On an Order to show cause why respondent should not be disbarred or otherwise disciplined.
Chief Justice Wilentz and Justices Handler, Pollock, O'Hern, Garibaldi, Stein, and Coleman join in this opinion.
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
IN THE MATTER OF DENNIS M. BARLOW, an Attorney-at-Law (D-95-94)
Argued January 30, 1995 -- Decided May 19, 1995
In the summer of 1991, the Office of Attorney Ethics (OAE) performed an audit on Dennis M. Barlow's attorney trust account. Following that audit, the District XIV Ethics Committee (DEC) filed a three-count ethics complaint on December 31, 1992, charging Barlow with record-keeping violations, gross neglect in failing to safeguard client funds, and knowing misappropriation of client funds.
The knowing misappropriation charge stems from two real estate transactions: the Spindel/Prehodka and Giordano matters. In both of those matters, Barlow failed to disburse properly clients' funds in his trust account. Barlow drew a check to himself in the amount of $2,894.94 although he knew these funds were to be used to pay unpaid invoices for title insurance and surveyor's fees.
The Special Master found that Barlow's misappropriation was knowing. The Disciplinary Review Board (DRB) unanimously found by clear and convincing evidence that Barlow violated RPC 1.15(d) (record-keeping violation), RPC 1.1(a) (gross neglect), and RPC 1.3 (lack of diligence). However, the DRB divided on the issue of knowing misappropriation: three members found that Barlow knowingly misappropriated client funds and, therefore recommended disbarment; two members recommended a two-year suspension; and one member recommended a six-month suspension. Three members did not participate.
HELD: The record demonstrates by clear and convincing evidence that Dennis Barlow knowingly misappropriated clients' funds and, therefore, he must be disbarred.
1. Under the Wilson rule, disbarment is the only appropriate discipline for knowing misappropriation of client funds. This rule is a harsh one and there are no significant exceptions to discipline resulting in disbarment. (pp. 5-7)
2. Proof of misappropriation, by itself, is insufficient to trigger disbarment. Also required is proof by clear and convincing evidence that the attorney misappropriated the funds knowingly. In this case, the evidence is clear and convincing that Barlow knew that the misappropriated funds were client funds and that his clients had not given him permission to use these funds, which he used to pay certain personal expenses. (pp. 7-11)
3. Barlow alleges three mitigating factors: 1) no one was injured by his actions; 2) his prior professional record was unblemished; and 3) he honestly believed that his actions did not constitute knowing misappropriation. Unfortunately, these factors are not sufficient to warrant departing from the Wilson rule. (pp. 11-12)
It is ORDERED that Dennis Barlow be DISBARRED for the knowing misappropriation of client funds.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, O'HERN, GARIBALDI, STEIN, and COLEMAN join in the Court's opinion.
Following an audit performed in the summer of 1991 by the Office of Attorney Ethics (OAE), the District XIV Ethics Committee (DEC) filed a three-count complaint on December 31, 1992, charging respondent, Dennis M. Barlow, with record-keeping violations, gross neglect in failing to safeguard client funds, and knowing misappropriation of client funds. Respondent does not dispute the first two charges, but argues that the OAE has failed to prove by clear and convincing evidence that he knowingly misappropriated client funds.
The charge of knowing misappropriation arises from two real estate transactions: the Spindel/Prehodka and Giordano matters. In both matters, respondent failed to disburse properly clients' funds in respondent's trust account. Instead, he drew a check to himself in the amount of $2,894.94 although he knew these funds should be used to pay unpaid invoices for title insurance and surveyor's fees. The Special Master found that respondent's misappropriation was knowing. The Disciplinary Review Board (DRB) divided on the issue. Our review of the record leads us to conclude by clear and convincing evidence that respondent knowingly misappropriated clients' funds.
The DRB summarized the relevant facts:
THE SPINDEL/PREHODKA AND THE GIORDANO MATTERS (knowing misappropriation)
Respondent represented Karen Spindel and Gregory Prehodka in the purchase of residential real estate from Blanche Goldstein. The closing on the property occurred on November 1, 1988. On or about that date, respondent deposited into his trust account the sum of $368,452.72. Thereafter, respondent made several disbursements from those funds between November 2, 1988 and April 12, 1989. After the disbursements, the trust account had a balance of $1,809 to the credit of the purchasers. In fact, a review of the Uniform Settlement Statement ("RESPA") disclosed that the sum of $1,889 should have remained on deposit for the payment of title insurance ($1,589) and surveyor's fees ($300). The $80 shortage was attributed to an overpayment to the Passaic County Register for realty transfer tax. That overpayment is not the subject of any disciplinary charges.
Respondent also represented John and Joanne Giordano in the refinancing of their mortgage. Closing in that matter occurred on October 31, 1988. Respondent received and deposited into his trust account the sum of $79,140.63. Thereafter, respondent made several disbursements between November 4, 1988 and March 13, 1989. After those disbursements, a balance of $1,085.94 remained in the trust account to the credit of the Giordanos. In fact, the RESPA statement shows that the sum of $1,144 should have remained on deposit for the payment of title insurance ($794) and surveyor's fees ($350). The $58.06 shortage, attributed to a computational error, is not the subject of any ethics charges.
As of April 12, 1989 -- respondent had not paid either the title insurance or the surveyors' fees relative to the Spindel/Prehodka and Giordano matters. As of that date, thus, there should have remained in respondent's trust account the sum of $2,894.94 attributable to those clients. Nevertheless, on April 12, 1989, respondent drew to himself trust account check No. 654 in the amount of $2,894.94, the exact amount that should have remained on deposit in those two matters. Respondent then deposited that check (as cash) into his business account on or about April 14, 1989, as part of a total deposit of $2,969.94. The memo portion of that check identified those client matters as the source of the funds. Prior to that deposit, respondent's business account had been overdrawn by $186.66. The deposit brought respondent's account into a positive position. In addition, from April 15, 1989 through May 3, 1989, respondent used these funds to pay other business and personal expenses. On May 3, 1989, after a check payable to Marina Associates (a casino) was presented for payment against the business account, the account was returned to a negative balance status.
Eventually, respondent paid the title insurance and survey invoices, using other funds. On June 14, 1989, seven and one-half months after the Giordano closing, he paid the NIA Title Agency invoice. The actual amount of that invoice was $594, not the $794 respondent had charged to his clients, pursuant to the RESPA statement. When respondent paid the NIA invoice, he paid the correct lower amount and failed to refund the $200 surplus to his clients. He ...