After a real estate closing where all parties approved the closing statement, may the buyer's attorney stop payment on his trust check to the seller because the buyer later claims defects in the building?

Plain-English summary

The inquirer asked whether an attorney who had issued his trust check covering the balance of sale proceeds due to a seller could ethically stop payment after the closing statement had been duly approved by all parties and attorneys. The asserted reason was that his client, the buyer, claimed upon taking possession to have found defects in the building.

The Committee concluded that where the parties to a closing agree that the closing obligations have been met and that the monies shall be paid, it is ethically improper to stop payment on the attorney's trust check issued to the seller. It stated that closing funds received upon the approval of all parties for distribution must be promptly accounted for and turned over to the persons agreed upon, in the absence of a court order to the contrary.

Currency note

This opinion was issued in 1977, before New Jersey's adoption of the 2004 revisions to the Rules of Professional Conduct, and predates the 1984 replacement of the Disciplinary Rules by the RPCs. The duty it applied, to promptly account for and deliver funds, corresponds in current New Jersey terms to RPC 1.15 (safekeeping property). Treat this page as historical context, not current guidance.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 stop payment on a closing trust check if the client later complains about the property?

A: Under this opinion, no. Once all parties approved the closing and agreed the funds were to be paid, the Committee found it ethically improper to stop payment on the trust check to the seller, even on a later defect claim.

Q: What is the attorney's duty over agreed closing funds?

A: The opinion stated that closing funds received on the approval of all parties must be promptly accounted for and turned over to the persons agreed upon, absent a court order to the contrary.

Q: What if there is a genuine dispute over the property?

A: The opinion pointed to a court order as the route to withhold the funds. It treated the parties' approval of the closing as fixing the obligation to pay, rather than letting the attorney unilaterally stop payment.

Background and rules framework

The opinion addressed an attorney's handling of trust funds after a real estate closing, holding that the parties' approval of the closing fixed the duty to distribute and that unilaterally stopping payment was improper. In current New Jersey terms, a lawyer's obligation to safeguard and promptly deliver funds held in trust is governed by RPC 1.15.

Citations and references

Rules of Professional Conduct:

• MR 1.15 / NJ RPC 1.15 (safekeeping property; prompt delivery of funds)

See also

• NJ ACPE Op. 687: Drawing On and Disbursing Funds Received at Real Estate Closings
• NJ ACPE Op. 582: Interest on Trust-Account Settlement Funds Belongs to the Client
• NJ ACPE Op. 537: Interest-Bearing Trust Account and Bank Access to Records

Source

• Full text (Justia mirror): https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp384-1.html
• Issuing authority: New Jersey Supreme Court Advisory Committee on Professional Ethics, via the NJ Courts Supreme Court Committees page

Original opinion text

Reproduced from a full-text mirror of the official opinion for research purposes. The linked official source controls.

100 N.J.L.J. 1217, December 29, 1977

OPINION 384

Stopping Payment on
Attorney's Trust Check To Seller

The inquirer asks whether an attorney who has issued his trust check covering balance of sale proceeds due to seller may ethically stop payment after the closing statement was duly approved by all parties and attorneys, for the reason that his client, the buyer, upon taking possession claimed he had found defects in the building.

It is the opinion of this Committee that where parties to a closing agree that the closing obligations have been met and that the monies shall be paid, it is ethically improper to stop payment on the attorney's trust check issued to sellers. Closing funds received upon approval of all parties to distribute must be promptly accounted for and turned over to the persons agreed upon in the absence of a court order to the contrary.