Group 5 III-Manresa

Ching, Kathleen Rose D.

Duco, Lance Kerwin S.

Julian, Stephen C.

Noble, Maria Jessa

Rodriguez, Pilar Asumpta S.R.

!Problems Areas in Legal Ethics Final Exam

!2. Atty. Fortes Infide services was engaged by Lobo Corporation, a family corporation belonging to the Inigo Family. Atty. Infide

became known to the corporation through Ben Iigo, a family member and stockholder of the corporation at the same time. As

a lawyer for the corporation, Atty. Infide handles the corporate and legal matters that for the corporation. All is well until the

family members start fighting with each other over corporate matters. Ben Iigo who took a position adverse to majority

position of the board of directors of the corporation sought the legal assistance of Atty. Infide and asked him to represent him in

the case.

!a.) Can Atty. Infide represent Ben Iigo? Why or why not? Cite your legal basis.

! No, Attorney Fortes Infide CANNOT represent Ben Iigo.

! Under RULE 15.03 of the Code of Professional Responsibility, A lawyer shall NOT represent conflicting interests

except by written consent of all concerned given after a full disclosure of the facts.

! Moreover, in the case of Hornilla v. Atty. Salunat, the Supreme Court provided the following tests to determine

whether a conflict of interest exists:

a. 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 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;

b. Also, there is conflict of interests 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; and

c. 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 thereof.

! In the case at bar, Atty. Infides services were engaged by Lobo Corporation, a family corporation belonging to the

Inigo family. By representing Ben Iigo, Atty. Infide may perform acts which will injuriously affect his first client, the Lobo

Corporation in any matter in which he may represent it. Atty. Infide may be called upon in his new relation with Ben Iigo and

use it against the Lobo Corporation, any knowledge acquired through their connection. Consequently, the acceptance of such

new relation with Ben Iigo leads to the third case of inconsistency above mentioned where Atty. Inifide is prevented from the

full discharge of his duties of providing undivided fidelity and loyalty to both his clients Ben and Lobo Corporation which would

invite suspicion of unfaithfulness or double dealing thereof. It is to note that the attorney in such situation will not be able to

pursue, with vigor and zeal, the new client, Iigos claim against his first client, Lobo Corporation and to properly represent the

latter as well wherein he is still retained as an in house counsel. A clear inconsistency of interests exists.

! In the same case of Hornilla v. Salunat, the Supreme Court further noted that the possibility for conflict of interest

here is universally recognized. Although early cases found joint representation permissible where no conflict of interest was

obvious, the emerging rule is against dual representation in all derivative actions. Outside counsel must thus be retained to

represent one of the defendants. 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.

! Premises considered, Atty. Fortes Infide cannot represent Ben Iigo without violating the rule against conflict of

interest.

b.) Can a lawyer for the corporation defend the board of directors in derivative suit? Cite your legal basis.

! No. The lawyer for the corporation cannot defend the board of directors in a derivative suit.

!

The Supreme Court discussed in the case of Hornilla vs Salunat that 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. Moreover, it cited that there is a possibility of conflict of

interest when a lawyer engaged by a corporation defend members of the board of the same corporation in a derivative suit.

The Supreme Court elaborated it in this manner;

Although early cases found joint representation permissible where no conflict of interest was obvious, the emerging

rule is against dual representation in all derivative actions. Outside counsel must thus be retained to represent one of the

defendants. 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.

The Court concluded that the interest of the corporate client is paramount and should not be influenced by any

interest of the individual corporate officials. Hence, a lawyer engaged by the corporation cannot represent the members of the

same corporations board in a derivative suit brought against them.