Gay v. Virginia State Bar ex rel. Second Dist. Committee

Decision Date02 March 1990
Docket NumberNo. 890912,890912
Citation389 S.E.2d 470,239 Va. 401
CourtVirginia Supreme Court
PartiesJames F. GAY v. VIRGINIA STATE BAR, ex rel. SECOND DISTRICT COMMITTEE. Record

Philip S. Marstiller (Edward R. Parker, Richmond, Dawn B. DeBoer, Parker, Pollard & Brown, Virginia Beach, on briefs), for appellant.

Gregory E. Lucyk, Asst. Atty. Gen. (Mary Sue Terry, Atty. Gen., Gail Starling Marshall, Deputy Atty. Gen., William H. Hauser, Sr. Asst. Atty. Gen., on brief), for appellee.

Present: All the Justices.

LACY, Justice.

In this appeal of right from a ruling of the Virginia State Bar Disciplinary Board (the Board), James F. Gay challenges the Board's decision to suspend his license to practice law in the Commonwealth for a period of three years. The Board based the suspension on its finding that Gay had violated Disciplinary Rules 1-102(A)(4), 1 6-101(B) and 6-101(C), 2 and 9-102(B)(3) and 9-102(B)(4). 3

In June of 1983, Gay was retained by Mary Lou Williams to recover insurance proceeds for the benefit of Williams' granddaughter, a minor. Gay did so successfully, and Williams requested Gay to invest the net proceeds of $29,099.64. On September 14, 1983, Gay deposited $27,000.00 into an interest-bearing trust account at Dominion Federal Savings and Loan Association, labeled "Money Market Checking, James F. Gay, Trustee for Mary Williams" (the trust account). He left approximately $2,100 in his escrow account. Gay disbursed $6,784.16 of the proceeds to Williams, leaving a balance of $20,746.39 in the trust account.

On February 1, 1984, Gay disbursed $2,000 from the trust account to Aqua Dynamics, Ltd., a business owned by Gay's family. On February 22, and April 2, 1984, Gay made separate disbursements of $4,500 and $8,000 from the trust account for the benefit of H & L Contractors, Inc. (H & L), a small construction firm which was also Gay's client. Gay did not inform Williams of the loans to Aqua Dynamics and H & L. He also failed to create any accounting device to memorialize the loans.

In June 1984, at Williams' request, Gay prepared a handwritten accounting of the trust assets. The accounting was misleading in several respects: it did not reveal any disbursements to Aqua Dynamics or to H & L; it failed to show any interest earned on the trust account; and it listed stock investments of $10,815 when in actuality no stock had been purchased.

On August 7, 1985, Gay made a note for $26,000, payable to himself as trustee of the trust account, which was signed by H & L officers. Gay testified that the note's purpose was to provide H & L with a line of credit, and that he had secured the debt by obtaining deeds of trust on the homes of H & L's principals. He also claimed to have obtained a "consent to pledge" on certain H & L equipment. However, the deeds of trust were never notarized, rendering them unrecordable, and Gay never filed financing statements, thereby failing to perfect a security interest against the H & L equipment.

From September to December of 1985, Gay disbursed another $5,800 from the trust account for the benefit of H & L. These disbursements reduced the trust account's balance to $104.52 at the end of 1985. Gay provided Williams with no accounting for 1985.

In February of 1986, Williams employed attorney A.J. Kalfus to ascertain the status of the trust account. After Kalfus mailed Gay three letters, all demanding an accounting, Gay provided Kalfus with typewritten documents labeled as accountings for 1983, 1984, 1985, and 1986. Each accounting was deficient. None identified the disbursements to Gay as loans to H & L, and the loan to Aqua Dynamics did not appear at all on the 1984 accounting. The 1985 accounting overstated the amount "invested in" H & L by $835 and overstated the year-end balance. The 1986 accounting overstated the opening balance and failed to account for a $10,000 deposit to the trust account, apparently made in partial payment of the H & L debt.

On June 10, 1986, Kalfus, acting on Williams' authorization, directed Gay to turn over the trust assets and records. Gay did not respond. On August 26, 1986, Gay disbursed another $6,000 from the trust account for the benefit of H & L. Gay later deposited $6,000 to the trust account, presumably to retire part of the H & L debt.

In September 1986, Williams filed a complaint against Gay with the Virginia State Bar. The day before the hearing date, Gay delivered a check to Kalfus for $25,770.96, representing what Gay claimed to be the balance due Williams.

After a hearing, the Second District Committee certified charges of Gay's misconduct to the Board. The Board, following hearings on February 17, and March 17, 1989, suspended Gay's license for three years. This Court stayed the suspension pending the outcome of this appeal.

On appeal, Gay seeks reversal of the Board's actions on three grounds. First, he contends that he was not acting as an attorney while investing funds for Williams and, therefore, the Board could not properly sanction him under the Disciplinary Rules. Second, he maintains that wrongful intent was not shown, and finally, he challenges the penalty as fundamentally unfair, arbitrary, and capricious.

I.

We will first address the application of the Disciplinary Rules to Gay's case. Gay claims that his decisions in regard to the trust account did not involve the application of legal principles, nor did he prepare any legal instruments concerning the trust account. Thus, under the definition contained in Part 6, Section I(B) of the Rules of the Virginia Supreme Court, he contends he was not practicing law and therefore was not subject to the penalties set forth in the Disciplinary Rules, Part 6, § IV, Para. 13 C(6)(c). We disagree, and hold that the Disciplinary Rules were applicable to Gay's actions.

"Generally, the relation of attorney and client exists, and one is deemed to be practicing law whenever he furnishes to another advice or service under circumstances which apply his possession and use of legal knowledge or skill." Rules, Part 6, § I(B). Clearly, an attorney-client relationship was established between Gay and Williams. There is no evidence that the relationship was interrupted or extinguished until 1986. Furthermore, Gay prepared legal instruments such as deeds of trust and a consent to pledge personalty in order to protect the funds in the trust account. Such actions involved the "use of legal knowledge or skill" under the Rules. See Gibbs v. Virginia State Bar, 232 Va. 39, 348 S.E.2d 209 (1986).

Gay, an attorney actively engaged in the practice of law, mismanaged his client's funds, and is subject to the Disciplinary Rules of his profession.

II.

Gay contends that, even if the Disciplinary Rules apply to his actions, the Board erred in finding him in violation of DR 1-102(A)(4) because he did not possess the wrongful intent to deprive Williams of any of her funds. We disagree.

We have assumed, without deciding, that scienter is a necessary element to establish a case of misrepresentation under DR 1-102(A)(4). 4 Pickus v. Virginia State Bar, 232 Va. 5, 9, 348 S.E.2d 202, 205 (1986); Gibbs, 232 Va. at 41, 348 S.E.2d at 210. The Bar has the burden to show such wrongful intent by "clear proof." Blue v. Seventh District Committee, 220 Va. 1056, 1062, 265 S.E.2d 753, 757 (1980). We hold that the Bar established by "clear proof" that Gay violated DR 1-102(A)(4).

In response to Williams' initial request to know the status of her investment, Gay did not inform her that he had loaned over $14,500 from the trust account to two different businesses, one owned by his family. Instead, he falsely represented that he had invested $10,825 in stocks. Further, when Gay submitted individual accountings for the years 1983 through 1986, he did not itemize or explain the disbursements made to himself for the benefit of H & L.

Gay made these representations with knowledge of their falsity. As we have stated before, it is an attorney's knowing and intentional misrepresentation, not a wrongful intent to defraud his client, which satisfies the scienter requirement of DR 1-102(A)(4). Pickus, 232 Va. at 9, 348 S.E.2d at 205; Gibbs, 232 Va. at 41-42, 348 S.E.2d at 210.

III.

Next, Gay contends that the suspension of his license for three years was fundamentally unfair, arbitrary, and capricious in light of less severe penalties issued in other cases, and inappropriate because his client ultimately did not suffer any monetary loss. On appeal, the penalty imposed by the Board will be viewed as prima facie correct and will not be disturbed unless we determine, upon independent review of the record, that the penalty was not justified by the evidence or was contrary to law. Tucker v. Virginia State Bar, 233 Va. 526, 534, 357 S.E.2d 525, 529 (1987); Blue, 220 Va. at 1061-62, 265 S.E.2d at 757.

First, Gay asserts his actions did not exhibit a pattern of unprofessional conduct which he maintains should exist to impose a penalty as severe as the one imposed in this case. In support of his position, he cites cases in which we have upheld penalties of revocation and three-year suspension based on a finding that an attorney was guilty of repeated misconduct. Tucker, 233 Va. at 526, 357 S.E.2d at 525; Wright v. Virginia State Bar, 233 Va. 491, 357 S.E.2d 518, cert. denied, 484 U.S. 930, 108 S.Ct. 300, 98 L.Ed.2d 259 (1987); Delk v. Virginia State Bar, 233 Va. 187, 355 S.E.2d 558 (1987).

We have never held that a "pattern of misconduct" must exist before a three-year suspension may be imposed. Although the Board correctly may consider such a pattern in arriving at the appropriate disciplinary measure, Tucker, 233 Va. at 533, 357 S.E.2d at 529, it has the discretion to issue a suspension of up to five years for any finding of misconduct. Rules, Part 6, § IV, Para. 13 C(6).

In any event, the Board found in its "Order and Opinion" that Gay engaged in "a continuing course of dealing with Mrs. Williams' funds in a manner...

To continue reading

Request your trial
11 cases
  • In re Disciplinary Proceeding against Haley
    • United States
    • Washington Supreme Court
    • January 26, 2006
    ...1294 (Miss.1993); In re Disciplinary Proceeding Against Rentel, 107 Wash.2d 276, 282, 729 P.2d 615 (1986); Gay v. Virginia State Bar, 239 Va. 401, 389 S.E.2d 470, 474 (1990) (referring to lawyer sanctions as "punishments"); Comm. on Legal Ethics v. Hobbs, 190 W.Va. 606, 439 S.E.2d 629, 634 ......
  • Simmons v. Miller
    • United States
    • Virginia Supreme Court
    • April 20, 2001
    ... ... 000785 ... Supreme Court of Virginia ... April 20, 2001 ...          544 ... mailed the articles of organization to the State Corporation Commission ("SCC") and, on February ... , including his duties as a member of a committee, in accordance with his good faith business ... ...
  • Advanced Marine Enterprises v. Prc Inc.
    • United States
    • Virginia Supreme Court
    • June 5, 1998
    ... ... 971950 ... Supreme Court of Virginia ... June 5, 1998 ...          501 ... under the statute, does not specifically state that treble damages may be awarded in a chancery ... Second, although the chancellor awarded $1,000,000 in ... ...
  • Office of Prof'l Conduct v. Bowen (In re Bowen)
    • United States
    • Utah Supreme Court
    • September 2, 2021
    ...designed to protect the public, is a punishment or penalty imposed on the lawyer."); Gay v. Virginia State Bar ex. rel. Second Dist. Comm., 239 Va. 401, 389 S.E.2d 470, 474 (Va. 1990) (referring to attorney sanctions as "punishments").In his dissent, Justice Lee questions the propriety of m......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT