Edwards v. State Bar

• Citation: 276 Cal.Rptr. 153,801 P.2d 396,52 Cal.3d 28
• Decision Date: 20 December 1990
• Docket Number: No. S008882,S008882
• Court: United States State Supreme Court (California)
• Parties: , 801 P.2d 396 John H. EDWARDS III, Petitioner, v. The STATE BAR OF CALIFORNIA, Respondent.

Page 153

276 Cal.Rptr. 153

52 Cal.3d 28, 801 P.2d 396

John H. EDWARDS III, Petitioner, v. The STATE BAR OF CALIFORNIA, Respondent.

No. S008882.

Supreme Court of California,

In Bank.

Dec. 20, 1990.

[52 Cal.3d 31] [801 P.2d 397] Kenneth K. Kocourek, Diamond Bar, for petitioner.

Diane C. Yu, Truitt A. Richey, Jr., Margaret E. Fourt, San Francisco, and Janet S. Hunt, Los Angeles, for respondent.

THE COURT:

The Review Department of the State Bar Court (review department) has recommended that petitioner John H. Edwards III be suspended from the practice of law in California for three years, that execution of the suspension order be stayed, and that he be placed on probation for three years upon conditions that include actual suspension from the practice of law for two years. The recommendation is based on uncontested evidence that petitioner commingled personal and client funds in a trust account and that on at least one occasion petitioner misappropriated a client's settlement funds Finding no significant errors in the procedures or in the findings and conclusions of the State Bar Court, we will adopt those findings and conclusions. We have determined, however, that the recommended discipline is excessive insofar as it requires an actual suspension for two years, and that the purposes of attorney discipline will be fully served by actually suspending petitioner for one year.

[801 P.2d 398] from the account. Petitioner contends that the recommended discipline is excessive and that the review department seeks to impose discipline for misconduct that was never charged.

FACTS

Petitioner was admitted to the practice of law in California in June 1972 and has been continuously licensed to practice since that time except for a 10-day suspension in 1985 ¹ for nonpayment of dues. Apart from this suspension, petitioner has not previously been disciplined by the State Bar.

Petitioner represented Paris Henighan-Shoup as the plaintiff in a personal injury matter that was settled for $5,000. Petitioner received the settlement proceeds and deposited them in his client trust account. On or about March 6, 1984, petitioner sent Henighan-Shoup a check for $3,000, the amount due her after deduction of petitioner's fee as provided by their contingency fee agreement. Henighan-Shoup tried to negotiate the check, but there were insufficient funds in the trust account and the check was not honored. Between February 22 and March 23 of 1984, the balance in petitioner's trust account fluctuated from a low of $31.22, on March 23, to a high of $634.37, on March 20.

Henighan-Shoup, who was then living in Billings, Montana, telephoned petitioner after learning that the check would not clear. Petitioner acknowledged that he had been having financial difficulties and promised that he would send her the settlement funds with an additional amount to compensate for the inconvenience. In the ensuing weeks, Henighan-Shoup made many additional telephone calls to petitioner's office to inquire about the funds. She spoke to petitioner personally on one or two of these occasions; he was polite and apologetic and promised to send the funds. On May 7, 1984, Henighan-Shoup signed an informal complaint to the State Bar regarding petitioner's conduct, but she did not tell petitioner she had done so. On or about May 28, 1984, petitioner sent Henighan-Shoup a cashier's check for $3,200. The delay in receiving the funds caused a corresponding delay in Henighan-Shoup's efforts to start her own business.

Based on these facts, the State Bar issued a notice to show cause charging petitioner with willfully misappropriating Henighan-Shoup's funds to his own use and purpose in violation of Business and Professions Code sections 6068, 6103, and 6106, ² and subdivisions (B)(1), (B)(3), and (B)(4) of former rule 8-101 (see now, rule 4-100) of the Rules of Professional Conduct. ³

The charges were heard before a two-referee hearing panel. ⁴ At the hearing, petitioner testified that his residence had been threatened by foreclosure proceedings in March 1984, and that around that time he had written a check on the trust account to prevent the foreclosure. He knew when he wrote the check that the funds in the account were not his. He subsequently reimbursed the account by depositing $3,000 of his own funds, but he did not remember when this occurred. He could not say whether it was Henighan-Shoup's settlement proceeds that were withdrawn from the client trust account to prevent the foreclosure. Her funds might have been withdrawn to pay another client who asked for a refund of unearned fees when he no longer wished to be represented by petitioner. This other client's fee payment had not been deposited into the trust account, but petitioner nonetheless used the trust account to refund the unearned fees.

Asked whether he knew the balance in the trust account when he wrote the check to Henighan-Shoup, petitioner replied that he had believed there were sufficient funds in the account to cover the check, but that he had not known the exact balance. He said he "would kind of keep a mental idea" as to the balance, rather than maintaining a record of the exact balance. Petitioner said he did not maintain a chart of the client funds in his trust account and did not promptly withdraw funds to which he became entitled as fees or as reimbursement for costs. He would allow his own funds to accumulate in the account and would draw on them as needed, sometimes by means of automated teller machines.

In mitigation, petitioner testified that he has been married since December 1972, that he has a 10-year-old son, that he is a sole practitioner doing primarily family law and employment discrimination, that he practices in an economically depressed area and is frequently unable to collect fees, that he now employs a certified public accountant to manage his trust account (although he makes all deposits and withdrawals himself), and that he no longer deposits his own funds into his trust account or writes checks on the trust account for his personal use. He also testified that the funds he eventually used to pay Henighan-Shoup came from a bank loan and that the delay in paying Henighan-Shoup resulted from the bank's delay in approving this loan.

The hearing panel found the facts relevant to misconduct to be as stated above. In regard to circumstances in mitigation and aggravation, the hearing panel made these findings: Petitioner's acts did not significantly harm Henighan-Shoup, although they caused her financial inconvenience; petitioner was candid and direct with the State Bar, supplying requested materials and explanations; petitioner made full repayment to Henighan-Shoup before he was aware he was under investigation by the State Bar; petitioner's dealings in his trust account, by his own admission, involve multiple acts of inappropriate record keeping and use of funds for personal matters; and petitioner in his testimony demonstrated a lack of appreciation of the seriousness of his misconduct and a surprising lack of understanding of the significance and use of trust property.

The hearing panel concluded that clear and convincing evidence supported the charges that petitioner had failed to maintain proper trust account records (former rule 8-101(B)(3)) and had failed to promptly pay funds his client was entitled to receive (former rule 8-101(B)(4)), but it also concluded that the charge that petitioner had failed to promptly notify his client of the receipt of her funds (former rule 8-101(B)(1)) was not so supported. The hearing panel concluded that by violating the Rules of Professional Conduct petitioner had also violated his oath and duties as an attorney (§§ 6068, 6103; see Garlow v. State Bar (1988) 44 Cal.3d 689, 706, 244 Cal.Rptr. 452, 749 P.2d 1307), but that petitioner's acts did not involve moral turpitude, dishonesty, or corruption (§ 6106). The hearing panel recommended, initially The State Bar petitioned for reconsideration on the grounds, among others, that a period of at least three months' actual suspension was required by standard 2.2(b) of the State Bar's Standards for Attorney Sanctions for Professional Misconduct (Rules Proc. of State Bar, div. V, Stds. for Atty. Sanctions for Prof. Misconduct); ⁵ and that petitioner should be required to take and pass the Professional Responsibility Examination under this court's decision in Segretti v. State Bar (1976) 15 Cal.3d 878, 891, 126 Cal.Rptr. 793, 544 P.2d 929. After reconsideration, the hearing panel modified its decision by adding certain probation conditions relating to the management of petitioner's trust accounts, and by requiring that petitioner take and pass the Professional Responsibility Examination, but the hearing panel again declined to impose a period of actual suspension.

[801 P.2d 400] that petitioner be suspended from the practice of law for one year, that execution of suspension be stayed, and that petitioner be placed on probation on various terms and conditions not including any actual suspension from the practice of law.

The review department adopted the hearing panel's findings of fact and conclusions of law, with these significant exceptions: a finding was added that petitioner had admitted engaging in periodic commingling and periodic misappropriation of trust funds, including kiting client funds; a conclusion that petitioner's acts involved moral turpitude, dishonesty, and corruption was substituted in place of the hearing panel's conclusion to the contrary; and a conclusion that petitioner had engaged in multiple acts of misappropriation was substituted in place of a conclusion that petitioner was not willfully dishonest. The review department recommended that this court discipline petitioner by placing him on suspension for three years, stayed, with a three-year period of probation on various conditions including actual suspension for the first two years of the probationary...