Opinion ID: 2068232
Heading Depth: 1
Heading Rank: 6

Heading: Johnson's Additional MRPC 1.15(b) Exceptions

Text: Johnson takes exception to the hearing judge's finding that [t]he parties were advised that the Barneses would remain in their house and that Apple Title would hold an escrow from the Barneses' sales proceeds equal to one year of rent payments. In support of this contention, Johnson points to Cheryl Bruce's testimony that she did not recall whether she had discussions with Mrs. Barnes about setting up an escrow account and that Johnson answered no when asked, Were you privy to any discussed proposal with Ms. Thompson-Burnett that involved terms that included the sale of property with a leaseback to the Barnes for a 12-month period? Johnson also points to the report issued by Bar Counsel's Investigator (Investigative Report). The investigator wrote that Michal Johnson told him, [N]either respondent Will Purcell nor Renard Johnson conducted any discussions with the parties concerning the sales agreement, the lease agreement, or the Barnes option to buy back the property on the day settlement was conducted. This exception boils down to a credibility contest between Respondent Johnson and Mrs. Barnes, who testified that Johnson told her that Apple Title would hold her money in escrow for the mortgage to be paid for the whole year. Maryland Rule 16-759(b)(2)(B) provides that the Court of Appeals shall give due regard to the opportunity of the hearing judge to assess the credibility of witnesses and we have held that [d]eference is accorded the hearing judge's findings because, having seen first-hand the demeanor of the witnesses, the hearing judge is in the best position to assess their credibility. Attorney Grievance v. Kimmel, 405 Md. 647, 667, 955 A.2d 269, 281 (2008). Here, we defer to the hearing judge's decision to believe Barnes and not Johnson. We are not persuaded that Cheryl Bruce's testimony or the hearsay statement by Michal Johnson, who did not testify at the hearing, reveals error by the hearing judge. This exception is overruled. Johnson also takes exception to the hearing judge's finding that Mr. and Mrs. Barnes understood that the remaining balance of their sellers' proceeds would be held in escrow by Apple Title and applied toward the rent payments in an amount equal to Ms. Thompson-Burnett's mortgage payments. Johnson argues that, because Mr. Barnes did not testify, there is not sufficient evidence for the hearing judge to have found what both he and Mrs. Barnes understood. Mrs. Barnes frequently referred to she and Mr. Barnes as a married unit in her testimony: we had no knowledge of [the lease/buyback] until we came to Apple Title Company. (Emphasis added.) With regard to the lease/buyback, Mrs. Barnes testified she and her husband had a discussion about the deal: we didn't want to get in a ... bind like that .... and my husband discussed it .... it kind of took a toll on both of us. (Emphasis added.) Mrs. Barnes also made it clear that she and her husband jointly responded to the proposed lease/buy back agreement: It was up to my husband and myself to do it, but we figured that it's kind of too late. (Emphasis added.) We again defer to the hearing judge's decision to believe this testimony, and we overrule the exception. Johnson also argues that Cheryl Bruce testified that she did not have conversations with Mr. and Mrs. Barnes about the escrow arrangement. This testimony from Bruce is immaterial because the discussion of the arrangement occurred between Mr. and Mrs. Barnes, Purcell, Johnson, and Michal Johnson, and Cheryl Bruce was not a participant. Johnson takes exception to the hearing judge's finding that Although Apple Title did not have a signed authorization or other directive from Calvin and Christine Barnes to disburse the remaining balance of their sellers' proceeds, or any portion thereof, to Michal Johnson, Shreco Thompson-Burnett or any other third party or entity, on April 25, 2005, Apple Title issued a check drawn on its real estate escrow account in the amount of $27,168.00, made payable jointly to Shreco Thompson-Burnett and Michal Johnson. Johnson contends that Apple Title acted properly in disbursing the money to Thompson-Burnett because it was rightly her property pursuant to the escrow arrangement to which Mr. and Mrs. Barnes agreed. Johnson cites Mrs. Barnes's testimony indicating that she expected $27,000 to go to Thompson-Burnett. He also points to a letter from the Barnes's counsel [5] sent after Michal Johnson cleaned out the account. This letter requested that the $27,000 be given to Thompson-Burnett. These proffers by Johnson do not go to the heart of his exception to the rather narrow finding that Apple Title did not have a signed authorization or other directive. There was no document directing the $27,000 to be held in escrow. Nor does the HUD-1 form reflect an assignment of funds to Thompson-Burnett to be held in escrow or otherwise. Cheryl Bruce testified that there was an assignment of funds document in the Barnes file that indicated $27,000 was to be paid to Thompson-Burnett, which caused her to withhold these funds from Mr. and Mrs. Barnes. When asked what happened to this document, Bruce responded, That, I don't know. The record contains no written agreement regarding the escrow account and there is no testimony from Mrs. Barnes that she directed this action, merely that she understood it would be implemented. We overrule this exception. We agree with the hearing judge's conclusion that because of Johnson's supervisory and managing position with Apple Title, he violated MRPC 1.15(b). There was ample evidence in the record to support this finding. Kochanski testified: Mr. Renard Johnson ... was responsible for all of the disbursements by Apple Title by being the manager of Apple Title. Apple Title undertook the responsibility to disburse funds in accordance with the HUD-1, and their employees didn't do so. And, frankly, I can't tell from this documentation why they made a lot of these disbursements. There was certainly nothing in writing here that satisfies some of them, and even when there is something in writing, it's not what is customarily used and it's not customary for that purpose. Apple Title took in a great deal of funds that they didn't account for in accordance with HUD-1. It appears they took in money that they kept, that was supposed to be used for other purposes, was never returned to the people that it was supposed to go to. The funds were taken in in trust and that trust was breached. Kochanski elaborated that there was evidence of Johnson's culpability in his answers to interrogatories: Interrogatory No. 10, If you contend you did not have supervisory authority over the activities of Will Purcell in connection with the April 5th, 2005, settlement conducted on the sale of 2345 Leyton Court, state the facts upon which you rely to support your contention. Answer to No. 10, He was a licensed settlement officer and licensed attorney contracted to conduct settlements. The ultimate responsibility was on me based on owning the company.    Interrogatory 21, Set forth the reason, reasons, why Apple Title issued a check drawn on its real estate escrow account on April 25, 2005, payable to Shreco Thompson-Burnett and Michal Johnson in the amount of $27,168 as averred in paragraph 26 of the PDRA. Also, state (a) whether you approved the issuance of said check and (b) the information, if any, you were given by Cheryl Bruce or any other Apple Title employee concerning issuance of the check. Answer, Ms. Bruce indicated that she had spoke with Burnett several times by phone, and she indicated to me that there was money in escrow for this particular transaction and that all of the parties involved wanted the money to be disbursed to Burnett and Johnson. Based on the information given to me, I approved the issuance of the check. (Emphasis added.) Interrogatory No. 21 reinforced Kochanski's testimony that Johnson had ultimate control over the funds and in this case they weren't disbursed without his permission and consent. The hearing judge's finding that Johnson violated MRPC 1.15(b) is supported by clear and convincing evidence based upon our independent review of the record and we overrule Johnson's exceptions.