Tanu Reddi vs. Atty. Diosdado C. Sebrio, Jr.

A lawyer’s dishonest and deceitful conduct, including failure to credibly account for client money received in trust, warrants disbarment under Section 27, Rule 138; disbarment proceedings are not the proper forum to determine criminal liability for estafa and falsification.

Complainant Tanu Reddi, an American citizen of Indian descent and a practicing endodontist in New York, sought to establish a hospital with modern facilities in an underdeveloped part of Asia and later explored Philippine real estate to generate funds. She was introduced to respondent Atty. Diosdado C. Sebrio, Jr., who was to help her acquire real properties for development or resale. Because she could not acquire Philippine lands in her own name, three corporations were formed as vehicles for the purchases. The disciplinary case arises under the Court’s power to disbar or suspend lawyers for deceit, malpractice, or other gross misconduct under Section 27, Rule 138 of the Rules of Court and the Code of Professional Responsibility.

Tanu Reddi, an American citizen of Indian descent and a practicing endodontist in New York, had philanthropic desires to open a hospital with modern facilities in an underdeveloped part of Asia. With Immaculada Luistro, a Filipino citizen and her assistant of over 10 years, she first visited the Philippines in 2000. Noting the level of poverty in the country and the lack of medical services for the poor, she decided to put up a hospital. Immaculada suggested that she consider engaging in the real estate business in the Philippines to speed up the generation of funds. Complainant returned to the Philippines in 2003 to explore opportunities in real estate. She was introduced to respondent Atty. Diosdado C. Sebrio, Jr., who would help her acquire real properties for development and/or resale. Because she could not acquire ownership of lands in the Philippines, respondent advised her to use corporate vehicles to effect the purchases; three corporations were formed — Tagaytay Twins, Inc., Manila Chic Twins, Inc., and Tanu, Inc.

For the Tagaytay City property, respondent represented that his client Teresita Monzon owned an untitled 27-hectare property in Tagaytay City. Through Tagaytay Twins, Inc., complainant and Teresita executed a Memorandum of Agreement dated March 21, 2003 (Tagaytay MOA), prepared by respondent, under which complainant agreed to finance the titling of the property in the total amount of ₱20,000,000; once titled, the property would be offered for sale and the proceeds divided equally between her and Teresita. Complainant made staggered payments of US$1,000, ₱2,000,000, and US$36,360 to Teresita. She later discovered that 996 square meters of the 27-hectare property had been purchased by Aldio Properties, Inc. in an extrajudicial foreclosure sale, which sale Teresita challenged in an action for annulment before the Regional Trial Court of Tagaytay City; respondent was Teresita’s counsel of record in that action.

For the Las Piñas City property, respondent offered complainant the option to purchase a house and lot encumbered by a mortgage, which he represented as owned and being sold by Francisca Parales to finance an urgently needed heart surgery of her daughter. On respondent’s advice, complainant obtained a franchise to operate a Jollibee food outlet, with the agreement that out of the profits, she would get 50% while respondent and Immaculada would share the remaining 50%. Complainant sent respondent sums of money for the acquisition of both the Las Piñas property and the Jollibee franchise. For the Makati City property, respondent introduced complainant to Mario C. Mangco, alleged legal officer of the intestate estate of Faustino Ramos, which estate was alleged to own a real property located at the consular area adjacent to Forbes Park in Makati City. Complainant became interested, and respondent prepared a Memorandum of Agreement (Makati MOA) which she, together with Mangco, forged on March 20, 2004. Under the Makati MOA, complainant agreed to release, as she did, ₱10,000,000 representing the cost of development and titling of the property and payment of back taxes, and an additional ₱2,000,000 for the execution of the Makati MOA. She later learned that the property was neither owned by the intestate estate of Ramos nor for sale.

For the Quezon City property, respondent broached to complainant the idea of buying the land on which SM North Mall in Quezon City stands, representing that it belonged to his client, purportedly a retired US Navy employee who resides in Mindanao. Complainant assented and transmitted large sums of money to respondent for the purpose of, among other things, filing a petition for injunction against SM North Mall, paying back taxes, and titling the land. For the Pasay City property, complainant sent respondent hefty amounts of money for the purchase of a vacant lot located along Roxas Boulevard in Pasay City, alleged to belong to Florenda Estrada and Alma Mallari, but which was mortgaged to one Atty. Go to secure a loan of ₱5,000,000. She also defrayed expenses, on the strength of respondent’s representations, to secure title to the lot, settle the mortgage obligation, relocate squatters on the lot, and bribe a judge to “close the transaction.” She subsequently discovered that there was no such vacant lot along Roxas Boulevard in Pasay City; instead, the “vacant lot” referred to was titled in the names of Philippine Bank of Communications (PBC) and Banco De Oro Universal Bank (BDO).

Complainant’s counsel, by letter dated December 19, 2005, demanded from respondent the return of US$3,000,000, claimed to be part of the total sum of money she had sent to him for all the transactions that did not come about. No amount was returned. The present complaint for disbarment was filed on January 27, 2006.

In his Comment, respondent admitted receiving a total of US$544,828 from complainant, which he claimed was used not only for the purchase of the Las Piñas property and discharge of the mortgage thereon, but also for the setting up of the corporations, as well as for the downpayment on the Makati property and related expenses. He likewise admitted having represented to complainant that the Las Piñas City property belonged to Francisca; the certificate of title and the corresponding deed of sale signed by Francisca were, by his claim, in his possession, but the title had not been transferred to Tanu, Inc. as agreed because of complainant’s failure to provide the money needed therefor, and he was also exercising a retaining lien over the Las Piñas documents. With respect to the Makati property, respondent claimed having paid ₱500,000 to Mangco as initial payment. Regarding the Tagaytay City property, he admitted that the Tagaytay MOA exists and averred that complainant wanted to get out of a perfected sale to recover her partial payment of approximately ₱4,000,000. With respect to the Quezon City property, he stated that he was willing to surrender all documents pertaining thereto only if complainant was first ordered to pay his professional fees. As for the Pasay City property, he denied complainant’s claims as mere “preposterous allegations.” At the mandatory conference before the IBP Commission on Bar Discipline, respondent failed to appear despite notice and sent a representative who sought a resetting; the Commissioner considered him to have waived his right to participate, and complainant presented evidence ex-parte. The only document respondent presented to account for the money was a handwritten acknowledgment of a supposed partial payment of ₱500,000 for the Makati property, purportedly executed by Mangco, who was not presented to confirm that he issued the receipt.

• Deceit and Misrepresentation: Complainant alleged that respondent deceived her into giving him a total of US$3,000,000 for the purpose of purchasing several real estate properties for resale, through misrepresentations about the properties and their owners.
• Failure to Return Funds: Complainant maintained that despite a demand letter dated December 19, 2005, respondent returned no amount of the money she had sent for the transactions that did not come about.
• Disbarment for Fraudulent Acts: Complainant sought respondent’s disbarment for allegedly committing fraudulent acts that violated the lawyer’s oath and the Code of Professional Responsibility.

• Admitted Receipt and Claimed Use: Respondent admitted receiving US$544,828 from complainant, which he claimed was used for the purchase of the Las Piñas property and discharge of its mortgage, the setting up of the corporations, and the downpayment on the Makati property and related expenses.
• Las Piñas Property and Retaining Lien: Respondent admitted representing that the Las Piñas City property belonged to Francisca; he claimed the certificate of title and deed of sale signed by Francisca were in his possession, that the title was not transferred to Tanu, Inc. because complainant failed to provide the needed money, and that he was exercising a retaining lien over the Las Piñas documents.
• Makati Payment: Respondent claimed having paid ₱500,000 to Mangco as initial payment for the Makati property.
• Tagaytay MOA: Respondent admitted the Tagaytay MOA exists but averred that complainant wanted to get out of a perfected sale to recover her partial payment of approximately ₱4,000,000.
• Quezon City Documents: Respondent stated he was willing to surrender all Quezon City documents only if complainant was first ordered to pay his professional fees.
• Pasay Denial: Respondent denied complainant’s claims regarding the Pasay City property as mere “preposterous allegations.”

• Dishonest and Deceitful Conduct: Whether respondent’s conduct in handling complainant’s funds for intended real property acquisitions, including his failure to account for the money upon demand, constitutes dishonest and deceitful conduct warranting disbarment under Section 27, Rule 138 and the Code of Professional Responsibility.
• Estafa and Falsification: Whether disbarment proceedings are the proper forum to determine respondent’s criminal liability for estafa and falsification.
• Amount to Return: Whether respondent should be ordered to return US$3,000,000 or only the admitted amount of US$544,828.

• Dishonest and Deceitful Conduct: Yes. Respondent’s dishonest and deceitful conduct and failure to credibly account for money held in trust warranted disbarment under Section 27, Rule 138 of the Rules of Court.
• Estafa and Falsification: No. Disbarment proceedings are not the proper forum to determine whether respondent committed estafa and falsification.
• Amount to Return: Only US$544,828. The admitted amount was sufficiently established, while the US$3,000,000 figure was a mere estimate and some remittances were not in respondent’s name.

• Dishonest and Deceitful Conduct: The IBP Board of Governors’ findings were sustained except its conclusion that respondent committed estafa and falsification. Respondent admitted receiving at least US$544,828 from complainant. His claim that the amount was used for the Las Piñas property, the corporations, and the Makati downpayment did not lie. The only document he presented to account for the money was a handwritten acknowledgment of a supposed ₱500,000 partial payment for the Makati property, purportedly executed by Mangco, who was not presented, if he exists at all, to confirm that he issued the receipt. Failure to credibly account, upon demand, for money held in trust is an element of misappropriation, and complainant’s claim that respondent employed deceit was thus established. Respondent’s defenses consisted mainly of bare denials; when the integrity of a member of the bar is challenged, it is not enough to deny the charges, as the lawyer must meet the issue and overcome the evidence and show that he still maintains the degree of morality and integrity expected of him. His retaining lien justification was incredible because, if the documents existed and his license was on the line, he could have attached even photocopies to his Comment; the claim also amounted to an admission that he acted as counsel for complainant yet failed to put her interests before his. The orchestrated fraudulent scheme, carried out in connivance with other persons and taking advantage of complainant’s naivete in Philippine real estate, showed that respondent was no longer fit to remain a member of the bar. Although disbarment is the most severe disciplinary sanction and must be exercised with great caution, it was warranted in this clear case of misconduct affecting respondent’s standing and moral character.
• Estafa and Falsification: The Court sustained the IBP Board of Governors except its findings/conclusion that respondent committed estafa and falsification. This is not the proper forum to determine whether he committed these offenses.
• Amount to Return: The IBP’s order to return only US$544,828 was sustained. While complainant submitted documents showing bank remittances involving different sums of money, some of these remittances were not made in the name of respondent. Complainant herself declared that the US$3,000,000 was a mere estimate of her total claim. Thus, only the return of the admitted amount of US$544,828 was in order, without prejudice to complainant’s recovery of any balance in the proper forum.

• Disbarment for deceit, malpractice, or gross misconduct — Under Section 27, Rule 138 of the Rules of Court, a member of the bar may be disbarred or suspended 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 order of a superior court, or corruptly or willfully appearing as an attorney for a party without authority. The Court applied this provision to respondent’s fraudulent scheme and failure to account, holding that he was no longer fit to remain a member of the bar.
• Lawyer’s duty to hold client funds in trust and account for them — Canon 16 and Rule 16.01 of the Code of Professional Responsibility require a lawyer to hold in trust all moneys and properties of his client and to account for all money or property collected or received for or from the client. Failure to credibly account upon demand for money held in trust is an element of misappropriation and supports a finding of deceit. Respondent’s failure to account for and return the US$544,828 he admitted receiving established this violation.
• Disbarment proceedings are not the proper forum for criminal liability — Administrative disbarment proceedings determine professional discipline, not criminal guilt. The Court declined to adopt the IBP’s findings that respondent committed estafa and falsification, stating that disbarment is not the proper forum to determine those offenses.
• Bare denials are insufficient in disbarment proceedings — When the integrity of a member of the bar is challenged, it is not enough that he denies the charges against him; he must meet the issue and overcome the evidence against him and show proof that he still maintains the degree of morality and integrity expected of him. Respondent’s defenses consisted mainly of bare denials, which failed to overcome the evidence.
• Retaining lien cannot excuse failure to account — The Court found respondent’s claim of a retaining lien over the Las Piñas documents incredible; if those documents existed, he could have attached even photocopies to his Comment, and the claim amounted to an admission that he acted as counsel for complainant yet failed to put her interests before his. This reinforced the finding of dishonest and deceitful conduct.
• Good moral character requirement — The requirement of good moral character is of much greater import, as far as the general public is concerned, than the possession of legal learning. Respondent’s conduct fell short of the exacting standards required of a member of the bar and an officer of the court.
• Return of admitted amount; balance may be litigated in the proper forum — In disbarment proceedings, the Court may order restitution of the amount admitted by respondent; claims for additional amounts not sufficiently established may be pursued in the proper forum. The Court ordered return of US$544,828, without prejudice to complainant’s recovery of any balance in the appropriate forum.

• “The Court sustains the IBP Board of Governors, except its findings/conclusion that respondent committed estafa and falsification. This is not the proper forum to determine whether he committed these offenses.” — This passage states the limitation of disbarment proceedings and the Court’s refusal to adopt the IBP’s criminal findings.
• “Since respondent failed to credibly account, upon demand, for the money held by him in trust – an element of misappropriation – complainant’s claim that respondent employed deceit on her is established.” — This is the ratio for the finding of deceit based on respondent’s failure to account for client funds.
• “When the integrity of a member of the bar is challenged, it is not enough that he denies the charges against him; he must meet the issue and overcome the evidence against him.” — This states the evidentiary burden on a lawyer facing disbarment charges.
• “The requirement of good moral character is, in fact, of much greater import, as far as the general public is concerned, than the possession of legal learning.” — This articulates the standard for continued membership in the bar and supports the disbarment penalty.

• Diaz vs. People, G.R. No. 171121, 26 August 2008 — Cited in support of the element of misappropriation in relation to failure to account for money held in trust.
• Lee vs. People, G.R. No. 157781, April 11, 2005, 455 SCRA 256 — Cited together with Diaz vs. People for the same point on misappropriation.
• Yu vs. Palaña, A.C. No. 7747, July 14, 2008 — Cited for the rule that a lawyer faced with charges against his integrity cannot rely on bare denials but must meet the issue and overcome the evidence.
• Sps. Amador and Rosita Tejada vs. Palaña, A.C. No. 7434, August 23, 2007, 530 SCRA 771, 772 — Cited for the requirement that a lawyer show proof that he still maintains the degree of morality and integrity expected of him.
• Soriano vs. Reyes, A.C. No. 4676, May 4, 2006, 489 SCRA 328, 330 — Cited for the principle that disbarment is the most severe disciplinary sanction and must be exercised with great caution and only for imperative reasons.
• Barrios vs. Martinez, A.C. No. 4585, November 12, 2004, 442 SCRA 324, 325 — Cited with Soriano vs. Reyes for the same cautionary principle on disbarment.
• Dantes vs. Dantes, A.C. No. 6486, September 22, 2004, 438 SCRA 582 — Cited for the proposition that those enrolled in the legal profession must accord continuing fidelity to its tenets and that good moral character is of greater import than legal learning.

• Section 27, Rule 138, Rules of Court — Provides the grounds for disbarment or suspension, including deceit, malpractice, gross misconduct, grossly immoral conduct, conviction of a crime involving moral turpitude, violation of the lawyer’s oath, willful disobedience of a lawful order of a superior court, and corruptly or willfully appearing as an attorney for a party without authority. Applied: respondent was disbarred for deceit and gross misconduct.
• Canon 1, Code of Professional Responsibility — A lawyer shall uphold the Constitution, obey the laws of the land, and promote respect for law and legal processes. The IBP Commissioner found respondent violated this by committing fraudulent acts, including misappropriation and tampering with Tanu, Inc.’s Articles of Incorporation; the Court sustained the finding of dishonest and deceitful conduct but declined to adopt the findings of estafa and falsification.
• Rule 1.01, Code of Professional Responsibility — A lawyer shall not engage in unlawful, dishonest, immoral, or deceitful conduct. Applied: respondent misrepresented properties and their owners, leading complainant to part with funds for properties that were fictitious, not susceptible to sale, simulated, or inexistent.
• Canon 16 and Rule 16.01, Code of Professional Responsibility — A lawyer shall hold in trust all moneys and properties of his client and shall account for all money or property collected or received for or from the client. Applied: respondent failed to account for and return the US$544,828 he admitted receiving.
• Rule 15.06, Code of Professional Responsibility — A lawyer shall not state or imply that he is able to influence any public official, tribunal, or legislative body. The IBP Commissioner found respondent violated this by convincing complainant to pay bribe money to judges, claiming it was a common practice in the Philippines.
• Article 315, Revised Penal Code — Defines estafa. The IBP Commissioner found respondent committed estafa under this provision, but the Court declined to adopt that finding, holding that disbarment proceedings are not the proper forum to determine criminal liability.

The decision is per curiam; no separate concurring opinion is indicated. The following justices signed the decision and are not marked “On Official Leave”: Leonardo A. Quisumbing (Acting Chief Justice), Antonio T. Carpio, Ma. Alicia Austria-Martinez, Renato C. Corona, Conchita Carpio Morales, Dante O. Tinga, Minita V. Chico-Nazario, Antonio Eduardo B. Nachura, Teresita J. Leonardo-De Castro, Arturo D. Brion, and Diosdado M. Peralta.