Philippines Legal Ethics Teaching Manual

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Foreword

The late Chief Justice of the Philippine Supreme Court, Manuel V. Moran, defined the term “legal ethics” as the “embodiment of all principles of morality and refinement that should govern the conduct of every member of the bar.” Accordingly, the legal profession, perhaps more than any other, requires a strong adherence to ethical standards which guide the profession and its members. These core ethical standards, embodied in the Code of Professional Responsibility (CPR) and the Canons of Professional Ethics (CPE), are an integral part of the education of every law student. The ABA-Asia Law Initiative is a passionate advocate in the promotion of high ethical standards and the rule of law worldwide. It is in that spirit that ABA-Asia partnered with the University of the Philippines Law School to develop a specialized ethics course. The process involved initial training on interactive teaching techniques by Professor Eleanor Myers of Temple University, followed by the development and implementation of the ethics course during the second semester of the 2005-06 school year, and finally the compilation of these course materials. The interactive nature of this course, which allows students to be actively involved in the classroom experience, is unique in the Philippines and is one that we hope will be a revolution in law school teaching methodology. The course materials are provided in this module for future use by law professors throughout the Philippines. ABA-Asia and the University of the Philippines Law School hope that this module will become a standard for the teaching of legal ethics. ABA-Asia wishes to acknowledge and thank the professors who worked so tirelessly to develop and teach the course and to compile this module. Those professors include: Professor Pacifico A. Agabin; Professor Vicente B. Amador; Professor Rogelio A. Vinluan; Professor Elizabeth A. Pangalangan; and Professor Rafael A. Morales. Dean Raul C. Pangalangan and his successor Dean Salvador T. Carlota enthusiastically and fully supported the preparation of this Manual. Professors Domingo P. Disini, Jr. and Concepcion L. Jardeleza performed administrative duties and assisted the writers, both in research and editing. We would also like to extend our thanks to Professor Eleanor Myers for her support of this project. ABA-Asia also wishes to acknowledge the financial support of the U.S. Agency for International Development (USAID).

Teresa L. Cannady Resident Legal Advisor ABA-Asia Law Initiative Manila, Philippines
This publication was made possible through support provided by the U.S. Agency for International Development Philippines Mission, under the terms of the Cooperative Agreement No. 492-A-00-03-00018-00. The opinions expressed herein are those of the author(s) and do not necessarily reflect the view of the U.S. Agency for International Development.

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TABLE OF CONTENTS
Page How To Use This Manual …...……………...….…….…….…..… I. Dilemma 1: Maternal/Fetal Interdependence; Who are Persons? ………………………………………….. 5 1

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II. Dilemma 2 & 3 : Contract for Support and Custody, and Simulated Birth Certificate ………………………….

III. Dilemma 4: Declaration of Presumptive Death for Purposes of Remarriage …………………………………… 17 IV. Dilemma 5: Last Will and Testament and Successional Rights ………………………………………... 22

Appendix “A” Appendix “B”

- Medical Certificate ……….…………….…… 27 - Contract ……………………………….…….… 29

Appendix “C” - Simulated Birth Certificate of Baby Ben …………………………………………….… 32 Appendix “D” - Email of Manuel to Louis …….….….....… 33 Appendix “E” - Letter from HSBC ……………..….…......… 34 Appendix “F” - Letter from Bags and Handicraft Company …………………..…….….…......… 35 Appendix “G” - Email of Cristina to Wendy ….…......….. 36 Appendix “H” - Will of Manuel Soriano ……….….…........ 37

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How To Use this Module
This module is aimed at clarifying to law students, who have taken the basic course on Legal Ethics, to see the lawyer’s code of professional ethics as applied to specific situations that s/he will encounter in Family Law practice. Legal Ethics, as traditionally taught in law schools in the Philippines, require knowledge of and familiarity with the Code of Professional Responsibility. This Module takes learning one step farther by giving situations that will bring to fore the lawyer’s moral judgment as to the bounds of what s/he may or may not do or advise the client. Here, the student is faced with a dilemma since s/he is under oath to render legal services to the best of their ability and to the satisfaction of the client. This may in turn, clash with the lawyer’s set of values and personal beliefs so that even if the law may allow their some elbow room, s/he may not be comfortable with using that space. It must be emphasized that there may not be one correct answer, no hard and fast rule of what is wrong or right for the lawyer to do that may be against his/her conscience but demanding by his fiduciary duty to his/her client. The Problem The Module is divided into four main problems, each of which could be characterized as a case falling within the substantive area of Persons and Family Relations.

The Client File

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The module examines the issues confronting Louis, a young lawyer, in giving advise to his high school friend and his wife on various occasions. The central theme is the capacity in which Louis acts, whether he gives advice as a lawyer or as a friend, considering that many times, his “legal” advice is sought in informal and unstructured situations. Another lawyer, Evie Escaler has to make certain choices as regards her duty to her client and her responsibility to the greater public as an advocate of a certain issue. The Client File has all the documents necessary for the students to see the weight of the document as evidence and create a theory of the particular case. To guide the students, the File include precise provisions of the Code of personal responsibility and cases decided by the Supreme Courts on a similar or same legal question. Class Activities The students could have a discussion in determining the ethical problems, identifying the pertinent substantive provisions of law and the Code and arriving at their own conclusions as to their boundaries. The professor could also divide the students into teams and have them debate on the competing questions. Role- playing, with students taking on the various characters in the problem could inject some fun in the otherwise tedious classroom work.

LEGAL ETHICS IN FAMILY LAW

I.

Dilemma 1: Maternal/Fetal Interdependence; Who are Persons?

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Manuel and Wendy were married 1992.

They are both

professionals, with stable jobs. In the five years that they were married, they were trying to conceive, but have not been successful. Manuel wanted to have a baby for so long that on the day Wendy received news that she was pregnant, Manuel was ecstatic. As Wendy’s pregnancy progressed, she started having difficulty breathing and was easily fatigued. One day, she was rushed to the hospital because she couldn’t breathe. The doctors diagnosed her as having mitral valve stenosis, a congestion of the heart due to a valve defect. As explained by the doctors, her heart has to work double time to be able to circulate blood in her system. Her condition was one of functional class III, and women with functional class III to IV heart conditions are strongly advised against pregnancy because of high maternal mortality rate. (See Appendix A, Medical Certificate) The doctors say that the chances of Wendy carrying the babying to term are slim because her heart would not be able to take it. She was then 10 weeks pregnant. Wendy was scared; she does not want to die. She contemplates the possibility of abortion, and seeks advice from Louis, a high school buddy of Manuel’s, who was a lawyer.

For Class Discussion – Faculty Guide a. If Louis, as a family friend, advises Wendy to have an abortion, would he be breaking his oath as a lawyer? I. Consider the following: i. Code of Professional Responsibility, Canons 1, 1.01, 9, 15.08, 17 ii. 1987 Constitution, Section 12, Article II iii. Revised Penal Code, Articles 256-259

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iv. Civil Code, Art. 41 - 42 b. Would abortion be justified if there was a serious risk to the life of the mother? I. Consider the following: i. Code of Professional Responsibility, Canons 15, 15.05, 15.07 c. If the situation were reverse and Louis, acting instinctively on his religious conviction, gives a legal opinion that abortion is criminal and does not allow for any exception, does he violate any law or ethical principle? I. Consider the following: i. Code of Professional Responsibility, Canons 1, 15, 15.05, 15.07

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II.

Dilemma 2 & 3: Contract for Support and Custody, and Simulated Birth Certificate Wendy lost the baby. Manuel was devastated. As much as he

hated to admit it, he blamed Wendy for not taking good care of her health, and they ended up having a big fight. Manuel decided he needed some time away from her, so he went to his home town in Candoni, Negros Occidental to clear his head. His aunt, Ysabel Ynares, was very happy to see him again after years of absence. She made sure that Manuel attended all the fiestas in their own town and nearby areas. Manuel was glad to oblige. All he cared about was getting drunk on every fiesta he went to. On one of such occasions, he got so drunk that he lost his way home. Fortunately, Cora, Ysabel’s niece by marriage, recognized Manuel, and helped him get to his room safely. Overcome by a mixture of emotions and drunkenness, Manuel took Cora in his arms and to his bed. The next day, Manuel awoke in sweat, overcome by a terrible guilt and fear of losing Wendy forever because of what he did the night before. He realized that he could not live without Wendy. He begged Cora to keep this incident secret from their relatives and friends. He told her that he has no intention of confessing to Wendy under any circumstance and hastily took the next flight back to Manila. Back together, Wendy and Manuel have never been happier. They decided to put the past behind them and think of their future. Since Wendy could not be pregnant, she broached to Manuel the possibility of adopting a child. Manuel was lukewarm to the idea and asked for time to mull it over. The following month, Manuel received word from Cora that she was pregnant with his baby and that she wanted support for herself and the child. Manuel asked Atty. Paulina Paz, his tax lawyer to draft a

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contract where Cora promised to drop all claims against Manuel if he took full responsibility for Cora’s financial needs until a year after her delivery and the baby’s until he/she finished College. Cora agreed to this and the provison that should Manuel exercise the option of supporting the child in his home, she will give up all her parental rights over the baby since this was clearly “in the best interest of the child.” Triumphant, Manuel then turned to Wendy and expressed his unequivocal consent and enthusiasm to adopt. He added that he wanted to adopt a relative, of whose background they could be sure. He suggested they adopt the child of Cora, whom he passed off as a distant cousin, without telling Wendy that the baby was actually his. Wendy agreed to this. They also were of the same mind about not wanting the baby and their neighbors to know of the arrangement. Neither did they want to bother going through adoption proceedings. They thought it would be best for Cora entered the hospital under Wendy’s name, so that the birth certificate would immediately show that the baby was Wendy’s and Manuel’s very own child. They then made the necessary plans for Cora to travel to Manila 4 months before the baby was due and ironed out other details including an apartment in Makati City where she could live until after she gave birth and was strong enough to return to Negros. At a birthday dinner among friends, the couple decided to ask the advice of Manuel’s lawyer friend Louis, on this matter. Furthermore, after the party, Manuel sent an email to Louis, confiding that his real reason for wanting to simulate the birth of the baby was because the baby was his, and he wanted the baby to be with him, but did not want Wendy to know that he was adulterous. Baby Ben was born in 1998. He grows up with the couple, Wendy and Manuel, knowing them to be his real parents.

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For Class Discussion – Faculty Guide a. Should Atty. Paulina Paz have prepared the support and custody contract between Cora and Manuel? I. See Appendix B, Contract II. Consider the following: i. Code of Professional Responsibility, Canons 1, 1.01, 1.02, 1.04, 9, 15 b. Comment on the plan of Manuel and Wendy to simulate the birth of the baby. I. See Appendix C, Simulated Birth Certificate of Baby Ben II. Consider the following: i. Revised Penal Code, Articles 347-348 ii. Republic Act 8552, Domestic Adoption Law c. Is there a lawyer-client relationship between the couple and Louis? Between Manuel and Louis? I. See Appendix D, Email of Manuel to Louis II. Consider the following: i. Code of Professional Responsibility, Canons 2, 2.01, 2.02, 15.08, 19.02 ii. Santiago v. Fojas, 248 SCRA 68 "It is axiomatic that no lawyer is obliged to act either as adviser or advocate for every person who may wish to become his client. He has the right to decline employment, subject, however, to Canon14 of the CPR. Once he agrees to take up the cause of a client, the lawyer owes fidelity to such cause and must always be mindful of the trust and confidence repose in him. he must serve his client

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with competence and diligence, and champion the latter's cause with whole-hearted fidelity, care, and devotion...." iii. Hilado v. David, 84 Phil 569 “The following rules accord with the ethics of the legal profession and meet with our approval: ‘In order to constitute the relation (of attorney and client) a professional one and not merely one of principal and agent, the attorneys must be employed either to give advice upon a legal point, to prosecute or defend an action in court of justice, or to prepare and draft, in legal form such papers as deeds, bills, contracts and the like." (Atkinson vs. Howlett, 11 Ky. Law Rep. (abstract), 264; cited in Vol. 88, A. L. R., p. 6.) ‘To constitute professional employment it is not essential that the client should have employed the attorney professionally on any previous occasion * * *. It is not necessary that any retainer should have been paid, promised, or charged for; neither is it material that the attorney consulted did not afterward undertake the case about which the consultation was had. If a person, in respect to his business affairs or troubles of any kind, consults with his attorney in his professional capacity with the view to obtaining professional advice or assistance, and the attorney voluntarily permits or acquiesces in such consultation, then the professional employment must be regarded as established (5 Jones Commentaries on Evidence, pp. 4118-4119.) ‘An attorney is employed-that is, he is engaged in his professional capacity as a lawyer or counselor-when he is listening to his client's preliminary statement of his case, or when he is giving advice thereon, just as truly as when he is drawing his client's pleadings, or advocating his client's cause in open court." (Denver Tramway Co. vs. Owens, 20 Colo., 107; 36 P., 848.) ‘Formality is not an essential element of the employment of an attorney. The contract may be express or implied and it is sufficient that the advice

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and assistance of the attorney is sought and received, in matters pertinent to his profession. An acceptance of the relation is implied on the part of the attorney from his acting in behalf of his client in pursuance of a request by the latter." (7 C. J. S., 848-849; see Hirach Bros. & Co. vs. R. E. Kennington Co., 99 A. L. R., 1.)

iv. Junio v. Grupo, Administrative Case No 5020 (Dec 18, 2001) [This is a case for malpractice and gross negligence against respondent Grupo. Complainant Junio entrusted to respondent Grupo, the amount of P25,000.00 in cash, to be used in the redemption of a parcel of land. Grupo failed to redeem the property. Junio demanded the return of the money, but despite repeated demands, Grupo refused to refund the money. Grupo, on the other hand, admitted receiving the amount in question for the purpose for which it was given, but alleged that when transaction failed, respondent requested the complainant that he be allowed, in the meantime, to avail of the money because he had an urgent need for some money himself to help defray his children's educational expenses. The family of the complainant and that of the respondent were very close and intimate with each other. They were considered practically part of respondent's own family. That is why, when complainant requested assistance regarding the problem of the mortgaged property, respondent had no second-thoughts in extending a helping hand, and did not ask for any fee. His services were purely gratuitous; his acts [were] on his own and by his own. It was more than pro bono; it was not even for charity; it was simply an act of a friend for a friend. It was just lamentably unfortunate that his efforts failed. Thus, the respondent concluded that there was, strictly

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speaking, no attorney-client [relationship] existing between them. Rather, right from the start, everything was sort of personal.] MENDOZA, J.: A lawyer shall not borrow money from his client unless the client's interests are fully protected by the nature of the case or by independent advice (Rule 16.04, Code of Professional Responsibility). This rule is intended to prevent the lawyer from taking advantage of his influence over the client. This rule is especially significant in the instant case where the respondent enjoys an immense ascendancy over the complainant who, "as well as two of his sisters, had served respondent's family as household helpers for many years." Having gained dominance over the complainant by virtue of such long relation of master and servant, the respondent took advantage of his influence by not returning the money entrusted to him. Instead, he imposed his will on the complainant and borrowed her funds without giving adequate security therefor and mindless of the interest of the complainant. In the light of the foregoing, . . . respondent has committed an act which falls short of the standard of the norm of conduct required of every attorney. If an ordinary borrower of money is required by the law to repay the loan failing which he may be subjected to court action, it is more so in the case of a lawyer whose conduct serves as an example…. Respondent's liability is thus not for misappropriation or embezzlement, but for violation of Rule 16.04 of the Code of Professional Responsibility, which forbids lawyers from borrowing money from their clients, unless the latter's interests are protected by the nature of the case or by independent advice. Respondent claims that complainant is a close personal friend and that in helping redeem the property of complainant's parents, he did not act as a lawyer but as a friend, hence there is no clientattorney relationship between them. This contention has no merit. As explained in Hilado v.

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David, “To constitute professional employment it is not essential that the client should have employed the attorney professionally on any previous occasion . . . It is not necessary that any retainer should have been paid. promised, or charged for; neither is it material that the attorney consulted did not afterward undertake the case about which the consultation was had. If a person, in respect to his business affairs or troubles of any kind, consults with his attorney in his professional capacity with the view to obtaining professional advice or assistance, and the attorney voluntarily permits or acquiesces in such consultation, then the professional employment must be regarded as established….”

d. Does a request for a legal opinion and a response done through the internet give rise to a lawyer-client relationship? I. See Appendix D, Email of Manuel to Louis II. Consider the following: i. Code of Professional Responsibility, Canons 14, 15, 15.04, 15.05, 15.07 e. Will duties of confidentiality be less strict, since as a rule, messages sent thru the internet are not secure? I. Consider the following: i. Code of Professional Responsibility, Canons 15.02, 17, 21, 21.01 ii. Rules of Court, Rule 130, section 24; Rule 138, section 20 (e) iii. Revised Penal Code, Article 209 iv. Rules on Electronic Evidence v. Hilado v. David, 84 Phil 569

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“Section 26 (e), Rule 123 of the Rules of Court provides that "an attorney cannot, without the consent of his client, be examined as to any communication made by the client to him, or his advice given thereon in the course of professional employment;" and section 19 (e) of Rule 127 imposes upon an attorney the duty "to maintain inviolate the confidence, and at every peril to himself, to preserve the secrets of his client." There is no law or provision in the Rules of Court prohibiting attorneys in express terms from acting on behalf of both parties to a controversy whose interests are opposed to each other, but such prohibition is necessarily implied in the injunctions above quoted. (In re De la Rosa, 27 Phil., 258.) In fact the prohibition derives validity from sources higher than written laws and rules. As has been aptly said in In re Merron, 22 N. M., 252, L.R.A., 1917B, 378, "information so received is sacred to the employment to which it pertains," and "to permit it to be used in the interest of another, or, worse still, in the interest of the adverse party, is to strike at the element of confidence which lies at the basis of, and affords the essential security in, the relation of attorney and client." “That only copies of pleadings already filed in court were furnished to Attorney Agrava and that, this being so, no secret communication was transmitted to him by the plaintiff, would not vary the situation even if we should discard Mrs. Hilado's statement that other papers, personal and private in character, were turned in by her. Precedents are at hand to support the doctrine that the mere relation of attorney and client ought to preclude the attorney from accepting the opposite party's retainer in the same litigation regardless of what information was received by him from his first client. "The principle which forbids an attorney who has been engaged to represent a client from thereafter appearing on behalf of the client's opponent applies equally even though during the continuance of the employment nothing of a confidential nature was revealed to the attorney by

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the client." (Christian vs. Waialua Agricultural Co., 30 Hawaii, 533, Footnote 7, C. J. S., 828.) "Where it appeared that an attorney, representing one party in litigation, had formerly represented the adverse party with respect to the same matter involved in the litigation, the court need not inquire as to how much knowledge the attorney acquired from his former client during that relationship, before refusing to permit the attorney to represent the adverse party." (Brown vs. Miller, 52 App. D. C. 330; 286, F. 994.) "In order that a court may prevent an attorney from appearing against a former client, it is unnecessary that the court ascertain in detail the extent to which the former client's affairs might have a bearing on the matters involved in the subsequent litigation on the attorney's knowledge thereof." (Boyd vs. Second Judicial Dist. Court, 274 P., 7; 51 Nev., 264.) "This rule has been so strictly enforced that it has been held that an attorney, on terminating his employment, cannot thereafter act as counsel against his client in the same general matter, even though, while acting for his former client, he acquired no knowledge which could operate to his client's disadvantage in the subsequent adverse employment." (Pierce vs. Palmer [1910], 31 R. L, 432; 77 Atl., 201, Ann. Cas., 1912S, 181.) “Communications between attorney and client are, in a great number of litigations, a complicated affair, consisting of entangled relevant and irrelevant, secret and well known facts. In the complexity of what is said in the course of the dealings between an attorney and a client, inquiry of the nature suggested would lead to the revelation, in advance of the trial, of other matters that might only further prejudice the complainant's cause. And the theory would be productive of other unsalutary results. To make the passing of confidential communication a condition precedent; i.e., to make the employment conditioned on the scope and character of the knowledge acquired by an attorney in determining his right to change sides, would not enhance the freedom of litigants, which is to be sedulously fostered, to consult with lawyers upon

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what they believe are their rights in litigation. The condition would of necessity call for an investigation of what information the attorney has received and in what way it is or it is not in conflict with his new position. Litigants would in consequence be wary in going to an attorney, lest by an unfortunate turn of the proceeding, if an investigation be held, the court should accept the attorney's inaccurate version of the facts that came to him. "Now the abstinence from seeking legal advice in a good cause is by hypothesis an evil which is fatal to the administration of justice." (John H. Wigmore's Evidence, 1923, Sections 2285, 2290, 2291.) Hence the necessity of setting down the existence of the bare relationship of attorney and client as the yardstick for testing incompatibility of interests. This stern rule is designed not alone to prevent the dishonest practitioner from fraudulent conduct, but as well to protect the honest lawyer from unfounded suspicion of unprofessional practice. (Strong vs. Int. Bldg., etc.; Ass'n, 183 III., 97; 47 L.R.A., 792.) It is founded on principles of public policy, on good taste. As has been said in another case, the question is not necessarily one of the rights of the parties, but as to whether the attorney has adhered to proper professional standard. With these thoughts in mind, it behooves attorneys, like Caesar's wife, not only to keep inviolate the client's confidence, but also to avoid the appearance of treachery and double-dealing. Only thus can litigants be encouraged to entrust their secrets to their attorneys which is of paramount importance in the administration of justice. So without impugning respondent's good faith, we nevertheless can not sanction his taking up the cause of the adversary of the party who had sought and obtained legal advice from his firm; this, not necessarily to prevent any injustice to the plaintiff but to keep above reproach the honor and integrity of the courts and of the bar. Without condemning the respondent's conduct as dishonest, corrupt, or fraudulent, we do believe that upon the admitted facts it is highly inexpedient. It had the

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tendency to bring the profession, of which he is a distinguished member, "into public disrepute and suspicion and undermine the integrity of justice."

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III.

Dilemma 4: Declaration of Presumptive Death for Purposes of Remarriage Three years later, on March 2001, Manuel went on a business trip. The plane on which he boarded crashed into the Pacific Ocean, with few survivors and many passengers unaccounted for. Despite efforts to locate Manuel’s body, he was never found. Wendy was devastated. She felt in her heart that Manuel was truly dead. About a year and a half passed since the plane crash, Wendy met another man, Omar. They fell in love, and decided to marry on June 2003. But in the months of January and February 2003, Wendy received information from three different sources (see Appendixes E, F, G) indicating that Manuel may be alive, and is living in Hong Kong. Despite efforts to verify, there was no confirmation from the Hong Kong authorities. Wendy informs Louis that she has broken off her engagement to Omar and asks Louis to help her locate Manuel. Louis feels guilty about Wendy being so concerned about Manuel, whom he considered undeserving of her love. Not wanting to see Wendy more depressed and anguished, he finally tells Wendy that Ben is the child of Manuel with Cora. Wendy was shocked and furious at both Manuel and Louis. To gain back Wendy’s trust, Louis suggests that she should disregard any information about Manuel since these were all hearsay. Thus, he says, having received no news that Manuel may be alive, she can secure a declaration of presumptive death in a summary proceeding before her June wedding. He adds that he would do this without compensation as proof of his friendship and remorse. He tells her of his uncle who is a family court judge and assures her that their case will be “raffled” to his court.

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For Class Discussion – Faculty Guide a. Did Louis violate his lawyer-client confidentiality when he told Wendy that Ben was Manuel’s child? I. Consider the discussion in Part II (c), (e) [whether there exists a lawyer-client relationship or not] II. Consider the following: i. ii. iii. Code of Professional Responsibility, Canons 21, 21.01, 21.02 Rules of Court, Rules 138, section 20 (e) Revised Penal Code, Article 209

b. Comment on the correctness, legal and moral, of his advice on securing a declaration of presumptive death of Manuel. Is unconfirmed information enough to destroy the spouse’s “well-founded belief” that the absentee spouse is dead? I. See Appendixes E, F, G (Information on Manuel after the plane crash) II. Consider the following: i. ii. iii. Civil Code, Articles 390-391 Family Code, Article 41 RP vs CA and Alan Alegro, GR 159614, December 9, 2005 “The spouse present is, thus, burdened to prove that his spouse has been absent and that he has a well-founded belief that the absent spouse is already dead before the present spouse may contract a subsequent marriage. The law does not define what is meant by a well-grounded belief….

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“Belief is a state of the mind or condition prompting the doing of an overt act. It may be proved by direct evidence or circumstantial evidence which may tend, even in a slight degree, to elucidate the inquiry or assist to a determination probably founded in truth. Any fact or circumstance relating to the character, habits, conditions, attachments, prosperity and objects of life which usually control the conduct of men, and are the motives of their actions, was, so far as it tends to explain or characterize their disappearance or throw light on their intentions, competence evidence on the ultimate question of his death. “The belief of the present spouse must be the result of proper and honest to goodness inquiries and efforts to ascertain the whereabouts of the absent spouse and whether the absent spouse is still alive or is already dead. Whether or not the spouse present acted on a well-founded belief of death of the absent spouse depends upon the inquiries to be drawn from a great many circumstances occurring before and after the disappearance of the absent spouse and the nature and extent of the inquiries made by present spouse.” iv. RP vs Nolasco, GR 94053, March 17, 1993 “United States v. Biasbas, is instructive as to degree of diligence required in searching for a missing spouse. In that case, defendant Macario Biasbas was charged with the crime of bigamy. He set-up the defense of a good faith belief that his first wife had already died. The Court held that defendant had not exercised due diligence to ascertain the whereabouts of his first wife, noting that: ‘While the defendant testified that he had made inquiries concerning the

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whereabouts of his wife, he fails to state of whom he made such inquiries. He did not even write to the parents of his first wife, who lived in the Province of Pampanga, for the purpose of securing information concerning her whereabouts. He admits that he had a suspicion only that his first wife was dead. He admits that the only basis of his suspicion was the fact that she had been absent. . . .’ “In the case at bar, the Court consider that the investigation allegedly conducted by respondent in his attempt to ascertain Janet Monica Parker's whereabouts is too sketchy to form the basis of a reasonable or well-founded belief that she was already dead. When he arrived in San Jose, Antique after learning of Janet Monica's departure, instead of seeking the help of local authorities or of the British Embassy, he secured another seaman's contract and went to London, a vast city of many millions of inhabitants, to look for her there.” c. Comment on the ethical questions involved in Louis’ planned legal strategy. I. Consider the following: i. On disregarding unconfirmed information about Manuel 1) Code 1.02 ii. On the insinuation about influence on the family court judge 1) Code 15.07 of Professional Canons 15.06, Responsibility, of Professional Responsibility, Canons 1, 1.01,

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IV. Dilemma 5: Last Will and Testament and Succesional Rights On April 2005, four years after the plane crash, probate proceedings for Manuel’s will were initiated. In the will, Manuel left P100, 000 to Cora, and the rest of all his properties to Wendy and Ben equally (see Appendix H, Will of Manuel Soriano). Louis, entrusted with the will, knew that if the will was to be followed, it would be unfair to Wendy, since Ben was really Manuel’s illegitimate child. Louis advices Wendy to contest the will. He adds, however that if she contests the will, she has to tell the whole world that Ben is not her biological child. Wendy does not want to give Ben up to his biological mother, since she (Wendy) has learned to love him. However, she is adamant about not giving Cora the P500, 000. For Class Discussion – Faculty Guide a. Should Wendy contest the will? I. See Appendix H, Will of Manuel Soriano II. Consider the following: i. Civil Code, Article 892, 894, 897

b. Louie reminds Wendy that in all their years of friendship, she and Manuel have gone to him for their legal problems but not once did he charge them a fee. Due to the time involved in litigating this case (as to not giving Cora the P500, 000), he accepts the case but demands from Wendy payment of P150, 000, his standard fee. Wendy refuses. Can Louis withdraw from the case? I. Consider the following: a. Code of Professional Responsibility, Canons 22, 22.01, 20.04, 14.04 b. Santiago vs. Fojas, 248 SCRA 68

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"It is axiomatic that no lawyer is obliged to act either as adviser or advocate for every person who may wish to become his client. he has the right to decline employment, subject, however, to Canon14 of the CPR. Once he agrees to take up the cause of a client, the lawyer owes fidelity to such cause and must always be mindful of the trust and confidence repose in him. he must serve his client with competence and diligence, and champion the latter's cause with wholehearted fidelity, care, and devotion...." c. If instead, Louie agrees to take the case upon Wendy’s promise to give him the entire P500,000 meant for Cora, should he win the case but only P25,000 should he lose, would this be correctly characterized as a contingent fee? I. Consider the following: i. Taganas vs. NLRC, GR 118746, 9/7/95 “A contingent fee arrangement is an agreement laid down in an express contract between a lawyer and a client in which the lawyer's professional fee, usually a fixed percentage of what may be recovered in the action is made to depend upon the success of the litigation. This arrangement is valid in this jurisdiction.” d. Distinguish between a champertous contract and a contingent fee. I. The case of Bautista vs Gonzales (182 SCRA 151) describes a champertous agreement as one “whereby an attorney agrees to pay expenses of proceedings to enforce the client’s rights.” In champertous contracts, the lawyer is the one paying for all the costs and fees of the case, without reimbursement from the client.

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II. On the other hand, a contingent fee is defined in the case of Taganas vs NLRC as “an agreement laid down in an express contract between a lawyer and a client in which the lawyer's professional fee, usually a fixed percentage of what may be recovered in the action is made to depend upon the success of the litigation.” Thus, in contingent fees, the lawyer gets paid the agreed amount if the case is successful, otherwise, he does not get paid, or gets paid a lower agreed amount. This does not mean though that the lawyer necessarily pays the costs and fees of the suit. The clients may still be paying for the costs of the suit, but the lawyer gets paid his agreed fee if they win. e. What are the criteria in considering the reasonableness of Attorney’s fees? I. Consider the following: i. ii. iii. Code of Professional Responsibility, Canon 20.01 Rules of Court, Rule 138, Section 24 Del Rosario vs. CA, 237 SCRA 39 “In determining the reasonableness of such [attorney’s] fees, this Court in a number of cases has provided various criteria which, for convenient guidance, we might collate thusly: a) the quantity and character of the services rendered; b) the labor, time and trouble involved;

24

c) the nature and importance of the litigation; d) the amount of money or the value of the property affected by the controversy; e) the novelty and difficulty of questions involved; f) the responsibility imposed on counsel; g) the skill and experience called for in the performance of the service; h) the professional character and social standing of the lawyer; i) the customary charges of the bar for similar services; j) the character of employment, whether casual or for establishment client; k) whether the fee is absolute or contingent (it being the rule that an attorney may properly charge a higher fee when it is contingent than when it is absolute); and l) the results secured.” f. Presume that Louis does not take the case and Wendy seeks the services of a media-savvy female lawyer, Atty. Evie Escaler. She believes that there is little chance that the case will prosper considering that Wendy wanted the bequest to Cora to be voided on moral grounds but did not want any proof to be presented that could identify Cora as Ben’s biological mother. Nevertheless, she keeps these thoughts to herself and accepts the case considering that it presented a real challenge and was a good

25

test case in addition to having the makings of a high profile case of “show-biz” proportions. Discuss the legal and moral issues involved. I. Consider the following: i. Code of Professional Responsibility, Canons 15, 15.05, 15.07, 17

APPENDIX “A”
ST. LUKE’S MEDICAL CENTER 279 E. Rodriguez Sr. Blvd., Quezon City, Philippines 1102 (632) 7230301 / 7230101 / 7230199 info@stluke.com.ph MEDICAL CERTIFICATE Date: January 21, 1997 Name of Patient: Age: Sex: Wendy G. Soriano 30 years Female

SYMPTOMS: • Difficulty of breathing • Pounding of heart • Easily tired without doing anything PHYSICAL EXAMINATION: • Intrauterine pregnancy 9 4/7 weeks age of gestation by last menstrual period, o 10 3/7 by first ultrasound o currently not in labor G1P0 • BP 130/90 • cardiac rate 110 ( normal 60-100) • respiratory rate 30 (normal 16-20)

26

• •

head & neck: o (+) neck vein engorgement, o jugular venous pressure 10 cm H20 chest & lungs: o crackles all lung fields o enlargement of the left atrium o (+) grade 3/6 murmur of the heart, best heard at the left 5th intercostal space, parasternal border and at the apex, with radiation to anterior axillary line, systolic. extremities: edema, grade 3, pitting

MEDICAL HISTORY: • rheumatic fever at age 15, poor follow up. • paroxysmal nocturnal dyspnea (difficulty of breathing before going to sleep) • easy fatigability, relieved by 3-4 pillows • bipedal edema (swelling of feet) FINAL DIAGNOSIS: Mitral Valve Stenotic: Congestive Heart Failure functional class III, secondary to Acquired valvular heart disease, secondary to Rheumatic Heart Disease.

(signed) DR. BETTINA COLORO, MD. Attending Physician License Number: 0987-35593

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APPENDIX “B”
CONTRACT KNOW BY ALL MEN THESE PRESENTS: Manuel V. Soriano, of legal age, married, residing at #14 Maginhawa Street, Teachers Village, Diliman, Quezon City, hereafter referred to as Donor and Cora Z. David, of legal age, single, residing at #37 Libertad Street, Candoni, Negros Occidental , hereinafter referred to as Donee

Do hereby agree to fulfill the following terms and conditions: I. That for and in consideration of the affection which Donor has for his cousin, Cora Z. David, Donor by these presents give Donee Four hundred thousand pesos (P400.000.00) to cover her financial needs, from the date of signing of this Contract, until one year after she delivers her baby and is able to resume her employment. II. That this amount shall be divided into 16 monthly payments and given in the amount of Twenty-five thousand pesos (P25, 000.00) per month to cover dwelling, food and health expenses, except that in addition to this amount, Donor agrees to shoulder the hospital expenses and physicians’ fees incurred in delivering the baby that Donee is now pregnant with. III. That by the third week of every month said amount shall be deposited to Donee’s account at Equitable PCI Bank, Candoni Branch with Savings Account Number 266-192837, without necessity of further demand; IV. That in addition to said donation, Donor hereby undertakes to take full responsibility for the child’s support until he/she completes his/her college education.

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V. That the child’s support shall be for the amount of P15,000 (Fifteen thousand pesos) per month subject to modification, considering the needs of the child and the financial capacity of Donor. VI. Said amount shall be deposited in the same bank account at the same time and manner as above-stated; VII. That in exchange for the preceding, Donee shall drop any case and desist from filing any and all future claims against Donor. VIII. That should Donor exercise the option of supporting the child in his home, Donee shall give up all her parental rights over the baby, both parties having agreed that such is in the best interest of the child. WITNESS WHEREOF, the parties hereto have hereunto set their hands, this 18th of September 1996, in Candoni, Negros Occidental, Philippines.

_____(signed)__________ Manuel V. Soriano

_______(signed)___________ Cora Z. David

Signed in the presence of: ______(signed)__________ Georgina H. Garcia _______(signed)___________ Francis U. Yu

JOINT ACKNOWLEDGMENT BEFORE ME, Ricardo Q. Romano, Notary Public in the municipality of Candoni, Negros Occidental, Philippines, this 18th day of September1996, personally appeared:

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Manuel V. Soriano, with CTC No. 234975 issued at Quezon City on February 3, 1996; Cora Z. David, with CTC No. 001938 issued at Candoni City on March 12, 1996; Georgina H. Garcia, with CTC No. 0039473 issued at Candoni City on January 17, 1996; Francis U. Yu, with CTC No. 0113290 issued at Quezon City on February 15, 1996; All known to me to be the same persons who signed the foregoing contract, and they respectively acknowledged to me that they signed the same as their own free act and deed. This Contract consists of two pages, including the page on which this acknowledgment is written, and has been signed on the left margin of each and every page thereof by the testator and his witnesses, and sealed with my notarial seal. IN WITNESS WHEREOF, I have hereunto set my hand the day, year, and place above written. (signed) ATTY. RICARDO Q. ROMANO Notary Public My commission expires December 30, 1996 Doc. No. 1981 Page No. 17 Book No. 1 Series of 1996

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APPENDIX “C”
Municipal Form No. 102 (Revised December 1, 1958) TO BE ACCOMPLISHED IN DUPLICATE

REPUBLIC OF THE PHILIPPINES

CERTIFICATE OF LIVE BIRTH
(FILL OUT COMPLETELY, ACCURATELY, LEGIBLY IN INK OR TYPEWRITER)

------------------------Register Number:

Province: ____National Capital Region________________ City or Municipality: ____Makati City____________________________
1. a. b. c. d. Place of Birth Province National Capital Region City or Municipality Makati City Name of Hospital or Institution (If not in hospital, give street address) St. Luke’s Medical Center Is place of Birth inside City Limits? O First Middle Benjamin Gomez 5a. This Birth Single O Twin O Triplet O Middle Last Viejo Soriano 10. Birthplace Candoni, Negros Occidental Last Gomez 15. Birthplace Quezon City 2. a. b. c. d.

(a) Civil Registrar-General No. ______________________ (b) Local Civil Registrar No. ________________________
Usual Residence of Mother (where does mother live?) Province National Capital Region City or Municipality Quezon City Number and Street #14 Maginhawa Street, Teachers Village, Diliman Is residence inside city limits? e. Is residence on a farm? YES O NO O Last YES O NO O

YES O NO 3. Name (Type or Print)

CHILD

4. Sex Male 7. Name First Manuel 9. Age (at time of this birth) Years 32

MOTHER FATHER

Soriano 5b. If Twin or Triplet, was child 1st O 2nd O 3rd O Religion Roman Catholic 11a. Usual Occupation Employee

6. Date of Birth Month Oct Day 8. Nationality Filipino

10 Year 1997 8a. Race

11b. Kind of Business or Industry

12. Maiden Name First Middle Wendy Chua 14. Age (at time of this birth) 31 17a. Informant’s Signature: b. Name in Print: c. Address

Religion 13. Nationality Roman Catholic Filipino 16. Previous deliveries to mother (do not include this birth) a. How many children are now living? 0 0 b. How many other children were born alive but are now dead? 0

13a. Race

c. How many fetal deaths (fetuses born dead any time after conception)? 0

18. Mother’s Mailing Address: (number, street, city, or municipality, province) #14 Maginhawa Street, Teachers Village, Diliman, Quezon City 19. ATTENDANT AT BIRTH d. Date signed by Attendant at Birth: I hereby certify that I attended the birth of this child who was born alive at _2:20 o’clock _p_m. on the ___________________________ date above indicated. e. Title of Attendant at Birth a. Signature: O M. D. O Midwife b. Name in Print: O Nurse O Others (specify) c. Address: 20. Received in the Office of the Local Civil Registrar by 21a. Given name added from supplemental report: a. Signature: b. Name in Print: c. Title or Position b. Date when given name was supplied: d. Date: 22b. Weight at Birth 23. Legitimate 22a. Length of Pregnancy YES O ____7__Lbs. ___2______Oz. _______36____ Complete weeks 24. Date and Place of Marriage of Parents (for legitimate birth) 25. This Certificate is prepared by: Signature: 2, 1992_____________ __May Name in Print: Month Day Year Title or Position: Date: City or Municipality __Quezon City__ Province _National Capital Region

NO

O

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APPENDIX “D”

Print – Close Window Date: From: To: Subject: Dear Louis, As you know, Wendy and I plan to take in as ours the baby that Cora is carrying. I know you question why we plan to do it this way. But I actually have a deeper reason for it, one that Wendy does not know. Cora’s baby is mine. I made a mistake, and I don’t want Wendy to know about it. At the same time, I want that baby to grow up with me, because after all, I’m the father. The only way this can happen is if we simulate the birth of the baby. Otherwise, the social worker handling the adoption case will be asking too many intrusive questions, and Wendy might find out I’m the father. I don’t know where to start. I need your support and advice on this Louis, as my friend. I trust that you will keep this between the two of us. Yours truly, Manuel __________________________________________________ Do You Yahoo!? Tired of spam? Yahoo! Mail has the best spam protection around http://mail.yahoo.com Wed, 12 May 1997 15:58:09 GMT +8:00 “Manuel V. Soriano” manuelvsoriano@yahoo.com “Louis Alcala” louisalcala@yahoo.com RE: Adoption of our baby

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APPENDIX “E”

Hong Kong Office and HSBC Premier Centre and Financial Management Centre 1 Queen’s Road Central, Central District, Hong Kong Island Tel: [852] 2748 3322 Fax: [852] 2899 8810

February 9, 2003 MRS. WENDY G. SORIANO # 14 Maginhawa Street, Teachers Village Diliman, Quezon City Philippines 1101 Dear Mrs. Soriano: Greetings from Hong Kong! You may have remembered me as the Manager of Hong Kong and Shanghai Bank Branch in Katipunan Avenue, Quezon City, where you maintained a Savings Account and a Joint Checking Account with your husband. I am now based in the Hong Kong, as I was recently promoted to Senior Manager for Investment Proposition. I often see Mr. Soriano here at the Hong Kong Office, and I assume that you planned to extend your investments to Hong Kong. I would like to offer the services of HSBC to you. I have some very good proposals that may interest you. Attached are some brochures and investment plans. Should you have any inquiries, you may contact me through the numbers at the letterhead. Thank you very much. Sincerely, (signed) Mr. ANTON K. ONG Senior Manager for Investments

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APPENDIX “F”

BAGS AND HANDICRAFTS COMPANY Eastwood City, Libis, Quezon City Tel No. (632) 927-3847 MEMORANDUM TO: FROM: RE: DATE: ALL EMPLOYEES Human Resource, ADMINISTRATION Authorized Agents in Asia January 17, 2003

Please be informed that that following people are the authorized agents of our distributors in Asia beginning year 2003: Bangkok, Thailand Beijing, China Chinese Taipei Hong Kong, China Jakarta, Indonesia Kuala Lumpur, Malaysia Seoul, South Korea Singapore Tokyo, Japan Ms. Yanisa Chanakarn Ms. Chen Shui Ben Mr. Francis Chang Mr. Manuel B.Soriano Mr. Guntur Setiawan Ms. Christine Yeoh Mr. Peter Jung Soon Mr. Michael Huang Mr. Takashi Imegu

Please be reminded to transact our business only with the authorized agents of our distributors, as furnished herein. Thank you. Noted: (signed) JULIANA C. RAMOS Human Resource Director

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APPENDIX “G”
Print – Close Window Date: From: To: Subject: Dear Wendy, It’s been a long time my dear friend. The last time we talked was just before my family and I left for Malaysia. That was three years ago! I hope you are doing well, and that baby Ben is in good health. My kids are doing well too. I must admit, rearing children is not an easy task. I don’t know how else I’m supposed to tell you this. The reason why I wrote is because I saw Manuel in Hong Kong when our family went on a vacation to Disneyland a couple of weeks ago. He had with him a one year old toddler. At first I thought I was hallucinating, but it was really him! I walked over to make sure, and sure enough, he recognized me. He said he’s been in Hong Kong all these years. An old lady took him in when he survived the crash, and now he’s married to the old lady’s daughter. He says he can’t go back to the Philippines anymore, because he can’t leave his new family behind. It came as a bit of a shock, and before I knew it, he was saying goodbye. He said his wife was waiting for him. I just thought you deserve to know this. You and Ben should come visit us here in Malaysia when you get the chance. It would be nice to see my inaanak again. Love, Cristina __________________________________________________ Do You Yahoo!? Tired of spam? Yahoo! Mail has the best spam protection around http://mail.yahoo.com Fri, 28 February 2003 09:26:11 GMT +8:00 “Cristina Valencia” cristina_valencia@yahoo.com “Wendy Soriano” wendysoriano@yahoo.com

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APPENDIX “H”

1 LAST WILL AND TESTAMENT of MANUEL V. SORIANO KNOW ALL MEN BY THESE PRESENTS: I, Manuel V Soriano, of legal age, married to Wendy G. Soriano, native of Candoni, Negros Occidental, having been born on the 17th day of August, 1966, now actually residing at #14 Maginhawa Street, Teachers Village, Diliman, Quezon City, being of sound and disposing mind and memory, and not acting under undue influence, violence, fraud, or intimidation of whatever kind, do by these presents declare this to be my Last Will and Testament which I have caused to be written in English, a language which is known to me. And I hereby declare that: I. I desire that my remains be buried according to the rites of the Roman Catholic Church and with dignity suitable to my circumstances; I give P500, 000 to Cora Z. David, for the happiness and help that she brought to me and my wife. I give and bequeath to my wife, Wendy, and my son, Ben, in equal shares, all the rest of my properties, real and personal, whatsoever and wheresoever located; I designate my wife Wendy, the sole executor of this my Last Will and Testament, and in her default or incapacity to act, my friend Louis Alcala, and in default or incapacity of the latter to act, my son Ben, if of age;

II.

III.

IV.

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V. VI.

I hereby direct that the executor named herein or his lawful substitute should serve without bond; I hereby revoke any and all my other wills, codicils, or testamentary dispositions heretofore executed, signed, or published, or alleged to have been executed, signed or published, by me.

IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of July, 2000, in Quezon City, Philippines.

(signed) MANUEL V. SORIANO

2 ATTESTATION CLAUSE We, the undersigned attesting witnesses, whose residences are stated opposite our respective names, do hereby certify: That the testator, Manuel V. Soriano, has published unto us the foregoing will, consisting of 3 pages, numbered correlatively on the upper part of each page, as his Last Will and Testament and has signed the same and every page thereof, on the left margin, in our joint presence and we, in turn, at his request, have witnessed and signed the same and every page thereof, on the left margin, in the presence of the testator, and in the presence of each and all of us. DIANA H. BAUTISTA 103 Burgundy One Building, Katipunan, Loyola Heights, Quezon City 99 Matahimik Street, Teachers Village, Diliman, Quezon City 58 Sikatuna Village, Diliman, Quezon City

EDWIN T. LAZARO

FRANCISO N. DOBLE

37

JOINT ACKNOWLEDGMENT BEFORE ME, Alesandro Y. Roma, Notary Public for and in the city of Quezon City, Philippines, this 10th day of July, 2000, personally appeared: The testator, MANUEL V. SORIANO, with CTC No. 18375640 issued at Quezon City on July 9, 2000; Witness, DIANA H. BAUTISTA, with CTC No. 01827465 issued at Quezon City on October 4, 1999; Witness, EDWIN T. LAZARO, with CTC No. 02837465 issued at Quezon City on January 16, 2000; Witness, FRANCISCO N. DOBLE, with CTC No. 01129385 issued at Quezon City on December 15, 1999;

3 All known to me to be the same persons who signed the foregoing Will, the first as testator and the last three as instrumental witnesses, and they respectively acknowledged to me that they signed the same as their own free act and deed. This Will consists of 3 pages, including the page on which this acknowledgment is written, and has been signed on the left margin of each and every page thereof by the testator and his witnesses, and sealed with my notarial seal.

IN WITNESS WHEREOF, I have hereunto set my hand the day, year, and place above written.

(signed) ALESANDRO Y. ROMA

38

Notary Public My commission expires April17, 2002

Doc. No. 1092 Page No. 89 Book No. 4 Series of 2000

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APPENDIX “I” Legal Ethics in Family Law
References: Constitution Code of Professional Responsibility Canon 1, 2, 6, 14 – 21 Rules of Court Rule 130, 138 Revised Penal Code Art . 208-209, Art. .256-259, Art 11, Art .347-348, Art. 350-352 Family Code Art. 41-43, Art.176, Art. 194- 208, Art 213-216 RA 8552 (Domestic Adoption Law) Civil Code Provisions on Wills and Succession Art. 41-42 I. Dilemma 1: Maternal/Fetal Interdependence; Who are Persons? a. If Louis, as a family friend, would advise for abortion, would he be breaking his oath as a lawyer? i. Would abortion be justified if there was a serious risk to the life of the mother? b. If the situation were reverse and Louis, acting instinctively on his religious conviction, gives a legal opinion that abortion is criminal and does not allow for any exception, does he violate any law or ethical principle? (pertinent provisions of the 1987 Constitution, Civil Code, Revised Penal Code, Code of Professional Responsibility)

II.

Dilemma 2 & 3: Contract for Support and Custody, and Simulated Birth Certificate

40

a. Should Atty. Paz have prepared the contract between Cora and Manuel? b. Is there a lawyer-client relationship between the couple and Louis? Between Manuel and Louis? i. Does a request for a legal opinion done through the internet give rise to a lawyer-client relationship? Cases: 1) Hilado v.David, 84 Phil 569 2) Junio v. Grupo,, Administrative Case No 5020 (Dec 18,2001) (pertinent provisions of the Family Code, Adoption Law, Code of Professional Responsibility) III. Dilemma 4: Declaration of Presumptive Death for Purposes of Remarriage a. Did Louis violate his lawyer-client confidentiality when he divulged to Wendy that Ben was Manuel’s child? b. Comment on the correctness, legal and moral, of his advice on securing a declaration of presumptive death of Manuel. i. Is unconfirmed information enough to destroy the spouse’s “well-founded belief” that the absentee spouse is dead? c. Comment on the ethical questions involved in Louis’ planned legal strategy? (pertinent provisions of the Civil Code, the Family Code, Code of Professional Responsibility)

IV.

Dilemma 5: Last Will and Testament and Successional Rights a. Can Louis refuse to handle the case given that he finds Wendy’s claims contradictory and that she refused to heed his legal advice? b. If instead, Louie reminds Wendy that in all their years of friendship, she and Manuel have gone to him for their
41

legal problems but not once did he charge them a fee. Due to the time involved in litigating this case, he accepts the case but only if Wendy will pay him P150,000, which he claims is his standard fee. Wendy refuses. Can Louis withdraw from the case? c. If instead, Louie agrees to take the case upon Wendy’s promise to give him the entire P300,000 meant for Cora, should he win (but only P25,000 should he lose), would this amount be correctly characterized as a contingent fee? i. If Louis agrees, spends his own money for expenses necessary to litigate, such amount exceeding P20,000 but looses the case anyway, can he demand a fee more than that agreed on ? (pertinent provisions of the Civil Code, Family Code, Code of Professional Responsibility)

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B

TABLE OF CONTENTS

Page HOW TO USE THIS MODULE ………………………………. I. INTRODUCTIONS: ADR - WHAT DOES IT MEAN? Study Guide ………………………………………………... 4 Role Play: Chekhov, The Proposal (On the Nature of Conflict) ……………………………… 5 1

Suggested Readings………………………………………… 14 II. PARADIGM SHIFT FOR THE LAWYER Study Guide ……………………………………………… 15 Suggested Readings ……………………………………….. 15 III. THE ROLE OF A LAWYER IN NEGOTIATION Study Guide ………………………………………………. 16 Suggested Readings ……………………………………… 16 IV. ETHICAL PROBLEMS IN NEGOTIATION Study Guide ………………………………………………. 17 Hypothetical Role Play: “The Call Center” ……..….… 17 Suggested Readings ………………………………………. 21 V. COURT-ANNEXED MEDIATION Study Guide ……………………………………………….. 22 Suggested Readings ………………………………………. 22

1

VI. ETHICAL PROBLEMS IN MEDIATION Study Guide ………………………………………….…… 24 Hypothetical Role Play: “The Father In Law” ……….. 25 Suggested Readings ……………………………………… 30 VII. CASE STUDY IN MEDIATION Hypothetical III : Draft Complaint and Answer …….. Hypothetical : Draft M/R for Respondent ………….. 31 31

2

HOW TO USE THIS MANUAL
This module introduces the student to some of the ethical issues which may be faced by the lawyer acting as counsel in Alternative Dispute Resolution. These issues will be developed through reading assignments, discussion of problems, role plays, and writing exercises. Through such exercises and role plays the student hopefully will gain experience in resolving ethical dilemmas that confront lawyers when they shift from the adversarial mode to the cooperative mode. The first set of readings is designed to acquaint the students with fundamentals of ADR, and is focused on negotiation and mediation. The second set deals with the lawyer’s ethical dilemma as he undergoes a paradigm shift from an advocate in a litigation to counsel in ADR. The third set then discusses the role of a lawyer as counsel in negotiation and mediation, and is followed by the fourth set which delves into the ethical problems of counsel as he encounters problems in negotiation. The fifth set of readings introduces the student to what is now being done in our trial courts, court-annexed mediation as mandated by the Supreme Court in civil cases, and is followed by materials that delve into ethical problems in mediation. The last set consists of materials for a case study which will require the students to write a memorandum on the current problem faced in court-annexed mediation in our trial courts. There are a number of ethical issues which a lawyer faces when he shifts from an adversarial to a cooperative mode in ADR. The first ethical conundrum crops up when the lawyer is being asked to shift from litigation to mediation: his financial interest conflicts with the interest of his client in expediting a compromise. The lawyer, who knows that in 3

mediation he is relegated from front and center stage to the background, may also have an interest in the publicity that accompanies a sensational case, or even an interest to practice his trial skills, against his client’s interest in settlement. When the lawyer finally agrees to go to the mediation table, they will have to grapple with the meaning of “advocacy” in the context of mediation: Does passionate advocacy mean continuing with the adversarial attitude, or does it mean shifting to a cooperative mode to achieve effective settlement? Another ethical dilemma arises when the parties are negotiating in mediation. This occurs in what is called “positional bargaining.” Does the counsel take an extreme position by telling a lie, or by simulating righteous anger, or by bluffing? In this connection, the lawyer also faces the issue of “loss of face” by giving up too much without a fight, so should he play “chicken”? Other techniques in negotiating include use of threats and deadlines, delaying at the behest of a client, or, in emotional causes, loss of personal meaning if it involves betrayal of a cause, as in environmental cases, assaults on freedom of the press, or in religious causes. All of these issues should be thoroughly presented and discussed with the student with the reading material as background. Such issues can be brought to a head by means of role plays. Then the student will have to grapple with a specific ethical dilemma against the backdrop of a concrete case by taking a position in a writing exercise which will sharpen not only his reasoning and analytical ability but also his ethical perspectives. For it is only by applying ethical standards in a factual setting that the student’s ethical orientation can be properly oriented.

4

I.

INTRODUCTIONS: ADR - WHAT DOES IT MEAN? Study Guide Assume that you have been engaged to handle a big estate case by

a wealthy client. Under your contract, you are to receive a down payment of P 25,000 acceptance fee, and a per appearance fee of P 5,000, aside from transportation and representation expenses. You figure that, since this is a big estate proceeding, it will drag on for about five years, and that you would have an assured retainer every month since a case is calendared at least every month. Further, your client has also intimated that he would like you to be appointed administrator of the estate if you win the case. The complaint is filed, and the case is set for pre-trial. As the case is called for pre-trial, the judge orders the parties to go to the Philippine Mediation Center for mediation. In the mediation proceedings, the mediator has proposed a compromise which will satisfy the wishes of your client. Considering that a compromise settlement will bring a sudden closure to the case, will you recommend acceptance of the compromise proposed by the mediator? Why or why not?

5

Role Play: Chekhov, The Proposal (On the Nature of Conflict) NATALYIA: Oh, so it’s you! And Papa said: go along, there’s a customer come for the goods. How do you do, Ivan Vasilievich? LOMOV: How do you do, my dear Natalyia Stepanovna? NATALYIA: Excuse my wearing this apron and not being properly dressed. We’re shelling peas for drying. Why haven’t you been to see us for so long? Do sit down... [They sit down.] Will you have some lunch? LOMOV: NATALYIA: No, thank you, I’ve already had lunch. Won’t you smoke? Here are some matches.... It’s a

magnificent day, but yesterday it rained so hard that the men did nothing all day. How many ricks did you manage to get in? Would you believe it, I was so set on getting it done that I had the whole meadow cut, and now I almost feel sorry – I’m afraid the hay may rot. It might have been better to wait. But what’s all this? I believe you’re wearing tails! This is something new! Are you going to a ball or something? By the way, you’ve changed – you’re better looking!... But really, why are you dressed up like this? LOMOV: [in agitation]: You see, dear Natalya Stepanovna. ... The fact is that I’ve decided to ask you to ...listen to me Naturally, you’ll be surprised, possibly even angry, but I...[aside] How dreadfully cold it is! NATALYIA: What is it then? [a pause] Well? LOMOV: I’ll try to be brief. You are aware, of course, my dear Natalyia Stepnovna, that I’ve had the honour of knowing your family a long time - from my very childhood, in fact. My late aunt and her husband - from whom, as you know, I inherited the estate - always

6

entertained a profound respect for your father and your late mother. The family of the Lomovs and the family of the Choobukovs have always been on the friendliest and, one might almost say, on intimate terms. Besides, as you are aware, my land is in close proximity to yours. Perhaps you will recollect that my Volovyi meadows lie alongside your birch wood. NATALYIA: Excuse me, but I must interrupt you there. You say ‘my’ Volovyi meadows…But are they really yours? LOMOV: yours! LOMOV: LOMOV: Swamp. NATALYIA: But yes, of course They’re ours. LOMOV: are mine. NATALYIA: Do come to your senses, Ivan Vassilievich! How long have they been yours? LOMOV: What do you mean by ‘how long’? As long as I can remember – they’ve always been ours. NATALYIA: Well, there you must excuse me for disagreeing. LOMOV: You can see it in the documents, my dear Natalyia Stepanovna. It’s true that the Volovyi meadows were a matter of dispute at one time, but now everyone knows that they’re mine. There’s really no need to argue about it. If I may explain - my aunt’s grandmother handed over those meadows to your great grandfather’s peasants for their use, rent free, for an indefinite period, in return for their firing her bricks. Your No, you’re mistaken, my dear Natalyia Stepanovna, they No, they’re mine, dear Natalyia Stepanovna. What do you mean, how? I’m speaking of the Volovyi NATALYIA: That’s news to me. How do they come to be yours? meadows that lie like a wedge between your birch wood and the Burnt Yes, mine NATALYIA: Well, what next! The Volovyi meadows are ours, not

7

great grandfather’s peasants used the meadows rent free for forty years or so and got accustomed to looking upon them as their own... and then when the settlement was made after the emancipation... NATALYIA: But it wasn’t at all as you say! Both my grandfather and my great grandfather considered that their land reached to the Burnt Swamp - so the Volovyi meadows must have been ours. So why argue about it? I can’t understand you. It’s really rather annoying! LOMOV: I’ll show you the documents, Natalyia Stepanovna! NATALYIA: No, you must be just joking, or trying to tease me.... What a surprise indeed! We’ve owned the land for something like three hundred years, and now suddenly someone declares that the land isn’t ours! Forgive me, Ivan Vassiliovich, but I just can’t believe my own ears.... I set no value on those meadows. They’re not more than fifteen acres, and they’re only worth about three hundred roubles, but it’s the injustice of it that disgusts me! You can say what you like, but I can’t tolerate injustice. LOMOV: Do hear me out, I implore you! Your father’s grandfather’s peasants, as I’ve already had the honour of telling you, fired bricks for my aunt’s grandmother. My aunt’s grandmother, wishing to do something for them... NATALYIA: Grandfather, grandmother, aunt... I don’t understand anything about it! The meadows are ours, that’s all! LOMOV: They’re mine! NATALYIA: They’re ours! You can go on trying to prove it for two days, you can put on fifteen dress suits if you like, but they’re still ours, ours, ours! ... I don't want what’s yours, but I have no desire to lose what’s mine…. You can please yourself! LOMOV: I don’t want the meadows, Natalyia Stepanovna, but it’s a matter of principle. If you wish, I’ll give them to you as a present.

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NATALYIA: But I’m the one who could make a present of them to you – because they’re mine I ... All this is very strange, Ivan Vassilievich, to say the least of it! Till now we’ve always regarded you as a good neighbour, a friend of ours. Last year we lent you our threshing machine, and because of that we had to finish threshing our own corn in November. And now you’re treating us as if we were gypsies! You’re making me a present of my own land! Forgive me, but this isn’t neighbourly conduct! To my mind it’s almost impertinent, if you want to know… LOMOV: You mean to say then that I’m a usurper? I've never stolen other people’s land, Madam, and I won’t allow anyone to accuse me of it [Goes rapidly to the decanter and drinks water.) The Volovyi meadows are mine! NATALYIA: That’s not true, they’re ours! LOMOV: They’re mine! NATALYIA: It isn’t true! I’ll prove it to you! I’ll send my men to mow those meadows today. LOMOV: LOMOV: LOMOV: What's that? I’ll kick them out! [clutches at his heart] The Volovyi meadows are mine! Don't NATALYIA: My men will be working there today! NATALYIA: You daren’t do that! you understand that? Mine! NATALYIA: Don’t shout, please! You can shout and choke with rage when you’re at home, but please don’t overstep the mark here! LOMOV: If it weren’t for these dreadful agonizing palpitations, Madam - if it weren’t for the throbbing in my temples, I should speak to you very differently! [Shouts] The Volovyi meadows are mine! NATALYIA: Ours! LOMOV: Mine!

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NATALYIA: Ours! LOMOV: Mine! What’s all this? What are you shouting about? Papa, please explain to this gentleman: to whom [to LOMOV] The meadows are ours, dear chap. [Enter CHOOBUKOV] CHOOBUKOV: NATALYIA: CHOOBUKOV: LOMOV:

do the Volovyi meadows belong - to him or to us? But forgive me, Stepan Stepanych, how do they come to

be yours? At least you might be reasonable! My aunt’s grandmother gave over the meadows to your grandfather’s peasants for temporary use without payment. The peasants had the use of the land for forty years and got accustomed to regarding it as their own. But when the settlement was made... CHOOBUKOV: Pardon me, my dear friend…You forget that it was just because there was a dispute and so on about these meadows that the peasants didn’t pay rent to your grandmother, and all the rest of it…And now every dog knows that they’re ours - yes, really! You can’t have seen the plans! LOMOV: LOMOV: But I’ll prove to you that they’re mine! You won’t prove it, my dear man. But why shout, my dear boy? You won’t prove Yes, I will! CHOOBUKOV: CHOOBUKOV:

anything by shouting! I don’t want what is yours, but I’ve no intention of letting go of what’s mine. Why should I! If it comes to that, my dear friend - if you’re thinking of starting a dispute about the meadows and all the rest of it, I’d sooner make a present of them to the peasants than to you. So that’s that! LOMOV: I don't understand this. What right have you to give away someone else’s property?

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CHOOBUKOV:

Permit me to decide whether I have the right or

not! And really, young man, I’m not used to being spoken to in that tone, and so forth…I’m twice your age, young man, and I beg you to speak to me without getting excited, and all that… LOMOV: No, you’re simply taking me for a fool and laughing at me! You call my land yours, and then you expect me to say cool and talk to you in the ordinary way. Good neighbors don’t behave in this way, Stepan Stepanych. You’re not a neighbor, you’re a usurper. CHOOBUKOV: CHOOBUKOV: up! I won’t, I won’t! LOMOV: they’re mine. CHOOBUKOV: In court? You take it to court, sir, and all the rest of it! You do it! I know you – you’ve really just been waiting for a chance to go to law, and all that. It comes natural to you - this petty niggling. Your family always had a weakness for litigation. All of them! LOMOV: Please don’t insult my family! The Lomovs have all been honest men, and not one of them has ever been on trial for embezzling money like your uncle! CHOOBUKOV: mad! NATALYIA: Every one of them - every one! CHOOBUKOV: Your grandfather was a dipsomaniac and your youngest aunt, Nastasyia Milvailovna - yes, it’s a fact - ran away with an architect, and all the rest of it... Every member of the Lomov family has been We shall see about that! I’ll prove to you in court that What’s that? What did you say? [to LOMOV] What was it you said, sir? NATALYIA: Papa, send the men to mow the meadows at once! NATALYIA: The Volovyi meadows are ours, and I won’t give them

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LOMOV: And your mother was deformed. [Clutches at his heart]. This shooting pain in my side!... The blood is gone to my head… Holy Fathers! Water! CHOOBUKOV: LOMOV: Your father was a gambler and a glutton! NATALYIA: Your aunt was a scandal-monger - and a rare one at that! My left leg’s paralyzed... And you’re an intriguer. ...Oh, my heart!... And it’s an open secret that before the elections you....There are flashes in front of my eyes... Where’s my hat?.. NATALYIA: It’s mean! It’s dishonest! It’s perfectly vile! CHOOBUKOV: fellow! Yes, you are! LOMOV: Here it is, my hat. ...My heart. ... Which way do I go? Where’s the door? Oh! I believe I’m dying…I’ve lost the use of my leg [Walks to the door]. CHOOBUKOV: house again! NATALYIA: Take it to court! We shall see! [LOMOV goes out staggering] CHOOBUKOV: after that! CHOOBUKOV: The ridiculous scarecrow! The scoundrel! NATALYIA: The monster! Grabs other people’s land, then dares to abuse them into the bargain! CHOOBUKOV: And this ridiculous freak, this eyesore - yes, he has the impertinence to come and make a proposal and all the rest of it! Would you believe it? A proposal! NATALYIA: What proposal? COOBUKOV: Yes, just fancy! He came to propose to you. The devil take him! [Walks about in agitation.] NATALYIA: Have you ever seen such a cad? Trust good neighbors [calling after him] I forbid you to set foot in my And you’re just a malicious, double-faced, mean

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NATALYIA: : that before? CHOOBUKOV: sausage! The shrimp!

To propose? To me? But why didn’t you tell me That’s why he got himself up in his tail-coat. The

NATALYIA: To me? A proposal? Oh! [Drops into a chair and moans.] Bring him back! Bring him back! Oh, bring him back! CHOOBUKOV: hysterically.] CHOOBUKOV: What is it? What do you want? [Clutches at his head.] What misery! I’ll shoot myself! I’ll hang myself! They’ve worn me out! NATALYIA: I’m dying. Bring him back! CHOOBUKOV: him back! Phew! Directly. Don’t howl. [Runs out] NATALYIA: [alone, moans] What have we done! Bring him back! Bring Bring whom back? NATALYIA: Be quick, be quick! I feel faint! Bring him back! [Shrieks

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Suggested Readings 1. The ABCs of ADR: A Dispute Resolution Glossary, Vol. 13 No. 11 Alternatives (1995) 2. Michael Fogel, A Rose By Any Other Name is Still… ADR Moving from Name Changing to System Transforming, 3. John Wade, Don’t Waste My Time on Negotiation and Mediation: This Dispute Needs a Judge, Vol. 18 No. 3 Mediation Quarterly (2001)

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II.

PARADIGM SHIFT FOR THE LAWYER Study Guide

You are a veteran labor lawyer as well as a labor leader of a big national labor federation. One day a multinational company approaches you and tells you that you have been chosen to act as a private impartial mediator in a sensational labor dispute between the company and another federation, which happens to be a rival of your own union. Will you accept the challenge of mediating between the company and the federation? Reason out your answer. If you accept, do you need to shift your perspectives to be an effective mediator? What paradigm shift would be necessary? Suggested Readings 1. Chris Guthrie, The Lawyer’s Philosophical Map and the Disputant’s Perceptual Map: Impediments to Facilitative Mediation and Lawyering, 6 Harvard Negotiation Law Review 145 (2001) 2. Mark Hansen, Selling Your Case a Different Way: Effective Mediation Calls for Advocacy Skills, Even if they're not the Kind Litigators Use in Court, 89 A.B.A. J. 59 (2003) 3. Marcelino, Philippine Culture and Personality in Mediation and Conflict Resolution

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III.

THE ROLE OF A LAWYER IN NEGOTIATIONS Study Guide As counsel for an employee who has been unjustly dismissed by

his employer, you assist him in the conciliation proceedings before the Labor Department. The conciliator asks your client if he has attempted to look for another job, and your client answers that he had tried very hard to look for a new one but he did not land any. You know very well that this is not true, for your client would have been accepted in another company but he rejected this because he found it too arduous. What will you do in such a situation?

Suggested Readings
1. The Role of Counsel in Negotiation (Module 1B: Fundamentals of Negotiation & Mediation) 2. Analysis of the Cooperative and Aggressive Negotiating Patterns 3. Roger Fisher & William Ury. Getting to Yes : Negotiating an Agreement Without Giving In. Business Books Limited, London, 1991. 4. Lowering Resistance to Agreement 5. How to Address Power Issues in Negotiation and Mediation IV. ETHICAL PROBLEMS IN NEGOTIATION Study Guide

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You are a negotiator for your client, a plaintiff in a bodily injury civil case arising from a bad accident where your client’s head was fractured. Your client suffered damages amounting to P 1,000,000. You are meeting with your counterpart negotiator and he has asked you to lay your cards on the table, and to give him your bottom line negotiating figure. You know very well that whatever amount you tell him will not be readily accepted and that your counterpart will probably try to cut it, possibly into half. Will you tell him the correct amount of damages, or will you inflate it to make allowance for a compromise?

Hypothetical Role Play: “The Call Center” Facts for Parties’ Counsel Lisa De Jesus has worked for the Hart & Andersen call center for the past year. She works from 10 AM to 7PM everyday except Saturday, handling inquiries from Hart & Andersen clients in the United Kingdom and Australia. Lisa is young, and quite pretty. In fact, in her province, she is something of a local celebrity: she is a product endorser for her town’s signature culinary delicacy. Hart & Andersen is a credit facility associated with a top international banking institution. The company’s head office is in London, but routes client inquiries and service requests to agents in the Philippines, as a way of minimizing overhead expenses. Because of its affiliations, and a long record of outstanding customer service, Hart & Andersen enjoys the reputation of being one of the world’s best credit facility providers.

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Simon Castro is the CEO for Hart & Andersen in the Philippines. One morning, after returning from a business trip to Melbourne, Simon receives a letter addressed to him from Lisa, saying she had contacted her lawyers and was contemplating the filing of charges against him for sexual harassment. Confidential Facts for Lisa De Jesus’ Counsel You have just passed the bar, and given your mediocre performance in law school, was fortunate to have as your godfather a senior partner of a top Makati law firm. You are, ergo, unsure of what exactly constitutes sexual harassment, although you have a general idea that it is prohibited under a special law and a just cause for termination under the Labor Code. In her initial conversation with you, Lisa tells you of several separate incidents on which she is basing her charge. The incidents consisted mainly of one-on-one encounters with Castro where he placed his hands on her back or her shoulders and uttered statements in a tone that suggested sexual overtures (in Lisa’s words, “tsansing”). Lisa is asking for nothing less than Php 150,000 by way of settlement, and she is adamant about remaining with Hart & Andersen. She has no qualms about going to court as she confides that all of your services are being “covered”. She is nevertheless interested in exploring an out-ofcourt settlement, as she believes this will enable her to quickly get the money she feels is due her.

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Upon consulting with your godfather about the case, he tells you that a senior partner of the law firm had promised, in return for Lisa’s services as an escort, to help Lisa in her undertaking. Afraid that this might be revealed should the case go to court, the senior partner is willing to give you the Php 150,000 that Lisa is requesting, or the balance from what Castro is willing to pay. However, should he be required to pay, then the settlement terms with Castro must include a stipulation that Lisa is to return home. He makes it clear that he does not want to spend more on Lisa than is necessary to “keep things quiet”. Lisa is unaware of this exchange. She knows that the senior partner is already helping her by allowing her to be represented by his firm. The senior partner does not want Lisa to know that he is doing anything more.

Confidential Facts for Simon Castro’s Counsel Simon Castro single-handedly convinced London management to open a call center in Manila, and is primarily in charge of ensuring that the call center functions in line with management directives. He himself has invested much time and money into this venture, and after 2 years of operation, has built up credibility with both the head office and partner corporations in Southeast Asia, who are consequently thinking of affiliating with Hart & Andersen through him. Simon does not want this case to go to court, as the consequences on his career would be devastating. He confides to you that though there were

19

instances where he did touch De Jesus and joke with her, he claims that he did so only because he thought that De Jesus was comfortable with it. He says that at no time did De Jesus show any signs of being offended by his conduct. He does however admit that he finds her pretty, and has more than once contemplated on asking her out. He tells you that it is not impossible that these thoughts may have found their way into his actions. In light of all this, Simon is willing to settle for no more than Php 200,000 but Lisa must tender her resignation and agree to bring no subsequent civil, criminal, or administrative action against him in connection with any cause arising from this settlement, including her termination. Later, you go to the gym, an exclusive one in the Makati area frequented by hotshot lawyers like yourself. While in the locker room, you happen to overhear a conversation between two young lawyers of a woman who provided the senior partner of a law firm with escort services, and who is now asking one of the newer lawyers of that firm to represent her in a case she is planning to file for sexual harassment against her boss. All the details seem to mirror the ones in Simon’s case, although no names are mentioned.

Suggested Readings
Rhode, Deborah L. Professional Responsibility : Ethics by the Pervasive Method, 2nd ed., Aspen Law and Business, 1998.

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21

V.

COURT-ANNEXED MEDIATION Study Guide

You are the judge in a civil case for legal separation, with plea for support pendente lite. At the pre-trial, you are enjoined under rules prescribed by the Court Administrator, to try your best to reconcile or at least to find a compromise between the parties. You do that, inquiring into the family life of the parties, examining the source of their disagreement, and probing into their hidden fears and interests. From your inquiry, you get to know that it is probably the husband who is at fault, and that the wife needs immediate support, otherwise she and her four children will starve. Despite your best efforts, your attempts to settle fail, and the case goes to trial. Will you go on and try the case yourself, or will you inhibit yourself and pass on the case to another judge?

Suggested Readings
1. Regulatory Framework a. A.M. No. 01-01-5-SC PhiljaSecond Revised Guidelines for the Implementation of Mediation Proceedings (Sept. 5, 2001) Code of Ethical Standards for Mediators

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-

Standard and Procedure for Accreditation Mediators for Court-Referred/Mediation Cases

2. Role of Lawyers in Court Annexed Mediation A.M. No. 04-3-05 SC: Guidelines for Parties Counsel in Court- Annexed Mediation Role of Counsel in Pre-Mediation and During Mediation The Role of Legal Counsel

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VI.

ETHICAL PROBLEMS IN MEDIATION Study Guide

1.

You are assisting a client in a mediation proceeding. During the

proceedings, the mediator makes a doctrinal statement about the rights of the parties which is erroneous but which is favorable to your client’s cause. Will you correct the mediator and state the right doctrine, or will you just keep quiet? Why? 2. Your are counsel in a mediation proceeding, and the mediator

assigned to the case by the Supervisor happens to be your friend. The other party and his counsel do not know this. If the mediator does not reveal this, will you volunteer the information, or just keep quiet? 3. In preparing for a mediation proceeding, you learn that the

mediator assigned to the case of your client is a married girl with whom you have had an extra-marital affair. Will you reveal this to disqualify her or not? 4. In a civil case that was subjected to mediation but failed, the

opposing party testifies in open court that he has been trying to settle with your client but he failed due to the intransigence of your client. In the mediation proceedings, however, it was the opposing party who backed out of a possible compromise after initially agreeing to it. Since mediation proceedings are confidential, will you bring out this fact to contradict him or not? Why or why not? 5. In a family dispute under mediation, you are assisting the defendant husband who has been accused of failing to support his wife and child. In the mediation proceedings, you witness the gross imbalance

24

of power between the wealthy and articulate husband and the destitute and inarticulate wife. The proceedings have become an opportunity for the husband to browbeat the wife and put her under intense psychological pressure. The wife cannot even afford to hire the services of counsel. As assisting counsel for the husband, what will you do, if you do anything at all? Why?

Hypothetical Role Play: “The Father In Law” Facts for All Parties Harry and Kathleen were engaged. Harry is the guitarist in a rock band that plays on weekends in bars around the city, while Kathleen is the beautiful daughter of a rich plastic surgeon whose clients include society’s bigwigs, actors, and wives of politicians. In fact, he has several billboards along major thoroughfares, a tv commercial, and a segment on a weekly talkshow. In preparation for their wedding, Harry, who is a bit overweight and has a tendency to sweat a lot, has decided to undergo surgery in the hands of Kathleen’s father. However, something goes horribly wrong during the liposuction procedure. Harry spends four months in the care of a team of specialists in one of the best hospitals in the country. Although he survives, he is left scarred in areas around his waist, and has been told that he has lost all reproductive abilities. Given the high profiles of Kathleen and her father, and the nature of Harry’s injuries, the parties have acquiesced to mediation as their preferred form of dispute resolution. They have further agreed that because of the intense emotions involved, it would be best to allow their

25

respective counsels to represent them in the mediation, rather than risk a volatile confrontation. The chosen mediator is Atty. Mariano, a friend of Harry’s family, who just recently arrived in the country from an assignment with the United Nations which included representing the UN in peace talks with belligerent states. Confidential Facts for Kathleen’s Father’s Counsel Kathleen’s father is not licensed to practice plastic surgery. In fact, he is a veterinarian. If this case goes to court, this will surely be revealed, and the consequences for him would be nothing short of disastrous. He is, therefore, willing to settle for as much as is needed to keep the case from being litigated. However, he tells you that he is currently in the process of settling separate claims with other clients whose jobs he botched. These settlements are all being done as quietly as possible, but they have drained much of his finances. In addition, word - mostly through hushed conversations - has been getting around, and the unconfirmed rumors have affected his business. He reveals that he personally spent for an advertising campaign as a counter-measure, an investment that likewise did not come cheap. In a telephone conversation with Harry’s counsel, you revealed your intention to have an independent doctor make a prognosis. This doctor’s report arrived only a few hours ago, and showed that the specialists who

26

treated Harry had overlooked a crucial indicator that the doctor warned might become the basis for an unduly favorable prognosis. Although you were initially averse to the choice of mediator, you capitulated after receiving confidential information that Atty. Mariano was involved with an extremist anti-capitalist syndicate engaged in the high-level corporate sabotage of key North American financial institutions. You are still unsure about how you are going to use this to your benefit -- if at all -- especially since you have been unable to substantiate the precise nature of the involvement. Nevertheless, you feel it is an important ace up your sleeve. Besides, Kathleen’s father has made it abundantly clear that he wants to facilitate the coming to an agreement, if only because his daughter’s emotional state has been highly affected by the whole affair.

Confidential Facts for Atty. Mariano You have just returned from three months of secret negotiations with the leaders of a covert international group whose extremist views against capitalism are basis for their highly sophisticated commercial sabotage of key North American financial institutions. Your part in the process, as a representative of the United Nations, is confidential: no one must know that the UN is even aware of the group’s existence.

27

Which is why, to throw off suspicion, you have been asked to spend a few weeks in your home country before returning to Geneva. You haven’t become a top international diplomat for nothing: your sense of professionalism, integrity, and fairness have been important factors in your success. You do not intend to treat this case any differently, even in spite of the long friendship you share with Harry’s family. In fact, because of this relationship, which you are well aware will spawn suspicion in counsel for Kahtleen’s father, you are going to exert extra effort simply to ensure that the process will be as just as possible, and that your conduct will be neutral and above reproach. Confidential Facts for Harry’s Counsel According to a report from the doctor who attended to Harry during his recovery, there is a 60% chance that Harry will recover normal reproductive functions within the next three years, but there is an 80% chance that, because of the damage to certain areas, dexterity in his limbs -- including the fingers -- will decrease significantly in the same period. The doctor however added that there is a 35% chance that with proper physical therapy, the risk of loss of dexterity could be reduced by as much as 50%. In a telephone conversation, counsel for Kathleen’s father informed you that they were requesting another doctor who did not participate in Harry’s recovery to be allowed to examine the medical records and make a separate prognosis. This has led you to suspect that neither Kathleen’s father nor his counsel may even be aware of the doctor’s report you have, much less its contents.

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Harry is still very much in love with Kathleen, despite what has happened, and wants a settlement with Kathleen’s father that won't endanger Harry’s chances of marrying. This is precisely why, although he does not have very much money, he does not want to go through a protracted legal process and is willing to give up all claims to the medical expenses incurred if Kathleen’s father will agree to pay for the physical therapy needed to keep the dexterity loss to a minimum. The hospital bills show that Harry’s medical expenses totalled more than Php 1.3 million. A conservative estimate for the physical therapy is Php 850,000. You are confident -- after hearing Harry’s explanation that Atty. Mariano was a regular guest of his family’s for Sunday lunches and out-of-town trips while Atty. Mariano was still in law school-- the mediation will yield favorable results.

Suggested Readings
Rhode, Deborah L. Professional Responsibility : Ethics by the Pervasive Method, 2nd ed., Aspen Law and Business, 1998.

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VII.

CASE STUDY IN MEDIATION 1. Hypothetical III: Draft Complaint and Answer 2. Hypothetical: Draft M/R for Respondent

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C

TABLE OF CONTENTS

Page Preface How to Use this Manual …………….………………………. Part I – Ethical Infrastructure: Conflict of Interest ……….… Conflict Screening Committee ……………………….. Suggested exercise …………………………………… Suggested reading ……………………………….…… Conflict Avoidance/Resolution Clauses in a Retainer Agreement …………………………………… Suggested exercise …………….……………………… Suggested reading ………………….…………………. Other Conflict Avoidance/Resolution Mechanisms ………….. (a) Non-exclusivity: Chinese Walls …………………… Suggested exercise ……………………………..……… (b) Defensive Retainer ………………….…………… Suggested exercise …………………………………….. (c) Compartmentalized Retainer ………………………. Suggested exercise ………………………..…………… Built-in Statutory or Regulatory Conflict-Resolution Measures …………………………………………………… Suggested exercise ……… …………………………… Suggested reading ………..……………………………. 1 4 5 6 6 6 9 9 9 10 10 11 12 12 13 14 18 20

1

Part II – Within the Legal Framework ………………………….. Notarial Practice ……………………………………….. Suggested exercise ………………………………. Suggested reading …………………………….…. Paper Minutes ………………………………………… Suggested exercise ………………………………. Suggested reading ……………………………….. Rules Penal in Character ……………………………….. Suggested exercise ………………………………. Suggested reading ……………………………….. Opinion Committee ……………………………………..

21 22 25 25 26 30 30 31 33 33 33

Suggested exercise …………………………………. 34 Suggested reading ………………………………….. 34 Code of Corporate Governance ………………………… Suggested reading ………………………………. Zealous Legal Representation …………………………… 34 35 35 Suggested exercise ………………………………… 35

Suggested exercise ………………………………… 36 Suggested reading …………………………………. 36 Appendix A – Form of Retainer Agreement …………………….. Appendix B – Form of Paper Minutes …………………………… Appendix C – Form of Secretary’s Certificate …………………… (Re Board Action Recorded in Paper Minutes) 37 43 44

2

HOW TO USE THIS MANUAL
By way of introduction, it may be advisable to begin the course by considering Justice J.B.L. Reyes’ article, Morality in Legal Education, in the Journal of the Integrated Bar of the Philippines. In his article, Justice Reyes emphasized the importance of “strong ethical moorings in law practitioners” and urged that “the principles of ethical conduct and professional responsibility should be taught and stressed throughout the entire four years of law study.” Indeed, this teaching manual, which is intended for a special course in legal ethics, may be seen as a step in that direction. This manual is divided into two parts. Part I begins with a brief discussion of the ethical infrastructure that can be established within a law firm to address conflicts of interest, in line with Canon 15 of the Code of Professional Responsibility. The discussion shifts to “conflict avoidance/ resolution” measures in a retainer agreement and outside of it, before turning to certain built-in statutory or regulatory mechanism for resolving conflicts of interest. In Part II, this manual will address the injunction to lawyers in Canon 1 to “obey the laws of the land,” using as springboard the new rules on notarial practice, as well as the occasional resort to paper minutes in corporate decision-making. Part II also considers an approach to interpreting unclear or ambiguous laws and regulations that are penal in character, as well as the use of an opinion committee (as part

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of the ethical infrastructure of a law firm). Finally, Part II deals with the Code of Corporate Governance or Manual on Corporate Governance (as a set of rules of conduct to be observed by directors and certain corporate officers who may well be lawyers), before turning to the ethical demand on lawyers to keep abreast of legal and related developments consistent with the zeal required by Canon 19 of the Code of Professional Responsibility. Both Parts provide “suggested readings” and “suggested exercises,” as well as scenarios for analysis and discussion in the classroom. In performing the exercises or in finding a solution to the ethical issues presented or engendered by the scenarios, role playing by the students may be done. The class may be divided into two groups, one espousing a position contrary to the other, with a view to presenting the two sides of the issue. In the end, the professor offers his or her own view on the matter, taking into account the arguments and ideas expressed by the students. Where there is no clear-cut solution to the problem, the professor should remind the students that, in the practice of law, ethical issues are not always easy to resolve, and that their course in legal ethics precisely seeks to alert the students that they will be faced with difficult ethical problems in the actual practice of the legal profession. In fact, the objective of the course is to provide law students with certain practical insights into the real-life application of legal ethics. Needless to state, this manual does not purport to highlight all possible ethical issues or scenarios that may confront practitioners in corporation and securities law. The forms attached as appendices to this manual are provided only as tools to highlight the relevant points being discussed.

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It goes without saying that a good companion to this manual (apart from the suggested readings) is an authoritative textbook on legal ethics, which provides commentaries on the Code of Professional Responsibility.

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PART I ETHICAL INFRASTRUCTURE: CONFLICT OF INTEREST Law firms are well advised to establish their respective “ethical infrastructure” aimed at promoting and enhancing compliance with the Code of Professional Responsibility. An important component of this ethical infrastructure is a mechanism for determining conflicts of interest ab initio, in line with Rule 15.01 of the Code of Professional Responsibility, which provides that: “A lawyer, in conferring with a prospective client, shall ascertain as soon as practicable whether the matter would involve a conflict with another client or his own interest, and if so, shall forthwith inform the prospective client.” In this respect, the Supreme Court, in Northwestern University, Inc., et al. v. Arquillo, 465 SCRA 513, 517 (2005), explained the tests for determining the existence of a conflict of interest as follows: When a lawyer represents two or more opposing parties, there is a conflict of interests, the existence of which is determined by three separate tests: (1) when, in representation of one client, a lawyer is required to fight for an issue or claim, but is also dutybound to oppose it for another client; (2) when the acceptance of the new retainer will require an attorney to perform an act that may injuriously affect the first client or, when called upon in a new relation, to use against the first one any knowledge acquired through their professional connection; or (3) when the acceptance of a new relation would prevent the full discharge of an attorney’s duty to give undivided fidelity and loyalty to the client or would invite suspicion of unfaithfulness or double dealing in the performance of that duty. For instance, a conflict of interest would arise if a law firm, which agreed to represent the buyer in a corporate asset acquisition, were to act for the seller in the same transaction; or, if that law firm should represent

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the issuer in a public offering of securities, when it already agreed to act as counsel to the underwriters of the issue. As will be shown shortly, however, it is possible for that law firm to act as common or transaction counsel to all parties to the transaction with their consent. Conflict-of-interest issues are inherent in law practice and go into the ability of a law firm to accept new clients or continue representation of existing ones. Moreover, conflicts of interest arise in a variety of situations and may not be readily identifiable. consideration should be given to them. Accordingly, careful

Conflict Screening Committee A law firm’s focused way of addressing the problem is to form a conflict screening committee (or an equivalent body) that will decide on conflict-of-interest issues. From time to time, however, the members of this committee or body may not be able to convene a meeting on short notice. Accordingly, the partners and legal staff of the law firm may, as a practical matter, use the telephone, the email system, or some other method of direct contact, to ask each other whether the firm would be conflicted if it were to accept the engagement of a prospective client. Here, a step in the right direction is to check the law firm’s list of clients, and see whether or not the firm is representing an existing client whose interest is adverse to that of the prospective client, using the tests articulated by the Supreme Court above.

Suggested exercise: The professor should inquire from the
students what additional or alternative ethical infrastructure could be established by law firms to avoid conflicts of interest pursuant to Canon

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15 of the Code of Professional Responsibility (particularly Rule 15.01 thereof).

Suggested reading:

Elizabeth Chambliss and Donald B.

Wilkins, “Promoting Effective Ethical Infrastructure in Large Law Firms: A Call for Research and Reporting,” Hofstra Law Review, Vol. 30, pp. 691716.

Conflict Avoidance/Resolution Clauses in a Retainer Agreement If there is no conflict of interest, then the law firm is free to accept the engagement of the new client. If the client wants to have a more-than-transitory relationship with the law firm, a retainer agreement is normally signed between the parties. A form of such retainer agreement is included as Appendix A to this manual. It will be observed that the sample retainer agreement stresses the law firm’s adherence to Rule 15.01 of the Code of Professional Responsibility in this fashion: For the avoidance of any misunderstanding later on, we should state in advance that the rules of legal ethics binding on our firm and its lawyers may prevent us from accepting an engagement from you if to do so would put us in conflict with our professional duty to another client of the firm. Sometimes, the existence of an actual or potential conflict of interest may not be readily discernible at the time we decide to accept a specific engagement from you; accordingly, notwithstanding our acceptance, we have to reserve the right to withdraw from such engagement should a conflict of interest become manifest. Our experience has been that sometimes, even in situations where we ourselves are not conflicted, a valued client might regard

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our accepting an engagement from you in regard to a specific matter to be adverse to its general interests, and thus object to our performing work for you in that regard. In situations like this, we would suggest that we address the feasibility of engagement on a caseby-case basis. In addition, a law firm can include in the retainer agreement certain clauses that address and resolve conflicts that may arise in the course of its dealings with the retainer client. One such “conflict avoidance/resolution” clause concerns the case of a “common/ transaction counsel” who acts for both parties to a business transaction. In the sample retainer agreement, the stipulation in question is worded as follows: In commercial and financial transactions, our experience has been that, where both parties are clients of our firm and where the parties have previously or independently (i.e., without our involvement) arrived at an understanding on the basic economic terms of their transaction, such parties have often been willing to allow our firm to act for only one of them, and in some instances, they may even engage our firm either as common counsel or as transaction counsel. If our firm were to act as common counsel to both parties, we will endeavor to have separate personnel handling work for each party. As transaction counsel, on the other hand, our principal task would be to provide a common legal advice to both parties to the transaction, and to reduce to legal or documentary terms the conditions and substance of the agreements independently reached by them. Clearly, this type of engagement also needs to be approached on a case-by-case basis. The above stipulation comports with Rule 15.03 of the Code of Professional Responsibility, which states: “A lawyer shall not represent conflicting interests except by written consent of all concerned given after a full disclosure of the facts.” The retainer agreements of the two clients containing the said “common/transaction counsel” stipulation would serve as the written consent required by Rule 15.03.

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Another conflict-avoidance clause in a retainer agreement is a stipulation whereby the client grants its consent in advance to the law firm’s acting for another client. The following paragraph in the sample retainer agreement deals with the possibility of the law firm’s acting for the Philippine government: We wish to add, finally, that the Philippine government, whose interests we represent in a number of government-owned or controlled corporations, has sometimes requested us to give them some preference (i.e., a right of first refusal) where a specific and real conflict of interest arises. We assume that it will be possible to resolve on a mutually acceptable basis such conflict of interest, should any arise, on a case-by-case basis and with reasonable accommodation as the basic goal.

Suggested exercise:
alternative clauses.

The students should be instructed to

comment on the foregoing illustrative clauses and suggest additional or

Suggested reading:

(1) The sample retainer agreement

(Appendix A) and (2) Dee v. Court of Appeals, 176 SCRA 651 (1989).

Other Conflict Avoidance/Resolution Mechanisms Evidently, the foregoing sample clauses do not provide a catch-all solution to all conflict situations. Certain other “conflict avoidance/ resolution” mechanisms have been used or proposed, in cases where a law firm is faced with the prospect of representing more than one client in a business transaction. Some of these mechanisms are presented below for discussion and analysis in the context of illustrative situations.

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(a)

Non-exclusivity: Chinese Wall From time to time, competing clients would want to engage the

services of the same law firm, in respect of a business transaction. To illustrate, a government asset may be up for privatization and two or more interested purchasers may want to participate in the bidding process. In this type of transaction, a law firm could adopt a policy of non-exclusivity. This means that it would agree to represent a bidder on a non-exclusive basis, that is without prejudice to its being able to represent another bidder. There is full disclosure of this policy to the clients. Moreover, separate teams of lawyers will be working for the competing clients under a “Chinese Wall” system. Under this system, a Great Wall of China is, at it were, erected between the two teams such that each team keeps and maintains files of documents separately to the exclusion of the other, and each acts as if it were a law firm in itself distinct from the other.

Suggested exercise: The professor will ask the students to
comment on the above approach to resolving a conflict of interest. In this connection, it should be borne in mind that the Chinese Wall system has gained acceptance under the Securities Regulation Code, with the adoption of SRC Rule 34.1 which pertinently states: 2. Segregation of Functions (Chinese Walls) A. Any Broker Dealer which assumes more than one function whether as a dealer, adviser, or underwriter, or which engages in market making transactions, shall maintain proper segregation of those functions within the firm to prevent:

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i. the flow of information between the different parts of its organization which perform each function; and ii. B. public; ii. relating to one or more public companies or securities of a public company; and iii. which, if it were made public, would likely affect the market price of the securities. C. A Broker Dealer shall at all times ensure that its trading functions and back-office settlement functions and physical setup are properly segregated and shall establish written procedures to ensure compliance with this rule. See also Kesselhaut v. United States, 555 F. 2d 791 (1977), the landmark ruling that validated the use of the Chinese Wall as a means of avoiding conflict of interest in law practice. any conflict of interest which may result.

For purposes of this rule, information means matter: i. of a specific nature which has not been made

(b)

Defensive retainer A client may have retainer agreements with many law firms but

refers work to only some (but not all) of them. Since no work referrals are actually given to the other law firms, one can deduce that the retainer is a defensive posture on the part of the client, as it hopes that, by the retainer, those other law firms will be conflicted in representing other companies that may have interests adverse to the retainer client. The issue that arises is whether a law firm under this situation could terminate the “defensive” retainer and represent another client rather than the

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erstwhile retainer client. For instance, the law firm may terminate a defensive retainer of a borrowing client to represent the bank lending to such client.

Suggested exercise: The students should be asked to critique
the propriety or feasibility of the foregoing conflict-avoidance measure.

(c)

Compartmentalized retainer It is not unusual for a client to retain the services of a particular

department or practice group in a law firm as distinguished from the rest of that firm. Thus, a retainer agreement may be signed only with, for instance, the labor department of a law firm. Under this situation, the question is whether it is feasible for any of the other departments or practice groups in the law firm (say, the securities practice group) to represent another client in a transaction involving the labor-only retainer client (say, the other client is an underwriter in an initial public offering of securities by the labor-only retainer client).

Suggested exercise: The students should examine the legal
feasibility of a compartmentalized retainer (absent written consents from the clients), in view of the fact that the different departments or practice groups are simply parts and parcels of the same law partnership, which is a single juridical entity,

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Built-in Statutory or Regulatory Conflict-Resolution Measures There are certain rules on the resolution of ethical issues in the area of conflict of interest, which a corporate/securities lawyer should take into account. For instance, a lawyer, who sits as a director, serves as a corporate secretary, or acts as a compliance officer or legal counsel in a company, ought to be reminded of the set of rules on self-dealing directors or officers in Section 32 of the Corporation Code, as this may find application in real life. Thus:

corporation with one or more of its directors or trustees or officers is voidable, at the option of such corporation, unless all the following conditions are present: 1. That the presence of such director or trustee in the board meeting in which the contract was approved was not necessary to constitute a quorum for such meeting;

SEC. 32. Dealings of directors, trustees or officers with the corporation. – A contract of the

2. That the vote of such director or trustee was not necessary for the approval of the contract; 3. That the contract is fair and reasonable under the circumstances; and 4. That in the case of an officer, the contract with the officer has been previously authorized by the Board of Directors. Where any of the first two conditions set forth in the preceding paragraph is absent, in the case of a contract with a director or trustee, such contract may be ratified by the vote of the stockholders representing at least two-thirds (2/3) of the outstanding capital stock or of two-thirds (2/3) of the members in a meeting called for the purpose: Provided, That full disclosure of the adverse interest of the directors or trustees involved is made at such meeting: Provided, however, That the contract is fair and reasonable under the circumstances.

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Here we have a situation where the Corporation Code itself supplements the Code of Professional Responsibility, as it prescribes a solution to an ethical problem. A similar function is performed by the rule concerning frontrunning securities brokers/dealers under the Securities Regulation Code. This rule prohibits brokers and dealers from executing their own proprietary orders ahead of their customers. Under the Customer First Policy embodied in SRC Rule 34.1 partly quoted below, frontrunning is not allowed; hence, brokers and dealers must execute a customer’s order ahead of their proprietary transactions at the same price. 1. Segregation of Broker and Dealer Function. Affiliations and Practices. A. A Member Broker of an Exchange (herein referred to as “Member Broker”) shall not effect any transaction on such Exchange for its own account, the account of an associated person, salesmen, or any other person associated with the Member Broker, including affiliated persons, or an account with respect to which an associated person exercises investment discretion, unless it complies with the “Customer First” Policy as prescribed below: 1. The Member-Broker gives priority to the execution of customer orders over its orders at the same price according to the following rules: a. When the Member Broker’s order is pre-existing (and has priority in terms of time) and thereupon the Member-Broker receives a customer’s order and/or holds a wholly or partially unexecuted customer’s order, then the Member-Broker shall surrender priority and give precedence to his client’s order; b. When the Member-Broker holds an unexecuted customer’s order with priority (pre-existing order), then any Broker’s order that takes precedence over the pre-existing order shall better the preexisting highest bid or lowest offer from a customer by at least one (1) fluctuation or such other number of fluctuations that the Commission, by Order, may set from time to time. . . . 15

A securities lawyer, who is an “associated person of a broker or dealer” (hence, a compliance officer), will simply be guided by the said SRC Rule in respect of the proprietary trading activities of his or her broker/dealer employer. One should also note the following provisions of SRC Rule 30.2: B. In considering whether a registered person is conducting his business in an ethical and fair manner, the Commission, in addition to requirements imposed under other SRC rules, will be guided by the following principles and requirements which incorporate International Organization of Securities Commission standards. . . . vi. Conflicts of Interest - A registered person should avoid conflicts of interest and when they cannot be avoided, should ensure that his clients are fairly treated and properly informed of such conflicts of interest. a. Client priority - A registered person shall handle orders of clients fairly and in the order in which they are received in compliance with SRC Rule 34.1, paragraph 1. (1) Orders of clients, or transactions to be undertaken on behalf of clients, shall have in all cases priority over orders for the account of the registered person, and otherwise comply with SRC Rule 34.1, paragraph 1 where the Broker is a Member of an Exchange; (2) A registered person shall, where he has aggregated an order for a client with an order for another client, or with an order for his own account, give priority to satisfying orders of clients, in any subsequent allocation, if all orders can not be filled; (3) A registered person shall not deal in any securities for himself or for any account in which he has an interest based upon advance knowledge he possesses of pending transactions for or with clients or any other nonpublic information, the disclosure of which

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would be expected to affect the price of such securities and violate Section 27 of the Code (insider trading prohibition); (4) A registered person who withdraws in whole or in part from providing any investment or related service shall ensure that affected clients are promptly notified of such action and that any business which remains outstanding is promptly completed or transferred to another registered person in accordance with SRC Rule 29 and any instruction of the affected clients. b. Conflicts of interest - Where a registered person has a material interest in a transaction with or for a client, or a relationship which gives rise to an actual or potential conflict of interest in relation to such transaction, he shall neither advise, nor deal in relation to the transaction unless he has disclosed that material interest or conflict to the client and has taken all reasonable steps to ensure fair treatment of the client.

Suggested exercise:

The professor could point out other

ethical provisions in the Corporation Code and the Securities Regulation Code that might find application in the practice of corporation and securities law by lawyers, whether in their traditional role as legal counsels, or as parties directly involved (e.g., as directors or officers of corporations, insiders, etc.). Consider, for instance, the following: (a) Section 33 of the Corporation Code concerning contracts between corporations with interlocking directors: SEC. 33. Contracts between corporations with inter-locking directors. – Except in cases of fraud, and provided the contract is fair and reasonable under the circumstances, a contract between two or more corporations having interlocking directors shall not be invalidated on that ground alone; Provided, That if the interest of the interlocking director in one corporation or corporations is merely nominal, he shall be subject to the provisions of the preceding section insofar as the latter corporation or corporations are concerned.

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Stockholdings exceeding twenty percent (20%) of the outstanding capital stock shall be considered substantial for purposes of interlocking directors. (b) Section 34 of the Corporation Code on corporate opportunity:

SEC. 34. Disloyalty of a director. – Where a director, by virtue of his office, acquires for himself a business opportunity which should belong to the corporation, thereby obtaining profits to the prejudice of such corporation, he must account to the latter for all such profits by refunding the same, unless his act has been ratified by a vote of the stockholders, owning or representing at least two-thirds (2/3) of the outstanding capital stock. This provision shall be applicable, notwithstanding the fact that the director risked his own funds in the venture. (c) Subsection 23.2 of the Securities Regulation Code on “shortswing profits” of insiders: 23.2. For the purpose of preventing the unfair use of information which may have been obtained by such beneficial owner, director, or officer by reason of his relationship to the issuer, any profit realized by him from any purchase and sale, or any sale and purchase, of any equity security of such issuer within any period of less than six (6) months, unless such security was acquired in good faith in connection with a debt previously contracted, shall inure to and be recoverable by the issuer, irrespective of any intention of holding the security purchased or of not repurchasing the security sold for a period exceeding six (6) months. Suit to recover such profit may be instituted before the Regional Trial Court by the issuer, or by the owner of any security of the issuer in the name and in behalf of the issuer if the issuer shall fail or refuse to bring such suit within sixty (60) days after request or shall fail diligently to prosecute the same thereafter, but no such suit shall be brought more than two (2) years after the date such profit was realized. This subsection shall not be construed to cover any transaction where such beneficial owner was not such both at the time of the purchase and sale, or the sale and purchase, of the security involved, or any transaction or transactions which the Commission by rules and regulations may exempt as not comprehended within the purpose of this subsection. 18

Suggested reading:

Legal commentaries on the pertinent

ethical provisions, including those quoted above.

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PART II WITHIN THE LEGAL FRAMEWORK

Canon 1 of the Code of Professional Responsibility mandates lawyers to “uphold the Constitution, obey the laws of the land and promote respect for the law and legal processes.” Perhaps there would be less difficulty observing this tenet, if only the Constitution, the laws, and the regulations are clear and free from ambiguities. However, in reality, this is not the case. into existing legal norms. To be discussed first below are the new notarial rules, as well as the use of paper minutes, as these impact on the practice of corporate lawyers. Next to be considered is an approach to the interpretation of rules that are penal in character. The discussion then shifts to the use by a law firm of an opinion committee to avoid or minimize conflicting or inconsistent opinions on the same legal issue. Thereafter, the focus will be on the Code of Corporate Governance or the Manual on Corporate Governance as part of the legal framework or infrastructure of corporations. Finally, we turn to the ethical demand on lawyers to keep abreast with legal and related developments with a view to having a current understanding of the legal framework, consistent with Canon 19 of the Code of Professional Responsibility which requires legal representation “with zeal within the bounds of the law.” Notarial Practice There are gray areas within the legal framework, not to mention that, at times, situations may not neatly fit

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Lawyers may be commissioned as notaries public and, in fact, associates in a law firm are encouraged to apply for a notarial commission. Accordingly, they should be familiar with the 2004 Rules on Notarial Practice promulgated by the Supreme Court, particularly Rule IV thereof, which contains certain ethical rules of conduct for notaries. In particular, Sections 4, 5 and 6 of Rule IV provide: SEC. 4. Refusal to Notarize. – A notary public shall not perform any notarial act described in these Rules for any person requesting such an act even if he tenders the appropriate fee specified by these Rules if: (a) the notary knows or has good reason to believe that the notarial act or transaction is unlawful or immoral; (b) the signatory shows a demeanor which engenders in the mind of the notary public reasonable doubt as to the former’s knowledge of the consequences of the transaction requiring a notarial act; and (c) in the notary’s judgment, the signatory is not acting of his or her own free will. SEC. 5. False or Incomplete Certificate. – A notary public shall not: (a) execute a certificate containing information known or believed by the notary to be false. (b) affix an official signature or seal on a notarial certificate that is incomplete. SEC. 6. Improper Instruments or Documents. – A notary public shall not notarize: (a) a blank or incomplete instrument or document; or

(b) an instrument or document without appropriate notarial certification.

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Moreover, notaries public should be aware of the following prohibitions and disqualifications under Sections 2 and 3 of Rule IV. SEC. 2. Prohibitions. – (a) A notary public shall not perform a notarial act outside his regular place of work or business; provided, however, that on certain exceptional occasions or situations, a notarial act may be performed at the request of the parties in the following sites located within his territorial jurisdiction: (1) public offices, convention halls, and similar places where oaths of office may be administered; (2) public function areas in hotels and similar places for the signing of instruments or documents requiring notarization; (3) hospitals and other medical institutions where a party to an instrument or document is confined for treatment; and (4) any place where a party to an instrument or document requiring notarization is under detention. (b) A person shall not perform a notarial act if the person involved as signatory to the instrument or document (1) is not in the notary’s presence personally at the time of the notarization; and (2) is not personally known to the notary public or otherwise identified by the notary public through competent evidence of identity as defined by these Rules. SEC. 3. Disqualifications. – A notary public is disqualified from performing a notarial act if he: (a) is a party to the instrument or document that is to be notarized; (b) will receive, as a direct or indirect result, any commission, fee, advantage, right, title, interest, cash, property, or other consideration, except as provided by these Rules and by law; or (c) is a spouse, common-law partner, ancestor, descendant, or relative by affinity or consanguinity of the principal within the fourth civil degree.

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In this connection, notaries public will be faced with situations that do not exactly fit into the foregoing rules. Consider, for instance, a notary public for Makati City, who resides in Quezon City. If someone, say his parish priest in Quezon City, appears before him and execute an affidavit in his presence in Quezon City, must he still require his parish priest to go with him to his Makati office to notarize the affidavit? If he notarizes the affidavit in Makati City in the absence of the parish priest, is he in violation of Section 2(b)(1) of Rule IV? Consider further a case where a Makati notary is asked by a client corporation to notarize the last will and testament of its sick president in the latter’s residence in Forbes Park, Makati City. If the notary holds office in Paseo de Roxas in Makati City, will he be in violation of the notarial rules if he agrees to notarize the last will and testament in Forbes Park, which is not in Paseo de Roxas?

Suggested exercise: The students should be asked to group
themselves into two, one group taking an affirmative position in respect of the questions raised above, while the other espousing the contrary stance. In this exercise, the students should take into account Section 2 of Rule I of the 2004 Rules on Notarial Practice, which provides that: “These Rules shall be applied and construed to advance the following purposes: (a) to promote, serve, and protect public interest; (b) to simplify, clarify, and modernize the rules governing notaries public; and (c) to foster ethical conduct among notaries public.”

Suggested reading: 2004 Rules on Notarial Practice (A.M. No.
02-8-13-SC).

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Paper Minutes A lawyer may be appointed as a corporate secretary. In such role, he will be faced with a situation where a decision of the Board of Directors has to be urgently made but there is no time to convene an actual board meeting. In such a case, the directors may be made to sign “paper minutes” to record such board decision made without a meeting. An ethical dilemma arises here in view of Section 25 of the Corporation Code, which provides that “every decision of at least a majority of the directors or trustees present at a meeting at which there is a quorum shall be valid as a corporate act.” As a rule, therefore, an actual meeting is required for a valid board decision; hence, the issue on the ethicality or propriety of paper minutes. To be sure, the above rule admits of exceptions. For instance, directors of a close corporation may act even without a meeting under the circumstances described in Section 101 of the Corporation Code. Thus:

provide otherwise, any action by, the directors of a close corporation without a meeting shall nevertheless be deemed valid if:

When board meeting is unnecessary or improperly held. – Unless the by-laws
SEC. 101.

1. Before or after such action is taken, written consent thereto is signed by all the directors; or 2. All the stockholders have actual or implied knowledge of the action and make no prompt objection thereto in writing; or 3. The directors are accustomed to take informal action with the express or implied acquiescence of all the stockholders; or

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4. All the directors have express or implied knowledge of the action in question and none of them makes prompt objection thereto in writing. If a directors’ meeting is held without proper call or notice, an action taken therein within corporate powers is deemed ratified by a director who failed to attend, unless he promptly files his written objection with the secretary of the corporation after having knowledge thereof. Moreover, there are Supreme Court decisions upholding the validity of directors’ actions taken outside of a duly convened meeting. Thus, in Board of Liquidators v. Heirs of Maximo M. Kalaw, 20 SCRA 987, 1005 (1967), the Supreme Court upheld as valid corporate acts the copra contracts entered into by the corporation’s general manager and board chairman, with the knowledge of the board members, but without their prior approval as required by the corporation’s by-laws. justified its ruling as follows: In the case at bar, the practice of the corporation has been to allow its general manager to negotiate and execute contracts in its copra trading activities for and in NACOCO’s behalf without prior board approval. If the by-laws were to be literally followed, the board The Court

should give its stamp of prior approval on all corporate contracts.

But the board itself, by its acts and through acquiescence practically laid aside the by-law requirement of prior approval.
Under the given circumstances, the Kalaw contracts are valid corporate acts. The Supreme Court, in its decision (at 1002), took notice of the peculiar nature of copra trading, the business of the corporation. Thus: . . . To NACOCO, forward sales were a necessity. Copra could not stay long in its hands; it would lose weight, its value decrease. Above all, NACOCO’s limited funds necessitated a quick 25

turnover. Copra contracts then had to be executed on

short notice – at times within twenty-four hours. To be appreciated then is the difficulty of calling a formal meeting of the board.

In another case, the Supreme Court held that a chattel mortgage executed by the president of the corporation was valid and binding upon the latter even if it was not formally approved by the board of directors in accordance with the corporation’s by-laws [Zamboanga Transportation Co. v. Bacharach Motor Co., 52 SCRA 244, 259-260 (1928)]. Ruled the Supreme Court: We therefore conclude that when the president of a corporation, who is one of the principal stockholders and at the same time its general manager, auditor, attorney or legal adviser, is empowered by its by-laws to enter into chattel mortgage contracts, subject to the approval of the board of directors, and enters into such contracts with the tacit approval of two other members of the board of directors, one of whom is also a principal shareholder, both of whom, together with the president, form a majority, and said corporation takes advantage of the benefits afforded by said contract, such acts are equivalent to an implied ratification of said contract by the board of directors and binds the corporation even if not

formally approved by said board of directors as required by the by-laws of the aforesaid corporation.

Be that as it may, there are at least four cases where the use of paper minutes is probably improper and impermissible, namely: (1) in approving a self-dealing contract of a director, a trustee, or an officer -- since, under Section 32 of the Corporation Code, a condition for the validity of such contract is “that the presence of such director or trustee in the board meeting in which the contract was approved was not necessary to constitute a quorum for such meeting;”

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(2) in electing officers -- since, in paragraph 1 of the Amended Rules Requiring the Filing of Information Sheet by Domestic Corporations, the Securities and Exchange Commission requires that the minutes of the board meeting show “the names of the directors who were present and have voted;” (3) if the by-laws of the corporation specifically requires that all acts of the board of directors (or trustees) be taken only at meetings duly called for the purpose -- considering that the by-laws of the corporation, pursuant to Section 46 of the Corporation Code, is the “code . . . for its government;” and (4) in respect of public companies (including companies

whose shares are listed on the Philippine Stock Exchange) -- because the higher standards of corporate governance required of them would warrant strict observance by their directors of Section 25 of the Corporation Code on the holding of actual board meetings. If paper minutes cannot be avoided, they must be allowed only outside of the cases described or contemplated above. Further, in allowable cases, the paper minutes (1) must indicate that all the directors have waived the notice required under Section 53 of the Corporation Code for board meetings, and (2) must be signed by all the directors. What is more, paper minutes must be used only in exceptional cases, and the acts of the directors, as shown in the paper minutes, must be (for good measure) ratified at an actual board meeting duly called and convened.

27

Suggested exercise: The students should comment on the
foregoing solution to the ethical issue of non-holding of a board meeting by the use of paper minutes.

Suggested readings: The sample paper minutes (Appendix B)
and the Secretary’s Certificate attesting to the action taken by the directors through the paper minutes (Appendix C). Note that the paper minutes or the Secretary’s Certificate should not contain language that might give the wrong impression that a meeting actually took place.

Rules Penal in Character As pointed out earlier, in laws and regulations, there are gray areas that call for interpretation. In this regard, if the law or regulation in question is penal in character in that there are criminal penalties for its breach, then there is basis to resolve the doubt in favor of the one being regulated and against the regulator. This approach to interpretation is consistent with the established principle that penal statutes are to be construed strictly against the state and liberally in favor of the accused. As held by the Supreme Court in People v. Purisima, 86 SCRA 542, 562563 (1978): . . . Penal statutes are to be construed strictly against the state and liberally in favor of an accused. American jurisprudence sets down the reason for this rule to be “the tenderness of the law of the rights of individual; the object is to establish a certain rule by conformity to which mankind would be safe, and the discretion of the court limited.” The purpose is not

28

to enable a guilty person to escape punishment through a technicality but to provide a precise definition of forbidden acts. Our own decisions have set down the same guidelines in this manner, viz: “Criminal statutes are to be construed strictly. No person should be brought within their terms who is not clearly within them, nor should any act be pronounced criminal which is not made clearly so by the statue.” (U.S. v. Abad Santos, 36 Phil. 243, 246) “The rule that penal statutes are given a strict construction is not the only factor controlling the interpretation of such laws, instead, the rule merely serves as an additional, single factor to be considered as an aid in determining the meaning of penal laws.” (People v. Manantan, 5 SCRA 684, 692) [Footnotes omitted] Rules promulgated by the Securities and Exchange Commission under the Securities Regulation Code, for instance, are penal in character, because those violating such rules may be punished by a fine of at least P50,000 but not more than P5,000,000, and/or imprisonment of at least 7 years but not more than 20 years (Section 73, Securities Regulation Code). Accordingly, doubts in the interpretation of these rules should be construed against the Securities and Exchange Commission. In the field of taxation, the Supreme Court is more categorical as it has settled, once and for all, the legality and propriety of tax avoidance (as distinguished from tax evasion). As ruled by the Supreme Court in Liddell & Co., Inc. v. Collector of Internal Revenue, 2 SCRA 632, 641 (1961), “the legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted.”

29

Be that as it may, one cannot simply disregard the following concluding remarks of Justice J.B.L. Reyes to the graduating class of the College of Law of the University of the Philippines in 1972: I shall conclude by pleading with the new graduates that they indelibly engrave in their hearts a maxim we have inherited from the great lawyers of antiquity – “Non omne quod licet honestum est.” Not everything that is permitted is honorable. Do not equate law, which is but the tool, with justice, that is the ultimate goal. Ever abide in the ways of honor and may the Almighty be with you.

Suggested exercise:

The professor can discuss with the

students certain rules implementing the Securities Regulation Code (e.g., the “tender offer” rules, and the reporting or disclosure requirements), and see whether there are ambiguities therein that can be interpreted in favor of the ones being regulated.

Suggested reading: Commentary on the rules specified in the
“Suggested exercise” above in Rafael A. Morales, The Philippine Securities Regulation Code (Annotated), 2005 edition. J.B.L. Reyes, “The Barbs of Outrageous Fortune,” Commencement address before the U.P. College of Law Class of 1972.

Opinion Committee A law firm should form (as part of its ethical infrastructure) an opinion committee that will ensure that its lawyers neither depart from lawful positions adopted by it nor give conflicting or inconsistent opinions on the same legal issue. Under this set-up, lawyers of the firm are required to submit copies of their opinions to the committee for review, preferably before the release thereof to the clients or the intended 30

recipients. Further, where the lawyer concerned is confronted with a novel issue that may involve a departure from the existing legal stance of the firm, he or she should refer the issue to the committee for guidance and disposition. The objective here is to avoid, if not minimize, the potential liability and embarrassment to the firm arising from incorrect, inconsistent, or conflicting opinions.

Suggested exercise:
opinion committee.

The students should be asked for

suggestions on how to improve further the oversight function of an

Suggested reading:

Elizabeth Chambliss and Donald B.

Wilkins, “Promoting Effective Ethical Infrastructure in Large Law Firms: A Call for Research and Reporting,” Hofstra Law Review, Vol. 30, pp. 691716.

Code of Corporate Governance Every corporate lawyer should be aware that the Securities and Exchange Commission has required the promulgation and implementation of the Code of Corporate Governance by “corporations whose securities are registered or listed, corporations which are grantees of permits/licenses and secondary franchise from the Commission, and public companies,” and by “branches or subsidiaries of foreign corporations operating in the Philippines whose securities are registered or listed” (SEC Memorandum Circular No. 2, Series of 2002). Moreover, the SEC released a Sample Manual on Corporate Governance “as a reference to aid the development of a similar manual by all corporations – listed and non-listed.” The said Code or Manual would form part of

31

the framework of governance of the corporation concerned, once adopted by it.

Suggested exercise: The professor should ask the students to study
and comment on the said Code or Manual, particularly the provisions on the duties of a Compliance Officer, a Corporate Secretary, and a Director, since any of these positions may well be occupied by them in the future.

Suggested reading:
Corporate Governance.

Code of Corporate Governance (SEC

Memorandum Circular No. 2, Series of 2002), and the Sample Manual on

Zealous Legal Representation Canon 19 of the Code of Professional Responsibility provides that “a lawyer shall represent his client with zeal within the bounds of the law.” In this regard, a lawyer can exhibit his zeal by keeping abreast of developments in the legal system. For a practitioner in corporation and securities law, this is a serious challenge because, aside from following the jurisprudence on the matter, he or she has to consider that the Securities and Exchange Commission regularly releases opinions, memorandum circulars, and other issuances to cover new matters, if not to amend, repeal, supplement, or otherwise modify existing rules. Moreover, a lawyer may have to familiarize himself or herself with other disciplines that may impact on legal practice, say, accounting and economics. The foregoing considered, the ethical demand on lawyers is for them to know the current configuration of the “legal framework” in line with Canon 1,

32

by keeping abreast with legal and related developments consistent with the zeal required by Canon 19 of the Code of Professional Responsibility.

Suggested exercise: The professor should discuss ways and
means of keeping abreast with legal and related developments, such as attending seminars and lectures, as well as reading books, journals and newsletters, about law in theory and practice.

Suggested reading:

Lawrence A. Cunningham, “Sharing

Accounting’s Burden: Business Lawyers, In Enron’s Dark Shadows,” The Business Lawyer, Vol. 57, No. 4, August 2002, pp. 1421-1462.

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APPENDIX A MORALES & ASSOCIATES 105-A Paseo de Roxas Makati City 1226 January 1, 2006 Fair and Square Philippines, Inc. 2/F Steady Tower Roxas Boulevard Manila Attention: Mr. Ralph Morseley President

Gentlemen: Retainer Agreement Further to our conversation with you, we are pleased to submit our proposal for a retainer arrangement between Fair and Square Philippines, Inc. (the “Company”)) and our law firm upon the following terms: 1. (P25,000.00). 2. Date of effectivity. This agreement becomes effective Retainer fee. Our firm will serve as retained counsel to

the Company at a monthly retainer of Twenty-five Thousand Pesos

on January 1, 2006. 3. Scope of retainer services. The regular monthly

retainer fee mentioned in paragraph 1 will cover the following services (unless otherwise specifically excluded by reason of paragraph 4 below):

34

(a) Verbal opinion and advice on general matters of Philippine law affecting the Company and its operations in the Philippines; (b) Preparation or review of simple contracts and like documents in the ordinary course of the Company’s business; and (c) Routine verification and follow-up with the Securities and Exchange Commission and other national and local government offices and agencies located within Metropolitan Manila. 4. Services excluded from the regular monthly retainer.

The following matters are not included within the scope of the regular monthly retainer: (a) Written opinions or memoranda of law requiring research; (b) Advice and assistance in specific business transactions which will require negotiations, drafting of special documentation or issuance by us of formal or closing opinions; (c) Litigation cases and similar proceedings before judicial or administrative bodies; (d) Collective bargaining and labor relations disputes, including proceedings before the Department of Labor and Employment and related agencies; and (e) Immigration, trademark and patent applications and cases. We normally send special billings for the matters and cases listed above on the basis of our prevailing charges for our lawyers’ time, depending on the level of seniority and experience of the lawyer

35

concerned. In these cases, we cannot usually determine in advance the amount of work and time that will be required. 5. Out-of-pocket expenses. All out-of-pocket

expenditures that we may incur in carrying out work on your behalf (whether in connection with litigation or non-litigation matters), such as long distance telephone calls, facsimile transmission charges, document reproduction charges, machine processing and printing charges, hotel and traveling expenses incurred in court appearances or other work for the Company outside the Metro Manila area, transportation expenses incurred in appearances before courts and administrative agencies, sheriff’s fees, cost of stenographic notes and the like, are for your account; provided that, if such expenses should exceed P10,000.00 in any given month, prior approval of the Company will be obtained before incurring any further expense. In case where a substantial amount of out-of-pocket disbursements are anticipated, we may request that a deposit be made by you to cover such disbursements. 6. Conflict of interest. For the avoidance of any

misunderstanding later on, we should state in advance that the rules of legal ethics binding on our firm and its lawyers may prevent us from accepting an engagement from you if to do so would put us in conflict with our professional duty to another client of the firm. Sometimes, the existence of an actual or potential conflict of interest may not be readily discernible at the time we decide to accept a specific engagement from you; accordingly, notwithstanding our acceptance, we have to reserve the right to withdraw from such engagement should a conflict of interest become manifest.

36

Our experience has been that sometimes, even in situations where we ourselves are not conflicted, a valued client might regard our accepting an engagement from you in regard to a specific matter to be adverse to its general interests, and thus object to our performing work for you in that regard. In situations like this, we would suggest that we address the feasibility of engagement on a case-by-case basis. In commercial and financial transactions, our experience has been that, where both parties are clients of our firm and where the parties have previously or independently (i.e., without our involvement) arrived at any understanding on the basic economic terms of their transaction, such parties have often been willing to allow our firm to act for only one of them, and in some instances, they may even engage our firm either as common counsel or as transaction counsel. If our firm were to act as common counsel to both parties, we will endeavor to have separate personnel handling work for each party. As transaction counsel, on the other hand, our principal task would be to provide a common legal advice to both parties to the transaction, and to reduce to legal or documentary terms the conditions and substance of the agreements independently reached by them. Clearly, this type of engagement also needs to be approached on a case-by-case basis. We wish to add, finally, that the Philippine government, whose interests we represent in a number of government-owned or controlled corporations, has sometimes requested us to give them some preference (i.e., a right of first refusal) where a specific and real conflict of interest arises. We assume that it will be possible to resolve on a mutually acceptable basis such conflict of interest, should any arise, on a case-bycase basis and with reasonable accommodation as the basic goal.

37

7.

Account Partner. The partner in charge of your account

is Raymond N.M. Morales. You should address all your communications to him. However, if he is not available, you can contact the undersigned. 8. Termination. This Agreement may be terminated at any

time upon 30 days written notice being given by one party to the other in advance of the termination date. We customarily send our retainer statement before the 10th day of each month. If the foregoing terms are acceptable to you, please countersign below and return one fully signed copy to us. Very truly yours, MORALES & ASSOCIATES By:

Nadine R.M. Morales Managing Partner ACCEPTED this 1st day of January, 2006: FAIR AND SQUARE PHILIPPINES, INC.

By:

Ralph Morseley 38

President

39

APPENDIX B MINUTES OF THE ACTION OF THE BOARD OF DIRECTORS OF FAIR AND SQUARE PHILIPPINES, INC. January 10, 2006 1. Unanimous Waiver of Call/Notice of Meeting All the members of Board of Directors have agreed to waive any requirement of formal call and notice of meeting with respect to the matters recorded in these minutes. 2. Action Taken The Board of Directors unanimously approved the following resolution: [Text of Board resolution] ATTEST: __________________________ Chairman of the Board APPROVED: __________________________ Director __________________________ Director _________________________ Director _________________________ Director APPENDIX C _________________________ Corporate Secretary

40

SECRETARY’S CERTIFICATE I, [Name] , being the duly elected and

qualified Corporate Secretary of Fair and Square Philippines, Inc., a corporation organized under the laws of the Philippines with offices at 2/F Steady Tower, Roxas Boulevard, Manila (the “Company”), hereby certify as follows: 1. The following is a true and correct copy of the resolution

unanimously adopted and approved by the Board of Directors of the Company on January 10, 2006: [Copy text of Board Resolution] 2. The said resolution has not been amended, modified or

rescinded, and is in full force and effect as of the date hereof. 3. The foregoing statements are true and correct and in

accordance with the records of the Company.

IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of January, 2006. ___________________________ Corporate Secretary REPUBLIC OF THE PHILIPPINES ) CITY OF MANILA ) S.S.

41

SUBSCRIBED AND SWORN to before me this 10th day of January, 2006, affiant exhibiting to me his Community Tax Certificate No. 1236789, issued at Manila on January 6, 2006.

NOTARY PUBLIC Appointment No. ______ until Dec. 31, 2006 Roll of Attorney No. ________ PTR No. _________; 01/06/2006; Manila IBP No. __________; 01/06/2006; Manila Chapter Address: ________________________________

Doc. No. __________; Page No. __________; Book No. __________; Series of 2006.

42

D

TABLE OF CONTENTS

Page Preface How To Use This Manual …...……………...….…….…….….… Statement of Factual Situation …………………………………... Assignment I ………………………………………….……….… 1. 2. 3. Assignment II 1. Research the Issues Confronting Lawyers in Accepting Cases …………………..…….……. Prepare to Discuss How to Handle the Trial of the Case Against Client …………….….. Reading Materials ……………………..…………. ………………………………………………….. Meet with Mr. Ruben Santos, the President and Principal Stockholder of MGC, Regarding he Defense(s) of MGC ……………….. Think About How You Will Handle the Trial ……………………………………………….. Reading Materials …………….….….…….…….… 1 3 5

5 5 6 7

7

2. 3.

7 7

1

Assignment III ……………………………………………….…. 1. Think About the Nature of the Adversary System and The Ethical Problems Arising From the So-Called Lawyer’s Trilemma ………... Reading Materials ……………….....…..……….. Write A Paper On the Lawyer’s Trilemma and the Three Hardest Ethical Issues Delineated by Professor Freedman .................... 11

9

9 9

2. 3.

Appendix “A” Appendix “B”

- Retainer Agreement ………………………..

12

- Description of Case “Vic Traders’ Corporation v. Mighty Glue Corporation” ………………………………… 16

Appendix “C” - Complaint of Vic Traders’ Corporation …………………….….….….…. 21

2

HOW TO USE THIS MANUAL
For a better appreciation of the ethical issues involved in an adversary system, it is advisable to read Professor Morgan Freedman’s article entitled “Professional Responsibility of the Criminal Defense Lawyer: The Three Hardest Questions” published in 64 Mich. L. Rev. 1469 (1966). A reading of the proceedings of the symposia held in 1974 by the Committee on Professional Responsibility of the Association of the Bar of the City of New York on the topics “Professional Responsibility in the Practice of Criminal Law: The Murky Divide Between Right and Wrong” and “Professional Responsibility in Civil Litigation: The Murky Divide Between Right and Wrong” (published in Galston, N.M., Professional Responsibility of the Lawyers, The Murky Divide Between Right and Wrong, pp. 49, 133 [1977] will facilitate understanding of the various complex ethical issues arising in an adversary system. The facts of an actual case (the names of the parties have been changed) are utilized to illustrate the ethical problems confronting lawyers in an adversary system. A short description of the facts of the case is attached as Appendix A. This manual is divided into four parts, the first one of which is the “Statement of Factual Situation”, and the other three are denominated as “Assignments”. The “Statement of Factual Situation” delineates the problem involved when a weak case is referred to a law firm under an existing retainer relationship with a client and it also gives a short summary of the factual and legal issues involved in the case.

3

Assignment I deals with the concerns and issues confronting law firms in the acceptances of cases, especially those with existing retainer agreements where clients pay monthly retainers for day-to-day counseling and “availability”. It addresses the problem of a case filed against the client which in the evaluation of the lawyers handling the case is meritorious but which the law firm is constrained to accept because of its retainer agreement with the client. In Assignment II, the manual shifts to the discussion of how the client should respond to the complaint in light of the fact that the client’s case is weak, but the client doesn’t want to settle. It also considers the preparation for trial and the problem of presenting witnesses whom the lawyers know would not be telling the truth. Likewise, it tackles the ethical propriety of cross-examining the witnesses of the other party whom the lawyers know would be telling the truth. Assignment III delineates in detail the various ethical problems involved in the context of an adversary system. It probes into the socalled lawyer’s trilemma, to wit: (a) A lawyer is required to know everything; (b) A lawyer must preserve the client’s secrets; and (c) A lawyer must reveal information to the court. This part raises the issue of what the advocate’s objective should be in an adversary system: the search for truth or the advancement of the client’s interest.

STATEMENT OF FACTUAL SITUATION

The problem involves the evaluation and acceptance of a case from a client that pays a law firm a monthly retainer fee for day-to-day counseling and “availability”. While ordinarily a lawyer will or should not

4

accept a case which on the basis of his honest evaluation has no chance of winning and one that a client should amicably settle, a lawyer or a law firm under a retainer agreement with a client is under a strong compulsion to accept it. This is a situation peculiar in the Philippine setting – i.e., a client paying an outside counsel a fixed monthly fee for day-to-day counseling and in most cases for availability. Although the standard retainer agreement (See Appendix “A”) usually contains a clause that the lawyer or law firm reserves “the right to make our own assessment of cases and/or matters referred to us for purposes of determining the proper disposition of the referral”, the lawyer is usually hard put to reject a case referral despite an unfavorable assessment of the merits of the case. The case arose from a complaint filed by Vic Traders’ Corporation (“VTC”) against Mighty Glue Corporation (“MGC”) for damages as a result of a fire that started in the premises of the latter corporation and spread to the neighboring compound of the former. The fire gutted not only the principal office of MGC but likewise the adjoining building of VTC. The principal issue is whether the cause of the fire was the spontaneous combustion of nitrocellulose which VTC claims was stored in the premises of MGC at the time of the fire. MGC was then engaged in the manufacture of leather dressings and leather varnishes which require the use of nitrocellulose. MGC, however, denied the presence of nitrocellulose at the time of the fire and contended that the cause was of “undetermined origin”, probably due to an electrical short circuit. A brief description of the case is in Appendix “B”.

5

ASSIGNMENT I
1. Research the Issues Confronting Lawyers in Accepting

Cases. The lawyer’s oath requires that he shall “not wittingly or willingly promote or sue any groundless, false or unlawful suit nor give aid or consent to the same.” Rule 10.01 states that “A lawyer shall not do any falsehood, nor consent to the doing of any in court; nor shall he mislead or allow the Court to be misled by any artifice.” After reading the description of the case of Vic Traders’ Corporation v. Mighty Glue Corporation, you should research the issues confronting law firms with retainer arrangements with clients – who pay monthly retainer fees in consideration, among others, of the lawyers’ “availability” – on the acceptance of cases. 2. Prepare to Discuss How to Handle the Trial of the Case

Against Client – Assume that you will be the lawyer for MGC. Based upon your careful evaluation of the facts of the case and interview of the witnesses, it is your considered opinion that VTC has a good cause of action against MGC and the facts alleged in the complaint are true. Prepare yourself to discuss the difficulties you may encounter during your representation of MGC in the case, including the application of the doctrine of res ipsa loquitur (Since the fire occurred in MGC’s premises, which was at all times under its complete control and supervision, the reasonable presumption is that MGC was negligent and was at fault.) Prepare a memorandum of the facts and law in your evaluation of the merits of the case. 3. Reading Materials

6

a. b.

Statutes – Article 2176, Civil Code of the Philippines Code of Professional Responsibility – Canon 1, Rule 1.03, Rule 1.04; Canon 10, Rule 10.01; Canon 15, Rule 15.05;

c.

Other Reading Materials (1) (2) Agpalo, Ruben E., Legal Ethics, pp. 61-62 ABA Model Code of Professional Responsibility, Canon 2, DR 2-109, Acceptance of Employment, DR 7-102 (3) (4) ABA Model Rules of Professional Conduct, Rule 3.1. Redlich, Norman, Standards of Professional Conduct for Lawyers & Judges, pp. 148-149 (1984) (5) Sangco, J. Cezar, Philippine Law on Torts & Damages, pp. 27-39 (rev. ed., 1993)

ASSIGNMENT II
1. Meet with Mr. Ruben Santos, the President and Principal

Stockholder of MGC, Regarding the Defense(s) of MGC. The President and principal stockholder of MGC is Mr. Ruben Santos. Your immediate concern is the preparation and filing of the answer within the

7

reglementary period. If Mr. Santos admits that the cause of the fire was the explosion of the drum containing nitrocellulose but settlement of the case is out of the question, what should you do? If your law firm rejects the case, your law firm stands to lose a montly retainer fee of P20,000 plus, of course, the additional billable hours to be generated from the handling of the case. If your law firm decides to accept the case, you need to prepare the answer of MGC and file it within the reglementary period. How will you draft the answer in light of what you know is the truth? 2. Think About How You Will Handle the Trial. - In handling the trial, will you present witnesses whom you know will not be telling the truth? And will you cross-examine the witnesses of VTC to destroy their credibility despite your knowledge that they are telling the truth? 3. a. Reading Materials Code of Professional Responsibility – Canon 10, Rule 10.01; Canon 19, Rule 19.01; b. Other Reading Materials (1) (2) Agpalo, Ruben E., Legal Ethics, pp. 155-162 American Code of Professional Responsibility, Canon 7, DR 7-101, 7-102, EC 7-1, 7-2, 7-3, 7-4, 7-5, 7-6, 7-9, 7-10, 7-26, 7-27, 7-28

8

(3)

Wise,

Raymond

L.,

Legal

Ethics

(1979

Supplement), pp. 326-353.

9

ASSIGNMENT III

1.

Think About the Nature of The Adversary System and

The Ethical Problems Arising From the So-Called Lawyer’s Trilemma. Professor Monroe Freedman has referred to the so-called lawyer’s trilemma, to wit: (a) A lawyer must know everything; (b) A lawyer must preserve the client’s secrets; and (c) A lawyer must reveal information to the court. He has also indicated that this trilemma is most acute in the practice of criminal law, particularly in the representation of an indigent accused. According to him, the following are the three hardest ethical questions in an adversary system: 1. Is it proper to cross-examine for the purpose of discrediting the reliability or credibility of an adverse witness whom you know to be telling the truth? 2. Is it proper to put a witness on the stand when you know he will commit perjury? 3. Is it proper to give your client legal advice when you have reason to believe that the knowledge you give him will tempt him to commit perjury? 4. a. Reading Materials Code of Professional Responsibility – Canon 10, Rule 10.01; Canon 19, Rule 19.01, Rule 19.02; Canon 21, Rule 21.01

10

b.

Other Reading Materials 1. Brosnahan, James and Carol, The Attorney’s Ethical Conduct During Adversary Proceedings, Professional Responsibility, A Guide for Attorneys, p. 143 (1978) 2. Kaufman, A.I., Problems in Professional

Responsibility, p. 137 (1975) 3. Pirsig, M. and Kirwin, K., Professional

Responsibility, Cases and Materials, p. 435 (1976) 4. Redlich, N., Professional Responsibility, A. Problem Approach, p. 39 (1983) 5. Galston, N.M., Professional Responsibility of the Lawyers, The Murky Divide Between Right and Wrong, p. 49, 133 (1977) 6. Agpalo, R., Legal and Judicial Ethics, p. 196 (2002, 7th ed.) 7. Wolfram, Client Perjury, 50 So. Cal. Rev. 809 (1977) 8. Brazil, Unanticipated Client Perjury and the Collision of Rules of Ethics, Evidence and Constitutional Law, 44 Mo. L. Rev. 601 (1979)

11

9.

Curtis, Charles P. The Ethics of Advocacy, 4 Stan., L. Rev. 3. (1951)

10.

Frankel, Marvin E., The Search for Truth: An Umpireal View, 123 U. Pa. L. Rev. 1031 (1975)

2.

Write A Paper On The Lawyer’s Trilemma and The

Three Hardest Ethical Issues Delineated by Professor Freedman. - In view of the importance of the issues raised by Professor Freedman, write a short paper on the topic and state your own views on how to reconcile the various conflicting duties of an advocate. To make the course more interesting and exciting, the students may engage in simulated skills exercises where some of them assume the roles of witnesses and the others conduct the interviews and prepare the direct examination or cross-examination. The instructor and the other students act as a critiquing panel and give immediate feedback. The objective is to make the whole class involved and enthusiastic.

APPENDIX “A”

6 February 2006

______________________ ______________________ ______________________ ______________________ Attention: _______________ _______________

12

Gentlemen: We have the honor to propose this retainer agreement for our engagement as legal counsel for ______________________, (the “Corporation”). Upon your acceptance of this proposal, the services of ACCRA through its different Service Departments, namely, the Retainer, Intellectual Property (Patents, Trademarks and Copyrights), Corporate and Special Projects, Labor, Immigration, Litigation (including Administrative Litigation, Arbitration and Admiralty) and Tax Departments, as well as the services of our Cebu and Davao Branches, shall be available to the Corporation, subject to the following terms: Effectivity Date 1 : _______________ Retainer Fee: 2 =________, or =_________ per quarter, plus P P 12% value added tax, payable quarterly in advance within the first five (5) days of the first month of each calendar quarter. This amount is tentatively fixed at this time since it is difficult for you and us at this stage to determine the volume of work, the nature of services to be rendered and the complexities of the problems that you may be encountering. Such retainer amount will be subject to adjustment upon mutual agreement of the parties if our periodic review of the engagement indicates that economic conditions or the volume of retainer work necessitate such adjustment. Services Covered by the Retainer Fee: The retainer fee will cover the legal services required in the ordinary course of the Corporation’s business, such as consultations, advice and preparation of simple contracts and opinions, but shall not cover legal services (including the drafting and/or review of contracts and/or the rendering of opinions) which will require extensive studies or time involvement by our lawyers, or assistance at negotiations with, or representation before, any governmental instrumentality. In the event our periodic review of the engagement
The effectivity of this agreement shall be subject to our receipt of (a) your written conformity to this retainer agreement, and (b) the initial retainer fee within fifteen (10) days from date hereof. (You may immediately fax to us an advance copy of the duly conformed to retainer agreement and send the original thereof to us by courier.) Subject to an additional amount corresponding to the applicable VAT in accordance with Republic Act No. 9337 and its implementing regulations.
2 1

13

indicates that the services rendered under this paragraph substantially exceed the amount of retainer fees paid, we reserve the right to send you additional retainer fee billing(s). Other Services Subject to Separate Billings: All services required of us other than those included above, such as litigation in court or appearance before legislative, quasi-judicial or administrative bodies or officials, other extraordinary legal services, as well as the services of our _____ and/or _____ Branches, shall be subject to separate special billings at a rate based upon, among others, the time spent and the extent of the services rendered or required, the novelty and difficulty of the questions involved, the importance of the subject matter, the skills demanded and the amount involved in the project or controversy, and the benefits resulting to the client from the service. We shall inform you whenever a particular case, project or matter you refer will be deemed by us as not covered by the retainer fee and, therefore, subject to separate special billings. However, we will take the retainer relationship into account and whenever we feel that the services covered by the retainer agreement are not being fully availed of, we will make appropriate adjustments to billings described in this paragraph. We reserve the right to make our own assessment of cases and/or other matters referred to us for purposes of determining the proper disposition of the referral. We shall send you on a regular basis a statement of account for our services which are subject to separate special billings. Delivery of Legal Services: Generally, a team of at least three (3) lawyers - composed of a Supervising Partner, a Partner or Senior Associate in-charge, and one or more assisting Associates - is assigned to every retainer client and to every case or project referred to the Firm. Our policy of creating a team of lawyers for every retainer client and for every referral, we believe, promotes superior work and also ensures, among others, that more than one lawyer will be responsible for any matter referred to us, whether covered by the scope of our retainer services or otherwise, and that any member of the assigned team of lawyers can take over the role of another who may not be available at any particular point in time. The members of the assigned team of lawyers do not work in isolation within our Firm. From time to time, they may have to consult with members of the other service groups in our Firm, i.e., the Corporate and Special Projects Department, Tax Department, Labor Department, Litigation Department, Immigration Department, and Intellectual Property Department. Out-of-pocket Expenses: Ordinary out-of-pocket expenses such as telex, facsimile, wordprocessing, machine reproduction and transportation expenses, as well as per diems and accommodation expenses (which are at least business class for our lawyers) incurred in undertaking work for you 14

outside the Metro Manila area, and other special out-of-pocket expenses you may authorize us to incur (which shall always be cleared with you in advance), shall be for your account. In this connection, we would request you to deposit with us the amount of =__________ to cover such out-ofP pocket expenses. Our Accounting Department will regularly render a report on these expenses and, if necessary, request a replenishment of the deposit. Interest Charges: Unpaid legal fees shall be charged two percent (2%) interest per month starting thirty (30) days after your receipt of the first billing. Further, any amount advanced by the Firm for your account shall be charged two percent (2%) interest per month from the date the amount was disbursed. Conflict of Interest: In case any matter should arise between you and another client of this office, by virtue of which we might have a conflict of interest under the code of professional responsibility which binds all lawyers, we reserve the right to inhibit ourselves from representing you and/or our other client(s) insofar as that particular matter is concerned. Termination: This retainer contract is subject to termination by either party on sixty (60) days notice in writing. If the foregoing meets with your approval, please indicate your conformity in the space provided hereinbelow and return to us a signed duplicate original of this letter for our files. We look forward to being able to work with you closely and to servicing your legal requirements.

Very truly yours, ___________________________________ By:

C O N F O R M E:

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____________________ By: ____________________

APPENDIX “B”

DESCRIPTION
Vic Traders’ Corporation (VTC) is a corporation engaged in the merchandising and trading business whose principal office prior to August 17, 2005 was at No. 353 Aurora Boulevard, Quezon City.

Mighty Glue Corporation (MGC) is a corporation engaged in the manufacture of industrial glues, vulcanizing cement, rubber cement, leather dressings, leather varnishes and cutting dies, most of which need highly inflammable and flammable solvents for their manufacture into finished products, such as “Tuluol”, “Pegasol” and “Barsol”, among others. Specifically, the manufacture of leather

dressings and leather varnishes required as an element the chemical substance known as “nitrocellulose”. Before August 17, 2005, the principal office of MGC was No. 355 Aurora Boulevard, Quezon City, adjoining that of VTC.

On August 17, 2005. at about 11:30 a.m., a fire, preceded by explosions, broke out from the Adhesives Department of MGC. The fire gutted not only the principal office of MGC but likewise the adjoining building of VTC.

16

On January 1, 2006, VTC filed a complaint for damages against MGC with the Regional Trial Court of Quezon City

alleging that the fire was “caused by the fault or negligence of defendant and/or its employees in not taking the necessary precautions to avoid damage to others and in failing to comply with the requirements of the authorities relative to the use and storage of highly inflammable goods and materials like nitrocellulose which is needed in the manufacture of its products.” The complaint seeks from MGC the payment of compensatory damages in the amount of P25 million, with legal interest from the filing of the complaint, plus exemplary damages, counsel fees, expenses of litigation and the costs of suit.

Upon receipt of the summons and the complaint, MGC referred it to the Magdangal and Matatag Law Firm (the “M & M Law Firm”), its retained counsel. MGC pays the M & M Law Firm a monthly retainer of P20,000 under a retainer agreement, a copy of which is attached.

It is the policy of the M & M Law Firm that for non-retainer clients a case referral must be carefully evaluated and must be rejected if the Litigation Department is of the view that the client’s position is not meritorious. But for retainer clients like MGC this policy is

relaxed and the M & M Law Firm feels obligated to accept the referral even if the Litigation Department has misgivings about the merits of the case.

The referral of MGC was referred to a team of three lawyers who immediately proceeded to interview the principal operating officers of the client and the prospective witnesses. The team, as is the

17

practice of the firm, prepared an analysis of the facts and the law. The team expressed serious doubts on the merits of the case, especially on the issue of the presence of nitrocellulose in MGC’s premises and whether it was the cause of the fire. It is MGC’s position that the cause of the fire was of “undetermined origin” or “accidental in origin of undetermined source”, probably due to an electrical short circuit.

The members of the legal team felt that the client’s prospective witnesses were not fully disclosing the truth and that VTC’s complaint is meritorious.

Assume that at the trial VTC will present the following two principal witnesses:

1.

Manuel de los Santos, a former employee of MGC, who will testify as follows:

(a)

Before August 17, 2005 he recommended to, and caused the importation by MGC, of four (4) drums of nitrocellulose which was stored in MGC’s Adhesive Manufacturing Department and that he was the one who supervised the use of the same.

(b)

He had been advising MGC that the drums of nitrocellulose be stored in a separate building outside the main building of the company.

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(c)

When his employment was terminated by MGC sometime in June 2005, there were still two (2) drums of unused nitrocellulose stored in the premises of MGC.

2.

Reynaldo Reyes, also a former employee of MGC, who will testify as follows:

(a)

On August 17, 2005, while working in the Adhesive Department of MGC, he saw that something was smoking inside one of the drums stored in the premises.

(b)

He hurriedly ran to the office of Mr. Oscar Cervantes, his boss, the one in charge of the Adhesive Department, to tell him about the smoking drum.

(c)

Mr. Cervantes and he immediately went to where the smoking drum was. Mr. Cervantes told him and the other employees who by then had also rushed to the scene not to tinker with the drum because it contained nitrocellulose and that it might explode and for them to remove anything located around the drum that might catch fire.

(d)

Shortly after Mr. Cervantes had warned them so, the drum exploded.

19

When the team handling the case interviewed Mr. Oscar Cervantes – who had resigned from MGC after the fire – he refused to testify for MGC for the purpose of contradicting the story of Mr. Reynaldo Reyes about the incident.

On the part of MGC, the team handling the case was asked to present witnesses who would testify that the probable cause of the fire was an electrical short circuit.

1.

Mr. Nicolas Salas – He will testify that long before the fire MGC had stopped the manufacture of leather dressings one of the ingredients of which is nitrocellulose and that at the time of the fire the nitrocellulose supply of VGC had already been consumed.

2.

Mr. Pedro Garcia – He will testify that on August 17, 2005, at about 11:00 a.m., he was conferring with his boss at the conference room when they heard the ringing of the alarm bell. They then hurriedly went out and he saw the three electrical wires in MGC’s premises parallel to the two meter wide alley at the height of about 8 to 10 meters burning and their insulations were peeling off and were burning rapidly towards their opposite ends.

3.

Gil Salas, As an expert witness, he will testify that the excessive heating of electrical wire caused by such electrical wire’s carrying electrical current beyond its rated capacity may cause fire. Example: When a motor

20

connected to an electrical wire becomes overloaded and the motor is damaged, short circuit may occur inside the motor causing the same to draw a larger amount of electric current causing the electrical wires to carry current beyond their rated capacity and the insulation thereof will burn and this starts the fire.

The team of lawyers assigned to handle the case in the M & M Law Firm were skeptical about the credibility of MGC’s witnesses because the evidence was overwhelming that a drum in MGC’s premises exploded and that this started the fire.

APPENDIX “C”

REPUBLIC OF THE PHILIPPINES COURT OF FIRST INSTANCE OF RIZAL QUEZON CITY BRANCH______

VIC TRADERS’ CORPORATION Plaintiff

- versus -

CIVIL CASE NO. ________

MIGHTY GLUE CORPORATION Defendant x-----------------------------------------x

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COMPLAINT

PLAINTIFF, through counsel, respectfully alleges that:

Plaintiff is a corporation duly organized and existing under the laws of the Philippines, with principal place of business and offices in Quezon City as borne by its Articles of Incorporation. Defendant is a corporation duly organized and existing under Philippine laws, with principal offices at No. 150 Pioneer Street, Mandaluyong, Rizal, where it may be served with summons and other processes of this Honorable Court.

2.

At all times material to this case, plaintiff was

essentially a trading firm while defendant was essentially a manufacturing firm and both firms had their offices and

trading/manufacturing spaces at Vic Traders’ Compound at 353 - 355 Aurora Boulevard, Quezon City.

3.

On or about August 17, 2005, a fire exploded from the

Adhesives Department of the defendant at 355 Aurora Boulevard, Quezon City, where it stored highly inflammable materials such as but not limited to toluol, pegasol, nitro-cellulose that it used in the manufacture of rubber cement, adhesives, sodium silicate, glue, varnish, and the like, as a result of which the adjacent offices and building of the plaintiff, together with the contents thereof consisting of various merchandise, finished goods, raw materials, machinery and

22

equipment in use and other equipment belonging to plaintiff were totally lost or destroyed.

4.

The said fire was caused by the fault or negligence of

defendant and/or its employees in not taking the necessary precautions to avoid damage to others and in failing to comply with the requirements of the authorities relative to use and storage of highly inflammable goods of materials.

5.

As a result of the said fire that was caused by the fault

or negligence of the defendant and/or its employees, the plaintiff suffered damages in the amount of at least P2,142,599.50, itemized as follows:

Estimated Merchandise Inventory Loss P1,507,503.24
FIXED ASSETS:

Cost Building Cement Machinery Furniture &Fixtures Medical Equipment P335,000.00 9,000.00 61,000.00 1,500.00

Depreciation P163,798.89 5,127.03 41,987.09 987.39 40,536.68 109,395.46 73,125.95 27,646.23 4,198.79

Net P171,201.11 3,872.97 19,012.91 512.61 33,463.32 117,604.54 49,874.05 4,353.77 5,801.21

Office Mach & Equipment 74,000.00 PVC Machinery 227,000.00

Shop Mach. & Equipment 123,000.00 Tools & Equipment Construction Equipment 32,000.00 10,000.00 P 872,500.00

P 466,803.51 P405,696.49

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Less: Salvage Value of Building 399,696.49 OTHERS: PVC Materials & Products Stock Cement Materials & Products Stock Shop & IRS Matrials & Products Stock Unused Office Supplies, Stamps & Medical Supplies 631,032.06 Total Estimate Fire Loss 2,538,231.79 Deduct: Insurance Proceeds 395,632.29 Net : Fire Loss

6,000.00

P173,000.00 313,000.00 130,000.00

15,032.06

2,142,599.50 vvvvvvvvvvvv

6.

By reason of the fault of negligence of the defendant

and/or its employees that caused the mentioned fire, defendant is liable to the plaintiff in the aforesaid amount of at least P2,142,599.50.

7.

To serve as an example for the public good and as a

deterrent against similar actuations, defendant should be made liable for exemplary damages in the amount of P500,000.00.

8.

In bringing this suit, plaintiff was constrained to retain

the services of counsel for a fee and to incur expenses of litigation in the amount of P300,000.00.

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WHEREFORE, it is most respectfully prayed that judgment be rendered ordering the defendant to pay the plaintiff the following amounts:

1.

P2,142,599.50 with legal interest from the date of filing

of this Complaint until fully paid;

2.

P500,000.00 as exemplary damages;

3. litigation.

P300,000.00 as attorney’s fees and expenses of

4.

The costs of suit.

Plaintiff also prays for such other reliefs just and equitable in the premises.

Manila for Quezon City, ____________

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E

TABLE OF CONTENTS

Page Preface How To Use This Materials ……….......................................... 1 3 Labor Lawyers’ Obligations as Contract Drafters ……………….

Non-Lawyers as Union Representatives and Voluntary Arbitrators ………………………………………………….. 5 Labor Lawyers’ Obligations as Negotiators ………………………. 10 Labor Lawyers’ Duty to Encourage Fair Settlement …….……. 16 Labor Lawyers’ Duty to Preserve Privileged Communication ………………………………………………… 21 Prohibitions Against Commission of Prohibited Activities ..... 22 Labor Lawyers’ Obligations to their Clients ……………………… 32 Suggested Ethical Scenarios ……………………………………… 34 Ethics Scenarios Scenario 1 - Employment Dismissal ……………………………. 38 Scenario 2 - Union formation ………………………………….. 41 Scenario 3 - Collective Bargaining ………………………………..43 Scenario 4 - Concerted Union Activity ………………………… 46 Appendix A – Probationary Employment Agreement ……...... Appendix B – Regular Employment Agreement ………………… Appendix C – Project Employment Contract ……………………. Appendix D – Independent Contractor Agreement …….......... 48 54 58 64

Appendix E – Deed of Release and Quitclaim ……………………. 73 Appendix F – Sample CBA Provisions ……………………………... 76

1

HOW TO USE THIS MANUAL
This manual allows the teacher to formulate different scenarios involving the application of substantive and procedural labor-law issues to typical labor cases. The scenarios also present the students with issues on professional responsibility. The students are called upon to resolve substantive law and ethical issues as they confront the particular scenarios of each case. The students are taught the basic rudiments of labor-law practice initially by formulating and drafting various forms of labor agreements including probationary, regular and project employment contracts, independent-contractor agreements, collective bargaining contract provisions particularly grievance and dispute-settlement provisions. The scenarios on professional responsibility are applied in the context of labor-employment issues and disputes so that the students can appreciate and resolve ethical issues that typically arise in labor law practice that they are likely to encounter when they engage in this field of law. The suggested ethics scenarios are appended to the Manual. The professor may change the facts of the scenarios or create entirely different scenarios on his/her own. With this teaching approach, the students may be better able to learn that labor law practice is different from other practice areas in the sense that labor lawyers and their labor organizations must have at least the basis conciliation skills, the technical abilities of an arbitrator and the persuasiveness of a litigator even as they are duty-bound to observe the Canons of Professional Responsibility. 2

3

LABOR LAWYERS’ OBLIGATIONS AS CONTRACT DRAFTERS

The first part of the module emphasizes to students the importance of formulating and using agreements relating to labor contracts, and labor and employment disputes that are consistent with legal requirements and in that sense may encourage strict adherence to ethical standards in labor law practice. In this part of the course the students are required to draft basic agreements in labor and employment relations. These agreements include (i) Probationary Employment Agreement (ii) Regular Employment Agreement and (iii) Project Employment Agreement. Sample forms of these documents are included in the Appendix. This assignment requires the students to formulate the appropriate language that would serve the stated purpose of each provision of the agreement in a way that would meet current formal and legal standards, and would not contravene any provision of the Labor Code or decisions of the Supreme Court. The assignment portion is an essential part of the module to help the students understand that despite the absence of any explicit legal ethics rules and principles under the Labor Code, they are nonetheless duty-bound, when drafting and using these agreement for labor and employment purposes to comply with the mandate that “ a lawyer shall uphold the constitution, obey the laws of the land and promote respect

4

for law and legal process 1 that they shall not engage in unlawful, dishonest or deceitful conduct, 2 and that lawyers who accept the cause of a person unable to pay his professional fees shall observe the same standard of conduct governing this relations with paying clients. 3 Furthermore, consistent with the preference of the Labor Code for compromise agreements as the primary means of settling labor and employment disputes, Rule 15 of the Code of Professional Responsibility enjoins a lawyer with the consent of all concerned to act as a mediator, conciliator or arbitrator in settling disputes and shall employ only fair and honest means to attain the lawful objectives of his client. 4

NON-LAWYERS AS UNION REPRESENTATIVES AND VOLUNTARY ARBITRATORS

The one peculiar aspect of labor and employment practice is that lawyers steeped in the substantive provisions of the Labor Code and in the rules of procedure of the labor agencies of the government as well as the provisions of the Code of Professional Responsibility may find
1 2

Canon 1 Canon 2 3 Rule 14.04 4 Rule 19.01

5

themselves facing non-lawyers or laymen as voluntary arbitrators in labor and employment disputes who are not subject to the ethics rules under the Code. This is on account of Article 222 of the Labor Code, which provides: “Article 222. Appearances and Fees. - (a) Nonlawyers may appear before the Commission or any Labor Arbiter only: 1. If they represent themselves; or 2. If they represent their organization or members thereof. (b) No attorney’s fees, negotiation fees or similar charges of any kind arising from any collective bargaining agreement shall be imposed on any individual member of the contracting union: Provided, However, that attorney’s fees may be charged against union funds in an amount to be agreed upon by the parties. Any contract, agreement or arrangement of any sort to the contrary shall be null and void. (As amended by Presidential Decree No. 1691, May 1, 1980).” The inclusion of this provision may have been dictated by practical reasons: workers and their labor organizations may find themselves able to attract only those legal practitioners who are committed to the advancement of labor unionism in the country and so may find themselves direly in need of legal services yet unable to compete with the professional fees that commercial companies can pay their retained lawyers. The financial constraints faced by labor organizations may have dictated allowing non-lawyers to appear before labor agencies but the liberal treatment should be counterbalanced by the need to impose ethical norms upon non-lawyers who are engaged in labor and employment practice.

6

The problems that may arise from this situation is bestexemplified by the Supreme Court decision in Trade Union Congress of the Philippines and Allied Services World Federation of Trade Unions vs. Hon. Bienvenido Laguesma and NAFLU. 5 In this case, the rank and file employees of PDIC represented by TUPAS entered into a collective bargaining agreement with said company. This CBA expired on April 30, 1991. Within the sixty-day freedom period, the employees attempted to disaffiliate from TUPAS and tried to affiliate instead with NAFLU. TUPAS intervened and filed a motion to refer the case to the Labor Advisory Consultative Council Code of Ethics, which provides: "1. *** b. Non-Union raiding *** *** Where company is organized. All organized local affiliates or unions of any LACC member must be discouraged from disaffiliating from their incumbent labor federations/national union affiliation. However, LACC recognizes the ultimate authority and right of the local unions to decide for themselves during the freedom period. In the event that said local unions intend to disaffiliate from any LACC member and to affiliate with another member, the latter must inform the former about the intention of their said local union and to settle the matter by themselves. If not so settled, the matter will be brought to the attention of the Fraternal Relations Committee of the LACC for final determination or settlement."

5

GR No. 102350, June 30, 1994 7

Said Code of Ethics was adopted and signed by four base organizations, namely: Kilusang Mayo Uno (KMU), to which private respondent NAFLU is affiliated; Federation of Free Workers (FFW); Lakas ng Manggagawa Labor Center (LMLC); and Philippine World Federation of Trade Unions (WFTU) Affiliates, which includes petitioner TUPAS. 2 Petitioner urged the DOLE to "give its imprimatur and uphold the binding effect of the Code among the LACC members." The Med-Arbiter ordered the conduct of a certification election. TUPAS appealed the order to the Secretary of Labor who affirmed the Order. On petition for certiorari to the Supreme Court, it chastised TUPAS for its attempt to supplant Article 256 of the Labor Code on certification elections with its Coe of Ethics the terms of which negate the right of the workers to freely choose their collective bargaining representative. “We find no merit in the petition. Public respondent did not act with grave abuse of discretion amounting to lack or excess of jurisdiction in affirming the Med-Arbiter's Order, dated June 3, 1991. The order for the holding of a certification election among the rank-and-file employees of PDIC finds legal warrant in Article 256 of the amended Labor Code, as earlier quoted. Under said provision, the Med-Arbiter shall automatically order a certification election by secret ballot in an organized establishment such as PDIC, provided the following requisites are met: (1) that a petition questioning the majority status of the incumbent bargaining agent is filed before the DOLE within the sixty-day freedom period; (2) that such petition is

8

verified; and (3) that the petition is supported by the written consent of at least twenty-five (25%) per cent of all employees in the bargaining unit. It is undisputed that all these requirements were met by private respondent NAFLU in its petition before the DOLE Regional Office No. 3, in San Fernando, Pampanga. Thus, Med-Arbiter Cortez, acting in accordance with Article 256 of the Labor Code, as amended, had no recourse but to automatically order the holding of a certification election at PDIC. It bears stressing that no obstacle must be placed to the holding of certification elections, for it is a statutory policy that should not be circumvented. We have held that whenever there is doubt as to whether a particular union represents the majority of the rank-and-file employees, in the absence of a legal impediment, the holding of a certification election is the most democratic method of determining the employees' choice of their bargaining representative. It is the appropriate means whereby controversies and disputes on representation may be laid to rest, by the unequivocal vote of the employees themselves. 9 Indeed, it is the keystone of industrial democracy. Article 256 of the Labor Code cannot be supplanted by the Code of Ethics of the LACC. Said Code cannot amend or repeal a law. And, as correctly observed by the Office of the Solicitor General, it merely provides for a voluntary mechanism to settle intra-union disputes. It only applies when both parties to the dispute seek the mediation of said Committee. However, when one of the parties decides to avail of the remedy provided for under Article 256 of our Labor Code and files the proper petition with the DOLE, jurisdiction over the dispute is exclusively acquired by and cannot be wrenched away from the MedArbiter. It is familiar learning that jurisdiction is vested by law, and not by

9

agreement between or among the parties. Moreover, labor disputes involve public interest, and hence any private agreement on their settlement cannot prevail over what is provided for by our laws.”

LABOR LAWYERS’ OBLIGATIONS AS NEGOTIATORS

The absence of explicit ethics rules governing labor and employment disputes has led the Supreme Court to rely upon the provisions of the Civil Code in resolving questions concerning the validity of compromise agreements concluded between employers and employees. In Veloso and Liguaton vs. Department of Labor and Employment and Noah’s Ark Sugar Carriers and Co., G.R. No. 87297, August 5, 199, the employer was held liable for unfair labor practices, underpayment and non-payment of overtime, holiday pay and other benefits. The employer filed a motion for reconsideration. While it was pending, the employees signed a Deed of Quitclaim and Release for a consideration of P25, 000.00. The employees subsequently impugned it, arguing that they signed the Quitclaim and Release because of their “dire necessity.” The Supreme Court held: “Reconsideration of the order having been denied on March 7, 1989, the petitioners have come to this Court on certiorari. They ask that the quitclaims they have signed be annulled and that writs of execution be issued for the sum of P21,267.92 in favor of Veloso and the sum of P26,267.92 in favor of Liguaton in settlement of their claims.”

10

Their petition is based primarily on Pampanga Sugar Development Co., Inc. v. Court of Industrial Relations, where it was held: . . . while rights may be waived, the same must not be contrary to law, public order, public policy, morals or good customs or prejudicial to a third person with a right recognized by law. (Article 6, New Civil Code) . . . . . . The above-quoted provision renders the quitclaim agreements void ad initio in their entirety since they obligated the workers concerned to forego their benefits, while at the same time, exempted the petitioner from any liability that it may choose to reject. This runs counter to Article 22 of the new Civil Code, which provides that no one shall be unjustly enriched at the expense of another. The Court had deliberated on the issues and the arguments of the parties and finds that the petition must fail. The exception and not the rule shall be applied in this case. The case cited is not apropos because the quitclaims therein invoked were secured by the employer after it had already lost in the lower court and were subsequently rejected by this Court when the employer invoked it in a petition for certiorari. By contrast, the quitclaims in the case before us were signed by the petitioners while the motion for reconsideration was still pending in the DOLE, which finally denied it on March 7, 1989. Furthermore, the quitclaims in the cited case were entered into without leave of the lower court whereas in the case at bar the quitclaims were made with the knowledge and approval of the DOLE, which declared in its order of December 16, 1988, that "the compromise agreement/settlements dated April 15, 1988 and July 19, 1988 are hereby approved."

11

It is also noteworthy that the quitclaims were voluntarily and knowingly made by both petitioners even if they may now deny this. In the case of Veloso, the quitclaim he had signed carried the notation that the sum stated therein had been paid to him in the presence of Atty. Gaga Mauna, his counsel, and the document was attested by Atty. Ferdinand Magabilin, Chief of the Industrial Relations Division of the National Capitol Region of the DOLE. In the case of Liguaton, his quitclaim was made with the assistance of his counsel, Atty. Leopoldo Balguma, who also notarized it and later confirmed it with the filing of the motion to dismiss Liguaton's complaint. The same Atty. Balguma is the petitioners' counsel in this proceeding. Curiously, he is now challenging the very same quitclaim of Liguaton that he himself notarized and invoked as the basis of Liguaton's motion to dismiss, but this time for a different reason. Whereas he had earlier argued for Liguaton that the latter's signature was a forgery, he has abandoned that contention and now claims that the quitclaim had been executed because of the petitioners' "dire necessity." "Dire necessity" is not an acceptable ground for annulling the releases, especially since it has not been shown that the employees had been forced to execute them. It has not even been proven that the considerations for the quitclaims were unconscionably low and that the petitioners had been tricked into accepting them. While it is true that the writ of execution dated November 24, 1987, called for the collection of the amount of P46,267.92 each for the petitioners, that amount was still subject to recomputation and modification as the private respondent's motion for reconsideration was still pending before the DOLE. The fact that the petitioners accepted the lower amounts would suggest that the

12

original award was exorbitant and they were apprehensive that it would be adjusted and reduced. In any event, no deception has been established on the part of the private respondent that would justify the annulment of the petitioners' quitclaims. The applicable law is Article 227 of the Labor Code providing clearly as follows:

Article 227. Compromise agreements. — Any compromise settlement, including those involving labor standard laws, voluntarily agreed upon by the parties with the assistance of the Bureau or the regional office of the Department of Labor, shall be final and binding upon the parties. The National Labor Relations Commission or any court shall not assume jurisdiction over issues involved therein except in case of non-compliance thereof or if there is prima facie evidence that the settlement was obtained through fraud, misrepresentation or coercion.
The petitioners cannot renege on their agreement simply because they may now feel they made a mistake in not awaiting the resolution of the private respondent's motion for reconsideration and recomputation. The possibility that the original award might have been affirmed does not justify the invalidation of the perfectly valid compromise agreements they had entered into in good faith and with full voluntariness. In General Rubber and Footwear Corp. v. Drilon, we "made clear that the Court is not saying that accrued money claims can never be effectively waived by workers and employees." As we later declared in Periquet v. NLRC: Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered into and represents a reasonable settlement, it is binding on the parties and may not later be disowned simply because of a change of mind. It is only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or

13

the terms of settlement are unconscionable on its face, that the law will step in to annul the questionable transaction. But where it is shown that the person making the waiver did so voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as a valid and binding undertaking. As in this case. We find that the questioned quitclaims were voluntarily and knowingly executed and that the petitioners should not be relieved of their waivers on the ground that they now feel they were improvident in agreeing to the compromise. What they call their "dire necessity" then is no warrant to nullify their solemn undertaking, which cannot be any less binding on them simply because they are laborers and deserve the protection of the Constitution. The Constitution protects the just, and it is not the petitioners in this case.”

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LABOR LAWYERS’ DUTY TO ENCOURAGE FAIR SETTLEMENT

In compromise settlement of employees’ wages and benefits earned for services rendered, which are pending with labor adjudicative agencies, it is important for lawyers to bear in mind Rule 1.04 of the Code of Professional Responsibility which provides: “Rule 1.04 - A lawyer shall encourage his clients to avoid, end or settle a controversy if it will admit of a fair settlement.” Furthermore, even in compromise settlements between an employer and the labor organization on behalf of the employees, the lawyers representing them must ensure that the affected employees have consented to the settlement through a special power of attorney. Accordingly, the Supreme Court in Jag and Haggar Jeans and Sportswear Corporation vs. NLRC, Lakas ng Manggagawa sa Jag et. al. 6 held: “The main issue to be resolved is whether or not the Compromise Agreement entered into by petitioner and the Union is binding upon private respondents.” Petitioner contends that the Compromise Agreement was deemed ratified by the union members considering that 102 out of the 114 affected employees already availed of and received the benefits under the said agreement and that private respondents were represented in all stages of the proceedings without them questioning the authority of their union officers and their counsel. It cites the case of Betting Ushers Union (PLUM) v. Jai-alai, 101 Phil. 822 (1957) Wherein we ruled that the "will of the majority should prevail over the minority" and which ruling
6

. G.R. No. 10570, February 23, 1995 15

was reiterated in Dionela v. Court of Industrial Relations, 8 SCRA 832 (1963) and Chua v. National Labor Relations Commission, 190 SCRA 558 (1990). On the other hand, private respondents allege that for a compromise agreement to be binding upon them, a special power of attorney or their express consent was necessary for what was being waived or surrendered under the agreement was their right to an employment. Such right is protected under the security of tenure provision of the Labor Code of the Philippines and cannot be lost without due process of law (Rollo, p. 62). "Settlement of disputes by way of compromise whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one already commenced, is an accepted, may desirable practice encouraged by the courts of law and administrative tribunals" (Santiago v. De Guzman 177 SCRA 344 [1989]). The authority of attorneys to bind their clients is governed by Section 7, Rule IV of the New Rules of Procedure of the National Labor Relations Commission, which provides: “Authority to bind party. — Attorneys and other representatives of parties shall have authority to bind their clients in all matters of procedure; buy they cannot, without a special power of attorney or express consent, enter into a compromise agreement with the opposing party in full or partial discharge of a client's claim.” (Emphasis supplied) It will be noted that the Compromise Agreement provides in paragraphs 2 and 3 thereof that:

16

"2. The union Board Members and Shop Stewards may be dismissed by respondent-appellee subject to the payment of separation pay equivalent to one-half month for every year of service; and "3. The mere union members are directed to report for work within 10 days from receipt of this Decision and management is ordered to accept them to their former or equivalent position" (Rollo, pp. 16-17). The Decision dated May 8, 1990 ordered the reinstatement of the union members to their former or equivalent position while in the case of the Union board members and shop stewards, petitioner was given the option to dismiss them subject to the payment of separation pay. However, in the Compromise Agreement, not only the union officers, board members and shop stewards were considered dismissed from the service but also the union members subject to the payment of separation pay and financial assistance. The waiver of reinstatement, like waivers of money claims, must be regarded as a personal right which must be exercised personally by the workers themselves. "For a waiver thereof to be legally effective, the individual consent or ratification of the workers or employees involved must be shown. Neither the officers nor the majority of the union had any authority to waive the accrued rights pertaining to the dissenting minority members, . . . The members of the union need the protective shield of this doctrine not only vis-a-vis their employer but also, at times, vis-a-vis the management of their own union, and at other times even against their own imprudence or impecuniousness" (General Rubber and Footwear Corporation v. Drilon, 169 SCRA 808 [1989]). We have ruled that ". . . when it comes to individual benefits accruing to members of a union from a favorable final judgment of any

17

court, the members themselves become the real parties in interest and it is for them, rather than for the union, to accept or reject individually the fruits of litigation" (Esso Philippines, Inc. v. Malayang Manggagawa sa Esso (MME), 75 SCRA 73 [1977]). The authority to compromise cannot lightly be presumed and should be duly established by evidence (General Rubber and Footwear Corporation v. Drilon, supra; Kaisahan ng mga Manggagawa sa La Campana v. Sarmiento, 133 SCRA 220, [1984]). We also find no reason for the union members to enter into a compromise when the decision of NLRC ordering their reinstatement is more advantageous to them than their being dismissed from their jobs under said Compromise Agreement. The Compromise Agreement does not apply to private respondents who did not sign the Compromise Agreement nor avail of its benefits. However, while respondents Domingo Namia and Rizalde Flores are not bound by the terms of the Compromise Agreement, they are bound by the amended decision of NLRC rendered on May 3, 1990 which provides that members of the board of directors of the union may be dismissed by petitioner subject to the payment of separation pay. The two respondents did not appeal the amended decision after the denial by NLRC of their motion for reconsideration thereof.”

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LABOR LAWYERS’ DUTY TO PRESERVE PRIVILEGED COMMUNICATION

In conciliation and mediation proceedings before labor agencies, lawyers are also obliged to preserve the confidences and secrets of their clients even after the termination of the attorney-client relationship. 7 Consistent with its preference for compromise agreements as the means for settlement of labor disputes, Article 233 of the Labor Code provides that:

“Article 233. Privileged communication. Information and statements made at conciliation proceedings shall be treated as privileged communication and shall not be used as evidence in the Commission. Conciliators and similar officials shall not testify in any court or body regarding any matters taken up at conciliation proceedings conducted by them.”
In this portion of the module, students will be asked to draft agreements like Independent Contractor Agreement, Deed of Release

7

Canon 21 19

and Quitclaim, and provisions of collective bargaining agreements establishing the grievance procedure for the settlement of labor disputes. This is essential to the students’ appreciation of the mechanics of compromise agreements in labor and employment disputes, consistent with the Code of Professional Responsibility that a lawyer shall encourage his clients to avoid, end or settle a controversy if it will admit of a fair settlement. PROHIBITIONS AGAINST COMMISSION OF PROHIBITED ACTIVITIES

As a matter of broad legal proposition, labor lawyers, whether they represent employers or employees or labor organizations, are obliged to uphold the constitution, obey the laws of the land, and promote respect for law and legal processes. 8 They should therefore not counsel or abet activities aimed at defiance of the law or at lessening confidence in the legal system. 9 They shall not engage in unlawful, dishonest, immoral or deceitful conduct. 10 A lawyer shall make his legal services available in an efficient and convenient manner compatible with the independence and effectiveness of the profession. 11 The unlawful activities that are penalized when committed by employers against their employees or their labor organizations are also considered unlawful when abetted by their lawyers pursuant to Rule 15.07 mandating that a lawyer shall impress upon his client compliance
8 9

Canon 1 Rule 1.02. 10 Rule 1.01 11 Canon 2

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with the laws and principles of fairness.

The prohibited acts of

employers under the Labor Code are equally applicable to the employers’ lawyer apart from being grounds for disciplinary action against the lawyer under the Code of Professional Responsibility. These prohibited acts include: shall be unlawful for any employer to discriminate against any woman employee with respect to terms and conditions of employment solely on account of her sex. The following are acts of discrimination: (a) Payment of a lesser compensation, including wage, salary or other form of remuneration and fringe benefits, to a female employees as against a male employee, for work of equal value; and (b) Favoring a male employee over a female employee with respect to promotion, training opportunities, study and scholarship grants solely on account of their sexes. Criminal liability for the willful commission of any unlawful act as provided in this Article or any violation of the rules and regulations issued pursuant to Section 2 hereof shall be penalized as provided in Articles 288 and 289 of this Code: Provided, That the institution of any criminal action under this provision shall not bar the aggrieved employee from filing an entirely separate and distinct action for money claims, which may include claims for damages and other affirmative reliefs. The actions hereby authorized shall proceed independently of each other. (As amended by Republic Act No. 6725, May 12, 1989).”

“Article 135. Discrimination prohibited. - It

shall be unlawful for an employer to require as a condition of employment or continuation of employment that a woman employee shall not get married, or to stipulate expressly or tacitly that upon getting married, a woman employee shall be deemed resigned or

“Article 136. Stipulation against marriage. - It

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separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a woman employee merely by reason of her marriage.” unlawful for any employer: (1) To deny any woman employee the benefits provided for in this Chapter or to discharge any woman employed by him for the purpose of preventing her from enjoying any of the benefits provided under this Code. (2) To discharge such woman on account of her pregnancy, or while on leave or in confinement due to her pregnancy; (3) To discharge or refuse the admission of such woman upon returning to her work for fear that she may again be pregnant.”

“Article 137. Prohibited acts. - (a) It shall be

coerce, discriminate against or unduly interfere with employees and workers in their exercise of the right to self-organization. Such right shall include the right to form, join, or assist labor organizations for the purpose of collective bargaining through representatives of their own choosing and to engage in lawful concerted activities for the same purpose for their mutual aid and protection, subject to the provisions of Article 264 of this Code. (As amended by Batas Pambansa Bilang 70, May 1, 1980).”

“Article 246. Non-abridgment of right to selforganization. - It shall be unlawful for any person to restrain,

practices violate the constitutional right of workers and employees to self-organization, are inimical to the legitimate interests of both labor and management, including their right to bargain collectively and otherwise deal with each other in an atmosphere of freedom and mutual respect, disrupt industrial peace and hinder the promotion of healthy and stable labor-management relations.

“Article 247. Concept of unfair labor practice and procedure for prosecution thereof. - Unfair labor

Consequently, unfair labor practices are not only violations of the civil rights of both labor and management but are also criminal offenses against the State which shall be subject to prosecution and punishment as herein provided. Subject to the exercise by the President or by the Secretary of Labor and Employment of the powers vested in them by Articles 263 and 264 of this Code, the civil aspects of all cases involving unfair labor practices, which may include claims for actual, moral, exemplary and 22

other forms of damages, attorney’s fees and other affirmative relief, shall be under the jurisdiction of the Labor Arbiters. The Labor Arbiters shall give utmost priority to the hearing and resolution of all cases involving unfair labor practices. They shall resolve such cases within thirty (30) calendar days from the time they are submitted for decision. Recovery of civil liability in the administrative proceedings shall bar recovery under the Civil Code. No criminal prosecution under this Title may be instituted without a final judgment finding that an unfair labor practice was committed, having been first obtained in the preceding paragraph. During the pendency of such administrative proceeding, the running of the period of prescription of the criminal offense herein penalized shall be considered interrupted: Provided, however, that the final judgment in the administrative proceedings shall not be binding in the criminal case nor be considered as evidence of guilt but merely as proof of compliance of the requirements therein set forth. (As amended by Batas Pambansa Bilang 70, May 1, 1980 and later further amended by Section 19, Republic Act No. 6715, March 21, 1989).”

of the following unfair labor practice:

“Article 248. Unfair labor practices of employers. - It shall be unlawful for an employer to commit any

(a) To interfere with, restrain or coerce employees in the exercise of their right to self-organization; (b) To require as a condition of employment that a person or an employee shall not join a labor organization or shall withdraw from one to which he belongs;

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(c) To contract out services or functions being performed by union members when such will interfere with, restrain or coerce employees in the exercise of their rights to self-organization; (d) To initiate, dominate, assist or otherwise interfere with the formation or administration of any labor organization, including the giving of financial or other support to it or its organizers or supporters; (e) To discriminate in regard to wages, hours of work and other terms and conditions of employment in order to encourage or discourage membership in any labor organization. Nothing in this Code or in any other law shall stop the parties from requiring membership in a recognized collective bargaining agent as a condition for employment, except those employees who are already members of another union at the time of the signing of the collective bargaining agreement. Employees of an appropriate bargaining unit who are not members of the recognized collective bargaining agent may be assessed a reasonable fee equivalent to the dues and other fees paid by members of the recognized collective bargaining agent, if such nonunion members accept the benefits under the collective bargaining agreement: Provided, that the individual authorization required under Article 242, paragraph (o) of this Code shall not apply to the non-members of the recognized collective bargaining agent; (f) To dismiss, discharge or otherwise prejudice or discriminate against an employee for having given or being about to give testimony under this Code; (g) To violate the duty to bargain collectively as prescribed by this Code; (h) To pay negotiation or attorney’s fees to the union or its officers or agents as part of the settlement of any issue in collective bargaining or any other dispute; or (i) To violate a collective bargaining agreement. The provisions of the preceding paragraph notwithstanding, only the officers and agents of corporations, associations or partnerships who have actually participated in, authorized or ratified unfair labor practices

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shall be held criminally liable. (As amended by Batas Pambansa Bilang 130, August 21, 1981).” Similarly, activities that are declared unlawful by the Labor Code when committed by labor organizations are also unlawful when committed upon the advice of their legal counsel. These prohibited acts are:

coerce, discriminate against or unduly interfere with employees and workers in their exercise of the right to self-organization. Such right shall include the right to form, join, or assist labor organizations for the purpose of collective bargaining through representatives of their own choosing and to engage in lawful concerted activities for the same purpose for their mutual aid and protection, subject to the provisions of Article 264 of this Code. (As amended by Batas Pambansa Bilang 70, May 1, 1980).”

“Article 246. Non-abridgment of right to selforganization. - It shall be unlawful for any person to restrain,

organization, its officers, agents or representatives:

“Article 249. Unfair labor practices of labor organizations. - It shall be unfair labor practice for a labor

(a) To restrain or coerce employees in the exercise of their right to self-organization. However, a labor organization shall have the right to prescribe its own rules with respect to the acquisition or retention of membership; (b) To cause or attempt to cause an employer to discriminate against an employee, including discrimination against an employee with respect to whom membership in such organization has been denied or to terminate an employee on any ground other than the usual terms and conditions under which membership or continuation of membership is made available to other members; (c) To violate the duty, or refuse to bargain collectively with the employer, provided it is the representative of the employees;

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(d) To cause or attempt to cause an employer to pay or deliver or agree to pay or deliver any money or other things of value, in the nature of an exaction, for services which are not performed or not to be performed, including the demand for fee for union negotiations; (e) To ask for or accept negotiation or attorney’s fees from employers as part of the settlement of any issue in collective bargaining or any other dispute; or (f) To violate a collective bargaining agreement. The provisions of the preceding paragraph notwithstanding, only the officers, members of governing boards, representatives or agents or members of labor associations or organizations who have actually participated in, authorized or ratified unfair labor practices shall be held criminally liable. (As amended by Batas Pambansa Bilang 130, August 21, 1981).” organization or employer shall declare a strike or lockout without first having bargained collectively in accordance with Title VII of this Book or without first having filed the notice required in the preceding Article or without the necessary strike or lockout vote first having been obtained and reported to the Ministry. No strike or lockout shall be declared after assumption of jurisdiction by the President or the Minister or after certification or submission of the dispute to compulsory or voluntary arbitration or during the pendency of cases involving the same grounds for the strike or lockout. Any worker whose employment has been terminated as a consequence of any unlawful lockout shall be entitled to reinstatement with full backwages. Any union officer who knowingly participates in an illegal strike and any worker or union officer who knowingly participates in the commission of illegal acts during a strike may be declared to have lost his employment status: Provided, That mere participation of a worker in a lawful strike shall not constitute sufficient ground for termination of his employment, even if a replacement had been hired by the employer during such lawful strike. (b) No person shall obstruct, impede, or interfere with, by force, violence, coercion, threats or intimidation, any peaceful 26

“Article 264. Prohibited activities. - (a) No labor

picketing by employees during any labor controversy or in the exercise of the right to self-organization or collective bargaining, or shall aid or abet such obstruction or interference. (c) No employer shall use or employ any strike-breaker, nor shall any person be employed as a strike-breaker. (d) No public official or employee, including officers and personnel of the New Armed Forces of the Philippines or the Integrated National Police, or armed person, shall bring in, introduce or escort in any manner, any individual who seeks to replace strikers in entering or leaving the premises of a strike area, or work in place of the strikers. The police force shall keep out of the picket lines unless actual violence or other criminal acts occur therein: Provided, That nothing herein shall be interpreted to prevent any public officer from taking any measure necessary to maintain peace and order, protect life and property, and/or enforce the law and legal order. (As amended by Executive Order No. 111, December 24, 1986). (e) No person engaged in picketing shall commit any act of violence, coercion or intimidation or obstruct the free ingress to or egress from the employer’s premises for lawful purposes, or obstruct public thoroughfares. (As amended by Batas Pambansa Bilang 227, June 1, 1982). However, a union member or officer or organizer who may have committed any of the above prohibited activities are not subject to immediate arrest except after consolation with the Secretary of Labor.”

peace or in case of commission of a crime, no union members or union organizers may be arrested or detained for union activities without previous consultations with the Secretary of Labor.”

“Article 266. Requirement for arrest and detention. - Except on grounds of national security and public

The criminal sanctions for violations of the above provisions by employers and labor organizations are specified in Article 272 of the Labor Code. any of the provisions of Article 264 of this Code shall be punished by a fine of not less than one thousand pesos (P1,000.00) nor more than ten thousand pesos (P10,000.00) and/or imprisonment for 27

“Article 272. Penalties. - (a) Any person violating

not less than three months nor more than three (3) years, or both such fine and imprisonment, at the discretion of the court. Prosecution under this provision shall preclude prosecution for the same act under the Revised Penal Code, and vice versa. (b) Upon the recommendation of the Minister of Labor and Employment and the Minister of National Defense, foreigners who violate the provisions of this Title shall be subject to immediate and summary deportation by the Commission on Immigration and Deportation and shall be permanently barred from re-entering the country without the special permission of the President of the Philippines. (As amended by Section 16, Batas Pambansa Bilang 130 and Section 7, Batas Pambansa Bilang 227).” Just like other crimes, prosecution for offenses under the Labor Code are subject to prescription. this Code and the rules and regulations issued pursuant thereto shall prescribe in three (3) years.

“Article 290. Offenses. - Offenses penalized under

All unfair labor practice arising from Book V shall be filed with the appropriate agency within one (1) year from accrual of such unfair labor practice; otherwise, they shall be forever barred.”

LABOR LAWYERS’ OBLIGATIONS TO THEIR CLIENTS A lawyer shall observe candor, fairness and loyalty in all his dealings and transactions with his clients. 12 A lawyer shall be bound by the rule on privileged communication in respect of matters disclosed to him by a prospective client. 13 A lawyer, in conferring with a prospective
12 13

Canon 15 Rule 15.02

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client, shall ascertain as soon as practicable whether the matter would involve a conflict with another client or his own interest, and if so, shall forthwith inform the prospective client. 14 A lawyer shall not represent conflicting interests except by written consent of all concerned given after a full disclosure of the facts. 15 A lawyer when advising his client shall give a candid and honest opinion on the merits and probable results of the client's case, neither overstating nor understating the prospects of the case. 16 A lawyer may, with the written consent of all concerned, act as mediator, conciliator or arbitrator in settling disputes. 17 A lawyer shall not allow his client to dictate the procedure in handling the case. 18 A lawyer shall preserve the confidence and secrets of his client even after the attorney client relation is terminated. 19 In this portion of the module, students will be asked to draft a retainer agreement covering legal services on labor disputes and employment matters. In this final portion of the course, students will be asked to engage in role-playing by acting as clerk of a Supreme Court justice who asked him or her to draft a decision disciplining a member of the Integrated Bar of the Philippines against whom an administrative complaint had been filed with the Supreme Court. The student may recommend either subjecting the lawyer to disciplinary sanctions or
14 15

Rule 15.01 Rule 15.03 16 Rule 15.05 17 Rule 15.04 18 Rule 19.03 19 Canon 21

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acquitting him from the charges of violating the Code of Professional Responsibility. The four ethics scenarios in the appendices are suggested for this purpose but the professor may alter the facts or create his own scenarios for his class.

Suggested Ethical Scenarios 1. Statement of Factual Situation

1(a) Scenario 1 _Employment Dismissal _ In this scenario, the students confront a dismissal case where an employer seeks to take reprisal action against an International School Teacher who has raised legitimate questions about the employment practices of the employer. The questions concerned the legality of granting locally-hired teachers terms and conditions of employment that are inferior to those extended to foreign-hired teachers. They are asked to examine the validity of the intended action in light of the provisions of the Labor Code and to evaluate the ethical issues arising from implementing the reprisal action. Other ethical issues arise from the fact that the Teacher’s lawyersboyfriend is a Senior Associate at a law firm which is the retained counsel

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of another International School that follows the same employment practices as IS Cebu. 1(b) Reading Materials Code of Professional Responsibility; Canon 7 to Canon 9 Articles 260 to 262-B; Articles 278 to 286, Labor Code of the Philippines 1(c) Analysis and Discussion: Use of Grievance Procedure and

Arbitration as Means of Solving Labor Disputes; Basic Legal Required of Labor Lawyers: Conciliator, Mediator and Negotiator; Labor Lawyers’ Obligations as Contract Drafters – As practical exercises, the professor may ask the students to draft basic agreements on labor law including probationary, regular and project employment contracts, and independent-contractor agreements. 2. Statement of Factual Situation

2(a) Scenario 2 _ Union formation -- In this scenario, the students confront a situation where the Union and the Company take antagonistic positions on the intended formation of a labor organization by the employees and their union and the Company’s attempt to stifle the exercise by the employees of their right to self-organization. Here, the Teachers, who decided to form a labor organization, were divided over whether it should be an independent union or a federation. The employer attempts to exploit the employees’ divided opinion by influencing the employees to form an independent union. The students should explore and evaluate the validity of the parties’ respective positions from the standpoint of both substantive labor law and the Code of Professional Responsibility.

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2 (b)

Reading Materials Canon 6.03;

(Code of Professional Responsibility Canon 1 to 241 to 246 Labor Code of the Philippines 2 (c) Analysis and Discussion:

Articles 211 to 212; Articles 217 to 222; Articles 224 to 240; Articles

Encouragement of compromise

agreements as a mode of settlement of labor disputes; requirements for validity of compromise agreements; drafting of sample compromise agreements and deeds of release and quitclaims; substantive and ethics issues in union formation – As practical exercises, the students should be asked to explore the value of mediation and conciliation as a means of settling labor disputes. 3. Statement of Factual Situation 3(a) Scenario 3 _ Collective Bargaining -- In this scenario, the students face a potential legal and ethical conflict between the competing interests of the employees’ labor organization and the employer’s attempt at dominating the union. In this scenario, the employer had a history of amicable relationship with the bargaining representative of the employees. A small but committed group of employees disaffiliated from the bargaining representative and expressed their preference for a major Federation. The employer and its retained counsel took steps to question the validity of disaffiliation on the ground that the employees were coerced into supporting the Federation. 3 (b) Reading Materials Code of Professional Responsibility; Canon 14 to Canon 22; Articles 243 to 259 Labor Code of the Philippines

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3 (c ) Analysis and Discussion: Non-Lawyers as Union Representatives and Voluntary Arbitrators; Negotiators; Labor Lawyers’ Ethical Obligations as Drafting Sample Provisions of Collective Bargaining

Agreements; Labor Lawyers’ Duty to Encourage Fair Settlement; Labor Lawyers’ Duty to Preserve Privileged Communication; Application to Lawyers and Union Representatives and Voluntary Arbitrators – As practical exercises, the students may be asked, as a matter of substantive labor law, to study the benefits and disadvantages of the mechanisms established under the Labor Code for the resolution of labor disputes and to examine how these mechanisms can be effectively utilized in a manner consistent with the Code of Professional Responsibility. 4. Statement of Factual Situation 4 (a) Scenario 4_ Concerted Union Activity – In this situation, the students confront a situation where the labor organization of the employees and the Company are engaged in an adversarial conflict through the coercive process of a labor strike. The contentious legal and ethical issues revolved around the economic provision of the collective bargaining agreement, and the Company’s outright rejection of the Union’s 30% wage increase proposal over the three-year duration of the CBA. 4(b) Reading Materials Code of Professional Responsibility; Canon 10 to Canon 13.03; Articles 263 to 266 Labor Code of the Philippines 4(c) Analysis and Discussion: Prohibitions Against Commission of

Activities Against Labor

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ETHICS SCENARIOS Scenario 1 Employment Dismissal

Atty. Victor Reyes’ girlfriend, Jaclyn, is a teacher at the International School of Cebu (IS Cebu). She was born and raised in the United States of America and acquired Philippine citizenship on the basis of the new Philippine Dual Citizenship Act. She obtained a Bachelor's Degree in English literature at Radcliff College. She was recruited by the International School Cebu (IS-Cebu) to teach English literature. The IS Cebu has two categories of teachers: foreign hired and local hired. Although Jaclyn was born and raised in the United States of America, she is a Filipina at heart and found it odd that local teachers hired in the Philippines received compensation and benefits that are 20% less than those given to foreign hired teachers like her. She started discussing these issue with Victor who was pleased to answer her questions and provide her legal guidance. Under other circumstances, Victor, who is a Senior Associate of the law firm of XYZ would have required a client's signature on an engagement letter. Since Jaclyn was his girlfriend, he considered it unnecessary to make her sign an engagement letter.

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As it happened, Jaclyn raised the following question and Victor answered them to the best that he can: Whether or not it is legally permissible for an employer to distinguish between foreign hired and local hired employees in terms of compensation and other economic benefits. Jaclyn also asked Victor how a labor organization may be formed under the Philippine Labor Code for purposes of collective bargaining. Unknown to Victor, the law firm of XYZ of which he is a Senior Associate, is the retained counsel of the International School of Manila (IS Manila), which is following the same employment practices as IS Cebu. When IS Cebu learned that Jaclyn was encouraging the locally hired teachers to protest against its equal work, unequal pay practices, the IS Cebu management asked the XYZ law firm whether Jaclyn could be subjected to disciplinary action for her conduct that in the judgment of the school management adversely affected in management-employee relationship in the school. Victor had to confront the question whether he can continue to advise Jaclyn concerning the equal work but unequal pay practices of IS Cebu, or even to represent her as a personal client in the threatened disciplinary action against her by IS Cebu, which is a retainer client of the XYZ law-firm.

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Victor takes the position that he has not rendered any service for IS Cebu which has consulted exclusively with Partner D of XYZ the lawfirm hence has no access to any confidential information of IS Cebu that he could unfairly use against it in the threatened disciplinary proceeding against Jaclyn. On the part of partner D, he has to contend with the question whether Jaclyn's conduct in raising questions about IS Cebu's equal work but unequal pay practices can be considered a form of misconduct that can subject her disciplinary action, possibly including dismissal. The partners of the XZZ law firm also had to grapple with the question whether (i) it is in a conflict of interest situation considering that Victor, a Senior Associate of the firm, had advised Jacklyn on legal issues concerning IS Cebu’s employment practices and (ii) asking Victor to resign from the firm or dismissing him if he refused will avoid any conflict of interest situation.

Scenario 2 Union formation

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The Alliance of Concerned Teachers (ACT) learned off the equal work, but unequal pay practices of IS Cebu and started recruitment activities among its locally hired teachers. ACT also attempted similar recruitment activities among the locally hired teachers of IS Manila, which was following the same employment practices as IS Cebu. However, the teachers at IS Manila appeared to be divided on the issue of union formation. About 60% of the teachers wanted to form an independent union, while the other 40% wanted to join ACT. The counsel of ACT complied with the requirements under Title IV, Chapter I, Articles 234 et seq. of the Labor Code of the Philippines for the registration of ACT. Since ACT is already a registered labor organization, the teachers of IS Cebu directly affiliated with it without any need to constitute the chapter into a separately registered labor organization. On the other hand, the teachers at IS Manila remained divided. 60% of the teachers formed an independent union, which they registered with the Department of Labor and Employment under Title IV, Chapter I, Article 234 et seq. of the Labor Code. Only 40% directly affiliated with ACT. ACT's counsel was consulted by the union officers on the question whether they can assail the legality of IS Manila’s independent union on the basis of the provisions Title IV, Chapter I that tend to favor the formation of industry wide federations with the apparent objective of strengthening labor unionism the country. ACT's officers requested counsel to render an opinion on whether this approach has a reasonable basis under the Labor Code and whether suppressing the formation of an

37

independent union ACT would expose ACT to an unfair labor practice charge under the Labor Code by the majority of the employees who prefer to be represented by an independent union under Title IV, Chapter III, Article 249 et seq. of the Labor Code. On the other hand, having learned that 60% of the teachers actually constituted themselves into an independently registered union, IS Manila's management subtly and discreetly encourage its members to maintain their independence and permanently reject affiliation with ACT. The school's management asked its legal counsel whether the approach is legally permissible and would not expose the school to charges of unfair labor practices under Title IV, Chapter ____. Article ___of the Labor Code. Counsel was also asked to set forth in writing whether there are ethical concerns that would prevent him from carrying out the school Management's instructions.

Scenario 3 Collective Bargaining The FCY Company concluded a collective bargaining agreement with Federation XYZ, the exclusive bargaining representative of its rankand-file employees. The CBA was to expire on April 30, 2006. The FCY found its bargaining relationship with Federation XYZ as an amicable one since most of the CBA interpretation issues and employee termination cases that arose during its term where resolved to the parties' mutual satisfaction.

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However, 60 days before the expiration of the CBA on April 30, 2006, and FCY Company received a notice from the local union president informing it that the employees have disaffiliated from a Federation XYZ and asking FCY Company to refrain from negotiating a collective bargaining agreement with it. The local union president told FCY Company that the employees would be negotiating with the Activists Union as their new collective bargaining representative. FCY Company entertained some doubts as to the validity of the disaffiliation because it received reports that some employees were coerced into supporting the Federation XYZ. On account of its preference for Federation XYZ, FCY Company instructed its retained counsel to question the validity of the employees' disaffiliation from Federation XYZ and their affiliation with the Activist Union. FCY Company's counsel turned out to be a good friend of the in-house counsel of Federation XYZ who in his turn sought to nullify the disaffiliation of the employees and their affiliation with the Activist Union on the ground that it was a violation of the no-union raiding agreement among labor federations in the Philippines. The Regional Office rejected the argument and directed the conduct of a certification election among the employees within the bargaining unit. Upon the instruction of FCY’s company's counsel, the supervisors of the rank-and-file workers exerted their influence rank-andfile employees and convinced them to vote for Federation XYZ, which

39

narrowly won the election with a margin of only 10 votes over the Activist Union. Bargaining negotiations commenced between FCY Company and Federation XYZ. In no time at all, a collective bargaining agreement was concluded which granted an increase of 10% over the wages and benefits granted under the previous collective bargaining agreement. The employees who voted for Activist Union also voted against the ratification of the collective bargaining agreement by an account of the influence exerted by the supervisors --acting with the discrete guidance of FCY’s company's counsel--the CBA was ratified by is slightly more than half of the employees within the collective bargaining unit. On able to accept their defeat, the members of the Activist Union filed an administrative complaint with the Supreme Court against FCY's Company counsel and Federation XYZ's counsel, asking that sanctions be imposed on them for colluding with each other to frustrate the free choice by the employees of a bargaining representative in their negotiations with their employer. The clerks of the Supreme Court justice to whom the case was assigned were directed to research and write a member on whether the administrative complaints against the two lawyers have merit and justify the imposition of disciplinary actions upon them.

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Scenario 4 Concerted Union Activity Activist Union commenced collective bargaining negotiations with and FCY Company soon after it was a certified as the collective bargaining representative of the employees within the bargaining unit with the vote of 90% of the qualified employees. Activist Union managed to secure copies of the audited financial statements of and FCY Company from unidentified sources and other corporate documents from the Securities and Exchange Commission. Activist Union, which has its own financial analyst, formulated a set of economic and non-economic demands based on the economic data. The economic data showed that FCY Company earned 100 million in net income while expenses of production, including employee's wages, amounted to only 35 million. Activist Union argued that based the data FCY Company has a very profitable rate of return compared to other companies, where a 50% rate of return is considered a significant profit achievement. Activist

41

Union therefore proposed a wage increase for the workers of 30% their present over their current wages effective on the date of execution of the collective bargaining agreement and on the second and third years of the agreement. Activist Union also proposed the adoption by FCY Company of medical and hospitalization insurance for the employees on top of those required of employers under current laws. In addition, Activist Union asked for a closed shop provision and check off union dues. Activist Union also asked FCY Company to submit a detailed proposal responding to each of the Activist Union's proposed economic and non-economic items. However, in its letter, FCY Company did not take a position on the specific items proposed by Activist Union. The letter simply stated that FCY Company is prepared to commenced the negotiations with Activist Union, proposed that the parties should designate the chairman of their respective bargaining panels, who should also be their principal negotiators. Other members of the bargaining final can speak only when authorized by the principal negotiator to ensure proceedings. On the first negotiation meeting, FCY Company signified that the following proposals are unacceptable under any and all conditions: medical and hospitalization insurance and the closed shop provision. It also informed Activist Union that the 30% wage increase proposal is totally out of the question although FCY Company is prepared to negotiate for a substantially lower wage increase consistent with the current standards in the manufacturing industry.

42

After 10 negotiation meetings, Activist Union maintained its 30% wage increase demand and FCY Company said it would not go higher than a 10% wage increase for each year of the three-year duration of the collective bargaining agreement. All other economic benefits would be granted based on the labor standards provision of the Labor Code. Activist union filed a notice of strike based on deadlock on the economic issues. FCY Company in turn filed a complaint for unfair labor practice against activist union and its officers under article 249 (d) in relation to article 252 for violation of the duty to bargain collectively in good faith.

APPENDIX A

43

PROBATIONARY EMPLOYMENT AGREEMENT

(Date)

M

Dear M

: We are pleased to advise you that you have successfully passed our

employment requirements and, subject to your submission of the required clearances, we are employing you on a probationary status, with the designation of 1. , under the following terms and conditions: This probationary employment is for the period

not to exceed six (6) months, commencing on ___________, unless we notify you in writing on or before the latter date that your services shall be continued and your name transferred to the permanent payroll. During this six-month period, you will be working with us on a trial basis and your conversion to permanent status shall be determined on the basis of satisfactory performance (determined by your dependability, efficiency, initiative, attitude toward work/the public/the Company/its officers/ other colleagues, cooperation, client response, judgment, punctuality, quality/quantity of work, educability, draftsmanship, articulateness and professionalism). In the event we terminate your services during this

44

period of probationary employment, you will be entitled to collect only your salaries up to the end of working hours of the last day of actual service. 2. For giving your entire time and attention to the

work assigned to you, you shall be paid a salary of P per month, payable semi-monthly, on the 15th and last day of a calendar month. Your salary already includes compensation for all unworked legal holidays and any mandatory allowance under existing laws. 3. You agree to abide by all the Company's rules and

regulations, which it shall be your duty to study and know immediately upon employment, and to refrain, during your employment with the Company and for a period of one year after the termination of your employment from engaging in any activity which is prejudicial to the interests of the Company or which interferes with the performance of your job, whether within or outside your working hours, without the prior written consent of the Company. 4. Any and all expenses you may incur in the execu-

tion of the duties of your position shall be reimbursed to you, provided that such expenses have been duly authorized by the Company. 5. This probationary employment does not entitle

you to vacation and/or sick leaves, nor to any other benefit that is or may hereafter be granted to regular and permanent employees, except those which the Company, as a matter of policy and upon its discretion, extends to all employees regardless of status and those provided by law.

45

6.

You agree that all records and documents of the

Company and its clients and all information pertaining to their affairs are confidential, and that no unauthorized disclosure or reproduction of the same will be made by you at any time during or after your employment with us. 7. You agree that all records, documents and proper-

ties of the Company or its clients in your custody shall be immediately surrendered to the Company, if requested during the employment period, and at the termination thereof, whether or not requested. 8. You agree, during the entire period of this proba-

tionary employment, to be assigned to any work or work station for such periods as may be determined by the Company and whenever the service requires such assignment. 9. In the event you are sent for special training,

whether in the country or abroad, relative to your position, you agree that the training expenses to be incurred by the Company are in the nature of an investment for the use of your future services, for which reason you agree to serve the Company exclusively, after training, for not less than years. Pursuant to this understanding, you agree, should you leave the service of the Company before the end of the above period, to reimburse the Company, among other remedies available to it, a pro-rata portion of the training expenses incurred for your training corresponding to the unserved portion of the above period for which the Company has not realized an exclusive use of your services.] 10. It is expressly agreed and understood that there are

no verbal agreements or understandings, between you and the Company

46

affecting this agreement and that no alterations or variations of the terms hereof shall be binding upon either party to this agreement unless the same are reduced in writing and signed by you and the Company. We welcome you into our organization and trust your association with us will be mutually beneficial.

Your signature below in the space provided hereunder will denote your acceptance of the foregoing terms. Very truly yours, ____ I hereby acknowledge receipt of the original of this

letter-agreement and agree to all the terms stated therein. ______ Signature ______ Date

47

APPENDIX B REGULAR EMPLOYMENT AGREEMENT (Date) M

Dear M

: We are pleased to advise you that you have successfully completed

your probationary period of employment with the Company and that effective ____________, your name will be transferred to the payroll for regular employees. Your period of probation shall be included in the computation of service required for entitlement to benefits accorded to a regular employee. Your present classification and grade are and you shall receive compensation of ___________ PESOS (P___________), payable on the 15th and the last day of the calendar month. Your salary already includes compensation for unworked legal holidays and any mandatory allowance under existing laws. Your employment is subject to the following terms and conditions: 1. You agree to abide by all Company rules and

regulations which it shall be your duty to study and know immediately upon hiring and to refrain, during your employment with the Company

48

and within one year after the termination of your employment, from engaging in any activity which is prejudicial to the interests of the Company or which will interfere with the performance of your job, whether within or outside Company hours, without the prior written consent of the Company. You agree to give immediate notice to the Company of any possible conflict of interest which you may have. 2. You agree to abide by the established working

hours of the Company for the position you are hired. You shall not perform any overtime work on any weekday, Sundays or legal holidays, unless specifically directed by duly designated officers of the Company. 3. Any and all expenses you may incur in the execu-

tion of the duties of your position shall be reimbursed to you, provided that such expenses have been duly authorized by the Company. 4. You agree that all records and documents of the

company and all information pertaining to its business or affairs are confidential and that no unauthorized disclosure or reproduction of the same will be made by you at any time during or after your employment with us. 5. You agree that all Company records, documents

and properties in your custody or control shall be immediately surrendered to the Company, if requested during the employment period, and at the termination thereof, whether or not requested. You also agree that you shall be held solely responsible and accountable for every money that comes into your possession by reason of your position and exercise of your duties. Accordingly, you shall return any overage, and restore any

49

shortage, to the Company immediately upon your discovery thereof or when demanded by the Company. 6. You agree, during the entire period of your

employment, to be assigned to any work, workplace or branch of the Company for such periods as may be determined by the Company and whenever the operations thereof require such assignment. 7. In the event you are sent for special training,

whether in the country or abroad, relative to your position, you agree that the training expenses to be incurred by the Company are in the nature of an investment for the use of your services, for which reason you agree to serve the Company exclusively, after training, for not less than years. Pursuant to this understanding, you agree, should you leave the service of the Company before the end of the above period, to reimburse the Company, among other remedies available to it, a pro-rata portion of the training expenses incurred for your training corresponding to the unserved portion of the above period for which the Company has not realized an exclusive use of your services.] 8. It is expressly agreed and understood that there are no verbal agreements or understandings between you and the Company or any of its agents and representatives, affecting this agreement and that no alterations or variations of the terms hereof shall be binding upon either party to this agreement unless the same are reduced in writing and signed by you and the Company. We trust that your association with us will be mutually beneficial. Your signature below in the space provided for hereunder will denote your acceptance of the foregoing terms.

50

Very truly yours, ____ I acknowledge receipt of the original of this letter-agreement and agree to all the terms and conditions stated therein. _______ Signature _______ Date

51

APPENDIX C PROJECT EMPLOYMENT CONTRACT KNOW ALL MEN BY THESE PRESENTS: This Contract executed by and between: __________________________, a domestic corporation duly organized and existing under Philippine laws with address at ________________________________________________, referred to as the “Company”) - and – , ____________ postal address at (herein referred to as “PROJECT EMPLOYEE”). W I T N E S S E T H: WHEREAS, the Company has a project (the “Project”) that needs that services of qualified individuals for its successful completion; WHEREAS, the PROJECT EMPLOYEE has the qualifications and has offered his services and the Company has agreed to hire him for the project. NOW, THEREFORE, for and in consideration of the foregoing, the Company and PROJECT EMPLOYEE have agreed as follows: Filipino, of legal age, , (herein

52

1.

The

Company

is

hiring

the

PROJECT

EMPLOYEE as ________________, for Project to undertake the following work/services: a. b. 2. The term of the PROJECT EMPLOYEE’s

engagement shall start from ____________________ and shall automatically expire on ________________, unless sooner terminated in accordance with Section 6 hereof, or unless the Project or any particular phase of the Project to which the PROJECT EMPLOYEE is engaged is abandoned or deemed terminated; 3. The Company shall pay PROJECT EMPLOYEE

a gross monthly compensation inclusive of all allowances and holiday pay prescribed by law, payable every fifteenth day of each month, in the sum of _______________________________ (PhP______________), which compensation shall be subject to withholding tax as prescribed by law. It is hereby further agreed that UBP shall have the right to set-off, deduct or withhold from PROJECT EMPLOYEE’s compensation any unpaid obligations to UBP; 4. PROJECT EMPLOYEE’s other assignments

related to the Project shall come directly from the Division Head/Branch Head of ___________________ and PROJECT EMPLOYEE shall be under the supervision of said Division Head/Branch Head and/or his deputy or delegate;

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5.

It

is

hereby

understood

that

as

a

__________________, on a project hire basis, PROJECT EMPLOYEE is not considered a regular employee of the Company and, therefore, is not entitled to the benefits extended by the Company to its regular employees; 6. Notwithstanding the non-expiration of the

stipulated term of the PROJECT EMPLOYEE’s engagement under this Contract, the Company shall have the absolute right and discretion, at any time after due notice and without need for judicial action to terminate and cancel this Contract in any of the following cases: a. Inefficiency and/or failure of PROJECT

EMPLOYEE to perform the services or duties agreed to be performed by him under this Contract; b. Violation by PROJECT EMPLOYEE of any

terms, conditions or stipulations of this Contract, instructions, rules and regulations of the Company in connection with the Project; c. Irregularity, misconduct, incompetence or

negligence in the performance by PROJECT EMPLOYEE of his work pr services contracted herein; d. If through the fault or negligence of PROJECT

EMPLOYEE, the Company suffers losses or otherwise put to unnecessary expense on any work or service connected with the Project; or if not connected therewith, any work/service originated, negotiated, solicited, 54 managed, supervised or

participated in by PROJECT EMPLOYEE with consent of the Company; e. Loss of confidence or breach of trust reposed by

the Company to PROJECT EMPLOYEE; f. If the Company has determined that it is no

longer to its best interest to retain PROJECT EMPLOYEE’s services under this Contract; or g. Any of the just and/or authorized causes

provided by law. 7. PROJECT EMPLOYEE is prohibited to divulge

or use in any manner prejudicial to the interest of the Company without its written consent any information and data obtained by PROJECT EMPLOYEE in the course of his engagement by the Company; 8. There are no oral or written agreement between

the Company and PROJECT EMPLOYEE covering the PROJECT EMPLOYEE’s engagement other than those specified herein. IN WITNESS WHEREOF, the parties have hereunto affixed their signatures this ______ day of ________________ in Makati City.

By:

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________ (Duly authorized for the purpose)

___________ (Project Employee)

SIGNED IN THE PRESENCE OF

______________________

_____________________

56

ACKNOWLEDGMENT

REPUBLIC OF THE PHILIPPINES ) MAKATI CITY ) ss.

BEFORE ME, a Notary Public for and in the City of Makati personally appeared: Community Tax Certificate No.

Name

Date/Place Issued

known to me and to me known to be the same person who executed the foregoing document and acknowledged to me that the same is their free and voluntary act and deed and that of the corporation herein represented.

Doc. No. Page No. Book No. Series of 2006. APPENDIX D

57

INDEPENDENT CONTRACTOR A G R E E M E N T

KNOW ALL MEN BY THESE PRESENTS:

This Agreement, made and entered into by and between:

, address at represented herein by its and hereinafter referred to as the “COMPANY” - and –

a

corporation ,

duly

organized and existing under the laws of the Philippines, with business , Mr./Ms. ___________

__________________________, INC., a corporation organized in accordance with law with business address at , represented herein by its and “CONTRACTOR”. hereinafter referred to , Mr./Ms. as the

W I T N E S S E T H:

WHEREAS, the Company desires to engage the services of a qualified and competent licensed independent contractor who will

58

provide the services and undertake all the works specified in Section 1 of this Agreement or those that may be required from time to time by its operations; WHEREAS, the CONTRACTOR has represented itself as able and qualified to undertake the aforesaid services in a satisfactory manner suitable for the purpose of the COMPANY; WHEREAS, the CONTRACTOR warrants that it has an independent business and that it has adequate capital and personnel to perform the services and works contracted for. NOW, THEREFORE, for and in consideration of the foregoing premises and of the mutual covenants hereinafter set forth, the parties hereto have agreed as follows: I. SCOPE OF SERVICES – The CONTRACTOR agrees to provide the COMPANY, upon its request, with the following services:

II.

MANNER OF PERFORMANCE – The CONTRACTOR shall execute and perform the services

contracted for and perform other related work in such a manner that they shall have the qualities desired by the COMPANY. III. CONTRACTOR’S RESPONSIBILITIES –

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A.

The

CONTRACTOR

shall

secure

all

necessary

government permits, licenses and clearances necessary for the performance of the services stated and specified in Section 1 of this Agreement and hereby assumes full responsibility for complying with all the laws, ordinances and regulations applicable to the said contracted work. The CONTRACTOR agrees to be solely responsible for renewing all such permits, licenses, and clearances and for securing additional permits, licenses and clearances which may hereinafter be required by law, rule or regulation. B. The CONTRACTOR hereby assumes full responsibility

for, and shall held the COMPANY free and harmless from any and all claims arising out of or in connection with any injury or damage that may be sustained by any person or property in connection with the performance of the services contracted for under this Agreement.

IV.

LABOR – A. The CONTRACTOR shall have the right to hire such

employees as it may deem necessary and convenient for the performance of the services and shall have sole control over the terms and conditions of the employment of such employees. The CONTRACTOR shall comply with all laws, rules and regulations pertaining to labor and employment with respect to the persons hired by it to carry out its undertaking under this Agreement.

60

B.

The CONTRACTOR shall have the sole right to

discipline, suspend or dismiss and of its employees but the COMPANY may report to it any untoward act or omission committed by any of them. The CONTRACTOR further agrees to pay the wages of its employees it being expressly understood that they are its employees and not those of the COMPANY. For this purpose, the CONTRACTOR agrees to post a bond equal to the cost of labor to answer for any and all wages which may be due to its employees should it fail to pay the same. C. The employer’s contribution to the Social Security System

and those mandated by law of an employer shall be the sole responsibility of the CONTRACTOR to its employees. The CONTRACTOR agrees to hold the COMPANY free and harmless from any from any and all claims arising from any injury sustained by any such worker in connection with the work done in the premises of the COMPANY. D. Should any such employee or other person or entity sue

the COMPANY on the theory that the COMPANY is the employer of such employee, the CONTRACTOR shall assist the COMPANY in defending this Agreement as one which establishes between the COMPANY and the CONTRACTOR the relation of owner and independent contractor and the CONTRACTOR shall hold the COMPANY free and harmless against any judgment which may be rendered against the COMPANY. E. The CONTRACTOR agrees to submit himself, his The

representatives and all workers under him to the rules and regulations pertaining to the security and safety of the COMPANY. CONTRACTOR assumes responsibility for the conduct of its workers

61

while inside the COMPANY’s premises and shall issue appropriate rules and regulations not inconsistent with pertinent COMPANY rules and regulations. V. MATERIALS AND/OR EQUIPMENT – The CONTRACTOR shall furnish all the materials and equipment, tools and supplies necessary to complete the contracted services stated and specified under Section 1 of this Agreement. The risk of loss and/or damage to any of the works and any and all parts of materials for the same, as well as for other related work shall be borne by the CONTRACTOR. VI. FEES – The COMPANY shall pay the CONTRACTOR for the works specified in this Agreement such amount or amounts as the parties shall agree on the basis of specified job orders. The CONTRACTOR shall be represented by a general supervisor at every eight-hour shift. It is agreed and understood that payment of the contract price shall be made on the condition that the CONTRACTOR has paid his employees who had been assigned to the aforesaid premises all of their salaries, wages, and other benefits due them up to and including the date of payment of the contract price by the COMPANY to the CONTRACTOR. It is understood that no portion of the aforementioned fee or price is or will be earmarked as salaries or wages of any employee utilized by the CONTRACTOR under this Agreement, and that the said fee or price and all parts thereof shall

62

pertain exclusively to the CONTRACTOR.

Neither may the

CONTRACTOR request the COMPANY to pay directly to any of the CONTRACTOR’s employee any amount owing them by the CONTRACTOR as salaries, wages or for any cause or matter whatsoever.

VII.

ASSIGNABILITY OF RIGHTS – The CONTRACTOR may assign any of his rights or

undertakings under this Agreement with the prior written consent of the COMPANY. VIII. COMPLETION OF WORK – The CONTRACTOR hereby undertakes to commence the services contracted for as stated and specified under Section 1 of this Agreement upon signing of the specified job order and shall continue from day to day, including Sundays and holidays (with the approval of the COMPANY) until it is completed. IX. ACCESS TO WORK PREMISES – A. The COMPANY shall allow the CONTRACTOR free

access to the work premises during regular hours of work of the COMPANY, and thereafter or on holidays, upon specific request from time to time by the CONTRACTOR.

63

B.

The COMPANY shall allow the CONTRACTOR the use

of existing electrical, water, and necessary facilities of the COMPANY, conformably with the requirements of the COMPANY’s operations. X. TERMINATION OF AGREEMENT This Agreement may be terminated as follows: A. B. By written agreement of the parties. By the COMPANY, in case of failure for any reason on

the part of the CONTRACTOR to discharge competently and faithfully its obligations under this Agreement; and C. By either party, in case of violation by the other party of

any of the terms of this Agreement subject to the payment by the COMPANY of the stipulated compensation based on work actually performed. IN WITNESS WHEREOF, the parties hereunto have signed this Agreement on this ______ day of _______________, 2000, at _____________________. INC. By: By: ________________________

64

SIGNED IN THE PRESENCE OF: _____________________ ____________________

ACKNOWLEDGMENT

REPUBLIC OF THE PHILIPPINES) MAKATI CITY ) SS.

BEFORE

ME,

a

Notary

Public

in

and

for

the

___________________, Philippines, personally appeared – Community Tax Certificate No.

Name

Date/Place Issued

both known to me and to me known to be the same persons who executed the foregoing document and they acknowledged to me that the same are their free and voluntary act and deed. of the above-named corporation which they represent. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my notarial seal this _____ day of __________________, 2000 at ________________, Philippines. Doc. No. Page No. ; ; They further acknowledged to me that the same is the free and voluntary act and deed

65

Book No. Series of 2006.

;

APPENDIX E

DEED OF RELEASE AND QUITCLAIM KNOW ALL MEN BY THESE PRESENTS: That I, _____________________, Filipino, lf legal age, a resident of _________________________________, Metro Manila and formerly employed by __________________________________ (the “Company”) do by these presents acknowledge receipt of the sum of __________________________ (P____) as full payment for all wages/salaries/bonuses and other benefits due me arising out of or in connection with my employment and the cessation of that employment with said Company. In consideration of my receipt of the above sum: 1. I hereby confirm the cessation of my employment with

the Company effective _______________. 2. I acknowledge the value of the opportunity afforded me

to be of service to the Company. 3. I acknowledge that I have received all amounts that are I also

now or in the future may be due me from the Company.

66

acknowledge that I am physically fit for work and, therefore, am not suffering from any disability. 4. I will not at any time, in any manner whatsoever, directly or indirectly engage in any activity prejudicial to the interest of the Company and its manager, or employees and will not disclose any information concerning the business of the Company, its manner of operation, its plans, processes or data of any kind. 5. I acknowledge that I have no cause of action, complaint,

case or grievance whatsoever against the Company and managers or employees in respect of any matter incident to or arising out of my previous employment or the cessation of my employment. I further warrant that I will institute no action against the company, its managers or employees and will not continue to prosecute any pending action which I may have filed or which may have been filed on my behalf. I also manifest that the acceptance by the Company of my resignation shall not be taken by me, my heirs or assigns as a confession or an admission of liability on the part of the Company, its managers or employees for any matter, cause, demand or claim for damages which I may have against any or all of them. 6. I finally declare that I have read this entire document and

the entire release, waiver and quitclaim hereby given are made by me willingly and voluntarily and with full knowledge or my rights under the law. IN WITNESS WHEREOF, I have hereunto set my hand at Makati City, Philippines, this ___ day of ____________2006. _____________________________ REPUBLIC OF THE PHILIPPINES) MAKATI CITY 67 ) S.S.

SUBSCRIBED AND SWORN to before me this ___ day of _______________, 200__ at Makati City, Philippines, affiant having exhibited to me his/her Community Tax Certificate No. ____________________ issued on __________________, 200__ at __________________.

Doc No.__________; Page No.__________; Book No._________; Series of 2006.

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APPENDIX F

SAMPLE CBA PROVISIONS ARTICLE XV LABOR MANAGEMENT RELATIONS COMMITTEE Section 1. Creation and Composition - The COMPANY and the UNION agree to create a Labor-Management Relations Committee, apart from the Grievance Committee to take up matters of mutual interests which fall outside the jurisdiction of the Grievance machinery. This Committee shall be made up of three (3) UNION representatives namely the President, Vice President and Secretary General and three (3) COMPANY representatives namely the Personnel Officer-in-Charge, a department head and the Vice President or his representative. Section 2. Aims and Functions - The Committee shall be purely advisory in nature without extra COMPANY remuneration to the members for the fulfillment of its duties. Its express aims shall be: (a) To provide a means for joint discussion of those matters not covered by the grievance machinery as may arise from time to time; (b) To provide a direct channel of communications for morale purposes between employees and the COMPANY; (c) To provide a means for constructive cooperation in increasing the level of efficiency and morale of COMPANY employees.

69

ARTICLE XVI GRIEVANCE AND ARBITRATION PROCEDURE Section 1. Objectives - The parties hereto agree on the principle that all disputes between labor and management may be settled through friendly negotiations; that the parties have the same interest in the continuity of work until all points in a dispute shall have been discussed and settled; that an open conflict in any form involves losses to the parties, and that, therefore, every effort shall be exerted to avoid such an open conflict. In furtherance of the foregoing principle, the parties hereto have agreed to establish a procedure for the adjustment of grievances so as to (1) provide an opportunity for discussion of any complaint and (2) establish procedure for the processing and settlement of grievances. Section 2. Grievance Definition - A grievance is any controversy between the COMPANY and a worker or workers about the interpretation or application of this agreement or any matter directly affecting the worker as to hours of work, wages or working conditions.

Section 3. Grievance and Voluntary Arbitration. STEP 1 - Before resorting to the grievance procedure herein provided, any employee or employees who believe they have cause for complaint or grievances should see first their respective Supervisors and their Shop Stewards for advice. The Supervisors and Shop Steward may confer with each other to determine whether or not there is a valid ground for submitting the grievance to the COMPANY. Immediately thereafter the employee's supervisor and unit shop steward shall resolve

70

and/or settle amicably the issue and render a decision thereon. Grievances not resolved by the supervisor and shop stewards among themselves may be brought to the next step provided herein within five days after submission of the grievance. STEP 2 - Department Head's Level - If the Chief Steward believes there is a valid ground for submitting the grievance, the same should be submitted to the Department Head. If the Grievance involves disciplinary action or matters affecting specific individuals only, the grievance must be submitted within five (5) working days after the cause of the grievance occurred, otherwise the same shall be forever barred. The Department Head shall have five (5) working days from his receipt of the grievance to investigate the matter, call the Chief Steward, employee concerned, witnesses if any, to try and work out an amicable solution. If this fails, the Department Head shall render his decision. If the decision is not satisfactory, the Chief Steward shall have five (5) working days within which to appeal to the next step. Decision not appealed within this period shall be deemed settled on the basis of the Department Head’s decision. STEP 3 - Grievance Committee - The appeal from Step 2 shall be made with the Grievance Committee to be composed of the following: From Management: (a) Officer-in-Charge of the Personnel Office who will act as Chairman (b) Department Head concerned

71

(c) Supervisor, if any (d) Legal Counsel, at the option of the COMPANY From Labor: (a) President of the UNION (b) Chief Steward (c) Employee/s concerned (d) Legal Counsel, at the option of the UNION The Committee shall have five (5) working days to settle the grievance which includes investigation and calling of employees concerned, witnesses, etc., and to try an amicable settlement or render their decisions. If the decision is not satisfactory, the next step shall be utilized. STEP 4 - Committee on Arbitration - As each case arises, the COMPANY and the UNION agree to prepare and submit a list of four (4) arbitrators each selected from the official list of arbitrators of the recognized arbitration associations in the Philippines, from which list totaling eight (8) arbitrators, the COMPANY member and the UNION member shall select two (2) arbitrators by the processes of canceling a name in each list. The remaining shall be appointed as arbitrator and accepted by both the COMPANY and the UNION. The decision or award of the Committee on Arbitration shall be final and binding in accordance with law. Should either party not accept and abide by the procedure set forth in this Article or the decisions resulting therefrom,

72

the party violating the terms in this Article shall be denied benefits of this Agreement. The Arbitrator shall have no power to add to, subtract from, alter, modify, amend or disregard any provisions of this Agreement, nor shall he substitute his discretion for that of the COMPANY or by the UNION where such discretion has been retained by the COMPANY or by the UNION, nor shall he exercise any responsibility or function of the COMPANY or of the UNION. The cost of arbitration shall be borne in equal shares by the COMPANY and the UNION.

ARTICLE XVII RESPONSIBILITIES OF THE PARTIES AND INDUSTRIAL PEACE Section 1. Cooperation - The UNION agrees to cooperate with the COMPANY in an effort to combat inefficiency, improve COMPANY's delivery of patient care services and equipment, and attain the highest level of employee performance. Section 2. Productivity - It is the intent of the parties to improve and sustain maximum productivity per employee during the period and duration of this Agreement. The UNION re-emphasizes its agreement with the objectives of achieving the highest level of employee performance and efficiency consistent with safety, good health and sustained efforts, and agrees that the UNION, its agents, and its members will not take, authorize, or condone any action, which may interfere with the attainment of these objectives.

73

Section 3. No Strike, No Lock Out -. Each of the parties hereto acknowledges the rights and responsibilities of the other party and agrees to discharge its responsibilities under this Agreement. The UNION, its officers and representatives of all levels, and all employees are bound to observe the provisions of this Agreement. In addition to the responsibilities that may be provided for elsewhere in this Agreement, the following shall be observed: (a) The UNION, its officers, and members agree that for the duration of this Agreement there shall be no strikes, walk-outs, sitdowns, slow-downs, stoppages-of-work, boycotts, secondary boycotts, sympathetic or general strikes, picketing or any acts of similar nature, however peaceful, which would interfere with the normal operations and work schedules of the COMPANY, and that it will not otherwise permit, countenance or suffer the existence or continuance of any kind of these acts, but shall strictly settle all issues between the parties through the grievance procedures set forth in Article XVI. Failure or refusal on the part of any employee to fully observe and obey the provisions hereof shall be sufficient cause for dismissal with cause. (b) The COMPANY agrees that there shall be no lockout so long as the Agreement is in effect and the grievance procedure for which provisions is made herein is followed by the UNION. However, the following shall not be considered as lock-out: (i) Any suspension of operations by COMPANY due to lack of work.

74

(ii) Any suspension of operations by the HOSPTIAL when it is beset with financial problems. (iii) Any suspension of operations by the COMPANY due to interruption caused by lack of supply of electricity and/or water and/or fuel or other force majeure which are beyond the control of the COMPANY. (iv) Any suspension of operations due to any other cause beyond the control of the COMPANY. (c) The UNION agrees that neither it nor any of its officers or members will engage in any union activities while such employees are on COMPANY time and premises. (d) The UNION agrees that under no condition and in no event whatsoever will the employees covered by this Agreement cease or abstain from the continuous performance of the duties pertaining to the positions held by them within the COMPANY. The COMPANY agrees on its part to do nothing to prevent such continuity of performance on the part of such employees insofar as such performance is required in the normal and usual operation of the COMPANY's business. The COMPANY, the UNION and the employees agree to fully comply with Article XVI hereof. (e) The UNION and its members recognize the need for running the COMPANY efficiently and continuously and agree to work with the COMPANY to promote such efficient and continuous operation and the welfare of the business.

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Section 4. Additional Responsibilities - The UNION agrees that it will not officially publish or circulate any false, prejudicial, or misleading remarks about the COMPANY, its operations, its officers or other management personnel.

ARTICLE XVIII COMPLETE SETTLEMENT Section 1. Settlement in General - All the terms and conditions of employment of employees and workers within the appropriate bargaining unit are embodied in this Agreement and in the written rules and regulations now in effect and to be effected in the COMPANY (except as specifically modified in this Agreement) and the same shall govern the relationship between the COMPANY and such employees or workers. On the other hand, all such benefits and/or privileges which are now being accorded, may in the future be accorded or might have previously been accorded to the employee shall be deemed to be voluntary acts on the part of the COMPANY. Since this Agreement was concluded after full negotiations by the parties conducted in a spirit of mutual accommodation, the benefits and other terms of this Agreement constitute a complete settlement of all demands and claims of the UNION and/or its members or any other employees within the bargaining unit, it being understood that the wages, benefits, privileges and improved terms of employment under this Agreement as well as the wage increases granted by the COMPANY in compliance with applicable laws in favor of those entitled thereto, as total package, constitute the full and valuable consideration for the release and discharge of any such demands or claims.

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The parties shall continue to be bound by their full and complete settlement of the issue concerning R.A. No. 5901, the terms of which as embodied in the parties' earlier collective bargaining agreements shall be deemed reproduced and incorporated herein. Section 2. Waiver - The parties acknowledge that during the negotiations which resulted in this Agreement, they had freely and voluntarily exercised full and unimpeded collective bargaining over all terms and conditions of employment, each having had the unlimited right and opportunity to make demands and proposals with respect to any subject or matter not covered by law and within the area of collective bargaining, and that the understandings and agreements arrived at by the parties after the exercise of that right and opportunity are set forth in this Agreement. Therefore, the COMPANY and the UNION, for the life of this Agreement, each voluntarily and unqualifiedly waives the right and each agrees that the other shall not be obliged to bargain collectively with respect to any subject or matter referred or covered in this Agreement or with respect to any subject or matter not specifically referred to or covered in this Agreement, even though such subject or matter may not have been within the knowledge and contemplation of either or both the parties at the time they negotiated or signed this Agreement.

ARTICLE XX SEPARABILITY Section 1. Within Agreement - Each Article in this Agreement is separate and independent from the others and is not to be construed or interpreted as having any restrictive or expansive effect upon the meanings, intention, interpretation, or execution of any other article of

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the Agreement either implicitly or explicitly, unless it so specifically provides. Section 2. Conflict with law - In the event any provision of this Agreement shall be declared invalid under any present or future law, the provisions of such law shall prevail without affecting the other provisions of this Agreement.

ARTICLE XXI DURATION AND RENEWAL OF AGREEMENT Section 1. Duration of Agreement. This Agreement shall remain in full force and effect for a period of five (5) years commencing on March 1, 2002 to February 28, 2007 with respect to the representation issue only, and for a period of two (2) years commencing on March 1, 2005 up to and until February 28, 2007, with respect to the economic and non-economic provisions of this Collective Bargaining Agreement, automatically renewed for another term should either party fail to notify in writing the other of its intention to amend or terminate the same at least sixty (60) days prior to its expiry date and hereby covenant to observe in full force and effect the provisions hereof during the negotiations for a new agreement and until such agreement is finally entered into. If either party gives notice, the parties shall meet not later than thirty (30) days before the expiration date of this Agreement and submit provisions and such submission must embody statements of any such changes or amendments desired. All provisions not specifically mentioned shall continue in effect until abrogated or amended. Section 2. Period of Notice - The party receiving notice of termination of any part of this Agreement shall have ten (10) days from 78

receipt of the notice in which to notify the other party by registered mail of the termination of any provision of this Agreement which has not been terminated by the party which sent the first notice. If the notice sent in accordance with the two paragraphs immediately preceding affect a portion or portions of this Agreement, the portions not affected shall remain in force during the renewal period. Section 3. Obligation to Bargain - Ten (10) days after the receipt of the first notice of termination, the parties shall meet for the purpose of bargaining with respect to the provisions of this Agreement, or part thereof, which have been terminated by either party as provided in Sections 1 and 2 of this Article.

ARTICLE XXII NATURE AND EFFECT OF AGREEMENT Section 1. Nature - The provisions of this Agreement establish the terms and conditions of employment of employees included in the bargaining unit hereinbefore defined. Employee conduct and disciplinary actions are covered by this Agreement. Section 2. Effect - Unless expressly revised in this Agreement, all provisions of prior collective bargaining agreements, memoranda of agreements or any interpretations made through voluntary arbitration or otherwise are deemed superseded and/or repealed. It is understood by the parties as well as their principals that the non-incorporation in this Agreement of any benefits, grant or privilege granted to employees within the bargaining unit under prior agreements 79

was the result of full bargaining, and therefore, shall not give rise to any further liability against the COMPANY. IN WITNESS WHEREOF, the parties hereto have caused these presents to be signed by their respective representatives at ____________, Metropolitan Manila, Philippines on ____________.

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