Opinion ID: 2603915
Heading Depth: 1
Heading Rank: 5

Heading: The Standish Matter.

Text: This count charges the respondent with failing to maintain a separate identifiable bank account for certain funds which he received for the use of his client, Glenn D. Standish, and not paying certain portions of the fund to the client upon demand. Also involved in the problems arising out of the relationship was a receipt and option contract for the sale to Standish of a dwelling owned by the respondent, using $10,000 of the client's funds as earnest money. This occurred in November 1975. The purchase price was $60,000. The contract was induced and prepared by respondent. It was a standard receipt and option contract. The liquidated damages clause was stricken by the respondent. The client had no independent advice and relied completely upon the respondent. Standish was unable to obtain a loan on the property in an amount sufficient to enable him to exercise the option to purchase, and he therefore demanded the return of his deposit. The respondent did not have sufficient available funds in his business account to comply with the refund demand. When respondent failed to return the deposit after repeated demands extending over a three- or four-week period, Standish retained other counsel to collect the money. At this point, respondent advised his former client, Standish, that unless he completed the purchase by a specified date the respondent would retain the $10,000 deposit as liquidated damages. After some negotiations and further delay, the respondent made a full accounting to Standish and paid him the amount owing. Standish paid his new counsel $1,800 for his services in recovering the funds. The Committee concluded that respondent accepted money belonging to his client under circumstances amounting to a trust, and that the money should have been placed in a separate identifiable bank account. Secondly, the Committee concluded that it was improper, under the circumstances, for the respondent to enter into the receipt and option agreement with his client. The separation of the funds of a client from those of the lawyer is imperative. Commingling such funds inevitably leads to trouble. The evil effects of such a practice are evident here. DR 9-102(A), EC 9-5. The Code of Professional Responsibility admonishes a lawyer not to enter into any business transaction with a client if the two have differing interests therein and if the client expects the lawyer to exercise his professional judgment for the protection of the client, unless the client has consented after full disclosure. DR 5-104(A). The Committee properly found that the transaction here fell within the proscription of this wise rule.