Opinion ID: 1304366
Heading Depth: 3
Heading Rank: 1

Heading: The Shugarman Matter

Text: In early August 1978, Lynn Shugarman and his father, Alvin Shugarman, employed petitioner to handle their $10,000 investment in a real estate venture in Redlands, California. The Shugarmans were referred to petitioner by Albert Corless, petitioner's longtime friend, business associate and client, who was also involved in the Redlands venture. While the record does not show the Shugarmans ever spoke to petitioner in person when hiring him, Lynn Shugarman testified he had two telephone conversations with petitioner in which they agreed upon the basic terms of the representation. [4] Shugarman further testified that after these conversations it was his absolute understanding that he had hired petitioner to represent him and his father in the Redlands venture. In the second of these conversations, Lynn Shugarman arranged with petitioner for the deposit of the Shugarmans' $10,000 check into petitioner's client trust fund account. Shugarman testified he told petitioner that he did not trust Corless with the money and that therefore he wanted the money protected in petitioner's client trust fund account. He also testified petitioner responded that he understood the Shugarmans' concerns and that the funds would be kept in the separate trust account as they had requested. The Shugarmans dated their check August 3, 1978, and made it payable to L. John Arden, Trust Fund. This check is part of the record before us. The Shugarmans delivered the check to Corless so he could give it to petitioner. All parties to the transaction apparently understood that Corless and petitioner would use the Shugarmans' money, if necessary, as an earnest money deposit. Lynn Shugarman testified that over the following month Corless and petitioner represented to him that the transaction was going forward. However, in the several months following, Shugarman learned through other sources there might be a problem with the venture because of a proposed building moratorium in Redlands. He later was informed by a broker familiar with the venture that it had collapsed. When Lynn Shugarman contacted petitioner to request that the money be returned, petitioner told him he thought the Shugarmans had agreed to allow him and Corless to retain the money as a loan. Shugarman testified he vehemently rejected any request that the appropriate paperwork for the loan be drawn up, declaring he and his father had never agreed to a loan. The Shugarmans made several unsuccessful demands on petitioner before filing a civil suit and obtaining a default judgment against him. The judgment remains unsatisfied and petitioner has never returned any portion of the Shugarmans' money. On August 9, 1978, after taking the Shugarmans' $10,000 check to their bank and obtaining a cashier's check for the $10,000 amount, petitioner deposited that cashier's check into his client trust fund account. That same day he wrote a check from that account to himself for $6,200 and marked the check Debit: Corless. A week later he wrote a check from that account to Corless and his wife for $3,400. A third check was written that week for $400 to an uninvolved party. All three checks appear in the record before us. The amounts of the three checks total exactly $10,000. Petitioner has asserted throughout this proceeding that the Shugarmans were never his clients and that he only agreed to deposit the money into his client trust fund account as a favor to Corless, his only client in the transaction. [5] Petitioner testified he removed the Shugarmans' money from his client trust fund account only after the Shugarmans had agreed to loan it to him and Corless. Petitioner stated that he waited to cash the check until it was apparent the earnest money would not be needed and until Lynn Shugarman signed documents evidencing the loan. Corless corroborated petitioner's story regarding the loan. He further testified that the 100 percent bank financing was affirmed on August 7, 1978, and that thereafter it was apparent the Shugarmans' money would not be required as an earnest deposit. He testified he contacted Lynn Shugarman before August 9 and negotiated a loan in exchange for a guarantee that the Shugarmans would receive some portion of the proceeds from the project. The Shugarmans both specifically denied they had ever acquiesced to a loan or signed any note or other document to that effect. [6] The hearing panel found that petitioner had wilfully and wrongfully commingled, misappropriated and failed promptly to repay the Shugarmans' money through conduct involving moral turpitude and in violation of rule 8-101. [7]