A: Yes. The Code of Professional Responsibility
mandates every lawyer to hold in trust all money and properties of his client that may come into his possession. A lawyer’s failure to return upon demand the funds or property held by him on behalf of his client gives rise to the presumption that he has appropriated the same for his own use to the prejudice of, and in violation of the trust reposed in him by, his client. The relation between attorney and client is highly fiduciary in nature. Being such, it requires utmost good faith, loyalty, fidelity and disinterestedness on the part of the attorney. Its fiduciary nature is intended for the protection of the client.
For misappropriating and failing to promptly report and deliver the money report and deliver the money received on behalf of their children of their clients, some lawyers have been disbarred while others have been suspended for six months. Since it appears to be the first case of respondent lawyer, the lighter penalty is imposed on him. (Espiritu vs. Ulep, A.C. No. 5808, May 4,2005)
Q: What is fiduciary duty?
A: The principle that an attorney derives no
undue advantage that may operate to the prejudice or cause an occasion for loss of a client. The relationship between the lawyer and client is one of mutual trust and confidence of the highest degree.
Q: When will the liability of a lawyer for “breach of fiduciary obligation” arise?
A: A lawyer may be held liable if he fails in his
obligation to make an accounting of funds or property that may come to his possession for a lawyer holds his client’s funds or property in trust for his client.
Q: What are the requisites for the liability of a lawyer for damages?
A: AWI
1. Attorney-client relationship;
2. Want of reasonable care and diligence by lawyer; and
3. Injury sustained by client as a proximate result of the lawyer’s negligence.
Q: When will civil liability arise? A:
1. Client is prejudiced by lawyer's negligence or misconduct;
2. Breach of fiduciary obligation; 3. Civil liability to third persons;
4. Libelous words in pleadings; violation of communication privilege;
5. Liability for costs of suit (treble costs) – when lawyer is made liable for insisting on client's patently unmeritorious case or interposing appeal merely to delay litigation.
Q: What are the effects of lawyer’s failure to return client’s money or property after demand? A:
1. There will be a presumption that the lawyer misappropriated the same; 2. It will give rise to civil liability of the
lawyer;
3. Criminal liability; and 4. Administrative liability.
Q: When is a lawyer not liable for libelous words in the pleadings?
A: A lawyer is exempted from liability for slander,
libel or for words otherwise defamatory, published in the course of judicial proceedings,
provided the statements are connected with,
relevant, pertinent and material to the cause in hand or subject of inquiry.
Note: Test of relevancy – The matter to which the privilege does not extend must be palpably wanting in relation to the subject of controversy, that no reasonable man can doubt its relevancy or propriety. Pleadings should contain plain and concise statements of material facts and if pleader goes beyond requisites of law and alleges irrelevant matter, which is libelous, he loses his privilege and may be liable in a separate suit.
Q: When will criminal liability exist?
A: A lawyer may be held criminally liable if he
commits any of the following:
1. Causing prejudice to the client thru malicious breach of professional duty or thru inexcusable negligence or ignorance; 2. Revealing client’s secrets learned in
lawyer’s professional capacity thru malicious breach of professional duty or inexcusable negligence or ignorance; 3. A lawyer who has undertaken the defense
of a client or has received confidential information from said client in a case may be criminally liable for undertaking defense of opposing party in same cause without consent of first client; (Art. 209,
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ACADEMICS CHAIR: LESTER JAY ALAN E.FLORES IIU
N I V E R S I T Y O FS
A N T OT
O M A S4. A lawyer who shall knowingly introduce in evidence in any judicial proceeding or to the damage of another or who, with intent to cause such damage, shall use any false document may be held criminally liable therefor; (Art. 172, RPC) and 5. A lawyer who misappropriates his client’s
funds may be held liable for estafa.
Note: When a lawyer collects or receives money from his client for a particular purpose, he should promptly account to the client how the money was spent. His failure either to render an accounting or to return the money (if the intended purpose of the money does not materialize) constitutes a blatant disregard of Rule 16.01 of the CPR.(Belleza v.
Malaca, A.C. No. 7815, July 23, 2009)
Note: If a lawyer does not use the money for the intended purpose, the lawyer must immediately return the money to the client. (Villanueva v.
Gonzales, A.C. No. 7657, February 12, 2008)
b. Co-Mingling of Funds
Note: Failure of the lawyer to account all the funds and property of his client which may come into his possession would amount to misappropriation which may subject him to disbarment on the ground of grave misconduct or a criminal prosecurion for
estafa under Art. 315, par. 1(b) of the RPC.
Q: BPI filed two complaints for replevin and damages against Esphar Medical Center Inc. and its president Cesar Espiritu. Espiritu engaged the services of Atty. Juan Cabredo IV. While these cases were pending in court, the latter advised Esphar to remit money and update payments to the bank through the trial court. Accordingly, Esphar's representative delivered a total of P51,161 to Atty. Cabredo's office. However, the management of Esphar found out that he did not deliver said money to the court or to the bank. Did Atty. Cabredo commit a breach of trust? A: Yes. His act amounted to deceit in violation of
his oath. The relationship between a lawyer and a client is highly fiduciary; it requires a high degree of fidelity and good faith. Hence, in dealing with trust property, a lawyer should be very scrupulous. Money or other trust property of the client coming into the possession of the lawyer
should be reported by the latter and account any circumstances, and should not be commingled with his own or be used by him. (Espiritu v.
Cabredo, A.C. No. 5831, Jan. 13, 2003)
Q. Atty. Magulta received 25,000 pesos from complainant for filing fees of a civil case to be filed. However, Atty. Magulta never filed the complaint. When complainant discovered this, he filed a a complaint for disbarment against the counsel. Should Atty. Magulta be held liable for the appropriation of funds in his own purposes? A: Yes. In failing to apply to the filing fee the
amount given by complainant -- as evidenced by the receipt issued by the law office of Atty. Magulta -- the latter also violated the rule that lawyers must be scrupulously careful in handling money entrusted to them in their professional capacity. Rule 16.01 of the Code of Professional Responsibility states that lawyers shall hold in trust all moneys of their clients and properties that may come into their possession.
Lawyers who convert the funds entrusted to them are in gross violation of professional ethics and are guilty of betrayal of public confidence in the legal profession. It may be true that they have a lien upon the client’s funds, documents and other papers that have lawfully come into their possession; that they may retain them until their lawful fees and disbursements have been paid; and that they may apply such funds to the satisfaction of such fees and disbursements. However, these considerations do not relieve them of their duty to promptly account for the moneys they received. Their failure to do so constitutes professional misconduct. In any event, they must still exert all effort to protect their client’s interest within the bounds of law. (Burbe
vs. Magulta, A.C. No. 5713, June 10,2002) c. Delivery of Funds Rule 16.02, Canon 16, CPR - 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, Canon 16, CPR - A lawyer shall