Opinion ID: 1309631
Heading Depth: 2
Heading Rank: 3

Heading: The Seda Kasabian Matter

Text: The record supports the Review Department's findings that Garlow (1) wilfully misappropriated his client's property for his own use, (2) wilfully refused to provide an accounting, and (3) made material misrepresentations to the United States Bankruptcy Court. Seda Kasabian retained Garlow in August 1981 to secure a stay on the impending foreclosure of her home. Garlow suggested a Chapter XI bankruptcy proceeding and required a $3,000 retainer before he filed any papers. Kasabian did not have $3,000 in cash to pay Garlow's retainer, but orally agreed to give him five rings worth $3,500 as security for her future payment. The rings were from the inventory of Kasabian's jewelry business. Garlow did not advise Kasabian that any property transfer between an attorney and client must be approved by the bankruptcy court. Garlow completed a petition for bankruptcy and filed it with the United States Bankruptcy Court. The stay of foreclosure was granted. Garlow did not inform the court that he had accepted Kasabian's business inventory as security for his fee despite at least two questions in the petition for bankruptcy specifically inquiring about legal fees and property transfers. Garlow's response to these questions on the petition was Not Applicable. Garlow testified that he did not think his fee agreement was relevant in a Chapter XI proceeding. Early in 1982, Kasabian exchanged a personal ring for the five inventory rings in the hopes that she could sell the five rings to pay Garlow. Around the same time, she began making cash payments to Garlow totalling $1,400. Later she exchanged three rings for the personal ring. [9] She testified that she also made numerous requests for an itemization to determine how much she owed, but never received one. Kasabian testified that in early June of 1982 she received a phone call from one of Garlow's secretaries. The secretary said Garlow was flashing Kasabian's rings around the office and calling jewelers in an effort to sell the three rings. Kasabian called Garlow and asked for her rings back. Garlow said he would not return them unless she paid him the balance due. A few days later, Kasabian went to Garlow's office with a friend named Mickey Walker. They spoke directly to Garlow and demanded the three rings back. Garlow told them he did not have the rings anymore. Garlow later testified that he had sold the rings by that time. Kasabian made a written demand upon Garlow for return of her three rings. Garlow's office received the letter, but Garlow did not respond. Kasabian had no further communication with Garlow and never received her rings or a refund of her $1,400 payment.
The Review Department concluded that Garlow violated rules 8-101(A), 8-101(B)(3) [10] and 8-101(B)(4) [11] of the Rules of Professional Conduct and section 6103 of the Business and Professions Code. The Review Department also determined that Garlow's misconduct involved moral turpitude and dishonesty within the meaning of Business and Professions Code section 6106. The Review Department determined that there were no mitigating circumstances, but found the following aggravating circumstances: (1) Garlow's prior disciplinary record; (2) the fact that his misconduct was not an isolated act but instead evidenced multiple acts of wrongdoing and a pattern of misconduct; and (3) that his conduct demonstrated indifference toward rectification or atonement because he never gave Kasabian an accounting and never returned her funds or property. The Review Department concluded that disbarment was warranted.
(16) Garlow first alleges that Kasabian transferred the rings to him as payment in full with the understanding that she could repurchase them within a certain undisclosed time period. Kasabian never repurchased the rings, he argues, and therefore they were his to do with as he wished. The record, however, supports Kasabian's position that the rings were given to Garlow as security for future cash payment. This is evidenced by the fact that Garlow directed his secretaries to call Kasabian regularly to demand payment. Moreover, Garlow's ledgers indicated that there was a balance due on Kasabian's account in excess of $3,000. Finally, Garlow allowed Kasabian to exchange the rings with other rings of lesser value following her partial cash payment. These facts are inconsistent with Garlow's contention that the rings constituted payment in full. We therefore conclude that the rings were to be held as security and that Garlow misappropriated them for his own purposes. (17) Garlow's next contention is that Kasabian urgently needed his services. That fact is irrelevant. Garlow also argues that he performed substantial services for Kasabian, earned the fee paid (i.e., the rings and the $1,400 cash payment) and there was no misappropriation. This argument misses the point. There is no doubt that Garlow obtained a stay for Kasabian and filed the bankruptcy petition for her. The issue here, however, is whether he misappropriated part of her business inventory while the status of the property was in dispute. Even if he was entitled to a $3,000 fee, he should have held the property in trust until the dispute was settled and should have completely disclosed his fee agreement to the bankruptcy court. (18) Garlow further alleges that Kasabian never requested an accounting. However, there is ample testimony in the record indicating otherwise. The Hearing Panel was in the best position to determine the credibility of this testimony and we defer to its finding that an accounting was requested and that Garlow failed to provide one. (19) Garlow next contends that the misrepresentation in the bankruptcy petition was simply a typographical error and not the result of culpable conduct. He points to the fact that the response to question 19, subpart b of the petition should have been typed under question 20, subpart b. [12] However, even if the intended response had been placed in the correct space, it still would not have informed the court that Garlow had accepted some of Kasabian's business inventory as security for his fee. Moreover, on the last page of the petition, the document has a space which reads: I agreed to turn over or give a security interest in the following property. In response, the secretary typed Not Applicable. This omission is not a typographical error; it is a false statement. There is no evidence that Garlow actually directed his secretary to type in the misleading information. However, there is evidence that Garlow knew property transfers and fee agreements involving business inventory had to be approved by the bankruptcy court. It is also clear that he did not make any effort to notify the court that he had accepted business inventory from Kasabian. These facts support the Review Department's finding that he made intentional misrepresentations to the United States Bankruptcy Court. (20) Finally, Garlow contends that he did not violate rule 8-101 of the Rules of Professional Conduct. We disagree. Garlow was required under rule 8-101 to hold the rings in trust until the dispute over the disposition of the rings was resolved. He violated this rule when he sold the rings. Moreover, rule 8-101 required him to keep adequate records of the property and payments given to him, but he failed to do so. Finally, he was required to promptly return any property or money which the client was entitled to receive. However, he sold the rings and kept the $1,400.