Title: In re Peterson
Citation: N/A
Docket Number: S056480
State: Oregon
Issuer: Oregon Supreme Court
Date: May 27, 2010

FILED: May 27, 2010
IN THE SUPREME COURT OF THE STATE OF OREGON
In re: Complaint as to the Conduct of 
THOMAS J. PETERSON,
Accused.
(OSB Case No. 06-109;
SC S056480)
En Banc
On review of the decision of a trial panel of
the Disciplinary Board.
Argued and submitted November 2, 2009.
Thomas J. Peterson, Eugene, argued the cause and
submitted the brief in propria persona.
Jeffrey D. Sapiro, Disciplinary Counsel, Oregon
State Bar, Tigard, argued the cause and filed the brief for the Oregon State
Bar.
PER CURIAM
The accused is suspended from the practice of
law for a period of 60 days, commencing 60 days from the date of this decision.
PER CURIAM
In this lawyer
disciplinary proceeding, the Oregon State Bar (Bar) charged the accused with
violating three provisions of the Oregon Rules of Professional Conduct (RPC):  RPC
1.15-1(a) (requiring lawyer to account for client funds and to deposit and
maintain client funds in trust), RPC 1.15-1(c) (requiring lawyer to withdraw
client money only as fees are earned or expenses incurred), and RPC 8.4(a)(3)
(prohibiting conduct involving dishonesty, fraud, deceit, or
misrepresentation).  A trial panel of the Disciplinary Board concluded that the
accused had violated the rules as alleged.  As a sanction, a majority of the
trial panel disbarred the accused.  A dissenting member of the trial panel
would have suspended the accused for one year and required a two-year period of
probation thereafter.
The accused sought
review pursuant to ORS 9.536(1) and Bar Rule of Procedure (BR) 10.1.  Pursuant
to ORS 9.536(2) and BR 10.6, this court reviews a decision of the trial panel de
novo.  On de novo review, the Bar has the burden of establishing the
accused's misconduct by clear and convincing evidence.  BR 5.2.  Clear and
convincing evidence is evidence establishing that the truth of facts asserted
is highly probable.  In re Johnson, 300 Or 52, 55, 707 P2d 573 (1985).
On review, we
conclude that the accused violated RPC 1.15-1(a) and RPC 1.15-1(c) as alleged
by the Bar.  We suspend the accused from the practice of law for 60 days.
I.  FACTUAL BACKGROUND
The accused, a sole
practitioner in Eugene, has practiced law in Oregon since 1976 and has no prior
disciplinary history.  His practice consists primarily of domestic relations
and real estate work, some of which is contract work performed for other
lawyers.  Prior to the Bar's investigation, the accused, who does his own
bookkeeping, kept "very spotty records" and did not maintain
individual client ledgers.  Although the accused did not have very many client
trust accounts, he testified that he would put client money that was to be held
in trust into a lawyer trust account.
The majority of the violations
alleged by the Bar stem from the handling of a $2,000 check from the accused's
clients, Frances and Emmet Thomas, that was made payable to "Thomas
Peterson, Lawyer Trust Account."  The Thomases, a retired couple, had
become involved in a boundary dispute with their neighbors, the Heneghans.  The
Heneghans and the Thomases owned adjoining five-acre parcels and the Thomases
had been concerned that the Heneghans were encroaching onto their property.  On
March 17, 2005, the Thomases contracted with surveyor Dave Wellman to locate
the boundary line between the two properties.  The survey revealed that a
driveway recently built by the Heneghans was actually located on the Thomases'
property.
The Thomases then
asked Eugene lawyer Laura Parrish, who had assisted them with a prior probate
matter, to help them resolve the boundary dispute.  Parrish, in turn, contacted
the accused, who previously had worked for her on a contract basis and who she
knew had experience with real estate issues.  There was no written retainer agreement
between Parrish and the accused or between the accused and the Thomases.  From
March 2005 until May 2006, the accused submitted regular bills for his services
to Parrish.  He billed his work at his contract rate of $70 per hour.  Parrish
paid the accused out of her office account and then billed the Thomases directly
for the accused's services.
The accused took the
lead role in working with the Thomases.  In September 2005, the Thomases and
the Heneghans tentatively agreed to settle their dispute by exchanging equal
portions of their five-acre parcels.    On September 27, 2005, the accused, the
Thomases, and the surveyor, Wellman, met at the Thomases' home to discuss how
the Thomases wanted to proceed with the property line adjustment.  On October
5, 2005, the Thomases authorized Wellman to go forward with the next round of
survey work.
Wellman estimated
that his fee for the property line adjustment work would be $2,000.  Although the
Heneghans and the Thomases had agreed to split payment of Wellman's fee, the
Thomases, Parrish, and the accused shared a concern that the Heneghans might
not pay their share.
On October 2 or 3,
2005, the accused called the Thomases, expressed a concern about the Heneghans not
paying their half of Wellman's fee, and stated that, if the Thomases put some
money towards Wellman's services, he would try to have the Heneghan's attorney,
Kate Thompson, put a like amount in reserve.  On October 3, 2005, Frances
Thomas wrote a check for $2,000 payable to "Thomas Peterson, Lawyer Trust
Account."  The check contained the notation "Land survey."  All
parties agree that $1,000 of the money represented payment in full of the
accused's fee in performing documentation work to finalize the settlement and that
the accused would use the other $1,000 to pay the Thomases' share of Wellman's
fee once Wellman completed his work and submitted his bill.  However, no
contemporaneous writing memorialized the purpose of the payment.
On October 6, 2005,
the accused deposited the $2,000 check into his trust account.  The next day,
the accused wrote a check for himself against his trust account in the sum of
$2,000 and deposited that check into his personal checking account.  
At that time, the
accused was experiencing financial difficulties.  He had filed for bankruptcy
on June 30, 2005, to prevent foreclosure on his home.  Because he had failed to
make the August and September payments on the bankruptcy plan, the bankruptcy
court had issued a September 23, 2005, order that required that the plan
payments be brought current by October 6, 2005.  On October 6, 2005, the
accused mailed the bankruptcy trustee a personal check for the August and
September payments, totaling $3,870.(1) 
Without the $2,000 from the Thomases, the accused would have had insufficient
funds in his checking account to timely make the $3,870 payment.(2)
The Thomases'
dispute with the Heneghans did not resolve quickly, and Wellman's fee rose to a
greater amount than anticipated.  After several disagreements between the
Heneghans and the Thomases as to the location of the new boundary line, Wellman
submitted his bill for $4,690 on June 6, 2006.  On June 19, 2006, the accused
sent Wellman the Thomases' share of his fee, which he paid by a $1,345 check
from the Thomases and a $1,000 check from his trust account.
Because the accused
believed that his trust account contained $505, he deposited $500 from his
personal account into his trust account to cover the check that he issued to
Wellman.  However, because the accused had withdrawn $100 from the account on
June 9, his $500 deposit only raised the trust account balance to $905.  Thus,
when Wellman cashed the $1,000 check on July 3, it resulted in a $95 overdraft
charge on the accused's trust account.  The bank honored the check but notified
the Bar of the overdraft.  That overdraft notice triggered the Bar's
investigation of the accused.
Although the accused
submitted his final bill through Parrish's office in May 2006, he continued to
perform documentation work on the Thomas matter until June 2007.  The
documentation work included drafting a property line adjustment, a septic line
easement, and a trust deed modification for the Heneghan's property, as well as
working with the title company to obtain title insurance for the Thomases'
property.  The accused did not submit any further bills to the Thomases for that
work except for a final bill for $174.66 for out-of-pocket costs advanced.
Throughout the Bar's
investigation, the accused has acknowledged that he did not keep proper trust
account records or otherwise follow proper bookkeeping procedures.  In the
accused's first letter to the Bar, he apologized and explained that he had made
a mistake in calculating the balance in his trust account because he
"improperly withdrew" $100 from the account on June 9.  In the
accused's second letter to the Bar, he explained his role in the Thomas matter
in more detail, stating:
"[A]fter discussing the matter with Ms. Parrish and Mr.
and Mrs. Thomas, it was decided that Mr. and Mrs. Thomas would deposit $2,000
with me, so that I could tell the Heneghan attorney, Kate Thompson, that I had
received money for the surveyor and that I assumed that she would also receive
money for the surveyor.  Mr. and Mrs. Thomas and I agreed that $1,000 of the
sum would go to Mr. Wellman, and $1,000 would go to payment of my attorney
fees.  I received the $2,000 on October 6, 2006, called Ms. Thompson that day
and stated that I had received money for the surveyor and that I assumed she
would do the same.  I then transferred the $2,000 into my personal account.  I
did so without confirming the arrangement in writing with Mr. and Mrs. Thomas,
and admit that I am at fault for not having done so."
In his third letter, the accused responded
to a question from the Bar investigator as to why he had removed the $1,000 intended
to pay for Wellman's services: 
"I admit that I should not have removed the $1,000 that
was to be paid to Mr. Wellman, and am at fault for having done so.  In
addition, I should have returned $1,000, instead of $500, to the trust account
to pay Mr. Wellman.  My rationale was that I had earned the remaining $500 from
[another client] but had not yet withdrawn those funds from the trust account. 
I admit that I did not follow proper bookkeeping procedures and am at fault for
not having done so." 
In his fourth letter to the Bar, the accused
further responded to questions regarding the withdrawal of the $1,000 earmarked
to as future payment for Wellman services:
 "I did not have a pressing need for the money at the
time I removed the $1,000 from the Thomas trust account fund that was to be
paid to the surveyor. * * * In any event, I cannot justify the withdrawal, and
any excuse I would attempt to make would sound forced and hollow.  What I did
was wrong." 
On November 8, 2006,
the Bar filed a complaint against the accused; the Bar filed an amended
complaint on March 20, 2007.  On April 2, 2007, the accused filed an answer to
the amended complaint.  The accused attached to his answer an affidavit dated
January 18, 2007, prepared by his lawyer and signed by the Thomases ("the
Thomas affidavit").  In part, the Thomas affidavit states: 
"On October 6, 2005, we paid $2,000 to Tom
Peterson.  $1,000 was a flat fee, fully earned at the time of receipt, paid to
Mr. Peterson, in advance, for consultation with Lane County, preparation and
filing of documents and follow-up matters needed to consummate the settlement. 
Mr. Peterson also agree[d] to assume responsibility for paying, when billed,
the sum of $1,000 to Mr. Wellman, the surveyor.  We agreed to pay the remainder
of our share of the survey cost.
"We expected Mr. Peterson to negotiate our
check and use the funds as he chose.  We claimed no ownership interest in any
of the money once it was paid to Mr. Peterson. 
"We understand that Mr. Peterson disbursed
to himself the sum of $2,000 shortly after receipt of our $2,000 check and then
later paid $1,000 to Mr. Wellman on or about June 19, 2006.  This is what we
expected him to do.  He made these disbursements with our knowledge, consent,
permission and approval.
"We didn't ask or expect Mr. Peterson to
retain any of the money in his trust account.  The entire sum was his, subject
only to his agreement to pay Mr. Wellman $1,000 at some later date when Mr.
Wellman sent a bill for his services."
The Thomas affidavit
is consistent with the accused's testimony at trial.  At various points during
the hearing and a pre-hearing deposition, the accused has referred to his
obligation to pay Wellman as an "agreement to assume responsibility"
of paying Wellman, a "legal obligation," a "moral, if not legal,
obligation," and a "contractual obligation."  At a pre-hearing
deposition and at the hearing, the accused claimed that he had discussed his
agreement with the Thomases to obligate himself pay $1,000 of Wellman's fee
with Laura Parrish and Dave Wellman.  However, at the hearing, neither Laura
Parrish, Dave Wellman, nor Frances Thomas recalled being told of such an
agreement.
Also at the hearing,
Frances Thomas testified regarding the accuracy of the affidavit.  She first
testified that she did not remember anything about Peterson's fee being
nonrefundable and fully earned upon receipt.  She also testified that the
statement that the accused could use the money "as he chose" was not
entirely accurate, because she and her husband only had granted "him
permission to use it for Dave Wellman and to tidy the loose ends."  She
further testified that, at the time, she did not really know how the $1,000 for
Wellman would be handled in the interim but that, in retrospect, now that she
had talked with the Bar's investigator and understood the purpose of a lawyer
trust account, it appeared as though the $1,000 should have been kept in the
trust account.  Finally, Mrs. Thomas also testified that she was pleased with
the accused's work and that he earned the money that he had been paid. 
II.  DISCUSSION
The trial panel
first found that the accused had violated RPC 1.15-1(a) by failing to keep
proper records of client funds between September 2005 and July 2006.  In part,
RPC 1.15-1(a) requires that a lawyer keep "[c]omplete records" of
funds held in a lawyer's trust account for clients or third persons.  The
accused has acknowledged that, prior to the Bar's investigation, he kept very
poor records, failed to maintain individual client ledgers, and failed to
reconcile his monthly trust account statements.  On review, the accused
concedes that he violated the recordkeeping requirements of RPC 1.15-1(a).  We
accept that concession.
The trial panel also
found that the accused's October 2005 withdrawal of the $2,000 violated RPC
1.15-1(a) and 1.15-1(c).  In part, RPC 1.15-1(a) requires that
"[a] lawyer shall hold property of clients or third
persons that is in a lawyer's possession separate from the lawyer's own
property.  Funds, including advances for costs and expenses and other funds
held for another, shall be kept in a separate 'Lawyer Trust Account' * * *."
RPC 1.15-1(c) requires that 
"[a] lawyer shall deposit into a lawyer trust account
legal fees and expenses that have been paid in advance, to be withdrawn by the
lawyer only as fees are earned or expenses incurred."
On review, the accused appears to contest
those violations, admitting only that he violated RPC 1.15-1(c) insofar as it
would require a written agreement on the facts of this case.
We begin by
determining to whom the $2,000 belonged on October 7, 2005, when the accused
withdrew the money from his lawyer trust account and deposited it into his
personal account.  The Bar argues that $1,000 represented an advance payment of
the accused's future attorney fees and thus remained client property until the
accused performed the documentation work to earn his fees.  The Bar contends
that the remaining $1,000 represented "anticipated expenses for the
surveyor paid by the Thomases in advance."  The accused, relying on the
affidavit, contends that the entire $2,000 sum was his property, subject only
to his agreement with the Thomases that he would pay the surveyor.
Even assuming that
the Thomases and Peterson had an oral agreement that the entire $2,000 sum
represented a fully non-refundable retainer earned on receipt, "an oral
agreement does not provide a sufficient basis for a lawyer to treat a client's
funds as if they were his or her own."  In re Fadeley, 342 Or 403,
409-10, 153 P3d 682 (2007) (lawyer violated former DR 9-101(A) by
depositing client funds into personal checking account rather than lawyer trust
account).  In the absence of a written fee agreement that expressly designates
a fee as a non-refundable retainer earned upon receipt, funds paid from a
client to a lawyer remain subject to trust account rules regarding funds held
for another.  In re Biggs, 318 Or 281, 293, 864 P2d 1310 (1994)
(applying former DR 9-101(A)); see also In re Balocca, 342
Or 279, 288-89, 151 P3d 154 (2007) (following Biggs).  Applying Fadeley,
Biggs, and Balocca, we conclude that the accused violated RPC
1.15-1(a) and (c) when he removed the $2,000 from his lawyer trust account and
deposited it into his personal checking account.
Our final inquiry
focuses on whether the accused's handling of the $2,000 also violates RPC
8.4(a)(3), as alleged by the Bar.  RPC 8.4(a)(3) provides:
"(a) It is professional misconduct for a
lawyer to:
"* * * * *
"(3) engage in conduct involving
dishonesty, fraud, deceit or misrepresentation that reflects adversely on the
lawyer's fitness to practice law."
Under this court's case law,
"dishonesty includes theft or knowing conversion of client property, such
as client funds."  In re Eakin, 334 Or 238, 248, 48 P3d 147 (2002).
To determine whether
an accused lawyer engaged in conduct involving dishonesty by conversion, we
apply the two-step analysis from In re Martin, 328 Or 177, 184, 970 P2d
638 (1998).  We first consider whether the accused's conduct "amounted to
conversion."  If so, we next evaluate whether the accused exhibited the
requisite intent such that the conversion constituted "conduct involving
dishonesty."(3)
An individual
commits the act of conversion when, without the legal right to do so, he or she
exercises "dominion or control over a chattel which so seriously
interferes with the right of another to control it that the actor may justly be
required to pay the other the full value of the chattel."  Id. (quoting
definition found in Restatement (Second) of Torts § 222A (1965)).
Because an actor who
mistakenly believes that his or her conduct is legal still can commit
conversion, not all conversions implicate the prohibition in RPC 8.4(a)(3)
against "conduct involving dishonesty."  Id. at 184-85.  Acts
of conversion that are "intentional or knowing" violate RPC
8.4(a)(3); acts that are "merely negligent, unknowing or innocent" do
not.  Id. at 186.  Stated differently, the Bar must prove, by clear and
convincing evidence, that the accused either (1) intended to convert property,
or (2) knew "that his conduct was culpable in some respect."  In
re Skagen, 342 Or 183, 203, 149 P3d 1171 (2006) (evaluating the mental
state required for "conduct involving dishonesty" under former DR
1-102(A)(3)).
As discussed above, there
was no written agreement between the accused and the Thomases that authorized
the accused to withdraw or spend the $2,000.  The affidavit signed by the
Thomases is not the equivalent of a contemporaneously signed written fee
agreement.  The conduct in question, however, is not in dispute:  the accused
withdrew $2,000 from his trust account, deposited the funds in his personal
account, and used the funds for his own personal purposes.  That conduct could
constitute conversion.  We need not decide that issue, however, because, as we
shall explain, we conclude that the Bar has failed to prove that the accused's
state of mind was a culpable one.
The Bar points to a
number of circumstances surrounding the accused's withdrawal of the $2,000 that
the Bar contends demonstrate that his conduct was culpable rather than
innocent.  The Bar begins with the circumstances surrounding the accused's
request for the $2,000, namely that:  (1) prior to October 2005, the accused
only had billed the Thomases indirectly through Parrish, (2) the accused did
not list the $2,000 as a credit on his November billing statement to Parrish or
tell her about the payment, and (3) because the Thomases were current on their
payments to Parrish, the accused had no reason to ask for the money except to
satisfy his own financial needs.
In addition, the Bar
contends that the accused's handling of the $2,000 indirectly demonstrates his
knowledge that the money did not belong to him.  The Bar argues that the
accused's initial deposit of the $2,000 into his trust account reflects his
knowledge that the $2,000 was client property that should remain in trust.  See
In re Hedges, 313 Or 618, 623, 836 P2d 119 (1992) (money paid by client to
lawyer remained client funds in the absence of a contrary written agreement
when the accused had deposited money in trust account and admitted that, had
the money had been a nonrefundable fixed fee, he would have deposited it in his
office account).  The Bar also points out that the accused issued the check
used to pay Wellman $1,000 from his trust account.
Next, the Bar points
to the accused's correspondence during the Bar's investigation.  The Bar
explains that the accused did not assert the explanation that the entire $2,000
was a flat fee earned upon receipt in his correspondence with the Bar.  The Bar
also notes that, in his correspondence with the Bar, the accused admitted that
he "should not have" withdrawn the $1,000 to be paid to the surveyor
and that such action "was wrong."
Finally, the Bar
contends that the accused has been dishonest and, accordingly, his explanations
are not entitled to any weight.  The Bar argues that the accused lied in a
deposition by stating that he did not have any pressing need for money in
October 2005.  Moreover, the Bar notes, although the accused testified that he
had personally obligated himself to pay Wellman and discussed that obligation
with Parrish, the Thomases, and Wellman, none of those persons corroborated
that story.
The accused makes
several points in response to the Bar's characterization of the evidence.  As
to the timing of his request, the accused responds that, in October 2005, the
settlement and survey were both moving forward, and that the request was made
in response to the shared concern that the Heneghans would not pay their share
of the surveyor's bill.  He also argues that the payment was sought because the
matter was moving forward such that he had transitioned from the initial phase
of his work (billed through Laura Parrish at a rate of $70 per hour) to the
documentation phase (billed through the $1,000 flat fee payment).  With regard
to his correspondence with the Bar, the accused responds that his statements
were focused on his failure to memorialize the agreement in writing and thus do
not properly support the conclusion that he was admitting to a knowing or
intentional conversion of client funds.  With regard to his financial
circumstances, the accused contends that he did not need the Thomas payment to
make his bankruptcy payments because his wife was paid on October 20 and he
could have obtained an extension of time from the trustee until that date.  Finally,
the accused responds that, as he testified at trial, the reason he paid the
surveyor from his trust account was because he did not have a business account
and he wanted the payment to look professional.
We find it helpful
to consider the $1,000 intended for the accused's services separately from the
$1,000 intended for payment to Wellman.  With regard to the $1,000 earmarked as
payment for the accused's services, we find that the Bar failed to prove by clear
and convincing evidence that the accused acted with culpable intent.  Below, we
discuss three sets of facts that could lead to objectively reasonable
inferences that the accused intentionally or knowingly converted the funds and
explain why those facts, taken in light of the circumstances of the case, are
insufficient to meet the standard of clear and convincing evidence.
First, the accused
directed Frances Thomas to make the $2,000 check payable to his lawyer trust
account and then deposited the check into his trust account.  That fact
suggests that the accused may have known that the $1,000 in attorney fees
belonged in trust because the accused testified that, when he had client money
that belonged in trust, his practice was to deposit that money into a trust
account.  However, it is also undisputed that, in October 2005, the accused was
using poor bookkeeping and trust account practices.  Thus, the deposit of the
funds into his trust account does not, standing alone, prove by clear and
convincing evidence that the accused knowingly misappropriated funds in this
case.  See In re Wyllie, 331 Or 606, 621, 19 P3d 338 (2001) (Bar's
argument that, because the accused generally lacked appropriate procedures for
handling client funds, the accused knowingly misappropriated client funds
"proves too much").
Second, the accused
never noted a credit on his billing to Laura Parrish that reflected the $2,000
payment received from the Thomases.  However, by October 2005, the accused had
taken the lead on the Thomas matter and Parrish was no longer directly
involved.  Parrish testified that, although she was not aware of the agreement
between the accused and the Thomases, she would not have objected.  Moreover,
although the accused submitted his last billing statement to Parrish on May 31,
2006, he continued to perform documentation work on the Thomas matter until
June 2007 without submitting any further billing, except a final bill for costs
advanced.
Third, when the
accused approached the Thomases and requested the $2,000, it was the first time
that he had directly contacted the Thomases regarding billing or fees.  One
plausible explanation for the accused's request is that he was seeking funds to
make the back payments on his bankruptcy plan to avoid dismissal.  But, an at
least equally plausible explanation is that the timing of the request
corresponded with the negotiation of a tentative settlement agreement and the
beginning of the surveyor's work on the property line adjustment.  We are
unpersuaded that the Bar proved by clear and convincing evidence that the
accused had no legitimate reason to ask for the $2,000 advance payment.  See
In re Claussen, 331 Or 252, 267, 14 P3d 586 (2000) ("The facts are
capable of supporting either party's view, but the evidence in the record does
not permit us to infer that the alleged violations are 'highly
probable.'").
Taken together, the
above-described evidence certainly raises the question whether the accused knew
that the $1,000 was client funds and not available for disbursement until all
work was performed.  However, this court's standard of review of clear and
convincing evidence "demands more than merely a suspicion that a
particular fact is true."  In re Albrecht, 333 Or 520, 539, 42 P3d
887 (2002).  We find that the Bar did not prove that the accused violated RPC
8.4(a)(3) in his handling of the $1,000 that had been earmarked as payment for
his attorney fees.
We turn to the
$1,000 that the clients had advanced for payment of the surveyor.  The accused
has consistently acknowledged that he received the $1,000 from the Thomases for
the purpose of paying the surveyor, Wellman.  The question, however, is whether
the accused knew that his withdrawal and application of the $1,000 was
inconsistent with the authority that the clients had given him.
The Bar stresses
that the $1,000 in question was meant solely to compensate Wellman, not the
accused.  The Bar also points out that the accused, in correspondence with the
Bar, acknowledged that he "should not have" withdrawn the $1,000 and
that that action "was wrong."
As we have already
discussed, the accused's acknowledgements that, viewed in retrospect, his
conduct was improper in some ways are not specific enough to serve as
admissions that he committed a conversion of client funds.  However, the lack
of specificity in his statements is not the most serious evidentiary problem
that we detect in this record.
We find that the
accused did believe that he had a binding obligation to the client to pay the
surveyor, and that he always intended to act consistently with that obligation,
as he understood it.  The parties differ sharply, however, in their portrayals
of the evidence of the authority that the accused received from the Thomases
regarding the money in question.  The Bar relies on the testimony of Frances
Thomas, summarized above, that the money was for Wellman's bill and that she
had realized, after speaking with the Bar's investigator, that the accused
should have kept the money in the trust account.  The Bar also criticizes the
accused's credibility and points out that Parrish, Wellman, and Frances Thomas
could not recall being told of the agreement that the accused described.
According to the
accused, his withdrawal of the $1,000 was consistent with his understanding
with the Thomases and, therefore, he was not acting dishonestly in making the
withdrawal.  The affidavit signed by the Thomases explicitly corroborates the
accused's explanation of his authority regarding the $1,000.(4)  Even if we disregard
the accused's testimony about his authority, as the Bar urges, there remains a
significant evidentiary conflict about what the accused was authorized to do
with the money that he received from the Thomases.  The fact that Frances
Thomas later acquired a different understanding of the Bar's rules pertaining
to trust accounts from the Bar's investigator does not alter the affidavit's
portrayal of the accused's authority on October 7, 2005.  The Bar focuses on
the fact that Frances Thomas expressed embarrassment for signing the affidavit
"without really studying it."  However, she also testified that she
read the affidavit, without time constraint, before she signed it in her home. 
Those differing accounts contribute to our conclusion that the evidence is in
conflict regarding the authority delegated to the accused.  Even if the court
could view Frances Thomas' testimony as expressing second thoughts about the
accuracy of the affidavit, she did not repudiate the affidavit and said nothing
to indicate that Emmet Thomas disavowed his statements in the affidavit. 
Additionally, as the accused points out, it is uncontradicted that the Thomases
were pleased with the accused's services and that he timely paid Wellman's bill
upon receipt.
As noted, the Bar
bears the burden to prove, by clear and convincing evidence, that the accused
had a culpable state of mind and, thus, acted dishonestly when he withdrew the
funds from his trust account and applied them to his own purposes.(5)  Even if we disregard
the accused's testimony entirely, the evidentiary conflict to which we have
adverted causes us to be unpersauded, by clear and convincing evidence, that
the accused intentionally or knowingly withdrew and applied the $1,000 in
violation of his authority.  We must resolve the resulting evidentiary question
against the party who bears the burden of proof on the question.  Consequently,
we conclude that the Bar has not proven the charge of conversion involving
dishonesty, in violation of RPC 8.4(a)(3), regarding the $1,000 payment for the
surveyor's services.
III.  SANCTION
Having found that
the accused violated RPC 1.15-1(a) and RPC 1.15-1(c), we next determine the
appropriate sanction.  This court has recognized that the purpose of lawyer
discipline is not retribution but rather to "protect the public and the
administration of justice from lawyers who have not discharged, will not
discharge, or are unlikely to properly discharge their professional duties to
clients, the public, the legal system, and the legal profession." 
American Bar Association's Standards for Imposing Lawyer Sanctions 1.1
(1991) (amended 1992) (ABA Standards); see In re Paulson, 346 Or 676,
712, 216 P3d 859 (2009), adh'd to as modified on recons, 347 Or
529, ___ P3d ___ (2010) (The purpose of lawyer discipline is not to punish a
lawyer who has failed to follow the rules of professional conduct.).  To
determine the appropriate sanction, we follow a three-step analytical
framework.  First, "we determine an initial presumptive sanction based on
(1) the ethical duty violated; (2) the lawyer's mental state; and (3) the
actual or potential injury caused" by the lawyer's conduct.  Paulson,
346 Or at 712 (citation omitted).  Second, we adjust the presumptive
sanction based on the presence of aggravating or mitigating circumstances.  Id. 
Third and finally, we consider whether that adjusted sanction is consistent
with Oregon case law.  Id.
A.        Preliminary analysis
In violating RPC
1.15-1(a) and RPC 1.15-1(c), the accused has violated his duty to his clients
to deal properly with client property and avoid potential injury to the
clients' interests.  ABA Standard  4.12.  Those violations also violate the
accused's duty to the public to avoid conduct that reflects adversely on his
fitness to practice law.  ABA Standard 5.14.
The ABA Standards
describe three types of culpable mental states: intent, knowledge, and
negligence.  A lawyer acts intentionally when the lawyer acts with "the
conscious objective or purpose to accomplish a particular result."  ABA
Standards at 7.  A lawyer acts knowingly when the lawyer acts with
"conscious awareness of the nature or attendant circumstances of the
conduct but without the conscious objective or purpose to accomplish a
particular result."  Id.  In turn, a lawyer acts negligently when
the lawyer deviates from the standard of care that a reasonable lawyer would
exercise in the situation by failing to heed a substantial risk that
circumstances exist or that a result will follow.  Id.  We find that the
accused acted negligently when he committed the trust account violations.  From
his lengthy experience in the practice of law, the accused knew or should have
known that his handling of his trust account funds was improper.
An injury to a
client's interests can be actual or potential.  Here, we find that the accused
caused potential economic injury to his clients because his poor accounting
methods jeopardized the security of trust account deposits.  By failing to
maintain his trust accounts in accordance with legal requirements, the accused
also caused actual harm to the legal profession.  In cases involving a failure
to observe trust account requirements, "[s]uspension is generally
appropriate when a lawyer knows or should know that he is dealing improperly
with client property and causes injury or potential injury to a client." 
ABA Standard 4.12.  In this case, the presumptive sanction is a suspension.
B.        Aggravating and mitigating
circumstances 
We next turn to a
consideration of aggravating and mitigating circumstances.  We find two
aggravating circumstances.  First, the accused committed multiple offenses in
this case.  ABA Standard 9.22(d).  Second, having practiced law in Oregon since
1976, the accused has substantial experience in the practice of law.  ABA
Standard 9.22(i). 
Two mitigating
circumstances also are present.  The accused lacks any prior disciplinary
record.  ABA Standard 9.32(a).  The accused also appears to have an excellent
reputation in the community.  ABA Standard 9.32(g).
C.        Oregon Case Law
We turn to a
consideration of whether the presumptive sanction is consistent with Oregon
case law.  Four recent cases are pertinent to this discussion.
In Fadeley,
the accused lawyer had no written fee agreement with his client.  He received a
$10,000 deposit from the client and deposited it in his personal checking
account.  The lawyer and client disagreed about whether the money constituted,
as the lawyer claimed, a fee fully earned on receipt.  The Bar alleged four
violations:  (1) failure to deposit client funds in a trust account, DR
9-101(A); (2) failure to render an accounting, DR 9-101(C)(3); (3) charging or
collecting a clearly excessive fee, DR 2-106(A); and (4) failure to promptly
refund an unearned fee, DR 2-110(A)(3).  The court in Fadeley found that
the lawyer committed the violations with a mental state of negligence; it also
found that the aggravating circumstances outweighed the mitigating circumstances. 
The court imposed a 30-day suspension.
In Eakin, the
accused lawyer and the client agreed on a flat fee for services of $3,500 and a
trust account deposit by the client of $3,000 to pay for costs.  The lawyer
mishandled the client trust account by reimbursing herself $850 for an expense
that she did not incur, thus paying herself more than she was entitled to
receive.  The court sustained charges against the lawyer under DR 9-101(A),
(C)(3), and (C)(4), all of which obligate a lawyer to properly administer
client funds in a trust account.  The court determined that the sole aggravating
circumstance, substantial experience in the practice of law, outweighed the two
mitigating circumstances present.  The court found that the lawyer should have
known that she was mishandling her trust account.  The court ordered a
suspension of 60 days.
In Balocca,
the accused lawyer produced no written agreement regarding fees with the
client.  The lawyer received the client's partial payment toward fees and costs,
but he did not deposit the funds into a trust account.  The court sustained
charges of improper trust account administration under DR 9-101(A) and
9-101(C), as well as a charge under DR 2-106(A) for charging or collecting an
excessive fee.  The court determined that the accused lawyer knew or should
have known that his handling of client funds was improper, and that there were
four aggravating circumstances and no mitigating circumstances.  The court
imposed a suspension of 90 days.
Finally, in Wyllie,
the accused lawyer had no written fee agreement with the client.  He collected
$750 from the client and deposited the money in a personal account, claiming
that he had earned that amount.  The court sustained charges that the lawyer had
failed to deposit and maintain client funds in a trust account, as well as
other charges that the lawyer charged or collected an excessive fee, DR
2-106(A), DR 9-101(A); and had a conflict of interest.  The court found that
the lawyer's mental state for the trust account violations was negligence, DR
5-105(E), and that there were several aggravating circumstances but no
mitigating circumstances.  The court imposed a sanction of a four-month
suspension.
Our review of the
foregoing Oregon cases, and others, leads us to conclude that the presumptive
sanction that we identified earlier, a suspension, is the appropriate sanction
in this case.  In determining the length of the suspension, we draw particular
attention, as did the court in Eakin, to the accused's substantial
experience in the practice of law.  The failure of a lawyer with substantial
experience to carry out fully the responsibilities imposed by RPC 1.15-1(a) and
RPC 1.15-1(c) for the protection of client funds in a lawyer trust account is a
serious deviation from the legal profession's ethics.  Under the circumstances
shown here, that aggravating circumstance outweighs his unblemished prior
disciplinary record and good reputation in the community.  The Bar's proved
charges require that the accused be suspended for 60 days.
The accused is
suspended from the practice of law for a period of 60 days, commencing 60 days
from the date of this decision.
1. Because
the bankruptcy trustee did not accept personal checks, the trustee requested dismissal
of the accused's bankruptcy petition.  The trustee later withdrew that motion
once the accused made payment via a cashier's check.
2. The
accused testified that his wife was paid on October 20, and that he could have
made arrangements with the bankruptcy trustee to postpone the due date of the
$3,870 payment until that time.  The Bar responds that the accused's
explanation is implausible, noting that the accused needed the funds from his
wife's paycheck to make the next payment on the bankruptcy plan.
3. The
analysis from In re Martin was developed for substantially identical former
DR 1-102(A)(3), which provided that "[i]t is professional misconduct for a
lawyer to: * * * * * (3) Engage in conduct involving dishonesty, fraud, deceit
or misrepresentation."  We consider the analysis in Martin equally
applicable to alleged violations of RPC 8.4(a)(3).
4. To repeat, the Thomases swore that the
following facts were true in their affidavit:
"Mr. Peterson also agree[d] to assume responsibility
for paying when billed, the sum of $1,000 to Mr. Wellman, the surveyor.  We
agreed to pay the remainder of our share of the survey cost.
"We expected Mr. Peterson to negotiate our
check and use the funds as he chose.  We claimed no ownership interest in any
of the money once it was paid to Mr. Peterson.
"We understand that Mr. Peterson disbursed
to himself the sum of $2,000 shortly after receipt of our $2,000 check and then
later paid $1,000 to Mr. Wellman on or about June 19, 2006.  This is what we
expected him to do.  He made these disbursements with our knowledge, consent,
permission and approval.
"We didn't ask or expect Mr. Peterson to
retain any of the money in his trust account.  The entire sum was his, subject
only to his agreement to pay Mr. Wellman
$1,000 at some later date when Mr. Wellman sent a bill for his services."
At the trial panel hearing, Frances
Thomas gave testimony in response to questions about the foregoing affidavit. 
Neither party called Emmet Thomas as a witness at the hearing.
5. Indeed,
intent is the distinguishing characteristic between failure to maintain client
funds in a trust account under RPC 1.15-1(a) and conversion involving
dishonesty under RPC 8.4(a)(3).  See In re Phelps, 306 Or 508, 512, 760
P2d 1331 (1988) (Under former disciplinary rules, "[a] lawyer may remove
money from a trust account * * * before intentionally appropriating that money
for the lawyer's own purposes * * * but removal of money from a trust account
does not necessarily constitute an intentional misappropriation.").