Attorneys – Discipline – Suspension – ‘Entrusted Property’ – Trust Account – Mistakenly Wired Funds

North Carolina State Bar v. Staples (Lawyers Weekly No. 12-16-0234, 9 pp.) (Douglas McCullough, J.) Appealed from the Disciplinary Hearing Commission. N.C. App. Unpub. Full-text opinion.

Holding: Even though $81,000 was mistakenly wired into the defendant-attorney’s trust account, the funds constituted “entrusted property” within the meaning of the Rules of Professional Conduct.

We affirm the three-year suspension of the attorney’s law license.

Facts

On June 17, 2004, a bank mistakenly wired $81,570.99 into defendant’s trust account. The bank intended to wire the money into another attorney’s trust account for a residential real estate closing. Neither lawyer realized the mistake until 2008 when the other attorney discovered the error and notified the bank.

Defendant failed to reconcile his trust account or to maintain client ledgers. His trust account balance fell below $81,000 by January 2005. He retired in 2006 and turned his trust account over to his law partner. His partner stopped using the trust account in 2007, at which point it had a balance of just below $5,000.

Defendant has hired a forensic certified public accountant and an expert in Softpro, but he has been unable to locate the misplaced funds.

The Disciplinary Hearing Commission (DHC) found that defendant intentionally failed to reconcile his trust account; that the bank was harmed by defendant’s failure; that the harm was foreseeable; and that defendant failed to properly identify, maintain, and disburse entrusted funds in accordance with the Rules of Professional Conduct (the Rules), due to the funds no longer being in defendant’s trust account. The DHC suspended defendant’s law license for three years with his reinstatement being conditioned on repayment of the funds.

Analysis

Defendant contends the DHC erred in finding that the mistakenly wired funds were “entrusted property” as defined by the Rules. “‘Entrusted property’ denotes trust funds, fiduciary funds and other property belonging to someone other than the lawyer which is in the lawyer’s possession or control in connection with the performance of legal services or professional fiduciary  services.” 27 NCAC 02 Rule 1.15-1(d).

We do not believe the State Bar intended, in adopting the Rules covering the safekeeping of property in trust accounts, for all funds received into a trust account to be related to a specific agreement or transaction between the attorney and a client. We believe the Bar intended that “entrusted property” be any funds generally received in relation to the attorney’s practice of law.

Here, defendant maintained his trust account for the purpose of receiving and disbursing funds on behalf of clients in connection with his real estate closings and other legal services. In other words, he maintained his trust account for use in the ordinary course of the practice of law and “in connection with the performance of legal services.” 27 NCAC 02 Rule 1.15-1(d). Consequently, any funds received into the account were “entrusted property.”

Had defendant followed the Rules, it is likely that he would have discovered the error within a few months. It is hard to fathom that an attorney could miss nearly $81,000 mistakenly deposited into his trust account and then believe that he did nothing wrong in spending the entire amount. Defendant’s failure to maintain records exacerbated the problem; thus, the DHC did not err in finding that the funds were “entrusted property” for which defendant failed to maintain and keep proper records.

Affirmed.