LEGAL ETHICS
Based on the book
CHAPTER 8 LAWYERS
FIDUCIARY
OBLIGATIONS
A. EFFECTS OF FIDUCIARY RELATION
Generally
The position of an attorney enables him to
put in his power, and opens him to the
temptation to avail himself, not only of the
necessity if his client but of his good
nature, liberality and credulity to obtain
undue advantages, bargains and
gratuities.
The well-established rule that the relation
of attorney and client is highly fiduciary
and disinterestedness on the part of the
attorney is designed to remove all such
temptation and to prevent everything of
that kind from being done for the
protection of the client.
Dealings with client closely scrutinized
A fiduciary relationship exists as a
matter of law between attorney and
client;
Legal and Judicial Ethics
By Atty. Ruben E. Agpalo
CANON 16. A LAWYER SHALL HOLD IN
TRUST ALL MONEYS AND PROPERTIES
OF HIS CLIENTS THAT MAY COME INTO
It is the courts duty to look
into dealings between
HIS POSSESSION. attorneys and their clients
and to guard and protect
Rule 16.01A lawyer shall account for all the latter from any undue
money or property collected or received for consequences resulting
or from the client. from a situation in which
they may stand unequal.
Rule 16.02A lawyer shall keep the funds of While a lawyer is not
each client separate and apart from his own barred from dealing with
and those of others kept by him. his client in business
transaction, the same is
Rule 16.03A lawyer shall deliver the funds disfavored and his
and property of his client when due or upon business dealings must be
characterized with utmost
demand. However, he shall have a lien over
honesty and good faith.
the funds and may apply so much thereof as The measure of good faith
may be necessary to satisfy his lawful fees which an attorney is
and disbursements, giving notice promptly required to exercise in his
thereafter to his client. He shall also have a dealings with his clients is
lien to the same extent on all judgments and a much higher standard
executions he has secured for his client as than is required in
business dealings where
provided for in the Rules of Court.
the parties trade at arms
length.
Rule 16.04A lawyer shall not borrow
When there is a business
money from his client unless the clients
transaction between an
interests are fully protected by the nature of attorney and his client, the
the case or by independent advice. Neither burden of proof rests upon
shall a lawyer lend money to a client except, the attorney to show that
when in the interest of justice, he has to the transaction is fair,
advance necessary expenses in a legal
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matter he is handling for the client.

equitable and just, and that it did not proceed from
undue influence, and that the property so acquired does
not belong constructively to the client.
Abuse of clients confidence
A lawyer should refrain from any action whereby for his
personal benefit or gain he abuses or takes advantage
of the confidence reposed in him by his client.
A lawyer may not retain the money of one client to force
a settlement of the disputed claim of another client
against the former.
An attorney, confronted with the situation of drawing a
will for a friend or a relative who wishes to make a
bequest to him or to a member of his family, should take
into consideration:
o The conflict of interests;
o The incompetence of a lawyer-beneficiary to
testify because of a transaction with the
deceased;
o The possible jeopardy of the will if its admission
to probate is contested;
o The possible harm to the other beneficiaries, and
o The undermining of the public trust and
confidence in the integrity of an attorney.
The mere existence of a confidential relation between a
testator and his lawyer who is beneficiary under the will
does not per se raise an inference of undue influence,
but the inference only arises where the attorney acts as
draftsman and other persuasive circumstances.
The attorney may draw a will in that situation where
undue influence may not be inferred and what he may
LEGAL ETHICS
Based on the book
Legal and Judicial Ethics
By Atty. Ruben E. Agpalo
receive by way of bequest is reasonable and no more
than what would be received under the law.
Rebates and commissions
A lawyer shall not, without the full knowledge and
consent of the client, accept any fee, reward, costs
commission interest, rebate or forwarding allowance or
other compensation whatsoever related to his
professional employment from anyone other than the
client.
This is to secure the attorneys wholehearted fidelity and
to prevent the situation where the receipt of rebates or
commission from another in connection with the clients
business may interfere with the full discharge of his duty.
Whatever the lawyer receives from the opposite party in
the service of his client belongs to the client, in the
absence of his clients consent made after full disclosure
of the facts.
A lawyer shall not borrow from, nor lend money to, client
Rule 16.04.01 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.
o This is intended to prevent the lawyer from taking
advantage of his influence over the client. Even if
he can borrow such as when the clients interests
are protected, he should not abuse the clients
confidence by delaying payment.
Rule 16.04.02 Neither shall a lawyer lend money to a
client except, when in the interest of justice, he has to
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advance necessary expenses in a legal matter he is
handling for the client.
o This is intended to assure the lawyers
independent professional judgment, for if the
lawyer acquires a financial interest in the
outcome of the case the free exercise of his
judgment may be adversely affected.
o This may lead the lawyer to consider his own
recovery rather than that of his client.
B. ACCOUNTING OF CLIENTS FUNDS
A lawyer shall account for clients funds
Canon 16 A lawyer shall hold in trust all moneys and
properties of his client that may come into his
possession.
Canon 16.01 A lawyer shall account for all money or
property collected or received for or from the client.
Such money or property include the following:
o The money collected by a lawyer in pursuance of
a judgment in favor of his client
o Money of a client not used for the purpose for
which it was entrusted to his counsel
o Any property redeemed with the clients money
and registered in the lawyers name
o Any fund received by him from a judgment
creditor as consideration for his desisting from
participating in the public sale of the clients
property.
LEGAL ETHICS
Based on the book
Legal and Judicial Ethics
By Atty. Ruben E. Agpalo
If the lawyer does not use the money entrusted to him by
his client for an intended purpose, he should
immediately return the money to his client.
The circumstance that an attorney has a lien for his
attorneys fees on the money in his hands collected for
his client does not relieve him from obligation to make a
prompt accounting.
If duly authorized, an attorney may cash a money order
belonging to his client and retain a part of it in payment
of his fees.
A lawyer shall not commingle clients funds
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.
He should not commingle a clients money with that of
other clients and with his private funds, nor use the
clients money for his personal purposes without the
clients consent.
A lawyer shall deliver funds to client, subject to his lien
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.
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The failure of an attorney to return the clients money
upon demand gives rise to the presumption that he has
misappropriated it for his own use to the prejudice of and
in violation of the trust reposed in him by the client.
There must already be an agreement between the
lawyer and the client as to the amount of attorneys fees
and as to the application of the clients fund to pay the
attorneys lawful fees and disbursement.
In case of disagreement as to the lawyers fees, the
lawyer should not arbitrarily apply the funds in his
possession to the payment of his fees; instead, he may
file the necessary action to fix and recover the amount of
his fees.
C. RESTRICTION AGAINST BUYING CLIENTS PROPERTY
Purchase of clients property in litigation
The law expressly prohibits a lawyer from purchasing,
even at a public or judicial auction, either in person or
through the mediation of another, any property or
interest involved in any litigation in which he may take
part by virtue of his profession. (Art. 1491, Civil Code of
the Philippines)
The prohibition which rests on considerations of public
policy is intended to curtail any undue influence of the
lawyer upon his client on account of his fiduciary and
confidential relation with him.
The prohibition is absolute and permanent.
Application of rule
LEGAL ETHICS
Based on the book
Legal and Judicial Ethics
By Atty. Ruben E. Agpalo
These four elements must concur:
o Attorney-client relationship
o The property or interest of the client must be in
litigation
o The attorney takes part as counsel in the case,
and
o The attorney by himself or through another
purchases such property or interest during the
pendency of the litigation.
Purchase or lease of the property in litigation is in favor
of a partnership, of which counsel is a partner
Where rule inapplicable
Absence of any of the elements
Purchaser of the property in litigation was a corporation
even though the attorney was an officer thereof
An attorney may properly bid on behalf of his client at
auction sale of the clients property in litigation because
his participation is not for his own benefit
Contract for attorneys fees contingent upon the outcome
of the litigation. It neither gives nor purports to give to the
attorney an absolute right, personal or real, in the
subject matter during the pendency of the litigation.
Effects of prohibited purchase
Breach of professional ethics
The attorney may be disciplined for such misconduct.
The transaction is null and void.
The client is entitled to recover the property or interest
from his attorney, together with its fruits. He should,
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 LEGAL ETHICS
Based on the book
Legal and Judicial Ethics
By Atty. Ruben E. Agpalo

however, return the purchase price and the legal less than their face value, with intent to collect them at
interests thereon to the attorney, as he may not unjustly large profit for himself.
enrich himself at the expense of his counsel. However, he may properly acquire choses in action not
in his professional capacity but as a legitimate
Purchase of choses in action investment.
Choses in action is the right to bring a lawsuit to
recover chattels, money or debt.
It is improper for a lawyer in his professional capacity to
but judgment notes or other choses in action for much