Conflict of interest

of Corporate Lawyers

Related Provisions on the Conflict

of Interests of Corporate Lawyers

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.

Canon 21. A lawyer shall preserve the

confidence and secrets of his client even after
the attorney-client relationship is terminated.

Hornilla v. Atty. Salunat

A.C. No. 5804, July 1, 2003

They alleged that respondent is a member of the ASSA Law and

Associates, which was the retained counsel of the Philippine
Public School Teachers Association (PPSTA). Respondents
brother, Aurelio S. Salunat, was a member of the PPSTA Board
which approved respondents engagement as retained counsel of
PPSTA.

Complainants, who are members of the PPSTA, filed an intracorporate case against its members of the Board of Directors
for the terms 1992-1995 and 1995-1997 before the Securities and
Exchange Commission. which was docketed as SEC Case No. 0597-5657, and a complaint before the Office of the Ombudsman,
docketed as OMB Case No. 0-97-0695, for unlawful spending and
the undervalued sale of real property of the PPSTA.

 A lawyer engaged as counsel for a corporation cannot represent

members of the same corporations board of directors in a

derivative suit brought against them. To do so would be
tantamount to representing conflicting interests, which is
prohibited by the Code of Professional Responsibility.

The interest of the corporate client is paramount and should

not be influenced by any interest of the individual corporate

officials.

 Respondent entered his appearance as counsel for the PPSTA

Board members in the said cases.

Complainants contend that respondent was guilty of conflict of

interest because he was engaged by the PPSTA, of which

complainants were members, and was being paid out of its
corporate funds where complainants have contributed. Despite
being told by PPSTA members of the said conflict of interest,
respondent refused to withdraw his appearance in the said
cases.

 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.

What is a derivative suit?

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.

 A lawyer engaged as counsel for a corporation cannot represent

members of the same corporations board of directors in a

derivative suit brought against them. To do so would be
tantamount to representing conflicting interests, which is
prohibited by the Code of Professional Responsibility.

The interest of the corporate client is paramount and should

not be influenced by any interest of the individual corporate

officials.

Corporation cannot consent to a

representation of a lawyer with COI
The cases and ethics opinions differ on whether there must be

separate representation from the outset or merely from the time

the corporation seeks to take an active role. Furthermore, this
restriction on dual representation should not be waivable by
consent in the usual way; the corporation should be
presumptively incapable of giving valid consent.

Outside counsel must thus be retained to represent one of the

defendants.

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.

Santos Ventura Hocorma Foundation, Inc. v.

Atty. Funk, A.C. No. 9094 August 15, 2012
It alleged that Atty. Funk used to work as corporate secretary,

counsel, chief executive officer, and trustee of the foundation from

1983 to 1985. He also served as its counsel in several criminal and
civil cases.

Hocorma Foundation further alleged that on November 25, 2006

Atty. Funk filed an action for quieting of title and damages against
Hocorma Foundation on behalf of Mabalacat Institute, Inc.
(Mabalacat Institute). Atty. Funk did so, according to the
foundation, using information that he acquired while serving
as its counsel xxx.

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 In his answer, Atty. Funk averred that Don Teodoro V. Santos

(Santos) organized Mabalacat Institute in 1950 and Hocorma

Foundation in 1979. Santos hired him in January 1982 to assist
Santos and the organizations he established, including the
Mabalacat Institute, in its legal problems. In 1983 the Mabalacat
Institute made Atty. Funk serve as a director and legal
counsel.

Subsequently, according to Atty. Funk, when Santos got involved in

various litigations, he sold or donated substantial portions of his

real and personal properties to the Hocorma Foundation. Santos
hired Atty. Funk for this purpose. The latter emphasized that, in all
these, the attorney-client relationship was always between
Santos and him. He was more of Santos' personal lawyer than
the lawyer of Hocorma Foundation.

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 Here, it is undeniable that Atty. Funk was formerly the legal

counsel of Hocorma Foundation. Years after terminating his

relationship with the foundation, he filed a complaint against it
on behalf of another client, the Mabalacat Institute, without the
foundation's written consent.

Here, the evidence shows that Hocorma Foundation availed

itself of the legal services of Atty. Funk in connection with,

among others, the transfer of one of the properties subject of the
several suits that the lawyer subsequently filed against the
foundation. Indeed, Atty. Funk collected attorney's fees from
the foundation for such services.

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De Guzman v. Atty. L. De Dios,

A.C. No. 4943 January 26, 2001
In 1995, complainant engaged the services of respondent as

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counsel in order to form a corporation.

On January 10, 1996, with the assistance of Atty. De Dios,
complainant registered Suzuki Beach Hotel, Inc. (SBHI) with
the Securities and Exchange Commission.
On December 15, 1997, the corporation required complainant
to pay her unpaid subscribed shares of stock amounting to
two million two hundred and thirty five thousand pesos
(P2,235,000.00) or 22,350 shares, on or before December 30,
1997.
Indeed, the board of directors now included respondent as
the president, Ramon del Rosario as secretary, Hikoi Suzuki
as chairman, Agnes Rodriguez as treasurer and Takayuki Sato
as director.

 It was complainant who retained respondent to form a

corporation. She appeared as counsel in behalf of complainant.

There was evidence of collusion between the board of

directors and respondent. Indeed, the board of directors now

included respondent as the president, Ramon del Rosario as
secretary, Hikoi Suzuki as chairman, Agnes Rodriguez as treasurer
and Takayuki Sato as director.

The present situation shows a clear case of conflict of interest of

the respondent.

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Tests to Determine Conflicting

Interests:
1.) Conflicting Duties: WON the attorney may be required to

contest for that which his duty to another client requires him to
oppose.

2.) Invitation of Suspicion: WON the acceptance of a new

relation invites suspicion and/or actually leads to

unfaithfulness or double-dealing towards another client.

3.) Use of prior knowledge obtained: WON the attorney may

be called upon in his new relation to use against his first client
any knowledge acquired in the previous employment.

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Quiambao vs Atty. Bamba

FACTS: From June 2000 to January 2001,

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the complainant was the president and

managing director of Allied Investigation
Bureau, Inc. (AIB), a family-owned
corporation engaged in providing security
and investigation services. She avers that
she procured the legal services of the
respondent not only for the corporate
affairs of AIB but also for her personal case.
Particularly, the respondent acted as her
counsel of record in an ejectment case
against Spouses Santiago and Florita
Torroba filed by her

 About six months after she resigned as AIB

president, or on 14 June 2001, the

respondent filed on behalf of AIB a
complaint for replevin and damages
against her for the purpose of recovering
from her the car of AIB assigned to her as a
service vehicle. This he did without
withdrawing as counsel of record in the
ejectment case, which was then still
pending

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 For his part, the respondent admits that he

represented the complainant in the

aforementioned ejectment case and later
represented AIB in the replevin case
against her. He, however, denies that he
was the personal lawyer of the
complainant, and avers that he was made
to believe that it was part of his function as
counsel for AIB to handle even the personal
cases of its officers.

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Even assuming that the complainant

confided to him privileged information

about her legal interests, the ejectment
case and the replevin case are unrelated
cases involving different issues and parties
and, therefore, the privileged information
which might have been gathered from one
case would have no use in the other

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 ISSUE: The issue in this case is whether

the respondent is guilty of misconduct for

representing conflicting interests in
contravention of the basic tenets of the
legal profession.

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 RULING: YES. Atty. Bamba is Guilty!

Rule 15.03, Canon 5 of the Code of

Professional Responsibility provides: A

lawyer shall not represent conflicting
interests except by written consent of all
concerned given after a full disclosure of
the facts

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 In the course of a lawyer-client

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relationship, the lawyer learns all the facts

connected with the clients case, including
the weak and strong points of the case. The
nature of that relationship is, therefore, one
of trust and confidence of the highest
degree. It behooves lawyers not only to
keep inviolate the clients 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 of
paramount importance in the

In broad terms, lawyers are deemed to

represent conflicting interests when, in

behalf of one client, it is their duty to
contend for that which duty to another
client requires them to oppose; Thus, if a
lawyers argument for one client has to be
opposed by that same lawyer in arguing for
the other client, there is a violation of the
rule.

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In this case, it is undisputed that at the

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time the respondent filed the replevin case

on behalf of AIB he was still the counsel of
record of the complainant in the pending
ejectment case. We do not sustain
respondents theory that since the
ejectment case and the replevin case are
unrelated cases fraught with different
issues, parties, and subject matters, the
prohibition is inapplicable. His
representation of opposing clients in both
cases, though unrelated, obviously
constitutes conflict of interest or, at the

 the respondent failed to show that he fully

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disclosed the facts to both his clients and

he failed to present any written consent of
the complainant and AIB as required under
Rule 15.03, Canon 15 of the Code of
Professional Responsibility.
In the process of determining whether
there is a conflict of interest, an important
criterion is probability, not certainty, of
conflict.
He is SUSPENDED from the practice of law
for a period of ONE (1) YEAR

Thank you for your kind

attention!!

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