401 | PALE | Online Class | 3/28/2020

LAST WEEK’S GROUP ACTIVITY:

I.
Answer true if the statement is true or false if the statement is false. Explain your answer.

(a) A lawyer is not allowed to borrow money from his client.

The answer can be TRUE or FALSE. Citing Canon 16.04 of the CPR and the case of HDI Holdings
where SC pointed out the reason behind Canon 16.04:

"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. The rule presumes that the client is
disadvantaged by the lawyer's ability to use all the legal maneuverings to renege on his obligation. In
Frias v. Atty. Lozada, the Court categorically declared that a lawyer's act of asking a client for a loan,
as what Atty. Cruz did, is unethical and that the act of borrowing money from a client was a violation
of Canon 16.04 of the CPR. Corollary, in borrowing money from HDI and thereafter failing to pay the
same within the agreed period, Atty. Cruz failed to uphold the integrity and dignity of the legal
profession."

GCC: Canon 16.04 mentions of an exception where the client's interests are fully protected by the
nature of the case or by an independent advice. There is no problem with the phrase "independent
advice" because that would refer to an opinion not from the lawyer who wants to borrow money from
the client but from somebody who has no interest whatsoever with such act of borrowing by the lawyer.

On the phrase "fully protected by the nature of the case", can you please give an example of this?

Answers:
(1) An example of the phrase "fully protected by the nature of the case" is that a lawyer may
borrow money from a client bank because the client's interests are fully protected by the bank's
rules and regulations which have to be complied with. The lawyer's use of his influence over
the client - which is sought to be prevented by the rule - shall have no suasion for the grant of
the loan is governed by fixed banking rules.

(2) HDI Holdings case: Loans or borrowings, provided there is security given such as Pledge or
mortgage.

(b) Practice of law requires extraordinary diligence.

FALSE. Citing Vda. de Enriquez v. San Jose, the Court said in Sps. Vargas v. Oriño:

"[W]hen a lawyer takes a client's cause, he covenants that he will exercise due diligence in protecting
the latter's rights. Failure to exercise that degree of vigilance and attention expected of a good father
of a family makes the lawyer unworthy of the trust reposed in him by his client and makes him
answerable not just to his client but also to the legal profession, the courts and society. Until the
lawyer's withdrawal is properly done, the lawyer is expected to do his or her best for the interest of
the client." So, the diligence required in the law profession is not after all the same as that of a common
carrier.

II.
A lawyer received money from a client for the processing of transfer of land title but it was
not used for the purpose. The money however was returned by the lawyer to the client

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when asked to do so. May the said lawyer be sanctioned for such conduct? Explain your
answer.

2 (mis)conducts are covered in the problem.

First is – NOT USING THE CLIENT'S MONEY FOR THE PURPOSE

Money of client not used for the purpose is held in trust and under Rule 16.01 of the CPR, a lawyer
should account (Gonoto v. Adaza, cited in Agpalo)

Second is – RETURNING TO THE CLIENT THE MONEY ONLY WHEN ASKED TO DO SO

In Isalos v. Cristal, HDI Holdings v. Cruz, Mariano v. Laki, and Huang v. Zambrano, SC said that
money entrusted to a lawyer for a specific purpose but not used for the purpose should be immediately
returned; Note that SC used the word “immediately”.

GCC: Here are my additional inputs on this topic. On the duty to account by a lawyer.

a) The duty to account for all money COLLECTED or RECEIVED FOR or FROM the client – so
this may include rent collected by a lawyer from a tenant, filing fees for filing of an initiatory
pleading in Court. I highlighted those important words to show emphasis.

b) SC calls this duty as the “RULE on the accounting of monies and properties received by lawyers
from clients as well as their return upon demand” (referring to Canon 16, Rules 16.01, 16.02
and 16.03 of the CPR) [Mariano v. Laki; Yoshimura v. Panagsagan).

c) Capinpin v. Cesa - fees paid by the adverse party were considered client’s money.

d) Receipt by the lawyer of the downpayment for the property and applied it as his share in the
property violates Canon 16 of the CPR (Heirs of Carlos v. Linsangan).

e) Money received by a lawyer on behalf of his client falls here (Huang v. Zambrano).

f) When should a lawyer account? The word used by SC is PROMPTLY (HDI Holdings).

Other inputs:

Where should a lawyer put the client’s funds?

a) Not in personal safe deposit vault (Palencia v. Linsangan)

b) Should be deposited in a separate trust account in a bank or trust company of good repute for
safekeeping (Palencia v. Linsangan)

Additional inputs:

Duty to serve client with competence and diligence.

a) Lawyer is bound to serve a client with competence and diligence whether the acceptance is FOR A
FEE or FOR FREE (Sps. Vargas v. Oriño). I highlighted those important words for emphasis again.

b) The decision to withdraw from the case due to a view that it is unmeritorious is not an excuse
because no formal withdrawal as counsel was made (Sps. Vargas v. Oriño).

c) RULE: Remember the principle that negligence of counsel binds the client

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EXCEPT: gross negligence, without fault of client

In re: Abellana v. Paredes, G.R. No. 232006, [July 10, 2019], SC said:

“In sum, the negligence and mistakes of the counsel are binding on the client, unless the counsel has
committed gross negligence. For a claim of a counsel's gross negligence to prosper, nothing short of
clear abandonment of the client's cause must be shown. As well, the gross negligence should not be
accompanied by the client's own negligence or malice.”

In addition to the discussion on the exception on gross negligence, please note the following case of SC
stressing that the client must be faultless for there to have an exception:

In Systems and Plan Integrator and Development Corp. v. Municipal Government of Murcia, G.R. No.
217121 (Resolution), [March 16, 2016]), SC said:

“It appears from the records that SPIDC's complaint was dismissed on account of the law office's
negligence. Philhouse Development instructs that as a general rule, the dereliction of duty by the
counsel affects the client. As an exception thereto, the client may be excused from the counsel's failure
only if the former can prove to have been entirely faultless.”

GCC: So, for me, to the client, do not leave the fate of the case to the lawyer.