Opinion ID: 2583020
Heading Depth: 1
Heading Rank: 6

Heading: Law Firm Has A Beneficial Interest In the Constructive Trust Impressed By Operation of Law On the Counsel-Fee Award

Text: ¶ 11 When an award for an attorney's fee is made directly to the client who is a party, [15] a constructive trust attaches eo instante by operation of law to the award [16] for the benefit of the lawyer who performed the services for which compensation is allowed. The legal entitlement to the award goes to the client, but the beneficial interest is created in favor of the lawyer. The client stands as a constructive trustee and the lawyer as a constructive beneficiary ( cestui que trust ). [17] It is the dual titlethe splitting of title into legal and equitable componentsthat creates the constructive trust. If money for satisfaction of the counsel-fee award comes into the hands of a constructive trustee it stands impressed eo instante in trustee's hands with the earmarks of the trust res. ¶ 12 The application of constructive-trust law to a counsel-fee award operates to protect the ethical restraints upon legal practitioners. These restraints prohibit a lawyer from sharing fees with nonlawyers and disallows a nonlawyer's attempt to lay claim to an attorney's fee. [18] ¶ 13 The constructive trust arises here from the wording of the counsel-fee award and the attorney-client relationship. When the wife was awarded an attorney's fee, she then stood as a constructive trustee of the award for the benefit of the Law Firm by operation of law. An ethical conflict would have arisen in violation of law if she were declared the sole beneficiary of that award. This is so because such declaration would constitute a legally impermissible award of an attorney's fee to a nonlawyer. In short, the imposition of a constructive trust in favor of the service-rendering lawyer assures the award's conformity to applicable law.