Key Lesson: Lawyers Must Uphold Integrity and Respect Court Processes in Corporate Disputes

Erlinda Bildner v. Atty. Sikini C. Labastilla and Atty. Alma Kristina Alobba, A.C. No. 12843, March 18, 2021

Imagine the chaos that ensues when two factions within a corporation fight for control, each claiming legitimacy and using legal maneuvers to assert their dominance. This scenario played out in the case of Erlinda Bildner against attorneys Sikini C. Labastilla and Alma Kristina Alobba, highlighting the critical role lawyers play in maintaining the integrity of corporate governance and legal proceedings. At the heart of this case is the question of whether lawyers can bend the truth or ignore court orders in pursuit of their clients’ interests, and the Supreme Court’s decision offers a clear stance on the ethical boundaries attorneys must respect.

The case stemmed from a bitter intra-corporate dispute between two groups vying for control over the Philippine Overseas Telecommunications Corporation (POTC) and its subsidiary, Philippine Communications Satellite Corporation (PHILCOMSAT). The conflict escalated when Atty. Labastilla, representing one faction, filed a complaint that led to a temporary restraining order (TRO) from the Sandiganbayan, effectively challenging a previous injunction from the Court of Appeals (CA). This action raised significant ethical questions about the duties of lawyers in such disputes.

Legal Context

In the realm of corporate law, disputes over control and governance are common, often leading to complex legal battles. The case of Bildner v. Labastilla and Alobba touches on several key legal principles:

Code of Professional Responsibility (CPR): This code governs the conduct of lawyers in the Philippines, emphasizing their duty to uphold the law and maintain the integrity of the legal system. Relevant provisions include:

• Canon 1: “A lawyer shall uphold the constitution, obey the laws of the land and promote respect for law and legal processes.”
• Rule 1.02: “A lawyer shall not counsel or abet activities aimed at defiance of the law or at lessening confidence in the legal system.”
• Rule 10.01: “A lawyer shall not do any falsehood, nor consent to the doing of any in court; nor shall he mislead, or allow the Court to be misled by any artifice.”
• Rule 19.01: “A lawyer shall employ only fair and honest means to attain the lawful objectives of his client and shall not present, participate in presenting or threaten to present unfounded criminal charges to obtain an improper advantage in any case or proceeding.”

These principles underscore the lawyer’s role as an officer of the court, tasked with ensuring justice and fairness, even in the face of client pressures.

Corporate Governance: In corporate disputes, the legitimacy of board members and their actions can be contentious. The case illustrates the importance of adhering to court orders, such as TROs and writs of preliminary injunction (WPI), which are designed to maintain the status quo during disputes.

Consider a hypothetical scenario where two groups within a company, Group A and Group B, are in a power struggle. Group A secures a TRO from a court, preventing Group B from holding a board meeting. If Group B’s lawyer, knowing of the TRO, advises them to proceed anyway, this could lead to legal repercussions for both the lawyer and the clients, similar to what occurred in the Bildner case.

Case Breakdown

The dispute between the Africa-Bildner and Nieto-PCGG groups over POTC and PHILCOMSAT began with the surrender of shares to the Presidential Commission on Good Governance (PCGG) post-EDSA Revolution. This led to a series of legal battles, including a Compromise Agreement in 1996, which attempted to resolve the ownership of contested shares.

By 2000, the Africa-Bildner group gained control through a special stockholders’ meeting. However, the Nieto-PCGG group continued to hold their own meetings, leading to conflicting claims of legitimacy. The Securities and Exchange Commission (SEC) and the CA issued orders and injunctions to regulate these meetings, culminating in the CA TRO and WPI in 2004, which restrained the Nieto-PCGG group from acting as the board.

Atty. Labastilla, representing the Nieto-PCGG group, filed a complaint with the Sandiganbayan in 2005, seeking to enjoin the Africa-Bildner group from acting as the board. This action, taken without disclosing the CA’s injunctions, led to a TRO from the Sandiganbayan, creating a direct conflict with the CA’s orders.

The Supreme Court’s decision focused on Atty. Labastilla’s actions:

“Atty. Labastilla’s failure to allege the existence of the CA TRO and WPI effectively misled the SB into issuing the SB TRO as it had no notice or knowledge of any other injunctive order involving the same issues.”

“By securing the SB TRO, Atty. Labastilla unfairly caused an impasse between POTC and PHILCOMSAT since the two factions would have been restrained from acting as members of POTC’s Board of Directors.”

The Court found Atty. Labastilla guilty of violating the CPR and suspended him for three months, emphasizing the importance of lawyers’ adherence to legal processes and ethical standards.

Practical Implications

The Bildner case serves as a reminder to lawyers and corporate stakeholders of the ethical boundaries they must respect in legal disputes. It underscores the following key lessons:

• Transparency and Full Disclosure: Lawyers must fully disclose all relevant court orders and legal proceedings to avoid misleading the courts.
• Respect for Court Orders: Ignoring or circumventing court injunctions can lead to severe professional consequences.
• Balancing Client Interests and Legal Ethics: While advocating for clients, lawyers must prioritize the integrity of the legal system.

For businesses and individuals involved in corporate disputes, it is crucial to work with lawyers who uphold these principles, ensuring that legal strategies do not compromise ethical standards.

Frequently Asked Questions

What is a temporary restraining order (TRO)?

A TRO is a court order that temporarily prevents a party from taking certain actions, often used to maintain the status quo during legal disputes.

How can a lawyer’s actions affect a corporate dispute?

A lawyer’s actions, such as filing misleading complaints or ignoring court orders, can escalate disputes and lead to legal repercussions, affecting the outcome of corporate governance battles.

What are the ethical responsibilities of lawyers in corporate disputes?

Lawyers must adhere to the Code of Professional Responsibility, ensuring they do not engage in falsehoods or actions that undermine the legal system’s integrity.

Can a lawyer be suspended for unethical conduct in a corporate dispute?

Yes, as seen in the Bildner case, lawyers can face suspension or other disciplinary actions for violating ethical standards, such as failing to disclose relevant court orders.

What should businesses do if they suspect their lawyer is acting unethically?

Businesses should seek a second opinion from another legal professional and consider filing a complaint with the Integrated Bar of the Philippines if they believe their lawyer’s actions are unethical.

ASG Law specializes in corporate governance and legal ethics. Contact us or email hello@asglawpartners.com to schedule a consultation.