On presentment from the Camden County Ethics and Grievance Committee.
For suspension for six months -- Chief Justice Weintraub, and Justices Heher, Wachenfeld, Burling, Jacobs, Francis and Proctor. Opposed -- None. The opinion of the court was delivered by Wachenfeld, J.
This disciplinary proceeding was instituted by a presentment from the Camden County Ethics and Grievance Committee. The initial return of the committee charged the respondent with violating Canon 11 of the Canons of Professional Ethics, principally by failing to report and account promptly for funds of clients coming into his possession. The committee recommended the issuance to respondent of an order to show cause why he should not be disciplined.
We remanded the case to the committee for further investigation and findings of fact. New testimony was taken and a supplemental presentment filed. This instrument made the additional charge that respondent had commingled his own and clients' moneys in a so-called "escrow" account.
In 1955 Baron was retained by Harriet C. Steelman and her two sisters, minority stockholders in a family corporation known as the White Star & Pitman Laundry, Inc. They brought a claim against the majority stockholders for mismanagement of corporate affairs. At or near the conclusion of the litigation, a settlement was reached. Baron's clients agreed to sell their stock to the corporation for the sum of $12,500, payment to be made in two installments, the first to be held in escrow until the second installment was received.
The first check in the amount of $5,000 was dated January 25, 1956, drawn to the order of "Victor N. Baron, Attorney," and promptly deposited in his attorney's or escrow account. The respondent likewise received and promptly deposited in the same account a second check, dated March 1, 1956, in the sum of $7,500. The stock certificates were endorsed and delivered to the representatives of the corporation, releases were executed, and the settlement thus consummated. Baron's fee was modest, $1,500 including all expenses.
On March 9, 1956, Baron sent a check for $1,500, drawn on his escrow account, to each of his three clients. Therefore, as of March 9, he had paid his clients $4,500 of the
$5,000 to which they were entitled under the first installment. However, he still owed $7,500, the amount of the second installment, plus the $500 balance left over from the first installment, less his fee of $1,500, or a total sum of $6,500.
Approximately two or three weeks thereafter, Baron drew three $1,000 checks on his escrow account and sent one check to each client. These were not paid, however, apparently because they were incorrectly drawn. When Baron was made aware of this situation, he immediately wired sufficient funds to cover the checks to the banks in which his clients had deposited them. But evidently this money did not come from his escrow account, since at no time during the period from March 14 to April 18, 1956 was his balance ever large enough to honor the checks.
Baron testified he had intended to remit the entire sum owing to his clients at this time, but that a telephone call to his bank had revealed his escrow account to be substantially lower than reflected in his records. Both he and his secretary attributed this difference to the fact that his check books and bank statements were in the hands of accountants due to certain difficulties encountered in his office. Consequently, the secretary was required to maintain an informal running account in a stenographer's notebook. They testified that upon examination of this account it showed certain arithmetical errors and, in particular, the complete omission of a $3,900 deduction which should have been made for a check which Baron drew for business purposes in January of 1956.
Baron stated that after learning of this deficiency, he tried to stop payment on several personal checks but was unable to do so because they had already cleared. Appreciating the trouble he was in, Baron met the situation head-on without resorting to subterfuge. He went directly to his clients, explained the deficiency, saying it had been caused by ...