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Opinion #43
Issued 11/22/1983
The Grievance Commission of the Board of Overseers
of the Bar
The Commission has received a request for an
advisory opinion about the ethical propriety of the attorney’s conduct in the
following situation.
Facts
Attorney for Seller (Attorney S) at real estate
closing asks Attorney for Buyer (Attorney B) to make out the check for the
balance of the purchase price payable to “Attorney S Trust Account.” The
contract of sale called for the balance due to be paid by check payable to order
of Seller, and provided that no term of the contract could be varied except by
agreement in writing signed by both parties. No such written variance was made.
Attorney B has in his trust account the amount of the purchase price paid to him
by Buyer, and he has no authority to do other than close according to the terms
of the contract. Attorney S does not have written authority from his client,
Seller, to show Attorney B authorizing Attorney S to have the money paid to
Attorney S Trust Account. Attorney S urges Attorney B to comply with request
anyway. Attorney S does have a trust account. It has in it only a small amount
of the attorney’s personal funds necessary to cover bank charges. Earlier on the
day in question Attorney S had deposited a check for $60,000.00 but he has
already drawn a check against this deposit for $60,000.00 payable to Client Z
who is entitled thereto.
Attorney B draws a check on his trust account for
the balance due, $70,000.00, payable to “Attorney S Trust Account,” receives the
deed, and records it. Attorney S sends a check drawn on his trust account to his
Seller client for the full $70,000.00, having deposited the check received from
Attorney B. The next day Client Z cashes his check for $60,000 at the bank.
Right after that the check for $60,000.00 which has been deposited is returned,
payment refused. When Seller presents his check to the bank for $70,000.00, he
is refused payment because of insufficient funds. We assume that Attorney S used
his trust account in this transaction for his own purposes and not for the
benefit of his client.
Opinion
On the facts given, the Commission does not
believe that an ethical infraction has occurred. The facts presented do not tell
us what we critically need to know, which is how the problem was resolved and
how quickly Seller received his funds, if he ever did.
Maine Bar Rule 3.6(f)(2) provides:
A lawyer shall:
(i) Promptly notify a client of the receipt of his
funds, securities, or other properties;
(ii) Identify and label securities and properties
of a client promptly upon receipt and place them in a safe‑deposit box or other
place of safekeeping as soon as practicable;
(iii) Maintain complete records of all funds,
securities, and other properties of a client coming into possession of the
lawyer and render prompt and appropriate accounts to his client regarding them;
and
(iv) Promptly pay or deliver to the client, as
requested by the client, the funds, securities, or other properties in the
possession of the lawyer which the client is entitled to receive. (Emphasis
added).
On the facts presented by this inquiry, it was the
duty of Attorney S to deliver $70,000.00 to his Seller Client. If the funds were
no longer available in his trust account, Attorney S was nevertheless obligated
to pay that amount to Seller. Attorney S was required to use his own funds if
necessary. It is the Commission’s opinion that a brief delay while this payment
was arranged would not amount to a violation of 3.6(f)(2)(iv), but any
substantial delay would subject Attorney S to disciplinary action.
Obviously the conduct outlined by this inquiry
represents very poor judgment on the part of Attorney S and exemplifies the
peril of drawing checks against uncollected funds. Attorney B likewise exercised
poor judgment, but in our opinion not an ethical violation, by allowing his
fellow attorney to persuade him to make the purchase funds payable otherwise
than directly to the Seller. This concession subjects his Buyer client to the
risk of litigation over the validity of the conveyance, a risk which could
easily have been avoided by more exact compliance with the contract.
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