Uy Chico vs. The Union Life Assurance Society, Limited, et al.

The attorney-client privilege does not protect an attorney’s testimony concerning a communication or act intended to be conveyed to a third person and acted upon by that third person; such testimony is admissible, and a client who acquiesces in a compromise effected through his attorney cannot later disavow it.

Uy Chico was engaged in the dry goods business formerly conducted by his deceased father, Uy Layco, and the defendant The Union Life Assurance Society, Limited, had issued insurance policies covering a stock of dry goods. The dispute also involved the estate of Uy Layco and its administrator, whose compromise with the insurer became central to the litigation. The applicable statutory framework included Act No. 190, which regulated attorney-client privilege and the testimony of lawyers.

Uy Chico brought this action to recover the face value of two insurance policies upon a stock of dry goods destroyed by fire. His father had died in 1897, at which time he was conducting a business under his own name, Uy Layco. The plaintiff and his brother took over the business and continued it under the same name, “Uy Layco.” Sometime before the date of the fire, the plaintiff purchased his brother’s interest in the business and continued to carry on the business under the father’s name. At the time of the fire, “Uy Layco” was heavily indebted, and subsequent thereto the creditors of the estate of the plaintiff’s father were involved in the proceedings.

During the course of these proceedings, the plaintiff’s attorney surrendered the policies of insurance to the administrator of the estate, who compromised with the insurance company for one-half their face value, or P6,000. This money was paid into court and was being held by the sheriff. The plaintiff then brought this action, maintaining that the policies and goods insured belonged to him and not to the estate of his deceased father, and alleging that he was not bound by the compromise effected by the administrator of his father’s estate.

The defendant insurance company sought to show that the plaintiff had agreed to a compromise settlement of the policies. For that purpose, it introduced evidence showing that the plaintiff’s attorney had surrendered the policies to the administrator with the understanding that such a compromise was to be effected. While on the witness stand, the plaintiff was asked if he had any objection to his attorney’s testifying concerning the surrender of the policies, and he replied in the negative. The attorney was then called for that purpose. Whereupon, counsel for the plaintiff formally withdrew the waiver previously given by the plaintiff and objected to the attorney’s testimony on the ground that it was privileged.

The attorney testified that when he delivered the policies to the administrator, he understood that there was a compromise to be effected, and that when he informed the plaintiff of the surrender of the policies for that purpose, the plaintiff made no objection whatever. The trial court overruled the privilege objection. The Supreme Court found the evidence sufficient to show that the plaintiff acquiesced in the compromise settlement of the policies.

• Ownership and Non-Binding Compromise: Plaintiff maintained that the policies and goods insured belonged to him and not to the estate of his deceased father, and alleged that he was not bound by the compromise effected by the administrator of his father’s estate.
• Withdrawal of Privilege Waiver: Counsel argued that a waiver of the client’s privilege may be withdrawn at any time before acted upon, citing Ross vs. Great Northern Ry. Co. and Natlee Draft Horse Co. vs. Cripe and Co.
• Privileged Testimony: Plaintiff objected to the attorney’s testimony on the ground that it was privileged after formally withdrawing the waiver he had previously given.

• Compromise Agreement: The defendant insurance company sought to show that the plaintiff had agreed to a compromise settlement of the policies.
• Evidence of Surrender: It introduced evidence that the plaintiff’s attorney had surrendered the policies to the administrator with the understanding that such a compromise was to be effected.

• Attorney-Client Privilege: Whether the testimony of the plaintiff’s attorney concerning the surrender of the policies to the administrator was privileged.
• Withdrawal of Waiver: Whether the plaintiff could withdraw his waiver of the attorney-client privilege after stating he had no objection to the attorney’s testimony.
• Acquiescence in Compromise: Whether the plaintiff was bound by the compromise settlement of the policies.

• Attorney-Client Privilege: No. The testimony concerned the attorney’s dealings with a third person and was intended to be communicated to and acted upon by that third person; it was therefore not a privileged communication under Act No. 190.
• Withdrawal of Waiver: Not reached. Because the testimony was not privileged, the withdrawal question did not need to be resolved; the objection was properly overruled.
• Acquiescence in Compromise: Yes. The evidence showed the plaintiff made no objection when informed of the surrender of the policies for compromise, so he acquiesced and could not disavow the compromise.

• Attorney-Client Privilege: Act No. 190, Sec. 31 and Sec. 383, No. 4, prohibited a lawyer from testifying without the client’s consent in open court to facts imparted in professional consultation or for legal advice. The privilege, however, protects communications not intended for third persons or to be acted upon by them, but for advising the client of his rights. A communication made by a client to his attorney for the express purpose of being communicated to a third person is inconsistent with the confidential relation. When the attorney delivers the communication to the intended third person and the latter acts upon it, the communication is no longer privileged between attorney and client; the attorney merely acts as intermediary or agent. The evidence here concerned the attorney’s dealings with the administrator and the surrender of the policies with an understanding that a compromise would be effected. Thus, the objection was properly overruled.
• Withdrawal of Waiver: Because the testimony was not privileged, the question whether a waiver could be withdrawn before being acted upon did not need to be resolved. The preliminary question of privilege was answered against the plaintiff, and the testimony was admissible.
• Acquiescence in Compromise: The attorney testified that when he delivered the policies to the administrator, he understood a compromise was to be effected, and that when he informed the plaintiff of the surrender for that purpose, the plaintiff made no objection. This was sufficient to show the plaintiff acquiesced in the compromise settlement. Having agreed to the compromise, he could not disavow it and maintain an action to recover the policies’ face value.

• Attorney-Client Privilege — Communications Intended for Third Persons — The privilege does not attach to a communication made by a client to his attorney for the express purpose of being communicated to a third person. Once the attorney delivers the communication to the intended third person and the latter acts upon it, the communication is essentially between the client and the third person, with the attorney merely serving as intermediary or agent. The Court applied this to hold that the attorney’s testimony about surrendering the policies to the administrator for compromise was not privileged.
• Attorney as Agent for Compromise — An attorney who, on his client’s authority, contracts or compromises with a third person may testify as to his authority to do so. The Court relied on the principle that allowing a client to close the attorney’s mouth after the attorney has acted would create a perilous facility for fraud and wrong upon the attorney and the third person. Applied to admit the attorney’s testimony regarding the compromise.
• Acquiescence in Compromise — A client who is informed that his attorney has surrendered property to a third person for the purpose of effecting a compromise and who makes no objection acquiesces in the compromise. Such acquiescence binds the client, who cannot later disavow the compromise and sue to recover the property’s face value. Applied to bar Uy Chico’s action.

• "It will be noted that the evidence in question concerned the dealings of the plaintiff's attorney with a third person. Of the very essence of the veil of secrecy which surrounds communications made between attorney and client, is that such communications are not intended for the information of third persons or to be acted upon by them, put of the purpose of advising the client as to his rights." — This passage defines the scope of the attorney-client privilege and explains why the testimony at issue fell outside it.
• "It is evident that a communication made by a client to his attorney for the express purpose of its being communicated to a third person is essentially inconsistent with the confidential relation." — This states the core exception to the privilege applied by the Court.
• "The evidence is sufficient to show that the plaintiff acquiesced in the compromise settlement of the policies. Having agreed to the compromise, he cannot now disavow it and maintain an action for the recovery of their face value." — This is the ratio for binding the plaintiff to the compromise.
• "It is manifest that the objection to the testimony of the plaintiff's attorney as to his authority to compromise was properly overruled." — This is the holding on admissibility.

• Koeber vs. Sommers, 108 Wis. 497; 52 L.R.A. 512 — Quoted and relied upon for the rule that a client cannot nullify his attorney’s authorized act by closing the attorney’s mouth as to the authority; supports admissibility of attorney testimony on compromise.
• Ross vs. Great Northern Ry. Co., 101 Minn. 122; 111 N.W. 951 — Cited by appellant for the proposition that a waiver of privilege may be withdrawn before acted upon; the Court did not need to resolve that contention because the testimony was not privileged.
• Natlee Draft Horse Co. vs. Cripe and Co., 142 Ky. 810 — Also cited by appellant to support withdrawal of waiver; similarly not controlling because the privilege did not apply.
• Williams vs. Blumenthal, 27 Wash. 24 — Cited as authority allowing an attorney’s testimony as to compromises entered into on behalf of his client.
• Henderson vs. Terry, 62 Tex. 281; Shove vs. Martin, 85 Minn. 29; In re Elliott, 73 Kan. 151; Collins vs. Hoffman, 62 Wash. 278; Gerhardt vs. Tucker, 187 Mo. 46 — Cited as cases in which objections to attorney testimony on privilege grounds were overruled for communications made by an attorney to third persons.

• Sec. 31, Act No. 190 — Provided that a lawyer must strictly maintain inviolate the confidence and preserve the secrets of his client and shall not be permitted in any court, without the client’s consent given in open court, to testify to facts imparted in professional consultation or for obtaining legal advice. The Court construed it not to cover communications intended to be communicated to third persons.
• Sec. 383, No. 4, Act No. 190 — Contained a similar attorney-client privilege provision. The Court treated it as part of the statutory basis for the privilege but found the testimony outside its protection.

Arellano, C.J., Torres, Carson, and Araullo, JJ., concurred. Moreland, J., concurred in the result.