclosed
confidential facts and information relating to the civil case for
annulment, then handled by respondent Vitriolo as her counsel.
This prompted complainant Mercado to bring this action against
respondent. She claims that, in filing the criminal case for
falsification, respondent is guilty of breaching their privileged and
confidential lawyer-client relationship, and should be disbarred.
Respondent filed his Comment/Motion to Dismiss on November 3,
1999 where he alleged that the complaint for disbarment was all
hearsay, misleading and irrelevant because all the allegations
leveled against him are subject of separate fact-finding bodies.
Respondent claimed that the pending cases against him are not
grounds for disbarment, and that he is presumed to be innocent
until proven otherwise.10 He also states that the decision of the
Ombudsman finding him guilty of misconduct and imposing upon
him the penalty of suspension for one month without pay is on
appeal with the Court of Appeals. He adds that he was found guilty,
only of simple misconduct, which he committed in good faith.11
In addition, respondent maintains that his filing of the criminal
complaint for falsification of public documents against complainant
does not violate the rule on privileged communication between
attorney and client because the bases of the falsification case are
two certificates of live birth which are public documents and in no
46 Legal Ethics
way connected with the confidence taken during the engagement
of respondent as counsel. According to respondent, the
complainant confided to him as then counsel only matters of facts
relating to the annulment case. Nothing was said about the alleged
falsification of the entries in the birth certificates of her two
daughters. The birth certificates are filed in the Records Division of
CHED and are accessible to anyone.12
In a Resolution dated February 9, 2000, this Court referred the
administrative case to the Integrated Bar of the Philippines (IBP)
for investigation, report and recommendation.13
The IBP Commission on Bar Discipline set two dates for hearing but
complainant failed to appear in both. Investigating Commissioner
Rosalina R. Datiles thus granted respondent's motion to file his
memorandum, and the case was submitted for resolution based on
the pleadings submitted by the parties.14
On June 21, 2003, the IBP Board of Governors approved the report
of investigating commissioner Datiles, finding the respondent guilty
of violating the rule on privileged communication between attorney
and client, and recommending his suspension from the practice of
law for one (1) year.
On August 6, 2003, complainant, upon receiving a copy of the IBP
report and recommendation, wrote Chief Justice Hilario Davide, Jr.,
a letter of desistance. She stated that after the passage of so many
years, she has now found forgiveness for those who have wronged
her.
At the outset, we stress that we shall not inquire into the merits of
the various criminal and administrative cases filed against
respondent. It is the duty of the tribunals where these cases are
pending to determine the guilt or innocence of the respondent.
We also emphasize that the Court is not bound by any withdrawal
of the complaint or desistance by the complainant. The letter of
complainant to the Chief Justice imparting forgiveness upon
respondent is inconsequential in disbarment proceedings.
We now resolve whether respondent violated the rule on privileged
communication between attorney and client when he filed a
criminal case for falsification of public document against his former
client.
A brief discussion of the nature of the relationship between
attorney and client and the rule on attorney-client privilege that is
designed to protect such relation is in order.
In engaging the services of an attorney, the client reposes on him
special powers of trust and confidence. Their relationship is strictly
personal and highly confidential and fiduciary. The relation is of
such delicate, exacting and confidential nature that is required by
necessity and public interest.15 Only by such confidentiality and
protection will a person be encouraged to repose his confidence in
an attorney. The hypothesis is that abstinence from seeking legal
advice in a good cause is an evil which is fatal to the administration
of justice.16 Thus, the preservation and protection of that relation
will encourage a client to entrust his legal problems to an attorney,
which is of paramount importance to the administration of
justice.17 One rule adopted to serve this purpose is the attorney-
client privilege: an attorney is to keep inviolate his client's secrets
or confidence and not to abuse them.18 Thus, the duty of a lawyer
to preserve his client's secrets and confidence outlasts the
termination of the attorney-client relationship,19 and continues
even after the client's death.20 It is the glory of the legal
profession that its fidelity to its client can be depended on, and
that a man may safely go to a lawyer and converse with him upon
his rights or supposed rights in any litigation with absolute
assurance that the lawyer's tongue is tied from ever disclosing
it.21 With full disclosure of the facts of the case by the client to his
attorney, adequate legal representation will result in the
ascertainment and enforcement of rights or the prosecution or
defense of the client's cause.
Now, we go to the rule on attorney-client privilege. Dean Wigmore
cites the factors essential to establish the existence of the
privilege, viz:
(1) Where legal advice of any kind is sought (2) from a
professional legal adviser in his capacity as such, (3) the
47 Legal Ethics
communications relating to that purpose, (4) made in confidence
(5) by the client, (6) are at his instance permanently protected (7)
from disclosure by himself or by the legal advisor, (8) except the
protection be waived.22
In fine, the factors are as follows:
(1) There exists an attorney-client relationship, or a prospective
attorney-client relationship, and it is by reason of this relationship
that the client made the communication.
Matters disclosed by a prospective client to a lawyer are protected
by the rule on privileged communication even if the prospective
client does not thereafter retain the lawyer or the latter declines
the employment.23 The reason for this is to make the prospective
client free to discuss whatever he wishes with the lawyer without
fear that what he tells the lawyer will be divulged or used against
him, and for the lawyer to be equally free to obtain information
from the prospective client.24
On the other hand, a communication from a (prospective) client to
a lawyer for some purpose other than on account of the
(prospective) attorney-client relation is not privileged. Instructive
is the case of Pfleider v. Palanca,25 where the client and his wife
leased to their attorney a 1,328-hectare agricultural land for a
period of ten years. In their contract, the parties agreed, among
others, that a specified portion of the lease rentals would be paid
to the client-lessors, and the remainder would be delivered by
counsel-lessee to client's listed creditors. The client alleged that the
list of creditors which he had "confidentially" supplied counsel for
the purpose of carrying out the terms of payment contained in the
lease contract was disclosed by counsel, in violation of their
lawyer-client relation, to parties whose interests are adverse to
those of the client. As the client himself, however, states, in the
execution of the terms of the aforesaid lease contract between the
parties, he furnished counsel with the "confidential" list of his
creditors. We ruled that this indicates that client delivered the list
of his creditors to counsel not because of the professional relation
then existing between them, but on account of the lease
agreement. We then held that a violation of the confidence that
accompanied the delivery of that list would partake more of a
private and civil wrong than of a breach of the fidelity owing from a
lawyer to his client.
(2) The client made the communication in confidence.
The mere relation of attorney and client does not raise a
presumption of confidentiality.26 The client must intend the
communication to be confidential.27
A confidential communication refers to information transmitted by
voluntary act of disclosure between attorney and client in
confidence and by means which, so far as the client is aware,
discloses the information to no third person other than one
reasonably necessary for the transmission of the information or the
accomplishment of the purpose for which it was given.28
Our jurisprudence on the matter rests on quiescent ground. Thus,
a compromise agreement prepared by a lawyer pursuant to the
instruction of his client and delivered to the opposing party,29 an
offer and counter-offer for settlement,30 or a document given by a
client to his counsel not in his professional capacity,31 are not
privileged communications, the element of confidentiality not being
present.32
(3) The legal advice must be sought from the attorney in his
professional capacity.33
The communication made by a client to his attorney must not be
intended for mere information, but for the purpose of seeking legal
advice from his attorney as to his rights or obligations. The
communication must have been transmitted by a client to his
attorney for the purpose of seeking legal advice.34
If the client seeks an accounting service,35 or business or personal
assistance,36 and not legal advice, the privilege does not attach to
a communication disclosed for such purpose.
Applying all these rules to the case at bar, we hold that the
evidence on record fails to substantiate complainant's allegations.
We note that complainant did not even specify the alleged
communication in confidence disclosed by respondent. All her
48 Legal Ethics
claims were couched in general terms and lacked specificity. She
contends that respondent violated the rule on privileged
communication when he instituted a criminal action against her for
falsification of public documents because the criminal complaint
disclosed facts relating to the civil case for annulment then handled
by respondent. She did not, however, spell out these facts which
will determine the merit of her complaint. The Court cannot be
involved in a guessing game as to the existence of facts which the
complainant must prove.
Indeed, complainant failed to attend the hearings at the IBP.
Without any testimony from the complainant as to the specific
confidential information allegedly divulged by respondent without
her consent, it is difficult, if not impossible to determine if there
was any violation of the rule on privileged communication. Such
confidential information is a crucial link in establishing a breach of
the rule on privileged communication between attorney and client.
It is not enough to merely assert the attorney-client privilege.37
The burden of proving that the privilege applies is placed upon the
party asserting the privilege.38
IN VIEW WHEREOF, the complaint against respondent Atty. Julito
D. Vitriolo is hereby DISMISSED for lack of merit.
SO ORDERED.
Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.
Tinga, J., out of the country.
Endnotes:
15 Regala v. Sandiganbayan, G.R. No. 105938, September 20, 1996, 262
SCRA 122, 138, citing Agpalo, Ruben, Legal Ethics, 1992 ed., p. 136.
16 Hilado v. David, 84 Phil 569, 578 (1949), citing J. Wigmore's Evidence
'' 2285, 2290, 2291 (1923).
17 Hilado v. David, 84 Phil 569, 579 (1949).
18 Agpalo, Ruben, Legal and Judicial Ethics, 2002 ed., pp. 177-178.
19 Canon 21, Code of Professional Responsibility. 37 Regala v. Sandiganbayan, First Division, Dissent by Justice R.S. Puno,
G.R. No. 105938, September 20, 1996, 262 SCRA 122, 184, citing
20 Canon 37 of the Canons of Professional Ethics; In re Miller, 357 N.C. Hoffman v. U.S., 341 US 479 (1951) also cited in Arredondo v. Ortiz, 365
316 (2003), citing Glover v. Patten, 165 U.S. 394, 407-408 (1897). F.3d 778 (2004).

21 In re Williams, 57 Ill.2d 63 (1974), citing People v. Gerold, 265 Ill 448 38 U.S. v. Landof, 591 F.2d 36, 38 (1978).
(1914).

22 8 J.Wigmore, Evidence '2292 (McNaughton rev. 1961).

23 Rule 15.02, Code of Professional Responsibility - A lawyer shall be

bound by the rule on privileged communication in respect of matters
disclosed to him by a prospective client.

24 Agpalo, Legal and Judicial Ethics, 2002 ed., pp. 186-187, citing
Comments of IBP Committee that drafted the Code, p. 81.

25 Adm. Case No. 927, September 28, 1970, 35 SCRA 75.

26 Hitpold v. Stern, 82 A2d 123, 26 ALR2d 852 (1951).

27 Uy Chico v. Union Life Assurance Society, 29 Phil 163, 165 (1915); City
& County of San Francisco v. Superior Court, 231 P2d 26 (1951).

28 Brown v. Saint Paul City R. Co., 62 NW2d 688, 44 ALR 535 (1954).

29 Uy Chico v. Union Life Assurance Society, 29 Phil 163 (1915).

30 Hiltold v. Stern, 82 A2d 123, 26 ALR2d 852 (1951).

31 Pfleider v. Palanca, Adm. Case No. 927, September 28, 1970, 35 SCRA
75.

32 Agpalo, Legal and Judicial Ethics, 2002 ed., p. 267.

33 Olender v. U.S., 210 F2d 795, 42 ALR2d 736 (1954).

34 Agpalo, Ruben, Legal and Judicial Ethics, 2002 ed., pp. 260-261.

35 U.S. v. Kovel, 296 F2d 918 (1961).

36 Radiant Burners, Inc. v. American Gas Association, 320 F2d 314

(1963).

49 Legal Ethics