Opinion 95-11
(May 1995)
 
Facts
 
You represent a bank and an individual as co-guardians of the estate of an incapacitated person which have filed an interim account for formal adjudication by an Orphans' Court because of the desire of the individual co-guardian to resign.
 
The bank had been holding the funds and making distributions on a monthly basis of some of the income to the individual co-guardian, the father of the incapacitated person, who is responsible for paying the bills, including substantial bills for rehabilitation for the incapacitated person. The bank prepared the account which you reviewed, and after both clients signed and filed it, you learned that the individual co-guardian had used some of the funds to pay his own personal bills. The bank is not aware of its co-guardian's use of the funds, but in the course of reviewing copies of the checks, the bank has asked the co-guardian about one of them which, if answered truthfully, would reveal that payment was inappropriate.
 
Questions
 
You have already advised the individual co-guardian that he must resign and promptly restore the funds, and now ask what further responsibilities you have under the Rules of Professional Conduct, and whether you can still represent either of the co-guardians.
 
Discussion
 
You have taken an important first step in abiding by the Rules by remonstrating with the individual co-guardian about his conduct and encouraging him to restore the funds and resign, which instructions your client has followed.
 
The next important step is the appropriate disclosure of your client's actions. In general, Rule 1.6, pertaining to confidentiality of information, particularly Rules 1.6(a) and 1.6(d), prohibits a lawyer from revealing to others the misconduct of one's client. However, there is an important exception to Rule 1.6 that is applicable.
 
Rule 1.6(b) requires a lawyer to reveal information necessary to comply with Rule 3.3, pertaining to candor toward a tribunal. Having reviewed and approved of the account, although without knowledge of the improper income expenditures, which had been masked by the nature of the account entries, you must see to it that the account is corrected. This might require filing an amended or supplemental account. Your failure to do so would be a violation of Rule 3.3(a)(2) which mandates the disclosure of a material fact to a tribunal when the disclosure is necessary to avoid assisting a criminal or fraudulent act by your client.
 
Because the process of correcting the account will inevitably disclose to the bank the nature of the improper acts of the individual co-fiduciary, you should also advise the individual co-guardian to permit you to disclose the activity directly to the bank and advise him to respond truthfully to the bank's inquiry about the check. Rule 4.1 provides that you shall not knowingly, (a) make a false statement of material fact or law to a third person; or (b) fail to disclose a material fact to a third person when disclosure is necessary to avoid aiding and abetting a criminal or fraudulent act by a client, unless disclosure is prohibited by Rule 1.6. Because disclosure to the Orphan's Court is mandatory pursuant to Rules 1.6 and 3.3, you would have an obligation to disclose the nature of the payment if you were asked directly by the bank or its representatives.
 
Because the bank is a fiduciary, it must consider taking action against the individual co-guardian to remedy any financial harm he did to the estate and even demand return of any compensation he has received. You must withdraw as counsel for the bank immediately pursuant to Rule 1.16(a)(1) because there is now a direct conflict of interest, set forth in Rule 1.7(a), the nature of which prohibits joint representation.
 
For the same reason, even if the individual co-guardian follows your advice and discloses fully to the tribunal and the bank in detail the nature of his activities, you most likely also should withdraw as counsel to the individual co-guardian pursuant to Rule l.16(a)(l). His interests are materially adverse to the interests of the bank, arising from a matter in which you represented them both which constitutes a conflict of interest pursuant to Rule 1.9. If the bank consents to your continued representation of the individual after a full disclosure of the circumstances and consultation with its successor counsel, your continued representation of the individual co-guardian may be possible. However, as you may be called as a witness, it is recommended that you also withdraw as counsel to the individual co-guardian even if the parties consented to your continued representation of the individual co-guardian.

   

The Philadelphia Bar Association's Professional Guidance Committee provides, upon request, advice for lawyers facing or anticipating facing ethical dilemmas. Advice is based on the consideration of the facts of the particular inquirer's situation and the Rules of Professional Conduct as promulgated by the Supreme Court of Pennsylvania. The Committee's opinions are advisory only and are based upon the facts set forth. The opinions are not binding upon the Disciplinary Board of the Supreme Court of Pennsylvania or any other Court. They carry only such weight as an appropriate reviewing authority may choose to give it.