Nakpil v.
Valdez OSG submitted report on disbarment complaint:
Ponente: Puno
Date: March 4, 1998
Petitioner: Imelda Nakpil
Respondent: Atty. Carlos Valdes
FACTS:
Jose Nakpil and Carlos Valdes were friends since the 1950s. Due to their friendship,
respondent (CPA-lawyer) became the business consultant, lawyer and accountant of the
Nakpils.
In 1965, Jose Nakpil became interested in purchasing a summer residence in Moran St. ,
Baguio City. For lack of funds, he requested respondent to purchase the Moran property for
him. They agreed that respondent would keep the property in thrust for the Nakpils until the
latter could buy it back. Pursuant to the agreement, respondent obtained 2 loans from a
bank, in the amounts of P65, 000 and P75, 000, which he used to purchase and renovate the
property. Title was then issued in respondent’s name.
Nakpils occupied the summer house. When Jose Nakpil died in 1973, respondent acted the
legal counsel and accountant of Jose’s widow. Respondent’s law form, Carlos J. Valdes &
Assoc. handled the proceeding for the settlement of Jose’s estate.
Ownership of the Moran property became an issue in the intestate proceedings. Respondent
excluded the Moran property from the inventory of Jose’s estate. He transferred his title to
the Moran property to his company, Caval Realty Corporation.
Complainant sought to recover Moran property by filing with the them CFI Baguio an action
for reconveyance with damages. During the pendencey of the action for reconveyance,
complainant filed this administrative case to disbar the respondent.
Allegations of complainant:
 Respondent maliciously appropriated the property in trust knowing that it did not
belong to him
 Respondent’s auditing firm excluded the Moran property from the inventory YET
included the Moran property in the claims against the estate the amounts P65k and
P75k which respondent represented as complainant’s husband’s loans applied
“probably for the purchase of a house and lot in Moran”
 Conflict of interest- Respondent’s law firm filed the petition for the settlement of her
husband’s estate in court, while respondent’s auditing firm acted as accountant of
both the estate and two of its creditors.
CFI dismissed the action for reconveyance
CA reversed the trial court. Respondent was the absolute owner of the Moran property.
 NO trust agreement between Nakpil and respondent
 Respondent was the absolute owner of the property
 No conflict of interest
 Recommendation: dismissal of administrative case
ISSUE1: WON respondent violated the Code of Professional Responsibility (CANON
17). – YES.
HELD/RATIO1:
(1) In violation of the trust agreement, respondent claimed absolute ownership over
the property and refused to sell the property to complainant after the death of Jose
Nakpil. Respondent initially acknowledged and respected the trust nature of the
Moran property. Respondent exercised bad faith in transferring the property to his
family corporation.
(2) Respondent’s act of excluding Moran property  lack of fidelity to the cause of his
client (Canon 17)
If he truly believed that it was his, he should have formally presented his claim in
the intestate proceedings instead of transferring it to his own company and
concealing it from complainant. His misuse of his legal expertise to deprive his
client of the Moran property is clearly unethical.
To make things worse, respondent through his accounting firm, charged two loans
against the estate as liability for the purchase and renovation of the property he
claimed for himself.
ISSUE2: WON respondent is guilty of representing conflicting interests. – YES.
HELD/RATIO2:
General Rule: An attorney cannot represent adverse interests.
Exception: Representation of conflicting interests may be allowed where the parties consent
to the representation, after full disclosure of the facts. Disclosure alone is not enough for the
clients must give their informed consent to such representation. The lawyer must explain to
his clients the nature and extent of conflict and possible adverse effect must be thoroughly
understood by his clients.
In the present case, there is no question that the interests of the estate and that of its
creditors are adverse to each other.
 Respondent denied that he represented complainant in the intestate proceedings.
He points out that it was one Atty Percival Cendana, who filed the case in court.
However, that is beside the point. Respondent acted as counsel and accountant of
complainant after the death of Jose Nakpil.
 When he transferred the Moran property to his corporation, the intestate
proceedings was still pending in court.
  His defense that complainant knew that his law firm was legal counsel of the estate
and that his accounting form was the auditor of both the estate and the two
claimants against it was not taken by the Court. There is nothing in the records to
show that respondent or his law firm explained the legal situation and its
consequences to complainant.
Respondent is a CPA-lawyer actively participating in both professions. He is the senior
partner in his law and accounting firms. Complainant is not charging respondent with breach
of ethics for being the common accountant of the estate and the two creditors. He is charged
for allowing his accounting firm to represent two creditors of the estate, and at the same time
allowing his law firm to represent the estate in the proceedings where these claims were
presented.
DISPO: Suspended from the practice of law for ONE YEAR.
Nakpil vs. Atty. Carlos J. Valdes
March 4, 1998
A lawyer violated the trust and confidence of the client when he represented
conflicting interest. He represented the creditors when his accounting firm prepared
and computed the claims of the creditors while his law firm represented the estate.
Case references:
1. If the acceptance of the new retainer will require the attorney to do anything
which will injuriously affect his first client in any matter in which he represents him
and also whether he will be called upon in his new relation, to use against his first
client any knowledge acquired thru their connection;
2. Whether the acceptance of a new relation will prevent an attorney from full
discharge of his duty of undivided fidelity and loyalty to his client or invite suspicion
of unfaithfulness or double dealing in the performance thereof.
Reason for prohibition
The reason for the prohibition is found in the relation of attorney and client, which is
one of trust and confidence of the highest degree. A lawyer becomes familiar with all
the facts connected with his client’s case. He learns from his client the weak points
of the action as well as the strong ones. Such knowledge must be considered sacred
and guarded with care. No opportunity must be given him to take advantage of his
client’s secrets. A lawyer must have the fullest confidence of his client. For, if the
confidence is abused, the profession will suffer by the loss thereof.
The prohibition applies however slight such adverse interest may be (Nakpil vs.
Valdes, 286 SCRA 758).
The essence of the rule is to maintain inviolate the client’s confidence or to refrain
from obtaining anything which will injuriously affect in any matter in which he
previously represented him.

Buted vs. Hernando, 203 SCRA 1

Maturan vs. Gonzales, March 12, 1998

Conflict of interest

(Pormento vs. Pontevedra, March 31, 2005)

A lawyer has to disclose to his client all the circumstances of his relations to the
parties in connection with the controversy which might influence the client in the
selection of counsel.

It is unprofessional to represent conflicting interests except by express consent of all

concerned given after full disclosure of the facts.

Tests to determine if there is conflicting interests: