CLIENT’S MONEYS AND PROPERTIES
CANON 16
“A lawyer shall hold in trust all moneys and properties
of his client that may come into his possession.”
Money collected by the lawyer on a judgment favorable
to his client constitute trust funds and should be
immediately paid over to the client.
While Section 37, Rule 138 of the Rules of Court grants
the lawyer a lien upon the funds, documents and papers
of his client, which have lawfully come into his
possession, such that he may retain the same until his
lawful fees and disbursements have been paid, and
apply such funds to the satisfaction thereof, the lawyer
still has the responsibility to promptly account to his
client for such moneys received. Failure to do so
constitutes professional misconduct.
The lawyer’s failure to turn over such funds, moneys, or
properties to the client despite the latter’s demands give
rise to the presumption that the lawyer had converted
the money for his personal use and benefit. This failure
also renders the lawyer vulnerable to judicial contempt
under Section 25, Rule 138 of the Rules of Court (CPR
Annotated, PhilJA).
Prohibition of a Lawyer acquiring client’s property.
Pursuant to Canon 16 of the Code of Professional
Responsibility.
Furthermore, Article 1491 of the Civil Code states that:
“The following persons cannot acquire or purchase,
even at public or judicial auction, either in person or
through the mediation of another:
xxx
(5) lawyers, with respect to the property and rights
which may be the object of any litigation in which they
take part by virtue of their profession” (see NCC).
Ratio: The prohibition is based on the existing relation
of trust or the lawyer’s peculiar control over the
property.
Requisites: (RLCP)
1. There is an attorney-client relationship.
2. The property or interest of the client is in litigation.
3. The attorney takes part as counsel in the case.
4. The attorney purchases or acquires the property or
right, by himself or through another, during the
pendency of litigation. [Laig v. CA, G.R. No. L-26882
(1978)]
INSTANCES WHEN PROHIBITION IN
CIVIL CODE ART. 1491 APPLIES:
(1) Even if the purchase or lease of the property in
litigation is in favor of a partnership, of which counsel is
a partner [Mananquil v. Villegas, A.C. No. 2430 (1990)]
(2) If the purchase is made by the wife of the attorney
[In re: Calderon, G.R. No. L-2409 (1907)]
(3) Mortgage of property in litigation to the lawyer. In
this case, acquisition is merely postponed until
foreclosure but effect is the same. It also includes
assignment of property [Ordonio v. Eduarte, A.M. No.
3216, (1992)].
The purchase by a lawyer of the property in litigation
from his client is void and could produce no legal effect
[Article 1409(7), Civil Code]
INSTANCES WHEN PROHIBITION IN
ART. 1491 DOES NOT APPLY:
(1) When the attorney is not a counsel in the case
involving the same property at the time of acquisition;
(2) When purchaser is a corporation, even if the attorney
was an officer [Tuason v. Tuason, G.R. No. L-3404
(1951)]
(3) When sale takes place after termination of litigation,
except if there was fraud or use/abuse of confidential
information or where lawyer exercised undue influence;
(4) Where property in question is stipulated as part of
attorney’s fees, provided that, the same is contingent
upon the favorable outcome of litigation and, provided
further, that the fee must be reasonable.
FIDUCIARY RELATIONSHIP
Rule 16.01, Canon 1
“A lawyer shall account for all money or property
collected or received for or from the client.”
Ratio: The lawyer merely holds said money or property
in trust.
When a lawyer collects or receives money from his
client for a particular purpose (such as for filing fees,
registration fees, transportation and office expenses), he
should promptly account to the client how the money
was spent. If he does not use the money for its intended
purpose, he must immediately return it to the client
[Belleza v. Macasa, A.C. No. 7815 (2009)]
The fact that a lawyer has a lien for fees on money in his
hands would not relieve him from the duty of promptly
accounting for the funds received [Daroy v. Legaspi,
A.C. No. 936 (1975)].
Fiduciary duty
The principle that an attorney derives no undue
advantage that may operate to the prejudice or cause an
occasion for loss of a client refers to fiduciary duty. The
relationship between the lawyer and the client is one of
mutual trust and confidence of the highest degree.
ii. Commingling of 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.”
A lawyer should not commingle a client’s money with
that of other clients and with his private funds, nor use
the client’s money for his personal purposes without the
client’s consent. [Daroy v. Legaspi, A.C. No. 936
(1975)].
iii. Delivery of Funds
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.”
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 Sec. shall not be a bar to criminal
prosecution [Sec. 25, Rule 138]
Money collected by a lawyer in pursuance of a
judgment in favor of his clients is held in trust and must
be immediately turned over to them [Busiños v.
Ricafort, A.C. No. 4349 (1997)]
The failure of an attorney to return the client’s 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
[Jinon v. Jiz, A.C. No. 9615 (2013)]
However, an attorney has 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 [Sec.
37, Rule 138].
iv. Borrowing or Lending
Rule 16.04
“A lawyer shall not borrow money from his client
unless the client’s 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.”
A LAWYER IS PROHIBITED FROM
BORROWING MONEY FROM HIS CLIENT
Ratio: The canon presumes that the client is
disadvantaged by the lawyer’s ability to use all the legal
maneuverings to renege on her obligation [Frias v.
Lozada, A.C. No. 6656 (2005)]
The profession demands of an attorney an absolute
abdication of every personal advantage conflicting in
any way, directly or indirectly, with the interest of his
client [Barnachea v. Quiocho, A.C. No. 5925 (2003)]
A LAWYER IS PROHIBITED FROM LENDING
MONEY TO HIS CLIENT
Ratio: The canon intends to assure the lawyer’s
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.
Exception: When, in the interest of justice, he has to
advance necessary expenses in a legal matter he is
handling.
FIDELITY TO CLIENT’S CAUSE
Canon 17.
“A lawyer owes fidelity to the cause of his client and
he shall be mindful of the trust and confidence
reposed in him.”
The failure to exercise due diligence and the
abandonment of a client’s cause make such a lawyer
unworthy of the trust which the client has reposed on
him [Cantilller v. Potenciano, A.C. No. 3195 (1989)]
Once he agrees to take up the cause of the client, no fear
or judicial disfavor or public unpopularity should
restrain him from the full discharge of his duty
[Santiago v. Fojas, A.M. No. 4103 (1995)]
By advising complainant that a foreigner could legally
and validly acquire real estate in the Philippines and by
assuring complainant that the property was alienable,
the lawyer deliberately foisted a falsehood on his client.
He did not give due regard to the trust and confidence
reposed in him by complainant.
Instead, he deceived complainant and misled him into
parting with P400,000 for services that were both illegal
and unprofessional [Stemmerik v. Mas, A.C. No. 8010
(2009)].
Stemmerik v. Mas, A.C. No. 8010 (2009)].
FACTS is the first precept of the Code of Professional
Responsibility
Stemmerik is a citizen and resident of Denmark. In one
of his trips in the Philippines, he met Atty. Mas. Since
he was marveled at the beauty of the country, he wanted
to buy a real property and consulted Atty. Mas. The
latter told Stemmerik that he could legally acquire a real
property in the Phils. And even suggested a 86K hectare
land in Subic, Zambales. Atty. Mas, as the atty.-in-fact
of Stemmerik bought the property from a certain
Bonifacio de Mesa. The contract to sell provided that De
Mesa sold the property to Ailyn Gonzales for3.8M.
Then, in another notarized deed made by Atty. Mas, it
was stated that Gonzales received the funds from
Stemmerik. In preparing all these documents, Atty. Mas
received 400K fee from Stemmerik. The latter also gave
Atty. Mas, the3.8M purchase price to which the latter
issued a receipt. Suddenly, Atty. Mas become scarce and
no longer answer the calls of Stemmerik. When
Stemmerik visited the Phils, he engaged the service of
the Fernandez Law Office and found out the subject
property is inalienable, being located in the former U.S.
military reservation. Also, he was apprised that aliens
cannot own real properties in the Phils. Meanwhile,
Atty. Mas had already abandoned his office and his
whereabouts is unknown. Stemmerik filed an action for
disbarment against Atty. Mas before the Commission on
Bar Discipline but Atty. Mas never appeared.

ISSUE: WON Atty. Mas should be disbarred? HELD:

YES!!!
Lawyers, as members of a noble profession, have the
duty to promote respect for the law and uphold the
integrity of the bar. As men and women entrusted with
the law, they must ensure that the law functions to
protect liberty and not as an instrument of oppression or
deception. Respondent has been weighed by the
exacting standards of the legal profession and has been
found wanting.
Respondent committed a serious breach of his oath as a
lawyer. He is also guilty of culpable violation of the
Code of Professional Responsibility, the code of ethics
of the legal profession.
By making it appear that de Mesa undertook to sell the
property to complainant and that de Mesa thereafter sold
the property to Gonzales who made the purchase for and
in behalf of complainant, he falsified public documents
and knowingly violated the Anti-Dummy Law.
All lawyers take an oath to support the Constitution, to
obey the laws and to do no falsehood.
That oath is neither mere formal ceremony nor hollow
words. It is a sacred trust that should be upheld and kept
inviolable at all times
Lawyers are servants of the law and the law is their
master. They should not simply obey the laws, they
should also inspire respect for and obedience thereto by
serving as exemplars worthy of emulation. Indeed, that