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                                         91 N.J.L.J. 108
                                        February 15, 1968


Appointed by the New Jersey Supreme Court


Accounts - Commingling

    On September 26, 1967 our Supreme Court adopted R. 1:12-5 relating to accounts and records required to be kept by attorneys. Several inquiries have been made relative to the same.
    The first inquiry is: Where an attorney's income is derived almost exclusively from his employment as "house counsel" or as an appointive officer of a corporation, must he maintain two separate accounts, a personal account and a business account?
    If two accounts were required, the attorney would merely be required to transfer his salary earnings from his business to his personal account. Good sense and reasonableness dictate that under the above set of facts the attorney should not be required to keep books or records merely to record his periodic salary receipts. He is not handling monies on behalf of his employer. His employer is not a "client" in the usual sense of the word. To compel two accounts, two sets of records, would be a needless duplication and an unnecessary burden, serving no purpose in helping the court to correct a situation which sometimes occurs in the traditional attorney-client relationship. If, however, independent clients are represented from time to time, separate records for these cases should be kept as prescribed by the rule in question.

    The second inquiry raises the question whether separate accounts must be kept where income is received by an attorney for professional services rendered to clients, and for monies earned for services rendered in a nonlegal capacity such as income received from teaching, income received as an insurance broker, as a real estate agent, or for rendering accounting services. The question is confined to these personal funds.
    The rule in addition to requiring a separate trust account requires the maintenance of a "business account into which all funds received for professional services shall be deposited." Rules of the court should receive a reasonable construction and should be read sensibly rather than literally. Ferguson & Beardsell v. Kays, 21 N.J.L. 431 (Sup. Ct.1848); Douglas v. Harris, 35 N.J. 270 (1961). One of the prime objectives of the new rule is to assist an ethics committee to determine if a proper accounting has been made to a client. Accordingly, only monies received in connection with the practice of law should be deposited in the business account required by the rule. Income received from teaching, as an insurance broker, as a real estate agent or for rendering accounting services, is not received from the practice of law and therefore should not be deposited into such business account.

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