PROBLEM AREAS IN LEGAL ETHICS 1

Conflict of Interest in a regular Lawyer-Client Relationship

LOLITA ARTEZUELA v. ATTY. MADERAZO

[A.C. No. 4354. April 22, 2002]
FACTS
Allan Echavia had a vehicular accident in Mandaue City. He was driving a Ford Telstar
car owned by a Japanese national, Hirometsi Kiyami, but was registered in the name of his
brother-in-law, Jun Anthony Villapez. The car rammed into a small carinderia owned by
complainant Lolita Artezuela. The destruction of the carinderia caused the cessation of the
operation of her small business and due to financial constraints, stopped sending her two children
to college. This prompted the complainant to engage the services of the respondent in filing a
damage suit before Cebu RTC. An Amended Complaint was thereafter filed, impleading
Echavia, Kiyami and Villapez, and dropping Sia as a party-defendant. However, the case was
dismissed allegedly upon the instance of the complainant and her husband. Because of the
dismissal, complainant filed a civil case for damages against the respondent lawyer but the same
was dismissed. Artezuela filed a verified complaint for disbarment against the respondent.
Complainant claimed that respondent prepared Echavias Answer to the Amended Complaint.
The said document was even printed in respondents office. Complainant further averred that it
was respondent who sought the dismissal of the case, misleading the trial court into thinking that
the dismissal was with her consent.
Respondents contention:
Respondent denied the complainants allegations and averred that he conscientiously did
his part as the complainants lawyer. He withdrew as counsel because the complainant was
uncooperative and refused to confer with him. He admitted that Echavias Answer to the
Amended Complaint was printed in his office but denied having prepared the document and
having acted as counsel of Echavia.
Board of Governors:
The Board of Governors of the IBP recommended the suspension from the practice of
law of respondent Atty. Ricarte B. Maderazo for 6 months, with a stern warning that repetition of
representing conflicting interests in violation of Canon 6 of the Code of Professional Ethics, and
Canon 15 and Rule 15.03 of the Code of Professional Responsibility will be dealt with more
severely.
ISSUE
Whether respondent had a direct hand in the preparation of Echavias Answer to the
Amended Complaint which is inimical to complainants interests.
RULING
To be guilty of representing conflicting interests, a counsel-of-record of one party need

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Conflict of Interest in a regular Lawyer-Client Relationship

not also be counsel-of-record of the adverse party. He does not have to publicly hold himself as
the counsel of the adverse party, nor make his efforts to advance the adverse partys conflicting
interests of record--- although these circumstances are the most obvious and satisfactory proof of
the charge. It is enough that the counsel of one party had a hand in the preparation of the
pleading of the other party, claiming adverse and conflicting interests with that of his original
client. To require that he also be counsel-of-record of the adverse party would punish only the
most obvious form of deceit and reward, with impunity, the highest form of disloyalty.
Canon 6 of the Code of Professional Ethics states:
It is the duty of a lawyer at the time of the retainer to disclose to the client the
circumstances of his relations to the parties and any interest in or in connection with the
controversy, which might influence the client in the selection of the counsel.
It is unprofessional to represent conflicting interests, except by express consent of
all concerned given after a full disclosure of the facts. Within the meaning of this
Canon, a lawyer represents conflicting interests when in behalf of one of the clients,
it is his duty to contend for that which duty to another client requires him to
oppose.
The professional obligation of the lawyer to give his undivided attention and zeal for his
clients cause is likewise demanded in the Code of Professional Responsibility. Inherently
disadvantageous to his clients cause, representation by the lawyer of conflicting interests requires
disclosure of all facts and consent of all the parties involved. Thus:
CANON 15- All lawyers shall observe candor, fairness and loyalty in all his dealings
and transactions with his clients.
xxx
Rule 15.03- A lawyer shall not represent conflicting interests except by written consent
of all concerned given after a full disclosure of the facts.
While the Resolution of the IBP is purely recommendatory, we find no reason to reverse the
same. In disciplinary proceedings against members of the bar, only clear preponderance of
evidence is required to establish liability. As long as the evidence presented by complainant or
that taken judicial notice of by the Court is more convincing and worthy of belief than that which
is offered in opposition thereto, the imposition of disciplinary sanction is justified.
Decision affirmed.

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Conflict of Interest in a regular Lawyer-Client Relationship

SANTOS VENTURA HOCORMA FOUNDATION, INC., rep. by ABAD v. ATTY. FUNK

A.C. No. 9094 August 15, 2012
FACTS
Atty. Funk used to work as corporate secretary, counsel, CEO, and trustee of Santos
Ventura Hocorma Foundation, Inc. (Hocorma Foundation). According to the foundation, Atty.
Funk used information that he acquired while serving as its counsel in violation of the Code of
Professional Responsibility (CPR) and in breach of attorney-client relationship.
Don Teodoro V. Santos (Santos) organized Mabalacat Institute and Hocorma Foundation.
Santos hired Atty. Funk to assist Santos and the organizations he established. Mabalacat Institute
made Atty. Funk serve as a director and legal counsel. Atty. Funk emphasized that he was more
of Santos personal lawyer than the lawyer of Hocorma Foundation. Atty. Funk entered into a
retainer agreement with Santos. An SPA was executed in favor of Atty. Funk which authorized
him to advise Hocorma Foundation and to register the 5-hectare land in the name of Mabalacat
Institute so a new title could be issued to it, separate from the properties of Hocorma Foundation.
When Santos executed the deeds of conveyances, Atty. Funks clients were only Santos and
Mabalacat Institute. Santos suggested to the foundations Board of Trustees the inclusion of Atty.
Funk in that board, which the foundation followed. After Santos died, Atty. Funk was elected
President of Mabalacat Institute, a position he had since held. When Hocorma Foundation
refused to pay his attorneys fees, Atty. Funk severed his professional relationship with it. Four
years later, he filed a complaint against the foundation for collection of his attorneys fees. The
trial court, the Court of Appeals (CA), and the Supreme Court decided the claim in his favor.
The Committee on Bar Discipline (CBD) found Atty. Funk to have violated Canon 15,
Rule 15.03 of the Code of Professional Responsibility (CPR) with the aggravating circumstance
of a pattern of misconduct consisting of four court appearances against his former client, the
Hocorma Foundation. The CBD recommended Atty. Funks suspension from the practice of law
for one year.
ISSUE
Whether Atty. Funk betrayed the trust and confidence of a former client in violation of
the CPR when he filed several actions against such client on behalf of a new one.
RULING
Canon 15, Rule 15.03 of the CPR provides that a lawyer cannot represent conflicting
interests except by written consent of all concerned given after a full disclosure of the facts.
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 foundations written consent.
An attorney owes his client undivided allegiance. Because of the highly fiduciary nature
of their relationship, sound public policy dictates that he be prohibited from representing
conflicting interests or discharging inconsistent duties.
An attorney may not, without being guilty of professional misconduct, act as counsel for
a person whose interest conflicts with that of his present or former client. This rule is so absolute
that good faith and honest intention on the erring lawyers part does not make it inoperative.
The reason for this is that a lawyer acquires knowledge of his former clients doings,
whether documented or not, that he would ordinarily not have acquired were it not for the trust
and confidence that his client placed on him in the light of their relationship. It would simply be

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impossible for the lawyer to identify and erase such entrusted knowledge with faultless precision
or lock the same into an iron box when suing the former client on behalf of a new one.
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 attorneys fees from the foundation for such services. Thus, he had an obligation not to
use any knowledge he acquired during that relationship, including the fact that the property
under litigation existed at all, when he sued the foundation.

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Conflict of Interest in a regular Lawyer-Client Relationship

PORMENTO, SR. v. ATTY. PONTEVEDRA

A.C. No. 5128 March 31, 2005
FACTS
Complainant claims that respondent, who was his lawyer in a civil case, deliberately failed
to inform him of the dismissal of his counterclaim despite receipt of the order. Hence, he was
deprived of his right to appeal. He only came to know of the trial courts order when the adverse
party extrajudicially foreclosed the mortgage executed over the parcel of land which is the
subject matter of the suit. In order to recover his ownership, he was constrained to hire a new
lawyer as Atty. Pontevedra refused to institute an action for its recovery. Also, he was forced to
initiate a criminal case for qualified theft against the relatives of the alleged new owner of the
said land. Respondent is the counsel of the accused. Complainant claims that respondent utilized
pieces of confidential information he obtained from complainant while the latter is still his client.
In a separate incident, he claims he bought a parcel of land where the Deed of Declaration of
Heirship and Sale of said land was prepared and notarized by respondent. Since there was
another person who claims ownership of the property, he heeded respondents advice to build a
small house on the property and to allow his (complainants) nephew and his family to occupy
the house in order for complainant to establish his possession of the said property. Subsequently,
complainants nephew refused to vacate the property prompting the former to file an ejectment
case. Respondent acted as the counsel of complainants nephew.
Respondents contention:
Respondent contends that he was never a direct recipient of any monetary support coming from
the complainant. Respondent denies the allegations: a) he claims that he delivered to complainant
a copy of the said order, apprising him of its contents; b) as to his representation of the persons
against whom complainant filed criminal cases for theft, respondent honestly believes that there
exists no conflict between his present and former clients interests as the cases he handled for
these clients are separate and distinct from each other and; c) with respect to the case for
ejectment, respondent admits that it was he who notarized the deed of sale but contends that what
is being contested in the said case is not the ownership of the subject land but the ownership of
the house built on the said land.
IBP Board of Governors:
It resolved to annul and set aside the recommendation of the Investigating Commissioner finding
the respondent guilty of violating Rule 15.03, Canon 15, CPR and instead approved the dismissal
of the complaint for lack of merit.
ISSUE
Whether respondent is guilty of malpractice and misconduct on 3 grounds: first, for
representing interests which conflict with those of his former client, herein complainant; second,
for taking advantage of the information and knowledge that he obtained from complainant; and,
third, for not notifying complainant of the dismissal of his counterclaim and should be disbarred
by reason thereof
RULING
Section 12(a), Rule 139-B of the Rules of Court provides:
SEC. 12. Review and decision by the Board of Governors.

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Conflict of Interest in a regular Lawyer-Client Relationship

(a) xx The decision of the Board upon such review shall be in writing and shall
clearly and distinctly state the facts and the reasons on which it is based. xx
As to the 1st and 2nd grounds, Rule 15.03, Canon 15 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.
In the present case, we find no conflict of interests when respondent represented herein
complainants nephew and other members of his family in the ejectment case and in the criminal
complaint filed by herein complainant against them. The only established participation
respondent had with respect to the parcel of land purchased by complainant, is that he was the
one who notarized the deed of sale of the said land. However, we find conflict of interests in
respondents representation as counsel of the accused in criminal case. It cannot be denied
that when respondent was the counsel of complainant in the civil case, he became privy to the
documents and information that complainant possessed with respect to the said parcel of land.
Hence, whatever may be said as to whether or not respondent utilized against complainant any
information given to him in a professional capacity, the mere fact of their previous relationship
should have precluded him from appearing as counsel for the opposing side. Hence, we find
respondent guilty of misconduct for representing conflicting interests.
As to the 3rd ground, we find that complainant failed to present substantial evidence to prove
that respondent did not inform him of the dismissal of his counterclaim. The court found
sufficient evidence to prove that complainant has been properly notified of the trial courts order
of dismissal.
Respondent Atty. Elias A. Pontevedra is found GUILTY of representing conflicting interests
and is hereby FINED in the amount of Ten Thousand (P10,000.00) Pesos. He is WARNED that a
repetition of the same or similar acts will be dealt with more severely.

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Conflict of Interest in a regular Lawyer-Client Relationship

ABC TRANS NAT'L TRANSPORT v. AERONAUTICS FORWARDERS

(Conflict of Interest of Corporate Lawyers)
413 N.E.2d 1299
90 Ill. App.3d 817 (1980)
FACTS
Plaintiff ABC-TNT is a private corporation engaged in transporting freight over land and
by air. Its separately operated air freight division, ABC Air Freight (ABC), acts as an
intermediary between customers, air carriers, and ground cartage companies. ABC was operating
at a loss, and defendant Robert Agnes was hired as president of ABC. Agnes subsequently hired
defendants Edward Brownstein, David Eades, Carl Cohen, Al Krause, and Bernard Marco. In
addition to their supervisory roles, these men also solicited and maintained clients. Thereafter,
ABC had become profitable. Meantime, defendant Franklin Weiss began negotiations for the purchase
of Aeronautics on behalf of Fifty States Freight Corp., formed by Perry and Mildred Zenlea. At the time,
Weiss was an attorney for ABC. Agnes eventually resigned which was accepted by Leon Mitchell

(president of ABC-TNT) and Arthur Brown (chairman of the board and owner of all ABC-TNT's
stock). Mitchell first learned that defendants had organized a competing air forwarder,
Aeronautics Forwarders, Inc. (Aeronautics), and planned to walk out en masse with other ABC
personnel. In Chicago, Brownstein was fired. At the other stations, each defendant vice president
was asked to remain with ABC, but each refused and left ABC. The following day, more than
one half the employees of the major ABC stations had resigned from ABC and joined
Aeronautics. Simultaneously, fifty percent of ABC's business, including most of its major
customers, switched over to Aeronautics. In addition, various items of personal property, such as
customer files, had been removed. Thereafter, plaintiff took several measures to recapture its lost
customers and business, including the filing of this action for injunctive relief.
ISSUE
I.
II.

Whether party-defendants committed an actionable breach of fiduciary duty.

YES.
Whether Weiss breached his attorney-client fiduciary duty to ABC. NO.

RULING
I.

Initially, it should be noted that the fact that none of the defendants (except for Agnes)
had employment contracts is immaterial to plaintiff's tort action. Defendants argue
that because their employment status was terminable at will, their collective departure
is not actionable. The malicious inducement of an employee to terminate an existing
employment to enter the employment of another gives rise to a cause of action and
"`the fact that the contract of employment is terminable at will does not bar
recovery.'" (62 Ill.App.3d 671, 683, 379 N.E.2d 1228, 1237.) We further noted that
one under a fiduciary duty breaches the fiduciary trust if he solicits his employer's
customers, appropriates his employer's personalty, or entices co-workers away from
his employer. We also stated that it is not necessarily a breach of duty for an agent to
set up a rival business while working for his principal, although it would be a breach
if the agent continued working for his principal after the rival corporation began

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doing business in competition with his principal. (1978 ABC Opinion, citing James C.
Wilborn & Sons, Inc. v. Heniff (1968), 95 Ill.App.2d 155, 237 N.E.2d 781.) Thus the
agent must terminate his employment with his employer before actively participating
in the rival concern. We reaffirm these principles as correct statements of Illinois law,
applicable to the issue of defendants' liability.
There is ample evidence in the record to support the judgment of liability. Defendants
were key management employees of ABC who were actively promoting the interests
of Aeronautics while still employed by ABC. The injury to ABC was the sudden,
potentially crippling loss of half of its business and major customers, as well as
substantial numbers of its personnel. The cause of this injury was defendants' wellorganized plan and their conduct in furtherance of the plan before they departed from
ABC.
II.

ABC charges that Weiss' activities on behalf of Aeronautics, at a time when Weiss
was ABC's outside counsel, bring him within the conspiracy of the other defendants.
Alternatively, ABC alleges that Weiss has breached his fiduciary duty to ABC by
simultaneously serving two masters having conflicting interests. At the very least,
plaintiff urges, Weiss owed ABC full disclosure of his involvement with Aeronautics.
It was alleged that Weiss breached his attorney-client fiduciary duty to ABC by
secretly representing Aeronautics' adverse interests. This issue involves the somewhat
nebulous standards of professional responsibility embodied in codes of ethics. It is
undisputed that Weiss acted as Aeronautics' counsel during the time when he was also
retained by ABC. Nor is it arguable that the two firms, as direct competitors, have
adverse interests. Weiss, however, characterizes his dual representation as constituting
"competing" rather than "conflicting" interests and declares that there is no legal
prohibition against an attorney's performance of legal services for more than one
company in a single industry.
Having determined that Weiss was not aware of defendants' tortious plan, the
court went on to find that Weiss' acts were capable of the "good inference" that
he was merely acting within the scope of his professional duties, according to his
professional judgment. We cannot say that the court's judgment that Weiss did not
breach a fiduciary duty to ABC is against the manifest weight of the evidence.
Plaintiff did not introduce expert testimony to establish the standard of care
applicable to Weiss' decision to represent Aeronautics while in the employment of
ABC. Unless the conflict is so clear as to be undisputed, expert testimony is generally
necessary to prove lawyer malpractice.