"Conflict of Interest" of Corporate Lawyers

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.
10
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.
11
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.
12
De Guzman v. Atty. L. De Dios,

A.C. No. 4943 January 26, 2001
In 1995, complainant engaged the services of respondent as
13
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.
14
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.
15
Thank you for your kind

attention!!
16

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Conflict of interest

Related Provisions on the Conflict

Rule 15.03. - A lawyer shall not represent

Canon 21. A lawyer shall preserve the

Hornilla v. Atty. Salunat

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

A lawyer engaged as counsel for a corporation cannot represent

members of the same corporations board of directors in a

The interest of the corporate client is paramount and should

not be influenced by any interest of the individual corporate

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

Respondent admits that the ASSA Law Firm, of which he is the

Managing Partner, was the retained counsel of PPSTA. Yet, he

What is a derivative suit?

by their frauds, ultra vires acts, or negligence, and the corporation

A lawyer engaged as counsel for a corporation cannot represent

members of the same corporations board of directors in a

The interest of the corporate client is paramount and should

not be influenced by any interest of the individual corporate

Corporation cannot consent to a

separate representation from the outset or merely from the time

Outside counsel must thus be retained to represent one of the

Rule 15.03. - A lawyer shall not represent conflicting interests

except by written consent of all concerned given after a full

Santos Ventura Hocorma Foundation, Inc. v.

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

Hocorma Foundation further alleged that on November 25, 2006

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

(Santos) organized Mabalacat Institute in 1950 and Hocorma

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

various litigations, he sold or donated substantial portions of his

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

counsel of Hocorma Foundation. Years after terminating his

Here, the evidence shows that Hocorma Foundation availed

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

De Guzman v. Atty. L. De Dios,

counsel in order to form a corporation.

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

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

Tests to Determine Conflicting

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

relation invites suspicion and/or actually leads to

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

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