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Prohibition against acquiring interest in object of litigation or transaction, C3S51 CPRA

Section 51, Canon III

SECTION 51. Prohibition against acquiring interest in object of litigation or transaction. – A lawyer shall not acquire, directly or indirectly, a proprietary interest in the property or rights which is the object of any litigation or transaction in which the lawyer may take part by virtue of the profession. (2023 Code of Professional Responsibility and Accountability or CPRA)

1. Prohibition against acquiring interest in object of litigation or transaction

a. Prohibited interest

Under this section, whether directly or indirectly, lawyers are prohibited rom acquiring “a proprietary interest in the property or rights which is the object of any litigation or transaction in which the lawyer may take part by virtue of the profession.”

Similarly, the Civil Code provides the same provision:

Article 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another:
x x x x
(5) Justices, judges, prosecuting attorneys, clerks of superior and inferior courts, and other officers and employees connected with the administration of justice, the property and rights in litigation or levied upon an execution before the court within whose jurisdiction or territory they exercise their respective functions; this prohibition includes the act of acquiring by assignment and shall apply to lawyers, with respect to the property and rights which may be the object of any litigation in which they may take part by virtue of their profession.

b. Public policy and interests

The prohibition, which rests on considerations of public policy and interests, is intended to curtail any undue influence of the lawyer upon his client on account of his fiduciary and confidential relationship with him. (Melad-Ong v. Sabban, En Banc, A.C. No. 10511, January 04, 2022, Per Curiam)

Undeniably, the Civil Code, in relation to the canons of professional ethics, prohibit the purchase by lawyers of any interest in the subject matter of the litigation in which they participated by reason of their profession. The rationale behind this prohibition is founded on public policy, which disallows such transactions in view of the fiduciary relationship involved, i.e., the relation of trust and confidence and the peculiar control exercised by these persons. The prohibition seeks to prevent the undue advantage that an attorney, by virtue of his office, may take through the credulity and ignorance of his client. (Ricardo, Jr. v. Go, A.C. No. 12280, September 16, 2020, Per Reyes, J. Jr., J.)

c. Coverage

For lawyers, the prohibition applies to all properties of their clients which were subject of a litigation that they took part in. (Melad-Ong v. Sabban [2022], supra.)

Guevarra v. Calalang, A.C. No. 681, September 30, 1982, Per Guttierez, Jr., J.:

• It was not professional misconduct or unethical practice for the respondent to acquire the rights and interests of his client to the 439 square meter parcel of land subject of the administrative charges because the land was not involved in the litigation he was handling. The land was acquired by Bernabe Flores in an execution sale conducted to satisfy the judgment secured in the course of Civil Case No. 2171. The case handled by the respondent was for damages.

Santos v. Arrojado, A.C. No. 8502, June 27, 2018, Per Del Castillo, J.:

• Undeniably, Article 1491(5) of the Civil Code prohibits the purchase by lawyers of any interest in the subject matter of the litigation in which they participated by reason of their profession. Here, however, respondent lawyer was not the purchaser or buyer of the property or rights in litigation. For, in point of fact, it was his son Julius, and not respondent lawyer, who purchased the subject property.

• Were we to include within the purview of the law the members of the immediate family or relatives of the lawyer laboring under disqualification, we would in effect be amending the law. We apply to this case the old and familiar Latin maxim expressio unius est exclusio alterius, which means that the express mention of one person, thing, act, or consequence excludes all others. Stated otherwise, “where the terms are expressly limited to certain matters, it may not, by interpretation or construction, be stretched or extended to other matters.”

• Concededly, Article 1491 provides that “[t]he following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another xxx.” However, perusal of the records would show that complainant failed to adduce any shred of evidence that Julius acted or mediated on behalf of respondent lawyer, or that respondent lawyer was the ultimate beneficiary of the sale transaction. The mere fact that it was Julius, son of respondent lawyer, who purchased the property, will not support the allegation that respondent lawyer violated Article 1491(5) of the Civil Code. As aptly noted by the Investigating Commissioner, “[t]here is no evidence to show that respondent had used his son as a conduit to gain the property in question xx x.”

1) During pendency of litigation

[F]or the prohibition to apply, the sale or assignment of the property must take place during the pendency of the litigation involving the property to which the lawyer participated. (Ricardo, Jr. v. Go [2020], supra.)

Ricardo, Jr. v. Go, A.C. No. 12280, September 16, 2020, Per Reyes, J. Jr., J.:

• In this regard, we sustain respondent’s position that the prohibition under Article 1491(5) is inapplicable.

• Contrary to complainant’s misleading allegations in this case, respondent’s interest in the subject property was acquired before he intervened as collaborating counsel for ICCSC and that said interest is, in fact, not inconsistent with that of his client. Too, it is noteworthy that the authority given by ICCSC to respondent to represent it as collaborating counsel was specifically limited to LRC Case No. 3732, which already attained finality per the Court’s Resolution dated February 19, 2018.

• The fact that his law firm was Standard Chartered’s counsel in the extra-judicial foreclosure proceedings is likewise of no moment. Records show that his firm’s participation in the proceedings was already concluded after the consolidation of title in ICCSC’s name upon Spouses Ricardo’s failure to exercise their right of redemption, or even before the institution of Civil Case No. CEB-33420. It is important to emphasize that after said 3732. Evidently, it was not professional misconduct or unethical practice for respondent to acquire the property as the same was not involved in any litigation he was handling when he acquired the same.

2) Upon approval of compromise agreement

Melad-Ong v. Sabban, En Banc, A.C. No. 10511, January 04, 2022, Per Curiam:

• In this case, respondent acquired by purchase from Concepcion a portion of the contested property as evidenced by the Deeds of Absolute Sale executed on April 1, 2008, the same day that the Compromise Agreement was judicially approved. It can be gleaned from this that respondent has had interest over the property even while the case was pending and immediately grabbed the opportunity to buy it upon approval of the Compromise Agreement so as to avoid the prohibition under Article 1491. The fact that the property was bought at the same date as the approval of the Compromise Agreement shows the propensity of respondent to circumvent the mandate of the law which is that respondent, as a lawyer, is prohibited from acquiring, either by purchase or assignment, the property and rights of his client that were involved in a litigation in which he took part in.

• Further, respondent violated Article 1491 of the Civil Code when he and his father, Atty. Benito, illegally retained about 7 hectares of the land subject of the litigation while the case was still pending. It is evidenced by the Order of the DAR dated November 3, 1995, granting Atty. Benito’s application for retention of the land for himself and for respondent. Likewise, it is bolstered by the Motion for Intervention with Consolidated Petition for Intervention and for Partial Lifting of Lis Pendens filed by Atty. Benito and notarized by respondent in Civil Case No. 3413 before RTC Branch 2 of Tuguegarao, Cagayan. In the said Motion, Atty. Benito sought to exclude the 10 hectares of the subject property ceded and transferred to him by Concepcion by virtue of the Deed of Confirmation of Attorney’s Fees. These pieces of evidence prove that respondent has known and consented to the acts of his father taking interest in the property in Civil Case No. 3413. Respondent was even granted the retention of two hectares of the subject land in contravention of the prohibition under Article 1491 of the Civil Code.

• Public policy prohibits these transactions in view of the fiduciary relationship involved between the lawyer and his client. It is intended to curtail any undue influence of the lawyer upon his client. Greed may get the better of the sentiments of loyalty and disinterestedness. Any violation of this prohibition would constitute malpractice and is a ground for suspension.

References

Canon III, 2023 Code of Professional Responsibility

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