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CM Villanueva

NEGOTIABLE INSTRUMENTS

V.

You are a member of the legal staff of a law firm doing corporate and securities work for Coco
Products Inc., a company with unique products derived from coconuts and whose shares are
traded in the Philippine Stock Exchange. A partner in the law firm, Atty. Buenexito, to whom
you report, is the Corporate Secretary of Coco Products. You have long been investing in Coco
Products stocks even before you became a lawyer.

While working with Atty. Buenexito on another file, he accidentally gave you the Coco Products
file containing the company's planned corporate financial rehabilitation. While you knew you
had the wrong file, your curiosity prevailed and you browsed through the file before returning it.
Thus, you learned that a petition for financial rehabilitation is imminent, as the company could
no longer meet its obligations as they fell due.

Soon after, your mother is rushed to the hospital for an emergency operation, and you have to
raise money for her hospital bills. An immediate option for you is to sell your Coco Products
shares. The sale would be very timely because the price of the company's stocks are still high.

Would you sell the shares to raise the needed funds for your mother's hospitalization? Take into
account legal (5%) and ethical (3%) considerations. (8% total points)

SUGGESTED ANSWER

The sale of the shares does not constitute insider trading. Although Atty. Buenexito, as corporate
secretary of Coco Products, Inc., was an insider, it did not obtain the information regarding the planned
corporate rehabilitation by a communication from him. He just accidentally gave the wrong file (Section
3.8 of Securities Regulation Code). It would be unethical to sell the shares. Rule 1.01 of the Code of
Professional Responsibility provide, “A lawyer shall not engage in unlawful, dishonest, immoral or
deceitful conduct.” A lawyer should not only refrain from performing unlawful acts. He should also desist
from engaging in unfair deceitful conduct to conceal from the buyer of the shares the planned corporate
rehabilitation.
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Case Digest:

Hadjula vs. Atty Madiana

A.C. No. 6711
July 3, 2007

FACTS:

Complainant alleged that she and respondent used to be friends as they both worked at the
Bureau of Fire Protection (BFP), claimed that she approached respondent for some legal advice and further
alleged that in the course of their conversation which was supposed to be kept confidential she disclosed
personal secrets only to be informed later by the respondent that she (respondent) would refer the matter to
a lawyer friend. It was malicious, so complainant states, of respondent to have refused handling her case
only after she had already heard her secrets.

Respondent denied giving legal advice to the complainant and dismissed any suggestion about the
existence of a lawyer-client relationship between them. Respondent also stated the observation that the
supposed confidential data and sensitive documents adverted to are in fact matters of common knowledge
in the BFP.

ISSUE:

Whether or not the Atty. Madiana breached her duty of preserving the confidence of a client and violated
the Code of Professional Responsibility.

HELD:

YES. Respondent was reprimanded and admonished.

RATIO:

The moment complainant approached the then receptive respondent to seek legal advice, a
veritable lawyer-client relationship evolved between the two. Such relationship imposes upon the lawyer
certain restrictions circumscribed by the ethics of the profession. Among the burdens of the relationship is
that which enjoins the lawyer, respondent in this instance, to keep inviolate confidential information
acquired or revealed during legal consultations.

The seriousness of the respondent’s offense notwithstanding, the Supreme Court feels that there is
room for compassion, absent compelling evidence that the respondent acted with ill-will. Without meaning
to condone the error of respondent’s ways, what at bottom is before the Court is two former friends
becoming bitter enemies and filing charges and counter-charges against each other using whatever
convenient tools and data were readily available. Unfortunately, the personal information respondent
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gathered from her conversation with complainant became handy in her quest to even the score. At the end
of the day, it appears clear to the Court that respondent was actuated by the urge to retaliate without
perhaps realizing that, in the process of giving vent to a negative sentiment, she was violating the rule on
confidentiality.
The purpose of the rule of confidentiality is actually to protect the client from possible breach of
confidence as a result of a consultation with a lawyer.
The seriousness of the respondents offense notwithstanding, the Court feels that there is room for
compassion, absent compelling evidence that the respondent acted with ill-will. Without meaning to
condone the error of respondents ways, what at bottom is before the Court is two former friends becoming
bitter enemies and filing charges and counter-charges against each other using whatever convenient tools
and data were readily available. Unfortunately, the personal information respondent gathered from her
conversation with complainant became handy in her quest to even the score. At the end of the day, it
appears clear to us that respondent was actuated by the urge to retaliate without perhaps realizing that, in
the process of giving vent to a negative sentiment, she was violating the rule on confidentiality.