Attorney Grievance v. Whitehead

• Decision Date: 19 June 2008
• Docket Number: No. 53, September Term, 2006.,53, September Term, 2006.
• Citation: 950 A.2d 798,405 Md. 240
• Parties: ATTORNEY GRIEVANCE COMMISSION of Maryland v. H. Allen WHITEHEAD.
• Court: Court of Special Appeals of Maryland

950 A.2d 798

405 Md. 240

ATTORNEY GRIEVANCE COMMISSION of Maryland v. H. Allen WHITEHEAD.

No. 53, September Term, 2006.

Court of Appeals of Maryland.

June 19, 2008.

Melvin Hirshman, Bar Counsel, Attorney Grievance Commission of Maryland, for petitioner.

Peter Axelrad of Annapolis, for respondent.

Argued before BELL, C.J., RAKER,^* HARRELL, BATTAGLIA, GREENE, MURPHY, and CATHELL, DALE R. (retired, specially assigned), JJ.

BATTAGLIA, J.

The Attorney Grievance Commission of Maryland ("Petitioner"), acting through Bar Counsel and pursuant to Maryland Rule 16-751(a),¹ filed a petition for disciplinary or remedial action against Respondent, H. Allen Whitehead on December 12 2006. Bar Counsel alleged that Respondent violated Maryland Rules of Professional Conduct ("MRPC") 1. 15, governing the safekeeping of property,² MRPC 8.4(a), (b), (c) and (d), governing attorney misconduct,³ Maryland Rule 16-609, prohibiting certain transactions,⁴ and Sections 10-306 and 10-307 of the Business Occupations and Professions Article, Maryland Code (1989, 2000 Repl.Vol.), limiting the use of trust money and subjecting those who inappropriately use trust money to disciplinary proceedings.⁵

In accordance with Maryland Rules 16-752(a) and 16-757(c),⁶ we referred the petition to Judge Diane O. Leasure of the Circuit Court for Howard County for an evidentiary hearing and to make findings of fact and conclusions of law. Judge Leasure held an evidentiary hearing on August 1, 2007; a September 26, 2007 Order of this Court granted an extension for submission of the court's findings and conclusions. On October 4, 2007, Judge Leasure issued the following Findings of Fact and Proposed Conclusions of Law, in which she found by clear and convincing evidence that Respondent had violated MRPC 1.15 and 8.4(a), (c) and (d), as well as Sections 10-306 and 10-307 of the Business Occupations and Professions Article, Maryland Code (1989, 2000 Repl.Vol.):⁷

Findings of Fact

"The relevant facts are, for the most part, not in dispute. Based upon the testimony and evidence presented at the hearing, the Court makes the following findings of fact.

1. The Respondent was admitted to the Bar of the Court of Appeals of Maryland on December 1, 1973.

2. The Respondent was admitted to the Bar of the District of Columbia in 1991

and to the Bar of the State of New York in 1997.

3. The Respondent was appointed as the Conservator[⁸] of the Estate of Reginald V. Grayson, Jr., an adult disabled ward, on September 16, 1999 by the Superior Court of the District of Columbia. Although he had been appointed as a trustee in the past, this was his first appointment as a conservator.

4. By his own admission, the Respondent thought being appointed as a conservator entailed the same obligations that he had when he served as a trustee. He acknowledged that he had not familiarized himself with the applicable District of Columbia rules[⁹] regarding this type of appointment.

5. During the time he served as the Conservator of the estate, the Respondent submitted petitions for the payment of legal fees; no orders authorizing the requested payments were issued.

6. During the period of time that he served as the Conservator for the estate, the Respondent took two actions without obtaining prior court approval: (i) he paid legal fees of $40,200 to himself; and (ii) he made a loan of $600,000 of estate assets to purchase property in New York City that was titled in his name and that of his business partner, Aric Johnson.

7. The property, which was the subject of the real estate transaction, is an eight unit rent-stabilized residential building located in Greenwich Village; the address of the property is 30 Perry Street, New York City, New York 10014. The building was being purchased as an investment property for the Respondent and his business partner. A Note, Mortgage, and Assignment of Rents and Leases secured the loan from the estate. The $600,000 Note was to be paid on a 30-year amortization schedule, but due in 2005 at an interest rate of 7.5%.

8. The subject real estate transaction was disclosed on the various accountings filed by the Respondent in his capacity as the Conservator of the estate.

9. The Respondent requested that an outside auditor review the estate's accounts and he received permission to do so. When the outside auditor questioned the propriety of the Respondent paying himself legal fees from the estate without prior court approval, he repaid the fees to the estate.

10. When the Probate Division of the Superior Court of the District of Columbia raised questions regarding the propriety of the real estate transaction, the Respondent refinanced the property in July 2003 and repaid the Note in full, thus returning the assets, along with interest, to the estate.

11. In October 2003, the Hon. Kaye K. Christian, a judge of the Superior Court of the District of Columbia issued a Show Cause Order against the Respondent. The Show Cause Order was issued in response to allegations that (i) the Respondent paid legal fees to himself without prior court approval; and (ii) that the Respondent entered into a mortgage investment transaction, utilizing $600,000 of the conservatorship estate assets, for the purchase of property located in New York City owned by the Respondent and his business partner, Aric Johnson.

12. The Respondent sent a letter to Judge Christian (dated November 26, 2003) in which he tendered his resignation as the Conservator of the estate. In this letter, the Respondent made the following statements regarding the real estate transaction: (i) he knew that his actions were a violation of Probate Rule 5 (which he admitted he had not familiarized himself with); and (ii) that he now saw how this could be considered a conflict of interest.

13. The Show Cause hearing was held after which Judge Christian entered an Order. In the Order, Judge Christian noted that the Respondent admitted that he paid legal fees in the amount of $40,200 to himself without prior authorization and that he entered into a self-dealing mortgage investment transaction.

14. Judge Christian denied the Respondent's request to resign as the Conservator and, as a result of his payment of legal fees to himself, without prior court approval, removed him as the Conservator of the estate.

15. The District of Columbia Bar Counsel thereafter initiated disciplinary proceedings against the Respondent. The Respondent represented himself during these proceedings and consented to disbarment from the Bar of the District of Columbia.

16. After the Respondent was disbarred in the District of Columbia, the Attorney Grievance Commission of Maryland filed a petition for reciprocal disciplinary action. The Court of Appeals held that the Respondent's conduct in taking fees from funds held in trust without prior court approval warranted an indefinite suspension rather than disbarment under Maryland law, Attorney Grievance v. Whitehead, 390 Md. 663, 890 A.2d 751 (2006), and indefinitely suspended him from the practice of law with the right to reapply after 18 months.

17. As a result of another reciprocal proceeding in the State of New York, on December 12, 2006, the Respondent was suspended from the practice of law in the State of New York for a period of 18 months. The Supreme Court of the State of New York determined that the sanction of disbarment would be excessive based upon the established facts.

Discussion

Since the basis of the indefinite suspension in Maryland was the fact that Respondent paid legal fees to himself without prior authorization, the present action is based solely upon the allegations surrounding the real estate transaction. The Respondent does not dispute the fact that he utilized $600,000 in estate funds to purchase real estate he owned with his business partner. The Respondent argues that he did not intend to take money improperly and that his actions resulted in no loss to the estate.

I. MRPC 1.15: Safekeeping Property.

Rule 1.15 obligates a lawyer to hold property of clients (or others) that is in lawyer's possession separate from the lawyer's own property.

The Petitioner claims that the Respondent violated this Rule by using estate funds to purchase real estate in New York City titled in the names of Respondent and his business partner, Aric Johnson; in essence, that the Respondent engaged in self-dealing. The Respondent argues that there was no self-dealing because the District of Columbia authorities were aware of the mortgage, since it was referenced in various estate filings made with the court. The Respondent additionally argues that the estate financially benefitted from this transaction since the mortgage interest rate was not less than the market value for similar real estate transactions.

Based upon the testimony and evidence received at the hearing, the court finds by clear and convincing evidence that the Respondent is in violation of the MRPC 1.15 by utilizing estate property for his own benefit. Although the court believes the Respondent was sincere in his desire to maximize the assets of the estate, the manner in which he chose to do so is a clear conflict of interest.

II. MRPC 8.4: Misconduct.

The Petitioner alleges that the Respondent violated MRPC 8.4(a), (c) and (d).¹

¹ Rule 8.4: Misconduct

It is professional misconduct for a lawyer to:

(a) violate or attempt to violate the Maryland Lawyers' Rules of Professional Conduct, knowingly assist or induce another to do so, or do so through the acts of another;

(b) commit a criminal act that reflects adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer in other respects;

(c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation;

(d) engage in conduct that is prejudicial to the administration of justice.

The Court finds that the Respondent clearly knew what he was doing when he utilized estate funds to purchase real property that he would personally own...