Baranowski v. State Bar

• Decision Date: 30 April 1979
• Court: California Supreme Court
• Parties: , 593 P.2d 613 Boris J. BARANOWSKI, Petitioner, v. The STATE BAR of California, Respondent. L.A. 31006.

Page 752

154 Cal.Rptr. 752

24 Cal.3d 153, 593 P.2d 613

Boris J. BARANOWSKI, Petitioner, v. The STATE BAR of California, Respondent.

L.A. 31006.

Supreme Court of California, In Bank.

April 30, 1979.

Cohen, Stokke, Owen & Davis and Mitchell Samuelson, Santa Ana, for petitioner.

Herbert M. Rosenthal, San Francisco, and Marie M. Moffat, Oakland, for respondent.

BY THE COURT: ^*

This is a proceeding to review a recommendation of the Disciplinary Board of the State Bar (Disciplinary Board) that the petitioner be suspended from the practice of law for one year on conditions of probation, including actual suspension of six months. Petitioner was admitted to practice law in California in 1962 and has no prior disciplinary record.

Petitioner is charged with violating his oath and duties as an attorney (Bus. & Prof.Code, §§ 6067, 6068), with acts involving moral turpitude and dishonesty (Bus. & Prof.Code, § 6106) and with failing to place advance fee payments from clients in an identified and labelled "Trust Account" (Rules of Prof. Conduct, rule 8-101).

FACTS:

The charges arise out of the petitioner's dealings with three different clients. These matters were consolidated for hearing before the Disciplinary Board. The root of his problem, however, appears to have been a $480,000 debt for back taxes which petitioner owed to the Internal Revenue Service (I.R.S.). The liability for the back taxes arose in 1969 as a result of petitioner's ownership of an engineering business, and resulted in a major tax lien against petitioner's earnings. In 1974, petitioner began to consider the possibility of declaring himself bankrupt. In 1976, he filed a voluntary bankruptcy petition which listed, in addition to the I.R.S. claim, a $25,000 debt for back taxes owing to the State of California and unsecured creditors' claims in the total amount of $251,126.54. ¹ Included in this last figure were amounts paid by petitioner's clients as advance fee payments for which services had never been rendered by petitioner and which petitioner considered morally and legally "refundable." These payments form the basis of most of the charges against petitioner. The Labosky Matter

The basic facts in this matter are not in dispute. In 1975, Mr. Phillip Labosky, doing business as a construction subcontractor, sought petitioner's advice about some problems he was having with a general contractor and a carpenters' union. During the course of their first meeting, petitioner informed Labosky that he had a "good case" for breach of contract. This analysis of the merits rested on Labosky's rather brief recitation of the events in question and on the fact that petitioner had previously prevailed over the attorney who was currently representing the general contractor. Petitioner's advice involved no independent inquiry or research. Petitioner also indicated to Labosky that a letter from the carpenters' union to its members afforded grounds for a "perfect libel suit" worth "twenty thousand dollars."

On the basis of these representations, Labosky agreed to pay petitioner a $5,000 fee to handle the case. The payments were made in a series of installments over a two-week period. Labosky testified that petitioner at no time contacted him to discuss the merits of the case. Petitioner did attend a meeting with the general contractor and his attorney sometime in early November. It was at this time, petitioner testified, that he determined that the chances of Labosky prevailing in a lawsuit were "less than desirable." At no time, however, did petitioner inform his client of his change in outlook. To the contrary, Labosky was not even able to contact petitioner; his numerous phone calls were never returned; he also made an appointment which petitioner failed to keep.

In February 1976, Labosky contacted another attorney, John Ball, about his problem. Ball investigated the matter and informed Labosky that his case against the general contractor was dubious; Ball, however, agreed to contact petitioner about a refund of the $5,000 fee. Although there is some question as to how much work was actually performed, petitioner admitted that the fee was not earned when received and that a substantial portion was owing to Labosky. Ball later represented Labosky in an action in Santa Clara County Superior Court and obtained a default judgment against petitioner. The $5,000 fee was not repaid until a week before the disciplinary hearing. Petitioner admits having spent the $5,000 "shortly after (he) received it" and does not dispute the fact that he failed to keep any time accounting records and failed to place any of the $5,000 fee in an identified and labelled trust account.

As a result of his dealings with Mr. Labosky, the Disciplinary Board hearing panel found that petitioner's advice to his client concerning the merits of his claim, as well as his failure to apprise his client of his change in attitude, constituted a reckless inducement to entertain a legal action in violation of his responsibility to discharge his duties as an attorney at law to the best of his knowledge and ability (Bus. & Prof.Code, § 6067) and of his obligation to counsel only such actions as appear to him legal or just. (Bus. & Prof.Code, § 6068.) The panel also concluded that such actions constituted "acts involving moral turpitude" in violation of Business and Professions Code section 6106. In addition, the panel determined that the petitioner's failure to place the $5,000 fee in an identifiable trust account violated rule 8-101 of the Rules of Professional Conduct of the State Bar.

The Potsdawny Matter

The facts in this matter are also not in dispute. On March 25, 1975, Adam Potsdawny contacted petitioner about drawing up a will. At that time, petitioner advised Potsdawny that he should incorporate his sole proprietorship because of certain "tax advantages." Potsdawny accepted petitioner's advice and paid him a $900 fee. Shortly thereafter, Potsdawny consulted his tax counselor who informed him that he knew of no tax advantages and advised him not to incorporate. Potsdawny immediately contacted petitioner and told him to stop the incorporation.

Petitioner testified that he considered the $900 fee at all times "to be a refundable fee." Nevertheless, he failed to place the money in an identifiable trust account, choosing instead to cash the check. Petitioner informed Potsdawny that he was financially unable to refund the $900 and did not refund the money until one week prior to the disciplinary hearing.

As a result of his transaction with Mr. Potsdawny, the Disciplinary Board hearing panel found that the petitioner's failure to place the $900 fee in an identifiable trust account constituted a violation of rule 8-101 of the Rules of Professional Conduct of the State Bar of California.

The Brown Matter

In January 1973, Eleanor Brown retained petitioner to represent her in a dispute over a marital settlement agreement with her ex-husband. He also agreed to prepare a will for her. The total fee paid by Mrs. Brown for these services was $450. There is considerable dispute between petitioner and his client over what services, if any, petitioner performed in conjunction with this fee. Petitioner claims that the entire $450 was earned. As with the previous cases, petitioner failed to maintain any time accounting records to support his assertions. ²

The substance of respondent State Bar's argument in this matter, however, concerns a loan which petitioner induced his client to make to him. In June 1973, petitioner approached Mrs. Brown about the possibility of her making him a $2,000 loan at 10 percent interest, payable at $200 per month for 11 months. He indicated that he needed the money to pay his staff since he was currently working on an important case pro bono. After he had properly made the first two payments, Mrs. Brown offered to lend him another $1,000 on the same terms, an offer which petitioner accepted. Subsequent to the second loan, although Mrs. Brown repeatedly asked for her money back, petitioner made no further payments to her until one week prior to the disciplinary hearing. At no time, however, did petitioner indicate to his client that he was unable to repay the loan.

There is a dispute between petitioner and Mrs. Brown as to how much she knew about his financial condition. He claims that she was aware of the I.R.S. tax lien. She testified that she did not learn of the extent of petitioner's difficulties until after he filed for bankruptcy. A witness at the hearing testified that petitioner had told Mrs. Brown that he was having "some difficulty in meeting his obligations as they came through." It is clear from the record, however, that petitioner refused to fill out a standard bank loan form listing assets and liabilities when requested to do so by Mrs. Brown and that he failed to fully explain to her the various means and methods of making loans or discuss with her terms of loans which are favorable to lenders.

As a result of his involvement with Mrs. Brown, the Disciplinary Board hearing panel found that petitioner's failure to disclose to his client the full extent and nature of his financial condition constituted a violation of his obligation to discharge the duties of an attorney at law to the best of his ability (Bus. & Prof.Code, § 6067) as well as an act involving moral turpitude. (Bus. & Prof.Code, § 6106.)

LEGAL ISSUES:

Petitioner's contention in this hearing fall into three general categories. He first argues that the findings of the hearing panel in the three matters are not supported by the evidence. Secondly, he contends that several procedural errors committed by the respondent denied him his right to a fair hearing. He finally urges that the findings of the hearing panel do not justify the severity of the disciplinary action imposed. We turn first to the petitioner's contention that the evidence does not support the hearing panel's findings.

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