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495 Phil. 485
EN BANC
[ G.R. NOS. 151809-12, April 12, 2005 ]
PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG), PETITIONER, VS. SANDIGANBAYAN (FIFTH DIVISION), LUCIO C. TAN, CARMEN KHAO TAN, FLORENCIO T. SANTOS, NATIVIDAD P. SANTOS, DOMINGO CHUA, TAN HUI NEE, MARIANO TAN ENG LIAN, ESTATE OF BENITO TAN KEE HIONG (REPRESENTED BY TARCIANA C. TAN), FLORENCIO N. SANTOS, JR., HARRY C. TAN, TAN ENG CHAN, CHUNG POE KEE, MARIANO KHOO, MANUEL KHOO, MIGUEL KHOO, JAIME KHOO, ELIZABETH KHOO, CELSO RANOLA, WILLIAM T. WONG, ERNESTO B. LIM, BENJAMIN T. ALBACITA, WILLY CO, ALLIED BANKING CORP., ALLIED LEASING AND FINANCE CORPORATION, ASIA BREWERY, INC., BASIC HOLDINGS CORP., FOREMOST FARMS, INC., FORTUNE TOBACCO CORP., GRANDSPAN DEVELOPMENT CORP., HIMMEL INDUSTRIES, IRIS HOLDINGS AND DEVELOPMENT CORP., JEWEL HOLDINGS, INC., MANUFACTURING SERVICES AND TRADE CORP., MARANAW HOTELS AND RESORT CORP., NORTHERN TOBACCO REDRYING PLANT, PROGRESSIVE FARMS, INC., SHAREHOLDINGS, INC., SIPALAY TRADING CORP., VIRGO HOLDINGS & DEVELOPMENT CORP., AND ATTY. ESTELITO P. MENDOZA, RESPONDENTS.
D E C I S I O N
PUNO, J.:
This case is
prima impressiones
and it is weighted with significance for it concerns on one hand, the efforts of the Bar to upgrade the ethics of lawyers in government service and on the other, its effect on the right of government to recruit competent counsel to defend its interests.
In
1976
, General Bank and Trust Company (GENBANK) encountered financial difficulties. GENBANK had extended considerable financial support to Filcapital Development Corporation causing it to incur daily overdrawings on its current account with the Central Bank.
It was later found by the Central Bank that GENBANK had approved various loans to directors, officers, stockholders and related interests totaling P172.3 million, of which 59% was classified as doubtful and P0.505 million as uncollectible.
As a bailout,
the Central Bank extended emergency loans to GENBANK which reached a total of P310 million
Despite the mega loans, GENBANK failed to recover from its financial woes. On March 25, 1977, the
Central Bank issued a resolution declaring GENBANK insolvent
and unable to resume business with safety to its depositors, creditors and the general public, and
ordering its liquidation
A
public bidding of GENBANK's assets
was held from March 26 to 28, 1977, wherein the Lucio Tan group submitted the winning bid.
Subsequently,
former Solicitor General Estelito P. Mendoza filed a petition
with the then Court of First Instance
praying for the assistance
and supervision of the court in GENBANK's liquidation as mandated by Section 29 of Republic Act No. 265.
In February 1986, the EDSA I revolution toppled the Marcos government. One of the first acts of President Corazon C. Aquino was to establish the Presidential Commission on Good Government (PCGG) to recover the alleged ill-gotten wealth of former President Ferdinand Marcos, his family and his cronies. Pursuant to this mandate, the PCGG, on July 17, 1987, filed with the
Sandiganbayan
a complaint for
"reversion, reconveyance, restitution, accounting and damages"
against respondents Lucio Tan, Carmen Khao Tan, Florencio T. Santos, Natividad P. Santos, Domingo Chua, Tan Hui Nee, Mariano Tan Eng Lian, Estate of Benito Tan Kee Hiong, Florencio N. Santos, Jr., Harry C. Tan, Tan Eng Chan, Chung Poe Kee, Mariano Khoo, Manuel Khoo, Miguel Khoo, Jaime Khoo, Elizabeth Khoo, Celso Ranola, William T. Wong, Ernesto B. Lim, Benjamin T. Albacita, Willy Co, Allied Banking Corporation (Allied Bank), Allied Leasing and Finance Corporation, Asia Brewery, Inc., Basic Holdings Corp., Foremost Farms, Inc., Fortune Tobacco Corporation, Grandspan Development Corp., Himmel Industries, Iris Holdings and Development Corp., Jewel Holdings, Inc., Manufacturing Services and Trade Corp., Maranaw Hotels and Resort Corp., Northern Tobacco Redrying Plant, Progressive Farms, Inc., Shareholdings, Inc., Sipalay Trading Corp., Virgo Holdings & Development Corp., (collectively referred to herein as respondents Tan,
et al.
), then President Ferdinand E. Marcos, Imelda R. Marcos, Panfilo O. Domingo, Cesar Zalamea, Don Ferry and Gregorio Licaros.
The case was docketed as Civil Case No. 0005
of the Second Division of the
Sandiganbayan
In connection therewith, the PCGG issued several
writs of sequestration
on properties allegedly acquired by the above-named persons by taking advantage of their close relationship and influence with former President Marcos.
Respondents Tan,
et al.
repaired to this Court and filed petitions for
certiorari
, prohibition and injunction to nullify, among others, the writs of sequestration issued by the PCGG.
After the filing of the parties' comments, this Court referred the cases to the
Sandiganbayan
for proper disposition. These cases were docketed as
Civil Case Nos. 0096-0099
. In all these cases, respondents Tan,
et al.
were represented by their counsel, former Solicitor General Estelito P. Mendoza, who has then resumed his private practice of law.
On February 5, 1991
, the PCGG filed
motions to disqualify
respondent Mendoza as counsel for respondents Tan,
et al.
with the Second Division of the
Sandiganbayan
in Civil Case Nos. 0005
and 0096-0099.
The motions alleged that respondent Mendoza, as then Solicitor General
[10]
and counsel to Central Bank,
"actively intervened"
in the liquidation of GENBANK, which was subsequently acquired by respondents Tan,
et al.
and became Allied Banking Corporation. Respondent Mendoza allegedly "intervened" in the acquisition of GENBANK by respondents Tan,
et al.
when, in his capacity as then Solicitor General, he
advised
the Central Bank's officials on the
procedure
to bring about GENBANK's liquidation and appeared as counsel for the Central Bank in connection with its petition for assistance in the liquidation of GENBANK which he filed with the Court of First Instance (now Regional Trial Court) of Manila and was docketed as Special Proceeding No. 107812. The motions to disqualify invoked
Rule 6.03 of the Code of Professional Responsibility
. Rule 6.03
prohibits former government lawyers
from accepting "engagement or employment in connection with any matter in which he had intervened while in said service."
On
April 22, 1991
the Second Division of the
Sandiganbayan
issued a resolution
denying
PCGG's motion to disqualify respondent Mendoza in Civil Case No. 0005.
[11]
It found that the PCGG failed to prove the existence of an inconsistency between respondent Mendoza's former function as Solicitor General and his present employment as counsel of the Lucio Tan group. It noted that respondent Mendoza did not take a position adverse to that taken on behalf of the Central Bank during his term as Solicitor General.
[12]
It further ruled that respondent Mendoza's appearance as counsel for respondents Tan,
et al.
was beyond the one-year prohibited period under Section 7(b) of Republic Act No. 6713 since he ceased to be Solicitor General in the year 1986. The said section prohibits a former public official or employee from practicing his profession in connection with any matter before the office he used to be with within one year from his resignation, retirement or separation from public office.
[13]
The PCGG did not seek any reconsideration of the ruling.
[14]
It appears that Civil Case Nos. 0096-0099 were
transferred
from the
Sandiganbayan's
Second Division to the Fifth Division.
[15]
In its resolution dated July 11, 2001, the Fifth Division of the
Sandiganbayan
denied the other PCGG's motion to disqualify respondent Mendoza.
[16]
It
adopted
the resolution of its
Second Division
dated April 22, 1991, and observed that the arguments were the same in substance as the motion to disqualify filed in Civil Case No. 0005. The PCGG sought reconsideration of the ruling but its motion was denied in its resolution dated December 5, 2001.
[17]
Hence, the recourse to this Court by the PCGG assailing the resolutions dated July 11, 2001 and December 5, 2001 of the
Fifth Division of the
Sandiganbayan
via a petition for
certiorari
and prohibition under Rule 65 of the 1997 Rules of Civil Procedure.
[18]
The PCGG alleged that the
Fifth Division
acted with grave abuse of discretion amounting to lack or excess of jurisdiction in issuing the assailed resolutions contending that: 1) Rule 6.03 of the Code of Professional Responsibility prohibits a former government lawyer from accepting employment in connection with any matter in which he intervened; 2) the prohibition in the Rule is not time-bound; 3) that Central Bank could not waive the objection to respondent Mendoza's appearance on behalf of the PCGG; and 4) the resolution in Civil Case No. 0005 was interlocutory, thus
res judicata
does not apply.
[19]
The petition at bar raises procedural and substantive issues of law. In view, however, of the import and impact of Rule 6.03 of the Code of Professional Responsibility to the legal profession and the government, we shall cut our way and forthwith resolve the substantive issue.
I
Substantive Issue
The
key issue
is whether Rule 6.03 of the Code of Professional Responsibility applies to respondent Mendoza. Again, the prohibition states: "A lawyer shall not, after leaving government service, accept engagement or employment in connection with any
matter
in which he had
intervened
while in the said service."
I.A. The history of Rule 6.03
A proper resolution of this case necessitates that we trace the
historical lineage
of Rule 6.03 of the Code of Professional Responsibility.
In the
seventeenth and eighteenth centuries
, ethical standards for lawyers were pervasive in
England
and other parts of Europe. The early statements of standards did not resemble modern codes of conduct. They were not detailed or collected in one source but surprisingly were comprehensive for their time. The principal thrust of the standards was directed towards the litigation conduct of lawyers. It underscored the central duty of truth and fairness in litigation as superior to any obligation to the client. The formulations of the litigation duties were at times intricate, including specific pleading standards, an obligation to inform the court of falsehoods and a duty to explore settlement alternatives. Most of the lawyer's other basic duties -- competency, diligence, loyalty, confidentiality, reasonable fees and service to the poor -- originated in the litigation context, but ultimately had broader application to all aspects of a lawyer's practice.
The forms of lawyer regulation in
colonial and early post-revolutionary America
did not differ markedly from those in England. The colonies and early states used oaths, statutes, judicial oversight, and procedural rules to govern attorney behavior. The difference from England was in the pervasiveness and continuity of such regulation. The standards set in England varied over time, but the variation in early America was far greater. The American regulation fluctuated within a single colony and differed from colony to colony. Many regulations had the effect of setting some standards of conduct, but the regulation was sporadic, leaving gaps in the substantive standards. Only three of the traditional core duties can be fairly characterized as pervasive in the formal, positive law of the colonial and post-revolutionary period: the duties of litigation fairness, competency and reasonable fees.
[20]
The
nineteenth century
has been termed the
"dark ages" of legal ethics
in the United States. By mid-century, American legal reformers were filling the void in two ways. First, David Dudley Field, the drafter of the highly influential New York "Field Code," introduced a new set of uniform standards of conduct for lawyers. This concise statement of eight statutory duties became law in several states in the second half of the nineteenth century. At the same time, legal educators, such as David Hoffman and George Sharswood, and many other lawyers were working to flesh out the broad outline of a lawyer's duties. These reformers wrote about legal ethics in unprecedented detail and thus brought a new level of understanding to a lawyer's duties. A number of mid-nineteenth century laws and statutes, other than the Field Code, governed lawyer behavior. A few forms of colonial regulations -
e.g.
, the "do no falsehood" oath and the deceit prohibitions -- persisted in some states. Procedural law continued to directly, or indirectly, limit an attorney's litigation behavior. The developing law of agency recognized basic duties of competence, loyalty and safeguarding of client property. Evidence law started to recognize with less equivocation the attorney-client privilege and its underlying theory of confidentiality. Thus, all of the core duties, with the likely exception of service to the poor, had some basis in formal law. Yet, as in the colonial and early post-revolutionary periods, these standards were isolated and did not provide a comprehensive statement of a lawyer's duties. The reformers, by contrast, were more comprehensive in their discussion of a lawyer's duties, and they actually ushered a new era in American legal ethics.
[21]
Toward the
end of the nineteenth century
, a new form of ethical standards began to guide lawyers in their practice - the bar association code of legal ethics. The bar codes were detailed ethical standards formulated by lawyers for lawyers. They combined the two primary sources of ethical guidance from the nineteenth century. Like the academic discourses, the bar association codes gave detail to the statutory statements of duty and the oaths of office. Unlike the academic lectures, however, the bar association codes retained some of the official imprimatur of the statutes and oaths. Over time, the bar association codes became extremely popular that states adopted them as binding rules of law. Critical to the development of the new codes was the re-emergence of bar associations themselves. Local bar associations formed sporadically during the colonial period, but they disbanded by the early nineteenth century. In the late nineteenth century, bar associations began to form again, picking up where their colonial predecessors had left off. Many of the new bar associations, most notably the Alabama State Bar Association and the American Bar Association, assumed on the task of drafting substantive standards of conduct for their members.
[22]
In 1887, Alabama
became the first state with a comprehensive bar association code of ethics. The 1887 Alabama Code of Ethics was the model for several states' codes, and it was the foundation for the American Bar Association's (ABA) 1908 Canons of Ethics.
[23]
In 1917, the Philippine Bar
found that the oath and duties of a lawyer were insufficient to attain the full measure of public respect to which the legal profession was entitled. In that year, the Philippine Bar Association adopted as its own, Canons 1 to 32 of the ABA Canons of Professional Ethics.
[24]
As early as 1924,
some ABA members have questioned the form and function of the canons. Among their concerns was the
"revolving door"
or "the process by which lawyers and others temporarily enter government service from private life and then leave it for large fees in private practice, where they can exploit information, contacts, and influence garnered in government service."
[25]
These concerns were classified as
adverse-interest conflicts'
and
"congruent-interest conflicts."
"Adverse-interest conflicts"
exist where the matter in which the former government lawyer represents a client in private practice is substantially related to a matter that the lawyer dealt with while employed by the government and the interests of the current and former are adverse.
[26]
On the other hand,
"congruent-interest representation conflicts"
are unique to government lawyers and apply primarily to former government lawyers.
[27]
For several years, the ABA attempted to correct and update the canons through new canons, individual amendments and interpretative opinions. In 1928, the ABA amended one canon and added thirteen new canons.
[28]
To deal with problems peculiar to former government lawyers,
Canon 36
was minted which disqualified them both for "adverse-interest conflicts" and "congruent-interest representation conflicts."
[29]
The rationale for disqualification is rooted in a concern that the government lawyer's largely discretionary actions would be influenced by the temptation to take action on behalf of the government client that later could be to the advantage of parties who might later become private practice clients.
[30]
Canon 36
provides,
viz
36. RETIREMENT FROM JUDICIAL POSITION OR PUBLIC EMPLOYMENT
A lawyer should not accept employment as an advocate in any matter upon the merits of which he has previously acted in a judicial capacity.
A lawyer, having once held public office or having been in the public employ should not, after his retirement, accept employment in connection with any matter he has investigated or passed upon while in such office or employ.
Over the next thirty years, the ABA continued to amend many of the canons and added Canons 46 and 47 in 1933 and 1937, respectively.
[31]
In 1946, the Philippine Bar Association
again adopted as its own Canons 33 to 47 of the ABA Canons of Professional Ethics.
[32]
By the middle of the twentieth century, there was growing consensus that the ABA Canons needed more meaningful revision. In 1964, the ABA President-elect Lewis Powell asked for the creation of a committee to study the "adequacy and effectiveness" of the ABA Canons. The committee recommended that the canons needed substantial revision, in part because the ABA Canons failed to distinguish between "the inspirational and the proscriptive" and were thus unsuccessful in enforcement. The legal profession in the United States likewise observed that
Canon 36
of the ABA Canons of Professional Ethics resulted in unnecessary disqualification of lawyers for negligible participation in matters during their employment with the government.
The unfairness of Canon 36 compelled ABA to replace it in the 1969 ABA Model Code of Professional Responsibility.
[33]
The basic ethical principles in the Code of Professional Responsibility were supplemented by Disciplinary Rules that defined minimum rules of conduct to which the lawyer must adhere.
[34]
In the case of Canon 9,
DR 9-101(b)
[35]
became the applicable supplementary norm. The drafting committee reformulated the canons into the Model Code of Professional Responsibility, and, in August of 1969, the ABA House of Delegates approved the
Model Code
[36]
Despite these amendments, legal practitioners remained unsatisfied with the results and indefinite standards set forth by DR 9-101(b) and the Model Code of Professional Responsibility as a whole.
Thus, in August 1983, the ABA adopted new Model Rules of Professional Responsibility.
The Model Rules used the "restatement format," where the conduct standards were set-out in rules, with comments following each rule. The new format was intended to give better guidance and clarity for enforcement "because the only enforceable standards were the black letter Rules." The Model Rules eliminated the broad canons altogether and reduced the emphasis on narrative discussion, by placing comments after the rules and limiting comment discussion to the content of the black letter rules. The Model Rules made a number of substantive improvements particularly with regard to conflicts of interests.
[37]
In particular, the ABA did away with Canon 9, citing the hopeless dependence of the concept of impropriety on the subjective views of anxious clients as well as the norm's indefinite nature.
[38]
In cadence with these changes,
the Integrated Bar of the Philippines (IBP) adopted a proposed Code of Professional Responsibility in 1980 which it submitted to this Court for approval
. The Code was drafted to reflect the local customs, traditions, and practices of the bar and to conform with new realities.
On June 21, 1988, this Court promulgated the Code of Professional Responsibility.
[39]
Rule 6.03 of the Code of Professional Responsibility deals particularly with former government lawyers, and provides,
viz.
Rule 6.03 - A lawyer shall not, after leaving government service, accept engagement or employment in connection with any
matter
in which he had
intervened
while in said service.
Rule 6.03 of the Code of Professional Responsibility retained the general structure of paragraph 2, Canon 36 of the Canons of Professional Ethics but
replaced
the expansive phrase
"investigated and passed upon"
with the word
"intervened."
It is, therefore, properly applicable to both
"adverse-interest conflicts"
and
"congruent-interest conflicts."
The case at bar does not involve the "adverse interest" aspect of Rule 6.03.
Respondent Mendoza, it is conceded, has no adverse interest problem when he acted as Solicitor General in Sp. Proc. No. 107812 and later as counsel of respondents Tan,
et al.
in Civil Case No. 0005 and Civil Case Nos. 0096-0099 before the
Sandiganbayan
. Nonetheless,
there remains the issue
of whether there exists a
"congruent-interest conflict"
sufficient to disqualify respondent Mendoza from representing respondents Tan,
et al.
I.B. The "congruent interest" aspect of Rule 6.03
The
key
to unlock Rule 6.03 lies in comprehending first, the meaning of
"matter"
referred to in the rule and, second, the metes and bounds of the
"intervention"
made by the former government lawyer on the "matter." The American Bar Association in its Formal
Opinion 342
, defined "matter" as any discrete, isolatable act as well as identifiable transaction or conduct involving a particular situation and specific party,
and not merely
an act of drafting, enforcing or interpreting government or agency procedures, regulations or laws, or briefing abstract principles of law.
Firstly
, it is critical that we pinpoint the
"matter"
which was the subject of intervention by respondent Mendoza while he was the Solicitor General. The PCGG relates the following acts of respondent Mendoza as constituting the
"matter"
where he intervened as a Solicitor General,
viz
[40]
The PCGG's Case for Atty. Mendoza's Disqualification
The PCGG imputes grave abuse of discretion on the part of the
Sandiganbayan
(Fifth Division) in issuing the assailed Resolutions dated July 11, 2001 and December 5, 2001 denying the motion to disqualify Atty. Mendoza as counsel for respondents Tan,
et al.
The PCGG insists that Atty. Mendoza, as then Solicitor General, actively intervened in the closure of GENBANK by advising the Central Bank on how to proceed with the said bank's liquidation and even filing the petition for its liquidation with the CFI of Manila.
As proof thereof, the PCGG cites the Memorandum dated March 29, 1977 prepared by certain key officials of the Central Bank, namely, then Senior Deputy Governor Amado R. Brinas, then Deputy Governor Jaime C. Laya, then Deputy Governor and General Counsel Gabriel C. Singson, then Special Assistant to the Governor Carlota P. Valenzuela, then Asistant to the Governor Arnulfo B. Aurellano and then Director of Department of Commercial and Savings Bank Antonio T. Castro, Jr., where they averred that on March 28, 1977, they had a conference with the Solicitor General (Atty. Mendoza), who advised them on how to proceed with the liquidation of GENBANK. The pertinent portion of the said memorandum states:
Immediately after said meeting, we had a conference with the Solicitor General and he advised that the following procedure should be taken:
1)
Management should submit a memorandum to the Monetary Board reporting that studies and evaluation had been made since the last examination of the bank as of August 31, 1976 and it is believed that the bank can not be reorganized or placed in a condition so that it may be permitted to resume business with safety to its depositors and creditors and the general public.
2)
If the said report is confirmed by the Monetary Board, it shall order the liquidation of the bank and indicate the manner of its liquidation and approve a liquidation plan.
3)
The Central Bank shall inform the principal stockholders of Genbank of the foregoing decision to liquidate the bank and the liquidation plan approved by the Monetary Board.
4)
The Solicitor General shall then file a petition in the Court of First Instance reciting the proceedings which had been taken and praying the assistance of the Court in the liquidation of Genbank.
The PCGG further cites the Minutes No. 13 dated March 29, 1977 of the Monetary Board where it was shown that Atty. Mendoza was furnished copies of pertinent documents relating to GENBANK in order to aid him in filing with the court the petition for assistance in the bank's liquidation. The pertinent portion of the said minutes reads:
The Board decided as follows:
E. To authorize Management to furnish the Solicitor General with a copy of the subject memorandum of the Director, Department of Commercial and Savings Bank dated March 29, 1977, together with copies of:
Memorandum of the Deputy Governor, Supervision and Examination Sector, to the Monetary Board, dated March 25, 1977, containing a report on the current situation of Genbank;
Aide Memoire
on the Antecedent Facts Re: General Bank and Trust Co., dated March 23, 1977;
Memorandum of the Director, Department of Commercial and Savings Bank, to the Monetary Board, dated March 24, 1977, submitting, pursuant to Section 29 of R.A. No. 265, as amended by P.D. No. 1007, a repot on the state of insolvency of Genbank, together with its attachments; and
Such other documents as may be necessary or needed by the Solicitor General for his use in then CFI-praying the assistance of the Court in the liquidation of Genbank.
Beyond doubt, therefore, the "
matter
" or the act of respondent Mendoza as Solicitor General involved in the case at bar is "advising the Central Bank, on
how to proceed
with the said bank's liquidation and even filing the petition for its liquidation with the CFI of Manila." In fine, the Court should resolve whether his act of advising the Central Bank on the
legal procedure
to liquidate GENBANK is included within the concept of "
matter
" under Rule 6.03. The
procedure of liquidation
is given in black and white in Republic Act No. 265, section 29,
viz
The provision reads in part:
SEC. 29.
Proceedings upon insolvency
. - Whenever, upon examination by the head of the appropriate supervising or examining department or his examiners or agents into the condition of any bank or non-bank financial intermediary performing quasi-banking functions, it shall be disclosed that the condition of the same is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors, it shall be the duty of the department head concerned forthwith, in writing, to inform the Monetary Board of the facts, and the Board may, upon finding the statements of the department head to be true, forbid the institution to do business in the Philippines and shall designate an official of the Central Bank or a person of recognized competence in banking or finance, as receiver to immediately take charge of its assets and liabilities, as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors, exercising all the powers necessary for these purposes including, but not limited to, bringing suits and foreclosing mortgages in the name of the bank or non-bank financial intermediary performing quasi-banking functions.
If the Monetary Board shall determine and confirm within the said period that the bank or non-bank financial intermediary performing quasi-banking functions is insolvent or cannot resume business with safety to its depositors, creditors and the general public, it shall, if the public interest requires, order its liquidation, indicate the manner of its liquidation and approve a liquidation plan. The Central Bank shall, by the Solicitor General, file a petition in the Court of First Instance reciting the proceedings which have been taken and praying the assistance of the court in the liquidation of such institution. The court shall have jurisdiction in the same proceedings to adjudicate disputed claims against the bank or non-bank financial intermediary performing quasi-banking functions and enforce individual liabilities of the stockholders and do all that is necessary to preserve the assets of such institution and to implement the liquidation plan approved by the Monetary Board. The Monetary Board shall designate an official of the Central Bank, or a person of recognized competence in banking or finance, as liquidator who shall take over the functions of the receiver previously appointed by the Monetary Board under this Section. The liquidator shall, with all convenient speed, convert the assets of the banking institution or non-bank financial intermediary performing quasi-banking functions to money or sell, assign or otherwise dispose of the same to creditors and other parties for the purpose of paying the debts of such institution and he may, in the name of the bank or non-bank financial intermediary performing quasi-banking functions, institute such actions as may be necessary in the appropriate court to collect and recover accounts and assets of such institution.
The provisions of any law to the contrary notwithstanding, the actions of the Monetary Board under this Section and the second paragraph of Section 34 of this Act shall be final and executory, and can be set aside by the court only if there is convincing proof that the action is plainly arbitrary and made in bad faith. No restraining order or injunction shall be issued by the court enjoining the Central Bank from implementing its actions under this Section and the second paragraph of Section 34 of this Act, unless there is convincing proof that the action of the Monetary Board is plainly arbitrary and made in bad faith and the petitioner or plaintiff files with the clerk or judge of the court in which the action is pending a bond executed in favor of the Central Bank, in an amount to be fixed by the court. The restraining order or injunction shall be refused or, if granted, shall be dissolved upon filing by the Central Bank of a bond, which shall be in the form of cash or Central Bank cashier(s) check, in an amount twice the amount of the bond of the petitioner or plaintiff conditioned that it will pay the damages which the petitioner or plaintiff may suffer by the refusal or the dissolution of the injunction. The provisions of Rule 58 of the New Rules of Court insofar as they are applicable and not inconsistent with the provisions of this Section shall govern the issuance and dissolution of the restraining order or injunction contemplated in this Section.
Insolvency, under this Act, shall be understood to mean the inability of a bank or non-bank financial intermediary performing quasi-banking functions to pay its liabilities as they fall due in the usual and ordinary course of business. Provided, however, That this shall not include the inability to pay of an otherwise non-insolvent bank or non-bank financial intermediary performing quasi-banking functions caused by extraordinary demands induced by financial panic commonly evidenced by a run on the bank or non-bank financial intermediary performing quasi-banking functions in the banking or financial community.
The appointment of a conservator under Section 28-A of this Act or the appointment of a receiver under this Section shall be vested exclusively with the Monetary Board, the provision of any law, general or special, to the contrary notwithstanding. (As amended by PD Nos. 72, 1007, 1771 & 1827, Jan. 16, 1981)
We hold that this advice given by respondent Mendoza on the procedure to liquidate GENBANK is
not the "matter"
contemplated by Rule 6.03 of the Code of Professional Responsibility.
ABA Formal Opinion No. 342 is clear as daylight in stressing
that the "drafting,
enforcing or interpreting
government or agency procedures, regulations or laws, or briefing abstract principles of law" are acts which
do not fall
within the scope of the term
"matter"
and cannot disqualify.
Secondly,
it can even be conceded for the sake of argument that the above act of respondent Mendoza falls within the definition of matter per ABA Formal Opinion No. 342. Be that as it may, the said act of respondent Mendoza which is the
"matter"
involved in Sp. Proc. No. 107812 is
entirely different
from the
"matter"
involved in Civil Case No. 0096. Again, the plain facts speak for themselves. It is given that respondent Mendoza had nothing to do with the decision of the Central Bank to liquidate GENBANK. It is also given that he did not participate in the sale of GENBANK to Allied Bank.
The "matter" where he got himself involved
was in informing Central Bank on the
procedure
provided by law to liquidate GENBANK thru the courts and in filing the necessary petition in Sp. Proc. No. 107812 in the then Court of First Instance.
The subject "matter" of Sp. Proc. No. 107812, therefore, is not the same nor is related to but is different from the subject "matter" in Civil Case No. 0096.
Civil Case No. 0096 involves the
sequestration of the stocks
owned by respondents Tan,
et al.
, in Allied Bank on the alleged ground that they are ill-gotten. The case does not involve the liquidation of GENBANK. Nor does it involve the sale of GENBANK to Allied Bank. Whether the shares of stock of the reorganized Allied Bank are ill-gotten is
far removed
from the issue of the dissolution and liquidation of GENBANK. GENBANK was liquidated by the Central Bank due, among others, to the alleged banking malpractices of its owners and officers. In other words, the legality of the liquidation of GENBANK is not an issue in the sequestration cases. Indeed, the jurisdiction of the PCGG does not include the dissolution and liquidation of banks. It goes without saying that Code 6.03 of the Code of Professional Responsibility
cannot apply to respondent Mendoza because his alleged intervention while a Solicitor General in Sp. Proc. No. 107812 is an intervention on a matter different from the matter involved in Civil Case No. 0096
Thirdly,
we now slide to the metes and bounds of the
"intervention"
contemplated by Rule 6.03. "Intervene" means, viz.:
1: to enter or appear as an irrelevant or extraneous feature or circumstance . . . 2: to occur, fall, or come in between points of time or events . . . 3: to come in or between by way of hindrance or modification: INTERPOSE . . . 4: to occur or lie between two things (Paris, where the same city lay on both sides of an intervening river . . .)
[41]
On the other hand, "intervention" is defined as:
1: the act or fact of intervening: INTERPOSITION; 2: interference that may affect the interests of others.
[42]
There are, therefore,
two
possible interpretations of the word "intervene." Under the
first interpretation
, "intervene" includes participation in a proceeding even if the intervention is irrelevant or has no effect or little influence.
[43]
Under the
second interpretation
, "intervene" only includes an act of a person who has the power to influence the subject proceedings.
[44]
We hold that this second meaning is more appropriate to give to the word "intervention" under Rule 6.03 of the Code of Professional Responsibility in light of its history. The evils sought to be remedied by the Rule do not exist where the government lawyer does an act which can be considered as innocuous such as "x x x drafting, enforcing or interpreting government or agency procedures, regulations or laws, or briefing abstract principles of law."
In fine, the intervention
cannot be insubstantial and insignificant
. Originally, Canon 36 provided that a former government lawyer "should not, after his retirement, accept employment in connection with any matter
which he has investigated or passed upon
while in such office or employ." As aforediscussed, the broad sweep of the phrase "which he has investigated or passed upon" resulted in unjust disqualification of former government lawyers. The 1969 Code restricted its latitude, hence, in DR 9-101(b), the prohibition extended only to a matter in which the lawyer, while in the government service, had "
substantial responsibility
." The 1983 Model Rules further constricted the reach of the rule. MR 1.11(a) provides that "a lawyer shall not represent a private client in connection with a matter in which the lawyer
participated personally and substantially
as a public officer or employee."
It is, however, alleged that the intervention of respondent Mendoza in Sp. Proc. No. 107812 is significant and substantial. We disagree. For one, the petition in the special proceedings is an
initiatory pleading,
hence, it has to be signed by respondent Mendoza as the then sitting Solicitor General. For another, the
record is arid
as to the
actual
participation of respondent Mendoza in the subsequent proceedings. Indeed, the case was in slumberville for a long number of years. None of the parties pushed for its early termination. Moreover, we note that the petition filed merely seeks the
assistance
of the court in the liquidation of GENBANK. The principal role of the court in this type of proceedings is to
assist
the Central Bank in determining
claims of creditors
against the GENBANK. The role of the court is not strictly as a court of justice but as an agent to assist the Central Bank in determining the claims of creditors. In such a proceeding, the participation of the Office of the Solicitor General is not that of the usual court litigator protecting the interest of government.
II
Balancing Policy Considerations
To be sure, Rule 6.03 of our Code of Professional Responsibility represents a commendable effort on the part of the IBP to upgrade the ethics of lawyers in the government service. As aforestressed, it is a take-off from similar efforts especially by the ABA which have not been without difficulties. To date, the legal profession in the United States is still fine tuning its DR 9-101(b) rule.
In fathoming the depth and breadth of Rule 6.03 of our Code of Professional Responsibility, the
Court took account of various policy considerations
to assure that its interpretation and application to the case at bar will achieve its end without necessarily prejudicing other values of equal importance. Thus, the rule was not interpreted to cause a
chilling effect on government recruitment of able legal talent
. At present, it is already difficult for government to match compensation offered by the private sector and it is unlikely that government will be able to reverse that situation. The observation is not inaccurate that the only card that the government may play to recruit lawyers is have them defer present income in return for the experience and contacts that can later be exchanged for higher income in private practice.
[45]
Rightly, Judge Kaufman warned that the sacrifice of entering government service would be too great for most men to endure should ethical rules prevent them from engaging in the practice of a technical specialty which they devoted years in acquiring and cause the firm with which they become associated to be disqualified.
[46]
Indeed, "to make government service more difficult to exit can only make it less appealing to enter."
[47]
In interpreting Rule 6.03, the Court also cast a harsh eye on its use as a
litigation tactic to harass opposing counsel
as well as deprive his client of competent legal representation. The danger that the rule will be misused to bludgeon an opposing counsel is not a mere guesswork. The Court of Appeals for the District of Columbia has noted "the tactical use of motions to disqualify counsel in order to delay proceedings, deprive the opposing party of counsel of its choice, and harass and embarrass the opponent," and observed that the tactic was "so prevalent in large civil cases in recent years as to prompt frequent judicial and academic commentary."
[48]
Even the United States Supreme Court found no quarrel with the Court of Appeals' description of disqualification motions as "a dangerous game."
[49]
In the case at bar, the
new attempt
to disqualify respondent Mendoza is difficult to divine. The disqualification of respondent Mendoza has long been a
dead issue
. It was resuscitated after the lapse of many years and only after PCGG has lost many legal incidents in the hands of respondent Mendoza. For a fact, the recycled motion for disqualification in the case at bar was filed
more than four years
after the filing of the petitions for
certiorari
, prohibition and injunction with the Supreme Court which were subsequently remanded to the
Sandiganbayan
and docketed as Civil Case Nos. 0096-0099.
[50]
At the very least, the circumstances under which the motion to disqualify in the case at bar were refiled put petitioner's motive as highly suspect.
Similarly, the Court in interpreting Rule 6.03 was not unconcerned with the prejudice to the client
which will be caused by its misapplication. It cannot be doubted that granting a disqualification motion causes the client to lose not only the law firm of choice, but probably an individual lawyer in whom the client has confidence.
[51]
The client with a disqualified lawyer must start again often without the benefit of the work done by the latter.
[52]
The effects of this prejudice to the right to choose an effective counsel cannot be overstated for it can result in denial of due process.
The Court has to consider also the possible adverse effect of a truncated reading of the rule on the official independence of lawyers in the government service.
According to Prof. Morgan: "An individual who has the security of knowing he or she can find private employment upon leaving the government is free to work vigorously, challenge official positions when he or she believes them to be in error, and resist illegal demands by superiors. An employee who lacks this assurance of private employment does not enjoy such freedom."
[53]
He adds: "Any system that affects the right to take a new job affects the ability to quit the old job and any limit on the ability to quit inhibits official independence."
[54]
The case at bar involves the position of Solicitor General
, the office once occupied by respondent Mendoza. It cannot be overly stressed that
the position of Solicitor General should be endowed with a great degree of independence
. It is this independence that allows the Solicitor General to recommend acquittal of the innocent; it is this independence that gives him the right to refuse to defend officials who violate the trust of their office. Any undue dimunition of the independence of the Solicitor General will have a corrosive effect on the rule of law.
No less significant a consideration is the deprivation of the former government lawyer of the freedom to exercise his profession.
Given the current state of our law, the disqualification of a former government lawyer may extend to all members of his law firm.
[55]
Former government lawyers stand in danger of becoming the
lepers of the legal profession
It is, however, proffered that the mischief sought to be remedied by Rule 6.03 of the Code of Professional Responsibility is the
possible appearance of impropriety
and loss of public confidence in government. But as well observed, the accuracy of gauging public perceptions is a highly speculative exercise at best
[56]
which can lead to untoward results.
[57]
No less than Judge Kaufman doubts that the lessening of restrictions as to former government attorneys will have any detrimental effect on that free flow of information between the government-client and its attorneys which the canons seek to protect.
[58]
Notably, the appearance of impropriety theory has been rejected in the 1983 ABA Model Rules of Professional Conduct
[59]
and some courts have abandoned per se disqualification based on Canons 4 and 9 when an actual conflict of interest exists, and demand an evaluation of the interests of the defendant, government, the witnesses in the case, and the public.
[60]
It is also submitted that the Court should apply Rule 6.03 in all its strictness for it correctly disfavors lawyers who "switch sides." It is claimed that "
switching sides
" carries the danger that former government employee may
compromise confidential official information
in the process. But this concern does not cast a shadow in the case at bar. As afore-discussed, the act of respondent Mendoza in informing the Central Bank on the procedure how to liquidate GENBANK is a
different matter
from the subject matter of Civil Case No. 0005 which is about the sequestration of the shares of respondents Tan,
et al.
, in Allied Bank. Consequently, the danger that confidential official information might be divulged is nil, if not inexistent. To be sure, there are no inconsistent "sides" to be bothered about in the case at bar. For there is no question that in lawyering for respondents Tan,
et al.
, respondent Mendoza is not working against the interest of Central Bank. On the contrary, he is indirectly defending the validity of the action of Central Bank in liquidating GENBANK and selling it later to Allied Bank.
Their interests coincide instead of colliding.
It is for this reason that Central Bank offered no objection to the lawyering of respondent Mendoza in Civil Case No. 0005 in defense of respondents Tan,
et al.
There is no switching of sides for no two sides are involved.
It is also urged that the Court should consider that Rule 6.03 is intended to avoid
conflict of loyalties
i.e.
, that a government employee might be subject to a conflict of loyalties while still in government service.
[61]
The example given by the proponents of this argument is that a lawyer who plans to work for the company that he or she is currently charged with prosecuting might be tempted to prosecute less vigorously.
[62]
In the cautionary words of the Association of the Bar Committee in 1960: "The greatest public risks arising from post employment conduct may well occur
during
the period of employment through the dampening of aggressive administration of government policies."
[63]
Prof. Morgan, however, considers this concern as "probably excessive."
[64]
He opines "x x x it is hard to imagine that a private firm would feel secure hiding someone who had just been disloyal to his or her last client - the government. Interviews with lawyers consistently confirm that law firms want the "best" government lawyers - the ones who were hardest to beat - not the least qualified or least vigorous advocates."
[65]
But again,
this particular concern is a non factor in the case at bar.
There is no charge against respondent Mendoza that he advised Central Bank on how to liquidate GENBANK with an eye in later defending respondents Tan,
et al.
of Allied Bank. Indeed, he continues defending both the interests of Central Bank and respondents Tan,
et al.
in the above cases.
Likewise, the Court is nudged to consider the need to curtail what is perceived as the
"excessive influence of former officials" or their "clout."
[66]
Prof. Morgan again warns against extending this concern too far. He explains the rationale for his warning,
viz
: "Much of what appears to be an employee's influence may actually be the power or authority of his or her position, power that evaporates quickly upon departure from government x x x."
[67]
More, he contends that the concern can be
demeaning
to those sitting in government. To quote him further: "x x x The idea that, present officials make significant decisions based on friendship rather than on the merit says more about the present officials than about their former co-worker friends. It implies a lack of will or talent, or both, in federal officials that does not seem justified or intended, and it ignores the possibility that the officials will tend to disfavor their friends in order to avoid even the appearance of favoritism."
[68]
III
The question of fairness
Mr. Justices Panganiban and Carpio are of the view, among others, that the congruent interest prong of Rule 6.03 of the Code of Professional Responsibility should be subject to a prescriptive period. Mr. Justice Tinga opines that the rule cannot apply retroactively to respondent Mendoza. Obviously, and rightly so, they are disquieted by the fact that (1) when respondent Mendoza was the Solicitor General, Rule 6.03 has not yet adopted by the IBP and approved by this Court, and (2) the bid to disqualify respondent Mendoza was made after the lapse of time whose length cannot, by any standard, qualify as reasonable. At bottom, the point they make relates to the unfairness of the rule if applied without any prescriptive period and retroactively, at that. Their concern is legitimate and deserves to be initially addressed by the IBP and our Committee on Revision of the Rules of Court.
IN VIEW WHEREOF,
the petition assailing the resolutions dated July 11, 2001 and December 5, 2001 of the Fifth Division of the
Sandiganbayan
in Civil Case Nos. 0096-0099 is denied.
No cost.
SO ORDERED.
Davide, Jr., C.J., Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona,
and
Garcia, JJ.,
concur.
Panganiban
and
Tinga, JJ.,
Please see separate opinion.
Carpio Morales
and
Callejo, Sr., JJ.,
Please see dissenting opinion.
Azcuna, J.,
I was former PCGG Chair.
Chico-Nazario, J.,
No part.
Rollo, p. 240; Filcapital Development Corporation was a related interest of the Yujuico Family Group and the directors and officers of GENBANK.
Rollo, pp. 240, 242.
Rollo, p. 7.
Rollo, pp. 7, 108, 248.
Rollo, pp. 110-114, 248.
Rollo, pp. 217-218.
Rollo, p. 143.
Rollo, pp. 216-220.
Rollo, pp. 44, 221- 225.
[10]
Atty. Mendoza served as Solicitor General from 1972 to 1986.
[11]
Rollo, p. 63.
[12]
Rollo, p. 61.
[13]
Rollo, pp. 57-63.
[14]
Rollo, p. 178.
[15]
Rollo, pp. 42, 44; The "Motion to disqualify Atty. Estelito P. Mendoza as counsel for petitioners' in Civil Case Nos. 0096-0099 was filed with the Sandiganbayan's Second Division. However, the motion was ultimately resolved by the Sandiganbayan's Fifth Division in its proceedings held on July 11, 2001.
[16]
Rollo, p. 42.
[17]
Rollo, p. 43.
[18]
Rollo, pp. 2-40.
[19]
Rollo, pp. 12-14.
[20]
Andrews, Standards of Conduct for Lawyers: An 800-Year Revolution, 57 SMU L. Rev. 1385 (2004).
[21]
Ibid
[22]
Ibid
[23]
Ibid
[24]
Agpalo, Legal and Judicial Ethics, pp. 24-25 (2002); In re Tagorda, 53 Phil. 37 (1927).
[25]
Wolfram, Modern Legal Ethics, p. 456 (1986).
[26]
Id
. at 457.
[27]
Ibid
.; The use of the word "conflict" is a misnomer; "congruent-interest representation conflicts" arguably do not involve conflicts at all, as it prohibits lawyers from representing a private practice client even if the interests of the former government client and the new client are entirely parallel.
[28]
Supra
, note 20.
[29]
ABA Canons of Professional Ethics, Canon 36 (1908); ABA Model Code of Professional Responsibility (1963), DR 9-101(b); ABA Model Rules of Professional Responsibility, MR 1.11(a) and (b) (1983).
[30]
Supra
, note 25 at 458.
[31]
Supra
, note 20.
[32]
Agpalo, Legal and Judicial Ethics, p. 25 (2002).
[33]
Canon 9 was adopted to replace Canon 36 because Canon 36 "proved to be too broadly encompassing." ABA Opinion No. 342 (1975); Canon 9 states: "A lawyer should avoid even the appearance of professional impropriety."
[34]
Model Code of Professional Responsibility, Preliminary Statement (1983); "The Disciplinary Rules ... are mandatory in character. The Disciplinary Rules state the minimum level of conduct below which no lawyer can fall without being subject to disciplinary action."
[35]
DR 9-101(b): A lawyer shall not accept private employment in a matter in which he had substantial responsibility while he was a public employee.
[36]
Supra
, note 20.
[37]
Ibid
[38]
Model Rules of Professional Conduct, Rule 1.09 comment (1984): "The other rubric formerly used for dealing with disqualification is the appearance of impropriety proscribed in Canon 9 of the ABA Model Code of Professional Responsibility. This rubric has a two-fold problem. First, the appearance of impropriety can be taken to include any new client-lawyer relationship that might make a former client feel anxious. If that meaning were adopted, disqualification would become little more than a question of subjective judgment by the former client. Second, since "impropriety" is undefined, the term appearance of impropriety is question-begging. It therefore has to be recognized that the problem of disqualification cannot be properly resolved . . . by the very general concept of appearance of impropriety."
[39]
Supra
, note 32.
[40]
See
Dissent of
J
. Callejo, Sr., pp.19-20.
[41]
Webster's Third New International Dictionary of the English Language Unabridged, p. 1183 (1993).
[42]
Id
[43]
Id
.; This may be inferred from the second definition of "intervene" which is "to occur, fall, or come in between points of time or events."
[44]
Id
.; This may be inferred from the third definition of "intervene" which is "to come in or between by way of hindrance or modification," and the second definition of "intervention" which is "interference that may affect the interests of others."
[45]
Wolfram, Modern Legal Ethics, p. 461 (1986).
[46]
Kaufman, The Former Government Attorney and Canons of Professional Ethics, 70 Harv. L. Rev. 657 (1957).
[47]
Remarks of Federal Trade Commission Chairman Calvin Collier before Council on Younger Lawyers, 1976 Annual Convention of the Federal Bar Association (September 16, 1976).
[48]
Koller v. Richardson-Merrell, Inc., 737 F.2d 1038, 1051 (D.C. Cir. 1984); Board of Education of New York City v. Nyquist, 590 F.2d 1241, 1246 (2d Cir. 1979); Williamsburg Wax Museum v. Historic Figures, Inc., 501 F.Supp. 326, 331 (D.D.C. 1980).
[49]
Richardson-Merrell, Inc. v. Koller, 472 U.S. 424, 436 (1985).
[50]
Rollo, p. 143; The petitions for
certiorari
, prohibition and injunction were filed sometime in August 1986. The motion for disqualification in Civil Case No. 0096-0099 was filed on February 5, 1991.
[51]
United States v. Brothers, 856 F. Supp. 370, 375 (M.D. Tenn. 1992).
[52]
First Wis. Mortgage Trust v. First Wis. Corp., 584 F.2d 201 (7th Cir. 1978); EZ Paintr Corp. v. Padco, Inc., 746 F.2d 1459, 1463 (Fed. Cir. 1984); Realco Serv. v. Holt, 479 F. Supp. 867, 880 (E.D. Pa. 1979).
[53]
Morgan, Appropriate Limits on Participation by a former Agency Official in Matters Before an Agency, Duke L.J., Vol. 1980, February, No. 1, p. 54.
[54]
Ibid
[55]
Agpalo, Legal and Judicial Ethics, pp. 292-293; Hilado v. David, 84 Phil. 569 (1949).
[56]
Wolfram, Modern Legal Ethics, p. 320 (1986).
[57]
Id
. at p. 321.
[58]
Kaufman, The Former Government Attorney and Canons of Professional Ethics, 70 Harv. L. Rev. 657 (1957).
[59]
Supra
, note 38.
[60]
United States v. O'Malley, 786 F.2d 786, 789 (7th Cir. 1985); United States v. James, 708 F.2d 40, 44 (2d Cir. 1983).
[61]
Supra
, note 53 at 44.
[62]
Ibid
[63]
Ibid
see
footnote 207 of article.
[64]
Ibid
[65]
Id
. at 45.
[66]
Id
. at 42.
[67]
Id
. at 42-43.
[68]
Id
. at 43.
CONCURRING OPINION
SANDOVAL - GUTIERREZ,
J
I join Mr. Justice Reynato S. Puno in his
ponencia
. Motions to disqualify counsel from representing their clients must be viewed with jaundiced eyes, for oftentimes they pose the very threat to the integrity of the judicial process.
Such motions are filed to harass a particular counsel, to delay the litigation, to intimidate adversary, or for other strategic purposes. It therefore behooves the courts to always look for the parties' inner motivations in filing such motions.
This case illustrates the sad reality that the filing of motions for disqualification may be motivated, not by a fine sense of ethics or sincere desire to remove from litigation an unethical practitioner, but to achieve a tactical advantage.
The facts are undisputed.
Subsequent to the downfall of President Ferdinand E. Marcos in 1986, came the first edict
of President Corazon C. Aquino creating the Presidential Commission on Good Government (PCGG) to recover the ill-gotten wealth of the Marcoses, their subordinates, and associates.
PCGG's initial target was Lucio Tan and the above-named private respondents (Tan
et al.
, for brevity). It issued several writs of sequestration on their properties and business enterprises. To nullify such writs, Tan
et al.
filed with this Court petitions for
certiorari
, prohibition and injunction. On February 15, 1990, after comments thereon were submitted, this Court referred the cases to the Sandiganbayan for proper disposition. These cases were raffled to it
Fifth Division
, docketed as follows:
(a) Civil Case No. 0095
Sipalay Trading Corp. vs. PCGG
, which seeks to nullify the PCGG's
Order dated July 24, 1986
sequestering Lucio Tan's shares of stocks in Maranaw Hotels and Resort Corporation (Century Park Sheraton Hotel);
(b) Civil Case No. 0096
Lucio Tan, Mariano Tanenglian, Allied Banking Corp., Iris Holding and Development Corp., Virgo Holdings Development Corp. and Jewel Holdings, Inc. v. PCGG
, which seeks to nullify the PCGG's
Order dated June 19, 1986 sequestering the shares of stocks in Allied Banking Corporation
held by and/or in the name of respondents Lucio Tan, Mariano Tanenglian, Iris Holding and Development Corp., Virgo Holdings Development Corp. and Jewel Holdings, Inc.;
(c) Civil Case No. 0097
Lucio Tan, Carmen Khao Tan, Florencio T. Santos, Natividad Santos, Florencio N. Santos, Jr. and Foremost Farms, Inc. v. PCGG
, which seeks to nullify the PCGG's
Order dated August 12, 1986
sequestering the shares of stocks in Foremost Farms, Inc. held by and/or in the name of Lucio Tan, Carmen Khao Tan, Florencio T. Santos, Natividad Santos and Florencio N. Santos, Jr.;
(d) Civil Case No. 0098
Lucio Tan, Carmen Khao Tan, Mariano Tanenglian, Florencio T. Santos, Natividad Santos, Florencio N. Santos, Jr., Shareholdings, Inc. and Fortune Tabacco Corp. v. PCGG.
, which seeks to nullify the PCGG's
Order dated July 24, 1986
sequestering the shares of stocks in Fortune Tobacco Corp. held by and /or in the name of Lucio Tan, Carmen Khao Tan, Mariano Tanenglian, Florencio T. Santos, Natividad Santos, Florencio N. Santos, Jr., Shareholdings, Inc.; and
(e) Civil Case No. 0099 --
Lucio Tan, Carmen Khao Tan, Mariano Tanenglian, Florencio T. Santos, Natividad Santos and Shareholdings, Inc. v. PCGG,
which seeks to nullify the PCGG's
Order dated July 24, 1986
sequestering the shares of stocks in Shareholdings, Inc. held by and/or in the name of Lucio Tan, Carmen Khao Tan, Mariano Tanenglian, Florencio T. Santos and Natividad Santos.
(f) Civil Case No. 0100
Allied Banking Corp. vs. PCGG,
which seeks to nullify the PCGG's Search and Seizure Order dated August 13, 1986, issued on bank documents of Allied Banking Corp.
Civil Cases Nos. 0096 and 0100 involve Tan,
et al.
's shares of stocks in the Allied Banking Corporation (Allied Bank).
Meanwhile, on July 17, 1987, the PCGG and the Office of the Solicitor General (OSG) filed with the Sandiganbayan a complaint for
"reversion, reconveyance, restitution, accounting and damages"
against Tan
et al.
This time, the case was raffled to the
Second Division
, docketed therein as
Civil Case No. 0005
. Among the properties sought to be reconveyed were Tan
et al.
's shares of stocks in the Allied Bank.
Since 1987, Atty. Estelito P. Mendoza has been the counsel for Tan et al. in all the above cases. But it was not until February 5, 1991, or after four years, that the PCGG filed three (3) identical motions to disqualify Atty. Mendoza.
In Civil Cases Nos. 0096-0099, PCGG filed a motion to disqualify him. It filed another similar motion in Civil Case No. 0100. The last motion was filed in Civil Case No. 0005. His disqualification was sought under Rule 6.03 of the Code of Professional Responsibility which reads:
Rule 6.03. - A lawyer shall not, after leaving government service, accept engagement or employment in connection with any matter in which he had intervened while in said service.
In each motion, PCGG alleged that Atty. Mendoza, then Solicitor General of the Marcos Administration, "actively intervened" in the liquidation of General Bank and Trust Company (GENBANK), subsequently acquired by Tan
et al.
and became Allied Bank. PCGG's allegations are similar in every aspect, thus:
He was the former Solicitor General of the Republic of the Philippines for almost 14 years appearing on behalf of the Republic in multitudes of cases.
(2) The records show that, as then Solicitor General, Atty. Estelito P. Mendoza appeared as counsel for the Central Bank of the Philippines in Special Proceedings No. 107812, pending before the Regional Trial Court of Manila, in connection with the Central Bank's Petition for assistance in the Liquidation of General bank and Trust Company (herein called "Genbank", for brevity). The records also show that Defendant Lucio Tan and his group were the same persons who acquired Genbank's assets, liabilities and interest.
(3) Consequently, Atty. Mendoza's appearance as counsel for the Defendant herein runs counter to the long-cherished ethical canon of the legal profession which prohibits a counsel to appear in litigation adverse to the interests of his former client. Interpreting this sanction, jurisprudence has held, that:
'The lawyer's obligation to represent the client with undivided fidelity and to keep his confidences, also forbid the lawyer from accepting retainers or employment from others in matters adversely affecting any interest of the client with respect to which confidence has been reposed in him. (Canon of Professional Ethics, 6). The prohibition stands even if the adverse interest is very slight; neither is it material that the intention and motive of the attorney may have been honest. (5 Am. Jur. 296).'
(4) The reason for the prohibition is obvious. Apart from the obligation to keep inviolate the prior relationship between counsel and his former client, such counsel obtains material information in confidence. Consequently, he should not be allowed to represent a party with adverse interest to his former client, arising out of the very transaction subject of the former relationship.
(5) In the case at bar, it should be stressed that Defendant Lucio Tan and his group acquired the assets and liabilities of Genbank. This manner of acquisition has been alleged to have been fraudulent, arbitrary and a product of collusion between them and the Central Bank officials. (Refer to Criminal Case No. 005 pending before this Honorable Court.) Atty. Mendoza's appearance as counsel for Defendants, clearly violates the Code of Professional Responsibility, which provides that:
'A lawyer shall not after leaving the government service accept engagement or employment in connection with any matter in which he had intervened while in said service.' (Code of Professional Responsibility, Canon 6, Rule 6.03)'
(6) In the liquidation of Genbank and its eventual acquisition by Lucio Tan and his group, Atty. Mendoza, as Solicitor-General, personally advised the Central Bank officials on the procedure to bring about Genbank's liquidation. In the Memorandum for the Governor of the Central Bank dated March 29, 1977 (signed by the following subordinates of then CB Governor Gregorio Licaros, namely: Senior Deputy Governor Amado R. Brinas (deceased), Deputy Governor Jaime C. Laya, Deputy Governor & General Counsel Gabriel C. Singson, Special Asst. to the Governor Carlota P. Valenzuela, Asst. to the Governor Arnulfo B. Aurellano and Director Antonio T. Castro, Jr.), the following portion disclosed Atty. Mendoza's participation:
'Immediately after said meeting,
we had a conference with the Solicitor General (atty. Mendoza) and he advised that the following procedure should be taken:
'(1) Management should submit a memorandum to the Monetary Board reporting that studies and evaluation had been made since the last examination of the bank as of August 31, 1976 and it is believed that the bank cannot be reorganized or placed in a condition so that it may be permitted to resume business with safety to its depositors and creditors and the general public.
'(2) If the said report is confirmed by the Monetary Board, it shall order the liquidation of the bank and indicate the manner of its liquidation and approve a liquidation plan.
(3) The Central Bank shall inform the principal stockholders of Genbank of the foregoing decision to liquidate the bank and the liquidation plan approved by the Monetary Board.
(4) The Solicitor General shall then file a petition in the Court of First Instance reciting the proceedings which had been taken and praying the assistance of the Court in the liquidation of Genbank."
Plainly stated, it was Atty. Mendoza who was the legal author of the closure of Genbank and the eventual sale to Mr. Lucio Tan and his Group. Clearly, Atty. Mendoza should be disqualified in this case.
On April 22, 1991, the Sandiganbayan issued a Resolution
in Civil Case No. 0005 denying PCGG's motion to disqualify Atty. Mendoza.
On May 7, 1991, the Sandiganbayan issued a Resolution
in Civil Case No. 0100 also denying PCGG's similar motion.
Motions for reconsideration were filed but to no avail. The PCGG took no further action. These Resolutions, therefore, became final and executory.
Subsequently, in a Decision dated August 23, 1996, the Sandiganbayan jointly granted Tan
et al.
's petitions in
Civil Cases Nos.
0095 and
0100
On March 29, 1996, this Court, in G.R. Nos. 112708-09
affirmed the said Decision.
The PCGG neither assigned as error nor mentioned the Sandiganbayan's denial of its motion to disqualify Atty. Mendoza in Civil Case No. 0100.
In the interim, the PCGG's motion to disqualify Atty. Mendoza in
Civil Cases Nos. 0096-0099
remained pending with the Sandiganbayan. It was only on
July 11, 2001
, or after ten (10) years, that it denied the PCGG's motion by merely adopting its
Resolution dated April 22, 1991 in Civil Case No. 0005 denying a similar motion
, thus:
"Acting on the
PCGG's "MOTION TO DISQUALIFY ATTY. ESTELITO P. MENDOZA AS COUNSEL FOR PETITIONER"
dated February 5,1991 which appears not to have been resolved by then Second Division of this Court, and it appearing that
(1) the motion is exactly the same in substance as that motion filed in Civil Case No. 0005
as in fact, Atty. Mendoza in his "OPPOSITION" dated March 5, 1991 manifested that he was just adopting his opposition to the same motion filed by PCGG in Civil Case No. 0005 and
in the Court's Order dated March 7,1991, the herein incident was taken-up jointly with the said same incident in Civil Case No. 0005 (pp.134-135,Vol. I, Record of Civil Case No. 0096), this Division hereby
reiterates and adopts the Resolution dated April 22, 1991 in Civil Case No. 0005
of the Second Division (pp.1418-1424, Vol. III, Record of Civil Case No. 0005)
denying the said motion as its Resolution in the case at bar.
The PCGG moved for the reconsideration of the foregoing Resolution, but was denied. In the Resolution dated December 5, 2001, the Sandiganbayan ruled:
"Acting on respondent
PCGG's "MOTION FOR RECONSIDERATION"
dated August 1, 2001 praying for the reconsideration of the Court's Resolution dated July 12, 2001 denying its motion to disqualify Atty. Estelito P. Mendoza as counsel for petitioners, to which petitioners have filed an "OPPOSITION TO MOTION FOR RECONSIDERATION DATED AUGUST 1, 2001" dated August 29, 2001, as well as the respondent's "REPLY (To Opposition to Motion for Reconsideration)" dated November 16, 2001,
it appearing that the main motion to disqualify Atty. Mendoza as counsel in these cases was exactly the same in substance as that motion to disqualify Atty. Mendoza filed by the PCGG in Civil Case No. 0005 (re:Republic vs. Lucio Tan, et al.) and the resolutions of this Court (Second Division) in Civil Case No. 0005 denying the main motion as well as of the motion for reconsideration thereof had become final and executory when PCGG failed to elevate the said resolutions to the Supreme Court, the instant motion is hereby DENIED
Hence, the PCGG's present petition for
certiorari and prohibition
alleging that the Sandiganbayan committed grave abuse of discretion in denying its motion to disqualify Atty. Mendoza in Civil Cases Nos. 0096-0099.
Mr. Justice Romeo J. Callejo, Sr., in his Dissent, granted the petition. On the procedural issues, he ruled that the assailed Resolutions dated July 11 and December 5, 2001 denying PCGG's motion to disqualify Atty. Mendoza are interlocutory orders, hence, in challenging such Resolutions, certiorari is the proper remedy, not appeal, as invoked by Tan et al. Based on the same premise, he likewise rejected Tan et al.'s claim that the Resolution dated April 22, 1991 in Civil Case No. 0005 constitutes a bar to similar motions to disqualify Atty. Mendoza under the doctrine of res judicata.
On the substantive aspect, Mr. Justice Callejo's Dissent states that Atty. Mendoza violated Rule 6.03 of the Code of Professional Responsibility. According to him, Atty. Mendoza's acts of (a) advising the Central Bank on how to proceed with the liquidation of GENBANK, and (b) filing Special Proceedings No. 107812, a petition by the Central Bank for assistance in the liquidation of GENBANK, with the then Court of First Instance (CFI) of Manila,
constitute "intervention."
And that while it may be true that his posture in Civil Cases Nos. 0096-0099 is not adverse to the interest of the Central Bank, still, he violated the proscription under the "congruent-interest representation conflict" doctrine.
Crucial to the resolution of the present controversy are the following queries:
(1) Is certiorari the proper remedy to assail the Sandiganbayan Resolutions dated July 11 and December 5, 2001 denying the PCGG's motion to disqualify Atty. Mendoza in Civil Cases Nos. 0096-0099?
(2) May Sandiganbayan Resolution dated April 22, 1991 in Civil Case No. 0005 be considered a bar to similar motions to disqualify Atty. Mendoza under the doctrine of res judicata?
(3) Does Atty. Mendoza's participation in the liquidation of GENBANK constitute intervention?
There are some important points I wish to stress at this incipient stage. I believe they should be considered if we are to arrive at a fair resolution of this case.
The scattershot manner in which the PCGG filed the various motions to disqualify Atty. Mendoza shows its intent to harass him and Tan
et al.
It may be recalled that the PCGG filed three (3)
identical motions
, one in Civil Cases Nos. 0096-0099, another in Civil Case No. 0100 and the last one in Civil Case No. 0005. Of these cases, only
Civil Cases Nos. 0096, 0100
and
0005
actually involve Tan
et al.
's shares of stocks in the Allied Bank. Civil Cases Nos. 0097, 0098 and 0099 have entirely different subject matter.
Thus, insofar as these cases are concerned, the motions to disqualify lack substantive merit.
Why then would the PCGG file identical motions to disqualify Atty. Mendoza in these unrelated cases? Its intention is suspect. To subject Tan
et al
. to
numerous
and
baseless
motions to disqualify their lawyer is, no doubt, a form of harassment.
As this juncture, it is important to emphasize that in evaluating motions to disqualify a lawyer, our minds are not bound by stringent rules. There is room for consideration of the combined effect of a party's right to counsel of his own choice, an attorney's interest in representing a client, the financial burden on a client of replacing disqualified counsel, and any tactical abuse underlying a disqualification proceeding.
I. Whether the PCGG's proper
remedy to assail the Sandiganbayan
Resolutions dated July 11 and
December 5, 2001 is appeal, not
certiorari.
The bottom line of this issue lies on how we categorize an order denying a motion to disqualify an opposing party's counsel. Is it interlocutory or final?
An order is deemed final when it finally disposes of the pending action so that nothing more can be done with it in the lower court.
[10]
On the other hand, an interlocutory order is one made during the pendency of an action, which does not dispose of the case, but leaves it for further action by the trial court in order to settle and determine the entire controversy.
[11]
In
Antonio vs. Samonte
[12]
this Court defined a final judgment, order or decree as "one that finally disposes of, adjudicates, or determines the rights, or some rights or rights of the parties,
either on the entire controversy or on some definite and separate branch, thereof and which concludes them until it is reversed or set aside x x x
De la Cruz v. Paras
[13]
it was held that a court order is final in character if
"it puts an end to the particular matter resolved or settles definitely the matter therein disposed of,"
such that no further questions can come before the court except the execution of the order. In
Day v. Regional Trial Court of Zamboanga City
[14]
this Court ruled that an order which decides an issue or issues in a complaint is final and appealable, although the other issue or issues have not been resolved,
if the latter issues are distinct and separate from others
With the foregoing disquisition as basis, it is my view that an order denying a motion to disqualify counsel is
final
and, therefore, appealable. The issue of whether or not Atty. Mendoza should be disqualified from representing Tan
et al.
is
separable from, independent of and collateral to the main issues in Civil Cases Nos. 0096-0099. In short, it is separable from the merits. Clearly, the present petition for certiorari, to my mind, is dismissible.
II. Whether the Resolution dated April
22, 1991 in Civil Case No. 0005
constitutes a bar to similar motions to
disqualify Atty. Mendoza under the
doctrine of res judicata.
I am convinced that the factual circumstances of this case justify the application of
res judicata
The
ponente
refuses to apply
res judicata
on the ground that the Sandignbayan Resolution dated April 22, 1991 in Civil Case No. 0005 is just an interlocutory order.
Assuming
arguendo
that an order denying a motion to disqualify Atty. Mendoza is indeed an intelocutory order, still, I believe that
res judicata
applies.
It will be recalled that on August 23, 1996, the Sandiganbayan rendered a Decision granting Tan
et al
.'s petitions in
Civil Cases Nos.
0095 and 0100. Such Decision reached this Court
in G.R. Nos. 112708-09
[15]
On March 29, 1996, we affirmed it. The PCGG could have assigned or raised as error in G.R. Nos. 112708-09 the Sandiganbayan Resolution dated May 7, 1991 in Civil Case No. 0100 denying its motion to disqualify Atty. Mendoza but it did not.
The fact that a final Decision therein has been promulgated by this Court renders the Resolution dated May 7, 1991 beyond review. The PCGG may not
relitigate such issue of disqualification as it was actually litigated and finally decided in G.R. Nos. 112707-09
[16]
To rule otherwise is to encourage the risk of inconsistent judicial rulings on the basis of the same set of facts. This should not be countenanced. Public policy, judicial orderliness, economy of judicial time and the interest of litigants, as well as the peace and order of society, all require that stability should be accorded judicial rulings and that controversies once decided shall remain in repose, and that there be an end to litigation.
[17]
III. Whether Atty. Mendoza's
participation in the liquidation of
GENBANK constitutes intervention.
As stated earlier, Atty. Mendoza is sought to be disqualified under Rule 6.03 of the Code of Professional Responsibility which states:
Rule 6.03. - A lawyer shall not, after leaving government service, accept engagement or employment in connection with any matter in which he had intervened while in said service.
In determining whether Atty. Mendoza committed a breach of this Rule, certain factual predicates should be established, thus: (a) in connection with what "matter" has Atty. Mendoza accepted an engagement or employment after leaving the government service?; (b) in connection with what "matter" did he intervene while in government service?; and (c) what acts did he particularly perform in "intervening" in connection with such "matter"?
The PCGG insists that Atty. Mendoza, as Solicitor General, "actively intervened" in the closure and liquidation of GENBANK. As primary evidence of such intervention, it cited his act of filing Special Proceedings No. 107812 with the then Court of First Instance (CFI) of Manila; and the Memorandum dated March 29, 1977 of certain key officials of the Central Bank stating that he (Atty. Mendoza) advised them of the procedure to be taken in the liquidation of GENBANK and that he was furnished copies of pertinent documents relating to such liquidation.
Tan
et al.
denied Atty. Mendoza's alleged "intervention," claiming that when he filed Special Proceedings No. 107812 with the CFI of Manila, the decision to prohibit GENBANK from doing business had already been made by the Central Bank Monetary Board. Also, Atty. Mendoza, in appearing as their counsel in Civil Cases Nos. 0096-0099, does not take a position adverse to his former client, the Central Bank.
The first concern in assessing the applicability of the Rule is the definition of "matter." The American Bar Association Committee on Ethics and Professional Responsibility stated in its Formal Opinion 342 that:
"Although a precise definition of "matter" as used in the Disciplinary Rule is difficult to formulate, the term seems to contemplate
a discrete and isolatable transaction or set of transactions between identifiable parties
. Perhaps the scope of the term "matter" may be indicated by examples. The same lawsuit or litigation is the same matter. The same issue of fact involving the same parties and the same situation or conduct is the same matter.
By contrast, work as a government employee in drafting, enforcing or interpreting government or agency procedures, regulations, or laws, or in briefing abstract principles of law, does not disqualify the lawyer under DR 9-101 (B) from subsequent private employment involving the same regulations, procedures, or points of law; the same "matter" is not involved because there is lacking the discrete, identifiable transaction or conduct involving a particular situation and specific parties.
In the case at bar, the Court's task is to determine whether Special Proceedings No. 107812 falls within the concept of "matter." This must be analyzed in relation with Civil Case No. 0096. Anent Civil Cases Nos. 0097, 0098 and 0099, there is no doubt that they do not involve the shares of stocks of Tan
et al.
in Allied Bank. Thus, only Special Proceedings No. 107812 and Civil Case No. 0096 must be considered.
Special Proceedings No. 107812 is a "petition by the Central Bank for Assistance in the Liquidation of General Bank and T