Presidential Commission on Good Government

v. Sandiganbayan: G.R. Nos. 151809-12, April 12, 2005

Facts:

the Central Bank declared the General Bank and Trust Company (GenBank) insolvent and ordered its
liquidation. Atty. Mendoza, then solicitor general, filed a Petition with the (CFI) of Manila, praying for the court’s
assistance and supervision in the liquidation of the bank.

Then came the EDSA Revolution of February 1986. Upon her ascension to power, President Corazon C.
Aquino established the Presidential Commission on Good Government (PCGG) to recover the alleged ill-
gotten wealth of former President Ferdinand Marcos, his family and his cronies. In line with its mandate, the
PCGG filed a Complaint for the recovery of those assets belonging to suspected cronies . Among
them was Lucio Tan’s group, which had by then acquired GenBank (later renamed Allied Banking
Corporation), The PCGG also issued several writs of sequestration on the properties of the Lucio Tan
group, including shares of stock of Allied Bank.

Tan et al. filed three Petitions in the Supreme Court to nullify the writs of sequestration. In all these cases
they were represented by former Solicitor General Mendoza, who had by then resumed his private practice of
law.

In Civil Case and the sequestration cases, the PCGG moved to disqualify Atty. Mendoza as counsel
for Tan et al. It was alleged that, as former solicitor general and counsel of the Central Bank, he had
“actively intervened” in the liquidation and Tan et al.’s subsequent acquisition of GenBank.

The Motion to disqualify him invoked Rule 6.03 of the Code of Professional Responsibility (CPR): “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.”

the Motion for the disqualification of Atty. Mendoza was denied by the SBN Fifth Division, alleged that the
PCGG had failed to prove any inconsistency between the former function of Atty. Mendoza as
solicitor general and his current employment as counsel of the Lucio Tan group. PCGG’s Motion for
Reconsideration was also denied.

Hence, the PCGG filed the Petition with the Supreme Court, ascribing grave abuse of discretion to the SBN
Fifth Division for issuing the Resolutions of July 11, 2001 and December 5, 2000.

The Issue

whether the prohibition under Rule 6.03 of the Code of Professional Responsibility applied to Atty.
Mendoza.
The Court’s Ruling

Justice Reynato S. Puno undertook an exhaustive investigation of the historical antecedents and rationale of
Rule 6.03 of the CPR. As early as 1924,concerns had been raised by the American Bar Association (ABA),
from whose canons the Philippine Code of Professional Responsibility has borrowed immensely. These
concerns were over the “revolving door,” in which “lawyers x x x 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.” The areas of concern were classified as “adverse-interest
conflicts” and “congruent-interest conflicts.”

An “adverse-interest conflict” exists when the matter in which a 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 current and the former interests are adverse.

On the other hand, a “congruent-interest conflict” prohibits a former government lawyer from
representing a private practice client, even if the interests of the former and the new clients are
entirely parallel. The case of Atty. Mendoza involved the second type of representation conflict.

The Court sustained the SBN’s denial of Atty. Mendoza’s disqualification, saying that the key
to unlocking Rule 6.03 of the CPR was understanding

(1) the meaning of “matter,” as well as (2) the metes and bounds of the “intervention” made
by the former government lawyer on the “matter.”

“Matter”

The “matter,” in which Atty. Mendoza intervened, referred to “advising the Central Bank on how to
proceed with [GenBank’s] liquidation and even filing the petition for its liquidation with the CFI of
Manila.”

This matter, the Court said, was not the one contemplated by Rule 6.03 of the CPR. As interpreted in ABA’s
Formal Opinion No. 342 (precursor of the Rule), 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 gov or agency procedures, regulations or laws or briefing abstract
principles of law.

“ hence, they cannot be used to disqualify. Besides, the matter” involved in the special proceeding for
GenBank’s liquidation was entirely different from the
“matter” involved in the sequestration cases.

Intervention

Meanwhile, two possible interpretations of the word “intervene” were noted. The first interpretation
included participation in a proceeding, even if the intervention was irrelevant or had no effect or little
influence. Under the second interpretation, “intervene” included only the act of a person who had the
power to influence the proceedings. The second meaning was more appropriately given to the word
“intervention” in Rule 6.03 of the CPR. The intervention, therefore, must be substantial and significant.
 In the instant case, the Petition in the special proceedings was noted to be an initiatory pleading;
hence, it had to be signed by Atty. Mendoza as the solicitor general. Moreover, his actual participation in
the liquidation was not that of the usual court litigator protecting the interest of the government.
Thus, his “intervention” was held to be insignificant and insubstantial.

Balancing Competing Policy Considerations

In ruling the way it did, the Court stressed that Rule 6.03 of the CPR had not been interpreted to
cause a chilling effect on government recruitment of able legal talent. It rejected the use of the litigation tactic
of harassing the opposing counsel to deprive the client not only of a law firm of choice, but also of an
individual lawyer in whom the latter had confidence.

The Court also considered the possible effect of a truncated Rule on the official independence of
lawyers in the government service. Found to be no less significant was the fact that former government
lawyers were being deprived of the freedom to exercise their profession.

Impropriety

On the other hand, the possible appearance of impropriety and loss of public confidence in
government -- the mischief sought to be remedied by Rule 6.03 of the CPR -- had already been rejected in
the 1983 ABA Model Rules of Professional Conduct. Accordingly, per se disqualification in cases involving
an actual conflict of interest has been abandoned by some courts. Demanded, instead, is an evaluation of
the interests of the defendant, the government, the witnesses, and the public.

Switching Sides

Meanwhile, found to be inapplicable was the argument for strictness that was meant to discourage lawyers
from “switching sides” and thereby compromising confidential official information.

There were no inconsistent sides, because Atty. Mendoza’s act of informing the Central Bank (CB) of
the procedure for liquidating GenBank was a subject matter that differed from that of the
sequestration cases involving Allied Bank. Consequently, there was no danger that confidential
official information might be divulged.

Conflict of Loyalties
Fears over a possible conflict of loyalties, which a government employee might experience
while still in government service, were likewise brushed aside as a non-factor. The Court pointed out that
Atty. Mendoza had not been charged with advising the CB on how to liquidate GenBank with an eye on
defending Tan et al. of Allied Bank at a later time. Quite the contrary, he continued defending both the
interests of the CB and of Tan et al. in the cases mentioned.

Excessive Influence or Clout of Former Officials

The Court likewise paid no heed to the need to curtail the alleged excessive influence or clout of
former officials. It considered such concern to be overextended and demeaning to those sitting in
government.
 In view of the foregoing points, the Petition assailing the Sandiganbayan Resolutions in the
sequestration cases was denied.