Professional Documents
Culture Documents
PCGG Vs Sandigang Bayan, GR 151809-12, April 12, 2005
PCGG Vs Sandigang Bayan, GR 151809-12, April 12, 2005
The key to unlock Rule 6.03 lies in comprehending first, the 3. The Central Bank shall inform the principal
meaning of matter referred to in the rule and, second, the metes stockholders of Genbank of the foregoing
and bounds of the intervention made by the former government decision to liquidate the bank and the liquidation
lawyer on the matter. The American Bar Association in its plan approved by the Monetary Board.
Formal Opinion 342, defined matter as any discrete, isolatable act
as well as identifiable transaction or conduct involving a particular 4. The Solicitor General shall then file a petition in the
situation and specific party, and not merely an act of drafting, Court of First Instance reciting the proceedings
enforcing or interpreting government or agency procedures, which had been taken and praying the assistance
regulations or laws, or briefing abstract principles of law. of the Court in the liquidation of Genbank.
Firstly, it is critical that we pinpoint the matter which was
The PCGG further cites the Minutes No. 13 dated March 29, 1977
the subject of intervention by respondent Mendoza while he was
the Solicitor General. The PCGG relates the following acts of of the Monetary Board where it was shown that Atty. Mendoza
was furnished copies of pertinent documents relating to
respondent Mendoza as constituting the matter where he
GENBANK in order to aid him in filing with the court the petition
intervened as a Solicitor General, viz:[40]
for assistance in the banks liquidation. The pertinent portion of
the said minutes reads:
The PCGGs Case for Atty. Mendozas Disqualification
The Board decided as follows:
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
E. To authorize Management to furnish the competence in banking or finance, as receiver to
Solicitor General with a copy of the immediately take charge of its assets and liabilities, as
subject memorandum of the Director, expeditiously as possible collect and gather all the
Department of Commercial and Savings assets and administer the same for the benefit of its
Bank dated March 29, 1977, together creditors, exercising all the powers necessary for
with copies of: these purposes including, but not limited to, bringing
suits and foreclosing mortgages in the name of the
1. Memorandum of the Deputy Governor, bank or non-bank financial intermediary performing
Supervision and Examination Sector, quasi-banking functions.
to the Monetary Board, dated March
25, 1977, containing a report on the ...
current situation of Genbank;
If the Monetary Board shall determine and
2. Aide Memoire on the Antecedent Facts confirm within the said period that the bank or non-
Re: General Bank and Trust Co., bank financial intermediary performing quasi-banking
dated March 23, 1977; functions is insolvent or cannot resume business with
safety to its depositors, creditors and the general
3. Memorandum of the Director, public, it shall, if the public interest requires, order its
Department of Commercial and liquidation, indicate the manner of its liquidation and
Savings Bank, to the Monetary approve a liquidation plan. The Central Bank shall, by
Board, dated March 24, 1977, the Solicitor General, file a petition in the Court of
submitting, pursuant to Section 29 of First Instance reciting the proceedings which have
R.A. No. 265, as amended by P.D. been taken and praying the assistance of the court in
No. 1007, a repot on the state of the liquidation of such institution. The court shall
insolvency of Genbank, together have jurisdiction in the same proceedings to
with its attachments; and adjudicate disputed claims against the bank or non-
bank financial intermediary performing quasi-banking
functions and enforce individual liabilities of the
4. Such other documents as may be
stockholders and do all that is necessary to preserve
necessary or needed by the Solicitor
the assets of such institution and to implement the
General for his use in then CFI-
liquidation plan approved by the Monetary Board.
praying the assistance of the Court in
The Monetary Board shall designate an official of the
the liquidation of Genbank.
Central Bank, or a person of recognized competence
in banking or finance, as liquidator who shall take
Beyond doubt, therefore, the matter or the act of over the functions of the receiver previously
respondent Mendoza as Solicitor General involved in the case at appointed by the Monetary Board under this Section.
bar is advising the Central Bank, on how to proceed with the said The liquidator shall, with all convenient speed,
banks liquidation and even filing the petition for its liquidation convert the assets of the banking institution or non-
with the CFI of Manila. In fine, the Court should resolve whether bank financial intermediary performing quasi-banking
his act of advising the Central Bank on the legal procedureto functions to money or sell, assign or otherwise
liquidate GENBANK is included within the concept dispose of the same to creditors and other parties for
of matter under Rule 6.03. The procedure of liquidation is given the purpose of paying the debts of such institution
in black and white in Republic Act No. 265, section 29, viz: and he may, in the name of the bank or non-bank
financial intermediary performing quasi-banking
The provision reads in part: functions, institute such actions as may be necessary
in the appropriate court to collect and recover
SEC. 29. Proceedings upon insolvency. accounts and assets of such institution.
Whenever, upon examination by the head of the
appropriate supervising or examining department or The provisions of any law to the contrary
his examiners or agents into the condition of any notwithstanding, the actions of the Monetary Board
bank or non-bank financial intermediary performing under this Section and the second paragraph of
quasi-banking functions, it shall be disclosed that the Section 34 of this Act shall be final and executory, and
condition of the same is one of insolvency, or that its can be set aside by the court only if there is
continuance in business would involve probable loss convincing proof that the action is plainly arbitrary
to its depositors or creditors, it shall be the duty of and made in bad faith. No restraining order or
the department head concerned forthwith, in writing, injunction shall be issued by the court enjoining the
to inform the Monetary Board of the facts, and the Central Bank from implementing its actions under this
Board may, upon finding the statements of the Section and the second paragraph of Section 34 of
department head to be true, forbid the institution to this Act, unless there is convincing proof that the
do business in the Philippines and shall designate an action of the Monetary Board is plainly arbitrary and
official of the Central Bank or a person of recognized made in bad faith and the petitioner or plaintiff files
with the clerk or judge of the court in which the in the then Court of First Instance. The subject matter of Sp. Proc.
action is pending a bond executed in favor of the No. 107812, therefore, is not the same nor is related to but is
Central Bank, in an amount to be fixed by the court. different from the subject matter in Civil Case No. 0096. Civil
The restraining order or injunction shall be refused Case No. 0096 involves the sequestration of the stocks owned by
or, if granted, shall be dissolved upon filing by the respondents Tan, et al., in Allied Bank on the alleged ground that
Central Bank of a bond, which shall be in the form of they are ill-gotten. The case does not involve the liquidation of
cash or Central Bank cashier(s) check, in an amount GENBANK. Nor does it involve the sale of GENBANK to Allied Bank.
twice the amount of the bond of the petitioner or Whether the shares of stock of the reorganized Allied Bank are ill-
plaintiff conditioned that it will pay the damages gotten is far removed from the issue of the dissolution and
which the petitioner or plaintiff may suffer by the liquidation of GENBANK. GENBANK was liquidated by the Central
refusal or the dissolution of the injunction. The Bank due, among others, to the alleged banking malpractices of
provisions of Rule 58 of the New Rules of Court its owners and officers. In other words, the legality of the
insofar as they are applicable and not inconsistent liquidation of GENBANK is not an issue in the sequestration cases.
with the provisions of this Section shall govern the Indeed, the jurisdiction of the PCGG does not include the
issuance and dissolution of the restraining order or dissolution and liquidation of banks. It goes without saying that
injunction contemplated in this Section. Code 6.03 of the Code of Professional Responsibility cannot apply
to respondent Mendoza because his alleged intervention while
Insolvency, under this Act, shall be a Solicitor General in Sp. Proc. No. 107812 is an intervention on
understood to mean the inability of a bank or non- a matter different from the matter involved in Civil Case No.
bank financial intermediary performing quasi-banking 0096.
functions to pay its liabilities as they fall due in the
Thirdly, we now slide to the metes and bounds of
usual and ordinary course of business. Provided,
the intervention contemplated by Rule 6.03. Intervene means,
however, That this shall not include the inability to
viz.:
pay of an otherwise non-insolvent bank or non-bank
financial intermediary performing quasi-banking
functions caused by extraordinary demands induced 1: to enter or appear as an irrelevant or extraneous feature or
by financial panic commonly evidenced by a run on circumstance . . . 2: to occur, fall, or come in between points of
the bank or non-bank financial intermediary time or events . . . 3: to come in or between by way of hindrance
performing quasi-banking functions in the banking or or modification: INTERPOSE . . . 4: to occur or lie between two
financial community. things (Paris, where the same city lay on both sides of an
intervening river . . .)[41]
The appointment of a conservator under
Section 28-A of this Act or the appointment of a On the other hand, intervention is defined as:
receiver under this Section shall be vested exclusively
with the Monetary Board, the provision of any law, 1: the act or fact of intervening:
general or special, to the contrary notwithstanding. INTERPOSITION; 2: interference that may affect the
(As amended by PD Nos. 72, 1007, 1771 & 1827, Jan. interests of others.[42]
16, 1981)
There are, therefore, two possible interpretations of the
We hold that this advice given by respondent Mendoza on word intervene. Under the first interpretation, intervene includes
the procedure to liquidate GENBANK is not the participation in a proceeding even if the intervention is irrelevant
matter contemplated by Rule 6.03 of the Code of Professional or has no effect or little influence.[43] Under the second
Responsibility. ABA Formal Opinion No. 342 is clear as daylight in interpretation, intervene only includes an act of a person who has
stressing that the drafting, enforcing or interpreting government the power to influence the subject proceedings.[44]We hold that
or agency procedures, regulations or laws, or briefing abstract this second meaning is more appropriate to give to the word
principles of law are acts which do not fall within the scope of the intervention under Rule 6.03 of the Code of Professional
term matter and cannot disqualify. Responsibility in light of its history. The evils sought to be
remedied by the Rule do not exist where the government lawyer
Secondly, it can even be conceded for the sake of argument does an act which can be considered as innocuous such as x x x
that the above act of respondent Mendoza falls within the drafting, enforcing or interpreting government or agency
definition of matter per ABA Formal Opinion No. 342. Be that as it procedures, regulations or laws, or briefing abstract principles of
may, the said act of respondent Mendoza which is law.
the matter involved in Sp. Proc. No. 107812 is entirely
different from the matter involved in Civil Case No. 0096. Again, In fine, the intervention cannot be insubstantial and
the plain facts speak for themselves. It is given that respondent insignificant. Originally, Canon 36 provided that a former
Mendoza had nothing to do with the decision of the Central Bank government lawyer should not, after his retirement, accept
to liquidate GENBANK. It is also given that he did not participate employment in connection with any matter which he has
in the sale of GENBANK to Allied Bank. The matter where he got investigated or passed upon while in such office or employ. As
himself involved was in informing Central Bank on aforediscussed, the broad sweep of the phrase which he has
the procedure provided by law to liquidate GENBANK thru the investigated or passed upon resulted in unjust disqualification of
courts and in filing the necessary petition in Sp. Proc. No. 107812 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, not a mere guesswork. The Court of Appeals for the District of
had substantial responsibility. The 1983 Model Rules further Columbia has noted the tactical use of motions to disqualify
constricted the reach of the rule. MR 1.11(a) provides that a counsel in order to delay proceedings, deprive the opposing party
lawyer shall not represent a private client in connection with a of counsel of its choice, and harass and embarrass the opponent,
matter in which the lawyer participated personally and and observed that the tactic was so prevalent in large civil cases
substantially as a public officer or employee. in recent years as to prompt frequent judicial and academic
commentary.[48] Even the United States Supreme Court found no
It is, however, alleged that the intervention of respondent quarrel with the Court of Appeals description of disqualification
Mendoza in Sp. Proc. No. 107812 is significant and substantial. We motions as a dangerous game.[49] In the case at bar, the new
disagree. For one, the petition in the special proceedings is attempt to disqualify respondent Mendoza is difficult to divine.
an initiatory pleading, hence, it has to be signed by respondent The disqualification of respondent Mendoza has long been a dead
Mendoza as the then sitting Solicitor General. For another, issue. It was resuscitated after the lapse of many years and only
the record is arid as to the actual participation of respondent after PCGG has lost many legal incidents in the hands of
Mendoza in the subsequent proceedings. Indeed, the case was in respondent Mendoza. For a fact, the recycled motion for
slumberville for a long number of years. None of the parties disqualification in the case at bar was filed more than four
pushed for its early termination. Moreover, we note that the years after the filing of the petitions for certiorari, prohibition and
petition filed merely seeks the assistance of the court in the injunction with the Supreme Court which were subsequently
liquidation of GENBANK. The principal role of the court in this type remanded to the Sandiganbayan and docketed as Civil Case Nos.
of proceedings is to assist the Central Bank in determining claims 0096-0099.[50] At the very least, the circumstances under which
of creditors against the GENBANK. The role of the court is not the motion to disqualify in the case at bar were refiled put
strictly as a court of justice but as an agent to assist the Central petitioners motive as highly suspect.
Bank in determining the claims of creditors. In such a proceeding,
the participation of the Office of the Solicitor General is not that Similarly, the Court in interpreting Rule 6.03 was not
of the usual court litigator protecting the interest of government. unconcerned with the prejudice to the client which will be
caused by its misapplication. It cannot be doubted that granting a
II 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
Balancing Policy Considerations
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
To be sure, Rule 6.03 of our Code of Professional effective counsel cannot be overstated for it can result in denial
Responsibility represents a commendable effort on the part of the of due process.
IBP to upgrade the ethics of lawyers in the government service. As
aforestressed, it is a take-off from similar efforts especially by the The Court has to consider also the possible adverse effect
ABA which have not been without difficulties. To date, the legal of a truncated reading of the rule on the official independence
profession in the United States is still fine tuning its DR 9-101(b) of lawyers in the government service. According to Prof. Morgan:
rule. An individual who has the security of knowing he or she can find
private employment upon leaving the government is free to work
In fathoming the depth and breadth of Rule 6.03 of our Code vigorously, challenge official positions when he or she believes
of Professional Responsibility, the Court took account of various them to be in error, and resist illegal demands by superiors. An
policy considerations to assure that its interpretation and employee who lacks this assurance of private employment does
application to the case at bar will achieve its end without not enjoy such freedom.[53] He adds: Any system that affects the
necessarily prejudicing other values of equal importance. Thus, right to take a new job affects the ability to quit the old job and
the rule was not interpreted to cause a chilling effect on any limit on the ability to quit inhibits official
government recruitment of able legal talent. At present, it is independence.[54] The case at bar involves the position of
already difficult for government to match compensation offered Solicitor General, the office once occupied by respondent
by the private sector and it is unlikely that government will be able Mendoza. It cannot be overly stressed that the position of
to reverse that situation. The observation is not inaccurate that Solicitor General should be endowed with a great degree of
the only card that the government may play to recruit lawyers is independence. It is this independence that allows the Solicitor
have them defer present income in return for the experience and General to recommend acquittal of the innocent; it is this
contacts that can later be exchanged for higher income in private independence that gives him the right to refuse to defend officials
practice.[45] Rightly, Judge Kaufman warned that the sacrifice of who violate the trust of their office. Any undue dimunition of the
entering government service would be too great for most men to independence of the Solicitor General will have a corrosive effect
endure should ethical rules prevent them from engaging in the on the rule of law.
practice of a technical specialty which they devoted years in
acquiring and cause the firm with which they become associated No less significant a consideration is the deprivation of the
to be disqualified.[46] Indeed, to make government service more former government lawyer of the freedom to exercise his
difficult to exit can only make it less appealing to enter.[47] profession. Given the current state of our law, the disqualification
of a former government lawyer may extend to all members of his
In interpreting Rule 6.03, the Court also cast a harsh eye on law firm.[55] Former government lawyers stand in danger of
its use as a litigation tactic to harass opposing counsel as well as becoming the lepers of the legal profession.
deprive his client of competent legal representation. The danger
that the rule will be misused to bludgeon an opposing counsel is
It is, however, proffered that the mischief sought to be interests of Central Bank and respondents Tan, et al. in the above
remedied by Rule 6.03 of the Code of Professional Responsibility cases.
is the possible appearance of impropriety and loss of public
confidence in government. But as well observed, the accuracy of Likewise, the Court is nudged to consider the need to curtail
gauging public perceptions is a highly speculative exercise at what is perceived as the excessive influence of former officials or
best[56] which can lead to untoward results.[57] No less than Judge their clout.[66] Prof. Morgan again warns against extending this
Kaufman doubts that the lessening of restrictions as to former concern too far. He explains the rationale for his warning, viz:
government attorneys will have any detrimental effect on that Much of what appears to be an employees influence may actually
free flow of information between the government-client and its be the power or authority of his or her position, power that
attorneys which the canons seek to protect.[58] Notably, the evaporates quickly upon departure from government x x
appearance of impropriety theory has been rejected in the 1983 x.[67] More, he contends that the concern can be demeaning to
ABA Model Rules of Professional Conduct[59] and some courts those sitting in government. To quote him further: x x x The idea
have abandoned per se disqualification based on Canons 4 and 9 that, present officials make significant decisions based on
when an actual conflict of interest exists, and demand an friendship rather than on the merit says more about the present
evaluation of the interests of the defendant, government, the officials than about their former co-worker friends. It implies a
witnesses in the case, and the public.[60] lack of will or talent, or both, in federal officials that does not
seem justified or intended, and it ignores the possibility that the
It is also submitted that the Court should apply Rule 6.03 in officials will tend to disfavor their friends in order to avoid even
all its strictness for it correctly disfavors lawyers who switch the appearance of favoritism.[68]
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
III
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 The question of fairness
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, Mr. Justices Panganiban and Carpio are of the view, among
there are no inconsistent sides to be bothered about in the case others, that the congruent interest prong of Rule 6.03 of the Code
at bar. For there is no question that in lawyering for respondents of Professional Responsibility should be subject to a prescriptive
Tan, et al., respondent Mendoza is not working against the period. Mr. Justice Tinga opines that the rule cannot apply
interest of Central Bank. On the contrary, he is indirectly retroactively to respondent Mendoza. Obviously, and rightly so,
defending the validity of the action of Central Bank in liquidating they are disquieted by the fact that (1) when respondent
GENBANK and selling it later to Allied Bank. Their interests Mendoza was the Solicitor General, Rule 6.03 has not yet adopted
coincide instead of colliding. It is for this reason that Central Bank by the IBP and approved by this Court, and (2) the bid to disqualify
offered no objection to the lawyering of respondent Mendoza in respondent Mendoza was made after the lapse of time whose
Civil Case No. 0005 in defense of respondents Tan, et al. There is length cannot, by any standard, qualify as reasonable. At bottom,
no switching of sides for no two sides are involved. the point they make relates to the unfairness of the rule if applied
without any prescriptive period and retroactively, at that. Their
It is also urged that the Court should consider that Rule 6.03 concern is legitimate and deserves to be initially addressed by the
is intended to avoid conflict of loyalties, i.e., that a government IBP and our Committee on Revision of the Rules of Court.
employee might be subject to a conflict of loyalties while still in
government service.[61] The example given by the proponents of IN VIEW WHEREOF, the petition assailing the resolutions
this argument is that a lawyer who plans to work for the company dated July 11, 2001 and December 5, 2001 of the Fifth Division of
that he or she is currently charged with prosecuting might be the Sandiganbayan in Civil Case Nos. 0096-0099 is denied.
tempted to prosecute less vigorously.[62] In the cautionary words
No cost.
of the Association of the Bar Committee in 1960: The greatest
public risks arising from post employment conduct may well SO ORDERED.
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