Kelly v. State Bar

• Decision Date: 13 June 1988
• Docket Number: No. S003401,S003401
• Citation: 45 Cal.3d 649,247 Cal.Rptr. 608,754 P.2d 1104
• Court: California Supreme Court
• Parties: , 754 P.2d 1104 John Patrick KELLY, Petitioner, v. The STATE BAR OF CALIFORNIA, Respondent.

Page 608

247 Cal.Rptr. 608

45 Cal.3d 649, 754 P.2d 1104

John Patrick KELLY, Petitioner, v. The STATE BAR OF CALIFORNIA, Respondent.

No. S003401.

Supreme Court of California In Bank.

June 13, 1988.

[45 Cal.3d 651] [754 P.2d 1105] John Patrick Kelly, Santa Ana, for petitioner.

Diane C. Yu, Truitt A. Richey, Jr., Richard J. Zanassi and Djinna M. Gochis, Office of General Counsel, State Bar of California, San Francisco, for respondent.

BY [45 Cal.3d 652] THE COURT.

This is a proceeding to review the State Bar Court's unanimous recommendation that petitioner John Patrick Kelly ¹ be disbarred for misappropriation of client trust funds and related misconduct. Our general practice, which is supported by the new Standards for Attorney Sanctions for Professional Misconduct (Rules Proc. of State Bar, div. V, eff. Jan. 1, 1986) (Standards), has been to impose strong disciplinary measures where a substantial amount of client funds has been misappropriated and no compelling mitigating circumstances are present. Since petitioner's undisputed expenditure of almost $20,000 in client funds was clearly unauthorized, wholly unexplained, and accompanied by another wrongful act, we adopt the recommended discipline.

BACKGROUND

This case concerns misconduct committed by petitioner while representing a single set of clients, Mr. and Mrs. Miltimore.

A. Charges

The notice to show cause filed on September 25, 1985, and amended on September 10, 1986, was divided into two counts. Count I alleged that petitioner wilfully misappropriated client funds (Rules Prof.Conduct, rule 8-101(B)(4)), ² committed acts of moral turpitude and dishonesty (Bus. & Prof.Code, § 6106), and violated the oath and duties of an attorney (Bus. & Prof Code, §§ 6067, 6068, 6103). Count II alleged that petitioner wilfully communicated with an adverse party upon a subject of controversy, knowing the party was represented by counsel, without the express consent of counsel. (Rule 7-103.)

B. Evidence

The facts underlying Count I (misappropriation) are--with two exceptions--undisputed. Petitioner had been handling the Miltimores' legal affairs for three or four years before the instant events occurred. In August 1981, the Miltimores gave petitioner an escrow check for $34,597.05 which they had received upon the sale of certain real property. They asked him to hold the money indefinitely on their behalf in his client trust account.

On September 30, 1981, petitioner sent the Miltimores a copy of a deposit slip showing that he had placed the entire check into his client trust account. ³ He also enclosed a letter describing the activity which had since taken place on that account. Specifically, he had made a $5000 cash disbursement to the Miltimores at their request. He also had withdrawn $10,000 and invested it in real property located in the Simi Valley (the Simi Valley property). ⁴ The parties disagree as to whether the Miltimores actually authorized this $10,000 withdrawal. They do agree, however, that the foregoing activity left a balance of $19,597.05 in the account.

Between September 30, 1981, and March 1, 1982, petitioner admittedly spent the entire balance in the trust account. Although the Miltimores each testified that they had not authorized any withdrawals, petitioner testified that they had orally agreed to "loan" him the $19,597.05.

At some point during this period, the Miltimores asked petitioner to return the balance in their trust account. When petitioner replied that he had spent and could not repay the money, the Miltimores asked for some proof of his indebtedness. On March 1, 1982, petitioner executed a promissory note for $19,500 which was payable in full upon 30 days' notice.

The Miltimores made repeated oral and written demands for payment under the note. When their efforts proved unsuccessful, they hired Attorney Estelle Levine to assist in their collection efforts. In October 1982, Levine negotiated a new promissory note on the Miltimores' behalf, in which petitioner agreed to pay $29,500, plus interest. A year later, in November 1983, petitioner made his first and only payment under this note, in the amount of $10,000.

The Miltimores eventually hired another attorney, Carl Yoder, who, in June 1984, filed a complaint against petitioner for recovery of the balance owed under the note. Settlement negotiations followed, during which time Yoder represented the Miltimores, and Attorney Joseph Laird represented petitioner. On September 6, 1985, the parties formally agreed that petitioner would pay the Miltimores a total of $30,651 in full satisfaction of their claim. Petitioner testified that, as of the September 2, 1986, hearing before the referee, he had made only two $5,000 payments under the settlement agreement.

The facts underlying Count II (improper communication with an adverse party) occurred shortly after this agreement was reached, and are not materially disputed. On September 13, 1985, petitioner phoned the Miltimores at home and asked if he could meet with them. Mr. Miltimore answered "no," because his wife was scheduled to undergo certain tests at the hospital that day. Nevertheless, petitioner and Attorney Laird visited the Miltimores at home, after they had returned from the hospital. Petitioner asked the Miltimores to sign a "statement of facts" which described all of the disputed trust fund withdrawals as "loans." This written statement was substantially similar to one which Yoder had earlier advised his clients not to sign. Mrs. Miltimore refused to sign the statement but Mr. Miltimore did. He testified that he felt coerced into doing so because petitioner's attorney indicated that no settlement payments would otherwise be made. Mr. Miltimore further testified that he and his wife were both "upset," and they just wanted the two men to leave.

Yoder was not present when these events occurred and had not been advised that such a meeting would take place. It is clear from the record that petitioner knew the Miltimores were represented by Yoder at all relevant times.

C. Findings

Based on the foregoing facts, the hearing referee found petitioner culpable of all charges--wilfully misappropriating $19,597.05 in client trust funds; wilfully failing to account to the client; ⁵ wilfully and wrongfully contacting an adverse party without the knowledge and consent of counsel; and moral turpitude and dishonesty. ⁶

The referee also found no factors in aggravation or mitigation, and summarily recommended disbarment. The referee's decision is silent as to whether petitioner has a prior disciplinary record.

The review department unanimously adopted the findings and the disciplinary recommendation, with one minor modification in the recommendation of disbarment. ⁷

DISCUSSION

A. Sufficiency of the Evidence ⁸

Petitioner's factual arguments are focused exclusively upon the circumstances under which he depleted the trust account. He first notes that there is conflicting testimony concerning the $10,000 he claims to have invested in the Simi Valley property (e.g., the Miltimores testified that they had considered but ultimately refused participating in the project; petitioner testified that they had given him their oral consent; and a letter written to petitioner indicates that the Miltimores did not object to the $10,000 withdrawal). Petitioner apparently believes that the mere existence of a factual dispute sheds doubt on the overall trustworthiness of the findings.

We begin by noting that petitioner has an overly simplistic view of the manner in which we resolve such evidentiary challenges. Although this court independently reviews the evidence, the State Bar Court's findings are viewed with "great deference, particularly when based on evaluations of credibility." (Maltaman v. State Bar (1987) 43 Cal.3d 924, 932, 239 Cal.Rptr. 687, 741 P.2d 185; see also, Bus. & Prof.Code, § 6083, subd. (c).) The hearing panel is best suited to resolving credibility questions, because it alone is able to observe the witnesses' demeanor and evaluate their veracity firsthand. (Galardi v. State Bar (1987) 43 Cal.3d 683, 690, 238 Cal.Rptr. 774, 739 P.2d 134.) Against this backdrop, the petitioner must demonstrate that the findings are not sustained by convincing proof and to a reasonable certainty. ( Galardi, supra, 43 Cal.3d at p. 689, 238 Cal.Rptr. 774, 739 P.2d 134.) Merely repeating conflicts in the evidence does not satisfy this burden. (See, e.g., Tarver v. State Bar (1984) 37 Cal.3d 122, 132, 207 Cal.Rptr. 302, 688 P.2d 911.)

Moreover, this particular factual dispute was resolved in petitioner's favor. The finding of wilful misappropriation related solely to the $19,597.05 balance which was in the account after the $10,000 withdrawal was made. Thus, the State Bar Court implicitly found no clear and convincing evidence that petitioner had misappropriated any of the money he purports to have invested in the Simi Valley property. He therefore has no grounds to complain on this point.

Petitioner also asks us to independently find that he was authorized to spend the entire $19,597.05. However, as implied by the findings, petitioner's explanation in this regard is inherently implausible. The Miltimores each testified that no part of the balance was ever loaned to petitioner, and that they were basically shocked to learn that he had spent it. A letter they wrote to petitioner in June 1982 confirmed this fact. The only controverting testimony was petitioner's self-serving claim that the Miltimores had agreed to loan him the money. And, other than the written "statement" which clearly was not voluntarily signed by Mr. Miltimore, petitioner had no documentary support for this claim. Petitioner also could not recall the purpose for which the "loan" was supposedly made. Accordingly, we see no reason to depart from the finding that petitioner wilfully misappropriated $19,597.05 in client trust funds.

B. Appropriate Discipline

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