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Fiduciary duty of a lawyer, C3S6 CPRA

Section 6, Canon III

SECTION 6. Fiduciary duty of a lawyer. – A lawyer shall be mindful of the trust and confidence reposed by the client.
To this end, a lawyer shall not abuse or exploit the relationship with a client. (2023 Code of Professional Responsibility and Accountability or CPRA)

1. Fiduciary duty of a lawyer

a. Trust and confidence by the client

Fiduciary – means “of, relating to, or involving a confidence or trust,” or “held or founded in trust or confidence.” (Merriam-Webster Online Dictionary)

Under this section, lawyers are required to “be mindful of the trust and confidence reposed by the client.”

[T]he relationship between a lawyer and her client is regarded as highly fiduciary. Between the lawyer and the client, it is the lawyer that has the better knowledge of facts, events, and remedies. While it is true that the client chooses which lawyer to engage, he or she usually does so on the basis of reputation. It is only upon actual engagement that the client discovers the level of diligence, competence, and accountability of the counsel that he or she chooses. In some cases, such as this one, the discovery comes too late. Between the lawyer and the client, therefore, it is the lawyer that should bear the full costs of indifference or negligence. (Ramirez v. Buhayang-Margallo, En Banc, A.C. No. 10537, February 3, 2015, Per Leone, J.)

The relationship between a lawyer and his client is highly fiduciary and prescribes on a lawyer a great fidelity and good faith. The highly fiduciary nature of this relationship imposes upon the lawyer the duty to account for the money or property collected or received for or from his client. Thus, a lawyer’s failure to return upon demand the funds held by him on behalf of his client, as in this case, 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. (Egger v. Duran, A.C. No. 11323, September 14, 206, Per Perlas-Bernabe)

1) Duty to account

The relationship between a lawyer and his client is highly fiduciary and prescribes on a lawyer great fidelity and good faith. The highly fiduciary nature of this relationship imposes upon the lawyer the duty to account for the money or property collected or received for or from his client. 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. (Bataan Shipyard and Engineering Company, Inc. v. Consunji, En Banc, A.C. No. 11439, January 04, 2022, Per Curiam)

The relationship between a lawyer and his client is highly fiduciary and ascribes to a lawyer a great degree of fidelity and good faith. As such, lawyers have the duty to account for the money or property they receive for or from their clients. When they receive money from a client for a particular purpose, they are bound to render an accounting of how the money was spent for the said purpose; and, in case the money was not used for the intended purpose, they must immediately return the money to the client. Failure of a lawyer to return the money entrusted to him by his client upon demand creates a presumption that he has appropriated the same for his own use. (Rodo Consultancy and Maritime Services Corporation v. Concepcion, En Banc, A.C. No. 7963, June 29, 2021, Per Curiam)

Bataan Shipyard and Engineering Company, Inc. v. Consunji, En Banc, A.C. No. 11439, January 04, 2022, Per Curiam:

• There is no dispute that Atty. Consunji received cash advances from BASECO for his professional fees and for the payment of certain taxes due to the government. According to BASECO, Atty. Consunji failed to liquidate and render an accounting of these cash advances. BASECO sent two demand letters asking Atty. Consunji to account for and liquidate the funds he received from them but Atty. Consunji failed to comply with the said demand.

• On the other hand, Atty. Consunji argues that he was able to render an accounting and liquidation of the fees he received and all these documents were submitted to the Finance Department of BASECO. However, due to the seizure of BASECO’s documents and files by the security personnel of the PCGG, he can no longer obtain access to the accounting and liquidation reports he submitted to BASECO. In his Comment and Position Paper, he provided the following explanation to the cash advances he received…

• The Court finds Atty. Consunji’s contentions bereft of merit. The explanation he provided is general and lacks substantiation. He merely stated that the receipts were turned over to the Finance Department of BASECO without specifying the OR Nos. per transaction, the dates that these were turned over and the officers who received the same. Further, in the receipt of payment for his professional fees, he merely issued acknowledgment receipts instead of official receipts as required by the law. He did not retain copies of these receipts for his record. All these circumstances lead the Court to believe that no actual accounting and liquidation was done by Atty. Consunji.

• It is incumbent upon a lawyer to keep records of his transactions with clients as a matter of prudence and due diligence. Ethical and practical considerations require lawyers to issue receipts to their clients, even if it was not demanded, and to keep copies of the said receipts for his own records.30 Thus, he cannot simply claim that the records were already with the Finance Department of BASECO. As a dutiful and prudent lawyer, he should have kept copies of these receipts and records of transactions he had with BASECO. Pursuant to Rule 16.01 of the CPR, a lawyer must be aware that he is accountable for the money entrusted to him by the clients, and that his only means of ensuring accountability is by issuing and keeping receipts.

• In this case, Atty. Consunji failed to provide evidence to show that he has already accounted for and liquidated the cash advances he received from BASECO. It is his duty to show that all moneys received from his client have been accounted for, that the money has been utilized for the purpose it was given, and that there are corresponding receipts issued with respect to these transactions. Atty. Consunji has not submitted any copies of the receipts he issued to BASECO with respect to the professional fees he received in processing the titling of the unregistered lands and reconstitution of lost titles in the Engineering Island. Further, he has failed to show copies of Official Receipts issued by the Province of Bataan and BIR with respect to the payment of transfer taxes, capital gains taxes, documentary stamp taxes and registration fees made by BASECO.

• The taxes payable to the Province of Bataan and BIR were released to Atty. Consunji, as the legal counsel of BASECO, in order to facilitate and process its payment to the concerned government units. It is incumbent upon him to show that these moneys he received were properly utilized to its purpose and that there are Official Receipts issued by the government as evidence of payment of these taxes. The claim that the liquidation records of these cash advances were already with the Finance Department of BASECO, which were seized by the PCGG, deserves scant consideration. If the custody of these documents and records were really with BASECO or PCGG, Atty. Consunji could have easily requested the IBP or the Court to order the former to produce these records pursuant to Rules 21 and 27 of the Rules of Court. The IBP Investigators have the power to issue subpoenas, take depositions and administer oaths pursuant to Sections 8 and 9 of Rule 139-B of the Rules of Court. However, Atty. Consunji failed to avail of these legal remedies. He failed to rebut the allegation of BASECO that no accounting and liquidation has been made to the cash advances released to him.

• The affidavits of former BASECO officers Maligalig, Avelino and Santos are not sufficient to absolve Atty. Consunji of his administrative liability. Both Avelino and Santos, Treasurer and Finance Branch Chief respectively, testified on the process of budget approvals and release followed by BASECO. Santos, as the Finance Branch Chief, had no statement indicating that she received accounting and liquidation reports from Atty. Consunji. It was in the Joint Affidavit of Maligalig and Avelino where they testified that all the moneys disbursed to Atty. Consunji were liquidated. However, the Court finds their statement irrelevant and self-serving.

• If indeed Atty. Consunji submitted the liquidation reports to the Finance Department, it should have been Santos, the Finance Branch Chief at that time, who is the most competent witness to testify having received these liquidation and accounting documents. However, there was no such statement coming from her which leads the Court to believe that there was no actual accounting and liquidation done for the moneys Atty. Consunji received from BASECO.

• Further, under the Rules of Evidence, when the contents of a document are the subject of inquiry in an action, the original document must be presented, as in this case, the original Official Receipts of the transactions and liquidation report submitted by Atty. Consunji. It is only in exceptional cases enumerated in Section 3, particularly Section 3(b) of Rule 130 that secondary evidence may be admitted. Such exception cannot apply in this case because Atty. Consunji failed to avail of his legal remedy to require BASECO or PCGG to produce the said documents, which were purportedly in the latter’s custody. Hence, the affidavits of his witnesses are not admissible to support his claim that he actually liquidated the moneys advanced to him by BASECO.

b. No exploitation of trust and confidence

Thus, lawyers should refrain from abusing or exploiting the relationship with a client.

When an action or proceeding is initiated in our courts, lawyers become the eyes and ears of their clients. Lawyers are expected to prosecute or defend the interests of their clients without need for reminders. The privilege of the office of attorney grants them the ability to warrant to their client that they will manage the case as if it were their own. The relationship between an attorney and client is a sacred agency. It cannot be disregarded on the flimsy excuse that the lawyer accepted the case only because he or she was asked by an acquaintance. The professional relationship remains the same regardless of the reasons for the acceptance by counsel and regardless of whether the case is highly paying or pro bono. (Ramirez v. Buhayang-Margallo [2015], supra.)

References

Canon III, 2023 Code of Professional Responsibility

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