Prepared by:

Azalea Gale Julian

Carlo Dumlao
John Mark Raguindin

CANON 16. A LAWYER SHALL HOLD IN TRUST ALL MONEYS AND PROPERTIES OF HIS CLIENT
THAT MAY COME INTO HIS POSSESSION.

A Lawyer is the Trustee of Clients Moneys and Properties

The moneys collected by an attorney for his client belong to the client and the lawyer is under
obligation to 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 16.02. A lawyer shall keep the funds of each client separate and apart from his own and those
of others kept by him.

Lawyers are accountable for all moneys and properties of client

Promptly accounts all funds received or held by him.
Keep and maintain adequate records of clients moneys or properties in his custody.
Label and to identify his clients property and keep it separate and apart from his own.
The prohibition against commingling is not only to prevent confusion but also to avoid the
appearance of impropriety.

Unlawful retention of clients funds: contemptuous

An attorney who unjustly retains in his hands money of his client after it has been demanded
may be punished for contempt as an officer of the Court who has misbehaved in his official
transactions (Sec. 25, Rule 138, 1997 Revised Rules of Court).

Money not used for specific purpose must be accounted immediately

Money delivered to the lawyer for specific purpose such as for filing fee, for appeal, for
arrangement of an amicable settlement, if not utilized for failure of counsel to take such steps
must immediately be returned.

Attorneys lien is not an excuse for non-rendition of accounting.

A lawyer is not relieved of the obligation to make a proper accounting even if he has an
attorneys lien over the clients money or funds in his possession (Daroy vs. Legaspi, 65 SCRA
304).

Lawyers cannot disburse clients money to clients creditors without authority.

In the absence of authority from his client, a lawyer is not allowed to disburse the money
collected for his client in favor of persons who may be entitled thereto considering that he
owes fidelity to the client and not to the creditor (In re: Abad, 98 Phil 899).

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 judgments and executions he has secured for his client as
provided for in the Rules of Court.
When shall clients funds and properties be delivered?
A lawyer who obtained possession of the funds and properties belonging to his client shall
deliver the same when (a) they become due, or (b) upon demand.
A lawyers 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 reposed in him (In re: David, 84 Phil 627).

Implementation of Attorneys Retaining or Charging Liens.

A lawyer shall have a lien over the clients funds and apply so much thereof to satisfy his
lawful fees and disbursements but must give prompt notice to his client for the latters
advisements.
To enforce a charging lien, it is necessary that the lawyer shall have caused a statement of
such lien to be entered upon the records of the court which rendered the favorable judgment
with written notice to the client and to the adverse party.
The client cannot, by settling, compromising or dismissing his suit during its pendency,
deprived the attorney of his compensation for the agreed amount, unless the lawyer consents
to such settlement, compromise or dismissal.

Adequate security may be required when documents are subject of lien.

When documents in the possession of a lawyer are the subject of attorneys lien, he cannot
be compelled to surrender the same without prior proof that his fees have been fully satisfied.
The claimant is required to file an adequate security for the lawyers fees before it can require
the surrender thereof.

Lawyers charging liens may be assigned.

A lawyer is not deprived of his attorneys fees by the death of his client.

Effect of Enforcement of Charging Liens

When a lawyer enforces a charging lien against his client, the client-lawyer relationship is
terminated (Llamas vs. Encarnacion, CA-GR No. 31920-R).

RULE 16.04. 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. 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.

Lawyer shall not borrow money from or lend money to client.

This is to prevent the lawyer from taking advantage of his influence over his client and to
assure the lawyers independent professional judgment.
A lawyer, who as guardian, borrowed money for his benefit using the property of the ward as
collateral without court approval is guilty of misconduct (In re: Pelayo, 44 Phil. 569).
EXCEPTIONS:
Lawyer as borrower, provided the interest of the client are fully protected by the nature of
the case or by independent advice.
Lawyer as lender, when it is necessary in the interest of justice to advance necessary expenses
in a legal matter he is handling for the client.

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 CANON 16: JURISPRUDENCE

ERLINDA R. TAROG vs. ATTY. ROMULO L. RICAFORT

A.C. No. 8253 | March 15, 2011

FACTS: In 1992, the Tarog accompanied by Vidal Miralles engaged Atty. Ricafort for the filing of civil
action to recover their property from a foreclosing banking institution. Atty. Ricafort required the
Tarogs to pay P7,000.00 as filing fee, which they gave to him. He also explained the importance of
depositing P65,000.00 in court to counter the P60,000.00 deposited by Antonio Tee, the buyer of the
foreclosed property. After some time, the Tarogs visited Atty. Ricafort to verify the status of the
consignation. Atty. Ricafort informed them that he had not deposited the amount in court, but in his
own account. He promised to return the money, plus interest. The Tarogs further claimed that the
RTC, where their complaint for annulment of sale was being heard, had required the parties to file
their memoranda. Accordingly, they delivered P15,000.00 to Atty. Ricafort for that purpose, but he
did not file the memorandum. When it became apparent to the Tarogs that Atty. Ricafort would not
make good his promise of returning the P65,000.00, plus interest, they demanded thru a letter dated
December 3, 2002 that Atty. Ricafort return the P65,000.00, plus interest, and the P15,000.00 paid
for the filing of the memorandum. Yet, they did not receive any reply from Atty. Ricafort.
In his defense, Atty. Ricafort denied that the P65,000.00 was intended to be deposited in
court, insisting that the amount was payment for his legal services under a package deal, that is, the
amount included his acceptance fee, attorneys fee, and appearance fees from the filing of the
complaint for annulment of sale until judgment, but excluding appeal. Tarog read, understood, and
agreed to the contents of the complaint, which did not mention anything about any consignation and
that he, being a retired school principal, was a learned person who would not have easily fallen for
any scheme like the one they depicted against him. Atty. Ricafort maintained that a retainer
agreement was immaterial because he had affirmed having received the P65,000.00 and having issued
a receipt for the amount; that he had not kept the receipt because the practice of lawyers in most
instances is that receipt is issued without duplicate as it behooves upon the client to demand for a
receipt.

ISSUE: Whether the acts of Atty. Ricafort constitute a grave violation of Canon 16 of the Code of
Professional Responsibility.

HELD: YES. It is clear that Atty. Ricafort persuaded the Tarogs on the need for that amount to be
deposited in court for purposes of their civil case. Being non-lawyers, they had no idea about the
requirement for them to consign any amount in court, due to the substantive and procedural
implications of such requirement being ordinarily known only to lawyers. Also, Atty. Ricafort explained
that he had no copies of the receipts for the P65,000.00 and P15,000.00 issued to the Tarogs because
the practice of lawyers in most instances is that receipt is issued without duplicate as it behooves upon
the client to demand for a receipt. But such explanation does not persuade us. Ethical and practical
considerations made it both natural and imperative for him to issue receipts, even if not demanded,
and to keep copies of the receipts for his own records. He was all too aware that he was accountable
for the moneys entrusted to him by the clients, and that his only means of ensuring accountability was
by issuing and keeping receipts. Rule 16.01 of the Code of Professional Responsibility expressly enjoins
such accountability. Definitely, Atty. Ricafort had a highly fiduciary and confidential relation with the
Tarogs. As such, he was burdened with the legal duty to promptly account for all the funds received
from or held by him for them.

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 Undoubtedly, Atty. Ricafort was required to hold in trust any money and property of his clients
that came into his possession and he needed to be always mindful of the trust and confidence his
clients reposed in him. Thus, having obtained the funds from the Tarogs in the course of his
professional employment, he had the obligation to deliver such funds to his clients (a) when they
became due, or (b) upon demand. WHEREFORE, Atty. Romulo L. Ricafort guilty of a violation of Canon
16, Rule 16.01 and Canon 17 of the Code of Professional Responsibility and, accordingly, disbar him.
The Bar Confidant is directed to strike out his name from the Roll of Attorneys.

PEDRO RAMOS VS. ATTY. MARIA NYMPHA C. MANDAGAN

A.C. No. 11128 |April 06, 2016

FACTS: Pedro Ramos, charged with murder before the Sandiganbayan, hired the services of Atty.
Maria Nympha Mandagan. The latter then demanded from him the amount of P300,000.00 which
shall be used as bail bond in the event his petition for bail was granted, and another P10,000.00 as
operating expenses. However, his petition for bail was denied. Atty. Mandagan, instead of returning
the P300,000.00, withdrew as counsel in his case and refused to return the money despite the demand
of Pedro. Thus, Pedro filed a disbarment case against Atty. Mandagan. In her answer, Atty. Mandagan
said that the amount was used as mobilization expenses for documentary exhibits; it was never
intended as payment of bail. She added that from the time she accepted the case up to her withdrawal
as counsel, Ramos never gave her acceptance fees, appearance fees and legal services fees.
The IBP-CBD issued a Report and Recommendation finding Atty. Mandagan liable for gross
misconduct and for failure to render an accounting of funds, and recommended her suspension from
the practice of law for one year. The Report and Recommendation was adopted by the IBP Board of
Governors.

ISSUE: Whether or not Atty. Mandagan is administratively liable.

HELD: After a careful review of the records of the case, the Court finds the Report and
Recommendation of the IBP-CBD, as adopted and approved by the IBP Board of Governors, to be
proper under the circumstances.
The practice of law is considered a privilege bestowed by the State on those who show that
they possess and continue to possess the legal qualifications for the profession. As such, lawyers are
expected to maintain at all times a high standard of legal proficiency, morality, honesty, integrity and
fair dealing, and must perform their four-fold duty to society, the legal profession, the courts, and
their clients, in accordance with the values and norms embodied in the Code
In Cruz-Villanueva v. Atty. Rivera, this Court held that:
When a lawyer receives money from the client for a particular purpose, the lawyer must
render an accounting to the client showing that the money was spent for the intended purpose.
Consequently, if the lawyer does not use the money for the intended purpose, the lawyer must
immediately return the money to the client.
In the present case, Atty. Mandagan never denied receiving the amount of P300,000.00 from
Ramos for the purpose of posting a bond to secure the latters provisional liberty. When the petition
for bail of Ramos, however, was denied by the Sandiganbayan, Atty. Mandagan failed to return the
amount to Ramos. Worse, she unjustifiably refused to turn over the amount to Ramos despite demand
from Ramos counsel.
Clearly, Atty. Mandagan failed to act in accordance with the rule stated in Canon 16 of the
CPR, to wit:

Rule 16.03 A lawyer shall deliver the funds and property of his client when due or upon demand. x x
x.

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 In Belleza v. Atty. Macasa, this Court stated that:
[A] lawyer has the duty to deliver his clients funds or properties as they fall due or upon demand. His
failure 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. It is a gross violation of general morality as well as of professional ethics; it impairs public
confidence in the legal profession and deserves punishment. Indeed, it may border on the criminal as
it may constitute a prima facie case of swindling or estafa.

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