On order to show cause why respondent should not be disciplined.
For suspension for three years -- Chief Justice Weintraub and Justices Jacobs, Francis, Proctor, Hall, Schettino and Haneman. Opposed -- None.
The Essex County Ethics Committee filed a presentment in which it found that the respondent, Michael L. Malanga, violated Canon 11 of the Canons of Professional Ethics by appropriating to his own use and failing to promptly account for funds belonging to his client.
The facts, as developed at hearings before the Committee, fully substantiate its findings. The complainant, John J. Erla, retained the respondent in January 1962, to press a claim for damages arising from an automobile collision in which he had suffered physical injury and property damage. After negotiating with the insurance carrier, the respondent received an offer of settlement. On July 11, 1962 the complainant signed a general release which respondent used to obtain a draft, dated July 19, 1962, for $3,250, payable to the order of "John J. Erla and Michael L. Malanga, Attorney." A direction printed on the back of the draft reads, "This draft must be endorsed by payee personally. * * *"
On July 23, 1962, the respondent deposited the draft in his bank account. The back of the cancelled draft shows that in addition to the endorsement of the respondent, the name "John J. Erla" appears. Mr. Erla did not endorse the draft and had no knowledge of the endorsement, and the respondent admits that, at his direction, Mr. Erla's name was placed there by someone else. It is significant to note that Mr. Erla's name was written on the draft so as to simulate his real signature.
At the time of the deposit, the $3,250 represented almost all the money in the respondent's bank account. From then until December 19, 1962, the respondent wrote 89 checks leaving a balance on that date of $2. None of these checks were payable to the complainant. None were for large amounts, and most were apparently used to pay the respondent's personal or office expenses.
Complainant saw the respondent for the last time on July 11, 1962, when the general release was executed and, despite numerous attempts to communicate with the respondent,
could get no closer to him than his answering service. Unable to obtain his share of the proceeds of the settlement for nearly two years, the complainant retained another attorney in the Spring of 1964. However, the respondent continued his evasiveness, and this attorney had no more success in dealing with him than had the complainant.
Payment of $2,200, which has been accepted by the complainant in satisfaction of his claim, has been made by the respondent, but under circumstances which are hardly extenuating. After the original complaint was filed with the Committee on October 7, 1964, a copy was sent to the respondent pursuant to R.R. 1:16-4 with the request that he file a written answer thereto within 10 days. Upon his failure to file such an answer, this court entered an order on December 7, 1964, directing the respondent to show cause why he should not be suspended pending the outcome of the charge against him. On January 5, 1965, the return date of the order to show cause, the respondent filed his answer and was directed by the court to forthwith turn over to the secretary of the Committee the sum of $2,200. Respondent made payment on the same day, two and one-half years after the settlement of the claim.
Although the respondent admits his wrongful conduct and offers no direct defense, he alleges that there are mitigating circumstances. Both parties have indicated that there was some dispute over the amount of the fee to be paid out of the recovery, and respondent contends that this dispute partially accounts for his dereliction. This contention finds no support in the record. It is clear from the testimony of both the respondent and the complainant that whatever difference there was between them was not serious. Of more importance, since respondent never communicated with complainant after he received the draft from the insurance company, there was never any dispute while the money was actually in the respondent's possession. Moreover, if the respondent did believe there was a genuine dispute over the amount of his fee, his proper course of action would have been to deduct from
the settlement the amount to which he thought himself entitled, remitting the remainder to his client with a statement of how the fee was calculated, and to arrange seasonably ...