G.R. No. 164358             December 20, 2006

THERESA MACALALAG, petitioner,

vs.

PEOPLE OF THE PHILIPPINES, respondent.

D E C I S I O N

CHICO-NAZARIO, J.:

This Petition for Review seeks to set aside the Court of Appeals' 10 October 2003 Decision1 convicting petitioner Theresa Macalalag (Macalalag) of Violation of Batas Pambansa Blg. 22, and its 13 May 2004 Resolution denying her Motion for Reconsideration.

The factual and procedural antecedents of this case are as follows:

On two separate occasions, particularly on 30 July 1995 and 16 October1995, petitioner Theresa Macalalag obtained loans from Grace Estrella (Estrella), each in the amount of P100,000.00, each bearing an interest of 10% per month. Macalalag consistently paid the interests starting 30 August 1995. Finding the interest rates so burdensome, Macalalag requested Estrella for a reduction of the same to which the latter agreed. On 16 April 1996 and 1 May 1996, Macalalag executed Acknowledgment/Affirmation Receipts promising to pay Estrella the facevalue of the loans in the total amount of P200,000.00 within two months from the date of its execution plus 6% interest per month for each loan. Under the two Acknowledgment/Affirmation Receipts, she further obligated herself to pay for the two (2) loans the total sum of P100,000.00 as liquidated damages and attorney's fees in the total sum of P40,000.00 as stipulated by the parties the moment she breachesthe terms and conditions thereof.

As security for the payment of the aforesaid loans, Macalalag issued two Philippine National Bank (PNB) Checks (Check No. C-889835 and No. 889836) on 30 June 1996, each in the amount of P100,000.00, in favor

of Estrella. However, when Estrella presented said checks for payment with the drawee bank, the same were dishonored for the reason that theaccount against which the same was drawn was already closed. Estrella sent a notice of dishonor and demand to make good the said checks to Macalalag, but the latter failed to do so. Hence, Estrella filed two criminal complaints for Violation of Batas Pambansa Blg. 22 before theMunicipal Trial Court in Cities (MTCC) of Bacolod City, docketed as Criminal Cases No. 76367 and No. 76368.

When arraigned, Macalalag entered a plea of "not guilty." On trial, Macalalag admitted her indebtedness and the issuance of the two PNB checks. She, however, stated that she already made payments over and above the value of the said checks. According to her, she made a totalpayment of P355,837.98, including the payment of P199,837.98 made during the pendency of the cases. Estrella admitted the payment of P199,837.98 but claimed that the same amount was applied to the payment of the interest.

On 5 February 2001, the MTCC of Bacolod City rendered its Decision, disposing of the case as follows:

WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered declaring the accused Theresa Macalalag guilty beyond reasonable doubt of the crime charged. Pursuant however to Eduardo Vaca vs. Court of Appeals case (G.R. No. 131714, November 16, 1998[,] 298 SCRA 656) and the RosaLim vs. People x x x case (G.R. No. 130038, September 18, 2000) where the Supreme Court deleted these penalty of imprisonment, the penalty therefore imposable is a fine of P100,000.00 for each of the two (2) checks and subsidiary imprisonment in case of insolvency or failure topay said fine.

As she is criminally liable, she is likewise ordered to pay as civil indemnity the total amount of P200,000.00 with interest at the legal rate from the time of the filing of the informations until the amount is fully paid; less whatever amount was thus far paid and validly deducted from the principal sum originally claimed.2

Petitioner Macalalag appealed with the Regional Trial Court (RTC) of Bacolod City, which affirmed in toto the MTCC Decision. Petitioner Macalalag appealed anew with the Court of Appeals, which affirmed the RTC and the MTCC decisions with modification to the effect that, amongother things, accused was convicted only of one (1) count of Violation

of Batas Pambansa Blg. 22, corresponding to the issuance of the secondcheck. The decretal portion of the Court of Appeals Decision reads:

WHEREFORE, foregoing premises considered, the petition is PARTLY GRANTED. Accordingly, the dispositive portion of the February 9, 2001 Decision of the Municipal Trial Court in Cities of Bacolod City, Branch 3, as affirmed by the Regional Trial Court of Bacolod City, Branch 43, is hereby MODIFIED to read as follows:

"WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered declaringthe accused Theresa Macalalag guilty beyond reasonable doubt of the crime charged. Pursuant however to Eduardo Vaca vs. Court of Appeals case (G.R. No. 131714, November 16, 1998[,] 298 SCRA 659) and the RosaLim vs. People of the Philippines case (G.R. No. 130038, September 18,2000) where the Supreme Court deleted the penalty of imprisonment, thepenalty therefore imposable is a fine of P100,000.00 for the second check and subsidiary imprisonment in case of insolvency or failure to pay said fine.

As she is criminally liable, she is likewise ordered to pay civil indemnity in the amount of P100,000.00 with interest at the legal ratefrom the time of the filing of the information until the amount is fully paid; less P195,837.98, the amount credited to the accused afterpaying the first loan, to be applied to the second loan."3

In acquitting petitioner Macalalag of one count of violation of Batas Pambansa Blg. 22, the Court of Appeals reversed the RTC ruling which held that Medel v. Court of Appeals4 is not applicable as it applies only in civil cases where the validity of the interest rate is in issue, and cannot be applied in criminal cases for violation of Batas Pambansa Blg. 22.5 In Medel, we held that, while the Usury Law is now legally inexistent, the stipulated rate of interest at 5.5% per month is iniquitous or unconscionable, which the court could equitably reduce.

The Court of Appeals was correct in applying Medel to the case at bar.The criminal action for violation of Batas Pambansa Blg. 22 is deemed to include the corresponding civil action.6 In fact, no reservation tofile such civil action shall be allowed.7 Verily then, whether the interest is unconscionable or not can be determined in the instant case. Furthermore, in all criminal prosecutions, any doubt should be resolved in favor of the accused and strictly against the State.

Following this principle, the issue of whether the Medel case should be applied in favor of Macalalag should be resolved in her favor.

The stipulated interest of 10% per month, and even the reduced rate of6% per month, are higher than the interest rates declared unconscionable in Medel and in several other cases with allegations ofunconscionable interests. Such cases were synthesized by then Associate Justice (now Chief Justice) Reynato Puno in Ruiz v. Court ofAppeals8:

The foregoing rates of interests and surcharges are in accord with Medel vs. Court of Appeals, Garcia vs. Court of Appeals, Bautista vs. Pilar Development Corporation, and the recent case of Spouses Solangonvs. Salazar. This Court invalidated a stipulated 5.5% per month or 66%per annum interest on a P500,000.00 loan in Medel and a 6% per month or 72% per annum interest on a P60,000.00 loan in Solangon for being excessive, iniquitous, unconscionable and exorbitant. In both cases, we reduced the interest rate to 12% per annum. We held that while the Usury Law has been suspended by Central Bank Circular No. 905, s. 1982, effective on January 1, 1983, and parties to a loan agreement have been given wide latitude to agree on any interest rate, still stipulated interest rates are illegal if they are unconscionable. Nothing in the said circular grants lenders carte blanche authority toraise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets. On the other hand, in Bautista vs. Pilar Development Corp., this Court upheld the validity of a 21% per annum interest on a P142,326.43 loan, and in Garcia vs. Court of Appeals, sustained the agreement of the parties toa 24% per annum interest on an P8,649,250.00 loan. It is on the basis of these cases that we reduce the 36% per annum interest to 12%. An interest of 12% per annum is deemed fair and reasonable. While it is true that this Court invalidated a much higher interest rate of 66% per annum in Medel and 72% in Solangon it has sustained the validity of a much lower interest rate of 21% in Bautista and 24% in Garcia. Westill find the 36% per annum interest rate in the case at bar to be substantially greater than those upheld by this Court in the two (2) aforecited cases.

Applying Medel, therefore, the Court of Appeals convicted petitioner Macalalag of one count of Batas Pambansa Blg. 22 and computed her civil liability as follows:

Thus, applying the Medel doctrine, the interest rate imposed by Estrella on the loans of Macalalag should be reduced to 12% per annum only plus 1% a month penalty charge as liquidated damages on each loan.

We now proceed to the determination of whether Macalalag had already paid her obligations to Estrella.

There is no dispute that Macalalag obtained the first P100,000.00 loanfrom Estrella on July 30, 1995. The said amount multiplied by 1% interest per month until July 1, 1996, the time the check representingthe said amount was dishonored (P100,000.00 x 1% x 11 + P100,000.00), would be P111,000.00.

The second loan of P100,000.00 was obtained on October 16, 1995 and the check that was issued for the payment of the said loan was also dishonored on July 1, 1996. Using the above formula (P100,000.00 x 1% x 8.5 + P100,000.00), Macalalag's obligation would only be P108,500.00.

Thus, when the checks were dishonored, Macalalag's total obligation toEstrella was P219,500.00.

In the instant case, it has been established that Macalalag made a total payment of P355,837.98 (P199,837.98 plus P156,000.00) (See 275-276, Records). The P156,000.00 was paid starting August 30, 1995 untilJune 15, 1996 while the amount of P199,837.98 was paid to complainant sometime in 1997 considering that the acknowledgment receipt was datedJanuary 5, 1998.

In the Acknowledgment/Affirmation Receipts, Macalalag promised to pay Estrella the principal loans within two (2) months after the executionof said documents. Thus, the two (2) loans of P100,000.00 each, or a total of P200,000.00, were demandable only on June 16, 1996 and July 1, 1996, respectively. Hence, the total amount of P156,000.00 already paid by Macalalag to Estrella could very well be applied to the face value of the first loan which fell due on June 16, 1996, including the1% interest rate per month on the two (2) loans or a total of 2% per month. Thus, Macalalag could no longer be held liable for violation ofB.P. Blg. 22 insofar as the first check is concerned since the same was already paid prior to its presentment for payment.

However, with respect to the second check, there is no doubt that Macalalag is liable under B.P. Blg. 22. Macalalag admitted having issued the said check and that said check, when presented for payment for payment with the drawee bank bounced for the reason "account closed". Despite notice of dishonor, Macalalag failed to make good thesaid check. All the elements of violation of B.P. Blg. 22, viz: a) themaking, drawing or issuance of any check to apply to account or for value; b) the knowledge of the maker[,] drawer, or issuer that at the time of the issue he does not have sufficient funds in, or credit with, the drawee bank for the payment of the check in full upon its presentment; and, c) the subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit, or dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to stop payment (Sycip, Jr. vs. Court of Appeals, 328 SCRA 447), are, therefore, present.

In view of the foregoing, the penalty imposed on Macalalag by the trial court should be modified. In accordance with the Vaca vs. Court of Appeals (294 SCRA 656) case, Macalalag should be meted the penalty of fine amounting to P100,000.00 only corresponding to the face value of the second check with subsidiary imprisonment in case of insolvency. Likewise, Macalalag should pay the civil indemnity in the total amount of P100,000.00 with interest at the legal rate from the time of the filing of the Information until fully satisfied less the amount of P195,837.98 which amount should be credited to her. This amount represents the balance after full payment of the first loan computed as follows:

P355,837.98

- total amount paid by petitioner to private complainant (P199,837.98 and P156,000.00)

LESS:

P160,000.00

- to fully pay the first loan (P100,000.00 face value of the loan plusinterests at P21,000.00 and P39,000.00)

P195,837.98

- amount to be credited to petitioner to be applied to pay the second loan.9

We have repeatedly held that there is no violation of Batas Pambansa Blg. 22 if the complainant was actually told by the drawer that he hasno sufficient funds in a bank.10 Where, as in the case at bar, the checks were issued as security for a loan, payment by the accused of the amount of the check prior to its presentation for payment would certainly serve the same purpose.

Batas Pambansa Blg. 22 was not intended to shelter or favor nor encourage users of the banking system to enrich themselves through themanipulation and circumvention of the noble purpose and objectives of the law.11 Such manipulation is manifest when payees of checks issued as security for loans present such checks for payment even after the payment of such loans.

Petitioner Macalalag, however, claims that she should not be convictedof even one count of Violation of Batas Pambansa Blg. 22. Petitioner Macalalag claims that: (1) the payment of the accounts before the checks became due and demandable and/or before the same are presented for payment would exempt the petitioner from Violation of Batas Pambansa Blg. 22;12 (2) the redeemable value of the check is limited only to its face value and does not include interest;13 and (3) partial redemption of the check will exempt the accused from criminal liability for Violation of Batas Pambansa Blg. 22.14

Petitioner Macalalag claims that, considering that she had already paid P156,000.00 at the time the subject checks were presented for payment, the amount of P100,000.00 should be applied for redemption ofthe first check and the remaining amount of P56,000.00 should be treated as partial redemption of the second check. Petitioner Macalalag posits that said partial redemption exempts her from

criminal liability because it was made before the check was presented for payment.

The petition must fail.

Even if we agree with petitioner Macalalag that the interests on her loans should not be imputed to the face value of the checks she issued, petitioner Macalalag is still liable for Violation of Batas Pambansa Blg. 22. Petitioner Macalalag herself declares that before the institution of the two cases against her, she has made a total payment of P156,000.00. Applying this amount to the first check (No. C-889835), what will be left is P56,000.00, an amount insufficient to cover her obligation with respect to the second check. As stated above, when Estrella presented the checks for payment, the same were dishonored on the ground that they were drawn against a closed account. Despite notice of dishonor, petitioner Macalalag failed to pay the full face value of the second check issued.

Only a full payment of the face value of the second check at the time of its presentment or during the five-day grace period15 could have exonerated her from criminal liability. A contrary interpretation would defeat the purpose of Batas Pambansa Blg. 22, that of safeguarding the interest of the banking system and the legitimate public checking account user,16 as the drawer could very well have himself exonerated by the mere expediency of paying a minimal fractionof the face value of the check.

Neither could petitioner Macalalag's subsequent payment of P199,837.98during the pendency of the cases against her before the MTCC result infreeing her from criminal liability because the same had already attached after the check was dishonored. Said subsequent payments can only affect her civil, not criminal, liability. A subsequent payment by the accused would not obliterate the criminal liability theretoforealready incurred.17

It is well to note that the gravamen of Batas Pambansa Blg. 22 is the issuance of a check, not the nonpayment of an obligation.18 The law has made the act of issuing a bum check a malum prohibitum.19 Consequently, the lack of criminal intent on the part of the accused is irrelevant,20 and the accused will be convicted for violation thereof as long as the following elements are proven:

1. The accused makes, draws or issues any check to apply to account orfor value;

2. The accused knows at the time of the issuance that he or she does not have sufficient funds in, or credit with, the drawee bank for the payment of the check in full upon its presentment; and

3. The check is subsequently dishonored by the drawee bank for insufficiency of funds or credit, or it would have been dishonored forthe same reason had not the drawer, without any valid reason, ordered the bank to stop payment.21

All these elements have been conclusively proven in Court, the second element by the prima facie evidence established by Section 2 of Batas Pambansa Blg. 22, which provides:

SEC. 2. Evidence of knowledge of insufficient funds. – the making, drawing and issuance of a check payment of which is refused by the drawee because of insufficient funds in or credit with such bank, whenpresented within ninety (90) days from the date of the check, shall beprima facie evidence of knowledge of such insufficiency of funds or credit unless such maker or drawer pays the holder thereof the amount due thereon, or makes arrangements for payment in full by the drawee of such check within five (5) banking days after receiving notice thatsuch check has not been paid by the drawee.

WHEREFORE, the Petition is DENIED. The Court of Appeals Decision dated10 October 2003 and Resolution dated 13 May 2004, affirming the conviction of petitioner Theresa Macalalag of one count of Violation of Batas Pambansa Blg. 22, are AFFIRMED. No costs.

SO ORDERED.

Ynares-Santiago, (Working Chairman) Austria-Martinez and Callejo, Sr.,JJ., concur.

 

Present:

 

 

PANGANIBAN, J., Chairman,

SANDOVAL-GUTIERREZ,

CORONA,

CARPIO MORALES, and

GARCIA, JJ.

 

 

Promulgated:

 

January 23, 2006

x-----------------------------------------------------------------------------------------x

 

RESOLUTION

 

 

SANDOVAL-GUTIERREZ, J.:

 

 

At bar is a motion for reconsideration of our Decision dated April 22,2005 finding Atty. Melanio “Batas” Mauricio, Jr., respondent, guilty of malpractice and gross misconduct and imposing upon him the penalty of suspension from the practice of law for a period of six (6) months.

A brief revisit of facts is imperative, thus:

 

On October 13, 2001, Valeriana U. Dalisay, complainant, engaged respondent’s services as counsel in Civil Case No. 00-044, entitled “Lucio De Guzman, etc., complainants, v. Dalisay U. Valeriana, respondent,” pending  before  the  Municipal  Trial Court, Branch  1, Binangonan, Rizal.  Notwithstanding his receipt of documents and attorney’s fees in the total amount of P56,000.00 from complainant,  respondent never rendered legal services for her.  As a result, she terminated the attorney-client relationship and demanded the return ofher money and documents, but respondent refused.

On January 13, 2004, Investigating Commissioner Lydia A. Navarro of the Integrated Bar of the Philippines (IBP) Commission on Bar Discipline, found that “for  the  amount  of  P56,000.00  paid  by  the   complainant x x x, no action had been taken nor any pleadings prepared by the respondent except his alleged conferences and opinionsrendered when complainant frequented his law office.”  She recommendedthat respondent be required to refund the amount of P56,000.00 to the complainant, and surprisingly, that the complaint be dismissed.

On February 27, 2004, the IBP Board of Governors passed Resolution No.XVI-2004-121, adopting and approving in toto Commissioner Navarro’s Report and Recommendation.

On April 22, 2005, we rendered the assailed Decision. 

Incidentally, upon learning of our Decision, respondent went to the MTC, Branch I, Binangonan, Rizal to verify the status of Civil Case No. 00-044.   There, he learned of the trial court’s Decision dated December 6, 2001 holding that “the tax declarations and title” submitted by complainant “are not official records of the Municipal Assessor and the Registry of Deed.” Thereupon, respondent filed a Sworn Affidavit Complaint[1] against complainant charging her with violations of Article 171[2] and 172,[3] and/or Article 182[4] of the

Revised Penal Code.   He alleged that complainant offered tampered evidence. 

In this motion for reconsideration, respondent raises the following arguments:

First, complainant did not engage his services as counsel in Civil Case No. 00-044.   She hired him for the purpose of filing two new petitions, a petition for declaration of nullity of title and a petition for review of a decree.

Second, Civil Case No. 00-044 was “considered submitted for decision” as early as August 6, 2001, or more than two months prior to October 13, 2001, the date he was engaged as counsel, hence, “he could not have done anything anymore” about it.

Third, complainant refused to provide him with documents related to the case, preventing him from doing his job.

And fourth, complainant offered tampered evidence in Civil Case No. 00-004, prompting him to file falsification cases against her.

In her opposition to the motion, complainant contends that:                    (1)  respondent violated the principle of confidentiality between a lawyer and his client when he filed falsification charges against her;  (2) respondent should have returned her money; (3) respondent should have verified the authenticity of her documents earlier if he really believed that they are falsified; and (4) his refusal to return her money despite this Court’s directive constitutes contempt.  

We deny respondent’s motion for reconsideration.

It  is  axiomatic  that  no  lawyer  is  obliged  to  act  either as adviser or advocate for every person who may wish to become his client. He has the right to decline employment.  But once he accepts money from a client, an attorney-client relationship is established, giving rise to the duty of fidelity to the client’s cause.[5]   From then on, he is expected to be mindful of the trust and confidence reposed in him.  He must serve the client with competence and diligence, and champion the latter’s cause with wholehearted devotion.[6] 

Respondent assumed such obligations when he received the amount of P56,000.00  from complainant and agreed to handle Civil Case  No. 00-044.  Unfortunately, he  had  been  remiss  in  the performance of hisduties.   As  we  have  ruled  earlier,   “there  is  nothing  in  the  records  to show that

he (respondent) entered his appearance as counsel of record for complainant in Civil Case No. 00-044.”   Neither is there any  evidence  nor  pleading submitted  to  show  that  he  initiated  new petitions.

With ingenuity, respondent now claims that “complainant did not engagehis services for Civil Case No. 00-044”  but,  instead,  she  engaged him for the filing of two new petitions.   This is obviously a last-ditch attempt to evade culpability.   Respondent knows very well that if he can successfully disassociate himself as complainant’s counsel in Civil Case No.00-044, he cannot be held guilty of any dereliction of duties.  

But respondent’s current assertion came too late in the day. He is already bound by his previous statements.   In his Verified Comment onthe Affidavit-Complaint,[7] he categorically stated that complainant engaged his services in Civil Case No. 00-044, originally handled by Atty. Oliver Lozano, thus:

4.a. Complainant was referred to the Respondent by Atty. Oliver Lozano.

 

4.b. The referral intrigued Respondent no end, simply because Atty. Oliver Lozano is a bright lawyer and is very much capable of handling Civil Case No. 00-044.

 

4.c.  Respondent-out of respect from Atty. Oliver Lozano – did not inquire the reason for the referral. But he was made to understand that he was being referred because Atty. Oliver Lozano believed that Respondent would be in a better position to prosecute and/or defend the Complainant in Civil Case No. 00-044.

 

x   x   x                                                      x    x   x

 

5.c.  Complainant went to the law office of Respondent on October 13, 2001 and demanded that he provides her with free legal service.

 

x   x   x                                                      x    x   x

 

5.e. Respondent, however, told Complainant that the case (Civil Case No. 00-044) would not entitle her to a free legal service and advised her to just re-engage the services of Atty. Oliver Lozano.

 

5.f.  Undaunted, Complainant asked Respondent to assess her case and how she and her lawyer should go prosecuting and/or defending her position therein.

 

 5.g.  Honestly believing that Complainant was no longer represented by counsel in Civil Case No. 00-044 at that time, Respondent gave his professional opinion on the factual and legal matters surrounding the said case.

 

5.h. Apparently impressed with the opinion of the Respondent, Complainant became even more adamant in asking the former to representher in Civil Case No. 00-044.

 

5.i. Respondent then told Complainant that she would be charged as a regular client is she insists in retaining his services.

 

5.j.  It was at this juncture that Complainant asked Respondent about his fees.

 

5.k. After re-assessing Civil Case No. 00-044, Respondent told Complainant that he will have to charge her with an acceptance fee of One Hundred Thousand Pesos (P100,000.00), aside form being charged forpapers/pleadings that may have to be prepared and filed in court in connection with the aforesaid case.

x   x   x                                                      x    x   x

 

5.n. A few days after, Respondent got a call from Atty. Oliver Lozano.The said Atty. Oliver Lozano interceded for and in behalf of Complainant and asked that the acceptance fee that Respondent was charging the Complainant be reduced.

 

x   x   x                                                      x    x   x

 

5.r. Complainant then returned to the office of the Respondent on October 20, 2001. The latter then informed the former of his conversation with Atty. Oliver Lozano and his (respondent’s) decision to reduce the acceptance fee.

 

5.s. Complainant was very grateful at the time, even shedding a tear or two simply because Respondent had agreed to handle her case at a greatly reduced acceptance fee.

 

 

Statements of similar tenor can also be found in respondent’s Memorandum[8] filed with the IBP.

Undoubtedly, respondent’s present version is a flagrant departure fromhis previous pleadings.  This cannot be countenanced.  A party should decide early what version he is going to advance.  A change of theory in the latter stage of the proceedings is objectionable, not due to the strict application of procedural rules, but because it is contraryto the rules of fair play, justice and due process.[9]   The present administrative case was resolved by the IBP on the basis of respondent’s previous admission that complainant engaged his legal services in Civil Case No. 00-044.   He cannot now unbind himself fromsuch admission and its consequences.   In fact, if anything at all hasbeen achieved by respondent’s inconsistent assertions, it is his dishonesty to this Court.    

At any rate, assuming arguendo that complainant indeed engaged respondent’s services in filing the two (2) new petitions, instead of Civil Case No. 00-044, still, his liability is unmistakable.   There is nothing in the records to show that he filed any petition.   The ethics of the profession demands that, in such a case, he should immediately return the filing fees to complainant.   In Pariñas v. Paguinto,[10] we held that “a lawyer shall account for all money or property collected from the client.   Money entrusted to a lawyer for a specific purpose, such as for filing fee, but not used for failure

to file the case must immediately be returned to the client on demand.”  Per records, complainant made repeated demands, but respondent is yet to return the money.

Neither do we find merit in respondent’s second argument.   The fact that Civil Case No. 00-044 was already “submitted for decision” does not justify his inaction.  After agreeing to handle Civil Case No. 00-044, his duty is, first and foremost, to enter his appearance.    Sadly, he failed to do this simple task.   He should have returned complainant’s money.   Surely, he cannot expect to be paid for doing nothing.

In his third argument, respondent attempts to evade responsibility by shifting the blame to complainant.   He claims that she refused to provide him with documents vital to the case.  He further claims that he would be violating the Code of Professional Responsibility by handling a case without adequate preparation.   This is preposterous.   When a lawyer accepts a case, his acceptance is an implied representation that he possesses the requisite academic learning, skill and ability to handle the case.[11]  As a lawyer, respondent knew where to obtain copies of the certificates of title.  As a matter of fact, he admitted that his Law Office, on its own, managed to verify the authenticity of complainant’s title.   It bears reiterating that respondent did not take any action on the case despite having been paid for his services.  This is tantamount to abandonment of his duties as a lawyer and taking undue advantage of his client.  

Finally, in an ironic twist of fate, respondent became the accuser of complainant.  In his fourth argument, respondent accuses her of offering falsified documentary evidence in Civil Case No. 00-004, prompting him to file falsification cases against her.   He thus justifies his inability to render legal services to complainant.

Assuming that complainant indeed offered falsified documentary evidence in Civil Case No. 00-044, will it be sufficient to exonerate

respondent?   We believe not.  First, Canon 19 outlines the procedure in dealing with clients who perpetrated fraud in the course of a legalproceeding.   Consistent with its mandate that a lawyer shall represent his client with zeal and only within the bounds of the law, Rule 19.02 of the same Canon specifically provides:

Rule 19.02 – A lawyer who has received information that his clients      has, in the course of the representation, perpetrated a fraud upon a person or tribunal, shall promptly call upon the client to rectify the same, and failing which he shall terminate the relationship with such client in accordance with  the Rules of Court. 

 

As a lawyer, respondent is expected to know this Rule. Instead of inaction, he should have confronted complainant and ask her to rectifyher fraudulent representation. If complainant refuses, then he should terminate his relationship with her.

Understandably, respondent failed to follow the above-cited Rule. Thisis because there is no truth to his claim that he did not render legalservice to complainant because she falsified the documentary evidence in Civil Case No.00-044.    This brings us to the second reason why wecannot sustain his fourth argument.   The pleadings show that he learned of the alleged falsification long after complainant had terminated their attorney-client relationship.  It was a result of hisactive search for a justification of his negligence in Civil Case No. 00-044.   As a matter of fact, he admitted that he verified the authenticity of complainant’s title only after the “news of his suspension spread in the legal community.”  To our mind, there is absurdity in invoking subsequent knowledge of a fact as justification for an act or omission that is fait accompli.

Obviously, in filing falsification charges against complainant, respondent was motivated by vindictiveness.  

In fine, let it be stressed that the authority of an attorney begins with his or her retainer.[12]  It gives rise to a relationship between

an attorney and a client that is highly fiduciary in nature and of a very delicate, exacting, and confidential character, requiring a high degree of fidelity and good faith.[13]   If much is demanded from an attorney, it is because the entrusted privilege to practice law carries with it the correlative duties not only to the client but alsoto the court, to the bar, and to the public.   A lawyer who performs his duty with diligence and candor not only protects the interest of his client; he also serves the ends of justice, does honor to the bar,and helps maintain the respect of the community to the legal profession.[14]  Indeed, law is an exacting goddess demanding of her votaries not only intellectual but also moral discipline. 

WHEREFORE, we DENY respondent’s motion for reconsideration.  Our Decision dated April 22, 2005 is immediately executory.  Respondent isdirected to report immediately to the Office of the Bar Confidant his compliance with our Decision.

Let a copy of this Resolution be attached to his personal record and copies furnished the Integrated Bar of the Philippines and the Office of the Court Administrator for dissemination to all courts.

SO ORDERED. 

 

Employee-employer relationship..

G.R. No. 170087

FIRST DIVISION

ANGELINA FRANCISCO,                                           G.R. No. 170087

                                                        Petitioner,

                                                                                                                                    Present:

  Panganiban, C.J. (Chairperson),

                  - versus -                                                                                   Ynares-Santiago,

                                                                                                                                      Austria-Martinez,

  Callejo, Sr., and

  Chico-Nazario, JJ.

NATIONAL LABOR RELATIONS

COMMISSION, KASEI CORPORATION,

SEIICHIRO TAKAHASHI, TIMOTEO

ACEDO, DELFIN LIZA, IRENE

BALLESTEROS, TRINIDAD LIZA               Promulgated:

and RAMON ESCUETA,

                                                        Respondents.

                                                                                                                                  August 31, 2006

x ---------------------------------------------------------------------------------------- x

DECISION

YNARES-SANTIAGO, J.:

                  This petition for review on certiorari under Rule 45 of the Rules of Court seeks to annul and set aside the Decision and Resolution of the Court of Appeals dated October 29, 2004[1] and October 7, 2005,[2] respectively, in CA-G.R. SP No. 78515 dismissing the complaint for constructive dismissal filed by herein petitioner Angelina Francisco.   The appellate court reversed and set aside the Decision of the National Labor Relations Commission (NLRC) dated April15, 2003,[3] in NLRC NCR CA No. 032766-02 which affirmed with modification the decision of the Labor Arbiter dated July 31, 2002,[4]in NLRC-NCR Case No. 30-10-0-489-01, finding that private respondents were liable for constructive dismissal.

                  In 1995, petitioner was hired by Kasei Corporation during its incorporation stage.   She was designated as Accountant and Corporate Secretary and was assigned to handle all the accounting needs of the company.   She was also designated as Liaison Officer to the City of Makati to secure business permits, construction permits and other licenses for the initial operation of the company.[5]

Although she was designated as Corporate Secretary, she was not entrusted with the corporate documents; neither did she attend any board meeting nor required to do so.   She never prepared any legal document and never represented the company as its Corporate Secretary.However, on some occasions, she was prevailed upon to sign documentation for the company.[6]  

In 1996, petitioner was designated Acting Manager.   The corporation also hired Gerry Nino as accountant in lieu of petitioner.   As Acting Manager, petitioner was assigned to handle recruitment of all employees and perform management administration functions; represent the company in all dealings with government agencies, especially with the Bureau of Internal Revenue (BIR), Social Security System (SSS) andin the city government of Makati; and to administer all other matters pertaining to the operation of Kasei Restaurant which is owned and operated by Kasei Corporation.[7]

For five years, petitioner performed the duties of Acting Manager.   As of December 31, 2000 her salary was P27,500.00 plus P3,000.00 housing allowance and a 10% share in the profit of Kasei Corporation.[8]

In January 2001, petitioner was replaced by Liza R. Fuentes as Manager.   Petitioner alleged that she was required to sign a prepared resolution for her replacement but she was assured that she would still be connected with Kasei Corporation.   Timoteo Acedo, the designated Treasurer, convened a meeting of all employees of Kasei Corporation and announced that nothing had changed and that petitionerwas still connected with Kasei Corporation as Technical Assistant to Seiji Kamura and in charge of all BIR matters.[9]

Thereafter, Kasei Corporation reduced her salary by P2,500.00 a month beginning January up to September 2001 for a total reduction of P22,500.00 as of September 2001.   Petitioner was not paid her mid-year bonus allegedly because the company was not earning well.   On October 2001, petitioner did not receive her salary from the company.   She

made repeated follow-ups with the company cashier but she was advised that the company was not earning well.[10]

On October 15, 2001, petitioner asked for her salary from Acedo and the rest of the officers but she was informed that she is no longer connected with the company.[11]  

Since she was no longer paid her salary, petitioner did not report forwork and filed an action for constructive dismissal before the labor arbiter.

Private respondents averred that petitioner is not an employee of Kasei Corporation.   They alleged that petitioner was hired in 1995 as one of its technical consultants on accounting matters and act concurrently as Corporate Secretary.   As technical consultant, petitioner performed her work at her own discretion without control and supervision of Kasei Corporation. Petitioner had no daily time record and she came to the office any time she wanted.   The company never interfered with her work except that from time to time, the management would ask her opinion on matters relating to her profession.   Petitioner did not go through the usual procedure of selection of employees, but her services were engaged through a Board Resolution designating her as technical consultant.   The money received by petitioner from the corporation was her professional fee subject to the 10% expanded withholding tax on professionals, and thatshe was not one of those reported to the BIR or SSS as one of the company’s employees.[12]

Petitioner’s designation as technical consultant depended solely upon the will of management.   As such, her consultancy may be terminated any time considering that her services were only temporary in nature and dependent on the needs of the corporation.

To prove that petitioner was not an employee of the corporation, private respondents submitted a list of employees for the years 1999

and 2000 duly received by the BIR showing that petitioner was not among the employees reported to the BIR, as well as a list of payees subject to expanded withholding tax which included petitioner.   SSS records were also submitted showing that petitioner’s latest employer was Seiji Corporation.[13]  

The Labor Arbiter found that petitioner was illegally dismissed, thus:

                  WHEREFORE, premises considered, judgment is hereby rendered as follows:

1.                 finding complainant an employee of respondent corporation;

2.                 declaring complainant’s dismissal as illegal;

3.                 ordering respondents to reinstate complainant to her former position without loss of seniority rights and jointly and severally pay complainant her money claims in accordance with the following computation:

a.                 Backwages 10/2001 – 07/2002                                               275,000.00

(27,500 x 10 mos.)

b.                 Salary Differentials (01/2001 – 09/2001)                     22,500.00

c.                 Housing Allowance (01/2001 – 07/2002)                   57,000.00

d.                 Midyear Bonus 2001                                                                                 27,500.00

e.                 13th Month Pay                                                                                                 27,500.00

f.                   10% share in the profits of Kasei

                      Corp. from 1996-2001                                                 361,175.00

g.                 Moral and exemplary damages                           100,000.00

h.                 10% Attorney’s fees                                                                                 87,076.50

                  P957,742.50

                      If reinstatement is no longer feasible, respondents are ordered to pay complainant separation pay with additional backwages that would accrue up to actual payment of separation pay.

                      SO ORDERED.[14]

On April 15, 2003, the NLRC affirmed with modification the Decision ofthe Labor Arbiter, the dispositive portion of which reads:

PREMISES CONSIDERED, the Decision of July 31, 2002 is hereby MODIFIED as follows:

1)                 Respondents are directed to pay complainant separation pay computed at one month per year of service in addition to full backwages from October 2001 to July 31, 2002;

2)                 The awards representing moral and exemplary damages and 10% share in profit in the respective accounts of P100,000.00 and P361,175.00 are deleted;

3)                 The award of 10% attorney’s fees shall be based on salary differential award only;

4)                 The awards representing salary differentials, housing allowance, mid year bonus and 13th month pay are AFFIRMED.

SO ORDERED.[15]

                  On appeal, the Court of Appeals reversed the NLRC decision, thus:

                      WHEREFORE, the instant petition is hereby GRANTED. The decision of the National Labor Relations Commissions dated April 15, 2003 is hereby REVERSED and SET ASIDE and a new one is hereby rendereddismissing the complaint filed by private respondent against Kasei Corporation, et al. for constructive dismissal.

                      SO ORDERED.[16]

                  The appellate court denied petitioner’s motion for reconsideration, hence, the present recourse.

The core issues to be resolved in this case are (1) whether there was an employer-employee relationship between petitioner and private respondent Kasei Corporation; and if in the affirmative, (2) whether petitioner was illegally dismissed.

Considering the conflicting findings by the Labor Arbiter and the National Labor Relations Commission on one hand, and the Court of Appeals on the other, there is a need to reexamine the records to determine which of the propositions espoused by the contending partiesis supported by substantial evidence.[17]

We held in Sevilla v. Court of Appeals[18] that in this jurisdiction, there has been no uniform test to determine the existence of an employer-employee relation.   Generally, courts have relied on the so- called right of control test where the person for whom the services are performed reserves a right to control not only the end to be achieved but also the means to be used in reaching such end.   In addition to the standard of right-of-control, the existing economic conditions prevailing between the parties, like the inclusion of the employee in the payrolls, can help in determining the existence of an employer-employee relationship.

However, in certain cases the control test is not sufficient to give acomplete picture of the relationship between the parties, owing to thecomplexity of such a relationship where several positions have been held by the worker.   There are instances when, aside from the employer’s power to control the employee with respect to the means andmethods by which the work is to be accomplished, economic realities ofthe employment relations help provide a comprehensive analysis of the true classification of the individual, whether as employee, independent contractor, corporate officer or some other capacity.

The better approach would therefore be to adopt a two-tiered test involving: (1) the putative employer’s power to control the employee with respect to the means and methods by which the work is to be

accomplished; and (2) the underlying economic realities of the activity or relationship.

This two-tiered test would provide us with a framework of analysis, which would take into consideration the totality of circumstances surrounding the true nature of the relationship between the parties.This is especially appropriate in this case where there is no written agreement or terms of reference to base the relationship on; and due to the complexity of the relationship based on the various positions and responsibilities given to the worker over the period of the latter’s employment.

The control test initially found application in the case of Viaña v. Al-Lagadan and Piga,[19] and lately in Leonardo v. Court of Appeals,[20] where we held that there is an employer-employee relationship when the person for whom the services are performed reserves the rightto control not only the end achieved but also the manner and means used to achieve that end.

In Sevilla v. Court of Appeals,[21] we observed the need to consider the existing economic conditions prevailing between the parties, in addition to the standard of right-of-control like the inclusion of theemployee in the payrolls, to give a clearer picture in determining theexistence of an employer-employee relationship based on an analysis ofthe totality of economic circumstances of the worker.

Thus, the determination of the relationship between employer and employee depends upon the circumstances of the whole economic activity,[22] such as: (1) the extent to which the services performed are an integral part of the employer’s business; (2) the extent of theworker’s investment in equipment and facilities; (3) the nature and degree of control exercised by the employer; (4) the worker’s opportunity for profit and loss; (5) the amount of initiative, skill, judgment or foresight required for the success of the claimed independent enterprise; (6) the permanency and duration of the relationship between the worker and the employer; and (7) the degree

of dependency of the worker upon the employer for his continued employment in that line of business.[23]

The proper standard of economic dependence is whether the worker is dependent on the alleged employer for his continued employment in thatline of business.[24]   In the United States, the touchstone of economic reality in analyzing possible employment relationships for purposes of the Federal Labor Standards Act is dependency.[25]   By analogy, the benchmark of economic reality in analyzing possible employment relationships for purposes of the Labor Code ought to be the economic dependence of the worker on his employer.

By applying the control test, there is no doubt that petitioner is an employee of Kasei Corporation because she was under the direct controland supervision of Seiji Kamura, the corporation’s Technical Consultant.   She reported for work regularly and served in various capacities as Accountant, Liaison Officer, Technical Consultant, Acting Manager and Corporate Secretary, with substantially the same job functions, that is, rendering accounting and tax services to the company and performing functions necessary and desirable for the proper operation of the corporation such as securing business permits and other licenses over an indefinite period of engagement.

Under the broader economic reality test, the petitioner can likewise be said to be an employee of respondent corporation because she had served the company for six years before her dismissal, receiving checkvouchers indicating her salaries/wages, benefits, 13th month pay, bonuses and allowances, as well as deductions and Social Security contributions from August 1, 1999 to December 18, 2000.[26]   When petitioner was designated General Manager, respondent corporation madea report to the SSS signed by Irene Ballesteros.   Petitioner’s membership in the SSS as manifested by a copy of the SSS specimen signature card which was signed by the President of Kasei Corporation and the inclusion of her name in the on-line inquiry system of the SSSevinces the existence of an employer-employee relationship between petitioner and respondent corporation.[27]

It is therefore apparent that petitioner is economically dependent on respondent corporation for her continued employment in the latter’s line of business.

In Domasig v. National Labor Relations Commission,[28] we held that ina business establishment, an identification card is provided not only as a security measure but mainly to identify the holder thereof as a bona fide employee of the firm that issues it.   Together with the cash vouchers covering petitioner’s salaries for the months stated therein,these matters constitute substantial evidence adequate to support a conclusion that petitioner was an employee of private respondent.

We likewise ruled in Flores v. Nuestro[29] that a corporation who registers its workers with the SSS is proof that the latter were the former’s employees.   The coverage of Social Security Law is predicated on the existence of an employer-employee relationship.

Furthermore, the affidavit of Seiji Kamura dated December 5, 2001 has clearly established that petitioner never acted as Corporate Secretaryand that her designation as such was only for convenience.   The actual nature of petitioner’s job was as Kamura’s direct assistant with the duty of acting as Liaison Officer in representing the company to secure construction permits, license to operate and other requirementsimposed by government agencies. Petitioner was never entrusted with corporate documents of the company, nor required to attend the meetingof the corporation.   She was never privy to the preparation of any document for the corporation, although once in a while she was required to sign prepared documentation for the company.[30]  

The second affidavit of Kamura dated March 7, 2002 which repudiated the December 5, 2001 affidavit has been allegedly withdrawn by Kamura himself from the records of the case.[31]   Regardless of this fact, we are convinced that the allegations in the first affidavit are

sufficient to establish that petitioner is an employee of Kasei Corporation.

Granting arguendo, that the second affidavit validly repudiated the first one, courts do not generally look with favor on any retraction or recanted testimony, for it could have been secured by considerations other than to tell the truth and would make solemn trials a mockery and place the investigation of the truth at the mercyof unscrupulous witnesses.[32]   A recantation does not necessarily cancel an earlier declaration, but like any other testimony the same is subject to the test of credibility and should be received with caution.[33]

Based on the foregoing, there can be no other conclusion that petitioner is an employee of respondent Kasei Corporation.   She was selected and engaged by the company for compensation, and is economically dependent upon respondent for her continued employment inthat line of business.   Her main job function involved accounting and tax services rendered to respondent corporation on a regular basis over an indefinite period of engagement.   Respondent corporation hired and engaged petitioner for compensation, with the power to dismiss herfor cause. More importantly, respondent corporation had the power to control petitioner with the means and methods by which the work is to be accomplished.

The corporation constructively dismissed petitioner when it reduced her salary by P2,500 a month from January to September 2001.   This amounts to an illegal termination of employment, where the petitioner is entitled to full backwages.   Since the position of petitioner as accountant is one of trust and confidence, and under the principle of strained relations, petitioner is further entitled to separation pay, in lieu of reinstatement.[34]

A diminution of pay is prejudicial to the employee and amounts to constructive dismissal.   Constructive dismissal is an involuntary resignation resulting in cessation of work resorted to when continued

employment becomes impossible, unreasonable or unlikely; when there isa demotion in rank or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to an employee.[35]   In Globe Telecom, Inc. v. Florendo- Flores,[36] we ruled that where an employee ceases to work due to a demotion of rank or a diminution of pay, an unreasonable situation arises which creates an adverse working environment rendering it impossible for such employee to continue working for her employer.Hence, her severance from the company was not of her own making and therefore amounted to an illegal termination of employment.

In affording full protection to labor, this Court must ensure equal work opportunities regardless of sex, race or creed.   Even as we, in every case, attempt to carefully balance the fragile relationship between employees and employers, we are mindful of the fact that the policy of the law is to apply the Labor Code to a greater number of employees.   This would enable employees to avail of the benefits accorded to them by law, in line with the constitutional mandate giving maximum aid and protection to labor, promoting their welfare and reaffirming it as a primary social economic force in furtherance of social justice and national development.

WHEREFORE, the petition is GRANTED.   The Decision and Resolution of the Court of Appeals dated October 29, 2004 and October 7, 200

Exclusionary Rule