Medina vs. Lizardo

A lawyer who accepts a subsequent engagement from a third party whose interests conflict with those of his original clients, and who withholds client property to advance the third party's claim, violates Rules 15.03 and 16.03 and Canons 16 and 17 of the Code of Professional Responsibility.

Silvestra Medina and her nephew Santos Medina Loraya were co-owners of certain parcels of land in Muntinlupa covered by TCT Nos. 13866 and 3900. Atty. Rufino C. Lizardo served as counsel for Silvestra and her late sister Alicia Medina in a partition case (Civil Case No. 18400) filed before the RTC of Makati, Branch 143. The properties were the subject of a prior CFI of Rizal decision dated May 16, 1962, based on a compromise agreement awarding Silvestra and Alicia a one-fourth share in Lots 456, 457, and 458. Silvestra and Alicia had purportedly sold their shares to Renato Martinez, who later claimed to have shouldered all legal expenses for the partition case.

Silvestra Medina, because of her advanced age, entrusted the owner's duplicate copies of TCTs Nos. 13866 and 3900 to Atty. Rufino C. Lizardo, who was her counsel and that of her late sister Alicia Medina. The titles covered Lots 456, 457, and 458 in Cupang, Muntinlupa, in which Silvestra and Alicia held a one-fourth share pursuant to a CFI of Rizal decision dated May 16, 1962 based on a compromise agreement. Atty. Lizardo received the TCTs sometime in 1987 in connection with the filing of a complaint for partition docketed as Civil Case No. 18400 before the RTC of Makati, Branch 143, where he was counsel of record for Silvestra and Alicia. Martinez was not named as a party in the complaint.

According to Atty. Lizardo, Silvestra and Alicia had sold their shares in the lots to Renato Martinez, who allegedly shouldered all legal expenses for the partition case. After Alicia's death, her heirs executed an Extrajudicial Settlement With Sale dated July 16, 1992, conveying their shares in TCTs Nos. 3900 and 13866 to Martinez and his spouse for ₱150,000.00. Atty. Lizardo notarized this document. Complainants, however, claimed they did not read the Extrajudicial Settlement because they trusted Atty. Lizardo to sell only one parcel of land covering 1,000 square meters to Martinez, and that they did not notice that Lot 456 covered by TCT No. 3900 was included in the sale.

When complainants learned that the sheriff was implementing the writ of execution issued in Civil Case No. 18400, they demanded the return of the two TCTs from Atty. Lizardo. On March 5, 2011, complainants went to Atty. Lizardo's residence and requested the return of the TCTs, but he refused, claiming that complainants did not secure the written consent of Martinez. Complainants thereafter filed a complaint with the IBP Commission on Bar Discipline, praying that Atty. Lizardo be ordered to turn over the TCTs to Silvestra. Atty. Lizardo argued that the Commission had no jurisdiction because the complaint involved an action for specific performance, and that Martinez was also his client in the partition case. The Investigating Commissioner found that Atty. Lizardo represented conflicting interests and allowed himself to be used by Martinez in deceiving the complainants, recommending a two-year suspension. The IBP Board of Governors adopted this recommendation and, on reconsideration, added a directive to return the TCTs.

• Jurisdiction of the IBP: Complainants maintained that the IBP Commission on Bar Discipline has jurisdiction over the complaint, as it covers transactions committed by lawyers either in their personal or professional capacity.
• Conflict of Interest: Complainants argued that as their lawyer, Atty. Lizardo should have protected their interests and legal rights, and should not have favored Martinez, who allegedly shouldered all legal expenses. They asserted that Atty. Lizardo was lawyering for them and at the same time lawyering for Martinez's interest.
• Deceit in the Extrajudicial Settlement: Complainants claimed they did not read the Extrajudicial Settlement With Sale because they trusted Atty. Lizardo to sell only one parcel of land to Martinez, and that they did not notice that Lot 456 was included in the sale.
• Fabrication of Martinez's Engagement: Complainants expressed that Atty. Lizardo's allegations that Martinez was also his client and that Silvestra and the heirs of Alicia appeared before him on July 16, 1992 were fabrications and mere afterthoughts.

• Lack of Jurisdiction: Atty. Lizardo argued that the Commission on Bar Discipline has no jurisdiction to hear and decide the complaint since it involves an action for specific performance.
• No Conflict of Interest: Atty. Lizardo claimed that Silvestra, Alicia, and Martinez all engaged his services to file the partition case, and that they all had the same interest in the outcome — the eventual transfer of the shares of Silvestra and Alicia to Martinez. He argued that Martinez shouldered the expenses and appeared in every hearing.
• Justification for Withholding TCTs: Atty. Lizardo refused to return the TCTs because complainants did not secure the written consent of Martinez, and that after the signing of the Extrajudicial Settlement With Sale, he received instructions from Martinez to hold the TCTs for transfer in the latter's name.
• Denial of Deceit: Atty. Lizardo denied that the Extrajudicial Settlement With Sale was signed during the wake of Alicia, claiming that its preparation, execution, signing, and notarization were all done in his office on July 16, 1992, beyond the period of the wake.

• Jurisdiction: Whether the IBP Commission on Bar Discipline has jurisdiction over the complaint.
• Conflict of Interest: Whether Atty. Lizardo represented conflicting interests in violation of Rule 15.03 of the Code of Professional Responsibility.
• Duty to Deliver Client Property: Whether Atty. Lizardo was obligated to return the TCTs to complainants under Canon 16, Rule 16.03, and Canon 17 of the Code of Professional Responsibility.
• Deceit: Whether Atty. Lizardo engaged in deceit in the execution of the Extrajudicial Settlement With Sale in violation of Canon 1, Rule 1.01 and Canon 7, Rule 7.03.
• Penalty: Whether the recommended two-year suspension is the appropriate penalty.

• Jurisdiction: Yes. The IBP Commission on Bar Discipline, as the investigating body of the IBP and the Supreme Court, has jurisdiction over all cases involving lawyers, covering transactions committed either in their personal or professional capacity.
• Conflict of Interest: Yes. Atty. Lizardo represented conflicting interests by accepting a subsequent engagement from Martinez against his original clients without the written consent of all parties after full disclosure, in violation of Rule 15.03.
• Duty to Deliver Client Property: Yes. Atty. Lizardo was obligated to deliver the TCTs to his clients upon demand under Canon 16, Rule 16.03, and Canon 17, and his withholding of the titles to protect another purported client constituted a clear violation.
• Deceit: Not ruled upon. The Court declined to pass upon the finding of deceit in the execution of the Extrajudicial Settlement With Sale, holding that the matter of fraud must first be threshed out by the parties in the appropriate proceedings.
• Penalty: No, two years is excessive. Suspension from the practice of law for one year was deemed sufficient, considering that Atty. Lizardo's conduct, while reprehensible, was not at par with that in Villanueva vs. Gonzales, and there was insufficient basis to hold him liable for deceit at this point.

• Jurisdiction: The IBP Commission on Bar Discipline's jurisdiction covers all cases involving lawyers, including transactions committed either in their personal or professional capacity. Atty. Lizardo's contention that the complaint was merely an action for specific performance was rejected because the core issue was his conduct as a lawyer in withholding client property and representing conflicting interests.

• Conflict of Interest: The test for conflict of interest is whether, in behalf of one client, it is the lawyer's duty to fight for an issue or claim, but it is his duty to oppose it for the other client. The rule applies regardless of the degree of adverse interests and covers not only cases involving confidential communications but also those where no confidence has been bestowed. Complainants Silvestra and Santos, on one hand, and Martinez, on the other, had conflicting interests regarding Lot 456 covered by TCT No. 3900, which complainants asserted they never sold to Martinez. Atty. Lizardo found himself arguing against the ownership by Silvestra and Santos of their shares in the disputed property — the very legal position he was bound to defend as their counsel. His claim that Martinez concurrently engaged his services was belied by the record: the complaint for partition named only Silvestra and Alicia as plaintiffs, with no mention of Martinez, and Atty. Lizardo never impleaded Martinez even after Alicia's death and the execution of the Extrajudicial Settlement. His admission that he received instructions from Martinez to hold the TCTs after the signing of the Extrajudicial Settlement confirmed a subsequent engagement adverse to his original clients, requiring written consent of all parties after full disclosure — a requirement he clearly failed to procure.

• Duty to Deliver Client Property: As counsel for Silvestra and Alicia, Atty. Lizardo was required to deliver the property of his clients when due or upon demand under Rule 16.03, and to owe them fidelity and vigilance under Canon 17. His withholding of the TCTs entrusted to him by his clients to protect another purported client who surreptitiously acquired his services despite a conflict of interest constituted a clear violation of these provisions. The return of the TCTs was upheld and would not unduly prejudice Martinez, who may cause his adverse claim to be duly annotated thereon.

• Deceit: The Investigating Commissioner found that Atty. Lizardo allowed himself to be used by Martinez to deceive the complainants into selling three parcels of land when they intended to sell only one. The Court refrained from ruling on this finding because the matter of fraud in the execution of the Extrajudicial Settlement With Sale, which would have implications on its validity and legal effects, must first be threshed out by the parties in the appropriate proceedings.

• Penalty: The IBP recommended a two-year suspension, the same penalty imposed in Villanueva vs. Gonzales. The Court found that Atty. Lizardo's conduct, while reprehensible, was not at par with that in Villanueva, where the lawyer not only withheld the TCT but also avoided the client for three years, failed to file an answer, and repeatedly failed to appear at mandatory conferences. Given the insufficient basis to hold Atty. Lizardo liable for deceit at this stage, a lighter penalty of one-year suspension was deemed sufficient.

• Conflict of Interest — There is conflict of interest when a lawyer represents inconsistent interests of two or more opposing parties. The test is whether, in behalf of one client, it is the lawyer's duty to fight for an issue or claim, but it is his duty to oppose it for the other client. The rule covers not only cases in which confidential communications have been confided but also those in which no confidence has been bestowed. It also applies when a lawyer represents a client against a former client in a controversy related, directly or indirectly, to the subject matter of the previous litigation. The rule applies regardless of the degree of adverse interests. A lawyer may only represent a client involving the same or a substantially related matter materially adverse to a former client if the former client consents after consultation. In this case, Atty. Lizardo's subsequent engagement by Martinez to hold the TCTs against the interest of his original clients Silvestra and Santos, without written consent of all parties after full disclosure, constituted a violation of Rule 15.03.

• Duty to Deliver Client Property — Under Canon 16 and Rule 16.03, a lawyer shall hold in trust all moneys and properties of the client and shall deliver the funds and property of the client when due or upon demand, subject to a lien for lawful fees and disbursements. Under Canon 17, a lawyer owes fidelity to the cause of the client and must be mindful of the trust and confidence reposed in him. Atty. Lizardo's withholding of the TCTs entrusted by his clients to protect another purported client's interest was a clear violation of these provisions.

• "There is conflict of interest when a lawyer represents inconsistent interests of two or more opposing parties. The test is 'whether or not in behalf of one client, it is the lawyer's duty to fight for an issue or claim, but it is his duty to oppose it for the other client. In brief, if he argues for one client, this argument will be opposed by him when he argues for the other client.'" — This passage states the canonical formulation of the conflict-of-interest test applied in this case, frequently cited in subsequent legal ethics jurisprudence.

• "Another test of the inconsistency of interests is whether the acceptance of a new relation will prevent an attorney from the full discharge of his duty of undivided fidelity and loyalty to his client or invite suspicion of unfaithfulness or double dealing in the performance thereof." — This articulates an alternative test for conflict of interest, emphasizing undivided fidelity and loyalty as the core of the lawyer-client relationship.

• "The rule prohibiting conflict of interest applies to situations wherein a lawyer would be representing a client whose interest is directly adverse to any of his present or former clients. It also applies when the lawyer represents a client against a former client in a controversy that is related, directly or indirectly, to the subject matter of the previous litigation in which he appeared for the former client." — This defines the scope of the prohibition on conflict of interest, extending it to representation adverse to former clients in related matters.

• Hornilla vs. Salunat, 453 Phil. 108 (2003) — Cited for the test in determining whether conflicting interests are being represented; the formulation was adopted as the controlling standard in this case.
• Mabini Colleges, Inc. vs. Pajarillo, A.C. No. 10687, July 22, 2015, 763 SCRA 288 — Cited for the rule that the prohibition on conflict of interest applies to representation against a former client in a controversy related to the subject matter of previous litigation, regardless of the degree of adverse interests.
• Villanueva vs. Gonzales, 568 Phil. 379 (2008) — Cited as the case imposing the same penalty recommended by the IBP (two-year suspension); distinguished by the Court because the lawyer's misconduct in Villanueva was more egregious, justifying a lighter penalty of one year for Atty. Lizardo.

• Rule 15.03, Canon 15, Code of Professional Responsibility — Provides that a lawyer shall not represent conflicting interests except by written consent of all concerned given after a full disclosure of the facts. Applied to find Atty. Lizardo liable for accepting Martinez's engagement against his original clients without such consent.
• Canon 16, Code of Professional Responsibility — Provides that a lawyer shall hold in trust all moneys and properties of the client that may come into his possession. Applied to find Atty. Lizardo liable for withholding the TCTs.
• Rule 16.03, Canon 16, Code of Professional Responsibility — Provides that a lawyer shall deliver the funds and property of the client when due or upon demand, subject to a lien for lawful fees and disbursements. Applied to order the return of the TCTs to complainant Silvestra Medina.
• 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. Applied to find Atty. Lizardo's withholding of client property a breach of fidelity.
• Canon 1, Rule 1.01 and Canon 7, Rule 7.03, Code of Professional Responsibility — Prohibit unlawful, dishonest, immoral, or deceitful conduct and conduct adversely reflecting on fitness to practice law. The Court declined to apply these provisions, finding insufficient basis to hold Atty. Lizardo liable for deceit at this stage.

Sereno, C.J. (Chairperson); Carpio, J.; Velasco, Jr., J.; Peralta, J.; Bersamin, J.; Del Castillo, J.; Mendoza, J.; Reyes, J.; Perlas-Bernabe, J.; Leonen, J.; Jardeleza, J.; Caguioa, J. — All concurred in the decision.