Cutler v. State Bar of Cal.

• Decision Date: 18 June 1969
• Citation: 78 Cal.Rptr. 172,455 P.2d 108,71 Cal.2d 241
• Parties: , 455 P.2d 108 C. DeForest CUTLER, Petitioner, v. The STATE BAR OF CALIFORNIA, Respondent. L.A. 29578, 29579.
• Court: California Supreme Court

Page 172

78 Cal.Rptr. 172

71 Cal.2d 241, 455 P.2d 108

C. DeForest CUTLER, Petitioner, v. The STATE BAR OF CALIFORNIA, Respondent.

L.A. 29578, 29579.

Supreme Court of California In Bank.

June 18, 1969.

Robert M. Newell and Newell & Chester, Los Angeles, for petitioner.

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

PER CURIAM.

This is a proceeding to review a recommendation of the Disciplinary Board of the State Bar of California in L.A. 29579 that petitioner be suspended from the practice of law for three years and its recommendation in L.A. 29578 that he be disbarred.

Questions: First. Does the evidence sustain the finding of culpability on the part of petitioner?

Yes. The burden is upon one seeking review of a recommendation of a disciplinary board to show that its findings are not supported by the evidence or that its recommendation is erroneous or unlawful. (McKinney v. State Bar, 62 Cal.2d 194, 195(2), 41 Cal.Rptr. 665, 397 P.2d 425.) In the present case, petitioner has not sustained this burden.

The two matters herein reviewed were heard by different trial committees, each proceeding independently of the other. They were argued before the disciplinary board at the same time, but the board acted separately on each proceeding as if each were an isolated case. It is appropriate, however, for this court to consider the two matters together even though there was been no formal consolidation of records. (See Resner v. State Bar, 53 Cal.2d 605, 613(4), 2 Cal.Rptr. 461, 349 P.2d 67.)

The undisputed disciplinary board findings in L.A. 29579 show that during July 1965, while representing the executor of an estate, petitioner caused the executor to deliver into his possession and control $34,684.81 cash belonging to the estate; that upon receipt thereof petitioner deposited said funds into a bank account which was designated a 'trust account,' but which was not maintained by petitioner as such ¹ (which account will hereinafter be referred to as petitioner's 'personal trust account'), and commingled the trust funds with his own funds; that thereafter, without the knowledge of the executor or the probate court, petitioner converted and appropriated $12,500 of said estate funds to his own use and $16,000 to the use of his relatives and third parties; that he wilfully and for his own gain delayed closing the estate more than six months after final distribution was ordered in July 1965; that he issued four distribution checks, each for $10,000 or more, none of which were honored (but all of which petitioner subsequently made good, in three instances after an interview with a representative of the district attorney); and that in another estate matter with the same person as executor, petitioner caused the executor to place most of the estate's cash in petitioner's control, and then, between October 1962 and July 1966, with the executor's permission, but without the probate court's permission, lent approximately $6,000 of the estate funds to other clients of his.

Petitioner does not question the above findings, but urges that a three-year suspension is 'somewhat harsh' and requests that this court review L.A. 29579 and L.A. 29578 together and 'if it finds that disbarment in (L.A. 29578) was too harsh a result, that it * * * order any suspension of the Petitioner (in L.A. 29579) be concurrent.'

In L.A. 29578, the record shows that in the latter part of 1962 Gudrun Seyfang, a 26-year-old German girl, who attended Huntsville University in Texas, was seriously injured in a railroad crossing accident near Visalia, California. In March 1963, her father, Dr. Rolf Seyfang, of Stuttgart, Germany, authorized petitioner to act for her in a claim for damages on a contingent fee basis. On April 6, 1963, Miss Seyfang, who had been transferred by her doctor to Texas, signed a retainer agreement on the terms authorized by her father, that is, 33 1/3% If settled before trial or 40% If settled afterwards. One of Miss Seyfang's brothers from Germany was in Texas with her at the time she signed the agreement, and he later took her back to Germany.

Thereafter, an action was filed in behalf of Miss Seyfang against the Atchison, Topeka, and Santa Fe Railroad Company. In November 1964, the railroad offered to settle it for $140,000. On December 4, 1964, petitioner flew to Germany to discuss the proposed settlement with Miss Seyfang and her family, who were caring for her. Petitioner took with him a release agreement prepared by the railroad's attorneys and a Title Insurance and Trust Company General Power of Attorney form. The railroad did not require petitioner to obtain a power of attorney, but one of Miss Seyfang's brothers testified that petitioner explained to them that it was needed so that he could sign Miss Seyfang's name to the settlement draft, obtain his fee, pay her medical expenses, and forward her share of the proceeds to her in Germany, thus saving them the trouble of having the whole sum sent to Germany first and then having to send back to the United States the amount of Miss Seyfang's unpaid bills and his fee.

Petitioner testified that it was his impression that he could have negotiated the settlement draft with a special power of attorney, but that if he was going to invest Miss Seyfang's money, he would have to have a general power of attorney. He further said that although prior to going to Germany in December 1964 he had not discussed the possibility that he would invest any of the settlement proceeds on behalf of Miss Seyfang, he nevertheless took with him to Germany only a general power of attorney form.

Petitioner testified that before going to Germany he suggested over the telephone to one of Miss Seyfang's brothers that he should be thinking about what Miss Seyfang would want to do with her funds. He further testified that he informed Miss Seyfang at the time she signed the power of attorney that he would have full authority under it to utilize the funds in his discretion for her best interest, and that she said, 'I have trusted you from the beginning, Mr. Cutler, I still trust you now, and I will execute this on that basis that you will serve my best interests.'

One of Miss Seyfang's brothers testified that while petitioner was in Germany, he indicated he could invest the funds very profitably for Miss Seyfang in a California firm, but said he would send a report on his investigations and wait for precise instructions what to do with the funds and would never do anything with them that would not be for her benefit. The brother further testified that both he and his father informed petitioner that any investment in the United States was out and that after receiving the money and paying Miss Seyfang's medical expenses and taking out his fees, he should immediately send the money to Germany. Petitioner, according to the brother's testimony, thereupon assured the Seyfangs that he would never do anything without Miss Seyfang's personal consent or instruction.

Petitioner said that he did not 'think' any of the Seyfangs had given him any clear-cut instructions at the time he was in Germany for the signing of the release and the power of attorney.

At the time petitioner made the trip to Germany in December 1964, he was financially interested in two Delaware corporations formed in 1962, Electron Industries, Inc. (hereinafter referred to as 'Electron') and Freeze-Aire International, Inc. (hereinafter referred to as 'Freeze-Aire'). The two corporations were of a speculative nature and were involved in developing new products. ²

In April 1963, petitioner had met Leo C. Popkin, president, general manager, and principal stockholder of the two corporations, and the following year they became close friends. They discussed the possibility of petitioner's eventually obtaining some of Popkin's stock in the corporations, and in July 1964 entered into an oral 'Gentlemen's agreement' that petitioner would lend the corporations $100,000. Under their agreement, loans would be made as required by the operations of the corporations, would be for three years, bear interest at 7% Payable at maturity, and would not be secured. As of December 2, 1964, petitioner had lent the corporations the sum of at least $38,000, part of which he had obtained as loans from two banks. Between December 24, 1964, and January 26, 1965, he lent the corporations, or paid for their account, an additional $60,000. Petitioner made the loans to the corporations without asking for, or receiving, any promissory notes, security, or other evidence of indebtedness by Popkin or the corporations.

Some time before December 11, 1964, petitioner entered into an oral agreement with Mr. Leon E. Heifetz, one of Electron's three stockholders, to purchase Mr. Heifetz' stock in the corporation. The agreement, requiring payment by petitioner of $37,500 for the stock, was reduced to writing on December 11, 1964.

Prior to December 1964, petitioner had investigated both corporations and obtained reports from a firm of accountants he had hired, from which it clearly appeared that the corporations were of a highly speculative nature, lacked adequate capitalization, and were in a critical financial position. ³

On December 24, 1964, petitioner received a draft for $140,000 in settlement of Miss Seyfang's case. He deposited it in a commercial bank account maintained in the name of Watson and Cutler and used for the payment of general office expenses and salaries. ⁴ Checks for attorney's fees totaling $45,000 ($30,000 to petitioner and $15,000 to Mr. Watson) were immediately drawn, leaving in the general office account around $95,000 of the $140,000 settlement. Of that amount, at least $93,000 belonged to Miss Seyfang.

Petitioner deposited the proceeds from his $30,000 fee check in his personal checking account. He immediately advanced an additional $10,000 to Electron, and by December 31, 1964, had reduced the balance in his...