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Matter of Davis

Decided: March 13, 1992.

IN THE MATTER OF HILTON DAVIS, AN ATTORNEY AT LAW


On an order to show cause why respondent should not be disbarred or otherwise disciplined.

For disbarment -- Chief Justice Wilentz, and Justices Clifford, Handler, Pollock, O'Hern, Garibaldi and Stein. Opposed -- None.

Per Curiam

The Office of Attorney Ethics (OAE) filed a complaint against respondent, Hilton Davis, charging him with seven

counts of knowing misappropriation of client trust funds. After three days of hearings, the District Ethics Committee (DEC) found that respondent had misappropriated funds, had failed to safeguard client funds, and had commingled personal and client funds, contrary to Rules of Professional Conduct 1.15 and 8.4, DR 1-102, and DR 9-102.*fn1 On review, the Disciplinary Review Board (DRB) unanimously recommended that respondent be disbarred. We agree that the factual record presents clear and convincing evidence that respondent engaged in knowing misappropriation of client trust funds and that that conduct warrants disbarment under In re Wilson, 81 N.J. 451, 409 A.2d 1153 (1979).

Respondent was admitted to the New Jersey bar in 1970 and began a solo practice in 1972. Prior to this complaint, respondent had received three private reprimands for unethical conduct. On January 3, 1989, this Court temporarily suspended him for misappropriation of funds. To date, six of respondent's former clients have presented claims to the Client Protection Fund (Fund), which paid out $19,900 on behalf of two clients.

I

The DRB's Decision and Recommendation summarizes the charges against respondent and the relevant evidence:

The Stark Matter (1988 Misappropriation)

In January 1988, respondent closed his attorney trust account at Midlantic Bank, which contained $1,909.85, and transferred the funds to a new trust account at the same bank. * * * [R]espondent was out of trust by $2,598.28 within three months of opening his new trust account * * *.

This shortage resulted from respondent's disbursement to himself by a trust account check in the amount of $2,500.00 claimed as a fee from a client named Starks on February 1, 1988. However, only $500.00 had been deposited in the trust account in behalf of this client. Respondent disbursed this $500.00 sum on March 30, 1988 directly to the client. No deposit for $2,500.00 was ever made to the new trust account in the Starks matter. Thus, when respondent disbursed $2,500.00 to himself, he was invading other client funds to cover his fee. The additional $98.28 of the $2,598.28 shortage represents bank charges for which respondent had made no provision.

When asked why he wrote the Starks' fee check, respondent gave the following explanation:

Q. * * * The $2,500 check was drawn to yourself, captioned Starks. How or why did you write yourself a $2,500 check captioned Starks?

A. To the best of my recollection, I mean sometimes you -- you know -- you take a stand, and I think this is one of the times that I took one and paid myself the money that she had said that -- that I said that she had owed me. You know, in retrospect and in thinking about it all, to the best of my recollection, it is one of the times that we were fighting about money or my fees.

Q. But you only had $1,900, give or take a couple of extra dollars, in that account to begin with.

A. Yeah, but it should have been -- that was only the money that transferred over, right? And I couldn't rationalize all of Starks -- what I did on Starks because it just got too complicated and too many files are missing. I just can't answer it any better.

Misappropriation 1981-1984

In count two of the complaint, respondent was charged with misappropriation, as evidenced by the fact that his trust account was increasingly out of trust from 1981 through 1984. Respondent was also charged in Counts Three through Seven with specific instances of knowing misappropriation during those years.

When respondent was first contacted by the OAE, in 1985, concerning these matters, he hired Anthony Santorelli, Jr. to examine his trust account for the period from 1981 through 1984. In 1985, Santorelli notified respondent that his trust account had been overdrawn for each year examined. The specific shortages were stated as follows:

December 31, 1981 -- $3,847.27

December 31, 1982 -- $4,663.77

December 31, 1983 -- $27,984.99

December 31, 1984 -- $30,178.79

In his answer, respondent contended that he was without sufficient information to either admit or deny his accountant's analysis. He also testified that he had contacted all of the clients for whom funds were supposedly due according

to the analysis, and that they all had stated that there were no monies owed to them.

The OAE accountant, William Morrison, testified regarding the bank balances at the Conclusion of each year. Although his accounting figures verified Santorelli's, they showed a lesser amount out of trust in December 1983 because he gave respondent credit for a greater amount in fees.

Respondent received warning from his bank of these trust account problems during the years 1981-1984. Indeed, as noted by Morrison, on two occasions, June 14, 1983 and March 9, 1984, the trust account was overdrawn. An overdraft charge was assessed against the account and recorded in the bank statement. Furthermore, seven trust account checks were returned for insufficient funds, two of which were checks drafted to respondent, personally. A separate $16 item charge for each of these returns was listed on the bank statements.

Respondent testified that he tried to reconcile his bank statements on a yearly basis and that, at a minimum, he did look at the bank statements on a monthly basis.

Finally, respondent acknowledged that his type of trust account lumped all client accounts together, so that if the account was overdrawn, all of his clients' trust funds were missing. Therefore, for the two months that his trust account was overdrawn, he had to know that all of his clients' funds had been invaded.

Misappropriation due to home refinancing

In 1983, respondent refinanced his home in order to pay off two IRS tax liens totalling $56,383.14. Although respondent had hired an attorney to handle the refinancing, in fact respondent himself sent three loan request letters to the bank and personally wrote the trust account ...


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