Discipline of Babilis, Matter of

• Decision Date: 12 December 1997
• Docket Number: No. 0159,No. 960167,0159,960167
• Citation: 951 P.2d 207
• Parties: 332 Utah Adv. Rep. 8 In the Matter of the DISCIPLINE OF Jean Robert BABILIS, Bar
• Court: Utah Supreme Court

Page 207

951 P.2d 207

332 Utah Adv. Rep. 8

In the Matter of the DISCIPLINE OF Jean Robert BABILIS, Bar No. 0159.

No. 960167.

Supreme Court of Utah.

Dec. 12, 1997.

Brian R. Florence, Ogden, for Babilis.

Stephen R. Cochell, Kate A. Toomey, Salt Lake City, for the Utah State Bar.

STEWART, Associate Chief Justice:

The Utah State Bar, through its Office of Attorney Discipline, appeals a district court order suspending Jean Robert Babilis from the practice of law for three years. The Bar filed a complaint alleging that Babilis had accepted representation of an estate in an uncontested probate matter on the basis of a contingency fee, converted estate funds to his own use, and lied to both his clients and a court about his handling of the case. On this appeal, the Bar asserts that the trial court, instead of suspending Babilis, should have disbarred him. Babilis has cross-appealed, arguing that the trial court should have imposed a lesser penalty than a three-year suspension. He also contends that the Bar had no right to appeal the trial court's disciplinary order. We hold that the Bar has a right to appeal disciplinary orders imposed by district courts and that Babilis' misconduct warrants disbarment.

I. FACTS

For ease of reference, we will refer to the district court that dealt with the probate proceeding as the "probate court" and the district court that dealt with the disciplinary proceeding as the "disciplinary court." The Bar filed its formal complaint with the Board of Bar Commissioners on January 6, 1993. Subsequently, this Court promulgated rules revising the procedures and rules for processing attorney discipline cases to provide, inter alia, adjudication of attorney disciplinary cases in the district courts. Thereafter, the Bar amended its complaint to comply with the requirements of the revised rules. These rules are found in chapters 14 and 15 of the Utah Court Rules. See R. Lawyer Discipline & Disability; Standards for Imposing Lawyer Sanctions.

The Bar's complaint was based primarily on Babilis' conduct in the probate of the estate of Jane Gayle Kerns. The decedent's stepson Thomas Kerns, to whom she had given a power of attorney prior to her death, and his wife Carol traveled from Hays, Kansas, to Utah to make funeral arrangements and to deal with Jane Kerns' estate. Upon their arrival in Utah, the Kernses experienced difficulty in gaining access to the decedent's home. Two neighbors were attempting to assert some sort of property interest in the home and had changed the locks. As a result, the Kernses sought legal counsel.

In September 1991, Thomas and Carol Kerns met with Babilis. Babilis represented to the Kernses that he was familiar with probate law, but in fact he had had little experience in the field. Babilis stated that he typically undertook probate matters on a contingency fee basis and that he believed a contingent fee of one-third of the entire estate would be less expensive than billing at an hourly rate. Babilis did not discuss with Kerns the differences between Kerns' role as a claimant on the estate and his role as personal representative of the estate, nor did Babilis inform Kerns that if Babilis acted as counsel for Kerns as the personal representative of the estate, a reasonable attorney fee would be allowed Babilis from the proceeds of the estate.

Kerns told Babilis of the estate assets of which he was aware--ownership interests in two parcels of real estate and two bank accounts totaling approximately $95,000. Kerns showed Babilis a copy of an option agreement to purchase real estate in favor of Jane Kerns' neighbors, and he identified Mary Campbell of Cedar Rapids, Iowa, as the only other potential heir of Jane Kerns. Babilis contacted Campbell by telephone. She stated at the outset that she did not wish to receive anything from the Kerns estate. Campbell stated that Jane Kerns had told her she wished the estate to go to Thomas Kerns. Campbell subsequently assigned her interest in the estate to Thomas Kerns. ¹ Neither Thomas Kerns nor Campbell knew of any other heirs.

Within two days after the first meeting with Thomas Kerns, Babilis' office had located the bulk of Jane Kerns' assets, consisting of property interests in two parcels of real estate (which were later sold for $40,000), $135,000 in four bank accounts, and approximately $40,000 in savings bonds. The day of Jane Kerns' funeral, Babilis obtained Thomas Kerns' signature on the contingency fee agreement that granted Babilis one-third of the value of the estate as his fee. Prior to obtaining the agreement, Babilis understood the nature and extent of the assets of the estate. The precise value of the bank accounts was known; the precise value of the savings bonds could have been determined easily although Babilis had not yet actually inventoried them; and the value of the real estate could have been roughly estimated. Babilis also knew that there were no likely claimants other than Thomas Kerns and that the adverse property interest asserted by Jane Kerns' neighbors was merely an option or right of first refusal that had little or no bearing on the disposition of the estate. Babilis was entitled by law to a reasonable attorney fee when acting as an attorney for the personal representative of the estate. See Utah Code Ann. § 75-3-718; Utah Code J. Admin. Rule 6-501.

During the latter part of 1991, Babilis wrote several checks on the estate trust account for his own personal benefit. In total, he withdrew approximately $36,000. Babilis drew one of these checks to purchase an airline ticket to Cedar Rapids, Iowa, purportedly to obtain a revised document from Mary Campbell. ² Babilis later cashed in the ticket and applied the proceeds to the purchase of tickets for him and his wife to inspect a houseboat in Wisconsin that they planned to purchase. He then lied to the Kernses, telling them that he had gone to Cedar Rapids but had been unable to meet with Campbell because she was hospitalized at the time. Babilis did not notify Kerns or the probate court about his withdrawals and never received permission to withdraw any money from the estate trust account.

In the formal petition for settlement and distribution of the Jane Kerns estate, Babilis misrepresented to the probate court the value of the savings bonds found in the safe deposit box to conceal the fact that he had stolen a substantial portion of them. He redeemed the bonds, taking the proceeds in cashier's checks, and had one check made out to the estate in the amount of $22,575, one made out to an automobile dealer for $11,525 for the purchase of a car for personal use, and one made out to himself in the amount of $5651.43. He thus converted over $17,000 of the savings bonds to his own use and attempted to conceal this misappropriation from both the Kernses and the probate court.

Babilis also took $25,000 from the sale of Jane Kerns' real estate and attempted to take an additional $4600 as a finder's fee, even though it was Thomas Kerns who found the buyer for the property. The sale of the real estate produced $40,000 for the estate. Five months after receiving the proceeds, Babilis deposited $15,000 in the trust account but has never accounted for the remaining $25,000. He ultimately conceded that he used it for personal purposes. In total, Babilis took $78,659.43 from the Kerns estate without authorization. He claimed that this money constituted an "advance" on his "contingent" fee. ³

In addition, the disciplinary court found that Babilis had billed the estate for nonexistent and overcharged expenses and services. He charged $4800 for a $40 consulting fee, $700 for $100 worth of outside legal fees, $5500 for $635 of accounting work, and $622 for federal estate taxes that had been separately paid by Thomas Kerns, and charged $2500 in undocumented office expenses. He thus charged or attempted to charge the estate $14,122 for $775 worth of documented services and expenses. The Kernses were not the only victims of over-billing. Babilis' employees testified that he "routinely" billed clients at his own hourly rate for work actually done by subordinates whose rates were much lower.

In the spring of 1992, Babilis sent an accounting to the Kernses, requesting that Thomas Kerns sign it so that a final distribution of the estate could be made. Kerns discovered mathematical errors and other discrepancies, questioned the appropriateness of the contingency fee agreement, and suggested that an hourly rate was more appropriate. Babilis agreed to "eat" the expenses but falsely asserted that he had not maintained time records and therefore could not readjust their agreement to an hourly charge.

When the Kernses raised the fee issue in the probate court, Babilis repeated the same false claim about nonmaintenance of records to the court. The Kernses eventually obtained new counsel and entered into a settlement agreement in which they received $30,000 of the money Babilis had taken from the estate. Later, the existence of time records came to light. At Babilis' disciplinary trial, his employees testified that Babilis always insisted on maintaining time records, whether a case was taken on an hourly or a contingent fee basis.

II. THE DISCIPLINARY COURT'S RULINGS

The disciplinary court ruled that the contingency fee arrangement violated rules 1.4(b) and 1.5 of the Rules of Professional Conduct. Rule 1.4(b) requires attorneys to make explanations adequate to assist clients in making informed decisions, ⁴ and rule 1.5 prohibits clearly excessive fees. ⁵ The court held that Babilis had violated rule 1.4(b) by failing to explain the capacity in which he was acting. Babilis had essentially set himself up as the attorney for Thomas Kerns both in Kerns' capacity as a claimant and in Kerns' capacity as personal representative of the estate--a clear conflict of interest. The disciplinary court also ruled that Babilis charged a clearly excessive fee. Unable to decide the...