Chapter 8 Lawyers Fiduciary Obligations

A. Effects of fiduciary relation

This relationship generally safeguards the attorney-client relationship.
The well-established rule that the relation of attorney and client is highly
fiduciary and strictly confidential requiring utmost good faith, loyalty, fidelity
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.
All dealings growing out of such relationship to be subject to the closest
judicial scrutiny.
A lawyer is not barred from conducting business transactions with a client but
it must be done with the utmost protection for the clients rights and interest.
The position of the lawyer, who haves the trust of the client reposed in his
person, can be tempted to deceive or take advantage of the credulity and
ignorance of his client.
Abuse of clients confidence.
o A lawyer may not retain the money of one client to force a settlement
of the disputed claim of another client against the former. Nor may he
obtain money from his client through false pretense or
misrepresentation.
Rebates and commission.
o Canon 20.03
This rule is designed to secure the attorneys wholehearted
fidelity to the clients cause and to prevent that situation in
which the receipt by him of a rebate or commission from
another in connection with the clients business may interfere
with the full discharge of his duty to his client.
Whatever a lawyer receives from the opposite party in the
service of his client belongs to the client.
Whenever the court awards damages in favor of his client it is
the clients money except when they expressly agreed that the
attorneys fees would form part of the lawyers actual
compensation.
A lawyer shall not borrow, nor lend money to, client.
o Rule 16.04 (consists of two parts)
First part: That the lawyer is prohibited from borrowing money
from his client. This is discouraged by the court because such
may lead to the abuse of the lawyer of the trust that is given to
him by his client.
He may borrow but only when the rights of the clients are
secured and fully protected.
Second part: That the lawyer is prohibited from lending money
to his client except in the interest of justice the lawyer
advances the payment of the legal expenses in a case he is
handling.
B. Accounting of clients funds
A lawyer shall account for clients funds. (Rule 16.01)

A lawyer is expected to account for all the funds and property that he
is to receive or to handle for his client.
o An attorney should promptly account for all the expenses he may incur.
o When a client gives money to his lawyer for a specific purpose such as
to file an action, appeal an adverse judgment, consummate a
settlement or pay the amount of a parcel of land to be purchased, the
lawyer must be able to account for all these expenses.
o Failure to return the money leads to the presumption that the lawyer
must have misappropriated such.
o If the money given was not used for the purpose which it was intended
for, the money should be returned to the client immediately.
o There must be due authorization before a lawyer may touch the money
that was put in his trust.
o When he fails to do these things then he may be disbarred or
suspended.
A lawyer shall not commingle clients funds.
o Rule 16.02
A lawyer must never commingle the funds that were entrusted
to him by his client with his private funds.
He should promptly report the money of his client that has
come to his possession.
A lawyer shall deliver funds to client, subject to his lien.
o Rule 16.03
Failure of the attorney to return to his client the funds that are
in his care will likely give rise to the presumption that he has
misappropriated his clients funds and used them for his own
use.
Without the clients consent, one may not apply the funds to his
fees.
Even if there was a disagreement with the attorneys fees, the
lawyer must still give the funds in his care to the client without
prejudice to the lawyers right to file a case for the collection of
his fees.
C. Restrictions against buying clients property.
Purchase of clients property in litigation.
o The prohibition which rests upon the considerations of public policy
and interest is intended to curtail any undue influence of the lawyers
upon his client on account of his fiduciary and confidential relation with
him.
o The law makes the incapacity of the lawyer to acquire his clients
property, absolute and permanent.
o This stands on the moral obligation of an attorney to refrain from
placing himself in the position which ordinarily excites conflict between
self-interest and integrity.
Application of the rule.
o Elements of the prohibition.
There must be an attorney-client relationship.
The property or interest of the client must be in litigation.
Attorney takes part in the case.
o

The attorney by himself for through another purchases such

property or interest during the pendency of the litigation.
When rule inapplicable.
o In the absence of any of the aforementioned elements renders the
prohibition inapplicable.
Example:
The property is not involved in litigation.
The property was bought long before it was involved in
litigation.
When the attorney is not the counsel in the case.
When the purchaser was a corporation even if the
attorney was part of it.
o A lawyer may validly represent his client in auction sales because it is
not for his own benefit.
Effects of prohibited purchase.
o The attorney who disregards this prohibition may be disciplined for
such misconduct.

Purchase of choses in action

o Purpose is to prevent a lawyer from the temptation to litigate in his
own account as a business proposition.
o Also improper for a lawyer in his professional capacity to buy judgment
notes or other choses in action for much less than their face value,
with intent to collect them at a large profit for himself.
o An attorney may properly acquire choses in action not in his
professional capacity but as a legitimate investment.