Opinion ID: 2106538
Heading Depth: 2
Heading Rank: 2

Heading: Count Two The Kohl Closing

Text: On March 28, 1988, respondent represented Barbra Kohl, the grievant in this matter, in the purchase of a house from G. Hewitt Meade. Respondent became involved in this transaction on the eve of the closing of title. Until that time, the parties had been jointly represented by Robert Pickett, Esq. It was Mr. Pickett's belief that Ms. Kohl and Mr. Meade were married. When he found out near the closing of title that they were not, he declined to represent both parties and asked respondent to represent Ms. Kohl. Respondent agreed. Mr. Pickett had been dealing with respondent's agency in procuring title insurance for the property. This was respondent's first real estate closing. The day after the settlement, March 29, 1988, respondent deposited its proceeds of $220,162.50 in the agency's escrow account. Prior to this deposit, the balance in the account was $3.96. Respondent made no other deposits into the account before the Kohl funds were disbursed. Out of closing proceeds, respondent was entitled to a payment of $1,802.00: $350 for his legal fee, $150 for delivery charges, $200 for fax charges, and $1,102 for the title insurance premium as agent for Chicago Title. Nevertheless, between March 28, 1988 and June 17, 1988, respondent wrote a series of checks against the Kohl funds for purposes unrelated to the closing. Among the checks drawn during this time period were the following: CHECK NO. PAYEE AMOUNT 1029 Diana Lopez $250 1031 Eugene Victor $100 1023 Ben Henderson $300 1026 Ben Henderson $300 1032 Ben Henderson $300 1025 Carmen Del Valle $200 1028 Carmen Del Valle $600 TOTAL $2,050 Eugene Victor and Diana Lopez were respondent's former clients; Carmen Del Valle was his secretary and Ben Henderson was the landlord of his office building. OAE Investigator Hall testified that respondent had admitted to him that he had issued those checks to his landlord because he had been locked out of his office for non-payment of rent in April 1988. Respondent did not deny issuing those checks for personal purposes. He claimed, however, that, because of his deficient bookkeeping practices, he was unaware of the balance in the escrow account. The following exchange took place at the DEC hearing between the presenter and respondent: Q.    now my question to you is on what basis could you have maintained an honest belief that you had any of your monies in that account after depositing the Kohl/Meade funds and prior to June 30, 1988? A. More times than not I would write a check without checking the balance or without being aware of what was in the account, which is primarily the reason why so many checks bounced. I did not write checks with regard to an amount and being aware of a particular amount there was in the account. On any of the accounts there are checks that bounced on all of these accounts there were checks that were paid on all of these accounts and there wasn't any conscious decision, well, I've got money in this account or I know I have X amount of dollars in this account. I will write the check on this account. Checks were written on accounts where there was no money as well as accounts that were  was written with money. And with money that was not that they should not have been written on [sic]. [T4/21/1994 53-54]         Q. And are you saying that you believe that you had your  some of your own funds  isn't it true that with regard to all three of your Contemporary Title accounts too, at Midlantic and the one at First Federal that from April 29th, until September 1988, you know, you held no other monies in any account, except the Kohl funds? A. Mr. McGill, I can't answer you affirmatively with that and in  a  in no account was a  I aware [sic] of any type of regular basis or any type of consistent basis what was in one of the accounts and what was not in one of the accounts     [T4/21/1994 76-78] In essence, respondent alleged that the misappropriation of the funds was the result of his careless recordkeeping and inattention to the requirements for the maintenance of trust and escrow accounts. This argument, however, must fail. As early as September 1987, when respondent's attorney records were audited by an accountant retained by the OAE, respondent had been made aware of his recordkeeping obligations. Moreover, the evidence gives rise to an inference that respondent knew precisely how much he had in his accounts, which showed very little activity. For instance, respondent maintained a trust account with First Fidelity Bank. On March 14, 1988, respondent withdrew the entire balance of the account, $168.45, to the penny. Respondent admitted that, at the time of the withdrawal, he knew the exact balance. Thereafter, respondent issued a series of checks against his First Fidelity account, which were drawn against insufficient funds. Specifically, as early as two days after the withdrawal of the entire balance of the account ($168.45), respondent issued a check for $250.70. On April 26, 1988, however, he deposited $95 to the account in order to bring the negative balance to a zero amount. Throughout the next several months, respondent again maintained a negative balance in the account. In August 1988, however, he deposited $141.14, again, to restore the zero dollar balance in the account. The logical conclusion is that respondent obviously knew the exact balance in the account in order to make corresponding deposits to bring the account to a zero balance. Another example is what occurred with the agency escrow account, which was opened in January 1988. As of February 18, 1988, the account balance was $13.98. On February 24, 1988, respondent deposited $500 in the account, bringing the account balance to $513.98. The source of the $500 deposit was the withdrawal of equivalent funds from the other account maintained by respondent in connection with the agency business, the agency account. Exhibit P2-10. On March 16, 1988, however, respondent withdrew the $500 from the escrow account and returned it to the agency account, which until then had a negative balance of $1.72. Exhibit P2-11. The foregoing account transactions leave no doubt that, contrary to respondent's assertions, he had a precise knowledge of the balances of the two Midlantic accounts. Respondent might not have reconciled the records in connection with his accounts, but there can be no other conclusion than that he knew exactly what his account balances were at various times.