SONIC STEEL INDUSTRIES, INC., COMPLAINANT, VS. ATTY. NONNATUS P. CHUA, RESPONDENT.

Sonic Steel Industries versus Chua

The Case

This is a disbarment case. Sonic Steel Industries, a corporation that manufactures and distributes aluminum-zinc coated metal sheets, filed a complaint against Atty. Nonnatus P. Chua, who served as Vice-President, Corporate Legal Counsel and Assistant Corporate Secretary of Steel Corporation. Sonic Steel accused the lawyer of dishonesty and deceit in connection with a search warrant application and a criminal complaint for patent infringement, because he allowed the court and the Department of Justice to believe that his client was the exclusive licensee of a patent that had, in truth, long expired. The case matters because it fixes the standard of candor a lawyer owes the courts, and it shows that a lawyer may be disciplined not only for an outright lie but for a strategic silence that keeps a material fact from the judge.

Procedural History

Sonic Steel filed the complaint for disbarment before the Supreme Court, which referred the matter to the Integrated Bar of the Philippines for investigation, report and recommendation. The Commission on Bar Discipline, in its Report and Recommendation dated July 10, 2007, resolved to suspend Atty. Chua from the practice of law for three months, with an admonition that a repetition of the same or similar act would be dealt with more severely. On August 17, 2007, the Board of Governors of the Integrated Bar adopted and approved that recommendation, but modified the penalty to six months of suspension. Atty. Chua moved for reconsideration, and the motion was denied on January 14, 2012. The Resolution and the records were then transmitted to the Supreme Court for final action, and the Court affirmed the findings and recommendations of the Integrated Bar in full.

Facts

Sonic Steel manufactures and sells zinc and aluminum-zinc coated metal sheets under the marks Superzinc and Superlume. Steel Corporation, through its officers and with the assistance of the National Bureau of Investigation, applied for a search warrant against Sonic Steel before the Regional Trial Court of Cavite City, Branch 17. The warrant was granted on September 5, 2005, and Sonic Steel's factory was searched and properties were seized. A week later, Steel Corporation filed a complaint before the Department of Justice for violation of Section 168, in relation to Section 170, of Republic Act No. 8293, the Intellectual Property Code.

The application rested on the claim that Steel Corporation was the exclusive licensee of Philippine Patent No. 16269 on the hot dip coating of ferrous strands, a process licensed to it by BIEC International, Inc. In the affidavit of its executive vice-president, Mr. Antonio Lorenzana, and in the complaint-affidavit that Atty. Chua himself prepared and subscribed before the Department of Justice, Steel Corporation asserted that it was the exclusive licensee of both the technical information and the patent. But Patent No. 16269 had been issued on August 25, 1983, and by the time of these proceedings it had already lapsed and passed into the public domain.

During the searching inquiry conducted by Judge Melchor Sadang, the judge asked whether there was a document to show the patent. Atty. Chua interposed that the defense reserved the presentation of the trademark license, and when the judge asked again about the patent on the hot dip coating of ferrous strands, he again reserved the right to present it at another time. The patent was never shown. Sonic Steel later obtained the patent and the transcript, and on these bases charged Atty. Chua with deliberately misleading the court and the Department of Justice. For his part, Atty. Chua insisted that he never claimed ownership of the patent, but only that his client was the exclusive licensee of the process by which Galvalume is produced.

Issues

• Whether or not Atty. Chua violated Rule 1.01 of Canon 1 of the Code of Professional Responsibility, which forbids a lawyer from engaging in unlawful, dishonest, immoral or deceitful conduct.
• Whether or not Atty. Chua violated Rule 10.01 of Canon 10 of the Code of Professional Responsibility, which requires candor, fairness and good faith toward the court, by concealing the expiration of the patent during the search warrant proceedings.
• Whether or not Atty. Chua should be suspended from the practice of law for his acts.

Applicable Provisions

Canon 1 of the Code of Professional Responsibility provides:

Canon 1 – A lawyer shall uphold the Constitution, obey the laws of the land and promote respect for the law and legal process.

This canon frames the lawyer's general duty of lawfulness, which the respondent is said to have breached.

Rule 1.01 of the same Code provides:

Rule 1.01 – A lawyer shall not engage in unlawful, dishonest and immoral or deceitful conduct.

This is the rule under which the Court tested the respondent's assertions about the patent.

Canon 10 provides:

Canon 10 – A lawyer owes candor, fairness and good faith to the court.

This canon states the duty of candor that governs a lawyer's dealings with the bench.

Rule 10.01 provides:

Rule 10.01 – A lawyer shall do no falsehood, nor consent to the doing of any in Court, nor shall he mislead or allow the Court to be misled by an artifice.

This is the precise rule engaged by the respondent's reservations in open court, which kept the judge from learning that the patent had expired.

Ruling

On the first issue, the Court held that the respondent violated his duty to avoid dishonest and deceitful conduct under Rule 1.01 of Canon 1. The investigation showed that under the license agreement between Steel Corporation and BIEC International, Inc., the technical information and the patent are separate and distinct. Steel Corporation held rights as licensee of the technical information, but not as licensee of the patent, which had expired more than five years before the search warrant proceedings. The respondent was therefore less than candid when he asserted that his client had rights to the entire process. All that Steel Corporation possessed was the residual right to use the technical information, an incomplete license over the process.

On the second issue, the Court held that the respondent likewise violated Rule 10.01 of Canon 10. Although Judge Sadang addressed his questions to Mr. Lorenzana, the respondent was quick to interrupt and reserve the presentation of the trademark license, and equally swift to end the inquiry over the patent by reserving the right to present it later. Given that the patent had been in expiry for years, the Court reasoned that the respondent was trying to conceal that fact so as to facilitate the grant of the search warrant. The Court stressed that even at the risk of jeopardizing the application, the respondent should have informed the court of the patent's expiration so that the judge could decide with all pertinent facts before him. In doing so, he also desecrated his lawyer's oath not to do any falsehood nor consent to the doing of any in court.

On the third issue, the Court held that the practice of law is not a right but a privilege, bestowed by the State on those who possess and continue to possess the required qualifications, one of which is honesty and candor. Candor in all dealings is the very essence of honorable membership in the profession.

Doctrine

A lawyer owes candor, fairness and good faith to the court, and must do no falsehood nor allow the court to be misled by any artifice. This duty is not discharged by mere literal accuracy. A half-truth, a carefully worded reservation, or a strategic silence that keeps a material fact from the judge is itself a violation of Rule 10.01 of Canon 10. A lawyer who asserts that a client holds a license over a process must be candid about each component of that process, and where a patent has lapsed and become part of the public domain, the lawyer must disclose that fact even if disclosure weakens the client's application. Such conduct is likewise dishonest and deceitful conduct under Rule 1.01 of Canon 1. The practice of law is a privilege conditioned on honesty and candor, and breach of that condition warrants suspension.

Disposition

The Supreme Court suspended Atty. Nonnatus P. Chua from the practice of law for six months, with an admonition that a repetition of the same or similar act in the future will be dealt with more severely.

Remember This

The one line to memorize is that a lawyer shall do no falsehood, nor consent to the doing of any in court, nor mislead or allow the court to be misled by an artifice, and that this duty reaches strategic silence about a lapsed patent. Examiners use this case in legal ethics to test candor toward the courts, the distinction between a half-truth and an outright lie, and the discipline of lawyers who conceal material facts to win an application.