Morales v. State Bar
| Decision Date | 31 March 1988 |
| Citation | 44 Cal.3d 1037,245 Cal.Rptr. 398 |
| Court | California Supreme Court |
| Parties | , 751 P.2d 457 Frank C. MORALES, Petitioner, v. The STATE BAR OF CALIFORNIA, Respondent. L.A. 32329. |
Herbert M. Rosenthal, Truitt A. Richey, Jr., Richard J. Zanassi and Lawrence C. Yee, San Francisco, for respondent.
In this proceeding we review the recommendation of the Review Department of the State Bar Court, one member abstaining, that Attorney Frank C. Morales be disbarred as a result of two incidents of misconduct, one involving breach of fiduciary duties in withdrawal of $23,343.10 from a pension plan account and the other involving misappropriation of a check for $3,000. We accord the recommendation of the review department great weight. As petitioner's objections to the procedures followed below, to the sufficiency of the evidence, and to the use of the new standards for attorney discipline appear meritless, we follow the State Bar's recommendation in this case.
Petitioner was admitted to the practice of law in California on June 10, 1959. In law school he had met Gary Mohi with whom he subsequently practiced law, and on or about October 29, 1973, the professional law corporation of Mohi, Morales & Glasman was formed. About a year later, on October 31, 1974, the firm established a pension plan approved by the Internal Revenue Service as an ERISA 1 plan. Mohi, Morales & Glasman dissolved under very acrimonious circumstances on December 31, 1975.
Petitioner's subsequent discipline by the State Bar has been related either directly to the firm's breakup or indirectly to the financial crisis that came in its wake. In March 1979 he was privately reproved for gross negligence in failing to keep complete records of client trust funds and failing to maintain sufficient funds in one such account to cover a check for medical services In November 1983 he was suspended for 18 months, execution of suspension was stayed, and he was placed on probation for 18 months as a result of his conviction of 27 misdemeanor offenses involving failure to withhold or pay certain payroll taxes and unemployment insurance contributions in 1976 and 1977. (See In re Morales (1983) 35 Cal.3d 1, 196 Cal.Rptr. 353, 671 P.2d 857.) In mitigation petitioner cited financial difficulties in setting up a new firm and obtaining, from the old firm, funds to which he felt entitled.
to a client. The relevant misconduct occurred in July and August of 1977. He blamed his misconduct on confusion during the dissolution of the firm and on a succession of inexperienced bookkeepers and asserted that an experienced accountant was now maintaining his books.
In the present case we consider conduct from 1976 to early 1978 involving the Mohi, Morales & Glasman pension fund and a check made out to Mohi and Glasman but deposited and used by petitioner. Again petitioner cites the bitter breakup of the law firm, blames unnamed employees, and, as he did in Morales, supra, 35 Cal.3d 1, 196 Cal.Rptr. 353, 671 P.2d 857, attacks the State Bar proceedings against him. At some point petitioner must take responsibility for his misconduct even though the circumstances he faced may have been difficult. This case, involving misappropriation of funds and lack of candor with the State Bar and this court, is that point.
On dissolution of Mohi, Morales & Glasman, the pension fund of which petitioner was a fiduciary, officer, and trustee and which was maintained at Los Angeles National Bank, was frozen. Petitioner acknowledged in a December 31, 1975, letter his understanding with the bank's attorney and president that funds would not be disbursed without written approval of both petitioner and Mohi. This was confirmed by letters to both Mohi and petitioner from the bank's attorney with copies to the bank's president on January 2, 1976.
In January 1977, however, the bank informed petitioner he was in default on a personal loan. Petitioner's response was to try to modify his prior understanding with regard to the Mohi, Morales & Glasman pension account by authorizing withdrawal of $23,343.10 from that account and deposit of the sum in another account from which the loan could be satisfied. He indicated he expected no "repercussions" from this action as he felt he was simply withdrawing his "unquestioned one-half" interest in the fund. In any event, he formally promised to hold the bank harmless for any liability from withdrawal of these funds. The withdrawal was made in February 1977 and the funds used to satisfy petitioner's personal loan.
Mohi learned of the unauthorized withdrawal in April 1977, reminded the bank of his understanding that two signatures were required for withdrawal, and demanded that the bank restore the money to the pension account. The bank refused and suit followed. Mohi obtained summary judgment against petitioner on February 7, 1978, in federal district court. (Mohi v. Morales (C.D.Cal.) Civ. No. 77-1688-HP.) Additionally, both the bank and petitioner were sued successfully in state court. 2 , 3
One of the cases retained by Mohi and Glasman after the breakup of the old firm was a workers' compensation matter involving Eugene Tyler. Mohi testified that petitioner had not been involved in that case. Glasman had, and Mohi and Glasman obtained an award for Tyler and were to receive $3,000 in attorney fees. A check According to the declaration of a United California Bank (UCB) employee, petitioner placed on the back of the check the stamped endorsement of Mohi, Morales & Glasman and deposited it on May 16, 1978. 4 Thereafter petitioner wrote several checks on the account which by December 1978 had a balance of $35.03.
for $3,000 payable to Mohi and Glasman and referencing the Tyler case was by error sent to petitioner's address.
Mohi learned of the disposition of this check, and on December 28, 1978, swore out an affidavit of forged endorsement which was presented to UCB in January 1979. UCB thereafter reimbursed Mohi and Glasman and made unsuccessful efforts to recover the $3,000 from petitioner.
We address first petitioner's contention that evidence before the State Bar was insufficient to permit the referee 5 to determine that he breached his fiduciary duties in withdrawing $23,343.10 from the pension fund account and had misappropriated to his own use 6 the $3,000 check to Mohi and Glasman in violation of Business and Professions Code section 6106. 7 Petitioner complains no evidence was presented as to the details of the pension plan and particularly his rights on its premature termination. He insists that the allegation that he breached a fiduciary duty in withdrawing money from the plan is unsupported.
As to the $3,000 check, he maintains here as he did below 8 that there was no evidence he knew of the arrival of the check, its "misendorsement" by "some employee" of Mohi, Morales & Glasman, or its negotiation. He portrays the incident as a simple mistake by some temporary employee in the course of winding up the complex affairs of the old law firm.
Petitioner also suggests that both the pension fund incident and the check incident were promptly and amicably remedied by the banks involved. Indeed he claims it was Los Angeles National Bank that insisted his personal loan be paid from the pension fund also on deposit there. It was the bank's attorneys, he contends, who rendered a legal opinion that he could withdraw funds with the safeguard that if he was not ultimately entitled to withdraw the money unilaterally, he would remain obligated on the note and the bank would restore the money to the pension fund.
While we independently examine the record in State Bar proceedings and determine the weight and sufficiency of the evidence supporting a recommendation of discipline, petitioner bears the burden of showing that the findings of the State Bar are not supported by the evidence. (Arden v. State Bar (1987) 43 Cal.3d 713, 724, 239 Cal.Rptr. 68, 739 P.2d 1236; Smith v. State Bar (1985) 38 Cal.3d 525, 538, 213 Cal.Rptr. 236, 698 P.2d 139; Trousil v. State Bar (1985) 38 Cal.3d 337, 341, 211 Cal.Rptr. 525, 695 P.2d 1066.) He has not met his burden in this case. To the extent he complains that insufficient detail was presented as to the terms of the pension plan and that Mohi's testimony did not reflect sufficient personal knowledge thereof, he raises evidentiary concerns he waived by absenting himself from the hearing. (See rule 555(e), Rules Proc. of State Bar.)
Breach of fiduciary duty as to the pension fund is supported not only by the testimony of Mohi but also by exhibits including the findings of fact and conclusions of law and the summary judgment of the federal district court in Mohi v. Morales, supra, Civ. No. 77-1688-HP finding that pension funds had been converted to petitioner's own use and removing him as a fiduciary because of it. 9 (Cf. Rosenthal v. State Bar (1987) 43 Cal.3d 612, 634, 238 Cal.Rptr. 377, 738 P.2d 723.)
Even outside the attorney-client context, an attorney's breach of fiduciary duties owed to another warrants discipline. (Galardi v. State Bar (1987) 43 Cal.3d 683, 691, 238 Cal.Rptr. 774, 739 P.2d 134; Worth v. State Bar (1976) 17 Cal.3d 337, 341, 130 Cal.Rptr. 712, 551 P.2d 16; Crooks v. State Bar (1970) 3 Cal.3d 346, 355, 90 Cal.Rptr. 600, 475 P.2d 872.) It is clear that knowing he was a trustee of the pension fund account and knowing two signatures were required to release any sum, he induced the bank to release $23,343.10 on his signature alone. His claim of entitlement to the funds may be relevant to defending against a criminal charge, but it does not mitigate the obvious breach of fiduciary duty.
As for the $3,000 check, petitioner's factual assertions are contradicted by the declaration of the UCB...
To continue reading
Request your trial