Lawyers are responsible for trust funds until the check clears.

The Florida Supreme Court has ruled that lawyers have an obligation to issue stop payment orders on checks issued from their trust accounts if they are served with writs of garnishment seeking that money.

"We conclude that Florida law imposes on both bank and non-bank garnishees the duty to retain funds held by the garnishee, even after a check on those funds has been drawn by the garnishee and delivered to the payee," the court held May 1 in Arnold, Matheny, and Eagan v. First American Holdings, case no. SC07-1136. "We hold that the funds remain in the possession or control of an attorney garnishee if service of the writ of garnishment occurs after a check drawn on an attorney's trust account has been written and delivered to a client but before presentment to the attorney's bank."

Accordingly--said Justice Barbara Pariente writing for the unanimous court in upholding a Second District Court of Appeal decision--pursuant to the provisions of the garnishment statute, the attorney in those circumstances has an obligation to inquire of the bank as to the status of the funds in his or her trust account and to issue a stop payment order if he or she has the ability to do so.

The issue in the case involved the interpretation of Florida's garnishment statute and the obligations it imposes on third parties, including attorneys, who are served with writs of garnishment.

In the case, the firm of Arnold, Matheny, and Eagan represented Preclude, Inc., in a lawsuit against Greenleaf Products, Inc., which resulted in AME obtaining a settlement from Greenleaf for Preclude. The settlement reached on June 14, 2002, required Greenleaf to pay these funds into AME's trust account.

Prior to the time of the settlement, First American Holdings, Inc., sought to collect on a judgment it had previously obtained in unrelated proceedings against Preclude.

On June 19, 2002, First American served AME with a writ of garnishment seeking to collect its judgment from the Greenleaf settlement. At that time, AME had not yet received the settlement funds and answered the writ by stating that AME did not currently hold any funds belonging to Preclude. Two days later, on June 21, 2002, AME received the proceeds of the settlement and deposited the funds into its trust account. On that same date, AME issued two trust account checks. AME made the first check payable to its operating account for attorneys' fees and costs--which the court said was not at issue in this case--and the...