Opinion ID: 1171979
Heading Depth: 1
Heading Rank: 2

Heading: facts

Text: Petitioner was admitted to the practice of law in 1957. In 1975 he was publicly reproved for gross negligence in the handling of a client's trust account. In 1978 he was suspended from the practice of law for two months after a conviction for failing to file federal income tax returns. The present disciplinary proceedings concern petitioner's representation of Mr. James Mederos, specifically the fee agreement with Mr. and Mrs. Mederos. In December 1979 petitioner agreed to represent Mr. Mederos through trial for a fee of $15,000. The Mederoses did not have the amount in cash, so petitioner requested that they give him a promissory note secured by a deed of trust with a power of sale on real property which they owned. Mrs. Mederos testified that petitioner told her that ... it was no big thing to sign the note, that he would hold the note until [she] could pay him payments or until the property was sold. They agreed to sign the standard form note secured by a deed of trust which petitioner presented to them. By its terms, the note was payable on demand. Petitioner prepared the note without the amount of indebtedness filled in. He informed Mr. Mederos that the fee would be $15,000, and both Mr. and Mrs. Mederos executed the note. Then in only Mrs. Mederos's presence, he filled in the amount of $20,000. When she objected, he informed her that the additional $5,000 was an advance against litigation costs. Petitioner then accompanied Mrs. Mederos to a real estate office where she listed the property for sale. As to this transaction, the hearing panel of the State Bar Court found that petitioner did not fully disclose and transmit in writing to the clients the terms of the security arrangement; that he did not advise and give them the opportunity to have the transaction reviewed by independent counsel; and that he did not provide them with copies of the promissory note and deed of trust. The hearing panel found that the clients did not understand how petitioner was to secure his fee or that he could foreclose on their property under the agreement. In May 1980, petitioner acquired a second promissory note from the Mederoses secured by another deed of trust on the same property, this time for $10,000. This was to pay for additional services required by the Mederoses. Again, the hearing panel found that petitioner failed to disclose fully in writing the terms of the security arrangement, failed to give the clients an opportunity to consult independent counsel, and failed to provide them with a copy of the security agreement. The Mederoses understood from petitioner that the fee eventually would be paid from the proceeds of their sale of the property. Instead of waiting for the clients to complete a sale, however, petitioner immediately assigned both notes and deeds of trust, and the assignee made a demand on the Mederoses. They had been unable to sell the property. They offered petitioner another piece of property to satisfy the debt. Petitioner said that he would discuss this with his partner, but they testified that he never responded to the offer again. The assignee assigned the note to a third party, who foreclosed. The hearing panel concluded that petitioner had violated rule 5-101. It found the terms of the transactions fair and reasonable, but found that the terms were not fully disclosed in language that the clients could understand. It found that the petitioner failed to provide a written explanation, and that the clients actually did not understand the legal significance of the agreement. The review department found, in addition, that the failure to comply with rule 5-101 and the modification of the first promissory note without the consent of the clients were acts of moral turpitude in violation of Business and Professions Code section 6106. The hearing panel recommended a one-year suspension with actual suspension of ninety days. Both petitioner and the examiner for the State Bar sought review. The review department increased the recommended discipline to four years' suspension and six months' actual suspension on the grounds that petitioner's acts involved moral turpitude and that he had more than one prior discipline involving money matters. Petitioner first contends that he was denied due process when the hearing panel conducted hearings on this matter in his absence, and when the panel refused to grant him a continuance so that he could be present, or to allow him to put on evidence on the merits at the hearing on discipline. He asks us to set aside his defaults under Code of Civil Procedure section 473 or under our equitable powers. He also argues in the most conclusory possible terms that taking a note secured by a deed of trust to secure payment of a fee is not subject to rule 5-101.