Title
Aguinaldo vs. Asuncion, Jr.
Case
A.C. No. 12086
Decision Date
Oct 7, 2020
A lawyer was suspended for six months for deceitful conduct in a failed land sale, violating the Code of Professional Responsibility by withholding earnest money and misrepresenting property details.
disbarment
lawyer
suspension
A

Case Summary (A.C. No. 12086)

Factual Background

Aguinaldo alleged that in October 2010, he and Atty. Asuncion, together with the latter’s mother and an agent named Mia Gan, discussed the sale of Atty. Asuncion’s property in Banauang, Moncada, Tarlac, consisting of 4.4 hectares. Aguinaldo alleged that Atty. Asuncion agreed to sell the property to him, and as part of the agreement, Aguinaldo handed Atty. Asuncion P100,000.00 as earnest money. Aguinaldo later claimed that Atty. Asuncion returned asking for an additional P400,000.00, which Aguinaldo refused to give because Atty. Asuncion allegedly failed to present documents pertaining to the property.

Because Atty. Asuncion allegedly continued to fail to provide the necessary details regarding the subject property, Aguinaldo sought the return of the earnest money. Despite repeated demand, Aguinaldo asserted that Atty. Asuncion did not return the amount, causing damage to him. Aguinaldo thus accused Atty. Asuncion of fraud and of using his profession to take advantage of Aguinaldo’s limited knowledge, which he argued was inconsistent with the Lawyer’s Oath and the CPR.

Atty. Asuncion denied liability. He maintained that the parties’ understanding was that the earnest money would serve as a guaranty that Aguinaldo would not back out, and that the respondent’s mother would not sell the subject portion of the land to other buyers until November 20, 2012, the date when Aguinaldo was to pay the down payment of P400,000.00. He insisted he had no legal obligation to return the earnest money because Aguinaldo allegedly failed to comply with his own obligation to pay on the due date, and thus was considered to have backed out. He further asserted that Aguinaldo supposedly backed out when he imposed a condition that had not been previously discussed and agreed upon. Those conditions, as described by Atty. Asuncion, included that the portion of the 4.4 hectares he was buying be first segregated and that a separate title be issued, which he claimed was contrary to customary transactions involving the sale of an undivided portion of land.

Atty. Asuncion also cited Spouses Doromal v. Court of Appeals to argue that earnest money, under the then-concept of the old Civil Code, was a guaranty; if the buyer backed out, the buyer forfeited the earnest money. Finally, he contended that he did not use his profession to take advantage of Aguinaldo because their disagreement was allegedly purely contractual and did not proceed due to Aguinaldo’s failure to comply with his own obligation.

IBP Proceedings and Pleadings

On June 13, 2012, a mandatory conference was held with both parties in attendance. They were directed to submit verified position papers and comments. On August 28, 2012, both parties filed a Joint Manifestation and Motion to Dismiss, stating that they reached a settlement out of mutual desire for peace. However, on December 4, 2012, Aguinaldo filed his Position Paper stating that the settlement did not materialize because Atty. Asuncion failed to comply with the terms of settlement. Atty. Asuncion responded by filing a Manifestation with Comment, alleging that Aguinaldo did not enter the settlement in good faith and faulting him for not honoring the earlier settlement.

IBP Findings and Recommended Sanction

After evaluating the evidence submitted in their pleadings, the IBP-CBD issued a Report and Recommendation dated December 14, 2014. It found Atty. Asuncion to have violated Canon 1 of the CPR, particularly Rule 1.01, for engaging in deceitful conduct. The Investigating Commissioner found that Atty. Asuncion failed to disclose material facts regarding the status of the subject property and obstinately refused to return the earnest money. The Investigating Commissioner recommended a penalty of suspension from the practice of law for six (6) months.

In a Resolution dated February 25, 2016, the IBP Board of Governors adopted the Report and Recommendation. Atty. Asuncion moved for reconsideration, reiterating his prior arguments. The IBP-BOG denied reconsideration through Notice of Resolution No. XXII-17-1269 dated April 20, 2017.

The Parties’ Contentions Before the Court

When the case reached the Court, the essential issue was whether Atty. Asuncion should be held administratively liable for violating the CPR. The Court emphasized that a disciplinary case is sui generis. It did not treat the matter as an attempt to grant civil relief to Aguinaldo. It framed the proceeding as an inquiry into Atty. Asuncion’s fitness to remain a member of the Bar, with public interest as its primary objective.

Although Atty. Asuncion characterized the dispute as contractual and asserted that earnest money should be forfeited if the buyer backed out, the Court focused on whether the respondent’s acts showed dishonesty, deceit, or fraud that would warrant administrative sanction.

Legal Basis and Reasoning

The Court anchored its analysis on Canon 1 and Rule 1.01 of the CPR, stating that Canon 1 commands obedience to laws and legal processes and that Rule 1.01 prohibits unlawful, dishonest, immoral, or deceitful conduct. It also reiterated that lawyers are expected to respect and abide by the law and avoid acts or omissions contrary thereto.

On the merits, the Court found that Atty. Asuncion had employed trickery by luring Aguinaldo into agreeing to buy the subject property. The Court held that Atty. Asuncion should not have led Aguinaldo to believe that the parcel was still owned by his mother when, in truth, it had already been sold to another buyer. The Court further found that Atty. Asuncion failed to disclose that the property was owned by the Posadas family, a conclusion supported by the fact that the respondent failed to produce documents to prove his asserted title or ownership when Aguinaldo required such proof.

The Court also treated Atty. Asuncion’s obstinate refusal to return the earnest money as further evidence of misconduct. It stated that Aguinaldo paid earnest money in advance and that this placement of integrity was “placed in serious doubt” when the transaction did not materialize and the respondent did not return the amount. It rejected Atty. Asuncion’s attempt to blame Aguinaldo for the failed transaction and for supposedly forfeiting the earnest money. It noted that the respondent even continued to assert that Aguinaldo backed out due to alleged unrealistic conditions and failure to pay the down payment. The Court adopted the IBP’s assessment that Atty. Asuncion’s claim was “preposterous,” particularly because the respondent failed to show that the earnest money was given merely as guaranty that the buyer would not back out. The Court noted that beyond a mere photocopy of a purported written proposal suggesting that the earnest money was not part of the purchase price, Atty. Asuncion presented no clear and convincing proof to support his claim.

In explaining the legal effect of earnest money, the Court invoked Article 1482 of the Civil Code, holding that earnest money in a contract of sale is considered part of the purchase price and proof of the perfection of the contract. Because Aguinaldo indicated that the earnest money was intended to form part of the purchase price and there was no stated objection from the private respondents, the Court reasoned that the earnest money was an advance payment that should be deducted from the total price. The Court concluded that the parties could not have intended forfeiture of earnest money if the buyer failed to pay the balance, especially absent a clear and express agreement for such forfeiture.

With the above as backdrop, the Court ruled that in the case at bar, the parties did not agree that earnest money would be forfeited on the ground alleged by Atty. Asuncion, because no express agreement supported such claim. Hence, the Court concluded that Atty. Asuncion should have returned the money when the transaction did not materialize. It also treated the misrepresentation as material to Aguinaldo’s decision to enter into the transaction and part with the earnest money. The Court found a lack of good faith based not only on the alleged misrepresentation but also on conduct after the transaction faltered: persistent failure to return despite repeated demands, and refusal even after a negotiated settlement was attempted, as the respondent again did not return the money and instead attributed fault to Aguinaldo.

The Court then explained the meanings of “dishonest” and “deceitful” as doctrinally understood. It described dishonesty as a disposition to lie, cheat, deceive, defraud, or betray, and as conduct marked by untrustworthiness and lack of integrity. It defined deceit as fraudulent and deceptive misrepresentation or artifice used on another who is ignorant of the true facts, to the prejudice and damage of the party imposed upon. The Court held that such deceit requires knowledge of falsity or

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