I hold a condo deposit as escrow agent; my client and the purchaser both claim it. What do I do with the disputed funds?

Plain-English summary

The inquiring attorney acted as escrow agent for a client's intended condominium sale and holds the purchaser's deposit. The purchaser, unable to obtain financing, claims a refund of the deposit; the client claims the deposit on the ground that the purchaser defaulted on the agreement.

The panel concluded that Rule 1.15 and its comments govern. A lawyer may have a duty to protect third-party interests in the disputed property against the client's claim, and in this situation may refuse to surrender the property to the client. The panel agreed that the property should be kept in a client fund account.

The panel advised that if the dispute over the deposit cannot be resolved, the attorney should consider filing an interpleader action in the appropriate forum.

Currency note

This opinion was issued in 1992, after the Rhode Island Supreme Court adopted the Model Rules of Professional Conduct effective November 15, 1988, and it applies Rule 1.15 as originally adopted. The Rhode Island Supreme Court later revised the Rules of Professional Conduct in 2007 as part of the nationwide Ethics 2000 process, which amended Rule 1.15. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule mentioned here.

Common questions

Q: Can I hand the disputed deposit to my client because it is my client's sale?

A: Per the opinion, a lawyer may have a duty to protect the purchaser's interest against the client's claim and may refuse to surrender the funds to the client.

Q: Where should I keep the disputed deposit while the claims are unresolved?

A: Per the opinion, the property should be kept in a client fund account.

Q: What if the client and purchaser cannot agree on who gets the deposit?

A: Per the opinion, the attorney should consider filing an interpleader action in the appropriate forum.

Background and rules framework

The opinion applies Rhode Island Rule 1.15 (safekeeping property), corresponding to Model Rule 1.15. The panel read Rule 1.15 and its comments to allow, and potentially require, a lawyer holding disputed property to protect a third party's competing interest, to decline to release the funds to the client, to hold the funds in the client fund account, and to resolve genuinely competing claims through interpleader.

Citations and references

Rules of Professional Conduct:

• MR 1.15 (safekeeping property)
• RI RPC 1.15

Statutes:

• None cited.

Cases:

• None cited.

Other opinions cited:

• None cited.

See also

• RI EAP Op. 89-16: Withdrawal and Interpleader Over Disputed Escrowed Construction Funds
• RI EAP Op. 91-53: Must Hold Disputed Fee Funds in Escrow Until Resolved
• RI EAP Op. 91-37: May Withdraw and Must Interplead When Client Refuses to Pay Medical Bills

Source

• Landing page: https://www.courts.ri.gov/attorney-resources/Pages/Ethics-Advisory-Panel-default.aspx
• Original PDF: https://www.courts.ri.gov/Opinions/EAP%2092-21.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

Digest of Ethics Advisory Panel
Opinion #92-21, Request #237
Issued May 5, 1992

An attorney seeks Panel advice regarding the intended sale of a condominium by the attorney's client. The attorney acted as escrow agent and is in possession of the deposit. The purchaser, who was unable to obtain financing, claims that he is entitled to a refund of the deposit. The client claims the deposit on the ground that the purchaser defaulted on the agreement.

The Panel believes that Rule 1.15 and the comments thereto govern this situation. A lawyer may have a duty to protect third party interests in the disputed property against the client's claim. In this situation, a lawyer may refuse to surrender the property to the client. The Panel agrees that the property should be kept in a client fund account. If the dispute over the deposit cannot be resolved, then the attorney should consider filing an interpleader action in the appropriate forum.