Bataan Shipyard and Engineering Company Inc. vs. Atty. Anthony Jay B. Consunji

A lawyer who receives money from a client, whether as professional fees or in trust for the payment of taxes and other obligations, must account for and liquidate such money, and must return any excess compensation when the legal services contracted for are not completed. Failure to do so constitutes a gross violation of the fiduciary duty owed to the client and warrants the ultimate penalty of disbarment.

BASECO is a stock corporation engaged in the leasing of real properties for pier and port operations, ship docking, provisioning, and cargo handling. Atty. Consunji served as its legal counsel from 2005 to 2011. The relationship was governed by the Code of Professional Responsibility, which imposes upon lawyers a highly fiduciary duty to account for all money or property collected or received for or from the client, and to serve the client with competence and diligence.

BASECO is a stock corporation engaged in the leasing of real properties for pier and port operations, ship docking, provisioning, and cargo handling. Atty. Consunji served as its legal counsel from 2005 to 2011. During his engagement, Atty. Consunji received several cash advances purportedly as payment for professional fees and taxes due to the government from BASECO, totaling P20,593,781.42. These advances consisted of: P1,150,000.00 for SEC registration of a joint venture corporation and other SEC registration expenses; P4,350,000.00 for payment of transfer taxes to the Province of Bataan, capital gains tax, documentary stamp tax, and registration fees; P7,962,781.42 for payment of documentary stamp tax, capital gains tax, and other BIR expenses; P51,000.00 for preparation and filing expenses for Articles of Incorporation and By-laws of Bataan-Baseco Joint Venture Inc.; P110,000.00 as advances for professional fees for re-issuance of Engineering Island titles; P500,000.00 for representation regarding issuance of new titles at Engineering Island; P1,020,000.00 as professional fee for reconstitution of Engineering Island title; P850,000.00 as professional fee for titling of four parcels of land in Engineering Island; P1,600,000.00 for representation regarding reconstitution of Engineering Island titles; and P3,000,000.00 for representation regarding titling of four parcels of land in Engineering Island.

Out of these cash advances, Atty. Consunji received P4,350,000.00 as representation fees for the titling of the four parcels of unregistered land and P2,730,000.00 as professional fees for the reconstitution of the lost titles of BASECO, both in Engineering Island. He also received P12,312,781.42 as payments for the taxes due to the government on certain transactions of BASECO. These payments were evidenced by payment vouchers submitted by BASECO.

BASECO averred that Atty. Consunji failed to liquidate or account for the advanced professional fees and taxes he received, and failed to render the professional services he was supposed to provide, which included the titling of unregistered lands and reconstitution of lost titles in Engineering Island. He also failed to submit the Official Receipts of the several taxes he paid to the Province of Bataan and the Bureau of Internal Revenue, and did not issue Official Receipts to BASECO with respect to the professional fees paid to him. BASECO further contended that it was able to successfully secure the re-issuance or reconstitution of the subject titles with the help of other lawyers, instead of Atty. Consunji, for only P200,000.00.

On December 14, 2012, BASECO sent a demand letter to Atty. Consunji asking for accounting, liquidation, and refund or reimbursement of the cash advances he received, but he failed to heed the demand. BASECO then filed charges against Atty. Consunji and its other former directors, officers, and employees for plunder and violation of R.A. 3019 before the Office of the Ombudsman, docketed as OMB-C-C-13-0429. After another demand went unheeded, BASECO filed the instant administrative complaint.

In his Comment, Atty. Consunji denied the charges, arguing that all cash advances were liquidated and accounted for, with liquidation documents submitted to the Finance Department of BASECO, and that all funds released to him were duly approved by the Board of Directors with the knowledge of the PCGG Comptroller. He submitted the affidavits of former BASECO President Proceso L. Maligalig, Treasurer Agustiniana Avelino, and Finance Branch Chief Socorro Santos to support his defense. In his Position Paper before the IBP, he cited the Ombudsman Resolution in OMB-C-C-13-0429 acquitting him of plunder and violation of Section 3(e) of R.A. 3019 for lack of substantial proof, and argued that he tried to obtain records from the Finance Department but all documents were seized by the PCGG on June 23, 2011. BASECO did not file a position paper before the IBP, as notices were returned unserved with a notation that the complainant had moved out.

On March 21, 2011, BASECO and Atty. Consunji entered into a Memorandum of Agreement wherein Atty. Consunji obligated himself to process the registration of the untitled parcels of land of BASECO in Engineering Island, for which he was entitled to an acceptance fee of P1,200,000.00 plus a success-contingent fee of 25% of the fair market value of the properties successfully registered and titled, payable only upon delivery of the certificates of title. It was not disputed that Atty. Consunji failed to deliver the certificates of title for the four parcels of unregistered land, yet he received P4,350,000.00 as compensation. Similarly, he received P2,730,000.00 for the reconstitution of lost titles but failed to accomplish the reconstitution.

• Failure to Account and Liquidate: BASECO contended that it was incumbent upon Atty. Consunji to account for and liquidate the cash advances he received, and that his failure to produce any objective or documentary proof of accounting and liquidation suggested that he did not actually account for and liquidate the cash advances.
• Failure to Render Services: BASECO argued that Atty. Consunji did not deny his failure to complete the reconstitution of the land titles in Engineering Island, for which he was paid, and that he must return or refund the professional fees he received in relation thereto.
• Substantial Evidence: BASECO maintained that it proved by substantial evidence that Atty. Consunji committed acts in violation of his duties and obligations as a member of the Bar under the CPR.

• Liquidation Completed: Atty. Consunji argued that all the cash advances he received were liquidated and well accounted for, and that he submitted all liquidation documents to the Finance Department of BASECO.
• Board Approval: He averred that all funds released to him were duly approved by the Board of Directors and with the knowledge of the PCGG Comptroller, supported by the affidavits of former BASECO President Maligalig, Treasurer Avelino, and Finance Branch Chief Santos.
• PCGG Seizure: He argued that he could not obtain access to the accounting and liquidation reports he submitted because all documents and records of BASECO were seized by the PCGG on June 23, 2011.
• Prior Acquittal: He cited the Ombudsman Resolution in OMB-C-C-13-0429 acquitting him of plunder and violation of Section 3(e) of R.A. 3019 for lack of substantial proof.
• Substantial Preparatory Work: He claimed, corroborated by Maligalig's affidavit, that he accomplished substantial preparatory works but was prevented from completing the same due to lack of relocation surveys and the seizure of records by PCGG.

• Violation of Rule 16.01, Canon 16: Whether Atty. Consunji violated his duty to account for all money or property collected or received for or from his client under Rule 16.01, Canon 16 of the CPR.
• Violation of Rules 18.01 and 18.03, Canon 18: Whether Atty. Consunji violated his duty to serve his client with competence and diligence under Rules 18.01 and 18.03, Canon 18 of the CPR by failing to complete the legal services for which he was paid.

• Violation of Rule 16.01, Canon 16: Yes. Atty. Consunji violated Rule 16.01, Canon 16 of the CPR. He failed to provide evidence showing that he accounted for and liquidated the cash advances he received from BASECO, and his general, unsubstantiated explanations and failure to keep copies of receipts led the Court to believe that no actual accounting and liquidation was done.
• Violation of Rules 18.01 and 18.03, Canon 18: Yes. Atty. Consunji violated Rules 18.01 and 18.03, Canon 18 of the CPR. He received millions in legal compensation but failed to fulfill his obligation to process the registration of untitled lands and reconstitution of lost titles, and he retained excess compensation instead of returning it upon nonfulfillment of his engagement.

• Violation of Rule 16.01, Canon 16: The relationship between a lawyer and his client is highly fiduciary and prescribes great fidelity and good faith. Money entrusted to a lawyer for a specific purpose but not used for that purpose should be immediately returned. A lawyer's failure to return, upon demand, funds held on behalf of a client gives rise to the presumption that he appropriated the same for his own use. Atty. Consunji's explanation of liquidation was general and lacked substantiation — he merely stated that receipts were turned over to the Finance Department without specifying the OR numbers per transaction, the dates of turnover, or the officers who received them. He issued only acknowledgment receipts instead of official receipts for professional fees and did not retain copies for his records. It is incumbent upon a lawyer to keep records of transactions with clients as a matter of prudence and due diligence. The claim that records were seized by PCGG deserved scant consideration because Atty. Consunji could have requested the IBP or the Court to order production of these records pursuant to Rules 21 and 27 of the Rules of Court, and the IBP Investigators have the power to issue subpoenas under Sections 8 and 9 of Rule 139-B. The affidavits of former BASECO officers were insufficient: Santos, the Finance Branch Chief, had no statement indicating she received accounting and liquidation reports from Atty. Consunji, and the Joint Affidavit of Maligalig and Avelino was self-serving. Under the Rules of Evidence, the original documents must be presented, and the exception under Section 3(b) of Rule 130 could not apply because Atty. Consunji failed to avail of his legal remedy to require production of the documents.
• Violation of Rules 18.01 and 18.03: Atty. Consunji received P4,350,000.00 for the titling of four parcels of unregistered land but failed to deliver the certificates of title. Under the MOA dated March 21, 2011, the success-contingent fee of 25% of the fair market value was due only upon delivery of the certificates of title. He also received P2,730,000.00 for the reconstitution of lost titles but failed to accomplish the reconstitution. The affidavit of Maligalig stating that Atty. Consunji made substantial preparatory works was self-serving — had he really done substantial work, he could have submitted documentary or object evidence to support his claim. The act of receiving money as acceptance fee and subsequently failing to render the services is a clear violation of Canon 18. The Court noted that BASECO was able to process the reconstitution of the lost titles with the help of another lawyer for only P200,000.00, while Atty. Consunji charged P2,730,000.00 for the same engagement and failed to accomplish it. Atty. Consunji's acts were so reprehensible and disgraceful, demonstrating his moral unfitness and unsuitability to discharge the duties of a lawyer, warranting the ultimate penalty of disbarment.

• Fiduciary duty of lawyers over client's money — The relationship between a lawyer and client is highly fiduciary, imposing upon the lawyer the duty to account for all money or property collected or received for or from the client. A lawyer's failure to return, upon demand, funds held on behalf of a client gives rise to the presumption that he appropriated the same for his own use in violation of the trust reposed in him. This constitutes a gross violation of general morality and professional ethics, impairing public confidence in the legal profession.
• Duty to keep records of client transactions — It is incumbent upon a lawyer to keep records of transactions with clients as a matter of prudence and due diligence. Ethical and practical considerations require lawyers to issue receipts to their clients, even if not demanded, and to keep copies of said receipts for their own records. A lawyer's only means of ensuring accountability is by issuing and keeping receipts.
• Quantum meruit in attorney's fees — Where a lawyer fails to complete a legal engagement, he may only retain compensation based on the principle of quantum meruit, or in accordance with the customary fees actually paid for the transaction. In this case, the Court allowed Atty. Consunji to retain P200,000.00 for the reconstitution engagement, consistent with the amount BASECO actually paid another lawyer for the successful reconstitution.
• Substantial evidence in administrative disciplinary proceedings — In administrative or disciplinary proceedings against lawyers, the burden of proving the allegations rests on the complainant, and a finding of guilt must be supported by substantial evidence — that evidence which a reasonable mind might accept as adequate to establish a conclusion. The standard is satisfied when there is reasonable ground to believe that the respondent is responsible for the misconduct complained of, even if such evidence might not be overwhelming or even preponderant.

• "Money entrusted to a lawyer for a specific purpose but not used for the purpose should be immediately returned. A lawyer's failure, to return upon demand, the funds held by him on behalf of his client gives rise to the presumption that he has appropriated the same for his own use in violation of the trust reposed in him by his client." — This passage articulates the core fiduciary principle applied in finding Atty. Consunji liable under Rule 16.01, Canon 16, and is the canonical formulation of a lawyer's duty over client funds.
• "It is incumbent upon a lawyer to keep records of his transactions with clients as a matter of prudence and due diligence. Ethical and practical considerations require lawyers to issue receipts to their clients, even if it was not demanded, and to keep copies of the said receipts for his own records." — This states the duty of record-keeping that Atty. Consunji failed to observe, forming the basis for the finding that no actual accounting and liquidation was done.
• "The act of receiving money as acceptance fee for legal services in handling complainant's case and subsequently failing to render such services is a clear violation of Canon 18 of the CPR which provides that a lawyer shall serve his client with competence and diligence." — This states the ratio decidendi for the finding of liability under Canon 18, establishing that failure to render services after receiving payment constitutes a violation of the duty of competence and diligence.

• Atty. Navarro vs. Atty. Meneses III, 349 Phil. 520 (1998) — Controlling precedent for disbarment where a lawyer failed to account for money received from a client. The Court ordered disbarment after the lawyer kept P50,000.00 entrusted to him even after the settlement for which it was given did not materialize, indicating unfitness for the confidence and trust reposed on him.
• Sison vs. Atty. Camacho, 777 Phil. 1 (2016) — Followed for disbarment where a lawyer violated Rules 1.01 and 16.01 of the CPR by entering into a compromise agreement without client authority and failing to account for P1,288,260.00 intended for payment of additional docket fees.
• Mariveles vs. Atty. Mallari, 292 Phil. 34 (1993) — Followed for disbarment where a lawyer failed to file the client's appellant's brief despite several extensions, demonstrating appalling indifference and lack of responsibility to the courts and client.
• Enriquez vs. Atty. Lavadia, 760 Phil. 1 (2015) — Followed for disbarment where a lawyer failed to file several pleadings resulting in an adverse decision against the client, revealing a nonchalant attitude to the client's cause in violation of Rule 18.03, Canon 18.
• Minas vs. Doctor, Jr., A.C. No. 12660, January 28, 2020 — Cited for the proposition that the highly fiduciary nature of the lawyer-client relationship imposes upon the lawyer the duty to account for money or property collected or received for or from the client.
• Tarog vs. Atty. Ricafort, 660 Phil. 618 (2011) — Cited for the duty of lawyers to issue receipts to clients and keep copies for their own records.
• Huang vs. Zambrano, A.C. No. 12460, March 26, 2019 — Cited for the principle that the appropriate penalty for a delinquent lawyer depends on the exercise of sound judicial discretion based on surrounding facts.
• Re: Allegations Made Under Oath at the Senate Blue Ribbon Committee Hearing, 743 Phil. 622 (2014) — Cited for the standard of substantial evidence in administrative disciplinary proceedings.

• Rule 16.01, Canon 16, Code of Professional Responsibility — Provides that a lawyer shall account for all money or property collected or received for or from the client. Applied to find Atty. Consunji liable for failing to account for and liquidate the P12,312,781.42 in tax payments and other cash advances he received from BASECO.
• Rule 18.01, Canon 18, Code of Professional Responsibility — Provides that a lawyer shall not undertake a legal service which he knows or should know that he is not qualified to render. Applied in the context of Atty. Consunji's failure to complete the legal services he undertook.
• Rule 18.03, Canon 18, Code of Professional Responsibility — Provides that a lawyer shall not neglect a legal matter entrusted to him, and his negligence in connection therewith shall render him liable. Applied to find Atty. Consunji liable for failing to complete the titling and reconstitution engagements despite receiving full compensation.
• Section 3(b), Rule 130, Rules of Court — Provides the exception to the original document rule, allowing secondary evidence in certain cases. The Court held this exception could not apply because Atty. Consunji failed to avail of his legal remedy to require BASECO or PCGG to produce the documents purportedly in their custody.
• Rules 21 and 27, Rules of Court — Provide for the production of documents in the custody of another party. The Court noted Atty. Consunji could have availed of these remedies to obtain the liquidation records he claimed were seized by PCGG.
• Sections 8 and 9, Rule 139-B, Rules of Court — Grant IBP Investigators the power to issue subpoenas, take depositions, and administer oaths. The Court noted Atty. Consunji failed to avail of these remedies to compel production of the records.

Gesmundo, C.J., Perlas-Bernabe, Leonen, Caguioa, Hernando, Carandang, Lazaro-Javier, Inting, Zalameda, M. Lopez, Gaerlan, Rosario, J. Lopez, Dimaampao, and Marquez, JJ., concurred.