You have asked for this Committee's opinion whether you are ethically prohibited from completing an attachment of a judgment debtors bank account, and distributing the funds contained in the account to your client, because the debtor may have a continuing interest in the funds. Based on the facts presented in your inquiry and the applicable Rules of Professional Conduct, the committee believes that you are not prevented from completing the attachment and disbursing the funds, even though the judgment debtor claims an interest in the funds and asserts that the debt has been satisfied.
You have advised the Committee of the following facts: Your firm was retained in a collection matter to recover funds owed to your client by the debtor. Following the receipt of a letter demanding payment of the debt, debtor's counsel contacted you claiming that the debt would be paid in full following completion of an arbitration matter.
To protect your client's interests, you filed a complaint against the debtor, which was not answered within the time period allowed by law. Accordingly, judgment was taken by default and a writ of execution with garnishment was filed against a bank account in the name of the judgment debtor.
You subsequently received a phone call from the judgment debtor claiming that the debt had been paid in full to a collection agency, which, he alleges, claimed to represent your client. Your client, however, has stated that while the collection agency solicited him, he declined its services and never received remittance of any portion of the debt owed. The judgment debtor was advised of this information and that neither the judgment nor the bank account would be released. For the present time, you have agreed not to disburse the funds held by the bank; however, your client is demanding that you complete the attachment and disburse the funds to him.
Rule 1.15(b) generally governs a lawyer's obligation with respect to property in his possession, or under his control, which may be subject to claims or interests of a third party. Rule 1.15(b) provides that:
Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person. Except as stated in this rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive and, upon request by the client or third person, shall promptly render a full accounting regarding such property.
The comments to Rule 1.15 provide, in part, that:
Third parties, such as a client's creditors, may have just claims against funds or other property in a lawyer's custody. A lawyer may have a duty under applicable law to protect such third party claims against wrongful interference by the client, and accordingly, may refuse to surrender the property to the client. However, a lawyer should not unilaterally assume to arbitrate a dispute between the client and the third party.
In the present case, there is no question that you have notified both the client and debtor of the judgment and attachment of the bank funds. The only issue is entitlement and whether the judgment debtor has any colorable claim to the funds subject to the attachment, which might require you to maintain the status quo to protect its interest against your client's request to disburse the funds.
Unlike the typical scenario described in the comments to Rule 1.15, your client is a judgment creditor, and it is the judgment debtor claiming an interest in the funds now legally controlled by you pursuant to applicable Pennsylvania law. Because Pennsylvania law, and not the Rules of Professional Conduct, will determine priority to the funds, the judgment debtor's claim or purported defense of payment are not ethical issues you must consider before proceeding to disburse the funds to your client. In any event, the comments to Rule 1.15(b) specifically state that you are not required to determine the validity of the debtor's entitlement to the funds or its payment defense, since these issues are legal in nature and must be decided by the court upon the debtor's own petition or motion.
Based on the facts of your inquiry, it does not appear that the Rules of Professional conduct impose any duty on you to protect the debtor's alleged interest in the funds now subject to a writ of execution. In fact, under the circumstances as they have been portrayed to the Committee, Rule 1.15(b) ethically obligates you to deliver promptly the funds to your client, unless there is an agreement not to do so. See also Rule 1.3 (requiring a lawyer to act with reasonable diligence and promptness in representing a client).