Canon 16
A lawyer shall hold in trust all moneys and
properties of his client that may come into his
possession.
The moneys collected by an attorney for his
client belong to the client. (Malcom, Legal and
Judicial Ethics)
Consequently, the lawyer is under
obligation to hold in trust all moneys and properties
of his client that may come into his possession.
The moneys collected by the lawyer in
pursuance of a judgment in favor of his client are
held in trust for the client (Aya vs Bigornia)
Prohibition:
Article 1491, paragraph 5 of Civil Code
prohibits lawyers to purchase even at a public
auction, the property which may be the object of
any litigation which they may take part by virtue of
their possession.
 This prohibition is ABSOLUTE AND
PERMANENT.
 Purpose: by reason of the relation of trust
or their peculiar control over the property.
 The prohibition on purchase is all embracing
to include not only sales to private
individuals but also public or judicial sales.
(In re: Atty. Leon Maquerra)
 Prohibition includes 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
vs Eduarte)
 Effect of prohibited purchase: Void and
could produce no legal effect
Article 1491 is not applicable:
1. The attorney is not counsel in case involving
the same property at the time of
acquisition.
2. When the purchaser is a corporation even
the attorney was an officer
3. When the sale took place after termination
of litigation except in cases of fraud
4. Where the property in question is stipulated
as part of attorney’s fees
Provided that:
 The same is contingent upon
favorable outcome of litigation
 The fee must be reasonable.
Fiduciary Relationship
Rule 16.01 A lawyer shall account for all money or
property collected or received for or from the
client.
Co-Mingling 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.
Fermina Daroy vs Atty. Legaspi (1975)
Daroy hired Atty. Legaspi as their counsel
for the intestate proceeding. Allegedly Atty. Legaspi
misappropriated the sum of P4,000.00 he had
collected for the complainants.
The SC held that a member of the bar who
convert the money of his client to his own benefit
through false pretenses is guilty of deceit,
malpractice and gross misconduct. The attorney,
who violates his oath of office, betrays the
confidence reposed in him by client and practices
deceit cannot be permitted to continue as a law
practitioner.
Atty. Legaspi is disbarred.
 A lawyer is obligated to report promptly the
money of his clients that has come into his
possession otherwise, a violation of Sec 25,
rule 138 of ROC.
 He should not commingle it with his private
property or use it for his personal purposes
without his client’s consent. He should
maintain a reputation for honesty and
fidelity to private trust.
 Purpose: avoid confusion and appearance
of impropriety.
 Money delivered for specific purpose such
as filing fee for appeal expenses, for
arrangement of an amicable settlement if
not utilized for failure to take such steps
must immediately be returned.
 He is allowed however to apply so much
funds as may be necessary to satisfy his
lawful fees and disbursements subject to
the condition that he shall promptly notify
his client.
 Effects:
1. The lawyer can be subject for contempt
as an officer of the Court who misbehave in
 his official transactions but proceedings
under this section shall not be a bar to a
criminal prosecution. (sec 25, Rule 138 of
ROC).
2. Disbarment
Delivery of Funds
16.03 A lawyer shall deliver the funds and
property of his client when due or upon demand.
However,
1. 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. (retaining lien)
2. he shall also have lien to the same extent
on all judgments and executions he has
secured for his client as provided for in the
ROC. (charging lien)
Presumption of Misappropriation
The lawyer’s failure to deliver upon demand
gives rise to the presumption that he has
misappropriated the funds for his own use to the
prejudice of the client and in violation of the trust
repost in him.
Retaining lien
A right merely to retain 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.
Requisites:
1. Atty-client relationship
2. Lawful possession by lawyer of the client’s funds,
documents and papers in his professional capacity.
3. Unsatisfied claim for attorney’s fees or
disbursement.
Charging lien
An equitable right of a lawyer to have the
fees and lawful disbursements for his services,
secured to him out of money judgment.
Requisites:
1. Atty-client relationship.
2. Attorney has rendered services
3. Money judgment favorable to the client has been
secured in the action.
4. Attorney has a claim for attorney’s fees or
advances statement of his claim has been duly
recorded in case with notice served upon the client
and adverse party.
Section 37, Rule 138 ROC
1. An attorney shall have a lien upon the funds,
documents and papers of his client which have
lawfully come into his possession.
Attorney may:
 retain the same until his lawful fees and
disbursements have been paid
 apply such funds to the satisfaction thereof.
2. An Attorney shall also have lien to all the
judgments for the payment of money, and
executions which he secured in the litigation of
his client
 when he shall have caused a statement of
his claim of such lien and entered upon the
records of the court
 shall have caused written notice to be
delivered to his client and to the adverse
party
 he shall have the same right and power
over such judgment or execution as his
client.
 Attorney’s Retaining lien does not apply to
public documents and exhibits.
 When documents in the possession of a
lawyer are subject of Attorney’s lien, he
cannot be compelled to surrender the
same without prior proof that his fees have
been fully satisfied.
It must first require the claimant to file an
adequate security for the lawyer’s fees
before it can require the surrender thereof.
 Attorney shall be entitled to have and
recover from his client—a reasonable
compensation for his services
Under Sec 24, Rule 138 the fee is based
on
 the importance of the subject matter
of the controversy
 the extent of the services rendered
 the professional standing of the
attorney.
 The attorney’s fees which had already been
registered as charging lien cannot be
altered or defeated by the client’s act
of terminating the lawyer’s services,
compromising the case or waiving his rights
in favor of the adverse party.
 When the dismissal of the lawyer
without justifiable cause, the client will
pay in full attorney’s fees expressly agreed
upon the contract. (sec26, rule 138)
  In case the client’s death the charging
lien survives.
 When a lawyer enforces a charging lien
against his client the client-lawyer
relationship is terminated (Llmas vs
Encarnacion).
Borrowing or Lending
long run, no one will engage any lawyer
anymore.
 Relationship of Lawyer-Client is highly
Fiduciary.
 An attorney owes loyalty to his client not
only in the case in which he has
represented him but also after the relation
of attorney and client has terminated.

Rule 16.04  As held in Lorenzana Food Corp. vs Daria, it

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 advance
necessary expenses in a legal matter he is handling
for the client.
is not a good practice to permit him
afterwards to defend in another case other
persons against his former client under the
pretext that the case is distinct from the
independent of the former case.

Purpose
First part of the rule—to prevent lawyer
from taking advantage of his influence over the
client.
Second part of the rule—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.

Exceptions:
1. Unless client’s interest are protected. A
lawyer may borrow money from a client’s bank, for
here the client’s interests are fully protected by the
bank’s rules and regulations which have to be
complied with.
2. Lawyer may lend money to a client when it
is necessary in the interest of justice. The
advance made shall be subject to reimbursement.
Otherwise, if the lawyer spends for all legal
expenses, his contract of legal employment might
become champertous, if his attorney’s fees will be
payable in kind. Champertous contracts are void.

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.

 Fidelity to the cause of client is the essence

of the legal profession. Without this fidelity,
the profession will not survive for in the