THE LAWYER AND THE MONEYS OR PROPERTIES OF HIS CLIENTS

Problem Areas in Legal Ethics No.11

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
interest are fully protected by the nature of the case or by independent
Neither shall a lawyer lend money to a client except, when in the interest of
he has to advance necessary expenses in a legal matter he is handling
client.

client's
advice.
justice,
for the

Section 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. No court shall be bound by the opinion of attorneys as
expert witnesses as to the proper compensation, but may disregard such testimony
and base its conclusion on its own professional knowledge. A written contract for
services shall control the amount to be paid therefor unless found by the court to be
unconscionable or unreasonable.
Section 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. vs. Atty. Frial)

LAWYER WITHDRAW MONEY DEPOSITED TO THE BRANCH CLERK OF COURT

WITHOUT INFORMING HIS CLIENT

Complainant, through his new counsel Atty. 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.
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 vs. Langit)

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 arm length. Business transactions
between and attorney and his client are disfavored and discouraged by the

policy of the law. Hence, the 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 form 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 if wrongdoing is considered in
an attorneys favor. (Chua and Hsia v. Atty. Mesina Jr.)
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, charging P 56,000.00 is improper. While giving legal
advice and opinion and 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 P 8,000.00 as filing
fee from complainant when he very well knew that the docket fee for the civil
case 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 vs. Atty. Mauricio, Jr.)

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 vs. Atty.
Ricafort)

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 vs. Atty. Ricafort)

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 vs. Atty.
Ricafort)
Depositing it in his personal account with the consent of client is ethical?

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
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.
The rule is that a lawyer shall not lend money to his client. 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 vs. Atty. Tolentino)

PURPOSE OF PROHIBITNG LENDING OF MONEY TO CLIENT

The rule is intended to safeguard the lawyers independence of mind so that

the free exercise of his judgement 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 vs. Atty. Tolentino)

III-EFFECTS OF LENDING MONEY TO CLIENTS

If the lawyer lends money to the client in connection with the clients case,
the lawyer acquires an interest in the subject matter of the case or an
additional stake in its outcome.
Either of these circumstances may:
o Lead the lawyer to consider his own recovery rather than that of his
client, or
o 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 vs. Atty. Tolentino)

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 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 vs. Atty. Reyes)

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 attorneys 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 attorneys 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 hi, 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 vs. Atty. De Vera and
Atty. Bandalan)
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 Complainant on behalf of his client and (b) his
appropriation for himself of the money given for the filing fee. (Burbe vs. Atty.
Magulta)

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 clients. There
should never be an instance where the victor in litigation loses everything he
won to the fees of his own lawyer. (Rivera vs. Atty. Angeles)

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 vs. Atty. Uy, Jr.)

AVOID KEEPING THE MONEY OF CLIENT

Keeping the money in his possession without his clients 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 peoples faith in the justice system
would remain undisturbed.

MISSAPPROPRIATION 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, 9999. They do show, however, that respondent
failed 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 vs. Atty. Uy, Jr.)