Opinion ID: 1441929
Heading Depth: 2
Heading Rank: 2

Heading: evidence and findings on culpability

Text: (1) Petitioner bears the burden of establishing that the findings of the review department are not supported by the record. ( Garlow v. State Bar (1988) 44 Cal.3d 689 [244 Cal. Rptr. 452, 749 P.2d 1307].) (2) While we make an independent review of the evidence, when credibility of witnesses is important we accord great weight to the findings of fact of the hearing department, which is in a better position than the review department to resolve conflicts in the evidence. ( Young v. State Bar (1990) 50 Cal.3d 1204, 1216 [270 Cal. Rptr. 315, 791 P.2d 994].) (3) The charges against an attorney must be supported by convincing proof and to a reasonable certainty; inferences leading to a conclusion of innocence must be drawn if equally reasonable but conflicting inferences may be drawn from the evidence. ( Skelly v. State Bar (1973) 9 Cal.3d 502, 508-509 [108 Cal. Rptr. 6, 509 P.2d 950].) Although petitioner disputes the sufficiency of the evidence to support the findings of the State Bar Court, and the propriety of the review department's de novo redetermination of facts based on disputed evidence in which the credibility of the witnesses was in issue, we conclude that undisputed evidence clearly supports the finding that petitioner misappropriated funds in violation of the Rules of Professional Conduct. We also conclude that, if, as petitioner testified, she believed that her use of client trust funds was authorized by her client, and that her client had the power to give such authorization, that belief was unreasonable. Prior to the date on which petitioner commenced her representation of Ms. Red, the court in which the dissolution action was pending had ordered that the family residence, which was the community property of Ms. Red and her husband, be listed for sale and that some child support payments to be made by Mr. Red should accrue and be payable from the proceeds of the sale. The order also provided that if the home had not been sold by November 1, 1984, it was to be immediately listed for rent, and that while rented the parties would be jointly liable for related expenses, and the rental payments would be placed in a joint account and utilized for those expenses, with the balance to be divided equally upon sale of the property. Proceeds of the sale were to be placed in an interest bearing trust account by Ms. Red's counsel, to be distributed by counsel for Ms. Red pursuant to a written agreement or order of the court. Counsel for the parties subsequently agreed first that the account would be opened and administered only by Ms. Red, and then, in January 1986, that petitioner would deposit the rents in, and make disbursements for related expenses from, her client trust account. On July 21, 1986, Ms. Red and her husband stipulated, in writing, to a division of property, thereby giving the residence and the funds deposited in the trust account after January 12, 1986, the date of the final decree of dissolution, to Ms. Red. That stipulation was incorporated in substance into a final judgment on August 27, 1987. No evidence was presented that prior to the July 21, 1986, stipulation Mr. Red, his attorney, or the court authorized the use by either Ms. Red or petitioner of any rents in the trust account for any purpose other than upkeep, maintenance, and expenses related to the residence agreed on by Mr. Red and petitioner's client. Undisputed evidence establishes that opposing counsel was unaware that tenant security deposits had been deposited in the account, and did not agree to the withdrawal of any sums from the trust account for other than the specified purposes, and did not know that such withdrawals were being made. Undisputed evidence also establishes that petitioner made numerous withdrawals from the Red money in the trust account to pay herself fees commencing on February 5, 1986, and continuing through August 29, 1986. Petitioner's argument, that she reasonably believed she had authority to apply Red trust funds to fees, is largely irrelevant since, as the review department and the referee agreed, the withdrawals commenced prior to the time at which petitioner could have believed that Ms. Red agreed to payment of legal fees in this manner. Even assuming that petitioner believed Ms. Red had done so, however, no evidence suggests a basis for believing that Mr. Red or his attorney had sanctioned this use of the trust funds remaining after payments of expenses prior to trial or settlement of the case. Petitioner acknowledged that she had written checks, drawn on the trust account, to pay herself fees in the Red matter in the following amounts: February 5, 1986: $1,000 February 5, 1986: $250 February 14, 1986: $65 (of a $100 check) March 1, 1986: $350.59 March 3, 1986: $180 March 11, 1986: $275 March 14, 1986: $100 April 17, 1986: $400 (of a $430 check) May 6, 1986: $50 [4] May 14, 1986: $377.86 [5] July 1, 1986: $1,558 (of a $2,580 check) July 16, 1986: $500 (of a $700 check) August 1, 1986; $900 August 29, 1986: $4,132. Petitioner's only basis for claiming that she was authorized to withdraw those community property funds from the trust account was an agreement that Mr. Red would be given credit against setoffs for support payments he owed Ms. Red. Although she testified that Ms. Red had authorized payment of fees out of the money in the account, the only indication of the date of this conversation is petitioner's testimony that toward the end of February Ms. Red told petitioner that Ms. Red's mother would pay petitioner another $1,000 and I agreed that since I could be paid out of the trust pending [the end of the case] Ms. Red would not have to pay more until then. Petitioner's billing records reflect no office visit with Ms. Red during February prior to February 25, 1990, and reflect the first telephone contact as being on February 7 to discuss a bill related to the septic tank. Petitioner acknowledged that the August 29, 1986, check drawn on the trust account and payable to herself for $4,132 was a payment for fees. She deposited $4,000 of her own money in the account to cover that check. She explained that it was actually a way of accounting for the fees already paid, I guess would be more proper, and was actually a redeposit so that one check would reflect the total fees paid. An accounting petitioner provided to Ms. Red on August 29, 1986, did not reflect petitioner's earlier payments of fees to herself from the trust account. Petitioner denied that she intended to give Ms. Red the impression that petitioner took her fees in a lump sum at that time, which was after the settlement and award of the monies in the account to Ms. Red. Petitioner conceded that she had never advised Ms. Red in writing that she had taken fees from the trust account. She listed the fees as an end-of-case accounting in the August 29, 1986, account because that would cause me less problems in the accounting, and said that Ms. Red had known that petitioner had been paid all along. Petitioner explained that she believed her client had authority to authorize use of the trust funds because Mr. Red owed more in support arrearages, taxes, insurance, and payments on the trust deeds than would ever be collected in rent. She had not discussed the amount of the arrearages or the use of the trust fund with opposing counsel, but at the time she began receiving the $1,000 per month rent, Mr. Red owed close to $15,000. Richard Beswick, a certified specialist in family law who represented Mr. Red in the dissolution proceeding, testified that when the residence was finally rented, petitioner maintained the trust account and he assumed the rents were deposited in the account. At no time prior to July 21 did Beswick understand that the rental money would not have to be held in trust. He had no discussion regarding a setoff of any arrearages in Mr. Red's child or spousal support payments against the trust funds and he had made no commitment to permit a setoff. He did not give petitioner permission to take money from the trust account to pay her fees and she had not asked him for such permission. He was not aware that the tenants of the residence had paid security deposits which had been placed in the trust account. Beverly Red testified that she understood that two $1,000 tenant security deposits which had been deposited in petitioner's client trust account were to be held, that the cost of any damages were to be taken out, and that the balance was to be returned to the tenants when they moved out. Ms. Red had no discussions with petitioner regarding use of the security deposits for any other purpose. She had no discussion or communication with petitioner prior to the July 21, 1986, court date, regarding taking money out of the trust fund for fees. Ms. Red never told petitioner or suggested that petitioner could do so. Ms. Red was certain that she had not agreed to use of the money in the trust account for payment of legal fees, because the money in the trust fund was earmarked for house payments and prior to the July 21, 1986, settlement half of the money belonged to Red's ex-husband. Ms. Red made no such agreement with petitioner prior to July 21, or on that date, or at any time prior to August 4, 1986, when she requested that the money in the trust account be paid to her at once.
The referee found that until July 26, 1986, when a settlement was reached in the dissolution proceeding, the money held for Red in petitioner's trust account was the community property of Beverly Red and William Red. The referee was impressed with petitioner's credibility, and had serious doubts as to the credibility of Ms. Red in the conflicting testimony regarding the existence of an agreement that petitioner's fees could be paid from the trust funds. He concluded, nonetheless, that the existence of the disputed agreement was not material to culpability because there was clear and convincing evidence that petitioner had begun taking money from the trust funds and applying it to her fee prior to time that agreement was, allegedly, made. In addition, because the trust funds were community property, they could not be used for any purpose other than that agreed upon by Mr. Red and his attorney. The referee accordingly found that during the six-month period in which the house was rented, petitioner collected and placed in her trust account $8,872.43 of money belonging to the Reds, and that there were expenses of approximately $2,740.36. Of the remaining funds, petitioner sent Ms. Red only the $2,000 in security deposits; on August 1, 1986, when that check was sent, there was under $1,000 in the account. Petitioner had been withdrawing money for herself since in or about February 1986, and on or about August 4, 1986, and August 29, 1986, petitioner had replaced money into the trust account. The accounting sent to Ms. Red on August 29, 1986, did not include the amounts petitioner had been withdrawing between February 1986 and August 1986. Ms. Red had requested an accounting several times prior to August 1, 1986, and petitioner had failed to provide one. Although petitioner had agreed to provide an accounting of the trust moneys to opposing counsel on final disposition of the case, none was provided. It was logical to assume that this subject became moot when the case was settled. The referee concluded that in committing these acts petitioner misappropriated funds in her trust account, and was in willful violation of former rule 8-101(B)(4), regardless of her state of mind at the time.
The review department did not adopt the findings of the referee, but its findings with regard to the agreement with opposing counsel, that petitioner receive and disburse the rent moneys, holding the remainder in trust, and that petitioner provide an accounting, are consistent with those of the referee. The review department also declined to make a finding on the existence of an agreement permitting petitioner to receive her fees from the trust account. It, too, found that petitioner had begun taking funds held for the Reds out of the trust account to apply to fees prior to the date on which Ms. Red allegedly agreed that she could do so. Those funds were community property that could not legally be used for any purpose other than one agreed upon by both William Red and his attorney, unless otherwise ordered by the court.
The review department concluded that petitioner had misappropriated $4,066 of funds in willful violation of section 6106, and former rules 8-101(B)(3) and 8-101(B)(4).