Home Guaranty Corporation vs. Atty. Lamberto T. Tagayano, Et. Al.,
A.C. No. 13131, February 23, 2022
Facts:
1. HGC engaged E.S.P. Collection Agency (ESP), which was represented by Atty. Panopio jointly with the Law Firm.
2. In 2003, HOC and ESP jointly with the Law Firm entered into a Collection Retainership Agreement, where HGC endorsed accounts for judicial and extrajudicial collection.
3. Consequently, HOC provided ESP and the Law Firm the necessary documents for collection and litigation purposes. HGC claimed that the Collection Retainership Agreement was renewed annually for several years, until HGC and ESP agreed to terminate their contractual relationship on October 23, 2013.
4. HGC claimed that respondents refused to return the documents, specifically 53 owner's duplicate copies of transfer certificates of title and other various documents, endorsed to the Law Firm in view of the termination of the Collection Retainership Agreement.
5. HGC claimed that Atty. Tagayuna (one of the partners of ESP and the Law Firm) was also the president of Blue Star Construction and Development Corporation (BSCDC). HGC averred that in 2012, BSCDC through Atty. Tagayuna initiated an arbitration case against it before the Construction Industry Arbitration Commission while the Collection Reiainership Agreement with ESP was still subsisting.
6. For their defense, respondents Atty. Tagayuna and Atty. Panopio claimed that the Collection Retainership Agreement was never extended until 2013; the contract expired on December 31, 2011 and was no longer renewed. Atty. Tagayuna admitted that he was an officer of BSCDC but not its counsel when the arbitration case was filed. He likewise insisted that the Collection Retainership Agreement was already expired when BSCDC filed the arbitration case against HGC on May 16, 2012.
Issues:
· Whether or not respondents violated Canon 15 of the Code of Professional Responsibility
· Whether or not respondents violated Canon 16 of the CPR
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Ruling:
FIRST ISSUE
No. The Supreme Court held that in determining whether a lawyer is guilty of violating the rules on conflict of interest under the CPR, it is essential to determine whether:
(1) "a lawyer is duty-bound to fight for an issue or claim in behalf of one client and, at the same time, to oppose that claim for the other client;"
(2) "the acceptance of a new relation would prevent the full discharge of a lawyer's duty of undivided fidelity and loyalty to the client or invite suspicion of unfaithfulness or doubledealing in the performance of that duty;" and
(3) "a lawyer would be called upon in the new relation to use against a former client any confidential information acquired through their connection or previous employment."
The Court finds that respondents did not violate the conflict of interest rule under the three tests.
Under the first test, there is conflict of interest if the lawyer represents both opposing parties in an issue or claim. The Court finds that there was no violation under the parameters of this test. Respondents did not represent conflicting interests-HGC's and BSCDC's interests-here. As found by the IBP, the Law Firm did not represent BSCDC as counsel in the arbitration case. The arbitration complaint was signed by Atty. Ruben L. Almadro as BSCDC's counsel. Atty. Almadro is not part or related to the Law Firm. On the other hand, Atty. Tagayuna merely signed as president to verify the complaint. Further, evidence show that the Law Firm and ESP were engaged by HGC for collection purposes only; as determined by the IBP, there is no proof that the Law Firm handled matters that were related to the arbitration case. Also, it was established that the Law Firm was no longer retained as counsel at the time of the filing of the arbitration case.
The Collection Retainership Agreement expired on December 31, 2011 and was never renewed, while the arbitration case was filed in May 2012.
For the second test, there is conflict of interest if the acceptance of a new relation or engagement will prevent the lawyer from faithfully performing his duties to a client. The second test is not relevant to the instant case; the factual circumstances did not include allegations of respondents' acceptance of a new relation while being counsel of HGC that prevented them from faithfully performing their duties to it.
The third test provides that there is conflict of interest if the lawyer, in a new relation, would be called upon to use against a former client any confidential information he has acquired through their connection or previous employment. The Court stated that "for there to be conflicting interests when a former client is involved, the following circumstances must concur: (a) the lawyer is called upon in his present engagement to make use against a former client confidential information, which was acquired through their connection or previous employment; and (b) the present engagement involves transactions that occurred during the lawyer's employment with the former client and matters that the lawyer previously handled for the said client."
Indeed, the professional relationship between the Law Firm and HGC expired on December 3 1, 2011. However, there is no proof that the Law Firm, in a new matter, used against HGC confidential information acquired from their previous relation. To reiterate, the subject of arbitration are matters not handled by the Law Firm; the Law Firm was engaged for collection purposes only.
SECOND ISSUE
Yes. It has been consistently held that any money or property collected for the client coming into the lawyer's possession should be promptly declared and reported to the client. The Court, however, recognizes that a lawyer is entitled to a lien over funds, documents and papers of his client which have lawfully come into his possession for purposes of satisfying the legal fees and disbursements due to him. Rule 16.03 of the CPR allows this upon prompt notice to the client. This is also provided in Section 37, Rule 138 of the Rules of Court. It is essential that the client consent to the application of his property or funds to the legal fees, in which case the lawyer may deduct what is due him and return the excess to the client. Absent the client's consent, the lawyer must return the funds to the client, without prejudice to the filing of a case to recover the unpaid fees.
Here, HGC claims that respondents failed to return documents related to the collection services, specifically 53 owner's duplicate copies of transfer certificates of title and other various documents, after the termination of their retainership agreement. Records show that respondents are no longer in possession of the documents that HGC claims to be unlawfully withheld. As found by the IBP, the titles were already returned by the Law Firm to HGC as evidenced by turnover letters as attached to respondents' position paper. The Court, however, takes note that as of the date of filing of the complaint in 2015, respondents have yet to return the documents. In other words, respondents are still in possession of some of these documents at the time of filing of the complaint. A careful examination of records show that they were returning documents to HGC up until 2018. They even admitted this in their position paper.
Respondents then claim that they were merely exercising their right to withhold to exercise retaining lien for unpaid fees. The Court, however, finds that the requisites to exercise lien were not met.
The Court acknowledges the fact that the documents were already returned to HGC during the pendency of this case. It remains, however, that respondents committed a violation of Canon 16 of the CPR at the time of the filing of the complaint. Considering these circumstances, the Court deems it proper to reprimand respondents, specifically Atty. Tagayuna and Atty. Panopio, with a stem warning that a repetition of a similar offense shall merit a heavier penalty.
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