CANON 15 - A LAWYER SHALL OBSERVE CANDOR, FAIRNESS AND LOYALTY IN ALL HIS

DEALINGS AND TRANSACTIONS WITH HIS CLIENTS.

1. HILADO V. DAVID

FACTS

Mrs. Hilado filed an action against Assad to annul the sale of several house & lot between Assad and her
now deceased husband, during the Japanese occupation; Assad’s counsel is Atty. Francisco; Mrs.
Hilado’s counsels are the following: Delgado, Dizon, Flores and Rodrigo; Atty. Dizon wrote Atty.
Francisco to discontinue representing Assad because Mrs. Hilado consulted her about the case and even
turned over some documents to Atty. Francisco; Atty. Francisco even wrote a legal opinion/letter
addressed to Mrs. Hilado regarding the same case, which states that Atty. Francisco will not represent
Mrs. Hilado in the case and he thinks that the action against Assad will not prosper; Mrs. Hilado’s
counsel filed a motion to DISQUALIFY Atty. Francisco; Atty. Francisco’s version of the story:

- Mrs. Hilado came to see Atty. Francisco about the case, but he refused to become her counsel because
he thinks that the action will not prosper. Days later, Atty. Francisco’s assistant, Atty. Agrava, informed
him that Mrs. Hilado left some expediente in the firm. Atty. Francisco instructed Atty. Agrava to return
the expediente because they will not handle the case of Mrs. Hilado. Later, the firm’s stenographer
showed Atty. Francisco a letter allegedly dictated by Atty. Agrava which explains to Mrs. Hilado why they
refuse to take the case. Atty. Francisco allegedly signed the letter without reading it. Later on, Assad
went to Atty. Francisco’s office. Afterwards, Atty. Francisco accepted the retainer fee

- Lower Court Held: no other information was transmitted to Atty. Francisco other than those in
plaintiff’s complaint and there was no attorney-client relationship between Atty. Francisco and Mrs.
Hilado. Hence, motion to disqualify is denied.

ISSUE

W/N there was an attorney-client relationship between Atty. Francisco and Mrs. Hilado

HELD

Yes, there was an attorney-client relationship because the purpose of Mrs. Hilado was to obtain Atty.
Francisco’s personal service as a lawyer

- Retainer and frequency of consultation is not needed , so long as the purpose is to obtain professional
advice or assistance and the attorney permits, then an attorney-client relationship is established

- Formality is not essential

2. NAKPIL V. VALDES

FACTS

Valdes is Jose Nakpil’s accountant, consultant and lawyer. Nakpil got interested in the purchase of a
summer residence in Baguio but due to lack of funds, he asked Valdes to buy it for him and hold it in
trust. Valdes obtained 2 loans (65k and 75k), then he bought the land and had the title issued in his
name. When Jose Nakpil died, Imelda, his wife, became the administratrix of Jose’s estate. And, Valdes’
law firm filed for the settlement of Jose’s estate. Baguio property became an issue because the property
was not included in Jose’s inventory of estate, but the loans used to purchase the property were
charged under his name. The title to the property was transferred from Valdes to Caval Realty, Valdes’
family realty corp. Valdes’ accounting firm handled the inventory of Jose’s estate but also handled the
claims of Jose’s creditors- Angel Nakpil and ENORN, INC.

ISSUE

W/N Valdes is guilty of representing conflicting interests in violation of the code of professional ethics

HELD

Yes.

The proscription applies no matter how slight the adverse interest is. Representation of conflicting
interests may be allowed only upon full disclosure of the facts among all concerned parties, as to the
extent of conflict and probable adverse outcome. The preparation of claims of the creditors against the
estate is obviously improper because he had to fight for one side, the claims he was defending against
for the other side. The defense that he had already resigned from the law firm was not supported by
evidence. His resignation from the accounting firm only shows that he was absent for quite some time
but returned to work during the tenure of the litigation of claims. Thus, he cannot claim ignorance of the
case. The test of impropriety of representation of conflicting interests is not the certainty of such
existence but mere probability for it to exist. Even though he could have committed such misconduct
not as a lawyer but as an accountant, the court is not divested of jurisdiction to punish a lawyer for
misconduct committed outside the legal field, as the good moral character requirement is not only a
requisite for entrance to the bar but a continuing requirement for the practice of law. A lawyer should
always act to promote public confidence to the legal profession.

3. HORNILLA V. SALUNAT

FACTS

Complainants in this case are members of the Philippine Public School Teachers Association (PPSTA) who
filed an intra-corporate case against its members of the Board of Directors for unlawful spending and
the undervalued sale of the real properties of PPSTA corporation. Attorney Salunat is the counsel of the
Philippine Public School Teachers Association (PPSTA) and at the same time the counsel of the PPSTA
Board of Directors. Hence, complainants now aver that Atty. Salunat is guilty of conflict of interest.
ISSUE

Can a lawyer, engaged by a corporation, defend members of the board of the same corporation in a
derivative suit?

HELD

No, a lawyer cannot. Hence, Atty. Salunat is guilty of representing conflicting interest and is admonished
to observe a higher degree of fidelity in the practice of his profession. The Court in this case explained
the nature of a derivative suit. Where corporation directors have committed a breach, ultra vires acts, or
negligence… a stockholder may sue on behalf of himself and other stockholders and for the benefit of
the corporation. In this suit therefore, the corporation is the real party in interest, while the stockholder
who files a suit for the corporation’s behalf is only the nominal party. The test of inconsistency of
interest 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. A situation wherein a lawyer represents both the corporation and
its assailed directors unavoidably gives rise to a conflict of interest.

4. NORTHWESTERN UNIVERSITY V. ARQUILLO

FACTS

Northwestern University filed an administrative case against Atty. Arquillo for representing conflicting
interests in a NLRC case. The complaint alleges that Atty. Arquillo appeared as counsel for both the
petitioner and the respondent (Castro) in the labor case. Atty. Arquillo, as a defense, contended that the
petitioners and respondent he represented in the labor case belonged to the same side as the latter
party was absolved from liability. Hence, there was no conflict of interests.

ISSUE

W/N Atty. Arquillo represented conflicting interests.

HELD

YES. 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. 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.

CANON 16

1. LICUANAN V. MELO

FACTS

Licuanan filed a complaint against Atty. Melo for breach of professional ethics. Atty. Melo was
Licuanan’s counsel in an ejectment case filed against her tenant. Atty. Melo failed to remit to her the
rentals collected nor did the said lawyer report to her the receipt of said amounts. It was only after a
year from actual receipt that Atty. Melo turned over his collections to Licuanan because a demand made
by the latter.

ISSUE

Whether or not Atty. Melo should be penalized for failure to remit rentals collected

HELD

Yes! Atty. Melo is disbarred.

Ratio:

The actuations of Atty. Melo in retaining for his personal benefit over a 1 year period, the mount of
P5,220 received by him on behalf of his client, Licuanan is deprived of its use, and withholding
information on the same despite inquiries made by her, I a breach of the Lawyer’s Oath to which he
swore observance, and an evident transgression of the CPR. Due to Atty. Melo’s professional
misconduct, he has breached the trust reposed in him by his client. Atty. Melo’s unprofessional
actuations considered, the SC find him guilty of deceit, malpractice and gross misconduct in office. He
has displayed lack of honesty and good moral character.

2. POSIDIO V. VITAN

FACTS

Posidio engaged the services of Vitan in a Testate Proceeding of the deceased Nicolasa Arroyo to
which she paid Php 20,000.00 as legal fees. However, Vitan withdrew his appearance in the said case
thus, Posidio had to engage the services of another lawyer. Six years after, Vitan contacted Posidio and
told her that he has with some tax declarations and other documents purportedly forming part of the
estate of Nicolasa Arroyo, but was not included in the inventory of properties for distribution. He
convinced complainant to file another case to recover her share in the alleged undeclared properties
and demanded P100,000.00 as legal fees. After several months, however, respondent failed to institute
any action. Complainant decided to forego the filing of the case and asked for the return of the
P100,000.00, but respondent refused despite repeated demands. The lower court ruled in favor of
Posidio and ordered Vitan to return the Php 100,000.00 and pay an additional Php 20,000.00 as interest
and damages. In compliance, Vitan issued a Prudential Bank check that was dishonored later on. Despite
being sent a notice of dishonor and the repeated demands to pay, Vitan refused to honor his obligation.
The case was referred to the Integrated Bar of the Philippines for investigation, report and
recommendation. The Investigating Commissioner submitted his Report finding Vitan guilty of violating
the lawyer’s oath and the Code of Professional Responsibility in defrauding his client and issuing a check
without sufficient funds to cover the same. The IBP penalized Vitan with a reprimand with stern warning
that a similar misconduct will warrant a more severe penalty.

ISSUE

Whether or not Vitan should be penalized?

HELD

The Supreme Court agrees with the findings of the IBP. However, they find that the penalty of
reprimand is not commensurate to the gravity of wrong committed by Vitan. In the instant case,
respondent received the amount of P100,000.00 as legal fees for filing additional claims against the
estate of Nicolasa S. de Guzman Arroyo.

3. LEMOINE V. BALON

FACTS

Lemoine, the petitioner, is a French national who filed an insurance claim with Metropolitan Insurance.
His friend, Jesus Garcia, arranged for the engagement of Atty. Balon’ services as his counsel Balon
advised Lemoine that he was charging 25% of the actual amount to being recovered payable upon
successful recovery. Lemoine never gave his consent as to the fee. Since he was leaving the country,
Lemoine signed an undated Special Power of Attorney authorizing Balon to bring any action against
Metropolitan Insurance for the satisfaction of Lemoine’s claim as well as to negotiate, sign, compromise,
encash and receive payments Metropolitan Insurance offered to settle Lemoine’s claim and Balon
confirmed his acceptance of the offer December 1998, Metropolitan Insurance issued a China Bank
check payable to Lemoine in the amount of P525,000 which was received by Balon. When Lemoine
asked Balon as to the status of the case, Balon answered that Metropolitan Insurance was offering
P350,000 for settlement which Lemoine suggested that Balon accept to avoid litigation. December 1999,
Lemoine visited the office of Metropolitan Insurance to ask on the status of the case and it answered
that the case was long settled via a check given to Balon. Balon acknowledge that he is in possession of
the check and that he is keeping the check as attorney’s lien pending Lemoine’s payment of his
attorney’s fee equivalent to 50% of the entire amount collected. He also threatened Lemoine that he
will not hesitate to make proper representation with the Bureau of Immigration and Deportation, DOLE
and BIR if Lemoine will make any trouble to Balon and that he has good network with the mentioned
agencies.

ISSUE
W/N Atty. Balon violated the Code of Professional Responsibility

HELD

YES. According to the SC, Atty. Balon violated Canons 1, 15, 16, 17, 18 and 21. Specifically, Canon 16
which provides that “a lawyer shall hold in trust all moneys and properties of his client that may come
into his possession.” Balon violated this and committed misconduct, when he failed to render an
account upon receipt of the money and further, when he failed to deliver such amount to Lemoine. It is
also the duty of the lawyer to surrender such money collected when demanded upon him. Balon
violated this duty when he refuses to return the amount to Lemoine contending that he has a lien on the
fund. The lawyer’s continuing exercise of his retaining lien, as provided for in Rule 16.03, presupposes
that the client agrees with the amount of attorney’s fees to be charged. In case of disagreement,
however, the lawyer must not arbitrarily apply the funds in his possession to the payment of his fees,
but rather he can file the necessary action with the proper court to fix the fees. And in the present case,
Lemoine never gave his consent on the proposal of Balon. It must be noted as well that before receiving
the check, Balon proposes a 25% attorney’s fees, after receiving the check, he was already asking for
50%. SC found Balon guilty of malpractice, deceit, and gross misconduct, and ordered disbarred.

4. IN RE: SUSPENSION FROM THE PRACTICE OF LAW IN THE TERRITORY OF GUAM OF ATTY LEON G.
MAQUERA

FACTS

Atty Maquera was counsel for a certain Castro who was indebted to Edward Benavente who obtained
judgment in a civil case. Castro’s propery was sold at public auction to satisfy the obligation, but Castro
retained the right to redemption over said property. In consideration for Maquera’s legal fees, Castro
and Atty Maquera entered into an oral agreement that he would assign his right of redemption to
Maquera. Maquera purchased the property from Benavente for $525.00 then sold it for $320,000. He
was suspended in the practice of law in Guam for two years for obtaining an unreasonably high fee for
his services.

Issue:

May a member of the Philippine Bar who was disbarred or suspended from the practice of law in a
foreign jurisdiction where he has also be admitted as an attorney be meted the same sanction as a
member of the Philippine Bar for the same infraction committed in the foreign jurisdiction?

Ruling:

It is not automatic suspension or disbarment, but is prima facie evidence only.The power of the Court to
disbar/suspend a lawyer for acts an omission committed in a foreign jurisdiction is found in Sec 27, Rule
138 of the Revised Rules of Court:

“[…]The disbarment or suspension of a member of the Philippine Bar by a competent court or other
disciplinatory agency in a foreign jurisdiction where he has also been admitted as an attorney is a ground
for his disbarment or suspension if the basis of such action includes any of the acts hereinabove
enumerated. The judgment, resolution or order of the foreign court or disciplinary agency shall be prima
facie evidence of the ground for disbarment or suspension.” Also, he violated Article 1492 in relation to
1491 of the civil code which prohibits a lawyer from acquiring by assignment the client’s property which
is the subject of litigation. It extends to legal redemption. Most particularly, Canon 17 which states that
a lawyer owes fidelity to the cause of his client and be mindful of the trust and confidence In him; and
rule 1.01, which prohibits a lawyer from engaging in unlawful, dishonest, immoral or deceitful
conduct.HOWEVER, there is a need to ascertain Maquera has the right to explain why he should and
should not be suspended/disbarred on those grounds. Suspension/disbarment is NOT
automaticNEVERTHELESS, the Court rules that Maquera should be suspended from the practice of law
for the non-payment of his IBP dues from 1977.

5. REDDI V. SERBIO, JR.

Facts: