People vs.

Sandiganbayan, (275 scra 505)

FACTS
Paredes, was the Provincial Attorney of Agusan del Sur, then Governor of the same
province and is at present a Congressman. Atty. Sansaet is a practicing attorney
who served as counsel for Paredes in several instances. In 1976, Paredes applied for
a free patent over a piece of land and it was granted to him. But later, the Director
of Lands found out that Paredes obtained the same through fraudulent
misrepresentations in his application. A civil case was filed and Sansaet served as
counsel of Paredes. A criminal case for perjury was subsequently filed against
Paredes and Sansaet also served as counsel.
Later, Teofilo Gelacio, a taxpayer, initiated perjury and graft charges against
Paredes and Sansaet, claiming that they acted in conspiracy, by not filing an
arraignment in the criminal case. To evade responsibility for his own participation,
he claimed that he did so upon the instigation and inducement of Paredes, and to
discharge himself as a government witness. The Sandiganbayan claimed that there
was an attorney-client privilege and resolved to deny the discharge.
ISSUES
Whether or not the testimony of Atty. Sanset is barred by the attorney-client
privilege
HELD
Statements and communications regarding the commission of a crime already
committed, made by a party who committed it, to an attorney, consulted as such,
are privileged communications. However, the communication between an attorney
and client having to do with the client's contemplated criminal acts, or in aid or
furtherance thereof, are not covered by the cloak of privilege ordinarily existing in
reference to communications between an attorney and a client. The falsification not
having been committed yet, these communications are outside the pale of the
attorney client privilege.
Moreover, Sansaet himself was a conspirator in the commission of the falsification.
For the communication to be privileged, it must be for a lawful purpose or in
furtherance of a lawful end. The existence of an unlawful purpose prevents the
privilege from attaching.

Uy Chico Vs. Union Life Assurance Society (29 Phil 163 - 1915)
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-9231

January 6, 1915

UY CHICO, plaintiff-appellant,
vs.
THE UNION LIFE ASSURANCE SOCIETY, LIMITED, ET AL., defendants-appellees.
Beaumont and Tenney for appellant.
Bruce, Lawrence, Ross and Block for appellees.
TRENT, J.:
An appeal from a judgment dismissing the complaint upon the merits, with costs.
The plaintiff seeks to recover the face value of two insurance policies upon a stock
of dry goods destroyed by fire. It appears that the father of the plaintiff died in
1897, at which time he was conducting a business under his own name, Uy Layco.
The plaintiff and his brother took over the business and continued it under the same
name, "Uy Layco." Sometime before the date of the fire, the plaintiff purchased his
brother's interest in the business and continued to carry on the business under the
father's name. At the time of the fire "Uy Layco" was heavily indebted and
subsequent thereto the creditors of the estate of the plaintiff's father. During the
course of these proceedings, the plaintiff's attorney surrendered the policies of
insurance to the administrator of the estate, who compromised with the insurance
company for one-half their face value, or P6,000. This money was paid into court
and is now being held by the sheriff. The plaintiff now brings this action, maintaining
that the policies and goods insured belonged to him and not to the estate of his
deceased father and alleges that he is not bound by the compromise effected by
the administrator of his father's estate.

The defendant insurance company sought to show that the plaintiff had agreed to
compromise settlement of the policies, and for that purpose introduced evidence
showing that the plaintiff's attorney had surrendered the policies to the
administrator with the understanding that such a compromise was to be effected.
The plaintiff was asked, while on the witness stand, if he had any objection to his
attorney's testifying concerning the surrender of the policies, to which he replied in
the negative. The attorney was then called for that purpose. Whereupon, counsel for
the plaintiff formally withdrew the waiver previously given by the plaintiff and
objected to the testimony of the attorney on the ground that it was privileged.
Counsel, on this appeal, base their argument of the proposition that a waiver of the
client's privilege may be withdrawn at any time before acted upon, and cite in
support thereof Ross vs. Great Northern Ry. Co., (101 Minn., 122; 111 N. W., 951).
The case of Natlee Draft Horse Co. vs. Cripe and Co. (142 Ky., 810), also appears to
sustain their contention. But a preliminary question suggest itself, Was the
testimony in question privileged?
Our practice Act provides: "A lawyer must strictly maintain inviolate the confidence
and preserve the secrets of his client. He shall not be permitted in any court,
without the consent of his client, given in open court, to testify to any facts
imparted to him by his client in professional consultation, or for the purpose of
obtaining advice upon legal matters." (Sec. 31, Act No. 190.)
A similar provision is inserted in section 383, No. 4, of the same Act. It will be noted
that the evidence in question concerned the dealings of the plaintiff's attorney with
a third person. Of the very essence of the veil of secrecy which surrounds
communications made between attorney and client, is that such communications
are not intended for the information of third persons or to be acted upon by them,
put of the purpose of advising the client as to his rights. It is evident that a
communication made by a client to his attorney for the express purpose of its being
communicated to a third person is essentially inconsistent with the confidential
relation. When the attorney has faithfully carried out his instructions be delivering
the communication to the third person for whom it was intended and the latter acts
upon it, it cannot, by any reasoning whatever, be classified in a legal sense as a
privileged communication between the attorney and his client. It is plain that such a
communication, after reaching the party for whom it was intended at least, is a
communication between the client and a third person, and that the attorney simply
occupies the role of intermediary or agent. We quote from but one case among the
many which may be found upon the point:
The proposition advanced by the respondent and adopted by the trial court,
that one, after fully authorizing his attorney, as his agent, to enter into
contract with a third party, and after such authority has been executed and
relied on, may effectively nullify his own and his duly authorized agent's act
by closing the attorney's mouth as to the giving of such authority, is most

startling. A perilous facility of fraud and wrong, both upon the attorney and
the third party, would result. The attorney who, on his client's authority,
contracts in his behalf, pledges his reputation and integrity that he binds his
client. The third party may well rely on the assurance of a reputable lawyer
that he has authority in fact, though such assurance be given only by
implication from the doing of the act itself. It is with gratification, therefore,
that we find overwhelming weight of authority, against the position assumed
by the court below, both in states where the privilege protecting
communications with attorneys is still regulated by the common law and in
those where it is controlled by statute, as in Wisconsin. (Koeber vs. Sommers,
108 Wis., 497; 52 L. R. A., 512.)
Other cases wherein the objection to such evidence on the ground of privilege has
been overruled are: Henderson vs. Terry (62 Tex., 281); Shove vs. Martin (85 Minn.,
29); In re Elliott (73 Kan., 151); Collins vs. Hoffman (62 Wash., 278); Gerhardt vs.
Tucker (187 Mo., 46). These cases cover a variety of communications made by an
authority in behalf of his client to third persons. And cases wherein evidence of the
attorney as to compromises entered into by him on behalf of his client were allowed
to be proved by the attorney's testimony are not wanting. (Williams vs. Blumenthal,
27 Wash., 24; Koeber vs. Sommers, supra.)
It is manifest that the objection to the testimony of the plaintiff's attorney as to his
authority to compromise was properly overruled. The testimony was to the effect
that when the attorney delivered the policies to the administrator, he understood
that there was a compromise to be effected, and that when he informed the plaintiff
of the surrender of the policies for that purpose the plaintiff made no objection
whatever. The evidence is sufficient to show that the plaintiff acquiesced in the
compromise settlement of the policies. Having agreed to the compromise, he
cannot now disavow it and maintain an action for the recovery of their face value.
For the foregoing reasons the judgment appealed from is affirmed, with costs. So
ordered.
Arellano, C.J., Torres, Carson and Araullo, JJ., concur.
Moreland, J., concurs in the result.

Saura, Jr. Vs. Agdeppa (325 scra 682 - 2000)

SECOND DIVISION
[A.C. No. 4426. February 17, 2000]

RAMON SAURA, Jr., complainant, vs. ATTY. LALAINE LILIBETH

AGDEPPA, respondent.
[A.C. No. 4429. February 17, 2000]
HELEN BALDORIA and RAYMUNDO SAURA, complainants, vs. ATTY. LALAINE
LILIBETH AGDEPPA, respondent. Sd-aad-sc
RESOLUTION
DE LEON, JR., J.:
Two (2) petitions, one by Ramon Saura, Jr. [1] and the other by Helen S. Baldoria and
Raymundo Y. Saura[2], were filed before this Court charging Atty. Lalaine Lilibeth
Agdeppa for violation of her lawyers oath and disregard of Sections 15, 22, 25, 29,
31 and 32 of the Canons of Professional Ethics. [3]
The two (2) complaints are related and arose from the handling of the respondent of
a settlement case involving a piece of property owned in common by the petitioners
with their other siblings, Macrina, Romeo and Amelita, all surnamed Saura, who
were then the administrators of the said property of the late Ramon E. Saura who
died intestate on May 15, 1992. xl-aw
The pertinent facts, as delineated in the report of the National Grievance
Investigation Office of the Integrated Bar of the Philippines, are as follows:
"It appears that negotiations for the settlement of the property
(referring to the intestate estate of Ramon E. Saura) dragged on for
three (3) years until on April 27, 1995, petitioners learned that the
administrators of the property, Macrina, Romeo and Amelita, had, with
the assistance of the respondent, who in fact notarized the Deed of
Sale, sold the property to Sandalwood Real Estate and Development
Corporation without the knowledge and participation of petitioners. To
compound matters, petitioners alledge [sic] that despite repeated
demands, the vendors or their counsel, respondent herein, have
refused to disclose the amount of the sale or account for the
proceeds. The petitioners have thus been constrained to institute
criminal and civil actions to enforce and protect their rights.
"This case was refered [sic] to the Integrated Bar by the Supreme
Court in a resolution dated November 20, 1995, after its earlier
resolution dated June 19, 1995, was returned unserved with the
Postmasters notation that the same was "unclaimed".

"At the scheduled hearing of this case on February 5, 1998, the

petitioners counsel, Atty. Carolina Esguerra-Ochoa filed a written entry
of appearance. There was no appearance for the respondent but
this office, noting the new address of the respondent as furnished by
Atty. Ochoa, suggested that the latter furnish a copy of the complaint
to respondent at the latters new address. In a Compliance dated
February 10, 1998, Atty. Ochoa informed this Office that she had
furnished the respondent with a copy of the petition dated May 24,
1995, plus the Supreme Courts resolution dated June 19, and
November 20, 1995, plus our Order dated December 8, 1997, and
Notice of Appearance dated February 5, 1998. x-sc
"On March 10, 1998, the petitioners counsel submitted a Manifestation
attached to which were photocopies of the front and dorsal portion of
the return card evidencing receipt by herein respondent of the
documents enumerated by Atty. Ochoa in her Compliance dated
February 10, 1998. The return card is dated March 2, 1998.
"To date, no response has been forth coming from Atty. Agdeppa." [4]
For her continued defiance of orders of this Court for her to answer the
administrative charges leveled against her, respondent was recommended to be
penalized with a fine of P10,000.00 and suspension from practice for one (1) year in
each of the two (2) cases pending against her.
Respondent filed a motion for reconsideration alleging that the petitions should be
dismissed because she was not accorded her right to due process and that she
could not answer the administrative charges against her without divulging certain
pieces of information in violation of the attorney-client privilege. Sc
Respondent does not convince.
First. The respondent was given notice on various occasions but she chose to
ignore them and failed to exercise her right to be heard.
Section 30, Rule 138 of the Rules of Court specifically provides that:
"Sec. 30. Attorney to be heard before removal or suspension. No
attorney shall be removed or suspended from the practice of his
profession, until he has full opportunity upon reasonable notice to
answer the charges against him, to produce witness in his behalf, and
to be heard by himself or counsel. But if upon reasonable notice he
fails to appear and answer the accusations, the court may proceed to
determine the matter ex parte."

Since respondent repeatedly ignored the notices sent to her by this Court, we
cannot be expected to wait indefinitely for her answer. While respondent may have
changed her address and did not, thus, receive the previous notices, still, on March
2, 1998, she came to know of the Supreme Court Resolution dated June 19, 1995.
[5]
The prudent thing for her to do was to file an answer immediately and not to
delay the matter any further. Sadly, the respondent ignored the Resolution [6] of the
Supreme Court ordering her to file an answer.
Second. The request for the information regarding the sale of the property and to
account for the proceeds is not a violation of the attorney-client privilege. Rule 130,
Section 24 (b) of the Rules of Court provides: Scmis
"Sec. 24. Disqualification by reason of privileged communication.
The following persons cannot testify as to matters learned in
confidence in the following cases:
xxx

xxx

xxx

(b) An attorney cannot, without the consent of his client, be examined

as to any communication made by the client to him, or his advice
given thereon in the course of, or with a view to, professional
employment, nor can an attorneys secretary, stenographer, or clerk
be examined, without the consent of the client and his employer,
concerning any fact the knowledge of which has been acquired in such
capacity." Missc
The information requested by petitioners is not privileged. The petitioners are only
asking for the disclosure of the amount of the sale or account for the proceeds.
Petitioners certainly have the right to ask for such information since they own the
property as co-heirs of the late Ramon E. Saura and as co-administrators of the
property. Hence, respondent cannot refuse to divulge such information to them and
hide behind the cloak of the attorney-client relationship.
WHEREFORE, for the refusal of Atty. Lalaine Lilibeth Agdeppa to comply with our
Resolutions dated June 7 and 19, 1995 directing her to file an answer to the
petitions, the Court hereby penalizes her with a FINE of two thousand pesos
(P2,000.00) which should be paid within ten (10) days from receipt hereof;
otherwise, a penalty of imprisonment for five (5) days shall be imposed. This
resolution shall be immediately executory.
SO ORDERED. Misspped
Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur.

Gross Misconduct and/or deceit of a lawyer

SAURA, ET AL. vs. AGDEPPA
Adm. Case No. 4426, February 17, 2000
Facts:
Respondent handled the settlement case involving a piece of property
owned in common by the petitioners with other siblings. It appears that the
negotiations for the settlement of the property dragged on for three years.
Petitioners learned that the administrators of the property, with the assistance of
the respondent, who in fact notarized the Deed of Sale, sold the property without
the knowledge and participation of petitioners. Petitioners allege that despite
repeated demands, respondent have refused to disclose the amount of the sale. The
petitioners have thus been constrained to institute criminal and civil actions.
However, at the scheduled hearing, there was no appearance for the
respondent despite receipt of the copy of the petition. To date, no response has
been forth coming from respondent.
Issues:
(1.) Should the petitions against respondent be dismissed as according to
her, she was not accorded her right to due process?
(2.) Is the respondent correct in saying that she could not answer the
charges against her without divulging certain pieces of information in violation of
the attorney-client privilege?
Held:
(1.) NO. The respondent was given notice on various occasions but she
chose to ignore them and failed to exercise her right to be heard.
Section 30, Rule 138 of the Rules of Court specifically provides that:
SECTION 30.
Attorney to be heard before removal or suspension charges
against him, to produce witness in his behalf, and to be. No attorney shall be
removed or suspended from the practice of his profession, until he has full
opportunity upon reasonable notice to answer the heard by himself or counsel. But
if upon reasonable notice he fails to appear and answer the accusations, the court
may proceed to determine the matter ex parte."
Since respondent repeatedly ignored the notices sent to her by this Court, the
Court cannot be expected to wait indefinitely for her answer.

(2.) NO. The request for the information regarding the sale of the property and to
account for the proceeds is not a violation of the attorney-client privilege. Rule
130, Section 24 (b) of the Rules of Court provides:

"SECTION 24.
Disqualification by reason of privileged communication. The
following persons cannot testify as to matters learned in confidence in the following
cases:
xxx
xxx
xxx
(b)
An attorney cannot, without the consent of his client, be examined as to
any communication made by the client to him, or his advice given thereon in the
course of, or with a view to, professional employment, nor can an attorney's
secretary, stenographer, or clerk be examined, without the consent of the client and
his employer, concerning any fact the knowledge of which has been acquired in
such capacity."
The information requested by petitioners is not privileged. The petitioners are only
asking for the disclosure of the amount of the sale or account for the proceeds.
Petitioners certainly have the right to ask for such information since they own the
property as co-heirs of the late Ramon E. Saura and as co-administrators of the
property. Hence, respondent cannot refuse to divulge such information to them and
hide behind the cloak of the attorney-client relationship
Kalubiran Vs. CA (GR 83106)

ADELAIDA KALUBIRAN, petitioner, vs. COURT OF APPEALS and J. RUBY

CONSTRUCTION AND MAINTENANCE SERVICES
CORPORATION, respondents.
DECISION
MENDOZA, J.:
This is a petition for review of the decision [1] of the Court of Appeals, dated
February 4, 1988, affirming in toto the decision of the Regional Trial Court of Quezon
City, Branch 89, which ordered petitioner to pay private respondent temperate
damages, exemplary damages, and attorneys fees in the total amount
of P75,000.00, plus the costs of the suit.
The facts are as follows:
Petitioner Adelaida Kalubiran is the owner of Kalmar Construction, a Cebu-based
single proprietorship engaged in the construction business. Private respondent J.
Ruby Construction and Maintenance Services (JRCM) is a corporation which is
likewise engaged in the construction business.
The Philippine Long Distance Telephone Company (PLDT) entered into
an agreement with private respondent JRCM for restoration work at Gen. Maxilom
Avenue, Cebu City in line with PLDTs expansion program. On June 9, 1982, the
project was considered completed and was accepted by the Cebu City Engineer. It
was stated in the acceptance letter of the Cebu City Engineer, however, that the
acceptance of the project did not relieve JRCM of its obligation to undertake repair

works on any failure that may occur in any section of the project within one (1) year
from the date of acceptance.[2]
On March 9, 1983, PLDT wrote the Cebu City Engineer requesting a permit for a
right-of-way in Cebu City.[3] The City Engineer informed PLDT that a permit would be
granted only upon restoration of the previously restored section affected by PLDTs
expansion programs along Gorordo Avenue, General Maxilom Avenue, D. Jakosalem
Street and M.J. Cuenco Avenue. He called attention to some failures and sagging
of the restored areas which need immediate repair to avoid further deterioration. [4]
PLDT referred the complaint to private respondent JRCM as its project engineer. It
called attention to the substandard quality of the materials used and the poor
workmanship which it alleged was not in accordance with standard engineering
practice.[5]
On May 4, 1983, the PLDT wrote to the City Engineer requesting reconsideration of
the denial of its application for a permit, [6] but the Cebu City Engineer stood pat on
his demand for immediate restoration of the areas affected as condition for the
issuance of a permit.[7]
There is a dispute as to who did the repair work, but the fact remains that it was
done and the PLDT was finally granted on July 19, 1983 a permit for its expansion
project.[8]
On November 4, 1983, petitioner Adelaida Kalubiran and Kalmar Construction,
through their counsel, wrote PLDT a letter claiming credit for the restoration
work and demanding payment of P28,000.00 on the ground that private
respondent JRCM refused to pay the amount. The letter reads: [9]
November 4, 1983
Philippine Long Distance
Telephone Company
Makati General Office Building
Makati, Metro Manila
Attention: Mr. Ceasar Campos
Senior Vice-President
S i r:

This is written in behalf of our client KALMAR CONSTRUCTION, in connection with

the repair of restoration works of J. Ruby Construction and Maintenance Services
Corporation and Communication Construction Incorporated undertaken by our
client, xerox copy of the restoration work is hereto attached and made an integral
part of this letter. The work has been done with the express approval of J. Ruby
Construction and Maintenance Services Corporation and Communication
Construction Incorporated and with the conformity of the City Engineer of Cebu.
The total claim of our client to J. Ruby Construction and Maintenance Services
Corporation and Communication Construction Incorporated is in the amount
of P28,000.00 more or less.
At present, J. Ruby Construction and Maintenance Services Corporation and
Communication Construction Inc. refused to pay our client because Philippine Long
Distance Telephone Company has not paid them for the works undertaken by said
companies.
We are therefore directing our claim direct to your end so that whatever amount
collectible by J. Ruby Construction and Maintenance Services Corp. and
Communication Construction Inc. be deducted from our claim.
Trusting for your immediate attention on this matter.
Very truly yours,
(SGD.) ROLANDO M. LIM
Counsel of Kalmar Construction
Copy furnished:
1)

J. Ruby Const. and Maintenance Services Corp.

2)

Communication Construction, Inc.

3)

City Engineers Office Cebu City

On December 19, 1983, private respondent JRCM filed a complaint for damages and
attorneys fees against Adelaida M. Kalubiran and/or Kalmar Construction, alleging
that it never authorized Kalmar Construction to undertake the repair work on PLDTs
project. JRCM further claimed that as a result of the letter of Kalmar Constructions
counsel to PLDT, the latter ceased giving them major contracts. JRCM also claimed
that by writing to PLDT Kalmar Construction engaged in unfair competition because
PLDT had a policy prohibiting its contractors to sub-contract work to third

persons. A violation of the policy could result in the withdrawal of PLDTs

accreditation and disqualification from its construction projects. [10]
In her answer, petitioner claimed that the letter to PLDT was sent pursuant to the
agreement of the parties, among which were PLDT and private respondent JRCM, at
a conference held in the Office of the City Engineer of Cebu City in June 1983 and
was not motivated by malice or a desire to place petitioner JRCM in a bad light.
Petitioner filed a counterclaim for the sum of P20,004.00, for maintenance services
allegedly rendered by her company, plus interest, and P500,000.00 as moral,
actual, and exemplary damages, and P100,000.00 as attorneys fees.[11]
On February 25, 1986, the trial court rendered a decision finding petitioner liable to
private respondent for damages. The dispositive portion of its decision reads:[12]
ACCORDINGLY, judgment is hereby rendered ordering the defendants to pay to the
plaintiff jointly and severally the sum of P25,000.00, as temperate damages, and
the additional sum of P25,000.00, by way of exemplary damages, plus reasonable
attorneys fees in the amount of P25,000.00, with costs against the
defendants. The counterclaim of the defendants is dismissed for lack of merit.
The trial court found that petitioner indeed made repairs on the restoration work
of private respondent JRCM. However, the trial court said she did so without
authority because the person (Ben Sayson) who told her to proceed with the repairs
at a conference held in June 1983 was a mere laborer who had no authority to
speak for private respondent. In addition, the trial court found that, contrary to
petitioners claim, PLDT had already paid private respondent for the work done at
the time petitioners counsel sent the letter to PLDT on November 4, 1983.
Petitioner appealed to the Court of Appeals, which on February 4, 1988,
rendered a decision affirming that of the Regional Trial Court. The Court of Appeals
found, however, that the repairs on the restoration work were actually made by
private respondent and not by petitioner. It agreed with the trial court that in
writing PLDT petitioner acted in bad faith. [13]
Hence, this petition.
First. Petitioner contends that the Court of Appeals erred in reversing the trial
courts finding that repairs on the restoration work were made by her although
without authority of private respondent JRCM. Petitioner claims that this finding
could no longer be revised by the Court of Appeals considering that private
respondent JRCM never appealed from the decision of the trial court and did not
even file an appellees brief in the Court of Appeals.
This contention has no merit.

The question of who actually did the repairs is relevant to the appeal of
petitioner because she claimed she had done the work but had been refused
payment for her services. In determining, therefore, whether her claim from PLDT
for payment for such work placed private respondent JRCM in a bad light since, as
far as PLDT was concerned, the repairs were to be made by JRCM, it was necessary
for the appellate court to pass on the question whether petitioner actually did the
repairs. Moreover, it is settled that the appellate court can consider issues,
although not specifically raised in the pleadings filed before it, as long as they were
raised in the trial court or are matters of record having some bearing on the issues
submitted which the parties failed to raise or the lower court ignored. [14]
Indeed, the questions who actually repaired the restoration work previously
done by private respondent JRCM and whether a conference actually took place in
June 1983 during which petitioner was allegedly asked by private respondent JRCM
to make the repairs are questions which were raised in the lower court. These
questions have a bearing not only on petitioners claim for P20,004.00, for costs of
repair that it had allegedly performed, but also on petitioners claim that in
demanding payment of this amount from PLDT her purpose was not to place JRCM
in a bad light in view of PLDTs prohibition against subcontracting of jobs being
undertaken for it. Nor is there any dispute that, in reviewing the findings of the trial
court on these issues, the Court of Appeals relied on the records of this case.
Second. Indeed, the records show that the restoration work was performed by
private respondent and not by petitioner and it is doubtful whether a conference
was really held in June 1983 during which petitioner was tasked with the repairs of
the restoration work.
What happened was that private respondent JRCM purchased asphalt from
petitioner and rented the latters road roller which was operated by petitioners
employee in order to undertake the repairs. Engineer Rodolfo Marcia, project
engineer of private respondent JRCM, testified: [15]
ATTY. PORMENTO:
Q

:
City?

Do you remember whether on May 16, 1983 you went to Cebu

Yes, sir.

And why did you go to Cebu City?

:
repair.

I was sent to by my employer, J. Ruby Construction to undertake a

What kind of repair was that?

Restoration of the asphalt pavement.

Where did you come from when you went to Cebu City?

From Manila

And what kind of transportation did you take?

By boat.

Did you have a ticket.

Yes, sir.

Will you be able to recognize that ticket if shown to you.

Yes, sir.

:
Showing to you a freight ticket of Sulpicio Lines, Inc., already
marked as Exhibit H, dated May 16, 1983, received from R. Marcia in the
amount of P896.75, Receipt No. 529926 and also in the name of R. Marcia, do
you recognize this receipt?

Yes, sir.

Who is this R. Marcia?

I am the one.

Did you arrive at Cebu City?

Yes, sir.

When you arrived there, what did you do after you arrived there?

:
I went to the Office of Local Manager of PLDT to coordinate with
him and to deliver the letter coming from my employer, J. Ruby Construction.

And were you able to do that?

Yes, sir.

:
Now, after you have delivered that letter and having presented
yourself with the Local officer of the PLDT what did you do?

:
I went to the jobsite, because I was then carrying the plan in
order to examine and investigate the failure of the restoration.

:
Were you able to go to the jobsite and see for yourself the failure
and investigate the failure of the project?

A
Q

Yes, sir.

:
Are you referring to the Project Estimate found at Gen. Maxillom
Cebu City?

COURT:
Is that marked already?
ATTY. PORMENTO:
Exhibits A, A-1 to A-5.
Q

A
Q

A
Q

A
Q

:
And what did you do after you have investigated and inspected
the jobsite?
:

I ordered for asphalt.

:
And by the way, when you proceeded to Cebu City from Manila,
what equipment did you bring with you?
:

Jeep, water pump and accessories.

:
Are you referring to these items in Exhibit J, this jeep and water
pump, these items here below the ticket No. 529926?
:

Yes, sir.

:
Were you able to purchase asphalt material for the use of the
repair, were you able to buy?

Yes, sir.

From whom?

Kalmar Construction.

:
Are you referring to
defendants in this case?

the

Kalmar

Construction,

one

Yes, sir.

And what construction material did you use in that repair?

We brought with us tools like rake.

I am referring to the asphalt material?

We were carrying with us the bituminous.

the

:
Now, after having purchased this asphalt mix from Kalmar and with
the bituminous you brought with you from Manila, what did you do?

I rented a road roller.

Why do you rent the road roller?

We need it for levelling and to compact the mix.

Where you able to use that road roller?

Yes, sir.

Who operated that road roller?

Kalmar Construction operator.

of

:
Now, how many failure or false on that restoration work on that
project did you find, more or less?

More or less thirty (30).

Were you able to repair this more or less 30 failures?

Yes, sir.

Now, how many purchases of asphalt did you make with Kalmar?

More than 24.

:
Now, in connection with rent of
Construction, do you have any receipt to show?

road

roller

from

Kalmar

A
Q

Yes, sir.

:
Showing to you this receipt dated June 4, 1983 Exhibit N, which
says below, rental of one (1) compactor with the road roller?
:

This is the proof that we rented the road roller.

Engineer Marcias testimony is supported by documentary evidence.

(1) Exhibit H[16] is a freight receipt issued by the Sulpicio Lines. It shows that a
service jeep with accessories was shipped to Cebu City from Manila by Engineer
Marcia in connection with the repairs made by his company;
(2) Exhibit M[17] is a receipt issued by Kalmar Construction showing payment by
private respondent JRCM of rent for the use of the formers compactor;
(3) Exhibits K and K-1[18] are receipts, also issued by Kalmar Construction,
acknowledging payments by private respondent JRCM for asphalt and other
material;
(4) Exhibit K-2[19] is another receipt issued by Kalmar Construction acknowledging
payment of rent by private respondent JRCM for the use of a road roller.
Marcias testimony was corroborated by no less than Engineer Evangeline
Kalubiran and petitioner Adelaida Kalubiran herself. Engineer Kalubiran testified: [20]
ATTY. SAMSON:
Q

A certain Engr. Marcia testified that he works with plaintiff Jose Ruby, and he
said that they bought asphalt from Kalmar Construction which they used in
the said restoration of the failure, what can you say about that, is it true or
not?

COURT:
Which one?
ATTY. SAMSON:
The fact that they bought asphalt, Your Honor.
WITNESS:

Yes, they bought asphalt from us but they used it in the first restoration, in
the original restoration.
ATTY. SAMSON:
Q

Now, about the asphalt material used in the restoration of the failure, the
subject matter of this case, who provide[d] this asphalt?

We provided the asphalt used in the failure of their original restoration.

Where did you get this asphalt?

From our plant.

This plant is situated where?

In Cebu City.

On the other hand, petitioner Adelaida Kalubiran told the court: [21]
ATTY. SAMSON
Q

A
Q

Since when have you been engaged in the construction and contractor
business?
Our construction started since 1968 in Cebu City.
In the course of your business as contractor of construction work,
do you have any transaction with certain corporation . . . with the plaintiff J.
Ruby?

Yes, sir.

What kind of construction [sic]?

They usually bought from us asphalt.

More or less, in what year was this transaction?

It was in the year 1983.

Petitioner Adelaida Kalubiran never claimed her company made the repairs on
the restoration work for private respondent. Much less did she mention any
agreement between her company and private respondent for the repair of PLDTs
restoration work. It thus appears that petitioner merely sold asphalt to private

respondent and rented out their road roller and compactor to it but she did not
actually make the repairs. The Court of Appeals correctly found that it was not
petitioner but private respondent which performed PLDTs restoration work.
Nor is there evidence to show that a conference was held in June 1983 during
which petitioner was contracted to make the repairs in question. One of those
allegedly present at the conference, PLDT Project Inspector Venancio Atienza,
denied there was such a conference held and said he had been asked by Engineer
Kalubiran to sign an affidavit falsely stating that he was present at the alleged
meeting. Atienza testified:[22]
Q

Now, Engineer Evangeline Kalubiran, a witness for the defendant, testified

in Court to the effect that there was a meeting or conference called by City
Engineer of Cebu sometime on June or July, 1983 at the Office of the City
Engineer of Cebu, according to her PLDT was present, their representative
represented by you, that J. Ruby, represented by Ben Sayson and other
company and that Kalmar was represented by Engineer Kalubiran and their
corporation, it was agreed by you and all the parties that the repair of the
failure of the restoration work conducted by J. Ruby on the PLDT East X4-OAC
IV at General Maxillom, Cebu City, that Kalmar shall take over the repair of
this failure in said place, what can you say on this?

I want to say to this Court that all the statement of Engineer Kalubiran was
wrong.

Why wrong?

Because, on that time June or July of 1983 I was already here in Manila.

A
Q

By the way, as Project Inspector of PLDT does the PLDT authorize project
inspector to represent in meetings?
No, sir.
Will the PLDT agree to such arrangement wherein another contractor which
has no contract with PLDT will take over the other contractor, of which the
PLDT ha[s] contract?

ATTY. SAMSON:
Hypothetical.
COURT:

May answer.
A

No, the PLDT will not permit that to give the contract to be taken over by
another contractor.

ATTY. PORMENTO:
Q

Do you know personally Engineer Kalubiran?

Yes, sir.

Do you remember having met them in Manila after you stayed in Cebu City?

Yes, sir, I met them.

How did you meet them?

They called me thru telephone and they said they are coming to Manila to
meet me.

Where were you when you received that telephone call?

I was in my office.

What was that telephone?

Long distance call from Cebu

Did they appear on the date told to you?

They did not arrive because of some problem then they called me another
long distance call and they said they are coming on the 4th day.

And did they actually come on the 4th day on the second telephone call?

Yes, sir.

Where did you meet?

PLDT office.

What transpired then?

They gave me an affidavit and let me sign or confirm that affidavit that I am
present on the meeting and I am the one representing the PLDT.

Did you sign that affidavit?

No, sir.

Why did you not sign?

Because that is not true.

It is noteworthy that no record of the alleged conference or of any agreement

supposedly made therein was ever presented.
Third. Nonetheless, it is contended that petitioner cannot be held liable for the
letter which gave rise to this action because it was written by petitioners
counsel. It is settled, however, that the mistake of counsel binds the client. It is
only in case of gross or palpable negligence of counsel when the courts must step in
and accord relief to a client who suffered thereby. [23]
Petitioners reliance on the ruling in Deles v. Aragona, Jr.,[24] that pleadings filed
in a case constitute privileged matter and are not actionable, is misplaced. In that
case, it was held:
Since there is no doubt that the allegations made by the respondent in the
questioned motion for contempt are statements made in the course of a judicial
proceeding . . . they are absolutely privileged, thereby precluding any liability on the
part of the respondent. [25]
The ruling is clearly inapplicable to the case at bar since the letter written by
petitioners counsel was not one made in the course of judicial proceedings. It was
not, therefore, privileged.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
Bellosillo (Chairman), Puno and Maritnez JJ. concur.

Regala Vs. Sandiganbayan (GR 105938)

F: Corporation clients of petitioner consulted them regarding corporate structure

and financial matters upon which legal advice were given by petitioners. Said

corporation is subject to investigation by the PCGG involving ill gotten wealth.

Petitioner refuses to provide information on fear that it may implicate them in the
very activity from which legal advice was sought from them and it may breach the
fiduciary relationship of the petitioner with their client.
I: WON fiduciary duty may be asserted by petitioner on refusal to disclose names of
their clients (privilege information)
R: SC upheld the right of petitioners to refuse disclosure of names of their clients
under the pain of breach of fiduciary relationship with their client.
As a general rule, a lawyer MAY NOT INVOKE THE PRIVILEGE BECAUSE:
1. The court has the right to know that the client whose privilege is sought to be
protected is flesh and blood.
2. Privilege begins to exist only after the atty-client relationship has been
established.
3. Privilege generally pertains to be the subject matter of the relationship.
4. With due process consideration, the opposing party should know his
adversary.
EXCEPTION: LAWYERS MAY INVOKE THE PRIVILEGE WHEN:
1. Strong probability exists that revealing the clients name would implicate the
client in the very activity for which he sought the lawyers advice.
2. Disclosure would open to civil liability of client. (present in this case)
3. Government lawyers have no case against the lawyers client unless by
revealing the clients name it would provide them the only link that would
form the chain of testimony necessary to convict an individual of a crime.
(present in this case)
4. Relevant to the subject matter of the legal problem on which client seeks
legal assistance. (present in this case)
5. Nature of atty-client relationship has been previously disclosed and it is the
identity which is intended to be confidential.
Old Code of Civil Procedure enacted by the Philippine Commission on August 7,
1901:
Section 383 of the Code specifically "forbids counsel, without authority of his client
to reveal any communication made by the client to him or his advice given thereon
in the course of professional employment." 28 Passed on into various provisions of
the Rules of Court, the attorney-client privilege, as currently worded provides:
Sec. 24. Disqualification by reason of privileged communication. The following
persons cannot testify as to matters learned in confidence in the following cases:
An attorney cannot, without the consent of his client, be examined as to any
communication made by the client to him, or his advice given thereon in the course
of, or with a view to, professional employment, can an attorney's secretary,
stenographer, or clerk be examined, without the consent of the client and his
employer, concerning any fact the knowledge of which has been acquired in such
capacity. 29
Further, Rule 138 of the Rules of Court states:
Sec. 20. It is the duty of an attorney: (e) to maintain inviolate the confidence, and at
every peril to himself, to preserve the secrets of his client, and to accept no

compensation in connection with his client's business except from him or with his
knowledge and approval.
This duty is explicitly mandated in Canon 17 of the Code of Professional
Responsibility which provides that:
Canon 17. A lawyer owes fidelity to the cause of his client and he shall be mindful of
the trust and confidence reposed in him.
Canon 15 of the Canons of Professional Ethics also demands a lawyer's fidelity to
client:
The lawyers owes "entire devotion to the interest of the client, warm zeal in the
maintenance and defense of his rights and the exertion of his utmost learning and
ability," to the end that nothing be taken or be withheld from him, save by the rules
of law, legally applied. No fear of judicial disfavor or public popularity should
restrain him from the full discharge of his duty. In the judicial forum the client is
entitled to the benefit of any and every remedy and defense that is authorized by
the law of the land, and he may expect his lawyer to assert every such remedy or
defense. But it is steadfastly to be borne in mind that the great trust of the lawyer is
to be performed within and not without the bounds of the law. The office of attorney
does not permit, much less does it demand of him for any client, violation of law or
any manner of fraud or chicanery. He must obey his own conscience and not that of
his client.
----------------------------------------------------------

Pflieder Vs. Palanca (AC 927 - Sept 28, 1970)

A.C. No. 927 September 28, 1970

IN THE MATTER OF THE COMPLAINT FOR DISBARMENT OF ATTORNEY
POTENCIANO A. PALANCA. WILLIAM C. PFLEIDER, complainant,
vs.
POTENCIANO A. PALANCA, respondent.
RESOLUTION

CASTRO, J.:

The respondent Atty. Potenciano A. Palanca was for sometime the legal counsel of
the complainant William C. Pfleider. According to the complainant, he retained the
legal services of Palanca from January 1966, whereas the latter insists that the
attorney-client relationship between them began as early as in 1960.
At all events, the relations between the two must have attained such a high level of
mutual trust that on October 10, 1969, Pfleider and his wife leased to Palanca a
1,328 hectare agricultural land in Hinobaan, Negros Occidental, known as the
Hacienda Asia, for a period of ten years. In their contract, the parties agreed, among
others, that a specified portion of the lease rentals would be paid to Pfleider, and
the remainder would be delivered by Palanca to Pfleider's listed creditors.
The arrangement worked smoothly until October 14, 1969 when the rupture came
with the filing by Pfleider of a civil suit (civil case 9187 of the CFI of Negros
Occidental) against Palanca for rescission of the contract of lease on the ground of
alleged default in the payment of rentals. In his answer to the complaint, Palanca
averred full satisfaction of his rental liabilities, and therefore contended that the
lease should continue. He also charged that he had already been dispossessed of
the hacienda by Pfleider and the latter's goons at gunpoint and consequently had
suffered tremendous financial losses.
With this history in, perspective, we shall now consider the administrative charges
of gross misconduct in office brought by Pfleider against Palanca. The indictment
consists of four counts.
First count. In regard to a criminal case for estafa filed in December 1965 by one
Gregorio Uy Matiao against Pfleider, the latter instructed Palanca to offer in
settlement the sum of P10,000, payable in installments, to Uy Matiao for the
dismissal of the case. After sometime, Palanca reported to Pfleider that the offer has
been rejected. Finally in October 1969, Palanca supposedly informed Pfleider that he
had succeeded in negotiating the dismissal of the estafa case by leaving the sum of
P5,000 with the Dumaguete City Court where the action was then pending.
Sometime in December 1969, however, Pfleider was the object of a warrant of
arrest in connection with the same estafa case. It turned out, charged the
complainant Pfleider, that Palanca had not deposited the sum of P5,000 with the
Dumaguete City Court, let alone communicated to Uy Matiao his earlier offer of
settlement.
We have closely examined all the pleadings filed by the parties in this case and the
annexes thereto, and it is our view that the first charge is devoid of merit. In support
of his claim of alleged assurance made by Palanca that theestafa case had already
been terminated, Pfleinder relies on certain letters written to him by Palanca. Our
own reading of these letters, however, belies his claim. They contain nothing which
might reasonably induce the complainant to believe that the criminal action against

him had been finally settled by his attorney. On the contrary, the letters merely
report a continuing attempt on the part of Palanca to secure a fair bargain for
Pfleider. The letter-report of October 10, 1969, invoke by the complainant, states in
no uncertain terms that "I am bargaining this (referring to the estafa case) even for
P8,000.00 and I think they will agree. I'll finalize this and pay Tingyan on Tuesday. I
have already left in Dumaguete P5,000.00 to show them the color of our money and
I will bring the balance when I go there Tuesday."
Nothing in the above letter indicates that Palanca had deposited the sum of P5,000
with the Dumaguete City Court. What he did state is that he had left that sum in
that City to enable their adversaries to see "the color of our money." In this
connection, the veracity of the certification by Felicisimo T. Hilay, Dumaguete
branch manager of RCPI, that he (Hilay) had been holding the sum of P5,000 during
the early part of October in trust for Pfleider and his lawyer, has not been assailed
by Pfleider.
If Pfleider was the object of a warrant of arrest in December 1969, no substantial
blame can be laid at the door of the respondent Palanca inasmuch as the latter's
services were implicitly terminated by Pfleider when the latter sued his lawyer in
October of the same year. While the object of the suit is the rescission of the
contract of lease between the parties, the conflict of interest which pits one against
the other became incompatible with that mutual confidence and trust essential to
every lawyer-client relation. Moreover, Pfleider fails to dispute Palanca's claim that
on October 26, 1968, Pfleider refused to acknowledge receipt of a certain letter and
several motions for withdrawal, including Palanca's withdrawal as counsel in
the estafa case.
Second count. Palanca had fraudulently charged the sum of P5,000 (which he
supposedly had left with the City Court in Dumaguete) to his rental account with
Pfleider as part payment of the lease rentals of the Hacienda Asia.Third count. In
the same statement of account, Palanca falsely represented having paid, for the
account of Pfleider, one Samuel Guintos the sum of P866.50 when the latter would
swear that he had received only the sum of P86.50.
These two charges are anchored upon the same "Statement of Disbursements"
submitted by Palanca to Pfleider. It is our view that this statement is but a
memorandum or report of the expenses which Palanca considered as chargeable to
the account of Pfleider. By its very tentative nature, it is subject to the examination
and subsequent approval or disapproval of Pfleider, and any and every error which
it contains may be brought to the attention of Palanca for rectification or
adjustment. Viewed in relation to the contract of lease between Pfleinder and
Palanca, this "statement" is but one aspect of the prestation required of Palanca by
the contract. Whatever breach he might have committed in regard to this prestation

would be but a civil or contractual wrong which does not affect his office as a
member of the Bar.
Final count. It is charged that the list of creditors which Pfleider had "confidentially"
supplied Palanca for the purpose of carrying out the terms of payment contained in
the lease contract was disclosed by Palanca, in violation of their lawyer-client
relation, to parties whose interests are adverse to those of Pfleider.
As Pfleider himself, however, in the execution of the terms of the aforesaid lease
contract between the parties, complainant furnished respondent with a confidential
list of his creditors." This should indicate that Pfleider delivered the list of his
creditors to Palanca not because of the professional relation then existing between
them, but on account of the lease agreement. A violation therefore of the
confidence that accompanied the delivery of that list would partake more of a
private and civil wrong than of a breach of the fidelity owing from a lawyer to his
client. Moreover, Pfleider fails to controvert Palanca's claim that there is no such
thing as a "confidential" list of creditors and that the list of creditors referred to by
Pfleider is the same list which forms part of the pleadings in civil case 9187 (the
action for rescission of the lease contract) now, pending between the complainant
and the respondent lawyer, and therefore is embraced within the category of public
records open to the perusal of persons properly interested therein.
In sum, we are satisfied, and we so hold, that nothing in written complaint for
disbarment against Palanca and in his reply to Palanca's answer supports a prima
facie finding of such misconduct in office by Palanca as would warrant further
proceedings in this case.
ACCORDINGLY, the complaint is hereby dismissed.
Reyes, J.B.L., Actg. C.J., Dizon, Makalintal, Fernando, Teehankee, Barredo, Villamor
and Makasiar, JJ., concur.
Zaldivar, J., took no part.
Concepcion, C.J., is on leave.

Barton Vs. Leyte Asphalt & Mineral Oil Co. (GR L-21237)

Republic of the Philippines

SUPREME COURT
Manila

EN BANC
G.R. No. L-21237

March 22, 1924

JAMES D. BARTON, plaintiff-appellee,

vs.
LEYTE ASPHALT & MINERAL OIL CO., LTD., defendant-appellant.
Block, Johnston & Greenbaum and Ross, Lawrence & Selph for appellant.
Frank B. Ingersoll for appellee.
STREET, J.:
This action was instituted in the Court of First Instance of the City of Manila by
James D. Barton, to recover of the Leyte Asphalt & Mineral Oil Co., Ltd., as damages
for breach of contract, the sum of $318,563.30, United States currency, and further
to secure a judicial pronouncement to the effect that the plaintiff is entitled to an
extension of the terms of the sales agencies specified in the contract Exhibit A. The
defendant answered with a general denial, and the cause was heard upon the proof,
both documentary and oral, after which the trial judge entered a judgment
absolving the defendant corporation from four of the six causes of action set forth in
the complaint and giving judgment for the plaintiff to recover of said defendant,
upon the first and fourth causes of action, the sum of $202,500, United States
currency, equivalent to $405,000, Philippine currency, with legal interest from June
2, 1921, and with costs. From this judgment the defendant company appealed.
The plaintiff is a citizen of the United States, resident in the City of Manila, while the
defendant is a corporation organized under the law of the Philippine Islands with its
principal office in the City of Cebu, Province of Cebu, Philippine Islands. Said
company appears to be the owner by a valuable deposit of bituminous limestone
and other asphalt products, located on the Island of Leyte and known as
the Lucio mine. On April 21, 1920, one William Anderson, as president and general
manager of the defendant company, addressed a letter Exhibit B, to the plaintiff
Barton, authorizing the latter to sell the products of the Lucio mine in the
Commonwealth of Australia and New Zealand upon a scale of prices indicated in
said letter.
In the third cause of action stated in the complaint the plaintiff alleges that during
the life of the agency indicated in Exhibit B, he rendered services to the defendant
company in the way of advertising and demonstrating the products of the defendant
and expended large sums of money in visiting various parts of the world for the
purpose of carrying on said advertising and demonstrations, in shipping to various
parts of the world samples of the products of the defendant, and in otherwise
carrying on advertising work. For these services and expenditures the plaintiff
sought, in said third cause of action, to recover the sum of $16,563.80, United
States currency. The court, however, absolved the defendant from all liability on this
cause of action and the plaintiff did not appeal, with the result that we are not now
concerned with this phase of the case. Besides, the authority contained in said
Exhibit B was admittedly superseded by the authority expressed in a later letter,

Exhibit A, dated October 1, 1920. This document bears the approval of the board of
directors of the defendant company and was formally accepted by the plaintiff. As it
supplies the principal basis of the action, it will be quoted in its entirety.
(Exhibit A)
CEBU, CEBU, P. I.
October 1, 1920.
JAMES D. BARTON, Esq.,
Cebu Hotel City.
DEAR SIR: You are hereby given the sole and exclusive sales agency for our
bituminous limestone and other asphalt products of the Leyte Asphalt and Mineral
Oil Company, Ltd., May first, 1922, in the following territory:
Australia

Saigon

Java

New Zealand

India

China

Tasmania

Sumatra

Hongkong

Siam and the Straits Settlements, also in the United States of America until May 1,
1921.
As regard bituminous limestone mined from the Lucio property. No orders for less
than one thousand (1,000) tons will be accepted except under special agreement
with us. All orders for said products are to be billed to you as follows:
Per ton
In 1,000 ton lots ...........................................
In 2,000 ton lots ...........................................
In 5,000 ton lots ...........................................
In 10,000 ton lots ..........................................

P15
14
12
10

with the understanding, however that, should the sales in the above territory equal
or exceed ten thousand (10,000) tons in the year ending October 1, 1921, then in
that event the price of all shipments made during the above period shall be ten
pesos (P10) per ton, and any sum charged to any of your customers or buyers in the
aforesaid territory in excess of ten pesos (P10) per ton, shall be rebated to you. Said
rebate to be due and payable when the gross sales have equalled or exceeded ten
thousand (10,000) tons in the twelve months period as hereinbefore described.
Rebates on lesser sales to apply as per above price list.
You are to have full authority to sell said product of the Lucio mine for any sum see
fit in excess of the prices quoted above and such excess in price shall be your extra
and additional profit and commission. Should we make any collection in excess of
the prices quoted, we agree to remit same to your within ten (10) days of the date
of such collections or payments.

All contracts taken with municipal governments will be subject to inspector before
shipping, by any authorized representative of such governments at whatever price
may be contracted for by you and we agree to accept such contracts subject to
draft attached to bill of lading in full payment of such shipment.
It is understood that the purchasers of the products of the Lucio mine are to pay
freight from the mine carriers to destination and are to be responsible for all freight,
insurance and other charges, providing said shipment has been accepted by their
inspectors.
All contracts taken with responsible firms are to be under the same conditions as
with municipal governments.
All contracts will be subject to delays caused by the acts of God, over which the
parties hereto have no control.
It is understood and agreed that we agree to load all ships, steamers, boats or other
carriers prompty and without delay and load not less than 1,000 tons each twentyfour hours after March 1, 1921, unless we so notify you specifically prior to that date
we are prepared to load at that rate, and it is also stipulated that we shall not be
required to ship orders of 5,000 tons except on 30 days notice and 10,000 tons
except on 60 days notice.
If your sales in the United States reach five thousand tons on or before May 1, 1921,
you are to have sole rights for this territory also for one year additional and should
your sales in the second year reach or exceed ten thousand tons you are to have
the option to renew the agreement for this territory on the same terms for an
additional two years.
Should your sales equal exceed ten thousand (10,000) tons in the year ending
October 1, 1921, or twenty thousand (20,000) tons by May 1, 1922, then this
contract is to be continued automatically for an additional three years ending April
30, 1925, under the same terms and conditions as above stipulated.
The products of the other mines can be sold by you in the aforesaid territories under
the same terms and conditions as the products of the Lucio mine; scale of prices to
be mutually agreed upon between us.
LEYTE ASPHALT & MINERAL OIL CO., LTD.
By (Sgd.) WM. ANDERSON
President
(Sgd.) W. C. A. PALMER
Secretary
Approved by Board of Directors,
October 1, 1920.
(Sgd.) WM. ANDERSON
President

Accepted.
(Sgd.) JAMES D. BARTON
Witness D. G. MCVEAN
Upon careful perusal of the fourth paragraph from the end of this letter it is
apparent that some negative word has been inadvertently omitted before
"prepared," so that the full expression should be "unless we should notify you
specifically prior to that date that we are unprepared to load at that rate," or "not
prepared to load at that rate."
Very soon after the aforesaid contract became effective, the plaintiff requested the
defendant company to give him a similar selling agency for Japan. To this request
the defendant company, through its president, Wm. Anderson, replied, under date
of November 27, 1920, as follows:
In re your request for Japanese agency, will say, that we are willing to give
you, the same commission on all sales made by you in Japan, on the same
basis as your Australian sales, but we do not feel like giving you a regular
agency for Japan until you can make some large sized sales there, because
some other people have given us assurances that they can handle our
Japanese sales, therefore we have decided to leave this agency open for a
time.
Meanwhile the plaintiff had embarked for San Francisco and upon arriving at that
port he entered into an agreement with Ludvigsen & McCurdy, of that city, whereby
said firm was constituted a subagent and given the sole selling rights for the
bituminous limestone products of the defendant company for the period of one year
from November 11, 1920, on terms stated in the letter Exhibit K. The territory
assigned to Ludvigsen & McCurdy included San Francisco and all territory in
California north of said city. Upon an earlier voyage during the same year to
Australia, the plaintiff had already made an agreement with Frank B. Smith, of
Sydney, whereby the latter was to act as the plaintiff's sales agent for bituminous
limestone mined at the defendant's quarry in Leyte, until February 12, 1921. Later
the same agreement was extended for the period of one year from January 1, 1921.
(Exhibit Q.)
On February 5, 1921, Ludvigsen & McCurdy, of San Francisco, addressed a letter to
the plaintiff, then in San Francisco, advising hi that he might enter an order for six
thousand tons of bituminous limestone to be loaded at Leyte not later than May 5,
1921, upon terms stated in the letter Exhibit G. Upon this letter the plaintiff
immediately indorsed his acceptance.
The plaintiff then returned to Manila; and on March 2, 1921, Anderson wrote to him
from Cebu, to the effect that the company was behind with construction and was
not then able to handle big contracts. (Exhibit FF.) On March 12, Anderson was in
Manila and the two had an interview in the Manila Hotel, in the course of which the
plaintiff informed Anderson of the San Francisco order. Anderson thereupon said
that, owing to lack of capital, adequate facilities had not been provided by the
company for filling large orders and suggested that the plaintiff had better hold up
in the matter of taking orders. The plaintiff expressed surprise at this and told

Anderson that he had not only the San Francisco order (which he says he exhibited
to Anderson) but other orders for large quantities of bituminous limestone to be
shipped to Australia and Shanghai. In another interview on the same Anderson
definitely informed the plaintiff that the contracts which be claimed to have
procured would not be filled.
Three days later the plaintiff addressed a letter (Exhibit Y) to the defendant
company in Cebu, in which he notified the company to be prepared to ship five
thousand tons of bituminous limestone to John Chapman Co., San Francisco, loading
to commence on May 1, and to proceed at the rate of one thousand tons per day of
each twenty-four hours, weather permitting.
On March 5, 1921, Frank B. Smith, of Sydney, had cabled the plaintiff an order for
five thousand tons of bituminous limestone; and in his letter of March 15 to the
defendant, the plaintiff advised the defendant company to be prepared to ship
another five thousand tons of bituminous limestone, on or about May 6, 1921, in
addition to the intended consignment for San Francisco. The name Henry E. White
was indicated as the name of the person through whom this contract had been
made, and it was stated that the consignee would be named later, no destination
for the shipment being given. The plaintiff explains that the name White, as used in
this letter, was based on an inference which he had erroneously drawn from the
cable sent by Frank B. Smith, and his intention was to have the second shipment
consigned to Australia in response to Smith's order.
It will be noted in connection with this letter of the plaintiff, of March 15, 1921, that
no mention was made of the names of the person, or firm, for whom the shipments
were really intended. The obvious explanation that occurs in connection with this is
that the plaintiff did not then care to reveal the fact that the two orders had
originated from his own subagents in San Francisco and Sydney.
To the plaintiff's letter of March 15, the assistant manager of the defendant
company replied on March, 25, 1921, acknowledging the receipt of an order for five
thousand tons of bituminous limestone to be consigned to John Chapman Co., of
San Francisco, and the further amount of five thousand tons of the same material to
be consigned to Henry E. White, and it was stated that "no orders can be
entertained unless cash has been actually deposited with either the International
Banking Corporation or the Chartered Bank of India, Australia and China, Cebu."
(Exhibit Z.)
To this letter the plaintiff in turn replied from Manila, under date of March, 1921,
questioning the right of the defendant to insist upon a cash deposit in Cebu prior to
the filling of the orders. In conclusion the plaintiff gave orders for shipment to
Australia of five thousand tons, or more, about May 22, 1921, and ten thousand
tons, or more, about June 1, 1921. In conclusion the plaintiff said "I have arranged
for deposits to be made on these additional shipments if you will signify your ability
to fulfill these orders on the dates mentioned." No name was mentioned as the
purchaser, or purchases, of these intended Australian consignments.
Soon after writing the letter last above-mentioned, the plaintiff embarked for China
and Japan. With his activities in China we are not here concerned, but we note that

in Tokio, Japan, he came in contact with one H. Hiwatari, who appears to have been
a suitable person for handling bituminous limestone for construction work in Japan.
In the letter Exhibit X, Hiwatari speaks of himself as if he had been appointed
exclusive sales agent for the plaintiff in Japan, but no document expressly
appointing him such is in evidence.
While the plaintiff was in Tokio he procured the letter Exhibit W, addressed to
himself, to be signed by Hiwatari. This letter, endited by the plaintiff himself,
contains an order for one thousand tons of bituminous limestone from the quarries
of the defendant company, to be delivered as soon after July 1, 1921, as possible. In
this letter Hiwatari states, "on receipt of the cable from you, notifying me of date
you will be ready to ship, and also tonnage rate, I will agree to transfer through the
Bank of Taiwan, of Tokio, to the Asia Banking Corporation, of Manila, P. I., the entire
payment of $16,000 gold, to be subject to our order on delivery of documents
covering bill of lading of shipments, the customs report of weight, and prepaid
export tax receipt. I will arrange in advance a confirmed or irrevocable letter of
credit for the above amounts so that payment can be ordered by cable, in reply to
your cable advising shipping date."
In a letter, Exhibit X, of May 16, 1921, Hiwatari informs the plaintiff that he had
shown the contract, signed by himself, to the submanager of the Taiwan Bank who
had given it as his opinion that he would be able to issue, upon request of Hiwatari,
a credit note for the contracted amount, but he added that the submanager was not
personally able to place his approval on the contract as that was a matter beyond
his authority. Accordingly Hiwatari advised that he was intending to make further
arrangements when the manager of the bank should return from Formosa.
In the letter of May 5, 1921, containing Hiwatari's order for one thousand tons of
bituminous limestone, it was stated that if the material should prove satisfactory
after being thoroughly tested by the Paving Department of the City of Tokio, he
would contract with the plaintiff for a minimum quantity of ten thousand additional
tons, to be used within a year from September 1, 1921, and that in this event the
contract was to be automatically extended for an additional four years. The
contents of the letter of May 5 seems to have been conveyed, though imperfectly,
by the plaintiff to his attorney, Mr. Frank B. Ingersoll, of Manila; and on May 17,
1921, Ingersoll addressed a note to the defendant company in Cebu in which he
stated that he had been requested by the plaintiff to notify the defendant that the
plaintiff had accepted an order from Hiwatari, of Tokio, approved by the Bank of
Taiwan, for a minimum order of ten thousand tons of the stone annually for a period
of five years, the first shipment of one thousand tons to be made as early after July
1 as possible. It will be noted that this communication did not truly reflect the
contents of Hiwatari's letter, which called unconditionally for only one thousand
tons, the taking of the remainder being contingent upon future eventualities.
It will be noted that the only written communications between the plaintiff and the
defendant company in which the former gave notice of having any orders for the
sale of bituminous limestone are the four letters Exhibit Y, AA, BB, and II. In the first
of these letters, dated March 15, 1921, the plaintiff advises the defendant company
to be prepared to ship five thousand tons of bituminous limestone, to be consigned
to John Chapman, Co., of San Francisco, to be loaded by March 5, and a further

consignment of five thousand tons, through a contract with Henry E. White,

consignees to be named later. In the letter Exhibit BB dated May 17, 1921, the
plaintiff's attorney gives notice of the acceptance by plaintiff of an order from
Hiwatari, of Tokio, approved by the Bank of Taiwan, for a minimum of ten thousand
annually for a period of five years, first shipment of a thousand tons to be as early
after July 1 as possible. In the letter Exhibit H the plaintiff gives notice of an
"additional" (?) order from H. E. White, Sydney, for two lots of bituminous limestone
of five thousand tons each, one for shipment not later than June 30, 1921, and the
other by July 20, 1921. In the same letter thousand tons from F. B. Smith, to be
shipped to Brisbane, Australia, by June 30, and a similar amount within thirty days
later.
After the suit was brought, the plaintiff filed an amendment to his complaint in
which he set out, in tabulated form, the orders which he claims to have received
and upon which his letters of notification to the defendant company were based. In
this amended answer the name of Ludvigsen & McCurdy appears for the first time;
and the name of Frank B. Smith, of Sydney, is used for the first time as the source of
the intended consignments of the letters, Exhibits G, L, M, and W, containing the
orders from Ludvigen & McCurdy, Frank B. Smith and H. Hiwatari were at no time
submitted for inspection to any officer of the defendant company, except possibly
the Exhibit G, which the plaintiff claims to have shown to Anderson in Manila on
March, 12, 1921.
The different items conspiring the award which the trial judge gave in favor of the
plaintiff are all based upon the orders given by Ludvigsen & McCurdy (Exhibit G), by
Frank B. Smith (Exhibit L and M), and by Hiwatari in Exhibit W; and the appealed
does not involve an order which came from Shanghai, China. We therefore now
address ourselves to the question whether or not the orders contained in Exhibit G,
L, M, and W, in connection with the subsequent notification thereof given by the
plaintiff to the defendant, are sufficient to support the judgment rendered by the
trial court.
The transaction indicated in the orders from Ludvigsen, & McCurdy and from Frank
B. Smith must, in our opinion, be at once excluded from consideration as emanating
from persons who had been constituted mere agents of the plaintiff. The San
Francisco order and the Australian orders are the same in legal effect as if they were
orders signed by the plaintiff and drawn upon himself; and it cannot be pretended
that those orders represent sales to bona fide purchasers found by the plaintiff. The
original contract by which the plaintiff was appointed sales agent for a limited
period of time in Australia and the United States contemplated that he should find
reliable and solvent buyers who should be prepared to obligate themselves to take
the quantity of bituminous limestone contracted for upon terms consistent with the
contract. These conditions were not met by the taking of these orders from the
plaintiff's own subagents, which was as if the plaintiff had bought for himself the
commodity which he was authorized to sell to others. Article 267 of the Code of
Commerce declares that no agent shall purchase for himself or for another that
which he has been ordered to sell. The law has placed its ban upon a broker's
purchasing from his principal unless the latter with full knowledge of all the facts
and circumstances acquiesces in such course; and even then the broker's action
must be characterized by the utmost good faith. A sale made by a broker to himself

without the consent of the principal is ineffectual whether the broker has been
guilty of fraudulent conduct or not. (4 R. C. L., 276-277.) We think, therefore, that
the position of the defendant company is indubitably sound in so far as it rest upon
the contention that the plaintiff has not in fact found any bona fide purchasers
ready and able to take the commodity contracted for upon terms compatible with
the contract which is the basis of the action.
It will be observed that the contract set out at the beginning of this opinion contains
provisions under which the period of the contract might be extended. That privilege
was probably considered a highly important incident of the contract and it will be
seen that the sale of five thousand tons which the plaintiff reported for shipment to
San Francisco was precisely adjusted to the purpose of the extension of the contract
for the United States for the period of an additional year; and the sales reported for
shipment to Australia were likewise adjusted to the requirements for the extention
of the contract in that territory. Given the circumstances surrounding these
contracts as they were reported to the defendant company and the concealment by
the plaintiff of the names of the authors of the orders, -- who after all were merely
the plaintiff's subagents, the officers of the defendant company might justly have
entertained the suspicion that the real and only person behind those contracts was
the plaintiff himself. Such at least turns out to have been the case.
Much energy has been expended in the briefs upon his appeal over the contention
whether the defendant was justified in laying down the condition mentioned in the
letter of March 26, 1921, to the effect that no order would be entertained unless
cash should be deposited with either the International Banking Corporation of the
Chartered Bank of India, Australia and China, in Cebu. In this connection the plaintiff
points to the stipulation of the contract which provides that contracts with
responsible parties are to be accepted "subject to draft attached to bill of lading in
full payment of such shipment." What passed between the parties upon this point
appears to have the character of mere diplomatic parrying, as the plaintiff had no
contract from any responsible purchaser other than his own subagents and the
defendant company could no probably have filled the contracts even if they had
been backed by the Bank of England.
Upon inspection of the plaintiff's letters (Exhibit Y and AA), there will be found
ample assurance that deposits for the amount of each shipment would be made
with a bank in Manila provided the defendant would indicated its ability to fill the
orders; but these assurance rested upon no other basis than the financial
responsibility of the plaintiff himself, and this circumstance doubtless did not escape
the discernment of the defendant's officers.
With respect to the order from H. Hiwatari, we observe that while he intimates that
he had been promised the exclusive agency under the plaintiff for Japan,
nevertheless it does not affirmatively appear that he had been in fact appointed to
be such at the time he signed to order Exhibit W at the request of the plaintiff. It
may be assumed, therefore, that he was at that time a stranger to the contract of
agency. It clearly appears, however, that he did not expect to purchase the
thousand tons of bituminous limestone referred to in his order without banking
assistance; and although the submanager of the Bank of Taiwan had said something
encouraging in respect to the matter, nevertheless that official had refrained from

giving his approval to the order Exhibit W. It is therefore not shown affirmatively
that this order proceeds from a responsible source.
The first assignment of error in the appellant's brief is directed to the action of the
trial judge in refusing to admit Exhibit 2, 7, 8, 9 and 10, offered by the defendant,
and in admitting Exhibit E, offered by the plaintiff. The Exhibit 2 is a letter dated
June 25, 1921, or more than three weeks after the action was instituted, in which
the defendant's assistant general manager undertakes to reply to the plaintiff's
letter of March 29 proceeding. It was evidently intended as an argumentative
presentation of the plaintiff's point of view in the litigation then pending, and its
probative value is so slight, even if admissible at all, that there was no error on the
part of the trial court in excluding it.
Exhibit 7, 8, 9 and 10 comprise correspondence which passed between the parties
by mail or telegraph during the first part of the year 1921. The subject-matter of
this correspondence relates to efforts that were being made by Anderson to dispose
of the controlling in the defendant corporation, and Exhibit 9 in particular contains
an offer from the plaintiff, representing certain associates, to but out Anderson's
interest for a fixed sum. While these exhibits perhaps shed some light upon the
relations of the parties during the time this controversy was brewing, the bearing of
the matter upon the litigation before us is too remote to exert any definitive
influence on the case. The trial court was not in error in our opinion in excluding
these documents.
Exhibit E is a letter from Anderson to the plaintiff, dated April 21, 1920, in which
information is given concerning the property of the defendant company. It is stated
in this letter that the output of the Lucio (quarry) during the coming year would
probably be at the rate of about five tons for twenty-four hours, with the equipment
then on hand, but that with the installation of a model cableway which was under
contemplation, the company would be able to handle two thousand tons in twentyfour hours. We see no legitimate reason for rejecting this document, although of
slight probative value; and her error imputed to the court in admitting the same was
not committed.
Exhibit 14, which was offered in evidence by the defendant, consists of a carbon
copy of a letter dated June 13, 1921, written by the plaintiff to his attorney, Frank B.
Ingersoll, Esq., of Manila, and in which plaintiff states, among other things, that his
profit from the San Francisco contract would have been at the rate of eigthy-five
cents (gold) per ton. The authenticity of this city document is admitted, and when it
was offered in evidence by the attorney for the defendant the counsel for the
plaintiff announced that he had no objection to the introduction of this carbon copy
in evidence if counsel for the defendant would explain where this copy was secured.
Upon this the attorney for the defendant informed the court that he received the
letter from the former attorneys of the defendant without explanation of the manner
in which the document had come into their possession. Upon this the attorney for
the plaintiff made this announcement: "We hereby give notice at this time that
unless such an explanation is made, explaining fully how this carbon copy came into
the possession of the defendant company, or any one representing it, we propose to
object to its admission on the ground that it is a confidential communication
between client and lawyer." No further information was then given by the attorney

for the defendant as to the manner in which the letter had come to his hands and
the trial judge thereupon excluded the document, on the ground that it was a
privileged communication between client and attorney.
We are of the opinion that this ruling was erroneous; for even supposing that the
letter was within the privilege which protects communications between attorney
and client, this privilege was lost when the letter came to the hands of the adverse
party. And it makes no difference how the adversary acquired possession. The law
protects the client from the effect of disclosures made by him to his attorney in the
confidence of the legal relation, but when such a document, containing admissions
of the client, comes to the hand of a third party, and reaches the adversary, it is
admissible in evidence. In this connection Mr. Wigmore says:
The law provides subjective freedom for the client by assuring him of
exemption from its processes of disclosure against himself or the attorney or
their agents of communication. This much, but not a whit more, is necessary
for the maintenance of the privilege. Since the means of preserving secrecy
of communication are entirely in the client's hands, and since the privilege is
a derogation from the general testimonial duty and should be strictly
construed, it would be improper to extend its prohibition to third persons who
obtain knowledge of the communications. One who overhears the
communication, whether with or without the client's knowledge, is not within
the protection of the privilege. The same rule ought to apply to one who
surreptitiously reads or obtains possession of a document in original or copy.
(5 Wigmore on Evidence, 2d ed., sec. 2326.)
Although the precedents are somewhat confusing, the better doctrine is to the
effect that when papers are offered in evidence a court will take no notice of how
they were obtained, whether legally or illegally, properly or improperly; nor will it
form a collateral issue to try that question. (10 R. C. L., 931; 1 Greenl. Evid., sec.
254a; Statevs. Mathers, 15 L. R. A., 268; Gross vs. State, 33 L. R. A., [N. S.], 477,
note.)
Our conclusion upon the entire record is that the judgment appealed from must be
reversed; and the defendant will be absolved from the complaint. It is so ordered,
without special pronouncement as to costs of either instance.
Araullo, C.J., Johnson, Avancea, Ostrand, Johns and Romualdez, JJ., concur.

Separate Opinions
MALCOLM, J., dissenting:
An intensive scrutiny of every phase of this case leads me to the conclusion that the
trial judge was correct in his findings of fact and in his decision. Without

encumbering the case with a long and tedious dissent, I shall endeavor to explain
my point of view as briefly and clearly as possible.
A decision must be reached on the record as it is and not on a record as we would
like to have it. The plaintiff and the defendant deliberately entered into a contract,
the basis of this action. The plaintiff, proceeding pursuant to this contract, spent
considerable effort and used considerable money to advance the interests of the
defendant and to secure orders for its products. These orders were submitted to the
president of the defendant company personally and later formally by writing. Prior
to the institution of the suit, the only objection of the defendant was that the money
should be deposited with either the International Banking Corporation or the
Chartered Bank of India, Australia and China at Cebu, a stipulation not found in the
contract.
A reasonable deduction, therefore, is that the plaintiff presented orders under
circumstances which were a substantial compliance with the terms of the contract
with the defendant, and which insured to the defendant payment for its deliveries
according to the price agreed upon, and that as the defendant has breached its
contract, it must respond in damages.
The current running through the majority opinion is that the order emanated from
subagents of the plaintiff, and that no bona fide purchasers were ready and able to
take the commodity contracted for upon terms compatible with the contract. The
answer is, in the first place, that the contract nowhere prohibits the plaintiff to
secure subagents. The answer is, in the second place, that the orders were so
phrased as to make the persons making them personally responsible. The
Ludvigsen & McCurdy order from San Francisco begins: "You can enter our order for
6,000 tons of bituminous limestone as per sample submitted, at $10 gold per ton, f.
o. b., island of Leyte, subject to the following terms and conditions:
* * * "(Exhibit G). The Smith order from Australia contains the following: "It is
therefore with great pleasure I confirm the booking of the following orders, to be
shipped at least within a week of respective dates: . . ." (Exhibit L). The Japan order
starts with the following sentence: "You can enter my order for 1,000 tons of 1,000
kilos each of bituminous limestone from the quarries of the Leyte Asphalt and
Mineral Oil Co. . . ." (Exhibit W.)
But the main point of the plaintiff which the majority decision misses entirely
centers on the proposition that the orders were communicated by the plaintiff to the
defendant, and that the only objection the defendant had related to the manner of
payment. To emphasize this thought again, let me quote the reply of the defendant
to the plaintiff when the defendant acknowledge receipts of the orders placed by
the plaintiff. The letter reads: "In reply to same we have to advice you that no
orders can be entertained unless cash has been actually deposited with either the
International Banking Corporation or the Chartered Bank of India, Australia and
China, Cebu." (Exhibit Y.) Prior to the filing of suit, the defendant company never at
any time raised any questioned as to whether the customers secured by plaintiff
were "responsible firms" within the meaning of the contract, and never secured any
information whatsoever as to their financial standing. Consequently, defendant is

now estopped by its conduct from raising new objections for rejection of the orders.
(Mechem on Agency, section 2441.)
The majority decision incidentally takes up for consideration assignments of error 1
and 2 having to do with either the admission or the rejection by the trial court of
certain exhibits. Having in mind that the Court reverses the courta quo on the facts,
what is said relative to these two assignments is absolutely unnecessary for a
judgment, and even as obiter dicta, contains unfortunate expressions. Exhibit 14,
for example, is a letter addressed by the plaintiff to his lawyer and probably merely
shown to the counsel of the defendant during negotiations to seek a compromise.
Whether that exhibit be considered improperly rejected or not would not change the
result one iota.
The rule now announced by the Court that it makes no difference how the adversary
acquired possession of the document, and that a court will take no notice of how it
was obtained, is destructive of the attorney's privilege and constitutes and obstacle
to attempts at friendly compromise. In the case of Uy Chico vs. Union Life
Assurance Society ([1915], 29 Phil., 163), it was held that communications made by
a client to his attorney for the purpose of being communicated to others are not
privileged if they have been so communicated. But here, there is no intimation that
Exhibit 14 was sent by the client to the lawyer for the purpose of being
communicated to others. The Supreme Court of Georgia in the case of Southern
Railway Co. vs. White ([1899], 108 Ga., 201), held that statements in a letter to a
party's attorney handed by the latter to the opponent's attorney, are confidential
communications and must be excluded.
Briefly, the decision of the majority appears to me to be defective in the following
particulars: (1) It sets aside without good reason the fair findings of fact as made by
the trial court and substitutes therefor other findings not warranted by the proof; (2)
it fails to stress plaintiff's main argument, and (3) it lay downs uncalled for rules
which undermine the inviolability of a client's communications to his attorney.
Accordingly, I dissent and vote for an affirmance of the judgment.