Palalan CARP Farmers Multi-Purpose Coop vs. Atty. Elmer A. Dela Rosa

A lawyer who acts as both counsel and selling agent for a client, conceals the buyer’s identity, fails to account for proceeds, and pursues his own pecuniary interest without the client’s written consent after full disclosure commits gross misconduct and may be disbarred under Section 27, Rule 138 of the Rules of Court and the Code of Professional Responsibility.

Palalan CARP Farmers Multi-Purpose Cooperative is a cooperative that acquired a 111.4-hectare tract in Barangay Lumbia, Cagayan de Oro City through a Certificate of Land Ownership Award issued by the Department of Agrarian Reform in 1992, holding legal title on behalf of its farmer-members as beneficial owners. In 1995, Philippine Veterans Bank sued the Cooperative for annulment of its Transfer Certificate of Title No. T-170. In 1997, the Cooperative engaged Atty. Elmer A. Dela Rosa and his law office to represent it in that case under a retainer agreement providing monthly compensation and a contingent fee. The present administrative proceeding concerns his compliance with the Code of Professional Responsibility in connection with that representation and the subsequent sale of the Cooperative’s land.

Palalan CARP Farmers Multi-Purpose Cooperative was the registered owner of a 111.4-hectare tract of prime agricultural land in Barangay Lumbia, Cagayan de Oro City, covered by Transfer Certificate of Title No. T-170. It acquired the land pursuant to a Certificate of Land Ownership Award issued by the Department of Agrarian Reform in 1992 and held legal title on behalf of its members as beneficial owners. In 1995, the Cooperative was sued by Philippine Veterans Bank for annulment of TCT No. T-170 in Civil Case No. 95-086, raffled to the Regional Trial Court, Branch 41, Cagayan de Oro City. In 1997, the Cooperative engaged Respondent Atty. Elmer A. Dela Rosa and his law office to represent it in that case under a retainer agreement providing P3,339.00 a month and a contingent fee of five percent of the settlement award, sale proceeds, disturbance compensation, or fair market value of the land.

On February 12, 2000, the Cooperative executed a special power of attorney authorizing Respondent to negotiate the sale of the land, execute documents necessary to consummate the sale, open a bank account in the Cooperative’s name with its Chairperson Paz Genilla as co-signatory, and collect, accept, or demand all sale proceeds and deposit them to the Cooperative’s account. Seven years later, on June 12, 2007, the Cooperative revoked Respondent’s special power of attorney. Respondent reacted by presenting General Assembly Resolution No. 1 dated March 19, 2008, showing that members of the Cooperative’s new governing board had retained him as counsel and reconfirmed all previous authorities granted him by the General Assembly. The resolution and related resolutions appeared to have been adopted by a new set of officers led by Lino D. Sajol, while the old set led by Beverly Domo opposed Sajol’s leadership.

In Civil Case No. 95-086, the trial court rendered a Decision dated May 14, 2008, dismissing the case for lack of jurisdiction over the subject matter. Not long after, the Cooperative’s 111.1484-hectare property was sold, with Respondent brokering the sale. Reports indicated that Respondent had booked a buyer as early as February 2008, and that the sale actually took place on August 7, 2009 to Diana Biron. Respondent did not reveal to the Cooperative the circumstances surrounding the sale or the buyer’s identity, invariably claiming that he was bound to keep the buyer’s identity confidential. He did not dispute that he processed the sale and paid the farmer-beneficiaries their respective shares in the purchase price.

Believing that Respondent was engaging in conflict of interest, the Cooperative charged him with gross misconduct for multiple violations of the Code of Professional Responsibility. The administrative complaint was referred to the IBP-CBD on November 13, 2008 and docketed as CBD Case No. 08-2327. Respondent initially did not answer the complaint; he later appeared at the April 17, 2009 mandatory conference and filed a verified answer on even date. The Cooperative also initiated Civil Case No. 2010-299 before RTC Branch 17, Cagayan de Oro City, for annulment of the sale brokered by Respondent and the actions of the new governing board led by Lino D. Sajol.

The IBP-Board of Governors found that Respondent did not act with diligence and competence when he allowed Civil Case No. 95-086 to drag on for about ten years; that he violated the rule against conflict of interest by demanding that the sale be done only through his intervention; that he breached his duty to protect his client’s interest by refusing to divulge the buyer’s identity; that he verbally abused the farmer-beneficiaries; and that he improperly compelled the Cooperative to sell the land at an extremely low price of P30.00 per square meter. It concluded that Respondent preferred his own personal pecuniary interest over the interest of his client and its members. In his motion for reconsideration, Respondent asserted that the sale to the undisclosed buyer bore the board’s authorization through Lino D. Sajol’s group. The Cooperative’s then Chairperson Fernando Bermoy opposed the motion, maintaining that the bona fide Chairpersons and authorized representatives of the Cooperative from 2007 to 2010 were Beverly Domo and Perfecto Saliga, Jr., respectively; that Lino Sajol’s group had no authority to bind the Cooperative at any time between 2007 and 2010; and that Diana G. Biron actually purchased the lot. Respondent did not dispute the identification of Diana G. Biron as the buyer. The IBP-Board of Governors denied his motion for reconsideration on May 27, 2017.

• Conflict of Interest and Gross Misconduct: Complainant charged Respondent with gross misconduct for multiple violations of the Code of Professional Responsibility, believing that he was engaging in conflict of interest in connection with the sale of the Cooperative’s land.
• Opposition to Motion for Reconsideration: Through then Chairperson Fernando Bermoy, Complainant opposed Respondent’s motion for reconsideration, maintaining that the bona fide Chairpersons and authorized representatives of the Cooperative from 2007 to 2010 were Beverly Domo and Perfecto Saliga, Jr., respectively, and that Lino D. Sajol’s group had no authority to bind the Cooperative at any time between 2007 and 2010.
• Identity of Buyer: Complainant revealed that Diana G. Biron actually purchased the lot.

• Confidentiality of Buyer: Respondent claimed he was bound to keep the buyer’s identity confidential and did not reveal the circumstances surrounding the sale.
• Authorization by Sajol Group: In his motion for reconsideration, Respondent asserted that the sale of the land to the undisclosed buyer bore the board’s authorization through Lino D. Sajol’s group.
• Processing and Payment: Respondent did not dispute that he processed the sale and paid the farmer-beneficiaries their respective shares in the purchase price.
• Non-Dispute of Buyer’s Identity: Respondent did not dispute the identification of Diana G. Biron as the buyer of the land.

• Violations of CPR and Section 27, Rule 138: Whether Respondent violated Section 27, Rule 138 of the Rules of Court and Rules 1.03, 8.01, 12.04, 15.03, 16.01 and Canons 12, 15, and 17 of the Code of Professional Responsibility.
• Penalty: Whether, in the affirmative, disbarment is the appropriate penalty on Respondent.

• Violations of CPR and Section 27, Rule 138: Yes. Respondent violated several provisions of the Code of Professional Responsibility in relation to Section 27, Rule 138 of the Rules of Court, his conduct amounting to grave misconduct due to conflict of interest and other serious breaches.
• Penalty: Disbarment. Given Respondent’s repeated professional infractions and the failure of his prior three-year suspension to reform him, disbarment is the appropriate penalty, and his name must be stricken from the Roll of Attorneys.

• Violations of CPR and Section 27, Rule 138: Section 27, Rule 138 of the Rules of Court allows disbarment or suspension for any deceit, malpractice, or other gross misconduct in office, grossly immoral conduct, conviction of a crime involving moral turpitude, violation of the lawyer’s oath, willful disobedience of a lawful court order, or corruptly or willfully appearing as an attorney without authority. Misconduct is intentional wrongdoing or a deliberate violation of a rule of law or standard of behavior; it is grave where corruption, clear intent to violate the law, or flagrant disregard of established rule is present. The core of Respondent’s infractions was his willful, voluntary, and knowing engagement in conflict of interest to serve his own pecuniary interest. Canon 15, Rules 15.01 and 15.03 prohibit conflict of interest, defined as a substantial risk that a lawyer’s loyalty to or representation of a client would be materially and adversely affected by the lawyer’s own interest or duties to another client, former client, or third person during the professional relationship. A lawyer cannot act or continue to act for a client when there is a conflict of interest unless there is written consent of all concerned after full disclosure. The rule is founded on the fiduciary lawyer-client relationship and the duty of loyalty, from which the duties of confidentiality, candor, and commitment derive. The IBP-Board of Governors correctly found that Respondent’s conflict lay in his desire for a quick sale to earn immediately, while the Cooperative wanted the most profit. Respondent took instructions from the unidentified buyer, concealed the buyer’s identity from the Cooperative, did not actively pursue the speedy end of Civil Case No. 95-086, and appeared to have a different agenda because the land was then statutorily barred from sale. He insisted that he alone negotiate and effect the sale; when the sale occurred, he did not reveal its details or the buyer’s identity. He sowed fear among farmer-beneficiaries who questioned the fairness of the extremely low price of P30.00 per square meter, telling them they had a slim chance of winning the Philippine Veterans Bank case and would end up with nothing if they did not accept the sale. After being spurned by the sitting Board, he sided with the opposition group led by Lino D. Sajol to complete the sale, tainted by his private interest to earn. He continued as both lawyer and agent, ignoring that the Cooperative had a personality distinct from its members. No written consent after full disclosure was obtained. Instead of declining the retainer or withdrawing, he continued his representation for monetary considerations. The Court cited Hornilla vs. Salunat’s test and Paces Industrial Corp. vs. Salandanan’s five rationales. Respondent proved disloyal, exploitative, untrustworthy, and a double-dealer: the land was sold, the client did not know the buyer or the amount paid, money flowed from an account set up by Respondent under the Cooperative’s name but to which he alone had access, and the proceeds were not accounted for. His conduct amounted to grave misconduct.
• Penalty: Disbarment is appropriate. This was the second time Respondent was accused of breaching fiduciary duties because of money. In Spouses Concepcion vs. Dela Rosa, he borrowed money from client-spouses, failed to pay on demand, and denied indebtedness, for which he was suspended for three years effective September 26, 2016. No sooner had he begun serving that penalty than the present infractions came to light; they were not merely a reincarnation of the same breach but dwarfed the first in number of persons affected, amounts involved, and audacity. While disbarment should never be decreed where a lesser penalty could accomplish the desired end, and violations of high moral standards justify appropriate penalties imposed with great caution, the threshold had been passed. The second conflict-of-interest incident involving substantial amounts occurred within a short span; he had been warned the first time but did not make amends. His prior three-year suspension was to no avail. In Pacana vs. Pascual-Lopez, a lawyer was disbarred for collecting money and properties from a client and failing to account for them while representing adverse interests; the situation was similar because Respondent was involved in conflict of interest and failed to account for funds owing his client. Thus, disbarment was imposed.

• Conflict of Interest — A lawyer is prohibited from representing conflicting interests except by written consent of all concerned given after full disclosure of the facts. Conflict of interest exists when there is a substantial risk that a lawyer’s loyalty to or representation of a client would be materially and adversely affected by the lawyer’s own interest or the lawyer’s duties to another client, a former client, or a third person during the various stages of the professional relationship. The test is whether, on behalf of one client, it is the lawyer’s duty to fight for an issue or claim, but it is the lawyer’s duty to oppose it for another client. The prohibition rests on five rationales: assuring undivided loyalty; enhancing effective legal representation; safeguarding confidential information; preventing exploitation of clients; and protecting the legal system’s interest in adequate presentations to tribunals. In this case, Respondent’s own pecuniary interest in completing the sale, his concealment of the buyer’s identity, and his failure to obtain written consent after full disclosure placed him in conflict with his client, the Cooperative.
• Fiduciary Duty of Loyalty — The lawyer-client relationship is a fiduciary relationship, and the lawyer owes a duty of loyalty to the client. The duties of confidentiality, candor, and commitment to the client’s cause are derivatives of the ultimate duty of loyalty. Respondent breached this duty by acting as both counsel and selling agent, taking instructions from the undisclosed buyer, and failing to account for the sale proceeds.
• Grave Misconduct — Misconduct is an intentional wrongdoing or a deliberate violation of a rule of law or standard of behavior. It is grave where the elements of corruption, clear intent to violate the law, or flagrant disregard of established rule are present; otherwise, it is only simple. Respondent acted with corrupt intent to flagrantly disregard established ethical rules, making his conduct grave misconduct.
• Disbarment as Penalty — Disbarment should never be decreed where any lesser penalty could accomplish the end desired, and it is imposed with great caution because it is the most severe form of disciplinary action. However, where a lawyer repeats a money-related breach of fiduciary duty after a prior suspension, the threshold for disbarment is passed. Respondent’s prior three-year suspension for borrowing money from clients did not reform him, and his subsequent conflict-of-interest infractions warranted disbarment.
• Duty to Account for Client Funds — Rule 16.01 of the Code of Professional Responsibility requires a lawyer to account for all money or property collected or received for or from the client. Respondent failed to account for the cash proceeds of the sale, which flowed from an account he set up under the Cooperative’s name but to which he alone had access.
• Duty to Decline or Withdraw from Conflicted Representation — The rule against conflict of interest requires a lawyer to decline a retainer from a prospective client or withdraw from a client’s ongoing matter when a conflict exists, unless there is written consent of all concerned after full disclosure. Respondent neither declined nor withdrew; he continued his representation for monetary considerations.
• Lawyer as Agent with Power to Sell — A conflict of interest is exacerbated when a lawyer, without full and honest disclosure to the client of the consequences of appointing him or her as an agent with the power to sell property, willfully and knowingly accepts such an appointment. The new agency relationship may obscure whether information was acquired in the course of the lawyer-client relationship or by reason of agency and may jeopardize the client’s right to confidentiality. Respondent accepted the special power of attorney to sell the land and acted as the Cooperative’s agent, creating such a conflict.
• Duty to Avoid Delay — A lawyer shall exert every effort to assist in the speedy and efficient administration of justice and shall not unduly delay a case, impede the execution of a judgment, or misuse court processes. Respondent did not actively pursue the quick end of Civil Case No. 95-086, appearing to have a different agenda because the land was then statutorily barred from sale.

• "The rule against conflict of interest is expressed in Canon 15, Rules 15.01 and 15.03 of the CPR. It means the existence of a substantial risk that a lawyer's loyalty to or representation of a client would be materially and adversely affected by the lawyer's own interest or the lawyer's duties to another client, a former client, or a third person, during the various stages of the professional relationship." — This passage defines conflict of interest and supplies the controlling standard applied to Respondent’s conduct.
• "A lawyer is prohibited from acting or continuing to act for a client where there is a conflict of interest, except when there is a written consent of all concerned after a full disclosure of the facts." — This states the general prohibition and the only exception, which Respondent failed to satisfy.
• "[d]isbarment should never be decreed where any lesser penalty could accomplish the end desired. Undoubtedly, a violation of the high moral standards of the legal profession justifies the imposition of the appropriate penalty, including suspension and disbarment. These penalties are imposed with great caution, because they are the most severe forms of disciplinary action and their consequences are beyond repair." — This articulates the cautionary rule on disbarment and frames why the Court nevertheless imposed the extreme penalty in this case.
• "Respondent had proven himself disloyal to his client --- exploitative, untrustworthy, and a double-dealer." — This summarizes the factual characterization of Respondent’s breach and supports the finding of grave misconduct.

• Hornilla vs. Salunat, 453 Phil. 108, 111-112 (2003) — Explains when a lawyer engages in conflict of interest and provides the test for inconsistent interests.
• Paces Industrial Corp. vs. Salandanan, A.C. No. 1346, July 25, 2017, 832 SCRA 1, 7-8 — Outlines the five rationales for the prohibition against conflict of interest.
• Spouses Concepcion vs. Atty. Dela Rosa, 752 Phil. 485 (2015) — Prior case in which Respondent was suspended for three years for borrowing money from client-spouses; cited to show repeated breach and justify disbarment.
• Pacana vs. Pascual-Lopez, 611 Phil. 399 (2009) — Disbarment for collecting money and properties from a client and failing to account for them while representing adverse interests; cited as similar to Respondent’s situation.
• Vertudes vs. Buenaflor, 514 Phil. 399, 423 (2005) — Definition of misconduct as intentional wrongdoing or deliberate violation of a rule of law or standard of behavior.
• Imperial vs. GSIS, 674 Phil. 286, 296 (2011) — Distinction between grave and simple misconduct.
• Francia vs. Abdon, 739 Phil. 299, 312 (2014) — Disbarment should not be decreed where a lesser penalty could accomplish the desired end.
• Palacios vs. Amora, Jr., A.C. No. 11504, August 1, 2017, 833 SCRA 481, 500, citing Quiambao vs. Bamba, 505 Phil. 126 (2005) — Definition of conflict of interest.
• Orola, et al. vs. Atty. Ramos, 717 Phil. 536, 544 (2013) — Prohibition against conflict of interest is founded on public policy and good taste.

• Section 27, Rule 138, Rules of Court — Governs disbarment and suspension of attorneys; quoted in full and applied because Respondent’s gross misconduct falls within its grounds.
• Canon 15, Code of Professional Responsibility — Requires a lawyer to observe candor, fairness, and loyalty in all dealings and transactions with clients; violated by Respondent’s concealment and self-interest.
• Rule 15.01, Code of Professional Responsibility — Requires a lawyer, in conferring with a prospective client, to ascertain as soon as practicable whether the matter would involve a conflict with another client or the lawyer’s own interest and, if so, to inform the prospective client; Respondent failed to avoid the conflict.
• Rule 15.03, Code of Professional Responsibility — Prohibits a lawyer from representing conflicting interests except by written consent of all concerned given after full disclosure; no such consent existed.
• 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 breached this duty.
• 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; Respondent failed to account for the sale proceeds.
• Rule 1.03, Code of Professional Responsibility — Prohibits a lawyer, for any corrupt motive or interest, from encouraging any suit or proceeding or delaying any man’s cause; cited in the IBP-Board’s finding on delay.
• Canon 12, Code of Professional Responsibility — Requires a lawyer to exert every effort and consider it a duty to assist in the speedy and efficient administration of justice; cited in the finding on delay.
• Rule 12.04, Code of Professional Responsibility — Prohibits a lawyer from unduly delaying a case, impeding the execution of a judgment, or misusing court processes; cited in the finding on delay.
• Rule 8.01, Code of Professional Responsibility — Prohibits a lawyer, in professional dealings, from using language that is abusive, offensive, or otherwise improper; cited in the IBP-Board’s finding that Respondent verbally abused the farmer-beneficiaries.
• Subsection 20(g), Rule 138, Rules of Court — Cited by the IBP-Board of Governors as violated by Respondent’s lack of diligence and competence in allowing Civil Case No. 95-086 to drag on for about ten years.

Bersamin, C.J., Carpio, Peralta, Perlas-Bernabe, Leonen, Jardeleza, Caguioa, A. Reyes, Jr., Gesmundo, J. Reyes, Jr., Hernando, Carandang, Lazaro-Javier, Inting, and Zalameda, JJ., concur.