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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.
A
TABLE OF CONTENTS

Page

How To Use This Manual …...……………...….…….…….…..… 1

I. Dilemma 1: Maternal/Fetal Interdependence;


Who are Persons? ………………………………………….. 3

II. Dilemma 2 & 3 : Contract for Support and Custody,


and Simulated Birth Certificate …………………………. 5

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” - Medical Certificate ……….…………….…… 27

Appendix “B” - 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

10
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 client-
attorney 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

12
“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

13
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

14
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

15
tendency to bring the profession, of which he is a
distinguished member, "into public disrepute and
suspicion and undermine the integrity of justice."

16
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.

17
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. Code of Professional Responsibility,
Canons 21, 21.01, 21.02
ii. Rules of Court, Rules 138, section 20 (e)
iii. 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. Civil Code, Articles 390-391
ii. Family Code, Article 41
iii. 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….

18
“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

19
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 of Professional
Responsibility, Canons 1, 1.01,
1.02
ii. On the insinuation about influence on the
family court judge
1) Code of Professional
Responsibility, Canons 15.06,
15.07

20
21
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

22
"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 whole-
hearted 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.

23
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. Code of Professional Responsibility,
Canon 20.01
ii. Rules of Court, Rule 138, Section 24
iii. 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: Wendy G. Soriano


Age: 30 years
Sex: 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

27
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.

28
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)__________ _______(signed)___________

Manuel V. Soriano Cora Z. David

Signed in the presence of:

______(signed)__________ _______(signed)___________

Georgina H. Garcia 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:

29
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

30
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________________ (a) Civil Registrar-General No. ______________________
City or Municipality: ____Makati City____________________________ (b) Local Civil Registrar No. ________________________
1. Place of Birth 2. Usual Residence of Mother (where does mother live?)
a. Province National Capital Region a. Province National Capital Region
b. City or Municipality b. City or Municipality
Makati City Quezon City
c. Name of Hospital or Institution (If not in hospital, give street address) c. Number and Street
St. Luke’s Medical Center #14 Maginhawa Street, Teachers Village, Diliman
d. Is place of Birth inside City Limits? d. Is residence inside city limits? e. Is residence on a farm?

YES O NO O YES O NO O YES O NO O


3. Name (Type or Print) First Middle Last
CHILD

Benjamin Gomez Soriano


4. Sex 5a. This Birth 5b. If Twin or Triplet, was child 6. Date of Birth
Male Single O Twin O Triplet O 1st O 2nd O 3rd O Month Oct Day 10 Year 1997
7. Name First Middle Last Religion 8. Nationality 8a. Race
MOTHER FATHER

Manuel Viejo Soriano Roman Catholic Filipino


9. Age (at time of this birth) 10. Birthplace 11a. Usual Occupation 11b. Kind of Business or Industry
Years 32 Candoni, Negros Occidental Employee

12. Maiden Name First Middle Last Religion 13. Nationality 13a. Race
Wendy Chua Gomez Roman Catholic Filipino
14. Age (at time of this birth) 15. Birthplace 16. Previous deliveries to mother (do not include this birth)
31 Quezon City 0
17a. Informant’s Signature: a. How many children are b. How many other children c. How many fetal deaths
b. Name in Print: now living? were born alive but are now (fetuses born dead any time
c. Address 0 dead? after conception)?
0 0
18. Mother’s Mailing Address: (number, street, city, or municipality, province)
#14 Maginhawa Street, Teachers Village, Diliman, Quezon City
19. 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 d. Date signed by Attendant at Birth:
date above indicated. ___________________________
a. Signature: e. Title of Attendant at Birth
b. Name in Print: O M. D. O Midwife
c. Address: O Nurse O Others (specify)
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:
22a. Length of Pregnancy 22b. Weight at Birth 23. Legitimate
_______36____ Complete weeks ____7__Lbs. ___2______Oz. YES O NO O
24. Date and Place of Marriage of Parents (for legitimate birth) 25. This Certificate is prepared by:
__May 2, 1992_____________ Signature:
Month Day Year Name in Print:
Title or Position:
City or Municipality __Quezon City__ Province _National Capital Region Date:

31
APPENDIX “D”

Print – Close Window

Date: Wed, 12 May 1997 15:58:09 GMT +8:00


From: “Manuel V. Soriano” manuelvsoriano@yahoo.com
To: “Louis Alcala” louisalcala@yahoo.com
Subject: RE: Adoption of our baby

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

32
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

33
APPENDIX “F”

BAGS AND HANDICRAFTS COMPANY


Eastwood City, Libis, Quezon City
Tel No. (632) 927-3847

MEMORANDUM

TO: ALL EMPLOYEES


FROM: Human Resource, ADMINISTRATION
RE: Authorized Agents in Asia
DATE: January 17, 2003

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

34
APPENDIX “G”

Print – Close Window

Date: Fri, 28 February 2003 09:26:11 GMT +8:00


From: “Cristina Valencia” cristina_valencia@yahoo.com
To: “Wendy Soriano” wendysoriano@yahoo.com
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

35
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;

II. I give P500, 000 to Cora Z. David, for the happiness and
help that she brought to me and my wife.

III. 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;

IV. 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;

36
V. I hereby direct that the executor named herein or his
lawful substitute should serve without bond;
VI. 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

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

EDWIN T. LAZARO 99 Matahimik Street, Teachers


Village, Diliman, Quezon City

FRANCISO N. DOBLE 58 Sikatuna Village, Diliman,


Quezon City

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;

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

39
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)

42
B
TABLE OF CONTENTS

Page

HOW TO USE THIS MODULE ………………………………. 1


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

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

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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 …….. 31
Hypothetical : Draft M/R for Respondent ………….. 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: No, thank you, I’ve already had lunch.
NATALYIA: 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: Yes, mine
NATALYIA: Well, what next! The Volovyi meadows are ours, not
yours!
LOMOV: No, they’re mine, dear Natalyia Stepanovna.
NATALYIA: That’s news to me. How do they come to be yours?
LOMOV: What do you mean, how? I’m speaking of the Volovyi
meadows that lie like a wedge between your birch wood and the Burnt
Swamp.
NATALYIA: But yes, of course They’re ours.
LOMOV: No, you’re mistaken, my dear Natalyia Stepanovna, they
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

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.

8
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: What's that?
NATALYIA: My men will be working there today!
LOMOV: I’ll kick them out!
NATALYIA: You daren’t do that!
LOMOV: [clutches at his heart] The Volovyi meadows are mine! Don't
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!

9
NATALYIA: Ours!
LOMOV: Mine!
[Enter CHOOBUKOV]
CHOOBUKOV: What’s all this? What are you shouting about?
NATALYIA: Papa, please explain to this gentleman: to whom
do the Volovyi meadows belong - to him or to us?
CHOOBUKOV: [to LOMOV] The meadows are ours, dear chap.
LOMOV: 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: But I’ll prove to you that they’re mine!
CHOOBUKOV: You won’t prove it, my dear man.
LOMOV: Yes, I will!
CHOOBUKOV: But why shout, my dear boy? You won’t prove
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?

10
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: What’s that? What did you say?
NATALYIA: Papa, send the men to mow the meadows at once!
CHOOBUKOV: [to LOMOV] What was it you said, sir?
NATALYIA: The Volovyi meadows are ours, and I won’t give them
up! I won’t, I won’t!
LOMOV: We shall see about that! I’ll prove to you in court that
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: Every member of the Lomov family has been
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...

11
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: Your father was a gambler and a glutton!
NATALYIA: Your aunt was a scandal-monger - and a rare one at that!
LOMOV: 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: And you’re just a malicious, double-faced, mean
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: [calling after him] I forbid you to set foot in my
house again!
NATALYIA: Take it to court! We shall see!
[LOMOV goes out staggering]
CHOOBUKOV: The devil take him! [Walks about in agitation.]
NATALYIA: Have you ever seen such a cad? Trust good neighbors
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.

12
NATALYIA: : To propose? To me? But why didn’t you tell me
that before?
CHOOBUKOV: That’s why he got himself up in his tail-coat. The
sausage! The shrimp!
NATALYIA: To me? A proposal? Oh! [Drops into a chair and moans.]
Bring him back! Bring him back! Oh, bring him back!
CHOOBUKOV: Bring whom back?
NATALYIA: Be quick, be quick! I feel faint! Bring him back! [Shrieks
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: Phew! Directly. Don’t howl. [Runs out]
NATALYIA: [alone, moans] What have we done! Bring him back! Bring
him back!

13
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)

14
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

15
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

16
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.

17
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-of-
court settlement, as she believes this will enable her to quickly get the
money she feels is due her.

18
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.

20
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 Philja-

- Second Revised Guidelines for the Implementation of


Mediation Proceedings (Sept. 5, 2001)

- Code of Ethical Standards for Mediators

22
- 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

23
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.

28
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.

29
VII. CASE STUDY IN MEDIATION

1. Hypothetical III: Draft Complaint and Answer


2. Hypothetical: Draft M/R for Respondent

30
C
TABLE OF CONTENTS

Page

Preface

How to Use this Manual …………….………………………. 1

Part I – Ethical Infrastructure: Conflict of Interest ……….… 4


Conflict Screening Committee ……………………….. 5
Suggested exercise …………………………………… 6
Suggested reading ……………………………….…… 6
Conflict Avoidance/Resolution Clauses
in a Retainer Agreement …………………………………… 6
Suggested exercise …………….……………………… 9
Suggested reading ………………….…………………. 9
Other Conflict Avoidance/Resolution Mechanisms ………….. 9
(a) Non-exclusivity: Chinese Walls …………………… 10
Suggested exercise ……………………………..……… 10
(b) Defensive Retainer ………………….…………… 11
Suggested exercise …………………………………….. 12
(c) Compartmentalized Retainer ………………………. 12
Suggested exercise ………………………..…………… 13
Built-in Statutory or Regulatory Conflict-Resolution
Measures …………………………………………………… 14
Suggested exercise ……… …………………………… 18
Suggested reading ………..……………………………. 20

1
Part II – Within the Legal Framework ………………………….. 21
Notarial Practice ……………………………………….. 22
Suggested exercise ………………………………. 25
Suggested reading …………………………….…. 25
Paper Minutes ………………………………………… 26
Suggested exercise ………………………………. 30
Suggested reading ……………………………….. 30
Rules Penal in Character ……………………………….. 31
Suggested exercise ………………………………. 33
Suggested reading ……………………………….. 33
Opinion Committee …………………………………….. 33
Suggested exercise …………………………………. 34
Suggested reading ………………………………….. 34
Code of Corporate Governance ………………………… 34
Suggested exercise ………………………………… 35
Suggested reading ………………………………. 35
Zealous Legal Representation …………………………… 35
Suggested exercise ………………………………… 36
Suggested reading …………………………………. 36
Appendix A – Form of Retainer Agreement …………………….. 37
Appendix B – Form of Paper Minutes …………………………… 43
Appendix C – Form of Secretary’s Certificate …………………… 44
(Re Board Action Recorded in Paper Minutes)

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

3
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.

4
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.

5
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 duty-
bound 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

6
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. Accordingly, careful
consideration should be given to them.

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

7
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. 691-
716.

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

8
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 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.

9
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: The students should be instructed to


comment on the foregoing illustrative clauses and suggest additional or
alternative clauses.

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.

10
(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:

11
i. the flow of information between the different parts
of its organization which perform each function; and

ii. any conflict of interest which may result.

B. For purposes of this rule, information means matter:

i. of a specific nature which has not been made


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.

(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

12
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,

13
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:

SEC. 32. Dealings of directors, trustees or


officers with the corporation. – A contract of the
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;

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.

14
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 pre-
existing 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

16
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.

17
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 “short-


swing 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.

19
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. There are gray areas within the legal
framework, not to mention that, at times, situations may not neatly fit
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

20
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.

21
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.

22
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).

23
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:

SEC. When board meeting is


101.
unnecessary or improperly held. – Unless the by-laws
provide otherwise, any action by, the directors of a close corporation
without a meeting shall nevertheless be deemed valid if:

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

24
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. The Court
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
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;”

26
(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, 562-
563 (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: The students should be asked for


suggestions on how to improve further the oversight function of an
opinion committee.

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. 691-
716.

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: Code of Corporate Governance (SEC


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

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.

33
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. Retainer fee. Our firm will serve as retained counsel to


the Company at a monthly retainer of Twenty-five Thousand Pesos
(P25,000.00).

2. Date of effectivity. This agreement becomes effective


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 appli-


cations 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-by-
case 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 Corporate Secretary

APPROVED:
__________________________ _________________________
Director Director
__________________________ _________________________
Director Director
APPENDIX C

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 …...……………...….…….…….….… 1

Statement of Factual Situation …………………………………... 3

Assignment I ………………………………………….……….… 5

1. Research the Issues Confronting Lawyers


in Accepting Cases …………………..…….……. 5

2. Prepare to Discuss How to Handle the


Trial of the Case Against Client …………….….. 5

3. Reading Materials ……………………..…………. 6

Assignment II ………………………………………………….. 7

1. Meet with Mr. Ruben Santos, the President


and Principal Stockholder of MGC,
Regarding he Defense(s) of MGC ……………….. 7

2. Think About How You Will Handle the


Trial ……………………………………………….. 7

3. Reading Materials …………….….….…….…….… 7

1
Assignment III ……………………………………………….…. 9

1. Think About the Nature of the Adversary


System and The Ethical Problems Arising
From the So-Called Lawyer’s Trilemma ………... 9

2. Reading Materials ……………….....…..……….. 9

3. Write A Paper On the Lawyer’s Trilemma


and the Three Hardest Ethical Issues
Delineated by Professor Freedman .................... 11

Appendix “A” - Retainer Agreement ……………………….. 12

Appendix “B” - 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 so-
called 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. Statutes – Article 2176, Civil Code of the Philippines

b. 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) Agpalo, Ruben E., Legal Ethics, pp. 61-62

(2) ABA Model Code of Professional Responsibility,


Canon 2, DR 2-109, Acceptance of Employment,
DR 7-102

(3) ABA Model Rules of Professional Conduct, Rule


3.1.
(4) 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. Reading Materials

a. Code of Professional Responsibility – Canon 10, Rule


10.01; Canon 19, Rule 19.01;

b. Other Reading Materials

(1) Agpalo, Ruben E., Legal Ethics, pp. 155-162

(2) 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. Reading Materials

a. 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 = P________, or = P_________ per quarter, plus


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
1
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.)

2
Subject to an additional amount corresponding to the applicable
VAT in accordance with Republic Act No. 9337 and its implementing
regulations.

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 =P__________ to cover such out-of-
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:

15
____________________

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.

18
(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

21
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 Depreciation Net


Building P335,000.00 P163,798.89 P171,201.11
Cement Machinery 9,000.00 5,127.03 3,872.97
Furniture &Fixtures 61,000.00 41,987.09 19,012.91
Medical Equipment 1,500.00 987.39 512.61
Office Mach & Equipment 74,000.00 40,536.68 33,463.32
PVC Machinery 227,000.00 109,395.46 117,604.54
Shop Mach. & Equipment 123,000.00 73,125.95 49,874.05
Tools & Equipment 32,000.00 27,646.23 4,353.77
Construction Equipment 10,000.00 4,198.79 5,801.21
P 872,500.00 P 466,803.51 P405,696.49

23
Less: Salvage Value of Building 6,000.00
399,696.49
OTHERS:
PVC Materials & Products Stock P173,000.00
Cement Materials & Products Stock 313,000.00
Shop & IRS Matrials & Products Stock 130,000.00
Unused Office Supplies, Stamps &
Medical Supplies 15,032.06
631,032.06
Total Estimate Fire Loss
2,538,231.79
Deduct: Insurance Proceeds
395,632.29
Net : Fire Loss
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.

24
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. P300,000.00 as attorney’s fees and expenses of


litigation.

4. The costs of suit.

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

Manila for Quezon City, ____________

25
E
TABLE OF CONTENTS

Page

Preface
How To Use This Materials ……….......................................... 1
Labor Lawyers’ Obligations as Contract Drafters ………………. 3
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 ……...... 48
Appendix B – Regular Employment Agreement ………………… 54
Appendix C – Project Employment Contract ……………………. 58
Appendix D – Independent Contractor Agreement …….......... 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
Canon 1
2
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) Non-


lawyers 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 best-
exemplified 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. Non-Union raiding


*** *** ***
b. 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 Med-
Arbiter. 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.”

14
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.”

18
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
Canon 1
9
Rule 1.02.
10
Rule 1.01
11
Canon 2

20
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:


“Article 135. Discrimination prohibited. - It
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 136. Stipulation against marriage. - 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

21
separated, or to actually dismiss, discharge, discriminate or otherwise
prejudice a woman employee merely by reason of her marriage.”

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


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 246. Non-abridgment of right to self-


organization. - It shall be unlawful for any person to restrain,
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 247. Concept of unfair labor practice


and procedure for prosecution thereof. - Unfair labor
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.

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).”

“Article 248. Unfair labor practices of


employers. - It shall be unlawful for an employer to commit any
of the following unfair labor practice:

(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;

23
(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 non-
union 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

24
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:

“Article 246. Non-abridgment of right to self-


organization. - It shall be unlawful for any person to restrain,
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 249. Unfair labor practices of labor


organizations. - It shall be unfair labor practice for a labor
organization, its officers, agents or representatives:

(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;

25
(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).”

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


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
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.”

“Article 266. Requirement for arrest and


detention. - Except on grounds of national security and public
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.”

The criminal sanctions for violations of the above provisions


by employers and labor organizations are specified in Article 272
of the Labor Code.

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


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
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.

“Article 290. Offenses. - Offenses penalized under


this Code and the rules and regulations issued pursuant thereto shall
prescribe in three (3) years.

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
Canon 15
13
Rule 15.02

28
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
Rule 15.01
15
Rule 15.03
16
Rule 15.05
17
Rule 15.04
18
Rule 19.03
19
Canon 21

29
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 lawyers-
boyfriend is a Senior Associate at a law firm which is the retained counsel

30
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.

31
2 (b) Reading Materials
(Code of Professional Responsibility Canon 1 to Canon 6.03;
Articles 211 to 212; Articles 217 to 222; Articles 224 to 240; Articles
241 to 246 Labor Code of the Philippines

2 (c) Analysis and Discussion: 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

32
3 (c ) Analysis and Discussion: Non-Lawyers as Union Representatives
and Voluntary Arbitrators; Labor Lawyers’ Ethical Obligations as
Negotiators; 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

33
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.

34
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.

35
Victor takes the position that he has not rendered any service for
IS Cebu which has consulted exclusively with Partner D of XYZ the law-
firm 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

36
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 rank-
and-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.

38
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-and-
file 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.

40
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)

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 , under the following terms and conditions:

1. 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)

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
________________________________________________, (herein
referred to as the “Company”)

- and –

, Filipino, of legal age,


____________ 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:

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;

53
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, managed, supervised or

54
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:

55
________ ___________
(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
Name Certificate No. 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:

, a corporation duly
organized and existing under the laws of the Philippines, with business
address at ,
represented herein by its , Mr./Ms. ___________
and hereinafter referred to as the “COMPANY”

- and –

__________________________, INC., a corporation organized in


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

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 –

59
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


representatives and all workers under him to the rules and regulations
pertaining to the security and safety of the COMPANY. The
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. By written agreement of the parties.

B. 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
Name Certificate No. 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. They further
acknowledged to me that the same is the 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. ;

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


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

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 ) S.S.

67
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.

68
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, sit-
downs, 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.

75
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.

76
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

77
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

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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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