ETRIII
REMEDIAL LAW REVIEW Lecture Series
Lecture
Outline No. 3
(PART 2)
Part 2
OUTLINE/ LECTURE ON
TESTIMONIAL EVIDENCE & DISQUALIFICATIONS
By: Atty. Eduardo T.
Reyes, III
(Prepared for Law 3-A,
University of San
Agustin Law School,
SY 2016-2017)
C.5. DEAD MAN STATUTE.
Section 23, Rule 130. Disqualification
by reason of death or insanity of adverse party. – Parties or assignors of parties to a case,
or persons in whose behalf a case is prosecuted, against an executor or
administrator or other representative of a deceased person, or against a person
of unsound mind, upon a claim or demand, against the estate of such deceased
person or before such person became of unsound mind.
-
Dead men tell no tales.
-
-
“Object and purpose of the rule- The object and purpose of the rule is to guard against
the temptation to give false testimony in regard of the transaction in question
on the part of the surviving party, and further to put the two parties to a
suit upon terms of equality in regard to the opportunity to giving testimony. If
one party to the alleged transaction is precluded from testifying by death,
insanity, or other mental disabilities, the other party is not entitled to the
undue advantage of giving his own uncontradicted and unexplained account of the
transaction. As has been said in an American case, “If the death has closed the
lips of one party, the policy of the law is to close the lips of the other”[1].
-
Requisites.
1)
That the witness is a party or assignor of a party to a
case or of a person in whose behalf a case is prosecuted;
2)
That the action is against an executor or administrator
or the representative of a deceased person, or against a person of unsound
mind;
3)
That the subject-matter of the action is a claim or
demand against the estate of such deceased person or against such person of
unsound mind; and
4)
That his testimony refers to any matter of fact which
occurred before the death of such deceased person or before such person
became of unsound mind.
c.5.1. Is the Dead Man Statute
Applicable to a Counterclaim? And Who is the assignor of a party who is also
disqualified under the rule.
Case law[2] teaches:
“SEC. 23. Disqualification
by reason of death or insanity of adverse party.-- Parties or assignors of parties to a
case, or persons in whose behalf a case is prosecuted, against an executor or
administrator or other representative of a deceased person, or against a person
of unsound mind, upon a claim or demand against the estate of such deceased
person, or against such person of unsound mind, cannot testify as to any matter
of fact occurring before the death of such deceased person or before such
person became of unsound mind.
Petitioners thus implore this
Court to rule that the testimonies of respondent and his alter ego, Josephine,
should not have been admitted to prove certain claims against a deceased person
(Jacinto), now represented by petitioners.
We are not
persuaded.
A
partnership may be constituted in any form, except where immovable property or
real rights are contributed thereto, in which case a public instrument shall be
necessary.[6] Hence, based on the intention of the
parties, as gathered from the facts and ascertained from their language and
conduct, a verbal contract of partnership may arise.[7] The essential points that must be
proven to show that a partnership was agreed upon are (1) mutual contribution to
a common stock, and (2) a joint interest in the profits.[8] Understandably so, in view of the
absence of a written contract of partnership between respondent and Jacinto,
respondent resorted to the introduction of documentary and testimonial evidence
to prove said partnership. The
crucial issue to settle then is whether or not the Dead Mans Statute applies to
this case so as to render inadmissible respondents testimony and that of his
witness, Josephine.
The Dead
Mans Statute provides that if one party to the alleged transaction is precluded
from testifying by death, insanity, or other mental disabilities, the surviving
party is not entitled to the undue advantage of giving his own uncontradicted
and unexplained account of the transaction.[9] But before this rule can be
successfully invoked to bar the introduction of testimonial evidence, it is
necessary that:
1. The witness is a party or assignor of
a party to a case or persons in whose behalf a case is prosecuted.
2. The action is against an executor or
administrator or other representative of a deceased person or a person of
unsound mind;
3. The subject-matter of the action is a
claim or demand against the estate of such deceased person or against person of
unsound mind;
4. His testimony refers to any matter of
fact which occurred before the death of such deceased person or before such
person became of unsound mind.[10]
Two reasons
forestall the application of the Dead Mans Statute to this case.
First,
petitioners filed a compulsory counterclaim[11] against respondent in their answer
before the trial court, and with the filing of their counterclaim, petitioners
themselves effectively removed this case from the ambit of the Dead Mans
Statute.[12] Well
entrenched is the rule that when it is the executor or administrator or representatives
of the estate that sets up the counterclaim, the plaintiff, herein respondent,
may testify to occurrences before the death of the deceased to defeat the
counterclaim.[13] Moreover, as defendant in the
counterclaim, respondent is not disqualified from testifying as to matters of
fact occurring before the death of the deceased, said action not having been
brought against but by the estate or representatives of the deceased.[14]
Second, the
testimony of Josephine is not covered by the Dead Mans Statute for the simple
reason that she is not a party or assignor of a party to a case or persons in
whose behalf a case is prosecuted.Records show that respondent offered the
testimony of Josephine to establish the existence of the partnership between
respondent and Jacinto. Petitioners
insistence that Josephine is the alter ego of respondent does not make her an
assignor because the term assignor of
a party means assignor of a cause of action which has arisen, and not the
assignor of a right assigned before any cause of action has arisen.[15] Plainly then,
Josephine is merely a witness of respondent, the latter being the party
plaintiff.
We are not
convinced by petitioners allegation that Josephines testimony lacks probative
value because she was allegedly coerced by respondent, her brother-in-law, to
testify in his favor. Josephine merely declared in court that she was requested
by respondent to testify and that if she were not requested to do so she would
not have testified. We fail to
see how we can conclude from this candid admission that Josephines testimony is
involuntary when she did not in any way categorically say that she was forced
to be a witness of respondent. Also,
the fact that Josephine is the sister of the wife of respondent does not
diminish the value of her testimony since relationship per
se, without more, does not affect the credibility of witnesses.[16]
Petitioners
reliance alone on the Dead Mans Statute to defeat respondents claim cannot
prevail over the factual findings of the trial court and the Court of Appeals
that a partnership was established between respondent and Jacinto. Based not only on the testimonial
evidence, but the documentary evidence as well, the trial court and the Court
of Appeals considered the evidence for respondent as sufficient to prove the
formation of a partnership, albeit an informal one.
Notably,
petitioners did not present any evidence in their favor during trial. By the
weight of judicial precedents, a factual matter like the finding of the
existence of a partnership between respondent and Jacinto cannot be inquired
into by this Court on review.[17] This Court can no longer be tasked to
go over the proofs presented by the parties and analyze, assess and weigh them
to ascertain if the trial court and the appellate court were correct in
according superior credit to this or that piece of evidence of one party or the
other.[18] It must be also pointed out that
petitioners failed to attend the presentation of evidence of respondent. Petitioners cannot now turn to this
Court to question the admissibility and authenticity of the documentary
evidence of respondent when petitioners failed to object to the admissibility
of the evidence at the time that such evidence was offered.[19]
-Thus, “the rule contemplates a suit against the
estate, its administrator or executor and not a suit filed by the administrator
or executor of the estate. A defendant, who opposes the suit filed by the
administrator to recover alleged shares of stock belonging to the deceased, is
not barred from testifying as to his transaction with the deceased with respect
to the shares”[3].
Others.
a. Trade Secrets.
“ x x x
Section 24[29] of
Rule 130 draws the types of disqualification by reason of privileged communication,
to wit: (a) communication between husband and wife; (b) communication between
attorney and client; (c) communication between physician and patient; (d)
communication between priest and penitent; and (e) public officers and public
interest. There are, however, other privileged matters that are not
mentioned by Rule 130. Among them are the following: (a) editors may
not be compelled to disclose the source of published news; (b) voters may not
be compelled to disclose for whom they voted; (c) trade secrets;
(d) information contained in tax census returns; and (d) bank deposits. [30]
x x x
A trade secret is defined as a plan or process, tool, mechanism or
compound known only to its owner and those of his employees to whom it is
necessary to confide it.[16] The definition also
extends to a secret formula or process not patented, but known only to certain
individuals using it in compounding some article of trade having a commercial
value.[17] A trade secret
may consist of any formula, pattern,
device, or compilation of information that: (1) is used in one's business; and
(2) gives the employer an opportunity to obtain an advantage over competitors
who do not possess the information.[18] Generally, a trade secret is a process or device
intended for continuous use in the operation of the business, for example, a
machine or formula, but can be a price list or catalogue or specialized
customer list.[19] It is indubitable that trade secrets constitute
proprietary rights. The inventor,
discoverer, or possessor of a trade secret or similar innovation has rights
therein which may be treated as property, and ordinarily an injunction will be
granted to prevent the disclosure of the trade secret by one who obtained the
information "in confidence" or through a "confidential
relationship."[20] American jurisprudence has utilized the following
factors[21] to determine if an information is a trade secret, to wit:
(5) the amount of effort or money expended by the company
in
(6) the extent to which the information
could be easily or readily obtained
through an independent source.[22]
In Cocoland
Development Corporation v. National Labor Relations Commission,[23] the issue was the legality of
an employees termination on the ground of unauthorized disclosure of trade
secrets. The Court laid down the rule that any determination by management
as to the confidential nature of technologies, processes, formulae or other
so-called trade secrets must have a substantial factual basis which can pass
judicial scrutiny. The Court rejected the employers naked contention that
its own determination as to what constitutes a trade secret should be binding
and conclusive upon the NLRC. As a caveat, the Court said that to rule
otherwise would be to permit an employer to label almost anything a trade
secret, and thereby create a weapon with which he/it may arbitrarily dismiss an
employee on the pretext that the latter somehow disclosed a trade secret, even
if in fact there be none at all to speak of.[24] Hence,
in Cocoland, the
parameters in the determination of trade secrets were set to be such substantial
factual basis that can withstand judicial scrutiny.
The chemical composition, formulation, and
ingredients of respondents special lubricants are trade secrets within the
contemplation of the law. Respondent was
established to engage in the business of general manufacturing and selling of,
and to deal in, distribute, sell or otherwise dispose of goods, wares,
merchandise, products, including but not limited to industrial chemicals,
solvents, lubricants, acids, alkalies, salts, paints, oils, varnishes, colors,
pigments and similar preparations, among others. It is unmistakable
to our minds that the manufacture and production of respondents products
proceed from a formulation of a secret list of ingredients. In the
creation of its lubricants, respondent expended efforts, skills, research, and
resources. What it had achieved by virtue of its investments may not be
wrested from respondent on the mere pretext that it is necessary for
petitioners defense against a collection for a sum of money. By and large,
the value of the information to respondent is crystal clear. The
ingredients constitute the very fabric of respondents production and
business. No doubt, the information is also valuable to respondents
competitors. To compel its disclosure is to cripple respondents business,
and to place it at an undue disadvantage. If
the chemical composition of respondents lubricants are opened to public
scrutiny, it will stand to lose the backbone on which its business is founded. This would result in nothing less than the probable
demise of respondents business. Respondents
proprietary interest over the ingredients which it had developed and expended
money and effort on is incontrovertible. Our conclusion is that the
detailed ingredients sought to be revealed have a commercial value to
respondent. Not only do we acknowledge the fact that the information
grants it a competitive advantage; we also find that there is clearly a glaring
intent on the part of respondent to keep the information confidential and not
available to the prying public.”[4]
b. LAWYER –CLIENT; GOVERNMENT SERVICE
Read [G.R. Nos. 151809-12. April 12, 2005]
PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG), petitioner, vs. SANDIGANBAYAN (Fifth Division), LUCIO
C. TAN, CARMEN KHAO TAN, FLORENCIO T. SANTOS, NATIVIDAD P. SANTOS, DOMINGO
CHUA, TAN HUI NEE, MARIANO TAN ENG LIAN, ESTATE OF BENITO TAN KEE HIONG
(represented by TARCIANA C. TAN), FLORENCIO N. SANTOS, JR., HARRY C. TAN, TAN
ENG CHAN, CHUNG POE KEE, MARIANO KHOO, MANUEL KHOO, MIGUEL KHOO, JAIME KHOO,
ELIZABETH KHOO, CELSO RANOLA, WILLIAM T. WONG, ERNESTO B. LIM, BENJAMIN T.
ALBACITA, WILLY CO, ALLIED BANKING CORP., ALLIED LEASING AND FINANCE
CORPORATION, ASIA BREWERY, INC., BASIC HOLDINGS CORP., FOREMOST FARMS, INC.,
FORTUNE TOBACCO CORP., GRANDSPAN DEVELOPMENT CORP., HIMMEL INDUSTRIES, IRIS
HOLDINGS AND DEVELOPMENT CORP., JEWEL HOLDINGS, INC., MANUFACTURING SERVICES
AND TRADE CORP., MARANAW HOTELS AND RESORT CORP., NORTHERN TOBACCO REDRYING
PLANT, PROGRESSIVE FARMS, INC., SHAREHOLDINGS, INC., SIPALAY TRADING CORP.,
VIRGO HOLDINGS & DEVELOPMENT CORP., and ATTY. ESTELITO P. MENDOZA, respondents.
“Substantive Issue
The key issue is
whether Rule 6.03 of the Code of Professional Responsibility applies to
respondent Mendoza. Again, the prohibition states: A lawyer shall not, after
leaving government service, accept engagement or employment in connection with
any matter in which he had intervened while
in the said service.
I.A. The history of Rule
6.03
A proper resolution of this
case necessitates that we trace the historical lineage of Rule
6.03 of the Code of Professional Responsibility.
In the seventeenth
and eighteenth centuries, ethical standards for lawyers were pervasive
in England and other parts of Europe. The early statements of
standards did not resemble modern codes of conduct. They were not detailed or
collected in one source but surprisingly were comprehensive for their time. The
principal thrust of the standards was directed towards the litigation conduct
of lawyers. It underscored the central duty of truth and fairness in litigation
as superior to any obligation to the client. The formulations of the litigation
duties were at times intricate, including specific pleading standards, an
obligation to inform the court of falsehoods and a duty to explore settlement
alternatives. Most of the lawyer's other basic duties -- competency, diligence,
loyalty, confidentiality, reasonable fees and service to the poor -- originated
in the litigation context, but ultimately had broader application to all
aspects of a lawyer's practice.
The forms of lawyer
regulation in colonial and early post-revolutionary America did
not differ markedly from those in England. The colonies and early states used
oaths, statutes, judicial oversight, and procedural rules to govern attorney
behavior. The difference from England was in the pervasiveness and continuity
of such regulation. The standards set in England varied over time, but the variation
in early America was far greater. The American regulation fluctuated within a
single colony and differed from colony to colony. Many regulations had the
effect of setting some standards of conduct, but the regulation was sporadic,
leaving gaps in the substantive standards. Only three of the traditional core
duties can be fairly characterized as pervasive in the formal, positive law of
the colonial and post-revolutionary period: the duties of litigation fairness,
competency and reasonable fees.[20]
The nineteenth
century has been termed the dark ages of legal ethics in
the United States. By mid-century, American legal reformers were filling the
void in two ways. First, David Dudley Field, the drafter of the highly
influential New York Field Code, introduced a new set of uniform standards of
conduct for lawyers. This concise statement of eight statutory duties became
law in several states in the second half of the nineteenth century. At the same
time, legal educators, such as David Hoffman and George Sharswood, and many
other lawyers were working to flesh out the broad outline of a lawyer's duties.
These reformers wrote about legal ethics in unprecedented detail and thus
brought a new level of understanding to a lawyer's duties. A number of
mid-nineteenth century laws and statutes, other than the Field Code, governed
lawyer behavior. A few forms of colonial regulations e.g., the do
no falsehood oath and the deceit prohibitions -- persisted in some states.
Procedural law continued to directly, or indirectly, limit an attorney's
litigation behavior. The developing law of agency recognized basic duties of
competence, loyalty and safeguarding of client property. Evidence law started
to recognize with less equivocation the attorney-client privilege and its
underlying theory of confidentiality. Thus, all of the core duties, with the
likely exception of service to the poor, had some basis in formal law. Yet, as
in the colonial and early post-revolutionary periods, these standards were
isolated and did not provide a comprehensive statement of a lawyer's duties.
The reformers, by contrast, were more comprehensive in their discussion of a
lawyer's duties, and they actually ushered a new era in American legal ethics.[21]
Toward the end of
the nineteenth century, a new form of ethical standards began to guide
lawyers in their practice the bar association code of legal ethics. The bar
codes were detailed ethical standards formulated by lawyers for lawyers. They
combined the two primary sources of ethical guidance from the nineteenth
century. Like the academic discourses, the bar association codes gave detail to
the statutory statements of duty and the oaths of office. Unlike the academic
lectures, however, the bar association codes retained some of the official
imprimatur of the statutes and oaths. Over time, the bar association codes became
extremely popular that states adopted them as binding rules of law. Critical to
the development of the new codes was the re-emergence of bar associations
themselves. Local bar associations formed sporadically during the colonial
period, but they disbanded by the early nineteenth century. In the late
nineteenth century, bar associations began to form again, picking up where
their colonial predecessors had left off. Many of the new bar associations,
most notably the Alabama State Bar Association and the American Bar
Association, assumed on the task of drafting substantive standards of conduct
for their members.[22]
In 1887, Alabama became the
first state with a comprehensive bar association code of ethics. The 1887
Alabama Code of Ethics was the model for several states codes, and it was the
foundation for the American Bar Association's (ABA) 1908 Canons of Ethics.[23]
In 1917, the Philippine Bar found that the
oath and duties of a lawyer were insufficient to attain the full measure of
public respect to which the legal profession was entitled. In that year, the
Philippine Bar Association adopted as its own, Canons 1 to 32 of the ABA Canons
of Professional Ethics.[24]
As early as 1924, some ABA members
have questioned the form and function of the canons. Among their concerns was
the revolving door or the process by which lawyers and others
temporarily enter government service from private life and then leave it for
large fees in private practice, where they can exploit information, contacts,
and influence garnered in government service.[25] These
concerns were classified as adverse-interest conflicts and congruent-interest
conflicts. Adverse-interest conflicts exist where the
matter in which the former government lawyer represents a client in private
practice is substantially related to a matter that the lawyer dealt with while
employed by the government and the interests of the current and former are
adverse.[26] On
the other hand, congruent-interest representation conflicts are
unique to government lawyers and apply primarily to former government lawyers.[27] For
several years, the ABA attempted to correct and update the canons through new
canons, individual amendments and interpretative opinions. In 1928, the ABA
amended one canon and added thirteen new canons.[28] To
deal with problems peculiar to former government lawyers, Canon 36 was
minted which disqualified them both for adverse-interest conflicts and
congruent-interest representation conflicts.[29] The rationale for disqualification
is rooted in a concern that the government lawyers largely discretionary
actions would be influenced by the temptation to take action on behalf of the
government client that later could be to the advantage of parties who might
later become private practice clients.[30] Canon 36 provides, viz.:
36. Retirement from judicial position or public employment
A lawyer should not accept employment as an advocate in any matter upon
the merits of which he has previously acted in a judicial capacity.
A lawyer, having once held public office or having been in the public
employ should not, after his retirement, accept employment in connection with
any matter he has investigated or passed upon while in such office or employ.
Over the next thirty years,
the ABA continued to amend many of the canons and added Canons 46 and 47 in
1933 and 1937, respectively.[31]
In 1946, the Philippine Bar
Association again adopted as its own Canons 33 to 47 of
the ABA Canons of Professional Ethics.[32]
By the middle of
the twentieth century, there was growing consensus that the ABA Canons
needed more meaningful revision. In 1964, the ABA President-elect Lewis Powell
asked for the creation of a committee to study the adequacy and effectiveness
of the ABA Canons. The committee recommended that the canons needed substantial
revision, in part because the ABA Canons failed to distinguish between the inspirational
and the proscriptive and were thus unsuccessful in enforcement. The legal
profession in the United States likewise observed that Canon 36 of
the ABA Canons of Professional Ethics resulted in unnecessary disqualification
of lawyers for negligible participation in matters during their employment with
the government.
The unfairness of Canon 36
compelled ABA to replace it in the 1969 ABA Model Code of Professional
Responsibility.[33] The
basic ethical principles in the Code of Professional Responsibility were
supplemented by Disciplinary Rules that defined minimum rules of conduct to
which the lawyer must adhere.[34] In
the case of Canon 9, DR 9-101(b)[35]became
the applicable supplementary norm. The drafting committee reformulated the
canons into the Model Code of Professional Responsibility, and, in August of
1969, the ABA House of Delegates approved the Model Code.[36]
Despite these amendments,
legal practitioners remained unsatisfied with the results and indefinite
standards set forth by DR 9-101(b) and the Model Code of Professional
Responsibility as a whole. Thus, in August 1983, the ABA adopted new Model
Rules of Professional Responsibility. The Model Rules used the restatement
format, where the conduct standards were set-out in rules, with comments
following each rule. The new format was intended to give better guidance and
clarity for enforcement because the only enforceable standards were the black
letter Rules. The Model Rules eliminated the broad canons altogether and
reduced the emphasis on narrative discussion, by placing comments after the
rules and limiting comment discussion to the content of the black letter rules.
The Model Rules made a number of substantive improvements particularly with
regard to conflicts of interests.[37] In
particular, the ABA did away with Canon 9, citing the hopeless dependence of
the concept of impropriety on the subjective views of anxious clients as well
as the norms indefinite nature.[38]
In cadence with these
changes, the Integrated Bar of the Philippines (IBP)
adopted a proposed Code of Professional Responsibility in 1980 which it
submitted to this Court for approval. The Code was drafted to reflect the
local customs, traditions, and practices of the bar and to conform with new
realities. On June 21, 1988, this Court promulgated the Code of
Professional Responsibility.[39] Rule
6.03 of the Code of Professional Responsibility deals particularly with former
government lawyers, and provides, viz.:
Rule 6.03 A lawyer shall not, after leaving government service, accept
engagement or employment in connection with any matter in
which he had intervened while in said service.
Rule 6.03 of the Code of
Professional Responsibility retained the general structure of paragraph 2,
Canon 36 of the Canons of Professional Ethics but replaced the
expansive phrase investigated and passed upon with the
word intervened. It is, therefore, properly applicable to
both adverse-interest conflicts and congruent-interest
conflicts.
The case at bar does not
involve the adverse interest aspect of Rule 6.03. Respondent Mendoza,
it is conceded, has no adverse interest problem when he acted as Solicitor
General in Sp. Proc. No. 107812 and later as counsel of respondents Tan, et
al. in Civil Case No. 0005 and Civil Case Nos. 0096-0099 before
the Sandiganbayan. Nonetheless, there remains the
issue of whether there exists a congruent-interest conflict sufficient
to disqualify respondent Mendoza from representing respondents Tan, et
al.
I.B. The congruent interest
aspect of Rule 6.03
The key to
unlock Rule 6.03 lies in comprehending first, the meaning of matter referred
to in the rule and, second, the metes and bounds of the intervention made
by the former government lawyer on the matter. The American Bar Association in
its Formal Opinion 342, defined matter as any discrete, isolatable
act as well as identifiable transaction or conduct involving a particular
situation and specific party, and not merely an act of
drafting, enforcing or interpreting government or agency procedures,
regulations or laws, or briefing abstract principles of law.
Firstly, it is critical that
we pinpoint the matter which was the subject of intervention
by respondent Mendoza while he was the Solicitor General. The PCGG relates the following
acts of respondent Mendoza as constituting the matter where he
intervened as a Solicitor General, viz:[40]
The PCGGs Case for Atty. Mendozas Disqualification
The PCGG imputes grave abuse of discretion on the part of the Sandiganbayan (Fifth
Division) in issuing the assailed Resolutions dated July 11, 2001 and December
5, 2001 denying the motion to disqualify Atty. Mendoza as counsel for respondents
Tan, et al. The PCGG insists that Atty. Mendoza, as then Solicitor
General, actively intervened in the closure of GENBANK by advising the Central
Bank on how to proceed with the said banks liquidation and even filing the
petition for its liquidation with the CFI of Manila.
As proof thereof, the PCGG cites the Memorandum dated March 29, 1977
prepared by certain key officials of the Central Bank, namely, then Senior
Deputy Governor Amado R. Brinas, then Deputy Governor Jaime C. Laya, then
Deputy Governor and General Counsel Gabriel C. Singson, then Special Assistant
to the Governor Carlota P. Valenzuela, then Asistant to the Governor Arnulfo B.
Aurellano and then Director of Department of Commercial and Savings Bank
Antonio T. Castro, Jr., where they averred that on March 28, 1977, they had a
conference with the Solicitor General (Atty. Mendoza), who advised them on how
to proceed with the liquidation of GENBANK. The pertinent portion of the said
memorandum states:
Immediately after said meeting, we had a conference with the Solicitor
General and he advised that the following procedure should be taken:
1.
Management should submit a memorandum to the Monetary Board reporting that
studies and evaluation had been made since the last examination of the bank as
of August 31, 1976 and it is believed that the bank can not be reorganized or
placed in a condition so that it may be permitted to resume business with
safety to its depositors and creditors and the general public.
2. If the
said report is confirmed by the Monetary Board, it shall order the liquidation
of the bank and indicate the manner of its liquidation and approve a
liquidation plan.
3. The
Central Bank shall inform the principal stockholders of Genbank of the
foregoing decision to liquidate the bank and the liquidation plan approved by
the Monetary Board.
4. The
Solicitor General shall then file a petition in the Court of First Instance
reciting the proceedings which had been taken and praying the assistance of the
Court in the liquidation of Genbank.
The PCGG further cites the Minutes No. 13 dated March 29, 1977 of the
Monetary Board where it was shown that Atty. Mendoza was furnished copies of
pertinent documents relating to GENBANK in order to aid him in filing with the
court the petition for assistance in the banks liquidation. The pertinent
portion of the said minutes reads:
The Board decided as follows:
. . .
E. To
authorize Management to furnish the Solicitor General with a copy of the
subject memorandum of the Director, Department of Commercial and Savings Bank
dated March 29, 1977, together with copies of:
1.
Memorandum of the Deputy Governor, Supervision and Examination Sector, to the
Monetary Board, dated March 25, 1977, containing a report on the current
situation of Genbank;
2. Aide
Memoire on the Antecedent Facts Re: General Bank and Trust Co., dated
March 23, 1977;
3.
Memorandum of the Director, Department of Commercial and Savings Bank, to the
Monetary Board, dated March 24, 1977, submitting, pursuant to Section 29 of
R.A. No. 265, as amended by P.D. No. 1007, a repot on the state of insolvency
of Genbank, together with its attachments; and
4. Such
other documents as may be necessary or needed by the Solicitor General for his
use in then CFI-praying the assistance of the Court in the liquidation of
Genbank.
Beyond doubt, therefore,
the matter or the act of respondent Mendoza as Solicitor
General involved in the case at bar is advising the Central Bank, on how
to proceed with the said banks liquidation and even filing the
petition for its liquidation with the CFI of Manila. In fine, the Court should
resolve whether his act of advising the Central Bank on the legal
procedure to liquidate GENBANK is included within the concept of matter under
Rule 6.03. The procedure of liquidation is given in black and
white in Republic Act No. 265, section 29, viz:
The provision reads in part:
SEC. 29. Proceedings upon insolvency. Whenever, upon
examination by the head of the appropriate supervising or examining department
or his examiners or agents into the condition of any bank or non-bank financial
intermediary performing quasi-banking functions, it shall be disclosed that the
condition of the same is one of insolvency, or that its continuance in business
would involve probable loss to its depositors or creditors, it shall be the
duty of the department head concerned forthwith, in writing, to inform the
Monetary Board of the facts, and the Board may, upon finding the statements of
the department head to be true, forbid the institution to do business in the
Philippines and shall designate an official of the Central Bank or a person of
recognized competence in banking or finance, as receiver to immediately take
charge of its assets and liabilities, as expeditiously as possible collect and
gather all the assets and administer the same for the benefit of its creditors,
exercising all the powers necessary for these purposes including, but not
limited to, bringing suits and foreclosing mortgages in the name of the bank or
non-bank financial intermediary performing quasi-banking functions.
. . .
If the Monetary Board shall determine and confirm within the said period
that the bank or non-bank financial intermediary performing quasi-banking
functions is insolvent or cannot resume business with safety to its depositors,
creditors and the general public, it shall, if the public interest requires,
order its liquidation, indicate the manner of its liquidation and approve a
liquidation plan. The Central Bank shall, by the Solicitor General, file a
petition in the Court of First Instance reciting the proceedings which have
been taken and praying the assistance of the court in the liquidation of such
institution. The court shall have jurisdiction in the same proceedings to
adjudicate disputed claims against the bank or non-bank financial intermediary
performing quasi-banking functions and enforce individual liabilities of the
stockholders and do all that is necessary to preserve the assets of such
institution and to implement the liquidation plan approved by the Monetary
Board. The Monetary Board shall designate an official of the Central Bank, or a
person of recognized competence in banking or finance, as liquidator who shall
take over the functions of the receiver previously appointed by the Monetary
Board under this Section. The liquidator shall, with all convenient speed,
convert the assets of the banking institution or non-bank financial intermediary
performing quasi-banking functions to money or sell, assign or otherwise
dispose of the same to creditors and other parties for the purpose of paying
the debts of such institution and he may, in the name of the bank or non-bank
financial intermediary performing quasi-banking functions, institute such
actions as may be necessary in the appropriate court to collect and recover
accounts and assets of such institution.
The provisions of any law to the contrary notwithstanding, the actions
of the Monetary Board under this Section and the second paragraph of Section 34
of this Act shall be final and executory, and can be set aside by the court
only if there is convincing proof that the action is plainly arbitrary and made
in bad faith. No restraining order or injunction shall be issued by the court
enjoining the Central Bank from implementing its actions under this Section and
the second paragraph of Section 34 of this Act, unless there is convincing
proof that the action of the Monetary Board is plainly arbitrary and made in
bad faith and the petitioner or plaintiff files with the clerk or judge of the
court in which the action is pending a bond executed in favor of the Central
Bank, in an amount to be fixed by the court. The restraining order or
injunction shall be refused or, if granted, shall be dissolved upon filing by
the Central Bank of a bond, which shall be in the form of cash or Central Bank
cashier(s) check, in an amount twice the amount of the bond of the petitioner
or plaintiff conditioned that it will pay the damages which the petitioner or
plaintiff may suffer by the refusal or the dissolution of the injunction. The
provisions of Rule 58 of the New Rules of Court insofar as they are applicable
and not inconsistent with the provisions of this Section shall govern the
issuance and dissolution of the restraining order or injunction contemplated in
this Section.
Insolvency, under this Act, shall be understood to mean the inability of
a bank or non-bank financial intermediary performing quasi-banking functions to
pay its liabilities as they fall due in the usual and ordinary course of
business. Provided, however, That this shall not include the inability to pay
of an otherwise non-insolvent bank or non-bank financial intermediary
performing quasi-banking functions caused by extraordinary demands induced by
financial panic commonly evidenced by a run on the bank or non-bank financial
intermediary performing quasi-banking functions in the banking or financial
community.
The appointment of a conservator under Section 28-A of this Act or the
appointment of a receiver under this Section shall be vested exclusively with
the Monetary Board, the provision of any law, general or special, to the
contrary notwithstanding. (As amended by PD Nos. 72, 1007, 1771 & 1827, Jan.
16, 1981)
We hold that this advice
given by respondent Mendoza on the procedure to liquidate GENBANK is not
the matter contemplated by Rule 6.03 of the Code of Professional
Responsibility. ABA Formal Opinion No. 342 is clear as daylight in
stressing that the drafting, enforcing or interpreting government
or agency procedures, regulations or laws, or briefing abstract principles of
law are acts which do not fall within the scope of the
term matter and cannot disqualify.
Secondly, it can even be
conceded for the sake of argument that the above act of respondent Mendoza
falls within the definition of matter per ABA Formal Opinion No. 342. Be that
as it may, the said act of respondent Mendoza which is the matter involved
in Sp. Proc. No. 107812 is entirely different from the matter involved
in Civil Case No. 0096. Again, the plain facts speak for themselves. It is
given that respondent Mendoza had nothing to do with the decision of the
Central Bank to liquidate GENBANK. It is also given that he did not participate
in the sale of GENBANK to Allied Bank. The matter where he got himself
involved was in informing Central Bank on the procedure provided
by law to liquidate GENBANK thru the courts and in filing the necessary
petition in Sp. Proc. No. 107812 in the then Court of First Instance. The
subject matter of Sp. Proc. No. 107812, therefore, is not the same nor is
related to but is different from the subject matter in Civil Case No. 0096.
Civil Case No. 0096 involves the sequestration of the stocks owned
by respondents Tan, et al., in Allied Bank on the alleged ground
that they are ill-gotten. The case does not involve the liquidation of GENBANK.
Nor does it involve the sale of GENBANK to Allied Bank. Whether the shares of
stock of the reorganized Allied Bank are ill-gotten is far removed from
the issue of the dissolution and liquidation of GENBANK. GENBANK was liquidated
by the Central Bank due, among others, to the alleged banking malpractices of
its owners and officers. In other words, the legality of the liquidation of
GENBANK is not an issue in the sequestration cases. Indeed, the jurisdiction of
the PCGG does not include the dissolution and liquidation of banks. It goes
without saying that Code 6.03 of the Code of Professional Responsibility cannot
apply to respondent Mendoza because his alleged intervention while a Solicitor
General in Sp. Proc. No. 107812 is an intervention on a matter different from
the matter involved in Civil Case No. 0096.
Thirdly, we now slide to the
metes and bounds of the intervention contemplated by Rule
6.03. Intervene means, viz.:
1: to enter or appear as an irrelevant or extraneous feature or
circumstance . . . 2: to occur, fall, or come in between points of time or
events . . . 3: to come in or between by way of hindrance or modification:
INTERPOSE . . . 4: to occur or lie between two things (Paris, where the same
city lay on both sides of an intervening river . . .)[41]
On the other hand, intervention is defined as:
1: the
act or fact of intervening: INTERPOSITION; 2: interference that may affect the
interests of others.[42]
There are, therefore, two possible
interpretations of the word intervene. Under the first interpretation,
intervene includes participation in a proceeding even if the intervention is
irrelevant or has no effect or little influence.[43] Under
the second interpretation, intervene only includes an act of a
person who has the power to influence the subject proceedings.[44]We
hold that this second meaning is more appropriate to give to the word
intervention under Rule 6.03 of the Code of Professional Responsibility in
light of its history. The evils sought to be remedied by the Rule do not exist
where the government lawyer does an act which can be considered as innocuous
such as x x x drafting, enforcing or interpreting government or agency
procedures, regulations or laws, or briefing abstract principles of law.
In fine, the
intervention cannot be insubstantial and insignificant. Originally,
Canon 36 provided that a former government lawyer should not, after his
retirement, accept employment in connection with any matter which he
has investigated or passed upon while in such office or employ. As
aforediscussed, the broad sweep of the phrase which he has investigated or
passed upon resulted in unjust disqualification of former government lawyers.
The 1969 Code restricted its latitude, hence, in DR 9-101(b), the prohibition
extended only to a matter in which the lawyer, while in the government service,
had substantial responsibility. The 1983 Model Rules further
constricted the reach of the rule. MR 1.11(a) provides that a lawyer shall not
represent a private client in connection with a matter in which the
lawyer participated personally and substantially as a public
officer or employee.
It is, however, alleged
that the intervention of respondent Mendoza in Sp. Proc. No. 107812 is
significant and substantial. We disagree. For one, the petition in the special
proceedings is an initiatory pleading, hence, it has to be signed
by respondent Mendoza as the then sitting Solicitor General. For another,
the record is arid as to the actual participation
of respondent Mendoza in the subsequent proceedings. Indeed, the case was in
slumberville for a long number of years. None of the parties pushed for its
early termination. Moreover, we note that the petition filed merely seeks
the assistance of the court in the liquidation of GENBANK. The
principal role of the court in this type of proceedings is to assist the
Central Bank in determining claims of creditors against the
GENBANK. The role of the court is not strictly as a court of justice but as an
agent to assist the Central Bank in determining the claims of creditors. In
such a proceeding, the participation of the Office of the Solicitor General is
not that of the usual court litigator protecting the interest of government.
II
Balancing Policy
Considerations
To be sure, Rule 6.03 of
our Code of Professional Responsibility represents a commendable effort on the
part of the IBP to upgrade the ethics of lawyers in the government service. As
aforestressed, it is a take-off from similar efforts especially by the ABA
which have not been without difficulties. To date, the legal profession in the
United States is still fine tuning its DR 9-101(b) rule.
In fathoming the depth and
breadth of Rule 6.03 of our Code of Professional Responsibility, the Court
took account of various policy considerations to assure that its
interpretation and application to the case at bar will achieve its end without
necessarily prejudicing other values of equal importance. Thus, the rule was
not interpreted to cause a chilling effect on government recruitment of
able legal talent. At present, it is already difficult for government to
match compensation offered by the private sector and it is unlikely that
government will be able to reverse that situation. The observation is not
inaccurate that the only card that the government may play to recruit lawyers
is have them defer present income in return for the experience and contacts
that can later be exchanged for higher income in private practice.[45] Rightly,
Judge Kaufman warned that the sacrifice of entering government service would be
too great for most men to endure should ethical rules prevent them from
engaging in the practice of a technical specialty which they devoted years in
acquiring and cause the firm with which they become associated to be
disqualified.[46] Indeed,
to make government service more difficult to exit can only make it less
appealing to enter.[47]
In interpreting Rule 6.03,
the Court also cast a harsh eye on its use as a litigation tactic to
harass opposing counsel as well as deprive his client of competent
legal representation. The danger that the rule will be misused to bludgeon an
opposing counsel is not a mere guesswork. The Court of Appeals for the District
of Columbia has noted the tactical use of motions to disqualify counsel in
order to delay proceedings, deprive the opposing party of counsel of its
choice, and harass and embarrass the opponent, and observed that the tactic was
so prevalent in large civil cases in recent years as to prompt frequent
judicial and academic commentary.[48] Even
the United States Supreme Court found no quarrel with the Court of Appeals
description of disqualification motions as a dangerous game.[49] In
the case at bar, the new attempt to disqualify respondent
Mendoza is difficult to divine. The disqualification of respondent Mendoza has
long been a dead issue. It was resuscitated after the lapse of many
years and only after PCGG has lost many legal incidents in the hands of
respondent Mendoza. For a fact, the recycled motion for disqualification in the
case at bar was filed more than four years after the filing of
the petitions for certiorari, prohibition and injunction with the
Supreme Court which were subsequently remanded to the Sandiganbayan and
docketed as Civil Case Nos. 0096-0099.[50] At
the very least, the circumstances under which the motion to disqualify in the
case at bar were refiled put petitioners motive as highly suspect.
Similarly, the Court in
interpreting Rule 6.03 was not unconcerned with the prejudice to the client which will be
caused by its misapplication. It cannot be doubted that granting a
disqualification motion causes the client to lose not only the law firm of
choice, but probably an individual lawyer in whom the client has confidence.[51] The
client with a disqualified lawyer must start again often without the benefit of
the work done by the latter.[52] The
effects of this prejudice to the right to choose an effective counsel cannot be
overstated for it can result in denial of due process.
The Court has to consider
also the possible adverse effect of a truncated reading of the rule on the
official independence of lawyers in the government service. According to Prof.
Morgan: An individual who has the security of knowing he or she can find
private employment upon leaving the government is free to work vigorously,
challenge official positions when he or she believes them to be in error, and
resist illegal demands by superiors. An employee who lacks this assurance of
private employment does not enjoy such freedom.[53] He
adds: Any system that affects the right to take a new job affects the ability
to quit the old job and any limit on the ability to quit inhibits official
independence.[54] The
case at bar involves the position of Solicitor General, the office once
occupied by respondent Mendoza. It cannot be overly stressed that the position
of Solicitor General should be endowed with a great degree of independence.
It is this independence that allows the Solicitor General to recommend
acquittal of the innocent; it is this independence that gives him the right to
refuse to defend officials who violate the trust of their office. Any undue
dimunition of the independence of the Solicitor General will have a corrosive
effect on the rule of law.
No less significant a
consideration is the deprivation of the former government lawyer of the freedom
to exercise his profession. Given the current state of our law, the
disqualification of a former government lawyer may extend to all members of his
law firm.[55] Former
government lawyers stand in danger of becoming the lepers of the legal
profession.
It is, however, proffered
that the mischief sought to be remedied by Rule 6.03 of the Code of
Professional Responsibility is the possible appearance of impropriety and
loss of public confidence in government. But as well observed, the accuracy of
gauging public perceptions is a highly speculative exercise at best[56] which
can lead to untoward results.[57] No
less than Judge Kaufman doubts that the lessening of restrictions as to former
government attorneys will have any detrimental effect on that free flow of
information between the government-client and its attorneys which the canons
seek to protect.[58] Notably,
the appearance of impropriety theory has been rejected in the 1983 ABA Model
Rules of Professional Conduct[59]and
some courts have abandoned per se disqualification
based on Canons 4 and 9 when an actual conflict of interest exists, and demand
an evaluation of the interests of the defendant, government, the witnesses in
the case, and the public.[60]
It is also submitted that
the Court should apply Rule 6.03 in all its strictness for it correctly
disfavors lawyers who switch sides. It is claimed that
switching sides carries the danger that former government employee may compromise
confidential official information in the process. But this concern
does not cast a shadow in the case at bar. As afore-discussed, the act of
respondent Mendoza in informing the Central Bank on the procedure how to
liquidate GENBANK is a different matter from the subject
matter of Civil Case No. 0005 which is about the sequestration of the shares of
respondents Tan, et al., in Allied Bank. Consequently,
the danger that confidential official information might be divulged is nil, if
not inexistent. To be sure, there are no inconsistent sides to
be bothered about in the case at bar. For there is no question that in
lawyering for respondents Tan, et al., respondent Mendoza is not
working against the interest of Central Bank. On the contrary, he is indirectly
defending the validity of the action of Central Bank in liquidating GENBANK and
selling it later to Allied Bank. Their interests coincide instead of
colliding. It is for this reason that Central Bank offered no objection to
the lawyering of respondent Mendoza in Civil Case No. 0005 in defense of
respondents Tan, et al. There is no switching of sides for
no two sides are involved.
It is also urged that the
Court should consider that Rule 6.03 is intended to avoid conflict of
loyalties, i.e., that a government employee might be subject to
a conflict of loyalties while still in government service.[61] The
example given by the proponents of this argument is that a lawyer who plans to
work for the company that he or she is currently charged with prosecuting might
be tempted to prosecute less vigorously.[62] In
the cautionary words of the Association of the Bar Committee in 1960: The
greatest public risks arising from post employment conduct may well occur during the
period of employment through the dampening of aggressive administration of
government policies.[63] Prof.
Morgan, however, considers this concern as probably excessive.[64] He
opines x x x it is hard to imagine that a private firm would feel secure hiding
someone who had just been disloyal to his or her last client the government.
Interviews with lawyers consistently confirm that law firms want the best
government lawyers the ones who were hardest to beat not the least qualified or
least vigorous advocates.[65] But
again, this particular concern is a non factor in the case at bar.
There is no charge against respondent Mendoza that he advised Central Bank on
how to liquidate GENBANK with an eye in later defending respondents Tan, et
al. of Allied Bank. Indeed, he continues defending both the interests of
Central Bank and respondents Tan, et al. in the above cases.
Likewise, the Court is
nudged to consider the need to curtail what is perceived as the excessive
influence of former officials or their clout.[66] Prof.
Morgan again warns against extending this concern too far. He explains the
rationale for his warning, viz: Much of what appears to be an
employees influence may actually be the power or authority of his or her
position, power that evaporates quickly upon departure from government x x x.[67] More,
he contends that the concern can be demeaning to those sitting
in government. To quote him further: x x x The idea that, present officials
make significant decisions based on friendship rather than on the merit says
more about the present officials than about their former co-worker friends. It
implies a lack of will or talent, or both, in federal officials that does not
seem justified or intended, and it ignores the possibility that the officials
will tend to disfavor their friends in order to avoid even the appearance of
favoritism.[68]
III
The question of fairness
Mr. Justices Panganiban and
Carpio are of the view, among others, that the congruent interest prong of Rule
6.03 of the Code of Professional Responsibility should be subject to a
prescriptive period. Mr. Justice Tinga opines that the rule cannot apply
retroactively to respondent Mendoza. Obviously, and rightly so, they are
disquieted by the fact that (1) when respondent Mendoza was the Solicitor
General, Rule 6.03 has not yet adopted by the IBP and approved by this Court,
and (2) the bid to disqualify respondent Mendoza was made after the lapse of
time whose length cannot, by any standard, qualify as reasonable. At bottom,
the point they make relates to the unfairness of the rule if applied without
any prescriptive period and retroactively, at that. Their concern is legitimate
and deserves to be initially addressed by the IBP and our Committee on Revision
of the Rules of Court.
IN VIEW WHEREOF, the petition
assailing the resolutions dated July 11, 2001 and December 5, 2001 of the Fifth
Division of the Sandiganbayan in Civil Case Nos. 0096-0099 is
denied.”
[2] [G.R. No.
143340. August 15, 2001]
LILIBETH SUNGA-CHAN and CECILIA SUNGA, petitioners, vs. LAMBERTO T. CHUA, respondent.
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