MAXIMO DUMADAG, PETITIONER, VS. ERNESTO L. LUMAYA, RESPONDENT.

RESOLUTION

PER CURIAM:
Respondent Atty. Ernesto L. Lumaya of Banganga, Davao Oriental is administratively charged with
unethical practices, conflict of interest and disloyalty to client by Maximo Dumadag in a sworn letter-
complaint dated 22 December 1983. Respondent was complainant's counsel in Civil Case No. 148 before
the RTC of Banganga, Davao Oriental, filed against spouses Jose and Jesusa Avellanosa, involving the
sale of a parcel of land. Civil Case No. 148 was terminated via a compromise agreement which
provided, inter alia, that not later than 1 October 1979, the Avellanosas would pay Dumadag the amount
of P4,644.00 and in turn Dumadag would execute in favor of the Avellanosas a deed of reconveyance of
the land. However, in case of failure of the Avellanosas to make full payment of the P4,644.00 within the
stipulated period, Dumadag would be entitled to obtain possession of the land. The compromise
agreement, prepared by respondent, was approved by the trial court. The Avellanosas failed to comply
with their undertaking under the compromise agreement to pay complainant the amount of P4,644.00 not
later than 1 October 1979, which necessitated the filing by Dumadag of a motion for execution.

According to complainant, he asked his then counsel, herein respondent, to prepare and file the
appropriate motion for execution; however, the latter failed to do so. It was through the assistance of the
court stenographer, Mr. Eleuterio Catubig, that complainant himself signed and filed the motion and later
obtained the writ of execution.

When the writ of execution was issued, Deputy Sheriff Rogelio Dongiapon, according to the complainant,
instead of serving the same on the Avellanosas, connived with respondent attorney by selling a one (1)
hectare portion of the land subject of Civil Case No. 148 to one Eleonora Astudillo to satisfy
complainant's claim, out of the proceeds of the sale, without however Dumadag's knowledge and
consent. The Deed of Sale between the Avellanosas and Astudillo, dated 14 September 1981, was
notarized by respondent attorney and stated that the "parcel of land, together with all the improvements
found and existing thereon, (is) free from liens and encumbrances, whatsoever." It expressly stated on its
face "That this Deed of Sale is executed also to satisfy finally the claim of Maximo Dumadag in Civil
Case No. 148 of the CFI of Banganga, Davao Oriental."

After the sale to Astudillo, or on 16 June 1983, Deputy Sheriff Rogelio Dongiapon made a Sheriff's
Return of Service which stated:

"Respectfully returned to MR. JAIME B. TOROBA, Officer-in-Charge, Office of the Clerk of Court, this
Court, the original copy of the Writ of Execution in Civil Case No. 148, with the information that said
Writ of Execution was partially satisfied the defendants Jose R. Avellanosa and Jesusa N. Avellanosa
having paid the amount of FOUR THOUSAND THREE HUNDRED FORTY FOUR (P4,344.00)
Philippine Currency to Atty. Ernesto L. Lumaya, plaintiff's counsel in the above entitled case in
November, 1981, with the balance of P300.00 which the defendants Jose R. Avellanosa and Jesusa N.
Avellanosa have not paid up to this moment." (Underscoring ours)
The said amount of P4,344.00, according to complainant, was not delivered to him by respondent
attorney, even after the former made a demand on the latter.

After respondent's comment and complainant's reply had been filed, the case was referred to the Office of
the Solicitor General for investigation, report and recommendation. Actual investigation and hearings
were conducted by Provincial Fiscal Arnulfo M. Agleron of Mati, Davao Oriental, who submitted a report
to the Office of the Solicitor General (OSG). Based on said report, the OSG prepared and submitted its
own report, including therewith a complaint for disbarment against respondent attorney, pursuant to Sec.
4, Rule 139 of the Rules of Court.

While respondent later filed an answer to the OSG-prepared complaint against him, he however, did not
appear at the earlier investigation despite due notice. We will nonetheless consider his answer as well as
comment prior to the referral of the case to the OSG.

Respondent claims that it was the presiding judge in Civil Case No. 148 who played an active role in the
settlement proceedings between Dumadag and the Avellanosas, and that it is unfortunate, according to
respondent, that there are no written records to prove this fact, but that it was agreed that Jose Avellanosa
would pay Dumadag the amount of P4,644.00 in installments, which he did, and that complainant
Dumadag claimed and received the money each time payment was made by Jose Avellanosa; thru herein
respondent. His (respondent's) mistake according to him, was that he merely noted at the back of his own
copy of the judgment by compromise the sums paid, all in the total amount of P3,000.00, and all taken by
complainant Dumadag, without any receipts. All his (respondent's) records of the case, according to
respondent, were also taken by Dumadag from his office when he became a provincial board member.

Respondent also denies having been asked by Dumadag to file a motion for execution in Civil Case No.
148 or having received from him a cow or P700.00; however he was promised one cow since he paid the
expenses in Civil Case No. 148.

Anent the sale by the Avellanos as to Eleonora Astudillo, the same, according to respondent, was a
private sale, Dumadag was not a party thereto. Respondent also claims that he was not aware that a
motion for execution had been filed in Civil Case No. 148 by Dumadag when the Deed of Sale between
the Avellanosas and Astudillo was presented to him for notarization, and that he did not see any cash
change hands as he was informed that it was just a ratification of an earlier verbal sale. He notarized the
deed of sale without intention to cause any damage. Respondent however admits that in a later case, Civil
Case No. 283 (where the validity of the sale from the Avellanosas to Astudillo was assailed by
Dumadag), it was disclosed that from the P7,000.00 actually realized from the sale of the land to
Astudillo, the sheriff deducted P1,605.00 for his expenses, with the balance being given to the vendors
(Avellanosas), because Dumadag had already been paid by the Avellanosas thru their lawyer, herein
respondent.

In the Court's resolution of 16 April 1990, respondent was required to answer the OSG
complaint. Respondent's answer merely reiterates his earlier explanation and further states:

"The truth of the matter was that the DEED OF SALE WAS ALREADY Prepared when SHERIFF
Dongiapon, the spouses Avellanosa and Maxima Astudillo came to my Office for the Notarization of that
DEED OF SALE. What respondent did was only to ask whether the signatures are theirs and that the
consideration was paid but did not go over the contents. All of the parties affirmed their signature and
informed respondent that the consideration was paid in installments. At that time respondent never was
informed that the proceeds was for the final satisfaction of Mr. Dumadag's claim. Respondent knew it
only when Mr. Dumadag came to claim the money of course I have to tell the truth and I told him,
Maximo Dumadag, that I have never received any money from Sheriff ROGELIO DONGIAPON and I
did not even know that there was a petition for the issuance of a writ of execution that he filed because I
was never asked by him. Mr. Maximo Dumadag told me that he will file a case against me if I will not
give the money . . . ."
For the reasons that respondent's acts constitute lack of fidelity, loyalty and devotion to his client's cause,
unethical practice and a violation of his lawyer's oath, the OSG recommends respondent's suspension
from the practice of law for not less than five (5) years.
In the case of Licuanan vs. Melo (Adm. Case No. 2361 - February 9, 1989) a lawyer was disbarred for
retaining for his personal benefit for over a one (1) year period, the amount of P5,220.00 received by him
in behalf of his client, thereby compelling the latter to file a groundless collection suit which exposed said
client to a damage countersuit.

While not exactly identical with the Licuanan case, herein complainant Dumadag had to file a separate
civil case (No. 283 - for annulment of sale, damages and attorney's fees) to recover the amount of
P4,344.00 from his previous counsel, herein respondent, Atty. Lumaya.

Under the Code of Professional Responsibility, Canon 16 -

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

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

A lawyer shall deliver the funds and property of his client when due or upon demand.
However, he shall have a lien over the funds and may apply so much thereof as may be
"Rule
necessary to satisfy his lawful fees and disbursements, giving notice promptly thereafter to his
16.03 -
client. He shall also have a lien to the same extent on all judgments and executions he has
secured for his client as provided for in the Rules of Court."
Both parties failed to apprise this Court of the final disposition of Civil Case No. 283, even as the Court
took note of the RTC decision in said case where a finding was made that the land earlier sold by the
Avellanosas to Dumadag is separate and distinct from the one (1) hectare portion sold by the Avellanosas
to Astudillo. However, the RTC in its decision also ordered co-defendant (herein respondent) Atty.
Lumaya to pay the plaintiff (herein complainant) the sum of P4,344.00 he (Atty. Lumaya) had received
from Deputy Sheriff Rogelio Dongiapon for herein complainant.

Therefore, even as respondent consistently denied liability to Dumadag, his former client, the records
abundantly point to his receipt of and failure to deliver the amount of P4,344.00 to his client, the herein
complainant, a clear breach of the canons of professional responsibility.

ACCORDINGLY, the Court hereby SUSPENDS Atty. Ernesto Lumaya INDEFINITELY from the
practice of law effective from date of his receipt of this resolution.

Let this resolution be served personally on the respondent at his given address of record and entered in his
record as attorney. Let the IBP and the Court Administrator be furnished also a copy of this resolution for
their information and guidance as well as for circularization to all courts in the country.

SO ORDERED.

Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla,
Bidin, Sarmiento, Griño-Aquino, Medialdea, Regalado, and Davide, Jr., JJ., concur.
In re Attorney FELIX P. DAVID, petitioner.

The respondent, Felix P. David, a member of a Philippine Bar, is charged with the malpractice for
misappropriating funds entrusted to him by his client, the complainant Briccio S. Henson. Respondent
having answered denying the charge, the complaint was referred to the Solicitor General for investigation.
After the investigation the Solicitor General rendered his report finding the respondent guilty of
professional misconduct and recommending disciplinary action. The Solicitor General reports the
following facts to have been conclusively established:

. . . that on February 15, 1947, respondent obtained P840 from his client Briccio Henson to be
applied to the payment of inheritance and real estate taxes due from the estate of Esteban Henson
for 1945, 1946 and 1947 (p. 3, t. s. n.), for which he signed a receipt (Annex 'A'; p. 3, t. s. n.). On
several occasions, complainant asked the respondent to show him the official tax receipt
evidencing the payment of said taxes, to which the latter answered that he had already paid them,
but the receipts were left with his friend in San Fernando. Respondent promised to give the
receipt later. Complainant waited patiently for it but it was never delivered. After the respondent
had failed to deliver the receipt, complainant became suspicious and inquired from the provincial
treasurer of Pampanga about the matter. Said official gave the information that the taxes were
never paid. Consequently, complainant requested the respondent to refund the money given him
for the payment of said taxes (p. 7, t. s. n., OSG), but he failed to do so. Respondent made several
promises to return the money which he never complied. Neither had he done anything to transfer
the titles of the land in the name of the heirs of Esteban Henson up to the present (p. 9, t. s. n.). In
view of this failure of the respondent, the complainant was ultimately forced to pay the taxes out
of his own pocket (p. 8, t.s.n.).

Required to answer the complaint formulated by the Solicitor General on the basis of his report,
respondent failed to do so. And despite due notice he likewise failed to appear at the hearing before this
Court. Indeed, we note from the Solicitor General's report that respondent, instead of welcoming every
opportunity for hearing, seems to have wanted to avoid it. On this point the report says:

At the hearing held on May 26, 1948, both parties appeared and the complainant had testified, the
hearing was set for continuance the following day. Both parties agreed in the presence of the
investigator to postpone said hearing for June 5, 1948. On June 5, 1948, complainant appeared,
but respondent did not show up, so to give the respondent a chance, the investigator postponed
the continuation of the hearing to June 17. Both parties were duly subpoenaed (attached to the
records). On June 15th, respondent sent a letter (attached to the records) to Assistant Solicitor
General Ruperto Kapunan, asking that the hearing be postponed to June 25, 1948. According to
the request, both parties were again duly subpoenaed for June 25, 1948 (attached to the record).
In the subpoena sent to respondent, his attention was invited to Rule 127, section 28, of the Rules
of Court, which provides that if he fails to appear and answer the charge, the Solicitor in charge
will proceed to hear the case ex parte. In spite of this, on the morning of June 25, he again sent
another letter (attached to the records) to Assistant Solicitor General Kapunan, asking that the
hearing be transferred to July 7, or 8, 1948. In order that the respondent be given all the chances
to defend himself, his request was granted. In the subpoena sent him setting the hearing for July
8, 1948, as requested, the following remark was stated:

Failure on your part to appear will cause the investigator to proceed with the investigation and to
file the corresponding recommendation to the Supreme Court. No further postponement will be
entertained.
 It is worthwhile mentioning that every time the case was set for hearing the complainant made his
appearance.

On the morning of July 8, 1948, both parties appeared; respondent made a formal request in
person to the investigator asking that the hearing be postponed to 2 o'clock p.m. of the same day.
Out of consideration to him, even to the discomfiture of complainant, respondent's request was
again granted. But contrary to his assurance, the respondent again failed to appear.

There is no question that respondent received from complainant the sum of P840 for the specific
purpose of applying the same to the payment of taxes due from the estate which he was engaged
to settle. The receipt which he issued for said amount as well as for the sum of P110 and a sack of
rice paid to him for his expenses and fee reads as follows: . . .

February 15, 1947.

Received from Mr. Briccio S. Henson the sum of eight hundred and forty (P840) pesos to
be paid as follows:

P210 -Inheritance tax of the heirs of the late Don Esteban

Henson.

P630 -Land taxes for 1945-1947.

Failure on my part to deliver to him the official receipts corresponding to the above
mentioned amount, I promise to return to him the whole amount of P840 not later than
April 16, 1947 without any obligation on his part.

A separate amount of one hundred and ten (P110) pesos and a sack of rice was paid to me
for my expenses and fee.

(Sgd.) Atty. FELIX DAVID.

Respondent did not care to testify. But through his unverified answer, he would make it appear that he
was entitled to and had been promised a legal fee for his services and that, as this promise was not
complied with, he "saw it fit to withhold said amount (the P840 for taxes) until he is paid." This
explanation is obviously an afterthought and clearly unfounded. For the established fact is that respondent
at first made complainant believe that the sum in question had already been applied by him to the
payment of taxes, and, as testified to by complainant, for the little that respondent was able to do in
connection with the case entrusted to him, he has already received his fee as shown by the above-copied
receipt. The conclusion is therefore irresistible that respondent misappropriated the money of his client.
This makes him guilty of unprofessional conduct.

In view of the gravity of the misconduct committed, the respondent Felix P. David is hereby ordered
suspended from the practice of law for a period of five years from the date this decision become final,
without prejudice to a more severe action if the sum misappropriated is not refunded within one month
from the same date.
Regino Aro vs Arsenio Nañawa

In 1964, Luis and Pablo Magtibay engaged the services of Atty. Regino Aro in a partition case. The
Magtibays have no money to pay Atty. Aro and so a contingent fee agreement was reduced in writing.
Atty. Aro did his part in prosecuting the case. Later, Atty. Aro was able to negotiate a proposed amicable
settlement whereby the opposing party agreed to pay P3,000.00 to the Magtibays. Atty. Aro then advised
his clients to meet with the other party but unfortunately, the Magtibays were not able to do so.
Later in October 1964, Atty. Aro received an order from the trial judge (Judge Arsenio Nañawa) which
stated that the case has been dismissed because the Magtibays had already entered into an amicable
settlement (extrajudicial settlement) with the other party. Atty. Aro opposed the dismissal on the ground
that such extrajudicial settlement without his assistance was fraudulent because it deprived him of the
contingent fees.
The Magtibay’s contended that it is their right to settle the case amicably even without the assistance of
Atty. Aro and that it is also their right to withdraw the services of Atty. Aro even before the case is
settled. The judge agreed with the Magtibays.
ISSUE: Whether or not Atty. Aro is entitled to attorney’s fees.
HELD: Yes. It is true that a client can withdraw the services of his counsel at any time provided the same
is grounded on valid reasons. It is also true that a client can enter into an amicable settlement with the
opposing party even without the assistance of counsel. However, if such is an attempt to defraud or if it is
a collusive agreement to deprive the lawyer of his attorney’s fees, then the courts can intervene to protect
the lawyers, who are officers of the court.
In this case, it is undisputed that there is already a written agreement as to Atty. Aro’s fees (the contingent
fee agreement). Fraud is apparent in this case because it appears that the amicable settlement initially
secured by Atty. Aro for the Magtibays is better than that secured by the Magtibays without the assistance
of Aro. Besides, there was no justifiable reason as to why the Magtibays dismissed the services of Aro. It
was through Aro’s effort that the Magtibay’s right to the disputed property was finally recognized by the
other party (who was actually their aunt).
ROSARIO JUNIO, complainant, vs. ATTY. SALVADOR M. GRUPO, respondent.

DECISION
MENDOZA, J.:

This is a complaint for disbarment filed against Atty. Salvador M. Grupo for malpractice and gross
misconduct.
Complainant Rosario N. Junio alleged that

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

4. On 21 August 1995, [complainant] entrusted to [respondent] the amount of P25,000.00 in cash to be

used in the redemption of the aforesaid property. Respondent received the said amount as evidenced by an
acknowledgment receipt, a copy of which is being hereto attached as Annex A.

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

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

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

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

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

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

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

9. . . . [T]he family of the complainant and that of the respondent were very close and intimate with each
other. Complainant, as well as two of her sisters, had served respondents family as household helpers for
many years when they were still in Manila, and during all those times they were treated with respect,
affection, and equality. They were considered practically part of respondents own family.

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

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

....

Of course, respondent accepts his fault, because, indeed, there were occasions when complainants sisters
came to respondent to ask for the payment in behalf of complainant, and he could not produce the money
because the circumstances somehow, did not allow it. [I]t does not mean that respondent will not pay, or
that he is that morally depraved as to wilfully and deliberately re[nege] in his obligation towards the
complainant.[2]

Complainant filed a reply denying that respondent informed her of his failure to redeem the property
and that respondent requested her to instead lend the money to him.[3]
The case was thereafter referred to the Integrated Bar of the Philippines (IBP) for investigation,
report, and recommendation. However, while two hearings were set for this purpose, both were postponed
at the instance of respondent. For this reason, on August 28, 2000, complainant asked the Investigating
Commissioner[4] to consider the case submitted for decision on the basis of the pleadings theretofore
filed. Respondent was required to comment on complainants motion, but he failed to do so. Consequently,
the case was considered submitted for resolution.
In his report, dated January 5, 2001, the Investigating Commissioner found respondent liable for
violation of Rule 16.04 of the Code of Professional Responsibility which forbids lawyers from borrowing
money from their clients unless the latters interests are protected by the nature of the case or by
independent advice. The Investigating Commissioner found that respondent failed to pay his clients
money. However, in view of respondents admission of liability and plea for magnanimity, the
Investigating Commissioner recommended that respondent be simply reprimanded and ordered to pay the
amount of P25,000.00 loan plus interest at the legal rate.
In its Resolution No. XIV-2001-183, dated April 29, 2001, the IBP Board of Governors adopted and
approved the Investigating Commissioners findings. However, it ordered

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

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

(a) there was no actual hearing of the case wherein respondent could have fully ventilated and
defended his position;
 (b) the subject Resolution gravely modified the Report and Recommendation of the Trial
Commissioner, Hon. Pedro Magpayo, Jr., . . . such that the resultant sanctions that are
ordered imposed are too leonine, unjust and cruel;
(c) that the factual circumstances attending the matter which gave rise to the complaint were not
rightly or fairly appreciated.[5]
He argues that the Court should adopt the report and recommendation of the IBP Investigating
Commissioner.
In its resolution of August 15, 2001, the Court resolved to treat respondents motion for
reconsideration as a petition for review of IBP Resolution No. XIV 2001-183 and required complainant to
comment on the petition.
In her comment, complainant states that her primary interest is to recover the amount of P25,000.00
with interest and that she is leaving it to the Court to decide whether respondent deserves the penalty
recommended by the IBP.[6]
The Court resolves to partially grant the petition. In his report and recommendation, Investigating
Commissioner Magpayo, Jr. made the following findings:

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

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

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

Respondent takes further refuge in the intimate and close relationship existing between himself and the
complainants family on the basis of which his legal services were purely gratuitous or simply an act of a
friend for a friend with no consideration involved. Unfortunately, his efforts to redeem the foreclosed
property, as already stated, did not produce the desired result because the mortgagee would not budge
anymore and would not accept the sum offered.

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

Granting to the respondent the benefit of the doubt, we shall assume that there was in reality a loan in the
amount of P25,000.00. This is likewise confirmed by the execution of a promissory note on 12 December
1996 by the respondent who undertook to pay Mrs. Junio on or before January 1997 (Annex B of
complaint). Moreover, the demand letter of 12 March 1998 (Annex B) mentions of reimbursement of the
sum received and interest of 24% per annum until fully paid giving the impression that the funds
previously intended to be used for the repurchase of a certain property (Annex A of complaint) was
converted into a loan with the consent of the complainant who gave way to the request of the respondent
to help defray his childrens educational expenses (par. 8 of Answer).
Be that as it may, the duty and obligation to repay the loan remains unshaken. Having utilized the sum to
fulfill his urgent need for some money, it is but just and proper that he return the amount borrowed
together with interest.

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

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

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

Having gained dominance over the complainant by virtue of such long relation of master and servant, the
respondent took advantage of his influence by not returning the money entrusted to him.Instead, he
imposed his will on the complainant and borrowed her funds without giving adequate security therefor
and mindless of the interest of the complainant.

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

It would indeed appear from the records of the case that respondent was allowed to borrow the
money previously entrusted to him by complainant for the purpose of securing the redemption of the
property belonging to complainants parents. Respondent, however, did not give adequate security for the
loan and subsequently failed to settle his obligation. Although complainant denied having loaned the
money to respondent, the fact is that complainant accepted the promissory note given her by respondent
on December 12, 1996. In effect, complainant consented to and ratified respondents use of the money. It
is noteworthy that complainant did not attach this promissory note to her complaint nor explain the
circumstances surrounding its execution. She only mentioned it in her demand letter of March 12, 1998
(Annex B), in which she referred to respondents undertaking to pay her the P25,000.00 on or before
January 1997. Under the circumstances and in view of complainants failure to deny the promissory note,
the Court is constrained to give credence to respondents claims that the money previously entrusted to
him by complainant was later converted into a loan.
Respondents liability is thus not for misappropriation or embezzlement but for violation of Rule
16.04 of the Code of Professional Responsibility which forbids lawyers from borrowing money from their
clients unless the latters interests are protected by the nature of the case or by independent advice. In this
case, respondents liability is compounded by the fact that not only did he not give any security for the
payment of the amount loaned to him but that he has also refused to pay the said amount. His claim that
he could not pay the loan because circumstances . . . did not allow it and that, because of the passage of
time, he somehow forgot about his obligation only underscores his blatant disregard of his obligation
which reflects on his honesty and candor. A lawyer is bound to observe candor, fairness, and loyalty in all
his dealings and transactions with his client.[8]
 Respondent claims that complainant is a close personal friend and that in helping redeem the
property of complainants parents, he did not act as a lawyer but as a friend, hence there is no client-
attorney relationship between them. This contention has no merit. As explained in Hilado v. David,[9]

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

Considering the foregoing, the Investigating Commissioners recommendation to impose on

respondent the penalty of reprimand and restitution of the amount loaned by him is clearly inadequate. On
the other hand, the penalty of indefinite suspension with restitution imposed by the IBP Board of
Governors is too harsh in view of respondents apparent lack of intent to defraud complainant and of the
fact that this appears to be his first administrative transgression. It is the penalty imposed in Igual v.
Javier[10] which applies to this case. In that case, this Court ordered the respondent suspended for one
month from the practice of law and directed him to pay the amount given him by his clients within 30
days from notice for his failure to return the money in question notwithstanding his admission that he did
not use the money for the filing of the appellees brief, as agreed by them, because of an alleged quarrel
with his clients.
Anent petitioners allegation regarding the lack of hearing during the IBP investigation, suffice it to
say that he waived such right when he failed to comment on petitioners motion to submit the case for
resolution on the basis of the pleadings theretofore filed despite due notice to him, not to mention the fact
that it was he who had requested the postponement of the two hearings scheduled by the Investigating
Commissioner.
WHEREFORE, the Court finds petitioner guilty of violation of Rule 16.04 of the Code of
Professional Responsibility and orders him suspended from the practice of law for a period of one (1)
month and to pay to respondent, within 30 days from notice, the amount of P25,000.00 with interest at the
legal rate, computed from December 12, 1996.
LORENZANA FOOD CORPORATION vs. ATTY. FRANCISCO L. DARIA, respondent.

Jose Feliciano Loy, Jr. for petitioners.

PER CURIAM:

The respondent lawyer, Atty. Francisco L. Daria, is administratively charged1 on two counts, to wit:

1. Negligence and

2. Betrayal of his former client's confidences.

A verified complaint dated February 22, 1985 was filed by Lorenzana Food Corporation LFC,
hereinafter), and received by the Court on February 25, 1985.2

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

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

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

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

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

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

In the meantime, on June 20, 1983, respondent received an Order in another labor case, setting
the hearing therein also on June 28, 1983 (Exh. H-6). Faced with a conflicting schedule,
respondent decided to move to postpone the hearing in the Hanopol case. However, instead of
filing a written motion for postponement, he opted to call, through his secretary, the Office of the
Labor Arbiter to move for postponement (Exh. H-5; tsn. p. 16, Dec. 9, 1985). Respondent's
telephone message apparently failed to reach the Labor Arbiter, because at the hearing on June
28, 1983, he considered the case submitted for decision on the basis of Hanopol's complaint and
affidavit (Exh. G-1). Respondent had not submitted a position paper.
After a month, on July 29, 1983, the Labor Arbiter issued a Decision directing LFC to pay
Hanopol the total sum of P6,469.60 in labor benefits, on the basis of Hanopol's evidence alone.

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

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

During the hearings in the Hanopol case on July 27, 1984 and August 8, 1984, no one appeared
for complainant.1avvphi1 So, on August 15, 1984, Hanopol filed a "Manifestation and Motion"
praying that the earlier Decision of the Labor Arbiter dated July 29, 1983 be revived. (Exh. 5).

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

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

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

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

xxx xxx xxx

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

It is the finding of the Solicitor General that this excuse by the respondent is not borne by the
Constancia5 setting the case for hearing. The Constancia clearly states: "By agreement of the parties, case
reset to June 17, 1983 at 2:00 p.m. as previously scheduled."6 Since it was signed by both Hanopol and
the respondent, the Solicitor General argues that the respondent's explanation is manifestly unsatisfactory.

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

. . . It is submitted that respondent's actuation was not warranted by the circumstances. As it

turned out, the telephone request apparently did not reach the Labor Arbiter, thereby constraining
him to declare complainant in default and render judgment against it.8

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

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

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

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

DILIGENCE

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

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

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

xxx xxx xxx

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

CANON 17 — A LAWYER OWES FIDELITY TO THE CAUSE OF HIS CLIENT AND HE

SHALL BE MINDFUL OF THE TRUST AND CONFIDENCE REPOSED IN HIM.

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

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

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

It is submitted that, apart from being a mere afterthought, respondent's explanation is

incredible.1âwphi1 His foregoing testimony is not reflected in his comment on the complaint . .
.13

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

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

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

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

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