Cerilla vs. Lezama

A special power of attorney authorizing a lawyer to appear in an ejectment case and to enter into an amicable settlement does not include the authority to sell the client’s real property; entering into a compromise sale without express authority violates Canons 5, 15, and 17 of the Code of Professional Responsibility.

Complainant Luzviminda S. Cerilla was one of the co-owners of a 730-square-meter parcel of land in Barangay Poblacion, Municipality of Sibulan, Negros Oriental, covered by TCT No. 1-20416 and registered in the name of Fulquerio Gringio. The property was later sold by Gringio’s sole heir, Pancracio A. Gringio, to the heirs of Fabio Solmayor, including complainant. Complainant engaged respondent Atty. Samuel SM. Lezama to file an unlawful detainer case against Carmelita S. Garlito and executed a Special Power of Attorney dated December 27, 2004 in his favor. The Code of Professional Responsibility, particularly Canons 5, 15, and 17, governs a lawyer’s competence, candor, fairness, loyalty, fidelity, and trust toward the client.

Complainant Luzviminda S. Cerilla was one of the co-owners of a 730-square-meter parcel of land in Barangay Poblacion, Municipality of Sibulan, Negros Oriental, covered by TCT No. 1-20416 and registered in the name of Fulquerio Gringio. The property was later sold by Gringio’s sole heir, Pancracio A. Gringio, to the heirs of Fabio Solmayor, including complainant. Because complainant was then working at Camp Aguinaldo, Quezon City, she engaged respondent Atty. Samuel SM. Lezama to file an unlawful detainer case against Carmelita S. Garlito before the Municipal Trial Court of Sibulan, Negros Oriental. On December 27, 2004, she executed a Special Power of Attorney in respondent’s favor to (1) represent and act on her behalf in filing an ejectment case against Lita Garlito of Sibulan, Negros Oriental, and (2) appear on her behalf during the preliminary conference in Civil Case No. 497-04 and make stipulations of facts, admissions, and other matters for the early resolution of the case, including amicable settlement if necessary.

On January 31, 2005, acting on the basis of that SPA, respondent entered into a Compromise Agreement with the defendant in the unlawful detainer case. Paragraph 2 of the agreement stated that the plaintiff was willing to sell the property to the defendant for ₱350,000.00 within three months from February 1, 2005 to April 30, 2005, payable in one setting. The MTC approved the Compromise Agreement in an Order dated January 31, 2005. Because complainant refused to execute a Deed of Sale, a Motion for Execution dated June 2, 2005 was filed for failure to comply with the terms of the compromise agreement, and the MTC issued a Writ of Execution on June 10, 2005.

Complainant contended that respondent misrepresented in paragraph 2 of the Compromise Agreement that she was willing to sell the property for ₱350,000.00. She averred that she did not authorize respondent to sell the property and was not willing to sell it at that amount, especially because there were other co-owners. She asserted that the property is located near the Municipal Hall and town plaza of Sibulan, Negros Oriental, with a market value of not less than ₱1,500,000.00, and that its sale for only ₱350,000.00 caused actual loss to her and the other co-owners. According to complainant, respondent’s act of entering into the compromise agreement without her consent or conformity, and with the misrepresentation that she was willing to sell, caused her material damage and warranted suspension or disbarment.

Respondent denied misrepresenting complainant’s willingness to sell. He claimed that he was armed with an SPA to enter into a compromise agreement and that ₱350,000.00 was the actual price paid by complainant to the owner of the property. He stated that the SPA was executed because complainant could not attend every hearing; that it contained the phrase “including amicable settlement of the case if necessary”; that during the preliminary conference he asked Presiding Judge Rafael Cresencio C. Tan, Jr. to allow him to contact complainant by mobile phone before any compromise, tried several times without success, and requested a resetting, but the judge insisted on a compromise agreement because respondent had the SPA; that after signing he contacted complainant, who objected because the amount was small; that he wrote a letter of repudiation to defendant’s counsel, filed a Manifestation dated February 24, 2005 attaching the repudiation, and filed a Motion to Set Aside Order and to Annul Compromise Agreement on the ground of mistake, which the MTC denied in an Order dated May 30, 2005, and his motion for reconsideration was also denied. He further stated that in 2006 the heirs of Favio Solmayor filed another unlawful detainer case over the same property against the same defendant, which was dismissed on the ground of res judicata, and that in 2008 complainant filed a civil case for annulment of judgment/quieting of title, recovery of possession, and damages against Carmelita S. Garlito, respondent Atty. Lezama, and the MTC of Sibulan, Negros Oriental, which remained pending before the Regional Trial Court of Dumaguete City, Branch 35, Negros Oriental. He also stated that the ₱350,000.00 payment was under the custody of the MTC of Sibulan, deposited with the Philippine Veterans Bank by Carmelita S. Garlito, who opened an account in respondent’s name, and that he never touched the deposit.

Respondent maintained that the SPA was sufficient authority; that ₱350,000.00 was the price complainant paid to the Gringio family; and that he entered the compromise under the honest and sincere belief that it was the fairest and most equitable arrangement. He invoked the policy that parties should endeavor to settle their differences amicably and argued that penalizing lawyers for judgment calls where they are armed with authority to settle would make them hesitant and apprehensive, and that disciplinary complaints should be anchored only on the most serious misconduct, which he believed was absent. During the mandatory conference before the IBP Commission on Bar Discipline, however, respondent admitted that complainant did not give him any instruction to sell the property prior to the execution of the compromise agreement and that he acted on his own belief. The Investigating Commissioner also found that respondent knew of the co-ownership because of the Extrajudicial Settlement of Estate, and the transcript of the preliminary conference showed that it was respondent who stated that the plaintiff was willing to sell the property and who fixed the selling price at ₱350,000.00.

• Lack of Authority to Sell: Complainant argued that although she executed an SPA in respondent’s favor, it granted no specific authority to sell the subject property for ₱350,000.00; respondent entered the compromise agreement without her consent or special authority.
• Misrepresentation and Gross Misconduct: Complainant contended that respondent misrepresented in paragraph 2 of the Compromise Agreement that she was willing to sell the property, thereby committing gross misconduct in the discharge of his duties to his client.
• Prejudice and Loss: Complainant asserted that respondent’s misconduct was the proximate cause of the loss of the subject property in the ejectment case, prejudicing her and the other co-owners, since the property’s market value was not less than ₱1,500,000.00 and it was sold for only ₱350,000.00.
• Penalty: Complainant maintained that respondent’s act, which caused her material damage, warranted his suspension or disbarment.

• Authority Under the SPA: Respondent denied misrepresentation and argued that he was duly armed with an SPA to enter into a compromise agreement, which contained the phrase “including amicable settlement of the case if necessary.”
• No Cause of Action / Procedural History: Respondent contended that complainant had no cause of action because the SPA was executed due to her inability to attend hearings; he tried to contact her before the compromise but failed; the judge insisted on a compromise; he later repudiated the agreement and filed a Manifestation and a Motion to Set Aside Order and to Annul Compromise Agreement on mistake; another unlawful detainer case was dismissed on res judicata; and a civil case for annulment of judgment/quieting of title was pending.
• Price and Custody of Payment: Respondent argued that ₱350,000.00 was the actual price paid by complainant to the owner of the property and that the payment was under the custody of the MTC of Sibulan, deposited with the Philippine Veterans Bank by Carmelita S. Garlito in respondent’s name, which he never touched.
• Honest Belief and Settlement Policy: Respondent maintained that he entered the compromise agreement under the honest and sincere belief that it was the fairest and most equitable arrangement, and that penalizing lawyers for judgment calls where they are armed with authority to settle would harm the litigation system; disciplinary complaints should be based only on the most serious misconduct, absent here.

• Scope of Authority Under the SPA: Whether the SPA granted by complainant to respondent authorized him to enter into a compromise agreement selling her property for ₱350,000.00.
• Violation of the Code of Professional Responsibility: Whether respondent’s act of entering into the compromise agreement without authority and representing that complainant was willing to sell the property violated Canons 5, 15, and 17 of the Code of Professional Responsibility.
• Penalty: Whether respondent should be suspended from the practice of law for two years.

• Scope of Authority Under the SPA: No. The SPA authorized representation in the ejectment case and amicable settlement, but nowhere expressly authorized respondent to compromise on the sale of the property or to sell it.
• Violation of the Code of Professional Responsibility: Yes. Respondent acted beyond the scope of his authority and violated Canons 5, 15, and 17 of the Code of Professional Responsibility.
• Penalty: Yes. Suspension from the practice of law for two years, with a stern warning, was imposed.

• Scope of Authority Under the SPA: The SPA authorized respondent to represent complainant in filing the ejectment case and “[t]o appear on [complainant’s] behalf during the preliminary conference in said ejectment case and to make stipulations of fact, admissions and other matters for the early resolution of the case, including amicable settlement of the case if necessary.” The Court found that nowhere in the SPA was respondent expressly authorized to compromise on the sale of the property or to sell complainant’s property. Respondent himself admitted during the mandatory conference that complainant did not instruct him to sell the property before the compromise agreement and that he acted on his own belief. Because the SPA did not contain the power to sell, respondent clearly acted beyond the scope of his authority when he entered the compromise agreement selling the property to Carmelita S. Garlito.
• Violation of the Code of Professional Responsibility: Respondent’s justification of honest belief did not persuade because it prejudiced his client: the property she was not willing to sell was sold at a price respondent decided on his own, causing complainant and her co-owners to file further cases to recover it. He overlooked that he was not authorized to sell. Canon 5 requires lawyers to keep abreast of legal developments and, as reiterated in Hernandez vs. Atty. Padilla, to obey the laws, promote respect for law and legal processes, be well-informed of existing laws, and be conversant with basic legal principles; failure may lead to mistakes. Canon 15 requires candor, fairness, and loyalty in all dealings with the client. Canon 17 requires fidelity to the client’s cause and mindfulness of the trust and confidence reposed. The Court sustained the IBP’s finding that respondent violated Canons 15 and 17, and also found him guilty under Canon 5.
• Penalty: The Court sustained the IBP Board of Governors’ recommendation that respondent be penalized with suspension from the practice of law for two years. It found him guilty of violating Canons 5, 15, and 17 and sternly warned that repetition of the same or similar offense would be dealt with more severely.

• Special Power of Attorney; Authority to Sell or Compromise Sale — A special power of attorney must expressly confer the power to sell or to compromise the sale of a client’s real property. An SPA that authorizes a lawyer merely to represent the client in an ejectment case and to make stipulations, admissions, and amicable settlement does not include authority to sell the client’s property. In this case, because the SPA did not contain the power to sell, respondent acted beyond the scope of his authority in entering a compromise agreement that sold complainant’s property.
• Lawyer’s Duty of Candor, Fairness, and Loyalty (Canon 15) — A lawyer shall observe candor, fairness, and loyalty in all dealings and transactions with the client. Respondent violated this duty by entering into a compromise agreement that misrepresented complainant’s willingness to sell the property and by binding her to a sale she did not authorize.
• Lawyer’s Duty of Fidelity and Trust (Canon 17) — A lawyer owes fidelity to the cause of the client and must be mindful of the trust and confidence reposed in him. Respondent betrayed that trust by acting beyond the SPA and selling the client’s property without her knowledge or authority.
• Lawyer’s Duty of Competence and Obedience to Law (Canon 5) — A lawyer must obey the laws, promote respect for law and legal processes, be well-informed of existing laws, and keep abreast of legal developments and jurisprudence. Failure to comply may lead to mistakes. Respondent overlooked the basic requirement that he needed express authority to sell the property.
• Amicable Settlement Policy Does Not Excuse Unauthorized Sale — The policy encouraging amicable settlement of cases does not authorize a lawyer to sell a client’s property without the client’s consent or express authority. An honest belief that settlement is equitable does not excuse an unauthorized compromise that prejudices the client.

• "Nowhere is it expressly stated in the SPA that respondent is authorized to compromise on the sale of the property or to sell the property of complainant." — This states the Court’s core ruling on the scope of the SPA and is the basis for finding respondent acted beyond his authority.
• "As the SPA granted to him by the complainant did not contain the power to sell the property, respondent clearly acted beyond the scope of his authority in entering into the compromise agreement wherein the property was sold to the defendant Carmelita S. Garlito." — This applies the rule to the facts and establishes the principal basis for the disciplinary liability.
• "However, his justification does not persuade, because his alleged honest belief prejudiced his client, since the property she was not willing to sell was sold at a price decided upon by respondent on his own, which caused his client and her co-owners to file further cases to recover their property that was sold due to respondent's mistake." — This rejects respondent’s honest-belief defense and explains why the unauthorized compromise warranted discipline.
• "The Court sustains the recommendation of the IBP Board of Governors that respondent be penalized with suspension from the practice of law for a period of two (2) years." — This states the penalty imposed and the Court’s agreement with the IBP recommendation.

• Hernandez vs. Atty. Padilla, 688 Phil. 329 (2012) — Cited by the Court for the obligations of lawyers under Canon 5: the primary duty to obey the laws, promote respect for law and legal processes, be well-informed of existing laws, keep abreast of legal developments, and be conversant with basic legal principles; failure may lead to mistakes.
• Dulalia, Jr. vs. Cruz, 550 Phil. 409, 420 (2007) — Cited in Hernandez vs. Atty. Padilla for the same Canon 5 obligations of lawyers.

• Canon 5, Code of Professional Responsibility — Requires a lawyer to keep abreast of legal developments, participate in continuing legal education, support efforts to achieve high standards in law schools and practical training, and assist in disseminating information regarding law and jurisprudence. The Court found respondent violated this Canon by overlooking the lack of authority to sell.
• Canon 15, Code of Professional Responsibility — Provides that a lawyer shall observe candor, fairness, and loyalty in all dealings and transactions with the client. Respondent violated this Canon by entering the unauthorized compromise agreement and misrepresenting complainant’s willingness to sell.
• Canon 17, Code of Professional Responsibility — Provides that a lawyer owes fidelity to the cause of the client and shall be mindful of the trust and confidence reposed in him. Respondent violated this Canon by acting beyond the SPA and binding complainant to a sale without her authority.
• Rule 139-B, Rules of Court — Cited as the basis for the transmittal of the documents of the case by the Director for Bar Discipline to the Supreme Court for final action.

Chief Justice Maria Lourdes P.A. Sereno; Associate Justices Antonio T. Carpio; Presbitero J. Velasco, Jr.; Teresita J. Leonardo-De Castro; Lucas P. Bersamin; Mariano C. Del Castillo; Estela M. Perlas-Bernabe; Marvic M.V.F. Leonen; Francis H. Jardeleza; Alfredo Benjamin S. Caguioa; Samuel R. Martires; Noel Gimenez Tijam; Andres B. Reyes, Jr.; Alexander G. Gesmundo. No separate concurring opinions are summarized in the text.