Andresen v. Bar Ass'n of Montgomery County

• Citation: 305 A.2d 845,269 Md. 313
• Decision Date: 12 June 1973
• Docket Number: No. 336,336
• Parties: Peter C. ANDRESEN v. BAR ASSOCIATION OF MONTGOMERY COUNTY, Maryland.
• Court: Court of Appeals of Maryland

Page 313

269 Md. 313

305 A.2d 845

Peter C. ANDRESEN v. BAR ASSOCIATION OF MONTGOMERY COUNTY, Maryland.

No. 336.

Court of Appeals of Maryland.

June 12, 1973.

David B. Lamb, Washington, D. C. (Peter C. Andresen, Kensington, on the brief), for appellant.

James T. Wharton, Rockville, for appellee.

Argued before MURPHY, C. J., and BARNES, McWILLIAMS, SINGLEY, SMITH, DIGGES and LEVINE, JJ.

MURPHY, Chief, judge.

Maryland Code (1957, 1966 Repl.Vol., 1971 Cum.Supp.), Article 21, § 42 (recodified as Article 21, § 7-106 in the 1973 Repl.Vol.), authorizes any duly organized bar association of this State to petition a court of equity 'to order an audit to be made of the accounts maintained . . . for funds received in connection with real estate closing transactions in this State' by persons responsible for disbursing funds in connection with the conveyancing of title to real estate where such persons fail to provide the buyer and seller, under certain circumstances and within a designated time, with specified documents evidencing the existence of recorded releases of mortgages or deeds of trust. ¹

On November 6, 1972 the Bar Association of Montgomery County, pursuant to the provisions of § 42, filed a petition in the Circuit Court for Montgomery County to obtain an audit of the accounts maintained by Peter C. Andresen, a member of the Maryland Bar, 'for funds received in connection with real estate closing transactions in the State of Maryland.' The petition alleged that the State's Attorney of Montgomery County had charged Andresen on November 1, 1972, by a criminal information, with four counts of false pretenses (as shown by a copy of the information attached to the petition); that 'additional facts' had been made available to the Bar Association by the State's Attorney 'which strongly suggest circumstances warranting the granting of a special audit upon . . . (Andresen's) escrow fund accounts'; that the Bar Association had been informed by the State's Attorney that releases of deeds of trust 'appear to have been made tardily or not at all' by Andresen who acted as settlement attorney for the sale of properties from the Clark-King Construction Company (Clark-King) to enumerated homeowners in the Potomac Woods Subdivision (the Subdivision) of Montgomery County; that the transactions in question involving unreleased deeds of trust pertained to lots 12(T), 13(T), 14(S), 15(S) and 25(R) of the Subdivision; and that the State's Attorney's investigation disclosed that many of the purchasers of properties in the Subdivision 'knew nothing of the named unreleased mortgages until the subject was revealed . . . to them (by the State's Attorney).'

Responding to the court's order to show cause why the audit should not be conducted, Andresen answered that he had not failed to comply with the requirements of § 42 because all the funds coming into his possession in connection with the transactions either 'were disbursed within five days after settlement, the parties waived receipt of the releases, or that the parties were notified pursuant to § 42(b).' In addition, Andresen entered a general denial that sufficient ground existed to conduct a special audit under § 42.

At the hearing on the petition, the Bar Association adduced evidence showing that on December 13, 1969, the F. O. Day Company (Day) took a deed of trust from Clark-King, developers of the Subdivision, as security for payment of a note; that the deed of trust, securing a $37,000 debt owed Day by Clark-King, covered sixteen or seventeen lots in the Subdivision and contained a clause authorizing the trustees, Andresen and William Wheeler (Day's attorney) to release each lot upon payment to the noteholder of $2,000 per lot; that no payments on account of the note were made until October 7, 1970 when $9,000 obtained by Clark-King in connection with settlement upon one of its properties located outside the Subdivision was paid to Day. There was evidence showing that settlement was held on a number of properties purchased within the Subdivision between 1970 and 1972; that Andresen acted as settlement attorney in these transactions; that the outstanding deed of trust held by Day covering the lots in the Subdivision was not disclosed by Andresen at the time of settlement and no release of many of the properties covered by the deed of trust was recorded until many months after the deeds were delivered. Testimony given by the purchasers of lots 25(R) and 7(T) in the Subdivision was to the effect that deeds for these properties were recorded in July of 1970, but they were not furnished copies of recorded releases of the deed of trust covering their lots until two years later in July and August of 1972 when the lots were released from the operation and effect of the deed of trust after demand was made upon Andresen that he provide each of them with a copy of the recorded release. In neither case were the property owners notified of any reason for the delay in releasing the deeds of trust.

Considerable evidence produced by the Bar Association to prove that Andresen, as settlement attorney, failed to comply with the requirements of § 42(a) and (b) pertained to properties in the Subdivision which were not specifically alluded to in the petition. Andresen's objections to the introduction of such evidence were summarily overruled by the trial court.

There was evidence showing that the time of settlement on lots 25(R) and 7(T), the property owners, after being advised by Andresen of the provisions of § 42, signed the following written waiver:

'We hereby waive being furnished evidence of recorded releases; having been assured by said settlement attorney that all funds in this transaction will have been disbursed within 5 days from the date of delivery of the deed.'

Andresen did not testify at the hearing and offered no evidence on his own behalf.

The lower court found that the evidence disclosed 'many transactions where there was a deed recorded, and a release was not of record until in some instances more than two years thereafter.' The court concluded that 'the presumption is . . . that the money was received but it was not disbursed.' Believing that the waivers signed by the owners of lots 25(R) and 7(T) did not constitute compliance with the requirements of § 42, and that the evidence otherwise showed that Andresen had not complied with the provisions of the statute, the court ordered that a special audit be conducted (by an independent auditor) 'of the accounts maintained by . . . Andresen . . . for funds received in connection with real estate closing transactions in the State of Maryland.' The order directed that the audit be submitted to the court and that upon receipt, the court would notify counsel for the parties and thereafter would pass 'a further order in these proceedings, particularly with reference to the use of said audit.' The court's order enjoined Andresen from secreting or taking from Montgomery County any of the accounts to be audited, 'or any of his account books, check book ledgers, statements of account, checks, stubs or files employed in connection therewith until further Order of this Court.'

Andresen claims on appeal, as he did below, that his Fifth Amendment right against compulsory self-incrimination, applicable to the states through the Fourteenth Amendment, Malloy v. Hogan, 378 U.S. 1, 84 S.Ct. 1489, 12 L.Ed.2d 653 (1964), would be violated if he were compelled to submit his accounts to the special audit ordered by the court. He alleges that the information gleaned from the audit, if made, will be used in connection with the criminal proceedings pending against him instituted by the State's Attorney, and the disbarment or disciplinary proceedings previously initiated against him by the Bar Association. Other allegations raised by Andresen on appeal are (1) that the lower court erred in admitting into evidence and considering testimony and exhibits regarding matters not included or referred to in the pleadings; (2) that prejudicial error was committed by the court when it considered the testimony of the Bar Association's investigating attorney to be that of an expert in real estate transactions; (3) that the court was in error in disregarding the written waivers executed by the property owners of their right under § 42 to be furnished with evidence of recorded releases; (4) that the evidence was legally insufficient to support the court's order, particularly since no evidence was offered by the Bar Association to show that funds coming into Andresen's possession were not disbursed within five days from the date of delivery of the deeds, thus obviating the need to provide the buyer and seller with evidence of recorded releases; (5) that § 42 was so vague and indefinite as to constitute a violation of the due process clause of the Fourteenth Amendment; (6) that a compulsory production of Andresen's accounts would constitute an unreasonable seizure in violation of the Fourth Amendment to the federal constitution.

I

As heretofore indicated, § 42(a) and (b) impose a duty upon attorneys assuming responsibility for disbursing funds in connection with the conveyance of title to real estate to provide the seller and buyer, within thirty days from the delivery of the deed (unless and extension of that period is warranted and becomes operative by reason of notice given to the parties), with documentary evidence of recorded releases of mortgages or deeds of trust. Under the provisions of § 42(c) failure to comply with these requirements may result in a petition being filed by the seller, buyer, or a bar association seeking an audit of the attorney's 'accounts maintained . . . for funds received in connection with real estate closing transactions in this State.' Any such petition is required to 'state concisely the facts showing such noncompliance and shall be verified.' § 42(c). By the provisions of § 42(e) a settlement attorney is not...