In re Reynolds

• Decision Date: 29 January 2002
• Docket Number: No. 27,037.,27,037.
• Citation: 131 N.M. 471,39 P.3d 136
• Parties: In the Matter of David G. REYNOLDS, Esquire, an Attorney Licensed to Practice Law Before the Courts of the State of New Mexico.
• Court: New Mexico Supreme Court

39 P.3d 136

131 N.M. 471

In the Matter of David G. REYNOLDS, Esquire, an Attorney Licensed to Practice Law Before the Courts of the State of New Mexico.

No. 27,037.

Supreme Court of New Mexico.

January 29, 2002.

Arne R. Leonard, Deputy Disciplinary Counsel, Albuquerque, NM, for Disciplinary Board.

Briggs F. Cheney, Albuquerque, NM, for Respondent.

OPINION

Per Curiam.

{1} This matter came before the Court upon recommendation of the disciplinary board and one of its hearing committees to accept a conditional agreement not to contest and consent to discipline tendered by respondent, David G. Reynolds, pursuant to Rule 17-211 NMRA 2001 of the Rules Governing Discipline. Under that agreement, respondent declared his intention not to contest allegations that he violated Rules 16-102(D), 16-115(A), 16-115(B), 16-804(C), and 16-804(H) NMRA 2001 of the Rules of Professional Conduct. We adopt the disciplinary board's recommendation and hereby disbar respondent.

I.

{2} While respondent was a shareholder in an Albuquerque law firm during the year 2000, he was entrusted with the duties of preparing, reviewing, and approving the billing of firm clients for which he provided legal services. During that time period, respondent also was entrusted with the duties of collecting checks payable to an estate, depositing those checks in a special trust account established by the firm for the estate, and distributing funds from that special trust account on a quarterly basis to the beneficiaries of the estate and other persons entitled to a percentage of those funds under the terms of a court order.

{3} On or about December 20, 2000, other shareholders in the firm discovered that respondent had misappropriated several checks made payable to the firm from one of its clients. As a result, the firm was missing at least $44,069.44 in payments from the client. Shortly thereafter, the firm also discovered that respondent had misappropriated several checks that should have been deposited in the special trust account that the firm had established for the estate. As a result, at least $11,500.00 was missing from the special trust account at that time. The firm reported these discoveries in a complaint that was hand-delivered to the office of disciplinary counsel on December 28, 2000.

{4} In his initial response to the complaint, respondent acknowledged that his conduct was improper. He also indicated that he had accepted payments from other clients that were not reported to the firm. Respondent explained that he was in the process of determining the amounts owed and making restitution to the firm and the estate.

{5} Further investigation of the complaint revealed that respondent had engaged in an elaborate scheme to conceal his misappropriation of funds from others in the firm and from the firm's clients. This scheme began with respondent's decision to open a trust account in his own name without informing the firm or reporting the account on the certification regarding records and handling of trust funds that he submitted to the disciplinary board pursuant to Rule 17-204(B) NMRA 2001. Respondent began depositing checks made payable to the firm from one of its clients in his secret trust account on February 8, 2000. He began depositing checks made payable to the estate into his secret trust account on June 16, 2000. Between February 2000 and December 2000, respondent deposited a total of at least $91,487.75 in funds belonging to the firm, its clients, and third parties in his secret trust account.

{6} Respondent failed to keep these funds in trust or maintain separate ledgers for each separate trust client containing the information required by Rule 17-204(A). Rather, he converted most, if not all, of the funds to his own use by making unauthorized withdrawals from his trust account for the purpose of paying his personal expenses and debts. Several of these withdrawals were accomplished with checks made payable to cash. Respondent also transferred some of the funds to his other personal bank accounts and then withdrew the funds from those accounts.

{7} When other shareholders in the firm became aware that the firm had not received payments from one of its clients, respondent falsely reported to them that the client had not paid. He also intercepted the billing correspondence between the firm and the client. He arranged for the firm's bills to be sent to a post office box that he owned and then reissued these bills to the client on his own letterhead with a different address. He wrote a letter to the client in which he falsely stated that, because of a change in the firm's billing system, future checks were to be made payable to him and sent to another post office box that he owned.

{8} As a result of these misrepresentations, respondent was able to obtain three additional checks from the firm's client that were made payable to him instead of the firm. The funds from these checks totaled $13,910.28. Respondent deposited two of these checks, for a total of $8,798.64, in his personal bank accounts and converted the proceeds from the two checks to his own use.

{9} Respondent concealed his misappropriation of estate funds from the firm's special trust account by attempting to replenish the account before quarterly distributions were made to the beneficiaries and others entitled to a percentage of those funds. Some of the funds that respondent used to replenish the firm's special trust account, however, were derived from the checks from one of the firm's clients that respondent had previously misappropriated. In addition, respondent failed to repay all the funds in time for the quarterly distributions. Respondent misappropriated a check in the amount of $1,032.05 on June 16, 2000, and failed to repay that amount until sometime between November 3, 2000, and November 6, 2000. At the time the firm discovered respondent's misappropriation of the estate funds in December 2000, more than $11,500.00 was missing from the firm's special trust account.

{10} After his misappropriation was discovered by others in the firm, respondent made restitution to the estate so that the quarterly distributions could be made in January 2001. He also entered into an agreement with the firm to pay restitution regarding other funds that he had misappropriated.

{11} Some of the funds that were the subject of respondent's restitution agreement with the firm were derived from payments that respondent received for legal work he performed for outside clients. According to respondent, the amount of funds he accepted from these outside clients totaled $16,173.73. Respondent failed to disclose his representation of these outside clients or the payments he received from them until after the firm filed its complaint against him with the disciplinary board. In response to requests for information from disciplinary counsel, respondent was unable to specifically identify the date, source, and description of each payment that he deposited or to produce trust account records regarding his outside clients that contained the information required by Rule 17-204(A).

{12} On April 9, 2001, formal charges of professional misconduct were filed against respondent. Following a prehearing conference pursuant to Rule 17-312(B) NMRA 2001 that addressed a number of issues raised by respondent's counsel, respondent filed an answer in which he admitted most, but not all, of the allegations in the charges. A hearing on the merits of the charges was set for July 18 and 19, 2001. On July 13, 2001, respondent entered into a conditional agreement not to contest and consent to discipline. In conjunction with that agreement, disciplinary counsel and respondent's counsel filed a joint petition for summary suspension pursuant to Rule 17-17-207(A)(5) NMRA 2001, which this Court granted on August 1, 2001.

II.

{13} Respondent's misappropriation of funds belonging to others and the elaborate scheme of deception he employed to conceal that misappropriation violated several provisions of the Rules of Professional Conduct. He violated Rule 16-102(D) by engaging in conduct that he knew to be criminal or fraudulent. He violated Rule 16-115(A) by failing to hold funds of clients or third persons that were in his possession in connection with a representation in a separate account and failing to keep complete records of such account funds in a manner that conforms to the requirements of Rule 17-204. He violated Rule 16-115(B) by failing to promptly notify a client or third persons of the receipt of funds in which that person has an interest and failing to promptly deliver to the client or third persons any funds that the client or third persons are entitled to receive. He violated Rule 16-804(C) by engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation. Finally, respondent's conduct adversely reflects on his fitness to practice law, thereby violating Rule 16-804(H).

{14} Disbarment is the appropriate sanction for respondent's violations of these rules. This Court has consistently imposed the sanction of disbarment when it has been shown that a lawyer knowingly misappropriated funds belonging to a client or third person. See In re Quintana, 2001-NMSC-021, ¶ 29, 130 N.M. 627, 29 P.3d 527

; In re Zamora, 2001-NMSC-011, ¶¶ 12, 18, 130 N.M. 161, 21 P.3d 30; In re Chavez, 2000-NMSC-015, ¶ 19, 129 N.M. 35, 1 P.3d 417; In re Hamar, 1997-NMSC-048, ¶ 28, 123 N.M. 795, 945 P.2d 1013; In re Krob, 1997-NMSC-037, ¶ 6,123 N.M. 652, 944 P.2d 881; In re Darnell, 1997-NMSC-025, 123 N.M. 323, 326, 940 P.2d 171, 174; In re Rohr, 1997-NMSC-012, 122 N.M. 774, 775, 931 P.2d 1390, 1391; In re Schmidt, 1996-NMSC-019, 121 N.M. 640, 642, 916 P.2d 840, 842; In re Greenfield, 1996-NMSC-015, 121 N.M. 633, 634, 916 P.2d 833, 834; In re Kelly, 1995-NMSC-039, 119 N.M. 807, 809, 896 P.2d 487, 489; In re Evans, 1995-NMSC-015, 119 N.M. 305, 310, 889 P.2d 1227, 1233; In re Wilson, 108 N.M. 378, 379, 772 P.2d...