Canon 15

CANON 15 - A LAWYER SHALL OBSERVE CANDOR, FAIRNESS AND LOYALTY IN ALL HIS DEALINGS AND TRANSACTIONS WITH HIS
CLIENTS.

Rule 15.01. - A lawyer, in conferring with a prospective client, shall ascertain as soon as practicable whether the
matter would involve a conflict with another client or his own interest, and if so, shall forthwith inform the
prospective client.
Rule 15.02.- A lawyer shall be bound by the rule on privilege communication in respect of matters disclosed to him by
a prospective client.
Rule 15.03. - A lawyer shall not represent conflicting interests except by written consent of all concerned given
after a full disclosure of the facts.
Rule 15.04. - A lawyer may, with the written consent of all concerned, act as mediator, conciliator or arbitrator in
settling disputes.
Rule 15.05. - A lawyer when advising his client, shall give a candid and honest opinion on the merits and probable
results of the client's case, neither overstating nor understating the prospects of the case.
Rule 15.06. - A lawyer shall not state or imply that he is able to influence any public official, tribunal or
legislative body.
Rule 15.07. - A lawyer shall impress upon his client compliance with the laws and the principles of fairness.
Rule 15.08. - A lawyer who is engaged in another profession or occupation concurrently with the practice of law shall
make clear to his client whether he is acting as a lawyer or in another capacity.
10. Acquiring interest in litigation
The lawyer should not purchase any interest in the subject matter of the litigation which he is
conducting.chanrobles virtual law
[A.C. No. 2040. March 4, 1998]

1
IMELDA A. NAKPIL, complainant, vs. ATTY. CARLOS J. VALDES, respondent.
DECISION
PUNO, J.:
CONFLICT OF INTEREST
The friendship of JOSE NAKPIL and respondent CARLOS J. VALDES dates back to the 50s during their schooldays in De La Salle and the
Philippine Law School. Their closeness extended to their families and respondent became the business consultant, lawyer and accountant of the
Nakpils.
In 1965, Jose Nakpil became interested in purchasing a summer residence in Moran Street, Baguio City.i[1] For lack of funds, he requested
respondent to purchase the Moran property for him. They agreed that respondent would keep the property in thrust for the Nakpils until the latter
could buy it back. Pursuant to their agreement, respondent obtained two (2) loans from a bank (in the amounts of P65,000.00 and P75,000.00)
which he used to purchase and renovate the property. Title was then issued in respondents name.
It was the Nakpils who occupied the Moran summer house. When Jose Nakpil died on July 8, 1973, respondent acted as the legal counsel and
accountant of his widow, complainant IMELDA NAKPIL. On March 9, 1976, respondents law firm, Carlos J. Valdes & Associates, handled the
proceeding for the settlement of Joses estate. Complainant was appointed as administratix of the estate.
The ownership of the Moran property became an issue in the intestate proceedings. It appears that respondent excluded the Moran property from
the inventory of Joses estate. On February 13, 1978, respondent transferred his title to the Moran property to his company, the Caval Realty
Corporation.
On March 29, 1979, complainant sought to recover the Moran property by filing with the then Court of First Instance (CFI) of Baguio City an action
for reconveyance with damages against respondent and his corporation. In defense, respondent claimed absolute ownership over the property and
denied that a trust was created over it.
During the pendency of the action for reconveyance, complainant filed this administrative case to disbar the respondent. She charged that
respondent violated professional ethics when he:
I.Assigned to his family corporation the Moran property (Pulong Maulap) which belonged to the estate he was settling as its lawyer and
auditor.
II. Excluded the Moran property from the inventory of real estate properties he prepared for a client-estate and, at the same time,
charged the loan secured to purchase the said excluded property as a liability of the estate, all for the purpose of transferring the
title to the said property to his family corporation.
III. Prepared and defended monetary claims against the estate that retained him as its counsel and auditor.ii[2]
2
On the first charge, complainant alleged that she accepted respondents offer to serve as lawyer and auditor to settle her husbands estate.
Respondents law firm then filed a petition for settlement of the estate of the deceased Nakpil but did not include the Moran property in the estates
inventory. Instead, respondent transferred the property to his corporation, Caval Realty Corporation, and title was issued in its name. Complainant
accused respondent of maliciously appropriating the property in trust knowing that it did not belong to him. She claimed that respondent has
expressly acknowledged that the said property belonged to the late Nakpil in his correspondencesiii[3] with the Baguio City Treasurer and the
complainant.
On the second charge, complainant alleged that respondents auditing firm (C. J. Valdes and Co., CPAs) excluded the Moran property from the
inventory of her husbands estate, yet included in the claims against the estate the amounts of P65,000.00 and P75,000.00, which respondent
represented as her husbands loans applied probably for the purchase of a house and lot in Moran Street, Baguio City.
As to the third charge, complainant alleged that respondents law firm (Carlos J. Valdes and Associates) filed the petition for the settlement of her
husbands estate in court, while respondents auditing firm (C. J. Valdes & Co., CPAs) acted as accountant of both the estate and two of its creditors.
She claimed that respondent represented conflicting interests when his accounting firm prepared the list of claims of creditors Angel Nakpil and
ENORN, Inc. against her husbands estate which was represented by respondents law firm. Complainant averred that there is no distinction
between respondents law and auditing firms as respondent is the senior and controlling partner of both firms which are housed in the same
building.
We required respondent to answer the charges against him. In hisANSWER,iv[4] respondent initially asserted that the resolution of the first and
second charges against him depended on the result of the pending action in the CFI for reconveyance which involved the issue of ownership of the
Moran property.
On the merit of the first charge, respondent reiterated his defense in the reconveyance case that he did not hold the Moran property in trust for the
Nakpils as he is its absolute owner. Respondent explained that the Nakpils never bought back the Moran property from him, hence, the property
remained to be his and was rightly excluded from the inventory of Nakpils estate.
As to the second charge, respondent denied preparing the list of claims against the estate which included his loans of P65,000.00 and P75,000.00
for the purchase and renovation of the Moran property. In charging his loans against the estate, he stressed that the list drawn up by his accounting
firm merely stated that the loans in respondents name were applied probably for the purchase of the house and lot in Moran Street, Baguio City.
Respondent insisted that this was not an admission that the Nakpils owned the property as the phrase probably for the purchase did not imply a
consummated transaction but a projected acquisition.
Respondent also disclaimed knowledge or privity in the preparation of a letter (Exhibit H) of his accounting firm to the Baguio City treasurer
remitting the real estate taxes for the Moran property on behalf of the Nakpils. He contended that the letter could be a mere error or oversight.
Respondent averred that it was complainant who acknowledged that they did not own the Moran property for: (1) complainants February 1979
Statement of Assets and Liabilities did not include the said property, and; (2) complainant, as administratrix, signed the Balance Sheet of the Estate
where the Moran property was not mentioned.
Respondent
3 admitted that complainant retained the services of his law and accounting firms in the settlement of her husbands estate.v[5] However,
he pointed out that he has resigned from his law and accounting firms as early as 1974. He alleged that it was Atty. Percival Cendaa (from the law
firm Carlos Valdes & Associates) who filed the inestate proceedings in court in 1976.
As to the third charge, respondent denied there was a conflict of interest when his law firm represented the estate in the inestate proceedings while
his accounting firm (C. J. Valdes & Co., CPAs) served as accountant of the estate and prepared the claims of creditors Angel Nakpil and ENORN,
Inc. against the estate. He proffered the following reasons for his thesis: First, the two claimants were closely related to the late Nakpil. Claimant
ENORN, Inc. is a family corporation of the Nakpils of which the late Nakpil was the President. Claimant Angel Nakpil is a brother of the late Nakpil
who, upon the latters death, became the President of ENORN, Inc. These two claimants had been clients of his law and accounting firms even
during the lifetime of Jose Nakpil. Second, his alleged representation of conflicting interests was with the knowledge and consent of complainant as
administratrix. Third, there was no conflict of interests between the estate and the claimants for they had forged a modus vivendi, i.e., that the
subject claims would be satisfied only after full payment of the principal bank creditors. Complainant, as administratrix, did not controvert the claims
of Angel Nakpil and ENORN, Inc. Complainant has started paying off the claims of Angel Nakpil and ENORN, Inc. after satisfying the banks claims.
Complainant did not assert that their claims caused prejudice to the estate. Fourth, the work of Carlos J. Valdes and Co. as common auditor
redounded to the benefit of the estate for the firm prepared a true and accurate amount of the claim. Fifth, respondent resigned from his law and
accounting firms as early as August 15, 1974.vi[6] He rejoined his accounting firm several years later. He submitted as proof the SECs certification
of the filing of his accounting firm of an Amended Articles of Partnership. Thus, it was not he but Atty. Percival Cendaa, from the firm Carlos J.
Valdes and Associates, who filed the intestate proceedings in court. On the other hand, the claimants were represented by their own counsel Atty.
Enrique O. Chan. Sixth, respondent alleged that in the remote possibility that he committed a breach of professional ethics, he committed such
misconduct not as a lawyer but as an accountant who acted as common auditor of the estate and its creditors. Hence, he should be held
accountable in another forum.
On November 12, 1979, complainant submitted her REPLY.vii[7] She maintained that the pendency of the reconveyance case is not prejudicial to the
investigation of her disbarment complaint against respondent for the issue in the latter is not the ownership of the Moran property but the ethics and
morality of respondents conduct as a CPA-lawyer.
Complainant alleged that respondents Annexes to his Reply (such as the Statement of Assets & Liability of the Nakpils and the Balance Sheet of
the Estate) which showed that complainant did not claim ownership of the Moran property were all prepared by C. J. Valdes and Co. as accountant
of the estate of Jose Nakpil and filed with the intestate court by C. J. Valdes and Associates as counsel for the estate. She averred that these
Annexes were not proofs that respondent owned the Moran property but were part of respondents scheme to remove the property from the estate
and transfer it to his family corporation. Complainant alleged that she signed the documents because of the professional counsel of respondent and
his firm that her signature thereon was required. Complainant charged respondent with greed for coveting the Moran property on the basis of
defects in the documents he himself prepared.
Complainant urged that respondent cannot disown unfavorable documents (the list of claims against the estate and the letter regarding Nakpils
payments of realty tax on the Moran property) which were prepared by his law and accounting firms and invoke other documents prepared by the
same firms which are favorable to him. She averred that respondent must accept responsibility not just for some, but for all the representations and
communications of his firms.
Complainant refuted respondents claim that he resigned from his firms from March 9, 1976 to several years later. She alleged that none of the
documents submitted as evidence referred to his resignation from his law firm. The documents merely substantiated his resignation from his
4
accounting firm.
In his REJOINDER,viii[8] respondent insisted that complainant cannot hold him liable for representing the interests of both the estate and the
claimants without showing that his action prejudiced the estate. He urged that it is not per se anomalous for respondents accounting firm to act as
accountant for the estate and its creditors. He reiterated that he is not subject to the jurisdiction of this Court for he acted not as lawyer, but as
accountant for both the estate and its claimants.
He alleged that his accounting firm merely prepared the list of claims of the creditors Angel Nakpil and ENORN, Inc. Their claims were not defended
by his accounting or law firm but by Atty. Enrique Chan. He averred that his law firm did not oppose these claims as they were legitimate and not
because they were prepared by his accounting firm. He emphasized that there was no allegation that the claims were fraudulent or excessive and
that the failure of respondents law firm to object to these claims damaged the estate.
In our January 21, 1980 Resolution,ix[9] we deferred further action on the disbarment case until after resolution of the action for reconveyance
between the parties involving the issue of ownership by the then CFI of Baguio. Complainant moved for reconsideration on the ground that the
issue of ownership pending with the CFI was not prejudicial to her complaint which involved an entirely different issue, i.e., the unethical acts of
respondent as a CPA-lawyer. We granted her motion and referred the administrative case to the Office of the Solicitor General (OSG) for
investigation, report and recommendation.x[10]
In 1983, the CFI of Baguio dismissed the action for reconveyance. The trial court ruled that respondent held the Moran property in trust for the
Nakpils but found that complainant waived her right over it.
On appeal, the Court of Appeals reversed the trial court. The appellate court held that respondent was the absolute owner of the Moran property.
The Decision was elevated to this Court.
On February 18, 1986, during the pendency of complainants appeal to this Court, the OSG submitted its Reportxi[11] on the disbarment complaint.
The OSG relied heavily on the decision of the Court of Appeals then pending review by this Court. The OSG found that respondent was not put on
notice of complainants claim over the property. It opined that there was no trust agreement created over the property and that respondent was the
absolute owner thereof. Thus, it upheld respondents right to transfer title to his family corporation. It also found no conflict of interests as the
claimants were related to the late Jose Nakpil. The OSG recommended the dismissal of the administrative case.
Prefatorily, we note that the case at bar presents a novel situation as it involves the disbarment of a CPA-lawyer for his demeanor in his accounting
profession and law practice in connection with the property of his client.
As a rule, a lawyer is not barred from dealing with his client but the business transaction must be characterized with utmost honesty and good
faith.xii[12] The measure of good faith which an attorney is required to exercise in his dealings with his client is a much higher standard than is
required in business dealings where the parties trade at arms length.xiii[13] Business transactions between an attorney and his client are disfavored
and discouraged by the policy of the law. Hence, courts carefully watch these transactions to assure that no advantage is taken by a lawyer over his
client. This rule is founded on public policy for, by virtue of his office, an attorney is in an easy position to take advantage of the credulity and
ignorance of his client. Thus, no presumption of innocence or improbability of wrongdoing is considered in an attorneys favor. xiv[14]
5
In the case at bar, we cannot subscribe to the findings of the OSG in its Report. These findings were based mainly on the decision of the Court of
Appeals in the action for reconveyance which was reversed by this Court in 1993.xv[15]
As to the first two charges, we are bound by the factual findings of this Court in the aforementioned reconveyance case.xvi[16] It is well-established
that respondent offered to the complainant the services of his law and accounting firms by reason of their close relationship dating as far back as
the 50s. She reposed her complete trust in respondent who was the lawyer, accountant and business consultant of her late husband. Respondent
and the late Nakpil agreed that the former would purchase the Moran property and keep it in trust for the latter. In violation of the trust agreement,
respondent claimed absolute ownership over the property and refused to sell the property to complainant after the death of Jose Nakpil. To place
the property beyond the reach of complainant and the intestate court, respondent later transferred it to his corporation.
Contrary to the findings of the OSG, respondent initially acknowledged and respected the trust nature of the Moran property. Respondents bad faith
in transferring the property to his family corporation is well discussed in this Courts Decision, xvii[17] thus:
x x x Valdes (herein respondent) never repudiated the trust during the lifetime of the late Jose Nakpil. On the contrary, he
expressly recognized it. x x x (H)e repudiated the trust when (he) excluded Pulong Maulap from the list of properties of the late Jose
Nakpil submitted to the intestate court in 1973. x x x
xxx
The fact that there was no transfer of ownership intended by the parties x x x can be bolstered by Exh. I-2, an annex to the claim filed
against the estate proceedings of the late Jose Nakpil by his brother, Angel Nakpil, which was prepared by Carlos J. Valdes & Co., the
accounting firm of herein respondent. Exhibit I-2, which is a list of the application of the proceeds of various FUB loans contracted as
of 31 December 1973 by the late Jose Nakpil, x x x contains the two (2) loans contracted in the name of respondent. If ownership of
Pulong Maulap was already transferred or ceded to Valdes, these loans should not have been included in the list.
Indeed, as we view it, what the parties merely agreed to under the arrangement outlined in Exh. J was that respondent Valdes would x
x x take over the total loan of P140,000.00 and pay all of the interests due on the notes while the heirs of the late Jose Nakpil
would continue to live in the disputed property for five (5) years without remuneration save for regular maintenance expenses.
This does not mean, however, that if at the end of the five-year period petitioner (Nakpil) failed to reimburse Valdes for his
advances, x x x Valdes could already automatically assume ownership of Pulong Maulap. Instead, the remedy of respondents
Carlos J. Valdes and Caval Realty Corporation was to proceed against the estate of the late Jose M. Nakpil and/or the property
itself. (emphasis supplied)
In the said reconveyance case, we further ruled that complainants documentary evidence (Exhibits H, J and L), which she also adduced in this
administrative case, should estop respondent from claiming that he bought the Moran property for himself, and not merely in trust for Jose Nakpil. xviii
[18]
It ought to follow that respondents act of excluding Moran property from the estate which his law firm was representing evinces a lack of fidelity to
the cause of his client. If respondent truly believed that the said property belonged to him, he should have at least informed complainant of his
adverse
6 claim. If they could not agree on its ownership, respondent should have formally presented his claim in the intestate proceedings instead of
transferring the property to his own corporation and concealing it from complainant and the judge in the estate proceedings. Respondents misuse of
his legal expertise to deprive his client of the Moran property is clearly unethical.
To make matters worse, respondent, through his accounting firm, charged the two loans of P65,000.00 and P75,000.00 as liability of the estate,
after said loans were obtained by respondent for the purchase and renovation of the property which he claimed for himself. Respondent seeks to
exculpate himself from this charge by disclaiming knowledge or privity in the preparation of the list of the estates liabilities. He theorizes that the
inclusion of the loans must have been a mere error or oversight of his accounting firm. It is clear that the information as to how these two loans
should be treated could have only come from respondent himself as the said loans were in his name. Hence, the supposed error of the accounting
firm in charging respondents loans against the estate could not have been committed without respondents participation. Respondent wanted to
have his cake and eat it too and subordinated the interest of his client to his own pecuniary gain. Respondent violated Canon 17 of the Code of
Professional Responsibility which provides that a lawyer owes fidelity to his clients cause and enjoins him to be mindful of the trust and confidence
reposed on him.
As regards the third charge, we hold that respondent is guilty of representing conflicting interests. It is generally the rule, based on sound public
policy, that an attorney cannot represent adverse interests. It is highly improper to represent both sides of an issue.xix[19] The proscription against
representation of conflicting interests finds application where the conflicting interests arise with respect to the same general matterxx[20] and is
applicable however slight such adverse interest may be. It applies although the attorneys intentions and motives were honest and he acted in good
faith.xxi[21] However, representation of conflicting interests may be allowed where the parties consent to the representation, after full disclosure of
facts. Disclosure alone is not enough for the clients must give their informed consent to such representation. The lawyer must explain to his clients
the nature and extent of conflict and the possible adverse effect must be thoroughly understood by his clients.xxii[22]
In the case at bar, there is no question that the interests of the estate and that of it creditors are adverse to each other. Respondents accounting
firm prepared the list of assets and liabilities of the estate and, at the same time, computed the claims of two creditors of the estate. There is clearly
a conflict between the interest of the estate which stands as the debtor, and that of the two claimants who are creditors of the estate. In fact, at one
instance, respondents law firm questioned the claims of creditor Angel Nakpil against the estate.
To exculpate himself, respondent denies that he represented complainant in the intestate proceedings. He points out that it was one Atty. Percival
Cendaa, from his law firm Carlos J. Valdes & Associates, who filed the intestate case in court. However, the fact that he did not personally file the
case and appear in court is beside the point. As established in the records of this case and in the reconveyance case, xxiii[23] respondent acted as
counsel and accountant of complainant after the death of Jose Nakpil. Respondents defense that he resigned from his law and accounting firms as
early as 1974 (or two years before the filing of the intestate case) is unworthy of merit. Respondents claim of resignation from his law firm is not
supported by any documentary proof. The documents on record xxiv[24] only show respondents resignation from his accounting firm in 1972 and
1974. Even these documents reveal that respondent returned to his accounting firm on July 1, 1976 and as of 1978, the intestate proceedings for
the settlement of Joses estate had not yet been terminated. It does not escape us that when respondent transferred the Moran property to his
corporation on February 13, 1978, the intestate proceedings was still pending in court. Thus, the succession of events shows that respondent could
not have been totally ignorant of the proceedings in the intestate case.
Respondent claims that complainant knew that his law firm Carlos J. Valdes & Associates was the legal counsel of the estatexxv[25] and his
accounting firm, C.J. Valdes & Co., CPAs, was the auditor of both the estate and the two claimants against it.xxvi[26] The fact, however, that
complainant, as administratrix, did not object to the set-up cannot be taken against her as there is nothing in the records to show that respondent or
7
his law firm explained the legal situation and its consequences to complainant. Thus, her silence regarding the arrangement does not amount to an
acquiescence based on an informed consent.
We also hold that the relationship of the claimants to the late Nakpil does not negate the conflict of interest. When a creditor files a claim against an
estate, his interest is per se adverse to the estate. As correctly pointed out by complainant, if she had a claim against her husbands estate, her
claim is still adverse and must be filed in the intestate proceedings.
Prescinding from these premises, respondent undoubtedly placed his law firm in a position where his loyalty to his client could be doubted. In the
estate proceedings, the duty of respondents law firm was to contest the claims of these two creditors but which claims were prepared by
respondents accounting firm. Even if the claims were valid and did not prejudice the estate, the set-up is still undesirable. The test to determine
whether there is a conflict of interest in the representation is probability, not certainty of conflict. It was respondents duty to inhibit either of his firms
from said proceedings to avoid the probability of conflict of interest.
Respondent advances the defense that assuming there was conflict of interest, he could not be charged before this Court as his alleged misconduct
pertains to his accounting practice.
We do not agree. Respondent is a CPA-lawyer who is actively practicing both professions. He is the senior partner of his law and accounting firms
which carry his name. In the case at bar, complainant is not charging respondent with breach of ethics for being the common accountant of the
estate and the two creditors. He is charged for allowing his accounting firm to represent two creditors of the estate and, at the same time, allowing
his law firm to represent the estate in the proceedings where these claims were presented. The act is a breach of professional ethics and
undesirable as it placed respondents and his law firms loyalty under a cloud of doubt. Even granting that respondents misconduct refers to his
accountancy practice, it would not prevent this Court from disciplining him as a member of the Bar. The rule is settled that a lawyer may be
suspended or disbarred for ANY misconduct, even if it pertains to his private activities, as long as it shows him to be wanting in moral character,
honesty, probity or good demeanor. xxvii[27] Possession of good moral character is not only a prerequisite to admission to the bar but also a
continuing requirement to the practice of law.
Public confidence in law and lawyers may be eroded by the irresponsible and improper conduct of a member of the bar. Thus, a lawyer should
determine his conduct by acting in a manner that would promote public confidence in the integrity of the legal profession. Members of the bar are
expected to always live up to the standards embodied in the Code of Professional Responsibility as the relationship between an attorney and his
client is highly fiduciary in nature and demands utmost fidelity and good faith. xxviii[28] In the case at bar, respondent exhibited less than full fidelity to
his duty to observe candor, fairness and loyalty in his dealings and transactions with his clients. xxix[29]
IN VIEW WHEREOF, the Court finds respondent ATTY. CARLOS J. VALDES guilty of misconduct. He is suspended from the practice of law for a
period of one (1) year effective from receipt of this Decision, with a warning that a similar infraction shall be dealt with more severely in the future.
Let copies of this Decision be furnished all courts, as well as the Integrated Bar of the Philippines and the Office of the Bar Confidant.
SO ORDERED.
Regalado
8 (Chairman), Mendoza and Martinez, JJ., concur.
Melo, J., no part. Previous associate with respondent.
BENEDICTO HORNILLA and ATTY. FEDERICO D. RICAFORT, complainants, vs. ATTY. ERNESTO S. SALUNAT, respondent.
RESOLUTION
YNARES-SANTIAGO, J.:
On November 21, 1997, Benedicto Hornilla and Federico D. Ricafort filed an administrative complaint 1[1] with the Integrated Bar of the Philippines (IBP)
Commission on Bar Discipline, against respondent Atty. Ernesto S. Salunat for illegal and unethical practice and conflict of interest. They alleged that respondent
is a member of the ASSA Law and Associates, which was the retained counsel of the Philippine Public School Teachers Association (PPSTA). Respondents
brother, Aurelio S. Salunat, was a member of the PPSTA Board which approved respondents engagement as retained counsel of PPSTA.
Complainants, who are members of the PPSTA, filed an intra-corporate case against its members of the Board of Directors for the terms 1992-1995 and 1995-1997
before the Securities and Exchange Commission, which was docketed as SEC Case No. 05-97-5657, and a complaint before the Office of the Ombudsman,
docketed as OMB Case No. 0-97-0695, for unlawful spending and the undervalued sale of real property of the PPSTA. Respondent entered his appearance as
counsel for the PPSTA Board members in the said cases. Complainants contend that respondent was guilty of conflict of interest because he was engaged by the
PPSTA, of which complainants were members, and was being paid out of its corporate funds where complainants have contributed. Despite being told by PPSTA
members of the said conflict of interest, respondent refused to withdraw his appearance in the said cases.
Moreover, complainants aver that respondent violated Rule 15.06 2[2] of the Code of Professional Responsibility when he appeared at the meeting of the PPSTA
Board and assured its members that he will win the PPSTA cases.
In his Answer,3[3] respondent stressed that he entered his appearance as counsel for the PPSTA Board Members for and in behalf of the ASSA Law and Associates.
As a partner in the said law firm, he only filed a Manifestation of Extreme Urgency in OMB Case No. 0-97-0695. 4[4] On the other hand, SEC Case No. 05-97-
5657 was handled by another partner of the firm, Atty. Agustin V. Agustin. Respondent claims that it was complainant Atty. Ricafort who instigated, orchestrated
and indiscriminately filed the said cases against members of the PPSTA and its Board.
Respondent pointed out that his relationship to Aurelio S. Salunat was immaterial; and that when he entered into the retainer contract with the PPSTA Board, he
did so, not in his individual capacity, but in representation of the ASSA Law Firm. He denied that he ensured the victory of the PPSTA Board in the case he was
handling. He merely assured the Board that the truth will come out and that the case before the Ombudsman will be dismissed for lack of jurisdiction, considering
that respondents therein are not public officials, but private employees. Anent the SEC case, respondent alleged that the same was being handled by the law firm of
Atty. Eduardo de Mesa, and not ASSA.
By way of Special and Affirmative Defenses, respondent averred that complainant Atty. Ricafort was himself guilty of gross violation of his oath of office
amounting to gross misconduct, malpractice and unethical conduct for filing trumped-up charges against him and Atty. De Mesa. Thus, he prayed that the
complaint against him be dismissed and, instead, complainant Ricafort be disciplined or disbarred.
9
1
The complainant was docketed as CBD Case No. 97-531 and referred to the IBP Commission on Bar Discipline. After investigation, Commissioner Lydia A.
Navarro recommended that respondent be suspended from the practice of law for six (6) months. The Board of Governors thereafter adopted Resolution No. XV-
3003-230 dated June 29, 2002, approving the report and recommendation of the Investigating Commissioner.
Respondent filed with this Court a Motion for Reconsideration of the above Resolution of the IBP Board of Governors.
The pertinent rule of the Code of Professional Responsibility provides:
RULE 15.03. A lawyer shall not represent conflicting interests except by written consent of all concerned given after a full disclosure of the facts.
There is conflict of interest when a lawyer represents inconsistent interests of two or more opposing parties. The test is whether or not in behalf of one client, it is
the lawyers duty to fight for an issue or claim, but it is his duty to oppose it for the other client. In brief, if he argues for one client, this argument will be opposed
by him when he argues for the other client.5[5] This rule covers not only cases in which confidential communications have been confided, but also those in which
no confidence has been bestowed or will be used. 6[6] Also, there is conflict of interests if the acceptance of the new retainer will require the attorney to perform an
act which will injuriously affect his first client in any matter in which he represents him and also whether he will be called upon in his new relation to use against
his first client any knowledge acquired through their connection. 7[7] Another test of the inconsistency of interests is whether the acceptance of a new relation will
prevent an attorney from the full discharge of his duty of undivided fidelity and loyalty to his client or invite suspicion of unfaithfulness or double dealing in the
performance thereof.8[8]
In this jurisdiction, a corporations board of directors is understood to be that body which (1) exercises all powers provided for under the Corporation Code; (2)
conducts all business of the corporation; and (3) controls and holds all property of the corporation. 9[9] Its members have been characterized as trustees or directors
clothed with a fiduciary character.10[10] It is clearly separate and distinct from the corporate entity itself.
Where corporate directors have committed a breach of trust either by their frauds, ultra vires acts, or negligence, and the corporation is unable or unwilling to
institute suit to remedy the wrong, a stockholder may sue on behalf of himself and other stockholders and for the benefit of the corporation, to bring about a
redress of the wrong done directly to the corporation and indirectly to the stockholders. 11[11] This is what is known as a derivative suit, and settled is the doctrine
7
10
8
10
11
that in a derivative suit, the corporation is the real party in interest while the stockholder filing suit for the corporations behalf is only nominal party. The
corporation should be included as a party in the suit.12[12]
Having thus laid a suitable foundation of the basic legal principles pertaining to derivative suits, we come now to the threshold question: can a lawyer engaged by
a corporation defend members of the board of the same corporation in a derivative suit? On this issue, the following disquisition is enlightening:
The possibility for conflict of interest here is universally recognized. Although early cases found joint representation permissible where no conflict of interest was
obvious, the emerging rule is against dual representation in all derivative actions. Outside counsel must thus be retained to represent one of the defendants. The
cases and ethics opinions differ on whether there must be separate representation from the outset or merely from the time the corporation seeks to take an active
role. Furthermore, this restriction on dual representation should not be waivable by consent in the usual way; the corporation should be presumptively incapable of
giving valid consent.13[13] (underscoring ours)
In other jurisdictions, the prevailing rule is that a situation wherein a lawyer represents both the corporation and its assailed directors unavoidably gives rise to a
conflict of interest. The interest of the corporate client is paramount and should not be influenced by any interest of the individual corporate officials. 14[14] The
rulings in these cases have persuasive effect upon us. After due deliberation on the wisdom of this doctrine, we are sufficiently convinced that a lawyer engaged as
counsel for a corporation cannot represent members of the same corporations board of directors in a derivative suit brought against them. To do so would be
tantamount to representing conflicting interests, which is prohibited by the Code of Professional Responsibility.
In the case at bar, the records show that SEC Case No. 05-97-5657, entitled Philippine Public School Teachers Assn., Inc., et al. v. 1992-1995 Board of Directors
of the Philippine Public School Teachers Assn. (PPSTA), et al., was filed by the PPSTA against its own Board of Directors. Respondent admits that the ASSA Law
Firm, of which he is the Managing Partner, was the retained counsel of PPSTA. Yet, he appeared as counsel of record for the respondent Board of Directors in the
said case. Clearly, respondent was guilty of conflict of interest when he represented the parties against whom his other client, the PPSTA, filed suit.
In his Answer, respondent argues that he only represented the Board of Directors in OMB Case No. 0-97-0695. In the said case, he filed a Manifestation of
Extreme Urgency wherein he prayed for the dismissal of the complaint against his clients, the individual Board Members. By filing the said pleading, he
necessarily entered his appearance therein. 15[15] Again, this constituted conflict of interests, considering that the complaint in the Ombudsman, albeit in the name
of the individual members of the PPSTA, was brought in behalf of and to protect the interest of the corporation.
Therefore, respondent is guilty of representing conflicting interests. Considering however, that this is his first offense, we find the penalty of suspension,
recommended in IBP Resolution No. XV-2002-230 dated June 29, 2002, to be too harsh. Instead, we resolve to admonish respondent to observe a higher degree of
fidelity in the practice of his profession.
11
12
13
14
15
ACCORDINGLY, respondent Atty. Ernesto Salunat is found GUILTY of representing conflicting interests and is ADMONISHED to observe a higher degree of
fidelity in the practice of his profession. He is further WARNED that a repetition of the same or similar acts will be dealt with more severely.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Vitug, Carpio, and Azcuna, JJ., concur.
NORTHWESTERN UNIVERSITY, INC., and BEN A. NICOLAS, complainants, vs. Atty. MACARIO D. ARQUILLO, respondent.
DECISION
PANGANIBAN, J.:
Representing conflicting interests is prohibited by the Code of Professional Responsibility. Unless all the affected clients written consent is given after a full
disclosure of all relevant facts, attorneys guilty of representing conflicting interests shall as a rule be sanctioned with suspension from the practice of law.
The Case and the Facts
This administrative case stems from a sworn Letter-Complaint[1] filed with the Integrated Bar of the Philippines-Commission on Bar Discipline (IBP-CBD) by
Ben A. Nicolas, acting for himself and on behalf of Northwestern University, Inc. In that Letter-Complaint, Atty. Macario D. Arquillo was charged with deceit,
malpractice, gross misconduct and/or violation of his oath as attorney by representing conflicting interests. The material averments of the Complaint are
summarized by the IBP-CBD as follows:
Herein [c]omplainants, Northwestern University, Inc. and Mr. Ben A. Nicolas, accuses (sic) herein [r]espondent, Atty. Macario D. Arquillo, of engaging in
conflicting interest in a case before the National Labor Relations Commission, Regional Arbitration Branch No. 1, San Fernando, La Union.
Complainant alleges that in a consolidated case, herein [r]espondent appeared and acted as counsels for both complainants (eight out of the eighteen complainants
therein) and respondent (one out of the ten respondents therein).
In a consolidation of NLRC Cases [Nos.] 1-05-1086-97, 1-05-1087-97, 1-05-1088-97, 1-05-1091-97, 1-05-1092-97, 1-05-1097-97, 1-05-1109-97, 1-05-1096-97
(consolidated cases), herein [r]espondent appeared as counsel for complainants therein, Teresita A. Velasco, Gervacio A. Velasco, Mariel S. Hernando, Virginio C.
Rasos, Bonifacio S. Blas, Ronald A. Daoang, Luzviminda T. Urcio and Araceli Quimoyog. In the very same consolidated case, [r]espondent was also the counsel
12 one of the respondents therein, Jose G. Castro.
of
Complainants, as their evidence, submitted the Motion to Dismiss dated August 12, 1997 filed by Jose G. Castro, represented by his counsel, herein [r]espondent
filed before the NLRC of San Fernando, La Union. Sixteen (16) days later or on August 28, 1997, [r]espondent filed a Complainants Consolidated Position Paper,
this time representing some of the complainants in the very same consolidated case.[2] (Citations omitted)
Respondent failed to file his Answer to the Complaint despite a June 24 1998 Order[3] of the IBP-CBD directing him to do so. Even after receiving five notices, he
failed to appear in any of the scheduled hearings. Consequently, he was deemed to have waived his right to participate in the proceedings. Thereafter, the
complainants were ordered to submit their verified position paper with supporting documents, after which the case was to be deemed submitted for decision. [4] In
their Manifestation[5] dated August 30, 2004, they said that they would no longer file a position paper. They agreed to submit the case for decision on the basis of
their Letter-Affidavit dated March 16, 1998, together with all the accompanying documents.
Report and Recommendation of the IBP
In his Report,[6] Commissioner Dennis B. Funa found respondent guilty of violating the conflict-of-interests rule under the Code of Professional Responsibility.
Thus, the former recommended the latters suspension from the practice of law for a period of six (6) months.
In Resolution No. XVI-2004-415 dated October 7, 2004, the Board of Governors of the IBP adopted the Report and Recommendation of Commissioner Funa, with
the modification that the period of suspension was increased to two (2) years.
On December 12, 2004, the Resolution and the records of the case were transmitted to this Court for final action, pursuant to Section 12(b) of Rule 139-B of the
Rules of Court. On January 20, 2005, respondent filed a Motion for Reconsideration to set aside Resolution No. XVI-2004-415. The IBP denied the Motion.
The Courts Ruling
We agree with the findings of the IBP Board of Governors, but reduce the recommended period of suspension to one year.
Administrative Liability of Respondent
The Code of Professional Responsibility requires lawyers to observe candor, fairness and loyalty in all their dealings and transactions with their clients.[7]
Corollary to this duty, lawyers shall not represent conflicting interests, except with all the concerned clients written consent, given after a full disclosure of the
facts.[8]
When a lawyer represents two or more opposing parties, there is a conflict of interests, the existence of which is determined by three separate tests: (1) when, in
representation of one client, a lawyer is required to fight for an issue or claim, but is also duty-bound to oppose it for another client; (2) when the acceptance of the
new retainer will require an attorney to perform an act that may injuriously affect the first client or, when called upon in a new relation, to use against the first one
any knowledge acquired through their professional connection; or (3) when the acceptance of a new relation would prevent the full discharge of an attorneys duty
to give undivided fidelity and loyalty to the client or would invite suspicion of unfaithfulness or double dealing in the performance of that duty.[9]
13
In the present case, Atty. Macario D. Arquillo, as counsel for Respondent Jose C. Castro in NLRC Case Nos. I-05-1083-97 to I-05-1109-97, filed a Motion to
Dismiss those cases. Shortly thereafter, a position paper was filed by Atty. Arquillo as counsel for several complainants in consolidated NLRC Case Nos. I-05-
1087-97, I-05-1088-97, I-05-1091-97, I-05-1092-97, I-05-1096-97, I-05-1097-97, and I-05-1109-97. All the cases in the second set were included in the first one,
for which he had filed the subject Motion to Dismiss. Furthermore, in his position paper for the complainants, Atty. Arquillo protected his other client, Respondent
Jose C. Castro, in these words:
3. More than lack of valid cause for the dismissal of complainants, respondents, except Atty. Jose C. Castro and Atty. Ernesto B. Asuncion, should be made
accountable for not according complainants their right to due process.[10]
In his two-page Motion for Reconsideration, Atty. Arquillo claims that there was no conflict of interest in his representation of both the respondent and the
complainants in the same consolidated cases, because all of them were allegedly on the same side. Attaching to the Motion the Decision of Labor Arbiter Norma
C. Olegario on the consolidated NLRC cases, Atty. Arquillo theorizes that her judgment absolved Castro of personal liability for the illegal dismissal of the
complainants; this fact allegedly showed that there was no conflict in the interests of all the parties concerned.
This Court does not agree. Atty. Arquillos acts cannot be justified by the fact that, in the end, Castro was proven to be not personally liable for the claims of the
dismissed employees. Having agreed to represent one of the opposing parties first, the lawyer should have known that there was an obvious conflict of interests,
regardless of his alleged belief that they were all on the same side. It cannot be denied that the dismissed employees were the complainants in the same cases in
which Castro was one of the respondents. Indeed, Commissioner Funa correctly enounced:
As counsel for complainants, [r]espondent had the duty to oppose the Motion to Dismiss filed by Jose G. Castro. But under the circumstance, it would be
impossible since [r]espondent is also the counsel of Jose G. Castro. And it appears that it was [r]espondent who prepared the Motion to Dismiss, which he should
be opposing [a]s counsel of Jose G. Castro, Respondent had the duty to prove the Complaint wrong. But Respondent cannot do this because he is the counsel for
the complainants. Here lies the inconsistency. The inconsistency of interests is very clear.
Thus it has been noted
The attorney in that situation will not be able to pursue, with vigor and zeal, the clients claim against the other and to properly represent the latter in the unrelated
action, or, if he can do so, he cannot avoid being suspected by the defeated client of disloyalty or partiality in favor of the successful client. The foregoing
considerations will strongly tend to deprive the relation of attorney and client of those special elements which make it one of trust and confidence[.] (Legal Ethics,
Agpalo, p. 230, 4th ed.; In re De la Rosa, 21 Phil. 258)[11]
An attorney cannot represent adverse interests. It is a hornbook doctrine grounded on public policy that a lawyers representation of both sides of an issue is highly
improper. The proscription applies when the conflicting interests arise with respect to the same general matter, however slight such conflict may be. It applies even
when the attorney acts from honest intentions or in good faith.[12]
The IBP Board of Governors recommended that respondent be suspended from the practice of law for two years. Considering, however, prior rulings in cases also
involving attorneys representing conflicting interests, we reduce the suspension to one (1) year.[13]
WHEREFORE,
14 Atty. Macario D. Arquillo is found GUILTY of misconduct and is hereby SUSPENDED from the practice of law for a period of one (1) year
effective upon his receipt of this Decision, with a warning that a similar infraction shall be dealt with more severely in the future.
SO ORDERED.
Davide, Jr., C.J., Puno, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Carpio-Morales, Callejo, Sr., Azcuna, Tinga, Chico-Nazario,
and Garcia, JJ., concur.
Corona, J., on official leave.
ADM. CASE NO. 6876 March 7, 2008
HEIRS OF LYDIO "JERRY" FALAME, namely: MELBA FALAME, LEO FALAME and JERRY FALAME, petitioners,
vs.
ATTY. EDGAR J. BAGUIO, respondent.
RESOLUTION
TINGA, J.:
On Petition for Review1 is the Resolution of the Integrated Bar of the Philippines (IBP) Board of Governors dismissing the disbarment complaint filed by the Heirs
of Lydio "Jerry" Falame (complainants) against Atty. Edgar J. Baguio (respondent), docketed as CBD Case No. 04-1191.
In their Complaint2 against respondent, complainants alleged that on 15 July 1991, their father, the late Lydio "Jerry" Falame (Lydio), engaged the services of
respondent to represent him in an action for forcible entry docketed as Civil Case No. A-2694 (the first civil case) and entitled "Heirs of Emilio T. Sy, represented
by Anastacia Velayo Vda. De Sy and Belen V. Sy vs. Lydio 'Jerry' Falame, Raleigh Falame and Four (4) John Does," in which Lydio was one of the defendants.3
Complainants recounted that respondent, as counsel for the defendants, filed the answer to the complaint in the first civil case. Subsequently, when the parties to
the first civil case were required to file their respective position papers, respondent used and submitted in evidence the following: (1) a special power of attorney
dated 1 July 1988 executed by Lydio in favor of his brother, Raleigh Falame, appointing the latter to be his attorney-in-fact; and (2) the affidavit of Raleigh Falame
dated 23 July 1988, executed before respondent, in which Raleigh stated that Lydio owned the property subject of the first civil case. 4
Complainants claimed that even after the Municipal Trial Court of Dipolog City had ruled in favor of the defendants in the first civil case, Lydio retained the
services of respondent as his legal adviser and counsel for his businesses until Lydio's death on 8 September 1996. 5
However, on 23 October 2000, in representation of spouses Raleigh and Noemi Falame, respondent filed a case against complainants allegedly involving the
property subject of the first civil case, entitled "Spouses Rally F. Falame and Noemi F. Falame v. Melba A. Falame, Leo A. Falame, Jerry A. Falame, Jr., Sugni
Realty Holdings and Development Corporations, their representatives, agents and persons acting in their behalf" and docketed as Civil Case No. 5568 (the second
civil case) before the Regional Trial Court of Dipolog City, Branch 6. The complaint sought the declaration of nullity of the deed of sale, its registration in the
registry of deeds, Transfer Certificate of Title No. 20241 issued as a consequence of the registration of the deed of sale, and the real estate mortgage on the said
property.
15 Alternatively, it prayed for specific performance and reconveyance or legal redemption and damages with preliminary injunction and restraining order. 6
Firstly, complainants maintained that by acting as counsel for the spouses Falame in the second civil case wherein they were impleaded as defendants, respondent
violated his oath of office and duty as an attorney. Plainly, they contended that the spouses Falame's interests are adverse to those of his former client, Lydio. 7
Secondly, complainants claimed that respondent knowingly made false statements of fact in the complaint in the second civil case to mislead the trial court. In so
doing, respondent violated paragraph (d), Section 208 of Rule 138 of the Rules of Court,9 complainants asserted further.
Lastly, complainants alleged that the second civil case is a baseless and fabricated suit which respondent filed as counsel for complainants' uncle against the heirs
of respondent's deceased client. Specifically, they averred that respondent filed the case for the sole purpose of retaining, maintaining and/or withholding the
possession of the subject property from complainants who are its true owners. Complainants concluded that respondent violated paragraph (g), Section 20 10 of
Rule 138 of the Rules of Court.11
In his Answer with Motion to Dismiss, 12 respondent controverted complainants' allegations. He emphasizes that it was only Raleigh Falame who personally
engaged his legal services for him and on Lydio's behalf and that, in fact, it was Raleigh who paid him the attorney's fees. He also stated that he signed the jurat in
Raleigh's affidavit, which was submitted as evidence in the first civil case, believing to the best of his knowledge that there is good ground to support it. Insisting
that he did not betray the confidence reposed in him by Lydio as the latter's counsel in the first civil case, respondent maintained that he did not reveal or use any
fact he acquired knowledge of during the existence of the attorney-client relation in the first civil case as he had never even conferred with nor talked to Lydio in
the first place. Respondent likewise contended that he did not knowingly make any misleading or untruthful statement of fact in the complaint in the second civil
case and neither did he employ any means inconsistent with truth and honor in the hearing of the case. 13
Respondent vigorously averred that Lydio had not retained him as counsel in any case or transaction. Stressing the long interval of twelve years separating the
termination of the first civil case and his acceptance of the second civil case, respondent pointed out that the first civil case was not between Lydio and Raleigh but
rather between the heirs of Emilio T. Sy on one hand and Lydio and Raleigh on the other where physical possession of property was at stake. Respondent further
averred that in contrast the second civil case is one involving the spouses Raleigh and Noemi Falame as plaintiffs, and Melba, Leo and Jerry Jr., all surnamed
Falame, and Sugni Realty Holdings and Development Corporation, as defendantsa case which arose from the wrongful acts committed by Melba, Leo and Jerry
Jr. after Lydio's death.14
Respondent maintained that since the second civil case was still pending before the trial court, the IBP had no jurisdiction over the instant administrative case. He
added that complainants filed this administrative case when Raleigh could no longer testify in his own favor as he had died a year earlier. 15
In their Position Paper16 dated 7 September 2004, in addition to their previous charges against respondent, complainants claimed that respondent violated Rule
15.0317 of the Code of Professional Responsibility when he represented the cause of the spouses Falame against that of his former client, Lydio. 18
On 25 June 2005, the IBP Board of Governors passed Resolution No. XVI-2005-167 adopting and approving Investigating Commissioner Winston D. Abuyuan's
report and recommendation for the dismissal of this administrative case, thus: 19
x x x The charge lacks specification as to what part of the lawyer's oath was violated by the respondent and what confidence was disclosed. The complainants may
have in mind the prohibition against disclosure of secret information learned in confidence, but there is no specification in the complaint what secret or
information learned in confidence under Civil Case No. A-2694 was disclosed or will be disclosed by respondent in Civil Case No. 5568. In administrative
complaints
16
for disbarment or suspension against lawyers, the complainant must specify in the affidavit-complaint the alleged secrets or confidential information
disclosed or will be disclosed in the professional employment (Uy v. Gonzalez, 426 SCRA 422; 431). In the absence of such specification, the complaint must fail.
In the complaint, there is no specific charge against respondent for violation of Canon 15, Rule 15.03 of the Code of Professional Responsibility about the
prohibition against representation of conflicting interest. So, the allegation in paragraph 1, page 8 and 9 of complainants' position paper stating: With all due
respect, it is submitted that respondent violated Canon 15, Rule 15.03 of the Code of Professional Responsibility" cannot be countenanced. The reason being that it
is an elementary principle of due process to which the respondent is entitled that only those charged in the complaint can be proved by the complainants. A charge
not specified in the complaint cannot be proved (Uy v. Gonzales, id.)
x x x But still this charge will not proper for lack of sufficient bases.
xxx
Civil Case No. 5568, which was commenced on 03 October 2000, or three years since the complainants became owners of Lydio Falame's properties, is a suit
against the complainants, not as representatives of Lydio Falame, but as owners of their respective aliquot interests in the property in question ( Gayon v. Gayon, 36
SCRA 104; 107-108). The complainants are sued not on the basis of the acts, rights, obligations and interest of Lydio Falame on the material possession of the
improvements found on Lot 345 litigated in Civil Case No. A-2694 nor even on such land itself, but rather on the facts alleged in the second amended and
supplemental complaint which give rise to their cause of action against them.
While the complainants could not specify under what circumstances the respondent committed [the] alleged breach of confidence, breach of secrecy or revelation
of secret or confidential information[,] the respondent has shown that he did not commit any violation of such duties or obligations of an attorney.
It is clear that only Raleigh Falame engaged the legal services of the respondent for his and Lydio Falame's defense in Civil Case No. A-2694.
xxx
The other allegations of the complainants that the respondent violated paragraph (d), Section 20 of Rule 139, Rules of Court, and his lawyer's oath when he
allegedly betrayed the trust and confidence of his former client by denying knowledge of the fact that the land was owned by Lydio Falame and when he did not
disclose to the Court that at one time his present clients categorically declared and unconditionally recognized the full ownership of the late Lydio Falame and
complainant Melba Falame over subject matter of both cases equally lacks evidentiary basis.
xxx
It is beyond the competence of the complainants to conclude and is outside the jurisdiction of this Honorable Commission to rule as to whether or nor (sic) the
complaint in Civil Case No.5568 is baseless or fabricated. It is only the Honorable Court which has the exclusive jurisdiction to determine the same and cannot be
the subject of an administrative complaint against the respondent.
xxx
WHEREFORE, premises considered, it is respectfully recommended that this complaint be dismissed on grounds of prescription, the same having been filed four
(4) years after the alleged misconduct took place and for lack of merit.
17
RESPECTFULLY SUBMITTED.20
Dissatisfied, complainants filed the instant petition for review under Rule 45 of the Rules of Court reiterating their allegations in the complaint and their position
paper.21 They likewise assert that the IBP erred in holding that the instant administrative complaint had been filed out of time since it was filed on 16 January 2004,
or three (3) years, four (4) months and sixteen (16) days after the second civil case was filed on 23 October 2000. 22 In addition, in their Consolidated Comment
(should be Consolidated Reply), 23 complainants invoke the Court's ruling in Frias v. Bautista-Lozada24to support their contention that administrative complaints
against members of the bar do not prescribe. 25
In his Comment,26 respondent principally maintains that the charges imputed to him have never been proven by clear, convincing and satisfactory evidence which
is the quantum of proof required in administrative cases against lawyers, and that complainants have the burden to prove their accusations as he enjoys the
presumption of innocence.27 Respondent likewise asserts that in accusing him of violation of Rule 15.03 of the Code of Professional Responsibility only in their
position paper and in the instant petition, complainants infringed his right to due process and to be informed of the nature and cause of accusation against him. 28
There is merit in the petition.
At the outset, the Court holds that the instant administrative action is not barred by prescription. As early as 1947, the Court held in Calo, Jr. v. Degamo,29 to wit:
The ordinary statutes of limitation have no application to disbarment proceedings, nor does the circumstance that the facts set up as a ground for disbarment
constitute a crime, prosecution for which in a criminal proceeding is barred by limitation, affect the disbarment proceeding x x x (5 Am. Jur. 434) 30
This doctrine was reaffirmed in the relatively recent case of Frias v. Bautista-Lozada31where the Court held that Rule VII, Section 1 of the Rules of Procedure of
the CBD-IBP, which provides for a prescriptive period for the filing of administrative complaints against lawyers, should be struck down as void and of no legal
effect for being ultra vires.32
Prescinding from the unavailability of the defense of prescription, the Court concurs with the Investigating Commissioner's opinion that some of the charges raised
by complainants in their complaint are unsubstantiated.
There is, however, sufficient basis to hold respondent accountable for violation of Rule 15.03 of the Code of Professional Responsibility. While this charge was not
raised in the initiatory pleading, it was put forward in complainants' position paper filed with the IBP and in the petition filed with the Court. In fact, respondent
proffered his defenses to the charge in his position paper before the IBP and likewise in his comment before the Court. In his very first pleading before the IBP, the
answer with motion to dismiss, he denied having Lydio as his client. Such absence of attorney-client relationship is the essential element of his defense to the
charge of conflict of interest, as articulated in his subsequent submissions.
The Court, therefore, rules and so holds that respondent has been adequately apprised of and heard on the issue. In administrative cases, the requirement of notice
and hearing does not connote full adversarial proceedings. Actual adversarial proceedings only become necessary for clarification when there is a need to
propound searching questions to witnesses who give vague testimonies. Due process is fulfilled when the parties were given reasonable opportunity to be heard
and to submit evidence in support of their arguments. 33
18
Rule 15.03 of the Code of Professional Responsibility provides:
A lawyer shall not represent conflicting interests except by written consent of all concerned given after a full disclosure of the facts.
A lawyer may not, without being guilty of professional misconduct, act as counsel for a person whose interest conflicts with that of his present or former client. 34
The test is whether, on behalf of one client, it is the lawyer's duty to contest for that which his duty to another client requires him to oppose or when the possibility
of such situation will develop.35 The rule covers not only cases in which confidential communications have been confided, but also those in which no confidence
has been bestowed or will be used. 36 In addition, the rule holds even if the inconsistency is remote or merely probable or the lawyer has acted in good faith and
with no intention to represent conflicting interests. 37
The rule concerning conflict of interest prohibits a lawyer from representing a client if that representation will be directly adverse to any of his present or former
clients. In the same way, a lawyer may only be allowed to represent a client involving the same or a substantially related matter that is materially adverse to the
former client only if the former client consents to it after consultation. The rule is grounded in the fiduciary obligation of loyalty. 38 In the course of a lawyer-client
relationship, the lawyer learns all the facts connected with the client's case, including the weak and strong points of the case. The nature of that relationship is,
therefore, one of trust and confidence of the highest degree. 39
The termination of attorney-client relation provides no justification for a lawyer to represent an interest adverse to or in conflict with that of the former client. The
client's confidence once reposed should not be divested by mere expiration of professional employment. Even after the severance of the relation, a lawyer should
not do anything which will injuriously affect his former client in any matter in which he previously represented him nor should he disclose or use any of the
client's confidences acquired in the previous relation. 40
In relation to this, Canon 17 of the Code of Professional Responsibility provides that a lawyer owes fidelity to the cause of his client and shall be mindful of the
trust and confidence reposed on him. His highest and most unquestioned duty is to protect the client at all hazards and costs even to himself. 41 The protection given
to the client is perpetual and does not cease with the termination of the litigation, nor is it affected by the party's ceasing to employ the attorney and retaining
another, or by any other change of relation between them. It even survives the death of the client. 42
In the case at bar, respondent admitted having jointly represented Lydio and Raleigh as defendants in the first civil case. Evidently, the attorney-client relation
between Lydio and respondent was established despite the fact that it was only Raleigh who paid him. The case of Hilado v. David43tells us that it is immaterial
whether such employment was paid, promised or charged for.44
As defense counsel in the first civil case, respondent advocated the stance that Lydio solely owned the property subject of the case. In the second civil case
involving the same property, respondent, as counsel for Raleigh and his spouse, has pursued the inconsistent position that Raleigh owned the same property in
common with Lydio, with complainants, who inherited the property, committing acts which debase respondent's rights as a co-owner.
The fact that the attorney-client relation had ceased by reason of Lydio's death or through the completion of the specific task for which respondent was employed
is not reason for respondent to advocate a position opposed to that of Lydio. 45 Precedents tell us that even after the termination of his employment, an attorney may
not act as counsel against his client in the same general matter, even though, while acting for his former client, he acquired no knowledge which could operate to
his client's disadvantage in the subsequent adverse employment. 46 And while complainants have never been respondent's clients, they derive their rights to the
property
19
from Lydio's ownership of it which respondent maintained in the first civil case.
For representing Raleigh's cause which is adverse to that of his former clientRaleigh's supposed co-ownership of the subject property respondent is guilty of
representing conflicting interests. Having previously undertaken joint representation of Lydio and Raleigh, respondent should have diligently studied and
anticipated the
potential conflict of interest. Accordingly, disciplinary action is warranted. 47 Heretofore, respondent is enjoined to look at any representation situation from "the
point of view that there are possible conflicts"; and further, "to think in terms of impaired loyalty" that is to evaluate if his representation in any way will impair
loyalty to a client.48 Considering, however, that this is respondent's first offense, the Court resolves to reprimand respondent, with admonition to observe a higher
degree of fidelity in the practice of his profession. 49
WHEREFORE, respondent Atty. Edgar J. Baguio is found GUILTY of representing conflicting interests and meted out the penalty of REPRIMAND. He is further
admonished to observe a higher degree of fidelity in the practice of his profession and to bear in mind that a repetition of the same or similar acts will be dealt with
more severely.
SO ORDERED.
Carpio, Acting Chairperson Carpio-Morales, Azcuna*, Velasco, Jr., JJ., concur.
FELICITAS S. QUIAMBAO, Adm. Case No. 6708
Complainant, (CBD Case No. 01-874)
Present:
DAVIDE, JR., C.J.,
(Chairman),
- versus - QUISUMBING,
SANTIAGO,
CARPIO, and
AZCUNA, JJ.
20
ATTY. NESTOR A. BAMBA , Promulgated:
Respondent.
August 25, 2005
X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -X
RESOLUTION
DAVIDE, JR., C.J.:
We are aware of the hapless fact that there are not enough lawyers to serve an exploding population. This
unfortunate state of affairs, however, will not seize this Court from exercising its disciplinary power over lawyers culpable
of serious indiscretions. The incidence of public force must be deployed to bear upon the community to eventually forge a
legal profession that provides quality, ethical, accessible, and cost-effective legal service to our people and whose members
are willing and able to answer the call to public service.
In this administrative case for disbarment, complainant Felicitas S. Quiambao charges respondent Atty. Nestor A.
Bamba with violation of the Code of Professional Responsibility for representing conflicting interests when the latter filed
a case against her while he was at that time representing her in another case, and for committing other acts of disloyalty
and double- dealing.
21
From June 2000 to January 2001, the complainant was the president and managing director of Allied Investigation
Bureau, Inc. (AIB), a family-owned corporation engaged in providing security and investigation services. She avers that she
procured the legal services of the respondent not only for the corporate affairs of AIB but also for her personal case.
Particularly, the respondent acted as her counsel of record in an ejectment case against Spouses Santiago and Florita
Torroba filed by her on 29 December 2000 before the Metropolitan Trial Court (MeTC) of Paraaque City, which was
docketed as Civil Case No. 11928. She paid attorneys fees for respondents legal services in that case. [1] About six months
after she resigned as AIB president, or on 14 June 2001, the respondent filed on behalf of AIB a complaint for replevin and
damages against her before the MeTC of Quezon City for the purpose of recovering from her the car of AIB assigned to her
as a service vehicle. This he did without withdrawing as counsel of record in the ejectment case, which was then still
pending. [2]
Apart from the foregoing litigation matter, the complainant, in her Position Paper, charges the respondent with acts
of disloyalty and double- dealing. She avers that the respondent proposed to her that she organize her own security agency
and that he would assist her in its organization, causing her to resign as president of AIB. The respondent indeed assisted
her in December 2000 in the formation of another security agency, Quiambao Risk Management Specialists, Inc., (QRMSI),
which was later registered under complain ants name, with the respondent as a silent partner represented by his associate
Atty. Gerardo P. Hernandez. The respondent was paid attorneys fees for his legal services in organizing and incorporating
QRMSI. He also planned to steal or pirate some of the more important clients of AIB. While serving as legal counsel for
AIB and a silent partner of QRMSI, he convinced complainants brother Leodegario Quiambao to organize another security
agency, San Esteban Security Services, Inc. (SESSI) where he (the respondent) served as its incorporator, director, and
president. The respondent and Leodegario then illegally diverted the funds of AIB to fund the incorporation of SESSI, and
likewise planned to eventually close down the operations of AIB and transfer the business to SESSI. [3]
For his part, the respondent admits that he represented the complainant in the aforementioned ejectment case and
22
later represented AIB in the replevin case against her. He, however, denies that he was the personal lawyer of the
complainant, and avers that he was made to believe that it was part of his function as counsel for AIB to handle even the
personal cases of its officers. Even assuming that the complainant confided to him privileged information about her legal
interests, the ejectment case and the replevin case are unrelated cases involving different issues and parties and, therefore,
the privileged information which might have been gathered from one case would have no use in the other. At any rate, it
was the complainant herself who insisted that he stay as her counsel despite the perceived differences among her, her
brother, and AIB over the motor vehicle subject of the replevin case. The complainant even asked him to assist her in her
monetary claims against AIB. [4]
The respondent also denies the charge raised by the complainant in her position paper that he agreed to be a silent
partner of QRMSI through his nominee, Atty. Gerardo P. Hernandez, who was his former law partner. He declined
complainants offer to assume that role and suggested Atty. Hernandez in his place; thus, 375 shares of stock were
registered in Atty. Hernandezs name as consideration of his (Atty. Hernandezs) legal services as corporate secretary and
legal counsel of QRMSI. The respondent also denies that he convinced complainants brother Leodegario to organize
another security agency and that the funds of AIB were unlawfully diverted to SESSI. It was to complement the business of
AIB, which was then in danger of collapse, that SESSI was established. Leodegarios wife and her son have the effective
control over SESSI. Respondents subscribed shareholdings in SESSI comprise only 800 shares out of 12,500 subscribed
shares. He serves AIB and SESSI in different capacities: as legal counsel of the former and as president of the latter. [5]
In his Report and Recommendation [6] dated 31 August 2004, the investigating commissioner of the IBP found the
respondent guilty of representing conflicting interests based on the following undisputed facts: first, the respondent was
still complainants counsel of record in the ejectment case when he filed, as legal counsel of AIB, the replevin case against
her; and second, the respondent was still the legal counsel of AIB when he advised the complainant on the incorporation of
another security agency, QRMSI, and recommended his former law partner, Atty. Gerardo Hernandez, to be its corporate
23
secretary and legal counsel and also when he conferred with Leodegario to organize another security agency, SESSI, where
the respondent became an incorporator, stockholder, and president. Thus, the investigating commissioner recommended
that the respondent be suspended from the practice of law for one year.
The IBP Board of Governors adopted and approved the investigating commissioners report and recommendation, but
reduced the penalty from one year to a stern reprimand. [7]
The issue in this case is whether the respondent is guilty of misconduct for representing conflicting interests in
contravention of the basic tenets of the legal profession.
Rule 15.03, Canon 5 of the Code of Professional Responsibility provides: A lawyer shall not represent conflicting interests
except by written consent of all concerned given after a full disclosure of the facts. This prohibition is founded on
principles of public policy and good taste. [8] In the course of a lawyer-client relationship, the lawyer learns all the facts
connected with the clients case, including the weak and strong points of the case. The nature of that relationship is,
therefore, one of trust and confidence of the highest degree. [9] It behooves lawyers not only to keep inviolate the clients
confidence, but also to avoid the appearance of treachery and double- dealing for only then can litigants be encouraged to
entrust their secrets to their lawyers, which is of paramount importance in the administration of justice. [10]
In broad terms, lawyers are deemed to represent conflicting interests when, in behalf of one client, it is their duty to
contend for that which duty to another client requires them to oppose. [11] Developments in jurisprudence have
particularized
24 various tests to determine whether a lawyers conduct lies within this proscription. One test is whether a
lawyer is duty-bound to fight for an issue or claim in behalf of one client and, at the same time, to oppose that claim for
the other client. [12] Thus, if a lawyers argument for one client has to be opposed by that same lawyer in arguing for the
other client, there is a violation of the rule.
Another test of inconsistency of interests is whether the acceptance of a new relation would prevent the full
discharge of the lawyers duty of undivided fidelity and loyalty to the client or invite suspicion of unfaithfulness or double-
dealing in the performance of that duty. [13] Still another test is whether the lawyer would be called upon in the new
relation to use against a former client any confidential information acquired through their connection or previous
employment. [14]
The proscription against representation of conflicting interests applies to a situation where the opposing parties are
present clients in the same action or in an unrelated action. It is of no moment that the lawyer would not be called upon to
contend for one client that which the lawyer has to oppose for the other client, or that there would be no occasion to use
the confidential information acquired from one to the disadvantage of the other as the two actions are wholly unrelated. It
is enough that the opposing parties in one case, one of whom would lose the suit, are present clients and the nature or
conditions of the lawyers respective retainers with each of them would affect the performance of the duty of undivided
fidelity to both clients. [15]
In this case, it is undisputed that at the time the respondent filed the replevin case on behalf of AIB he was still the
counsel of record of the complainant in the pending ejectment case. We do not sustain respondents theory that since the
ejectment case and the replevin case are unrelated cases fraught with different issues, parties, and subject matters, the
prohibition is inapplicable. His representation of opposing clients in both cases, though unrelated, obviously constitutes
25
conflict of interest or, at the least, invites suspicion of double-dealing. While the respondent may assert that the
complainant expressly consented to his continued representation in the ejectment case, the respondent failed to show that
he fully disclosed the facts to both his clients and he failed to present any written consent of the complainant and AIB as
required under Rule 15.03, Canon 15 of the Code of Professional Responsibility.
Neither can we accept respondents plea that he was duty-bound to handle all the cases referred to him by AIB, including
the personal cases of its officers which had no connection to its corporate affairs. That the representation of conflicting
interest is in good faith and with honest intention on the part of the lawyer does not make the prohibition inoperative. [16]
Moreover, lawyers are not obliged to act either as an adviser or advocate for every person who may wish to become their
client. They have the right to decline such employment, subject, however, to Canon 14 of the Code of Professional
Responsibility. [17] Although there are instances where lawyers cannot decline representation, [18] they cannot be made to
labor under conflict of interest between a present client and a prospective one. [19]
Additionally, in his position paper, the respondent alleges that when the complainant invited the respondent to join
QRMSI, he vehemently refused to join them due to his perception of conflicting interest as he was then (and still is at
present) the Legal Counsel of AIB, which is also a security agency. [ 2 0 ] To bolster his allegation, he invoked the affidavits of
complainants witnesses which contained statements of his apprehension of conflict of interest should he join QRMSI. [ 2 1 ]
Surprisingly, despite his apprehension or awareness of a possible conflict of interest should he join QRMSI, the respondent
later allowed himself to become an incorporator, stockholder, and president of SESSI, which is also a security agency. He
justified his act by claiming that that while both AIB and SESSI are engaged in security agency business, he is serving in
different capacities. As the in-house legal counsel of AIB, he serves its legal interest the parameter of which evolves around
legal matters such as protecting the legal rights and interest of the corporation; conducting an investigation or a hearing
26
on violations of company rules and regulations of their office employees and security guards; sending demand letters in
collection cases; and representing the corporation in any litigation for or against it. And as president of SESSI, he serves
the operational aspects of the business such as how does it operate[], how much do they price their services, what kind or
how do they train[] their security guards, how they solicit clients. Thus, conflict of interest is far-fetched. Moreover, the
respondent argues that the complainant, not being a stockholder of AIB and SESSI, has no right to question his alleged
conflict of interest in serving the two security agencies. [ 2 2 ]
While the complainant lacks personality to question the alleged conflict of interests on the part of the respondent in
serving both security agencies, we cannot just turn a blind eye to respondents act. It must be noted that the proscription
against representation of conflicting interests finds application where the conflicting interests arise with respect to the
same general matter however slight the adverse interest may be. It applies even if the conflict pertains to the lawyers
private activity or in the performance of a function in a non-professional capacity. [ 2 3 ] In the process of determining
whether there is a conflict of interest, an important criterion is probability, not certainty, of conflict.
Since the respondent has financial or pecuniary interest in SESSI, which is engaged in a business competing with his
clients, and, more importantly, he occupies the highest position in SESSI, one cannot help entertaining a doubt on his
loyalty to his client AIB. This kind of situation passes the second test of conflict of interest, which is whether the
acceptance of a new relationship would prevent the full discharge of the lawyers duty of undivided fidelity and loyalty to
the client or invite suspicion of unfaithfulness or double-dealing in the performance of that duty. The close relationship of
the majority stockholders of both companies does not negate the conflict of interest. Neither does his protestation that his
shareholding in SESSI is a mere pebble among the sands.
27
In view of all of the foregoing, we find the respondent guilty of serious misconduct for representing conflicting
interests.
Furthermore, it must be noted that Republic Act No. 5487, otherwise known as the Private Security Agency Law ,
prohibits a person from organizing or having an interest in more than one security agency. From respondents position
paper, it can be culled that Leodegario Quiambao is the president and managing director of AIB, holding 60% of the
outstanding shares; while his four other siblings who are permanent residents in the United States own the remaining 40%.
[24]
This prohibition notwithstanding, the respondent organized SESSI, with Leodegarios wife and son as majority
stockholders holding about 70% of the outstanding shares and with him (the respondent), as well as the rest of the
stockholders, holding minimal shares. [ 2 5 ] In doing so, the respondent virtually allowed Leodegario and the latters wife to
violate or circumvent the law by having an interest in more than one security agency. It must be noted that in the
affidavit [ 2 6 ] of Leodegarios wife, she mentioned of their conjugal property. In the absence of evidence to the contrary, the
property relation of Leodegario and his wife can be presumed to be that of conjugal partnership of gains; hence, the
majority shares in AIB and SESSI are the conjugal property of Leodegario and his wife, thereby placing themselves in
possession of an interest in more than one security agency in contravention of R.A. No. 5487. Thus, in organizing SESSI,
the respondent violated Rule 1.02, Canon 1 of the Code of Professional Responsibility, which mandates lawyers to promote
respect for the law and refrain from counseling or abetting activities aimed at defiance of the law.
As to the recommendation that the penalty be reduced from a suspension of one year to a stern warning, we find the
same to be without basis. We are disturbed by the reduction made by the IBP Board of Governors of the penalty
recommended by the investigating commissioner without clearly and distinctly stating the facts and reasons on which that
reduction is based.
Section 12(a), Rule 139-B of the Rules of Court reads in part as follows:
SEC. 12. Review and decision by the Board of Governors .
28 (a) Every case heard by an investigator shall be reviewed by the IBP Board of Governors upon the record
and evidence transmitted to it by the Investigator with his report. The decision of the Board upon such review
shall be in writing and shall clearly and distinctly state the facts and the reasons on which it is based.
We may consider the resolution of the IBP Board of Governors as a memorandum decision adopting by reference the
report of the investigating commissioner. However, we look with disfavor the change in the recommended penalty without
any explanation therefor. Again, we remind the IBP Board of Governors of the importance of the requirement to announce
in plain terms its legal reasoning, since the requirement that its decision in disciplinary proceedings must state the facts
and the reasons on which its decision is based is akin to what is required of the decisions of courts of record. [27] The
reasons for handing down a penalty occupy no lesser station than any other portion of the ratio.
In similar cases where the respondent was found guilty of representing conflicting interests a penalty ranging from
one to three years suspension was imposed. [28] In this case, we find that a suspension from the practice of law for one
year is warranted.
WHEREFORE , respondent Atty. Nestor A. Bamba is hereby held GUILTY of violation of Rule 15.03 of Canon 15 and
Rule 1.02 of Canon 1 of the Code of Professional Responsibility. He is SUSPENDED from the practice of law for a period
of ONE (1) YEAR effective from receipt of this Resolution, with a warning that a similar infraction in the future shall be
dealt with more severely.
Let copies of this Resolution be furnished to the Office of the Bar Confidant and the Integrated Bar of the
Philippines.
29
SO ORDERED.
A.C. No. 10567 February 25, 2015

WILFREDO ANGLO, Complainant,
vs.
ATTY. JOSE MA. V. VALENCIA, ATTY. JOSE MA. J. CIOCON, ATTY. PHILIP Z. DABAO, ATTY. LILY UYV ALENCIA, ATTY. JOEY P. DE LA
PAZ, ATTY. CRIS G. DIONELA, ATTY. RAYMUNDO T. PANDAN, JR.,* ATTY. RODNEY K. RUBICA,** and ATTY. WILFRED RAMON M.
PENALOSA, Respondents.
DECISION
PERLAS-BERNABE, J.:
This is an administrative case stemming from a complaint-affidavit1 dated December 4, 2009 filed by complainant Wilfredo Anglo (complainant) charging
respondents Attys. Jose Ma. V. Valencia (Atty. Valencia), Jose Ma. J. Ciocon (Atty. Ciocon ), Philip Z. Dabao (Atty. Dabao ), Lily Uy-Valencia (Atty. Uy-
Valencia), Joey P. De La Paz (Atty. De La Paz), Cris G. Dionela (Atty. Dionela), Raymundo T. Pandan, Jr. (Atty. Pandan, Jr.), Rodney K. Rubica (Atty. Rubica),
and Wilfred Ramon M. Penalosa (Atty. Penalosa; collectively, respondents) of violating the Code of Professional Responsibility (CPR), specifica1ly the rule
against conflict of interest.
The Facts
In his complaint-affidavit, complainant alleged that he availed the services of the law firm Valencia Ciocon Dabao Valencia De La Paz Dionela Pandan Rubica
Law Office(law firm), of which Attys. Valencia, Ciocon, Dabao, Uy-Valencia, De La Paz, Dionela, Pandan, Jr., and Rubica were partners, for two (2) consolidated
labor cases2 where he was impleaded as respondent. Atty. Dionela, a partner of the law firm, was assigned to represent complainant. The labor cases were
terminated on June 5, 2008 upon the agreement of both parties.3
On September 18, 2009, a criminal case4 for qualified theft was filed against complainant and his wife by FEVE Farms Agricultural Corporation (FEVE Farms)
acting through a certain Michael Villacorta (Villacorta). Villacorta, however, was represented by the law firm, the same law office which handled complainants
labor cases. Aggrieved, complainant filed this disbarment case against respondents, alleging that they violated Rule 15.03, Canon 15 and Canon 21 of the CPR, 5 to
wit:
CANON 15 A LAWYER SHALL OBSERVE CANDOR, FAIRNESS AND LOYALTY IN ALL HIS DEALINGS AND TRANSACTIONS WITH HIS
CLIENTS.
xxxx
30
RULE 15.03 A lawyer shall not represent conflicting interests except by written consent of all concerned given after a full disclosure of the facts.
xxxx
CANON 21 A LAWYER SHALL PRESERVE THE CONFIDENCES AND SECRETS OF HIS CLIENT EVEN AFTER THE ATTORNEY-CLIENT
RELATION IS TERMINATED.
In their defense,6 respondents admitted that they indeed operated under the name Valencia Ciocon Dabao Valencia De La Paz Dionela Pandan Rubica Law Office,
but explained that their association is not a formal partnership, but one that is subject to certain "arrangements." According to them, each lawyer contributes a
fixed amount every month for the maintenance of the entire office; and expenses for cases, such as transportation, copying, printing, mailing, and the like are
shouldered by each lawyer separately, allowing each lawyer to fix and receive his own professional fees exclusively. 7 As such, the lawyers do not discuss their
clientele with the other lawyers and associates, unless they agree that a case be handled collaboratively. Respondents claim that this has been the practice of the
law firm since its inception. They averred that complainants labor cases were solely and exclusively handled by Atty. Dionela and not by the entire law firm.
Moreover, respondents asserted that the qualified theft case filed by FEVE Farms was handled by Atty. Pealosa, a new associate who had no knowledge of
complainants labor cases, as he started working for the firm after the termination thereof. 8 Meanwhile, Atty. Dionela confirmed that he indeed handled
complainants labor cases but averred that it was terminated on June 13, 2008,9 and that complainant did not have any monthly retainer contract.10 He likewise
explained that he did not see the need to discuss complainants labor cases with the other lawyers as the issue involved was very simple, 11 and that the latter did
not confide any secret during the time the labor cases were pending that would have been used in the criminal case with FEVE Farms. He also claimed that the
other lawyers were not aware of the details of complainants labor cases nor did they know that he was the handling counsel for complainant even after the said
cases were closed and terminated.12 The IBPs Report and Recommendation
In a Report and Recommendation13 dated September 26, 2011, the IBP Commissioner found respondents to have violated the rule on conflict of interest and
recommended that they be reprimandedtherefor, with the exception of Atty. Dabao, who had died on January 17, 2010. 14 The IBP found that complainant was
indeed represented in the labor cases by the respondents acting together as a law firm and not solely by Atty. Dionela. Consequently, there was a conflict of interest
in this case, as respondents, through Atty. Pealosa, having been retained by FEVE Farms, created a connection that would injure complainant in the qualified theft
case. Moreover, the termination of attorney-client relation provides no justification for a lawyer to represent an interest adverse to or in conflict with that of the
former client.15
In a Resolution16 dated February 12, 2013, the IBP Board of Governors adopted and approved the IBP Commissioners Report and Recommendation with
modification. Instead of the penalty of reprimand, the IBP Board of Governors dismissed the case with warning that a repetition of the same or similar act shall be
dealt with more severely.
Complainant filed a motion for reconsideration17 thereof, which the IBP Board of Governors granted in its Resolution18 dated March 23, 2014 and thereby (a) set
aside its February 12, 2013 Resolution and (b) adopted and approved the IBP Commissioners Report and Recommendation, with modification, (1) reprimanding
the respondents for violation of the rule on conflict of interest; (2) dismissing the case against Atty. Dabao in view of his death; and (3) suspending Atty. Dionela
from the practice of law for one year, being the handling counsel of complainants labor cases.
The Issue Before the Court
The essential issue in this case is whether or not respondents are guilty of representing conflicting interests in violation of the pertinent provisions of the CPR.
31
The Courts Ruling
Rule 15.03, Canon 15 and Canon 21 of the CPR provide:
CANON 15 A LAWYER SHALL OBSERVE CANDOR, FAIRNESS AND LOYALTY IN ALL HIS DEALINGS AND TRANSACTIONS WITH HIS
CLIENTS.
xxxx
RULE 15.03 A lawyer shall not represent conflicting interests except by written consent of all concerned given after a full disclosure of the facts.
xxxx
CANON 21 A LAWYER SHALL PRESERVE THE CONFIDENCES AND SECRETS OF HIS CLIENT EVEN AFTER THE ATTORNEY-CLIENT
RELATIONSHIP IS TERMINATED.
In Hornilla v. Atty. Salunat,19 the Court explained the concept of conflict of interest in this wise:
There is conflict of interest when a lawyer represents inconsistent interests of two or more opposing parties. 1wphi1 The test is "whether or not in behalf of one
client, it is the lawyers duty to fight for an issue or claim, but it is his duty to oppose it for the other client. In brief, if he argues for one client, this argument will
be opposed by him when he argues for the other client." This rule covers not only cases in which confidential communications have been confided, but also those
in which no confidence has been bestowed or will be used. Also, there is conflict of interests if the acceptance of the new retainer will require the attorney to
perform an act which will injuriously affect his first client in any matter in which he represents him and also whether he will be called upon in his new relation to
use against his first client any knowledge acquired through their connection. Another test of the inconsistency of interests is whether the acceptance of a new
relation will prevent an attorney from the full discharge of his duty of undivided fidelity and loyalty to his client or invite suspicion of unfaithfulness or double
dealing in the performance thereof.20
As such, a lawyer is prohibited from representing new clients whose interests oppose those of a former client in any manner, whether or not they are parties in the
same action or on totally unrelated cases. The prohibition is founded on the principles of public policy and good taste. 21 In this case, the Court concurs with the
IBPs conclusions that respondents represented conflicting interests and must therefore be held liable. As the records bear out, respondents law firm was engaged
and, thus, represented complainant in the labor cases instituted against him. However, after the termination thereof, the law firm agreed to represent a new client,
FEVE Farms, in the filing of a criminal case for qualified theft against complainant, its former client, and his wife. As the Court observes, the law firms unethical
acceptance of the criminal case arose from its failure to organize and implement a system by which it would have been able to keep track of all cases assigned to
its handling lawyers to the end of, among others, ensuring that every engagement it accepts stands clear of any potential conflict of interest. As an organization of
individual lawyers which, albeit engaged as a collective, assigns legal work to a corresponding handling lawyer, it behooves the law firm to value coordination in
deference to the conflict of interest rule. This lack of coordination, as respondents law firm exhibited in this case, intolerably renders its clients secrets vulnerable
to undue and even adverse exposure, eroding in the balance the lawyer-client relationships primordial ideal of unimpaired trust and confidence. Had such system
been institutionalized, all of its members, Atty. Dionela included, would have been wary of the above-mentioned conflict, thereby impelling the firm to decline
FEVE Farms subsequent engagement. Thus, for this shortcoming, herein respondents, as the charged members of the law firm, ought to be administratively
sanctioned.
32
Note that the Court finds no sufficient reason as to why Atty. Dionela should suffer the greater penalty of suspension. As the Court sees it, all
respondents stand in equal fault for the law firms deficient organization for which Rule 15.03, Canon 15 and Canon 21 of the CPR had been violated. As such, all
of them are meted with the same penalty of reprimand, with a stern warning that a repetition of the same or similar infraction would be dealt with more severely.
As a final point, the Court clarifies that respondents' pronounced liability is not altered by the fact that the labor cases against complainant had long been
terminated. Verily, the termination of attorney-client relation provides no justification for a lawyer to represent an interest adverse to or in conflict with that of the
former client. The client's confidence once reposed should not be divested by mere expiration of professional employment.22
WHEREFORE, respondents Attys. Jose Ma. V. Valencia, Jose Ma. J. Ciocon, Lily Uy-Valencia, Joey P. De La Paz, Cris G. Dionela, Raymundo T. Pandan, Jr.,
Rodney K. Rubica, and Wilfred Ramon M. Penalosa are found GUILTY of representing conflicting interests in violation of Rule 15.03, Canon 15 and Canon 21 of
the Code of Professional Responsibility and are therefore REPRIMANDED for said violations, with a STERN WARNING that a repetition of the same or similar
infraction would be dealt with more severely. Meanwhile, the case against Atty. Philip Dabao is DISMISSED in view of his death.
Let a copy of this Resolution be furnished the Office of the Bar Confidant, to be appended to respondents' personal records as attorneys. Further, let copies of this
Resolution be furnished the Integrated Bar of the Philippines and the Office of the Court Administrator, which is directed to circulate them to all courts in the
country for their information and guidance.
SO ORDERED.
ESTELA M. PERLAS-BERNABE
Associate Justice
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CANON 15 - A LAWYER SHALL OBSERVE CANDOR, FAIRNESS AND LOYALTY IN ALL HIS DEALINGS AND TRANSACTIONS WITH HIS

10. Acquiring interest in litigation

[A.C. No. 2040. March 4, 1998]

Melo, J., no part. Previous associate with respondent.

The pertinent rule of the Code of Professional Responsibility provides:

The Case and the Facts

Report and Recommendation of the IBP

The Courts Ruling

Administrative Liability of Respondent

Thus it has been noted

ADM. CASE NO. 6876 March 7, 2008

There is merit in the petition.

Carpio, Acting Chairperson Carpio-Morales, Azcuna*, Velasco, Jr., JJ., concur.

FELICITAS S. QUIAMBAO, Adm. Case No. 6708

Complainant, (CBD Case No. 01-874)

DAVIDE, JR., C.J.,

ATTY. NESTOR A. BAMBA , Promulgated:

August 25, 2005

DAVIDE, JR., C.J.:

SEC. 12. Review and decision by the Board of Governors .

A.C. No. 10567 February 25, 2015

The Issue Before the Court

The Courts Ruling

Rule 15.03, Canon 15 and Canon 21 of the CPR provide:

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