Opinion ID: 2571721
Heading Depth: 1
Heading Rank: 6

Heading: rpc 1.14loans from mckean's trust account

Text: The most serious charge against McKean involves the loans he made from his trust account to American Hay Company. The complaint alleged this violated RPC 1.14, and the hearing examiner and Board agreed. RPC 1.14 provides the minimum requirements for a lawyer's fiduciary responsibility when handling clients' funds and property. See generally RPC 1.14; see also RPC Preliminary Statement. For example, RPC 1.14 requires a lawyer, inter alia, to deposit clients' funds in a trust account, separate from the lawyer's own funds. RPC 1.14(a). The rule also requires a lawyer to provide the client with documentation for the receipt of the funds and to [m]aintain 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 or her client regarding them.... RPC 1.14(b)(1), (3). RPC 1.14, however, also encompasses a duty of care beyond these minimum standards. As several commentators on professional responsibility have recognized, [9] `[a]n attorney who accepts the responsibility of a fiduciary nature is held to the high standards of the legal profession whether or not he acts in his capacity of an attorney.' Annotated Model Rules of Professional Conduct, 230-31 (Center for Professional Responsibility, American Bar Association, 4th ed.1999) (discussing model rule 1.15 and quoting Ridge v. State Bar, 47 Cal.3d 952, 766 P.2d 569, 574, 254 Cal.Rptr. 803 (1989)). Lawyers sometimes forget that the dangers of commingling are not merely that the lawyer will squander the money `borrowed' from a trust account and not be able to restore it, but that the commingled funds might be subject to attachment by a lawyer's creditors, thus preempting the lawyer's ability to do so. Geoffrey C. Hazard, Jr. & W. William Hodes, The Law of Lawyering: Handbook on the Model Rules of Professional Conduct § 19.4 (3d ed. 2001 & Supp.2002). Commingling and, to a lesser extent, conversion frequently result from bad bookkeeping rather than an intent to take the money. ABA/BNA Lawyer's Manual on Professional Conduct 45:303 (2002). RPC 1.14 thus requires more than merely keeping track of or not stealing client funds. A lawyer's duty to be honest and use good professional judgment is a higher standard than merely not breaking the law. Cf. Seventh Elect Church in Israel v. Rogers, 102 Wash.2d 527, 534, 688 P.2d 506 (1984) (the ethics rule of attorney-client confidentiality is a higher standard than the statutory attorney-client privilege). Lawyers are held to higher standards of moral conduct than are other citizens. In re Disciplinary Proceeding Against Krogh, 85 Wash.2d 462, 488, 536 P.2d 578 (1975). A lawyer's ethical duties are not merely toward his clients. A lawyer's obligation to protect ... property... and to exhibit the highest standards of honesty and integrity extends to the public as well as to the lawyers' clients. In re Disciplinary Proceeding Against McGough, 115 Wash.2d 1, 11, 793 P.2d 430 (1990). We hold that RPC 1.14 encompasses the extreme care, caution, and good judgment required of a lawyer when handling a client's property. A lawyer has the highest fiduciary duty to steward his client's funds with the utmost care, transparency, and prudence. Although the duty not to self deal client funds is explicitly addressed elsewhere in the Rules of Professional Conduct, [10] RPC 1.14 implicitly includes the duty not to use a lawyer's trust account as a personal bank. A lawyer thus violates RPC 1.14 by loaning money held in trust to the lawyer's own business ventures or those of the lawyer's business associates, or to other clients. Here, McKean violated RPC 1.14 when he loaned client money held in trust to his own business venture with another client. This act alone was an ethical violation requiring the imposition of sanctions. McKean compounded the seriousness of the violation by not securing or accurately documenting the investment in a venture that he knew, or should have known, to be a poor business risk, and by not providing notice to those with an interest in the funds. McKean's sloppy accounting practices not only further obscured the loans to the Company, but jeopardized all of the client funds he held in trust. McKean ultimately reimbursed with interest the client funds he borrowed, but he endangered the funds entrusted to him and violated the high fiduciary duty owed his clients. We therefore affirm that McKean violated RPC 1.14 and the high standards of professional judgment and fiduciary duty that rule encompasses. We reject McKean's assertion that he had legal authority to make the loans as personal representative of the Bergman Estate under RCW 11.100.020. [11] We also reject McKean's argument he did not have a duty to the heirs of the estate because they were not his clients. [12] These arguments miss the point. McKean's loans of client funds held in trust violated RPC 1.14 despite any legal authority McKean had to invest the money of the Bergman estate. Accord In re Levingston, 96-1379 (La.12/6/96), 685 So.2d 105 (making speculative and unsecured loans with trust funds to business associates and friends was grossly negligent and in reckless disregard of fiduciary duties, despite no evidence of intentional misconduct or dishonest motive). In sum, McKean's loan of client money held in trust alone violates RPC 1.14 and requires the imposition of sanctions. McKean compounded this violation by not providing security or documentation for the loans and by his poor accounting practices. We also affirm the undisputed conclusion that McKean violated RPC 1.14 when he commingled client funds held in trust with his own money for approximately two weeks in 1996, as well as his undisputed violation of RPC 1.8(a) when he failed to adequately disclose to the Martins his conflict of interest.