5.

THIRD DIVISION

G.R. No. 143783           December 9, 2002

DANTE SARRAGA, SR. and MARIA TERESA SARRAGA, petitioners, 

vs.
BANCO FILIPINO SAVINGS AND MORTGAGE BANK, respondent.

DECISION

SANDOVAL-GUTIERREZ, J.:

Spouses Dante Sarraga, Sr. and Maria Teresa Sarraga, petitioners, were the absolute owners of
three (3) parcels of land, one of which is Lot 416-B, situated in Poblacion, Cagayan de Oro City, and
the other two, Lots 1053-A and 1053-B, in Lapasan, same city.

Sometime in the early 1980’s, petitioners mortgaged their lots to Banco Filipino Savings and
Mortgage Bank (Banco Filipino), respondent, as security for a loan in the amount of P3,618,714.59.

Petitioners defaulted in the payment of their loan. Consequently, Banco Filipino foreclosed the
mortgage.

On June 29, 1984, Banco Filipino was placed in conservatorship by the Central Bank of the
Philippines. On January 25, 1985, it was ordered closed and placed under receivership and
liquidation.

On April 9, 1985, or before the expiration of the period for the redemption of the lots, petitioner Dante
P. Sarraga sent a letter to Banco Filipino’s receiver-liquidator offering to redeem the same.

On July 2, 1985, Deputy Receiver Arnulfo B. Aurellano wrote petitioners that "at this stage of the
liquidation of the bank, we are not yet selling the aforesaid properties."

Since petitioners were not allowed to redeem their lots within the period prescribed by law, titles
thereto were consolidated in the name of Banco Filipino.

On October 10, 1986, petitioners received a letter from Banco Filipino recognizing their intention to
redeem their lots. Later, Banco Filipino, through its liquidators, started negotiating with petitioners on
the terms of redemption.
Finally, on October 30, 1990, Mr. Renan Santos, then Banco Filipino’s liquidator, wrote petitioners
allowing them to repurchase the lots for P8,506,597.73, with 12% interest per annum, under the
terms stipulated therein.1 The terms include, among others, that petitioners may pay by installments
and that upon full payment of the repurchase price, Banco Filipino shall execute the corresponding
deed of sale for the three (3) lots in their favor.2 They were likewise granted the power to manage
and administer the building located in Lot 416-B. The terms were later embodied in a Memorandum
of Agreement3 (MOA) signed by the parties.

On May 16, 1991, Banco Filipino formally conveyed to petitioners the two (2) lots (Lots 1053-A and
1053-B)located in Lapasan, Cagayan de Oro City.

On October 30, 1992, petitioners paid in full the total repurchase price for the three (3) lots.
However, Banco Filipino refused to execute the corresponding deed of sale and turn over Lot 416-B
to petitioners.

Instead, Banco Filipino, on April 5, 1993, filed with the Regional Trial Court, Branch 38, Cagayan de
Oro City, a complaint4 against petitioners for quieting of title, recovery of ownership and possession,
accounting and damages, docketed as Civil Case No. 93-186.

On April 27, 1993, petitioners filed their answer with counterclaim. 5 They were represented by Atty.
Florentino G. Dumlao, Jr. who formally entered his appearance as their counsel of record.

However, prior to the pre-trial, Atty. Dumlao suffered a mild stroke, incapacitating him from
participating actively in the proceedings, prompting petitioners to hire the services of another
counsel, Atty. Rogelio Bagabuyo. While the latter appeared for the petitioners during the hearing and
signed pleadings for them, Atty. Dumlao remained petitioners’ counsel of record. As such, the trial
court continued to serve pleadings, motions, processes, and other documents upon Atty. Dumlao.

On June 1, 1998, the trial court rendered a decision, 6 the dispositive portion of which states:

"Wherefore, judgment is hereby rendered, as follows:

1. Declaring the sale and conveyance of the two (2) parcels of land (denominated as Lots
1035-A and 1053-B) situated in Barangay Lapasan, Cagayan de Oro, as valid and title
thereto shall pertain to defendant spouses Sarraga;

2. Declaring plaintiff Banco Filipino to be the true and lawful owners of Lot 416-B and the
building therein (formerly known as the Lucar Building but now as Executive Centrum)
situated along J.R. Borja Street, Cagayan de Oro City;

3. Ordering defendant spouses Sarraga to immediately relinquish and surrender possession

of Lot No. 416-B and the building thereon to plaintiff Bank; and

4. All other claims of plaintiff Bank as well as counterclaims by the defendants are dismissed.

"No pronouncement as to costs.

"SO ORDERED."7

On July 1, 1998. petitioners filed a motion for reconsideration, 8 signed by both Attys. Dumlao and
Bagabuyo.
On September 3, 1998, the trial court issued an order 9 denying petitioners’ motion. On September
10, 1998, the order was received by Ms. Llerna Guligado, a newly-hired clerk at the office of Atty.
Bagabuyo. Owing to her lack of work experience in a law office, she merely left the court order on
her desk and eventually it was misplaced. She failed to bring the matter to the attention of Atty.
Bagabuyo when she resigned on September 15, 1998. The day before, or on September 14, 1998,
Atty. Bagabuyo was appointed Senior State Prosecutor in the Department of Justice. Due to his
excitement and relocation to Manila, he failed to apprise Atty. Dumlao on the status of the case.

Concerned that no action had been taken on their motion for reconsideration of the Decision,
petitioners, on December 7, 1998, verified its status. In the trial court, they found that the records of
the case were already transmitted to the Court of Appeals due to a partial appeal interposed by
Banco Filipino.

This prompted petitioners to file with the trial court a notice of appeal which was denied for being
late.

Eventually, they filed a petition for relief from judgment. 10 During the hearing, they came to know that
the order dated September 3, 1998 denying their motion for reconsideration was served upon Atty.
Bagabuyo only.

On February 12, 1999, the trial court issued an order 11 dismissing the petition for relief on the ground
that it was filed out of time. Petitioners filed a motion for reconsideration but was denied. 12

They then filed a petition for certiorari with the Court of Appeals, docketed as CA GR-SP No. 53765,
ascribing to the trial court grave abuse of discretion for dismissing their petition for relief from
judgment.

On June 20, 2000, the Appellate Court rendered a Decision 13 dismissing the petition, thus:

"WHEREFORE, foregoing premises considered, we hold that public respondent did not err much
less act with grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the
disputed orders, for which reason, the herein petition has to be, as it is hereby DISMISSSED.

"SO ORDERED."14

Hence this petition for review on certiorari.

The fundamental issues for our resolution are: 1) whether there was a valid service of the trial court’s
order denying petitioners’ motion for reconsideration upon Atty. Bagabuyo; 2) whether Atty.
Bagabuyo was negligent which prevented petitioners from filing a timely notice of appeal; and 3) if
so, whether such negligence is binding upon petitioners.

Petitioners maintain that Atty. Bagabuyo is not their counsel of record since he did not file with the
trial court a formal appearance. Consequently, the service upon him of the trial court’s order denying
their motion for reconsideration is not valid.

Such posture is untenable. It is undisputed that petitioners were represented by two (2) lawyers,
Attys. Dumlao and Bagabuyo. Pursuant to Section 2, Rule 13 of the 1997 Rules of Civil Procedure,
as amended,15 service of the trial court’s order denying petitioners’ motion for reconsideration may
be made upon either counsel.16
The Court of Appeals correctly found that indeed petitioners’ counsel was Atty. Bagabuyo, thus:

"We find no merit in the first ground invoked by petitioners. As explained by the court a quo in its
May 24, 1999 order-

"The records of this case show that Atty. Rogelio Zosa B. Bagabuyo did not ‘merely enter his
appearance orally at every hearing which he attended.’ He filed several pleadings in this case as
‘counsel for the defendants’ in which he indicated his address. The first pleading that he filed x x x
was a MOTION TO HEAR SPECIAL AND AFFIRMATIVE DEFENSES AS IF A MOTION TO
DISMISS HAD BEEN FILED, dated November 28, 1994, which he signed alone as ‘counsel for
Defendants’ and in which he indicated his address as ‘Suite 201, Travellers Life Building, corners
Tiano & J.R. Borja Streets, City of Cagayan de Oro.’ Atty. Bagabuyo, since he started appearing in
this case, acted alone, signed pleadings alone, made decisions alone, without in any way indicating
to the court and the adverse party that he had to defer to the judgment of Atty. Dumlao on any
matter pertaining to the instant case. He presented the defendant Dante Sarraga and the latter’s
witness, Mr. Gaudencio Beduya, at the trial of this case and terminated the presentation of the
defendant’s evidence without consulting, or intimating to the court and the adverse party that he had
to consult Atty. Dumlao on the matter. The MEMORANDUM FOR THE DEFENDANTS dated April 8,
1996 was signed by him alone as counsel for the defendants. Atty. Rogelio Zosa Bagabuyo signed
as lead counsel the defendants’ Motion for Reconsideration dated 26 June 1998 and the Urgent
Rejoinder to Plaintiff’s Opposition To Our Motion for Reconsideration dated 03 August 1998, in
which he indicated his address as 14th-10th Streets, Macasandig, City of Cagayan de Oro.’ He
signed alone as counsel for the defendants an URGENT MOTION TO CANCEL SCHEDULED
HEARING ON 31 July 1998 dated 28 July 1998 in which he indicated his address as ‘72 corners
14th-10th Streets, Macasandig, City of Cagayan de Oro.’ (Annex "F," Petition, pp. 196-197, rollo).

"Given the foregoing circumstances and the court a quo’s further observation that Atty. Bagabuyo
‘had been the one actively handling the case for the defendants since the pre-trial stage,’ x x x it is
simply absurd for petitioners to even suggest that service upon Atty. Bagabuyo of a copy of the
Order dated September 3, 1998 which denied their Motion for Reconsideration of the judgment was
ineffective or did not bind them. To be sure, Section 2, Rule 13 of the 1997 Rules of Civil Procedure
explicitly provides that ‘(i)f any party has appeared by counsel, service upon him shall be made upon
his counsel or one of them x x x.’ The obvious meaning of said rule is that if a party is represented
by more than one lawyer, service of pleadings, judgments and other papers may be made on any
one of them.

Obviously, Atty. Bagabuyo was negligent which prevented petitioners from filing a timely notice of
appeal. Atty. Bagabuyo knew that his clerk has no work experience in a law firm. He should have
supervised her office performance very closely considering the importance of his legal calling. Time
and again this Court has admonished law offices to adopt a system of distributing and receiving
pleadings and notices, so that the lawyers will be promptly informed of the status of their cases.
Thus, the negligence of clerks which adversely affect the cases handled by lawyers is binding upon
the latter.17

Nothing is more settled than the rule that the negligence of counsel binds the client. However, the
application of the general rule to a given case should be looked into and adopted according to the
surrounding circumstances.18Thus, exceptions to the said rule have been recognized by this Court:
(1) where reckless or gross negligence of counsel deprives the client of due process of law; (2) when
its application will result in outright deprivation of the client’s liberty or property; or (3) where the
interests of justice so require.19 In such cases, courts must step in and accord relief to a client who
suffered thereby.
Here, we find that the negligence of Atty. Bagabuyo falls under the said exceptions. Indeed, he
committed gross negligence. Petitioners were deprived of their right to appeal when he failed to
inform them immediately of the denial of their motion for reconsideration of the trial court’s decision.
Ultimately, this will result in the deprivation of their property, specifically Lot 416-B.

In Apex Mining, Inc. vs. Court of Appeals,20 this Court ruled:

"If the incompetence, ignorance or inexperience of counsel is so great and the error committed as a
result thereof is so serious that the client, who otherwise has a good cause, is prejudiced and denied
his day in court, the litigation may be reopened to give the client another chance to present his case.
Similarly, when an unsuccessful party has been prevented from fully and fairly presenting his case
as a result of his lawyer’s professional delinquency or infidelity the litigation may be reopened to
allow the party to present his side. Where counsel is guilty of gross ignorance, negligence and
dereliction of duty, which resulted in the client’s being held liable for damages in a damage suit, the
client is deprived of his day in court and the judgment may be set aside on such ground.

"In view of the foregoing circumstances, higher interests of justice and equity demand that
petitioners be allowed to present evidence on their defense. Petitioners may not be made suffer for
the lawyer’s mistakes and should be afforded another opportunity, at least, to introduce evidence on
their behalf. To cling to the general rule in this case is only to condone rather than rectify a serious
injustice to a party whose only fault was to repose his faith and entrust his innocence to his previous
lawyers."

Petitioners cannot be faulted for failing to verify the status of their case with the trial court since a
client has the right to expect that his lawyer will protect his interest during the hearing of his case.

"A client may reasonably expect that his counsel will make good his representations and has the
right to expect that his lawyer will protect his interests during the trial of his case. For the general
employment of an attorney to prosecute or defend a case or proceeding ordinarily vests in a plaintiffs
attorney the implied authority to take all steps or do all acts necessary or incidental to the regular
and orderly prosecution and management of the suit, and in a defendant’s attorney, the power to
take such steps as he deems necessary to defend the suit and protect the interests of the
defendant."21

Undoubtedly, the trial court gravely abused its discretion when it denied the petition for relief.
Considering the circumstances obtaining here, petitioners should not be made to suffer the
consequences of their counsel’s negligence. Hence, the period within which to file their petition for
relief should be reckoned from their actual receipt of the order denying their motion for
reconsideration, which is December 7, 1998. Accordingly, the petition for relief filed on December
16, 1998 was well within the sixty-day period prescribed in Section 3, Rule 38, of the 1997 Rules of
Civil Procedure, as amended.

Both lower courts actually sacrificed justice for technicality. This Court has consistently ruled that it is
a far better and more prudent course of action for a court to excuse a technical lapse and afford the
parties a review of the case on the merits to attain the ends of justice rather than dispose of the case
on technicality and cause a grave injustice to the parties, giving a false impression of speedy
disposal of cases while actually resulting in more delay, if not a miscarriage of justice. 22 Hence, it
would be more in accord with justice and equity to allow the appeal by petitioners to enable the
Court of Appeals to review the trial court’s decision.

The fundamental purpose of procedural rules is to afford each litigant every opportunity to present
evidence in their behalf in order that substantial justice is achieved. Court litigations are primarily for
the search of truth, and a liberal interpretation of the rules by which both parties are given the fullest
opportunity to adduce proofs is the best way to ferret out such truth. The dispensation of justice and
vindication of legitimate grievances should not be barred by technicalities. 23

Hence, in cases where a party was denied this right, we have relaxed the stringent application of
procedural rules in order to allow a party the chance to be heard. This policy applies with equal force
in case of appeals. It has been consistently held that the dismissal of appeal on purely technical
grounds is frowned upon.24

"x x x, dismissal of appeals purely on technical grounds is frowned upon and the rules of procedure
ought not to be applied in a very rigid, technical sense, for they are adopted to help secure, not
override, substantial justice, and thereby defeat their very aims. Verily, this Court, in the exercise of
its equity jurisdiction, may even stay the dismissal of appeals grounded merely on technicalities,
especially in this case where petitioners’ appeal appears prima facie worthy of the CA’s full
consideration on the merits."25

WHEREFORE, the petition is GRANTED. The challenged Decision of the Court of Appeals dated
June 20, 2000 in CA-GR SP No. 53765 is SET ASIDE. The Regional Trial Court, Branch 38,
Cagayan de Oro City is DIRECTED to grant the petition for relief filed by petitioners and to GIVE
DUE COURSE to their notice of appeal in Civil Case No. 93-186.

SO ORDERED.

Puno, (Chairman), Corona, and Carpio- Morales, JJ., concur.

Panganiban, J., no part. Former counsel of a party.

Footnotes

1
 Annex "A," Petition; Rollo, at 47-48.

2
 Id.

3
 Annex "B," id., at 49.

4
 Annex "C," id., at 53.

5
 Annex "D," id., at 64.

6
 Annex "F," id., at 79.

7
 Id., at 90.

8
 Annex "G," id., at 91.
9
 Annex "H," id., at 112.

10
 Annex "J," id., at 116.

11
 Annex "M," id., at 139.

12
 Annex "P," id., at 164.

13
 Annex "T," id., at 428.

14
 Id., at 437.

 "Sec. 2. Filing and service defined. – Filing is the act of presenting the pleading or other
15

paper to the clerk of court.

Service is the act of providing a party with a copy of the pleading or paper
concerned. If any party has appeared by counsel, service upon him shall be made
upon his counsel or one of them, unless service upon the party himself is ordered
by the court. Where one counsel appears for several parties, he shall only be entitled
to one copy of any paper served upon him by the opposite side." (emphasis added)

16
 Sublay vs. NLRC, 324 SCRA 188, 194 (2000).

17
 Negros Stevedoring, Inc. vs. Court of Appeals, 162 SCRA 371, 375 (1988).

18
 Apex Mining, Inc. vs. Court of Appeals, 319 SCRA 456, 465-466 (1999).

 Id., at 466; Gacutana-Fraile vs. Domingo, 348 SCRA 414, 422 (2000); Salazar, et al. vs.
19

Court of Appeals, G.R. 142920, February 6, 2002, citing Legarda vs. Court of Appeals, 195
SCRA 418 (1991) and Aguilar vs. Court of Appeals, 250 SCRA 371 (1995); Del Mar vs.
Court of Appeals, G.R. No. 139008, March 13, 2002.

20
 Id., at 468.

21
 Id., at 467.

 Insular Bank of Asia and America vs. Court of Appeals, 228 SCRA 420 (1993); Coco-
22

Chemical Philippines, Inc. vs. Court of Appeals, 264 SCRA 345, 349 (1996), citing People’s
Security, Inc. vs. NLRC, 226 SCRA 146 (1993); Aguam vs. Court of Appeals, 332 SCRA 784
(2000).

 Salazar, et al. vs. Court of Appeals, supra, citing Abrajano vs. Court of Appeals, 343 SCRA

23

68, 86 (2000).

24
 Id.

 Piglas-Kamao (Sari-Sari Chapter), et al. vs. NLRC, 357 SCRA 640 (2001), citing Pacific
25

Life Assurance Corp. vs. Sison, 299 SCRA 16, 22 (1998).

Case digest:

6.

FIRST DIVISION

A.C. No. 5302             February 18, 2005

MARCIAL L. ABIERO, complainant, 
vs.
ATTY. BERNARDO G. JUANINO, respondent.

DECISION

YNARES-SANTIAGO, J.:

A lawyer owes fidelity to the cause of his client at all times, mindful of the trust and confidence
reposed in him. He must always serve with competence and diligence, and never neglect a legal
matter entrusted to him. An attorney should endeavor to keep his client informed of the status of his
case and respond within a reasonable time to the latter’s request for information. Failure to comply
with these abiding precepts of ethical conduct renders counsel liable for violating the canons of his
profession.

On July 20, 2000, an administrative complaint was filed by Marcial L. Abiero charging respondent
1 

Atty. Bernardo G. Juanino with negligence in connection with a legal matter entrusted to him.

It appears that complainant engaged the services of respondent of the law firm P.C. Nolasco and
Associates as counsel de parte in NLRC NCR OCW Case No. 00-12-00904-95. On January 29,
2 

1998, Labor Arbiter Eduardo J. Carpio ruled in favor of complainant by ordering the respondents to
pay complainant his unpaid wages and unpaid vacation leave pay, to refund his plane fare and to
pay moral damages and attorney’s fees. 3 
1ªvvphi1.nét

On appeal, the National Labor Relations Commission reversed the arbiter’s decision and dismissed
the case for lack of basis.
4

For several times, complainant, either personally or through his designated agents, tried to follow up
the status of the case. Each time, respondent would advise him to call on a later date at which time
he may have some news of any development with the case. 5
Respondent filed with the Court of Appeals a motion for extension of time to file a petition for review
and paid the corresponding docket fee.

When complainant verified with the Court of Appeals the status of the case, he found out that
respondent never filed a Petition for Review of his labor case. Consequently, the NLRC decision
became final and executory. Thus, complainant filed this administrative complaint against
respondent.

On August 30, 2000, respondent was required to file his comment within 10 days from notice. On 6 

September 25, 2000, respondent requested for additional time to file comment. Subsequently,
7 

respondent filed a series of motions for extension to file comment. On February 28, 2001,
respondent was warned that no further extension shall be granted. Notwithstanding, and despite 11
8 

extensions, respondent still failed to file his comment.

Consequently, on July 29, 2002, respondent was required to show cause why he should not be
disciplinarily dealt with or held in contempt for failure to comply with our directives.
9

On September 2, 2002, respondent filed his Compliance with Motion for Final Twelve (12) Day
Extension With No Further Extension. 10

Finally, on September 17, 2002, respondent filed his comment together with a Motion to Admit
11 

Comment Filed One Day Late.

In a Resolution dated October 21, 2002, respondent’s Motion to Admit Comment Filed One Day
Late was referred to the Integrated Bar of the Philippines for investigation, report and
recommendation. 12

As summarized, respondent alleged by way of defense, the following:

(1) that complainant became respondent’s client after respondent handled these cases for
complainant’s uncle Aniceto Encio and his family namely Criminal Case No. F-10088, POEA Case
No. M-91-06-602, I.S. No. 93 E-17909 and POEA Case No. L-93-04-610; that respondent
successfully handled these cases which led to the dismissal of the criminal case against Aniceto
Encio and recovery of monetary awards in the other cases; (2) that NLRC NCR OCW Case No. 00-
12-00904-95 was referred by Aniceto Encio to respondent for handling; that herein complainant and
Aniceto Encio requested respondent not to charge them an acceptance fee for said case and
instead offered to pay respondent 30% of any monetary award recovered in said case; … that on
appeal to the National Labor Relations Commission, the Decision of Labor Arbiter Carpio was
reversed and NLRC OCW Case No. 00-12-00904-95 was dismissed by the NLRC for lack of merit;
… (4) that at the time respondent advanced the docket fees, complainant and respondent did not
have any agreement that a Petition for Certiorari would be filed with the Court of Appeals; … (5) that
weeks later, when complainant reimbursed respondent for the docket fees he had advanced,
respondent advised complainant and his uncle that respondent intended to appeal the Decision of
the NLRC to the Court of Appeals and so he filed a Petition for Extension of Time to File Petition …;
(7) that there was an error in judgment on respondent’s part when instead of filing a Petition for
Certiorari as originally intended, respondent chose to pursue another course of action, that of
entertaining the idea of filing a Motion for Execution to enforce the Labor Arbiter’s Decision against
the other respondents who did not appeal said Decision; (8) that respondent pleads good faith in the
subsequent course of action taken; that respondent entertained the idea that he could enforce the
original Decision through a Motion for Execution; … (9) that respondent tried his best to win
complainant’s labor case and in fact, he won it at the Labor Arbiter’s level; (10) that respondent
appeals to the sense of fairness of complainant; that in the 4 cases respondent handled for
complainant and his uncle, respondent won 3 cases for them especially the criminal complaint for
Homicide against complainant’s uncle; that in said criminal case, respondent did not charge a single
centavo for attorney’s fees. 13

In his letter-reply filed on February 7, 2003, complainant averred the following statements originally
in the vernacular:

… it is not true that there was no acceptance fee because complainant paid respondent the amount
of P1,500 plus the amount of P500 per hearing but no receipts were issued for these payments; that
there is no truth to respondent’s allegation that complainant was in the province because
complainant’s uncle called respondent 3 times a week to follow-up the Petition for Review; that it
was actually complainant who paid for the docket fees but respondent who physically paid the same
to the Court of Appeals; and that respondent made several promises to complainant’s uncle
regarding the status of the Petition for Review but nothing came out of said promises. 14

The lone issue for resolution is whether respondent violated Canons 17 and 18 of the Code of
Professional Responsibility.

In its Report and Recommendation, the Commission on Bar Discipline of the Integrated Bar of the
Philippines (IBP), held that there was no sufficient justification for respondent’s failure to file the
15 

petition for review with the Court of Appeals. It found that respondent was aware of the period for
filing said petition because he himself paid the docket fees and filed the Motion for Extension of Time
to File the Petition for Review. His claim that he was pursuing another legal remedy in the labor case
did not justify his failure to file the petition for review within the prescribed period. Complainant had
placed his trust in respondent to handle his claims against his previous employer. Failure to comply
with his legal duty as counsel of complainant in NLRC NCR OCW Case No. 00-12-00904-95 has
caused damage and prejudice to the latter. Thus, in failing to file the petition for review, respondent
was held to have breached Canons 17 and 18 of the Code of Professional Responsibility. The
Commission on Bar Discipline of IBP recommended that respondent be suspended from the practice
of law for a period of six (6) months.
16

The Board of Governors of the Integrated Bar of the Philippines, adopted the Report and
Recommendation of the Investigating Commissioner, thus:

RESOLVED to ADOPT and APPROVE, as it is hereby ADOPTED and APPROVED, the Report and
Recommendation of the Investigating Commissioner of the above-entitled case, herein made part of
this Resolution/Decision as Annex "A"; and, finding the recommendation fully supported by the
evidence on record and the applicable laws and rules, and considering respondent’s violation of
Canons 17 & 18 of the Code of Professional Responsibility by failing to file the Petition for Certiorari,
Atty. Bernardo G. Juanino is hereby SUSPENDED from the practice of law for six (6) months. 17

We agree with the findings of the IBP Investigating Commissioner.

The lawyer has the duty to exert his best judgment in the prosecution or defense of the case
entrusted to him and to exercise reasonable and ordinary care and diligence in the pursuit or
defense of the case. By his own admission, respondent entertained the idea of filing a motion for
18 

execution, thus:

I honestly believed then that since the other respondents did not appeal the Decision to the
Commission of the NLRC, I could enforce the Decision (See THIRD REASON) against these other
respondents who did not appeal. So undersigned went to Honorable Labor Arbiter Eduardo J. Carpio
and explained to him about my plan to file a Motion for Execution against the other respondents who
did not appeal the Decision to the Commission of the NLRC. I was not able to see him the first two
times that I went as I was informed he was assigned to certain task force and when I saw him the
third time, Honorable Labor Arbiter Eduardo J. Carpio informed me that since decision was reversed
on appeal and the complaint dismissed, there would be no basis for filing a Motion for Execution to
enforce Decision. I was dumbfounded as the period to file a Petition for Certiorari already expired. 19

As a lawyer, respondent should know that he is not required to seek prior approval from the labor
arbiter before he could file a motion for execution. Notwithstanding, he presented himself, not once,
but thrice, before the office of the arbiter to discuss his plan to file a motion for execution, only to
discover that such recourse was not feasible. Worse, while respondent was waiting for the arbiter’s
opinion, the period to file the petition before the Court of Appeals continued to run, as in fact, it
eventually expired.

Failure to appeal to the Court of Appeals despite instructions by the client to do so constitutes
inexcusable negligence on the part of counsel. Once a lawyer consents to defend the cause of his
client, he owes fidelity to such cause and must at all times be mindful of the trust and confidence
reposed in him. He is bound to protect his client’s interest to the best of his ability and perform his
duties to his client with utmost diligence. Nothing less can be expected from a member of the
Philippine Bar. For having neglected a legal matter entrusted to him by his client, respondent did not
serve his client with diligence and competence. His inexcusable negligence on such matter renders
him liable for violation of Canons 17 and 18 of the Code of Professional Responsibility. 20

As we held in the recent case of Barbuco v. Atty. Beltran, an attorney is bound to protect his client’s
21 

interest to the best of his ability and with utmost diligence. Thus, failure to file brief for his client
certainly constitutes inexcusable negligence on his part, especially if such failure took the form of
filing a pleading after the deadline for filing the same has passed. Respondent has indeed committed
a serious lapse in judgment in failing to perform his professional duty to his client under the canons
of his profession.

The failure to timely file a pleading is by itself a sin of omission on the part of the respondent.
However, complainant’s travails were further compounded by the failure of the respondent to
maintain an open line of communication with his client in direct contravention of Canon 18, Rule
18.04 of the Code of Professional Responsibility which requires a lawyer to keep his client informed
of the status of his case and respond within a reasonable time to the client’s request for information. 22

In Legarda v. Court of Appeals, counsel’s failure to exercise due diligence in protecting the interest
23 

of his client caused the latter material prejudice. The moment counsel takes a client’s cause, he
covenants that he will exert all effort for its prosecution until its final resolution.  A lawyer who fails to
l^vvphi1.net

exercise due diligence or abandon’s his client’s cause makes him unworthy of the trust reposed on
him by the latter; he owes fealty, not only to his client, but also to the Court of which he is an officer. 24

We observed in Pariñas v. Atty. Paguinto that a lawyer should give adequate attention, care and
25 

time to his client’s case. Once he agrees to handle a case, he should undertake the task with
dedication and care. If he fails in this duty, he is not true to his oath as a lawyer. Thus, a lawyer
should accept only as much cases as he can efficiently handle in order to sufficiently protect his
clients’ interests. It is not enough that a lawyer possesses the qualification to handle the legal matter;
he must also give adequate attention to his legal work. Utmost fidelity is demanded once counsel
agrees to take the cudgels for his client’s cause. 1a\^/phi1.net

In Barbuco v. Atty. Beltran, Guiang v. Atty. Antonio, and Sps. Villaluz v. Judge Armenta, the Court
26  27 

suspended counsel for six months upon a finding that their failure to perfect an appeal was
inexcusable and persuasively demonstrative of negligence and malpractice, a violation of Rule 18.03
of the Code of Professional Responsibility which declares that "a lawyer shall not neglect a legal
matter entrusted to him and his negligence in connection therewith shall render him liable."

We cannot overstate the duty of a lawyer to uphold the integrity and dignity of the legal profession at
all times. He can do this by faithfully performing his duties to society, to the bar, to the courts and to
his clients. 28

Incidentally, we note that respondent delayed the filing of the comment for more than two (2) years.
Despite numerous extensions, which were all granted, still, he filed the comment one (1) day late. By
neglecting his duties to his client and to this Court, respondent transgressed the canons of legal
ethics enshrined in the Code of Professional Responsibility. Such misconduct should not be
countenanced. 1a\^/phi1.net

WHEREFORE, in view of the foregoing, respondent Atty. Bernardo G. Juanino is found guilty of
negligence and is SUSPENDED from the practice of law for six (6) months effective upon receipt of
this Decision, with a WARNING that a repetition of the same or similar acts will be dealt with more
severely.

Let a copy of this Decision be furnished to the Office of the Bar Confidant, the Integrated Bar of the
Philippines, and all courts in the Philippines, for their information and guidance.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Quisumbing, Carpio, and Azcuna, JJ., concur.

Footnotes

Rollo, p. 1.
1 

Marcial O. Abiero v. Diamond-H Marine Services and Shipping Agency, Inc., et al.
2 

Rollo, p. 48.
3 

Id., p. 65.
4 

Id., p. 1.
5 

Id., p. 67.
6 

Id., p. 68.
7 

Id., p. 85.
8 

Id., p. 145.
9 

10 
Id., p. 147.
 11 
Id., pp. 150-154.

12 
Id., p. 163.

Report and Recommendation of the Commission on Bar Discipline, Integrated Bar of the
13 

Philippines, pp. 2-5. IBP Investigating Commissioner is Milagros V. San Juan.

14 
Id., pp. 5-6.

15 
Id., pp. 6-7.

16 
Id.

Resolution No. XV-2003-337, Adm. Case No. 5302, Marcial L. Abiero v. Atty. Bernardo G.
17 

Juanino, 21 June 2003.

18 
Pariñas v. Atty. Paguinto, A.C. No. 6297, 13 July 2004, pp. 6-7.

19 
Comment, p. 4; Rollo, p. 153.

Canon 17 of the Code of Professional Responsibility provides that "[a] lawyer owes fidelity
20 

to the cause of his client and he shall be mindful of the trust and confidence reposed in him."
Canon 18 states that "[a] lawyer shall serve his client with competence and diligence."
Specifically, Canon 18, Rule 18.03 provides that "[a] lawyer shall not neglect a legal matter
entrusted to him, and his negligence in connection therewith shall render him liable."

21 
A.C. No. 5092, 11 August 2004, p. 4.

22 
Id.

23 
G.R. No. 94457, 10 June 1992, 209 SCRA 722, 730-731.

24 
Id.

25 
A.C. No. 6297, 13 July 2004, p. 7.

26 
A.C. No. 2473, 3 February 1993, 218 SCRA 381, 384.

27 
348 Phil. 776, 784 (1998).

28 
Reyes v. Atty. Javier, 426 Phil. 243, 248 (2002).

CASE DIGEST:

MARCIAL L. ABIERO vs. ATTY. BERNARDO G. JUANINO C. No. 5302.

February 18, 2005
FACTS:

Atty. Juanino, representing Abiero, won in a labor case. However, on appeal, the NLRC 
reversed the arbiters decision and dismissed the case for lack of basis. Each time Abiero 
would follow up the case, respondent would advise him to call on a later date at which ti
me he may have some news of any development with the case. Atty Juanino then filed wi
th the Court of Appeals a motion for extension of time to file a petition for review and pa
id the corresponding docket fee. When complainant verified with the Court of Appeals t
he status of the case, he found out that respondent never filed a Petition for Review of hi
s labor case. Consequently, the NLRC decision became final and executory. In his defens
e, he said that he honestly believed that he could enforce the decision against those who 
did not appeal, so he went to the labor arbiter and discussed it, but the arbiter said he co
uld not since the decision was reversed and there would be no basis for the enforcement. 
Too late, the period to file petition for certiorari had already expired.

ISSUE:

Whether or not discussing a legal action to a judge constitutes violation of the Code of Pr
ofessional Responsibility.

RULING:

Yes. As a lawyer, Atty. Juanino should’ve known that he is not required to seek prior app
roval from the labor arbiter before he could file a motion for execution. Nevertheless, he 
presented himself, not once, but thrice, before the office of the arbiter to discuss his plan 
to file a motion for execution, only to discover that such recourse was not feasible. Wors
e, while respondent was waiting for the arbiters opinion, the period to file the petition b
efore the Court of Appeals continued to run, as in fact, it eventually expired.

Failure to appeal to the Court of Appeals despite instructions by the client to do so const
itutes inexcusable negligence on the part of counsel because once a lawyer consents to d
efend the cause of his client, he owes fidelity to such cause and must at all times be mind
ful of the trust and confidence reposed in him. His inexcusable negligence on such matte
r renders him liable for violation of Canons 17 and 18 of the Code of Professional Respon
sibility. Atty. Juanino is SUSPENDED from the practice of law for six (6) months.

7.
Republic of the Philippines
SUPREME COURT
Manila
 THIRD DIVISION

afsaf

On 9 February 1981, petitioner Raul Sesbreño made a money market placement in the amount of
P300,000.00 with the Philippine Underwriters Finance Corporation ("Philfinance"), Cebu Branch; the
placement, with a term of thirty-two (32) days, would mature on 13 March 1981, Philfinance, also on
9 February 1981bdfbsdfbfinance as drawer, and Insular Bank of Asia and America as drawee, in the
total amount of P304,533.33.

On 13 March 1981, petitioner sought to encash the postdated checks issued by Philfinance.
However, the checks were dishonored for having been drawn against insufficient funds.

On 26 March 1981, Philfinance delivered to petitioner the DCR No. 10805 issued by private
respondent Pilipinas Bank ("Pilipinas"). It reads as follows:

PILIPINAS BANK
Makati Stock Exchange Bldg.,
Ayala Avenue, Makati,
Metro Manila

February 9, 198
———————
VALUE DATE

TO Raul Sesbreño

April 6, 1981
———————
MATURITY DAT

NO. 10805

DENOMINATED CUSTODIAN RECEIPT

This confirms that as a duly Custodian Bank, and upon instruction of PHILIPPINE
UNDERWRITES FINANCE CORPORATION, we have in our custody the following
securities to you [sic] the extent herein indicated.

SERIAL MAT. FACE ISSUED REGISTERED AMOUNT

NUMBER DATE VALUE BY HOLDER PAYEE

2731 4-6-81 2,300,833.34 DMC PHIL. 307,933.33

UNDERWRITERS
FINANCE CORP.

We further certify that these securities may be inspected by you or your duly
authorized representative at any time during regular banking hours.
 Upon your written instructions we shall undertake physical delivery of the above
securities fully assigned to you should this Denominated Custodianship Receipt
remain outstanding in your favor thirty (30) days after its maturity.

PILIPIN
AS
BANK
(By
Elizabet
h De
Villa
Illegible
Signatu
re)1

On 2 April 1981, petitioner approached Ms. Elizabeth de Villa of private respondent Pilipinas, Makati
Branch, and handed her a demand letter informing the bank that his placement with Philfinance in
the amount reflected in the DCR No. 10805 had remained unpaid and outstanding, and that he in
effect was asking for the physical delivery of the underlying promissory note. Petitioner then
examined the original of the DMC PN No. 2731 and found: that the security had been issued on 10
April 1980; that it would mature on 6 April 1981; that it had a face value of P2,300,833.33, with the
Philfinance as "payee" and private respondent Delta Motors Corporation ("Delta") as "maker;" and
that on face of the promissory note was stamped "NON NEGOTIABLE." Pilipinas did not deliver the
Note, nor any certificate of participation in respect thereof, to petitioner.

Petitioner later made similar demand letters, dated 3 July 1981 and 3 August 1981,  again asking
2

private respondent Pilipinas for physical delivery of the original of DMC PN No. 2731. Pilipinas
allegedly referred all of petitioner's demand letters to Philfinance for written instructions, as has been
supposedly agreed upon in "Securities Custodianship Agreement" between Pilipinas and
Philfinance. Philfinance did not provide the appropriate instructions; Pilipinas never released DMC
PN No. 2731, nor any other instrument in respect thereof, to petitioner.

Petitioner also made a written demand on 14 July 1981  upon private respondent Delta for the partial
3

satisfaction of DMC PN No. 2731, explaining that Philfinance, as payee thereof, had assigned to him
said Note to the extent of P307,933.33. Delta, however, denied any liability to petitioner on the
promissory note, and explained in turn that it had previously agreed with Philfinance to offset its
DMC PN No. 2731 (along with DMC PN No. 2730) against Philfinance PN No. 143-A issued in favor
of Delta.

In the meantime, Philfinance, on 18 June 1981, was placed under the joint management of the
Securities and exchange commission ("SEC") and the Central Bank. Pilipinas delivered to the SEC
DMC PN No. 2731, which to date apparently remains in the custody of the SEC. 4

As petitioner had failed to collect his investment and interest thereon, he filed on 28 September 1982
an action for damages with the Regional Trial Court ("RTC") of Cebu City, Branch 21, against private
respondents Delta and Pilipinas. The trial court, in a decision dated 5 August 1987, dismissed the
5

complaint and counterclaims for lack of merit and for lack of cause of action, with costs against
petitioner.

Petitioner appealed to respondent Court of Appeals in C.A.-G.R. CV No. 15195. In a Decision dated
21 March 1989, the Court of Appeals denied the appeal and held: 6
 Be that as it may, from the evidence on record, if there is anyone that appears liable
for the travails of plaintiff-appellant, it is Philfinance. As correctly observed by the trial
court:

This act of Philfinance in accepting the investment of plaintiff and

charging it against DMC PN No. 2731 when its entire face value was
already obligated or earmarked for set-off or compensation is difficult
to comprehend and may have been motivated with bad faith.
Philfinance, therefore, is solely and legally obligated to return the
investment of plaintiff, together with its earnings, and to answer all the
damages plaintiff has suffered incident thereto. Unfortunately for
plaintiff, Philfinance was not impleaded as one of the defendants in
this case at bar; hence, this Court is without jurisdiction to pronounce
judgement against it. (p. 11, Decision)

WHEREFORE, finding no reversible error in the decision appealed from, the same is
hereby affirmed in toto. Cost against plaintiff-appellant.

Petitioner moved for reconsideration of the above Decision, without success.

Hence, this Petition for Review on Certiorari.

After consideration of the allegations contained and issues raised in the pleadings, the Court
resolved to give due course to the petition and required the parties to file their respective
memoranda. 7

Petitioner reiterates the assignment of errors he directed at the trial court decision, and contends
that respondent court of Appeals gravely erred: (i) in concluding that he cannot recover from private
respondent Delta his assigned portion of DMC PN No. 2731; (ii) in failing to hold private respondent
Pilipinas solidarily liable on the DMC PN No. 2731 in view of the provisions stipulated in DCR No.
10805 issued in favor r of petitioner, and (iii) in refusing to pierce the veil of corporate entity between
Philfinance, and private respondents Delta and Pilipinas, considering that the three (3) entities
belong to the "Silverio Group of Companies" under the leadership of Mr. Ricardo Silverio, Sr. 8

There are at least two (2) sets of relationships which we need to address: firstly, the relationship of
petitioner vis-a-vis Delta; secondly, the relationship of petitioner in respect of Pilipinas. Actually, of
course, there is a third relationship that is of critical importance: the relationship of petitioner and
Philfinance. However, since Philfinance has not been impleaded in this case, neither the trial court
nor the Court of Appeals acquired jurisdiction over the person of Philfinance. It is, consequently, not
necessary for present purposes to deal with this third relationship, except to the extent it necessarily
impinges upon or intersects the first and second relationships.

I.

We consider first the relationship between petitioner and Delta.

The Court of appeals in effect held that petitioner acquired no rights vis-a-vis Delta in respect of the
Delta promissory note (DMC PN No. 2731) which Philfinance sold "without recourse" to petitioner, to
the extent of P304,533.33. The Court of Appeals said on this point:
 Nor could plaintiff-appellant have acquired any right over DMC PN No. 2731 as the
same is "non-negotiable" as stamped on its face (Exhibit "6"), negotiation being
defined as the transfer of an instrument from one person to another so as to
constitute the transferee the holder of the instrument (Sec. 30, Negotiable
Instruments Law). A person not a holder cannot sue on the instrument in his own
name and cannot demand or receive payment (Section 51, id.) 9

Petitioner admits that DMC PN No. 2731 was non-negotiable but contends that the Note had been
validly transferred, in part to him by assignment and that as a result of such transfer, Delta as
debtor-maker of the Note, was obligated to pay petitioner the portion of that Note assigned to him by
the payee Philfinance.

Delta, however, disputes petitioner's contention and argues:

(1) that DMC PN No. 2731 was not intended to be negotiated or otherwise
transferred by Philfinance as manifested by the word "non-negotiable" stamp across
the face of the Note  and because maker Delta and payee Philfinance intended that
10

this Note would be offset against the outstanding obligation of Philfinance

represented by Philfinance PN No. 143-A issued to Delta as payee;

(2) that the assignment of DMC PN No. 2731 by Philfinance was without Delta's
consent, if not against its instructions; and

(3) assuming (arguendo only) that the partial assignment in favor of petitioner was
valid, petitioner took the Note subject to the defenses available to Delta, in particular,
the offsetting of DMC PN No. 2731 against Philfinance PN No. 143-A. 11

We consider Delta's arguments seriatim.

Firstly, it is important to bear in mind that the negotiation of a negotiable instrument must be

distinguished from the assignment or transfer of an instrument whether that be negotiable or non-
negotiable. Only an instrument qualifying as a negotiable instrument under the relevant statute may
be negotiated either by indorsement thereof coupled with delivery, or by delivery alone where the
negotiable instrument is in bearer form. A negotiable instrument may, however, instead of being
negotiated, also be assigned or transferred. The legal consequences of negotiation as distinguished
from assignment of a negotiable instrument are, of course, different. A non-negotiable instrument
may, obviously, not be negotiated; but it may be assigned or transferred, absent an express
prohibition against assignment or transfer written in the face of the instrument:

The words "not negotiable," stamped on the face of the bill of lading, did not destroy
its assignability, but the sole effect was to exempt the bill from the statutory
provisions relative thereto, and a bill, though not negotiable, may be transferred by
assignment; the assignee taking subject to the equities between the original
parties.  (Emphasis added)
12

DMC PN No. 2731, while marked "non-negotiable," was not at the same time stamped "non-
transferable" or "non-assignable." It contained no stipulation which prohibited Philfinance from
assigning or transferring, in whole or in part, that Note.

Delta adduced the "Letter of Agreement" which it had entered into with Philfinance and which should
be quoted in full:
 April
10,
1980

Philippine Underwriters Finance Corp.

Benavidez St., Makati,
Metro Manila.

Attention: Mr. Alfredo O. Banaria

SVP-Treasurer

GENTLEMEN:

This refers to our outstanding placement of P4,601,666.67 as evidenced by your

Promissory Note No. 143-A, dated April 10, 1980, to mature on April 6, 1981.

As agreed upon, we enclose our non-negotiable Promissory Note No. 2730 and 2731
for P2,000,000.00 each, dated April 10, 1980, to be offsetted [sic] against your PN
No. 143-A upon co-terminal maturity.

Please deliver the proceeds of our PNs to our representative, Mr. Eric Castillo.

Very
Truly
Yours,

(Sgd.)
Florenci
o B.
Biagan
Senior
Vice
Preside
nt 13

We find nothing in his "Letter of Agreement" which can be reasonably construed as a prohibition
upon Philfinance assigning or transferring all or part of DMC PN No. 2731, before the maturity
thereof. It is scarcely necessary to add that, even had this "Letter of Agreement" set forth an explicit
prohibition of transfer upon Philfinance, such a prohibition cannot be invoked against an assignee or
transferee of the Note who parted with valuable consideration in good faith and without notice of
such prohibition. It is not disputed that petitioner was such an assignee or transferee. Our conclusion
on this point is reinforced by the fact that what Philfinance and Delta were doing by their exchange of
their promissory notes was this: Delta invested, by making a money market placement with
Philfinance, approximately P4,600,000.00 on 10 April 1980; but promptly, on the same day,
borrowed back the bulk of that placement, i.e., P4,000,000.00, by issuing its two (2) promissory
notes: DMC PN No. 2730 and DMC PN No. 2731, both also dated 10 April 1980. Thus, Philfinance
was left with not P4,600,000.00 but only P600,000.00 in cash and the two (2) Delta promissory
notes.

Apropos Delta's complaint that the partial assignment by Philfinance of DMC PN No. 2731 had been
effected without the consent of Delta, we note that such consent was not necessary for the validity
and enforceability of the assignment in favor of petitioner.  Delta's argument that Philfinance's sale
14

or assignment of part of its rights to DMC PN No. 2731 constituted conventional subrogation, which
required its (Delta's) consent, is quite mistaken. Conventional subrogation, which in the first place is
never lightly inferred,  must be clearly established by the unequivocal terms of the substituting
15

obligation or by the evident incompatibility of the new and old obligations on every point.  Nothing of
16

the sort is present in the instant case.

It is in fact difficult to be impressed with Delta's complaint, since it released its DMC PN No. 2731 to
Philfinance, an entity engaged in the business of buying and selling debt instruments and other
securities, and more generally, in money market transactions. In Perez v. Court of Appeals,  the 17

Court, speaking through Mme. Justice Herrera, made the following important statement:

There is another aspect to this case. What is involved here is a money market
transaction. As defined by Lawrence Smith "the money market is a market dealing in
standardized short-term credit instruments (involving large amounts) where lenders
and borrowers do not deal directly with each other but through a middle manor a
dealer in the open market." It involves "commercial papers" which are instruments
"evidencing indebtness of any person or entity. . ., which are issued, endorsed, sold
or transferred or in any manner conveyed to another person or entity, with or without
recourse". The fundamental function of the money market device in its operation is to
match and bring together in a most impersonal manner both the "fund users" and the
"fund suppliers." The money market is an "impersonal market", free from personal
considerations. "The market mechanism is intended to provide quick mobility of
money and securities."

The impersonal character of the money market device overlooks the individuals or
entities concerned. The issuer of a commercial paper in the money market
necessarily knows in advance that it would be expenditiously transacted and
transferred to any investor/lender without need of notice to said issuer. In practice, no
notification is given to the borrower or issuer of commercial paper of the sale or
transfer to the investor.

xxx xxx xxx

There is need to individuate a money market transaction, a relatively novel institution

in the Philippine commercial scene. It has been intended to facilitate the flow and
acquisition of capital on an impersonal basis. And as specifically required by
Presidential Decree No. 678, the investing public must be given adequate and
effective protection in availing of the credit of a borrower in the commercial paper
market. (Citations omitted; emphasis supplied)
18

We turn to Delta's arguments concerning alleged compensation or offsetting between DMC PN No.
2731 and Philfinance PN No. 143-A. It is important to note that at the time Philfinance sold part of its
rights under DMC PN No. 2731 to petitioner on 9 February 1981, no compensation had as yet taken
place and indeed none could have taken place. The essential requirements of compensation are
listed in the Civil Code as follows:

Art. 1279. In order that compensation may be proper, it is necessary:

(1) That each one of the obligors be bound principally, and that he be at the same
time a principal creditor of the other;
 (2) That both debts consists in a sum of money, or if the things due are consumable,
they be of the same kind, and also of the same quality if the latter has been stated;

(3) That the two debts are due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by
third persons and communicated in due time to the debtor. (Emphasis supplied)

On 9 February 1981, neither DMC PN No. 2731 nor Philfinance PN No. 143-A was due. This was
explicitly recognized by Delta in its 10 April 1980 "Letter of Agreement" with Philfinance, where Delta
acknowledged that the relevant promissory notes were "to be offsetted (sic) against [Philfinance] PN
No. 143-A upon co-terminal maturity."

As noted, the assignment to petitioner was made on 9 February 1981 or from forty-nine (49) days
before the "co-terminal maturity" date, that is to say, before any compensation had taken place.
Further, the assignment to petitioner would have prevented compensation had taken place between
Philfinance and Delta, to the extent of P304,533.33, because upon execution of the assignment in
favor of petitioner, Philfinance and Delta would have ceased to be creditors and debtors of each
other in their own right to the extent of the amount assigned by Philfinance to petitioner. Thus, we
conclude that the assignment effected by Philfinance in favor of petitioner was a valid one and that
petitioner accordingly became owner of DMC PN No. 2731 to the extent of the portion thereof
assigned to him.

The record shows, however, that petitioner notified Delta of the fact of the assignment to him only on
14 July 1981,   that is, after the maturity not only of the money market placement made by petitioner
19

but also of both DMC PN No. 2731 and Philfinance PN No. 143-A. In other words, petitioner notified
Delta of his rights as assignee after compensation had taken place by operation of law because the
offsetting instruments had both reached maturity. It is a firmly settled doctrine that the rights of an
assignee are not any greater that the rights of the assignor, since the assignee is merely substituted
in the place of the assignor   and that the assignee acquires his rights subject to the equities — i.e.,
20

the defenses — which the debtor could have set up against the original assignor before notice of the
assignment was given to the debtor. Article 1285 of the Civil Code provides that:

Art. 1285. The debtor who has consented to the assignment of rights made by a
creditor in favor of a third person, cannot set up against the assignee the
compensation which would pertain to him against the assignor, unless the assignor
was notified by the debtor at the time he gave his consent, that he reserved his right
to the compensation.

If the creditor communicated the cession to him but the debtor did not
consent thereto, the latter may set up the compensation of debts previous to the
cession, but not of subsequent ones.

If the assignment is made without the knowledge of the debtor, he may set up the

compensation of all credits prior to the same and also later ones until he
had knowledge of the assignment. (Emphasis supplied)
Article 1626 of the same code states that: "the debtor who, before having knowledge of the
assignment, pays his creditor shall be released from the obligation." In Sison v. Yap-Tico,  the Court
21

explained that:

[n]o man is bound to remain a debtor; he may pay to him with whom he contacted to
pay; and if he pay before notice that his debt has been assigned, the law holds him
exonerated, for the reason that it is the duty of the person who has acquired a title by
transfer to demand payment of the debt, to give his debt or notice. 22

At the time that Delta was first put to notice of the assignment in petitioner's favor on 14 July 1981,
DMC PN No. 2731 had already been discharged by compensation. Since the assignor Philfinance
could not have then compelled payment anew by Delta of DMC PN No. 2731, petitioner, as assignee
of Philfinance, is similarly disabled from collecting from Delta the portion of the Note assigned to him.

It bears some emphasis that petitioner could have notified Delta of the assignment or sale was
effected on 9 February 1981. He could have notified Delta as soon as his money market placement
matured on 13 March 1981 without payment thereof being made by Philfinance; at that time,
compensation had yet to set in and discharge DMC PN No. 2731. Again petitioner could have
notified Delta on 26 March 1981 when petitioner received from Philfinance the Denominated
Custodianship Receipt ("DCR") No. 10805 issued by private respondent Pilipinas in favor of
petitioner. Petitioner could, in fine, have notified Delta at any time before the maturity date of DMC
PN No. 2731. Because petitioner failed to do so, and because the record is bare of any indication
that Philfinance had itself notified Delta of the assignment to petitioner, the Court is compelled to
uphold the defense of compensation raised by private respondent Delta. Of course, Philfinance
remains liable to petitioner under the terms of the assignment made by Philfinance to petitioner.

II.

We turn now to the relationship between petitioner and private respondent Pilipinas. Petitioner
contends that Pilipinas became solidarily liable with Philfinance and Delta when Pilipinas issued
DCR No. 10805 with the following words:

Upon your written instruction, we [Pilipinas] shall undertake physical delivery of the

above securities fully assigned to you —. 23

The Court is not persuaded. We find nothing in the DCR that establishes an obligation on the part of
Pilipinas to pay petitioner the amount of P307,933.33 nor any assumption of liability in solidum with
Philfinance and Delta under DMC PN No. 2731. We read the DCR as a confirmation on the part of
Pilipinas that:

(1) it has in its custody, as duly constituted custodian bank, DMC PN No. 2731 of a
certain face value, to mature on 6 April 1981 and payable to the order of Philfinance;

(2) Pilipinas was, from and after said date of the assignment by Philfinance to
petitioner (9 February 1981), holding that Note on behalf and for the benefit of
petitioner, at least to the extent it had been assigned to petitioner by payee
Philfinance;24

(3) petitioner may inspect the Note either "personally or by authorized

representative", at any time during regular bank hours; and
 (4) upon written instructions of petitioner, Pilipinas would physically deliver the DMC
PN No. 2731 (or a participation therein to the extent of P307,933.33) "should this
Denominated Custodianship receipt remain outstanding in [petitioner's] favor thirty
(30) days after its maturity."

Thus, we find nothing written in printers ink on the DCR which could reasonably be read as
converting Pilipinas into an obligor under the terms of DMC PN No. 2731 assigned to petitioner,
either upon maturity thereof or any other time. We note that both in his complaint and in his
testimony before the trial court, petitioner referred merely to the obligation of private respondent
Pilipinas to effect the physical delivery to him of DMC PN No. 2731.  Accordingly, petitioner's theory
25

that Pilipinas had assumed a solidary obligation to pay the amount represented by a portion of the
Note assigned to him by Philfinance, appears to be a new theory constructed only after the trial court
had ruled against him. The solidary liability that petitioner seeks to impute Pilipinas cannot, however,
be lightly inferred. Under article 1207 of the Civil Code, "there is a solidary liability only when the law
or the nature of the obligation requires solidarity," The record here exhibits no express assumption of
solidary liability vis-a-vis petitioner, on the part of Pilipinas. Petitioner has not pointed to us to any
law which imposed such liability upon Pilipinas nor has petitioner argued that the very nature of the
custodianship assumed by private respondent Pilipinas necessarily implies solidary liability under the
securities, custody of which was taken by Pilipinas. Accordingly, we are unable to hold Pilipinas
solidarily liable with Philfinance and private respondent Delta under DMC PN No. 2731.

We do not, however, mean to suggest that Pilipinas has no responsibility and liability in respect of
petitioner under the terms of the DCR. To the contrary, we find, after prolonged analysis and
deliberation, that private respondent Pilipinas had breached its undertaking under the DCR to
petitioner Sesbreño.

We believe and so hold that a contract of deposit was constituted by the act of Philfinance in
designating Pilipinas as custodian or depositary bank. The depositor was initially Philfinance; the
obligation of the depository was owed, however, to petitioner Sesbreño as beneficiary of the
custodianship or depository agreement. We do not consider that this is a simple case of a
stipulation pour autri. The custodianship or depositary agreement was established as an integral part
of the money market transaction entered into by petitioner with Philfinance. Petitioner bought a
portion of DMC PN No. 2731; Philfinance as assignor-vendor deposited that Note with Pilipinas in
order that the thing sold would be placed outside the control of the vendor. Indeed, the constituting
of the depositary or custodianship agreement was equivalent to constructive delivery of the Note (to
the extent it had been sold or assigned to petitioner) to petitioner. It will be seen that custodianship
agreements are designed to facilitate transactions in the money market by providing a basis for
confidence on the part of the investors or placers that the instruments bought by them are effectively
taken out of the pocket, as it were, of the vendors and placed safely beyond their reach, that those
instruments will be there available to the placers of funds should they have need of them. The
depositary in a contract of deposit is obliged to return the security or the thing deposited upon
demand of the depositor (or, in the presented case, of the beneficiary) of the contract, even though a
term for such return may have been established in the said contract.  Accordingly, any stipulation in
26

the contract of deposit or custodianship that runs counter to the fundamental purpose of that
agreement or which was not brought to the notice of and accepted by the placer-beneficiary, cannot
be enforced as against such beneficiary-placer.

We believe that the position taken above is supported by considerations of public policy. If there is
any party that needs the equalizing protection of the law in money market transactions, it is the
members of the general public whom place their savings in such market for the purpose of
generating interest revenues.  The custodian bank, if it is not related either in terms of equity
27

ownership or management control to the borrower of the funds, or the commercial paper dealer, is
normally a preferred or traditional banker of such borrower or dealer (here, Philfinance). The
custodian bank would have every incentive to protect the interest of its client the borrower or dealer
as against the placer of funds. The providers of such funds must be safeguarded from the impact of
stipulations privately made between the borrowers or dealers and the custodian banks, and
disclosed to fund-providers only after trouble has erupted.

In the case at bar, the custodian-depositary bank Pilipinas refused to deliver the security deposited
with it when petitioner first demanded physical delivery thereof on 2 April 1981. We must again note,
in this connection, that on 2 April 1981, DMC PN No. 2731 had not yet matured and therefore,
compensation or offsetting against Philfinance PN No. 143-A had not yet taken place. Instead of
complying with the demand of the petitioner, Pilipinas purported to require and await the instructions
of Philfinance, in obvious contravention of its undertaking under the DCR to effect physical delivery
of the Note upon receipt of "written instructions" from petitioner Sesbreño. The ostensible term
written into the DCR (i.e., "should this [DCR] remain outstanding in your favor thirty [30] days after its
maturity") was not a defense against petitioner's demand for physical surrender of the Note on at
least three grounds: firstly, such term was never brought to the attention of petitioner Sesbreño at
the time the money market placement with Philfinance was made; secondly, such term runs counter
to the very purpose of the custodianship or depositary agreement as an integral part of a money
market transaction; and thirdly, it is inconsistent with the provisions of Article 1988 of the Civil Code
noted above. Indeed, in principle, petitioner became entitled to demand physical delivery of the Note
held by Pilipinas as soon as petitioner's money market placement matured on 13 March 1981
without payment from Philfinance.

We conclude, therefore, that private respondent Pilipinas must respond to petitioner for damages
sustained by arising out of its breach of duty. By failing to deliver the Note to the petitioner as
depositor-beneficiary of the thing deposited, Pilipinas effectively and unlawfully deprived petitioner of
the Note deposited with it. Whether or not Pilipinas itself benefitted from such conversion or unlawful
deprivation inflicted upon petitioner, is of no moment for present purposes. Prima facie, the damages
suffered by petitioner consisted of P304,533.33, the portion of the DMC PN No. 2731 assigned to
petitioner but lost by him by reason of discharge of the Note by compensation, plus legal interest of
six percent (6%)per annum containing from 14 March 1981.

The conclusion we have reached is, of course, without prejudice to such right of reimbursement as
Pilipinas may have vis-a-vis Philfinance.

III.

The third principal contention of petitioner — that Philfinance and private respondents Delta and
Pilipinas should be treated as one corporate entity — need not detain us for long.

In the first place, as already noted, jurisdiction over the person of Philfinance was never acquired
either by the trial court nor by the respondent Court of Appeals. Petitioner similarly did not seek to
implead Philfinance in the Petition before us.

Secondly, it is not disputed that Philfinance and private respondents Delta and Pilipinas have been
organized as separate corporate entities. Petitioner asks us to pierce their separate corporate
entities, but has been able only to cite the presence of a common Director — Mr. Ricardo Silverio,
Sr., sitting on the Board of Directors of all three (3) companies. Petitioner has neither alleged nor
proved that one or another of the three (3) concededly related companies used the other two (2) as
mere alter egos or that the corporate affairs of the other two (2) were administered and managed for
the benefit of one. There is simply not enough evidence of record to justify disregarding the separate
corporate personalities of delta and Pilipinas and to hold them liable for any assumed or
undetermined liability of Philfinance to petitioner.
28

WHEREFORE, for all the foregoing, the Decision and Resolution of the Court of Appeals in C.A.-
G.R. CV No. 15195 dated 21 march 1989 and 17 July 1989, respectively, are hereby MODIFIED and
SET ASIDE, to the extent that such Decision and Resolution had dismissed petitioner's complaint
against Pilipinas Bank. Private respondent Pilipinas bank is hereby ORDERED to indemnify
petitioner for damages in the amount of P304,533.33, plus legal interest thereon at the rate of six
percent (6%) per annum counted from 2 April 1981. As so modified, the Decision and Resolution of
the Court of Appeals are hereby AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Bidin, Davide, Jr., Romero and Melo, JJ., concur.

# Footnotes

1 Exhibit "C", Folder of Exhibits, p. 3; TSN, 14 June 1983, p. 41.

2 Records, p. 441; Plaintiff's Memorandum, p. 3.

3 Id., p. 451; Plaintiff's Memorandum, p. 13.

4 TSN, 14 June 1983, p. 35.

5 Petitioner explained that he did not implead Philfinance as party defendant

because the latter was under rehabilitation by the Securities and Exchange
Commission (TSN of the Pre-trial Conference, pp. 6 and 30; dated 04 March 1983).

6 Court of Appeals' Decision, p. 8; Rollo, p. 90.

7 Private respondent Delta adopted as its own the Memorandum filed by private
respondent Pilipinas (Rollo, pp. 269-73).

8 Rollo, p. 6; Petition, p. 5.

9 Id., p. 88.

10 TSN, 17 August 1983, p. 36.

11 Records, pp. 36-37.

12 National Bank of Bristol v. Bartolome & O.R. Co., 59 A. 134, 138. See also, in this
connection, Consolidated Plywood v. IFC Leasing, 149 SCRA 449 (1987).

13 Exhibit "3," Records, p. 240.

14 National Investment and Development Corporation v. De Los Angeles, 40 SCRA

487 (1971); Bastida v. Dy Buncio & Co., 93 Phil. 195 (1953). See also Articles 1285
and 1625, Civil Code.
 15 Article 1300, Civil Code.

16 Article 1292, id.

17 127 SCRA 636 (1984).

18 127 SCRA at 645-646.

19 Records, p, 451; Plaintiff's Memorandum, p. 13.

20 Gonzales v. Land Bank of the Philippines, 183 SCRA 520 (1990); Philippine
National bank v. General Acceptance and Finance Corp., 161 SCRA 449 (1988);
National Investment and Development Corporation v. De los Angeles, 40 SCRA 489
(1971); Montinola v. Philippine National Bank, 88 Phil. 178 (1951); National
Exchange Company, Ltd. v. Ramos, 51 Phil. 310 (1927); Sison v. Yap-Tico, 37 Phil.
584 (1918).

21 37 Phil. 584 (1918).

22 37 Phil. at 589. See also Rodriguez v. Court of Appeals, 207 SCRA 553, 559

(1992). See, generally, Philippine National Bank v. General Acceptance and Finance
Corp., 161 SCRA 449, 457 (1988).

23 Petitioner's Memorandum, p. 12; Rollo, p. 221.

24 The DCR specified the amount of P307,933.33 as the extent to which DMC PN
No. 2731 pertained to petitioner Raul Sesbreño. This amount probably refers to the
placement of P300,000.00 by petitioner plus interest from 9 February 1981 until the
maturity date of DMC PN No. 2731, i.e., 6 April 1981.

25 Complaint, pp. 2-3; Rollo, pp. 23-24; TSN of 11 April 1983, p. 51; TSN, 9 October
1986, pp. 15-16. See also Minutes of the Pre-trial Conference, dated 04 March 1983,
p. 9.

26 Article 1988, Civil Code.

27 See, in this connection, the second and third "whereas" clauses of P.D. No. 678,
dated 2 April 1975.

28 Pabalan v. National Labor Relations Commission, 184 SCRA 495 (1990); Del
Rosario v. National Labor Relations Commission, 187 SCRA 777 (1990); Remo, Jr.
v. Intermediate Appellate Court, 172 SCRA 405 (1989).

Case digest:
Sesbreño v. Court of Appeals [G.R. No. 89252. May 24, 1993]

FACTS
Petitioner Raul Sesbreño made a money market placement in the amount
of P300,000.00 with the Philippine Underwriters Finance Corporation
(“Philfinance”). The latter issued a Certificate of Confirmation of Sale
“without recourse” from Delta Motors Corporation Promissory Note, a
Certificate of securities indicating the sale to petitioner, with the notation
that the said security was in custodianship of Pilipinas Bank, andpost-dated
checks payable with petitioner as payee, Philfinance as drawer. Petitioner
approached private respondent Pilipinas Bank and handed her a demand
letter informing the bank that his placement with Philfinance had remained
unpaid and outstanding, and that he in effect was asking for the physical
delivery of the underlying promissory note. Pilipinas did not deliver the
Note, nor any certificate of participation in respect thereof, to petitioner.

ISSUES
(a) Whether or not Pilipinas Bank is liable for its action.

(b)Whether or not non-negotiable instruments are transferrable.

RULING
(1) YES. Private respondent Pilipinas bank is liable for damages plus legal
interest thereon by arising out of its breach of duty. By failing to deliver the
Note to the petitioner as depositor-beneficiary of the thing deposited,
Pilipinas effectively and unlawfully deprived petitioner of the Note deposited
with it. Whether or not Pilipinas itself benefitted from such conversion or
unlawful deprivation inflicted upon petitioner, is of no moment for present
purposes.In the case at bar, the custodian-depositary bank Pilipinas
refused to deliver the security deposited with it when petitioner first
demanded physical delivery thereof. Instead of complying with the demand
of the petitioner, Pilipinas purported to require and await the instructions of
Philfinance, in obvious contravention of its undertaking under the DCR to
effect physical delivery of the Note upon receipt of “written instructions”
from petitioner Sesbreño.
(2) YES. A non-negotiable instrument may, obviously, not be negotiated;
but it may be assigned or transferred, absent an express prohibition against
assignment or transfer written in the face of the instrument. It is important
to bear in mind that the negotiation of a negotiable instrument must be
distinguished from the assignment or transfer of an instrument whether that
be negotiable or non-negotiable. Only an instrument qualifying as a
negotiable instrument under the relevant statute may be negotiated either
by indorsement thereof coupled with delivery, or by delivery alone where
the negotiable instrument is in bearer form. A negotiable instrument may,
however, instead of being negotiated, also be assigned or transferred. The
legal consequences of negotiation as distinguished from assignment of a
negotiable instrument are, of course, different.

8.
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 105938 September 20, 1996

TEODORO R. REGALA, EDGARDO J. ANGARA, AVELINO V. CRUZ, JOSE C. CONCEPCION,

ROGELIO A. VINLUAN, VICTOR P. LAZATIN and EDUARDO U. ESCUETA, petitioners, 
vs.
THE HONORABLE SANDIGANBAYAN, First Division, REPUBLIC OF THE PHILIPPINES,
ACTING THROUGH THE PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, and RAUL
S. ROCO, respondents.

G.R. No. 108113 September 20, 1996

PARAJA G. HAYUDINI, petitioner, 
vs.
THE SANDIGANBAYAN and THE REPUBLIC OF THE PHILIPPINES, respondents.

KAPUNAN, J.:

These case touch the very cornerstone of every State's judicial system, upon which the workings of
the contentious and adversarial system in the Philippine legal process are based — the sanctity of
fiduciary duty in the client-lawyer relationship. The fiduciary duty of a counsel and advocate is also
what makes the law profession a unique position of trust and confidence, which distinguishes it from
any other calling. In this instance, we have no recourse but to uphold and strengthen the mantle of
protection accorded to the confidentiality that proceeds from the performance of the lawyer's duty to
his client.

The facts of the case are undisputed.

The matters raised herein are an offshoot of the institution of the Complaint on July 31, 1987 before
the Sandiganbayan by the Republic of the Philippines, through the Presidential Commission on
Good Government against Eduardo M. Cojuangco, Jr., as one of the principal defendants, for the
recovery of alleged ill-gotten wealth, which includes shares of stocks in the named corporations in
PCGG Case No. 33 (Civil Case No. 0033), entitled "Republic of the Philippines versus Eduardo
Cojuangco, et al."
1

Among the dependants named in the case are herein petitioners Teodoro Regala, Edgardo J.
Angara, Avelino V. Cruz, Jose C. Concepcion, Rogelio A. Vinluan, Victor P. Lazatin, Eduardo U.
Escueta and Paraja G. Hayudini, and herein private respondent Raul S. Roco, who all were then
partners of the law firm Angara, Abello, Concepcion, Regala and Cruz Law Offices (hereinafter
referred to as the ACCRA Law Firm). ACCRA Law Firm performed legal services for its clients,
which included, among others, the organization and acquisition of business associations and/or
organizations, with the correlative and incidental services where its members acted as incorporators,
or simply, as stockholders. More specifically, in the performance of these services, the members of
the law firm delivered to its client documents which substantiate the client's equity holdings, i.e.,
stock certificates endorsed in blank representing the shares registered in the client's name, and a
blank deed of trust or assignment covering said shares. In the course of their dealings with their
clients, the members of the law firm acquire information relative to the assets of clients as well as
their personal and business circumstances. As members of the ACCRA Law Firm, petitioners and
private respondent Raul Roco admit that they assisted in the organization and acquisition of the
companies included in Civil Case No. 0033, and in keeping with the office practice, ACCRA lawyers
acted as nominees-stockholders of the said corporations involved in sequestration proceedings. 2

On August 20, 1991, respondent Presidential Commission on Good Government (hereinafter

referred to as respondent PCGG) filed a "Motion to Admit Third Amended Complaint" and "Third
Amended Complaint" which excluded private respondent Raul S. Roco from the complaint in PCGG
Case No. 33 as party-defendant. Respondent PCGG based its exclusion of private respondent Roco
3

as party-defendant on his undertaking that he will reveal the identity of the principal/s for whom he
acted as nominee/stockholder in the companies involved in PCGG Case No. 33. 4

Petitioners were included in the Third Amended Complaint on the strength of the following
allegations:

14. Defendants Eduardo Cojuangco, Jr., Edgardo J. Angara, Jose C. Concepcion,

Teodoro Regala, Avelino V. Cruz, Rogelio A. Vinluan, Eduardo U. Escueta, Paraja G.
Hayudini and Raul Roco of the Angara Concepcion Cruz Regala and Abello law
offices (ACCRA) plotted, devised, schemed conspired and confederated with each
other in setting up, through the use of the coconut levy funds, the financial and
corporate framework and structures that led to the establishment of UCPB, UNICOM,
COCOLIFE, COCOMARK, CIC, and more than twenty other coconut levy funded
corporations, including the acquisition of San Miguel Corporation shares and its
institutionalization through presidential directives of the coconut monopoly. Through
insidious means and machinations, ACCRA, being the wholly-owned investment
arm, ACCRA Investments Corporation, became the holder of approximately fifteen
million shares representing roughly 3.3% of the total outstanding capital stock of
UCPB as of 31 March 1987. This ranks ACCRA Investments Corporation number 44
among the top 100 biggest stockholders of UCPB which has approximately
1,400,000 shareholders. On the other hand, corporate books show the name
Edgardo J. Angara as holding approximately 3,744 shares as of February, 1984. 5

In their answer to the Expanded Amended Complaint, petitioners ACCRA lawyers alleged that:

4.4 Defendants-ACCRA lawyers' participation in the acts with which their

codefendants are charged, was in furtherance of legitimate lawyering.
 4.4.1 In the course of rendering professional and legal services to
clients, defendants-ACCRA lawyers, Jose C. Concepcion, Teodoro
D. Regala, Rogelio A. Vinluan and Eduardo U. Escueta, became
holders of shares of stock in the corporations listed under their
respective names in Annex "A" of the expanded Amended Complaint
as incorporating or acquiring stockholders only and, as such, they do
not claim any proprietary interest in the said shares of stock.

4.5 Defendant ACCRA-lawyer Avelino V. Cruz was one of the incorporators in 1976
of Mermaid Marketing Corporation, which was organized for legitimate business
purposes not related to the allegations of the expanded Amended Complaint.
However, he has long ago transferred any material interest therein and therefore
denies that the "shares" appearing in his name in Annex "A" of the expanded
Amended Complaint are his assets. 6

Petitioner Paraja Hayudini, who had separated from ACCRA law firm, filed a separate answer
denying the allegations in the complaint implicating him in the alleged ill-gotten wealth. 7

Petitioners ACCRA lawyers subsequently filed their "COMMENT AND/OR OPPOSITION" dated
October 8, 1991 with Counter-Motion that respondent PCGG similarly grant the same treatment to
them (exclusion as parties-defendants) as accorded private respondent Roco.  The Counter-Motion
8

for dropping petitioners from the complaint was duly set for hearing on October 18, 1991 in
accordance with the requirements of Rule 15 of the Rules of Court.

In its "Comment," respondent PCGG set the following conditions precedent for the exclusion of
petitioners, namely: (a) the disclosure of the identity of its clients; (b) submission of documents
substantiating the lawyer-client relationship; and (c) the submission of the deeds of assignments
petitioners executed in favor of its client covering their respective 
shareholdings. 9

Consequently, respondent PCGG presented supposed proof to substantiate compliance by private

respondent Roco of the conditions precedent to warrant the latter's exclusion as party-defendant in
PCGG Case No. 33, to wit: (a) Letter to respondent PCGG of the counsel of respondent Roco dated
May 24, 1989 reiterating a previous request for reinvestigation by the PCGG in PCGG Case No. 33;
(b) Affidavit dated March 8, 1989 executed by private respondent Roco as Attachment to the letter
aforestated in (a); and (c) Letter of the Roco, Bunag, and Kapunan Law Offices dated September 21,
1988 to the respondent PCGG in behalf of private respondent Roco originally requesting the
reinvestigation and/or re-examination of the evidence of the PCGG against Roco in its Complaint in
PCGG Case No. 33.  10

It is noteworthy that during said proceedings, private respondent Roco did not refute petitioners'
contention that he did actually not reveal the identity of the client involved in PCGG Case No. 33, nor
had he undertaken to reveal the identity of the client for whom he acted as nominee-stockholder.  11

On March 18, 1992, respondent Sandiganbayan promulgated the Resolution, herein questioned,
denying the exclusion of petitioners in PCGG Case No. 33, for their refusal to comply with the
conditions required by respondent PCGG. It held:

xxx xxx xxx

ACCRA lawyers may take the heroic stance of not revealing the identity of the client
for whom they have acted, i.e. their principal, and that will be their choice. But until
 they do identify their clients, considerations of whether or not the privilege claimed by
the ACCRA lawyers exists cannot even begin to be debated. The ACCRA lawyers
cannot excuse themselves from the consequences of their acts until they have begun
to establish the basis for recognizing the privilege; the existence and identity of the
client.

This is what appears to be the cause for which they have been impleaded by the
PCGG as defendants herein.

5. The PCGG is satisfied that defendant Roco has demonstrated his agency and that
Roco has apparently identified his principal, which revelation could show the lack of
cause against him. This in turn has allowed the PCGG to exercise its power both
under the rules of Agency and under Section 5 of E.O. No. 14-A in relation to the
Supreme Court's ruling in Republic v. Sandiganbayan (173 SCRA 72).

The PCGG has apparently offered to the ACCRA lawyers the same conditions
availed of by Roco; full disclosure in exchange for exclusion from these proceedings
(par. 7, PCGG's COMMENT dated November 4, 1991). The ACCRA lawyers have
preferred not to make the disclosures required by the PCGG.

The ACCRA lawyers cannot, therefore, begrudge the PCGG for keeping them as
party defendants. In the same vein, they cannot compel the PCGG to be accorded
the same treatment accorded to Roco.

Neither can this Court.

WHEREFORE, the Counter Motion dated October 8, 1991 filed by the ACCRA
lawyers and joined in by Atty. Paraja G. Hayudini for the same treatment by the
PCGG as accorded to Raul S. Roco is DENIED for lack of merit.  12

ACCRA lawyers moved for a reconsideration of the above resolution but the same was denied by
the respondent Sandiganbayan. Hence, the ACCRA lawyers filed the petition for certiorari, docketed
as G.R. No. 105938, invoking the following grounds:

The Honorable Sandiganbayan gravely abused its discretion in subjecting petitioners

ACCRA lawyers who undisputably acted as lawyers in serving as nominee-
stockholders, to the strict application of the law of agency.

II

The Honorable Sandiganbayan committed grave abuse of discretion in not

considering petitioners ACCRA lawyers and Mr. Roco as similarly situated and,
therefore, deserving of equal treatment.

1. There is absolutely no evidence that Mr. Roco had revealed, or

had undertaken to reveal, the identities of the client(s) for whom he
acted as nominee-stockholder.
 2. Even assuming that Mr. Roco had revealed, or had undertaken to
reveal, the identities of the client(s), the disclosure does not constitute
a substantial distinction as would make the classification reasonable
under the equal protection clause.

3. Respondent Sandiganbayan sanctioned favoritism and undue

preference in favor of Mr. Roco in violation of the equal protection
clause.

III

The Honorable Sandiganbayan committed grave abuse of discretion in not holding

that, under the facts of this case, the attorney-client privilege prohibits petitioners
ACCRA lawyers from revealing the identity of their client(s) and the other information
requested by the PCGG.

1. Under the peculiar facts of this case, the attorney-client privilege

includes the identity of the client(s).

2. The factual disclosures required by the PCGG are not limited to the
identity of petitioners ACCRA lawyers' alleged client(s) but extend to
other privileged matters.

IV

The Honorable Sandiganbayan committed grave abuse of discretion in not requiring

that the dropping of party-defendants by the PCGG must be based on reasonable
and just grounds and with due consideration to the constitutional right of petitioners
ACCRA lawyers to the equal protection of the law.

Petitioner Paraja G. Hayudini, likewise, filed his own motion for reconsideration of the March 18,
1991 resolution which was denied by respondent Sandiganbayan. Thus, he filed a separate petition
for certiorari, docketed as G.R. No. 108113, assailing respondent Sandiganbayan's resolution on
essentially the same grounds averred by petitioners in G.R. No. 105938.

Petitioners contend that the exclusion of respondent Roco as party-defendant in PCGG Case No. 33
grants him a favorable treatment, on the pretext of his alleged undertaking to divulge the identity of
his client, giving him an advantage over them who are in the same footing as partners in the ACCRA
law firm. Petitioners further argue that even granting that such an undertaking has been assumed by
private respondent Roco, they are prohibited from revealing the identity of their principal under their
sworn mandate and fiduciary duty as lawyers to uphold at all times the confidentiality of information
obtained during such lawyer-client relationship.

Respondent PCGG, through its counsel, refutes petitioners' contention, alleging that the revelation of
the identity of the client is not within the ambit of the lawyer-client confidentiality privilege, nor are the
documents it required (deeds of assignment) protected, because they are evidence of nominee
status. 
13

In his comment, respondent Roco asseverates that respondent PCGG acted correctly in excluding
him as party-defendant because he "(Roco) has not filed an Answer. PCGG had therefore the right
to dismiss Civil Case No.0033 as to Roco 'without an order of court by filing a notice of
dismissal',"   and he has undertaken to identify his principal. 
14 15

Petitioners' contentions are impressed with merit.

It is quite apparent that petitioners were impleaded by the PCGG as co-defendants to force them to
disclose the identity of their clients. Clearly, respondent PCGG is not after petitioners but the "bigger
fish" as they say in street parlance. This ploy is quite clear from the PCGG's willingness to cut a deal
with petitioners — the names of their clients in exchange for exclusion from the complaint. The
statement of the Sandiganbayan in its questioned resolution dated March 18, 1992 is explicit:

ACCRA lawyers may take the heroic stance of not revealing the identity of the client
for whom they have acted, i.e, their principal, and that will be their choice. But until
they do identify their clients, considerations of whether or not the privilege claimed by
the ACCRA lawyers exists cannot even begin to be debated. The ACCRA lawyers
cannot excuse themselves from the consequences of their acts until they have begun
to establish the basis for recognizing the privilege; the existence and identity of the
client.

This is what appears to be the cause for which they have been impleaded by the
PCGG as defendants herein. (Emphasis ours)

In a closely related case, Civil Case No. 0110 of the Sandiganbayan, Third Division, entitled
"Primavera Farms, Inc., et al. vs. Presidential Commission on Good Government" respondent
PCGG, through counsel Mario Ongkiko, manifested at the hearing on December 5, 1991 that the
PCGG wanted to establish through the ACCRA that their "so called client is Mr. Eduardo
Cojuangco;" that "it was Mr. Eduardo Cojuangco who furnished all the monies to those subscription
payments in corporations included in Annex "A" of the Third Amended Complaint; that the ACCRA
lawyers executed deeds of trust and deeds of assignment, some in the name of particular persons;
some in blank.

We quote Atty. Ongkiko:

ATTY. ONGKIKO:

With the permission of this Hon. Court. I propose to establish through these ACCRA
lawyers that, one, their so-called client is Mr. Eduardo Cojuangco. Second, it was Mr.
Eduardo Cojuangco who furnished all the monies to these subscription payments of
these corporations who are now the petitioners in this case. Third, that these lawyers
executed deeds of trust, some in the name of a particular person, some in blank.
Now, these blank deeds are important to our claim that some of the shares are
actually being held by the nominees for the late President Marcos. Fourth, they also
executed deeds of assignment and some of these assignments have also blank
assignees. Again, this is important to our claim that some of the shares are for Mr.
Conjuangco and some are for Mr. Marcos. Fifth, that most of thes e corporations are
really just paper corporations. Why do we say that? One: There are no really fixed
sets of officers, no fixed sets of directors at the time of incorporation and even up to
1986, which is the crucial year. And not only that, they have no permits from the
municipal authorities in Makati. Next, actually all their addresses now are care of
Villareal Law Office. They really have no address on records. These are some of the
 principal things that we would ask of these nominees stockholders, as they called
themselves.  16

It would seem that petitioners are merely standing in for their clients as defendants in the complaint.
Petitioners are being prosecuted solely on the basis of activities and services performed in the
course of their duties as lawyers. Quite obviously, petitioners' inclusion as co-defendants in the
complaint is merely being used as leverage to compel them to name their clients and consequently
to enable the PCGG to nail these clients. Such being the case, respondent PCGG has no valid
cause of action as against petitioners and should exclude them from the Third Amended Complaint.

II

The nature of lawyer-client relationship is premised on the Roman Law concepts of locatio conductio
operarum(contract of lease of services) where one person lets his services and another hires them
without reference to the object of which the services are to be performed, wherein lawyers' services
may be compensated by honorarium or for hire,   and mandato (contract of agency) wherein a friend
17

on whom reliance could be placed makes a contract in his name, but gives up all that he gained by
the contract to the person who requested him.   But the lawyer-client relationship is more than that
18

of the principal-agent and lessor-lessee.

In modern day perception of the lawyer-client relationship, an attorney is more than a mere agent or
servant, because he possesses special powers of trust and confidence reposed on him by his
client.   A lawyer is also as independent as the judge of the court, thus his powers are entirely
19

different from and superior to those of an ordinary agent.  Moreover, an attorney also occupies what
20

may be considered as a "quasi-judicial office" since he is in fact an officer of the Court   and
21

exercises his judgment in the choice of courses of action to be taken favorable to his client.

Thus, in the creation of lawyer-client relationship, there are rules, ethical conduct and duties that
breathe life into it, among those, the fiduciary duty to his client which is of a very delicate, exacting
and confidential character, requiring a very high degree of fidelity and good faith,   that is required by
22

reason of necessity and public interest   based on the hypothesis that abstinence from seeking legal
23

advice in a good cause is an evil which is fatal to the administration of justice.  24

It is also the strict sense of fidelity of a lawyer to his client that distinguishes him from
any other professional in society. This conception is entrenched and embodies
centuries of established and stable tradition.   In Stockton v. Ford,  the U. S.
25 26

Supreme Court held:

There are few of the business relations of life involving a higher trust and confidence
than that of attorney and client, or generally speaking, one more honorably and
faithfully discharged; few more anxiously guarded by the law, or governed by the
sterner principles of morality and justice; and it is the duty of the court to administer
them in a corresponding spirit, and to be watchful and industrious, to see that
confidence thus reposed shall not be used to the detriment or prejudice of the rights
of the party bestowing it.  27

In our jurisdiction, this privilege takes off from the old Code of Civil Procedure enacted by the
Philippine Commission on August 7, 1901. Section 383 of the Code specifically "forbids counsel,
without authority of his client to reveal any communication made by the client to him or his advice
given thereon in the course of professional employment."  Passed on into various provisions of the
28

Rules of Court, the attorney-client privilege, as currently worded provides:

 Sec. 24. Disqualification by reason of privileged communication. — The following
persons cannot testify as to matters learned in confidence in the following cases:

xxx xxx xxx

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, or with a view to, professional employment, can an attorney's secretary,
stenographer, or clerk be examined, without the consent of the client and his
employer, concerning any fact the knowledge of which has been acquired in such
capacity. 29

Further, Rule 138 of the Rules of Court states:

Sec. 20. It is the duty of an attorney: (e) to maintain inviolate the confidence, and at
every peril to himself, to preserve the secrets of his client, and to accept no
compensation in connection with his client's business except from him or with his
knowledge and approval.

This duty is explicitly mandated in Canon 17 of the Code of Professional Responsibility which
provides that:

Canon 17. A lawyer owes fidelity to the cause of his client and he shall be mindful of
the trust and confidence reposed in him.

Canon 15 of the Canons of Professional Ethics also demands a lawyer's fidelity to client:

The lawyers owes "entire devotion to the interest of the client, warm zeal in the
maintenance and defense of his rights and the exertion of his utmost learning and
ability," to the end that nothing be taken or be withheld from him, save by the rules of
law, legally applied. No fear of judicial disfavor or public popularity should restrain
him from the full discharge of his duty. In the judicial forum the client is entitled to the
benefit of any and every remedy and defense that is authorized by the law of the
land, and he may expect his lawyer to assert every such remedy or defense. But it is
steadfastly to be borne in mind that the great trust of the lawyer is to be performed
within and not without the bounds of the law. The office of attorney does not permit,
much less does it demand of him for any client, violation of law or any manner of
fraud or chicanery. He must obey his own conscience and not that of his client.

Considerations favoring confidentially in lawyer-client relationships are many and serve several
constitutional and policy concerns. In the constitutional sphere, the privilege gives flesh to one of the
most sacrosanct rights available to the accused, the right to counsel. If a client were made to choose
between legal representation without effective communication and disclosure and legal
representation with all his secrets revealed then he might be compelled, in some instances, to either
opt to stay away from the judicial system or to lose the right to counsel. If the price of disclosure is
too high, or if it amounts to self incrimination, then the flow of information would be curtailed thereby
rendering the right practically nugatory. The threat this represents against another sacrosanct
individual right, the right to be presumed innocent is at once self-evident.

Encouraging full disclosure to a lawyer by one seeking legal services opens the door to a whole
spectrum of legal options which would otherwise be circumscribed by limited information
engendered by a fear of disclosure. An effective lawyer-client relationship is largely dependent upon
the degree of confidence which exists between lawyer and client which in turn requires a situation
which encourages a dynamic and fruitful exchange and flow of information. It necessarily follows that
in order to attain effective representation, the lawyer must invoke the privilege not as a matter of
option but as a matter of duty and professional responsibility.

The question now arises whether or not this duty may be asserted in refusing to disclose the name
of petitioners' client(s) in the case at bar. Under the facts and circumstances obtaining in the instant
case, the answer must be in the affirmative.

As a matter of public policy, a client's identity should not be shrouded in mystery   Under this
30

premise, the general rule in our jurisdiction as well as in the United States is that a lawyer may not
invoke the privilege and refuse to divulge the name or identity of this client. 
31

The reasons advanced for the general rule are well established.

First, the court has a right to know that the client whose privileged information is sought to be
protected is flesh and blood.

Second, the privilege begins to exist only after the attorney-client relationship has been established.
The attorney-client privilege does not attach until there is a client.

Third, the privilege generally pertains to the subject matter of the relationship.

Finally, due process considerations require that the opposing party should, as a general rule, know
his adversary. "A party suing or sued is entitled to know who his opponent is."   He cannot be
32

obliged to grope in the dark against unknown forces.  33

Notwithstanding these considerations, the general rule is however qualified by some important
exceptions.

1) Client identity is privileged where a strong probability exists that revealing the client's name would
implicate that client in the very activity for which he sought the lawyer's advice.

In Ex-Parte Enzor,   a state supreme court reversed a lower court order requiring a lawyer to divulge
34

the name of her client on the ground that the subject matter of the relationship was so closely related
to the issue of the client's identity that the privilege actually attached to both. In Enzor, the
unidentified client, an election official, informed his attorney in confidence that he had been offered a
bribe to violate election laws or that he had accepted a bribe to that end. In her testimony, the
attorney revealed that she had advised her client to count the votes correctly, but averred that she
could not remember whether her client had been, in fact, bribed. The lawyer was cited for contempt
for her refusal to reveal his client's identity before a grand jury. Reversing the lower court's contempt
orders, the state supreme court held that under the circumstances of the case, and under the
exceptions described above, even the name of the client was privileged.

U .S. v. Hodge and Zweig,  involved the same exception, i.e. that client identity is privileged in those
35

instances where a strong probability exists that the disclosure of the client's identity would implicate
the client in the very criminal activity for which the lawyer's legal advice was obtained.
The Hodge case involved federal grand jury proceedings inquiring into the activities of the "Sandino
Gang," a gang involved in the illegal importation of drugs in the United States. The respondents, law
partners, represented key witnesses and suspects including the leader of the gang, Joe Sandino.

In connection with a tax investigation in November of 1973, the IRS issued summons to Hodge and
Zweig, requiring them to produce documents and information regarding payment received by
Sandino on behalf of any other person, and vice versa. The lawyers refused to divulge the names.
The Ninth Circuit of the United States Court of Appeals, upholding non-disclosure under the facts
and circumstances of the case, held:

A client's identity and the nature of that client's fee arrangements may be privileged
where the person invoking the privilege can show that a strong probability exists that
disclosure of such information would implicate that client in the very criminal activity
for which legal advice was sought Baird v. Koerner, 279 F. 2d at 680. While in Baird
Owe enunciated this rule as a matter of California law, the rule also reflects federal
law. Appellants contend that the Baird exception applies to this case.

The Baird exception is entirely consonant with the principal policy behind the

attorney-client privilege. "In order to promote freedom of consultation of legal
advisors by clients, the apprehension of compelled disclosure from the legal advisors
must be removed; hence, the law must prohibit such disclosure except on the client's
consent." 8 J. Wigmore, supra sec. 2291, at 545. In furtherance of this policy, the
client's identity and the nature of his fee arrangements are, in exceptional cases,
protected as confidential communications.  36

2) Where disclosure would open the client to civil liability; his identity is privileged. For instance, the
peculiar facts and circumstances of Neugass v. Terminal Cab Corporation,  prompted the New York
37

Supreme Court to allow a lawyer's claim to the effect that he could not reveal the name of his client
because this would expose the latter to civil litigation.

In the said case, Neugass, the plaintiff, suffered injury when the taxicab she was riding, owned by
respondent corporation, collided with a second taxicab, whose owner was unknown. Plaintiff brought
action both against defendant corporation and the owner of the second cab, identified in the
information only as John Doe. It turned out that when the attorney of defendant corporation
appeared on preliminary examination, the fact was somehow revealed that the lawyer came to know
the name of the owner of the second cab when a man, a client of the insurance company, prior to
the institution of legal action, came to him and reported that he was involved in a car accident. It was
apparent under the circumstances that the man was the owner of the second cab. The state
supreme court held that the reports were clearly made to the lawyer in his professional capacity. The
court said:

That his employment came about through the fact that the insurance company had
hired him to defend its policyholders seems immaterial. The attorney is such cases is
clearly the attorney for the policyholder when the policyholder goes to him to report
an occurrence contemplating that it would be used in an action or claim against
him. 38

xxx xxx xxx

All communications made by a client to his counsel, for the purpose of professional
advice or assistance, are privileged, whether they relate to a suit pending or
contemplated, or to any other matter proper for such advice or aid; . . . And whenever
 the communication made, relates to a matter so connected with the employment as
attorney or counsel as to afford presumption that it was the ground of the address by
the client, then it is privileged from disclosure. . .

It appears . . . that the name and address of the owner of the second cab came to
the attorney in this case as a confidential communication. His client is not seeking to
use the courts, and his address cannot be disclosed on that theory, nor is the present
action pending against him as service of the summons on him has not been effected.
The objections on which the court reserved decision are sustained.  39

In the case of Matter of Shawmut Mining Company,  the lawyer involved was required by a lower
40

court to disclose whether he represented certain clients in a certain transaction. The purpose of the
court's request was to determine whether the unnamed persons as interested parties were
connected with the purchase of properties involved in the action. The lawyer refused and brought the
question to the State Supreme Court. Upholding the lawyer's refusal to divulge the names of his
clients the court held:

If it can compel the witness to state, as directed by the order appealed from, that he
represented certain persons in the purchase or sale of these mines, it has made
progress in establishing by such evidence their version of the litigation. As already
suggested, such testimony by the witness would compel him to disclose not only that
he was attorney for certain people, but that, as the result of communications made to
him in the course of such employment as such attorney, he knew that they were
interested in certain transactions. We feel sure that under such conditions no case
has ever gone to the length of compelling an attorney, at the instance of a hostile
litigant, to disclose not only his retainer, but the nature of the transactions to which it
related, when such information could be made the basis of a suit against his client.  41

3) Where the government's lawyers have no case against an attorney's client unless, by revealing
the client's name, the said name would furnish the only link that would form the chain of testimony
necessary to convict an individual of a crime, the client's name is privileged.

In Baird vs. Korner,  a lawyer was consulted by the accountants and the lawyer of certain
42

undisclosed taxpayers regarding steps to be taken to place the undisclosed taxpayers in a favorable
position in case criminal charges were brought against them by the U.S. Internal Revenue Service
(IRS).

It appeared that the taxpayers' returns of previous years were probably incorrect and the taxes
understated. The clients themselves were unsure about whether or not they violated tax laws and
sought advice from Baird on the hypothetical possibility that they had. No investigation was then
being undertaken by the IRS of the taxpayers. Subsequently, the attorney of the taxpayers delivered
to Baird the sum of $12, 706.85, which had been previously assessed as the tax due, and another
amount of money representing his fee for the advice given. Baird then sent a check for $12,706.85
to the IRS in Baltimore, Maryland, with a note explaining the payment, but without naming his clients.
The IRS demanded that Baird identify the lawyers, accountants, and other clients involved. Baird
refused on the ground that he did not know their names, and declined to name the attorney and
accountants because this constituted privileged communication. A petition was filed for the
enforcement of the IRS summons. For Baird's repeated refusal to name his clients he was found
guilty of civil contempt. The Ninth Circuit Court of Appeals held that, a lawyer could not be forced to
reveal the names of clients who employed him to pay sums of money to the government voluntarily
in settlement of undetermined income taxes, unsued on, and with no government audit or
investigation into that client's income tax liability pending. The court emphasized the exception that a
client's name is privileged when so much has been revealed concerning the legal services rendered
that the disclosure of the client's identity exposes him to possible investigation and sanction by
government agencies. The Court held:

The facts of the instant case bring it squarely within that exception to the general
rule. Here money was received by the government, paid by persons who thereby
admitted they had not paid a sufficient amount in income taxes some one or more
years in the past. The names of the clients are useful to the government for but one
purpose — to ascertain which taxpayers think they were delinquent, so that it may
check the records for that one year or several years. The voluntary nature of the
payment indicates a belief by the taxpayers that more taxes or interest or penalties
are due than the sum previously paid, if any. It indicates a feeling of guilt for
nonpayment of taxes, though whether it is criminal guilt is undisclosed. But it may
well be the link that could form the chain of testimony necessary to convict an
individual of a federal crime. Certainly the payment and the feeling of guilt are the
reasons the attorney here involved was employed — to advise his clients what,
under the circumstances, should be done.  43

Apart from these principal exceptions, there exist other situations which could qualify as exceptions
to the general rule.

For example, the content of any client communication to a lawyer lies within the privilege if it is
relevant to the subject matter of the legal problem on which the client seeks legal
assistance.   Moreover, where the nature of the attorney-client relationship has been previously
44

disclosed and it is the identity which is intended to be confidential, the identity of the client has been
held to be privileged, since such revelation would otherwise result in disclosure of the entire
transaction. 45

Summarizing these exceptions, information relating to the identity of a client may fall within the ambit
of the privilege when the client's name itself has an independent significance, such that disclosure
would then reveal client confidences.  46

The circumstances involving the engagement of lawyers in the case at bench, therefore, clearly
reveal that the instant case falls under at least two exceptions to the general rule. First, disclosure of
the alleged client's name would lead to establish said client's connection with the very fact in issue of
the case, which is privileged information, because the privilege, as stated earlier, protects the
subject matter or the substance (without which there would be not attorney-client relationship).

The link between the alleged criminal offense and the legal advice or legal service sought was duly
establishes in the case at bar, by no less than the PCGG itself. The key lies in the three specific
conditions laid down by the PCGG which constitutes petitioners' ticket to non-prosecution should
they accede thereto:

(a) the disclosure of the identity of its clients;

(b) submission of documents substantiating the lawyer-client relationship; and

(c) the submission of the deeds of assignment petitioners executed in favor of their
clients covering their respective shareholdings.
From these conditions, particularly the third, we can readily deduce that the clients indeed consulted
the petitioners, in their capacity as lawyers, regarding the financial and corporate structure,
framework and set-up of the corporations in question. In turn, petitioners gave their professional
advice in the form of, among others, the aforementioned deeds of assignment covering their client's
shareholdings.

There is no question that the preparation of the aforestated documents was part and parcel of
petitioners' legal service to their clients. More important, it constituted an integral part of their duties
as lawyers. Petitioners, therefore, have a legitimate fear that identifying their clients would implicate
them in the very activity for which legal advice had been sought, i.e., the alleged accumulation of ill-
gotten wealth in the aforementioned corporations.

Furthermore, under the third main exception, revelation of the client's name would obviously provide
the necessary link for the prosecution to build its case, where none otherwise exists. It is the link, in
the words of Baird, "that would inevitably form the chain of testimony necessary to convict the (client)
of a . . . crime." 
47

An important distinction must be made between a case where a client takes on the services of an
attorney for illicit purposes, seeking advice about how to go around the law for the purpose of
committing illegal activities and a case where a client thinks he might have previously committed
something illegal and consults his attorney about it. The first case clearly does not fall within the
privilege because the same cannot be invoked for purposes illegal. The second case falls within the
exception because whether or not the act for which the client sought advice turns out to be illegal,
his name cannot be used or disclosed if the disclosure leads to evidence, not yet in the hands of the
prosecution, which might lead to possible action against him.

These cases may be readily distinguished, because the privilege cannot be invoked or used as a
shield for an illegal act, as in the first example; while the prosecution may not have a case against
the client in the second example and cannot use the attorney client relationship to build up a case
against the latter. The reason for the first rule is that it is not within the professional character of a
lawyer to give advice on the commission of a crime.   The reason for the second has been stated in
48

the cases above discussed and are founded on the same policy grounds for which the attorney-
client privilege, in general, exists.

In Matter of Shawmut Mining Co., supra, the appellate court therein stated that "under such
conditions no case has ever yet gone to the length of compelling an attorney, at the instance of a
hostile litigant, to disclose not only his retainer, but the nature of the transactions to which it related,
when such information could be made the basis of a suit against his client."   "Communications
49

made to an attorney in the course of any personal employment, relating to the subject thereof, and
which may be supposed to be drawn out in consequence of the relation in which the parties stand to
each other, are under the seal of confidence and entitled to protection as privileged
communications."  Where the communicated information, which clearly falls within the privilege,
50

would suggest possible criminal activity but there would be not much in the information known to the
prosecution which would sustain a charge except that revealing the name of the client would open
up other privileged information which would substantiate the prosecution's suspicions, then the
client's identity is so inextricably linked to the subject matter itself that it falls within the protection.
The Baird exception, applicable to the instant case, is consonant with the principal policy behind the
privilege, i.e., that for the purpose of promoting freedom of consultation of legal advisors by clients,
apprehension of compelled disclosure from attorneys must be eliminated. This exception has
likewise been sustained in In re Grand Jury Proceedings  and Tillotson v. Boughner.  What these
51 52

cases unanimously seek to avoid is the exploitation of the general rule in what may amount to a
fishing expedition by the prosecution.
There are, after all, alternative source of information available to the prosecutor which do not depend
on utilizing a defendant's counsel as a convenient and readily available source of information in the
building of a case against the latter. Compelling disclosure of the client's name in circumstances
such as the one which exists in the case at bench amounts to sanctioning fishing expeditions by lazy
prosecutors and litigants which we cannot and will not countenance. When the nature of the
transaction would be revealed by disclosure of an attorney's retainer, such retainer is obviously
protected by the privilege.   It follows that petitioner attorneys in the instant case owe their client(s) a
53

duty and an obligation not to disclose the latter's identity which in turn requires them to invoke the
privilege.

In fine, the crux of petitioners' objections ultimately hinges on their expectation that if the prosecution
has a case against their clients, the latter's case should be built upon evidence painstakingly
gathered by them from their own sources and not from compelled testimony requiring them to reveal
the name of their clients, information which unavoidably reveals much about the nature of the
transaction which may or may not be illegal. The logical nexus between name and nature of
transaction is so intimate in this case the it would be difficult to simply dissociate one from the other.
In this sense, the name is as much "communication" as information revealed directly about the
transaction in question itself, a communication which is clearly and distinctly privileged. A lawyer
cannot reveal such communication without exposing himself to charges of violating a principle which
forms the bulwark of the entire attorney-client relationship.

The uberrimei fidei relationship between a lawyer and his client therefore imposes a strict liability for
negligence on the former. The ethical duties owing to the client, including confidentiality, loyalty,
competence, diligence as well as the responsibility to keep clients informed and protect their rights to
make decisions have been zealously sustained. In Milbank, Tweed, Hadley and McCloy
v. Boon,  the US Second District Court rejected the plea of the petitioner law firm that it breached its
54

fiduciary duty to its client by helping the latter's former agent in closing a deal for the agent's benefit
only after its client hesitated in proceeding with the transaction, thus causing no harm to its client.
The Court instead ruled that breaches of a fiduciary relationship in any context comprise a special
breed of cases that often loosen normally stringent requirements of causation and damages, and
found in favor of the client.

To the same effect is the ruling in Searcy, Denney, Scarola, Barnhart, and Shipley
P.A. v. Scheller  requiring strict obligation of lawyers vis-a-vis clients. In this case, a contingent fee
55

lawyer was fired shortly before the end of completion of his work, and sought payment quantum
meruit of work done. The court, however, found that the lawyer was fired for cause after he sought to
pressure his client into signing a new fee agreement while settlement negotiations were at a critical
stage. While the client found a new lawyer during the interregnum, events forced the client to settle
for less than what was originally offered. Reiterating the principle of fiduciary duty of lawyers to
clients in Meinhard v. Salmon  famously attributed to Justice Benjamin Cardozo that "Not honesty
56

alone, but the punctilioof an honor the most sensitive, is then the standard of behavior," the US
Court found that the lawyer involved was fired for cause, thus deserved no attorney's fees at all.

The utmost zeal given by Courts to the protection of the lawyer-client confidentiality privilege and
lawyer's loyalty to his client is evident in the duration of the protection, which exists not only during
the relationship, but extends even after the termination of the relationship.  57

Such are the unrelenting duties required by lawyers vis-a-vis their clients because the law, which the
lawyers are sworn to uphold, in the words of Oliver Wendell Holmes,   ". . . is an exacting goddess,
58

demanding of her votaries in intellectual and moral discipline." The Court, no less, is not prepared to
accept respondents' position without denigrating the noble profession that is lawyering, so extolled
by Justice Holmes in this wise:
 Every calling is great when greatly pursued. But what other gives such scope to
realize the spontaneous energy of one's soul? In what other does one plunge so
deep in the stream of life — so share its passions its battles, its despair, its triumphs,
both as witness and actor? . . . But that is not all. What a subject is this in which we
are united — this abstraction called the Law, wherein as in a magic mirror, we see
reflected, not only in our lives, but the lives of all men that have been. When I think
on this majestic theme my eyes dazzle. If we are to speak of the law as our mistress,
we who are here know that she is a mistress only to be won with sustained and
lonely passion — only to be won by straining all the faculties by which man is likened
to God.

We have no choice but to uphold petitioners' right not to reveal the identity of their clients under pain
of the breach of fiduciary duty owing to their clients, because the facts of the instant case clearly fall
within recognized exceptions to the rule that the client's name is not privileged information.

If we were to sustain respondent PCGG that the lawyer-client confidential privilege under the
circumstances obtaining here does not cover the identity of the client, then it would expose the
lawyers themselves to possible litigation by their clients in view of the strict fiduciary responsibility
imposed on them in the exercise of their duties.

The complaint in Civil Case No. 0033 alleged that the defendants therein, including herein
petitioners and Eduardo Cojuangco, Jr. conspired with each other in setting up through the
use of coconut levy funds the financial and corporate framework and structures that led to
the establishment of UCPB, UNICOM and others and that through insidious means and
machinations, ACCRA, using its wholly-owned investment arm, ACCRA Investment
Corporation, became the holder of approximately fifteen million shares representing roughly
3.3% of the total capital stock of UCPB as of 31 March 1987. The PCGG wanted to establish
through the ACCRA lawyers that Mr. Cojuangco is their client and it was Cojuangco who
furnished all the monies to the subscription payment; hence, petitioners acted as dummies,
nominees and/or agents by allowing themselves, among others, to be used as instrument in
accumulating ill-gotten wealth through government concessions, etc., which acts constitute
gross abuse of official position and authority, flagrant breach of public trust, unjust
enrichment, violation of the Constitution and laws of the Republic of the Philippines.

By compelling petitioners, not only to reveal the identity of their clients, but worse, to submit
to the PCGG documents substantiating the client-lawyer relationship, as well as deeds of
assignment petitioners executed in favor of its clients covering their respective
shareholdings, the PCGG would exact from petitioners a link "that would inevitably form the
chain of testimony necessary to convict the (client) of a crime."

III

In response to petitioners' last assignment of error, respondents alleged that the private
respondent was dropped as party defendant not only because of his admission that he acted
merely as a nominee but also because of his undertaking to testify to such facts and
circumstances "as the interest of truth may require, which includes . . . the identity of the
principal."59

First, as to the bare statement that private respondent merely acted as a lawyer and
nominee, a statement made in his out-of-court settlement with the PCGG, it is sufficient to
state that petitioners have likewise made the same claim not merely out-of-court but also in
the Answer to plaintiff's Expanded Amended Complaint, signed by counsel, claiming that
their acts were made in furtherance of "legitimate lawyering."  Being "similarly situated" in
60

this regard, public respondents must show that there exist other conditions and
circumstances which would warrant their treating the private respondent differently from
petitioners in the case at bench in order to evade a violation of the equal protection clause of
the Constitution.

To this end, public respondents contend that the primary consideration behind their decision
to sustain the PCGG's dropping of private respondent as a defendant was his promise to
disclose the identities of the clients in question. However, respondents failed to show — and
absolute nothing exists in the records of the case at bar — that private respondent actually
revealed the identity of his client(s) to the PCGG. Since the undertaking happens to be the
leitmotif of the entire arrangement between Mr. Roco and the PCGG, an undertaking which
is so material as to have justified PCGG's special treatment exempting the private
respondent from prosecution, respondent Sandiganbayan should have required proof of the
undertaking more substantial than a "bare assertion" that private respondent did indeed
comply with the undertaking. Instead, as manifested by the PCGG, only three documents
were submitted for the purpose, two of which were mere requests for re-investigation and
one simply disclosed certain clients which petitioners (ACCRA lawyers) were themselves
willing to reveal. These were clients to whom both petitioners and private respondent
rendered legal services while all of them were partners at ACCRA, and were not the clients
which the PCGG wanted disclosed for the alleged questioned transactions. 61

To justify the dropping of the private respondent from the case or the filing of the suit in the
respondent court without him, therefore, the PCGG should conclusively show that Mr. Roco
was treated as species apart from the rest of the ACCRA lawyers on the basis of a
classification which made substantial distinctions based on real differences. No such
substantial distinctions exist from the records of the case at bench, in violation of the equal
protection clause.

The equal protection clause is a guarantee which provides a wall of protection against
uneven application of status and regulations. In the broader sense, the guarantee operates
against uneven application of legal norms so
that all persons under similar circumstances would be accorded the same treatment.   Those
62

who fall within a particular class ought to be treated alike not only as to privileges granted but
also as to the liabilities imposed.

. . . What is required under this constitutional guarantee is the uniform operation of

legal norms so that all persons under similar circumstances would be accorded the
same treatment both in the privileges conferred and the liabilities imposed. As was
noted in a recent decision: "Favoritism and undue preference cannot be allowed. For
the principle is that equal protection and security shall be given to every person
under circumstances, which if not identical are analogous. If law be looked upon in
terms of burden or charges, those that fall within a class should be treated in the
same fashion, whatever restrictions cast on some in the group equally binding the
rest.
63

We find that the condition precedent required by the respondent PCGG of the petitioners for
their exclusion as parties-defendants in PCGG Case No. 33 violates the lawyer-client
confidentiality privilege. The condition also constitutes a transgression by respondents
Sandiganbayan and PCGG of the equal protection clause of the Constitution.  It is grossly
64

unfair to exempt one similarly situated litigant from prosecution without allowing the same
exemption to the others. Moreover, the PCGG's demand not only touches upon the question
 of the identity of their clients but also on documents related to the suspected transactions,
not only in violation of the attorney-client privilege but also of the constitutional right against
self-incrimination. Whichever way one looks at it, this is a fishing expedition, a free ride at the
expense of such rights.

An argument is advanced that the invocation by petitioners of the privilege of attorney-client

confidentiality at this stage of the proceedings is premature and that they should wait until
they are called to testify and examine as witnesses as to matters learned in confidence
before they can raise their objections. But petitioners are not mere witnesses. They are co-
principals in the case for recovery of alleged ill-gotten wealth. They have made their position
clear from the very beginning that they are not willing to testify and they cannot be compelled
to testify in view of their constitutional right against self-incrimination and of their fundamental
legal right to maintain inviolate the privilege of attorney-client confidentiality.

It is clear then that the case against petitioners should never be allowed to take its full course
in the Sandiganbayan. Petitioners should not be made to suffer the effects of further litigation
when it is obvious that their inclusion in the complaint arose from a privileged attorney-client
relationship and as a means of coercing them to disclose the identities of their clients. To
allow the case to continue with respect to them when this Court could nip the problem in the
bud at this early opportunity would be to sanction an unjust situation which we should not
here countenance. The case hangs as a real and palpable threat, a proverbial Sword of
Damocles over petitioners' heads. It should not be allowed to continue a day longer.

While we are aware of respondent PCGG's legal mandate to recover ill-gotten wealth, we will
not sanction acts which violate the equal protection guarantee and the right against self-
incrimination and subvert the lawyer-client confidentiality privilege.

WHEREFORE, IN VIEW OF THE FOREGOING, the Resolutions of respondent

Sandiganbayan (First Division) promulgated on March 18, 1992 and May 21, 1992 are
hereby ANNULLED and SET ASIDE. Respondent Sandiganbayan is further ordered to
exclude petitioners Teodoro D. Regala, Edgardo J. Angara, Avelino V. Cruz, Jose C.
Concepcion, Victor P. Lazatin, Eduardo U. Escueta and Paraja G. Hayuduni as parties-
defendants in SB Civil Case No. 0033 entitled "Republic of the Philippines v. Eduardo
Cojuangco, Jr., et al."

SO ORDERED.

Bellosillo, Melo and Francisco, JJ., concur.

Padilla, Panganiban and Torres, Jr., JJ., concur in the result.

Romero and Hermosisima, Jr., JJ., took no part.

Mendoza, J., is on leave.

 
 

Separate Opinions

 
VITUG, J., concurring:

The legal profession, despite all the unrestrained calumny hurled against it, is still the noblest
of professions. It exists upon the thesis that, in an orderly society that is opposed to all forms
of anarchy, it so occupies, as it should, an exalted position in the proper dispensation of
justice. In time, principles have evolved that would help ensure its effective ministration. The
protection of confidentiality of the lawyer-client relationship is one, and it has since been an
accepted firmament in the profession. It allows the lawyer and the client to institutionalize a
unique relationship based on full trust and confidence essential in a justice system that works
on the basis of substantive and procedural due process. To be sure, the rule is not without
its pitfalls, and demands against it may be strong, but these problems are, in the ultimate
analysis, no more than mere tests of vigor that have made and will make that rule endure.

I see in the case before us, given the attendant circumstances already detailed in
the ponencia, a situation of the Republic attempting to establish a case not on what it
perceives to be the strength of its own evidence but on what it could elicit from a counsel
against his client. I find it unreasonable for the Sandiganbayan to compel petitioners to
breach the trust reposed on them and succumb to a thinly disguised threat of incrimination.

Accordingly, I join my other colleague who vote for the GRANT of the petition.

DAVIDE, JR., J.: dissenting

The impressive presentation of the case in the ponencia of Mr. Justice Kapunan makes
difficult the espousal of a dissenting view. Nevertheless, I do not hesitate to express that
view because I strongly feel that this Court must confine itself to the key issue in this special
civil action for certiorari, viz., whether or not the Sandiganbayan acted with grave abuse of
discretion in not excluding the defendants, the petitioners herein, from the Third Amended
Complaint in Civil Case No. 0033. That issue, unfortunately, has been simply buried under
the avalanche of authorities upholding the sanctity of lawyer-client relationship which
appears to me to be prematurely invoked.

From the undisputed facts disclosed by the pleadings and summarized in the ponencia, I
cannot find my way clear to a conclusion that the Sandiganbayan committed grave abuse of
discretion in not acting favorably on the petitioners' prayer in their Comment to the PCGG's
Motion to Admit Third Amended Complaint.

The prerogative to determine who shall be made defendants in a civil case is initially vested
in the plaintiff, or the PCGG in this case. The control of the Court comes in only when the
issue of "interest" (§ 2, Rule 3, Rules of Court) as, e.g., whether an indispensable party has
not been joined, or whether there is a misjoinder of parties (§ 7, 8, and 9, Id.), is raised.
In the case below, the PCGG decided to drop or exclude from the complaint original co-
defendant Raul Roco because he had allegedly complied with the condition prescribed by
the PCGG, viz., undertake that he will reveal the identity of the principals for whom he acted
as nominee/stockholder in the companies involved in PCGG Case No. 0033. In short, there
was an agreement or compromise settlement between the PCGG and Roco. Accordingly,
the PCGG submitted a Third Amended Complaint without Roco as a defendant. No obstacle
to such an agreement has been insinuated. If Roco's revelation violated the confidentiality of
a lawyer-client relationship, he would be solely answerable therefor to his principals/clients
and, probably, to this Court in an appropriate disciplinary action if warranted. There is at all
no showing that Civil Case No. 0033 cannot further be proceeded upon or that any judgment
therein cannot be binding without Roco remaining as a defendant. Accordingly, the
admission of the Third Amended Complaint cannot be validly withheld by the
Sandiganbayan.

Are the petitioners, who did not file a formal motion to be excluded but only made the
request to that effect as a rider to their Comment to the Motion to Admit Third Amended
Complaint, entitled to be excluded from the Third Amended Complaint such that denial
thereof would constitute grave abuse of discretion on the Sandiganbayan's part? To me, the
answer is clearly in the negative.

The petitioners seek to be accorded the same benefit granted to or to be similarly treated as
Roco. Reason and logic dictate that they cannot, unless they too would make themselves
like Roco. Otherwise stated, they must first voluntarily adopt for themselves the factual milieu
created by Roco and must bind themselves to perform certain obligations as Roco. It is
precisely for this that in response to the petitioners' comment on the aforementioned Motion
to Admit Third Amended Complaint the PCGG manifested that it is willing to accord the
petitioners the treatment it gave Roco provided they would do what Roco had done, that is,
disclose the identity of their principals/clients and submit documents substantiating their
claimed lawyer-client relationship with the said principals/clients, as well as copies of deeds
of assignments the petitioners executed in favor of their principals/clients. The petitioners did
not do so because they believed that compliance thereof would breach the sanctity of their
fiduciary duty in a lawyer-client relationship.

It, indeed, appears that Roco has complied with his obligation as a consideration for his
exclusion from the Third Amended Complaint. The Sandiganbayan found that

5. The PCGG is satisfied that defendant Roco has demonstrated his agency and that
Roco has apparently identified his principal, which revelation could show the lack of
action against him. This in turn has allowed the PCGG to exercise its power both
under the rules of agency and under Section 5 of E.O. No. 14-1 in relation to the
Supreme Court's ruling in Republic v. Sandiganbayan (173 SCRA 72).

As a matter of fact, the PCGG presented evidence to substantiate Roco's compliance.

The ponencia itself so stated, thus:

. . . respondent PCGG presented evidence to substantiate compliance by private

respondent Roco of the conditions precedent to warrant the latter's exclusion as
party-defendant in PCGG Case No. 33, to wit: (a) Letter to respondent PCGG of the
counsel of respondent Roco dated May 24, 1989 reiterating a previous request for
reinvestigation by the PCGG in PCGG Case No. 33; (b) Affidavit dated March 8,
1989 executed by private respondent Roco as Attachment to the letter aforestated in
(a); and (c) Letter of Roco, Bunag, and Kapunan Law Offices dated September 21,
 1988 to the respondent in behalf of private respondent Roco originally requesting the
reinvestigation and/or re-examination of evidence by the PCGG it Complaint in
PCGG Case No. 33. (Id., 5-6).

These are the pieces of evidence upon which the Sandiganbayan founded its conclusion that
the PCGG was satisfied with Roco's compliance. The petitioners have not assailed such
finding as arbitrary.

The ponencia's observation then that Roco did not refute the petitioners' contention that he
did not comply with his obligation to disclose the identity of his principals is entirely irrelevant.

In view of their adamantine position, the petitioners did not, therefore, allow themselves to be
like Roco. They cannot claim the same treatment, much less compel the PCGG to drop them
as defendants, for nothing whatsoever. They have no right to make such a demand for until
they shall have complied with the conditions imposed for their exclusion, they cannot be
excluded except by way of a motion to dismiss based on the grounds allowed by law (e.g.,
those enumerated in § 1, Rule 16, Rules of Court). The rule of confidentiality under the
lawyer-client relationship is not a cause to exclude a party. It is merely aground for
disqualification of a witness (§ 24, Rule 130, Rules of Court) and may only be invoked at the
appropriate time, i.e., when a lawyer is under compulsion to answer as witness, as when,
having taken the witness stand, he is questioned as to such confidential communicator or
advice, or is being otherwise judicially coerced to produce, through subpoena duces
tecum or otherwise, letters or other documents containing the same privileged matter. But
none of the lawyers in this case is being required to testify about or otherwise reveal "any
[confidential] communication made by the client to him, or his advice given thereon in the
course of, or with a view to, professional employment." What they are being asked to do, in
line with their claim that they had done the acts ascribed to them in pursuance of their
professional relation to their clients, is to identify the latter to the PCGG and the Court; but
this, only if they so choose in order to be dropped from the complaint, such identification
being the condition under which the PCGG has expressed willingness to exclude them from
the action. The revelation is entirely optional, discretionary, on their part. The attorney-client
privilege is not therefor applicable.

Thus, the Sandiganbayan did not commit any abuse of discretion when it denied the
petitioners' prayer for their exclusion as party-defendants because they did not want to abide
with any of the conditions set by the PCGG. There would have been abuse if the
Sandiganbayan granted the prayer because then it would have capriciously, whimsically,
arbitrarily, and oppressively imposed its will on the PCGG.

Again, what the petitioners want is their exclusion from the Third Amended Complaint or the
dismissal of the case insofar as they are concerned because either they are invested with
immunity under the principle of confidentiality in a lawyer-client relationship, or the claims
against them in Civil Case No. 0033 are barred by such principle.

Even if we have to accommodate this issue, I still submit that the lawyer-client privilege
provides the petitioners no refuge. They are sued as principal defendants in Civil Case No.
0033, a case of the recovery of alleged ill-gotten wealth. Conspiracy is imputed to the
petitioners therein. In short, they are, allegedly, conspirators in the commission of the acts
complained of for being nominees of certain parties.

Their inclusion as defendants in justified under § 15, Article XI of the Constitution — which
provides that the right of the State to recover properties unlawfully acquired by public officials
or employees, from them or from their nominees or transferees, shall not be barred by
prescription, laches or estoppel — and E.O. No. 1 of 28 February 1986, E.O. No. 2 of 12
March 1986, E.O. No. 14 of 7 May 1986, and the Rules and Regulations of the PCGG.
Furthermore, § 2, Rule 110 of the Rules of Court requires that the complaint or information
should be "against all persons who appear to be responsible for the offense involved."

Hypothetically admitting the allegations in the complaint in Civil Case No. 0033, I find myself
unable to agree with the majority opinion that the petitioners are immune from suit or that
they have to be excluded as defendants, or that they cannot be compelled to reveal or
disclose the identity of their principals, all because of the sacred lawyer-client privilege.

This privilege is well put in Rule 130 of the Rules of Court, to wit:

§ 24. Disqualification by reason of privileged communication. — The following

persons cannot testify as to matters learned in confidence in the following cases:

xxx xxx xxx

(b) 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, or with a view to, professional employment, nor can an attorney's secretary,
stenographer, or clerk be examined, without the consent of the client and his
employer, concerning any fact the knowledge of which has been acquired in such
capacity.

The majority seeks to expand the scope of the Philippine rule on the lawyer-client privilege
by copious citations of American jurisprudence which includes in the privilege the identity of
the client under the exceptional situations narrated therein. From the plethora of cases cited,
two facts stand out in bold relief. Firstly, the issue of privilege contested therein arose in
grand jury proceedings on different States, which are preliminary proceedings before the
filing of the case in court, and we are not even told what evidentiary rules apply in the said
hearings. In the present case, the privilege is invoked in the court where it was already filed
and presently pends, and we have the foregoing specific rules above-quoted. Secondly, and
more important, in the cases cited by the majority, the lawyers concerned were merely
advocating the cause of their clients but were not indicted for the charges against their said
clients. Here, the counsel themselves are co-defendants duly charged in court as co-
conspirators in the offenses charged. The cases cited by the majority evidently do not apply
to them.

Hence, I wish to repeat and underscore the fact that the lawyer-client privilege is not a shield
for the commission of a crime or against the prosecution of the lawyer therefor. I quote, with
emphases supplied, from 81 AM JUR 2d, Witnesses, § 393 to 395, pages 356-357:

§ 393. Effect of unlawful purpose.

The existence of an unlawful purpose prevents the attorney-client privilege from

attaching. The attorney-client privilege does not generally exist where the
representation is sought to further criminal or fraudulent conduct either past, present,
or future. Thus, a confidence received by an attorney in order to advance a criminal
or fraudulent purpose is beyond the scope of the privilege.
 Observation: The common-law rule that the privilege protecting
confidential communications between attorney and client is lost if the
relation is abused by a client who seeks legal assistance to
perpetrate a crime or fraud has been codified.

§ 394. Attorney participation.

The attorney-client privilege cannot be used to protect a client in the perpetration of a

crime in concert with the attorney, even where the attorney is not aware of his client's
purpose. The reason for the rule is that it is not within the professional character of a
lawyer to give advised on the commission of crime. Professional responsibility does
not countenance the use of the attorney-client privilege as a subterfuge, and all
conspiracies, either active or passive, which are calculated to hinder the
administration of justice will vitiate the privilege. In some jurisdictions, however, this
exception to the rule of privilege in confined to such intended acts in violation of the
law as are mala in se, as distinguished from those which are merely mala prohibita.

§ 395. Communication in contemplation of crime.

Communications between attorney and client having to do with the client's

contemplated criminal acts, or in aid or furtherance thereof, are not covered by the
cloak of privilege ordinarily existing in reference to communications between attorney
and client. But, the mere charge of illegality, not supported by evidence, will not
defeat the privilege; there must be at least prima facie evidence that the illegality has
some foundation in fact.

Underhill also states:

There are many other cases to the same effect, for the rule is prostitution of the
honorable relation of attorney and client will not be permitted under the guise of
privilege, and every communication made to an attorney by a client for a criminal
purpose is a conspiracy or attempt at a conspiracy which is not only lawful to divulge,
but which the attorney under certain circumstances may be bound to disclose at
once in the interest of justice. In accordance with this rule, where a forged will or
other false instrument has come into possession of an attorney through the
instrumentality of the accused, with the hope and expectation that the attorney would
take some action in reference thereto, and the attorney does act, in ignorance of the
true character of the instrument, there is no privilege, inasmuch as full confidence
has been withheld. The attorney is then compelled to produce a forged writing
against the client. The fact that the attorney is not cognizant of the criminal or
wrongful purpose, or, knowing it, attempts to dissuade his client, is immaterial. The
attorney's ignorance of his client's intentions deprives the information of a
professional character as full confidence has been withheld. (H.C. Underhill, A
Treatise on the Law of Criminal Case Evidence, vol. 2, Fifth ed. (1956), Sec. 332, pp.
836-837; emphasis mine).

125 AMERICAN LAW REPORTS ANNOTATED, 516-519, summarizes the rationale of the
rule excepting communications with respect to contemplated criminal or fraudulent acts,
thus:

c. Rationale of rule excepting communications with respect to contemplated criminal

or fraudulent act.
Various reasons have been announced as being the foundation for the holdings that
communications with respect to contemplated criminal or fraudulent acts are not
privileged.

The reason perhaps most frequently advanced is that in such cases there is no
professional employment, properly speaking. Standard F. Ins. Co v. Smithhart (1919)
183 Ky 679, 211 SW. 441, 5 ALR 972; Cummings v. Com. (1927) 221 Ky 301, 298
SW 943; Strong v. Abner (1937) 268 Ky 502, 105 SW(2d) 599; People v. Van
Alstine (1885) 57 Mich 69, 23 NW 594; Hamil & Co. v. England (1892) 50 Mo App
338; Carney v. United R. Co. (1920) 205 Mo App 495, 226 SW 308; Matthews
v. Hoagland(1891) 48 NJ Eq 455, 21 A 1054; Covency v. Tannahill (1841) 1 Hill (NY)
33, 37 AM Dec 287; People ex rel. Vogelstein v. Warden (1934) 150 Misc 714, 270
NYS 362 (affirmed without opinion in (1934) 242 App Div 611, 271 NYS
1059); Russell v. Jackson (1851) 9 Hare 387, 68 Eng Reprint 558; Charlton
v. Coombes (1863) 4 Giff 372, 66 Eng Reprint 751; Reg. v. Cox (1884) LR 14 QB Div
(Eng) 153 — CCR; Re Postlethwaite (1887) LR 35 Ch Div (Eng) 722.

In Reg. v. Cox (1884) LR 14 QB Div (Eng) 153 — CCR, the court said: "In order that
the rule may apply, there must be both professional confidence and professional
employment, but if the client has a criminal object in view in his communications with
his solicitor one of these elements must necessarily be absent. The client must either
conspire with his solicitor or deceive him. If his criminal object is avowed, the client
does not consult his adviser professionally, because it cannot be the solicitor's
business to further any criminal object. If the client does not avow his object, he
reposes no confidence, for the state of facts which is the foundation of the supposed
confidence does not exist. The solicitor's advice is obtained by a fraud."

So, in Standard F. Ins. Co. v. Smithhart (1919) 183 Ky 679, 211 SW 441, 5 ALR 972,

the court said: "The reason of the principle which holds such communications not to
be privileged is that it is not within the professional character of a lawyer to give
advice upon such subjects, and that it is no part of the profession of an attorney or
counselor at law to be advising persons as to how they may commit crimes or frauds,
or how they may escape the consequences of contemplated crimes and frauds. If the
crime or fraud has already been committed and finished, a client may advise with an
attorney in regard to it, and communicate with him freely, and the communications
cannot be divulged as evidence without the consent of the client, because it is a part
of the business and duty of those engaged in the practice of the profession of law,
when employed and relied upon for that purpose, to give advice to those who have
made infractions of the laws; and, to enable the attorney to properly advise and to
properly represent the client in court or when prosecutions are threatened, it is
conducive to the administration of justice that the client shall be free to communicate
to his attorney all the facts within his knowledge, and that he may be assured that a
communication made by him shall not be used to his prejudice."

The protection which the law affords to communications between attorney and client
has reference to those which are legitimately and properly within the scope of a
lawful employment, and does not extend to communications made in contemplation
of a crime, or perpetration of a fraud. Strong v. Abner (1937) 368 Ky 502, 105 SW
(2d) 599.

The court in People v. Van Alstine (1885) 57 Mich 69, 23 NW 594, in holding not

privileged communications to an attorney having for their object the communication
of a crime, said: "They then partake of the nature of a conspiracy, or attempted
conspiracy, and it is not only lawful to divulge such communications, but under
certain circumstances it might become the duty of the attorney to do so.The interests
of public justice require that no such shield from merited exposure shall be
interposed to protect a person who takes counsel how he can safely commit a crime.
The relation of attorney and client cannot exist for the purpose of counsel in
concocting crimes."

And in Coveney v. Tannahill (1841) 1 Hill (NY) 33, 37 Am Dec 287, the court was of
the opinion that there could be no such relation as that of attorney and client, either
in the commission of a crime, or in the doing of a wrong by force or fraud to an
individual, the privileged relation of attorney and client existing only for lawful and
honest purposes.

If the client consults the attorney at law with reference to the perpetration of a crime,
and they co-operate in effecting it, there is no privilege, inasmuch as it is no part of
the lawyer's duty to aid in crime — he ceases to be counsel and becomes a
criminal. Matthews v. Hoagland (1891) 48 NJ Eq 455, 21 A 1054.

The court cannot permit it to be said that the contriving of a fraud forms part of the
professional business of an attorney or solicitor. Charlton v. Coombes (1863) 4 Giff
372, 66 Eng Reprint 751.

If the client does not frankly and freely reveal his object and intention as well as facts,
there is not professional confidence, and therefore no privilege. Matthews
v. Hoagland (NJ) supra. See to the same effect Carney v. United R. Co. (1920) 205
Mo App 495, 226 SW 308.

There is no valid claim of privilege in regard to the production of documents passing

between solicitor and client, when the transaction impeached is charged to be based
upon fraud, that is the matter to be investigated, and it is thought better that the
alleged privilege should suffer than that honestly and fair dealing should appear to be
violated with impunity. Smith v. Hunt (1901) 1 Ont L Rep 334.

In Tichborne v. Lushington, shorthand Notes (Eng) p. 5211 (cited in Reg. v. Cox

(1884) LR 14 QB Div (Eng) 172 — CCR), the chief justice said "I believe the law is,
and properly is, that if a party consults an attorney, and obtains advice for what
afterwards turns out to be the commission of a crime or a fraud, that party so
consulting the attorney has no privilege whatever to close the lips of the attorney
from stating the truth. Indeed, if any such privilege should be contended for, or
existing, it would work most grievous hardship on an attorney, who, after he had
been consulted upon what subsequently appeared to be a manifest crime and fraud,
would have his lips closed, and might place him in a very serious position of being
suspected to be a party to the fraud, and without his having an opportunity of
exculpating himself . . . There is no privilege in the case which I have suggested of a
party consulting another, a professional man, as to what may afterwards turn out to
be a crime or fraud, and the best mode of accomplishing it."

In Garside v. Outram (1856) 3 Jur NS (Eng) 39, although the question of privilege as

to communications between attorney and client was not involved, the question
directly involved being the competency of a clerk in a business establishment to
testify as to certain information which he acquired while working in the establishment,
 the court strongly approved of a view as stated arguendo for plaintiff, in Annesley
v. Anglesea (1743) 17 How St Tr (Eng) 1229, as follows: "I shall claim leave to
consider whether an attorney may be examined as to any matter which came to his
knowledge as an attorney. If he is employed as an attorney in any unlawful or wicked
act, his duty to the public obliges him to disclose it; no private obligations can
dispense with that universal one which lies on every member of society to discover
every design which may be formed, contrary to the laws of society, to destroy the
public welfare. For this reason, I apprehend that if a secret which is contrary to the
public good, such as a design to commit treason, murder, or perjury, comes to the
knowledge of an attorney, even in a cause where he is concerned, the obligation to
the public must dispense with the private obligation to the client."

The court in McMannus v. State (1858) 2 Head (Tenn) 213, said; "It would be
monstrous to hold that if counsel was asked and obtained in reference to a
contemplated crime that the lips of the attorney would be sealed, when the facts
might become important to the ends of justice in the prosecution of crime. In such a
case the relation cannot be taken to exist. Public policy would forbid it."

And the court in Lanum v. Patterson (1909) 151 Ill App 36, observed that this rule
was not in contravention of sound public policy, but on the contrary, tended to the
maintenance of a higher standard of professional ethics by preventing the relation of
attorney and client from operating as a cloak for fraud.

Communications of a client to an attorney are not privileged if they were a request for
advice as to how to commit a fraud, it being in such a case not only the attorney's
privilege, but his duty, to disclose the facts to the court. Will v. Tornabells & Co.
(1907) 3 Porto Rico Fed Rep 125. The court said: "We say this notwithstanding the
comments of opposing counsel as to the indelicacy of his position because of his
being now on the opposite side of the issue that arose as a consequence of the
communication he testifies about, and is interested in the cause to the extent of a
large contingent fee, as he confesses."

The object of prohibiting the disclosure of confidential communications is to protect

the client, and not to make the attorney an accomplice or permit him to aid in the
commission of a crime. People vs. Petersen (1901) 60 App Div 118, NYS 941.

The seal of personal confidence can never be used to cover a transaction which is in
itself a crime. People v. Farmer (1909) 194 NY 251, 87 NE 457.

As to disclosing the identity of a client, 81 AM JUR 2d, Witnesses, § 410 and 411, pages
366-368, states:

§ 410. Name or identity of client.

Disclosure of a client's identity is necessary proof of the existence of the attorney-

client relationship and is not privileged information. Thus, the attorney-client privilege
is inapplicable even though the information was communicated confidentially to the
attorney in his professional capacity and, in some cases, in spite of the fact that the
attorney may have been sworn to secrecy, where an inquiry is directed to an attorney
as to the name or identity of his client. This general rule applies in criminal cases, as
well as in civil actions. Where an undisclosed client is a party to an action, the
 opposing party has a right to know with whom he is contending or who the real party
in interest is, if not the nominal adversary.

§ 411. Disclosure of identity of client as breach of confidentiality.

The revelation of the identification of a client is not usually considered privileged,

except where so much has been divulged with regard to to legal services rendered or
the advice sought, that to reveal the client's name would be to disclose the whole
relationship and confidential communications. However, even where the subject
matter of the attorney-client relationship has already been revealed, the client's name
has been deemed privileged.

Where disclosure of the identity of a client might harm the client by being used
against him under circumstances where there are no countervailing factors, then the
identity is protected by the attorney-client privilege.

In criminal proceedings, a client's name may be privileged if information already

obtained by the tribunal, combined with the client's identity, might expose him to
criminal prosecution for acts subsequent to, and because of, which he had sought
the advice of his attorney.

Although as a general rule, the identity of a defendant in a criminal prosecution is a

matter of public record and, thus, not covered by the attorney-client privilege, where
the attorney has surrendered to the authorities physical evidence in his possession
by way of the attorney-client relationship, the state must prove the connection
between the piece of physical evidence and the defendant without in any way relying
on the testimony of the client's attorney who initially received the evidence and, thus,
the attorney may not be called to the stand and asked to disclose the identity of the
client. However, an attorney cannot refuse to reveal the identity of a person who
asked him to deliver stolen property to the police department, whether a bona fide
attorney-client relationship exists between them, inasmuch as the transaction was
not a legal service or done in the attorney's professional capacity.

Distinction: Where an attorney was informed by a male client that his

female acquaintance was possibly involved in [a] his-and-run
accident, the identity of the female did not come within scope of
attorney-client privilege although the identity of the male client was
protected. (emphases supplied)

WIGMORE explains why the identity of a client is not within the lawyer-client privilege in this
manner:

§ 2313. Identity of client or purpose of suit. — The identity of the attorney's client or
the name of the real party in interest will seldom be a matter communicated in
confidence because the procedure of litigation ordinarily presupposes a disclosure of
these facts. Furthermore, so far as a client may in fact desire secrecy and may be
able to secure action without appearing as a party to the proceedings, it would be
improper to sanction such a wish. Every litigant is in justice entitled to know the
identity of his opponents. He cannot be obliged to struggle in the dark against
unknown forces. He has by anticipation the right, in later proceedings, if desired, to
enforce the legal responsibility of those who may have maliciously sued or
prosecuted him or fraudulently evaded his claim. He has as much right to ask the
 attorney "Who fees your fee?" as to ask the witness (966 supra). "Who maintains you
during this trial?" upon the analogy of the principle already examined (2298 supra),
the privilege cannot be used to evade a client's responsibility for the use of legal
process. And if it is necessary for the purpose to make a plain exception to the rule of
confidence, then it must be made. (Wigmore on Evidence, vol. 8, (1961), p. 609;
emphases supplied).

In 114 ALR, 1322, we also find the following statement:

1. Name or identity.

As is indicated in 28 R.C.L. p. 563, it appears that the rule making communications

between attorney and client privileged from disclosure ordinarily does not apply
where the inquiry is confined to the fact of the attorney's employment and the name
of the person employing him, since the privilege presupposes the relationship of
client and attorney, and therefore does not attach to its creation.

At the present stage of the proceedings below, the petitioners have not shown that they are
so situated with respect to their principals as to bring them within any of the exceptions
established by American jurisprudence. There will be full opportunity for them to establish
that fact at the trial where the broader perspectives of the case shall have been presented
and can be better appreciated by the court. The insistence for their exclusion from the case
is understandable, but the reasons for the hasty resolution desired is naturally suspect.

We do not even have to go beyond our shores for an authority that the lawyer-client privilege
cannot be invoked to prevent the disclosure of a client's identity where the lawyer and the
client are conspirators in the commission of a crime or a fraud. Under our jurisdiction,
lawyers are mandated not to counsel or abet activities aimed at defiance of the law or at
lessening confidence in the legal system (Rule 1.02, Canon 1, Code of Professional
Responsibility) and to employ only fair and honest means to attain the lawful objectives of his
client (Rule 19.01, Canon 19, Id.). And under the Canons of Professional Ethics, a lawyer
must steadfastly bear in mind that his great trust is to be performed within and not without
the bounds of the law (Canon 15, Id.), that he advances the honor of his profession and the
best interest of his client when he renders service or gives advice tending to impress upon
the client and his undertaking exact compliance with the strictest principles of moral law
(Canon 32, Id.). These canons strip a lawyer of the lawyer-client privilege whenever he
conspires with the client in the commission of a crime or a fraud.

I then vote to DENY, for want of merit, the instant petition.

Narvasa, C.J. and Regalado, J., concur.

PUNO, J., dissenting:

This is an important petition for certiorari to annul the resolutions of the

respondent Sandiganbayan denying petitioners' motion to be excluded from the Complaint
for recovery of alleged ill-gotten wealth on the principal ground that as lawyers they cannot
be ordered to reveal the identity of their client.

First, we fast forward the facts. The Presidential Commission on Good Government (PCGG)
filed Civil Case No. 33 before the Sandiganbayan against Eduardo M. Cojuangco, Jr., for the
recovery of alleged ill-gotten wealth. Sued as co-defendants are the petitioners in the cases
at bar — lawyers Teodoro Regala, Edgardo J. Angara, Avelino V. Cruz, Jose Concepcion,
Rogelio A. Vinluan, Victor P. Lazatin, Eduardo Escueta and Paraja Hayudini. Also included
as a co-defendant is lawyer Raul Roco, now a duly elected senator of the Republic. All co-
defendants were then partners of the law firm, Angara, Abello, Concepcion, Regala and Cruz
Law Offices, better known as the ACCRA Law Firm. The Complaint against Cojuangco, Jr.,
and the petitioners alleged, inter alia, viz:

xxx xxx xxx

The wrongs committed by defendants acting singly or collectively and in unlawful

concert with one another, include the misappropriation and theft of public funds,
plunder of the nation's wealth, extortion, blackmail, bribery, embezzlement and other
acts of corruption, betrayal of public trust and brazen abuse of power as more fully
described (in the subsequent paragraphs of the complaint), all at the expense and to
the grave and irreparable damage of Plaintiff and the Filipino people.

Defendants Eduardo Cojuangco, Jr., Edgardo J. Angara, Jose C. Concepcion,

Teodoro D. Regala, Avelino V. Cruz, Regalio A. Vinluan, Eduardo U. Escueta, Paraja
G. Hayudini and Raul S. Roco of Angara, Concepcion, Cruz, Regala, and Abello law
offices (ACCRA) plotted, devised, schemed, conspired and confederated with each
other in setting up, through the use of the coconut levy funds, the financial and
corporate framework and structures that led to the establishment of UCPB, UNICOM,
COCOLIFE, COCOMARK, CIC and more than twenty other coconut levy funded
corporations, including the acquisition of the San Miguel Corporation shares and the
institutionalization through presidential directives of the coconut monopoly. through
insidious means and machinations, ACCRA, using its wholly-owned investment arm,
ACCRA Investments Corporation, became the holder of approximately fifteen million
shares representing roughly 3.3% of the total outstanding capital stock of UCPB as
of 31 March 1987. This ranks ACCRA Investments Corporation number 44 among
the top 100 biggest stockholders of UCPB which has approximately 1,400,000
shareholders. On the other hand, corporate books show the name Edgardo J.
Angara as holding approximately 3,744 shares as of 7 June 1984.

In their Answer, petitioners alleged that the legal services offered and made available by
their firm to its clients include: (a) organizing and acquiring business organizations, (b) acting
as incorporators or stockholders thereof, and (c) delivering to clients the corresponding
documents of their equity holdings (i.e., certificates of stock endorsed in blank or blank
deeds of trust or assignment). They claimed that their activities were "in furtherance of
legitimate lawyering."

In the course of the proceedings in the Sandiganbayan, the PCGG filed a Motion to Admit
Third Amended Complaint and the Third Amended Complaint excluding lawyer Roco as
party defendant. Lawyer Roco was excluded on the basis of his promise to reveal the identity
of the principals for whom he acted as nominee/stockholder in the companies involved in the
case.

The Sandiganbayan ordered petitioners to comment on the motion. In their Comment,

petitioners demanded that they be extended the same privilege as their co-defendant Roco.
They prayed for their exclusion from the complaint. PCGG agreed but set the following
conditions: (1) disclosure of the identity of their client; (2) submission of documents
substantiating their lawyer-client relationship; and (3) submission of the deeds of assignment
petitioners executed in favor of their client covering their respective shareholdings. The same
conditions were imposed on lawyer Roco.

Petitioners refused to comply with the PCGG conditions contending that the attorney-client
privilege gives them the right not to reveal the identity of their client. They also alleged that
lawyer Roco was excluded though he did not in fact reveal the identity of his clients. On
March 18, 1992, the Sandiganbayan denied the exclusion of petitioners in Case No. 33. It
held:

xxx xxx xxx

ACCRA lawyers may take the heroic stance of not revealing the identity of the client
for whom they have acted, i.e., their principal, and that will be their choice. But until
they do identify their clients, considerations of whether or not the privilege claimed by
the ACCRA lawyers exists cannot even begin to the debated. The ACCRA lawyers
cannot excuse themselves from the consequences of their acts until they have begun
to establish the basis for recognizing the privilege; the existence and identity of the
client.

This is what appears to be the cause for which they have been impleaded by the
PCGG as defendants herein.

5. The PCGG is satisfied that defendant Roco has demonstrated his agency and that
Roco has apparently identified his principal, which revelation could show the lack of
course against him. This in turn has allowed the PCGG to exercise its power both
under the rules of Agency and under Section 5 of E.O. No. 14-A in relation to the
Supreme Court's ruling in Republic v. Sandiganbayan (173 SCRA 72).

The PCGG has apparently offered to the ACCRA lawyers the same conditions
availed of by Roco; full disclosure in exchange for exclusion from these proceedings
(par. 7, PCGG's COMMENT dated November 4, 1991). The ACCRA lawyers have
preferred not to make the disclosures required by the PCGG.

The ACCRA lawyers cannot, therefore, begrudge the PCGG for keeping them as a
party defendants. In the same vein, they cannot compel the PCGG to be accorded
the same treatment accorded to Roco.

Neither can this Court.

WHEREFORE, the Counter Motion dated October 8, 1991 filed by the ACCRA
lawyers and joined in by Atty. Paraja G. Hayudini for the same treatment by the
PCGG as accorded to Raul S. Roco is DENIED for lack of merit.

Sandiganbayan later denied petitioners' motions for reconsideration in its resolutions dated
May 21, 1988 and September 3, 1992.

In this petition for certiorari, petitioners contend:

I
 The Honorable Sandiganbayan gravely abused its discretion in subjecting petitioners
ACCRA lawyers who indisputably acted as lawyers in serving as nominee-
stockholders, to the strict application of the law agency.

II

The Honorable Sandiganbayan committed grave abuse of discretion in not

considering petitioners ACCRA lawyers and Mr. Roco as similarly situated and,
therefore, deserving of equal treatment.

1. There is absolutely no evidence that Mr. Roco had revealed, or

had undertaken to reveal, the identities of the client(s) for whom he
acted as nominee-stockholder.

2. Even assuming that Mr. Roco had revealed, or had undertaken to

reveal, the identities of the client(s), the disclosure does not constitute
a substantial distinction as would make the classification reasonable
under the equal protection clause.

3. Respondent Sandiganbayan sanctioned favoritism and undue

preference in favor of Mr. Roco and violation of the equal protection
clause.

III

The Honorable Sandiganbayan committed grave abuse of discretion in not holding

that, under the facts of this case, the attorney-client privilege prohibits petitioners
ACCRA lawyers from revealing the identity of their client(s) and the other information
requested by the PCGG.

1. Under the peculiar facts of this case, the attorney-client privilege

includes the identity of the client(s).

2. The factual disclosures required by the PCGG are not limited to the
identity of petitioners ACCRA lawyers' alleged client(s) but extend to
other privileged matters.

IV

The Honorable Sandiganbayan committed grave abuse of discretion in not requiring

that the dropping of party-defendants by the PCGG must be based on reasonable
and just grounds and with due consideration to the constitutional right of petitioners
ACCRA lawyers to the equal protection of the law.

The petition at bar is atypical of the usual case where the hinge issue involves the
applicability of attorney-client privilege. It ought to be noted that petitioners were included as
defendants in Civil Case No. 33 as conspirators. Together with Mr. Cojuangco, Jr., they are
charged with having ". . . conspired and confederated with each other in setting up, through
the use of the coconut levy funds, the financial and corporate framework and structures that
led to the establishment of UCPB, UNICOM, COCOLIFE, COCOMARK, CICI and more than
twenty other coconut levy funded corporations, including the acquisition of San Miguel
Corporation shares and the institutionalization through presidential directives of the coconut
monopoly." To stress, petitioners are charged with having conspired in the commission of
crimes. The issue of attorney-client privilege arose when PCGG agreed to exclude
petitioners from the complaint on condition they reveal the identity of their client. Petitioners
refused to comply and assailed the condition on the ground that to reveal the identity of their
client will violate the attorney-client privilege.

It is thus necessary to resolve whether the Sandiganbayan committed grave abuse of

discretion when it rejected petitioners' thesis that to reveal the identity of their client would
violate the attorney-client privilege. The attorney-client privilege is the oldest of the privileges
for confidential communications known to the common law.  For the first time in this
1

jurisdiction, we are asked to rule whether the attorney-client privilege includes the right not to
disclose the identity of client. The issue poses a trilemma for its resolution requires the
delicate balancing of three opposing policy considerations. One overriding policy
consideration is the need for courts to discover the truth for truth alone is the true touchstone
of justice.  Equally compelling is the need to protect the adversary system of justice where
2

truth is best extracted by giving a client broad privilege to confide facts to his
counsel.  Similarly deserving of sedulous concern is the need to keep inviolate the
3

constitutional right against self-incrimination and the right to effective counsel in criminal
litigations. To bridle at center the centrifugal forces of these policy considerations, courts
have followed to prudential principle that the attorney-client privilege must not be expansively
construed as it is in derogation of the search for truth. Accordingly, a narrow construction has
4

been given to the privilege and it has been consistently held that "these competing societal
interests demand that application of the privilege not exceed that which is necessary to effect
the policy considerations underlying the privilege, i.e., the privilege must be upheld only in
those circumstances for which it was created.'" 5

Prescinding from these premises, our initial task is to define in clear strokes the substantive
content of the attorney-client privilege within the context of the distinct issues posed by the
petition at bar. With due respect, I like to start by stressing the irreducible principle that the
attorney-client privilege can never be used as a shield to commit a crime or a fraud.
Communications to an attorney having for their object the commission of a crime ". . .
partake the nature of a conspiracy, and it is not only lawful to divulge such communications,
but under certain circumstances it might become the duty of the attorney to do so. The
interests of public justice require that no such shield from merited exposure shall be
interposed to protect a person who takes counsel how he can safely commit a crime. The
relation of attorney and client cannot exist for the purpose of counsel in concocting
crimes."  In the well chosen words of retired Justice Quiason, a lawyer is not a gun for hire.  I
6 7

hasten to add, however, that a mere allegation that a lawyer conspired with his client to
commit a crime or a fraud will not defeat the privilege.  As early as 1933, no less than the Mr.
8

Justice Cardozo held in Clark v. United States  that: "there are early cases apparently to the
9

effect that a mere charge of illegality, not supported by any evidence, will set the confidences
free . . . But this conception of the privilege is without support . . . To drive the privilege away,
there must be 'something to give colour to the charge;' there must beprima facie evidence
that it has foundation in fact." In the petition at bar, however, the PCGG appears to have
relented on its original stance as spelled out in its Complaint that petitioners are co-
conspirators in crimes and cannot invoke the attorney-client privilege. The PCGG has agreed
to exclude petitioners from the Complaint provided they reveal the identity of their client. In
fine, PCGG has conceded that petitioner are entitled to invoke the attorney-client privilege if
they reveal their client's identity.

Assuming then that petitioners can invoke the attorney-client privilege since the PCGG is no
longer proceeding against them as co-conspirators in crimes, we should focus on the more
specific issue of whether the attorney-client privilege includes the right not to divulge the
identity of a client as contended by the petitioners. As a general rule, the attorney-client
privilege does not include the right of non-disclosure of client identity. The general rule,
however, admits of well-etched exceptions which the Sandiganbayan failed to recognize.
The general rule and its exceptions are accurately summarized in In re Grand Jury
Investigation, viz:
10

The federal forum is unanimously in accord with the general rule that the identity of a
client is, with limited exceptions, not within the protective ambit of the attorney-client
privilege. See: In re Grand Jury Proceedings (Pavlick), 680 F.2d 1026, 1027 (5th Cir.
1982) (en banc); In re Grand Jury Proceedings (Jones), 517 F. 2d 666, 670-71 (5th
Cir. 1975); In re Grand Jury Proceedings (Fine), 651 F. 2d 199, 204 (5th Cir.
1981); Frank v. Tomlinson, 351 F.2d 384 (5th Cir. 1965), cert. denied, 382 U.S.
1082, 86 S.Ct. 648, 15 L.Ed.2d 540 (1966); In re Grand Jury Witness (Salas), 695
F.2d 359, 361 (9th Cir. 1982); In re Grand Jury Subpoenas Duces Tecum
(Marger/Merenbach), 695 F.2d 363, 365 (9th Cir. 1982); In re Grand Jury
Proceedings (Lawson), 600 F.2d 215, 218 (9th Cir. 1979).

The Circuits have embraced various "exceptions" to the general rule that the identity
of a client is not within the protective ambit of the attorney-client privilege. All such
exceptions appear to be firmly grounded in the Ninth Circuit's seminal decision
in Baird v. Koerner, 279 F.2d 633 (9th Cir. 1960). In Baird the IRS received a letter
from an attorney stating that an enclosed check in the amount of $12,706 was being
tendered for additional amounts due from undisclosed taxpayers. When the IRS
summoned the attorney to ascertain the identity of the delinquent taxpayers the
attorney refused identification assertion the attorney-client privilege. The Ninth
Circuit, applying California law, adjudged that the "exception" to the general rule as
pronounced in Ex parte McDonough, 170 Cal. 230, 149 P. 566 (1915) controlled:

The name of the client will be considered privileged matter where the
circumstances of the case are such that the name of the client is
material only for the purpose of showing an acknowledgment of guilt
on the part of such client of the very offenses on account of which the
attorney was employed.

Baird, supra, 279 F.2d at 633. The identity of the Baird taxpayer was adjudged within
this exception to the general rule. The Ninth Circuit has continued to acknowledge
this exception.

A significant exception to this principle of non-confidentiality holds

that such information may be privileged when the person invoking the
privilege is able to show that a strong possibility exists that disclosure
of the information would implicate the client in the very matter for
which legal advice was sought in the first case.

In re Grand Jury Subpoenas Duces Tecum (Marger/Merenbach), 695 F.2d 363, 365
(9th Cir. 1982). Accord: United States v. Hodge and Zweig, 548 F.2d 1347, 1353 (9th
Cir. 1977); In re Grand Jury Proceedings (Lawson), 600 F.2d 215, 218 (9th Cir.
1979); United States v. Sherman, 627 F.2d 189, 190-91 (9th Cir. 1980); In re Grand
Jury Witness (Salas), 695 F.2d 359, 361 (9th Cir. 1982). This exception, which can
perhaps be most succinctly characterized as the "legal advice" exception, has also
been recognized by other circuits. See: In re Walsh, 623 F.2d 489, 495 (7th Cir.),
 cert. denied, 449 U.S. 994, 101 S. Ct. 531, 66 L.Ed.2d 291 (1980); In re Grand Jury
Investigation (Tinari), 631 F.2d 17, 19 (3d Cir 1980), cert. denied, 449 U.S.1083, 101
S.Ct. 869-70, 66 L.Ed.2d 808 (1981). Since the legal advice exception is firmly
grounded in the policy of protecting confidential communications, this Court adopts
and applies its principles herein. See: In re Grand Jury Subpoenas Duces Tecum
(Marger/Merenbach), supra.

It should be observed, however that the legal advice exception may be defeated
through a prima facieshowing that the legal representation was secured in
furtherance of present or intended continuing illegality, as where the legal
representation itself is part of a larger conspiracy. See: In re Grand Jury Subpoenas
Decus Tecum (Marger/Merenbach), supra, 695 F.2d at 365 n. 1; In re Walsh, 623
F.2d 489, 495 (7th Cir.), cert. denied, 449, U.S. 994, 101 S.Ct. 531, 66 L.Ed. 2d 291
(1980); In re Grand Jury Investigation (Tinari), 631 F.2d 17, 19 (3d Cir 1980); cert.
denied, 449 U.S. 1083, 101 S.Ct. 869, 66 L.Ed. 2d 808 (1981); In re Grand Jury
Proceedings (Lawson), 600 F.2d 215, 218 (9th Cir. 1979); United States v. Friedman,
445 F.2d 1076, 1086 (9th Cir. 1971). See also: Clark v. United States, 289 U.S. 1,
15, 53, S.Ct. 465, 469, 77, L.Ed. 993 (1933); In re Grand Jury Proceedings (Pavlick),
680 F.2d 1026, 1028-29 (5th Cir. 1982 (en banc).

Another exception to the general rule that the identity of a client is not privileged
arises where disclosure of the identity would be tantamount to disclosing an
otherwise protected confidential communication. In Baird, supra, the Ninth Circuit
observed:

If the identification of the client conveys information which ordinarily

would be conceded to be part of the usual privileged communication
between attorney and client, then the privilege should extend to such
identification in the absence of another factors.

Id., 279 F.2d at 632. Citing Baird, the Fourth Circuit promulgated the following exception:

To the general rule is an exception, firmly embedded as the rule itself.

The privilege may be recognized where so much of the actual
communication has already been disclosed that identification of the
client amounts to disclosure of a confidential communication.

NLRB v. Harvey, 349 F.2d 900, 905 (4th Cir. 1965). Accord: United States v. Tratner,
511 F.2d 248, 252 (7th Cir. 1975); Colton v. United States, 306 F.2d 633, 637 (2d
Cir. 1962), cert. denied, 371 U.S. 951, 83 S.Ct. 505, 9 L.Ed.2d 499 1963); Tillotson
v. Boughner, 350 F.2d 663, 666 (7th Cir. 1965); United States v. Pape, 144 F.2d 778,
783 (2d Cir. 1944). See also: Chirac v. Reinecker, 24 U.S. (11 Wheat) 280, 6 L.Ed.
474 (1826). The Seventh Circuit has added to the Harvey exception the following
emphasized caveat:

The privilege may be recognized where so much of the actual

communication has already been disclosed [not necessarily by the
attorney, but by independent sources as well] that identification of the
client [or of fees paid] amounts to disclosure of a confidential
communication.
 United States vs. Jeffers, 532 F.2d 1101, 1115 (7th Cir. 1976 (emphasis added). The
Third Circuit, applying this exception, has emphasized that it is the link between the
client and the communication, rather than the link between the client and the
possibility of potential criminal prosecution, which serves to bring the client's identity
within the protective ambit of the attorney-client privilege. See: In re Grand Jury
Empanelled February 14, 1978 (Markowitz), 603 F.2d 469, 473 n. 4 (3d Cir. 1979).
Like the "legal advice" exception, this exception is also firmly rooted in principles of
confidentiality.

Another exception, articulated in the Fifth Circuit's en banc decision of In re Grand

Jury Proceedings (Pavlick), 680 F.2d 1026 (5th Cir. 1982 (en banc), is recognized
when disclosure of the identity of the client would provide the "last link" of evidence:

We have long recognized the general rule that matters involving the
payment of fees and the identity of clients are not generally
privileged. In re Grand Jury Proceedings, (United States v. Jones),
517 F.2d 666 (5th Cir. 1975); see cases collected id. at 670 n. 2.
There we also recognized, however, a limited and narrow exception
to the general rule, one that obtains when the disclosure of the
client's identity by his attorney would have supplied the last link in an
existing chain of incriminating evidence likely to lead to the client's
indictment.

I join the majority in holding that the Sandiganbayan committed grave abuse of discretion
when it misdelineated the metes and bounds of the attorney-client privilege by failing to
recognize the exceptions discussed above.

Be that as it may, I part ways with the majority when it ruled that petitioners need not prove
they fall within the exceptions to the general rule. I respectfully submit that the attorney-client
privilege is not a magic mantra whose invocation will ipso facto and ipso jure drape he who
invokes it with its protection. Plainly put, it is not enough to assert the privilege.  The person
11

claiming the privilege or its exceptions has the obligation to present the underlying facts
demonstrating the existence of the privilege.  When these facts can be presented only by
12

revealing the very information sought to be protected by the privilege, the procedure is for
the lawyer to move for an inspection of the evidence in an in camera hearing.  The hearing
13

can even be in camera and ex-parte. Thus, it has been held that "a well-recognized means
for an attorney to demonstrate the existence of an exception to the general rule, while
simultaneously preserving confidentiality of the identity of his client, is to move the court for
an in camera ex-parte hearing.  Without the proofs adduced in these in camera hearings, the
14

Court has no factual basis to determine whether petitioners fall within any of the exceptions
to the general rule.

In the case at bar, it cannot be gainsaid that petitioners have not adduced evidence that they
fall within any of the above mentioned exceptions for as aforestated, the Sandiganbayan did
not recognize the exceptions, hence, the order compelling them to reveal the identity of their
client. In ruling that petitioners need not further establish the factual basis of their claim that
they fall within the exceptions to the general rule, the majority held:

The circumstances involving the engagement of lawyers in the case at bench

therefore clearly reveal that the instant case falls under at least two exceptions to the
general rule. First, disclosure of the alleged client's name would lead to establish
said client's connection with the very fact in issue of the case, which is privileged
 information, because the privilege, as stated earlier, protects the subject matter or
the substance (without which there would be no attorney-client relationship).
Furthermore, under the third main exception, revelation of the client's name would
obviously provide the necessary link for the prosecution to build its case, where none
otherwise exists. It is the link, in the word of Baird, "that would inevitably form the
chain of testimony necessary to convict the (client) of a . . . crime.

I respectfully submit that the first and third exceptions relied upon by the majority are not self-
executory but need factual basis for their successful invocation. The first exception as cited
by the majority is ". . . where a strong probability exists that revealing the clients' name would
implicate that client in the very activity for which he sought the lawyer's advice." It seems to
me evident that "the very activity for which he sought the lawyer's advice" is a question of
fact which must first be established before there can be any ruling that the exception can be
invoked. The majority cites Ex Parte Enzor,   and
15

U S v. Hodge and Zweig,  but these cases leave no doubt that the "very activity" for which
16

the client sought the advice of counsel was properly proved. In both cases, the "very activity"
of the clients reveal they sought advice on their criminal activities. Thus, in Enzor, the
majority opinion states that the "unidentified client, an election official, informed his attorney
in confidence that he had been offered a bribe to violate election laws or that he had
accepted a bribe to that end."  In Hodge, the "very activity" of the clients deals with illegal
17

importation of drugs. In the case at bar, there is no inkling whatsoever about the "very
activity" for which the clients of petitioners sought their professional advice as lawyers. There
is nothing in the records that petitioners were consulted on the "criminal activities" of their
client. The complaint did allege that petitioners and their client conspired to commit crimes
but allegations are not evidence.

So it is with the third exception which as related by the majority is "where the government's
lawyers have no case against an attorney's client unless, by revealing the client's name, the
said name would furnish the only link that would form the chain of testimony necessary to
convict an individual of a crime."  Again, the rhetorical questions that answer themselves
18

are: (1) how can we determine that PCGG has "no case" against petitioners without
presentation of evidence? and (2) how can we determine that the name of the client is the
only link without presentation of evidence as to the other links? The case of Baird
vs. Koerner  does not support the "no need for evidence" ruling of the majority. In Baird, as
19

related by the majority itself, "a lawyer was consulted by the accountants and the lawyer of
certain undisclosed taxpayers regarding steps to be taken to place the undisclosed
taxpayers in a favorable position in case criminal charges were brought against them by the
US Internal Revenue Service (IRS). It appeared that the taxpayers' returns of previous years
were probably incorrect and the taxes understated.  Once more, it is clear that the Baird
20

court was informed of the activity of the client for which the lawyer was consulted and the
activity involved probable violation of the tax laws. Thus, the Court held:

The facts of the instant case bring it squarely within that exception to the general
rule. Here money was received by the government, paid by persons who thereby
admitted they had not paid a sufficient amount in income taxes some one or more
years in the past. The names of the clients are useful to the government for but one
purpose — to ascertain which taxpayers think they were delinquent, so that it may
check the records for that one year or several years. The voluntary nature of the
payment indicates a belief by the taxpayers that more tax or interest or penalties are
due than the sum previously paid, if any. It indicates a feeling of guilt for nonpayment
of taxes, though whether it is criminal guilt is undisclosed. But it may well be the link
that could form the chain of testimony necessary to convict an individual of a federal
crime. Certainly the payment and the feeling of guilt are the reasons the attorney
 here involved was employed — to advise his clients what, under the circumstances,
should be done.

In fine, the factual basis for the ruling in Baird was properly established by the parties. In the
case at bar, there is no evidence about the subject matter of the consultation made by
petitioners' client. Again, the records do not show that the subject matter is criminal in
character except for the raw allegations in the Complaint. Yet, this is the unstated predicate
of the majority ruling that revealing the identity of the client ". . . would furnish the only link
that would form the chain of testimony necessary to convict an individual of a crime." The
silent implication is unflattering and unfair to petitioners who are marquee names in the legal
profession and unjust to their undisclosed client.

Finally, it ought to be obvious that petitioners' right to claim the attorney-client privilege is
resolutory of the Complaint against them, and hence should be decided ahead and
independently of their claim to equal protection of the law. Pursuant to the rule in legal
hermeneutics that courts should not decide constitutional issues unless unavoidable, I also
respectfully submit that there is no immediate necessity to resolve petitioners' claim to equal
protection of the law at this stage of the proceedings.

IN VIEW WHEREOF, I respectfully register a qualified dissent from the majority opinion.

Separate Opinions

VITUG, J., concurring:

The legal profession, despite all the unrestrained calumny hurled against it, is still the noblest
of professions. It exists upon the thesis that, in an orderly society that is opposed to all forms
of anarchy, it so occupies, as it should, an exalted position in the proper dispensation of
justice. In time, principles have evolved that would help ensure its effective ministration. The
protection of confidentiality of the lawyer-client relationship is one, and it has since been an
accepted firmament in the profession. It allows the lawyer and the client to institutionalize a
unique relationship based on full trust and confidence essential in a justice system that works
on the basis of substantive and procedural due process. To be sure, the rule is not without
its pitfalls, and demands against it may be strong, but these problems are, in the ultimate
analysis, no more than mere tests of vigor that have made and will make that rule endure.

I see in the case before us, given the attendant circumstances already detailed in
the ponencia, a situation of the Republic attempting to establish a case not on what it
perceives to be the strength of its own evidence but on what it could elicit from a counsel
against his client. I find it unreasonable for the Sandiganbayan to compel petitioners to
breach the trust reposed on them and succumb to a thinly disguised threat of incrimination.

Accordingly, I join my other colleague who vote for the GRANT of the petition.

DAVIDE, JR., J.: dissenting
The impressive presentation of the case in the ponencia of Mr. Justice Kapunan makes
difficult the espousal of a dissenting view. Nevertheless, I do not hesitate to express that
view because I strongly feel that this Court must confine itself to the key issue in this special
civil action for certiorari, viz., whether or not the Sandiganbayan acted with grave abuse of
discretion in not excluding the defendants, the petitioners herein, from the Third Amended
Complaint in Civil Case No. 0033. That issue, unfortunately, has been simply buried under
the avalanche of authorities upholding the sanctity of lawyer-client relationship which
appears to me to be prematurely invoked.

From the undisputed facts disclosed by the pleadings and summarized in the ponencia, I
cannot find my way clear to a conclusion that the Sandiganbayan committed grave abuse of
discretion in not acting favorably on the petitioners' prayer in their Comment to the PCGG's
Motion to Admit Third Amended Complaint.

The prerogative to determine who shall be made defendants in a civil case is initially vested
in the plaintiff, or the PCGG in this case. The control of the Court comes in only when the
issue of "interest" (§ 2, Rule 3, Rules of Court) as, e.g., whether an indispensable party has
not been joined, or whether there is a misjoinder of parties (§ 7, 8, and 9, Id.), is raised.

In the case below, the PCGG decided to drop or exclude from the complaint original co-
defendant Raul Roco because he had allegedly complied with the condition prescribed by
the PCGG, viz., undertake that he will reveal the identity of the principals for whom he acted
as nominee/stockholder in the companies involved in PCGG Case No. 0033. In short, there
was an agreement or compromise settlement between the PCGG and Roco. Accordingly,
the PCGG submitted a Third Amended Complaint without Roco as a defendant. No obstacle
to such an agreement has been insinuated. If Roco's revelation violated the confidentiality of
a lawyer-client relationship, he would be solely answerable therefor to his principals/clients
and, probably, to this Court in an appropriate disciplinary action if warranted. There is at all
no showing that Civil Case No. 0033 cannot further be proceeded upon or that any judgment
therein cannot be binding without Roco remaining as a defendant. Accordingly, the
admission of the Third Amended Complaint cannot be validly withheld by the
Sandiganbayan.

Are the petitioners, who did not file a formal motion to be excluded but only made the
request to that effect as a rider to their Comment to the Motion to Admit Third Amended
Complaint, entitled to be excluded from the Third Amended Complaint such that denial
thereof would constitute grave abuse of discretion on the Sandiganbayan's part? To me, the
answer is clearly in the negative.

The petitioners seek to be accorded the same benefit granted to or to be similarly treated as
Roco. Reason and logic dictate that they cannot, unless they too would make themselves
like Roco. Otherwise stated, they must first voluntarily adopt for themselves the factual milieu
created by Roco and must bind themselves to perform certain obligations as Roco. It is
precisely for this that in response to the petitioners' comment on the aforementioned Motion
to Admit Third Amended Complaint the PCGG manifested that it is willing to accord the
petitioners the treatment it gave Roco provided they would do what Roco had done, that is,
disclose the identity of their principals/clients and submit documents substantiating their
claimed lawyer-client relationship with the said principals/clients, as well as copies of deeds
of assignments the petitioners executed in favor of their principals/clients. The petitioners did
not do so because they believed that compliance thereof would breach the sanctity of their
fiduciary duty in a lawyer-client relationship.
It, indeed, appears that Roco has complied with his obligation as a consideration for his
exclusion from the Third Amended Complaint. The Sandiganbayan found that

5. The PCGG is satisfied that defendant Roco has demonstrated his agency and that
Roco has apparently identified his principal, which revelation could show the lack of
action against him. This in turn has allowed the PCGG to exercise its power both
under the rules of agency and under Section 5 of E.O. No. 14-1 in relation to the
Supreme Court's ruling in Republic v. Sandiganbayan (173 SCRA 72).

As a matter of fact, the PCGG presented evidence to substantiate Roco's compliance.

The ponencia itself so stated, thus:

. . . respondent PCGG presented evidence to substantiate compliance by private

respondent Roco of the conditions precedent to warrant the latter's exclusion as
party-defendant in PCGG Case No. 33, to wit: (a) Letter to respondent PCGG of the
counsel of respondent Roco dated May 24, 1989 reiterating a previous request for
reinvestigation by the PCGG in PCGG Case No. 33; (b) Affidavit dated March 8,
1989 executed by private respondent Roco as Attachment to the letter aforestated in
(a); and (c) Letter of Roco, Bunag, and Kapunan Law Offices dated September 21,
1988 to the respondent in behalf of private respondent Roco originally requesting the
reinvestigation and/or re-examination of evidence by the PCGG it Complaint in
PCGG Case No. 33. (Id., 5-6).

These are the pieces of evidence upon which the Sandiganbayan founded its conclusion that
the PCGG was satisfied with Roco's compliance. The petitioners have not assailed such
finding as arbitrary.

The ponencia's observation then that Roco did not refute the petitioners' contention that he
did not comply with his obligation to disclose the identity of his principals is entirely irrelevant.

In view of their adamantine position, the petitioners did not, therefore, allow themselves to be
like Roco. They cannot claim the same treatment, much less compel the PCGG to drop them
as defendants, for nothing whatsoever. They have no right to make such a demand for until
they shall have complied with the conditions imposed for their exclusion, they cannot be
excluded except by way of a motion to dismiss based on the grounds allowed by law (e.g.,
those enumerated in § 1, Rule 16, Rules of Court). The rule of confidentiality under the
lawyer-client relationship is not a cause to exclude a party. It is merely aground for
disqualification of a witness (§ 24, Rule 130, Rules of Court) and may only be invoked at the
appropriate time, i.e., when a lawyer is under compulsion to answer as witness, as when,
having taken the witness stand, he is questioned as to such confidential communicator or
advice, or is being otherwise judicially coerced to produce, through subpoena duces
tecum or otherwise, letters or other documents containing the same privileged matter. But
none of the lawyers in this case is being required to testify about or otherwise reveal "any
[confidential] communication made by the client to him, or his advice given thereon in the
course of, or with a view to, professional employment." What they are being asked to do, in
line with their claim that they had done the acts ascribed to them in pursuance of their
professional relation to their clients, is to identify the latter to the PCGG and the Court; but
this, only if they so choose in order to be dropped from the complaint, such identification
being the condition under which the PCGG has expressed willingness to exclude them from
the action. The revelation is entirely optional, discretionary, on their part. The attorney-client
privilege is not therefor applicable.
Thus, the Sandiganbayan did not commit any abuse of discretion when it denied the
petitioners' prayer for their exclusion as party-defendants because they did not want to abide
with any of the conditions set by the PCGG. There would have been abuse if the
Sandiganbayan granted the prayer because then it would have capriciously, whimsically,
arbitrarily, and oppressively imposed its will on the PCGG.

Again, what the petitioners want is their exclusion from the Third Amended Complaint or the
dismissal of the case insofar as they are concerned because either they are invested with
immunity under the principle of confidentiality in a lawyer-client relationship, or the claims
against them in Civil Case No. 0033 are barred by such principle.

Even if we have to accommodate this issue, I still submit that the lawyer-client privilege
provides the petitioners no refuge. They are sued as principal defendants in Civil Case No.
0033, a case of the recovery of alleged ill-gotten wealth. Conspiracy is imputed to the
petitioners therein. In short, they are, allegedly, conspirators in the commission of the acts
complained of for being nominees of certain parties.

Their inclusion as defendants in justified under § 15, Article XI of the Constitution — which
provides that the right of the State to recover properties unlawfully acquired by public officials
or employees, from them or from their nominees or transferees, shall not be barred by
prescription, laches or estoppel — and E.O. No. 1 of 28 February 1986, E.O. No. 2 of 12
March 1986, E.O. No. 14 of 7 May 1986, and the Rules and Regulations of the PCGG.
Furthermore, § 2, Rule 110 of the Rules of Court requires that the complaint or information
should be "against all persons who appear to be responsible for the offense involved."

Hypothetically admitting the allegations in the complaint in Civil Case No. 0033, I find myself
unable to agree with the majority opinion that the petitioners are immune from suit or that
they have to be excluded as defendants, or that they cannot be compelled to reveal or
disclose the identity of their principals, all because of the sacred lawyer-client privilege.

This privilege is well put in Rule 130 of the Rules of Court, to wit:

§ 24. Disqualification by reason of privileged communication. — The following

persons cannot testify as to matters learned in confidence in the following cases:

xxx xxx xxx

(b) 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, or with a view to, professional employment, nor can an attorney's secretary,
stenographer, or clerk be examined, without the consent of the client and his
employer, concerning any fact the knowledge of which has been acquired in such
capacity.

The majority seeks to expand the scope of the Philippine rule on the lawyer-client privilege
by copious citations of American jurisprudence which includes in the privilege the identity of
the client under the exceptional situations narrated therein. From the plethora of cases cited,
two facts stand out in bold relief. Firstly, the issue of privilege contested therein arose in
grand jury proceedings on different States, which are preliminary proceedings before the
filing of the case in court, and we are not even told what evidentiary rules apply in the said
hearings. In the present case, the privilege is invoked in the court where it was already filed
and presently pends, and we have the foregoing specific rules above-quoted. Secondly, and
more important, in the cases cited by the majority, the lawyers concerned were merely
advocating the cause of their clients but were not indicted for the charges against their said
clients. Here, the counsel themselves are co-defendants duly charged in court as co-
conspirators in the offenses charged. The cases cited by the majority evidently do not apply
to them.

Hence, I wish to repeat and underscore the fact that the lawyer-client privilege is not a shield
for the commission of a crime or against the prosecution of the lawyer therefor. I quote, with
emphases supplied, from 81 AM JUR 2d, Witnesses, § 393 to 395, pages 356-357:

§ 393. Effect of unlawful purpose.

The existence of an unlawful purpose prevents the attorney-client privilege from

attaching. The attorney-client privilege does not generally exist where the
representation is sought to further criminal or fraudulent conduct either past, present,
or future. Thus, a confidence received by an attorney in order to advance a criminal
or fraudulent purpose is beyond the scope of the privilege.

Observation: The common-law rule that the privilege protecting

confidential communications between attorney and client is lost if the
relation is abused by a client who seeks legal assistance to
perpetrate a crime or fraud has been codified.

§ 394. Attorney participation.

The attorney-client privilege cannot be used to protect a client in the perpetration of a

crime in concert with the attorney, even where the attorney is not aware of his client's
purpose. The reason for the rule is that it is not within the professional character of a
lawyer to give advised on the commission of crime. Professional responsibility does
not countenance the use of the attorney-client privilege as a subterfuge, and all
conspiracies, either active or passive, which are calculated to hinder the
administration of justice will vitiate the privilege. In some jurisdictions, however, this
exception to the rule of privilege in confined to such intended acts in violation of the
law as are mala in se, as distinguished from those which are merely mala prohibita.

§ 395. Communication in contemplation of crime.

Communications between attorney and client having to do with the client's

contemplated criminal acts, or in aid or furtherance thereof, are not covered by the
cloak of privilege ordinarily existing in reference to communications between attorney
and client. But, the mere charge of illegality, not supported by evidence, will not
defeat the privilege; there must be at least prima facie evidence that the illegality has
some foundation in fact.

Underhill also states:

There are many other cases to the same effect, for the rule is prostitution of the
honorable relation of attorney and client will not be permitted under the guise of
privilege, and every communication made to an attorney by a client for a criminal
purpose is a conspiracy or attempt at a conspiracy which is not only lawful to divulge,
but which the attorney under certain circumstances may be bound to disclose at
 once in the interest of justice. In accordance with this rule, where a forged will or
other false instrument has come into possession of an attorney through the
instrumentality of the accused, with the hope and expectation that the attorney would
take some action in reference thereto, and the attorney does act, in ignorance of the
true character of the instrument, there is no privilege, inasmuch as full confidence
has been withheld. The attorney is then compelled to produce a forged writing
against the client. The fact that the attorney is not cognizant of the criminal or
wrongful purpose, or, knowing it, attempts to dissuade his client, is immaterial. The
attorney's ignorance of his client's intentions deprives the information of a
professional character as full confidence has been withheld. (H.C. Underhill, A
Treatise on the Law of Criminal Case Evidence, vol. 2, Fifth ed. (1956), Sec. 332, pp.
836-837; emphasis mine).

125 AMERICAN LAW REPORTS ANNOTATED, 516-519, summarizes the rationale of the
rule excepting communications with respect to contemplated criminal or fraudulent acts,
thus:

c. Rationale of rule excepting communications with respect to contemplated criminal

or fraudulent act.

Various reasons have been announced as being the foundation for the holdings that
communications with respect to contemplated criminal or fraudulent acts are not
privileged.

The reason perhaps most frequently advanced is that in such cases there is no
professional employment, properly speaking. Standard F. Ins. Co v. Smithhart (1919)
183 Ky 679, 211 SW. 441, 5 ALR 972; Cummings v. Com. (1927) 221 Ky 301, 298
SW 943; Strong v. Abner (1937) 268 Ky 502, 105 SW(2d) 599; People v. Van
Alstine (1885) 57 Mich 69, 23 NW 594; Hamil & Co. v. England (1892) 50 Mo App
338; Carney v. United R. Co. (1920) 205 Mo App 495, 226 SW 308; Matthews
v. Hoagland(1891) 48 NJ Eq 455, 21 A 1054; Covency v. Tannahill (1841) 1 Hill (NY)
33, 37 AM Dec 287; People ex rel. Vogelstein v. Warden (1934) 150 Misc 714, 270
NYS 362 (affirmed without opinion in (1934) 242 App Div 611, 271 NYS
1059); Russell v. Jackson (1851) 9 Hare 387, 68 Eng Reprint 558; Charlton
v. Coombes (1863) 4 Giff 372, 66 Eng Reprint 751; Reg. v. Cox (1884) LR 14 QB Div
(Eng) 153 — CCR; Re Postlethwaite (1887) LR 35 Ch Div (Eng) 722.

In Reg. v. Cox (1884) LR 14 QB Div (Eng) 153 — CCR, the court said: "In order that
the rule may apply, there must be both professional confidence and professional
employment, but if the client has a criminal object in view in his communications with
his solicitor one of these elements must necessarily be absent. The client must either
conspire with his solicitor or deceive him. If his criminal object is avowed, the client
does not consult his adviser professionally, because it cannot be the solicitor's
business to further any criminal object. If the client does not avow his object, he
reposes no confidence, for the state of facts which is the foundation of the supposed
confidence does not exist. The solicitor's advice is obtained by a fraud."

So, in Standard F. Ins. Co. v. Smithhart (1919) 183 Ky 679, 211 SW 441, 5 ALR 972,

the court said: "The reason of the principle which holds such communications not to
be privileged is that it is not within the professional character of a lawyer to give
advice upon such subjects, and that it is no part of the profession of an attorney or
counselor at law to be advising persons as to how they may commit crimes or frauds,
or how they may escape the consequences of contemplated crimes and frauds. If the
crime or fraud has already been committed and finished, a client may advise with an
attorney in regard to it, and communicate with him freely, and the communications
cannot be divulged as evidence without the consent of the client, because it is a part
of the business and duty of those engaged in the practice of the profession of law,
when employed and relied upon for that purpose, to give advice to those who have
made infractions of the laws; and, to enable the attorney to properly advise and to
properly represent the client in court or when prosecutions are threatened, it is
conducive to the administration of justice that the client shall be free to communicate
to his attorney all the facts within his knowledge, and that he may be assured that a
communication made by him shall not be used to his prejudice."

The protection which the law affords to communications between attorney and client
has reference to those which are legitimately and properly within the scope of a
lawful employment, and does not extend to communications made in contemplation
of a crime, or perpetration of a fraud. Strong v. Abner (1937) 368 Ky 502, 105 SW
(2d) 599.

The court in People v. Van Alstine (1885) 57 Mich 69, 23 NW 594, in holding not

privileged communications to an attorney having for their object the communication
of a crime, said: "They then partake of the nature of a conspiracy, or attempted
conspiracy, and it is not only lawful to divulge such communications, but under
certain circumstances it might become the duty of the attorney to do so.The interests
of public justice require that no such shield from merited exposure shall be
interposed to protect a person who takes counsel how he can safely commit a crime.
The relation of attorney and client cannot exist for the purpose of counsel in
concocting crimes."

And in Coveney v. Tannahill (1841) 1 Hill (NY) 33, 37 Am Dec 287, the court was of
the opinion that there could be no such relation as that of attorney and client, either
in the commission of a crime, or in the doing of a wrong by force or fraud to an
individual, the privileged relation of attorney and client existing only for lawful and
honest purposes.

If the client consults the attorney at law with reference to the perpetration of a crime,
and they co-operate in effecting it, there is no privilege, inasmuch as it is no part of
the lawyer's duty to aid in crime — he ceases to be counsel and becomes a
criminal. Matthews v. Hoagland (1891) 48 NJ Eq 455, 21 A 1054.

The court cannot permit it to be said that the contriving of a fraud forms part of the
professional business of an attorney or solicitor. Charlton v. Coombes (1863) 4 Giff
372, 66 Eng Reprint 751.

If the client does not frankly and freely reveal his object and intention as well as facts,
there is not professional confidence, and therefore no privilege. Matthews
v. Hoagland (NJ) supra. See to the same effect Carney v. United R. Co. (1920) 205
Mo App 495, 226 SW 308.

There is no valid claim of privilege in regard to the production of documents passing

between solicitor and client, when the transaction impeached is charged to be based
upon fraud, that is the matter to be investigated, and it is thought better that the
alleged privilege should suffer than that honestly and fair dealing should appear to be
violated with impunity. Smith v. Hunt (1901) 1 Ont L Rep 334.

In Tichborne v. Lushington, shorthand Notes (Eng) p. 5211 (cited in Reg. v. Cox

(1884) LR 14 QB Div (Eng) 172 — CCR), the chief justice said "I believe the law is,
and properly is, that if a party consults an attorney, and obtains advice for what
afterwards turns out to be the commission of a crime or a fraud, that party so
consulting the attorney has no privilege whatever to close the lips of the attorney
from stating the truth. Indeed, if any such privilege should be contended for, or
existing, it would work most grievous hardship on an attorney, who, after he had
been consulted upon what subsequently appeared to be a manifest crime and fraud,
would have his lips closed, and might place him in a very serious position of being
suspected to be a party to the fraud, and without his having an opportunity of
exculpating himself . . . There is no privilege in the case which I have suggested of a
party consulting another, a professional man, as to what may afterwards turn out to
be a crime or fraud, and the best mode of accomplishing it."

In Garside v. Outram (1856) 3 Jur NS (Eng) 39, although the question of privilege as

to communications between attorney and client was not involved, the question
directly involved being the competency of a clerk in a business establishment to
testify as to certain information which he acquired while working in the establishment,
the court strongly approved of a view as stated arguendo for plaintiff, in Annesley
v. Anglesea (1743) 17 How St Tr (Eng) 1229, as follows: "I shall claim leave to
consider whether an attorney may be examined as to any matter which came to his
knowledge as an attorney. If he is employed as an attorney in any unlawful or wicked
act, his duty to the public obliges him to disclose it; no private obligations can
dispense with that universal one which lies on every member of society to discover
every design which may be formed, contrary to the laws of society, to destroy the
public welfare. For this reason, I apprehend that if a secret which is contrary to the
public good, such as a design to commit treason, murder, or perjury, comes to the
knowledge of an attorney, even in a cause where he is concerned, the obligation to
the public must dispense with the private obligation to the client."

The court in McMannus v. State (1858) 2 Head (Tenn) 213, said; "It would be
monstrous to hold that if counsel was asked and obtained in reference to a
contemplated crime that the lips of the attorney would be sealed, when the facts
might become important to the ends of justice in the prosecution of crime. In such a
case the relation cannot be taken to exist. Public policy would forbid it."

And the court in Lanum v. Patterson (1909) 151 Ill App 36, observed that this rule
was not in contravention of sound public policy, but on the contrary, tended to the
maintenance of a higher standard of professional ethics by preventing the relation of
attorney and client from operating as a cloak for fraud.

Communications of a client to an attorney are not privileged if they were a request for
advice as to how to commit a fraud, it being in such a case not only the attorney's
privilege, but his duty, to disclose the facts to the court. Will v. Tornabells & Co.
(1907) 3 Porto Rico Fed Rep 125. The court said: "We say this notwithstanding the
comments of opposing counsel as to the indelicacy of his position because of his
being now on the opposite side of the issue that arose as a consequence of the
communication he testifies about, and is interested in the cause to the extent of a
large contingent fee, as he confesses."
 The object of prohibiting the disclosure of confidential communications is to protect
the client, and not to make the attorney an accomplice or permit him to aid in the
commission of a crime. People vs. Petersen (1901) 60 App Div 118, NYS 941.

The seal of personal confidence can never be used to cover a transaction which is in
itself a crime. People v. Farmer (1909) 194 NY 251, 87 NE 457.

As to disclosing the identity of a client, 81 AM JUR 2d, Witnesses, § 410 and 411, pages
366-368, states:

§ 410. Name or identity of client.

Disclosure of a client's identity is necessary proof of the existence of the attorney-

client relationship and is not privileged information. Thus, the attorney-client privilege
is inapplicable even though the information was communicated confidentially to the
attorney in his professional capacity and, in some cases, in spite of the fact that the
attorney may have been sworn to secrecy, where an inquiry is directed to an attorney
as to the name or identity of his client. This general rule applies in criminal cases, as
well as in civil actions. Where an undisclosed client is a party to an action, the
opposing party has a right to know with whom he is contending or who the real party
in interest is, if not the nominal adversary.

§ 411. Disclosure of identity of client as breach of confidentiality.

The revelation of the identification of a client is not usually considered privileged,

except where so much has been divulged with regard to to legal services rendered or
the advice sought, that to reveal the client's name would be to disclose the whole
relationship and confidential communications. However, even where the subject
matter of the attorney-client relationship has already been revealed, the client's name
has been deemed privileged.

Where disclosure of the identity of a client might harm the client by being used
against him under circumstances where there are no countervailing factors, then the
identity is protected by the attorney-client privilege.

In criminal proceedings, a client's name may be privileged if information already

obtained by the tribunal, combined with the client's identity, might expose him to
criminal prosecution for acts subsequent to, and because of, which he had sought
the advice of his attorney.

Although as a general rule, the identity of a defendant in a criminal prosecution is a

matter of public record and, thus, not covered by the attorney-client privilege, where
the attorney has surrendered to the authorities physical evidence in his possession
by way of the attorney-client relationship, the state must prove the connection
between the piece of physical evidence and the defendant without in any way relying
on the testimony of the client's attorney who initially received the evidence and, thus,
the attorney may not be called to the stand and asked to disclose the identity of the
client. However, an attorney cannot refuse to reveal the identity of a person who
asked him to deliver stolen property to the police department, whether a bona fide
attorney-client relationship exists between them, inasmuch as the transaction was
not a legal service or done in the attorney's professional capacity.
 Distinction: Where an attorney was informed by a male client that his
female acquaintance was possibly involved in [a] his-and-run
accident, the identity of the female did not come within scope of
attorney-client privilege although the identity of the male client was
protected. (emphases supplied)

WIGMORE explains why the identity of a client is not within the lawyer-client privilege in this
manner:

§ 2313. Identity of client or purpose of suit. — The identity of the attorney's client or
the name of the real party in interest will seldom be a matter communicated in
confidence because the procedure of litigation ordinarily presupposes a disclosure of
these facts. Furthermore, so far as a client may in fact desire secrecy and may be
able to secure action without appearing as a party to the proceedings, it would be
improper to sanction such a wish. Every litigant is in justice entitled to know the
identity of his opponents. He cannot be obliged to struggle in the dark against
unknown forces. He has by anticipation the right, in later proceedings, if desired, to
enforce the legal responsibility of those who may have maliciously sued or
prosecuted him or fraudulently evaded his claim. He has as much right to ask the
attorney "Who fees your fee?" as to ask the witness (966 supra). "Who maintains you
during this trial?" upon the analogy of the principle already examined (2298 supra),
the privilege cannot be used to evade a client's responsibility for the use of legal
process. And if it is necessary for the purpose to make a plain exception to the rule of
confidence, then it must be made. (Wigmore on Evidence, vol. 8, (1961), p. 609;
emphases supplied).

In 114 ALR, 1322, we also find the following statement:

1. Name or identity.

As is indicated in 28 R.C.L. p. 563, it appears that the rule making communications

between attorney and client privileged from disclosure ordinarily does not apply
where the inquiry is confined to the fact of the attorney's employment and the name
of the person employing him, since the privilege presupposes the relationship of
client and attorney, and therefore does not attach to its creation.

At the present stage of the proceedings below, the petitioners have not shown that they are
so situated with respect to their principals as to bring them within any of the exceptions
established by American jurisprudence. There will be full opportunity for them to establish
that fact at the trial where the broader perspectives of the case shall have been presented
and can be better appreciated by the court. The insistence for their exclusion from the case
is understandable, but the reasons for the hasty resolution desired is naturally suspect.

We do not even have to go beyond our shores for an authority that the lawyer-client privilege
cannot be invoked to prevent the disclosure of a client's identity where the lawyer and the
client are conspirators in the commission of a crime or a fraud. Under our jurisdiction,
lawyers are mandated not to counsel or abet activities aimed at defiance of the law or at
lessening confidence in the legal system (Rule 1.02, Canon 1, Code of Professional
Responsibility) and to employ only fair and honest means to attain the lawful objectives of his
client (Rule 19.01, Canon 19, Id.). And under the Canons of Professional Ethics, a lawyer
must steadfastly bear in mind that his great trust is to be performed within and not without
the bounds of the law (Canon 15, Id.), that he advances the honor of his profession and the
 best interest of his client when he renders service or gives advice tending to impress upon
the client and his undertaking exact compliance with the strictest principles of moral law
(Canon 32, Id.). These canons strip a lawyer of the lawyer-client privilege whenever he
conspires with the client in the commission of a crime or a fraud.

I then vote to DENY, for want of merit, the instant petition.

Narvasa, C.J. and Regalado, J., concur.

PUNO, J., dissenting:

This is an important petition for certiorari to annul the resolutions of the

respondent Sandiganbayan denying petitioners' motion to be excluded from the Complaint
for recovery of alleged ill-gotten wealth on the principal ground that as lawyers they cannot
be ordered to reveal the identity of their client.

First, we fast forward the facts. The Presidential Commission on Good Government (PCGG)
filed Civil Case No. 33 before the Sandiganbayan against Eduardo M. Cojuangco, Jr., for the
recovery of alleged ill-gotten wealth. Sued as co-defendants are the petitioners in the cases
at bar — lawyers Teodoro Regala, Edgardo J. Angara, Avelino V. Cruz, Jose Concepcion,
Rogelio A. Vinluan, Victor P. Lazatin, Eduardo Escueta and Paraja Hayudini. Also included
as a co-defendant is lawyer Raul Roco, now a duly elected senator of the Republic. All co-
defendants were then partners of the law firm, Angara, Abello, Concepcion, Regala and Cruz
Law Offices, better known as the ACCRA Law Firm. The Complaint against Cojuangco, Jr.,
and the petitioners alleged, inter alia, viz:

xxx xxx xxx

The wrongs committed by defendants acting singly or collectively and in unlawful

concert with one another, include the misappropriation and theft of public funds,
plunder of the nation's wealth, extortion, blackmail, bribery, embezzlement and other
acts of corruption, betrayal of public trust and brazen abuse of power as more fully
described (in the subsequent paragraphs of the complaint), all at the expense and to
the grave and irreparable damage of Plaintiff and the Filipino people.

Defendants Eduardo Cojuangco, Jr., Edgardo J. Angara, Jose C. Concepcion,

Teodoro D. Regala, Avelino V. Cruz, Regalio A. Vinluan, Eduardo U. Escueta, Paraja
G. Hayudini and Raul S. Roco of Angara, Concepcion, Cruz, Regala, and Abello law
offices (ACCRA) plotted, devised, schemed, conspired and confederated with each
other in setting up, through the use of the coconut levy funds, the financial and
corporate framework and structures that led to the establishment of UCPB, UNICOM,
COCOLIFE, COCOMARK, CIC and more than twenty other coconut levy funded
corporations, including the acquisition of the San Miguel Corporation shares and the
institutionalization through presidential directives of the coconut monopoly. through
insidious means and machinations, ACCRA, using its wholly-owned investment arm,
ACCRA Investments Corporation, became the holder of approximately fifteen million
shares representing roughly 3.3% of the total outstanding capital stock of UCPB as
of 31 March 1987. This ranks ACCRA Investments Corporation number 44 among
the top 100 biggest stockholders of UCPB which has approximately 1,400,000
shareholders. On the other hand, corporate books show the name Edgardo J.
Angara as holding approximately 3,744 shares as of 7 June 1984.
In their Answer, petitioners alleged that the legal services offered and made available by
their firm to its clients include: (a) organizing and acquiring business organizations, (b) acting
as incorporators or stockholders thereof, and (c) delivering to clients the corresponding
documents of their equity holdings (i.e., certificates of stock endorsed in blank or blank
deeds of trust or assignment). They claimed that their activities were "in furtherance of
legitimate lawyering."

In the course of the proceedings in the Sandiganbayan, the PCGG filed a Motion to Admit
Third Amended Complaint and the Third Amended Complaint excluding lawyer Roco as
party defendant. Lawyer Roco was excluded on the basis of his promise to reveal the identity
of the principals for whom he acted as nominee/stockholder in the companies involved in the
case.

The Sandiganbayan ordered petitioners to comment on the motion. In their Comment,

petitioners demanded that they be extended the same privilege as their co-defendant Roco.
They prayed for their exclusion from the complaint. PCGG agreed but set the following
conditions: (1) disclosure of the identity of their client; (2) submission of documents
substantiating their lawyer-client relationship; and (3) submission of the deeds of assignment
petitioners executed in favor of their client covering their respective shareholdings. The same
conditions were imposed on lawyer Roco.

Petitioners refused to comply with the PCGG conditions contending that the attorney-client
privilege gives them the right not to reveal the identity of their client. They also alleged that
lawyer Roco was excluded though he did not in fact reveal the identity of his clients. On
March 18, 1992, the Sandiganbayan denied the exclusion of petitioners in Case No. 33. It
held:

xxx xxx xxx

ACCRA lawyers may take the heroic stance of not revealing the identity of the client
for whom they have acted, i.e., their principal, and that will be their choice. But until
they do identify their clients, considerations of whether or not the privilege claimed by
the ACCRA lawyers exists cannot even begin to the debated. The ACCRA lawyers
cannot excuse themselves from the consequences of their acts until they have begun
to establish the basis for recognizing the privilege; the existence and identity of the
client.

This is what appears to be the cause for which they have been impleaded by the
PCGG as defendants herein.

5. The PCGG is satisfied that defendant Roco has demonstrated his agency and that
Roco has apparently identified his principal, which revelation could show the lack of
course against him. This in turn has allowed the PCGG to exercise its power both
under the rules of Agency and under Section 5 of E.O. No. 14-A in relation to the
Supreme Court's ruling in Republic v. Sandiganbayan (173 SCRA 72).

The PCGG has apparently offered to the ACCRA lawyers the same conditions
availed of by Roco; full disclosure in exchange for exclusion from these proceedings
(par. 7, PCGG's COMMENT dated November 4, 1991). The ACCRA lawyers have
preferred not to make the disclosures required by the PCGG.
 The ACCRA lawyers cannot, therefore, begrudge the PCGG for keeping them as a
party defendants. In the same vein, they cannot compel the PCGG to be accorded
the same treatment accorded to Roco.

Neither can this Court.

WHEREFORE, the Counter Motion dated October 8, 1991 filed by the ACCRA
lawyers and joined in by Atty. Paraja G. Hayudini for the same treatment by the
PCGG as accorded to Raul S. Roco is DENIED for lack of merit.

Sandiganbayan later denied petitioners' motions for reconsideration in its resolutions dated
May 21, 1988 and September 3, 1992.

In this petition for certiorari, petitioners contend:

The Honorable Sandiganbayan gravely abused its discretion in subjecting petitioners

ACCRA lawyers who indisputably acted as lawyers in serving as nominee-
stockholders, to the strict application of the law agency.

II

The Honorable Sandiganbayan committed grave abuse of discretion in not

considering petitioners ACCRA lawyers and Mr. Roco as similarly situated and,
therefore, deserving of equal treatment.

1. There is absolutely no evidence that Mr. Roco had revealed, or

had undertaken to reveal, the identities of the client(s) for whom he
acted as nominee-stockholder.

2. Even assuming that Mr. Roco had revealed, or had undertaken to

reveal, the identities of the client(s), the disclosure does not constitute
a substantial distinction as would make the classification reasonable
under the equal protection clause.

3. Respondent Sandiganbayan sanctioned favoritism and undue

preference in favor of Mr. Roco and violation of the equal protection
clause.

III

The Honorable Sandiganbayan committed grave abuse of discretion in not holding

that, under the facts of this case, the attorney-client privilege prohibits petitioners
ACCRA lawyers from revealing the identity of their client(s) and the other information
requested by the PCGG.

1. Under the peculiar facts of this case, the attorney-client privilege

includes the identity of the client(s).
 2. The factual disclosures required by the PCGG are not limited to the
identity of petitioners ACCRA lawyers' alleged client(s) but extend to
other privileged matters.

IV

The Honorable Sandiganbayan committed grave abuse of discretion in not requiring

that the dropping of party-defendants by the PCGG must be based on reasonable
and just grounds and with due consideration to the constitutional right of petitioners
ACCRA lawyers to the equal protection of the law.

The petition at bar is atypical of the usual case where the hinge issue involves the
applicability of attorney-client privilege. It ought to be noted that petitioners were included as
defendants in Civil Case No. 33 as conspirators. Together with Mr. Cojuangco, Jr., they are
charged with having ". . . conspired and confederated with each other in setting up, through
the use of the coconut levy funds, the financial and corporate framework and structures that
led to the establishment of UCPB, UNICOM, COCOLIFE, COCOMARK, CICI and more than
twenty other coconut levy funded corporations, including the acquisition of San Miguel
Corporation shares and the institutionalization through presidential directives of the coconut
monopoly." To stress, petitioners are charged with having conspired in the commission of
crimes. The issue of attorney-client privilege arose when PCGG agreed to exclude
petitioners from the complaint on condition they reveal the identity of their client. Petitioners
refused to comply and assailed the condition on the ground that to reveal the identity of their
client will violate the attorney-client privilege.

It is thus necessary to resolve whether the Sandiganbayan committed grave abuse of

discretion when it rejected petitioners' thesis that to reveal the identity of their client would
violate the attorney-client privilege. The attorney-client privilege is the oldest of the privileges
for confidential communications known to the common law.  For the first time in this
1

jurisdiction, we are asked to rule whether the attorney-client privilege includes the right not to
disclose the identity of client. The issue poses a trilemma for its resolution requires the
delicate balancing of three opposing policy considerations. One overriding policy
consideration is the need for courts to discover the truth for truth alone is the true touchstone
of justice.  Equally compelling is the need to protect the adversary system of justice where
2

truth is best extracted by giving a client broad privilege to confide facts to his
counsel.  Similarly deserving of sedulous concern is the need to keep inviolate the
3

constitutional right against self-incrimination and the right to effective counsel in criminal
litigations. To bridle at center the centrifugal forces of these policy considerations, courts
have followed to prudential principle that the attorney-client privilege must not be expansively
construed as it is in derogation of the search for truth. Accordingly, a narrow construction has
4

been given to the privilege and it has been consistently held that "these competing societal
interests demand that application of the privilege not exceed that which is necessary to effect
the policy considerations underlying the privilege, i.e., the privilege must be upheld only in
those circumstances for which it was created.'" 5

Prescinding from these premises, our initial task is to define in clear strokes the substantive
content of the attorney-client privilege within the context of the distinct issues posed by the
petition at bar. With due respect, I like to start by stressing the irreducible principle that the
attorney-client privilege can never be used as a shield to commit a crime or a fraud.
Communications to an attorney having for their object the commission of a crime ". . .
partake the nature of a conspiracy, and it is not only lawful to divulge such communications,
but under certain circumstances it might become the duty of the attorney to do so. The
interests of public justice require that no such shield from merited exposure shall be
interposed to protect a person who takes counsel how he can safely commit a crime. The
relation of attorney and client cannot exist for the purpose of counsel in concocting
crimes."  In the well chosen words of retired Justice Quiason, a lawyer is not a gun for hire.  I
6 7

hasten to add, however, that a mere allegation that a lawyer conspired with his client to
commit a crime or a fraud will not defeat the privilege.  As early as 1933, no less than the Mr.
8

Justice Cardozo held in Clark v. United States  that: "there are early cases apparently to the
9

effect that a mere charge of illegality, not supported by any evidence, will set the confidences
free . . . But this conception of the privilege is without support . . . To drive the privilege away,
there must be 'something to give colour to the charge;' there must beprima facie evidence
that it has foundation in fact." In the petition at bar, however, the PCGG appears to have
relented on its original stance as spelled out in its Complaint that petitioners are co-
conspirators in crimes and cannot invoke the attorney-client privilege. The PCGG has agreed
to exclude petitioners from the Complaint provided they reveal the identity of their client. In
fine, PCGG has conceded that petitioner are entitled to invoke the attorney-client privilege if
they reveal their client's identity.

Assuming then that petitioners can invoke the attorney-client privilege since the PCGG is no
longer proceeding against them as co-conspirators in crimes, we should focus on the more
specific issue of whether the attorney-client privilege includes the right not to divulge the
identity of a client as contended by the petitioners. As a general rule, the attorney-client
privilege does not include the right of non-disclosure of client identity. The general rule,
however, admits of well-etched exceptions which the Sandiganbayan failed to recognize.
The general rule and its exceptions are accurately summarized in In re Grand Jury
Investigation, viz:
10

The federal forum is unanimously in accord with the general rule that the identity of a
client is, with limited exceptions, not within the protective ambit of the attorney-client
privilege. See: In re Grand Jury Proceedings (Pavlick), 680 F.2d 1026, 1027 (5th Cir.
1982) (en banc); In re Grand Jury Proceedings (Jones), 517 F. 2d 666, 670-71 (5th
Cir. 1975); In re Grand Jury Proceedings (Fine), 651 F. 2d 199, 204 (5th Cir.
1981); Frank v. Tomlinson, 351 F.2d 384 (5th Cir. 1965), cert. denied, 382 U.S.
1082, 86 S.Ct. 648, 15 L.Ed.2d 540 (1966); In re Grand Jury Witness (Salas), 695
F.2d 359, 361 (9th Cir. 1982); In re Grand Jury Subpoenas Duces Tecum
(Marger/Merenbach), 695 F.2d 363, 365 (9th Cir. 1982); In re Grand Jury
Proceedings (Lawson), 600 F.2d 215, 218 (9th Cir. 1979).

The Circuits have embraced various "exceptions" to the general rule that the identity
of a client is not within the protective ambit of the attorney-client privilege. All such
exceptions appear to be firmly grounded in the Ninth Circuit's seminal decision
in Baird v. Koerner, 279 F.2d 633 (9th Cir. 1960). In Baird the IRS received a letter
from an attorney stating that an enclosed check in the amount of $12,706 was being
tendered for additional amounts due from undisclosed taxpayers. When the IRS
summoned the attorney to ascertain the identity of the delinquent taxpayers the
attorney refused identification assertion the attorney-client privilege. The Ninth
Circuit, applying California law, adjudged that the "exception" to the general rule as
pronounced in Ex parte McDonough, 170 Cal. 230, 149 P. 566 (1915) controlled:

The name of the client will be considered privileged matter where the
circumstances of the case are such that the name of the client is
material only for the purpose of showing an acknowledgment of guilt
 on the part of such client of the very offenses on account of which the
attorney was employed.

Baird, supra, 279 F.2d at 633. The identity of the Baird taxpayer was adjudged within
this exception to the general rule. The Ninth Circuit has continued to acknowledge
this exception.

A significant exception to this principle of non-confidentiality holds

that such information may be privileged when the person invoking the
privilege is able to show that a strong possibility exists that disclosure
of the information would implicate the client in the very matter for
which legal advice was sought in the first case.

In re Grand Jury Subpoenas Duces Tecum (Marger/Merenbach), 695 F.2d 363, 365
(9th Cir. 1982). Accord: United States v. Hodge and Zweig, 548 F.2d 1347, 1353 (9th
Cir. 1977); In re Grand Jury Proceedings (Lawson), 600 F.2d 215, 218 (9th Cir.
1979); United States v. Sherman, 627 F.2d 189, 190-91 (9th Cir. 1980); In re Grand
Jury Witness (Salas), 695 F.2d 359, 361 (9th Cir. 1982). This exception, which can
perhaps be most succinctly characterized as the "legal advice" exception, has also
been recognized by other circuits. See: In re Walsh, 623 F.2d 489, 495 (7th Cir.),
cert. denied, 449 U.S. 994, 101 S. Ct. 531, 66 L.Ed.2d 291 (1980); In re Grand Jury
Investigation (Tinari), 631 F.2d 17, 19 (3d Cir 1980), cert. denied, 449 U.S.1083, 101
S.Ct. 869-70, 66 L.Ed.2d 808 (1981). Since the legal advice exception is firmly
grounded in the policy of protecting confidential communications, this Court adopts
and applies its principles herein. See: In re Grand Jury Subpoenas Duces Tecum
(Marger/Merenbach), supra.

It should be observed, however that the legal advice exception may be defeated
through a prima facieshowing that the legal representation was secured in
furtherance of present or intended continuing illegality, as where the legal
representation itself is part of a larger conspiracy. See: In re Grand Jury Subpoenas
Decus Tecum (Marger/Merenbach), supra, 695 F.2d at 365 n. 1; In re Walsh, 623
F.2d 489, 495 (7th Cir.), cert. denied, 449, U.S. 994, 101 S.Ct. 531, 66 L.Ed. 2d 291
(1980); In re Grand Jury Investigation (Tinari), 631 F.2d 17, 19 (3d Cir 1980); cert.
denied, 449 U.S. 1083, 101 S.Ct. 869, 66 L.Ed. 2d 808 (1981); In re Grand Jury
Proceedings (Lawson), 600 F.2d 215, 218 (9th Cir. 1979); United States v. Friedman,
445 F.2d 1076, 1086 (9th Cir. 1971). See also: Clark v. United States, 289 U.S. 1,
15, 53, S.Ct. 465, 469, 77, L.Ed. 993 (1933); In re Grand Jury Proceedings (Pavlick),
680 F.2d 1026, 1028-29 (5th Cir. 1982 (en banc).

Another exception to the general rule that the identity of a client is not privileged
arises where disclosure of the identity would be tantamount to disclosing an
otherwise protected confidential communication. In Baird, supra, the Ninth Circuit
observed:

If the identification of the client conveys information which ordinarily

would be conceded to be part of the usual privileged communication
between attorney and client, then the privilege should extend to such
identification in the absence of another factors.

Id., 279 F.2d at 632. Citing Baird, the Fourth Circuit promulgated the following exception:
 To the general rule is an exception, firmly embedded as the rule itself.
The privilege may be recognized where so much of the actual
communication has already been disclosed that identification of the
client amounts to disclosure of a confidential communication.

NLRB v. Harvey, 349 F.2d 900, 905 (4th Cir. 1965). Accord: United States v. Tratner,
511 F.2d 248, 252 (7th Cir. 1975); Colton v. United States, 306 F.2d 633, 637 (2d
Cir. 1962), cert. denied, 371 U.S. 951, 83 S.Ct. 505, 9 L.Ed.2d 499 1963); Tillotson
v. Boughner, 350 F.2d 663, 666 (7th Cir. 1965); United States v. Pape, 144 F.2d 778,
783 (2d Cir. 1944). See also: Chirac v. Reinecker, 24 U.S. (11 Wheat) 280, 6 L.Ed.
474 (1826). The Seventh Circuit has added to the Harvey exception the following
emphasized caveat:

The privilege may be recognized where so much of the actual

communication has already been disclosed [not necessarily by the
attorney, but by independent sources as well] that identification of the
client [or of fees paid] amounts to disclosure of a confidential
communication.

United States vs. Jeffers, 532 F.2d 1101, 1115 (7th Cir. 1976 (emphasis added). The
Third Circuit, applying this exception, has emphasized that it is the link between the
client and the communication, rather than the link between the client and the
possibility of potential criminal prosecution, which serves to bring the client's identity
within the protective ambit of the attorney-client privilege. See: In re Grand Jury
Empanelled February 14, 1978 (Markowitz), 603 F.2d 469, 473 n. 4 (3d Cir. 1979).
Like the "legal advice" exception, this exception is also firmly rooted in principles of
confidentiality.

Another exception, articulated in the Fifth Circuit's en banc decision of In re Grand

Jury Proceedings (Pavlick), 680 F.2d 1026 (5th Cir. 1982 (en banc), is recognized
when disclosure of the identity of the client would provide the "last link" of evidence:

We have long recognized the general rule that matters involving the
payment of fees and the identity of clients are not generally
privileged. In re Grand Jury Proceedings, (United States v. Jones),
517 F.2d 666 (5th Cir. 1975); see cases collected id. at 670 n. 2.
There we also recognized, however, a limited and narrow exception
to the general rule, one that obtains when the disclosure of the
client's identity by his attorney would have supplied the last link in an
existing chain of incriminating evidence likely to lead to the client's
indictment.

I join the majority in holding that the Sandiganbayan committed grave abuse of discretion
when it misdelineated the metes and bounds of the attorney-client privilege by failing to
recognize the exceptions discussed above.

Be that as it may, I part ways with the majority when it ruled that petitioners need not prove
they fall within the exceptions to the general rule. I respectfully submit that the attorney-client
privilege is not a magic mantra whose invocation will ipso facto and ipso jure drape he who
invokes it with its protection. Plainly put, it is not enough to assert the privilege.  The person
11

claiming the privilege or its exceptions has the obligation to present the underlying facts
demonstrating the existence of the privilege.  When these facts can be presented only by
12
revealing the very information sought to be protected by the privilege, the procedure is for
the lawyer to move for an inspection of the evidence in an in camera hearing.  The hearing
13

can even be in camera and ex-parte. Thus, it has been held that "a well-recognized means
for an attorney to demonstrate the existence of an exception to the general rule, while
simultaneously preserving confidentiality of the identity of his client, is to move the court for
an in camera ex-parte hearing.  Without the proofs adduced in these in camera hearings, the
14

Court has no factual basis to determine whether petitioners fall within any of the exceptions
to the general rule.

In the case at bar, it cannot be gainsaid that petitioners have not adduced evidence that they
fall within any of the above mentioned exceptions for as aforestated, the Sandiganbayan did
not recognize the exceptions, hence, the order compelling them to reveal the identity of their
client. In ruling that petitioners need not further establish the factual basis of their claim that
they fall within the exceptions to the general rule, the majority held:

The circumstances involving the engagement of lawyers in the case at bench

therefore clearly reveal that the instant case falls under at least two exceptions to the
general rule. First, disclosure of the alleged client's name would lead to establish
said client's connection with the very fact in issue of the case, which is privileged
information, because the privilege, as stated earlier, protects the subject matter or
the substance (without which there would be no attorney-client relationship).
Furthermore, under the third main exception, revelation of the client's name would
obviously provide the necessary link for the prosecution to build its case, where none
otherwise exists. It is the link, in the word of Baird, "that would inevitably form the
chain of testimony necessary to convict the (client) of a . . . crime.

I respectfully submit that the first and third exceptions relied upon by the majority are not self-
executory but need factual basis for their successful invocation. The first exception as cited
by the majority is ". . . where a strong probability exists that revealing the clients' name would
implicate that client in the very activity for which he sought the lawyer's advice." It seems to
me evident that "the very activity for which he sought the lawyer's advice" is a question of
fact which must first be established before there can be any ruling that the exception can be
invoked. The majority cites Ex Parte Enzor,   and
15

U S v. Hodge and Zweig,  but these cases leave no doubt that the "very activity" for which
16

the client sought the advice of counsel was properly proved. In both cases, the "very activity"
of the clients reveal they sought advice on their criminal activities. Thus, in Enzor, the
majority opinion states that the "unidentified client, an election official, informed his attorney
in confidence that he had been offered a bribe to violate election laws or that he had
accepted a bribe to that end."  In Hodge, the "very activity" of the clients deals with illegal
17

importation of drugs. In the case at bar, there is no inkling whatsoever about the "very
activity" for which the clients of petitioners sought their professional advice as lawyers. There
is nothing in the records that petitioners were consulted on the "criminal activities" of their
client. The complaint did allege that petitioners and their client conspired to commit crimes
but allegations are not evidence.

So it is with the third exception which as related by the majority is "where the government's
lawyers have no case against an attorney's client unless, by revealing the client's name, the
said name would furnish the only link that would form the chain of testimony necessary to
convict an individual of a crime."  Again, the rhetorical questions that answer themselves
18

are: (1) how can we determine that PCGG has "no case" against petitioners without
presentation of evidence? and (2) how can we determine that the name of the client is the
only link without presentation of evidence as to the other links? The case of Baird
 vs. Koerner  does not support the "no need for evidence" ruling of the majority. In Baird, as
19

related by the majority itself, "a lawyer was consulted by the accountants and the lawyer of
certain undisclosed taxpayers regarding steps to be taken to place the undisclosed
taxpayers in a favorable position in case criminal charges were brought against them by the
US Internal Revenue Service (IRS). It appeared that the taxpayers' returns of previous years
were probably incorrect and the taxes understated.  Once more, it is clear that the Baird
20

court was informed of the activity of the client for which the lawyer was consulted and the
activity involved probable violation of the tax laws. Thus, the Court held:

The facts of the instant case bring it squarely within that exception to the general
rule. Here money was received by the government, paid by persons who thereby
admitted they had not paid a sufficient amount in income taxes some one or more
years in the past. The names of the clients are useful to the government for but one
purpose — to ascertain which taxpayers think they were delinquent, so that it may
check the records for that one year or several years. The voluntary nature of the
payment indicates a belief by the taxpayers that more tax or interest or penalties are
due than the sum previously paid, if any. It indicates a feeling of guilt for nonpayment
of taxes, though whether it is criminal guilt is undisclosed. But it may well be the link
that could form the chain of testimony necessary to convict an individual of a federal
crime. Certainly the payment and the feeling of guilt are the reasons the attorney
here involved was employed — to advise his clients what, under the circumstances,
should be done.

In fine, the factual basis for the ruling in Baird was properly established by the parties. In the
case at bar, there is no evidence about the subject matter of the consultation made by
petitioners' client. Again, the records do not show that the subject matter is criminal in
character except for the raw allegations in the Complaint. Yet, this is the unstated predicate
of the majority ruling that revealing the identity of the client ". . . would furnish the only link
that would form the chain of testimony necessary to convict an individual of a crime." The
silent implication is unflattering and unfair to petitioners who are marquee names in the legal
profession and unjust to their undisclosed client.

Finally, it ought to be obvious that petitioners' right to claim the attorney-client privilege is
resolutory of the Complaint against them, and hence should be decided ahead and
independently of their claim to equal protection of the law. Pursuant to the rule in legal
hermeneutics that courts should not decide constitutional issues unless unavoidable, I also
respectfully submit that there is no immediate necessity to resolve petitioners' claim to equal
protection of the law at this stage of the proceedings.

IN VIEW WHEREOF, I respectfully register a qualified dissent from the majority opinion.

Footnotes

1 Agricultural Consultancy Services, Inc.; Agricultural Investors, Inc.; Anglo Ventures, Inc.;
Archipelago Realty Corporation; AP Holdings, Inc.; ARC Investment, Inc. ASC Investment,
Inc.; Autonomous Development Corporation; Balete Ranch, Inc.; Black Stallion Ranch, Inc.;
Cagayan de Oro Oil Company, Inc.; Christenses Plantation Company; Cocoa Investors, Inc.;
Coconut Investment Company (CIC); Cocofed Marketing Corporation (COCOMARK)
Coconut Davao Agricultural Aviation, Inc.; Discovery Realty Corporation; Dream Pastures,
Inc.; Echo Ranch, Inc.; ECJ and Sons Agricultural Management, Inc.; Far East Ranch, Inc.;
Filso v Shipping Co. Inc.; First Meridian Development, Inc.; First United Transport, Inc.;
Granexport Manufacturing Corporation; Habagat Realty Development, Inc.; Hyco
Agricultural, Inc.; Iligan Coconut Industries, Inc.; Kalawakan Resorts, Inc.; Kaunlaran
Agricultural Corporation; Labayog Air Terminals, Inc.; Landair International Marketing
Corporation; Legaspi Oil Co., Inc.; LHL Cattle Corporation; Lucena Oil Factory, Inc.; Meadow
Lark Plantation, Inc.; Metroplex Commodities, Inc.; Misty Mountains Agricultural Corporation;
Northern Carriers Corporation; Northwest Contract Traders, Inc.; Ocean Side Maritime
Enterprises, Inc.; Oro Verde Services; Pastoral Farms, Inc.; PCY Oil Manufacturing
Corporation; Philippine Coconut Producers Federation, Inc.; [(COCOFED) as an entity and in
representation of the "so-called more than one million member-coconut farmers"]; Philippine
Radio Corporation, Inc.; Philippine Technologies, Inc.; Primavera Farms, Inc.; Punong-Bayan
Housing Development Corp.; Pura Electric Co., Inc.; Radio Audience Developers Integrated
Organization, Inc.; Radio Pilipino Corporation; Rancho Grande, Inc.; Randy Allied Ventures,
Inc.; Reddee Developers, Inc.; Rocksteel Resources, Inc.; Roxas Shares, Inc.; San Esteban
Development Corporation; San Miguel Corporation Officers Incorporation; San Pablo
Manufacturing Corporation; Southern Luzon Oil Mills, Inc.; Silver Leaf Plantation, Inc.;
Soriano Shares, Inc.; Southern Services Traders, Inc.; Southern Star Cattle Corporation;
Spade 1 Resorts Corporation; Tagum Agricultural Development Corporation; Tedeum
Resources, Inc.; Thilagro Edible Oil Mills Inc.; Toda Holdings Inc.; United Coconut Oil Mills,
Inc.; United Coconut Planters Life Assurance Corporation (COCOLIFE); Unexplored Land
Developers, Inc.; Valhalla Properties Inc.; Verdant Plantations, Inc.; Vesta Agricultural
Corporation; and Wings Resort Corporation.

2 Petition in G.R. No. 105938, Rollo, p. 6.

3 Id., Annex "B," Rollo, p. 45.

4 Id., Annex "C," Rollo, p. 143.

5 Id., Annex "A," Rollo, p. 39.

6 Id., Annex "A," Rollo, p. 39.

7 Petitioner in G.R. No. 108113, Annexes "E," Rollo, p. 161.

8 Id., Annex "D," Rollo, p. 145.

9 Petition in G.R. No. 105938, Annex "E," Rollo, p. 161.

10 Id., Annexes, "G," "H" and "I," Rollo, pp. 191-196.

11 Id., Rollo, p. 8.

12 Id., Annex "K," p. 222.

13 Rollo, p. 303.

14 Id., at 285.

15 Id., at 287.

16 Annex "F," Rollo, pp. 181-182.

17 Coquia, Jorge, Principles of Roman Law (Manila: Central Law Book Supply, Inc., 1979),
p. 116.

18 Id., at 122.

19 Kelly v. Judge of Recorders' Court [Kelly v. Boyne], 239 Mich. 204, 214 NW 316, 53
A.L.R. 273; Rhode Island Bar Association v. Automobile Service Association, 179 A. 139,
100 ALR 226.

20 Curtis v. Richards, 95 Am St. Rep. 134; also cited in Martin, Ruperto, Legal and Judicial
Ethics (Manila, Premium Printing Press, 1988) at p. 90.

21 Rhode Island Bar Association v. Automobile Service Association, 100 ALR 226; Cooper v.
Bell, 153 SW 844; Ingersoll v. Coal Creek Co., 98 SW 173; Armstrong v. 163 NW 179; Re
Mosness, 20 Am. Rep. 55.

22 Re Paschal (Texas v. White) 19 L. Ed. 992; Stockton v. Ford, 11 How. (US) 232; 13 L.
Ed. 676; Berman v. Cookley, 137 N <E> 667; 26v ALR 92; Re Dunn 98 NE 914.

23 Agpalo, Ruben, Legal Ethics (Manila: Rex Book Store, 1992), p. 136.

24 Hilado v. David, 84 Phil. 569; Hernandez v. Villanueva, 40 Phil. 775.

25 C. WOLFRAM, MODERN LEGAL ETHICS, 146 (1986).

26 52 U. S. ( 11 How.) 232, 247, 13 L. Ed. 676 (1850).

27 Ibid.

28 Act No. 190, sec. 383.

29 Rules of Court, Rule 130, sec. 24 (b).

30 People v. Warden of Country Jail, 270 NYS 362 [1934].

31 58 AmJur 2d Witnesses sec. 507, 285.

32 Id.

33 5 Wigmore on Evidence, sec. 23 13, pp. 607-608. See also, U. S. v. Flores, 628 F2d 521;
People v. Doe, 371 N.E. 2d. 334.

34 270 ALA 254 (1960).

35 548 F 2d 1347 (9th Cir. 197).

36 Id. (citations omitted).

37 249 NYS 631 (1931).

38 Id., at 632.

39 Id., at 634.

40 87 NYS 1059 (1904).

41 Id.

42 279 F. 2d 623 (1960).

43 Id., at 633.

44 Supra, note 20, at 257.

45 R. ARONSON, PROFESSIONAL RESPONSIBILITY, 203 (1991).

46 Hays v. Wood, 25 Cal. 3d 770, 603 P. 2d 19, 160 Cal. Rptr. 102 (1979); Ex
parte McDonough, 180 Cal. 230, 149 P. 566 (1915); In re Grand Jury Proceedings, 600 F.
2d 215, 218 (9th Cir. 1979); United States v. Hodge & Zweig, 548 F. 2d 1347, 1353 (9th Cir.
1977); In re Michaelson, 511 F. 2d 882, 888 (9th Cir.), cert. denied, 421 U.S. 978, 95 S. Ct.
1979, 44 L Ed. 2d 469 (1975); Baird v. Koerner, 279 F. 2d 623, 634-35 (9th Cir. 1960)
(applying California law); United States v. Jeffers, 532 F. 2d 1101, 114 15 (7th Cir. 1976),
aff'd in part and vacated in part, 432 U.S. 137, 97 S. Ct. 2207, 53 L. Ed. 2d 168 (1977); In re
Grand Jury Proceedings, 517 F. 2d 666, 670 71 (5th Cir. 1975); Tillotson v. Boughner, 350
F. 2d, 663, 665-66 (7th Cir. 1965); NLRB v. Harvey, 349 F. 2d 900, 905 (4th Cir. 1965);
Colton v. United States, 306 F. 2d 633, 637 (2d Cir. 1962), cert. denied, 371 U.S. 951, 83 S
Ct. 505, 9 L. Ed.2d 499 (1963).

47 Baird v. Koerner, supra. The general exceptions to the rule of privilege are: "a)
Communications for illegal purposes, generally. b) Communications as to crime; and c)
Communications as to fraud." 58 Am Jur 515-517. In order that a communication between a
lawyer and his client may be privileged, it must be for a lawful purpose or in furtherance of a
lawful end. The existence of an unlawful purpose prevents the privilege from attaching. This
includes contemplated criminal acts or in aid or furtherance thereof. But, "Statements and
communications regarding the commission of a crime already committed, made by the party
who committed it to an attorney, consulted as such are, of course privileged
communications, whether a fee has or has not been paid. "Id. In such instances even the
name of the client thereby becomes privileged.

48 58 Am Jur 515-517.

49 Supra, note 40.

50 Bacon v. Frisbie, 80 NY 394, 399.

51 517 F. 2d 66 6, 671 (5th Cir., 1965).

52 350 F. 2d 663 (7th Cir., 1965).

53 See, In re Shawmut Mining Co., 87 N.Y.S. 1059 (1904).

54 US Case No. 491, 93-7418 (1994).

55 US Case No. 92-2439 (1993).

56 249 NY 458 (1920).

57 Lorenzana Food Corporation v. Daria, 197 SCRA 428.

58 Lerner, Max, The Mind and Faith of Justice Holmes (New York; Halycon House, Garden
City, 1943), p. 28.

59 Rollo, p. 164

60 Id., at 155.

61 As manifested by the PCGG, the following documents constituted the basis for the
PCGG's decision to drop private respondent:

1. A letter to the PCGG dated 24 May 1989 signed by Mr. Augusto Sanchez, as
counsel for Mr. Roco reiterating an earlier request for reinvestigation of the case;

2. An affidavit dated 8 March 1989 signed and executed by Mr. Roco which was an
enclosure to the letter of 24 May 1989;

3. A letter to the PCGG dated 21 September 1988 by the Roco, Bunag and Kapunan
Law offices, which was the original request for reinvestigation and/or reexamination
of the evidence in the possession of the PCGG. Rollo, p. 238.

62 Gumabon v. Director of Prisons, 37 SCRA 420 (1971).

63 Id.

64 Article III, Section 1 of the Constitution provides:

Sec. 1. No person shall be deprived of life, liberty, or property without due process of law,
nor shall any person be denied the equal protection of the laws.

PUNO, J., dissenting:

1 8 J. Wigmore, Evidence, S. 2290 (McNaughton rev. 1961).

2 In re Selser 15 N.J. 393, 405-406, 105 A. 2d 395, 401-402 (1954).

3 See Note, Professional Responsibility and In re Ryder: Can Attorney Serve Two Masters?
54 Va. L. Rev. 145 (1968).

4 United States v. Nixon, 418 US 683, 710, 94 S.Ct. 3090, 41 L.Ed. 2d 1039 (1974).
 5 In re Grand Jury Investigation No. 83-2-35, 83-1290, 723 F2d. 447 (1983) citing In re
Walsh, 623 F2d 489, cert. denied 449 US 994, 101 S.Ct. 531, 66 L.Ed.2d 291 (1980); Fisher
v. United States, 425 US 391, 96 S.Ct. 1569, 48 L.Ed.2d 39 (1975).

6 125 American Law Reports Annotated 516-519 citing People v. Van Alstine, 57 Mich 69,
23 NW 594.

7 Millare v. Montero, 246 SCRA 1.

8 81 AM JUR 2d. Witnesses, Section 395, pp. 356-357.

9 289 US 1 (1933).

10 Op cit.

11 Hoffman v. United States, 341 US 479, 71 S. Ct. 814, 95 L.ed. 118 (1951).

12 US, et al. v. Tratner, 511 F., 2d, 248-255 (1975); US v. Landoff, 591 F 2d 36 (1978); US
v. Bartlett, 449 F 2d 700 (1971); cert. denied, 504 US 932, 92 S-Ct. 990, 30 L.ed. 2d 808
(1972).

13 US v. Tratner, op cit., p. 252 citing US v. Johnson, 465 F2d 793 (1972).

14 In re Grand Jury Investigation No. 83-2-35, 723 F2d 446 (1983).

15 270 ALA 254 (1960).

16 548 F2d 1347 (9th Cir. 197).

17 See page 25 of majority decision.

18 See page 31 of majority decision.

19 279 F2d 623 (1960).

20 See pp. 31-32 of majority decision

Case digest:
by Irish Jhade Alimpolos

TEODORO R. REGALA v. SANDIGANBAYAN, GR No. 105938, 1996-09-20

Facts:
Complaint on July 31, 1987 before the Sandiganbayan by the Republic of the Philippines,
through the Presidential Commission on Good Government against Eduardo M. Cojuangco,
Jr., as one of the principal... defendants, for the recovery of alleged ill-gotten wealth, which
includes shares of stocks in the named corporations
Among the defendants named in the case are herein petitioners Teodoro Regala, Edgardo
J. Angara, Avelino V. Cruz, Jose C. Concepcion, Rogelio A. Vinluan, Victor P. Lazatin,
Eduardo U. Escueta and Paraja G. Hayudini, and herein private respondent Raul S. Roco,
who all were then... partners of the law firm Angara, Abello, Concepcion, Regala and Cruz
Law Offices (hereinafter referred to as the ACCRA Law Firm).
In the course of their dealings with their clients, the... members of the law firm acquire
information relative to the assets of clients as well as their personal and business
circumstances.
As members of the ACCRA Law Firm, petitioners and private respondent Raul Roco admit
that they assisted in the organization and acquisition... of the companies included in Civil
Case No. 0033, and in keeping with the office practice, ACCRA lawyers acted as nominees-
stockholders of the said corporations involved in sequestration proceedings.[2]... espondent
Presidential Commission on Good Government (hereinafter referred to as respondent
PCGG) filed a "Motion to Admit Third Amended Complaint" and "Third Amended Complaint"
which excluded  private respondent Raul S. Roco from the complaint in PCGG
Case No. 33 as party-defendan... undertaking that he will reveal the identity of the
principal/s for whom he acted as nominee/stockholder in the companies involved in
PCGG Case No. 33.
Petitioners ACCRA lawyers subsequently filed their "COMMENT AND/OR OPPOSITION"
dated October 8, 1991 with Counter-Motion that respondent PCGG similarly grant the same
treatment to them (exclusion as parties-defendants) as accorded private respondent Roco.
In its "Comment," respondent PCGG set the following conditions precedent for the
exclusion of petitioners, namely:  (a) the disclosure of the identity of its clients; (b)
submission of documents substantiating the lawyer-client relationship; and (c) the
submission of the... deeds of assignments petitioners executed in favor of its clients
covering their respective shareholdings.[9]... respondent Sandiganbayan promulgated the
Resolution, herein questioned, denying the exclusion of petitioners in PCGG Case No. 33,
for their refusal to comply with the conditions required by respondent PCGG
Hence, the ACCRA lawyers filed the petition for certiorari,... The Honorable Sandiganbayan
committed grave abuse of discretion in not holding that, under the facts of this case, the
attorney-client privilege prohibits petitioners ACCRA lawyers from revealing the identity of
their client(s) and the other information requested by the
PCGG.
Issues:
whether or not this duty may be asserted in refusing to disclose the name of petitioners'
client(s) in the case at bar.
Ruling:
the general rule in our jurisdiction as well as in the United States is that a lawyer may not
invoke the privilege and refuse to divulge the name or... identity of his client
The reasons advanced for the general rule are well established.
First, the court has a right to know that the client whose privileged information is sought to
be protected is flesh and blood.
Second, the privilege begins to exist only after the attorney-client relationship has been
established.  The attorney-client privilege does not attach until there is a client.
Third, the privilege generally pertains to the subject matter of the relationship.
Finally, due process considerations require that the opposing party should, as a general
rule, know his adversary.
the general rule is however qualified by some important exceptions.
1)  Client identity is privileged where a strong probability exists that revealing the client's
name would implicate that client in the very activity for which he sought the lawyer's advice.
2. Where disclosure would open the client to civil liability, his identity is privileged.
3. Where the government's lawyers have no case against an attorney's client unless,
by revealing the client's name, the said name would furnish the only link that would
form the chain of testimony necessary to convict an individual of a crime, the client's
name is... privileged.
there exist other situations which could qualify as exceptions to the general rule.
information relating to the identity of a client may fall within the ambit of the privilege when
the client's name itself has an independent significance, such that disclosure would then
reveal client confidences.
Summarizing these exceptions, in
The circumstances involving the engagement of lawyers in the case at bench, therefore,
clearly reveal that the instant case falls under at least two exceptions to the general rule. 
First, disclosure of the alleged client's name would lead to establish said client's...
connection with the very fact in issue of the case, which is privileged information, because
the privilege, as stated earlier, protects the subject matter or the substance (without which
there would be no attorney-client relationship
Furthermore, under the third main exception, revelation of the client's name would obviously
provide the necessary link for the prosecution to build its case, where none otherwise
exists.  It is the link, in the words of Baird, "that would inevitably form the chain of...
testimony necessary to convict the (client) of a... crime."[47]
An important distinction must be made between a case where a client takes on the services
of an attorney for illicit purposes, seeking advice about how to go around the law for the
purpose of committing illegal activities and a case where a client thinks he might have
previously... committed something illegal and consults his attorney about it.  The first case
clearly does not fall within the privilege because the same cannot be invoked for purposes
illegal.  The second case falls within the exception because whether or not the act for which
the... advice turns out to be illegal, his name cannot be used or disclosed if the disclosure
leads to evidence, not yet in the hands of the prosecution, which might lead to possible 
action against him.
There are, after all, alternative sources of information available to the prosecutor which do
not depend on utilizing a defendant's counsel as a convenient and readily available source
of information in the building of a case against the latter.  Compelling disclosure of... the
client's name in circumstances such as the one which exists in the case at bench amounts
to sanctioning fishing expeditions by lazy prosecutors and litigants which we cannot and will
not countenance.
We have no choice but to uphold petitioners' right not to reveal the identity of their clients
under pain of the breach of fiduciary duty owing to their clients, because the facts of the
instant case clearly fall within recognized exceptions to the rule that the client's name is...
not privileged information.
respondents failed to show -... and absolutely nothing exists in the records of the case at
bar - that private respondent actually revealed the identity of his client(s) to the PCGG.
We find that the condition precedent required by the respondent PCGG of the petitioners for
their exclusion as parties-defendants in PCGG Case No. 33 violates the lawyer-client
confidentiality privilege.
.  The condition also constitutes a transgression by respondents
Sandiganbayan and PCGG of the equal protection clause of the Constitution.[64] It is
grossly unfair to exempt one similarly situated litigant from prosecution without allowing the
same exemption to the others.
.  Moreover, the PCGG's demand not only... touches upon the question of the identity of
their clients but also on documents related to the suspected transactions, not only in
violation of the attorney-client privilege but also of the constitutional right against self-
incrimination.  Whichever way one looks at it,... this is a fishing expedition, a free ride at the
expense of such rights.
Principles:
Rule 138 of the Rules of Court states:
Sec. 20.  It is the duty of an attorney:
(e) to maintain inviolate the confidence, and at every peril to himself, to preserve the secrets
of his client, and to accept no compensation in connection with his client's business except
from him or with his knowledge and approval.
Canon 17 of the Code of Professional Responsibility which provides that:
Canon 17.  A lawyer owes fidelity to the cause of his client  and he shall be mindful of the
trust and confidence reposed in him.
Canon 15 of the Canons of Professional Ethics also demands a lawyer's fidelity to client:
The lawyer owes "entire devotion to the interest of the client, warm zeal in the maintenance
and defense of his rights and the exertion of his utmost learning and ability," to the end that
nothing be taken or be withheld from him, save by the rules of law, legally... applied.  No
fear of judicial disfavor or public popularity should restrain him from the full discharge of his
duty.  In the judicial forum the client is entitled to the benefit of any and every remedy and
defense that is authorized by the law of the land, and he may... expect his lawyer to assert
every such remedy or defense.  But it is steadfastly to be borne in mind that the great trust
of the lawyer is to be performed within and not without the bounds of the law.  The office of
attorney does not permit, much less does it demand of... him for any client, violation of law
or any manner of fraud or chicanery.  He must obey his own conscience and not that of his
client.
An effective lawyer-client relationship is largely... dependent upon the degree of confidence
which exists between lawyer and client which in turn requires a situation which encourages
a dynamic and fruitful exchange and flow of information.  It necessarily follows that in order
to attain effective representation, the lawyer... must invoke the privilege not as a matter of
option but as a matter of duty and professional responsibility.
Justice Benjamin Cardoz
Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of
behavior,"