Editor's Note:
State Bar Ethics Opinions cite the applicable California Rules of Professional Conduct in effect at the time of the writing of the opinion. Please refer to the California Rules of Professional Conduct Cross Reference Chart for a table indicating the corresponding current operative rule. There, you can also link to the text of the current rule.
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Ethical responsibilities involved in preserving the identity of trust account funds.
It is improper for an attorney to transfer clients' funds held in a trust account to the attorney's general account, even if the clients can no longer be located.
Rule 8-101 of the Rules of Professional Conduct of the State Bar.
American Bar Association Code of Professional Responsibility, Disciplinary Rule 9-102.
Code of Civil Procedure section 1518.
The Committee has been requested to render an opinion as to the status of monies long held in a trust account of a legal aid society, the attorneys having been unable in good faith to locate said clients. The attorneys wish to be advised with respect to the propriety of transferring said trust funds to their general account, with the express provision that said amounts will be payable to said clients when and if said clients appear to claim the monies. For reasons hereinafter stated, the Committee is of the opinion that such transfer would be improper.
The applicable provision of the Rules of Professional Conduct of the State Bar, as adopted by the Board of Governors and approved by the California Supreme Court effective January 1, 1975, is rule 8-101 which, in relevant part, reads as follows:
"Rule 8-101. Preserving Identity of Funds and Property of a Client.
"(A) All funds received or held for the benefit of clients by a member of the State Bar or firm of which he is a member, including advances for costs and expenses, shall be deposited in one or more identifiable bank accounts labeled "Trust Account," "Client's Funds Account" or words of similar import, maintained in the State of California, or, with written consent of the client, in such other jurisdiction where there is a substantial relationship between his client or his client's business and the other jurisdiction and no funds belonging to the member of the State Bar or firm of which he is a member shall be deposited therein or otherwise comingled therewith except as follows:
"(1) Funds reasonably sufficient to pay bank charges may be deposited therein.
"(2) Funds belonging in part to a client and in part presently or potentially to the member of the State Bar or firm of which is member must be deposited therein and the portion belonging to the member must be withdrawn at the earliest reasonable time after the member's interests in that portion becomes fixed. However, when the right of the member of the State Bar or firm of which the right of the member to receive a portion or trust funds is disputed by the client, the disputed portion shall not be withdrawn until the dispute is finally resolved."
No other exceptions are either noted or, by inference, approved. The relevant portions of American Bar Association Code of Professional Responsibility, Disciplinary Rule 9-102 are identical to the above-quoted subsection of rule 8-101 of the Rules of Professional Conduct.
American Bar Association Committee of Professional Ethics, informal opinion No. 991 (1967) held that an attorney may not offset the expense of running a trust account by putting trust funds in a separate savings account, stating:
"The language of this Canon [former canon 11] is too plain to receive or permit interpretation. When the Canon states that money of the client or collected for the client or other trust property coming into the possession of the lawyer should not under any circumstances be used by him, it means exactly what it says..." (Emphasis added.)
The Committee suggests that said unclaimed monies be subject to distribution pursuant to California Code of Civil Procedure section 1518. The Committee observes that, if the provisions pertaining to trust funds contained in the Unclaimed Property Law (Code Civ. Proc., Sec. 1518 et seq.) were followed, the Committee would see no impropriety.
This opinion is issued by the Standing Committee on Professional Responsibility and Conduct of the State Bar of California. It is advisory only. It is not binding upon the courts, The State Bar of California, its Board of Governors, any persons or tribunals charged with regulatory responsibilities, or any member of the State Bar.
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