Opinion ID: 1452154
Heading Depth: 1
Heading Rank: 3

Heading: Pacheco Matter.

Text: In early March 1968 Mrs. June Pacheco (a woman 46-50 years of age) and her husband were injured in an automobile accident. They retained petitioner to prosecute their claim for damages. A compromise settlement resulted in the distribution to her of $36,750 and check in that amount was sent to petitioner by the insurance company together with releases. Mrs. Pacheco was severely and extensively injured in the accident, was undergoing intense pain, had emotional problems (threatened breakup of her 20-year marriage and her son's various difficulties with the law) and had financial problems. On June 30, 1969, petitioner took the settlement draft and the releases to the Pacheco home. Mr. Pacheco signed inside the house. Mrs. Pacheco accompanied petitioner to his car and signed the note there as she had matters to discuss with him regarding her welfare status and the handling of the proceeds, and did not want her husband to hear the conversation. Prior to the settlement of the personal injury claim Mrs. Pacheco indicated to petitioner that she was interested in investing a portion and in having a portion put in trust so that she could have a monthly amount for living expenses. They discussed this again when she signed the settlement check. Petitioner then gave her a promissory note for $25,000 (her share of the proceeds after agreed upon deductions). [3] The note was handwritten by him on his office stationery; was dated June 30, 1969; it provided for interest payments at 10 percent per annum, payable monthly commencing August 1, 1969, with a due date of July 1, 1975; and stated that This note shall be secured by a pledge of the stock to be issued by Anwright Corp., a California Corporation, to the undersigned. Said stock represents approximately twenty percent (20%) of the proposed stock issuance presently in said corporation. The stock was never issued by the company. No security was ever given by petitioner to Mrs. Pacheco for the note. No memorandum for the files or for his client was made by him explaining the transaction. At that time petitioner was under threat of disciplinary and criminal proceedings to repay the moneys misappropriated from the Shehorns. He was overdrawn on his office checking account with the bank during the period of February through June 1969 and was personally insolvent. He had financial obligations totaling $30,000-$40,000 exclusive of what he owed on the family home, and that home was homesteaded. On the following day, July 1, petitioner deposited $8,500 of the Pacheco proceeds in his commercial account; deposited the balance in his trust account, which at that time had a balance of $59.59; and made restitution to the Shehorns out of the trust account. Within three months he had used the entire balance for his own use and benefit. He continued to make payments of $250 a month to Mrs. Pacheco until March 1970. On one occasion, at her request, he gave her a check for $2,000. On April 23, 1970, Mrs. Pacheco filed a civil fraud action in Santa Clara County. There, as in this proceeding, petitioner maintained that the $25,000 was loaned to him by Mrs. Pacheco in exchange for his promissory note, that there was no misappropriation because it was his money to do with as he pleased, that there was no confidential relationship between himself and Mrs. Pacheco at that time, and that he told her the money was going into a business venture and that is where the money went. The trial court found that there was a confidential relationship between the parties at the time petitioner gave Mrs. Pacheco the promissory note and deposited the settlement proceeds in his bank accounts; that prior to the settlement of the action they had discussed the investment of these proceeds and petitioner had represented to her that if she would permit him to retain $25,000 from her share he would hold it as trustee for her and invest it for her benefit as he often made investments for clients; that he made these representations for the express purpose of inducing her to allow him to retain these moneys; that she did rely upon his representations; and that she would not have permitted him to retain the $25,000 had the statements not been made because there existed between them a fiduciary and confidential relationship. Furthermore, the court found that Mrs. Pacheco had no business experience or prior experience with promissory notes, that she relied upon his experience and judgment and did not discuss investment of these proceeds with anyone else, and that she did not discover the true nature and effect of the purported promissory note and the fact that petitioner had wrongfully used the moneys for his own benefit and purpose until about March 1, 1970. In his testimony before the special administrative committee petitioner agreed that this was not the kind of business investment that he as an attorney would have recommended. However, he did not consider that he was in a fiduciary relationship with her at that time because she mentioned she was going to get a divorce and did not ask him to represent her. He explained the deposit of a portion of the proceeds in his trust account as follows: first, that it was not commingling of clients' funds because there was only a $59 balance at that time; second, that he wanted to keep them out of the reach of creditors; that if he put them in a regular commercial account it would be reachable by a writ of attachment at that time; that he always had a $5,000 note to the bank outstanding so that nobody could come in and zap [his] bank account. So anything above that $5,000 note probably I had it setting in the trust account so it could not be reached by a writ of attachment.... At the time of the hearing petitioner had paid less than $200 in restitution to Mrs. Pacheco since the civil judgment. With regard to the punitive damages he testified that [T]he judge found ... that either there was undue influence or something, fraud or some damn thing, and I got nailed for $25,000 punitive damages. So, you know, I'm on the hook. I have no objection to paying her $25,000 but I'll tell you right now for the record she's going to have one hell of a time on that extra twenty-five thousand. I'm sure she'll get it, but they are going to earn that last twenty-five thousand. I owe her the first. The second I'll deal with. The committee recommended that petitioner be suspended until August 29, 1973; that terms of probation include his making full restitution to Mrs. Pacheco, plus accrued interest during the period of his probation; and that he not practice as a sole practitioner for three years of his probation or be solely responsible for handling of clients' funds during the entire probationary period. The board recommended disbarment. (4) The record discloses serious and wilful misconduct in violation of petitioner's obligations as an attorney at law and officer of the court and lack of the requisite moral fitness to be held out as a member of the State Bar. In addition to the conviction of grand theft, a felony involving moral turpitude, and one which normally calls for disbarment, petitioner misappropriated the funds of another client; practiced fraud and deceit upon his clients and upon Judge Cooney; commingled clients' funds; and, by his manner of handling his office bank accounts, engaged in fraud upon creditors. Restitution made to the Shehorns does not call for any act of clemency. Restitution made to Mrs. Pacheco is of little weight, in view of his persistence in his patently false account that he made restitution to the Shehorns from funds loaned to him by Mrs. Pacheco, and his lack of repentance with regard to the Pacheco matter. His attitude does not reflect present rehabilitation. No clearly extenuating circumstances are shown. The letters from petitioner's fellow lawyers, judges, and the Shehorns, victims of the grand theft, are in his favor but they are not conclusive in the absence of a showing by petitioner of a proper attitude of mind regarding his offense (see Feinstein v. State Bar (1952) 39 Cal.2d 541, 547 [248 P.2d 3]). His explanation that he was under financial pressure because of his business venture commitments and that he was having financial and domestic problems may explain his actions but they do not excuse his violation of his oath and duties as an attorney at law. His explanation that in law school he was instructed in legal ethics but not in how to handle a trust account deserves no comment. Disbarment is necessary to protect the public and to maintain public confidence in the courts and the legal profession. It is therefore ordered that petitioner, Loy Dale Wright, be disbarred from the practice of law in this state, and that his name be stricken from the roll of attorneys, effective 30 days after the filing of this opinion.