## Facts

- Arnold M. Warhaftig, a New Jersey real-estate attorney, was audited for trust-account compliance for a two-year period ending October 31, 1983.
- The audit found that he repeatedly issued trust-account checks to himself for legal fees in real-estate matters before the closings occurred, later replacing the funds when closing proceeds were received.
- The audit identified multiple advance withdrawals over varying time periods before closings, totaling several thousand dollars, and showed the practice was recurrent rather than isolated.
- Warhaftig kept personal lists tracking the advances, including client names and amounts taken.
- He testified that he took advances due to financial pressure from a decline in practice and serious family medical expenses, believed he would repay the money, and asserted no client suffered a loss.
- After learning an unannounced audit would occur, he attempted to cover the trust-account shortfall by transferring money from his sons’ trust accounts into his attorney trust account.

## Issues

1. Whether withdrawing unearned, anticipated fees from a client trust account constitutes “knowing misappropriation” under New Jersey’s attorney discipline rule announced in In re Wilson.
2. Whether an attorney’s expectation of earning the fees (“colorable future interest”), lack of client loss, intent to repay, or personal hardship permits discipline short of disbarment.

## Decision

- The New Jersey Supreme Court rejected the Disciplinary Review Board’s recommendation of a public reprimand.
- The Court held that Warhaftig’s withdrawals of unearned fees from the trust account were knowing misappropriation of client funds.
- The Court ordered disbarment, applying the mandatory sanction required by the Wilson rule for knowing misappropriation.

## Legal Principles

- Client trust-account funds remain client property until the attorney earns the fee and properly withdraws it under the governing rules; an anticipated fee does not create a present right to take trust funds.
- “Knowing misappropriation” is established when an attorney knowingly uses client trust funds for personal purposes, regardless of whether the attorney characterizes the conduct as “borrowing.”
- Once knowing misappropriation is proven, disbarment is required; personal hardship, lack of client loss, restitution, and intent to repay do not justify a lesser sanction.
- Efforts to conceal or temporarily cure a trust-account deficiency may support, rather than negate, a finding that the misappropriation was knowing.

## Conclusion

The court disbarred Warhaftig for knowingly taking unearned fees from client trust funds in anticipation of future closings, holding that neither a claimed future entitlement to fees nor mitigating circumstances can reduce the mandatory disbarment sanction for knowing misappropriation.


In re Warhaftig, 106 N.J. 529, 524 A.2d 398 (N.J. 1987)