Besa-Edelmaier vs. Arevalo

A lawyer who accepts attorney's fees but neglects to file the very case for which he was engaged, fails to issue receipts for amounts received, initially denies receipt of client funds, and unjustifiably withholds reimbursement until threatened with disbarment is guilty of violating Canons 16 and 18 of the Code of Professional Responsibility, warranting suspension from the practice of law rather than disbarment where mitigating circumstances obtain.

Complainant Marie Judy Besa-Edelmaier, then an employee of the Bank of the Philippine Islands (BPI), had receivables of approximately P10,000,000.00 from MR Knitwear Specialist Phil., Inc., a BPI client, arising from transactions in which she supplied foreign currency to MR Knitwear with interest. She engaged respondent Atty. Restituto M. Arevalo, then a senior official of the Philippine Long Distance Telephone Company (PLDT), to pursue a collection suit against MR Knitwear. Respondent was subject to a PLDT prohibition against its lawyers handling external cases — a restriction he confirmed but did not explain why he disregarded.

In February 2003, Marie Judy Besa-Edelmaier, then an employee of the Bank of the Philippine Islands (BPI), engaged the legal services of Atty. Restituto M. Arevalo, then a senior official of the Philippine Long Distance Telephone Company (PLDT), to pursue a monetary claim of approximately P10,000,000.00 against MR Knitwear Specialist Phil., Inc. (MR Knitwear). The receivables arose from several transactions under which Besa-Edelmaier supplied foreign currency to MR Knitwear, a BPI client, with interest. Atty. Arevalo accepted the engagement and pegged his legal fees at P1,000,000.00, covering services up to the appellate level, to which Besa-Edelmaier agreed. Atty. Arevalo demanded an advance payment of P900,000.00, purportedly to be turned over to his law firm.

In March 2003, Besa-Edelmaier paid P800,000.00 in cash to Atty. Arevalo, and in April 2003, she deposited P100,000.00 to his bank account. On both occasions, Atty. Arevalo did not issue receipts. Over the following months, several meetings ensued in which Besa-Edelmaier constantly followed up on the filing of a collection suit against MR Knitwear. Atty. Arevalo, however, claimed that delaying the filing was more prudent because MR Knitwear could file a counterclaim for overcharged interest payments and apprise BPI about Besa-Edelmaier's side business of supplying foreign currency to a BPI client without the bank's knowledge, thereby threatening her employment and retirement benefits.

By October 2003, Atty. Arevalo had filed no case, prompting Besa-Edelmaier to terminate his services and seek reimbursement of the P900,000.00 paid. Atty. Arevalo paid no heed to the demand. In January 2004, Besa-Edelmaier, through counsel, sent a letter requesting a detailed breakdown of legal services rendered and time spent, acknowledging that Atty. Arevalo was at least entitled to attorney's fees on a quantum meruit basis. Thereafter, IBP-CBD Commissioner Siegfred B. Mison sent a letter to Atty. Arevalo pursuing the request and warning that his conduct could constitute a gross violation of the Canons of Professional Ethics and/or the Code of Professional Responsibility.

A month after receiving the letter, Atty. Arevalo met Besa-Edelmaier, accompanied by Atty. Yasay-Murillo, at a coffee shop in Makati City. In that meeting, Atty. Arevalo refused to acknowledge receipt of the P800,000.00 cash, although he admitted receiving the P100,000.00 deposit. When asked about legal actions undertaken, he claimed to have sent demand letters but could not produce copies. He also confirmed that PLDT prohibited its lawyers from handling external cases but did not explain why he disregarded the restriction.

In February 2007, Besa-Edelmaier filed an administrative complaint before the IBP-CBD charging Atty. Arevalo with grave misconduct. In his Position Paper, Atty. Arevalo averred that he assisted Besa-Edelmaier in her separation from BPI without dishonorable dismissal, attended to a demand letter from MR Knitwear seeking return of overcharged interest and threatening estafa charges, and coordinated with Besa-Edelmaier upon his return from the USA. He claimed he agreed to file the collection case and advised Besa-Edelmaier to prepare filing fees, but never heard from her again until receiving the demand for reimbursement. During the pendency of his motion for reconsideration before the IBP, Atty. Arevalo returned the P900,000.00 to Besa-Edelmaier by issuing several checks, which she substantially encashed. Complainant's counsel later moved to withdraw appearance, stating that complainant had moved out of her known address and had not communicated with him for a long time; complainant never filed the comment directed by the Court.

• Grave Misconduct: Complainant charged respondent with grave misconduct for willfully neglecting to diligently pursue the case against MR Knitwear despite advance payment of P900,000.00, and sought the penalty of suspension or disbarment.
• Demand for Reimbursement: Complainant demanded reimbursement of the P900,000.00 paid as attorney's fees, respondent having rendered no meaningful legal service, and requested a detailed breakdown of services rendered and time spent to determine attorney's fees on a quantum meruit basis.

• No Deliberate Neglect: Respondent averred that he never deliberately neglected his duty of diligence and competence to complainant, and that his inaction was part of a prudent legal strategy to avoid a counterclaim and potential estafa charges from MR Knitwear.
• Legal Services Rendered: Respondent claimed he assisted complainant in her separation from BPI without dishonorable dismissal, attended to MR Knitwear's demand letter, and coordinated with complainant upon his return from the USA; he agreed to file the collection case but never heard from complainant again until the demand for reimbursement.
• Reasonableness of Fees: Respondent argued that the P1,000,000.00 as attorney's fees was reasonable.
• Excessive Penalty: Respondent contended that even assuming he could be faulted, the penalty of disbarment was too harsh.
• Unlawful Scheme: Respondent espoused the view that the case was an unlawful scheme on the part of the complainant.

• Administrative Liability: Whether respondent should be held administratively liable for his conduct toward complainant.
• Appropriate Penalty: Whether disbarment, as recommended by the IBP Board of Governors, is the appropriate penalty or whether a lesser sanction is warranted.

• Administrative Liability: Yes. Respondent was found guilty of violating Canons 16 and 18 of the Code of Professional Responsibility for neglecting the legal matter entrusted to him, failing to keep the client informed, failing to issue receipts, initially denying receipt of client funds, and unjustifiably withholding reimbursement despite demand.
• Appropriate Penalty: No, disbarment is too severe. Suspension from the practice of law for two years is the appropriate penalty, given that this is respondent's first infraction on record, he had reimbursed the full amount albeit belatedly, and complainant had effectively abandoned the proceedings.

• Administrative Liability: The Court found that respondent's actions fell short of the standards imposed upon members of the bar. Despite receiving P900,000.00 in attorney's fees, respondent failed to institute the collection suit against MR Knitwear — the very purpose for which he was engaged. His justification that delaying the filing was a prudent strategy was rejected for two reasons: first, he never properly discussed this strategy with complainant or sought her perspective; second, he never performed any preparatory act such as preparing or sending a demand letter to MR Knitwear, and only raised the strategy when confronted about his inaction. His claim that the strategy benefited complainant was speculative, as the decisions of BPI and MR Knitwear not to file cases were their own prerogatives, not influenced by respondent. The Court identified specific violations: Canon 18, Rules 18.03 and 18.04, for neglecting the legal matter and failing to keep the client informed; Rule 16.03, for unjustified failure to reimburse despite consistent demand; and Rule 16.01, for failing to issue receipts and initially denying receipt of the P800,000.00 cash. The Court characterized respondent's conduct as audacious — perpetrating the wrong of non-issuance of receipts to justify another wrong, the initial refusal to acknowledge and reimburse the money. The belated return of P900,000.00 did not exonerate respondent, as it was made only after the IBP Board of Governors approved the recommendation for disbarment; had it not been for the danger of losing his privilege to practice law, he would not have returned the money.

• Appropriate Penalty: While the IBP recommended disbarment, the Court found this too severe and harsh under the circumstances. Case law is replete with instances where lawyers committing similar acts against their clients warranted suspension rather than disbarment. In Rollon vs. Naraval, Small vs. Banares, Jinon vs. Jiz, Segovia-Ribaya vs. Lawsin, and Go vs. Buri, the Court imposed suspensions of one to two years for comparable misconduct — failure to render legal service after receiving payment, failure to file cases, and negligence in handling client affairs. The Court considered three mitigating circumstances: first, this was respondent's first infraction on record; second, respondent had actually reimbursed the entire amount, albeit belatedly; and third, complainant had effectively abandoned the administrative case after receiving the money, as shown by her failure to participate meaningfully in the proceedings before the Court. Accordingly, a penalty of suspension for two years was deemed justified.

• Presumption of Innocence in Disbarment Proceedings — An attorney enjoys the legal presumption of innocence of the charges against him until the contrary is proved, and as an officer of the Court is presumed to have performed his duties in accordance with his oath. The quantum of proof is substantial evidence, and the burden of proof is on the complainant. The power to disbar must be exercised with great caution and should be imposed only in clear cases of misconduct that seriously affect the standing and character of the lawyer as an officer of the court and member of the bar, or where misconduct borders on the criminal or is committed under scandalous circumstances.

• Duty of Fidelity Arising from Acceptance of Fees — Acceptance of money from a client establishes an attorney-client relationship and gives rise to the duty of fidelity to the client's cause. Once a lawyer agrees to handle a case, he must undertake the task with zeal, care, and utmost devotion. Every case which a lawyer accepts deserves full attention, diligence, skill, and competence, regardless of its importance.

• Belated Restitution Does Not Exonerate — A lawyer's return of client funds after disciplinary proceedings have been initiated and an adverse recommendation issued does not exonerate him from administrative liability, particularly where the return was motivated by the threat of losing the privilege to practice law rather than by genuine remorse or sense of obligation.

• "When a lawyer takes a client's cause, he covenants that he will exercise due diligence in protecting the latter's rights." — This states the foundational duty of diligence arising from the attorney-client relationship, which respondent was found to have breached by failing to file the collection suit.

• "Acceptance of money from a client establishes an attorney-client relationship and gives rise to the duty of fidelity to the client's cause. Indeed, every case which a lawyer accepts deserves full attention, diligence, skill, and competence, regardless of its importance." — This defines the scope of a lawyer's duty upon accepting a case and receiving payment, a formulation frequently cited in legal ethics jurisprudence.

• "On this score, respondent's ensuing return of the entire amount of P900,000.00 to the complainant cannot exonerate him from administrative liability. Notably, he returned the money after the IBP Board of Governors had approved the Report and Recommendation of Commissioner Cachapero to disbar him. In sooth, had it not been for the danger of losing his privilege of practicing law, he would not have done the same. This act should never be countenanced." — This establishes the principle that belated restitution motivated by self-preservation does not absolve a lawyer of administrative liability, and that such conduct should not be countenanced by the Court.

• Rollon vs. Naraval, 493 Phil. 24 (2005) — Lawyer suspended for two years for failing to render any legal service after receiving money from the complainant and for failing to return the money and documents received. Followed as precedent for imposing suspension rather than disbarment for comparable misconduct.
• Small vs. Banares, 545 Phil. 226 (2007) — Lawyer suspended for two years for failing to file a case for which he received P80,000.00 from the client. Followed as comparable precedent supporting suspension.
• Jinon vs. Jiz, 705 Phil. 321 (2013) — Lawyer suspended for two years for failing to perform what was needed by the client. Followed as comparable precedent.
• Segovia-Ribaya vs. Lawsin, 721 Phil. 44 (2013) — Lawyer suspended for one year for failure to perform obligations under a retainership agreement. Followed as comparable precedent.
• Go vs. Buri, A.C. No. 12296, December 4, 2018 — Lawyer suspended for two years for negligence in handling client's affairs. Followed as comparable precedent.

• Canon 16, Code of Professional Responsibility — Governs a lawyer's duty to hold in trust all moneys and properties of a client. Applied to respondent's failure to account for and timely return client funds.
• Rule 16.01, Code of Professional Responsibility — Requires a lawyer to account for all money or property collected or received for or from the client. Applied to respondent's failure to issue receipts and his initial denial of receiving P800,000.00 in cash.
• Rule 16.03, Code of Professional Responsibility — Requires a lawyer to deliver funds and property of the client when due or upon demand, subject to a lien for lawful fees. Applied to respondent's unjustified failure to reimburse amounts paid despite consistent demand from complainant.
• Canon 18, Code of Professional Responsibility — Requires a lawyer to serve his client with competence and diligence. Applied to respondent's failure to file the collection suit he was engaged to pursue.
• Rule 18.03, Code of Professional Responsibility — Prohibits a lawyer from neglecting a legal matter entrusted to him; negligence renders him liable. Applied to respondent's failure to institute the collection case against MR Knitwear.
• Rule 18.04, Code of Professional Responsibility — Requires a lawyer to keep the client informed of the status of the case and respond within a reasonable time to requests for information. Applied to respondent's failure to inform complainant of the status and his reasons for not filing the case.

Gesmundo, C.J., Leonen, SAJ., Caguioa, Hernando, Inting, Zalameda, M. Lopez, Gaerlan, Rosario, J. Lopez, Marquez, Kho, Jr., and Singh, JJ., concurred. Lazaro-Javier took no part.