Hornilla Vs Salunat

Doctrine of Centralized Management (3) Controls and holds all property of the corporation.
Hornilla vs Salunat Its members have been characterized as trustees or

directors clothed with a fiduciary character. It is clearly
Facts: separate and distinct from the corporate entity itself.
Benedicto Hornilla and Federico D. Ricafort filed an
administrative complaint with the Integrated Bar of the XPN: Derivative Suit— Where corporate directors have
Philippines (IBP) against Atty. Ernesto S. Salunat for committed a breach of trust either by their frauds, ultra
illegal and unethical practice and conflict of interest. vires acts, or negligence, and the corporation is unable
or unwilling to institute suit to remedy the wrong, a
Hornilla et al alleged that Salunat is a member of the stockholder may sue on behalf of himself and other
ASSA Law and Associates, which was the retained stockholders and for the benefit of the corporation, to
counsel of the Philippine Public School Teachers bring about a redress of the wrong done directly to the
Association (PPSTA). corporation and indirectly to the stockholders.
Then members of the PPSTA filed an intracorporate Real-party in interest in a derivative suit is a
case against its members of the BOD for unlawful corporation: This is what is known as a derivative suit,
spending and the undervalued sale of real property of and settled is the doctrine that in a derivative suit, the
the PPSTA. corporation is the real party in interest while the
stockholder filing suit for the corporation’s behalf is
Salunat entered his appearance as counsel for the only nominal party. The corporation should be included
PPSTA Board members (Defendants) in the said cases. as a party in the suit.
The complainants (Plaintiff), namely the members of Conflict of Interest in representing both the
the PPSTA, contend that Salunat was guilty of conflict Corporation and the BOD: In other jurisdictions, the
of interest because prevailing rule is that a situation wherein a lawyer
1. He was engaged as the counsel of PPTSA represents both the corporation and its assailed
where Hornilla was a member directors unavoidably gives rise to a conflict of interest.
2. And he was being paid out of funds which
were contributed by Hornilla et al. The interest of the corporate client is paramount and
should not be influenced by any interest of the
Despite being told by PPSTA members of the said individual corporate officials. The rulings in these cases
conflict of interest, Salunat refused to withdraw his have persuasive effect upon us.
appearance in the said cases.
SC ruled that a lawyer engaged as counsel for a
Issue: W/N a lawyer engaged by a corporation (plaintiff) corporation cannot represent members of the same
may defend the members of the Board of Directors corporation’s board of directors in a derivative suit
(defendant) of the same corporation in a derivative brought against them.
suit? No, There is conflict of interest.
To do so would be tantamount to representing
Ruling: NO conflicting interests, which is prohibited by the Code of
GR: In relation to the Doctrine of Centralized Professional Responsibility.
Management.
In the case at bar, the records show that SEC Case No.
In this jurisdiction, a corporation’s board of directors is 05-97-5657, entitled "Philippine Public School Teacher’s
understood to be that body which Assn., Inc., et al. v. 1992-1995 Board of Directors of the
(1) Exercises all powers provided for under the Philippine Public School Teacher’s Assn. (PPSTA), et al.,"
Corporation Code; was filed by the PPSTA against its own Board of
(2) Conducts all business of the corporation; and Directors.
ASSA Law Firm, of which Salunat is the Managing
Partner, was the retained counsel of PPSTA. Yet, he
appeared as counsel of record for the respondent
Board of Directors in the said case.
Clearly, respondent was guilty of conflict of interest

when he represented the parties against whom his
other client, the PPSTA, filed suit.

Hornilla Vs Salunat

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Doctrine of Centralized Management (3) Controls and holds all property of the corporation.

Hornilla vs Salunat Its members have been characterized as trustees or

Clearly, respondent was guilty of conflict of interest

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