Brown, Matter of
| Decision Date | 22 May 1986 |
| Citation | 102 N.J. 512,509 A.2d 176 |
| Parties | In the Matter of Arnold E. BROWN, An Attorney-at-Law. |
| Court | New Jersey Supreme Court |
Richard J. Engelhardt, Asst. Counsel, on behalf of Office of Attorney ethics.
Frank P. Lucianna, for respondent (Lucianna, Bierman & Stillman).
Acting on a presentment filed by a District Ethics Committee (the Committee), the Disciplinary Review Board (DRB) concluded that respondent, Arnold E. Brown, was guilty of "a number of incidents of misconduct that reveal an overall inability properly to represent clients and to exhibit proper judgment in the management of trust accounts." Although it agreed with the Committee's finding that "respondent was out-of-trust for almost four years," the DRB nevertheless determined that "this is not a misappropriation case as defined in In re Wilson, 81 N.J. 451, 409 A.2d 1153 (1979)," and therefore recommended a one-year suspension.
We disagree. Our independent review of the record leads to the conclusion, established by clear and convincing evidence, that this proceeding is indeed controlled by Wilson and that respondent should be disbarred.
Although the Committee and the DRB dealt with complaints of four clients of respondent, the source of respondent's ethical problems came to light only after an audit of his books and records by the Division of Ethics and Professional Services (DEPS), predecessor of the Office of Attorney Ethics. The client complaints produced findings by the DRB of respondent's gross negligence in violation of DR 6-101(A)(1) (Annie Lou Gibbs); failure to preserve the identity of client funds and intentional delay in payment of taxes (Henry Wright); intentional failure to carry out a contract of employment contrary to DR 7-101, and failure to preserve the identity of a client's funds in violation of DR 9-102 (Mildred Hurt); and, again contrary to DR 9-102, failure to preserve the identity of trust-account funds (Nathaniel and Mary Roberson).
The Roberson matter involved respondent's delivery of a trust-account check to the buyer's attorney in a real-estate transaction. The check represented deposit funds of $6900 held in escrow by respondent, who represented the seller. When the deal fell through, the buyer sought the return of the deposit. Because respondent's trust account check was twice dishonored, the buyer's attorney notified the ethics authorities, after which respondent delivered certified checks totalling $6900. It was the ethics complaint arising out of this transaction that prompted the DEPS audit, which is the object of our focus.
The audit covered the period August 1981 through July 1982. The trust accounts could not be reconciled because respondent was unable to produce individual client trust records. The auditor concluded that respondent's trust account "regularly had balances lower than $6900 and was frequently deficient."
Respondent's explanation--and the heart of his defense--is that in March 1978 he deposited in his trust account a $20,000 check of a client, Astroscope, Inc. Instead of waiting for the funds to clear the account before disbursing them, as required by DR 9-102, respondent issued checks in accordance with the client's instructions. When the bank dishonored the $20,000 check, the client was unable to make good on the check. The result, then, was a $20,000 deficiency in respondent's trust account. The client thereafter filed for bankruptcy.
Rather than reveal this unhappy turn of events to all the affected parties and to the attorney disciplinary authorities, or take steps towards restitution of the monies lost, respondent continually invaded the trust funds of one client to pay another. As respondent's brief puts it,
[h]e was forced into a process commonly known as "lapping," whereby the designated funds of one client are used to pay for another client's needs. However, [because respondent was] a sole practitioner, the sum was too great for respondent to make up.
This "lapping" process continued for more than four years, up until the time of the audit.
Respondent's difficulties were compounded in April 1980, when the Internal Revenue Service seized $8,098 from an interest-bearing escrow account that respondent had opened on behalf of his client Johnson. The account was characterized by a couple of peculiarities: it was not denominated as a "trust account," and the social security number on the account was respondent's, not the client's. The IRS took custody of the funds to pay outstanding liens on personal taxes owed by respondent. Again respondent resorted to "lapping" in order to pay off Johnson. The result was that as of April 1980 his trust account was short more than $28,000, rather than the original $20,000.
Respondent's effort to make up the shortage from the time it was originally created by his drawing on funds not yet cleared by the bank consisted of his leaving earned legal fees in his trust account. Although this may have made a dent in the shortage from time to time, it did not come near returning the account to an in-trust condition during the four-year span. As the auditor concluded on the basis on respondent's records and admissions in the course of the audit,
Mr. Brown intentionally used new client trust funds to cover deficiencies from prior matters, as well as for office expenditures, on a routine and regular basis.
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In conclusion, it appears that Mr. Brown had commingled trust funds over an extended period of time. Further, he has not maintained adequate trust records within the provisions of 1:21-6. It appears that Mr. Brown's trust account has a deficiency of $28,000 or more. Again, the extensive commingling and inadequate record keeping preclude a more precise appraisal of the deficiency at this time.
The auditor's comment about "office expenditures" refers to respondent's use of trust monies not simply for the purpose of taking from one client to pay another but also for paying both his secretary's salary and the monthly rental for his law office.
It was not until September 1982, after ethics complaints had been filed and the audit had been completed, that respondent refinanced his home and...
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Konopka, Matter of
...clients' funds. In fact, we have criticized an attorney when he has not made up deficits in his account. See In re Brown, 102 N.J. 512, 509 A.2d 176 (1986) (respondent continually invaded trust funds of one client to pay another). In addition, we know from the record that after the OAE audi......
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In re Wade
...present, Respondent admitted using funds from one client to pay for another client's needs -- known as "lapping," see In re Brown, 102 N.J. 512, 514-15, 509 A.2d 176 (1986) -- but claimed she did not know that was improper.At various times, Respondent explained that she never intended to st......
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Devlin, Matter of
...533, 524 A.2d 398 (1987); In re Lennan, 102 N.J. 518, 523, 509 A.2d 179 (1986). Such action is expressly proscribed. In re Brown, 102 N.J. 512, 517, 509 A.2d 176 (1986). As this Court observed in In re [t]he misappropriation that will trigger automatic disbarment under In re Wilson, ... con......
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Irizarry, Matter of
...(1989) (quoting In re Orlando, supra, 104 N.J. at 350, 517 A.2d 139). Respondent's situation is unlike the attorney in In re Brown, 102 N.J. 512, 509 A.2d 176 (1986). In that case, the attorney knowingly invaded the trust funds of one client to pay another after a client had given the attor......