Case Title: Attorney Grievance v. Davis

Citation: 379 Md. 361

Docket Number: 80ag/02

State: maryland

Court: Maryland Supreme Court

Date: 2004-02-11T00:00:00Z

Document:
Circuit Court for Prince George’s County
Case No. CAE02-26578
IN THE COURT OF APPEALS
OF MARYLAND
Misc. Docket AG No. 80
September Term, 2002
ATTORNEY GRIEVANCE COMMISSION
OF MARYLAND
v.
GARY E. DAVIS
Bell, C.J.
         *Eldridge
Raker
Wilner
Cathell
Harrell
Battaglia,
JJ.
Opinion by Raker, J.
Bell, C.J., Wilner and Harrell, JJ., dissent
Filed: February 11, 2004
*Eldridge, J., now retired, participated in hearing and
conference of this case while an active member of this
Court; after being recalled pursuant to the
Constitution, Article IV, Section 3A, he also
participated in the decision and adoption of this
opinion.
1Rule 1.15 provides as follows:
“a) A lawyer shall hold property of clients or third persons that
is in a lawyer’s possession in connection with a representation
separate from the lawyer’s own property. Funds shall be kept in
a separate account maintained pursuant to Title 16, Chapter 600
of the Maryland Rules. Other property shall be identified as such
and appropriately safeguarded. Complete records of such
account funds and of other property shall be kept by the lawyer
and shall be preserved for a period of five years after
termination of the representation.
(b) Upon receiving funds or other property in which a client or
third person has an interest, a lawyer shall promptly notify the
client or third person. Except as stated in this Rule or otherwise
permitted by law or by agreement with the client, a lawyer shall
promptly deliver to the client or third person any funds or other
property that the client or third person is entitled to receive and,
upon request by the client or third person, shall promptly render
a full accounting regarding such property.
(c) When in the course of representation a lawyer is in
possession of property in which both the lawyer and another
person claim interests, the property shall be kept separate by the
lawyer until there is an accounting and severance of their
interests. If a dispute arises concerning their respective interests,
the portion in dispute shall be kept separate by the lawyer until
the dispute is resolved.”
2Rule 8.4 provides, in pertinent part, as follows:
“It is professional misconduct for a lawyer to:
* * *
On November 12, 2002, the Attorney Grievance Commission, acting through Bar
Counsel, filed a petition with this Court for disciplinary action against respondent Gary E.
Davis, charging him with violating Maryland Rules of Professional Conduct 1.15
(Safekeeping property)1 and 8.4(b), (c), and (d) (Misconduct). 2  Pursuant to Maryland Rule
(b) commit a criminal act that reflects adversely
on the lawyer’s honesty, trustworthiness or
fitness as a lawyer in other respects;
(c) engage in conduct involving dishonesty,
fraud, deceit or misrepresentation;
(d) engage in conduct that is prejudicial to the
administration of justice”
-2-
16-752(a), we referred the matter to Judge Julia Weatherly of the Circuit Court for Prince
George’s County to make findings of fact and proposed conclusions of law.  Judge Weatherly
held an evidentiary hearing on May 7, 2003, and concluded that the Rules of Professional
Conduct had not been violated as alleged by Bar Counsel, but that Davis had violated
Maryland Code (2002 Repl. Vol., 2003 Cum. Supp.) § 22-103(f) of the Insurance Article.
I.
Judge Weatherly made the following findings of fact and conclusions of law:
FINDINGS OF FACT
“1.  Respondent was admitted to the Bar of the Court of Appeals on
May 25, 1982.  In October 1999, Respondent was in private practice
specializing in criminal defense representation and personal injury work on
behalf of plaintiffs.  He testified that he has recently ended his active practice
of law.
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“2.  In October 1997, the Respondent and his then girlfriend, Linda
Pelton, established and formed Allegiance Title & Escrow, Ltd. (hereinafter
‘Allegiance Title’).  The Respondent was the sole owner and President of the
company.  Ms. Pelton was Vice President.  He did not receive a salary but
would share any profits earned by the company equally with Ms. Pelton, who
operated the business. 
“3.  Respondent did not attend or conduct any settlements on behalf of
the company.  He did contribute to the operation of Allegiance Title by
reviewing and signing deeds.  He was paid a fee for each deed.  He was also
a signatory on the bank accounts.
“4.  When Allegiance started in 1997, Respondent opened an escrow
account and a commercial checking account in the company’s name with the
Community Bank of Maryland (hereinafter ‘Bank’). 
“5.  At the time the escrow account was opened, the Respondent was
unaware of the provisions of Chapter 22 of the Insurance Article of the
Annotated Code of Maryland.  Section 22-103(b) requires all title insurance
companies to pool and commingle monies received as the result of a
settlement, closing, or other title work if the title insurer believes the deposit
will generate interest less than $50 or the cost of administering a separate
account.  Section 22-103(c) requires the interest in the escrow accounts that
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contained commingled funds as indicated in (b) above to be paid by the Bank
to the Maryland Affordable Housing Trust (MAHT), to help provide
affordable housing throughout Maryland.  Section 22-103(f) provides that
except for the trust money deposited into a MAHT account, trust money may
be deposited in any other deposit or investment vehicle specified by the client
or beneficial owner, or as agreed to by the beneficial owner and title insurer,
or its agent.  Those accounts can be an interest bearing account. 
“6.  In the fall of 1999 Chicago Title conducted an audit of Allegiance
Title, and notified the Respondent of the existence of the requirement for all
title insurance companies to maintain a MAHT (Maryland Affordable Housing
Trust) account.  The Respondent then met with an employee of the Bank, who
suggested that Allegiance Title should set up a MAHT account and a ‘sweep
account.’
“7.  After a review of Allegiance Title’s records, the Bank suggested to
the Respondent that the company should deposit funds less than $150,000 into
a MAHT account, as these funds were likely to generate less than $50.00 in
interest or the cost of administering a separate account pursuant to Md. Code
Ann., Title Ins. § 22-103(b)(c).  Deposits of $150,000 or greater were to be
deposited into the company’s existing escrow account.  
“8.  Respondent instructed Ms. Pelton to structure Allegiance Title’s
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deposits as described above.  However, between November or December 1999
and December 2000, the Bank closed the MAHT account on several occasions
because there was no activity in the account.  After each such occasion,
Allegiance Title instructed the Bank to reopen the account.  The Respondent
attributed the lack of use of the account [] to difficulties with Allegiance
Title’s software.  Respondent’s Exhibit No. 1, Document 2 (Letter from
Respondent’s attorney, Jan. 22, 2001).  It was not until December 2000 that
Allegiance Title began to utilize the MAHT account.  
“9.  Allegiance Title maintained its original escrow account.  Deposits
in excess of $150,000 were made into this account.  Monies held in that
account were transferred or swept by the Bank at the end of each banking day
into a separate interest bearing account established in the name of the
company.  The following banking day, the interest earned on the funds held in
that separate interest bearing account was transferred to Allegiance Title’s
commercial checking account.  The principal balance was transferred back to
the escrow account on the next banking day following the sweep as needed to
meet the obligations of the original escrow account.  Through the use of the
sweep account, Allegiance Title earned interest on funds in its escrow account
in the amount of $6,625.10 in 1999 and $19,984.79 in 2000.
“10.  There is no evidence that [] Allegiance Title’s MAHT account
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was ever swept or that Allegiance Title retained the interest on that account.
“11.  The Respondent admits that the beneficial owners were not given
notice and their consent was not acquired prior to Allegiance Title depositing
trust money into its escrow account and the sweep account.
“12.  During the relevant period, the Respondent maintained separate
general and escrow accounts for his legal practice.  He properly maintained his
escrow funds in an IOLTA account as required by Md. Code Ann., Bus. Occ.
& Prof. § 10-301 et seq.
CONCLUSIONS OF LAW
“The Commission does not allege that the Respondent has improperly
handled the trust account used in his legal practice.  The Commission has filed
this disciplinary proceeding against the Respondent, alleging that because he
is an attorney, his title insurance company cannot retain the benefit of the
interest earned in the ‘sweep accounts.’  The Petitioner maintains that if the
trust funds were not deposited in a MAHT account, these funds should have
been dealt with as any other fiduciary funds as defined by the statute.  The
statute required that those beneficial owners must consent to the deposit of
trust money into an account which benefitted the Respondent and the consent
needed to be in writing in conformity with COMAR 31.16.03.05.  The
Complaint alleges that failure to comply with these statutes constitutes a
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violation of his ethical obligations.  They also allege that by retaining the
interest in the sweep account he is guilty of theft, and fraudulent
misappropriation by a fiduciary.
I.  Rule 8.4 –  Misconduct
“Rule 8.4 of the Maryland Rules of Professional Conduct provides the
following:
‘It is professional misconduct for a lawyer to:
(b) commit a criminal act that reflects adversely
on the lawyer’s honesty, trustworthiness or fitness
as a lawyer in other respects;
(c) engage in conduct involving dishonesty, fraud,
deceit or misrepresentation;
(d) engage in conduct that is prejudicial to the
administration of justice.’
“In conjunction with this alleged violation the Petitioner asserts that the
Respondent violated two criminal statutes.  Petitioner alleges that the
Respondent violated Article 27 § 132 of the Annotated Code of Maryland,
Fraudulent misappropriation by fiduciaries, and Article 27 § 342 of the
Annotated Code of Maryland, Theft.  Article 27 § 132, Fraudulent
misappropriation by fiduciaries, states:
‘If any executor, administrator, guardian, committee, trustee,
receiver or any fiduciary shall fraudulently and willfully
appropriate to any use and purpose not in the due and lawful
execution of his trust, any money or any other thing of value
which may come into his hands as such executor, administrator,
guardian, committee, trustee, receiver, or in any other fiduciary
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capacity, or secrete it with a fraudulent intent to appropriate it to
such use or purpose, he shall be deemed guilty of embezzlement,
and shall be punished upon conviction by imprisonment in the
penitentiary for not less than one year nor more than five years.’
“Article 27 § 342 states:
‘(a) Obtaining or exerting unauthorized control.
–  A person commits the offense of theft when he
willfully or knowingly obtains control which is
unauthorized 
or 
exerts 
control 
which 
is
unauthorized over property of the owner, and:
(1) Has the purpose of depriving the owner of the
property; or
(2) Willfully or knowingly uses, conceals, or
abandons the property in such manner as to
deprive the owner of the property; or
(3) Uses, conceals, or abandons the property
knowing the use, concealment, or abandonment
probably will deprive the owner of the property.
(b) Obtaining control by deception. – A person
commits the offense of theft when he willfully or
knowingly uses deception to obtain and does
obtain control over property of the owner, and: 
(1) Has the purpose of depriving the owner of the
property; or
(2) Willfully or knowingly uses, conceals, or
abandons the property in such manner as to
deprive the owner of the property; or
(3) Uses, conceals, or abandons the property
knowing such use, concealment, or abandonment
probably will deprive the owner of the property.’
“In Maryland fraudulent misappropriation by fiduciary, commonly
referred to as embezzlement, and theft are specific intent crimes.  The
Petitioner has the burden to demonstrate that the Respondent specifically
intended to deprive owners of their property by retaining the interest on the
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principal that was generated in the escrow account and swept into Allegiance
Title’s operating account.  
“The Respondent opened up the sweep account and maintained the
interest at the invitation of his bank.  There is ample evidence and the
Petitioner admits title insurance companies regularly maintain these accounts.
The establishment of the sweep account is insufficient evidence to prove the
mens rea of the Respondent.  The Court does not find that it is illegal for a title
company to maintain a sweep account.  The Respondent had no information
that would lead him to conclude that it was wrong for his title insurance
company to retain the interest on the escrow account.
“Furthermore, there is no evidence to determine what property interest
existed for any beneficial owner.  There is no evidence upon which the Court
could find that any individual beneficial owner was deprived of interest to
which they would be entitled.  So long as the deposited trust funds were likely
to generate less than $50.00 in interest or the cost of administering a separate
account, the trust funds should have been deposited into the MAHT account,
and the interest provided to a charitable organization.  In this situation, the
beneficial owners had no right to the interest on the escrowed funds.  The
Court finds that no fraudulent misappropriation or theft has been proven by
clear and convincing evidence.
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“Without a finding of theft or fraudulent misappropriation, this Court
finds that the Respondent has not violated Rule 8.4 of the Maryland Rules  of
Professional Conduct.  No evidence has been submitted that would
substantiate the Petitioner’s claims that the Respondent committed a criminal
act, engaged in dishonest, fraudulent, deceitful conduct or misrepresentation.
In addition, the Petitioner has failed to prove that the Respondent has engaged
in conduct that is prejudicial to the administration of justice.  
II.  Rule 1.15 – Safekeeping property
“Rule 1.15 of the Maryland Rules of Professional Conduct provides the
following:
‘(a) A lawyer shall hold property of clients or
third persons that is in a lawyer’s possession in
connection with a representation separate from
the lawyer’s own property.  Funds shall be kept in
a separate account maintained pursuant to Title
16, Chapter 600 of the Maryland Rules.  Other
property shall be identified as such and
appropriately safeguarded.  Complete records of
such account funds and of other property shall be
kept by the lawyer and shall be preserved for a
period of five years after termination of the
representation.
(b) Upon receiving funds or other property in
which a client or third person has an interest, a
lawyer shall promptly notify the client or third
person.  Except as stated in this Rule or otherwise
permitted by law or by agreement with the client,
a lawyer shall promptly deliver to the client or
third person any funds or other property that the
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client or third person is entitled to receive and,
upon request by the client or third person, shall
promptly render a full accounting regarding such
property.
(c) When in the course of representation a lawyer
is in possession of property in which both the
lawyer and another person claim interests, the
property shall be kept separate by the lawyer until
there is an accounting and severance of their
interests.  If a dispute arises concerning their
respective interests, the portion in dispute shall be
kept separate by the lawyer until the dispute is
resolved.’
“The Petitioner asserts that the Respondent has a fiduciary obligation
as an agent to safeguard and maintain the clients’ or third party funds.
Commission asserts that by retaining the interest earned from clients funds in
Allegiance Title’s sweep account, the Respondent has misused the client funds
entrusted to him as a fiduciary for his own personal gain.  The issue is whether
it is a violation of the Professional Rules of Conduct for an attorney to benefit
from the interest on escrowed money in his title insurance business if it is legal
for the title insurance to maintain an interest bearing escrow account.  The
second issue is whether the attorney/owner has a fiduciary obligation to the
parties in the real estate settlement.  Neither side was able to provide to the
Court any clear authority dispositive of the issue.  The Petitioner primarily
cited cases that dealt with attorneys who conduct real estate settlements as part
of their legal practice.  The Respondent maintains this is a case of first
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impression brought by the Commission and there is no case, statute or ethics
opinion which would hold that his actions were improper.  
“The Respondent primarily relied on an opinion issued by a Bar
Counsel Blue Ribbon Inquiry Panel on December 13, 1991.  The complaint
questioned whether it was misconduct for an attorney, who owned a title
insurance company, to deposit escrow funds into an interest bearing account
instead of an IOLTA account.  The title company retained the interest on the
escrowed funds.  The Panel concluded that no attorney-client relationship
existed between the attorney/owner and the parties to a real estate transaction.
BC Docket No. 91-52-14-5 (1991).  Respondent’s Exhibit No. 4.  They also
found that there is ample legislative history to conclude that the legislature was
aware that many attorneys owned title companies.  By refusing to enact the
IOTA bill, which would have required that interest on title companies’
escrowed accounts be paid to a charitable cause, the legislature did not intend
to impose the requirements of IOLTA on attorneys who owned title insurance
companies.
“In the instant matter the Respondent is not a real estate attorney, nor
does he conduct settlements or closings on behalf of Allegiance Title.  There
is no evidence to suggest that the Respondent ever deposited any funds related
to a real estate transaction into the bank accounts associated with his law
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practice.  Funds associated with real estate transactions were only deposited
into Allegiance Title’s accounts.  The Respondent’s connection with the title
company was that of an owner.  As an owner he was not required to be an
attorney, and he did not perform duties as an owner which required legal skills
and performance.  His legal involvement with the title business consisted
solely of reviewing deeds for which he was paid a fee per deed, and was
separate from any remuneration he may have received from the profits of the
company as the owner.  See In the Matter of Grimble, 157 Ariz. 448, 759 P.2d
594 at 598 (1988).
“The Court finds that even though the attorney would not be entitled to
retain the interest on the escrowed funds in his law practice, the Respondent
does not violate Rule 1.15 by owning a title insurance company, which under
the laws of Maryland is entitled to retain the money earned on an interest
bearing escrow account.
III.  Annotated Code of Maryland, Business Occupations and Professions
Article § 10-306  Misuse of trust money 
“Pursuant to Md. Code Ann., Bus. Occ. & Prof. § 10-306: ‘A lawyer
may not use trust money for any purpose other than the purpose for which the
trust money is entrusted to the lawyer.’  Petitioner alleges that the funds held
in the Respondent’s title company’s escrow account are trust money pursuant
to this statute.  The Complaint alleges that the Respondent violates this statute
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because his title insurance company retains interest from escrowed funds in its
sweep account.  Petitioner concludes that the sweeping of the interest into
Allegiance’s commercial checking account constitutes misuse of this trust
money pursuant to this subsection because he is an attorney. 
“This Court finds that Md. Code Ann. Bus. Occ. & Prof. § 10-306 is
inapplicable to the Respondent’s corporate title company’s escrow accounts,
because such an account is not an ‘Attorney trust account,’as defined in Md.
Code Ann., Bus. Occ. & Prof. § 10-301(b).  In the instant matter, no money is
being entrusted to the Respondent to hold for the benefit of a client or a
beneficial owner.  Funds were given to Allegiance Title as the result of a
closing, settlement or to pay for title work.  The Respondent is not a settlement
attorney acting on behalf of any of the participants.  He is the owner of the title
insurance company that is involved in the real estate transactions.  There is no
evidence to suggest that an attorney-client relationship exists between the
Respondent and the parties to the real estate transactions.  
IV.  Annotated Code of Maryland, Insurance Article, § 22-103 – Deposits
of trust money:
“‘(a) Definitions. – (1)  In this section the following words have
the meanings indicated.
(2) “Beneficial owner” means a person, other than the buyer in
a real estate transaction, for whose benefit a title insurer or its
agent is entrusted to hold trust money.
(3) “Trust money” means a deposit, payment, or other money
that a person entrusts to a title insurer or its agent to hold for the
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benefit of a buyer in a real estate transaction or for a beneficial
owner, in connection with an escrow, settlement, closing, or title
indemnification.
(b) Pooling and commingling trust money authorized. – A title
insurer or its agent shall pool and commingle trust money
received from clients or beneficial owners in connection with
escrows, settlements, closings, or title indemnifications if, in the
judgment of the title insurer or its agent, a separate deposit of
the trust money would generate interest in an amount not greater
than $50 or the cost of administering a separate account.  
(c) Payment of interest to Maryland Affordable Housing Trust.
– At least quarterly, the financial institution in which a
commingled account is maintained under this section shall pay
the interest earned on the account, less any service charges of
the financial institution, to the Maryland Affordable Housing
Trust to enhance the availability of affordable housing
throughout the State as provided in Article 83B, § 11-102 of the
Code.  
(d) Deposit in specified financial institutions. – Trust money
required to be commingled under subsection (b) of this section
in connection with a real estate transaction shall be deposited
and maintained until disbursed in accordance with the
transaction: 
(1) in a financial institution located in the State; or
(2) subject to approval of the Banking Board in the Department
of Labor, Licensing, and Regulation, in a financial institution
outside the State that complies with the requirements of this
subtitle. 
(e) No violation of ethical or legal duties. – A title insurer or its
agent does not violate, and may not be charged by the
Commissioner with a violation of, any ethical or legal duties by
placing trust money in an account under subsection (b) of this
section with the interest paid to the Maryland Affordable
Housing Trust under subsection (c) of this section.
(f) Other deposits of trust money allowed. – Except for trust
money that a title insurer or its agent places in a commingled
account under subsections (b) and (c) of this section, and subject
to regulations of the Commissioner, trust money in the
possession of the title insurer or its agent may be deposited in
any other deposit or investment vehicle:
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(1) specified by the client or beneficial owner; or
(2) as agreed on by the client or beneficial owner and the title
insurer or its agent.’
“The Commission asserts that it is permissible for a Title Company to
deposit funds that are not required to be deposited in a MAHT account into a
separate account provided that the beneficial owners have knowledge and
agree in writing to such an allocation, pursuant to subsection (f) above and
COMAR 31.16.03.05 (2003).  According to the Petitioner, Allegiance Title’s
retention of the interest earned from their sweep account violates these rules
since the beneficial owners did not have knowledge of the funds allocation,
nor had they consented to Allegiance Title’s retention of the interest.  The
Court agrees with this assertion.  
“The statute provides two methods to handle trust funds.  Trust money
can be deposited into a MAHT account.  All other deposits of trust funds may
be deposited in any other deposit or investment vehicle as specified by the
client or beneficial owner or as agreed on by the client or the beneficial owner
and the title insurer or its agent.  COMAR 31.16.03.05 makes the requirement
of obtaining the consent of the parties to the settlement absolutely clear.  The
Respondent testified that he relied on the advice of the Bank in setting up the
MAHT and sweep accounts.  He produced the materials given to him by the
Bank as an attachment to his proposed findings of fact.  The Bank’s brochure
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on the MAHT account includes the following provision: 
‘Q. MUST INTEREST ON ALL TRUST ACCOUNTS BE
GIVEN TO MAHT?
A. No.  Individual trust accounts may be put into some other
deposit or investment vehicle, if they are expected (a) to earn
more than $50 in interest and (2) to earn interest which will
exceed the cost of opening a separate interest bearing account,
if the beneficial owner and title insurer, agent or approved
attorney both agree.’  (emphasis added) 
“The Respondent and Allegiance Title both had notice that the title
company was required to obtain the consent of the beneficial owner to deposit
money into a non MAHT fund.  The Respondent did not dispute that
Allegiance Title did not give any notice to the parties to the real estate
transactions that the trust money would be placed in an interest bearing
account, and that the interest earned would be retained by Allegiance Title.  
“The Respondent argues that even if the provisions of this statute have
been violated, the enforcement for non-compliance should not come from the
Attorney Grievance Commission.  Pursuant to COMAR 31.16.03.08 (2003),
the Maryland Insurance Commissioner may impose on a title insurer or title
insurance agent any penalty, sanction, or other form of legal enforcement for
failure to comply with the provisions of the MAHT account chapter.  He
asserts that he was not acting as an attorney in establishing the sweep account
and should only be held to the same standard of discipline as other owners of
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title companies.
“Pursuant to Md. Code Ann., Ins. § 2-201(a) and COMAR 31.16.03.08,
the Maryland Insurance Commissioner has the authority to discipline
Respondent and Allegiance Title for their non-compliance with the MAHT
account statutes.  However, the Respondent’s accountability for these
violations of the law does not rest solely with the Commissioner.  
“An attorney may engage in other activities separate and apart from his
legal profession.  He may not, however, abandon his professional ethics when
he enters the marketplace without jeopardy to his professional standing.  In re
Lurie, 113 Ariz. 95, 98, 546 P.2d 1126, 1129 (1976).  The Oregon Court held
in In Re Heider, 217 Or. 134, 159, 341 P.2d 1107, 1118 (1959), ‘...there is no
cleavage or separation of responsibility for petitioner’s acts as a business man
and as a lawyer.  He may not employ and accept the benefits of such
intermingling of activity involving both the law and business without assuming
responsibility for both.’  The Maryland Courts have held that violations of
laws not directly involved in the practice of law may be grounds for
disciplinary action.  In Attorney Grievance Comm’n v. Clark, 363 Md. 169,
767 A.2d 865 (2001) [the Court] held that failure to pay state income taxes was
a basis for disciplinary action.  The Court stated, ‘The lawyer, after all, is
intimately associated with the administration of the law and should rightfully
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be expected to set an example in observing the law.  By willfully failing to file
his tax returns, a lawyer appears to the public to be placing himself above the
law,’ at 183, citing Attorney Grievance Comm’n v. Baldwin, 308 Md. 397,
407-08, 519 A.2d 1291, 1297 (1987). 
“The Court finds that the Respondent is in violation of Md. Ann. Code,
Ins. Art. § 22-103.  The Court notes that no third party in any real estate
transaction handled by Allegiance Title has filed a complaint based on the
failure to give notice or obtain consent to the deposit of their funds into the
interest bearing account, or that Allegiance Title received interest from the
account.  There is no evidence that the Respondent intended to defraud third
parties.  However, as a licensed attorney, the Respondent is responsible for
complying with the requirements of the law in both his legal practice and
separate business entities.” 
II.
A.
This Court has original jurisdiction over attorney disciplinary proceedings.  See
Attorney Grievance Comm’n v. Harris, 371 Md. 510, 539, 810 A.2d 457, 474-75 (2002).  In
the exercise of our obligation, we conduct an independent review of the record, accepting the
hearing judge’s findings of fact unless they are clearly erroneous.  See Attorney Grievance
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Comm’n v. Garfield, 369 Md. 85, 97, 797 A.2d 757, 763-64 (2002).  We review the hearing
judge’s proposed conclusions of law de novo.  See Attorney Grievance Comm’n v.
McLaughlin, 372 Md. 467, 493, 813 A.2d 1145, 1160 (2002).
Bar Counsel’s petition against respondent rests upon the allegation that respondent
violated Maryland Code (2002 Repl. Vol., 2003 Cum. Supp.) § 22-103(f) of the Insurance
Article when his title company retained possession of the interest generated by funds in the
title company’s bank account, which originated from his clients and were to be held in trust
by the title company until the funds could be distributed to the proper beneficiaries.  If § 22-
103(f) was not violated, then whatever merit there might have been in Bar Counsel’s
remaining allegations dissipates, and respondent cannot be found to have violated the ethical
rules for lawyers.  See Attorney Grievance Comm’n v. Lichtenberg, ___ Md. ___, ___ A.2d
___ (2004).  Thus, the inquiry of this Court, as well as the thrust of both Bar Counsel’s and
respondent’s arguments before this Court, centers on the proper application and interpretation
of § 22-103(f) of the Insurance Article of the Maryland Code. 
B.
Section 22-103(f) of the Insurance Article reads as follows:
“(f) Other deposits of trust money allowed. — Except for trust
money that a title insurer or its agent places in a commingled
account under subsections (b) and (c) of this section, and subject
to regulations of the Commissioner, trust money in the
possession of the title insurer or its agent may be deposited in
any other deposit or investment vehicle:
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(1) specified by the client or beneficial owner; or
(2) as agreed on by the client or beneficial owner
and the title insurer or its agent.”
Section 22-103(a) provides definitions for the terms “beneficial owner” and “trust money”:
“(a) Definitions. — (1) In this section the following words have
the meanings indicated.
(2) ‘Beneficial owner’ means a person, other than the buyer in
a real estate transaction, for whose benefit a title insurer or its
agent is entrusted to hold trust money.
(3) ‘Trust money’ means a deposit, payment, or other money
that a person entrusts to a title insurer or its agent to hold for the
benefit of a buyer in a real estate transaction or for a beneficial
owner, in connection with an escrow, settlement, closing, or title
indemnification.”
Section 22-103 does not provide a definition for the term “client.”  
Bar Counsel maintains that in order to satisfy § 22-103(f), respondent was required
to receive the consent of the beneficial owners to retain the interest from the funds deposited
into the trust account:
 
“[T]he role of [respondent as] a settlement agent is that of a
fiduciary on behalf of numerous beneficiaries where the
settlement officer comes into possession of funds that are to be
distributed in accordance with the instructions of the lender . .
. .  It is Petitioner’s contention . . . that the short term possession
of these funds . . . is not to accrue to the benefit of one party
over another and has historically and properly been deposited
into a non-interest-bearing account because to do otherwise
would be an exercise in control over the funds to the detriment
of the beneficial owner.”
Petitioner’s Exceptions and Recommendation of Sanction, at 5 (emphasis added).
Significantly, Bar Counsel’s contentions rest upon the fact that the beneficial owners, as
-22-
defined by § 22-103, did not consent to respondent’s retention of interest.  Although Bar
Counsel sometimes mentions the term “clients,” in the Petition for Disciplinary Action he
does so only in the context of alleging a violation of § 22-103 because respondent did not
receive the consent of the beneficial owners, not because respondent failed to receive the
consent of his client.  Thus, Bar Counsel contends:
“[T]he commingled funds represented by settlement proceeds
under common law and Insurance Article § 22-103 preserves the
identity of the funds as belonging to the various principals to
which a lender’s closing instructions refer.”
Petitioner’s Exceptions and Recommendation of Sanction, at 10.  Bar Counsel identifies the
“various principals” as the “beneficial owners” of the trust money: 
“The principal owner of the funds, commingled by their very
nature as settlement funds subject to the instruction of the lender
for distribution, is the anticipated recipient of the fiduciary funds
as set forth in the lender’s closing instructions.
* * *
“[Such ownership] conforms with the statutory definition of
‘beneficial owners’ as set forth in Insurance Article § 22-
103(a)(2).”
Id. at 12-13.  In sum, Bar Counsel alleges that in order to retain the interest generated by the
funds transferred to him by his client, respondent was required to obtain the consent of
intended beneficiaries of that fund.  If obtaining such consent is, as respondent argues,
impossible, then no one was entitled to the interest, and the funds should have been deposited
into a non-interest-bearing account.
Respondent presents arguments to support his position that he did nothing to violate
3There is one factual difference between the instant case and Lichtenberg.  In
Lichtenberg, the hearing court found that the title company had obtained the consent of the
-23-
the Rules of Professional Conduct and, specifically, that he did not violate § 22-103 of the
Insurance Article.  First, respondent argues that the term “trust money” as defined in § 22-
103(a)(3) is ambiguous and may not include those funds which are deposited into the title
company’s escrow account after the settlement has already occurred.  Respondent describes
the settlement process as follows:
“As a practical matter, what really happens is settlement is
scheduled for 1pm and the parties arrive at 1pm but the payoff
money from the new lender is NOT YET wired into the title
company’s account or worse, there is no wire and merely a
check which the title company’s bank has to process in spite of
the fact that checks have already been issued on the as yet non-
negotiated payoff money.
* * *
What [Bar Counsel] fails to comprehend is that none of the trust
monies are ever in the bank for an appreciable period of time
and are almost always, if not ALWAYS, deposited after the
monies have been properly distributed and the trustee
obligations of the title company have been fulfilled and fully
discharged, thereby rendering the ‘trust’ terminated and moot.”
Respondent’s Proposed Findings of Fact and Conclusions of Law, at Part II.
C.
This case presents the same issue as was presented in Attorney Grievance Commission
v. Lichtenberg, ___ Md. ___, ___ A.2d ___ (2004).  The facts in the case at bar and
Lichtenberg are, in all relevant aspects, similar.3  Here, as in Lichtenberg, Bar Counsel
title company’s client, though not of the beneficial owners.  The record in the instant case
does not reflect that Davis secured the consent of his client.  To Bar Counsel, this is a
distinction without a difference because it is Bar Counsel’s position that the statute requires
the consent of the beneficial interest holders, and it is undisputed in the instant case that the
beneficial owners did not consent.
-24-
essentially complains that respondent did not get the consent of the “beneficial owners”
before he retained the interest in the accounts.  The gravamen of Bar Counsel’s complaint
is that respondent failed to secure the consent of the beneficial owners as defined by statute,
and not that he failed to secure the consent of any client.
We decline to construe the statute for the same reasons stated in Lichtenberg.  For the
reasons stated therein, we do not decide whether respondent violated the Insurance Article
and therefore will dismiss Bar Counsel’s petition.
In Lichtenberg, we emphasized that § 22-103(f) previously had not been interpreted
by either this Court or the Insurance Administration and that this case had come to us through
our supervisory capacity regulating the practice of law and the ethical behavior of attorneys,
not through the usual judicial channels of appellate review.  We elected not to construe the
Insurance Article without input from the agency who was not a party to the case and had
declined Bar Counsel’s invitation to clarify the issue.  We noted that we discipline attorneys
for violation of Rule 8.4 when it is clear that a law has been violated, even if there is no
criminal conviction, but not when such a violation is unclear.  That reasoning applies equally
here.
Indeed, in some ways, this case accentuates the complexity of interpreting § 22-
-25-
103(f)—even more so than Lichtenberg—and the reasons for which it would be better to
have the Insurance Administration decide the propriety of respondent’s actions or, at
minimum, be involved in the litigation that decides the proper interpretation of the statute it
administers.  For instance, we were told at oral argument, and it was undisputed by Bar
Counsel, that it is the general, commonplace practice of banks to offer sweep accounts to title
companies; that banks receive a large portion of the interest generated overnight as
compensation for their performance of the sweep; that only a portion of the aggregate funds
in the account from all of the clients of the title company are swept each night; and that it
therefore is impossible to identify whose interest was generated at what portion.
Significantly, it is not even certain that § 22-103(f) applies when, for example, a title
company receives a check from the client and simply pays out of its own funds the amount
necessary to settle the real estate transaction before the client’s check has been cashed.  After
disbursing the monies, it is unclear whether the fiduciary duty to the client exists any longer
with respect to the monies deposited into the title company’s trust account sometime after the
settlement is finished.  Indeed, it is also unclear whether the monies disbursed are ever in the
account for an appreciable period prior to the disbursement, at which point the fiduciary
obligations arguably are discharged.
Our point is not to argue respondent’s case, nor do we intimate that we are persuaded
by this line of argument.  We merely wish to illustrate the complexity of interpreting § 22-
103(f).  This case differs from those cases in which we proceeded with disciplinary actions
-26-
in the absence of a criminal conviction where, for example, the lawyer has failed to file or
pay income taxes.  There the violation is clear but the prosecution is uninitiated.  Here, not
only is the violation vague and unsubstantiated, but the presence and the advice of the
regulating authority, an agency charged with protecting the public, is strikingly absent from
any part of these proceedings.  In this respect, this case is no different from Lichtenberg and
will be dismissed. 
Bar Counsel’s exceptions are overruled, and there being no violation of the Rules of
Professional Conduct, the petition is hereby dismissed.
PETITION 
FOR 
DISCIPLINARY
ACTION DISMISSED.  COSTS TO BE
PAID  
B Y  
T H E  
A T T O R N EY
GRIEVANCE 
COMMISSION 
OF
MARYLAND.
IN THE COURT OF APPEALS OF MARYLAND
Misc. Docket AG No. 80
September Term, 2002
______________________________________
ATTORNEY GRIEVANCE COMMISSION
OF MARYLAND
v.
GARY E.  DAVIS
______________________________________
Bell, C.J.
                  *Eldridge
Raker
Wilner
Cathell
Harrell
Battaglia,
  
 JJ.
______________________________________
Dissenting Opinion by Wilner, J., in which
Harrell, J., joins
______________________________________
Filed: February 11, 2004
*Eldridge, J., now retired, participated in the
hearing and conference of this case while an active
member of this Court; after being recalled pursuant
to the Constitution, Article IV, Section 3A, he also
participated in the decision and adoption of this
opinion.
At the direction of the Attorney Grievance Commission, Bar Counsel filed a petition
against respondent, Gary Davis, charging him of having violated Rules 1.15 and 8.4(b), (c),
and (d) of the Maryland Rules of Professional Conduct.  The alleged violations arose from
the manner in which Davis, in his capacity as owner and president of a title insurance
company, handled certain funds entrusted to the company in the course of real estate
settlements.  In particular, Bar Counsel alleged that Davis, through his company, had retained
interest earned on trust funds in violation of Maryland Code, § 10-306 of the Business
Occupations and Professions (BOP) Article and  § 22-103 of the Insurance Article.  
The Court holds, and I agree, that, because the funds in question were not received
by Davis in his capacity as a lawyer, there was no violation of BOP, § 10-306 or Rule 1.15.
I part company with the Court, however, in its decision to avoid construing, and thus finding
a violation of, § 22-103 of the Insurance Article – a violation that is clear beyond cavil – and,
by reason of that violation, a violation of Rule 8.4(d) as well.
Title insurance companies are subject to both statutory and administrative regulation.
See Insurance Article, §§ 11-401-11-409, providing for the regulation of rates and policies
and requiring that certain information be disclosed to the Insurance Commissioner, and § 22-
102, requiring the sending of certain notices in connection with real estate settlements.
Section 22-103 contains requirements and prohibitions with respect to money received in
trust – money that “a person entrusts to a title insurer or its agent to hold for the benefit of
a buyer in a real estate transaction or for a beneficial owner, in connection with an escrow,
settlement, closing, or title indemnification.” § 22-103(a)(3).  Section 22-103(b) requires title
-2-
insurers and their agents to pool and commingle trust money received from clients or
beneficial owners in connection with escrows, settlements, closings, or title indemnifications
if, in the judgment of the insurer or agent, a separate deposit of the trust money would not
generate interest in an amount greater than $50 or the cost of administering a separate
account.  Under § 22-103(c), the interest earned from such commingled funds, less any
service charges, must be paid quarterly to the Maryland Affordable Housing Trust.  Those
provisions are the equivalent for title insurers of the IOLTA arrangement applicable to
lawyers’ trust accounts.  See BOP, §10-303 and Maryland Rule 16-608.
Section 22-103(f) – the provision most applicable here – provides that, except for trust
money required by subsections (b) and (c) to be commingled, trust money in the possession
of a title insurer or agent “may be deposited in any other deposit or investment vehicle: (1)
specified by the client or beneficial owner; or (2) as agreed on by the client or beneficial
owner and the title insurer or its agent.”  Unlike the situation in Attorney Grievance
Commission v. Lichtenberg,      Md.      ,      A.2d         (2003), which we consolidated with
this case, there is no doubt whatever that, by acquiescing in the “sweeping” scheme
suggested by his bank, Davis violated § 22-103(f).  
As owner and president (and thus as agent) of a title insurer, he deposited trust funds
received for the benefit of clients in an account, other than a commingled account permitted
by subsections (b) and (c), that had been neither specified nor agreed to by the client or by
any possible beneficial owner of the funds, and the clear and intended effect of that
-3-
arrangement was that, without the consent of his clients or any beneficial owners of the trust
funds, his company retained all of the net interest earned on those accounts.  There is no
conceivable basis upon which he was entitled to divert the interest on trust funds received
for the benefit of clients to his own use or that of his company.  Indeed, as the “sweeping”
scheme was described to us, it appears that more than the diversion of interest was involved:
each night, the principal balances in the accounts – the actual trust funds – were
automatically diverted to his own use and thus, at least for the night, misappropriated.  
The record in this case establishes that the misappropriation was with the actual intent
of depriving the clients of the interest earned on trust funds deposited for their direct or
indirect benefit, and, even if that conduct was the product of negligence, of Davis being
unaware that it was unlawful, it nonetheless is, indeed, unlawful.  When a lawyer, even when
acting in another capacity, takes money that does not belong to him and that, under the law,
he has no right to take, he commits conduct prejudicial to the administration of justice, and
thus violates Rule 8.4(d).
The Court – as far as I can tell for the first time in its history – has chosen to ignore
both a clear violation of the Rules of Professional Conduct and the Court’s ultimate
responsibility for enforcing those rules by deliberately refusing to address the statutory basis
for those violations.
The Court admits that “the inquiry of this Court, as well as the thrust of both Bar
Counsel’s and respondent’s arguments before this Court, centers on the proper application
-4-
and interpretation of § 22-103(f) of the Insurance Article of the Maryland Code,” but then
declines to construe the statute on the ground that the necessary issue should not be addressed
unless the Insurance Commissioner is a party to the litigation, which effectively means it can
never be addressed in an attorney disciplinary proceeding.  Such a deferral is unprecedented,
extraordinary, and wholly inappropriate.
In Attorney General v. Waldron, 289 Md. 683, 692, 426 A.2d 929, 934 (1981), we
held, explicitly, that “the regulation of the practice of law, the admittance of new members
to the bar, and the discipline of attorneys who fail to conform to the established standards
governing their professional conduct are essentially judicial in nature and, accordingly, are
encompassed in the constitutional grant of judicial authority to the courts of this State.”
Quoting from Pub. Serv. Comm’n v. Hahn Transp., Inc., 253 Md. 571, 583, 253 A.2d 845,
852 (1969), we added that “[u]nder our constitutional system of separation of powers, the
determination of what constitutes the practice of law and the regulation of the practice and
of its practitioners is, and essentially and appropriately should be, a function of the judicial
branch of government.”  Attorney General v. Waldron, 289 Md. at 692, 426 A.2d at 935. 
Over and over and over again, in nearly every attorney grievance case, we have emphasized
that, in these special proceedings, this Court has “original and complete jurisdiction.”
Attorney Grievance v. Smith, 376 Md. 202, 229, 829 A.2d 567, 583 (2003); Attorney
Grievance v. Garfield, 369 Md. 85, 97, 797 A.2d 757, 763 (2002); Attorney Grievance v.
Snyder, 368 Md. 242, 253, 793 A.2d 515, 521 (2002); Attorney Griev. Comm. v. Garland,
1Deferral to the Insurance Commissioner is particularly pointless in this case
where, as the Majority acknowledges, the Insurance Administration “declined Bar
Counsel’s invitation to clarify” the Administration’s interpretation of Section 22-103 (f)
under the facts presented.  Why should the Court shirk its responsibility for the
regulation of attorney conduct in order to defer to an executive branch agency that
(continued...)
-5-
345 Md. 383, 392, 692 A.2d 465, 469 (1997); Attorney Griev. Comm’n v. Kent, 337 Md. 361,
371, 653 A.2d 909, 914 (1995) (Emphasis added).
That jurisdiction, in this case, cannot be implemented without construing § 22-103(f),
and yet the Court declines to address the statute, preferring either to allow the Insurance
Commissioner to deal with the issue or to wait until a case arises in which the Commissioner
is a party.  Such a deferral appears to me to be applying the doctrine of primary jurisdiction,
disguised as something else, and it is flat-out inconsistent with the notion that this Court has
a Constitutionally-based “original and complete” jurisdiction over attorney discipline matters.
If, as we have held, our jurisdiction is “complete,” it cannot be regarded as shared with any
administrative agency.  As Waldron makes clear, this is not an area in which the Legislature
is even competent to allocate jurisdiction between the courts and executive agencies.  This
is not a situation in which a court and an administrative agency have concurrent jurisdiction
over the same matter.  This is not a situation in which Bar Counsel could have obtained any
relief from the Insurance Commissioner.  The Commissioner could, if he chose to do so, take
some action against the title insurance company, or Davis as its agent, for violating the
insurance law, but he would be powerless to determine whether Davis had violated a Rule
of Professional Conduct, much less to do anything about such a violation.1
1(...continued)
apparently has little or no interest in weighing in on a related subject?  Having declined
the opportunity to express its expert opinion here, one could infer logically that the
agency has nothing to add and instead defers to the Court’s traditional role in
interpreting legislative enactments.
2 It is questionable whether the Insurance Commissioner even has primary
jurisdiction over ordinary civil claims that arise from an alleged violation of § 22-103, but
he certainly cannot have primary jurisdiction over an attorney grievance matter based
on that statute. I am not at all sure that, if one of Davis’s clients had filed a civil action in
court to recover interest that accrued on funds held in trust for him by Davis, we would
have insisted that the client turn first to the Insurance Commissioner for relief. See
Zappone v. Liberty Life, supra, 349 Md. 45, 706 A.2d 1060.  Although the
Commissioner has general authority to hold hearings, discipline companies and agents
subject to his jurisdiction, and provide certain  forms of relief to persons who suffer loss
because of violations of the Insurance Code by entities or persons subject to regulation,
there is no administrative procedure attached specifically to § 22-103, and there is
nothing in that statute that evidences an intent by the Legislature that claims under that
statute be submitted first to the Insurance Commissioner.  The statute is not an
interconnected part of an overall regulatory scheme, for which some administrative
expertise exists.  It is a stand-alone statute regulating trust accounts, and it does not
appear to me that any special administrative expertise is required in interpreting it.
-6-
The effect of the Court’s deferral in this case is nothing less than an impermissible
delegation of what we have already held to be a judicial function to an executive agency that
has no authority in the matter.2   The exercise of our “original and complete” jurisdiction
may, from time to time, require us to construe a statute over which an administrative agency
has jurisdiction, and we are entirely competent to do so.  See Attorney Griev. Comm’n v.
Eisenstein, 333 Md. 464, 635 A.2d 1327 (1994) (disciplining attorney for taking fees in
excess of those allowed under Longshore and Harbor Workers’ Compensation Act).  
I would find that, as a title insurance agent, Davis violated the statute and, by doing
so, also, as a lawyer, violated Rule 8.4(d).  Upon that finding, I would then address the
question of what sanction to impose or, indeed, on this record, whether to impose any
-7-
sanction.
Judge Harrell has authorized me to state that he joins in this dissenting opinion.
IN THE COURT OF APPEALS OF MARYLAND
Misc. Docket AG No. 80
September Term, 2002
______________________________________
ATTORNEY GRIEVANCE COMMISSION
OF MARYLAND
v.
GARY E.  DAVIS
______________________________________
Bell, C.J.
                   *Eldridge
Raker
Wilner
Cathell
Harrell
Battaglia,
   
JJ.
_____________________________________
Dissenting Opinion by Bell, C. J.
___________________________________
Filed: February 11, 2004
*Eldridge, J., now retired, participated in the hearing
and conference of this case while an active member of
this Court; after being recalled pursuant to the
Constitution, Article IV, Section 3A, he also
participated in the decision and adoption of this
opinion.
For the reasons enunciated in the dissenting opinion of Judge Wilner, I respectfully
dissent.   Unlike Judge Wilner and Judge Harrell, however, I believe that the  determination
of the culpability of Gary Davis, the respondent, with respect to all of the charged violations
must, and should, await this Court’s construction of Maryland Code (1996, 2002
Replacement Volume) § 22-103 of the Insurance Article.