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(Inquiry No. 446 )
Disbursement of escrow funds.
To the extent escrow funds are insufficient to pay the sum due to party entitled thereto because of the escrow attorney’s error, the deficiency should be covered by the attorney so that the full amount due can be paid.
Inquiring counsel represented a client in connection with a personal injury claim. A narrative report from the client’s Orthopedist was required. Inquiring counsel discussed with the client the possibility of giving the Orthopedist a lien on the settlemept to cover his charge for the report. The client agreed and inquiring counsel wrote to the orthopedist offering a lien on any settlement in lieu of present payment of the report fee. The Orthopedist agreed and submitted his report. No other documentation concerning the client was signed by inquiring counsel, or to counsel’s knowledge, by the client. The personal injury claim was subsequently settled and the settlement check was deposited to inquiring counsel’s escrow account. In disbursing the escrowed funds to the client, an error was made in the client’s favor, leaving insufficient funds in the escrow account to pay the orthopedist his fee. Upon discovery of the error, before client presented the check for payment, counsel advised the client that an error had been made and not to deposit the check. The client disregarded the instruction and deposited the check anyway. Client refuses to remit the overpayment.
May inquiring attorney deduct the overage from the amount due the Orthopedist and should the balance in the escrow account be paid to the Orthopedist or to the client?
The question of to whom the funds in escrow belong is one of law beyond the purview of this committee, but to the extent that the funds deposited belong to the Orthopedist, they should be paid to him and if the balance on hand in the escrow is insufficient because of the erroneous overpayment to the client, the error is for counsel’s account and the shortage must be made up by him to make the Orthopedist whole.
Whether or not a lien in favor of the Orthopedist was created and to whom escrow funds belong are questions of law beyond the purview of this committee. However, inquiring counsel did offer a right to payment against the settlement in exchange for the orthopedist’s report which offer the Orthopedist accepted by furnishing the report. The making of the offer was authorized by the client as indicated by the inquiring counsel. Inquiring counsel recognized the obligation to the Orthopedist by depositing the settlement funds in his escrow account and attempting to retain the appropriate amount for remittance. Only by reason of an error was the amount retained after payment to the client insufficient to cover the sum due the Orthopedist. The error, being that of the attorney, cannot be charged to the Orthopedist. The attorney should cover the deficiency and seek reimbursement from his client.
EC 1-1 provides that it is a lawyer’s ethical responsibility to maintain the integrity of the Bar to meet the highest standards. EC 1-5 states that “A lawyer shall maintain the highest standards of professional conduct and should encourage others to do so.” As provided in DR 1-102 A 4, a lawyer shall not “engage in conduct involving dishonesty, fraud, deceit, or misrepresentation.” A lawyer should promote public confidence in the legal profession (EC 9-1) and “every lawyer owes a solemn duty to uphold the integrity and honor of the profession … and to strive to avoid not only professional impropriety but also the appearance of impropriety” (EC 9-6).
The Orthopedist, by his actions, in responding to the lawyer’s offer, is entitled to rely on the lawyer fulfilling the terms of the offer. A failure by inquiring counsel to deliver as promised, in the opinion of this committee, would violate the mandates set forth in the above cited ethical considerations and disciplinary rule.
[Approved by the Executive Subcommittee on 1/5/93] [Approved by the Full committee on 1/27/93].