Arroyo-Posidio vs. Vitan

A lawyer who receives client funds for a specific purpose and fails to perform the agreed service must immediately return the money upon demand; failure to do so, coupled with issuance of a bouncing check and disobedience to a final court order, warrants suspension from the practice of law.

Celia Arroyo-Posidio was the client of Atty. Jeremias R. Vitan in Special Proceeding No. C-525, a testate estate matter before the Regional Trial Court of Caloocan City. The lawyer-client relationship and the funds entrusted for contemplated legal services form the context of the administrative complaint. The governing standards are the lawyer’s oath and the Code of Professional Responsibility.

Celia Arroyo-Posidio engaged the services of Atty. Jeremias R. Vitan in Special Proceeding No. C-525, entitled “Testate Estate of deceased Nicolasa S. de Guzman Arroyo,” filed before the Regional Trial Court of Caloocan City. Complainant paid respondent legal fees of ₱20,000. On June 6, 1990, respondent withdrew his appearance as counsel in the said case, and complainant engaged the services of another lawyer.

Sometime in August 1996, respondent contacted complainant and showed her documents consisting of tax declarations of properties purportedly forming part of the estate of Nicolasa S. de Guzman-Arroyo but not included in the Inventory of Properties for distribution in Special Proceeding No. C-525. He convinced complainant to file another case to recover her share in the alleged undeclared properties and demanded ₱100,000 as legal fees therefor. After several months, however, respondent failed to institute any action. Complainant decided to forego the filing of the case and asked for the return of the ₱100,000, but respondent refused despite repeated demands.

Consequently, complainant filed an action for sum of money and damages against respondent before Branch 81, Metropolitan Trial Court, Valenzuela City, docketed as Civil Case No. 7130. On March 31, 1999, the trial court rendered a decision ordering respondent to pay complainant ₱100,000 with interest at 12% per annum from September 7, 1996 until fully paid, ₱8,000 as attorney’s fees, and the cost of suit. Respondent appealed to the Regional Trial Court, which affirmed the Metropolitan Trial Court decision in toto. Complainant then filed a Motion for Issuance of a Writ of Execution, which was granted on March 19, 2001.

To satisfy the judgment against him, respondent issued Prudential Bank check number 0338742 dated May 31, 2001 in the amount of ₱120,000 in favor of complainant. Upon presentment for payment, however, the check was dishonored for the reason: ACCOUNT CLOSED. Despite a written notice of dishonor and demand dated September 3, 2001, respondent refused to honor his obligation. Hence, complainant filed the administrative complaint charging respondent with deceit, fraud, dishonesty, and commission of acts in violation of the lawyer’s oath.

Respondent denied complainant’s allegations. He admitted having received the amount of ₱100,000 but claimed that the same was partial payment for his services in Special Proceeding Case No. C-525. He further alleged that he had already paid complainant the amount of ₱150,000 as evidenced by a Receipt & Quitclaim dated August 10, 2000. The Metropolitan Trial Court found that the ₱100,000 was consideration for respondent’s representation in additional claims against the estate, not payment for prior services in Special Proceeding No. C-525; the Regional Trial Court affirmed that decision in toto. The Investigating Commissioner found respondent guilty of violating the lawyer’s oath and the Code of Professional Responsibility in defrauding his client and issuing a check without sufficient funds to cover the same.

• Deceit and Fraud: Complainant alleged that respondent engaged in deceit, fraud, dishonesty, and acts in violation of the lawyer’s oath by accepting ₱100,000 for filing additional claims against the estate, failing to institute any action, and refusing to return the money despite repeated demands.
• Dishonored Check: Complainant alleged that respondent issued Prudential Bank check number 0338742 dated May 31, 2001 for ₱120,000 to satisfy the judgment, but the check was dishonored for “ACCOUNT CLOSED,” and respondent refused to honor his obligation despite written notice and demand.
• Disobedience to Final Judgment: Complainant alleged that respondent failed to comply with the final and executory judgment in Civil Case No. 7130 ordering payment of ₱100,000 plus interest and attorney’s fees.

• Payment for Prior Services: Respondent denied complainant’s allegations and admitted receiving ₱100,000, but claimed that the amount was partial payment for his services in Special Proceeding Case No. C-525.
• Receipt and Quitclaim: Respondent alleged that he had already paid complainant ₱150,000 as evidenced by a Receipt & Quitclaim dated August 10, 2000.

• Failure to Return Client Funds: Whether respondent violated the Code of Professional Responsibility and the lawyer’s oath by failing to return the ₱100,000 upon demand after not filing the contemplated action.
• Issuance of Bouncing Check: Whether respondent’s issuance of a check drawn against a closed account constitutes willful dishonesty and immoral conduct warranting disciplinary action.
• Disobedience to Court Orders: Whether respondent’s failure to comply with the final and executory judgment in Civil Case No. 7130 constitutes willful disobedience to lawful court orders.
• Penalty: Whether the penalty of reprimand recommended by the IBP Board of Governors is commensurate to respondent’s infractions, or whether suspension is warranted.

• Failure to Return Client Funds: Yes. Respondent violated Rule 16.01, Canon 16 of the Code of Professional Responsibility and his lawyer’s oath; having received ₱100,000 for a specific purpose and failed to render the service, he was obligated to return it immediately upon demand.
• Issuance of Bouncing Check: Yes. The act of issuing a check without sufficient funds to cover it constitutes willful dishonesty and immoral conduct, undermining public confidence in law and lawyers, and is a ground for disciplinary action.
• Disobedience to Court Orders: Yes. Failure to comply with the final and executory judgment in Civil Case No. 7130 constituted willful disobedience to the court’s lawful orders, especially for a lawyer and officer of the court.
• Penalty: Suspension for one year. Reprimand was not commensurate; suspension is called for under the circumstances, with a stern warning.

• Failure to Return Client Funds: Rule 16.01, Canon 16 of the Code of Professional Responsibility requires a lawyer to account for all money or property collected or received for or from his client. Where a client gives money to his lawyer for a specific purpose, such as to file an action, appeal an adverse judgment, consummate a settlement, or pay the purchase price of a parcel of land, the lawyer should, upon failure to take such step and spend the money for it, immediately return the money to his client. Respondent received ₱100,000 as legal fees for filing additional claims against the estate of Nicolasa S. de Guzman Arroyo, but he failed to institute an action. It was therefore imperative that he immediately return the amount to complainant upon demand. Having received payment for services which were not rendered, respondent was unjustified in keeping complainant’s money. His refusal to do so despite repeated demands violated his oath where he pledges not to delay any man for money and swears to conduct himself with good fidelity to his clients. A lawyer must refrain from abusing the confidence reposed in him by his client and must be scrupulously careful in handling money entrusted to him in his professional capacity. Failure to return the money upon demand gives rise to a presumption that he has misappropriated it in violation of the trust reposed on him; conversion of client funds is a gross violation of professional ethics and a betrayal of public confidence in the legal profession.
• Issuance of Bouncing Check: Respondent issued Prudential Bank check number 0338742 dated May 31, 2001 for ₱120,000 in favor of complainant, purportedly to satisfy the judgment against him, but the check was dishonored for having been drawn against a closed account. Respondent never denied the issuance of the check or refuted complainant’s allegations regarding the same. The act of issuing a bouncing check compounded respondent’s infractions. The act of a lawyer in issuing a check without sufficient funds to cover the same constitutes willful dishonesty and immoral conduct as to undermine public confidence in law and lawyers. Such conduct indicates respondent’s unfitness for the trust and confidence reposed in him, shows such lack of personal honesty and good moral character as to render him unworthy of public confidence, and constitutes a ground for disciplinary action.
• Disobedience to Court Orders: The judgment against respondent in Civil Case No. 7130 had long become final and executory. However, up to the date of the decision, he had failed to comply with the order to pay complainant ₱100,000 as well as interest and attorney’s fees. His refusal to comply with the said order constituted a willful disobedience to the court’s lawful orders. Lawyers are particularly called upon to obey court orders and processes and are expected to stand foremost in complying with court directives, being themselves officers of the court. The issuance of the check did not cure the disobedience; its dishonor further compounded respondent’s infractions.
• Penalty: The findings of the IBP were adopted, but the penalty of reprimand was not commensurate to the gravity of the wrong committed by respondent. The ethics of the legal profession enjoin every lawyer to act with the highest standards of truthfulness, fair play, and nobility in the practice of law. Membership in the legal profession is a privilege; whenever it appears that an attorney is no longer worthy of the trust and confidence of the public, the Court has not only the right but also the duty to withdraw the privilege. A penalty of suspension is called for. In Espiritu vs. Cabredo IV, a lawyer was suspended for one year for failure to account for and return ₱51,161.00 to his client. In Reyes vs. Maglaya, a lawyer was suspended for one year for failure to return ₱1,500.00 despite numerous demands. In Castillo vs. Taguines, a lawyer was suspended for one year for failure to return ₱500.00 and for issuing a bouncing check. Accordingly, respondent was suspended for one year with a stern warning.

• Fiduciary Duty of Lawyers Over Client Funds — A lawyer is obliged to hold in trust money or property of his client that may come into his possession. He is a trustee of said funds and property and must keep the funds of his client separate and apart from his own and those of others kept by him. Money entrusted to a lawyer for a specific purpose, such as filing an action, appealing an adverse judgment, consummating a settlement, or paying the purchase price of a parcel of land, must be returned immediately to the client upon failure to take the contemplated step and spend the money for it. Failure to return the money upon demand gives rise to a presumption that the lawyer has misappropriated it in violation of the trust reposed on him; conversion of client funds is a gross violation of professional ethics and a betrayal of public confidence in the legal profession. The Court applied this doctrine because respondent received ₱100,000 for filing additional claims, failed to file any action, and refused to return the money despite repeated demands.
• Issuance of a Bouncing Check by a Lawyer — The act of a lawyer in issuing a check without sufficient funds to cover the same constitutes willful dishonesty and immoral conduct as to undermine public confidence in law and lawyers. Such conduct indicates the lawyer’s unfitness for the trust and confidence reposed in him, shows such lack of personal honesty and good moral character as to render him unworthy of public confidence, and constitutes a ground for disciplinary action. The Court applied this doctrine because respondent issued a ₱120,000 check to satisfy the judgment, but the check was dishonored for having been drawn against a closed account.
• Lawyers as Officers of the Court Must Obey Court Orders — Lawyers are particularly called upon to obey court orders and processes and are expected to stand foremost in complying with court directives, being themselves officers of the court. A lawyer should, at all times, comply with what the court lawfully requires. The Court applied this doctrine because respondent failed to comply with the final and executory judgment in Civil Case No. 7130 ordering him to pay ₱100,000 plus interest and attorney’s fees.
• Disbarment or Suspension as Withdrawal of a Privilege — Membership in the legal profession is a privilege. Whenever it is made to appear that an attorney is no longer worthy of the trust and confidence of the public, it becomes not only the right but also the duty of the Court, which made him one of its officers and gave him the privilege of ministering within its Bar, to withdraw the privilege. The Court applied this doctrine in imposing suspension rather than reprimand.

• "The ethics of the legal profession rightly enjoin every lawyer to act with the highest standards of truthfulness, fair play and nobility in the course of his practice of law." — This passage states the general ethical standard governing lawyers and introduces the Court’s basis for rejecting the recommended penalty of reprimand.
• "Rule 16.01, Canon 16 of the Code of Professional Responsibility requires the lawyer to account for all money or property collected or received for or from his client. Where a client gives money to his lawyer for a specific purpose, such as to file an action, appeal an adverse judgment, consummate a settlement, or pay the purchase price of a parcel of land, the lawyer should, upon failure to take such step and spend the money for it, immediately return the money to his client." — This is the ratio decidendi on the duty to return client funds and the controlling formulation of Rule 16.01, Canon 16.
• "The lawyer’s failure to return the money of his client upon demand gave rise to a presumption that he has misappropriated said money in violation of the trust reposed on him. The conversion by a lawyer [of] funds entrusted to him by his client is a gross violation of professional ethics and a betrayal of public confidence in the legal profession." — This passage, quoted from Barnachea vs. Quiocho, supplies the presumption of misappropriation and characterizes conversion of client funds as a gross ethical violation.
• "Time and again, we have held that the act of a lawyer in issuing a check without sufficient funds to cover the same constitutes willful dishonesty and immoral conduct as to undermine the public confidence in law and lawyers." — This passage defines the disciplinary character of a lawyer’s issuance of a bouncing check and supports the finding of an additional ground for suspension.

• Barnachea vs. Quiocho, 447 Phil. 67 (2003) — The Court relied on this case for the rule that a lawyer holds client money in trust; failure to return it upon demand gives rise to a presumption of misappropriation, and conversion of client funds is a gross violation of professional ethics and a betrayal of public confidence.
• Schulz vs. Flores, 462 Phil. 601, 612 (2003) — Cited for the rule that where a client gives money to a lawyer for a specific purpose, the lawyer must immediately return the money upon failure to take the contemplated step and spend the money for it.
• Espiritu vs. Cabredo IV, 443 Phil. 24 (2003) — Cited to support the one-year suspension imposed; the lawyer there was suspended for one year for failure to account for and return ₱51,161.00 to his client.
• Reyes vs. Maglaya, 313 Phil. 1 (1995) — Cited to support the one-year suspension; the lawyer there was suspended for one year for failure to return ₱1,500.00 despite numerous demands.
• Castillo vs. Taguines, 325 Phil. 1 (1996) — Cited to support the one-year suspension; the lawyer there was suspended for one year for failure to return ₱500.00 and for issuing a bouncing check.
• Barrios vs. Martinez, A.C. No. 4585, November 12, 2004, 442 SCRA 324, 335 — Cited for the rule that a lawyer’s act of issuing a check without sufficient funds constitutes willful dishonesty and immoral conduct undermining public confidence in law and lawyers.
• Sibulo vs. Ilagan, A.C. No. 4711, November 25, 2004, 444 SCRA 1, 7 — Cited for the principle that lawyers are particularly called upon to obey court orders and processes and are expected to stand foremost in complying with court directives.
• Frias vs. Lozada, A.C. No. 6656, December 13, 2005, 477 SCRA 393, 402 — Cited for the reminder that a lawyer should, at all times, comply with what the court lawfully requires.
• Malhabour vs. Atty. Sarmiento, A.C. No. 5417, March 31, 2006, 486 SCRA 1, 9 — Cited for the principle that membership in the legal profession is a privilege and that the Court has the right and duty to withdraw it when an attorney is no longer worthy of public trust and confidence.
• Cuizon vs. Macalino, Adm. Case No. 4334, July 7, 2004, 433 SCRA 479, 484 — Cited for the rule that conduct showing lack of personal honesty and good moral character renders a lawyer unworthy of public confidence and is a ground for disciplinary action.

• Rule 1.01, Canon I, Code of Professional Responsibility — Lawyers are prohibited from engaging in unlawful, dishonest, immoral, or deceitful conduct. The Court cited this provision in finding that respondent’s failure to return the client’s money and issuance of a bouncing check violated the ethical standards of the profession.
• Canon 18, Code of Professional Responsibility — Lawyers are mandated to serve their clients with competence and diligence. The Court cited this provision because respondent accepted ₱100,000 for additional claims but failed to institute any action.
• Rule 16.01, Canon 16, Code of Professional Responsibility — A lawyer shall account for all money or property collected or received for or from his client. Where a client gives money to his lawyer for a specific purpose, the lawyer should, upon failure to take the contemplated step and spend the money for it, immediately return the money to his client. The Court applied this provision to respondent’s retention of the ₱100,000 despite demand.
• Lawyer’s Oath — The lawyer pledges not to delay any man for money and swears to conduct himself with good fidelity to his clients. The Court found respondent’s refusal to return complainant’s money despite repeated demands to be a violation of this oath.

• Justice Ma. Alicia Austria-Martinez
• Justice Romeo J. Callejo, Sr.
• Justice Minita V. Chico-Nazario
• Justice Antonio Eduardo B. Nachura