TL;DR

The Supreme Court suspended Atty. Casiano S. Retardo, Jr. from law practice for one year and revoked his notarial commission for two years due to serious ethical breaches. He was found guilty of representing conflicting interests by advising clients against his former clients and for gross ignorance of the law by preparing and notarizing loan documents containing a prohibited pactum commissorium stipulation. This ruling underscores the duty of lawyers to uphold the law, avoid conflicts of interest, and competently advise clients, ensuring fairness and integrity within the legal profession.

When Loyalty Falters: Attorney Disciplined for Conflicting Duties and Illegal Loan Terms

This case revolves around a complaint filed by Spouses Niles against Atty. Casiano S. Retardo, Jr., accusing him of ethical violations stemming from his handling of a loan agreement. The core issue is whether Atty. Retardo breached his professional responsibilities by preparing loan documents with an illegal pactum commissorium provision and by representing conflicting interests. The spouses sought Atty. Retardo’s legal assistance to formalize a loan to Spouses Quirante. Unbeknownst to the Nileses initially, Atty. Retardo had prior relationships with the Quirantes, creating a complex web of potential conflicts.

The controversial loan agreement, drafted and notarized by Atty. Retardo, included an Acknowledgment Receipt and an undated Deed of Absolute Sale. The Acknowledgment Receipt contained a clause stipulating that in case of default, the Quirantes’ property would automatically transfer ownership to the Nileses – a clear instance of pactum commissorium, which Philippine law prohibits. As defined, pactum commissorium is a stipulation that allows a creditor to automatically appropriate the pledged or mortgaged property upon the debtor’s failure to pay the principal obligation. This is void under Article 2088 of the Civil Code, which aims to prevent creditors from unjustly enriching themselves at the expense of debtors.

Throughout the loan period, Atty. Retardo continued to advise the Nileses, preparing demand letters that reiterated the illegal pactum commissorium clause. When the Quirantes defaulted, Atty. Retardo instructed the Nileses to proceed with registering the Deed of Absolute Sale, effectively enforcing the prohibited stipulation. However, when the Quirantes later filed a civil case against the Nileses to nullify the sale, Atty. Retardo declined to represent the Nileses, citing a “potential conflict of interest.” This was the first time he disclosed his prior relationships with the Quirantes, including representing Mr. Quirante in a previous case and being a wedding sponsor for their son. The Regional Trial Court eventually ruled against the Nileses, declaring the loan agreement void due to the pactum commissorium. This ruling became the basis for the administrative complaint against Atty. Retardo.

The Supreme Court, agreeing with the Integrated Bar of the Philippines (IBP), found Atty. Retardo guilty of violating the Code of Professional Responsibility and Accountability (CPRA) and the 2004 Rules on Notarial Practice. The Court emphasized that an attorney-client relationship is established the moment a client seeks legal advice, regardless of whether a formal case is filed. In this instance, Atty. Retardo provided legal services to the Nileses by drafting and notarizing documents, advising them on legal strategy, and preparing demand letters. These actions clearly established an attorney-client relationship. By failing to disclose his prior relationship with the Quirantes and by advising the Nileses in a matter adverse to the Quirantes’ interests, Atty. Retardo violated the rule against representing conflicting interests. Section 13 and 17, Canon III of the CPRA explicitly prohibit representing conflicting interests without informed consent from all parties involved. The court highlighted the essence of lawyer’s duty of loyalty, quoting Artezuela v. Atty. Maderazo:

It is enough that the counsel of one party had a hand in the preparation of the pleading of the other party, claiming adverse and conflicting interests with that of his original client. To require that he also be counsel-of-record of the adverse party would punish only the most obvious form of deceit and reward, with impunity, the highest.form of disloyalty.

Furthermore, the Court condemned Atty. Retardo’s gross ignorance of the law and violation of notarial rules. Despite knowing that pactum commissorium is illegal, he drafted and notarized documents that hinged on this prohibited stipulation. This demonstrated a clear disregard for established legal principles. Section 4(a), Rule IV of the Notarial Rules states that a notary public shall refuse to perform a notarial act if they know or have good reason to believe it is unlawful. Atty. Retardo’s actions directly contravened this rule. The Court underscored the solemnity of notarization, stating that it is not a mere routine act and demands utmost care from lawyers commissioned as notaries public.

In its decision, the Supreme Court imposed separate penalties for each offense, reflecting the severity of Atty. Retardo’s misconduct. These penalties included suspension from the practice of law for six months and one day for intentional violation of conflict of interest rules, another suspension of six months and one day for gross ignorance of the law and disregard of basic rules in bad faith, and revocation of his notarial commission with a two-year disqualification. This case serves as a stark reminder to legal practitioners about the paramount importance of ethical conduct, client loyalty, and adherence to the law. It reinforces the principle that lawyers must not only avoid actual conflicts of interest but also the appearance of impropriety, and they must ensure that their legal advice and services are always within the bounds of the law.

FAQs

For inquiries regarding the application of this ruling to specific circumstances, please contact Atty. Gabriel Ablola through gaboogle.com or via email at connect@gaboogle.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Spouses William Thomas and Marife Yukot Niles v. Atty. Casiano S. Retardo, Jr., A.C. No. 13229, June 21, 2023