VOL.

113, MARCH 25, 1982 31

Puyat vs. De Guzman, Jr.
*

No. L-51122. March 25, 1982.

EUGENIO J. PUYAT, ERWIN L. CHIONGBIAN, EDGARDO P.

REYES, ANTONIO G. PUYAT, JAIME R. BLANCO, RAFAEL
R. RECTO and REYNALDO L. LARDIZABAL, petitioners, vs.
HON. SIXTO T. J. DE GUZMAN, JR., as

_______________

* EN BANC.

32

32 SUPREME COURT REPORTS ANNOTATED

Puyat vs. De Guzman, Jr.

Associate Commissioner of the Securities & Exchange

Commission, EUSTAQUIO T. C. ACERO, R. G. VILDZIUS,
ENRIQUE M. BELO, MANUEL G. ABELLO, SERVILLANO
DOLINA, JUANITO MERCADO and ESTANISLAO A.
FERNANDEZ, respondents.

Attorneys; Constitutional Law; Administrative Law; Corporations

Act; An assemblyman cannot indirectly fail to follow the Constitutional
prohibition not to appear as counsel before an administrative tribunal
like the SEC by buying a nominal amount of share of one of the
shareholders after his appearance as counsel therein was contested.
—Ordinarily, by virtue of the Motion for Intervention, Assemblyman
Fernandez cannot be said to be appearing as counsel. Ostensibly, he
is not appearing on behalf of another, although he is joining the
cause of the private respondents His appearance could theoretically
be for the protection of his ownership of ten (10) shares of IPI in
respect of the matter in litigation and not for the protection of the
petitioners nor respondents who have their respective capable and
respected counsel.
 Same; Same; Same; Same.—However, certain salient
circumstances militate against the intervention of Assemblyman Fer-
nandez in the SEC Case. He had acquired a mere P200.00 worth of
stock in IPI, representing ten shares out of 262,843 outstanding
shares. He acquired them “after the fact”, that is, on May 30, 1979,
after the contested election of Directors on May 14, 1979, after the
quo warranto suit had been filed on May 25, 1979 before SEC and
one day before the scheduled hearing of the case before the SEC on
May 31, 1979. And what is more, before he moved to intervene, he
had signified his intention to appear as counsel for respondent
Eustaquio T. C Acero, but which was objected to by petitioners.
Realizing, perhaps, the validity of the objection, he decided, instead,
to “intervene” on the ground of legal interest in the matter under
litigation. And it may be noted that in the case filed before the Rizal
Court of First Instance (L-51928), he appeared as counsel for
defendant Excelsior, co-defendant of respondent Acero therein.
Same; Same; Same; Same.—Under those facts and
circumstances, we are constrained to find that there has been an
indirect “appearance as counsel before x x x an administrative body”
and, in our opinion, that is a circumvention of the Constitutional
prohibition. The “intervention” was an afterthought to enable him to
appear actively in the proceedings in some other capacity. To believe

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VOL. 113, MARCH 25, 1982 33

Puyat vs. De Guzman, Jr.

the avowed purpose, that is, to enable him eventually to vote and to
be elected as Director in the event of an unfavorable outcome of the
SEC Case would be pure naivete. He would still appear as counsel
indirectly.

Barredo, J.:

I reserve my vote.
PETITION for certiorari and prohibition with preliminary
injunction to review the order of the Commissioner of the
Security and Exchange Commission.
The facts are stated in the opinion of the Court.

MELENCIO-HERRERA, J.:

This suit for Certiorari and Prohibition with Preliminary

Injunction is poised against the Order of respondent Associate
Commissioner of the Securities and Exchange Commission
(SEC) granting Assemblyman Estanislao A. Fernandez leave
to intervene in SEC Case No. 1747.
A question of novel import is in issue. For its resolution, the
following dates and allegations are being given and made:
a) May 14, 1979. An election for the eleven Directors of the
International Pipe Industries Corporation (IPI) a private
corporation, was held. Those in charge ruled that the following
were elected as Directors:
Eugenio J. Puyat Eustaquio T.C. Acero
Erwin L. Chiongbian R. G. Vildzius
Edgardo P. Reyes Enrique M. Belo
Antonio G. Puyat Servillano Dolina
Jaime R. Blanco Juanito Mercado
Rafael R. Recto

Those named on the left list may be called the Puyat Group;
those on the right, the Acero Group. Thus, the Puyat Group
would be in control of the Board and of the management of
IPI.

34

3 SUPREME COURT REPORTS ANNOTATED

Puyat vs. De Guzman, Jr.

b) May 25, 1979. The Acero Group instituted at the

Securities and Exchange Commission (SEC) quo
warranto proceedings, docketed as Case No. 1747
(the SEC Case), questioning the election of May 14,
1979. The Acero Group claimed that the stockholders’
votes were not properly counted.
c) May 25-31, 1979. The Puyat Group claims that at
conferences of the parties with respondent SEC
Commissioner de Guzman, Justice Estanislao A.
Fernandez, then a member of the Interim Batasang
Pambansa, orally entered his appearance as counsel
for respondent Acero to which the Puyat Group
objected on Constitutional grounds. Section 11, Article
VIII, of the 1973 Constitution, then in force, provided
that no Assemblyman could “appear as counsel before
x x x any administrative body”, and SEC was an
administrative body. Incidentally, the same prohibition
was maintained by the April 7, 1981 plebiscite. The
cited Constitutional prohibition being clear,
Assemblyman Fernandez did not continue his
appearance for respondent Acero.
 d) May 31, 1979. When the SEC Case was called, it
turned out that:

(i) On May 15, 1979, Assemblyman Estanislao A. Fernandez

had purchased from Augusto A. Morales ten (10) shares of
stock of IPI for P200.00 upon request of respondent Acero to
qualify him to run for election as a Director.
(ii) The deed of sale, however, was notarized only on May 30,
1979 and was sought to be registered on said date.
(iii) On May 31, 1979, the day following the notarization of
Assemblyman Fernandez’ purchase, the latter had filed an
Urgent Motion for Intervention in the SEC Case as the owner
of ten (10) IPI shares alleging legal interest in the matter in
litigation.

e) July 17, 1979. The SEC granted leave to intervene on the 1

basis of Atty. Fernandez’ ownership of the said ten shares. It

is this Order allowing intervention that precipitated the instant
petition for Certiorari and Prohibition with Preliminary
Injunction.

_______________

1 p. 23, Rollo.

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VOL. 113, MARCH 25, 1982 35

Puyat vs. De Guzman, Jr.

f) July 3, 1979. Edgardo P. Reyes instituted a case before the

Court of First Instance of Rizal (Pasig), Branch XXI, against
N.V. Verenigde Bueinzenfabrieken Excelsior—De Maas and
respondent Eustaquio T. C. Acero and others, to annul the
sale of Excelsior’s shares in the IPI to respondent Acero (CC
No. 33739). In that case, Assemblyman Fernandez appeared
as counsel for defendant Excelsior. In L-51928, we ruled that
Assemblyman Fernandez could not appear as counsel in a
case originally filed with a Court of First Instance as in such
situation the Court would be one “without appellate
jurisdiction.”
On September 4, 1979, the Court en banc issued a
temporary Restraining Order enjoining respondent SEC
Associate Commissioner from allowing the participation as an
intervenor, of respondent Assemblyman Estanislao Fernandez
at the proceedings in the SEC Case.
The Solicitor General, in his Comment for respondent
Commissioner, supports the stand of the latter in allowing
intervention. The Court en banc, on November 6, 1979,
resolved to consider the Comment as an Answer to the
Petition.
The issue which will be resolved is whether or not
Assemblyman Fernandez, as a then stockholder of IPI. may
intervene in the SEC Case without violating Section 11, Article
VIII of the Constitution, which, as amended, now reads:

“SEC. 11.
No Member of the Batasang Pambansa shall appear as counsel
before any court without appellate jurisdiction.
before any court in any civil case wherein the Government, or any
subdivision, agency, or instrumentality thereof is the adverse party,
or in any criminal case wherein any officer or employee of the
Government is accused of an offense committed in relation to his
office,
or before any administrative body.
Neither shall he, directly or indirectly be interested financially in
any contract with, or in any franchise or special privilege granted by
the Government, or any subdivision, agency or instrumentality

36

36 SUPREME COURT REPORTS ANNOTATED

Puyat vs. De Guzman, Jr.

thereof, including any government-owned or controlled corporation,

during his term of office.
He shall not accept employment to intervene in any cause or
matter where he may be called to act on account of his office.
(Emphasis and paragraphs supplied)

What really has to be resolved is whether or not, in intervening

in the SEC Case, Assemblyman Fernandez is, in effect,
appearing as counsel, albeit indirectly, before an
administrative body in contravention of the Constitutional
provision.
Ordinarily, by virtue of the Motion for Intervention,
Assemblyman Fernandez cannot be said to be appearing as
counsel. Ostensibly, he is not appearing on behalf of another,
although he is joining the cause of the private respondents.
His appearance could theoretically be for the protection of his
ownership of ten (10) shares of IPI in respect of the matter in
litigation and not for the protection of the petitioners nor
respondents who have their respective capable and respected
counsel.
However, certain salient circumstances militate against the
intervention of Assemblyman Fernandez in the SEC Case. He
had acquired a mere P200.00 worth of stock in IPI,
representing ten shares out of 262,843 outstanding shares.
He acquired them “after the fact”, that is, on May 30, 1979,
after the contested election of Directors on May 14, 1979,
after the quo warranto suit had been filed on May 25, 1979
before SEC and one day before the scheduled hearing of the
case before the SEC on May 31, 1979. And what is more,
before he moved to intervene, he had signified his intention 2 to
appear as counsel for respondent Eustaquio T. C. Acero, but
which was objected to by petitioners. Realizing, perhaps, the
validity of the objection, he decided, instead, to “intervene” on
the ground of legal interest in the matter under litigation. And it
maybe noted that in the case filed before the Rizal Court of
First Instance (L-51928), he appeared as counsel for
defendant Excelsior, co-defendant of respondent Acero
therein.

_______________

2 p. 6, ibid.

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VOL. 113, MARCH 25, 1982 37

Puyat vs. De Guzman, Jr.

Under those facts and circumstances, we are constrained to

find that there has been an indirect “appearance as counsel
before x x x an administrative body” and, in our opinion, that is
a circumvention of the Constitutional prohibition. The
“intervention” was an afterthought to enable him to appear
actively in the proceedings in some other capacity. To believe
the avowed purpose, that is, to enable him eventually to vote
and to be elected as Director in the event of an unfavorable
outcome of the SEC Case would be pure naivete. He would
still appear as counsel indirectly.
A ruling upholding the “intervention” would make the
constitutional provision ineffective. All an Assemblyman need
do, if he wants to influence an administrative body is to
acquire a minimal participation in the “interest” of the client
and then “intervene” in the proceedings. That which the
Constitution directly prohibits may not be done by indirection
or by a general legislative act which is intended 3 to accomplish
the objects specifically or impliedly prohibited.
In brief, we hold that the intervention of Assemblyman
Fernandez in SEC. No. 1747 falls within the ambit of the
prohibition contained in Section 11, Article VIII of the
Constitution.
 Our resolution of this case should not be construed as,
absent the question of the constitutional prohibition against
members of the Batasan, allowing any stockholder, or any
number of stockholders, in a corporation to intervene in any
controversy before the SEC relating to intra-corporate matters.
A resolution of that question is not necessary in this case.
WHEREFORE, respondent Commissioner’s Order granting
Atty. Estanislao A. Fernandez leave to intervene in SEC Case
No. 1747 is hereby reversed and set aside. The temporary
Restraining Order heretofore issued is hereby made
permanent.
No costs.
SO ORDERED.

_______________

3 Am. Digest, 2d Dicennial Ed., Vol. 5, citing Atkinson vs. Board, etc., 108
P. 1046.

38

38 SUPREME COURT REPORTS ANNOTATED

Puyat vs. De Guzman, Jr.

Fernando, C.J., Teehankee, Makasiar, Concepcion,

Jr., Fernandez, Guerrero, Abad Santos, De Castro, Ericta,
Plana and Escolin, JJ., concur.
Barredo, J., I reserve my vote.
Aquino, J., no part.

Order reversed and set aside.

Notes.—Prohibited purchase of property under litigation

from client by his lawyer is void and produces no legal effect.
Its nullity cannot be cured by ratification. (Rubias vs. Batiller,
51 SCRA 120.)
Attorney’s withdrawal from the case must be with the
consent of the client. (Republic vs. CFI of Lanao del Norte,
Branch II, 53 SCRA 317.)
It is the duty of counsel to check with the court respecting
the outcome of the hearing at which he failed to appear.
(Galvez vs. Court of Appeals, 42 SCRA 278.)
There is need of proof as to the amount of damages for
attorney’s fees. (Medenilla vs. Kayanan, 40 SCRA 154.)
An attorney is entitled to recover compensation for his
services on quantum meruit basis. (Cabildo vs. Navarro, 54
SCRA 26.)
 Article 1491 of the New Civil Code prohibiting sale to
lawyer of client’s estate involved in a litigation applies only
while litigation is pending. (Director of Lands vs. Adaba, 88
SCRA 513.)
An agreement for payment of 1/2 of real property in
litigation to a lawyer as attorney’s fees in case appealed does
not violate Article 1491 of the New Civil Code. (Director of
Lands vs. Adaba, 88 SCRA 513.)
An attorney is not disqualified where the relations of
attorney and client has terminated before the appointment or
where, although he is attorney of another judgment creditor or
defendant, he is not attorney for the judgment creditor who
ap-

39

VOL. 113, MARCH 25, 1982 39

Villegas vs. Legaspi

plied for the receivership; and, a fortiori, the mere fact that one
is a Solicitor or practicing barrister being in no way connected
with the particular parties or subject matter, does not disqualify
him to be receiver. (Cochingyan, Jr. vs. Cloribel, 76 SCRA
361.)

——o0o——

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