J.A.B. Bulao & Associates

PCI LEASING AND FINANCE INC.  VS. TROJIAN METAL INDUSTRIES INCORPORATED, WALFRIDO DIZON, ELIZABETH DIZON, AND JOHN DOE (G.R. NO. 176381, 15 DECEMBER 2010) SUBJECTS: FINANCIAL LEASING; REFORMATION OF INSTRUMENT.

DOCTRINES:

WHAT IS FINANCIAL LEASING?

“Thus, in a true financial leasing, whether under RA 5980 or RA 8556, a finance company purchases on behalf of a cash-strapped lessee the equipment the latter wants to buy but, due to financial limitations, is incapable of doing so. The finance company then leases the equipment to the lessee in exchange for the latter’s periodic payment of a fixed amount of rental.”

TMII  OWNS CERTAIN EQUIPMENT. IT NEEDED MONEY. SO IT SOLD THE EQUIPMENT TO PCI LENDING. THEN PCI LENDING RENTED THE EQUIPMENT TO TMII. IS THE TRANSACTION A FINANCIAL LENDING? NO, IT WAS JUST A SIMPLE LOAN  BECAUSE IN THE BEGINNING TMII OWNED THE EQUIPMENT.

“In the present case, since the transaction between PCILF and TMI involved equipment already owned by TMI, it cannot be considered as one of financial leasing, as defined by law, but simply a loan secured by the various equipment owned by TMI.”

TO MAKE CLEAR THE INTENTION OF THE PARTIES TO ENTER INTO A SIMPLE LOAN CONTRACT,  THE SOLUTION IS REFORMATION OF CONTRACT TO BE DONE WITHIN 10 YEARS FROM THE DATE THE CONTRACT WAS EXECUTED.

Articles 1359 and 1362 of the Civil Code provide:

Art. 1359. When, there having been a meeting of the minds of the parties to a contract, their true intention is not expressed in the instrument purporting to embody the agreement, by reason of mistake, fraud, inequitable conduct, or accident, one of the parties may ask for the reformation of the instrument to the end that such true intention may be expressed.

Art. 1362. If one party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does not show their true intention, the former may ask for the reformation of the instrument.

Under Article 1144 of the Civil Code, the prescriptive period for actions based upon a written contract and for reformation of an instrument is ten years.²⁵ The right of action for reformation accrued from the date of execution of the lease agreement on 8 April 1997. TMI timely exercised its right of action when it filed an answer²⁶ on 14 February 2000 asking for the reformation of the lease agreement.”

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D E C I S I O N

CARPIO, J.:

The Case

This is a petition for review¹ with application for the immediate issuance of a temporary restraining order and writ of preliminary injunction assailing the 5 October 2006 Decision² and the 23 January 2007 Resolution³ of the Court of Appeals in CA-G.R. CV No. 75855. The 5 October 2006 Decision set aside the 23 July 2002 Decision⁴ of the Regional Trial Court (Branch 79) of Quezon City in Civil Case No. Q-99-37559, which granted petitioner’s complaint for recovery of sum of money and personal property with prayer for the issuance of a writ of replevin. The 23 January 2007 Resolution denied petitioner’s motion for reconsideration.

The Facts

Sometime in 1997, respondent Trojan Metal Industries, Inc. (TMI) came to petitioner PCI Leasing and Finance, Inc. (PCILF) to seek a loan. Instead of extending a loan, PCILF offered to buy various equipment TMI owned, namely: a Verson double action hydraulic press with cushion, a Hinohara powerpress 75-tons capacity, a USI-clearing powerpress 60-tons capacity, a Watanabe powerpress 60-tons capacity, a YMGP powerpress 30-tons capacity, a YMGP powerpress 15-tons capacity, a lathe machine, a vertical milling machine, and a radial drill. Hard-pressed for money, TMI agreed. PCILF and TMI immediately executed deeds of sale⁵ evidencing TMI’s sale to PCILF of the various equipment in consideration of the total amount of P 2,865,070.00.

PCILF and TMI then entered into a lease agreement,⁶ dated 8 April 1997, whereby the latter leased from the former the various equipment it previously owned. Pursuant to the lease agreement, TMI issued postdated checks representing 24 monthly installments. The monthly rental for the Verson double action hydraulic press with cushion was in the amount of P62,328.00; for the Hinohara powerpress 75-tons capacity, the USI-clearing powerpress 60-tons capacity, the Watanabe powerpress 60-tons capacity, the YMGP powerpress 30-tons capacity, and the YMGP powerpress 15-tons capacity, the monthly rental was in the amount of P49,259.00; and for the lathe machine, the vertical milling machine, and the radial drill, the monthly rental was in the amount of P22,205.00.

The lease agreement required TMI to give PCILF a guaranty deposit of P1,030,350.00,⁷ which would serve as security for the timely performance of TMI’s obligations under the lease agreement, to be automatically forfeited should TMI return the leased equipment before the expiration of the lease agreement.

Further, spouses Walfrido and Elizabeth Dizon, as TMI’s President and Vice-President, respectively executed in favor of PCILF a Continuing Guaranty of Lease Obligations.⁸ Under the continuing guaranty, the Dizon spouses agreed to immediately pay whatever obligations would be due PCILF in case TMI failed to meet its obligations under the lease agreement.

To obtain additional loan from another financing company,⁹ TMI used the leased equipment as temporary collateral.¹⁰ PCILF considered the second mortgage a violation of the lease agreement. At this time, TMI’s partial payments had reached P1,717,091.00.¹¹ On 8 December 1998, PCILF sent TMI a demand letter¹² for the payment of the latter’s outstanding obligation. PCILF’s demand remained unheeded.

On 7 May 1999, PCILF filed in the Regional Trial Court (Branch 79) of Quezon City a complaint¹³ against TMI, spouses Dizon, and John Doe (collectively referred to as “respondents” hereon) for recovery of sum of money and personal property with prayer for the issuance of a writ of replevin, docketed as Civil Case No. Q-99-37559.

On 7 September 1999, the RTC issued the writ of replevin¹⁴ PCILF prayed for, directing the sheriff to take custody of the leased equipment. Not long after, PCILF sold the leased equipment to a third party and collected the proceeds amounting to P1,025,000.00.¹⁵

In their answer,¹⁶ respondents claimed that the sale with lease agreement was a mere scheme to facilitate the financial lease between PCILF and TMI. Respondents explained that in a simulated financial lease, property of the debtor would be sold to the creditor to be repaid through rentals; at the end of the lease period, the property sold would revert back to the debtor. Respondents prayed that they be allowed to reform the lease agreement to show the true agreement between the parties, which was a loan secured by a chattel mortgage.

The Ruling of the RTC

In its 23 July 2002 Decision, the RTC granted the prayer of PCILF in its complaint. The RTC ruled that the lease agreement must be presumed valid as the law between the parties even if some of its provisions constituted unjust enrichment on the part of PCILF. The dispositive portion of its Decision reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff-PCI Leasing and Finance, Inc. and against defendants Trojan Metal, Walfrido Dizon, and Elizabeth Dizon, as follows:

1.      Ordering the plaintiff to be entitled to the possession of herein machineries.

2.      Ordering the defendants to pay the remaining rental obligation in the amount of Php 888,434.48 plus legal interest from the date of filing of the complaint;

3.      Ordering defendant to pay an attorneys fees in the amount of Php 50,000.00;

4.      Ordering the defendant to pay the cost of suit.

SO ORDERED.¹⁷

Respondents appealed to the Court of Appeals alleging that the RTC erred in ruling that PCILF was entitled to the possession of TMI’s equipment and that respondents still owed PCILF the balance of P888,423.48.

The Ruling of the Court of Appeals

The Court of Appeals ruled that the sale with lease agreement was in fact a loan secured by chattel mortgage. The Court of Appeals held that since PCILF sold the equipment to a third party for P1,025,000.00 and TMI paid PCILF a guaranty deposit of P1,030,000.00, PCILF had in its hands the sum of P2,055,250.00, as against TMI’s remaining obligation of P888,423.48, or an excess of P1,166,826.52, which should be returned to TMI in accordance with Section 14 of the Chattel Mortgage Law.

Thus, in its 5 October 2006 Decision, the Court of Appeals set aside the Decision of the RTC. The Court of Appeals entered a new one dismissing PCILF’s complaint and directing PCILF to pay TMI, by way of refund, the amount of P1,166,826.52. The decretal part of its Decision reads:

WHEREFORE, premises considered, the July 23, 2002 Decision of the Regional Trial Court of Quezon City, Branch 79, in Civil Case No. Q-99-37559, is hereby REVERSED and SET ASIDE, and a new one entered DISMISSING the complaint and DIRECTING the plaintiff-appellee PCI Leasing and Finance, Inc. to PAY, by way of REFUND, to the defendant-appellant Trojan Metal Industries, Inc., the net amount of Php 1,166,826.52.

SO ORDERED.¹⁸

The Issues

The issues for resolution are (1) whether the sale with lease agreement the parties entered into was a financial lease or a loan secured by chattel mortgage; and (2) whether PCILF should pay TMI, by way of refund, the amount of P1,166,826.52.

The Court’s Ruling

The petition lacks merit.

PCILF contends that the transaction between the parties was a sale and leaseback financing arrangement where the client sells movable property to a financing company, which then leases the same back to the client. PCILF insists the transaction is not financial leasing, which contemplates extension of credit to assist a buyer in acquiring movable property which the buyer can use and eventually own. PCILF claims that the sale and leaseback financing arrangement is not contrary to law, morals, good customs, public order, or public policy. PCILF stresses that the guaranty deposit should be forfeited in its favor, as provided in the lease agreement. PCILF points out that this case does not involve mere failure to pay rentals, it deals with a flagrant violation of the lease agreement.

Respondents counter that from the very beginning, transfer to PCILF of ownership over the subject equipment was never the intention of the parties. Respondents claim that under the lease agreement, the guaranty deposit would be forfeited if TMI returned the leased equipment to PCILF before the expiration of the lease agreement; thus, since TMI never returned the leased equipment voluntarily, but through a writ of replevin ordered by the RTC, the guaranty deposit should not be forfeited.

Since the lease agreement in this case was executed on 8 April 1997, Republic Act No. 5980 (RA 5980), otherwise known as the Financing Company Act, governs as to what constitutes financial leasing. Section 1, paragraph (j) of the New Rules and Regulations to Implement RA 5980¹⁹ defines financial leasing as follows:

LEASING shall refer to financial leasing which is a mode of extending credit through a non-cancelable contract under which the lessor purchases or acquires at the instance of the lessee heavy equipment, motor vehicles, industrial machinery, appliances, business and office machines, and other movable property in consideration of the periodic payment by the lessee of a fixed amount of money sufficient to amortize at least 70% of the purchase price or acquisition cost, including any incidental expenses and a margin of profit, over the lease period. The contract shall extend over an obligatory period during which the lessee has the right to hold and use the leased property and shall bear the cost of repairs, maintenance, insurance, and preservation thereof, but with no obligation or option on the part of the lessee to purchase the leased property at the end of the lease contract.

The above definition of financial leasing gained statutory recognition with the enactment of Republic Act No. 8556 (RA 8556), otherwise known as the Financing Company Act of 1998.²⁰ Section 3(d) of RA 8556 defines financial leasing as:

a mode of extending credit through a non-cancelable lease contract under which the lessor purchases or acquires, at the instance of the lessee, machinery, equipment, motor vehicles, appliances, business and office machines, and other movable or immovable property in consideration of the periodic payment by the lessee of a fixed amount of money sufficient to amortize at least seventy (70%) of the purchase price or acquisition cost, including any incidental expenses and a margin of profit over an obligatory period of not less than two (2) years during which the lessee has the right to hold and use the leased property with the right to expense the lease rentals paid to the lessor and bears the cost of repairs, maintenance, insurance and preservation thereof, but with no obligation or option on his part to purchase the leased property from the owner-lessor at the end of the lease contract.

Thus, in a true financial leasing, whether under RA 5980 or RA 8556, a finance company purchases on behalf of a cash-strapped lessee the equipment the latter wants to buy but, due to financial limitations, is incapable of doing so. The finance company then leases the equipment to the lessee in exchange for the latter’s periodic payment of a fixed amount of rental.

In this case, however, TMI already owned the subject equipment before it transacted with PCILF. Therefore, the transaction between the parties in this case cannot be deemed to be in the nature of a financial leasing as defined by law.

The facts in the instant case are analogous to those in Cebu Contractors Consortium Co. v. Court of Appeals.²¹ There, Cebu Contractors Consortium Co. (CCCC) approached Makati Leasing and Finance Corporation (MLFC) to obtain a loan. MLFC agreed to extend financial assistance to CCCC but, instead of a loan with collateral, MLFC induced CCCC to adopt a sale and leaseback scheme. Under the scheme, several of CCCC’s equipment were made to appear as sold to MLFC and then leased back to CCCC, which in turn paid lease rentals to MLFC. The rentals were treated as installment payments to repurchase the equipment.

The Court held in Cebu Contractors Consortium Co. v. Court of Appeals²² that the transaction between CCCC and MLFC was not one of financial leasing as defined by law, but simply a loan secured by a chattel mortgage over CCCC’s equipment. The Court went on to explain that where the client already owned the equipment but needed additional working capital and the finance company purchased such equipment with the intention of leasing it back to him, the lease agreement was simulated to disguise the true transaction that was a loan with security. In that instance, continued the Court, the intention of the parties was not to enable the client to acquire and use the equipment, but to extend to him a loan.

Similarly, in Investors Finance Corporation v. Court of Appeals,²³ a borrower came to Investors Finance Corporation (IFC) to secure a loan with his heavy equipment and machinery as collateral. The parties executed documents where IFC was made to appear as the owner of the equipment and the borrower as the lessee. As consideration for the lease, the borrower-lessee was to pay monthly amortizations over a period of 36 months. The parties executed a lease agreement covering various equipment described in the lease schedules attached to the lease agreement. As security, the borrower-lessee also executed a continuing guaranty.

The Court in Investors Finance Corporation v. Court of Appeals²⁴ held that the transaction between the parties was not a true financial leasing because the intention of the parties was not to enable the borrower-lessee to acquire and use the heavy equipment and machinery, which already belonged to him, but to extend to him a loan to use as capital for his construction and logging businesses. The Court held that the lease agreement was simulated to disguise the true transaction between the parties, which was a simple loan secured by heavy equipment and machinery owned by the borrower-lessee. The Court differentiated between a true financial leasing and a loan with mortgage in the guise of a lease. The Court said that financial leasing contemplates the extension of credit to assist a buyer in acquiring movable property which he can use and eventually own. If the movable property already belonged to the borrower-lessee, the transaction between the parties, according to the Court, was a loan with mortgage in the guise of a lease.

In the present case, since the transaction between PCILF and TMI involved equipment already owned by TMI, it cannot be considered as one of financial leasing, as defined by law, but simply a loan secured by the various equipment owned by TMI.

Articles 1359 and 1362 of the Civil Code provide:

Art. 1359. When, there having been a meeting of the minds of the parties to a contract, their true intention is not expressed in the instrument purporting to embody the agreement, by reason of mistake, fraud, inequitable conduct, or accident, one of the parties may ask for the reformation of the instrument to the end that such true intention may be expressed.

Art. 1362. If one party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does not show their true intention, the former may ask for the reformation of the instrument.

Under Article 1144 of the Civil Code, the prescriptive period for actions based upon a written contract and for reformation of an instrument is ten years.²⁵ The right of action for reformation accrued from the date of execution of the lease agreement on 8 April 1997. TMI timely exercised its right of action when it filed an answer²⁶ on 14 February 2000 asking for the reformation of the lease agreement.

Hence, had the true transaction between the parties been expressed in a proper instrument, it would have been a simple loan secured by a chattel mortgage, instead of a simulated financial leasing. Thus, upon TMI’s default, PCILF was entitled to seize the mortgaged equipment, not as owner but as creditor-mortgagee for the purpose of foreclosing the chattel mortgage. PCILF’s sale to a third party of the mortgaged equipment and collection of the proceeds of the sale can be deemed in the exercise of its right to foreclose the chattel mortgage as creditor-mortgagee.

The Court of Appeals correctly ruled that the transaction between the parties was simply a loan secured by a chattel mortgage. However, in reckoning the amount of the principal obligation, the Court of Appeals should have taken into account the proceeds of the sale to PCILF less the guaranty deposit paid by TMI. After deducting payments made by TMI to PCILF, the balance plus applicable interest should then be applied against the aggregate cash already in PCILF’s hands.

Records show that PCILF paid TMI P2,865,070.00²⁷ as consideration for acquiring the mortgaged equipment. In turn, TMI gave PCILF a guaranty deposit of P1,030,350.00.²⁸ Thus, the amount of the principal loan was P1,834,720.00, which was the net amount actually received by TMI (proceeds of the sale of the equipment to PCILF minus the guaranty deposit). Against the principal loan of P1,834,720.00 plus the applicable interest should be deducted loan payments, totaling P1,717,091.00.²⁹ Since PCILF sold the mortgaged equipment to a third party for P1,025,000.00,³⁰ the proceeds of the said sale should be applied to offset the remaining balance on the principal loan plus applicable interest.

However, the exact date of the sale of the mortgaged equipment, which is needed to compute the interest on the remaining balance of the principal loan, cannot be gleaned from the facts on record. We thus remand the case to the RTC for the computation of the total amount due from the date of demand on 8 December 1998 until the date of sale of the mortgaged equipment to a third party, which amount due shall be offset against the proceeds of the sale.

In the absence of stipulation, the applicable interest due on the remaining balance of the loan is the legal rate of 12% per annum, computed from the date PCILF sent a demand letter to TMI on 8 December 1998. No interest can be charged prior to this date because TMI was not yet in default prior to 8 December 1998. The interest due shall also earn legal interest from the time it is judicially demanded, pursuant to Article 2212 of the Civil Code, which provides:

Art. 2212. Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point.

The foregoing provision has been incorporated in the comprehensive summary of existing rules on the computation of legal interest laid down by the Court in Eastern Shipping Lines, Inc. v. Court of Appeals,³¹ to wit:

1.      When an obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2.      When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3.      When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. (Emphasis supplied)

Applying the rules in the computation of interest, the remaining balance of the principal loan subject of the chattel mortgage must earn the legal interest of 12% per annum, which interest, as long as unpaid, also earns legal interest of 12% per annum, computed from the filing of the complaint on 7 May 1999.

In accordance with the rules laid down in Eastern Shipping Lines, Inc. v. Court of Appeals,³² we derive the following formula for the RTC’s guidance:

TOTAL AMOUNT DUE = [principal – partial payments made] + [interest + interest on interest], where

Interest = remaining balance x 12% per annum x no. of years from due date (8 December 1998 when demand was made) until date of sale to a third party

Interest on interest = interest computed as of the filing of the complaint on 7 May 1999 x 12% x no. of years until date of sale to a third party

From the computed total amount should be deducted P1,025,000.00 representing the proceeds of the sale already in PCILF’s hands. The difference represents overpayment by TMI, which the law requires PCILF to refund to TMI.

Section 14 of Act No. 1508, otherwise known as the Chattel Mortgage Law, provides:

Section 14. Sale of property at public auction; officer’s return; fees; disposition of proceeds. x x x The proceeds of such sale shall be applied to the payment, first, of the costs and expenses of keeping and sale, and then to the payment of the demand or obligation secured by such mortgage, and the residue shall be paid to persons holding subsequent mortgages in their order, and the balance, after paying the mortgages, shall be paid to the mortgagor or person holding under him on demand.

Section 14 of the Chattel Mortgage Law expressly entitles the debtor-mortgagor to the balance of the proceeds, upon satisfaction of the principal loan and costs. Prevailing jurisprudence³³ also holds that the Chattel Mortgage Law bars the creditor-mortgagee from retaining the excess of the sale proceeds.

TMI’s right to the refund accrued from the time PCILF received the proceeds of the sale of the mortgaged equipment. However, since TMI never made a counterclaim or demand for refund due on the resulting overpayment after offsetting the proceeds of the sale against the remaining balance on the principal loan plus applicable interest, no interest applies on the amount of refund due. Nonetheless, in accord with prevailing jurisprudence,³⁴ the excess amount PCILF must refund to TMI is subject to interest at 12% per annum from finality of this Decision until fully paid.

WHEREFORE, we DENY the petition. We AFFIRM with MODIFICATION the 5 October 2006 Decision and the 23 January 2007 Resolution of the Court of Appeals in CA-G.R. CV No. 75855. Petitioner PCI Leasing and Finance, Inc. is hereby ORDERED to PAY respondent Trojan Metal Industries, Inc., by way of refund, the excess amount to be computed by the Regional Trial Court based on the formula specified above, with interest at 12% per annum from finality of this Decision until fully paid.

Costs against petitioner.

SO ORDERED.

ANTONIO T. CARPIO

Associate Justice

WE CONCUR:

ANTONIO EDUARDO B. NACHURA

Associate Justice

DIOSDADO M. PERALTA ROBERTO A. ABAD

Associate Justice Associate Justice

JOSE C. MENDOZA

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

ANTONIO T. CARPIO

Associate Justice

Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

RENATO C. CORONA

Chief Justice

1 Under Rule 45 of the Rules of Court.

2 Rollo, pp. 42-52. Penned by Associate Justice Vicente Q. Roxas, with Associate Justices Josefina Guevara-Salonga and Apolinario D. Bruselas, Jr., concurring.

3 Id. at 53. Penned by Associate Justice Vicente Q. Roxas, with Associate Justices Josefina Guevara-Salonga and Apolinario D. Bruselas, Jr., concurring.

4 CA rollo, pp. 67-72. Penned by Judge Demetrio B. Macapagal, Sr.

5 Records, pp. 179-181.

6 Id. at 10-14.

7 Id. at 12-14. TSN dated 12 July 2001, p. 19.

8 Id. at 17.

9 Technology and Livelihood Resources Center.

10 Records, pp. 279-280, 204-205; TSN dated 7 February 2002, p. 7.

11 Id. at 157, 187.

12 Id. at 15-16.

13 Id. at 1-9.

14 Id. at 75-76.

15 TSN dated 17 August 2001, p. 15.

16 Records, pp. 117-119.

17 CA rollo, p. 72.

18 Rollo, p. 52.

19 Dated 16 October 1991.

20 An Act Amending Republic Act No. 5980, otherwise known as the Financing Company Act.

21 G.R. No. 107199, 22 July 2003, 407 SCRA 154.

22 Id.

23 G.R. No. 91334, 7 February 1991, 193 SCRA 701.

24 Id.

25 Civil Code, Art. 1144. The following actions must be brought within ten years from the time the right of action accrues:

1.      Upon a written contract;

x x x x

26 Records, pp. 117-119.

27 Records, pp. 179-181.

28 Id.

29 Id. at 157, 187.

30 TSN dated 17 August 2001, p. 15.

31 G.R. No. 97412, 12 July 1994, 234 SCRA 78, 95-97.

32 Id.

33 PAMECA Wood Treatment Plant, Inc. v. CA, 369 Phil. 544 (1999).

34 Cuyco v. Cuyco, G.R. No. 168736, 19 April 2006, 487 SCRA 693.

CARMEN EDANO VS. JUDGE FATIMA G. ASDALA, RTC BRANCH 87, QUEZON CITY (A.M. NO. RTJ-06-2007, 06 DECEMBER 2010) SUBJECT: DEADLINE OF JUDGES FOR RENDERING DECISIONS; DECISIONS NOT SUBJECT TO DISCIPLINARY ACTIONS;

DOCTRINES:

JUDGES MUST DECIDE ALL CASES WITHIN 3 MONTHS FROM DATE OF SUBMISSION

“. . . Section 15, Article VIII of the Constitution requires judges to decide all cases within three (3) months from the date of submission. This Constitutional policy is reiterated in Rule 1.02, Canon 1 of the Code of Judicial Conduct which states that a judge should administer justice impartially and without delay; and Rule 3.05, Canon 3 of the same Code provides that a judge shall dispose of the court’s business promptly and decide cases within the required periods.

ACTS OF JUDGE PERTAINING TO HIS JUDICIAL FUNCTIONS ARE NOT SUBJECT TO DISCIPLINARY ACTION UNLESS THEY ARE TAINTED WITH FRAUD, DISHONESTY, CORRUPTION OR BAD FAITH.

“. . The respondent judge’s dismissal of the civil case for Support and her denial of the notice of appeal were done in the discharge of her judicial functions. Time and again, we have ruled that the acts of a judge, pertaining to his judicial functions, are not subject to disciplinary action, unless they are tainted with fraud, dishonesty, corruption or bad faith.^[1][10] As we explained in Jabon v. Usman:^[2][11]

It must be stressed that an administrative complaint is not an appropriate remedy where judicial recourse is still available, such as a motion for reconsideration, an appeal, or a petition for certiorari, unless the assailed order or decision is tainted with fraud, malice, or dishonesty.  The remedy of the aggrieved party is to elevate the assailed decision or order to the higher court for review and correction.  Thus, disciplinary proceedings and criminal actions against magistrates do not complement, supplement or substitute judicial remedies, whether ordinary or extraordinary. An inquiry into their civil, criminal and/or administrative liability may be made only after the available remedies have been exhausted and decided with finality. In fine, only judicial errors tainted with fraud, dishonesty, gross ignorance, bad faith, or deliberate intent to do an injustice will be administratively sanctioned.  To hold, otherwise, would be to render judicial office untenable, for no one called upon to try the facts or interpret the law in the process of administering justice can be infallible in his judgment.”

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D E C I S I O N

BRION, J.:

          We resolve in this Decision the administrative complaint for violation of the Code of Judicial Ethics, misconduct, rendering an erroneous decision, and rendering a decision beyond the 90-day reglementary period filed by Carmen Edaño (complainant) against Judge Fatima G. Asdala (respondent judge).

          In her letter-complaint,^[3][1] the complainant alleged that she was the plaintiff in a civil case for Support with prayer for Support Pendente Lite (Civil Case No. Q-97-30576), entitled “Carlo Edaño and Jay-ar Edaño, represented by Carmen Edano v. George F. Butler,” pending before the Regional Trial Court, Branch 87, Quezon City, presided over by the respondent judge.

The complainant claimed that the respondent judge made it appear that Civil Case No. Q-97-30576 was decided on March 22, 2005, although the records show that she (respondent judge) still ruled on several motions relating to this case even after that date. The complainant further alleged that the respondent judge erred in denying her notice of appeal.

          The Office of the Court Administrator (OCA) required the respondent judge to comment on the complaint. In her comment,^[4][2] the respondent judge maintained that she had rendered the decision on March 22, 2005, although it was mailed on a later date. Even assuming that there was delay in rendering the decision, the delay was not deliberate. She added that the complainant was not prejudiced by the delay as she continuously received support pendente lite from the defendant.

          The respondent judge likewise explained that the orders she issued after March 22, 2005 did not touch on the merits of the case; they were orders directing the release of money deposited by the defendant as support pendente lite. According to her, she denied the complainant’s notice of appeal because Section 1, Rule 41 of the Revised Rules of Court provides that no appeal may be taken from an order dismissing an action without prejudice. Finally, she explained that her dismissal of the subject civil case and the denial of the notice of appeal are not the proper subjects of an administrative case as they are acts pertaining to her judicial functions.

          In her reply,^[5][3] complainant maintained that the respondent judge violated the 90-day reglementary period for rendering decisions. She also revealed that the respondent judge made her sign a complaint against a Public Attorneys Office lawyer, to force the said lawyer to stay in her (respondent judge’s) sala.

          The OCA, in its Report^[6][4] dated April 18, 2006, recommended that the respondent judge be fined in the amount of P10,000.00 for undue delay in rendering a decision, with a stern warning that a commission of similar acts in the future will be dealt with more severely.

THE COURT’S RULING

          We agree with the finding of the OCA that the respondent judge is guilty of undue delay in rendering a decision. Section 15, Article VIII of the Constitution requires judges to decide all cases within three (3) months from the date of submission. This Constitutional policy is reiterated in Rule 1.02, Canon 1 of the Code of Judicial Conduct which states that a judge should administer justice impartially and without delay; and Rule 3.05, Canon 3 of the same Code provides that a judge shall dispose of the court’s business promptly and decide cases within the required periods.

In Office of the Court Administrator v. Garcia-Blanco,^[7][5] the Court held that the 90-day period is mandatory. Failure to decide cases within the reglementary period constitutes a ground for administrative liability except when there are valid reasons for the delay. We explained the raison d’etre behind the rule on mandatory compliance with the constitutionally prescribed periods in Office of the Court Administrator v. Reyes:^[8][6]

The honor and integrity of the judiciary is measured not only by the fairness and correctness of the decisions rendered, but also by the efficiency with which disputes are resolved. Thus, judges must perform their official duties with utmost diligence if public confidence in the judiciary is to be preserved. There is no excuse for mediocrity in the performance of judicial functions. The position of judge exacts nothing less than faithful observance of the law and the Constitution in the discharge of official duties. 

In the present case, Civil Case No. Q-97-30576 had been submitted for decision on December 9, 2004; the decision was, therefore, due on March 9, 2005.  The records do not show that the respondent judge asked for an extension to decide this case.  Thus, when she decided the case on March 22, 2005, the 90-day reglementary period had already lapsed. The respondent judge’s explanation that the complainant was not prejudiced by the delay is immaterial, as it is her constitutional duty to decide the case within three months from the date of submission.

Under Rule 140, Section 9(1) of the Rules of Court,^[9][7] as amended by Administrative Matter No. 01-8-10-SC,^[10][8] the respondent judge’s undue delay in rendering a decision is classified as a less serious offense. It is punishable by suspension from office without salary and other benefits for not less than one month nor more than three months or a fine of more than P10,000.00 but not exceeding P20,000.00.  The OCA’s recommendation of P10,000.00 fine is, therefore, in order.

We point out that the respondent judge, in Edaño v. Asdala,^[11][9] had been dismissed from the service, with forfeiture of all salaries, benefits and leave credits to which she may be entitled. The Court, in its resolution of September 11, 2007, modified the dispositive portion of this decision and exempted from forfeiture her accrued leave credits. The Court, in another Resolution dated January 15, 2008, directed the Financial Management Office to release and pay the money value of the accrued leave credits of Judge Fatima G. Asdala, subject to the retention of P80,000.00. In light of these considerations, we thus deduct the P10,000.00 fine, imposed in this case, from the P80,000.00 which this Court withheld, pursuant to our  January 15, 2008 Resolution.

Other Charges

The Court agrees with the OCA that the complainant’s charges of misconduct and rendering an erroneous decision have no leg to stand on. The respondent judge’s dismissal of the civil case for Support and her denial of the notice of appeal were done in the discharge of her judicial functions. Time and again, we have ruled that the acts of a judge, pertaining to his judicial functions, are not subject to disciplinary action, unless they are tainted with fraud, dishonesty, corruption or bad faith.^[12][10] As we explained in Jabon v. Usman:^[13][11]

It must be stressed that an administrative complaint is not an appropriate remedy where judicial recourse is still available, such as a motion for reconsideration, an appeal, or a petition for certiorari, unless the assailed order or decision is tainted with fraud, malice, or dishonesty.  The remedy of the aggrieved party is to elevate the assailed decision or order to the higher court for review and correction.  Thus, disciplinary proceedings and criminal actions against magistrates do not complement, supplement or substitute judicial remedies, whether ordinary or extraordinary. An inquiry into their civil, criminal and/or administrative liability may be made only after the available remedies have been exhausted and decided with finality. In fine, only judicial errors tainted with fraud, dishonesty, gross ignorance, bad faith, or deliberate intent to do an injustice will be administratively sanctioned.  To hold, otherwise, would be to render judicial office untenable, for no one called upon to try the facts or interpret the law in the process of administering justice can be infallible in his judgment.

WHEREFORE, premises considered, Judge Fatima G. Asdala is hereby found GUILTY of undue delay in rendering a decision. Accordingly, she is FINED  Ten Thousand Pesos (P10,000.00), to be deducted from the Eighty Thousand Pesos (P80,000.00) which the Court withheld pursuant to its January 15, 2008 Resolution.

SO ORDERED.

ARTURO D. BRION

                                                                       Associate Justice  

WE CONCUR:

MARIA LOURDES P.A. SERENO

Associate Justice 

JOVITO S. OLAZO VS. JUSTICE DANTE O. TINGA (RET.) (A.M. NO. 10-5-7-SC, 07 DECEMBER 2010) SUBJECT: DEFINITION OF PRACTICE OF LAW; ACCOUNTABILITY OF GOVERNMENT LAWYERS; ON PRIVATE PRACTICE BY GOVT LAWYERS; RULE ON PRACTICE OF LAW UPON LEAVING GOVERNMENT SERVICE.

DOCTRINES:

        DEFINITION OF PRACTICE OF LAW.

“IN CAYETANO V. MONSOD,^[1][28] WE DEFINED THE PRACTICE OF LAW AS ANY ACTIVITY, IN AND OUT OF COURT, THAT REQUIRES THE APPLICATION OF LAW, LEGAL PROCEDURE, KNOWLEDGE, TRAINING AND EXPERIENCE. MOREOVER, WE RULED THAT TO ENGAGE IN THE PRACTICE OF LAW IS TO PERFORM THOSE ACTS WHICH ARE CHARACTERISTICS OF THE PROFESSION; TO PRACTICE LAW IS TO GIVE NOTICE OR RENDER ANY KIND OF SERVICE, WHICH DEVICE OR SERVICE REQUIRES THE USE IN ANY DEGREE OF LEGAL KNOWLEDGE OR SKILL.”

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“THE COMPLAINANT, TOO, FAILED TO SUFFICIENTLY ESTABLISH THAT THE RESPONDENT WAS ENGAGED IN THE PRACTICE OF LAW. AT FACE VALUE, THE LEGAL SERVICE RENDERED BY THE RESPONDENT WAS LIMITED ONLY IN THE PREPARATION OF A SINGLE DOCUMENT.  IN BORJA, SR. V. SULYAP, INC.,^[2][32] WE SPECIFICALLY DESCRIBED PRIVATE PRACTICE OF LAW AS ONE THAT CONTEMPLATES A SUCCESSION OF ACTS OF THE SAME NATURE HABITUALLY OR CUSTOMARILY HOLDING ONE’S SELF TO THE PUBLIC AS A LAWYER.

ACCOUNTABILITY OF A GOVERNMENT LAWYER IN PUBLIC OFFICE

“CANON 6 OF THE CODE OF PROFESSIONAL RESPONSIBILITY HIGHLIGHTS THE CONTINUING STANDARD OF ETHICAL CONDUCT TO BE OBSERVED BY GOVERNMENT LAWYERS IN THE DISCHARGE OF THEIR OFFICIAL TASKS. IN ADDITION TO THE STANDARD OF CONDUCT LAID DOWN UNDER R.A. NO. 6713 FOR GOVERNMENT EMPLOYEES, A LAWYER IN THE GOVERNMENT SERVICE IS OBLIGED TO OBSERVE THE STANDARD OF CONDUCT UNDER THE CODE OF PROFESSIONAL RESPONSIBILITY. 

SINCE PUBLIC OFFICE IS A PUBLIC TRUST, THE ETHICAL CONDUCT DEMANDED UPON LAWYERS IN THE GOVERNMENT SERVICE IS MORE EXACTING THAN THE STANDARDS FOR THOSE IN PRIVATE PRACTICE. LAWYERS IN THE GOVERNMENT SERVICE ARE SUBJECT TO CONSTANT PUBLIC SCRUTINY UNDER NORMS OF PUBLIC ACCOUNTABILITY.  THEY ALSO BEAR THE HEAVY BURDEN OF HAVING TO PUT ASIDE THEIR PRIVATE INTEREST IN FAVOR OF THE INTEREST OF THE PUBLIC; THEIR PRIVATE ACTIVITIES SHOULD NOT INTERFERE WITH THE DISCHARGE OF THEIR OFFICIAL FUNCTIONS.^[3][11]

THE FIRST CHARGE INVOLVES A VIOLATION OF RULE 6.02 OF THE CODE OF PROFESSIONAL RESPONSIBILITY.  IT IMPOSES THE FOLLOWING RESTRICTIONS IN THE CONDUCT OF A GOVERNMENT LAWYER:

A LAWYER IN THE GOVERNMENT SERVICE SHALL NOT USE HIS PUBLIC POSITION TO PROMOTE OR ADVANCE HIS PRIVATE INTERESTS, NOR ALLOW THE LATTER TO INTERFERE WITH HIS PUBLIC DUTIES.

THE ABOVE PROVISION PROHIBITS A LAWYER FROM USING HIS OR HER PUBLIC POSITION TO: (1) PROMOTE PRIVATE INTERESTS; (2) ADVANCE PRIVATE INTERESTS; OR (3) ALLOW PRIVATE INTEREST TO INTERFERE WITH HIS OR HER PUBLIC DUTIES. WE PREVIOUSLY HELD THAT THE RESTRICTION EXTENDS TO ALL GOVERNMENT LAWYERS WHO USE THEIR PUBLIC OFFICES TO PROMOTE THEIR PRIVATE INTERESTS.^[4][12]

IN HUYSSEN V. GUTIERREZ,^[5][13] WE DEFINED PROMOTION OF PRIVATE INTEREST TO INCLUDE SOLICITING GIFTS OR ANYTHING OF MONETARY VALUE IN ANY TRANSACTION REQUIRING THE APPROVAL OF HIS OR HER OFFICE, OR MAY BE AFFECTED BY THE FUNCTIONS OF HIS OR HER OFFICE.  IN ALI V. BUBONG,^[6][14] WE RECOGNIZED THAT PRIVATE INTEREST IS NOT LIMITED TO DIRECT INTEREST, BUT EXTENDS TO ADVANCING THE INTEREST OF RELATIVES.  WE ALSO RULED THAT PRIVATE INTEREST INTERFERES WITH PUBLIC DUTY WHEN THE RESPONDENT USES THE OFFICE AND HIS OR HER KNOWLEDGE OF THE INTRICACIES OF THE LAW TO BENEFIT RELATIVES.^[7][15] 

IN VITRIOLO V. DASIG,^[8][16]  WE FOUND THE ACT OF THE RESPONDENT (AN OFFICIAL OF THE COMMISSION ON HIGHER EDUCATION) OF EXTORTING MONEY FROM PERSONS WITH APPLICATIONS OR REQUESTS PENDING BEFORE HER OFFICE TO BE A SERIOUS BREACH OF RULE 6.02 OF THE CODE OF PROFESSIONAL RESPONSIBILITY.^[9][17] WE REACHED THE SAME CONCLUSION IN HUYSSEN, WHERE WE FOUND THE RESPONDENT (AN EMPLOYEE OF THE BUREAU OF IMMIGRATION AND DEPORTATION) LIABLE UNDER RULE 6.02 OF THE CODE OF PROFESSIONAL RESPONSIBILITY, BASED ON THE EVIDENCE SHOWING THAT HE DEMANDED MONEY FROM THE COMPLAINANT WHO HAD A PENDING APPLICATION FOR VISAS BEFORE HIS OFFICE.^[10][18] 

SIMILARLY, IN IGOY V. SORIANO^[11][19] WE FOUND THE RESPONDENT (A COURT ATTORNEY OF THIS COURT) LIABLE FOR VIOLATING RULE 6.02 OF THE CODE OF PROFESSIONAL RESPONSIBILITY, AFTER CONSIDERING THE EVIDENCE SHOWING THAT HE DEMANDED AND RECEIVED MONEY FROM THE COMPLAINANT WHO HAD A PENDING CASE BEFORE THIS COURT.”

RULE ON PRIVATE PRACTICE OF LAWYERS WHO ARE IN GOVERNMENT.

“AS A RULE, GOVERNMENT LAWYERS ARE NOT ALLOWED TO ENGAGE IN THE PRIVATE PRACTICE OF THEIR PROFESSION DURING THEIR INCUMBENCY.^[12][29]  BY WAY OF EXCEPTION, A GOVERNMENT LAWYER CAN ENGAGE IN THE PRACTICE OF HIS OR HER PROFESSION UNDER THE FOLLOWING CONDITIONS: FIRST, THE PRIVATE PRACTICE IS AUTHORIZED BY THE CONSTITUTION OR BY THE LAW; AND SECOND, THE PRACTICE WILL NOT CONFLICT OR TEND TO CONFLICT WITH HIS OR HER OFFICIAL FUNCTIONS.^[13][30]  THE LAST PARAGRAPH OF SECTION 7 PROVIDES AN EXCEPTION TO THE EXCEPTION.  IN CASE OF LAWYERS SEPARATED FROM THE GOVERNMENT SERVICE WHO ARE COVERED UNDER SUBPARAGRAPH (B) (2) OF SECTION 7 OF R.A. NO. 6713, A ONE-YEAR PROHIBITION IS IMPOSED TO PRACTICE LAW IN CONNECTION WITH ANY MATTER BEFORE THE OFFICE HE USED TO BE WITH.”

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DECISION

BRION, J.:

Before us is the disbarment case against retired Supreme Court Associate Justice Dante O. Tinga (respondent) filed by Mr. Jovito S. Olazo (complainant).  The respondent is charged of violating Rule 6.02,^[14][1] Rule 6.03^[15][2] and Rule 1.01^[16][3] of the Code of Professional Responsibility for representing conflicting interests.

Factual Background

          In March 1990, the complainant filed a sales application covering a parcel of land situated in Barangay Lower Bicutan in the Municipality of Taguig. The land (subject land) was previously part of Fort Andres Bonifacio that was segregated and declared open for disposition pursuant to Proclamation No. 2476,^[17][4] issued on January 7, 1986, and Proclamation No. 172,^[18][5] issued on October 16, 1987.

To implement Proclamation No. 172, Memorandum No. 119 was issued by then Executive Secretary Catalino Macaraig, creating a Committee on Awards whose duty was to study, evaluate, and make a recommendation on the applications to purchase the lands declared open for disposition. The Committee on Awards was headed by the Director of Lands and the respondent was one of the Committee members, in his official capacity as the Congressman of Taguig and Pateros (from 1987 to 1998); the respondent’s district includes the areas covered by the proclamations.

The First Charge: Violation of Rule 6.02

In the complaint,^[19][6] the complainant claimed that the respondent abused his position as Congressman and as a member of the Committee on Awards when he unduly interfered with the complainant’s sales application because of his personal interest over the subject land. The complainant alleged that the respondent exerted undue pressure and influence over the complainant’s father, Miguel P. Olazo, for the latter to contest the complainant’s sales application and claim the subject land for himself.  The complainant also alleged that the respondent prevailed upon Miguel Olazo to accept, on various dates, sums of money as payment of the latter’s alleged rights over the subject land. The complainant further claimed that the respondent brokered the transfer of rights of the subject land between Miguel Olazo and Joseph Jeffrey Rodriguez, who is the nephew of the respondent’s deceased wife.

As a result of the respondent’s abuse of his official functions, the complainant’s sales application was denied. The conveyance of rights to Joseph Jeffrey Rodriguez and his sales application were subsequently given due course by the Department of Environment and Natural Resources (DENR).

The Second Charge: Violation of Rule 6.03

The second charge involves another parcel of land within the proclaimed areas belonging to Manuel Olazo, the complainant’s brother.  The complainant alleged that the respondent persuaded Miguel Olazo to direct Manuel to convey his rights over the land to Joseph Jeffrey Rodriguez. As a result of the respondent’s promptings, the rights to the land were transferred to Joseph Jeffrey Rodriguez.

In addition, the complainant alleged that in May 1999, the respondent met with Manuel for the purpose of nullifying the conveyance of rights over the land to Joseph Jeffrey Rodriguez. The complainant claimed that the respondent wanted the rights over the land transferred to one Rolando Olazo, the Barangay Chairman of Hagonoy, Taguig.  The respondent in this regard executed an “Assurance” where he stated that he was the lawyer of Ramon Lee and Joseph Jeffrey Rodriguez.

The Third Charge: Violation of  Rule 1.01

The complainant alleged that the respondent engaged in unlawful conduct considering his knowledge that Joseph Jeffrey Rodriguez was not a qualified beneficiary under Memorandum No. 119. The complainant averred that Joseph Jeffrey Rodriguez is not a bona fide resident of the proclaimed areas and does not qualify for an award. Thus, the approval of his sales application by the Committee on Awards amounted to a violation of the objectives of Proclamation No. 172 and Memorandum No. 119. 

The complainant also alleged that the respondent violated Section 7(b)(2) of the Code of Conduct and Ethical Standards for Public Officials and Employees or Republic Act (R.A.) No. 6713  since he engaged in the practice of law, within the one-year prohibition period, when he appeared as a lawyer for Ramon Lee and Joseph Jeffrey Rodriguez before the Committee on Awards. 

          In his Comment,^[20][7] the respondent claimed that the present complaint is the third malicious charge filed against him by the complainant. The first one was submitted before the Judicial and Bar Council when he was nominated as an Associate Justice of the Supreme Court; the second complaint is now pending  with the Office of the Ombudsman, for alleged violation of Section 3(e) and (i) of R.A. No. 3019, as amended.

With his own supporting documents, the respondent presented a different version of the antecedent events.

The respondent asserted that Miguel Olazo owned the rights over the subject land and he later conveyed these rights to Joseph Jeffrey Rodriguez. Miguel Olazo’s rights over the subject land and the transfer of his rights to Joseph Jeffrey Rodriguez were duly recognized by the Secretary of the DENR before whom the conflict of rights over the subject land (between Miguel Olazo and Joseph Jeffrey Rodriguez, on one hand, and the complainant on the other hand) was brought. In its decision, the DENR found Joseph Jeffrey Rodriguez a qualified applicant, and his application over the subject land was given due course.  The respondent emphasized that the DENR decision is now final and executory.  It was affirmed by the Office of the President, by the Court of Appeals and by the Supreme Court.

          The respondent also advanced the following defenses:

(1) He denied the complainant’s allegation that Miguel Olazo told him (complainant) that the respondent had been orchestrating to get the subject land. The respondent argued that this allegation was without corroboration and was debunked by the affidavits of Miguel Olazo and Francisca Olazo, the complainant’s sister.

(2) He denied the complainant’s allegation that he offered the complainant P50,000.00 for the subject land and that he (the respondent) had exerted undue pressure and influence on Miguel Olazo to claim the rights over the subject land. The respondent also denied that he had an inordinate interest in the subject land.

(3) He claimed that there was nothing wrong in signing as a witness in Miguel Olazo’s affidavit where the latter asserted his rights over the subject land. The affidavit merely attested to the truth.

(4) He asserted that he and Miguel Olazo were cousins and that the latter decided to sell his rights over the subject land for the medical treatment of his heart condition and the illness of his daughter, Francisca Olazo.  The respondent insisted that the money he extended to them was a form of loan. 

(5)  The respondent’s participation in the transaction between Miguel Olazo and Joseph Jeffrey Rodriguez involved the payment of the loan that the respondent extended to Miguel Olazo.

(6) Manuel’s belated and secondhand allegation in his Sinumpaang Salaysay, dated January 20, 2000, regarding what his father told him, cannot prevail over his earlier Sinumpaang Salaysay with Francisca Olazo, dated August 2, 1997. In the said Sinumpaang Salaysay, Manuel categorically asserted that his father Miguel Olazo, not the complainant, was the farmer-beneficiary. Manuel also expressed his agreement to the transfer of rights (Pagpapatibay Sa Paglilipat Ng Karapatan) in favor of Joseph Jeffrey Rodriguez, and the withdrawal of his father’s application to give way to Joseph Jeffrey Rodriguez’s application. 

(7) The complainant’s allegation that the respondent had pressured and influenced Miguel Olazo to sell the subject land was not sufficient as it was lacking in specificity and corroboration. The DENR decision was clear that the complainant had no rights over the subject land.

 The respondent additionally denied violating Rule 1.01 of the Code of Professional Responsibility.  He alleged that during his third term as Congressman from 1995 to 1997, the conflicting applications of the complainant, Miguel Olazo and Joseph Jeffrey Rodriguez were not included in the agenda for deliberation of the Committee on Awards.  Rather, their conflicting claims and their respective supporting documents were before the Office of the Regional Director, NCR of the DENR.  This office ruled over the conflicting claims only on August 2, 2000. This ruling became the basis of the decision of the Secretary of the DENR. 

Similarly, the respondent cannot be held liable under Rule 6.02 of the Code of Professional Responsibility since the provision applies to lawyers in the government service who are allowed by law to engage in private law practice and to those who, though prohibited from engaging in the practice of law, have friends, former associates and relatives who are in the active practice of law.^[21][8] In this regard, the respondent had already completed his third term in Congress and his stint in the Committee on Awards when he represented Joseph Jeffrey Rodriguez on May 24, 1999.

Lastly, the respondent claimed that he cannot be held liable under Rule 6.03 of the Code of Professional Responsibility since he did not intervene in the disposition of the conflicting applications of the complainant and Joseph Jeffrey Rodriguez because the applications were not submitted to the Committee on Awards when he was still a member.

The Court’s Ruling

Generally, a lawyer who holds a government office may not be disciplined as a member of the Bar for misconduct in the discharge of his duties as a government official.^[22][9]  He may be disciplined by this Court as a member of the Bar only when his misconduct also constitutes a violation of his oath as a lawyer.^[23][10] 

The issue in this case calls for a determination of whether the respondent’s actions constitute a breach of the standard ethical conduct – first, while the respondent was still an elective public official and a member of the Committee on Awards; and second, when he was no longer a public official, but a private lawyer who represented a client before the office he was previously connected with.   

          After a careful evaluation of the pleadings filed by both parties and their respective pieces of evidence, we resolve to dismiss the administrative complaint.

Accountability of a government lawyer in public office

     Canon 6 of the Code of Professional Responsibility highlights the continuing standard of ethical conduct to be observed by government lawyers in the discharge of their official tasks. In addition to the standard of conduct laid down under R.A. No. 6713 for government employees, a lawyer in the government service is obliged to observe the standard of conduct under the Code of Professional Responsibility. 

Since public office is a public trust, the ethical conduct demanded upon lawyers in the government service is more exacting than the standards for those in private practice. Lawyers in the government service are subject to constant public scrutiny under norms of public accountability.  They also bear the heavy burden of having to put aside their private interest in favor of the interest of the public; their private activities should not interfere with the discharge of their official functions.^[24][11]

The first charge involves a violation of Rule 6.02 of the Code of Professional Responsibility.  It imposes the following restrictions in the conduct of a government lawyer:

A lawyer in the government service shall not use his public position to promote or advance his private interests, nor allow the latter to interfere with his public duties.

The above provision prohibits a lawyer from using his or her public position to: (1) promote private interests; (2) advance private interests; or (3) allow private interest to interfere with his or her public duties. We previously held that the restriction extends to all government lawyers who use their public offices to promote their private interests.^[25][12]

          In Huyssen v. Gutierrez,^[26][13] we defined promotion of private interest to include soliciting gifts or anything of monetary value in any transaction requiring the approval of his or her office, or may be affected by the functions of his or her office.  In Ali v. Bubong,^[27][14] we recognized that private interest is not limited to direct interest, but extends to advancing the interest of relatives.  We also ruled that private interest interferes with public duty when the respondent uses the office and his or her knowledge of the intricacies of the law to benefit relatives.^[28][15]

 In Vitriolo v. Dasig,^[29][16]  we found the act of the respondent (an official of the Commission on Higher Education) of extorting money from persons with applications or requests pending before her office to be a serious breach of Rule 6.02 of the Code of Professional Responsibility.^[30][17] We reached the same conclusion in Huyssen, where we found the respondent (an employee of the Bureau of Immigration and Deportation) liable under Rule 6.02 of the Code of Professional Responsibility, based on the evidence showing that he demanded money from the complainant who had a pending application for visas before his office.^[31][18] 

          Similarly, in Igoy v. Soriano^[32][19] we found the respondent (a Court Attorney of this Court) liable for violating Rule 6.02 of the Code of Professional Responsibility, after considering the evidence showing that he demanded and received money from the complainant who had a pending case before this Court.

Applying these legal precepts to the facts of the case, we find the absence of any concrete proof that the respondent abused his position as a Congressman and as a member of the Committee on Awards in the manner defined under Rule 6.02 of the Code of Professional Responsibility.

First, the records do not clearly show if the complainant’s sales application was ever brought before the Committee on Awards. By the complaint’s own account, the complainant filed a sales application in March 1990 before the Land Management Bureau.  By 1996, the complainant’s sales application was pending before the Office of the Regional Director, NCR of the DENR due to the conflicting claims of Miguel Olazo, and, subsequently, of Joseph Jeffrey Rodriguez. The records show that it was only on August 2, 2000 that the Office of the Regional Director, NCR of the DENR rendered its decision, or after the term of the respondent’s elective public office and membership to the Committee on Awards, which expired in 1997.

 These circumstances do not show that the respondent did in any way promote, advance or use his private interests in the discharge of his official duties. To repeat, since the sales application was not brought before the Committee on Awards when the respondent was still a member, no sufficient basis exists to conclude that he used his position to obtain personal benefits.  We note in this regard that the denial of the complainant’s sales application over the subject land was made by the DENR, not by the Committee on Awards. 

Second, the complainant’s allegation that the respondent “orchestrated” the efforts to get the subject land does not specify how the orchestration was undertaken.  What appears clear in the records is the uncorroborated Sinumpaang Salaysay of Miguel Olazo, dated May 25, 2003,^[33][20] categorically stating that the respondent had no interest in the subject land, and neither was he a contracting party in the transfer of his rights over the subject land.  In the absence of any specific charge, Olazo’s disclaimer is the nearest relevant statement on the respondent’s alleged participation, and we find it to be in the respondent’s favor.

Third, the other documents executed by Miguel Olazo, that the complainant presented to support his claim that the respondent exerted undue pressure and influence over his father (namely: the letter, dated June 22, 1996, to the DENR Regional Director-NCR;^[34][21] the Sinumpaang Salaysay dated July 12, 1996;^[35][22] and the Sinumpaang Salaysay dated July 17, 1996^[36][23]), do not contain any reference to the alleged pressure or force exerted by the respondent over Miguel Olazo. The documents merely showed that the respondent helped Miguel Olazo in having his farm lots (covered by the proclaimed areas) surveyed.  They also showed that the respondent merely acted as a witness in the Sinumpaang Salaysay dated July 17, 1996.  To our mind, there are neutral acts that may be rendered by one relative to another, and do not show how the respondent could have influenced the decision of Miguel Olazo to contest the complainant’s sales application.  At the same time, we cannot give any credit to the Sinumpaang Salaysay, dated January 20, 2000, of Manuel.  They are not only hearsay but are contrary to what Miguel Olazo states on the record.  We note that Manuel had no personal knowledge, other than what Miguel Olazo told him, of the force allegedly exerted by the respondent against Miguel Olazo.

In turn, the respondent was able to provide a satisfactory explanation – backed by corroborating evidence – of the nature of the transaction in which he gave the various sums of money to Miguel Olazo and Francisca Olazo in the year 1995. In her affidavits dated May 25, 2003^[37][24] and July 21, 2010,^[38][25]  Francisca Olazo corroborated the respondent’s claim that the sums of money he extended to her and Miguel Olazo were loans used for their medical treatment. Miguel Olazo, in his Sinumpaang Salaysay dated May 25, 2003, asserted that some of the money borrowed from the respondent was used for his medical treatment and hospitalization expenses.

The affidavit of Joseph Jeffrey Rodriguez further corroborated the respondent’s claim that the latter’s involvement was limited to being paid the loans he gave to Miguel Olazo and Francisca Olazo. According to Joseph Jeffrey Rodriguez, he and Miguel Olazo agreed that a portion of the loan would be directly paid by Joseph Jeffrey Rodriguez to the respondent and the amount paid would be considered as part of the purchase price of the subject land.^[39][26]

It also bears stressing that a facial comparison of the documentary evidence, specifically the dates when the sums of money were extended by the respondent – on February 21, 1995, September 2, 1995 and October 17, 1995, and the date when the Deed of Conveyance^[40][27] over the subject land was executed or on October 25, 1995, showed that the sums of money were extended prior to the transfer of rights over the subject land. These pieces of evidence are consistent with the respondent’s allegation that Miguel Olazo decided to sell his rights over the subject land to pay the loans he obtained from the respondent and, also, to finance his continuing medical treatment.

Private practice of law after separation from public office

As proof that the respondent was engaged in an unauthorized practice of law after his separation from the government service, the complainant presented the Sinumpaang Salaysay, dated January 20, 2000, of Manuel and the document entitled “Assurance” where the respondent legally represented Ramon Lee and Joseph Jeffrey Rodriguez. Nevertheless, the foregoing pieces of evidence fail to persuade us to conclude that there was a violation of Rule 6.03 of the Code of Professional Responsibility.

In Cayetano v. Monsod,^[41][28] we defined the practice of law as any activity, in and out of court, that requires the application of law, legal procedure, knowledge, training and experience. Moreover, we ruled that to engage in the practice of law is to perform those acts which are characteristics of the profession; to practice law is to give notice or render any kind of service, which device or service requires the use in any degree of legal knowledge or skill.

    Under the circumstances, the foregoing definition should be correlated with R.A. No. 6713 and Rule 6.03 of the Code of Professional Responsibility which impose certain restrictions on government lawyers to engage in private practice after their separation from the service.

Section 7(b)(2) of R.A. No. 6713 reads:

Section 7. Prohibited Acts and Transactions. — In addition to acts and

omissions of public officials and employees now prescribed in the Constitution and existing laws, the following shall constitute prohibited acts and transactions of any public official and employee and are hereby declared to be unlawful:

x  x  x  x

(b) Outside employment and other activities related thereto. – Public officials and employees during their incumbency shall not:

x  x  x  x

(2) Engage in the private practice of their profession unless authorized by the Constitution or law, provided, that such practice will not conflict or tend to conflict with their official functions; x  x  x

These prohibitions shall continue to apply for a period of one (1) year after resignation, retirement, or separation from public office, except in the case of subparagraph (b) (2) above, but the professional concerned cannot practice his profession in connection with any matter before the office he used to be with, in which case the one-year prohibition shall likewise apply.

As a rule, government lawyers are not allowed to engage in the private practice of their profession during their incumbency.^[42][29]  By way of exception, a government lawyer can engage in the practice of his or her profession under the following conditions: first, the private practice is authorized by the Constitution or by the law; and second, the practice will not conflict or tend to conflict with his or her official functions.^[43][30]  The last paragraph of Section 7 provides an exception to the exception.  In case of lawyers separated from the government service who are covered under subparagraph (b) (2) of Section 7 of R.A. No. 6713, a one-year prohibition is imposed to practice law in connection with any matter before the office he used to be with.

Rule 6.03 of the Code of Professional Responsibility echoes this restriction and prohibits lawyers, after leaving the government service, to accept engagement or employment in connection with any matter in which he had intervened while in the said service.  The keyword in Rule 6.03 of the Code of Professional Responsibility is the term “intervene” which we previously interpreted to include an act of a person who has the power to influence the proceedings.^[44][31]  Otherwise stated, to fall within the ambit of Rule 6.03 of the Code of Professional Responsibility, the respondent must have accepted engagement or employment in a matter which, by virtue of his public office, he had previously exercised power to  influence the outcome of the proceedings.

As the records show, no evidence exists showing that the respondent previously interfered with the sales application covering Manuel’s land when the former was still a member of the Committee on Awards.  The complainant, too, failed to sufficiently establish that the respondent was engaged in the practice of law. At face value, the legal service rendered by the respondent was limited only in the preparation of a single document.  In Borja, Sr. v. Sulyap, Inc.,^[45][32] we specifically described private practice of law as one that contemplates a succession of acts of the same nature habitually or customarily holding one’s self to the public as a lawyer.

In any event, even granting that respondent’s act fell within the definition of practice of law, the available pieces of evidence are insufficient to show that the legal representation was made before the Committee on Awards, or that the Assurance was intended to be presented before it.  These are matters for the complainant to prove and we cannot consider any uncertainty in this regard against the respondent’s favor.

Violation of Rule 1.01

Rule 1.01 prohibits a lawyer from engaging in unlawful, immoral or deceitful conduct. From the above discussion, we already struck down the complainant’s allegation that respondent engaged in an unauthorized practice of law when he appeared as a lawyer for Ramon Lee and Joseph Jeffrey Rodriguez before the Committee on Awards.

We find that a similar treatment should be given to the complainant’s claim that the respondent violated paragraph 4(1)^[46][33] of Memorandum No. 119 when he encouraged the sales application of Joseph Jeffrey Rodriguez despite his knowledge that his nephew was not a qualified applicant.  The matter of  Joseph Jeffrey Rodriguez’s qualifications to apply for a sales application over lots covered by the proclaimed areas has been resolved in the affirmative  by the Secretary of the DENR in the decision dated April 3, 2004,^[47][34] when the DENR gave due course to his sales application over the subject land.  We are, at this point, bound by this finding.

As pointed out by the respondent, the DENR decision was affirmed by the Office of the President, the Court of Appeals^[48][35] and, finally, the Court, per our Minute Resolution, dated October 11, 2006, in G.R. No. 173453. In our Resolution, we dismissed the petition for review on certiorari filed by the complainant after finding, among others, that no reversible error was committed by the Court of Appeals in its decision.^[49][36]

All told, considering the serious consequences of the penalty of disbarment or suspension of a member of the Bar, the burden rests on the complainant to present clear, convincing and satisfactory proof for the Court to exercise its disciplinary powers.^[50][37]  The respondent generally is under no obligation to prove his/her defense,^[51][38] until the burden shifts to him/her because of what the complainant has proven.  Where no case has in the first place been proven, nothing has to be rebutted in defense.^[52][39]

With this in mind, we resolve to dismiss the administrative case against the respondent for the complainant’s failure to prove by clear and convincing evidence that the former committed unethical infractions warranting the exercise of the Court’s disciplinary power.

WHEREFORE, premises considered, we DISMISS the administrative case for violation of Rule 6.02, Rule 6.03 and Rule 1.01 of the Code of Professional Responsibility, filed against retired Supreme Court Associate Justice Dante O. Tinga, for lack of merit.

SO ORDERED. 

                                                          ARTURO D. BRION

                                                             Associate Justice

WE CONCUR:

MARIA LOURDES P.A. SERENO

Associate Justice