Facts: Complainant Rosaura Cordon filed with this Court a complaint for disbarment against respondent Balicanta. The court, referred the matter to the IBP for investigation, report and recommendation. Complainant filed a supplemental complaint which was duly admitted and, as agreed upon, the parties filed their respective position papers. Based on her complaint, she and her daughter inherited 21 parcels of land located in Zamboanga City. The respondent helped her settle the estate of her late husband. Respondent enticed complainant and her daughter to organize a corporation that would develop the said real properties. Thereafter, respondent single-handedly ran the affairs of the corporation in his capacity as Chairman of the Board, President, General Manager and Treasurer. The respondent also made complainant sign a document which turned out to be a voting trust agreement. Respondent likewise succeeded in making complainant sign a special power of attorney to sell and mortgage some of the parcels of land she inherited from her deceased husband. In time the corporation became in debt and in the brink of foreclosure. Respondent refused to cooperate with the complainant when it tried to take over the management of the corporation. Respondent’s blamed the stockholders in the failure of the corporation and absolves himself.
Issue: Whether the respondent can invoke the separate personality of the corporation to absolve him from exercising these duties over the properties turned over to him by complainant.
Held: No, the Court holds that respondent cannot invoke the separate personality of the corporation to absolve him from exercising these duties over the properties turned over to him by complainant. He blatantly used the corporate veil to defeat his fiduciary obligation to his client, the complainant. Toleration of such fraudulent conduct was never the reason for the creation of said corporate fiction. The massive fraud perpetrated by respondent on the complainant leaves us no choice but to set aside the veil of corporate entity. For purposes of this action therefore, the properties registered in the name of the corporation should still be considered as properties of complainant and her daughter. The respondent merely held them in trust for complainant (now an ailing 83-year-old) and her daughter. The properties conveyed fraudulently and/or without the requisite authority should be deemed as never to have been transferred, sold or mortgaged at all. Respondent shall be liable, in his personal capacity, to third parties who may have contracted with him in good faith.
Based on the aforementioned findings, this Court believes that the gravity of respondent’s offenses cannot be adequately matched by mere suspension as recommended by the IBP. Instead, his wrongdoings deserve the severe penalty of disbarment, without prejudice to his criminal and civil liabilities for his dishonest acts. Good moral standing is manifested in the duty of the lawyer “to hold in trust all moneys and properties of his client that may come into his possession.” He is bound “to account for all money or property collected or received for or from the client.” The relation between an attorney and his client is highly fiduciary in nature. Thus, lawyers are bound to promptly account for money or property received by them on behalf of their clients and failure to do so constitutes professional misconduct.
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