Bar appeal brings disbarment for misappropriation of $40,000

A Sonora attorney whose misappropriation of $40,000 from a client was characterized by the State Bar as "inexcusable" was disbarred Jan. 8. REX ALLEN SPAITH [#64627], 48, also was ordered to comply with rule 955 of the California Rules of Court. The State Bar Court's review department found that Spaith also misled his client about the status of the $40,000.

At the disciplinary hearing, the State Bar Court judge recommended a four-year stayed suspension with five years probation and three years of actual suspension. Both Spaith and the State Bar requested review of the matter. Spaith conceded that his misconduct was serious, but argued that his actual suspension should be reduced to six months due to compelling mitigating circumstances. The State Bar, however, contended that Spaith's misconduct was "inexcusable" and warranted disbarment.

In 1988, Spaith was employed by a woman to handle legal matters stemming from an automobile accident in which she and her two minor children were injured and her husband killed.

By 1990, two insurance companies had issued settlement checks. A workers' compensation claim was settled in 1991.

Spaith withdrew his fees from the workers' compensation settlement and one of the insurance settlements, distributing entitled funds to his clients.

Funds from the second insurance settlement were placed in his client trust account when the superior court ordered that any money paid by the company on behalf of the client's children be placed in a blocked savings account.

The client wanted to invest the money in a mutual fund and Spaith said he would obtain permission from the court to do so.

In January 1991, after he began to have law office financial problems, Spaith withdrew about $40,000 from his client trust account, the amount due to the client.

Whenever the client inquired about the funds, Spaith told her he was still attempting to obtain a new court order to place the money in a mutual fund.

A year later, Spaith admitted to the client that he had misappropriated the money and promised to pay it back, which he began to do so in 1992.

In mitigation, Spaith said financial difficulties in his law office led him to misappropriate the funds. He attempted to restructure his practice to make it more profitable, but was unsuccessful.

In 1990, a relative suggested he borrow $100,000 from funds Spaith and his wife had available for construction of a new home. His wife was reluctant, but agreed, then changed her mind two days later. The financial problems put a strain on his marriage.

In its decision, the review department of the State Bar Court did not find Spaith's financial problems sufficiently compelling to justify a lesser sanction than disbarment.

"Many attorneys may experience financial and resulting emotional difficulties comparable to those experienced by [Spaith] in the present matter," wrote the review judge. "While these stresses are never easy, we must expect attorneys to cope with them without engaging in dishonest activities, as did [Spaith]."