LEO #1617 ATTORNEY AS FIDUCIARY; ACCOUNTING FOR FUNDS AND PROPERTY
You have presented a hypothetical situation in which an attorney
serves as an executor, trustee, guardian, attorney-in-fact, or
other fiduciary.
You have asked the committee to opine under the facts of the
inquiry, (1) whether DR 9-102(B)(3) imposes a duty of accounting on
an attorney serving as executor, trustee, guardian, attorney-in-
fact, or other fiduciary; (2) if there is a duty to account imposed
by DR 9-102(B)(3), how an attorney satisfies his obligation to
render "appropriate accounts"; (3) to whom an attorney should
render any such accounts; and (4) whether the duty of accounting
may be waived.
As you have indicated, the appropriate and controlling Disciplinary
Rule related to your inquiry is DR 9-102(B)(3), which provides that
an attorney shall maintain complete records of all funds,
securities, and other properties of a client coming into the
possession of the lawyer and render appropriate accounts to his
client regarding them.
The committee responds to your inquiries relative to the facts
presented as follows:
1. The committee is of the opinion that DR 9-102(B)(3) does not
distinguish between an attorney rendering legal services to a
client and an attorney serving as an executor, trustee,
guardian, attorney in fact, or other fiduciary, and therefore
an attorney serving in any of the stated fiduciary capacities
has a duty to render appropriate accounts. See LEO #1515.
The Committee notes that there is significant case authority
supporting the imposition of this duty. "Because the
professional fiduciary rules apply generally, most courts have
not been impressed with arguments that the requirements of the
professional rules should be narrowly applied to client-lawyer
relationships and have applied the rules even if the lawyer
was technically functioning as a trustee, guardian, ... or was
holding funds of a third party who was not the lawyer's
client." See e.g., C.W. Wolfram, Modern Legal Ethics at 178;
In re Burton, 472 A. 2d 831 (D.C.App. 1984), cert. denied ___
U.S. ___ , 105 S.Ct. 563 (1984); State v. Freeman, 629 P. 2d
716 (1981); In re Gallop, 426 S. 2d 509 (1981); In re Cary,
585 P. 2d 1161 (1978); Kentucky Bar Association v. Ricketts,
599 S.W. 2d 454 (1980); Clark v. State Bar, 246 P. 2d 1
(1952); In re Draper. 317 A. 2d 106 (Del.1974); Oklahoma ex
rel. Oklahoma Bar Association v. Steger, 433 P.2d 225 (1966).
Indeed, the committee has repeatedly and consistently opined
that if an attorney acting in a fiduciary capacity violates
his or her duty in a manner that would justify disciplinary
action had the relationship been that of attorney-client, the
attorney may be properly disciplined pursuant to the Code of
Professional Responsibility. See LEOs #1325, #1442, #1487.
Further, it should be noted that the definition of "attorney
trust account" under DR 9-103 includes accounts in which are
deposited funds received or held by an attorney or law firm
for an estate or ward.
2. The committee recognizes that there are two general types of
fiduciary relationships in which attorneys serve: those
governed by the accounting rules of Title 26 of the Code of
Virginia, related to fiduciaries, and those for which there is
no statutorily required accounting. How an attorney satisfies
his duty of accounting, therefore, depends upon the type of
fiduciary relationship.
To the extent that an attorney is serving as a fiduciary in a
situation subject to the accounting provisions of Code of
Virginia 26-8 et. seq., the committee is of the view that
compliance with those requirements satisfies the requirements
of DR 9-l02(B)(3) for the attorneey to render appropriate
accounts.
As to fiduciary relationships which are not subject to Title
26, the committee opines that DR 9-102(B)(3) requires at least
an annual accounting of funds and property under the
attorney's control until the attorney no longer has the funds
or property under his control.
In those cases not subject to Title 26, the substance of an
appropriate accounting may vary significantly depending on the
circumstances. For example, in cases where, as a result of
the duties imposed on the attorney or the amount of funds and
property under his or her control, an attorney has little or
no discretion in the use or application of those funds and
property, a simple receipt and disbursement summary (similar
to that described in Code of Virginia 26-17.8) will be
satisfactory. In other cases, however, where the attorney has
significant discretionary power, the accounting should be of
sufficient detail to allow persons receiving it to determine
if the attorney has properly exercised that discretion. Thus,
in a case of trust arrangements which will last for a long
period of time and which involve a substantial amount of money
and property, the committee suggests the preparation of an
accounting similar to that contemplated by Code of Virginia
26-17.6.
Special circumstances exist where the attorney is the
attorney-in-fact. He may well have authority to take control
of his client's money or property, but he may not have done
so, either because his client is still capable or there is no
need at the time to take control of certain assets. In that
case, the attorney need only account when he has taken control
of specific assets, and then he need account only for those
specific assets and not for all of the assets which the power
of attorney authorizes him to control.
3. The committee opines that determination of to whom the
accounting should be rendered again depends upon the type of
fiduciary relationship.
The committee believes that, to the extent that the attorney's
client is also the primary beneficiary of the fiduciary
relationship, as might be the case involving an attorney-in-
fact or a trust of which the client is a beneficiary, the duty
of accounting should lie to the attorney's client unless
directed otherwise by the terms of the trust. The committee
further believes that, in the case of a trust, the attorney
should account to at least the income beneficiaries.
The committee is of the view that, in the event the person to
whom an accounting should be rendered is under a disability or
incapacity, the appropriate person to receive the accounting
would be the guardian/committee of the property of the person
under an incapacity. If the attorney is also the guardian or
the committee, or if no such individual has been appointed,
the appropriate person to receive the accounting would be an
adult member of the family of the individual under a
disability or incapacity.
4. Finally, the committee is of the opinion that the duty of
accounting may not be waived. The plain language of
Disciplinary Rule 9-102 does not provide for waiver of the
duties therein imposed. As an advisory body, the committee is
charged with interpretation of the Code of Professional
Responsibility and is not authorized to unilaterally modify or
amend the Disciplinary Rules. See Rules of the Supreme Court,
Part Six, Section IV, 10 (k)(i-ii).
[DRs 9-102(B)(3), 9-103; LEOs 1515, 1325, 1442, 1487; Va. Code Ann.
Title 26, 26-8 and 26-17.8; Rules of the Supreme Court of
Virginia, Part 6, IV, 10(k)(i-ii); C. W. Wolfram, Modern Legal
Ethics at 178; In re Burton, 472 A. 2nd 831 (D.C.App. 1984), cert.
denied U.S. , 105 S.Ct. 563 (1984); State v. Freeman, 629
P. 2nd 716 (1981); In re Gallop, 426 S. 2d 509 (1081); In re Cary,
585 P. 2nd 1161 (1978); Kentucky Bar Association v. Ricketts, 599
S.W. 2d 454 (1980); Clark v. State Bar, 246 P. 2d 1 (1952); In re
Draper, 317 A. 2d 106 (Del. 1974); Oklahoma ex rel. Oklahoma Bar
Association v. Steger, 433 P.2d 225 (1966)]
Committee Opinion
February 17, 1995
|