X x x, 2011
Urgent - Via Personal Delivery
ATTY. X x x
X x x
X x x City
RE : REQUEST TO VOLUNTARILY INHIBIT AND DISQUALIFY
YOUR GOOD SELF AS COUNSEL
Dear Atty. X x x:
In Civil Case No. x x x pending with the Regional Trial Court, Branch x x x, of x x x City, under Judge x x x., you represent us as co-plaintiffs against x x x, past president of x x x, where we are incumbent directors/officers.
In I.S. No. x x x pending with the Office of the City Prosecutor of x x x City, you act as adverse counsel against us and you represent the same association and its president x x x against us.
With all due respect to your good self, we humbly believe that you are bound by the ethical rule against conflict of interest under the Code of Professional Responsibility applicable to the Philippine Bar.
We extensively cite the following jurisprudence for your guidance, thus:
BENEDICTO HORNILLA and ATTY. FEDERICO D. RICAFORT, complainants, vs. ATTY. ERNESTO S. SALUNAT, respondent. [A.C. No. 5804. July 1, 2003]
X x x.
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 lawyer’s 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.
In this jurisdiction, a corporation’s 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. Its members have been characterized as trustees or directors clothed with a fiduciary character. 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. This is what is known as a derivative suit, and settled is the doctrine that in a derivative suit, the corporation is the real party in interest while the stockholder filing suit for the corporation’s behalf is only nominal party. The corporation should be included as a party in the suit.
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. (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. 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 corporation’s 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 Teacher’s Assn., Inc., et al. v. 1992-1995 Board of Directors of the Philippine Public School Teacher’s 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. 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.
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.
NORTHWESTERN UNIVERSITY, INC., and BEN A. NICOLAS, complainants, vs. Atty. MACARIO D. ARQUILLO, respondent. [En Banc, A.C. No. 6632. August 2, 2005]
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.
X x x.
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. 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.
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 attorney’s 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.
X x x.
X x x. 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 client’s 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)”
An attorney cannot represent adverse interests. It is a hornbook doctrine grounded on public policy that a lawyer’s 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.
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.
WHEREFORE, 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.
FELICITAS S. QUIAMBAO vs. ATTY. NESTOR A. BAMBA, Adm. Case No. 6708 (CBD Case No. 01-874), August 25, 2005
X x x.
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. 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. It behooves lawyers not only to keep inviolate the client’s 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.
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. Developments in jurisprudence have particularized various tests to determine whether a lawyer’s 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. Thus, if a lawyer’s 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 lawyer’s duty of undivided fidelity and loyalty to the client or invite suspicion of unfaithfulness or double-dealing in the performance of that duty. 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.
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 lawyer’s respective retainers with each of them would affect the performance of the duty of undivided fidelity to both clients.
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 respondent’s 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 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 respondent’s 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. 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. Although there are instances where lawyers cannot decline representation, they cannot be made to labor under conflict of interest between a present client and a prospective one.
X x x.
X x x. 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 lawyer’s private activity or in the performance of a function in a non-professional capacity. In the process of determining whether there is a conflict of interest, an important criterion is probability, not certainty, of conflict.
X x x.
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. X x x.
IN CLOSING, out of DELICADEZA, we humbly request that you voluntarily INHIBIT OR DISQUALIFY yourself as counsel in the two (2) aforecited pending cases, or, at least, as adverse counsel against us in the second case docketed as I.S. No. x x x pending with the Office of the City Prosecutor of x x x City, if the former is not possible.
We shall anticipate your written reply within three (3) days from receipt hereof.
We hope that the situation will not reach the stage where we might be compelled to formally report the matter to the Supreme Court and the Integrated Bar of the Philippines for administration action.
Very truly yours,
X x x
X x x
X x x
 Pineda, Legal and Judicial Ethics, p. 199 [1999 ed.].
 Id., citing Hilado v. David, 84 Phil. 569 ; Nombrado v. Hernandez, 26 SCRA 13 ; Bautista v. Barrios, 9 SCRA 695 .
 Pineda, Legal and Judicial Ethics, supra, p. 199, citing Pierce v. Palmer, 31 R.I. 432.
 Agpalo, Legal Ethics, supra, p. 220, citing In re De la Rosa, 27 Phil. 258 ; Grievance Committee v. Rottner, 152 Conn. 59, 203 A 2d 82  and Titania v. Ocampo, 200 SCRA 472 .
 Corporation Code, sec. 23.
 3 Fletcher, Cyclopedia Corporations (Permanent Ed.) § 8044 (Importance of determining whether officer a trustee or agent).
 Asset Privatization Trust v. CA, 360 Phil. 768 (1998).
 Harvard Law Review, Developments in the Law: Conflict of Interest, 94 Harv. L. Rev. 1244, 1339-1342 (1981), cited in Solomon, Schwartz, Bauman & Weiss, Corporations: Law and Policy (3rd ed.) 1129 (1994).
 Cannon v. United States Acoustics Corporation, 398 F. Supp. 209 (N.D. Ill. 1975), affirmed in relevant part per curiam 532 F. 2d 1118 (7th Circ. 1978), citing Murphy v. Washington American League Baseball Club, Inc., 116 U.S. App. D.C. 362, 324 F. 2d 394 (1963).
 Ong Ching v. Ramolete, 151-A Phil. 509, 514 .