Lee vs. Simando

A lawyer is prohibited from representing conflicting interests, and this proscription applies even where the conflicting interests arise with respect to the same general matter, however slight the adverse interest may be, and even if the conflict pertains to the lawyer's private activity or performance of a function in a non-professional capacity. The test is whether the lawyer would be called upon to use against a former client any confidential information acquired through their connection or previous employment, and the termination of the attorney-client relationship does not justify representing an interest adverse to the former client.

Dr. Teresita Lee was a client of Atty. Amador L. Simando, who served as her retained counsel from November 2004 until January 8, 2008, with a monthly retainer fee of Three Thousand Pesos (Php3,000.00). Atty. Simando also represented Felicito M. Mejorado in a claim for informer's reward against the Bureau of Customs. The case is an administrative disciplinary proceeding arising from the respondent's conduct in facilitating a financial transaction between his two clients.

Dr. Teresita Lee was a client of Atty. Amador L. Simando, who served as her retained counsel from November 2004 until January 8, 2008, with a monthly retainer fee of Three Thousand Pesos (Php3,000.00). During this period, Atty. Simando approached Dr. Lee and asked if she could help a certain Felicito M. Mejorado, who was awaiting the release of his claim for informer's reward from the Bureau of Customs. Dr. Lee initially refused because she did not know Mejorado personally and was not in the business of lending money. Atty. Simando allegedly persisted, assuring her that Mejorado would pay his obligation and would issue postdated checks and sign promissory notes. He even offered to be the co-maker of Mejorado and assured her that the obligation would be paid when due, saying: "Ipapahamak ba kita, kliyente kita"; "Sigurado ito, kung gusto mo, gagarantiyahan ko pa ito, at pipirma din ako"; "Isang buwan lang, at hindi hihigit sa dalawang buwan ito, bayad ka na."

Due to Atty. Simando's persistence, daily calls, and frequent visits, Dr. Lee finally agreed to give Mejorado sizeable amounts of money. Respondent acted as co-maker with Mejorado in various cash loans: Php400,000.00 on November 11, 2006; Php200,000.00 on November 24, 2006; Php400,000.00 on November 27, 2006; Php200,000.00 on December 7, 2006; and Php200,000.00 on December 13, 2006, totaling Php1,400,000.00. When the obligation became due, Mejorado failed and refused to comply despite repeated demands. Dr. Lee instructed Atty. Simando, who was still her lawyer, to initiate legal action against Mejorado. Atty. Simando said he would get in touch with Mejorado and ask him to pay without resorting to legal action. However, even after several months, Mejorado still failed to pay. When Dr. Lee reminded Atty. Simando that he was supposed to be the co-maker of the obligation, he replied: "Di kasuhan din ninyo ako!" Despite repeated requests, respondent ignored her and failed to bring legal actions against Mejorado, forcing Dr. Lee to terminate her contract with him in January 2008.

Subsequently, Dr. Lee's new lawyer, Atty. Gilbert Morandarte, sent a demand letter dated June 13, 2008 to Atty. Simando in his capacity as co-maker of some of the loans of Mejorado. In his Letter dated June 30, 2008, respondent denied his liability as a co-maker and claimed that novation had occurred because complainant had allegedly given additional loans to Mejorado without his knowledge. Dr. Lee then accused Atty. Simando of violating the trust and confidence she gave upon him as her lawyer and of taking advantage of their professional relationship to get a loan for his client.

In his Answer, Atty. Simando claimed that complainant, who was engaged in lending money at a high interest rate, was the one who initiated the financial transaction. He narrated that complainant asked him if Mejorado was his client, and when he affirmed, she signified willingness to give money for Mejorado's financial needs. He stressed that Dr. Lee gave Mejorado a total of Php700,000.00 as an investment but he signed as co-maker in all the receipts showing double the amount or Php1,400,000.00. He claimed that from the time Mejorado and Dr. Lee became close, the latter gave Mejorado additional investments, one Silverado Pick-up at ₱500,000.00, and fifty sacks of old clothings, all without his knowledge. He alleged that with Dr. Lee's investment of around ₱2 Million, she required Mejorado to issue five checks with a total value of ₱7,033,500.00. He denied refusing to take legal action and insisted he did not violate the lawyer-client relationship since Dr. Lee voluntarily made the financial investment and he merely introduced complainant to Mejorado.

In her Reply, Dr. Lee denied that what she entered into was a mere investment, insisting it was a loan with respondent as co-maker. She submitted written loan agreements/receipts categorically stating that the money received was a loan with due dates, signed by Mejorado and respondent as co-maker. She also lamented that respondent divulged confidential information he had acquired while he was still her lawyer and used it against her in the present case. Both parties failed to appear during the mandatory conference on January 15, 2010, and the IBP terminated the conference and required the parties to submit their position papers.

• Conflict of Interest: Dr. Lee argued that Atty. Simando violated the trust and confidence she gave upon him as her lawyer and took advantage of their professional relationship to obtain a loan for his client Mejorado, who was also his client.
• Co-maker Liability: Dr. Lee insisted that the transaction was a loan, not an investment, as shown by written loan agreements/receipts categorically stating that the money received was a loan with due dates, signed by Mejorado and respondent as co-maker.
• Novation: Dr. Lee argued that respondent's claim of novation holds no water since what she was collecting was merely his obligation pertaining to the loan amounting to Php1,400,000.00 only, and nothing more.
• Violation of Confidentiality: Dr. Lee maintained that respondent divulged confidential information he had acquired while he was still her lawyer and used it against her in the present case, constituting another unethical conduct.

• Initiation of Transaction: Atty. Simando claimed that complainant, who was engaged in lending money at a high interest rate, was the one who initiated the financial transaction between her and Mejorado.
• Investment, Not Loan: Respondent stressed that Dr. Lee gave Mejorado a total of Php700,000.00 as an investment but he signed as co-maker in all the receipts showing double the amount or Php1,400,000.00.
• No Conflict of Interest: Atty. Simando insisted there was no conflict of interest because he was Mejorado's lawyer relative to the latter's claim for informer's reward, and not Mejorado's lawyer against Dr. Lee, and there was no case between Mejorado and Dr. Lee that he was handling for both of them.
• No Refusal to Take Legal Action: Respondent claimed that complainant never instructed him to file legal action since the latter knew that Mejorado is obligated to pay only upon receipt of his informer's reward.
• Novation: Respondent claimed in his Letter dated June 30, 2008 that novation had occurred because complainant had allegedly given additional loans to Mejorado without his knowledge.

• Conflict of Interest: Whether Atty. Simando violated the proscription against representing conflicting interests when he facilitated a loan transaction between his two clients and signed as co-maker.
• Violation of Client Confidentiality: Whether Atty. Simando violated Rule 21.01 of the Code of Professional Responsibility by divulging confidential information acquired during his lawyer-client relationship with Dr. Lee.

• Conflict of Interest: Yes. Substantial evidence established respondent's violation of the parameters against representing conflicting interests, as shown by the undisputed lawyer-client relationship with complainant, his admission that Mejorado was another client, his introduction of the two clients for a financial transaction, and his signing as co-maker to the loan agreement.
• Violation of Client Confidentiality: Yes. Respondent was found guilty of violating Rule 21.01 of the Code of Professional Responsibility when he divulged information acquired in confidence during the existence of his lawyer-client relationship with complainant in his last-ditch effort to impeach her credibility.

• Conflict of Interest: The Court applied the three tests from jurisprudence in determining whether a lawyer is guilty of representing conflicting interests: (1) whether 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) whether the acceptance of a new relation would prevent the full discharge of the lawyer's duty of undivided fidelity and loyalty to the client or invite suspicion of unfaithfulness or double-dealing; and (3) whether the 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 found substantial evidence supporting violation of these parameters: the undisputed lawyer-client relationship between complainant and Atty. Simando; Atty. Simando's admission that Mejorado was another client; his introduction of the parties for a financial transaction while knowing their interests could conflict; his consent and signing as co-maker to the loan agreement; and his subsequent actions of failing to act on Mejorado's failure to pay, denying liability despite signing as co-maker, and rebutting complainant's allegations while divulging confidential information. The Court held that it is improper for respondent to appear as counsel for one party against an adverse party who is also his client, since a lawyer is prohibited from representing conflicting interests. Respondent's assertion that there was no conflict because the clients were his in unrelated cases failed to convince, as his representation of opposing clients in both cases, though unrelated, obviously constitutes conflict of interest or, at the least, invites suspicion of double-dealing. The Court also rejected respondent's argument that the money received was an investment and not a loan, noting that it is objectionable that a lawyer would sign as co-maker if he knew all along that the intention was a mere investment, and that as a lawyer he is aware of the nature of suretyship and the consequences of signing as co-maker. The proscription against representation of conflicting interests applies where the conflicting interests arise with respect to the same general matter however slight the adverse interest may be, and even if the conflict pertains to the lawyer's private activity or in the performance of a function in a non-professional capacity. The important criterion is probability, not certainty, of conflict.

• Violation of Client Confidentiality: The Court found respondent guilty of violating Rule 21.01 of the Code of Professional Responsibility, which provides that a lawyer shall not, to the disadvantage of his client, use information acquired in the course of employment, nor shall he use the same to his own advantage or that of a third person, unless the client with full knowledge of the circumstances consents thereto. In his last-ditch effort to impeach the credibility of complainant, respondent divulged information he acquired in confidence during the existence of their lawyer-client relationship. Citing Nombrado vs. Hernandez, the Court held that the termination of the relation of attorney and client provides no justification for a lawyer to represent an interest adverse to or in conflict with that of the former client, because the client's confidence once reposed cannot be divested by the expiration of the professional employment. A lawyer should not, even after the severance of the relation with his client, do anything which will injuriously affect his former client in any matter in which he previously represented him, nor should he disclose or use any of the client's confidences acquired in the previous relation. The Court reiterated that lawyers are enjoined to look at any representation situation from "the point of view that there are possible conflicts" and "to think in terms of impaired loyalty" to evaluate if their representation in any way will impair loyalty to a client.

• Conflict of Interest (Three Tests) — The Court applied three tests in determining whether a lawyer is guilty of representing conflicting interests: (1) whether 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) whether the acceptance of a new relation would prevent the full discharge of the lawyer's duty of undivided fidelity and loyalty to the client or invite suspicion of unfaithfulness or double-dealing in the performance of that duty; and (3) whether the 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 found substantial evidence supporting respondent's violation of these parameters.
• Proscription Against Conflicting Interests (Scope) — The proscription against representation of conflicting interests finds application where the conflicting interests arise with respect to the same general matter however slight the adverse interest may be. It applies even if the conflict pertains to the lawyer's private activity or in the performance of a function in a non-professional capacity. In determining whether there is a conflict of interest, the important criterion is probability, not certainty, of conflict.
• Continuing Duty of Confidentiality After Termination of Attorney-Client Relationship — The termination of the relation of attorney and client provides no justification for a lawyer to represent an interest adverse to or in conflict with that of the former client. The client's confidence once reposed cannot be divested by the expiration of the professional employment. A lawyer should not, even after the severance of the relation with his client, do anything which will injuriously affect his former client in any matter in which he previously represented him, nor should he disclose or use any of the client's confidences acquired in the previous relation.

• "Clearly, it is improper for respondent to appear as counsel for one party (complainant as creditor) against the adverse party (Mejorado as debtor) who is also his client, since a lawyer is prohibited from representing conflicting interests. He may not, without being guilty of professional misconduct, act as counsel for a person whose interest conflict with that of his present or former client." — This passage states the core ratio decidendi on the conflict of interest issue, articulating the fundamental prohibition against a lawyer representing conflicting interests.
• "It must be stressed that the proscription against representation of conflicting interests finds application where the conflicting interests arise with respect to the same general matter however slight the adverse interest may be. It applies even if the conflict pertains to the lawyer's private activity or in the performance of a function in a non-professional capacity. In the process of determining whether there is a conflict of interest, an important criterion is probability, not certainty, of conflict." — This passage defines the broad scope of the conflict of interest proscription, including its application to a lawyer's private activities and the probability standard for determining conflict.
• "We held in Nombrado v. Hernandez that the termination of the relation of attorney and client provides no justification for a lawyer to represent an interest adverse to or in conflict with that of the former client. The reason for the rule is that the client's confidence once reposed cannot be divested by the expiration of the professional employment." — This passage articulates the continuing duty of confidentiality that survives the termination of the attorney-client relationship.

• Josefina M. Aninon vs. Atty. Clemencio Sabitsana, Jr., A.C. No. 5098, April 11, 2012 — Cited as the source of the three tests for determining whether a lawyer is guilty of representing conflicting interests; controlling precedent applied to the facts of the case.
• Quiambao vs. Atty. Bamba, A.C. No. 6708, August 25, 2005, 465 SCRA 1, 13 — Cited for the proposition that the proscription against representation of conflicting interests applies where the conflicting interests arise with respect to the same general matter however slight the adverse interest may be, and that the important criterion is probability, not certainty, of conflict.
• Nombrado vs. Hernandez, 135 Phil. 5, 9 (1968) — Cited for the rule that the termination of the attorney-client relationship provides no justification for a lawyer to represent an interest adverse to or in conflict with that of the former client, and that the client's confidence once reposed cannot be divested by the expiration of the professional employment.
• Heirs of Falame vs. Atty. Baguio, A.C. No. 6876, March 7, 2008, 548 SCRA 1, 15 — Cited for the proposition that lawyers are enjoined to look at any representation situation from "the point of view that there are possible conflicts" and "to think in terms of impaired loyalty."

• Rule 21.01, Code of Professional Responsibility — Provides that a lawyer shall not, to the disadvantage of his client, use information acquired in the course of employment, nor shall he use the same to his own advantage or that of a third person, unless the client with full knowledge of the circumstances consents thereto. The Court found respondent guilty of violating this rule when he divulged confidential information acquired during his lawyer-client relationship with complainant.

Presbitero J. Velasco, Jr. (Chairperson), Roberto A. Abad, Jose Catral Mendoza, and Marvic Mario Victor F. Leonen.