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Chapter VIII: Lawyer’s Fiduciary Obligations instance the executor is not bound to retain him as Rule 16.

im as Rule 16.01: A lawyer shall account for all money or


counsel. property collected or received for or form the client.
A. Effects of Fiduciary Relation
8.04 Rebates and commissions  A lawyer entrusted by his client of amounts for
8.01 Generally
 Rule 20.03: A lawyer shall not, without the full specific purpose but did not spend the money for
 The well-established rule that the relation of attorney such purpose and instead misappropriated the same
knowledge and consent of the client, accept any fee,
and client is highly fiduciary and strictly confidential for his personal use is guilty of violation of Canon 16,
reward, costs, commission, interest, rebate or
requiring utmost good faith, loyalty, fidelity and for which he may be suspended or disbarred, and
forwarding allowance or other compensation
disinterestedness on the part of the attorney is ordered to restitute the same within a specified
whatsoever related to his professional employment
designed to remove all such temptation and to period (Celaje v Soriano).
from anyone other than the client.
prevent everything of that kind from being done for
 Whatever a lawyer receives from the opposite party  Money received by a lawyer form a person who is
the protection of the client.
in the service of his client belongs to the client, in the NOT a client (not strictly considered as a lawyer
8.02 Dealings with client closely scrutinized handling the client’s fund) is also held by him in trust
absence of his client’s consent made after full
 A fiduciary relationship exists as a matter of law disclosure of the facts. and he is under obligation to account for it.
between attorney and client.  A lawyer may not claim the attorney’s fees in the  The circumstance that an attorney has a lien for his
 As a rule, a lawyer is not barred from dealing with his concept of damages awarded by the court in favor of attorney’s fees on the money in his hands collected
client but the business transaction must be his client, the latter and the former being entitled for his client does not relieve from the obligation to
characterized with utmost honesty and good faith. thereto, EXCEPT when he and his client have agreed make a prompt accounting.

 Even when the transaction between an attorney and


that whatever amount the court may award as  XPN: When duly authorized by client, e.g. an attorney
his client is not prohibited by law, the burden of proof attorney’s fees would form part of his compensation. may cash a money order belonging to his client and
rests upon the attorney to show that the transaction 8.05 A lawyer shall not borrow from, nor lent money to, retain part of it in payment of his fees.
is fair, that it was equitable and just, that it did not client  The question is not necessarily whether the rights of
proceed from undue influence and the property so the client have been prejudiced, but whether the
Rule 16.04: A lawyer shall not borrow money from his
acquired does not belong constructively to the client. lawyer has adhered to the ethical standards of the
client unless the client’s interests are fully protected by
8.03 Abuse of client’s confidence bar.
the nature of the case or by independent advice. Neither
shall a lawyer lend money to a client except, when in the 8.07 A lawyer shall not commingle client’s funds
 A “lawyer should refrain from any action whereby for
interest of justice, he has to advance necessary expenses Rule 16.02: A lawyer shall keep the funds of each client
his personal benefit or gain he abuses or takes
in a legal matter he is handling for the client. separate and apart from his own and those of others kept
advantage of the confidence reposed in him by his
client” (Canon 11, Canons of Professional Ethics). REASONS: by him.
 A lawyer may not retain the money of one client to Prohibition to borrow money from client: to prevent the 8.08 A lawyer shall deliver the funds to client, subject to
force a settlement of the disputed claim of another lawyer from taking advantage of his influence over the his lien
client against the former. Nor may he obtain money client.
from his client through false pretense or Rule 16.03: A lawyer shall deliver the funds and property
misrepresentation. Prohibition to lend money to client: To prevent the lawyer of his client when due or upon demand. However, he shall
from acquiring an interest in the subject matter of the case have a lien over the funds and may apply so much thereof
 The attorney should not ordinarily draw a will under a as may be necessary to satisfy his lawful fees and
or an additional stake in its outcome, either of which may
circumstance which gives rise to an inference of disbursements, giving notice promptly thereafter to his
lead the lawyer to consider his own recovery rather than
undue influence; he may draw a will in that situation client. He shall also have a lien to the same extent on all
that of his client or to accept a settlement which might
where undue influence may not be inferred and what judgments and executions he has secured for his client as
take care of his interest in the verdict to the sacrifice of
he may receive by way of bequest is reasonable and provided for in the Rules of Court.
that of the client.
no more than what would be received under the law.
 An attorney may draw a will containing a provision, B. Accounting of Client’s Funds  Rule 16.03 assumes that the client agrees with the
desired by his client, appointing him as executor or lawyer as to the amount of attorney’s fees and as to
8.06 A lawyer shall account for the client’s funds
directing the executor name him as counsel for the the application of the client’s fund to pay his lawful
estate because in the former instance his Canon 16: A lawyer shall hold in trust all moneys and fees and disbursement, in which case he may deduct
appointment as executor is not final but subject to properties of his client that may come into his possession. what is due him and remit the balance to his client,
the approval of the probate court, and in the latter with full disclosure on every detail.
 Without the client’s consent, the lawyer has no  It is immaterial that the deed of sale is executed at  The attorney at the time of the purchase was not
authority to apply the client’s money for his fees. He the instance of the client or at the behest of the counsel in the case;
should, instead, return the money to his client, attorney.  The purchaser of the property in litigation was a
without prejudice to his filing a case to recover his  Any scheme which has the effect of circumventing corporation even though the attorney was an
unsatisfied fees. the law comes within the prohibition such as: officer thereof;
 Where there is disagreement as to the lawyer’s fees,  Purchase or lease of the property in litigation is  The sale took place after the termination of the
or when the client disputes the amount claimed by in favor of a partnership, of which counsel is a litigation.
the lawyer for being unconscionable, the lawyer partner; 8.12 Effects of prohibited purchase
should not arbitrarily apply the funds in his
 The purchase by the wife of an attorney for the
possession to the payment of his fees. Instead, he  The transaction being categorically prohibited by law
estate of the decedent, of an interest belonging
may file the necessary action to fix and recover the is null and void ab initio.
to the estate;
amount of his fees.  Its nullity is definite and permanent and cannot be
 The acquisition by the guardian’s lawyer of the
C. Restriction Against Buying the Client’s Property cured by ratification (or compromise).
ward’s property;
8.13 Purchase of choses in action
8.09 Purchase of client’s property in litigation  A lawyer who makes financial advances to his
client for the latter’s living or family expenses to Chose in Action
 A lawyer is prohibited from purchasing, even at a be reimbursed out of the prospective verdict
public or judicial auction, either in person or through The right to bring a lawsuit to recover chattels, money, or a
acquires thereby an interest in the subject
the mediation of another, any property or interest matter of the litigation in violation of the debt.
involved in any litigation in which he may take part by
restriction. A chose in action is a comprehensive term used to describe
virtue of his profession (Art 1491, Civil Code.)
 A lawyer who executed with his client a transfer a property right or the right to possession of something
 The law makes the incapacity of the attorney to of right over a parcel of land involved in a that can only be obtained or enforced through legal action.
acquire his client’s property in litigation absolute and pending litigation as this attorney’s fees violates
permanent. Examples of a chose in action are the right of an heir to
the rule prohibiting the purchase or property in
interest in the estate of his or her decedent; the right to
 This prohibition is intended to curtail any undue litigation by a lawyer from his client.
sue for damages for an injury; and the right of an
influence of the lawyer upon his client on 8.11 Where rule inapplicable employee to unpaid wages.
account of his fiduciary and confidential relation
with him.  The absence of any of the elements constitutive of West's Encyclopedia of American Law, edition 2.
 The prohibition is entirely independent of any the rule above renders the prohibition inapplicable.
 The question as to whether the purchase of a chose
fraud that might have intervened. No fraud in  If at the time of the purchase the attorney-client
in action by an attorney is improper calls for
fact need be shown and no excuse will be heard. relationship has terminated, the prohibition does not
application the spirit of the rule against the
It is to avoid necessity of any such inquiry that apply in the absence of fraud or the use or abuse of
acquisition of a client’s property in litigation and the
the prohibition is made absolute. confidential information acquired during the previous injunction against stirring up the strife.
8.10 Application of rule employment.
 The purpose is to prevent a lawyer from the
 The severance of the relation must be in good faith temptation to litigate in his own account as a
The rule forbidding an attorney from purchasing his
and not for the purpose of evading the restriction, business proposition.
client’s property or interest in litigation involves four
otherwise the prohibition applies.
elements:  A lawyer may not accumulate distinct causes of action
 The prohibition does not apply where: in himself by assignment from hundreds of small
a. There must be an attorney-client relationship;
 Sale by the client to his attorney of a parcel of claimants and sue in his name for the benefit of the
b. The property or interest of the client must be in land, acquired by the client to satisfy the clients directly interested.
litigation; judgment in his favor, as long as the property  The attorney places himself in the category of a
c. The attorney takes part as counsel in the case; was not the subject of the litigation; voluntary litigant for a profit, which renders his
and  The property purchased by a lawyer was not conduct improper.
d. The attorney by himself or through another involved in litigation;
 It is improper for a lawyer to enter into an
purchases such property or interest during the  The sale took place before it became involved in arrangement with one who purchases future interests
pendency of the litigation. the suit; in estates by the terms of which in consideration of
his work in securing the interests, he becomes part
owner thereof and shares in the profit obtained
therefrom.
 An attorney may, however, properly acquire choses in
action not in his professional capacity but as a
legitimate investment.
 He may also make investments in a collection agency
which solicits business under its name provided that
he does no participate in the agency’s collection
activities or in the handling of its claims in court.