PROBLEM AREAS IN LEGAL ETHICS

Atty. David Ballesteros

Group 3:

ARMILLO, Joyce
CAMBA, Kevin Dustine
FRANCISCO, Ricardo Paolo
HERNANDEZ, Gabriel
MORALES, Joan Louraine
 ACQUISITION OF PROPERTIES SUBJECT OF LITIGATION

Contingent fee arrangement does not violate Article 1491 (5) of the Civil Code

Hence, a contract between a lawyer and his client stipulating a contingent fee is not
covered by said prohibition under because the payment of said fee is not made during the
pendency of the litigation but only after judgment has been rendered in the case handled by the
lawyer. In fact, under the 1988 Code of Professional Responsibility, a lawyer may have a lien over
funds and property of his client and may apply so much thereof as may be necessary to satisfy
his lawful fees and disbursements. - Fabillo and Tana v. IAC G.R. No. L-68838 [1991]

Limitations of contingent fee

As long as the lawyer does not exert undue influence on his client, that no fraud is
committed or imposition applied, or that the compensation is clearly not excessive as to amount
to extortion, a contract for contingent fee is valid and enforceable. Moreover, contingent fees
were impliedly sanctioned by No. 13 of the Canons of Professional Ethics which governed lawyer-
client relationships when the contract of services was entered into between the Fabillo spouses
and Murillo. - Fabillo and Tana v. IAC G.R. No. L-68838 [1991]

Appearance of impropriety if judge purchase property after litigation

Finally, while it is true that respondent Judge did not violate paragraph 5, Article 1491 of
the New Civil Code in acquiring by purchase a portion of Lot 1184-E which was in litigation in his
court, it was, however, improper for him to have acquired the same. He should be reminded of
Canon 3 of the Canons of Judicial Ethics which requires that: "A judge's official conduct should be
free from the appearance of impropriety, and his personal behavior, not only upon the bench
and in the performance of judicial duties, but also in his everyday life, should be beyond
reproach." And as aptly observed by the Investigating Justice: "... it was unwise and indiscreet on
the part of respondent to have purchased or acquired a portion of a piece of property that was
or had been in litigation in his court and caused it to be transferred to a corporation of which he
and his wife were ranking officers at the time of such transfer. - Macariola v. Asuncion, A.M. No.
133-J [1982]
The property must be the very subject of litigation for Article 1491 to apply

It is true that Canon No. 10 of the Canons of Professional Ethics prohibits the lawyer from
purchasing any interest in the subject-matter of the litigation which he is conducting, and Article
1491, paragraph 5, of the New Civil Code prohibits him from acquiring by purchase or assignment
the property and rights which may be the object of any litigation in which he may take part by
virtue of his profession. But in those cases where these provisions were applied, the rights or
properties purchased by the lawyer were the very subject of the litigation handled by him. -
Guevara v. Calalang, A.M. No. 681 [1982]

Levied property in satisfaction of damages can be properly acquired by lawyer

In the case at bar, the lot in which respondent acquired rights by assignment was not the subject
of Civil Case No. 2171 in which he approved (sic) as counsel for Bernabe Flores and others. The said case
was purely one for damages and did not involve the lot in question. The lot was simply levied upon on
execution after judgment was rendered in favor of the plaintiffs. Therefore Article 1491 of the New Civil
Code did not apply. Consequently, respondent had not violated the said provision of law. - Guevara v.
Calalang, A.M. No. 681 [1982]

It was not professional misconduct or unethical practice for the respondent to acquire
the rights and interests of his client to the 439 square meter parcel of land subject of the
administrative charges because the land was not involved in the litigation he was handling. The
land was acquired by Bernabe Flores in an execution sale conducted to satisfy the judgment
secured in the course of Civil Case No. 2171. The case handled by the respondent was for
damages. - Guevara v. Calalang, A.M. No. 681 [1982]

Under the case of Christopher Santos vs. Atty. Joseph Arrojado, the Supreme Court
stressed that the prohibition contemplated under Article 1491 of the New Civil Code which rests
on considerations of public policy and interests is intended to curtail any undue influence of the
lawyer upon his client on account of his fiduciary and confidential relationship with him. The
Court stated that in the case at bar, there was no slightest proof showing that the respondent
attorney’s son was used by him to acquire the property of his clients. Affidavits executed by the
owners, as well as the attorney’s son himself showed that respondent attorney did not even
actively participate in the negotiations concerning the property. At most, although respondent
lawyer's role or participation in the sale in question, if any, might ruffle very sensitive scruples, it
is not, however, per se prohibited or forbidden by said Article 1491
Withdrawal of the amount deposited in order to pay attorney’s fees violates Article 1491 of
the NCC

The withdrawal of the amount deposited in order to pay attorney’s fees to petitioner’s
counsel, Atty. De Guzman, Jr., violates Article 1491 of the Civil Code which forbids lawyers from
acquiring by assignment, property and rights which are the object of any litigation in which they
may take part by virtue of their profession. Furthermore, Rule 10 of the Canons of Professional
Ethics provides that “the lawyer should not purchase any interest in the subject matter of the
litigation which he is conducting.” The assailed transaction falls within the prohibition because
the Deed assigning the amount of P672,900.00 to Atty. De Guzman, Jr., as part of his attorney’
s fees was executed during the pendency of this case with the Court of Appeals. In his Motion to
Intervene, Atty. De Guzman, Jr., not only asserted ownership over said amount, but likewise
prayed that the same be released to him. - Pabugais v. Sahijwani G.R. No. 156846 [2004]

Even if litigant voluntarily assigned the amount

That petitioner knowingly and voluntarily assigned the subject amount to his counsel did
not remove their agreement within the ambit of the prohibitory provisions. - Pabugais v.
Sahijwani G.R. No. 156846 [2004]

Assignment of property violates Article 1491

We agree with the Investigating Commissioner's opinion that the prohibition applies
when the lawyer has not paid money for it and the property was merely assigned to him in
consideration of legal services rendered at a time when the property is still the subject of a
pending case. - Ordonio v. Atty. Eduarte, A.M. No. 3216 [1992]

Prohibition still applies even if lessee is a separate juridical person

Thus, even if the parties designated as lessees in the assailed lease contracts were the
"Heirs of Jose Villegas" and the partnership HIJOS DE JOSE VILLEGAS, and respondent signed
merely as an agent of the latter, the Court rules that the lease contracts are covered by the
prohibition against any acquisition or lease by a lawyer of properties involved in litigation in
which he takes part. To rule otherwise would be to lend a stamp of judicial approval on an
arrangement which, in effect, circumvents that which is directly prohibited by law. For, piercing
through the legal fiction of separate juridical personality, the Court cannot ignore the obvious
implication that respondent as one of the heirs of Jose Villegas and partner, later manager of, in
HIJOS DE JOSE VILLEGAS stands to benefit from the contractual relationship created between his
client Felix Leong and his family partnership over properties involved in the ongoing testate
proceedings. - Mananquil v. Atty. Villegas, A.M. No. 93-7-696-0 February 21, 1995
Mortgage contract included in the prohibition

To state that mortgages are not included within the prohibition is to open the door to an
indirect circumvention of that statutory injunction, acquisition of the property being merely
postponed till eventual foreclosure.

Respondent asserts further that Article 1491[5] does not apply to judgment creditors of
which, he claims, he was one. Under ordinary circumstances, the argument of respondent could
be considered plausible. Unfortunately, however, as heretofore explained, the mortgage was
executed in violation of Article 1491[5] so that this Article has a direct bearing on this case and
respondent cannot escape its provision. Having violated the same, he cannot be considered in
the general run of a judgment creditor. - Fornilda, et. al. v. RTC Branch 164, G.R.No. L-72306
[1989]

Mere demand for delivery of the litigated property does not violate the rule

In the instant case, there was no actual acquisition of the property in litigation since the
respondent only made a written demand for its delivery which the complainant refused to
comply. Mere demand for delivery of the litigated property does not cause the transfer of
ownership, hence, not a prohibited transaction within the contemplation of Article 1491. Even
assuming arguendo that such demand for delivery is unethical, respondent's act does not fall
within the purview of Article 1491. - Ramos v. Atty. Ngaseo, A.C. No. 6210 [2004]

Certiorari proceeding still bars purchase of property under Article 1491

In the case at bar, while it is true that Atty. Arsenio Fer. Cabanting purchased the lot after
finality of judgment, there was still a pending certiorari proceeding. A thing is said to be in
litigation not only if there is some contest or litigation over it in court, but also from the moment
that it becomes subject to the judicial action of the judge. - Valencia v. Atty. Cabanting, A.M. No.
1302, 1391 and 1543 [1991]

ARTICLE 1491. The following persons cannot acquire any purchase, even at a public auction,
either in person of through the mediation of another:

(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and
other officers and employees connected with the administration of justice, the property and
rights of in litigation or levied upon an execution before the court within whose jurisdiction or
territory they exercise their respective functions; this prohibition includes the act of acquiring an
assignment and shall apply to lawyers, with respect to the property and rights which may be the
object of any litigation in which they may take part by virtue of their profession.

There is no written prohibition in the Code of Professional Conduct from acquiring interest

However, respondent notes that Canon 10 of the old Canons of Professional Ethics, which
states that "[t]he lawyer should not purchase any interests in the subject matter of the litigation
which he is conducting," does not appear anymore in the new Code of Professional
Responsibility. He therefore concludes that while a purchase by a lawyer of property in litigation
is void under Art. 1491 of the Civil Code, such purchase is no longer a ground for disciplinary
action under the new Code of Professional Responsibility

This contention is without merit. The very first Canon of the new Code states that "a
lawyer shall uphold the Constitution, obey the laws of the land and promote respect for law and
legal process" (Emphasis supplied), Moreover, Rule 138, Sec. 3 of the Revised Rules of Court
requires every lawyer to take an oath to obey the laws [of the Republic of the Philippines] as well
as the legal orders of the duly constituted authorities therein.“ xxx And for any violation of this
oath, a lawyer may be suspended or disbarred by the Supreme Court [Rule 138, Sec. 27, Revised
Rules of Court]. – Bautista v. Atty. R. Gonzales, A.M. No. 1625 February 12, 1990

Parenthetically, it should be noted that the persons mentioned in Art. 1491 of the Civil
Code are prohibited from purchasing the property mentioned therein because of their existing
trust relationship with the latter. A lawyer is disqualified from acquiring by purchase the property
and rights in litigation because of his fiduciary relationship with such property and rights, as well
as with the client. And it cannot be claimed that the new Code of Professional Responsibility has
failed to emphasize the nature and consequences of such relationship.

Canon 17 states that "a lawyer owes fidelity to the cause of his client and he shall be
mindful of the trust and confidence reposed in him." On the other hand, Canon 16 provides that
"a lawyer shall hold in trust all moneys and properties of his client that may come into his
possession." Hence, notwithstanding the absence of a specific provision on the matter in the new
Code, the Court, considering the above quoted provisions of the new Code in relation to Art.
1491 of the Civil Code, as well as the prevailing jurisprudence, holds that the purchase by a lawyer
of his client's property in litigation constitutes a breach of professional ethics for which a
disciplinary action may be brought against him. - Bautista v. Atty. R. Gonzales, A.M. No. 1625
February 12, 1990
What is “a property [is] in litigation”?

A property is in litigation if there is a contest or litigation over it in court or when it is

subject of a judicial action. - Peña v. Delos Santos, et. al., GR NO. 202223, March 02, 2016

A thing is said to be in litigation not only if there is some contest or litigation over it in
court, but also from the moment that it becomes subject to the judicial action of the judge. –
Natividad Ariaga vda. De Gurrea, et. Al. v. against Atty. Enrique Suplico , G.R. No. 144320, April
26, 2006

Mortgage also falls under Article 1491[5]

Respondent Amonoy avers that at the time of the execution of the mortgage on 20
January 1965, subject properties were no longer "properties in litigation" since the Project of
Partition (as signed by the intestate heirs) covering said properties was approved by the lower
Court as early as 12 January 1965.

This argument must fail for the reason that while the Project of Partition was approved
on 12 January 1965, it was only on 6 August 1969, and after all charges against the estate had
been paid, that the estate was declared closed and terminated. In fact, by his own admission, he
had acted as counsel from 1959 until 1968.

Thus, at the time of the execution of the mortgage contract, the Controverted Parcels
were still in litigation and a fiduciary relationship of lawyer and client, which Article 1491[5]
precisely seeks to protect, still existed between the parties. To state that mortgages are not
included within the prohibition is to open the door to an indirect circumvention of that statutory
injunction, acquisition of the property being merely postponed till eventual foreclosure.

Respondent asserts further that Article 1491[5] does not apply to judgment creditors of
which, he claims, he was one. Under ordinary circumstances, the argument of respondent could
be considered plausible. Unfortunately, however, as heretofore explained, the mortgage was
executed in violation of Article 1491[5] so that this Article has a direct bearing on this case and
respondent cannot escape its provision. Having violated the same, he cannot be considered in
the general run of a judgment creditor. - Fornilda, et. al. v. Branch 164, RTC Pasig, G.R.No. L-
72306 January 24, 1989
 CONFLICT OF INTEREST IN A REGULAR
LAWYER-CLIENT RELATIONSHIP

CANON 21

A lawyer shall preserve the confidence and secrets of his client even after the attorney-
client relation is terminated.

Rule 21.02 - A lawyer shall not, to the disadvantage of his client, use information acquired in the
course of employment, nor shall he use the same to his own advantage or that of a third person,
unless the client with full knowledge of the circumstances consefnts thereto.

Rule 21.07 - A lawyer shall not reveal that he has been consulted about a particular case except
to avoid possible conflict of interest.

Client consent can sometimes resolve such a conflict, but it is not a panacea.

Put slightly differently, representation is prohibited notwithstanding informed client

consent if the court “cannot reasonably conclude that the lawyer will be able to provide
competent and diligent representation.”

Consent of client.

Although clients agree to some form of consent—and they do not always agree—
questions often arise over whether a waiver, particularly one given in advance, is made with
knowledge of all relevant information, as well as to what matters and to what entities it extends.
It may be difficult, if not impossible, to identify and discuss all possible future ramifications of the
potentially conflicting representations. Additionally, informed consent requires disclosure of
meaningful information.

General Rule in Law Firms:

Rule 21.04 - A lawyer may disclose the affairs of a client of the firm to partners or associates
thereof unless prohibited by the client.

An information obtained from a client by a member or assistant of a law firm is

information imparted to the firm. This is not a mere fiction or an arbitrary rule; for such member
or assistant, as in our case, not only acts in the name and interest of the firm, but his information,
by the nature of his connection with the firm is available to his associates or employers. (Hilado
v. David, et. Al., G.R. No. L-961, September 21, 1949)

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 15.03. - 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 15.08. - 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.

The prohibition against conflict-of-interest rests on five (5) rationales

First — the law seeks to assure clients that their lawyers will represent them with undivided
loyalty. A client is entitled to be represented by a lawyer whom the client can trust. Instilling such
confidence is an objective important in itself.

Second — the prohibition against conflicts of interest seeks to enhance the effectiveness of legal
representation. To the extent that a conflict of interest undermines the independence of the
lawyer’s professional judgment or inhibits a lawyer from working with appropriate vigor in the
client’s behalf, the client’s expectation of effective representation x x x could be compromised.
(Samson v. Atty. Era, A.C. No. 6664 July 16, 2013)

Third — a client has a legal right to have the lawyer safeguard the client’s confidential information
xxx. Preventing use of confidential client information against the interests of the client, either to
benefit the lawyer’s personal interest, in aid of some other client, or to foster an assumed public
purpose is facilitated through conflicts rules that reduce the opportunity for such abuse.

Fourth — conflicts rules help ensure that lawyers will not exploit clients, such as by inducing a
client to make a gift to the lawyer xxx.
Finally, some conflict-of-interest rules protect interests
of the legal system in obtaining adequate presentations to tribunals. In the absence of such rules,
for example, a lawyer might appear on both sides of the litigation, complicating the process of
taking proof and compromise adversary argumentation. (Samson v. Atty. Era, A.C. No. 6664 July
16, 2013)

Mere presence of adverse interest no matter how slight is sufficient.

An attorney owes to his client undivided allegiance. After being retained and receiving
the confidences of the client, he cannot, without the free and intelligent consent of his client, act
both for his client and for one whose interest is adverse to, or conflicting with that of his client in
the same general matter. The prohibition stands even if the adverse interest is very slight; neither
is it material that the intention and motive of the attorney may have been honest. (Humberto C.
Lim Jr. v. Atty. Nicanor V. Villarosa, A.C. No. 5303, June 15, 2006)

Nature and extent of the information received by the lawyer from his client is irrelevant

This rule has been so strictly enforced that is has been held that an attorney, on
terminating his employment, cannot thereafter 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. Thus, the
nature and extent of the information received by the lawyer from his client is irrelevant in
determining the existence of conflict of interest. (Mabini Colleges, Inc. v. Atty. Pajarillo, A.C. No.
10687, July 22, 2015)

NOTE: In order that a court may prevent an attorney from appearing against a former client, it is
unnecessary that the court ascertain in detail the extent to which the former client’s affairs might
have a bearing on the matters involved in the subsequent litigation on the attorney’s knowledge
thereof.

Duty of loyalty and Duty of confidentiality

Where an attorney successively represents one client following the prior representation
of another client, the concern is to enforce the duty of confidentiality owed to the former client.
In contrast, where the same attorney simultaneously represents potentially conflicting parties,
the primary interest at stake is the attorney's duty of loyalty.
Standards of disqualification in COI

Different standards have evolved for conflicts arising out of simultaneous representation
of clients with potentially adverse interests and for conflicts arising out of successive
representation of clients with adverse interests.
Where the representation is successive that is
when an attorney is engaged to represent the interests of a party that are adverse to a former
client of the attorney's, courts have recognized that the chief fiduciary value jeopardized is that
of client confidentiality.”
The test used for disqualification in those instances is whether there
is a "substantial relationship" between the subjects of the former and current representations.

However, when the potentially conflicting parties are simultaneously represented by the
same attorney, "the primary value at stake ... is the attorney's duty and the client's legitimate
expectation of loyalty, rather than confidentiality.” Thus, two duties are recognized, the duty of
confidentiality and the duty of loyalty. We are dealing with both duties in the situation presented
here.

Types of Conflicts

1. Concurrent Clients

The concurrent client conflicts rule in every state, based largely on the duty of
loyalty, prevents a lawyer from acting adversely to a current client on any matter, even
with respect to matters wholly unrelated to any work the lawyer is doing for the client,
and even when the representation involves no possible use of a client’s confidences.
Because the prevailing American rule is predicated on a duty of loyalty, it does not require
a substantial relationship between matters, or a risk of misuse of confidential
information, as is the case in many other parts of the world.

2. Former Clients

With respect to former clients, the prevailing rule recognizes a conflict only if a
substantial relationship exists between matters or the lawyer had access to confidential
information of the client in the former representation that is material to the second
representation (where it might be used against the former client or place the lawyer in a
position of divided loyalty between the two clients). The former client conflicts rule is
based primarily on the duty of confidentiality and only secondarily on the duty of loyalty.
 3. Prospective Clients

A somewhat similar, but more flexible, rule applies to prospective clients who do
not become clients. A conflict arises if a prospective client disclosed “significantly
harmful” confidential information to the attorney with some reasonable expectation that
an attorney-client relationship may be formed. This rule, too, is premised on the duty of
confidentiality and provides that the conflict may be cured by prompt and effective
screening of lawyers who received confidential information with notice to the prospective
client. The recognition of screening in the prospective client rule is particularly significant
in a state such as New York, which has not adopted a rule to permit screening to cure
intra-firm imputation of former client conflicts in other contexts, such as that of lateral
hires.

4. Possible Positional Conflicts

A final type of conflict, addressed at best inferentially in the rules, is a positional

conflict. Such a possible conflict involves taking a formal position in a matter not involving
the client that may nevertheless be contrary to a position important to the client in other
matters, including some where the lawyer may work with the client. Apart from the
business retention problems they are likely to cause, historically, these situations
generally have not been thought to pose true conflicts where different positions are taken
before different courts, though in some circumstances discernible and concrete harm to
a client may mandate disqualification.

5. Imputation of Conflicts

The strict imputation rule in the United States exacerbates the effect of the
conflict’s rules. This rule stipulates that aside from certain personal conflicts, the conflict of
any lawyer in a firm, including a lateral hire, is imputed to every lawyer at a firm. Effective
screening under carefully prescribed conditions may be used to cure some lateral conflicts.
Courts, in an exercise of their discretion to control the conduct of lawyers in the proceedings
before them, do sometimes permit its use to avoid disqualifying a firm for conflicts of lawyers
with peripheral roles in the matter.

NOTE: Conflicts of interest are not the exclusive headache of large, urban, multi-office law firms.
Conflicts of interest arise within and affect law practices of every size, geographical location and
discipline. The number of clients, adverse parties, and interested non-parties with whom
attorneys become involved throughout their careers is truly staggering and invariably
underestimated.

➢ It is a proposition that it is the client, and not the lawyer, that defines the client's interests and
instructs the lawyer about them. It is generally the rule based on sound public policy that
attorney cannot represent diverse interest. It is highly improper to represent both sides of an
issue.

➢ Courts have found that a competitor conflict is present when the lawyer attempts to represent
two competitors on a material aspect of their competition. The greater the involvement in the
client's affairs the greater the danger that confidences (where such exist) will be revealed.
“Closed file” conflicts. Involve representation adverse to a former client in the same or
substantially related matters. Extreme case of Conflict of Interest. The most obvious conflicts
of interest are those in which the lawyer's personal interests clash with those of the client.

➢ A demand of another case is a form of “conflict of interest.” “The basic rule which must guide
every lawyer is that his total loyalty is due each client in each case, and he may never permit
the pressing of one point or one case to be guided or influenced by the demands of another
case. The risk of jeopardizing other cases, if it in fact exists, presents a conflict he must resolve
in such a way that his immediate responsibility is faithfully discharged.”

Duty to protect only matters acquired during the lawyer-client relationship

The intent of the law is to impose upon the lawyer the duty to protect the client’s interests
only on matters that he previously handled for the former client and not for matters that arose
after the lawyer-client relationship has terminated. (Palm v. Atty. Iledan, Jr. A.C. No. 8242 [2009])

Doctrine of “Imputed Knowledge”

Doctrine of imputed knowledge is based on the assumption that an attorney, who has notice
of matter affecting his client, has communicated the same to his principal in the course of
professional dealings. The doctrine applies regardless of whether or not the lawyer actually
communicated to the client what he learned in his professional capacity, the attorney and his
client being one judicial person.

Knowledge of one member of a law firm will be imputed by inference to all members of that
firm; free flow of information within the partnership.
“Personal Interests” not ordinarily imputed

When a lawyer has discussions concerning possible employment with an opponent of the
lawyer's client, or with a law firm representing the opponent, such discussions could materially
limit the lawyer's representation of the client. Without effective client consent, the lawyer must
terminate all further discussions concerning the employment, or withdraw from representing the
client. The same protocol is required with respect to a merger of law firms or similar change. A
personal interest conflict is clearly present where there is an outstanding offer of employment
that the lawyer is considering or has accepted.

Client of law firm is the client of every partners and associates

Respondent further argued that it was his brother who represented Gonzales in the civil
case and not him, thus, there could be no conflict of interest. We do not agree. As respondent
admitted, it was their law firm, which represented Gonzales in the civil case. Such being the case,
the rule against representing conflicting interests applies. (Gonzales v. Atty. Cabucana, A.C. No.
6836, January 23, 2006)

Vicarious disqualification

Traditionally, if a lawyer is ineligible to represent a particular client, all members of the

lawyer's firm also are ineligible.
The basis for vicarious disqualification is the "presumption of
shared confidences," which seeks to prevent disclosure of client confidences, preserve counsel
loyalty, and avoid the appearance of impropriety.

No vicarious disqualification of partners or associates

The rules provide that no lawyer associated in a firm “shall knowingly represent a client
when any one of them practicing alone would be prohibited from doing so. An exception arises,
however, when “the prohibition is based on a personal interest of the prohibited lawyer and does
not present a significant risk of materially limiting the representation of the client by the
remaining lawyers in the firm.”
Irrebuttable and rebuttable presumption

Basing vicarious disqualification on an irrebuttable presumption of transfer of

information from the attorney to the firm of which he or she is then a member. If, however, a
vicariously disqualified partner leaves the firm and joins another, the presumption is rebuttable,
and his or her new partners will not necessarily be disqualified. "They need show only that the
vicariously disqualified partner's knowledge was imputed, not actual.”

Preliminary conflict of interest check

Whenever a prospective client seeking legal assistance contacts an attorney, the attorney
should politely but firmly decline to discuss the matter in detail until a preliminary conflict of
interest check can be performed. As the adjective suggests, preliminary conflict of interest checks
should ideally be performed before the prospective client divulges additional confidential
information which may conflict the attorney out of current or future representations. 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.

Confidentiality of information is not relevant in conflict of interests

The rule on conflict of interests 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. (Atty. Jalandoni v. Atty. Villarosa, AC 5303, June 15, 2006)

Unqualified opposing interest of new and former clients

The rule prohibits a lawyer 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 in totally
unrelated cases. (Atty. Jalandoni v. Atty. Villarosa, AC 5303, June 15, 2006)

Degree of adverse interest, intention or motive are not material

An attorney owes to his client undivided allegiance. After being retained and receiving
the confidences of the client, he cannot, without the free and intelligent consent of his client, act
both for his client and for one whose interest is adverse to, or conflicting with that of his client in
the same general matter.... The prohibition stands even if the adverse interest is very slight;
neither is it material that the intention and motive of the attorney may have been honest. (Lim
Jr. v. Atty. Villarosa, A.C. No. 5303, June 15, 2006)

As to who initiate engagement is immaterial

To negate any culpability, respondent explained that he did not offer his legal services to
accused Avila and Ilo but it was the two accused who sought his assistance in executing their
extrajudicial confessions. Nonetheless, he acceded to their request to act as counsel after
apprising them of their constitutional rights and after being convinced that the accused were
under no compulsion to give their confession. (Perez v. Atty. Dela Torre, AC 6160, March 30, 2006)

Retained counsel of either party cannot act as mediator without consent

➢ Even respondent’s alleged effort to settle the existing controversy among the family
members was improper because the written consent of all concerned was still required. A lawyer
who acts as such in settling a dispute cannot represent any of the parties to it. (Lim Jr. v. Atty.
Villarosa, A.C. No. 5303, June 15, 2006)

➢ Rule 15.04. - A lawyer may, with the written consent of all concerned, act as mediator,
conciliator or arbitrator in settling disputes.

Nature of the case is irrelevant

The claim of respondent that there is no conflict of interests in this case, as the civil case
handled by their law firm where Gonzales is the complainant and the criminal cases filed by
Gonzales against the Gatcheco spouses are not related, has no merit. The representation of
opposing clients in said cases, though unrelated, constitutes conflict of interests or, at the very
least, invites suspicion of double-dealing, which this Court cannot allow. (Gonzales v. Atty.
Cabucana, A.C. No. 6836, January 23, 2006)

Professional engagement starts the moment the lawyer listens to his prospective client

An attorney is employed that is, he is engaged in his professional capacity as a lawyer or

counselor when he is listening to his client s preliminary statement of his case, or when he is
giving advice thereon, just as truly as when he is drawing his client s pleadings, or advocating his
client s pleadings, or advocating his client s cause in open court. (Atty. Catalan v. Atty. Silvosa
A.C. No. 7360 [2012])

Client’s consent can sometimes resolve such a conflict, but it is not a panacea

Client consent can sometimes resolve such a conflict, but it is not a panacea. The lawyer
must always “reasonably believe that he will be able to provide competent and diligent
representation to each affected client.” Representation is prohibited notwithstanding informed
client consent if the court “cannot reasonably conclude that the lawyer will be able to provide
competent and diligent representation.”

Consent ineffective

➢ A lawyer may not properly represent conflicting interests even though the parties
concerned agree to the dual representation where:

1. The conflict is between the attorney’s interest and that of a client; or

2. Between a private client’s interests and that of the government or any of its
instrumentalities;

3. Between an accused and counsel.

➢ Section 12. (Article III of the Constitution)

(1) Any person under investigation for the commission of an offense shall have the right
to be informed of his right to remain silent and to have competent and independent counsel
preferably of his own choice. If the person cannot afford the services of counsel, he must be
provided with one. These rights cannot be waived except in writing and in the presence of
counsel.

Three tests to determine conflicting interests

1. When, on behalf of one client, it is the attorney’s duty to contest for that which his duty to
another client requires him to oppose or when this possibility of such situation will develop
 (conflicting duties).

2. Whether the acceptance of the new relation will prevent a lawyer from the full discharge
of his duty of undivided fidelity and loyalty to his client or will invite suspicion of unfaithfulness
or double-dealing in the performance thereof (Invitation of suspicion).

3. Whether a lawyer will be called upon in his new relation to use against the first client any
knowledge acquired in the previous employment (use of prior knowledge obtained).

NOTE: Representing conflicting interests would occur only where the attorney’s new
engagement would require her to use against a former client any confidential information gained
from the previous professional relation.
The prohibition did not cover a situation where the
subject matter of the present engagement was totally unrelated to the previous engagement of
the attorney. (Seares, Jr. v. Atty. Gonzales-Alzate, Adm. Case No. 9058 November 14, 2012)

Effects of Representing Adverse Interests

1. Disqualification as counsel of new client on petition of former client.

2. Where such is unknown to, becomes prejudicial interests of the new client, a judgment
against such may, on that ground be set aside.

3. A lawyer can be held administratively liable through disciplinary action and may be held
criminally liable for betrayal of trust.

4. The attorney’s right to fees may be defeated if found to be related to such conflict and such
was objected to by the former client, or if there was a concealment and prejudice by reason
of the attorney’s previous professional relationship with the opposite party.

Types of conflict of interest

1. Concurrent or multiple or simultaneous representation

- A lawyer represents clients whose objectives are adverse to each other, no matter how
slight or remote these are Take note of this minimal degree.

EXAMPLE: A CPA-lawyer being part of a firm that represents the estate and being part of
the accountancy firm that represents the creditors. The conflict need not arise from two
 legal relationships.

2. Sequential or successive representation

-Representation of present client who may have an interest adverse to prior client.
Successive representation is when a lawyer or law firm seeks to represent a client whose
interests are adverse to a former client without the former client's consent. The rule against
simultaneous representation is based principally on the duty of undivided loyalty. Unlike
simultaneous representation, successive representation is not prima facie improper. The duty
to preserve client confidences is the primary ethical consideration implicated by successive
representation.
Successive representation implicates both the duty of loyalty and the
preservation of the attorney-client relationship.

Only instance when a lawyer can represent conflicting interest

➢ A lawyer cannot represent conflicting interests except by written consent of all concerned
given after a full disclosure of the facts. (Santos Ventura Hocorma Foundation, Inc. v. Atty. Funk,
A.C. No. 9094 August 15, 2012)

Limit of full disclosure

➢ A lawyer is forbidden from representing a subsequent client against a former client when
the subject matter of the present controversy is related, directly or indirectly, to the subject
matter of the previous litigation in which he appeared for the former client. Conversely, he may
properly act as counsel for a new client, with full disclosure to the latter, against a former client
in a matter wholly unrelated to that of the previous employment, there being in that instance no
conflict of interests. Where, however, the subject matter of the present suit between the
lawyer’s new client and his former client is in some way connected with that of the former client’s
action, the lawyer may have to contend for his new client that which he previously opposed as
counsel for the former client or to use against the latter information confided to him as his
counsel. (Pormento, Sr. v. Atty. Pontevedra, A.C. No. 5128. March 31, 2005)

Purpose and intention is immaterial

➢ Respondent contends that he handled the defense of the accused in the subject criminal
case for humanitarian reasons and with the honest belief that there exists no conflict of interests.
However, the rule is settled that the prohibition against representation of conflicting interests
applies although the attorney’s intentions and motives were honest and he acted in good faith.
Moreover, the fact that the conflict of interests is remote or merely probable does not make the
prohibition inoperative. (Pormento, Sr. v. Atty. Pontevedra, A.C. No. 5128. March 31, 2005)
Good faith and honest intention is not a defense

➢ 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. (Quiambao v. Atty. Bamba,
Adm. Case No. 6708 August 25, 2005)

➢ 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.
(Quiambao v. Atty. Bamba, Adm. Case No. 6708 August 25, 2005)

➢ Indeed, the prohibition against representation of conflicting interests applies although

the attorney’s intentions were honest and he acted in good faith. (Atty. Catalan v. Atty. Silvosa
A.C. No. 7360 [2012])

Termination of Attorney -Client relations is not a justification

➢ Respondent also asserts that when he accepted employment in Criminal Case No. 3159,
the attorney-client relations between him and complainant in Civil Case No. 1648 had already
been terminated. This defense does not hold water because the termination of the relation of
attorney and client provides no justification for a lawyer to represent an interest adverse to or in
conflict with that of the former client. (Pormento, Sr. v. Atty. Pontevedra, A.C. No. 5128. March
31, 2005)

➢ Informed consent must be written.

➢ A client's implied consent is insufficient to waive a potential conflict of interest.

➢ 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.

➢ 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. (Quiambao v. Atty. Bamba, Adm. Case No. 6708 August 25, 2005)

➢ Conflict of interest remains after termination of attorney-client relationship.

NOTE: The termination of the attorney-client relationship does not justify a lawyer
to represent an interest adverse to or in conflict with that of the former client. The
spirit behind this rule is that the client’s confidence once given should not be
stripped by the mere expiration of the professional employment. Even after the
 severance of the relation, a lawyer should not do anything that will injuriously
affect his former client in any matter in which the lawyer previously represented
the client. (Samson v. Atty. Era, A.C. No. 6664 July 16, 2013)

Husband and wife lawyers in legal practice

➢ Where both husband and wife are lawyers but they are not practicing in association with
one another, may they or their firms represent differing interests?
Some firms
apparently have been reluctant to employ one spouse-lawyer where that person's
husband or wife is, or may soon be, practicing with another firm in the same city or
area.
Some law firms are concerned whether a law firm is disqualified, by reason of its
employment of one spouse, to represent a client opposing an interest represented by
another law firm that employs the husband or wife of the inquiring firm's associate.

➢ It is not necessarily improper for husband-and-wife lawyers who are practicing in different
offices or firms to represent differing interests. No disciplinary rule expressly requires a
lawyer to decline employment if a husband, wife, son, daughter, brother, father, or other
close relative represents the opposing party in negotiation or litigation.

➢ Likewise, it is not necessarily improper for a law firm having a married partner or associate
to represent clients whose interests are opposed to those of other clients represented by
another law firm with which the married lawyer's spouse is associated as a lawyer.
Married partners who are lawyers must guard carefully at all times against inadvertent
violations of their professional responsibilities arising by reason of the marital
relationship.

➢ The disqualification of married or related lawyers who oppose one another professionally
is not generally imputed to other lawyers in the related lawyer's law offices. Such personal
disqualification is not imputed to the spouses' firms unless the lawyers have a personal
interest in the outcome of the case.

Special circumstances that highlight the concern

1. Whether the fee of either firm is contingent;

2. Whether the disputed matter is one of negotiation or litigation, and whether the married
lawyer in question will or will not actually be working on the particular matter;

3. Another variation of the problem is the situation in which a governmental agency, such as
a district attorney or an attorney general, is the employer of either the husband or the wife,
and the spouse is associated with a law firm in the same community.
Recommendations regarding husband-and-wife lawyers in legal practice

Married partners who are lawyers must guard carefully at all times against inadvertent
violations of their professional responsibilities arising by reason of the marital relationship.

Lawyer Relatives

➢ Ethical precepts admonish lawyers related by blood or marriage to avoid adversarial

representations without the informed consent of the parties.
Lawyers related by blood
or marriage have long been permitted to represent adversarial interests provided that a
reasonable effort is made to anticipate and expose potential conflicts to clients before
obtaining their consent to representation.
Faced with client consent, courts have
consistently required an actual conflict of interest rather than simply the fact of
adversarial lawyer relatives before ordering disqualification.

Personal Relationships

➢ A lawyer is romantically involved with the opposing party’s attorney, or sexually involved
with a client, the lawyer’s loyalty or judgment can be impaired.

➢ Lawyers who are dating and also representing adversaries in litigation should disclose
their relationship if it is sufficiently close that their clients might have questions about the
lawyers' ability to represent them zealously.
➢ A lawyer is prohibited from having sex with a client unless a consensual sexual
relationship existed prior to the start of professional representation.

Sexual relationship during the course of representation

➢ It is apparent that a sexual relationship during the course of representation can seriously
harm the client's interests. Therefore, the Committee concludes that because of the
danger of impairment to the lawyer's representation associated with a sexual relationship
between lawyer and client, the lawyer would be well advised to refrain from such a
relationship.

➢ If such a sexual relationship occurs and the impairment is not avoided, the lawyer will
have violated ethical obligations to the client.
 ➢ Client's consent to sexual relations alone will rarely be sufficient. "The client's consent to
sexual relations alone will rarely be sufficient to eliminate this danger. In many cases, the
client's ability to give meaningful consent is vitiated by the lawyer's potential undue
influence and/or the emotional vulnerability of the client.

➢ Defense- The lawyer may, therefore, be called upon in a disciplinary or other proceeding
to show that the client consented, that the consent was freely given based on full and
reasonable disclosure of the risks involved, and that any ensuing sexual relationship did
not in any way disadvantage the client in the representation, that is, the attorney's
judgment remained independent, the representation proceeded free of conflicts, the
privilege was not compromised and the other ethical obligations to the client were
fulfilled.

The rule on Conflict of Interests also covers cases in which no confidence has been bestowed or
will be used

➢ The rule on conflict of interests 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. - Humberto C. Lim Jr. v. Atty. Nicanor V. Villarosa, A.C. No. 5303,
June 15, 2006

➢ “Friendly accommodations“ by a lawyer creates a professional relationship- Respondent

must have known that her act of constantly and actively communicating with
complainant, who, at that time, was beleaguered with demands from investors of
Multitel, eventually led to the establishment of a lawyer-client relationship. Respondent
cannot shield herself from the inevitable consequences of her actions by simply saying
that the assistance she rendered to complainant was only in the form of "friendly
accommodations," precisely because at the time she was giving assistance to
complainant, she was already privy to the cause of the opposing parties who had been
referred to her by the SEC. (Palacios v. Atty. Amora, A.C. No. 11504, August 01, 2017)

➢ Drafting of demand letter creates Conflict of Interest-

A lawyer-client relationship can exist notwithstanding the close friendship

between complainant and respondent. The relationship was established the moment
complainant sought legal advice from respondent regarding the dishonored checks. By
drafting the demand letter respondent further affirmed such relationship. The fact that
the demand letter was not utilized in the criminal complaint filed and that respondent
was not eventually engaged by complainant to represent her in the criminal cases is of no
moment. As observed by the Investigating Commissioner, by referring to complainant
Justo as “my client” in the demand letter sent to the defaulting debtor, respondent
 admitted the existence of the lawyer-client relationship. Such admission effectively
estopped him from claiming otherwise.

➢ The non-payment of professional fee will also not exculpate respondent from liability.
Absence of monetary consideration does not exempt lawyers from complying with the
prohibition against pursuing cases with conflicting interests. The prohibition attaches
from the moment the attorney-client relationship is established and extends beyond the
duration of the professional relationship. We held in Burbe v. Atty. Magulta that it is not
necessary that any retainer be paid, promised or charged; neither is it material that the
attorney consulted did not afterward handle the case for which his service had been
sought. (Castro-Justo v. Atty. Galing, A.C. No. 6174, November 16, 2011)

The take- over of a client’s cause of action by another lawyer

The excuse proffered by respondent that it was not him but Atty. A who was eventually
engaged by complainant will not exonerate him from the clear violation of Rule 15.03 of the Code
of Professional Responsibility. The take- over of a client’s cause of action by another lawyer does
not give the former lawyer the right to represent the opposing party. It is not only malpractice
but also constitutes a violation of the confidence resulting from the attorney-client relationship.
(Lydia Castro-Justo v. Atty. Rodolfo T. Galing, A.C. No. 6174, November 16, 2011)

A motion to disqualify counsel may implicate several important interests

1. A client's right to chosen counsel;

2. An attorney's interest in representing a client;

3. The financial burden on a client to replace disqualified counsel; and

4. The possibility that tactical abuse underlies the disqualification motion.

Case of Paces Industrial Corporation vs. Atty Edgardo Salandanan

- In this case, the Supreme Court reiterated on the concept of conflict of interest.
Conflict of interest exists when a lawyer represents inconsistent interests of two or
more opposing parties. It is explicit that 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 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 short, 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 of said duty. The prohibition is founded on the principles of public
policy and good taste.

- Even after the severance of the relation, a lawyer should not do anything that will
injuriously affect his former client in any matter in which the lawyer previously
represented the client. Nor should the lawyer disclose or use any of the client's
confidences acquired in the previous relation. The nature of that relationship is,
therefore, one of trust and confidence of the highest degree.

- The protection given to the client is perpetual and does not cease with the
termination of the litigation, nor is it affected by the client'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.

- It must, however, be noted that a lawyer's immutable duty to a former client does not
cover transactions that occurred beyond the lawyer's employment with the client. The
intent of the law is to impose upon the lawyer the duty to protect the client's interests
only on matters that he previously handled for the former client and not for matters
that arose after the lawyer-client relationship has terminated.

CONFLICT OF INTEREST OF CORPORATE LAWYERS

Conflict of interest in Corporate Practice

Conflict of interest issues exist in corporate practice because, although the attorney
represents the entity, the attorney actually deals with various constituents within that entity.
The types of conflicts that exist in corporate practice mirror those that exist in conflicts
generally, and the resolution of those conflicts turn on the same general themes - loyalty,
preservation of confidential information and exercise of independent professional judgment by
the attorney.
Corporate counsel

refers to an in-house attorney for a corporation; lawyer employed by a company.

(Corporate Counsel, In-house counsel, p. 401, Black’s Law Dictionary 9th Edition)

Identifying the Client for conflict purposes

It is clear that a "'corporate attorney', whether an in-house lawyer or a law firm that
serves as counsel to the company, owes a duty to act in accordance with the interests of the
corporate entity itself. His client is the corporation. Thus, the attorney's duty to preserve
confidential information and to exercise independent professional judgment run to the entity,
and not to other constituents within the organization.

Representing the Corporation and Constituents

In dealing with constituents of the corporation, whether they be management,

employees, directors or others, the lawyer must be clear in his or her role. The lawyer's role as
counsel for the entity should be clarified in any situation where the interest of the constituent
has the potential of being averse to the interest of the corporation.

DUTY TO A CORPORATE CLIENT

A corporate counsel represents the interests of the corporate client, not the latter’s individual
officers or shareholders.

In Heim v. Signcraft Screenprint Inc. (01 C 50014, N.D. Ill. Jul. 20, 2001), the plaintiff sought
to disqualify a witness from giving his testimony on the ground that said person is currently the
corporate counsel of the defense and had advised the former in her capacity as a former Director.
However, the same was dismissed on the basis that “a corporate attorney represents the
corporation, not the individual directors or officers.”

In Kopka v. Kamensky & Rubenstein (821 N.E.2d 719, Dec. 16, 2004), the plaintiff argued that
the defense owed him its fiduciary duty since the former was a shareholder and partner in a
corporation with relations to the firm. However, the argument was dismissed on the basis that
“the attorney for a corporation, even a closely held one, does not have a specific fiduciary duty
toward the individual shareholders”
ENGAGEMENT OF A RETAINER BY A CORPORATE CLIENT

A corporate client engages the services of an attorney to render legal advice or to defend or
prosecute its cause in court.

• In a corporation, the Board of Directors or a Corporate Officer with delegated power may
hire an attorney
• In a Derivative Suit, a stockholder may secure the services of lawyer to on behalf of the
corporation.

CORPORATE LAWYER AND LAW FIRM

A lawyer who is deemed disqualified due to a conflict of interest shares the same
disqualification with his law firm. The employment of a law firm is considered a retainer of all its
members.

INSTANCES OF CONFLICT OF INTEREST WITH A CORPORATE CLIENT

• When a family-owned corporation retains a lawyer for both corporate affairs and personal
cases. (Quiambao v. Atty. Nestor Bamba, A. C. No. 6708, Aug. 25, 2005)

• When a retained law firm refuses to withdraw his appearance as counsel in intra-corporate
case filed by the association members against their Board of Directors. (Hornilla v. Atty.
Salunat, A.C. No. 5804, Jul. 1, 2003)

• When a lawyer-accountant is a controlling partner to both a law firm and an auditing firm
that handled intestate proceedings and provided accounting services for the estate and other
creditors. (Nakpil v. Atty. Carlos J. Valdez, A.C. No. 2040 Mar. 4, 1998)

Special conflict of interest problems in the representation of affiliated entities

When a lawyer represents two or more organizations with some common ownership or
membership, whether a conflict exists is determined primarily on the basis of formal
organizational distinctions. With regard to affiliated organizations, the lawyer must respect the
organizational boundaries of each and analyze possible conflicts of interest on the basis that the
organizations are separate entities. In dealing with affiliated entities, whether they be parent,
subsidiary, division, or sister corporation, the first question to be addressed is whether the
attorney who represents the corporation also represents that entity.

Generally, a lawyer may represent more than one division within an entity, and must
resolve differences among them according to the organization’s normal decision-making
procedures.

A parent company's in-house counsel may represent an affiliated company in its dealings
with third parties and may represent both parties on the same matter where no conflict of
interest exists. Where the attorney is found to represent both a corporation and an affiliated
entity, the attorney may not sue one and represent the other, even in unrelated matters, without
client consent. In such a situation, the representation would be deemed "directly adverse."

-THE END-