Case Title: Matter of Douglas

Citation: 158 Ariz. 516, 764 P.2d 1

Docket Number: SB-87-0037-D

State: arizona

Court: Arizona Supreme Court

Date: 1988-10-04T00:00:00Z

Document:
158 Ariz. 516 (1988) 764 P.2d 1 In the Matter of a Member of the State Bar of Arizona, Randall Ray DOUGLAS, Respondent. No. SB-87-0037-D. Supreme Court of Arizona, En Banc. October 4, 1988. Crowe & Scott, P.A. by Michael B. Scott, Phoenix, for respondent. Gallagher & Kennedy by E. Calvin Fuchs, Phoenix, for State Bar. CAMERON, Justice. I. JURISDICTION The Bar Disciplinary Commission recommends that the Respondent, Randall R. Douglas, be suspended from the practice of the law for six months. Because the conduct in question occurred prior to the adoption of the Rules of Professional Conduct, Rule 42, Rules of the Supreme Court, 17A A.R.S. effective 7 September 1984, the matter was considered under the Code of Professional Responsibility. See former Rule 29(a), Rules of the Supreme Court 1987 Supplemental Pamphlet to Vol. 17A A.R.S., page 438, et seq. We have jurisdiction pursuant to Ariz. R.S.Ct. 46 and 53(e), 17A A.R.S. II. QUESTIONS Respondent raises two questions. *517 In addition the Bar Counsel raises two questions. III. PROCEDURAL FACTS Respondent was accused of ten counts of professional misconduct. After five days of hearings over a six month period, the Hearing Committee dismissed four counts and found Respondent in violation of six counts of the Code of Professional Responsibility. The Hearing Committee recommended that the Respondent be suspended for seven months. The Bar Disciplinary Commission adopted the Committee's findings and conclusion of law but rejected the Committee's recommendations for a seven month suspension and reduced the suspension to six months. The Commission also rejected the recommendation of the Committee that Respondent make restitution to the Client Security Fund. Both Respondent and Bar Counsel objected to the Commission's report. We note that in reviewing the records of Bar disciplinary actions we are both a trier of law and ultimate fact, In re Mercer, 133 Ariz. 391, 393, 652 P.2d 130, 132-33 (1982). Also in order to find misconduct the evidence must be clear and convincing. In re Rogers, 100 Ariz. 214, 221, 412 P.2d 710, 715 (1966). IV. WAS THE RESPONDENT GUILTY OF PROFESSIONAL MISCONDUCT? A. COUNT ONE Respondent was appointed personal representative of the Estate of Judith E. Weil on 30 January 1981. As part of his duties as personal representative, he was required to file tax returns on behalf of the estate. The returns were due in September, 1981. Respondent testified before the Hearing Committee that he prepared a request for extension of time to file the federal estate tax return in September, 1981. He stated that he did not know whether the extension was lost in his office or in the mail. Respondent's secretary, stated that she had no recollection of either typing or mailing the request for extension. Respondent's testimony is contrary to a letter to the Internal Revenue Service. In the letter, Respondent claimed the returns were not filed because of difficulties in dissolving two personal holding companies, the complexity of the estate, and "unavoidable personal problems suffered by the personal representative," including litigation in Grand Rapids, Michigan, bacterial dysentery, and knee and hip surgery in September, 1981. Respondent also wrote Attorney Edwin V. Matney a letter in which Respondent recognized that the estate tax return was due on 20 September 1981. Mr. Douglas explained that he was hospitalized for surgery on that date. He also stated: "Because I could not be sure when the estate could be closed, and what the final values would be, no extension was filed." As a result of Respondent's inaction, the Estate of Judith E. Weil was subjected to substantial interest and penalties by federal and state taxing authorities, as follows: *518 The Committee found that Respondent's conduct violated DR 6-101(A)(2), handling a matter without adequate preparation and DR 6-101(A)(3), neglect of client's legal matter. We believe the allegations contained in count one are supported by clear and convincing evidence and that the Respondent violated the cited sections of the Code of Professional Responsibility. We note that Respondent's malpractice carrier reimbursed Respondent's clients so they suffered no loss. Had it not been for this insurance, the client could have suffered considerable loss. Respondent's negligence is inexcusable and his lack of candor unacceptable for an attorney. See People v. Stewart, 752 P.2d 528 (Colo. 1987). B. COUNT THREE Respondent was charged with several instances of double billings regarding the sale of a home from the Estate of Judith E. Weil. According to Respondent, he had an agreement with the heirs of the Estate of Judith E. Weil that in lieu of charging the Estate hourly fees for his efforts in selling the deceased's patio home, he would simply charge a commission of five percent of the sales price. The evidence indicated that Respondent did collect a "commission" of $5,650 on the sale of the house. He also charged and collected hourly fees from the Estate relating to the sale of the patio home. Respondent testified: Rick Weil, one of the heirs, testified there was no agreement for a commission on the sale of the house. Respondent claims the double billing was the result of a "clerical error." This allegation was rejected by the Hearing Committee and the Commission. Both found Respondent violated DR 1-102(A)(4), fraud, deceit or misrepresentation, DR 2-106(A), excessive fees, DR 5-101(A), conflict of interest, and DR 6-101(A)(2), handling a matter without adequate preparation. There is no prohibition against an attorney charging a commission for the sale of a client's property as long as there is a clear agreement for such with the client. Our statute provides that an attorney at law is exempt from the requirement that a person must be a licensed real estate broker or salesperson before a commission may be received for the sale of real property. A.R.S. § 32-2121(A)(3). In construing a similar statute the Maryland Court of Appeals has stated: Atlantic Richfield Co. v. Sybert, 295 Md. 347, 363, 456 A.2d 20, 28 (1983). Clearly an attorney may not, however, obtain a commission and charge hourly legal fees for the same sale. We agree with the Committee and the Commission that the Respondent violated the stated disciplinary rules. *519 C. COUNT FIVE Respondent testified that he reached an agreement with Mrs. Weil prior to her death where he would charge her $125 an hour for the work he did on her estate. This fee agreement was never put into writing. Respondent testified that he charged the estate approximately $35,000. In the Amended Accounting filed in the probate matter, verified by the Respondent, he represented that he received a personal representative fee of $30,235 plus a real estate commission in the sum of $5,650. The client ledger for the estate shows Respondent logged 197.4 hours on the matter. Even without subtracting the double billed hours relating to the sale of the patio home, it appears Respondent charged a fee in excess of that allegedly agreed to by Mrs. Weil. ($30,235 divided by 197.4 hours = $153.17 per hour.) Before the committee, Mr. Crehore, a partner in the law firm of Lewis and Roca who had handled over one thousand estates, testified that the fees charged the estate by Respondent were "grossly excessive." Mr. Crehore also testified as to the time spent on the estate: *520 The Committee and the Commission found the Respondent violated DR 2-106(A), excessive fees. We agree. D. COUNT SIX In 1982, Respondent caused to be published in the Metro Phoenix Consumer Yellow Pages an advertisement listing "Estate Conservation" as a specialty. The file indicates that Respondent had handled no more than "a half dozen" estates. Estate conservation has never been recognized as an area of specialty by the Arizona Board of Legal Specialization. The Hearing Committee and Disciplinary Commission found Respondent's conduct to be a "technical violation" of DR 2-105(A)(3), which reads: We believe this is more than a "technical violation." An attorney who without additional training and only six estate cases to his credit is hardly a specialist in "Estate Conservation." We believe this is a violation of DR 2-101(A) which reads: Not only did Respondent profess to be a specialist in a specialty not recognized by the Arizona Board of Legal Specialization, but even if there were such a speciality, Respondent would not have qualified. We believe Respondent violated DR 2-101(A). E. COUNT SEVEN Respondent was retained by George Wendelken to represent him in a professional malpractice and breach of contract claim against Oliver/Pilcher Insurance, Inc. and one of its agents, Stewart White. On 17 February 1983, the attorney for the defendant, Richard K. Mahrle, filed a motion for summary judgment in the action. The Honorable J.D. Howe issued a minute entry on the following day which provided in pertinent part: Respondent did not file a response to the motion for summary judgment. Judge Howe issued a minute entry on 17 March 1983, stating: The same day the minute entry was issued (17 March), Respondent wrote a letter to Mr. Mahrle, stating: "As I told you, a response to your motion was filed on Monday, March 14, 1983. Obviously, Judge Howe [will] have to reconsider his ruling." According to the testimony of the Respondent, when he arrived at his office on the morning of 17 March 1983, he discovered that oral argument on the motion for summary judgment had been cancelled. Respondent claims he promptly telephoned the judge's secretary and learned that the Court had granted summary judgment against Mr. Wendelken because no response had been filed. Respondent then wrote the letter to Mr. Mahrle representing that a response had been filed. *521 The Committee and the Commission found the Respondent violated DR 1-102(A)(5), conduct prejudicial to the administration of justice, and DR 1-102(A)(6), fitness to practice law. We agree. We are most concerned, however, with Respondent's lack of candor to another attorney that a response had been filed when in fact this had not been done. This is not acceptable conduct for an attorney and violated the DR as indicated. F. COUNT NINE Count nine concerns two contempt citations against Respondent as a result of the break-up of Respondent's law partnership with David Gustafson. On 18 June 1984, David Gustafson filed a complaint requesting, among other things, a partnership accounting and dissolution. Respondent filed a similar complaint on 22 June 1984. These Actions were consolidated under Cause No. 516670. 1. First Contempt Citation In July 1984, Respondent negotiated a $500,000 settlement on behalf of clients of the partnership. Mr. Gustafson's attorney, in the partnership dissolution action, filed a motion for temporary restraining order to prohibit Respondent from disbursing any portion of the settlement proceeds that constituted fees or costs. On 12 July 1984, the Honorable Edward C. Voss heard the motion for temporary restraining order. At the hearing, counsel for the respective parties stipulated that forty percent of the settlement check would be deposited "forthwith" either with the Clerk of the Superior Court of Maricopa County or into an interest-bearing account mutually agreeable to the parties. The motion for temporary restraining order was withdrawn. Following the settlement, Respondent flew to Colorado to have the client endorse the settlement draft. Respondent negotiated the settlement draft and had a cashier's check issued to his client. Of the remaining $200,000, a check for $100,000 was issued to an associate in his office, and $100,000 was deposited to a bank account in Colorado. Respondent flew back to Phoenix, delivered the $100,000 check to his associate, then telephoned his lawyer in the partnership dissolution action, Mike Parham. They discussed Judge Voss' order made that morning. Respondent testified that it was his belief that he was required to retain forty percent of his portion of the fee only ($40,000), not forty percent of the entire fee ($80,000). Respondent's check register for the Colorado bank account reveals he wrote a $10,000 check to his professional corporation business account on 17 July 1984. On the same day, he made a personal withdrawal of $20,000. On 19 July 1984, Respondent wrote another $10,000 check to his professional corporation. On 23 July 1984, Respondent's counsel filed a motion for clarification of order. In the motion, Respondent's counsel requested "that the July 12, 1984, minute entry be clarified to require only 40% of the remaining half of the legal fees ... (that half remaining after payment to Mr. Stachon) be impounded." While the motion for clarification was pending, Respondent withdrew another $20,000 from the Colorado bank account, leaving a balance slightly in excess of $40,000. Respondent claims he did so upon advice of his counsel. Mr. Parham unequivocally denied, however, that he ever advised Respondent it was permissible to withdraw money from the Colorado account before the motion for clarification had been ruled upon by the Court. Judge O'Toole entered another order on 28 September 1984, requiring Respondent to deposit $80,000, plus interest thereon from 12 July 1984, in an interest-bearing account no later than noon on 10 October 1984. Respondent did not comply with this order. Judge O'Toole heard the motion to quash on 6 November 1984 and denied the Respondent's motion to quash. The hearing on the order to show cause regarding the alleged contempt was commenced *522 on 9 November 1984. Respondent had placed $40,000 plus interest in the interest-bearing account, but claimed that he could not raise the remaining $40,000 in order to comply with the Court's order. Judge O'Toole ordered the Respondent to submit a sworn financial affidavit to the Court, demonstrating his inability to pay. Respondent then made an offer to compromise and purge the alleged contempt on 14 November 1984. Judge O'Toole conducted a hearing on the same date and extended the time for Respondent to file his financial affidavit. On 20 November 1984, a new deadline for submitting the financial affidavit was established at Respondent's request. Mr. Douglas failed to file the financial affidavit. The contempt hearing was resumed on 21 November 1984. After a hearing, Respondent was held in contempt of court by Judge O'Toole. 2. Second Contempt Citation On 17 September 1984, Judge O'Toole issued a minute entry which stated, in pertinent part: On 18 January 1985, Gustafson filed another petition for order to show cause regarding an alleged contempt for violation of the order of 17 September 1984, requiring prompt notification of financial activity on cases. A hearing was held one week later. The Court made a determination that Respondent willfully and knowingly violated the 17 September 1984 order of the court. Mr. Douglas was once again held in contempt. Judge O'Toole testified before the committee as follows: The Committee and the Commission found that the Respondent: The Committee found Respondent's conduct violated particularly DR 1-102(A)(3), illegal conduct involving moral turpitude, DR 1-102(A)(4), conduct involving dishonesty, fraud, deceit or misrepresentation, DR 1-102(A)(5), conduct prejudicial to the administration of justice and DR 1-102(A)(6), conduct that adversely reflects on fitness to practice law, Rules of the Supreme Court. We agree. V. WERE THE SANCTIONS EXCESSIVE? The purpose of bar discipline is to protect the public and not to punish the attorney. In re Lurie, 113 Ariz. 95, 95, 546 P.2d 1126, 1126 (1976). In the instant case, the Hearing Committee recommended suspension of the Respondent for seven months. The State Bar Commission reduced the amount of suspension from seven months to six months. Pursuant to Rule 41(a) of the Former Disciplinary Rules of the Arizona Supreme Court, a member suspended for more than six months, must go through the application process to be reinstated, whereas, a person who has been suspended for six months or less shall be reinstated pursuant to Rule 41(k), which allows the member to be reinstated without complying with the other provisions of the rule. See Rule 41(a), (k) Ariz. R.S.Ct., 1987 Supplemental Pamphlet to Vol. 17A A.R.S., at 467. We disagree, however, with both the Committee and the Commission. The actions of the Respondent directly affected the property and legal position of his clients. His actions put them in financial risk and indeed caused his liability carrier to have to pay an amount for damages. We believe that both the Committee and the Commission erred on the side of leniency in this matter. The purpose of attorney discipline is to protect the public and not to punish the lawyer. As the Standards for Imposing Lawyer Sanctions state: ABA, Standards for Imposing Lawyer Sanctions, Standard 1.1 (1986). In the instant case, the Respondent has been guilty of "fee gorging," failure to protect the interest of his client and most importantly a lack of candor before the Commission and the Committee. As the Standards for Imposing Lawyer Sanctions states: ABA, Standards For Imposing Lawyer Sanctions, Standards 9.21, 9.22(f) (1986). We believe the Respondent has shown a pattern of misconduct which warrants that the public be protected by disbarment rather than suspension. As we have noted: In re Russell, 57 Ariz. 395, 406, 114 P.2d 241, 245 (1941). VI. DID THE HEARING COMMITTEE ERR IN DISMISSING COUNT FOUR? In November, 1980, shortly before Mrs. Weil's death, Respondent borrowed the sum of $3,000 from Mrs. Weil. Respondent claims he gave Mrs. Weil a promissory note reflecting the loan at the going rate of interest, but there is no evidence to corroborate this claim. Respondent did not find the note among Mrs. Weil's personal effects after she died. Respondent did not retain a copy of the promissory note for his own records, despite his practice of keeping copies of contracts of indebtedness which he had signed. No one else was present when the transaction occurred. Respondent repaid the principal due on the note by crediting the account of Mrs. Weil's estate, but did not pay the interest due. Respondent was charged in count four with violations of DR 1-102(A)(4), conduct involving dishonesty, fraud, deceit or misrepresentation; DR 1-102(A)(6), conduct which adversely reflects on fitness to practice law, and DR 5-104(A), business relations with a client. After the Hearing Committee dismissed count four and the Commission agreed, Bar counsel appealed. See Ariz.R.S.Ct. 53(e), 17A A.R.S. While we might agree with Bar counsel that Respondent violated one or more of the DR's, see In re Kali, 124 Ariz. 592, 606 P.2d 808 (1980); In re Neville, 147 Ariz. 106, 111-12, 708 P.2d 1297, 1302-03 (1985); In re Staples, 259 Or. 406, 410, 486 P.2d 1281, 1283 (1971), we are unable to reinstate count four because our rules do not allow us to review a dismissal of a charge. Ariz. R.S.Ct. 53(d)(2), 17A A.R.S. VII. WAS RESTITUTION PROPER? The hearing committee recommended that the amount of $15,235 be paid to the Client Security Fund as restitution for excessive fees, including double billing. The reason for requiring the matter to be paid to the Client Security Fund was that the amount involved had been paid by Respondent's insurance carrier and therefore the client had suffered no actual loss. The Commission disagreed with the Committee as the Commission believed they did not have authority to require restitution to the Client Security Fund. In this, the Commission was correct. The client had been repaid by the malpractice insurance carrier of the Respondent and even though we have stated that it is not appropriate to order a member to repay his malpractice insurer, see, In re Scanlan, Jr., 144 Ariz. 334, 697 P.2d 1084 (1985), we can think of no other person or entity to whom the Respondent could be required to pay. Admittedly, this is a partial windfall in that it is an amount Respondent might not have to pay. He should not, however, be penalized for protecting his clients by maintaining his malpractice insurance. The purpose of attorney discipline is not to punish, but to protect the public. No matter how noble it is to expend money for the benefit of the Client Security Fund, it is not provided for by our rules. *525 The Respondent is found guilty of misconduct. Costs in the amount of $11,629.91 are assessed. Respondent is disbarred. GORDON, C.J., and HOLOHAN and MOELLER, JJ., concur. FELDMAN, V.C.J., recused himself and did not participate in this decision.