. December 08, 1923

This action for malpractice brought by Vicente Diaz against Attorney
Ruperto Kapunan, has to do with the conduct of Attorney Kapunan during
the legal proceedings which followed the business troubles of Vicente
Diaz and Secundino de Mendezona, and particularly relates to the
conduct of Attorney Kapunan in civil case No. 2098 of the Court of
First Instance of Leyte. The ultimate question on which we would
concentrate attention concerns the agreement between Diaz and Kapunan
at the time of the sale of the property of Mendezona, whereby Kapunan,
on the promise of Diaz to pay him P1,000, agreed to desist from further
participation in the sale, all in alleged violation of article 1459 of
the Civil Code and article 542 of the Penal Code.

Omitting the irrelevant matter interjected into this case, the principal facts of record are the following:

In 1917, Vicente Diaz and Secundino de Mendezona formed a partnership
and entered into extensive business transactions in the Province of
Leyte. The capital of the partnership was P380,000. Unfortunately,
however, the business failed to prosper, with the result that on
liquidation, it was found to have suffered a loss of P67,000. When Diaz
and Mendezona came to settle up their affairs, they eventually
formulated a document of sale and mortgage in which Mendezona
recognized a debt in favor of Diaz in the sum of P80,000 and an
additional sum of P10,000 owing to Diaz, laid upon the hacienda
“Mapuyo,” and to be paid within the term of one year. When the year had
expired Mendezona was not to be found and his family was unable to meet
the payment. There followed the usual proceedings for foreclosure and
sale, which, after considerable delay, resulted in the hacienda’s being offered for sale at public auction.

At the time fixed for the sale, December 23, 1922, there appeared
Vicente Diaz, accompanied by his lawyer Emilio Benitez, and Attorney
Ruperto Kapunan. Luis Velarde, the deputy sheriff of Leyte, is
authority for the statement that Kapunan told him that he, Kapunan, was
ready to bid on the property up to P16,000 in order to assist the
Mendezona family which was in financial straits. At any rate, the
bidding was opened by Kapunan offering P12,000 for the property and
with Diaz and Kapunan raising the bids until finally Diaz offered
P12,500. There the bids stopped on account of Diaz and Kapunan entering
into the agreement, of decisive importance, which we next quote in full:

“We,
Vicente Diaz and Ruperto Kapunan, both being the bidders at the auction
held for the sale of the properties of Secundino Mendezona, do hereby
agree that Don Ruperto Kapunan should withdraw his bid and refrain from
bidding at the said auction as he does hereby withdraw his bid, and in
consideration thereof, the said Mr. Diaz offers him a premium of one
thousand pesos (P1,000) which, out of consideration to said Don Vicente
Diaz, Mr. Kapunan accepts and has, for this reason, refrained from
bidding in competition with said Mr. Diaz.

“Tacloban, Leyte, December 23, 1922.

(Sgd.)

“V. DIAZ.

(Sgd.)

RUPERTO KAPUNAN.”

Following
the termination of the sheriff’s sale, Diaz on December 26, 1922, gave
Kapunan P500 of the P1,000 mentioned in the above quoted document. Diaz
further followed the usual procedure to take over the property of
Mendezona pursuant to his bid of P12,500, which covered the amount of
the mortgage with its accumulated interest and with the judicial
expenses.

Although it was on December 23, 1922, that Diaz
and Kapunan entered into the agreement, Diaz could only wait until
January 4, 1923, following, to lay before this court charges against
Attorney Kapunan for alleged unprofessional conduct. Undoubtedly,
before Kapunan had knowledge of the disbarment proceedings, on January
10, 1923, he presented a motion in the Court of First Instance of Leyte
asking that he be permitted to retain the P500 in question, in part
payment of his professional fees. Later, on February 4, 1923, when
Kapunan must have had knowledge of the disbarment proceedings, he filed
another motion, withdrawing his former motion and asking the court to
permit him to turn over the P500 to Diaz, which Judge Causing refused
to do on the ground that it was a personal matter. Nevertheless, on
July 10, 1923, the clerk of the Court of First Instance of Leyte handed
the P500 to Diaz who, in turn, receipted for that amount.

From correspondence, it further is evident that the family of Mendezona
was led to believe that the P500 would shortly be sent them. Without
doubt, the Mendezona family would have been gratified to receive even
the P500 pittance out of the business wreck in Leyte of the senior
Mendezona.

During much of the time here mentioned, Kapunan
was the attorney of Mendezona. Kapunan was given extensive authority by
the letter of Mendezona of April 12, 1919. When Kapunan took part in
the sale, it must be assumed that he was bidding in representation of
his client and for the benefit of the client.

It remains to
be said that following the presentation of the charges against Attorney
Kapunan in this court, he was given an opportunity to answer, and the
usual investigation of his professional conduct was made by the
provincial fiscal of Leyte acting under the supervision of the
Attorney-General. From the report of the fiscal, indorsed by the
Attorney-General, three charges seem to have been considered. The first
two, relating to Kapunan’s attempt to represent both parties in the
case, and to molest and disturb Diaz by frivolous motions, the law
officer of the Government finds not substantiated; and with this
conclusion we fully agree. The third charge is more serious and has to
do with Kapunan having intervened in the manner in which he did in the
sale of the property of his client Mendezona. The Attorney-General is
of the opinion on this point that the facts constitute a flagrant
violation of the provisions of article 1459 of the Civil Code and
article 542 of the Penal Code. “In view thereof, it is recommended that
corrective measures commensurate with the irregularity committed by
Attorney Kapunan, be taken against him.”

Article 1459 of the Civil Code was held in force in the case of Hernandez vs.
Villanueva ([1920], 40 Phil., 775). It provides that the following
persons, naming them, “cannot take by purchase, even at a public or
judicial auction, either in person or through the mediation of
another.” The provision contained in the last paragraph of said article
is made to include lawyers, with respect to any property or rights
involved in any litigation in which they may take part by virtue of
their profession and office. We do not believe this article has been
infringed by the respondent because he has not purchased property at a
public or judicial auction and because his participation in the auction
was in representation of his client. It has been held that an execution
sale to the attorney of the defendant is not unlawful if made in good
faith, with the consent of the client, and without any purpose of
defrauding the latter’s creditors. (2 R. C. L., 1011; 1 Thornton on
Attorneys at Law, pp. 298, 299; Smith vs. Smith [1848], 1 Iowa, 307.)

The more puzzling question relates to the alleged violation by Attorney
Kapunan of article 542 of the Penal Code. This article punishes “any
person who shall solicit any gift or promise as a consideration for
agreeing to refrain from taking part in any public auction.” The crime
is consummated by the mere act of soliciting a gift or promise for the
purpose of abstaining from taking part in the auction. Not permitting
our minds to be confused by the varied explanations of Diaz and
Kapunan, the document formulated by them and hereinbefore quoted,
demonstrates that Kapunan, on the promise of Diaz to pay P1,000,
refrained from further participation in the sale of the property of
Mendezona, which is exactly the situation covered by article 542 of the
Penal Code.

Public policy discountenances combinations or
agreements on the part of bidders at execution sales, the objects and
effects’ of which are to stifle competition. The courts will consider
an agreement between a judgment creditor and one claiming an interest
in the thing about to be sold under an execution, that neither shall
bid against the other, as void, unless all parties concerned know of
the arrangement and consent thereto. Execution sales should be open to
free and full competition, in order to secure the maximum benefit for
the debtor. Article 542 of the Penal Code is, therefore, a wise
provision even though rarely invoked, and should be used to discourage
the stifling of bids at judicial sales. (23 C. J., 647; Packard vs. Bird and Chapman [1870], 40 Cal., 378; 3 Viada, Codigo Penal, 594.)

We conclude that Attorney Kapunan has been guilty of a technical
violation of article 542 of the Penal Code. But we cannot adopt the
vigorous recommendation of the Attorney-General, for we consider
present certain mitigating circumstances which exert an influence in
favor of the respondent. In the first place, as disclosed by the
judicial records, no reported prosecution under article 542 has been
attempted, which is eloquent proof of the practical disuse of this
article; and the Spanish jurisprudence, while indicative of the meaning
of the article, relies principally on the decisions of the French Court
of Cassation. (See Code of Napoleon, arts. 222, 223; decisions
of the French Court of Cassation of October 16, 1844, May 15, 1857, and
January 8,1863.) In the next place, the complainant Diaz is equally
guilty with the respondent Kapunan. And lastly, Kapunan appears to have
been acting in good faith for his client, although adopting an
irregular procedure, and although attempting to make tardy restitution
of the money received by him.

Our judgment is that Attorney
Ruperto Kapunan shall stand reprimanded and that the complainant,
Vicente Diaz, shall immediately return to the clerk of the Court of
First Instance of Leyte the P500 received by Diaz from the clerk and
receipted for by Diaz, and the clerk of court shall transmit the P500
to Secundino de Mendezona or, in case of his absence, to Miss Carmen de
Mendezona. Costs shall be taxed in accordance with the provisions of
the Code of Civil Procedure. So ordered.

Johnson, Avanceña, Villamor, Ostrand, and Johns, JJ., concur.

Romualdez, J., did not take part.