Dear PAO,
My brother secured the services of a lawyer to help him with the annulment of his marriage. About two years into their engagement, this lawyer obtained a loan from my brother, through his lending company, in the amount of Five million pesos (P5,000,000.00). Unfortunately, the lawyer failed to comply with the terms of their contract as he failed to make timely payments. My brother is thinking of filing a disbarment case against him, but he is unsure whether such action is proper. He saw a “vlog” stating that lawyers are not allowed to borrow from their clients and that such act constitutes a violation of the code of conduct for lawyers. Is that correct? Please advise.
Conrado

Dear Conrado,
The rule, as provided for under A.M. No. 22-09-01-SC, or the Code of Professional Responsibility and Accountability (CPRA), promulgated by the Supreme Court on 11 April 2023, is that lawyers are proscribed from borrowing money from their clients while there exists a lawyer-client relationship between them, unless the clients’ interests are fully protected by the nature of the case, or by independent advice. This rule is intended to thwart any possible abuses on the part of lawyers who are at an advantageous position for their knowledge of the law and skills acquired in practice.

However, the foregoing rule admits of certain exceptions. Under the CPRA, lawyers may borrow from their clients: (1) if it is a standard commercial transaction for products or services that the latter offers to the public in general; (2) if the concerned lawyer and the client have an existing or prior business relationship; or (3) if there is a contract between the concerned lawyer and client. To be certain, Section 52, Canon III of the CPRA states:
“SECTION 52. Prohibition on lending and borrowing; exceptions. – During the existence of the lawyer-client relationship, a lawyer shall not lend money to a client, except under urgent and justifiable circumstances. Advances for professional fees and necessary expenses in a legal matter the lawyer is handling for a client shall not be covered by this rule.

“Neither shall a lawyer borrow money from a client during the existence of the lawyer-client relationship, unless the client’s interests are fully protected by the nature of the case, or by independent advice. This rule does not apply to standard commercial transactions for products or services that the client offers to the public in general, or where the lawyer and the client have an existing or prior business relationship, or where there is a contract between the lawyer and the client.” (Emphasis supplied)
The rationale for the aforementioned exceptions has been explained by the Supreme Court, through Honorable Associate Justice Alfredo Benjamin S. Caguioa, in the case of Henry G. Lacida vs. Atty. Rejoice S. Subejano (A.C. No. 13361 [Formerly CBD Case No. 17-5314], February 12, 2025):

“The exceptions in Section 52 of the CPRA are intended to carve out specific transactions where the prohibition on borrowing of money or property from clients does not apply. These exceptions recognize that legitimate business transactions can occur between lawyers and clients outside the scope of their professional relationships. Still, not all business transactions are exempt from the prohibition. Only transactions where the lawyer avails of the products and services generally offered by the client to the public, where there is an existing or prior business relationship between the lawyer and the client, or where the transaction is covered by a contract, are excluded from the prohibition. In these cases, the client’s interests are safeguarded through formal agreements or through the client’s knowledge of the business arrangement, ensuring that the transaction does not compromise the lawyer’s duties of trust and loyalty to the client.”
Accordingly, it is not entirely correct to say that any instance of a lawyer borrowing money from a client constitutes a violation of the CPRA. It is only violative of the CPRA if the transaction does not fall under any of the exceptions recognized therein. Particularly, in the situation of your brother, the act of his lawyer of borrowing money from your brother, through his lending company, may not be considered a violation of the CPRA if it can be established that said loan transaction is a standard commercial transaction for products or services which your brother’s company offers to the public in general, or if there is a contract of loan between them.

We hope that we are able to answer your queries. This advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.

We appreciate your trust and support.

Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to [email protected]