SECOND DIVISION
[A.C. No. 12332. March 18, 2019.]
KELLY L. LUYM, complainant, vs.ATTY. MANUEL ESPINA, respondent.
NOTICE
Sirs/Mesdames :
Please take notice that the Court, Second Division, issued a Resolution dated 18 March 2019which reads as follows:
"A.C. No. 12332 — Kelly L. LuYm v. Atty. Manuel Espina
This resolves the Complaint for Disbarment 1 filed on July 29, 2015 by Kelly L. LuYm (complainant) against respondent Atty. Manuel A. Espina (Atty. Espina) charging the latter of violating the rule on conflict of interest in violation of the Lawyer's Oath and the Code of Professional Responsibility (CPR), specifically Canon 15, Rule 15.03. 2
Antecedents
Complainant was the Director and Executive Vice-President of Ludo ** and LuYm Corporation (LLC) from early 1980s until October 1999. Atty. Espina was one of the retained counsels of LLC and later became its Corporate Secretary. He had also done some legal works for LLC when he was still an Associate Lawyer of ACCRA Law Firm in Cebu.
In his Complaint for Disbarment filed with the Integrated Bar of the Philippines (IBP) on July 29, 2015, complainant alleged that Atty. Espina engaged in two acts of conflict of interest during his tenure as Corporate Secretary of LLC.
According to the complainant, the directors of LLC, together with Atty. Espina acting as LLC's Corporate Secretary, illegally increased the authorized capital stock of the corporation. Because of this, complainant was constrained to file a derivative suit against Atty. Espina and the directors of LLC, which is pending before the Regional Trial Court (RTC) of Cebu City Branch 11 in SRC-242-CEB. In the said case, Atty. Espina acted as counsel for himself and all the directors. Complainant alleged that, because of this, there exists a conflict of interest considering that Atty. Espina used to be a personal lawyer of the complainant.
Aside from that, in another alleged act of conflict of interest, complainant averred that Atty. Espina represented Douglas LuYm and Ferdinand LuDo in an earlier case filed against complainant for allegedly manipulating the membership and board of trustees of Ludo and LuYm Foundation, Inc. (LLFI) in SRC-227-CEB pending before the RTC-Cebu City Branch 11. Complainant posits that there was a conflict of interest in this case because he was previously a lawyer of the complainant and privy to the complainant's dealings and transactions. Thus, complainant sent him a letter reminding him of the clear conflict of interest he had placed himself. However, Atty. Espina did not withdraw his representation as counsel in SRC-227-CEB. CAIHTE
Respondent's Position
Atty. Espina vehemently denied any conflict of interest and alleged that he is merely a victim of an internal turmoil within the prominent Ludo and LuYm clan of Cebu.
Atty. Espina claimed that LLC, while under the complainant's management, suffered financial reverses that led to its near bankruptcy. Because of this, complainant resigned from the corporation which left the other principal stockholders to fend off various creditors of the corporation. This led the other principal stockholders, i.e., Douglas LuYm and David Lu, to propose to the stockholders, including complainant to infuse additional capital to save the corporation. Thus, the board of directors and stockholders of LLC amended the Articles of Incorporation to increase the authorized capital stock.
As a result of the increase in authorized capital stock, complainant and the LuYm family became minority stockholders of LLC and did not have the necessary number of shares to elect a director in the corporation. This resulted in a bitter intra-corporate dispute between the camp of Douglas LuYm and David Lu against the LuYm family. In May 2013, David Lu and Barbara Ann Lu filed an intra-corporate case against LLFI, complainant Kelly LuYm, et al., before the RTC-Cebu City Branch 11 in SRC-227-CEB. Douglas LuYm and Ferdinand LuDo were impleaded as co-defendants of complainant. Respondent represented Douglas LuYm and Ferdinand LuDo in the case in their capacity as members and/or trustees of the foundation and with the consent of David Lu and Barbara Lu.
Atty. Espina also claimed that the letter he sent for and in behalf of complainant against Graham Maitland Smith, which was complainant's basis in saying that the defendant was his personal lawyer, was merely an isolated referral that happened fifteen (15) years ago and was made as an accommodation to the complainant being the Executive Vice-President and Treasurer of LLC. The matter involved an infraction of Maria Luisa Park Association against complainant.
As a result of the said dispute, complainant filed a derivative suit. Atty. Espina was impleaded as defendant in the derivative suit being the corporate secretary of LLC at the time of the amendment of the Articles of Incorporation. Considering that he was impleaded as defendant and there was an allegation that he was in conspiracy with his co-defendants as counsel in the case, Atty. Espina deemed it proper to represent himself and his co-defendants in the case.
Report and Recommendation
In his Report and Recommendation, 3 Commissioner Eldrid C. Antiquiera (Commissioner Antiquera) of the Integrated Bar of the Philippines-Commission on Bar Discipline (IBP-CBD), found Atty. Espina liable for violation of Rule 15.03, Canon 15 of the CPR and recommended that a penalty of one year suspension be imposed. He noted that Atty. Espina should have been more circumspect in his professional dealings by not acting as counsel of the other defendants if only to avoid the possibility of double dealing which may put him in a conflict of interest situation. Atty. Espina knew at the outset that as a retained lawyer of the corporation, he is duty bound to discharge undivided loyalty to the cause of his client by not siding with any individual stockholder whose interests are adverse to the corporation.
On April 20, 2017, a Resolution 4 was passed by the Board of Governors of the IBP which recommends the dismissal of the instant case, to wit:
RESOLUTION NO. XXII-2017-1279Kelly L. Luym vs. Atty. Manuel A. Espina
RESOLVED to REVERSE the recommendation of the Investigating Commissioner and therefore to recommend the DISMISSAL of the complaint against Respondent in as much as by personally handling the corporate derivative case, Respondent was merely defending himself in his capacity as the corporate secretary of the corporation. DETACa
In its June 25, 2018 Extended Resolution, 5 the IBP Board of Governors delved into the basis of the reversal and setting aside of the recommendation of Commissioner Antiquera. The decretal portion of the resolution reads:
In view thereof, the IBP Board of governors finds the respondent Atty. Manuel A. Espina not guilty for any act and/or omission constituting any offense for which he may be disciplined as a member of the Bar.
Hence, the case was transmitted to this court for Review.
The Court's Ruling
The Court adopts the recommendation of the IBP Board of Governors.
Rule 15.03, Canon 15 of the Code of Professional Responsibility (CPR) provides:
CANON 15 — A LAWYER SHALL OBSERVE CANDOR, FAIRNESS AND LOYALTY IN ALL HIS DEALINGS AND TRANSACTIONS WITH HIS CLIENTS.
xxx xxx 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.
Under the aforecited rule, it is explicit that a lawyer is prohibited from representing new clients whose interests oppose those of a former client in any manner, whether or not they are parties in the same action or on totally unrelated cases. 6 Conflict of interest exists 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 lawyer's duty to fight for an issue or claim, but it is his duty to oppose it for the other client. In short, 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 interest 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 of said duty. 7 The prohibition is founded on the principles of public policy and good taste. 8
The prohibition against conflict of interest rests on the five (5) rationales: 9
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 can trust. Instilling such confidence is an objective important in itself. x x x
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 lawyer's professional judgment or inhibits a lawyer from working with appropriate vigor in the client's behalf, the client's expectation of effective representation x x x could be compromised.
Third, a client has a legal right to have the lawyer safeguard the client's confidential information x x x [pertaining to it.] Preventing [the] use of confidential client information against the interests of the client, either to benefit the lawyer's 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.
Fourth, conflicts rules help ensure that lawyers will not exploit clients, such as by inducing a client to make a gift to the lawyer x x x. [or grant in the lawyer's favor.]
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. 10 (Citation omitted)
Even the termination of the attorney-client relationship does not justify a lawyer to represent an interest adverse to or in conflict with that of the former client. The spirit behind this rule is that the client's confidence once given should not be stripped by the mere expiration of the professional employment. Even after the severance of the relation, a lawyer should not do anything that will injuriously affect his former client in any matter in which the lawyer previously represented the client. Nor should the lawyer disclose or use any of the client's confidences acquired in the previous relation. In this regard, Canon 17 of the CPR expressly declares that: "A lawyer owes fidelity to the cause of his client and he shall be mindful of the trust and confidence reposed in him." The lawyer's highest and most unquestioned duty is to protect the client at all hazards and costs even to himself. The protection given to the client is perpetual and does not cease with the termination of the litigation, nor is it affected by the client's ceasing to employ the attorney and retaining another, or by any other change of relation between them. It even survives the death of the client. 11
After a review of the records, the Court agrees with the findings of the IBP Board of Governors that there was no conflict of interest in the instant case. Under SRC Case No. 242-CEB which pertains to the derivative suit, Atty. Espina was clearly defending himself and his reputation having been impleaded in the case as the corporate secretary. By being sued, Atty. Espina's natural reaction was to defend himself. Furthermore, since conspiracy was alleged in the complaint where the prayer seeks for joint and solidary liability among the defendants, Atty. Espina will be necessarily prejudiced by the outcome of the case not only against himself but also against his co-defendants. It must be emphasized that a solidary or joint and several obligation, as in this case, is one in which each debtor is liable for the entire obligation, and each creditor is entitled to demand the whole obligation. 12
A reading of the complaint would show that the complainant anchors her case on a letter-complaint dated June 17, 1999 issued by Atty. Manuel A. Espina on behalf of the complainant against Maria Luisa Park Association. However, it must be emphasized that this letter is not a correspondence in behalf of LuDo Corporation and LuYm Foundation, Inc. but only an isolated matter which was made for the complainant in her private capacity more than 15 years ago. Hence, it is clear that there is no conflict of interest since the issues in the June 17, 1999 letter and the derivative suit are not intertwined being that the interest advanced in the former is a private matter compared to the latter which is corporate in nature.
Anent the allegation of conflict of interest in SRC-227-CEB, the IBP Board of Governors is correct in recommending that there is no clear and convincing evidence to hold Atty. Espina liable for conflict of interest. We must remember that Atty. Espina was able to secure the consent of David and Barbara Lu, the clients of Atty. Espina, in representing Douglas LuYm and Ferdinand LuDo.
This Court will not hesitate to mete out proper disciplinary punishment upon lawyers who are shown to have failed to live up to their sworn duties, but neither will it hesitate to extend its protective arm to them when the accusation against them is not indubitably proven. 13
WHEREFORE, finding the recommendation of the Integrated Bar of the Philippines Board of Governors to be fully supported by the evidence on record and applicable laws, the Court RESOLVES to DISMISS the case against Atty. Manuel A. Espina and consider the same as CLOSED and TERMINATED. aDSIHc
SO ORDERED."
Very truly yours,
MARIA LOURDES C. PERFECTODivision Clerk of Court
By:
(SGD.) TERESITA AQUINO TUAZONDeputy Division Clerk of Court
Footnotes
** Also referred to as "LuDo" in some parts of the rollo.
1.Rollo, pp. 1-6.
2. CANON 15. A lawyer shall observe candor, fairness and loyalty in all his dealings and transactions with his clients.
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.
3.Rollo, pp. 639-642.
4.Id. at 638.
5.Id. at 643-646.
6.Orola v. Atty. Ramos, 717 Phil. 536, 544 (2013).
7.Id. at 544-545.
8.Id. at 544.
9.Samson v. Atty. Era, 714 Phil. 101 (2013).
10.Id. at 110-111.
11.Id. at 112-113.
12.Inciong, Jr. v. Court of Appeals, 327 Phil. 364, 372 (1996).
13.Garrido v. Atty. Quisumbing, A.C. No. 3724, March 31, 1992, 207 SCRA 616, 621 (1992).