LECTURE 8

CANON 16 – A LAWYER SHALL HOLD IN TRUST ALL MONEYS AND PROPERTIES OF HIS CLIENT THAT MAY COME
INTO HIS POSSESSION.
Rule 16.01 – A lawyer shall account for all money or property collected or received for or from the client.
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 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.
 However, C.f., Rule 138, sec.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. …
IN OTHER WORDS:
1. Lawyers are bound to promptly account for money received by them on behalf of their clients and
failure to do so constitutes professional misconduct.
2. The fact that a lawyer has a lien for fees on money in his hands collected for his clients does not relieve
him from the duty of promptly accounting for the funds received.
3. However, delivery of funds is subject to lawyer’s lien [subject to exception – Quilban v. Robinol].
 In Licuanan v. Melo [Adm. Case No. 2361, February 9, 1989], the lawyer who failed to inform his client that
he had collected money from the client’s debtor, despite repeated inquiries by the client, was disbarred for
breach of the client’s trust. His defense that he wanted to surprise the client with his success in collecting
the debt did not sit well with the Court. According to the Court, the lawyer violated his oath “not to delay
any man for money or malice.”
 This same ruling was reiterated in Cunanan v. Rimorin [Adm. Case No. 5315, August 23, 2000] and in Rivera
v. Angeles [Adm. Case No. 2519, August 29, 2000] where the Court ruled: 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 his clients. There should never be
an instance where the victor in litigation loses everything he won to the fees of his own lawyer.
 A lawyer who receives money from his clients for a specific purpose has no right to claim a lien on and
thus retain that money to ensure payment of his legal services as that would be totally unjust. It would
jeopardize the clients’ interest and betray their trust. [Quilban v. Robinol, Adm. Case No. 2144. April 10,
1989 – Atty. Robinol’s clients were informal settlers who were raising money to buy the land they were
occupying. Instead of turning over the money to the seller-owner of the property, he converted his
contingent fee of a parcel of land into the cash turned over to him by his clients ; Likewise, in Dhaliwal v.
Dumaguing, Adm. Case No. 9390. August 1, 2012 – the Court reiterated that money entrusted to a lawyer
for a specific purpose, but not used for the purpose, should be immediately returned. "A lawyer's failure to
return upon demand the funds held by him on behalf of his client gives rise to the presumption that he has
appropriated the same for his own use in violation of the trust reposed in him by his client. Such act is a
gross violation of general morality as well as of professional ethics. It impairs public confidence in the legal
profession and deserves punishment."]
Huang v. Zambrano, AC No. 12460, March 26, 2019
 Settlement was reached in the criminal case for estafa where Zambrano was counsel for Huang, a Singapore
resident. Zambrano received settlement money of behalf of his client but when asked about it informed the
client that the dismissal of the Estafa Case should first be processed before he can get the money.
 The Court held: Once money of property is received by a lawyer on behalf of his client, the former has the
obligation to account for the said money or property and remit the same immediately to the latter. To
ignore consecutive follow-ups and demands from the client without any acceptable reason corrodes the
client's trust and stains the legal profession… There is no law or jurisprudence which requires the formal
dismissal of the case before the lawyer yields possession of his client's money.

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Dumadag v. Lumaya [Adm. Case No. 2614. May 21, 1991]
 Atty. Lumaya’s client executed a compromise agreement with opposing party. Under the agreement, failure
of the Abellanosas to pay the agreed amount on the agreed date would entitle Dumadag to possession of
the property. The Abellanosas failed in their undertaking. Instead of filing a motion for execution, Lumaya
connived with the sheriff to sell a portion of the property in the amount covering the obligation of the
Abellanosas, without the knowledge and consent of his client. He also did not turn over the amount
recovered to his client. Atty. Lumaya was suspended indefinitely from the practice of law.
 [NOTE: A lawyer cannot compromise or settle his client’s cause without the client’s knowledge and consent
no matter how fair or advantageous that settlement was in favor of his client. Doing so would be a breach of
the client’s trust and confidence.]
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 16.04 – A lawyer shall not borrow 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.
 NOTE: Stated positively, the first part of the above rule allows the lawyer to borrow from his client if the
client’s interests are fully protected by the nature of the case or by independent advice; while the second
part allows the lawyer to lend money to his client only when he has to advance necessary expenses in a
legal matter he is handling for the client as this will serve the ends of justice.
 In Sps Concepcion v. Dela Rosa, Adm. Case No. 10681, February 3, 2015, citing another case, the Court
emphasized that the relationship between a lawyer and his client is one imbued with trust and confidence.
The rule against borrowing of money by a lawyer from his client is intended to prevent the lawyer from
taking advantage of his influence over his client. It presumes that the client is disadvantaged by the lawyer's
ability to use all the legal maneuverings to renege on his obligation.
Champertous contracts and Maintenance
 “Champerty” is a bargain by a stranger [the lawyer] with a party to a suit [the client], by which such third
person undertakes to carry on the litigation at his own expense and risk, in consideration of receiving, if
successful, a part of the proceeds or subject sought to be recovered. It is a bargain to divide the proceeds of
litigation between the owner of the liquidated claim and a party supporting or enforcing the litigation
[Black’s Law Dictionary (1968)].
 NOTE: A champertous contract is different from a contingent fee contract because in the latter case, the
lawyer gets reimbursed for any advances made for the client in the course of representation, whether he
wins the suit or not; only the amount of attorney’s fees is contingent upon winning. A champertous contract
is unlawful because the lawyer acquires personal interest in the suit since he will lose even what he had
advanced if he loses the case.
Bautista v. Gonzales [Adm. Matter No. 1625. February 12, 1990]
 The record shows that respondent prepared a document entitled "Transfer of Rights". The document
assigned to respondent one-half (1/2) of the properties of the Fortunados for and in consideration of his
legal services to the latter. At the time the document was executed, respondent knew that the
abovementioned properties were the subject of a civil case [Civil Case No. Q-15143] pending before the
Court of First Instance of Quezon City since he was acting as counsel for the Fortunados in said case.
 In executing the document transferring one-half (1/2) of the subject properties to himself, respondent
violated the law expressly prohibiting a lawyer from acquiring his client's property or interest involved in any
litigation in which he may take part by virtue of his profession [Article 1491, New Civil Code]
 NOTE: nothing wrong with contingent fee contract where fee is part of the property in litigation. However,
transfer of property to attorney cannot take place before the end of litigation; otherwise, it violates Art.
1491 of the Civil Code.

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 Further, the Court found that the 50% contingent fee contract which provides in part that the attorney shall
defray all expenses for the suit, including court fees was champertous. Although a lawyer may in good faith,
advance the expenses of litigation, the same should be subject to reimbursement.
Lien for Attorney’s Fees
Tanhueco v. De Dumo [Adm. Case No. 1437, April 25, 1989]
 the lawyer was able to collect a portion of the amount due to the client from a debtor. Since the agreement
was for a 50% contingency attorney’s fees, he applied the amount to his attorney’s fees and did not turn this
over to the client.
 The Court held: Moneys collected by an attorney on a judgment rendered in favor of his client, constitute
trust funds and must be immediately paid over to the client... The fact that a lawyer has a lien for fees on
moneys in his hands collected for his client, does not relieve him from his duty promptly to account for the
moneys received; …what respondent could have properly done was to make an accounting with his client,
the complainant, deduct his attorney's fees due in respect of the amount actually collected by him, and turn
over the remaining balance to the complainant.