Bernstein v. State Bar

• Decision Date: 27 April 1972
• Citation: 101 Cal.Rptr. 369,495 P.2d 1289,6 Cal.3d 909
• Court: California Supreme Court
• Parties: , 495 P.2d 1289 Albert Martin BERNSTEIN, Petitioner, v. The STATE BAR OF CALIFORNIA, Respondent. L.A. 29839. In Bank

Page 369

101 Cal.Rptr. 369

6 Cal.3d 909, 495 P.2d 1289

Albert Martin BERNSTEIN, Petitioner, v. The STATE BAR OF CALIFORNIA, Respondent.

L.A. 29839.

Supreme Court of California,

In Bank.

April 27, 1972.

Rehearing Denied May 23, 1972.

James P. Cantillon, Beverly Hills, for petitioner.

F. LaMar Forshee, Herbert M. Rosenthal and Ronald W. Stovitz, San Francisco, for respondent.

BY THE COURT

This is a proceeding under Business and Professions Code section 6083, subdivision (a) and rule 59(a) of the California Rules of Court, to review a recommendation of the State Bar Disciplinary Board. The petitioner, Albert Martin Bernstein, was admitted to the practice of law in this state on June 11, 1958. He has no prior record of discipline.

Local Administrative Committee Number 26 for Los Angeles County found that petitioner wilfully violated rule 9 of the State Bar Rules of Professional Conduct by commingling his clients' funds with his own. It further found that he converted his clients' funds to his own use, an act of moral turpitude which is cause for suspension under section 6106 of the Business and Professions Code. The local committee recommended that petitioner be placed on probation for one year on the condition, among others, that he be suspended from the practice of law for thirty days. The Disciplinary Board of the State Bar adopting the committee's findings with one minor amendment, ¹ changed the recommended discipline to six months actual suspension with no probationary period. As explained below, we conclude that a 30 days' suspension is appropriate.

The complaining witnesses, Mr. and Mrs. George Nielsen, ² were injured in a two-car collision on July 27, 1966. They were passengers in a car driven by Frank Novak. After the accident the Nielsens retained an attorney to obtain a recovery from the driver of the other car, but they became dissatisfied with his services. On April 6, 1967, they asked Bernstein to take over the case. He agreed, and the parties signed a contingent fee contract giving Bernstein 45 percent of the recovery if a suit was commenced. ³

Bernstein later obtained a police report of the accident which, contradicting the Nielsens' story, concluded that Novak's car had been involved in a speed contest at the time of the accident. To aid him in the case, which he now considered difficult, Bernstein hired as an 'investigator' David Gornel. Gornel apparently participated in the negotiations with Farmers Insurance and likewise did some investigative work. According to Bernstein the Nielsens agreed to pay Gornel's fee of $200 from their share of the recovery. The Neilsens deny making this agreement.

On April 15, 1967, George and Verna Nielsen signed a form of lien authorizing and directing Bernstein to pay their medical bills directly from any recovery. The Nielsens testified that they told Bernstein that they desired only to see that their medical bills were paid, and expected no other recovery. The medical bills eventually totalled approximately $1,000.

On August 23, 1967, Farmers Insurance issued two drafts totalling $3,500 in settlement of the Nielsen claim. On August 25, the clients met with Bernstein in his office. They signed the release forms and endorsed the drafts. ⁴

Bernstein testified that he explained to the Nielsens that the drafts would require seven to ten days to clear. Since the Neilsens wanted their money immediately, Bernstein offered to deposit the drafts in his personal account and write checks to the Nielsens that the bank would immediately honor.

At the Bank of America Bernstein deposited in his personal account the insurance company drafts, less $100 for his personal use. He testified that he saw no impropriety in this procedure since he intended immediately to pay both the clients and the doctor bills in full. According to Bernstein's testimony, following the deposit he conferred with the clients at the bank, calculating on a piece of paper the division of the recovery. The Nielsens then expressed displeasure at the size of their share, which would have been approximately $660 after deducting both the doctor bills and medical costs as well as Gornel's $200 fee. The Nielsens suggested that Bernstein could recover medical costs from Novak's insurer, State Farm. Bernstein suggested that the three of them return to his office to discuss the matter further.

At the office Bernstein agreed to negotiate with State Farm but told the Nielsens he would retain all the funds until the conclusion of negotiations. When the clients objected that they wished to go to Las Vegas that weekend, Bernstein advanced them $200. As to this entire episode, the Nielsens testified only that despite their requests Bernstein would not give them more than $200. Bernstein also wrote a $200 check to Gornel on the same day.

Bernstein testified that by the conclusion of these discussions with the Nielsens on August 25, the bank had already closed, and that by inadvertence he subsequently neglected to transfer the remaining funds to a clients' trust account that he maintained at the same bank. Bank records show, however, that Bernstein's trust account had been closed the previous June. The record does not indicate if Bernstein had a trust account at another bank at this time.

On September 14, Bernstein paid George Nielsen an additional $500 from his personal account. By December Bernstein had still neither paid the medical bills nor settled with State Farm, and the Nielsens complained to the State Bar. On December 12, 1967, the bar wrote Bernstein advising him that the Nielsens would appreciate further information.

Bernstein replied on December 14 enclosing copies of his correspondence with State Farm, and the lien form signed by Mr. Nielsen. He wrote that if State Farm did not honor the Nielsens' claim he would attempt to settle with the doctors. He offered to cease his negotiations with State Farm and pay the doctors from the original recovery if the Nielsens desired.

Bernstein's account at the Bank of America, however, was consistently overdrawn. Although there was a positive balance immediately following the August 25 deposit, the account was overdrawn again on September 18. It remained so through October 25, 1967, the last day for which the record includes a statement of the account. The highest balance in Bernstein's account between October 2 and October 25 was a -$2,031.20, on October 2; the lowest was a -$7,771.20, on October 9. The gist of Bernstein's explanation at the disciplinary hearings was that his clients' funds were not endangered because of his arrangement with the bank for 'carte blanche' credit. He also claimed that 'bookkeeping-wise' he was still holding the $1,000 to pay the Nielsens' bills.

On May 2, 1968, Bernstein wrote another check to George Nielsen, for $100, bringing the total he had paid Nielsen to $800. This check was drawn on an account that was apparently a personal one at the Independence Bank. Yet Bernstein had still not paid any of the Nielsens' doctor bills. A week later Bernstein settled with State Farm, obtaining an additional $609. He deposited the State Farm payment in a clients' trust account at the Independence Bank and wrote a check on that account to George Nielsen for the full $609, without deducting any portion for a fee.

The Nielsens complained again to the State Bar because of the unpaid medical bills. On November 26, 1968, the bar again wrote to Bernstein, requesting a complete accounting of the funds. The bar letter itemized $1,073.05 of medical bills still unpaid.

The bar received Bernstein's reply on January 16. In reply, Bernstein wrote that he had not been able to ascertain the amount that was paid 'by the insurance carrier' until December 20, 1968. This statement presumably refers to State Farm, as Bernstein had told the bar in his previous letter of payments to the Nielsens from the Farmers Insurance recovery. In fact, Bernstein had settled with State Farm on May 13, 1968, and deposited their payment in his clients' account on May 15.

The reply also included a rather incoherent accounting of the funds. Noting that the total recovery was $4,109, Bernstein calculated his own fee at 45 percent, to be $1,849. This fee included 45 percent of the State Farm recovery which he had previously paid in full to the Nielsens. He then apparently deducted the fee, $1,073 in medical bills, and $247.14 in costs, from the $4,109, and concluded that the remaining $939.86 was the amount he owed the Nielsens. It then appears that he deducted this figure from $1,300, listed as 'paid to clients,' concluding that the Nielsens should refund to him $360.14. Bernstein had actually paid his clients $1,409 by this time, the three initial checks totalling $800 and the State Farm payment of $609. He recognized this fact on the second page of his letter when he referred to the $1,400 eventually obtained by the Nielsens.'

Bernstein ended the letter by noting that 'we are presently sending to the doctors involved checks for the monies outlined in your letter of November 26, 1968.' Despite this representation, the bills were not paid in full until at least July 9, 1969, six months later. Bernstein made one payment of $287.05 on June 9, 1969, and a second payment of apparently $696 on July 9, 1969. The record does not indicate the date of the final payment of $90 owed the Southeast Doctors Hospital.

The local administrative committee sent Bernstein a notice to show cause on December 17, 1969. Hearings were held on April 2 and 16, 1970; the Nielsens and Bernstein testified. The local committee found no basis for the following charges included in the notice: a) that Bernstein had known that the Nielsens' prior attorney had already filed suit in the matter, but nevertheless wilfully inserted in his agreement with the Nielsens a misleading provision that provided for a 40 percent fee if no suit was commenced; b) that Bernstein wilfully failed to pay...