(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).
Argued January 30, 1995 -- Decided May 19, 1995
PER CURIAM
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.
SUPREME COURT OF NEW JERSEY
D-
95 September Term 1994
IN THE MATTER OF
DENNIS M. BARLOW,
an Attorney-at-Law
Argued January 30, 1995 -- Decided May 19, 1995
On an Order to show cause why respondent
should not be disbarred or otherwise
disciplined.
Walton W. Kingsbery, III, Deputy Ethics
Counsel, argued the cause on behalf of Office
of Attorney Ethics.
Dennis M. Barlow submitted a letter in lieu
of brief, pro se.
PER CURIAM
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 paid the
surveyor's bill in the Giordano matter on
March 9, 1990, after the surveyor obtained a
judgment against him.
Respondent paid NIA Title Agency's
invoice in the Spindel/Prehodka matter on
January 19, 1990, fourteen months after the
claim. He paid the surveyor, Ferwerda, on
November 16, 1992, four years after the
closing.
The DRB unanimously found by clear and convincing evidence that
respondent had 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 of the DRB found that the
misappropriation was knowing and, therefore, recommended
disbarment. Two members recommended a two-year suspension, and
one member recommended a six-month suspension. Three members did
not participate.
The member recommending a six-month suspension found that the misappropriation was not knowing. In that member's view, the
appropriated funds were not client funds, but reimbursements by
clients to respondent for costs for which he was personally
liable. That member reasoned that the funds advanced by
respondent's clients were not trust funds, and that respondent
need not have segregated them in his trust account. The member
further theorized that even if respondent did not have actual
legal authority to deposit those funds into his business account,
his honest, albeit mistaken, belief that he could transfer them
to that account precluded a finding that his misappropriation was
knowing. In addition, that member believed that respondent
simply forgot to pay the outstanding bills after transfer of the
monies from his trust account to his business account, and that
respondent did not intend to use the transferred funds for
personal expenses.
The two members recommending a two-year suspension indicated
that they were not convinced that the OAE had sustained its
burden of proving by clear and convincing evidence that
respondent had knowingly misappropriated client funds. Those
members believed that the proofs do not exclude the possibility
that because of shoddy bookkeeping, respondent inadvertently used
the funds for his own benefit. Thus, they found that respondent
should not be disbarred for negligent misappropriation.
We have consistently held that "disbarment is the only
appropriate discipline [for knowing misappropriation of client
funds]." In re Wilson,
81 N.J. 451, 453 (1979). In Wilson, we
declared that "all . . . cases [involving knowing
misappropriation] shall result in disbarment." Ibid. When
announcing this rule, we stated that there were "no significant
exceptions to this rule . . . ." Ibid. Even when the lawyer
"borrows" without permission rather than steals, we have
invariably imposed disbarment rather than a lesser sanction. Id.
at 455 n.1. Misappropriation "includ[es] not only stealing, but
also unauthorized temporary use for the lawyer's own purpose,
whether or not he derives any personal gain or benefit
therefrom". Ibid.
The Wilson rule is harsh. We have justified its harshness because of the paramount need to preserve public confidence in the integrity of the bar. Id. at 461. Since we rendered the Wilson opinion, we have not retreated from the strict rule that knowing misappropriation of client funds almost invariably warrants disbarment of an attorney. See, e.g., In re Davis, 127 N.J. 118 (1992); In re Bell, 126 N.J. 261 (1991); In re Sommers, 114 N.J. 209 (1989); In re Warhaftig, 106 N.J. 529 (1987); cf. In re Siegel, 133 N.J. 162, 170 (1993) (disbarring lawyer for knowing misappropriation of law firm partnership funds); but cf. In re Peterman, 134 N.J. 201, 209 (1993) (certifying applicant's
admission to state bar despite applicant's prior knowing
misappropriation of client funds while practicing in another
jurisdiction). We have disbarred attorneys despite evidence of
compelling mitigating factors. See, e.g., In re Steinhoff,
114 N.J. 268 (1989) (drug dependency); In re Nitti,
110 N.J. 321
(1988) (compulsive gambling); In re Skevin,
104 N.J. 476 (1986)
(family hardship), cert. denied,
481 U.S. 1028,
107 S. Ct. 1954,
95 L. Ed.2d 526 (1987); In re Lennan,
102 N.J. 518 (1986)
(same).
We have been equally resolute in requiring proof of respondent's state of mind by clear and convincing evidence. Proof of misappropriation, by itself, is insufficient to trigger the harsh penalty of disbarment. Rather, the evidence must clearly and convincingly prove that respondent misappropriated client funds knowingly. See In re Moras, 131 N.J. 164, 168-69 (1993) (evidence that attorney wrote check for client on trust account against uncollected funds does not establish knowing misappropriation); In re Konopka, 126 N.J. 225, 233 (1991) (attorney's negligent misappropriation of client funds due to careless record-keeping does not mandate disbarment); In re Goldstein, 116 N.J. 1, 6 (1989) (OAE failed to establish that respondent knew misappropriation of interest earned on trust funds was improper); In re Hollendonner, 102 N.J. 21, 29 (1985)
(OAE failed to prove by clear and convincing evidence that
respondent invaded escrow funds with knowledge that use of funds
was improper).
Knowing misappropriation "consists simply of a lawyer taking
a client's money entrusted to him, knowing that it is the
client's money and knowing that the client has not authorized the
taking." In re Noonan,
102 N.J. 157, 160 (1986). In the present
case, the evidence is clear and convincing that respondent knew
that the misappropriated funds were client funds and that his
clients had not given him permission to use these funds.
Respondent testified before the Special Master: "Were those
balances belonging to these two clients [Spindel/Prehodka and
Giordano]? Of course, they were."
On cross-examination, respondent again admitted to knowledge
that he had disbursed client funds to pay for personal expenses:
Q. So those funds were then spent
by you for your own purposes?
A. Yes.
Q. And these were client funds?
A. Well, a great deal of it was,
yes.
Q. Okay. And you knew at the time that you made those disbursements
that you were not entitled to use
those client funds in that fashion?
A. Well, that's presupposing at
the time the disbursements
were made, and it was my
knowledge and intent to spend
the money[] I had taken from
the trust account and put in
the general account.
Q. Are you saying these checks were
written inadvertently?
A. Not at all. Not at all.
Q. So you intentionally wrote those
checks?
A. Absolutely. I've admitted that
before.
Q. And intentionally wrote those
checks on a balance which you knew
was comprised of your clients'
funds?
A. But that's not true.
Q. That's not true?
A. No, sir.
Q. You were not aware those were your
clients' fund?
A. That's not true either. Of course
I was aware they were my clients'
funds.
Respondent's record-keeping, although egregiously haphazard, was not the cause of his misappropriation. He wrote a check to himself for $2,984.94, a sum exactly equal to the trust account
balances for the Spindel/Prehodka and Giordano matters.
Indeed, the check contains the notation "Prehodka/Giordano."
Respondent contends that he withdrew the $2,898.94 balance
on April 12, 1989, and deposited the funds into his business
account because he intended to pay outstanding invoices.
Respondent, however, did not pay these invoices until months
later. He paid the title company in the Spindel/Prehodka and
Giordano matters in January 1990 and June 1989, respectively. He
did not pay the surveyor in the Giordano matter until March 1990,
after the debt had been reduced to judgment. Indeed, respondent
did not pay the surveyor in the Spindel/Prehodka matter until
November 1992.
Instead of timely paying the invoices, respondent used the
funds to pay for personal expenses. On April 11, 1989, just
before the deposit of the check drawn on respondent's trust
account, respondent was $186.66 short in his business account.
From April 20 to May 3, respondent made several withdrawals and
wrote a series of checks for personal expenses, including a
$7,500 check to Marina Associates for a casino debt.
Moreover, the record clearly indicates that respondent knew,
when he deposited these funds in his business account, that he
was not entitled to disburse these funds to himself:
Q. Okay. You also knew at the
time that you wrote that check
that those funds for each of
those two closings were
earmarked for the payment of
the title invoices and
surveys?
A. Yes.
Q. Okay. And you also knew at the
time that the check was written
that those title invoices and
surveys had not been paid.
A. Yes, sir.
Q. Okay. Knowing that, you
nevertheless took those funds and
deposited them into your business
account?
A. Right.
Q. Okay. Now, you were not entitled
to those funds at that time. Is
that correct?
A. That's correct. Yes.
Q. Okay. Your clients had not given
you permission to withdraw those
funds, had they?
A. No.
Respondent's sole excuse for depositing those funds in his business account was that he intended to hide from his clients his failure to pay certain outstanding invoices. Although unable to explain why he did not pay those invoices immediately, respondent insists that he always intended to pay them after he transferred trust funds to his business account. Respondent
insists that he never intended to keep those funds: "[I]t was
never my intention to steal any funds from my client, to take
$2,800 [sic] and not pay surveyors and not pay the title
policies."
Intent to deprive permanently a client of misappropriated
funds, however, is not an element of knowing misappropriation.
Nor is the intent to repay funds or otherwise make restitution a
defense to the charge of knowing misappropriation. A lawyer who
uses funds, knowing that the funds belong to a client and that
the client has not given permission to invade them, is guilty of
knowing misappropriation. The sanction is disbarment.
Respondent points to several factors in mitigation: (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. Regrettably, these
factors are insufficient to warrant departing from the Wilson
rule. Consequently, respondent must be disbarred.
Respondent shall reimburse the Disciplinary Oversight
Committee for appropriate administrative costs, including the
costs of transcripts.
Chief Justice Wilentz and Justices Handler, Pollock, O'Hern,
Garibaldi, Stein, and Coleman join in this opinion.
SUPREME COURT OF NEW JERSEY
D-
95 September Term 1994
IN THE MATTER OF :
DENNIS M. BARLOW, : O R D E R
AN ATTORNEY AT LAW :
It is ORDERED that DENNIS M. BARLOW of NUTLEY, who was
admitted to the bar of this State in 1976, be disbarred and that
his name be stricken from the roll of attorneys of this State,
effective immediately; and it is further
ORDERED that DENNIS M. BARLOW be and hereby is permanently
restrained and enjoined from practicing law; and it is further
ORDERED that all funds, if any, currently existing in any
New Jersey financial institution maintained by DENNIS M. BARLOW,
pursuant to Rule 1:21-6, be restrained from disbursement except
upon application to this Court, for good cause shown, and shall
be transferred by the financial institution to the Clerk of the
Superior Court, who is directed to deposit the funds in the
Superior Court Trust Fund, pending further Order of this Court;
and it is further
ORDERED that DENNIS M. BARLOW comply with Rule 1:20-20
dealing with disbarred attorneys; and it is further
ORDERED that DENNIS M. BARLOW reimburse the Disciplinary
Oversight Committee for appropriate administrative costs,
including the costs of transcripts.
WITNESS, the Honorable Robert N. Wilentz, Chief Justice, at
Trenton, this 19th day of May, 1995.
/s/ Stephen W. Townsend
CLERK OF THE SUPREME COURT
NO. D-95 SEPTEMBER TERM 1994
Application for
Disposition Disbar
Decided May 19, 1995
Order returnable
Opinion by Per Curiam