Title
Malhabour vs. Sarmiento
Case
A.C. No. 5417
Decision Date
Mar 31, 2006
A lawyer misappropriated client funds, falsified authority, and delayed legal actions, leading to a one-year suspension for violating professional ethics and breaching trust.
lawyer
suspended
deceit
A

Case Summary (G. R. No. 41429)

Factual Background in the Underlying Labor Dispute

On May 29, 1993, HY2LB Shipping hired complainant as an electrician for M/V Gold Faith under a contract for twelve months at a monthly salary of US$600.00, requiring forty-eight hours of work per week with thirty percent (30%) overtime pay. Complainant served aboard the vessel for four months and nine days and was subsequently asked to disembark on August 5, 1993, reportedly because the foreign principal was reducing personnel.

Complainant then filed with the Philippine Overseas Employment and Administration Office (POEA) a Complaint for Illegal Dismissal against HY2LB Shipping, New Ocean Ltd., and Premier Insurance and Surety Corporation. On June 14, 1995, the POEA Adjudication Office rendered judgment in complainant’s favor and ordered HY2LB Shipping, New Ocean Ltd., and Premier Insurance to pay jointly and severally (i) US$4,680.00 representing the unexpired portion of the employment contract, (ii) US$220.00 unpaid salary, and (iii) US$774.00 fixed overtime pay, with no other pronouncement.

On appeal, the NLRC affirmed the POEA judgment and denied the parties’ motion for reconsideration. HY2LB Shipping then sought certiorari in the Court of Appeals, which dismissed the petition in a decision dated June 17, 1999 for lack of grave abuse of discretion on the NLRC’s part.

In invoking Section 10 of R.A. No. 8042, HY2LB Shipping obtained a modification. In a Resolution dated February 15, 2000, the Court of Appeals modified the NLRC decision by reducing complainant’s entitlement to only three (3) months’ salary, reasoning that it was the lesser amount relative to the one-year employment contract. The Court of Appeals also affirmed entitlement to overtime pay as provided in the employment contract. Complainant immediately requested respondent to file a motion for reconsideration.

Respondent’s Conduct in the Post-Decision Phase

Complainant’s request for further litigation was met with respondent’s contrary approach. Respondent did not file a motion for reconsideration as promptly requested. Instead, respondent filed only a “Notice to File Motion for Reconsideration with Manifestation to File an Appeal in case Same is Denied.” Respondent advised complainant to accept the Court of Appeals’ resolution and suggested that a motion for reconsideration would merely prolong the litigation. Complainant disregarded that advice and filed his own motion for reconsideration, but it was denied by the appellate court for being late by forty-three (43) days.

After denial, complainant urged respondent to file a Petition for Review on Certiorari with the Supreme Court. Respondent agreed, but the petition was not timely filed. On July 24, 2000, this Court issued a resolution denying the petition for being late.

Meanwhile, and unbeknownst to complainant, respondent sent a letter dated April 7, 2000 to the NLRC stating that complainant had executed a Special Power of Attorney authorizing respondent to receive the “judgment award.” Respondent then filed a Motion for Execution alleging complainant decided to terminate the case and would no longer file a motion for reconsideration of the Court of Appeals’ February 15, 2000 resolution.

On June 16, 2000, respondent received from the NLRC a check dated June 14, 2000 in the amount of P99,490.00, which he deposited with the Ecology Bank, Banawe Branch, under his personal account. Complainant later learned of an NLRC order dated June 6, 2000 directing the NLRC cashier to release to respondent the P99,490.00 representing the money judgment. Complainant sought assistance from the Presidential Anti-Organized Crime Task Force, and he then filed with the National Bureau of Investigation (NBI) a complaint for estafa through falsification of a public document. The NBI referred the matter to the Office of the City Prosecutor of Quezon City.

During the confrontation at the NBI, respondent paid complainant P40,000.00 as partial payment of the P60,000.00 awarded to him. Later, on January 30, 2001, respondent paid only P10,000.00, leaving an alleged remaining balance of P10,000.00. Complainant then filed the instant complaint for disbarment with this Court.

Respondent’s Explanation and the IBP’s Findings

In his Comment dated June 1, 2001, respondent asserted that the case stemmed from “a quarrel between a client and his counsel.” He claimed that after the Court of Appeals’ decision and resolution, HY2LB Shipping filed a petition for review with this Court. Respondent admitted filing a motion for execution with the NLRC and claimed partial grant of his motion through issuance of a check in the amount of P100,000.00 by virtue of a Special Power of Attorney signed by complainant. He further invoked an alleged agreement that their shares in the award were on a “40-60 ratio,” stating that he kept complainant’s share of P60,000.00. Respondent maintained that he was ready to give complainant his share but that complainant did not make demand and refused to receive the balance on June 30, 2001.

This Court referred the case to the Integrated Bar of the Philippines (IBP) for investigation, report, and recommendation on August 27, 2001. In its Report and Recommendation dated April 15, 2002, the IBP Investigating Commissioner, Rebecca Villanueva-Maala, found that it was apparent complainant did not agree with the Court of Appeals’ modified decision and instructed respondent to file a petition for certiorari with the Supreme Court. The IBP further found that respondent filed a motion for execution with the NLRC without complainant’s knowledge and consent, resulting in an award of P100,000.00 to complainant.

The IBP also treated respondent’s reliance on a Special Power of Attorney with skepticism. It found that respondent admitted he encashed the check by virtue of a Special Power of Attorney which complainant denied having executed. The IBP concluded that respondent received the money award and took it upon himself to divide the money into a 60-40 ratio on the theory of attorney’s fees owed to him. It held that respondent failed to inform complainant beforehand of his plan, and only paid complainant on installment after the latter filed a criminal complaint. It noted that a P10,000.00 balance still remained at the time of the IBP’s report.

The IBP recommended the suspension of respondent from the practice of law and from membership in the Bar for one year.

On August 3, 2002, the IBP Board of Governors adopted and approved the Investigating Commissioner’s report by Resolution No. XV-2002-397. The IBP’s conclusion was sustained by the Court.

The Parties’ Contentions Before This Court

Complainant contended, in substance, that respondent violated the Code of Professional Responsibility by acting with deceit and dishonesty in connection with the money award. Complainant maintained that respondent misrepresented the existence and effect of a Special Power of Attorney, acted without complainant’s knowledge and consent, received the judgment proceeds, and withheld or appropriated the award beyond what was due, requiring criminal complaints and piecemeal payment before complainant was able to recover part of the money.

Respondent, by contrast, sought to characterize the controversy as a disagreement between client and counsel and emphasized the existence of a Special Power of Attorney and an alleged fixed sharing arrangement. Respondent also justified retention by invoking attorney’s fees and claimed that complainant refused to receive the balance.

Legal Basis and Reasoning of the Court

The Court anchored its ruling on Canon 1, Rule 1.01 of the Code of Professional Responsibility, which provides that a lawyer shall uphold the Constitution, obey the laws, and promote respect for law and legal processes, and that a lawyer shall not engage in unlawful, dishonest, immoral, or deceitful conduct.

Applying that standard, the Court held that respondent’s conduct disclosed deceit and failure to comply with his professional obligations. It noted that the records and the IBP’s findings showed respondent made it appear that complainant executed a Special Power of Attorney authorizing him to file with the NLRC a Motion for Execution and to collect the money judgment awarded to complainant. The Court emphasized that respondent later received a check amounting to P99,490.00 from the NLRC and retained the amount. It further highlighted that only after complainant reported the matter to the NBI did respondent pay P40,000.00 as partial payment, with an outstanding P10,000.00 balance remaining.

The Court also rejected respondent’s unilateral appropriation theory. It held that respondent had no right to retain or appropriate unilaterally his lawyer’s lien by dividing the money into a 60-40 ratio without proper recourse. The Court described respondent’s acts as clinging to something not his and to which he had no right. It concluded that such conduct indicated lack of integrity and propriety.

In explaining why the sanction was warranted, the Court underscored that a lawyer is the servant of the law and belongs to a profession entrusted with the administration of law and dispensation of justice. It stated that lawyers must act as exemplars and refrain from conduct that would lessen public trust in the fidelity, honesty, and integrity of the legal profession. Membership in the legal profession was characterized as a privilege, and when an attorney is no longer worthy of pub

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