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PALE Finals - notes | 3C | 2017

CONFLICT OF INTEREST

------------------------------------------------------------------------------------------------------------ In Hornilla v. Atty. Salunat, 27 the Court discussed the concept of  conflict of interest in
this wise:

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
Rule on Conflicting Interest 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
It is generally the rule based on sound public policy that an attorney cannot confided, but also those in which no confidence has been bestowed or will be used. Also,
represent adverse interest. It is highly improper to represent both sides of an issue. The there is conflict of interests if the acceptance of the new retainer will require the attorney to
proscription against representation of conflicting interest finds application where the perform an act which will injuriously affect his first client in any matter in which he represents
conflicting interest arises with respect to the same general matter and is applicable however him and also whether he will be called upon in his new relation to use against his first client
slight such adverse interest may be. It applies although the attorneys intention and motives any knowledge acquired through their connection. Another test of the inconsistency of
were honest and he acted in good faith. However, representation of conflicting interest may interests is whether the acceptance of a new relation will prevent an attorney from the full
be allowed where the parties consent to the representation after full disclosure of facts. discharge of his duty of undivided fidelity and loyalty to his client or invite suspicion of
(Nakpil vs. Valdez, 286 SCRA 758). unfaithfulness or double dealing in the performance thereof.

General Rule:An attorney cannot represent adverse interest.

The prohibition against conflict of interest rests on five rationales, rendered as follows:
Exception:Where the parties consent to the representation after full disclosure of
facts.
x x x.

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

The test is whether or not the acceptance of a new relation will prevent an attorney xxx
from the full discharge of his duty of individual fidelity and loyalty to his client or invite
suspicion of unfaithfulness in double-dealing in the performance thereof.(Tiana vs. Ocampo)
Second, the prohibition against conflicts of interest seeks to enhance the
effectiveness of legal representation. To the extent that a conflict of interest
undermines the independence of the lawyers professional judgment or inhibits a
lawyer from working with appropriate vigor in the Clients behalf, the clients
Page 1 of 6 expectation of effective representation could be compromised.
Rule 15.03, Canon 15 of the Code of Professional Responsibility provides that: “A
lawyer shall not represent conflicting interests except by written consent of all concerned
given after a full disclosure of the facts.” Atty. Era thus owed to Samson and his x x x.
group entire devotion to their genuine interest, and warm zeal in the maintenance and
defense of their  rights.25 He was expected to exert his best efforts and ability to
preserve the clients’ cause, for the unwavering loyalty displayed to his clients
likewise served the ends of justice.
PALE Finals - notes | 3C | 2017

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

x x x.

Fourth, conflicts rules help ensure that lawyers will not exploit clients, such as by
inducing a client to make a gift to the lawyer

xxx.

Finally, some conflict-of-interest rules protect interests of the legal system in


obtaining adequate presentations to tribunals. In the absence of such rules, for
example, a lawyer might appear on both sides of the litigation, complicating the
process of taking proof and compromise adversary argumentation

x x x.

The rule prohibiting conflict of interest was fashioned to prevent situations wherein a lawyer
would be representing a client whose interest is directly adverse to any of his present or
former clients. In the same way, a lawyer may only be allowed to represent a client involving
the same or a substantially related matter that is materially adverse to the former client only
if the former client consents to it after consultation. The rule is grounded in the fiduciary
obligation of loyalty. Throughout the course of a lawyer-client relationship, the lawyer learns
all the facts connected with the client's case, including the weak and strong points of the
case. Knowledge and information gathered in the course of the relationship must be treated
as sacred and guarded with care. It behooves lawyers not only to keep inviolate the client s
confidence, but also to avoid the appearance of treachery and double-dealing, for only then
can litigants be encouraged to entrust their secrets to their lawyers, which is paramount in
the administration of justice.32 The nature of that relationship is, therefore, one of trust and
confidence of the highest degree

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PALE Finals - notes | 3C | 2017

When a lawyer enforces a charging lien against his client, the client-lawyer
relationship is terminated.

ATTORNEYS LIENS
The principle behind Rule 16.04 is to prevent the lawyer from taking advantage of his
influence over the client or to avoid acquiring a financial interest in the outcome of the case.
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An attorney's lien is of two kinds: one is called retaining alien and the other charging lien.
Rule 16.03 A lawyer shall deliver the funds and property of his client when due or The retaining lien is the right of the attorney to retain the funds, documents, and papers of
upon demand. However, he shall have a lien over the funds and may apply so much his client which have lawfully come into his possession until his lawful fees and
thereof as may be necessary to satisfy his lawful fees and disbursements, giving disbursements have been paid and to apply such funds to the satisfaction thereof. The
notice promptly thereafter to his client. He shall also have a lien to the same extent charging lien is the right which the attorney has upon all judgments for the payment of
on all judgments and executions he has secured for his client as provided for the money, and executions issued in pursuance of said judgments, which he has secured in
Rules of Court. litigation of his client (Section 33, Rule 127; Rustia vs. Abeto, 72 Phil., 133). Under this rule,
this lien, whether retaining or charging, takes legal effect only from and after, but not before,
Attorneys Liens notice of said lien has been entered in the record and served on the adverse party
(Macondray & Company, Inc. vs. Jose, 66 Phil., 590; Menzi and Company vs. Bastida, 63
Phil., 16).
An attorney shall have a lien upon the funds, documents and papers of his client which
have lawfully come into his possession and may retain the same until his lawful fees and
disbursements have been paid, and may apply such finds to the satisfaction thereof. He It may therefore be seen that the right of a lawyer to insure the payment of his professional
shall also have a lien to the same extent upon all judgements for the payment of money, and fee is either to retain the funds, documents, and papers of his client which may have lawfully
executions issued in pursuance of such judgements which he has secured in a litigation of come into his possession, or to enforce it upon any judgment for the payment of money he
his client, from and after the time when he shall have caused a statement of his claim of may secure in favor of his client. And it has been held that the retaining lien is dependent
such lien to be entered upon the records of the court rendering such judgement, or issuing upon possession and does not attach to anything not in attorney's hands. The lien exists
such execution, and shall have caused written notice thereof to be delivered to his client and only so long as the attorney's retains possession ends (Rustia vs. Abeto, supra).
to the adverse party; and he shall have the same right and power over such judgments and
executions as his client would have to enforce his lien and secure the payment of his fees
and disbursements. (Sec, 37, Rule 138, RRC)

EFFECT OF LIEN ON A PROPERTY


Rule 16.04 A lawyer shall not borrow money from his client unless the clients
interests are fully protected by the nature of the case or by independent advice.
Neither shall a lawyer lend money to a client except, when in the interest of justice, he
has to advance necessary expenses in the legal matter he is handling for the client.
1. The Closing Process Can Be Put On Hold
Attorneys lien is not an excuse for non-rendition of accounting

Page 3 Itofis 6the responsibility of the settlement agent to ensure that the property title on a piece of
Cannot disburse clients money to clients creditors without authority. real estate is verified and cleared before closing. He or she must run a title report and go
through the process of ensuring that any issues from unreleased liens are resolved. If the
agent is unable to do so in an efficient manner, the whole process could be put on hold.
Failure to deliver upon demand gives rise to the presumption that he has
misappropriated the funds for his own use to the prejudice of the client and in
violation of the trust reposed in him.

Notify client if retaining lien shall be implemented


PALE Finals - notes | 3C | 2017

Even in cases where the loan was paid off, it may have never been released by the lender, IRS Tax Liens: Unpaid Federal taxes can also place a lien on a property. To
therefore clouding the title. The truth is that an unreleased lien -- whether satisfied by the recoup unpaid taxes, the IRS will typically first garnish wages for money owed, but
borrower or not -- indicates that the lender still has a claim or interest in the property. if the debtor has insufficient income to satisfy the debt, a lien can be placed on the
Having that lien released involves getting in touch with the lender and obtaining an official, debtors property. And the IRS is far more aggressive than most other claimants in
recordable document. that if no solution is presented for fulfilling significant back taxes, they will pursue a
forced sale.
All too frequently, no one (not even the existing owners) follows up to ensure that the liens
on a property associated with a previous mortgage paid off years earlier were actually Contractor Liens: Mechanic's or contractor's liens are placed on a property when
released until the time comes to either sell or refinance the property. At this point, time is a a contractor has not been paid for work done on a property. This happens
commodity. frequently with foreclosures and distressed properties, when underwater
homeowners stop paying for services.
Someone needs to track down the lender and arrange for the lien release, and this effort is
not always a quick and easy one. It could actually cause a delayed closing. Judgments, Child Support & Alimony Liens: If a homeowner is sued, loses the
case and fails to pay the appropriated amount, the winning party can place a
In fact, without the proper experience and resources, this is likely to be an extremely tedious judgment lien on the homeowner's property. Unpaid child support and/or alimony
and time-consuming task -- especially if the lender on an old lien has gone out of business may also result in a court action to place liens on a property's title.
or is a small private lender. And as a lien gets older and older, it becomes more and more
challenging to contact the required people to resolve the issue. But until this happens, it is
Mortgage Liens: In this case, the homeowner agrees that the lender has a claim
impossible for the deal to move forward.
or lien to the property until the underlying debt is paid.

Regardless of who is at fault for an existing lien on the property, or whether or not a
When it comes to facing any type of lien, consumers have a choice between paying it or
lenders failure to release a lien makes them liable for penalties and fees, none of this does
disputing it. A dispute could drag out the settlement and closing process or kill a sale entirely.
anything to keep the settlement from being delayed or postponed.

3. The Process Could Extend for a Long Time


2. The Entire Process Could Be Cancelled if The Involved Parties Cannot Agree

Ultimately, a lien will not be cleared until it is paid and released. In the event that a seller
A lien on a property is a glaring red flag for real estate professionals. Liens -- however
opts to evade responsibility for an unpaid lien, a lawsuit could ensue between the seller and
negligible they may seem -- cloud the property title and have the potential to generate big
the buyer. Lawsuits can be long, drawn-out ordeals that prolong the settlement and closing
problems for future buyers. They could even cause sales or refinances to fall through
process indefinitely. This is a hazard of real estate sales that involve liens on the property.
altogether.

In the end, the only way to ensure that a lien doesnt wreak havoc on your real estate
If a lien is not released in a timely matter, if it must undergo a legal battle to settle a dispute
transaction is to work with experts in lien release and title curative services. From
or if it causes the homebuyer to forgo the purchase, the whole settlement and closing
homeowners to settlements agents, having access to the knowledge, experience and
process could be cancelled completely. And while mortgage liens are sometimes easier to
resources of a service like reQuire gives you peace of mind that any existing liens will be
clear up, other types of liens (i.e., tax liens and attorneys liens) can become real
reported on upfront and addressed in the most efficient way possible
headaches.

Consider the various types of liens that could cause a real estate transaction to crash and
burn:
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ATTORNEYS FEES
Property Tax Liens: This is a very common type of lien, one that is prioritized
over every other claimant to the property -- from the mortgage lender to unpaid
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contractors. If property taxes are not properly paid, the government has the power
to step in and sell the home to pay off the remaining balance.
CANON 20 A lawyer shall charge only fair and reasonable fees.
PALE Finals - notes | 3C | 2017

Rule 20.01 A lawyer shall be guided by the following factors in determining his fees: 1. Ordinary attorneys fee -the reasonable compensation paid to a lawyer by his
client for the legal services he has rendered to the latter. The basis for this
compensation is the fact of his employment by and his agreement with the client.
a. The time spent and the extent of the services rendered or required.

b. The novelty and difficulty of the questions involved;


2. Extraordinary attorneys fee an indemnity for damages ordered by the court to
be paid by the losing party in litigation. The basis for this is any of the cases provided
for by law where such award can be made, such as those authorized in Article 2208
c. The importance of the subject matter; of the Civil Code, and is payable NOT to the lawyer but to the client, unless they
have agreed that the award shall pertain to the lawyer as additional compensation or
d. The skill demanded; as part thereof.

e. The probability of losing other employment as a result of acceptance of the proffered case;

f. The customary charges for similar services and the schedule of fees of the IBP chapter to How attorneys fees may be claimed by the lawyer:
which he belongs;
1. It may be asserted either in the very action in which the services of a lawyer had
g. The amount involved in the controversy and the benefits resulting to the client from the been rendered or in a separate action.
services;
2. A petition for attorneys fees may be filed before the judgment in favor of the client
h. The contingency or certainty of compensation; is satisfied or the proceeds thereof delivered to the client.

i. The character of the employment, whether occasional or established; and 3. The determination as to the propriety of the fees or as to the amount thereof will
have to be held in abeyance until the main case from which the lawyers claim for
j. The professional standing of the lawyer. attorneys fees may arise has become final. Otherwise, the determination of the
courts will be premature.

Kinds of Payment which may be stipulated upon:


Kinds of Retainer Agreements on Attorneys fees:

1. a fixed or absolute fee which is payable regardless of the result of the case
1. General Retainer or Retaining Fee it is the fee paid to a lawyer to secure his
future services as general counsel for any ordinary legal problem that may arise in
2. a contingent fee that is conditioned to the securing of a favorable judgment and recovery of the ordinary business of the client and referred to him for legal action;
money or property and the amount of which may be on a percentage basis
2. Special Retainer that is a fee for a specific case or service rendered by the
3. a fixed fee payable per appearance lawyer for a client

4. a fixed fee computed by the number of hours spent Page 5 of 6

5. a fixed fee based on a piece of work Quantum Meruit

It means as much as he deserves, and is used as the basis for determining the
lawyers professional fees in the absence of a contract, but recoverable by him from
Attorneys Fees his client.
PALE Finals - notes | 3C | 2017

2. when although there is a formal contract for attorneys fees, the stipulated fees are
found unconscionable or unreasonable by the court.
Quantum meruit literally meaning as much as he deserves is used as basis for
determining an attorneys professional fees in the absence of an express agreement. The 3. When the contract for attorneys fees is void due to purely formal matters or defects of
recovery of attorneys fees on the basis of quantum meruit is a device that prevents an execution
unscrupulous client from running away with the fruits of the legal services of counsel
without paying for it and also avoids unjust enrichment on the part of the attorney himself.
4. When the counsel, for justifiable cause, was not able to finish the case to its
An attorney must show that he is entitled to reasonable compensation for the effort in
conclusion
pursuing the clients cause, taking into account certain factors in fixing the amount of legal
fees. [NPC v Heirs of Makabangkit Sangkay GR No 165828 August 24, 2011]
5. When lawyer and client disregard the contract for attorneys fees.

a) Skill: length of practice is not a safe criterion of professional ability.


Quantum Meruit is resorted to where:

1. there is no express contract for payment of attorneys fees agreed upon between the
lawyer and the client;

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