Chapter 8 Lawyer’s Fiduciary Obligations beneficiary to testify bcuz of a transaction w/ the deceased, the possible jeopardy of the will
y bcuz of a transaction w/ the deceased, the possible jeopardy of the will if its admission to
EFFECTS OF FIDUCIARY RELATION
Generally
>position of any atty enables him to put in his power, and opens him to the tempt’n to
avail himself, not only of the necessity of his client but of his good nature, liberality, and
credulity to obtain undue advantages, bargains and gratuities.
Well established rule: relation of atty and client is highly fiduciary and strictly
confidential requiring utmost good faith, loyalty, fidelity and disinterestedness on the part
of the atty is designed to remove all such temptation and to prevent everything of that
kind from being done for the protection of the client.
Principle of expediency and just demand: atty derive no advantage whatsoever from such
act, when done by him, as may operate to the prejudice of or occasion a loss to client, and
that all the advantages which otherwise would have arisen therefrom to the atty inure to
the benefit of the client
Dealings w/ client closely scrutinized
Fiduciary relationship exists as a matter of law b/n atty and client. Requires all dealings
growing out of such relationship to be subject to the closest jud’l scrutiny
Court’s duty to look into the dealings b/n atty and their clients and to guard and protect
the latter from any undue consqncs resulting from a sit’n in which they may stand
unequal.
Law requires: in all contractual, property or other relations, when 1 of the parties is at a
disadvantage on account of his moral dependence, ignorance, indigence, mental weakness,
tender age or other handicaps, the courts must be vigilant for his protection.
RULE: lawyer is not barred from dealing w/ his client but the business trans’n must be
characterized w/ UTMOST HONESTY and GOOD FAITH.
>MEASURE of GOOD FAITH which an atty is required to exercise in his dealings w/ his
client is a much higher standard than is required in business dealings where the parties
trade at “arms length”.
Business Trans’n b/n atty and client are disfavored and discouraged by the policy of the
law. Courts watch transactions to assure that no advantage is taken by a lawyer over his
client.
Rule FOUNDED on PUBLIC POLICY: virtue of atty office, an easy position to take
advantage of the credulity and ignorance of his client.
“NO PRESUMPTION OF INNOCENCE OR IMPROBABILITY OF WRONGDOING IS
CONSIDERED IN HIS FAVOR”
Fidelity to the cause of his client requires him to be ever mindful of the responsibility
expected of him as a lawyer.
Lawyer not allowed to profit from an ingenious scheme to circumvent the statutory
prohibition against the acquisition of the client’s property in litigation. Neither may he be
permitted, in his relation w/ his client or 3rd party, to take advantage of his being a lawyer
or to plead ignorance of or lack of familiarity w/ the intricacies of the law. And even when
the transaction b/n an atty and client is not prohibited by law.
BURDEN OF PROOF rests upon the atty to show that the transaction is fair, that is was
equitable and just, that it didn’t proceed from under influence and that the property so
acquired doesn’t belong constructively to the client.
Abuse of client’s confidence
“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”
Layer may not retain the money of clients to force a settlement of the disputed claim of
another client against the former.
Nor obtain money from his client thru false pretense/misrepresentation.
Atty, confront w/ the situation of drawing a will of a friend/relative who wishes to make a bequest to him or to
member of his family, should take into consideration the conflict of interests, the incompetence of a lawyer
probate is contestedthe possible harm to the other beneficiaries and the undermining public trust and confidence
in the integrity of an atty.
The mere existence of a confidential relation b/n a TESTATOR and his LAWYER who is
a beneficiary under the will doesn’t per se raise an inference of undue influence, but the
inference arises where the atty acts as draftsmen of the will and there are other
persuasive circumstances, such as preferential treatment of the atty in relation to others,
the inclusion of a bequest of more than a token or modest amount from a personal friend
or a suggestion by the atty for a bequest to him or a member of his family.
Atty shouldn’t ordinarily draw a will under a ccircumstance which gives rise to an
INFERENCE OF UNDUE INFLUENCE; he may draw a will in that situation where
undue influence may not be inferred and what he may receive by way of bequest is
reasonable and no more than what would be received under the law.
Atty may draw a will containing a provision, desired by his client, appointing him as
executor or directing the executor to name him ass counsel for the estate bcuz in the
former instance his appointment as executor is not final but subject to the approval of the
PROBATE COURT, and in the latter instance the executor is not bound to retain him as
counsel for the estate.
REBATES and COMMISSIONS
A Lawyer shall not, w/o 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 any1 other than the client.
Secure the atty’s wholehearted fidelity to the client’s cause and to prevent that situation
in which the receipt by him of a rebate or commission from another in connection w/ the
client’s business may interfere w/ the full discharge of his duty to his client.
Principle, whatever a lawyer receives from the opposite party in the service of his client
belongs to the client, in the absence of his client’s consent made after full disclosure of the
facts.
MONEY received from the judgment CR by the lawyer of the judgment DR as consideration for the lawyer’s
desisting from participating in execution sale of the dr’s property is owned by and must be turned over to the client.
Lawyer may not claim the atty’s fees in the concept of damages awarded by the court in
favor of his client, latter and not the former being entitled thereto, except when he and
his client agreed that whatever amount the court may award as atty’s fees would form
part of his compensation.
A lawyer shall not borrow from, nor lend money to client
Rule 16.04: 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.
2nd part which prohibits a lawyer from lending money to the client, except, in the
interested of justice, he has to advance necessary expenses in a legal matter he is
handling, is intended to assure the lawyer’s independent professional judgment.
>If the lawyer acquires a financial interest in the outcome of the case the free exercise of
his judgment may be adversely affected.
>If the lawyer lends money to the client in connection w/ the client’s case, the lawyer in
effect acquires an interest in the subject matter of the case or an add’l stake in its outcome,
either of which may lead the lawyer to consider his own recocery rather than that of his
client or to accept a settlement which might take care of his interest in the verdict to the
sacrifice of that of the client in violation of his duty of undivided fidelity to the client’s
cause.
If such be what he takes, he will violate his oath to conduct himself as a lawyer w/ all good
fidelity to his clients and make lawyering a money-making venture and not a profession.
ACCOUNTING FOR CLIENTS FUNDS
A lawyer shall account for client’s funds
Canon 16: Lawyer shall hold in trust all money and properties of his client of his client
that may come into his possession
Rule 16.01:lawyer shall account for all money or property collected or received for or from
the client.
Lawyer may receive money or property for or from his client in the course of his profs’l
relationship w/ his client. Lawyer holds such money/property in trust and he is under obli
to make an accounting thereof.
Such money or property include the ff:
1 money collected by a lawyer in pursuance of a judgment in favor of his client is held in
trust. So money of a client not used for the purpose for which it was entrusted to his
counsel.
Thus, client’s money given to his lawyer intended as filing fees and other legal fees for the counterclaims in the
answer he filed for his client, which was not paid for such purpose bcuz the counterclaims were compulsory and
required no payment of fees, is money of the client which the lawyer should account.
Lawyer holds for the benefit of his client any property redeemed w/ the client’s money and
registered in the lawyer’s name or any fund received by him for a judgment CR as
consideration for his desisting from participating in the public sale of the client’s property.
Highly fiduciary and confid’l relation of atty and client requires that the atty should
promptly account for all funds and property received or held by him for the client’s benefit.
Where a client gives money to his lawyer for a specific purpose, such as to file an action, appeal an adverse judgment
or consummate a settlement, pay the purchase price of a parcel of land, the lawyer should account for the money
If he fails to accomplish the purpose for which the money is intended, he should
immediately return the money of his client. His failure to make an accounting or to return
the money if the purpose for which the money is intended has failed, constitutes blatant
disregard of R16.01
CELAJEvSORIANO held a L entrusted by his client of amounts for specific purpose but did not spend the money
for such purpose and instead misappropriated the same for his personal use is guilty of violation of canon 16, for
which he may be suspended or disbarred, and ordered to restitute the same w/n a specified period. The court held:
Canon 16: L shall hold in trust all moneys and properties of his client that may come into his possession. He shall
account for all money or property collected or received from his client and shall deliver the funds and property of
his client when due or upon demand.
Comm Funa, it was established that resp couldn’t account 5.8k which was part of the sum given by complainant to
him for purposes of filing an injunctive bond. Resp admitted having received from complainant 17.8k for preliminary
injunction and admitted to having a balance of 9k in his prom note to the MNL insurance Co. reduced to 5.8k by
reason of add’l payment of 4k leaving an amount of 5.8k unaccounted for. Affidavit of the insurance that 5.8k wasn’t
paid.
Resp’s failure to return the money to complainant upon demand gave rise to the presumption that he
misappropriated it for his own use to the prejudice of, and in violation of the trust reposed in him by his client.
Gross violation of general morality and of proef’l ethics and impairs public confidence in the legal profession which
deserves punishment.
Court: when L receive money from C for partc purpose> L bound to render an accounting to the client showing that
money was spend for purposes. And if he doesn’t use the money for the purpose, L must immediately return the
money to his client. Exacting in its demand for integrity and good moral character of members of the Bar who are
expected at all times to uphold the integrity and dignity of the legal profession and refrain from any act or omission
which might lessen the trust and confidence reposed by the public in the fidelity, honesty, and integrity of the legal
profession. Membership in the legal profession is a privilege.
SMALLvBANARES resp was suspended for 2 years for violating Canon 16, particularly for failing to file a case 80k
given by client, failing to return amount upon demand. Suspension of 2 years by IBP.
Money received by a lawyer from a person who is not his client is held by him in trust and
he is under obligation to account for it.
L entrusted by a person not his client, w/ money for payment of SSS contributions and failed to remit until a
complaint for disbarment has been filed against him may not be considered strictly as a L handling the client’s
fund, but the ruel requiring a L to promptly account for his client’s money is applicable to him, and his failure to
immediately remit the amount to the SSS gives rise to the presumption that he misappropriated for own use. It is
a grows violation of general morality as well as prof’l ethics, it impairs public confidence in the legal profession and
deserves punishment.
Circs that a L has a lien for his atty’s fees on the money in his hands collected for his client
doesn’t relieve him form the obli’n to make a prompt accounting.
L needs the client’s money to protect him against claims of bondsmen on the bond he
secured for his client or that his client owes him atty’s fees doesn’t entitle him to
unilaterally appropriate his client’s money for himself.
If duly authorized, an atty may cash a money order belonging to his client and retain part
of it in payment of his fees. He may not, in the absence of authority from his client,
disburse the money collected for his client in favor of persons who may be entitled thereto,
he owing fidelity to the former and not the latter. His act of collecting unreas’ble fees may
amount to a retention of his client’s funds and constitute prof’l indiscretion or misconduct.
ANGELESvUYJR. Relationship b/n a L and C is highly fiduciary, requires gigh degree of fidelity and good faith.
Designed to remove all such temptation and to prevent everything of that kind from being done for the proection of
the client.
RULE16.01”a L shall account for all money or property collected or received for or from
the client.
CPE: the L should refrain from any action whereby for his personal benefit/gain he abuses
or takes advantage of the confidence reposed in him by his client.
Money of the C collected for the C or other trust property coming into the possession of
the L should be reported and accounted for promptly and shouldn’t under nay circs be
comingled w/ his own or be used by him.
Records don’t clearly show w/r UY in fact appropriated the said amount; mrs del rosario acknowledged that hse had
received it. Resp failed to promptly report that amount to her. Clearly a violation of his prof’l responsibility.
AYAvBIGORNIA money collected by a L in favor of his clients must be immediately turned over to them.
DAROYvLEGASPI L are bound to promptly account for money or property received by them on behalf of their
clients and failure to do so constitutes prof’l misconduct.
Question is w/r the L had adhered to the ethic’l standards of the bar. Resp has not done so. OBC: keeping the money
in his possession w/o the client’s knowledge only provided Uy the tempting opportunity to appropriate for himself
the money belonging to his client. This sit’n should at all times, be avoided by mem of the bar. J/L must not only be
clean; they must appear clean. This way, the pp’ls faith in the justice system would remain undisturbed. For
misappropriating and failing to promptly report and delvivery money they received on behalf of their clients, some
Ls have been disbarred and suspended 6 mos. In the case, records merely show that resp didn’t promptly report
that he received money on behalf of his client. No clear evidence of misappro’n. under the circs, we rule that he
should be suspended for 1 mo.
A L shall not commingle clients funds
>L shall keep the funds of each C separate and apart from his own and those of others
kept by him.
>Shouldn’t commingle a C’s money w/ that of other clients and /w his private funds, nor
use the C’s money for his personal purposes w/o the C’s consent.
>Should report promptly the money of thie C that has come to his possession.
>Should remain a reputation for honesty and fidelity to private trust.
A L shall deliver funds to client, subject to his lien.
R16.03 A L 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. 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 ROC.
Failure of L to return C’s money upon demand gives rise to the presumption that he has
misapprop’d of his own use to the prejudice of and in violation of the trust reposed in him
by the client. Gross viol’n of general morality as well as of prof’l ethics, it impairs the
public confidence in the legal profession and deserves punishment.
R16.03 allows L to “apply so much thereof as may be necessary to satisfy his lawful fees
and disbursements, giving notice promptly thereafter to his client.
Assumes that C agrees w/ the L as to the amount of atty’s fees and as to the application
of the C’s fund to pay his lawful fees and disbursement, in which case he may deduct what
is due him and remit the balance to his client, w/ full disclosure on very detail.
w/o C’s consent, L has not authority to apply the C’s money for his fees, but he should in
instead return the money to his C, w/o prejudice to his filing a case to recover his
unsatisfied fees.
When disagreement as L’s fees, or when C disputes the amount claimed by the L for being
unconscionable, L should not arbitrarily apply the funds in his possession to the payment
of his fess for it would be violative of the trust relationship b/n the atty and client and
would open the door to possible abuse by those who are less than mindful of the fiduciary
duty, he may file necessary action to fix and recover the amount of his fees.
RESTRICITON AGAISNT BUYING CLIENT’S PROPERTY
Purchase of client’s prop in litigation
1 rule prohibiting a L from purchasing, event at a public or jud’l auction, either in person
or thru the mediation of another, any prop or interest involved in any litigation in which
he may take part by virtue of his profession.
Law expressly prohibits a L form purchasing, evet at a public or jud’l auction, either in
person or thru the mediation of another, any property or interest involved in any litigation
in which he may take part by virtue of his profession.
PUBLIC POLICY and INTEREST is intended to curtail any undue influence of the L upon
his C on account of his fiduciary and confidential relation with him.
>L makes the incapacity of the atty to acquire his C’s in litigation abs and permanent.
>Fear that greed may get the better of the sentiments of loyalty and disinterestedness which should animate an
atty in his relation w/ his client underlies the incapacity.
>L doesn’t trust human nature to resist the temptation likely to arise out of the antagonism b/n the interest of the
client as seller and that of his atty as buyer.
>Prohibition is entirely independent of any fraud that might have intervened.
>No fraud in fact need be shown and no excuse will be heard.
>To avoid the necessity of any such inquiry that the prohibition is made absolute.
>It stands on the moral obligation of an atty to refrain from placing himself in a position which ordinarily excites
conflict b/n conflict b/n self-interest and integrity and duty to his client, by making it impossible to profit by yielding
to such temptation.
Application of rule
Rule of forbidding an atty from purchasing his C’s property or interest in litigation
involves 4 elements:
1 there must be atty-client relationships;
2 the property or interest of the client must be in litigation;
3 the atty takes part as counsel in the case; and
4atty by himself or thru another purchases such property or interest during the pendency
of the litigation.
Presence of all the foregoing elements makes the acquisition by a L of his C’s property in
litigation violative of the law and renders his conduct ethically improper.
Immaterial that deed of sale is executed at the instance of the C or at the behest of the atty.
Atty occupies a vantage position to press upon or dictate his terms to a harassed C in breach of the rule so amply
protective of conf’l relation which must necessarily exist b/n atty and C, and of the rights of both.
Any scheme which has the effect of circumventing the law comes w/n the prohibition.
>Prohibition applies even if the purchase or lease of the property in litigation is in favor of a partnership, of which
counsel is a partner for the rule otherwise is to circumvent the law.
>Purchase by the wife of an atty for the estate of a decedent, of an interest belonging to the estate or the acquisition
by the guardian’s L of the ward’s property violates the prohibition.
>Value of the property in litigation deeded by a client in favor of his atty in payment of the latter’s fees is greatly
more than the worth of the atty’s services, the transfer greatly more than the worth of the atty’s services, the
transfer contravenes the law.
>L who makes financial advances to his client for the latter’s living or family expenses to be reimbursed out of the
prospective verdict acquires thereby an interest in the subject matter of the litigation in violation of the restriction.
>L who executed w/ is client a transfer of right over a parcel of land involved in a pending litigation as his atty’s
fees violates the rule prohibiting the purchase of property in litigation by a L form his C. MALPRACTICE
Where rule inapplicable
Absence of elements constitutive of the rule forbidding a L from purchasing his C’s
property litigation renders the prohibition inapplicable.
>prohibition doesn’t apply where the prop purchased by a L was not involved in litigation
>where the sale took place before it became involved in the suit,
>where atty at the time of the purchase was not counsel in the case
>where purchaser of the prop in litigation was a corporation even tho the atty was an officer thereof
>where the sale took place after the exam’n of the litigation
If at the time of the purchase atty-C relationship has terminated, the prohibition doesn’t
apply in the absence of fraud or the use or abuse of conf’l info acquired during the previous
employment.
Severance of the relation must be in good faith and not for the purpose of evading the
restriction, otherwise prohibition applliees.
Measure of L’s good faith in dealings is a much higher standard than that of the market
place where the parties trade at arm’s length.
>Atty may properly bid on behalf of his client at the auction slae of the C’s property in litigation, the restriction not
being applicable as his participation is not for his own benefit.
>L may accept an assignment from his client of a money judgment rendered in the latter’s favor in a case in which
he was not counsel, in payment of prof’ services performed in another case
>After completion of a successful litigation, he may take on account of his fees an interest in the assets realized by
the litigation or attach them to secure payment thereof and bid at the auction sale to the extent of his claim.
>Prohibition doesn’t apply to sale by the C to his atty of a land, acquired by the C to satisfy the judgment in his
favor, provided prop was not subject of the litigation.
>Prohibition doesn’t apply to contract for atty’s fees contingent upon the outcome of the litigation. Contingent fee
contract neither gives nor purports to give atty an absolute right, personal or real, in the subject matter during the
pendency of the litigation.Measure of compensation therein provided is a mere basis for the computation of the fees
and payment thereof from out of the proceeds realized in the litigation is effect only after its successful termination
Distinction b/n purchasing an intrest in the litigation as a device to enable the L to litigate
on his won account or to abuse his C’s confidence, which is what the prohibition seeks to
prevent. While, agreeing in his prof’l capacity to accept compensation contingent upon the
result of the litigation.
Contingent fee contract is unreas’ble ceases to be a measure of due compensation for
services rendered and makes the L a partner or proprietor in the lawsuit. Kind of
contingent fee agreement will be disregarded by the court
Effects of prohibited purchase
Purchase by atty of his C’s prop or interest in litigation is a breach of prof’l ethics. Atty,
in an approp case, may be disciplined for such misconduct.
Transaction ebing categorically prohibited by law is null and void ab initio.
Nullity is definite and permanent and cannot be cured by ratification.
Public interest an public policy remain paramount and don’t permit compromise or
ratification of the prohibited contract even after the atty-C relationship has ceased.
RUBISAvBATILLER overruled WALSONvESTATEofMARTINEZ, sale “is not void but voidable at the election of
the vendor” L holds the property or interest so purchased in trust for his client. C entitled to recover it from his
atty, w/ fruits. He should return the purchase price and the legal interests to the atty, he may not unjustly enrich
himself at the exepense of his counsel.
Purchase of choses in action
W/r the purchase of a chose in action by an atty is improper calls for app’n the spirit of the
rule against the acquisition of a C’s prop in litigation and the injunction agaissnt stirring
up of strife.
Purpose: prevent a L from the temptation to litigate in his own account as business
proposition.
>L may not accumulate distinct causes of action in himself by assignment from hundreds of small claimants and
use in his name for the benefit of the Cs directly interested.
>While there is yet no litigation at the time the assignment took place, litigation is its primary reason.
>By resorting to such a device, the atty has placed himself in the category of a voluntary litigant for a profit, which
renders his conduct improper.
>Improper for a L in his prof’l capacity to buy judgment notes or other choses in action for much less than their
Face value, w/ intent to collect them at large profit for himself.
>Improper for L to enter into an arrangement w/ 1 who purchases future interest 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.