Lewis v. State Bar
| Decision Date | 16 July 1973 |
| Citation | 511 P.2d 1173,9 Cal.3d 704,108 Cal.Rptr. 821 |
| Court | California Supreme Court |
| Parties | , 511 P.2d 1173 Neil R. LEWIS, Petitioner, v. The STATE BAR of California, Respondent. L.A. 30112. |
Neil R. Lewis, in pro. per.
F. LaMar Forshee, Herbert M. Rosental, and Ronald W. Stovitz, San Francisco, for respondent.
This is a proceeding to review a recommendation of the Disciplinary Board of the State Bar of California that petitioner be suspended from the practice of law for a period of one year.
Petitioner was admitted to practice in this state on September 11, 1962. He testified that, in addition, he was a real estate broker and a general contractor and had been in the construction business since 1955.
During 1962, Herbert Ratcliffe, a pilot for Western Airlines, met petitioner through another pilot, William Schultz, who was also an attorney and was associated with petitioner. Mr. Ratcliffe and his wife owned a 1 1/2 acre unencumbered parcel of real property at 2080 West 264th Street in Lomita, California (hereinafter referred to as 'the Lomita parcel'), worth about $40,000.
In September 1962, petitioner, the Ratcliffes, and Schultz formed a limited partnership known as Lomita Pines Development Company (hereinafter referred to as 'Lomita Pines'), with petitioner as the only general partner and the Ratcliffes and Schultz as limited partners. Under the terms of the partnership agreement, the Ratcliffes agreed to convey the Lomita parcel to Lomita Pines for $40,000, secured by a 'subordinated deed or deeds of trust' recorded concurrently with, and junior only to, a first deed of trust for construction financing. It was proposed that the Lomita parcel be divided into lots and new homes constructed thereon; and the agreement provided that the Ratcliffes could exchange their beneficial interest in the subordinated trust deed for one of the lots, with a home thereon, of equal value.
Petitioner, as the general partner, was to manage the partnership business and deposit all funds received by him in connection with Lomita Pines in a special bank account. Any net profits were to be divided, as follows: 50 percent to the Ratcliffes, 25 percent to petitioner, and 25 percent to Schultz. Unless otherwise agreed in writing, the Ratcliffes, as limited partners, were not to be liable for additional contributions. Title to the real property purchased by Lomita Pines was to be held under the partnership name. No part of any partner's interest could be 'pledged, mortgaged, sold or assigned in any manner' without the express written consent of a majority of the partnership interest. Likewise, petitioner, as general partner, could not 'pledge, mortgage, sell, assign or in any manner voluntarily transfer his interest' except on consent and approval of the majority of the limited partnership interest. At all times during the continuance of the partnership, there were to be kept complete and true books of account with repect to the partnership business and affairs. Each partner had the right at all reasonable times to examine the partnership books and records and was entitled on demand to have true and full information on all matters affecting the partnership and to have a formal accounting of its affairs.
On October 2, 1962, the Ratcliffes executed a grant deed of the Lomita parcel to Lomita Pines. On November 21, 1962, petitioner executed, in the name of Lomita Pines, as trustor, and in favor of the Ratcliffes, as beneficiaries, a trust deed securing the $40,000 purchase price. The trust deed also recited an agreement between the trustor and the beneficiaries to subordinate the trust deed at a future date to a new construction loan trust deed, payable upon such conditions as were required by the lender making the construction loan. The grant deed from the Ratcliffes and the trust deed in their favor were recorded on December 19, 1962.
In January 1963, the Ratcliffes moved out of their old home on the Lomita parcel and moved into a home in Palos Verdes Estates owned by petitioner. Shortly thereafter, petitioner engaged a civil engineer, obtained permits, employed a contractor, and began rough grading work on the Lomita parcel. The parcel was divided into eight lots for development purposes.
According to Mr. Ratcliffe's testimony, petitioner told the Ratcliffes in March 1963 that in order for him to obtain the necessary construction loan, they would have to reconvey to Lomita Pines the $40,000 trust deed on the Lomita parcel. Mr. Ratcliffe further stated, however, that petitioner represented to them that as soon as he had obtained the construction financing, he would reinstate a second trust deed in the Ratcliffes' favor. The Ratcliffes thereupon executed a request or authorization to reconvey, and on March 29, 1963, a full reconveyance was recorded. On the same day, there were recorded three trust deeds on the Lomita parcel in favor of Belmont Savings and Loan Association, securing the repayment of a total of $109,000 in construction loans.
Petitioner had new residences constructed on four of the eight lots and in January 1964 gave possession to the Ratcliffes of the residence on lot 1. Although the other residences were not sold promptly, petitioner eventually sold the ones on lots 2 and 3 to third persons and later sold the one on lot 4 to Richard Reynolds, another pilot acquaintance of his. Thereafter, lots 5 through 8 were sold as one 'parcel' for $50,000.
Some time in January 1964 or later, the Ratcliffes realized that they had not received another trust deed. They had made no inquiries of petitioner with respect thereto, assuming that he would, soon after obtaining the construction loans, record another trust deed in their favor. According to the Ratcliffes' testimony, they had many discussions with petitioner about the progress of Lomita Pines and were assured that everything was 'sweetness and light' and that there was nothing to worry about.
Between March and September 1964, while the Ratcliffes held no trust deed on the Lomita parcel, petitioner used the parcel to secure indebtedness in the gross sum of $32,550, executing a total of six second trust deeds in favor of five separate creditors. These six trust deeds were recorded between March 24 and September 21, 1964. One of them covered lot 1, on which the Ratcliffes' new home had been built. Mr. Ratcliffe testified that he did not discover that second deeds of trust had been placed on the Lomita parcel until the lots were in foreclosure in the fall of 1964. He further testified that at some time he asked petitioner for an accounting of the Lomita Pines project but never received one. Mrs. Ratcliffe said that petitioner refused to show them the partnership books of account on one occasion when they asked to see them.
On July 12, 1967, this court suspended petitioner from practice for six months, but stayed execution of the suspension and placed him on probation for six months. His misconduct in that proceeding related to his handling of funds received from Mr. Ratcliffe and Mr. Reynolds in March 1965 to cover taxes on their respective lots. 1 The prior procceding was brought on the complaint of Mr. Reynolds, but Mr. Ratcliffe appeared as a witness therein.
In 1967, at the time petitioner was disciplined in the prior proceeding, there was pending against him a civil action filed by the Ratcliffes in the Los Angeles County Superior Court; but the Ratcliffes did not make a complaint to the State Bar with respect to the subject matter of the action until April 17, 1968.
The Ratcliffes' action was filed on April 5, 1965, and was one for fraud, for misappropriation of assets of Lomita Pines, for an accounting of Lomita Pines' receipts, for the dissolution of Lomita Pines, and for the appointment of a receiver to take possession of the assets of Lomita Pines. Trial was commenced on August 10, 1967; and the following day petitioner and the Ratcliffes' counsel entered into an oral stipulation, recited in open court, for judgment against petitioner for $40,000 and a court order awarding the Ratcliffes a quitclaim deed to lot 1 of the Lomita parcel. Judgment was entered January 2, 1968, consistent with the parties' stipulation.
At the time Mr. Ratcliffe complained to the State Bar, he enclosed a copy of a written stipulation signed by petitioner about the time of the civil action. In that stipulation, petitioner admitted fraudulent acts committed by him toward the Ratcliffes with regard to their interest in the Lomita parcel. Thus, the stipulation provides, in part: 'The reconveyance of the $40,000 Deed of Trust in favor of Ratcliffe was obtained by (petitioner) from the Ratcliffes With the understanding and representation by (petitioner) that it was for the purpose of obtaining First Trust Deed Loans and that the $40,000.00 Deed of Trust would be restored as a Second Deed of Trust after the obtaining of the First Deed of Trust Loan; that at the time thereof (petitioner) did not intend to carry this out nor was it done at all in that the Second Trust Deed of the Ratcliffes' was never placed on the property again And instead, (petitioner), without disclosing same to Ratcliffes borrowed funds and placed Second Deeds of Trust on the real property of the above action as security to third persons without disclosing same to the Ratcliffes.' (Italics added.)
Other provisions of the written stipulation show that it was not to be used in the Ratcliffes' civil fraud action, as petitioner did not want judgment against him entered on the basis of fraud. At the same time, the stipulation expressly permitted the Ratcliffes to use it to establish petitioner's fraud 'if for any reason it should be deemed advisable,' specifically in the event petitioner sought to discharge the Ratcliffes' judgment in bankruptcy.
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