Opinion ID: 1442161
Heading Depth: 2
Heading Rank: 4

Heading: The Louk matter

Text: Shirley Louk retained petitioner to represent her in a marital dissolution action. The written retainer agreement stated if case settled without trial, total fee [$]3500, if trial, fee $7500. (Punctuation added.) Under the agreement, $3,500 was payable immediately, and Louk would execute in petitioner's favor a note and deed of trust on real property to secure payment of the additional $4,000 that would be payable if the case were tried. Louk executed the trust deed, but petitioner agreed not to record it until the trial, if any. He recorded the trust deed, however, before trial, and in September 1984 received the additional $4,000 from an escrow for the sale of the property. Petitioner was then aware that Louk disputed his claim to the money, contending that no trial had taken place. The referee found an absence of convincing evidence that trial had not taken place and that petitioner had thus not earned the additional $4,000. The referee's decision stated, It appears that a very brief trial occurred, most of the issues being settled, and only one or two brief issues being decided by the court. Based on these findings, the referee concluded there was no misconduct, more specifically, that: (1) Although the client disputed petitioner's right to the $4,000, he did not violate rule 8-101(A)(2) because the money was not from an identifiable client trust fund; and (2) petitioner violated his agreement not to record the trust deed before trial, but the client was not harmed because petitioner subsequently became entitled to record the deed when the trial began.
The review department rejected the referee's finding that a trial had been held. The review department also found that petitioner knew his claim to the $4,000 was disputed but failed to deposit it into a trust account. The review department concluded his misconduct was a violation of rule 8-101(A)(2) (disputed trust funds), rule 2-111(A)(3) (failure to return unearned fees), Business and Professions Code sections 6068, subdivision (a) and 6103 (violation of duties), and 6106 (moral turpitude/dishonesty).
(9) We agree in part with both the referee and the review department. Trial was scheduled for 9 a.m. on November 23, 1983. Petitioner and his opposing counsel appeared for the trial. It was delayed, however, so they could continue settlement negotiations. About noon, they reached a partial oral agreement as to the parties' property division. Counsel and the parties then appeared before the court for approximately 24 minutes. The only disputed issues were the distribution of the proceeds from the sale of a boat and the resolution of a related contempt action. The court resolved both issues and congratulated petitioner and his opposing counsel for having reached a settlement during the morning. Whether trial was held is debatable. That is not enough. A State Bar finding must be supported by clear and convincing proof. The referee, a trial judge for 20 years, was unable to conclude that no trial had been held. We reject the review department's finding of no trial. (10) Petitioner, however, admits he agreed not to record the deed of trust on his client's property before trial. The trial was held on November 23, 1983. Petitioner recorded the trust deed before that date. Even though a trial was later held and he then became entitled to the additional payment, that subsequent development did not retroactively justify his prior recording of the trust deed before he was entitled to do so. At a minimum, the improper recording was a breach of his agreement with his client. The misconduct also placed a cloud on his client's title to the property.