Gemmer, Matter of

• Decision Date: 07 February 1991
• Docket Number: No. 485,485
• Citation: 566 N.E.2d 528
• Parties: In the Matter of Arthur H. GEMMER. S 145.
• Court: Indiana Supreme Court

Page 528

566 N.E.2d 528

In the Matter of Arthur H. GEMMER.

No. 485 S 145.

Supreme Court of Indiana.

Feb. 7, 1991.

Philip S. Kappes and David Hughes, Indianapolis, for respondent.

DISCIPLINARY ACTION

PER CURIAM.

This case is before us on a two count complaint for disciplinary action charging the Respondent, Arthur H. Gemmer, with violating the Code of Professional Responsibility for Attorneys at Law (now superseded by the Rules of Professional Conduct ). The Hearing Officer appointed pursuant to Admission and Discipline Rule 23 has tendered his findings of fact, conclusions of law and recommendations. The Respondent has challenged the Hearing Officer's report and has petitioned for review and oral argument. His petition for oral argument is hereby denied.

The review process employed in disciplinary cases entails a de novo examination of all matters presented. This includes a review not only of the Hearing Officer's report but also of the entire record tendered in the case. The Hearing Officer's findings receive emphasis due to the unique opportunity for direct observation of witnesses, but this Court makes the ultimate determination as to misconduct and sanction. In re Kern (1990), Ind., 555 N.E.2d 479; In re Hampton (1989), Ind., 533 N.E.2d 122. The issues raised in Respondent's petition for review will be resolved within the context of this review process.

Upon review of all matters tendered to this Court, we find under the charges of Count I that Donald Hall retained the Respondent on July 20, 1983, to represent Hall, Hall's wife, and Hall's two businesses, "Hall's Wheel Alignment and Brake Specialists, Inc." and "Hall's Automotive Repair Center." The Indiana Department of Revenue (Department) asserted that Hall and his wife and/or businesses owed in excess of $100,000 in sales and/or use taxes. Prior to contacting the Respondent, Hall had been advised by the Indiana Department of Revenue that his retail merchant's certificate would be revoked and not renewed unless the due taxes were paid in full. Such revocation would have effectively precluded Hall from doing business.

The Respondent required a retainer fee of $2,500 and agreed to accept payment in installments. By October 1, 1983, the Respondent received $2,300. The Respondent and Hall additionally agreed that Hall would repair Respondent's automobile, and that the value of such service would be credited as part of the payment of Respondent's fees. By August 26, 1983, the Respondent received automobile repair services having a reasonable value of $1,011.71. During the course of the attorney-client relationship, the Respondent received payment and/or services having a total value of $3,311.71.

The Respondent was able to negotiate an agreement pursuant to which Hall paid $10,000 immediately, and, in return, the Department recalled the outstanding tax warrants which had been issued to the county sheriff. As part of the preliminary negotiations with the Department, the Respondent had agreed that he would report, no later than October 31, 1983, on his review of Hall's records as well as Hall's progress in raising sufficient funds to apply to tax payments.

On Respondent's recommendation, Hall authorized and the Respondent retained a certified public accountant to assist the Respondent in examining Hall's tax situation. Hall believed that his financial records would demonstrate misapplication of sales tax to items which were nontaxable or which were labor items. Hall turned over to the Respondent and the accountant a number of records. They included a group of cancelled checks approximately one to one and a half inches thick showing federal and state tax payments and numerous boxes containing financial records, particularly the monthly expenses for a three year period which was the subject of dispute with the Department. Among other things, the accountant was to examine the records from Hall's previous accountant and organize them into a computerized format for Respondent's use.

Approximately one week prior to a meeting with the Department which Hall believed was to take place, the Respondent informed Hall that the records did not support Hall's contention and that the Respondent could do nothing on Hall's behalf. Up until such announcement, Hall had not seen any work product produced by either the Respondent or the accountant and ultimately became convinced that his records had not been examined as they appeared to have never been opened or moved from the accountant's car.

Having become dissatisfied with Respondent's lack of effort on his behalf, Hall, on October 11, 1983, wrote to Respondent advising that he will be retaining another attorney and that he will be in Respondent's office on October 13, 1983, to collect all of his records.

Prior to receiving Hall's letter, the Respondent, under an invoice of October 12, 1983, billed the Halls a total of $5,125.00. The bill incorrectly credited the Halls with paying only $1,300 and also incorrectly credited the value of the car repair services as only $849.30. It also contained a request for $2,648.75 as fees for the accountant.

Upon receipt of Hall's letter, the Respondent responded by letter stating:

"You, of course, have the right to change Attorney's (sic) at any time. However, as a condition precedent thereto, all of the fees of the first Attorney must be paid in full, and all files and records are retained until then."

"Therefore in response to your letter, I hereby advise you: (1) No ethical or competent Attorney will undertake to represent you, until he first determines that the prior Attorney has been paid in full; and the same is true as between a second Certified Public Accountant in regard to a prior C.P.A.; (2) I will retain your records in my possession until my fees, including those of the financial consultant are paid in full."

On several subsequent occasions Hall persisted in demanding the return of his business and personal records to no avail. The Respondent advised him in substance that if Hall did not pay Respondent, the records will not be returned and Hall's businesses would be closed.

Approximately twenty days after the Respondent had been advised that he was discharged from the case, he wrote a letter to the Department concerning Hall's case stating, among other things, as follows:

"I have advised you (by telephone this date) (i) that our examination of the client's records, fails to show any documentation for misinterpreting or misapplication of the sales tax ... the client has expressed a desire and intention to 'retain other counsel'."

"Since we are Attorneys of record with Powers of Attorney on file with your State Agency, we have a professional obligation to continue to represent the client to the best of our ability limited by his own records, until replaced ..."

The Respondent did not consult with or advise Hall of his intention to write this letter nor did he seek Hall's permission to do so.

On November 7, 1983, Hall's new attorney also wrote the Respondent requesting that he turn over Hall's files and advising the Respondent that delaying the return could cause serious damage to Hall. The Respondent replied stating, among other things, as follows:

"Before you can undertake to represent a client already represented by an Attorney, you have a professional responsibility to first determine that the prior Attorney has been paid ... proceeding without making such inquiry is a breach of professional ethics ..."

"I hereby make demand upon you to either (i) forward a certified check for the full amount of said fees ($5,624.39); or (ii) withdraw your filed Power of Attorney and withdraw from any representation of Mr. Hall ..."

"... if, upon my return, you have not remedied your ethical conduct, I will not hesitate to take appropriate action with the Disciplinary Commission."

Thereafter, the Respondent did file a grievance with the Disciplinary Commission against Hall's new attorney for having undertaken Hall's representation when the Respondent's bill had not been paid.

Hall ultimately recovered many of his records but he has never recovered the stack of cancelled checks which related directly to payments made to taxing authorities nor a number of boxes of monthly records. Hall needed these particular records in his dispute with the Indiana Department of Revenue and for an Internal Revenue Service (IRS) audit covering the same period of time. The Respondent was aware of the IRS audit and the importance of these records to Hall. Ultimately the IRS audit was completed without Hall being able to utilize his records.

On January 6, 1984, the Respondent filed documents entitled "Attorneys Equitable Lien Against Real Estate" against two properties. One was Hall's residence located in Greenwood, Indiana; the other was Hall's business property in Indianapolis which was being purchased by Hall on contract from Paul and Jane Baldwin. The lien was in the amount of $5,624.39. On February 10, 1984, the Respondent sent another bill to Hall, this time claiming a fee of $7,352.36. This bill included not only the previously claimed fee but also 12% interest, charges for letters to Hall and Hall's new attorney demanding payment of fees and refusing to return records, charges for a conference with the IRS advising that the "client had misrepresented to agent that I had his profit and loss statements" and charges of $965.57 for damages to Respondent's automobile due to breakdown while Respondent was on vacation. The Respondent further noted on this bill that "this does not include time, trouble, and expense necessary to rebut and refute baseless and false grievance filed by client with the Indiana State Bar Association."

Hall eventually received a discharge in bankruptcy which included Respondent's fee claims. When the Baldwins filed for foreclosure on the property being purchased by Hall on contract, they had to make the Respondent a party by virtue of the lien which he had...