Can a lawyer who over-collected on one client's judgment apply the excess held in trust to another client's claim against the same debtor when the debtor objects?

Plain-English summary

Opinion E-75-16 considered an attorney who represented two creditors of the same debtor. The first creditor, an insurance company, reduced its claim to judgment and collected it in full. After collection but before the attorney accounted to the insurer, the insurer audited, concluded it had overcharged the debtor by about $200, and was remitted the corrected (lower) amount, leaving roughly $200 in the attorney's trust account. The attorney also represented a second creditor of the same debtor whose undisputed claim exceeded that $200. The debtor did not dispute the second creditor's claim but objected to the $200 being applied to it. The question was whether the attorney could apply the funds to the second client's claim.

The committee considered Disciplinary Rule 5-106, on settling similar claims of clients, and Disciplinary Rule 9-102, on the proper handling of trust funds, and concluded that the proposed payment of the $200 held as a result of the over-collection, where the debtor strongly objected, would be improper. The committee further stated that doing so would violate the lawyer's normal fiduciary responsibility to clients and to others who have entrusted funds to an attorney.

Currency note

This opinion was issued in 1975, before Wisconsin's July 1, 2007 adoption of the revised Rules of Professional Conduct for Attorneys (the state's Ethics 2000 update), and it applies the former Code's DR 5-106 and DR 9-102. The current counterpart governing trust funds and property of others is SCR 20:1.15 / Model Rule 1.15 (safekeeping property). 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 Treat this page as historical context, not current guidance.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, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer move over-collected funds from one client's matter to another client's claim?

A: Under this opinion, no, where a party with an interest objects. The committee found that applying the roughly $200 over-collection to the second client's claim, over the debtor's strong objection, would be improper.

Q: Why did the over-collected money pose a problem?

A: The committee treated the funds as held in trust and subject to the lawyer's fiduciary responsibility to those who entrusted funds, not as money the attorney could redirect to another client over the debtor's objection.

Background and rules framework

The opinion applied the former Code's DR 5-106 (settling similar claims of clients) and DR 9-102 (handling of client trust funds), along with the lawyer's general fiduciary duty, to disputed funds held in a trust account. The current counterpart is SCR 20:1.15 / Model Rule 1.15 (safekeeping property).

Citations and references

Rules of Professional Conduct:

• Model Rule 1.15 / SCR 20:1.15 (safekeeping property; trust accounts); former Code DR 5-106, DR 9-102

See also

• WI Ethics Op. E-86-9: Retainers and Advances in Trust Accounts
• WI Ethics Op. E-83-11: Garnishment Action to Secure Fees

Source

• Landing page: https://www.wisbar.org/formembers/ethics/pages/formal-opinions.aspx
• Original PDF: https://www.wisbar.org/formembers/ethics/Ethics%20Opinions/E-75-16.pdf