RITA P. COSTENOBLE, COMPLAINANT, VS. ATTY. JOSE L. ALVAREZ, JR., RESPONDENT.

Costenoble versus Alvarez

The Case

This is an administrative complaint for disbarment filed by Rita P. Costenoble against Atty. Jose L. Alvarez, Jr. before the Integrated Bar of the Philippines, arising from his dishonest and fraudulent acts and unprofessional conduct in a land registration engagement. The complainant entrusted the respondent with two certificates of title and a check for 115,000 pesos to cover fees and expenses, yet he never registered the properties, never returned the money or the titles, and refused to face her despite demand. The case matters because it is the Court's clean statement of a lawyer's fiduciary duty over client money and property, and of how that duty is enforced through the Code of Professional Responsibility.

Procedural History

The complaint was filed with the Integrated Bar of the Philippines, which referred it to its Commission on Bar Discipline. The respondent moved for an extension of time to file his answer but never filed a verified answer or position paper, so the case was submitted for resolution. The investigating commissioner, in a report and recommendation dated August 19, 2014, recommended suspension from the practice of law for one year. The Board of Governors of the Integrated Bar of the Philippines, by resolution dated December 13, 2014, adopted and approved the commissioner's report but increased the period of suspension to three years. The records were then transmitted to the Supreme Court for final action, and the Court resolved the matter in this decision.

Facts

On June 15, 2011, Costenoble hired Atty. Alvarez, Jr. to register two parcels of land. She gave him a check for 115,000 pesos to cover fees and expenses, and entrusted him with the certificates of title of her real properties. He issued an acknowledgment receipt and assured her that the transfer of titles would be completed by September 2011.

After several months, Costenoble tried to contact him but failed. When she visited his office, she spoke instead with Atty. Jose Alvarez, Sr., who promised to take care of her case on behalf of his son. When her secretary followed up, however, the elder Alvarez got angry and asked where he would steal 115,000 pesos. Costenoble sought help from the barangay office in San Vicente, San Pedro, Laguna, but Atty. Alvarez, Jr. never appeared despite notice.

On October 9, 2012, Costenoble sent him a demand letter asking for the return of the certificates of title and the 115,000 pesos she had paid. He neither complied nor answered the complaint properly, and the case proceeded without his verified answer or position paper.

Issues

• Whether or not Atty. Alvarez, Jr. is administratively liable for neglect of duty in failing to perform the legal service entrusted to him.
• Whether or not Atty. Alvarez, Jr. is administratively liable for failing to return the money and documents given to him by his client despite demand.
• Whether or not the penalty of suspension from the practice of law for three years is proper under the circumstances.

Applicable Provisions

Canon 16 of the Code of Professional Responsibility provides:

CANON 16 — A lawyer shall hold in trust all moneys and properties of his client that may come into his profession.

This is the fiduciary core of the case, because the respondent received both money and title documents in the course of his engagement.

Rule 16.01 of the Code of Professional Responsibility provides:

Rule 16.01 — A lawyer shall account for all money or property collected or received for or from the client.

The respondent never accounted for the 115,000 pesos or the certificates of title.

Rule 16.03 of the Code of Professional Responsibility provides:

Rule 16.03 — A lawyer shall deliver the funds and property of his client when due or upon demand. However, he shall have a lien over the funds and may apply so much thereof as may be necessary to satisfy his lawful fees and disbursements, giving notice promptly thereafter to his client. He shall also have a lien to the same extent on all judgments and executions he has secured for his client as provided for in the Rules of Court.

He failed to deliver upon demand, and no lawful lien was asserted in the decision.

Canon 17 of the Code of Professional Responsibility provides:

CANON 17 — A lawyer owes fidelity to the cause of his client and he shall be mindful of the trust and confidence reposed in him.

His disappearance from the engagement betrayed that fidelity.

Canon 18 of the Code of Professional Responsibility provides:

CANON 18 — A lawyer shall serve his client with competence and diligence.

He rendered no service at all on the registration.

Rule 18.03 of the Code of Professional Responsibility provides:

Rule 18.03 — A lawyer shall not neglect a legal matter entrusted to him, and his negligence in connection therewith shall render him liable.

This is the express basis for administrative liability for neglect.

Ruling

On the first issue, the Court held that a lawyer's neglect of a legal matter entrusted to him constitutes inexcusable negligence for which he must be held administratively liable. The practice of law is a profession and a form of public trust, entrusted only to those who are qualified and of good moral character. When a lawyer agrees to act as counsel, he guarantees the reasonable degree of care and skill demanded by the character of the business, and he is duty-bound to exert best efforts and serve with utmost diligence and competence. The respondent accepted the engagement to register the properties, received the documents and the check, and then failed to perform, ignored repeated follow-ups, and refused to meet his client. The Court stressed that the mere failure of the lawyer to perform the obligations due to his client is considered per se a violation of the lawyer's oath.

On the second issue, the Court held that ingrained in the professional duty is the obligation to hold in trust and account for all moneys and properties of the client that come into the lawyer's possession. A lawyer's failure to return upon demand the funds held on behalf of his client gives rise to the presumption that he has appropriated the money for his own, a gross violation of general morality as well as of professional ethics. The respondent's acts constituted a clear violation of Canon 16, Rules 16.01 and 16.03, Canon 17, and Canon 18, Rule 18.03 of the Code of Professional Responsibility.

On the third issue, the Court noted that the penalty rests on sound judicial discretion based on the surrounding facts, and that in similar cases it had imposed penalties ranging from reprimand to suspension of three months to two years, and even disbarment in aggravated cases. Considering that this is not the first time that Atty. Alvarez, Jr. has been held administratively liable, having previously been suspended for six months for issuing worthless checks and for delay in filing a case on behalf of his client, the Court adopted the recommendation of the Board of Governors and imposed suspension for three years. The Court also held that disciplinary proceedings include matters intrinsically linked to the lawyer's professional engagement, such as the payment of money received but not used for the given purpose, so it ordered the return of the 115,000 pesos with legal interest of six percent per annum from receipt of the resolution until full payment.

Doctrine

A lawyer holds the money and property of a client in trust, and must account for and deliver them when due or upon demand, under Canon 16 and its Rules 16.01 and 16.03. Failure to return funds upon demand raises the presumption that the lawyer has appropriated them for his own use, a gross violation of professional ethics. Neglect of a legal matter entrusted to a lawyer is inexcusable negligence that renders him administratively liable under Canon 18, Rule 18.03, and the mere failure to perform the obligations due to the client is per se a violation of the lawyer's oath. The penalty depends on judicial discretion and on attendant facts, and a prior administrative liability is an aggravating circumstance that justifies a heavier suspension. Disciplinary proceedings may also order the restitution of money received but not used for the purpose given, with legal interest.

Disposition

The Court suspended Atty. Jose L. Alvarez, Jr. from the practice of law for three years, warned him that a repetition shall be dealt with more severely, and ordered him to return the 115,000 pesos and the documents he received within thirty days from finality, with legal interest of six percent per annum until full payment.

Remember This

Memorize the line that a lawyer's failure to return upon demand the funds held for his client gives rise to the presumption that he has appropriated the money for his own. Examiners use this case for bar discipline questions on Canon 16 and Canon 18, on restitution with interest in administrative proceedings, and on prior liability as a ground for a heavier penalty.