Ethics Hotline & Opinions

ETHICS DOCKET NO. 2001-13

MARYLAND STATE BAR ASSOCIATION, INC.

COMMITTEE ON ETHICS

ETHICS DOCKET NO. 2001-13

UN-CASHED THIRD PARTY ESCROW CHECKS


You have asked for the Committee’s guidance involving a situation that arose when you determined that some of your clients had not negotiated checks that you had issued to them. You want to contact your clients and determine if the checks have been lost and to reissue them when appropriate, but are concerned that without a “stop payment order” your client might inadvertently negotiate one of the previously issued checks and your Trust Account balance would be jeopardized. You have asked your bank and another approved financial institution about their policies on honoring checks and have been informed that each will honor a check regardless of date unless a stop payment order exists. They each advise you that you may pay them to renew a stop payment order every six months.

By Rule 1.15, lawyers are required to maintain a Trust Account in certain approved financial institutions pursuant to the Maryland Rules of Procedure, Title 16, Chapter 600 and § 10-304 of the Business Occupations Article, Md. Code Annot. While the Rules allow all funds held in trust to be commingled in one account, the concept of the trust prohibits a lawyer from overdrawing one client’s funds for the benefit of another. Similarly, the lawyer’s funds must not be commingled in the trust except as allowed in Rule 16-607. That Rule specifically contemplates that a lawyer must provide a mechanism for paying the costs of account maintenance:

Rule 16-607. Commingling of funds.

b. Exceptions.-

1. An attorney or law firm shall either (A) deposit into an attorney trust account funds to pay any fees, service charges, or minimum balance required by the financial institution to open or maintain the account, including those fees that cannot be charged against interest due to the Maryland Legal Services Corporation Fund pursuant to Rule 16-610 b 1 (D), or (B) enter into an agreement with the financial institution to have any fees or charges deducted from an operating account maintained by the attorney or law firm. The attorney or law firm may deposit into an attorney trust account any funds expected to be advanced on behalf of a client and expected to be reimbursed to the attorney by the client.

The Rules of Professional Conduct require you to structure your practice in such a way so as to preclude the effect of a client’s intentional or inadvertent negotiation of a replaced check from overdrawing funds available to your client in your Trust Account.

 

REFERENCES:

Maryland Annotated Code, Business Occupations Article, § 10-304
Maryland Rules of Procedure, Title 16, Chapter 600
Maryland Rules of Procedure 16-607
Maryland Rules of Professional Conduct 1.15


DISCLAIMER: Opinions of the Maryland State Bar Association (MSBA) Ethics Committee are an uncompensated service of the MSBA. This Committee’s opinions are not binding on the Maryland Court of Appeals, Maryland Attorney Grievance Commission, MSBA or this Committee. The reader is advised that subsequent judicial opinions, revisions to the rules of professional conduct, and future opinions of this Committee may render the Opinions stated herein outdated. As such, the Committee’s opinions are advisory only and neither the Committee nor the MSBA assumes any liability whatsoever with respect thereto. Accordingly, reliance upon the opinions of this Committee is solely at the risk of the user.