Court Opinion

ID: 9688777
Source: CourtListenerOpinion
Date Created: 2023-08-24 18:04:40.489869+00
Date Added: 2024-06-11T18:18:42.203152
License: Public Domain

SABERS, Justice.
The sole issue in this original proceeding is the appropriate discipline to be imposed.
FACTS
Donald Kallenberger (Kallenberger) was admitted to the practice of law in South Dakota on May 14th, 1979. He was in private practice and a State’s Attorney through 1988. After being defeated as State’s Attorney, Kallenberger continued in his practice as a sole practitioner in Eureka, South Dakota.
In February, 1992, Kallenberger was convicted of Failure to File Sales Tax Return (SDCL 10-45-48.1(4)), a Class I misdemeanor.1 A disciplinary action was commenced2 and the Supreme Court referred the matter to the Disciplinary Board of the State Bar (Board) for a report and recommendation.
The Board met April 3, 1992. Kallenber-ger testified that he began experiencing financial problems in 1989.3 From January, 1989 through December, 1991, Kallen-berger was consistently late in filing sales tax returns. The delinquencies varied from 1 to 126 days. The amounts varied as well. From May, 1989 through December, 1991, Kallenberger filed only 2 returns in a timely manner. Eight returns were delinquent 10 days or less and 15 returns were over thirty days past due.
On September 26, 1989 and January 18, 1990, John Lomheim (Lomheim), a Tax Program Representative of the Division of Sales and Use Tax of the South Dakota Department of Revenue, attempted to visit Kallenberger at his office to discuss the delinquent taxes. On both occasions, Kal-lenberger was not present and Lomheim left a message for Kallenberger to call him, which Kallenberger did on at least one occasion. Kallenberger was informed that by statute, reporting over 30 days late 2 times in any twelve-month period is a Class 6 felony and delinquent status itself is a Class 1 misdemeanor. (Lomheim Aff. paragraph 3).
Attorney General Roger Tellinghuisen (Tellinghuisen) wrote Kallenberger June 6, 1990 to inform him that the Attorney General’s Office had been asked to authorize Kallenberger’s prosecution for delinquent sales taxes. Tellinghuisen offered, in his letter, to give Kallenberger a final opportunity to comply with the tax laws. According to the letter, Tellinghuisen granted continuing authorization for the use of criminal sanctions should Kallenberger fail to remain current. Although Kallenberger *711does not recall either the receipt of Tellinghuisen’s letter or the reading of it, his signature appears on the certified mail return receipt dated June 7, 1990.
Glen Johnson, of the Board, contacted Kallenberger by letter on July 12, 1991 regarding the appearance of Kallenber-ger’s name on the sales tax delinquency list. At this time, Johnson informed Kal-lenberger that the board considered sales tax collected from clients money held in trust for the state. In response to Johnson’s letter, Kallenberger remedied the sales tax arrearages. He continued, however, to file sales tax returns late throughout 1991.
In September, 1991, Kallenberger spoke with Tim Weber, an attorney with the Department of Revenue. Kallenberger and Weber became associated during the early to mid-1980’s when they both occupied positions as County State’s Attorneys. When Weber accepted the position of attorney for the Department of Revenue, Kallenberger was appointed to complete Weber’s term as McPherson County State’s Attorney. At that time, Kallenberger purchased a computer from Weber. Kallenberger and Weber’s friendship continued after Weber accepted the position, and they communicated regularly.
Kallenberger called Weber in September primarily to discuss a problem he was experiencing with the computer. During this conversation Kallenberger “mentioned” his sales tax delinquencies and the letter from the Board. He was informed “that the department routinely worked with people on sales tax payments and that (he) should keep (Weber) informed ...” Hr’g Tr. 10. Kallenberger contacted Weber in October, 1991 at which time he was again informed of the Department’s policy of working with delinquent taxpayers. In January, 1992, when Kallenberger was served with a complaint for delinquent sales taxes for October and November, he again called Weber. Kallenberger asked Weber to contact the state’s attorney regarding his prior conversations with Weber concerning the department’s history of working with people. Kallenberger then met with the state’s attorney, who felt that the charges could not be dismissed completely because the complaint also cited a felony.
Kallenberger pled guilty to Failure to File Sales Tax Return. He was sentenced by the Circuit Court of McPherson County on February 4, 1992, placed on 18 months of probation, and ordered to remain current on his sales tax return. The Board recommended that Kallenberger be disciplined by private reprimand.
DECISION
In determining the appropriate disciplinary action to be imposed,4 we must keep in mind the goal of disciplinary proceedings. “In disciplinary proceedings, this court strives to protect the public from fraudulent, unethical, or incompetent practices by attorneys and preserve the image and integrity of the legal profession as a whole.” In re Discipline of Johnson, 488 N.W.2d 682, 684 (S.D.1992), reh’g granted, September 16, 1992 (citing In re Discipline of Simpson, 467 N.W.2d 921 (S.D.1991); In re Discipline of Pier, 472 N.W.2d 916 (S.D.1991)). While the Board has recommended that Kallenberger be disciplined by private reprimand, “[w]e need not give deference to the Board’s recommendation for sanctions. The ultimate decision for discipline of members of the State Bar rests with this Court.” In re Discipline of Pier, 472 N.W.2d 916, 917 (S.D.1991) (citing In re Discipline of Stanton, 446 N.W.2d 33 (S.D.*7121989); In re Discipline of Dana, 415 N.W.2d 818 (S.D.1987)). These facts indicate a stronger sanction is in order.
According to Kallenberger, his repeated failure to file a sales tax return in a timely manner was due to an insufficient cash flow. He attributes this problem to a series of repair costs, along with difficulties encountered cultivating his practice after being defeated in re-elections for State’s Attorney. This court noted in In re Discipline of Rude, 88 S.D. 416, 221 N.W.2d 43 (S.D.1974) that “[financial problems, however, do not excuse nor do they justify a course of conduct in the handling of a client’s funds that leads to the misallocation or withholding, however temporary, of such funds.” Id. at 47-48.5
While Kallenberger did not withhold these funds from clients, he did withhold them from the State of South Dakota. Kallenberger claims that he was unaware of “the concept that sales tax was money held in trust for the state[.]” (Letter from Kallenberger to Chief Justice Miller of May 5, 1992, at 1). This “concept”, however, was recognized by the court in In re Discipline of Crabb, 416 N.W.2d 258 (S.D.1987). We stated in Crabb that “tax defalcation ... borders on embezzlement of funds received from clients in payment of sales tax, which monies Crabb, in effect, holds in trust for remittance to the State.” Crabb, 416 N.W.2d at 260 (emphasis added). As noted above, Kallenberger was notified of this “concept” when he received the letter in July, 1991, from Glen Johnson of the Board. According to Kallenberger’s own testimony, this letter specifically stated that “the [b]oard considered sales tax to be money held in trust.” Hr’g Tr. 9. Even after receiving “actual” notice from the Board, Kallenberger continued to file delinquent sales tax returns until he was served with a complaint in January, 1992.
Kallenberger further claims that he was “[unjaware of the criminal statutes with regards to sales tax filings.” Hr’g Tr. 21-22. The facts indicate that both Lomheim and Tellinghuisen addressed criminal sanctions in their communications with Kallen-berger on September 26, 1989 and June 6, 1990, respectively.
Kallenberger continued, over a period exceeding two years, to convert funds “held in trust for the state” to his own use and file delinquent sales tax returns. While each individual sales tax delinquency may appear at first glance a minor violation, this court must look at the entire picture.6 “A pattern of repeated offenses, even ones of minor significance when considered separately, can indicate indifference to legal obligation.” SDCL ch. 16-18, Appx. Rule 8.4 Comment. Therefore, this court holds that Kallenberger’s conduct indicated an indifference to legal and financial obligations and warrants public censure.7
MILLER, C.J., and WUEST and AMUNDSON, JJ., concur.
HENDERSON, J., dissents.

. SDCL 10-45-48.1 provides:
Any person who:
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(4) Fails to file a return ... within thirty days from the date the return is due is guilty of a Class I misdemeanor[.]

. SDCL 16-19-36 provides:
The clerk of any court in this state in which an attorney is convicted of a serious crime shall within ten days of said conviction transmit a certificate thereof to the Supreme Court. The term "serious crime” shall include any felony and any lesser crime a necessary element of which, as determined by the statutory or common law definition of such crime, involves improper conduct as an attorney, interference with the administration of justice, false swearing, misrepresentation, fraud, wilful failure to file income tax returns, deceit, bribery, extortion, misappropriation, theft, or an attempt or a conspiracy or solicitation of another to commit a serious crime.

.Kallenberger’s own testimony indicated some of the delinquencies occurred during his term as State’s Attorney, with the last two sales tax reports of 1988 not having been submitted until January 25, 1989.

. SDCL 16-19-35 provides:
Misconduct shall be grounds for:
(1) Disbarment by the Supreme Court;
(2) Suspension by the Supreme Court for an appropriate fixed period of time, or for an appropriate fixed period of time and an indefinite period concurrently or thereafter to be determined by the condition imposed by the judgment. No suspension shall be ordered for a specific period in excess of three years;
(3) Placement on a probationary status by the Supreme Court for a stated period, or until further order of the Court, with such conditions as the Court may specify;
(4) Public censure by the Supreme Court; or
(5) Private reprimand by the disciplinary board.

. This court further noted that “[w]hile we are not unappreciative of, nor insensitive to, the problems that confront the young inexperienced attorney who seeks to establish a sole practice, financial problems per se are not an excuse for the manner in which respondent conducted his professional affairs with respect to the matters here in question." Rude, 221 N.W.2d at 47 (emphasis in original).

. Kallenberger’s testimony also indicates he failed to file Forms 940 (Federal Unemployment Tax) and 941 (Employer's Quarterly Federal Tax Return) in 1989 and 1990. Hr’g Tr. 14.

.SDCL 16-18, Appx. Rule 8.4 provides: It is professional misconduct for a lawyer to:
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(b) commit a criminal act that reflects adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer in other respects;
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(d) engage in conduct that is prejudicial to the administration of justice!.]