Hilado v.

David
In April 1945, Blandina Hilado filed a complaint to have some deeds of
sale annulled against Selim Assad. Attorney Delgado Dizon represented
Hilado. Assad was represented by a certain Atty. Ohnick.
In January 1946, Atty. Vicente Francisco replaced Atty. Ohnick as
counsel for Assad and he thenafter entered his appearance in court.
In May 1946 or four months later, Atty. Dizon filed a motion to have
Atty. Francisco be disqualified because Atty. Dizon found out that in
June 1945, Hilado approached Atty. Francisco to ask for additional legal
opinion regarding her case and for which Atty. Francisco sent Hilado a
legal opinion letter.
Atty. Francisco opposed the motion for his disqualification. In his
opposition, he said that no material information was relayed to him by
Hilado; that in fact, upon hearing Hilados story, Atty. Francisco advised
her that her case will not win in court; but that later, Hilado returned
with a copy of the Complaint prepared by Atty. Dizon; that however,
when Hilado returned, Atty. Francisco was not around but an associate
in his firm was there (a certain Atty. Federico Agrava); that Atty. Agrava
attended to Hilado; that after Hilado left, leaving behind the legal
documents, Atty. Agrava then prepared a legal opinion letter where it
was stated that Hilado has no cause of action to file suit; that Atty.
Agrava had Atty. Francisco sign the letter; that Atty. Francisco did not
read the letter as Atty. Agrava said that it was merely a letter
explaining why the firm cannot take on Hilados case.
Atty. Francisco also pointed out that he was not paid for his advice; that
no confidential information was relayed because all Hilado brought was
a copy of the Complaint which was already filed in court; and that, if
any, Hilado already waived her right to disqualify Atty. Francisco
because he was already representing Assad in court for four months in
the said case.
Judge Jose Gutierrez David ruled in favor of Atty. Francisco.
ISSUE: Whether or not Atty. Francisco should be disqualified in the said
civil case.
HELD: Yes. There already existed an attorney-client relationship
between Hilado and Atty. Francisco. Hence, Atty. Francisco cannot act
as counsel against Hilado without the latters consent.
As ruled by the Supreme Court, to constitute an attorney-client
relationship, it is not necessary that any retainer should have been
paid, promised, or charged for; neither is it material that the attorney

consulted did not afterward undertake the case about which the
consultation was had. If a person, in respect to his business affairs or
troubles of any kind, consults with his attorney in his professional
capacity with the view to obtaining professional advice or assistance,
and the attorney voluntarily permits or acquiesces in such
consultation, then the professional employment must be regarded as
established.
Anent the issue of what information was relayed by Hilado to Atty.
Francisco: It does not matter if the information relayed is confidential
or not. So long as the attorney-client relationship is established, the
lawyer is proscribed from taking other representations against the
client.
Anent the issue that the legal opinion was not actually written by Atty.
Francisco but was only signed by him: It still binds him because Atty.
Agrava, assuming that he was the real author, was part of the same
law firm. An information obtained from a client by a member or
assistant of a law firm is information imparted to the firm, his
associates or his employers.
Anent the issue of the fact that it took Hilado four months from the
time Atty. Francisco filed his entry of appearance to file a
disqualification: It does not matter. The length of time is not a waiver
of her right. The right of a client to have a lawyer be disqualified,
based on previous atty-client relationship, as counsel against her does
not prescribe. Professional confidence once reposed can never be
divested by expiration of professional employment.
Nakpil v. Valdes
Facts:
The friendship of JOSE NAKPIL and respondent CARLOS J. VALDES dates
back to the 50s during their schooldays in De La Salle and the
Philippine Law School. Their closeness extended to their families and
respondent became the business consultant, lawyer and accountant of
the Nakpils.
In 1965, Jose Nakpil became interested in purchasing a summer
residence in Moran Street, Baguio City.[1] For lack of funds, he
requested respondent to purchase the Moran property for him. They
agreed that respondent would keep the property in thrust for the
Nakpils until the latter could buy it back. Pursuant to their agreement,
respondent obtained two (2) loans from a bank (in the amounts of
P65,000.00 and P75,000.00) which he used to purchase and renovate
the property. Title was then issued in respondents name.

It was the Nakpils who occupied the Moran summer house. When Jose
Nakpil died on July 8, 1973, respondent acted as the legal counsel and
accountant of his widow, complainant IMELDA NAKPIL. On March 9,
1976, respondents law firm, Carlos J. Valdes & Associates, handled the
proceeding for the settlement of Joses estate. Complainant was
appointed as administratix of the estate.
The ownership of the Moran property became an issue in the intestate
proceedings. It appears that respondent excluded the Moran property
from the inventory of Joses estate. On February 13, 1978, respondent
transferred his title to the Moran property to his company, the Caval
Realty Corporation.
On March 29, 1979, complainant sought to recover the Moran property
by filing with the then Court of First Instance (CFI) of Baguio City an
action for reconveyance with damages against respondent and his
corporation. In defense, respondent claimed absolute ownership over
the property and denied that a trust was created over it.
During the pendency of the action for reconveyance, complainant filed
this administrative case to disbar the respondent. She charged that
respondent violated professional ethics when he:
I.
Assigned to his family corporation the Moran property (Pulong
Maulap) which belonged to the estate he was settling as its lawyer and
auditor.
II.
Excluded the Moran property from the inventory of real estate
properties he prepared for a client-estate and, at the same time,
charged the loan secured to purchase the said excluded property as a
liability of the estate, all for the purpose of transferring the title to the
said property to his family corporation.
III.
Prepared and defended monetary claims against the estate that
retained him as its counsel and auditor.
Issue: Whether Valdes acted dishonestly an unethically?
Held: Yes. As a rule, a lawyer is not barred from dealing with his client
but the business transaction must be characterized with utmost
honesty and good faith. The measure of good faith which an attorney is
required to exercise in his dealings with his client is a much higher
standard than is required in business dealings where the parties trade
at arms length.

Business transactions between an attorney and his client are

disfavored and discouraged by the policy of the law. Hence, courts
carefully watch these transactions to assure that a lawyer takes no
advantage over his client.
This rule is founded on public policy for, by virtue of his office, an
attorney is in an easy position to take advantage of the credulity and
ignorance of his client. Thus, no presumption of innocence or
improbability of wrongdoing is considered in an attorneys favor.
It is well-established that respondent offered to the complainant the
services of his law and accounting firms by reason of their close
relationship dating as far back as the 50s. She reposed her complete
trust in respondent who was the lawyer, accountant and business
consultant of her late husband. Respondent and the late Nakpil agreed
that the former would purchase the Moran property and keep it in trust
for the latter. In violation of the trust agreement, respondent claimed
absolute ownership over the property and refused to sell the property
to complainant after the death of Jose Nakpil.
To place the property beyond the reach of complainant and the
intestate court, respondent later transferred it to his corporation.
Contrary to the findings of the OSG, respondent initially acknowledged
and respected the trust nature of the Moran property. Respondents
bad faith in transferring the property to his family corporation is well
discussed in this Courts Decision.
Respondents act of excluding Moran property from the estate which
his law firm was representing evinces a lack of fidelity to the cause of
his client. If respondent truly believed that the said property belonged
to him, he should have at least informed complainant of his adverse
claim. If they could not agree on its ownership, respondent should have
formally presented his claim in the intestate proceedings instead of
transferring the property to his own corporation and concealing it from
complainant and the judge in the estate proceedings. Respondents
misuse of his legal expertise to deprive his client of the Moran property
is clearly unethical.
To make matters worse, respondent, through his accounting firm,
charged the two loans of P65,000.00 and P75,000.00 as liability of the
estate, after said loans were obtained by respondent for the purchase
and renovation of the property which he claimed for himself.
Hornilla v. Salunat

Facts: Hornilla filed a complaint against Atty. Salunat with the IBP
Commission on Bar Discipline for unethical practice regarding conflict
of interests. Said counsel is a member of the ASSA Law Office and
acted as the lawyer for the Philippine Public School Teachers
Association.
In a squabble between the PPSTA and some of its board members
pending SEC resolution for unlawful spending and undervalued sale of
real properties, Atty. Salunat appeared as counsel for said board
members.
Respondent says he only appeared in behalf of ASSA since he was a
partner. Moreover, he only filed a Manifestation for extreme urgency.
Issue: Whether or not Salunat is guilty of unethical behavior as a
member of the IBP.
Held: Yes. Respondent Atty. Ernesto Salunat is found GUILTY of
representing conflicting interests and is ADMONISHED to observe a
higher degree of fidelity in the practice of his profession. He is further
WARNED that a repetition of the same or similar acts will be dealt with
more severely.
RULE 15.03. A lawyer shall not represent conflicting interests except by
written consent of all concerned given after a full disclosure of the
facts.
There is conflict of interest when a lawyer represents inconsistent
interests of two or more opposing parties. The test is whether or not in
behalf of one client, it is the lawyers duty to fight for an issue or claim,
but it is his duty to oppose it for the other client. In brief, if he argues
for one client, this argument will be opposed by him when he argues
for the other client. This rule covers not only cases in which
confidential communications have been confided, but also those in
which no confidence has been bestowed or will be used. Also, there is
conflict of interests if the acceptance of the new retainer will require
the attorney to perform an act which will injuriously affect his first
client in any matter in which he represents him and also whether he
will be called upon in his new relation to use against his first client any
knowledge acquired through their connection.Another test of the
inconsistency of interests is whether the acceptance of a new relation
will prevent an attorney from the full discharge of his duty of undivided
fidelity and loyalty to his client or invite suspicion of unfaithfulness or
double dealing in the performance thereof.

Where corporate directors have committed a breach of trust either by

their frauds, ultra vires acts, or negligence, and the corporation is
unable or unwilling to institute suit to remedy the wrong, a stockholder
may sue on behalf of himself and other stockholders and for the
benefit of the corporation, to bring about a redress of the wrong done
directly to the corporation and indirectly to the stockholders. This is
what is known as a derivative suit, and settled is the doctrine that in a
derivative suit, the corporation is the real party in interest while the
stockholder filing suit for the corporations behalf is only nominal party.
The corporation should be included as a party in the suit.
In the case at bar, the records show that SEC Case No. 05-97-5657,
entitled Philippine Public School Teachers Assn., Inc., et al. v. 19921995 Board of Directors of the Philippine Public School Teachers Assn.
(PPSTA), et al., was filed by the PPSTA against its own Board of
Directors. Respondent admits that the ASSA Law Firm, of which he is
the Managing Partner, was the retained counsel of PPSTA. Yet, he
appeared as counsel of record for the respondent Board of Directors in
the said case. Clearly, respondent was guilty of conflict of interest
when he represented the parties against whom his other client, the
PPSTA, filed suit.
Northwestern v. Arquillo
Facts: Ben Nicolas submitted a letter-complaint with the Integrated
Bar of the Philippines against Atty. Macario Arquillo for
deceit,malpractice,gross misconduct and violation of his oath as Atty
by representing conflicting interest.
It is alleged that in a case before the NLRC Atty Arquillo represented
both complainants & defendants.He is represented 7 complainants &
also represented 1 of the respondents/ defendants, Jose Castroin the
same consolidated case.
Commissioner Dennis Funa found Atty. Arquillo guilty & recommended
suspension for 6 months. The Board of Governors of IBP modified the
suspension to 2 years.
Issue: Whether or not Atty. Arquillo is guilty to warrant the suspension
Held: YES. The Code of Professional Responsibility requires lawyers to
observe candor, fairness & loyalty in all their dealings with their clients.
Corollary to his duty,they should not represent conflicting interests,
except with all the concerned clients written consent, given after a full
disclosure of facts.

When a lawyer represents 2 or more opposing parties, there is a

conflict of interests , the existence of which determined by 3 separate
tests: (1) when, in representation of one client, a lawyer is required to
fight for an issue or claim, but is also duty-bound to oppose it for
another client; (2) when the acceptance of the new retainer will require
an attorney to perform an act that may injuriously that affect the client
or, when called upon in a new relation, to use against the first one any
knowledge acquired through their professional connection; or (3) when
the acceptance of a new relation would prevent the full discharge of an
attorneys duty to give undivided fidelity and loyalty to the client or
would invite suspicion of unfaithfulness or double dealing in the
performance of that duty.
In this case, Atty. Arquillo represented both parties. He even filed a
motion to dismiss in behalf of 1 respondent, Jose Castro and drafted a
position paper in behalf of 7 complainants. His acts cannot be justified
even by the fact that Jose Castro was absolved from the complaints. It
cannot be denied that he represented 2 opposing parties.
An attorney cannot represent adverse interests. It is a hornbook
doctrine grounded on public policy that a lawyers representation of
both sides of an issue is highly improper. The proscription applies when
the conflicting interests arise with respect to the same general matter,
however slight such conflict may be. It applies even when the attorney
acts from honest intentions or in good faith.