LEGAL ETHICS
Based on the book
CHAPTER 8 LAWYERS FIDUCIARY
OBLIGATIONS
CANON 16. A LAWYER SHALL HOLD IN
TRUST ALL MONEYS AND PROPERTIES
OF HIS CLIENTS THAT MAY COME INTO
HIS POSSESSION.
Rule 16.01A lawyer shall account for all
money or property collected or received for or
from the client.
Rule 16.02A lawyer shall keep the funds of
each client separate and apart from his own
and those of others kept by him.
Rule 16.03A 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 16.04A lawyer shall not borrow money
from his client unless the clients interests are
fully protected by the nature of the case or by
Legal and Judicial Ethics
By Atty. Ruben E. Agpalo
A. EFFECTS OF FIDUCIARY RELATION
Generally
The position of an attorney enables him to put in his
power, and opens him to the temptation to avail himself, not only
of the necessity if his client but of his good nature, liberality and
credulity to obtain undue advantages, bargains and gratuities.
The well-established rule that the relation of attorney and
client is highly fiduciary 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.
Dealings with client closely scrutinized
A fiduciary relationship exists as a matter of law between
attorney and client;
It is the courts duty to look into dealings between
attorneys and their clients and to guard and protect the
latter from any undue consequences resulting from a
situation in which they may stand unequal.
While a lawyer is not barred from dealing with his client in
business transaction, the same is disfavored and his
business dealings 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 clients is a much higher
standard than is required in business dealings where the
parties trade at arms length.
When there is a business transaction between an attorney
and his client, the burden of proof rests upon the attorney
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to show that the transaction is fair, equitable and just, and
that it did not proceed from undue influence, and that the
property so acquired does not belong constructively to the
client.
Abuse of clients confidence
A 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.
A lawyer may not retain the money of one client to force
a settlement of the disputed claim of another client against
the former.
An attorney, confronted with the situation of drawing a will
for a friend or a relative who wishes to make a bequest to
him or to a member of his family, should take into
consideration:
o The conflict of interests;
o The incompetence of a lawyer-beneficiary to
testify because of a transaction with the deceased;
o The possible jeopardy of the will if its admission to
probate is contested;
o The possible harm to the other beneficiaries, and
o The undermining of the public trust and
confidence in the integrity of an attorney.
The mere existence of a confidential relation between a
testator and his lawyer who is beneficiary under the will
does not per se raise an inference of undue influence, but
the inference only arises where the attorney acts as
draftsman and other persuasive circumstances.
LEGAL ETHICS
Based on the book
Legal and Judicial Ethics
By Atty. Ruben E. Agpalo
The attorney 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.
Rebates and commissions
A lawyer shall not, without 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 anyone other than the client.
This is to secure the attorneys wholehearted fidelity and
to prevent the situation where the receipt of rebates or
commission from another in connection with the clients
business may interfere with the full discharge of his duty.
Whatever the lawyer receives from the opposite party in
the service of his client belongs to the client, in the
absence of his clients consent made after full disclosure
of the facts.
A lawyer shall not borrow from, nor lend money to, client
Rule 16.04.01 A lawyer shall not borrow money from his
client unless the clients interests are fully protected by the
nature of the case or by independent advice.
o This is intended to prevent the lawyer from taking
advantage of his influence over the client. Even if
he can borrow such as when the clients interests
are protected, he should not abuse the clients
confidence by delaying payment.
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Rule 16.04.02 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.
o This is intended to assure the lawyers
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.
o This may lead the lawyer to consider his own
recovery rather than that of his client.
B. ACCOUNTING OF CLIENTS FUNDS
A lawyer shall account for clients funds
Canon 16 A lawyer shall hold in trust all moneys and
properties of his client that may come into his possession.
Canon 16.01 A lawyer shall account for all money or
property collected or received for or from the client.
Such money or property include the following:
o The money collected by a lawyer in pursuance of
a judgment in favor of his client
o Money of a client not used for the purpose for
which it was entrusted to his counsel
o Any property redeemed with the clients money
and registered in the lawyers name
o Any fund received by him from a judgment creditor
as consideration for his desisting from
LEGAL ETHICS
Based on the book
Legal and Judicial Ethics
By Atty. Ruben E. Agpalo
participating in the public sale of the clients
property.
If the lawyer does not use the money entrusted to him by
his client for an intended purpose, he should immediately
return the money to his client.
The circumstance that an attorney has a lien for his
attorneys fees on the money in his hands collected for his
client does not relieve him from obligation to make a
prompt accounting.
If duly authorized, an attorney may cash a money order
belonging to his client and retain a part of it in payment of
his fees.
A lawyer shall not commingle clients 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.
He should not commingle a clients money with that of
other clients and with his private funds, nor use the clients
money for his personal purposes without the clients
consent.
A lawyer shall deliver funds to client, subject to his lien
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
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judgments and executions he has secured for his client
as provided for in the Rules of Court.
The failure of an attorney to return the clients 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.
There must already be an agreement between the lawyer
and the client as to the amount of attorneys fees and as
to the application of the clients fund to pay the attorneys
lawful fees and disbursement.
In case of disagreement as to the lawyers fees, the
lawyer should not arbitrarily apply the funds in his
possession to the payment of his fees; instead, he may
file the necessary action to fix and recover the amount of
his fees.
C. RESTRICTION AGAINST BUYING CLIENTS PROPERTY
Purchase of clients property in litigation
The law expressly prohibits a lawyer from purchasing,
even at a public or judicial auction, either in person or
through the mediation of another, any property or interest
involved in any litigation in which he may take part by
virtue of his profession. (Art. 1491, Civil Code of the
Philippines)
The prohibition which rests on considerations of public
policy is intended to curtail any undue influence of the
lawyer upon his client on account of his fiduciary and
confidential relation with him.
LEGAL ETHICS
Based on the book
Legal and Judicial Ethics
By Atty. Ruben E. Agpalo
The prohibition is absolute and permanent.
Application of rule
These four elements must concur:
o Attorney-client relationship
o The property or interest of the client must be in
litigation
o The attorney takes part as counsel in the case,
and
o The attorney by himself or through another
purchases such property or interest during the
pendency of the litigation.
Purchase or lease of the property in litigation is in favor of
a partnership, of which counsel is a partner
Where rule inapplicable
Absence of any of the elements
Purchaser of the property in litigation was a corporation
even though the attorney was an officer thereof
An attorney may properly bid on behalf of his client at
auction sale of the clients property in litigation because
his participation is not for his own benefit
Contract for attorneys fees contingent upon the outcome
of the litigation. It neither gives nor purports to give to the
attorney an absolute right, personal or real, in the subject
matter during the pendency of the litigation.
Effects of prohibited purchase
Breach of professional ethics
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 LEGAL ETHICS
Based on the book
Legal and Judicial Ethics
By Atty. Ruben E. Agpalo

The attorney may be disciplined for such misconduct.

The transaction is null and void.
The client is entitled to recover the property or interest
from his attorney, together with its fruits. He should,
however, return the purchase price and the legal interests
thereon to the attorney, as he may not unjustly enrich
himself at the expense of his counsel.

Purchase of choses in action

Choses in action is the right to bring a lawsuit to recover

chattels, money or debt.
It is improper for a lawyer in his professional capacity to
but judgment notes or other choses in action for much
less than their face value, with intent to collect them at
large profit for himself.
However, he may properly acquire choses in action not in
his professional capacity but as a legitimate investment.