Opinion ID: 1309631
Heading Depth: 2
Heading Rank: 1

Heading: The Evelyn Perez Matter

Text: The record supports the Review Department's findings that Garlow (1) wilfully refused to turn over money to his client which he had in his control and to which he had no claim, (2) wilfully withdrew money for his personal use from his client trust account which should have been held until a fee dispute was resolved, and (3) testified falsely before the Hearing Panel regarding the status of his client trust account. In October of 1974, Evelyn Perez retained Garlow to handle the dissolution of her marriage. Garlow and Perez orally agreed that she would pay him $175 for the entire dissolution proceeding, but that more fees would be charged if the dissolution became complicated. Perez paid the $175, plus an additional $75 billed by Garlow. The court ordered Perez's husband, Jimmy, to pay her attorney fees stemming from the dissolution action. Thereafter Garlow billed Jimmy directly for any additional fees and did not send Perez another bill. The final statement sent by Garlow to Jimmy indicated a balance due of $355. A settlement agreement entered into by the Perezes provided that Jimmy would purchase the family home from Perez and that she would pay the $355 balance due on Garlow's attorney fees. The $355 amount was rounded off to $400 to cover any escrow charges arising from the sale of the house. Garlow signed the agreement without contesting the balance due him. Pursuant to the settlement agreement, the purchase of the Perez home was placed in escrow. [1] Upon close of escrow, an escrow check made payable to Garlow and Perez in the amount of $24,000 was sent to Garlow's office. Perez intended to pay Garlow's $400 fee out of the proceeds of this check. At the time Perez came to Garlow's office to pick up the check and pay Garlow his $400 fee, there was nothing further to be done in her case. Nevertheless, Garlow refused to endorse the $24,000 check to her unless she paid him $2,100. Perez was surprised by Garlow's request and asked him if he had documentation to support his increased fee. Garlow said he did not have such documentation, but added that if he had to provide her with an accounting he would charge her $5,000. Perez left Garlow's office without indorsing or obtaining the escrow check. Perez sought advice from another attorney, E. Belmont Herring. Herring wrote several letters to Garlow requesting that Garlow endorse the $24,000 check over to Perez. Garlow refused, indicating that he planned to bring a motion in the family law court for resolution of the fee dispute. Herring advised Garlow that the family law court lacked jurisdiction to resolve the fee dispute. Nevertheless, Garlow brought a motion in that court. The court determined that it did not have jurisdiction to resolve the dispute. Outside the courtroom, Herring and Garlow entered into an oral agreement whereby Garlow gave Herring the $24,000 check; Herring then gave $19,000 to Perez and the remaining $5,000 was given to Garlow to hold in his client trust account until the fee dispute was resolved. Herring advised Garlow that he should seek arbitration of the fee dispute through the State Bar. Herring did nothing further in the matter for two years, believing that Garlow and Perez had initiated arbitration. When Perez subsequently informed Herring that arbitration had never been sought and that Garlow had never forwarded any of the $5,000 to her, Herring initiated a civil suit against Garlow to recover the disputed sum. That suit has not resolved the dispute and no money has as yet been forthcoming from Garlow. Garlow testified before the Hearing Panel that he deposited the $5,000 amount immediately in his client trust account at Pan American National Bank. He admitted, however, that he withdrew $2,100 from his trust account while the $5,000 was still in dispute, because he believed Perez owed him that amount. Garlow then testified that his trust account balance never fell below $2,700. Bank records, however, reveal that Garlow's testimony regarding the balance of his trust account was false. On numerous occasions his balance fell below $100, sometimes even below $10.
The Review Department concluded that Garlow's wilful withdrawal of disputed client funds for personal use violated rule 8-101(A) of the Rules of Professional Conduct. [2] Moreover, the Review Department concluded that his withdrawal of funds and wilful refusal to pay over to his client those funds to which he had no claim violated Business and Professions Code section 6103, [3] and that Garlow's culpable conduct involved moral turpitude and dishonesty within the meaning of Business and Professions Code section 6106. [4] The Review Department determined that there were no mitigating circumstances, but found the following aggravating circumstances: (1) that Garlow had a prior record of disciplinary proceedings, (2) that he evidenced indifference towards rectification or atonement for his misconduct by failing to restore to his client trust account or to his client any of the $5,000 amount, (3) that he exhibited a lack of candor by testifying falsely before the Hearing Panel regarding the balance of his trust account, and (4) that he exhibited bad faith, dishonesty, concealment, overreaching and other violations of the State Bar Act and the Rules of Professional Conduct by (i) failing to apprise his client that his fees would ever amount to $2,100 or $5,000, (ii) failing to provide an accounting to his client, and (iii) threatening to increase his fee when the client requested an accounting. The Review Department concluded that disbarment was warranted.
Garlow contends that the evidence was insufficient to support the Review Department's findings of fact and conclusions of law. He alleges that the overwhelming weight of the evidence supports the following contentions. (3) Garlow first contends that he performed substantial legal services for Perez for which she was obligated to pay and that he earned the $5,000 fee. This contention misses the point. Even if Garlow had in fact done sufficient work to justify a fee of $2,100 or $5,000, he nevertheless should have informed his client of his billing rates at the outset of their relationship. Moreover, he should have sent updated billing statements indicating that $355 was not the balance due, and should have provided Perez with an itemization of his bill upon request without threatening to double his fee. Finally, he should not have withdrawn substantially all of the funds held in his trust account until he had established through arbitration that he was entitled to the higher fee. (4) Garlow next contends that he acted in good faith and attempted to resolve the fee dispute immediately by filing a motion in the family law court. While it is true that he immediately brought a motion before the family law court to resolve the fee dispute, he nevertheless kept the $5,000 and did not seek further resolution of the dispute once the family law court determined that it lacked jurisdiction. Thus, while Garlow's initial effort might be laudable, he should have followed up. Instead, he has done nothing to resolve the dispute and has withdrawn substantially all of the funds in his client trust account. (5) Garlow next argues that the fee dispute has never been resolved because Perez opposed the jurisdiction of the family law court and waited several years before bringing suit against him. Garlow mistakenly argues that the family law court dismissed his motion on the basis of Perez's opposition, rather than the court's lack of jurisdiction to resolve the matter. Garlow cannot use his choice of an improper forum, a fact pointed out to him by Attorney Herring, as an excuse for his misappropriation. Nor can he exculpate himself from responsibility simply because Perez took several years to file suit against him. (6) Garlow makes a creative, if unmeritorious, argument in his sixth contention. A letter from Herring to Garlow dated April 27, 1979, outlined the stipulation reached by the two attorneys regarding the temporary disposition of the $5,000: The enclosed check, as I understand it, is to be deposited into your trust account and held therein pending further order of court concerning the amount, if any, of attorney's fees owed to you by Ms. Perez.... (Italics added.) Garlow argues that the language emphasized above means pending further order of the family law court. He then contends that since Perez opposed his motion in the family law court  thereby causing the court to determine that it did not have jurisdiction  the condition precedent to his right to the funds was satisfied and he was free to withdraw the funds from the trust account. It is evident from the language of the letter and the context of the stipulation, however, that Garlow was to keep the $5,000 in his trust account until the dispute was settled by further order of a court having jurisdiction to resolve the dispute. Garlow had no right to withdraw the disputed funds simply because the family law court would not hear his motion. (7) In his seventh contention, Garlow argues that he did not intend to deceive the Hearing Panel regarding the continuing balance of his trust account. He claims that he was testifying from memory about account activity which occurred many years before and was simply mistaken about the continuing balance. The argument is unconvincing. Garlow testified without hesitation that his balance had never fallen below $2,700. It is difficult to believe that Garlow did not know his trust account balance had dropped below $10 on several occasions. The Hearing Panel was in the best position to determine the veracity of Garlow's testimony and his intent to mislead regarding the balance of his trust account. We rely heavily on the findings of the State Bar Court in disciplinary proceedings. ( Guzzetta v. State Bar (1987) 43 Cal.3d 962, 968 [239 Cal. Rptr. 675, 741 P.2d 172].) On this issue, we defer to its determinations of fact. (8) Alternatively, Garlow asserts that even if his testimony is found to be untruthful, it should have been stricken as irrelevant to the proceedings. He points out that if his withdrawal of funds from the trust account was wrong pursuant to rule 8-101(A), it is irrelevant whether he withdrew $2,100 or $4,999. We agree that Garlow committed misconduct the moment his trust account balance dropped below $5,000. The problem with Garlow's attack on the relevancy of his testimony, however, is that it was his own counsel who elicited the testimony. More importantly, it is the fact of the false testimony that is relevant here, not whether the testimony itself was or was not relevant to an issue being tried.