Corporate lawyers; conflict of interest, C3S19 CPRA

Section 19, Canon III

SECTION 19. Corporate lawyers; conflict of interest. – In relation to organizational clients, a lawyer who represents a corporation or any organization does not, by virtue of such representation, necessarily represent any constituent or affiliated organization, such as a parent or subsidiary.
A lawyer for a corporation or other organization, who is also a member of its board of directors or trustees, shall determine whether the responsibilities of the two roles may conflict. In the event of the latter, the lawyer shall disclose the conflict of interest to all concerned parties. (2023 Code of Professional Responsibility and Accountability or CPRA)

1. Corporate lawyers; conflict of interest

a. Corporations and its affiliated organizations, parent or subsidiary

For organizations as clients, lawyers who represent a corporation or any organization do not “by virtue of such representation, necessarily represent any constituent or affiliated organization, such as a parent or subsidiary.”

A corporation is an artificial being invested by law with a personality separate and distinct from that of other corporations to which it may be connected. (Fortun v. Quinsayas, G.R. No. 194578, February 13, 2013, Per Carpio, J.)

b. When also a member of the Board of Directors

If lawyers who represent corporations or other organizations and they are also a member of its Board of Directors or Trustees, they are required to “determine whether the responsibilities of the two roles may conflict.”

If there is a conflict of interest, the lawyers are required to “disclose the conflict of interest to all concerned parties.”

Burgos v. Bereber, A.C. No. 12666, March 04, 2020, Per Hernando, J.:

• In his complaint, Burgos claimed that Bereber committed acts constituting conflict of interest, and lacking in “delicadeza.”

• Burgos alleged that he is a member-consumer of District III2 of Capiz Electric Cooperative, Inc. (CAPELCO), a non-stock, non-profit electric cooperative supervised by the National Electrification Administration (NEA), which currently provides electric services to the Province of Capiz. On July 1, 2015, Burgos and two other member-consumers of District III of CAPELCO, on the basis of a NEA Comprehensive Operations Audit, filed an administrative complaint4 with the NEA against several management staff of CAPELCO and certain members of its Board of Directors for committing acts constituting Grave Misconduct, Neglect of Duty, and Falsification. Having been elected as director by member-consumers of District III, Burgos insisted that Bereber failed to advance their interests, and as such, had no regard for professionalism, ethics, integrity, and “delicadeza” when he represented the accused members of the Board of Directors and management staff in the proceedings before the NEA.

• On his part, Bereber admitted in his Verified Answer, Position Paper, and other allied pleadings that the accused members of the Board of Directors consulted with him and sought his legal services in connection with the administrative complaint filed by Burgos with the NEA. Bereber then drafted, prepared, and signed their answer to the NEA complaint, and appeared as counsel/collaborating counsel for them in the same case during the preliminary conferences before the NEA. This notwithstanding, Bereber insisted that he did not represent conflicting interests and, perforce, cannot be held administratively liable therefor.

• In particular, Bereber argued that there existed no lawyer-client relationship between him and Burgos, considering that Burgos, at no instance in the past, obtained his legal advice or sought consultation on any legal matter arising from the pending NEA complaint and/or the NEA Comprehensive Operations Audit. On the contrary, Bereber emphasized that he even acted as counsel for the adverse parties in Civil Case No. 477 for forcible entry and damages, and in Criminal Case No. 2564 for light coercion filed against Burgos pending before the Municipal Circuit Trial Court in President Roxas, Capiz.

• Bereber further argued that he has the discretion to represent the causes of his fellow member-consumers of CAPELCO, such as the accused members of its Board of Directors, in the NEA administrative case. On this point, Bereber clarified that the district election of CAPELCO is only for the purpose of determining the number of directors that will sit on its Board of Directors. Thus, while he was elected as director of CAPELCO by the member-consumers of District III, he does not, by virtue thereof, exclusively represent them in the board, nor does he become the counsel of the member-consumers of the district where he was elected. Bereber explained that, as CAPELCO director, he is mandated to represent not only the member-consumers of District III, but also the entire membership of CAPELCO.

• Bereber also maintained that current state of laws does not prohibit him from practicing his profession as a lawyer upon his election as CAPELCO director, and that “delicadeza” is “not a ground to prohibit a lawyer from acting as counsel to a party.”

• The Court adopts the findings of the IBP and accepts its recommendation to dismiss the complaint against Bereber for lack of merit.

• We take note at this point that Bereber rendered his legal services to CAPELCO further to his duties and responsibilities as director. This is evident from the December 18, 2015 Affidavit of Mr. Salvador A. Asis, former President of CAPELCO (as attached to Bereber’s Answer), which states, in part:

4.) Atty. James is the only lawyer in CAPELCO’s Board of Directors; the entire members of the board appreciate so much his presence as director because he shared with us his legal opinion on matters requiring it for the betterment of CAPELCO, its members-consumers and employees, he drafted our rules of procedure to be observed every board meeting; he argued and give inputs on legal points, passed several resolutions and policies, drafted the revision of our by-laws and did many other works; he chaired the newly created Committee on Employees’ Welfare and did his assigned tasks well; he worked in the CAPELCO very satisfactorily as a director and a lawyer; the running of the general management of CAPELCO is smooth and well with the help of Atty. James[.]

• Considering that an administrative complaint was filed with the NEA against certain members of the board and management staff in their capacities as directors and officers, respectively, of CAPELCO, Bereber, as its counsel, took on the responsibility of representing them during the proceedings before the NEA. From the foregoing recitals, it appears, therefore, that Bereber assumed the dual role of a director and lawyer of CAPELCO.

• Bearing in mind his roles as director and lawyer of CAPELCO, the issue for consideration of this Court is whether Bereber is guilty of representing conflicting interests in violation of the pertinent provisions of the Code of Professional Responsibility (CPR) when he appeared as counsel for the accused members and management staff of CAPELCO in a case filed against them by CAPELCO member-consumers of District III.

• Notably, the absence of an attorney-client relationship between Bereber and Burgos is an essential element of Bereber’s defense to the charge of conflict of interest.

• On the basis of the attendant facts of the case, we find no conflict of interest when Bereber appeared as counsel before the NEA for the accused directors and management staff of CAPELCO.

• The Court finds insufficient evidence which would confirm the presence of an attorney-client relationship between Burgos and Bereber. We are inclined to believe the defense of Bereber, i.e., that at no instance did Burgos obtain Bereber’s legal advice in connection with the pending NEA complaint and/or Audit Report, in as much as Burgos made no attempt to refute such allegations decisive of this controversy.

• In his attempt to show even a semblance of an attorney-client relationship between him and Bereber, Burgos suggested that Bereber is a supposed “representative” of District III from which the complainants of the NEA case, such as Burgos, are also member-consumers thereof. This Court, however, agrees with the finding of the IBP that Bereber, as CAPELCO director, represents the entire membership of CAPELCO, and not just the member-consumers of District III. In any case, Burgos failed to establish that Bereber was engaged as counsel by the member-consumers of District III.

Moreover, a lawyer can be said to be representing conflicting interests specifically in circumstances when he, having been engaged as counsel for a corporation, subsequently represents the members of the same corporation’s board of directors in a derivative suit filed against them. To be clear, a corporation in a derivative suit is the real party in interest, while the stockholder filing suit in the corporation’s behalf would only be considered a nominal party.25 This is clearly wanting in this case. While the facts established on record reveal that Bereber assumed the role as counsel of CAPELCO, the administrative complaint filed before the NEA against the accused CAPELCO directors and managerial staff were brought by Burgos and other consumer-members in their individual capacities and not in behalf of CAPELCO.

• This Court is also not inclined to mete out disciplinary punishment on Bereber on the allegation of his supposed lack of “delicadeza” or sense of decency in this case because it is not a legal ground for administrative disciplinary action under the CPR. At best, Bereber can be said to have merely exercised independence of judgment as a lawyer when he defended the interests of other member-consumers of CAPELCO.

• Indeed, while “[t]his Court will not hesitate to mete out [the] proper disciplinary punishment upon lawyers who are shown to have failed to live up to their sworn duties, x x x neither will it hesitate to extend its protective arm to them when the accusation against them is not indubitably proven.”


Canon III, 2023 Code of Professional Responsibility

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