Legal Profession

2nd semester, A.Y.

2014-2015

Nakpil v. Valdez
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 respondents name.
Nakpils occupied the summer house. When Jose Nakpil died in 1973, respondent acted the legal counsel and accountant of Joses
widow. Respondents law form, Carlos J. Valdes & Assoc. handled the proceeding for the settlement of Joses estate.
Ownership of the Moran property became an issue in the intestate proceedings. Respondent excluded the Moran property from the
inventory of Joses 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
Respondents 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 complainants husbands loans applied
probably for the purchase of a house and lot in Moran
Conflict of interest- Respondents law firm filed the petition for the settlement of her husbands estate in court, while
respondents 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.
OSG submitted report on disbarment complaint:
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) Respondents 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.
Batac, Endaya, Lingat, Santos, Saturnino, Villafuerte, Yee

Legal Profession
2nd semester, A.Y.
2014-2015

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.

Batac, Endaya, Lingat, Santos, Saturnino, Villafuerte, Yee