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Fiduciary Duty to Non-Clients

Dynasty Building Corp. v. Ackerman, 376 N.J. Super. 280 (App. Div. 2005)

NJ: Attorney Trust Account Funds

Student Contributor: Michael Park

Facts: Attorney received funds from Plaintiff through an accidental wire transfer directly into his trust account. Plaintiff learned of the accidental transfer a couple weeks later and demanded that the monies be returned. Attorney insisted that the monies belonged to his client. After consulting with his client, the attorney turned the monies over to his client instead of Plaintiff. Plaintiff filed a complaint to recover the monies four years later, and was awarded a default judgment after the complaint went unanswered almost a year later. Attorney was then granted his motion to vacate the default judgment because the motion judge ruled that Plaintiff failed to give notice of the default judgment to attorney, and the complaint was barred by a six-year statute of limitations, which had run by one day.

Issue: Was the motion to vacate properly granted?

Ruling: In reversing the motion judge, the Appellate Division held that the motion to vacate the default judgment was not properly granted for the following reasons:
1) The court found there was little prejudice to the attorney as he had obviously been aware of the default judgment because he filed his motion to vacate twenty-four days later.
2) Instead of counting from the date that the monies were turned over to attorney’s client, the time started to run when the attorney breached his duty to the Plaintiff. The motion judge had started counting from the day that the funds went into the attorney’s trust fund, incorrectly concluding that was when the conversion occurred, when in fact the funds were just sitting there and no damages had been suffered.

If in fact the plaintiffs can establish that it was their funds, a fiduciary relationship developed between them and [attorney] even though he did not represent them in any matter.

Lesson: Although the plaintiff was not a client of the attorney, and it was unclear how the money had been transferred into his clients’ trust account; the attorney still owed a fiduciary duty to the Plaintiff to not touch the money.

The attorney argued that he had consulted with his client and was instructed to give the client the monies, which he did, having no reason not to believe him. However, the court reasoned that the attorney should have left the monies untouched in the trust fund account until it was discovered who the monies belonged to, instead of deciding himself who was telling the truth.



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Posted in: Commercial, Fiduciary Duty, New Jersey