De Guzman vs. De Dios

A lawyer violates the prohibition against representing conflicting interests when, after being retained by a client to form a corporation, the lawyer subsequently represents the corporation in actions adverse to the original client and acquires shares in the same corporation as payment for legal services.

Complainant Diana D. De Guzman engaged Atty. Lourdes I. De Dios in 1995 to form Suzuki Beach Hotel, Inc. (SBHI), a corporation intended for a hotel and restaurant business in Olongapo City. Complainant became the majority stockholder, subscribing to 29,800 shares and paying an initial P745,000. Respondent received a monthly retainer fee of P5,000 from complainant. Disputes later arose between complainant and the Japanese investors regarding fund misappropriation, leading the board of directors—upon respondent's advice—to call for the payment of unpaid subscriptions and subsequently auction off complainant's delinquent shares.

• Retention and Incorporation: In 1995, complainant engaged respondent to form a corporation for a hotel and restaurant business. Respondent assisted in registering SBHI with the Securities and Exchange Commission on January 10, 1996. Complainant paid respondent a monthly retainer fee of P5,000.
• Call for Unpaid Subscriptions: On December 15, 1997, the corporation required complainant to pay her unpaid subscribed shares amounting to P2,235,000 on or before December 30, 1997.
• Auction and Ouster: On January 29, 1998, complainant received notice of a public auction sale of her delinquent shares and a copy of a board resolution dated January 6, 1998, authorizing such sale. Complainant's shares were acquired by Ramon del Rosario, an incorporator, resulting in her complete ouster from the corporation.
• Conflict of Interest and Acquisition of Shares: Respondent appeared as counsel in a case involving complainant, claiming her appearance was to protect SBHI's interests as the real owner of the disputed land. Respondent eventually became the president of SBHI. Del Rosario transferred 100 shares to respondent in payment for legal services, as evidenced by a Deed of Waiver and Transfer of Corporate Shares of Stock.

• Conflict of Interest: Petitioner argued that respondent violated Canon 15, Rule 15.03 of the Code of Professional Responsibility by representing conflicting interests.
• Acquisition of Property in Litigation: Petitioner maintained that respondent violated Article 1491 of the Civil Code by acquiring property in litigation.
• Breach of Trust: Petitioner alleged that she relied on respondent's advice and believed that, as counsel for the majority stockholder, respondent would help her with the management of the corporation.
• Attorney-Client Relationship: Petitioner pointed out that respondent appeared as her counsel and signed pleadings in a case where complainant was a party, thereby establishing an attorney-client relationship.

• Best Interest of Client: Respondent countered that her acts were not motivated by ill will and were done in the best interest of her client, SBHI.
• No Attorney-Client Relationship with Complainant: Respondent argued that complainant misunderstood her role, as she was the legal counsel of SBHI, not complainant, and her appearance in the case was to protect SBHI's rights as the real owner of the land.
• Justification for Ouster: Respondent maintained that complainant misappropriated corporate funds and property, causing the relationship with Japanese investors to sour. To save the corporation from bankruptcy, respondent advised stockholders to call for the payment of unpaid subscriptions and the subsequent sale of delinquent shares.

• Conflict of Interest: Whether respondent violated the prohibition against representing conflicting interests under Canon 15, Rule 15.03 of the Code of Professional Responsibility.
• Attorney-Client Relationship: Whether an attorney-client relationship existed between complainant and respondent.
• Acquisition of Property: Whether respondent violated Article 1491 of the Civil Code by acquiring property in litigation.

• Conflict of Interest: The prohibition against representing conflicting interests was violated. Respondent represented conflicting interests by acting against her original client, complainant, in favor of the corporation, eventually becoming its president and colluding with the board of directors to oust complainant.
• Attorney-Client Relationship: An attorney-client relationship was established. Complainant retained respondent to form the corporation, and respondent appeared as counsel on behalf of complainant in a legal proceeding.
• Acquisition of Property: Respondent violated Article 1491 of the Civil Code and her lawyer's oath by acquiring 100 shares of the corporation in payment for legal services while the dispute over the corporate shares was ongoing, constituting unlawful acquisition of property in litigation.

• Prohibition against representing conflicting interests — A lawyer cannot represent a client whose interest is adverse to that of a former client in the same or substantially related matter. Applied here where respondent, initially retained by complainant to form the corporation, subsequently represented the corporation in actions adverse to complainant, leading to complainant's ouster.
• Lawyer's Oath as a source of obligation — The lawyer's oath is a source of obligations, and violation thereof is a ground for suspension, disbarment, or other disciplinary action. Applied here where respondent was found remiss in her sworn duty to her client and to the bar by engaging in deceitful conduct and representing conflicting interests.

• "To say that lawyers must at all times uphold and respect the law is to state the obvious, but such statement can never be overemphasized. Considering that, 'of all classes and professions, [lawyers are] most sacredly bound to uphold the law,' it is imperative that they live by the law. Accordingly, lawyers who violate their oath and engage in deceitful conduct have no place in the legal profession."

• Resurreccion v. Sayson, 300 SCRA 129 (1998) — Cited as controlling precedent for the principle that lawyers must conduct themselves with honesty and integrity, and those who engage in deceitful conduct have no place in the legal profession.
• Magdaluyo v. Nace, A.C. 3808 (February 2, 2000) — Followed for the proposition that the lawyer's oath is a source of obligations and its violation is a ground for suspension, disbarment, or other disciplinary action.

• Canon 15, Rule 15.03, Code of Professional Responsibility — Prohibits a lawyer from representing conflicting interests. Applied to find respondent liable for representing the corporation against her original client.
• Canon 1, Rule 1.01, Code of Professional Responsibility — Prohibits lawyers from engaging in unlawful, dishonest, immoral, or deceitful conduct. Applied to respondent's actions in colluding to oust complainant.
• Article 1491, Civil Code — Prohibits lawyers from acquiring property in litigation. Applied to respondent's acquisition of 100 shares in payment for legal services during the corporate dispute.
• Lawyer's Oath — Requires lawyers to do no falsehood or consent to its commission and to conduct themselves according to the best of their knowledge and discretion. Violated by respondent's deceitful conduct.

Davide, Jr., Puno, Kapunan, and Ynares-Santiago, JJ.