The lawyer and the moneys or

properties of his clients

Problem Areas in Legal Ethics
Arellano University School of Law Arellano Law Foundation
2014-2015

 CANON 16 - A LAWYER SHALL HOLD IN TRUST ALL MONEYS

AND PROPERTIES OF HIS CLIENT THAT MAY COME INTO HIS
PROFESSION.
Rule 16.01 - A lawyer shall account for all money or property
collected or received for or from the client.

Rule 16.02 - A lawyer shall keep the funds of each client

separate and apart from his own and those of others kept by
him.

 Rule 16.03 - A lawyer shall deliver the funds and property of his
client when due or upon demand. However, he shall have a lien
over the funds and may apply so much thereof as may be
necessary to satisfy his lawful fees and disbursements, giving
notice promptly thereafter to his client. He shall also have a lien to
the same extent on all judgments and executions he has secured
for his client as provided for in the Rules of Court.

Rule 16.04 - A lawyer shall not borrow money from his client
unless the client's interest are fully protected by the nature of the
case or by independent advice. Neither shall a lawyer lend money
to a client except, when in the interest of justice, he has to advance
necessary expenses in a legal matter he is handling for the client.

 Rule 138 Sec. 24. Compensation of attorneys; agreement as to

fees. - An attorney shall be entitled to have and recover from
his client no more than a reasonable compensation for his
services, with a view to the importance of the subject matter of
the controversy, the extent of the services rendered, and the
professional standing of the attorney. xxx

 Rule 138 Sec. 25. Unlawful retention of client's funds; contempt.

- When an attorney unjustly retains in his hands money of his
client after it has been demanded, he may be punished for
contempt as an officer of the Court who has misbehaved in his
official transactions; but proceedings under this section shall not
be a bar to a criminal prosecution.

 Rule 138 Sec. 37. Attorneys' liens. - An attorney shall have a lien
upon the funds, documents and papers of his client which have
lawfully come into his possession and may retain the same until his
lawful fees and disbursements have been paid, and may apply such
funds to the satisfaction thereof.
He shall also have a lien to the same extent upon all judgments for
the payment of money, and executions issued in pursuance of such
judgments, which he has secured in a litigation of his client, from
and after the time when he shall have caused a statement of his
claim of such lien to be entered upon the records of the court
rendering such judgment, or issuing such execution, and shall have
caused written notice thereof to be delivered to his client and to
the adverse party; and he shall have the same right and power
over such judgments and executions as his client would have to
enforce his lien and secure the payment of his just fees and
disbursements.

Lawyer took custody of 2 cars subject of

preliminary attachment
According to Atty. Salomon, the attaching sheriff of Manila, instead
of depositing the attached cars in the court premises, turned them
over to Atty. Frial, Los counsel.
Very patently, Atty. Frial was remiss in his obligation of taking good
care of the attached cars. He also allowed the use of the Nissan
Sentra car by persons who had no business using it. He did not
inform the court or at least the sheriff of the destruction of the
Volvo car. What is worse is that he took custody of them without
so much as informing the court, let alone securing, its authority. -

Atty. Salomon Jr. v. Atty. Frial, A.C. No. 7820 [2008]

Lawyer withdraw money deposited to

the Branch Clerk of Court without
informing his client
Complainant, through his new counsel Atty. Miguel D. Larida, sent
respondent on 30 June 2003 a final demand letter for the
accounting and return of the P255,000. Respondent failed to reply.
Respondent committed a flagrant violation of his oath when he
received the sum of money representing the monthly rentals
intended for his client, without accounting for and returning such
sum to its rightful owner. Respondent received the money in his
capacity as counsel for complainant. Therefore, respondent held
the money in trust for complainant.

Cont
Respondent should have immediately notified complainant of the
trial courts approval of the motion to withdraw the deposited
rentals. Upon release of the funds to him, respondent could have
collected any lien which he had over them in connection with his
legal services, provided he gave prompt notice to complainant. A
lawyer is not entitled to unilaterally appropriate his clients money
for himself by the mere fact that the client owes him attorneys
fees. In this case, respondent did not even seek to prove the
existence of any lien, or any other right that he had to retain the
money.
Respondents failure to turn over the money to complainant
despite the latters demands gives rise to the presumption that he
had converted the money for his personal use and benefit. -

Almandrez Jr. v. Atty. Langit, A.C. No. 7057 [2006]

Business transaction between lawyer

and client is discourage
As a rule, a lawyer is not barred from dealing with his client but
the business transaction must be characterized with utmost
honesty and good faith. The measure of good faith which an
attorney is required to exercise in his dealings with his client is a
much higher standard that is required in business dealings
where the parties trade at "arms length." Business transactions
between an attorney and his client are disfavored and
discouraged by the policy of the law. Hence, courts carefully
watch these transactions to assure that no advantage is taken
by a lawyer over his client. This rule is founded on public policy
for, by virtue of his office, an attorney is in an easy position to
take advantage of the credulity and ignorance of his client. Thus,
no presumption of innocence or improbability of wrongdoing is
considered in an attorneys favor. - Chua and Hsia v. Atty.

Mesina Jr., A.C. No. 4904 [2004]

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No services rendered,
money must be returned
It is now clear to us that since respondent did not take any step
to assist complainant in her case, charging P56,000.00 is
improper. While giving legal advice and opinion on
complainants problems and those of her family constitutes legal
service, however, the attorneys fee must be reasonable.
Obviously, P56,000.00 is exorbitant.
We cannot understand why respondent initially demanded
P8,000.00 as filing fee from complainant when he very well
knew that the docket fee for Civil Case No. 00-044 had been
paid. If it was intended as a docket fee for another case, why
did he not file the corresponding complaint?
Respondent lawyer did not return the money to complainant
despite demand following his failure to file the case. - Dalisay

v. Atty. Mauricio, Jr., A.C. No. 5655 [2006]

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Issuing and keeping of receipts are

practices of accountability
Ethical and practical considerations made it both natural and
imperative for him to issue receipts, even if not demanded, and
to keep copies of the receipts for his own records. He was all
too aware that he was accountable for the moneys entrusted to
him by the clients, and that his only means of ensuring
accountability was by issuing and keeping receipts. - Tarog v.

Atty. Ricafort, A.C. No. 8253 [2011]

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When to deliver funds of clients

Thus, having obtained the funds from the [client] in the course
of his professional employment, [a lawyer] had the obligation to
deliver such funds to his clients
(a) when they became due, or
(b) upon demand.
- Tarog v. Atty. Ricafort, A.C. No. 8253 [2011]

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Lawyer should not deposit the funds in

his personal account
For him to deposit the amount of P65,000.00 in his personal
account without the consent of the Tarogs and not return it
upon demand, and for him to fail to file the memorandum and
yet not return the amount of P15,000.00 upon demand
constituted a serious breach of his fiduciary duties as their
attorney. He reneged on his duty to render an accounting to his
clients showing that he had spent the amounts for the particular
purposes intended. - Tarog v. Atty. Ricafort, A.C. No. 8253 [2011]
Depositing it in his personal account with the consent of client
is ethical?

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Lending money to client

Moreover, by engaging in a money-lending venture with his clients as
borrowers, respondent violated Rule 16.04:
Rule 16.04 A lawyer shall not borrow money from his
client unless the clients interests are fully protected by the nature of
the case or by independent advice. Neither shall a lawyer lend
money to a client except, when in the interest of justice, he has to
advance necessary expenses in a legal matter he is handling for the
client.
The rule is that a lawyer shall not lend money to his client. The only
exception is, when in the interest of justice, he has to advance
necessary expenses (such as filing fees, stenographers fees for

transcript of stenographic notes, cash bond or premium for surety

bond, etc.) for a matter that he is handling for the client. - Linsangan v.
Atty. Tolentino, A.C. No. 6672 [2009]

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Purpose of prohibiting lending of money

to client
The rule is intended to safeguard the lawyers independence of
mind so that the free exercise of his judgment may not be
adversely affected. It seeks to ensure his undivided attention to
the case he is handling as well as his entire devotion and fidelity
to the clients cause. - Linsangan v. Atty. Tolentino, A.C. No. 6672

[2009]

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Ill-effects of lending money to clients

If the lawyer lends money to the client in connection with the
clients case, the lawyer in effect acquires an interest in the
subject matter of the case or an additional stake in its outcome.
Either of these circumstances may:
a. lead the lawyer to consider his own recovery rather than that
of his client, or
b. to accept a settlement which may take care of his interest in
the verdict to the prejudice of the client in violation of his
duty of undivided fidelity to the clients cause. - Linsangan

v. Atty. Tolentino, A.C. No. 6672 [2009]

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Rule 16.01 includes money judgment in

favor of client
There is no question that the money or property received by a
lawyer for her client properly belongs to the latter. Conformably
with these canons of professional responsibility, we have held that
a lawyer is obliged to render an accounting of all the property and
money she has collected for her client. This obligation includes the
prompt reporting and accounting of the money collected by the
lawyer by reason of a favorable judgment to his client. - Bayonla v.

Atty. Reyes, A.C. No. 4808 [2011]

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Lawyer and client must agree

with the amount before retaining lien
is validly applied
In both cases, however, it is to be assumed that the client agrees with
the lawyer in the amount of attorney's fees. In case of a disagreement,
or when the client disputes the amount claimed by the lawyer for being
unconscionable, the lawyer should not arbitrarily apply the funds in his
possession to the payment of his fees; instead, it should behoove the
lawyer to file, if he still deems it desirable, the necessary action or the
proper motion with the proper court to fix the amount of his attorney's
fees. If a lawyer were allowed to unilaterally apply the funds in his
hands in payment of his claimed compensation even when there is a
disagreement between him and his client would not only be violative
of the trust relationship between them but can also open the door to
possible abuse by those who are less than mindful of their fiduciary duty. -

J.K. Mercado and Sons v. Atty. De Vera and Atty. Bandalan, A.C. No. 3066
[2001]

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Misuse of filing fee violates the rule that

lawyers must be scrupulously careful in
handling money entrusted to them in their
professional capacity
Central to this case are the following alleged acts of respondent
lawyer: (a) his non-filing of the Complaint on behalf of his client
and (b) his appropriation for himself of the money given for the
filing fee. - Burbe v. Atty. Magulta, AC No. 99-634 [2002]

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Appropriating the entire award is a

violation of Canon 16 and Rule 16.01

The Court is not oblivious of the right of a lawyer to be paid for

the legal services he has extended to his client but such right
should not be exercised whimsically by appropriating to himself
the money intended for his clients. There should never be an
instance where the victor in litigation loses everything he won
to the fees of his own lawyer. - Rivera v. Atty. Angeles, A.C. No.

2519 [2000]

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Obligation of lawyer once the money or

property intended for his client is
received
should be reported and accounted for promptly and
should not under any circumstances be commingled with his own
or
be used by him.
- Judge Angeles v. Atty. Uy, Jr., A.C. No. 5019. April 6, 2000

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Misappropriation is not required

The records do not clearly show whether Attorney Uy had in fact
appropriated the said amount; in fact, Mrs. Del Rosario
acknowledged that she had received it on February 12, 1999. They
do show, however, that respondent failed to promptly report
that amount to her. This is clearly a violation of his professional
responsibility.
Verily, the question is not necessarily whether the rights of the
clients have been prejudiced, but whether the lawyer has adhered
to the ethical standards of the bar. - Judge Angeles v. Atty. Uy, Jr.,

A.C. No. 5019. April 6, 2000

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Avoid keeping the money of client

Keeping the money in his possession without his client's
knowledge only provided Atty. Uy the tempting opportunity to
appropriate for himself the money belonging to his client. This
situation should, at all times, be avoided by members of the
bar. Like judges, lawyers must not only be clean; they must also
appear clean. This way, the people's faith in the justice system
would remain undisturbed. - Judge Angeles v. Atty. Uy, Jr., A.C.

No. 5019. April 6, 2000

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Thank you for your attention!!

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