Most v. State Bar

• Decision Date: 06 November 1967
• Citation: 432 P.2d 953,63 Cal.Rptr. 265,67 Cal.2d 589
• Court: California Supreme Court
• Parties: , 432 P.2d 953 Louis MOST, Petitioner, v. The STATE BAR of California, Respondent. L.A. 29421.

Page 265

63 Cal.Rptr. 265

67 Cal.2d 589, 432 P.2d 953

Louis MOST, Petitioner, v. The STATE BAR of California, Respondent.

L.A. 29421.

Supreme Court of California,

In Bank.

Nov. 6, 1967.

Rehearing Denied Dec. 6, 1967.

Louis Most, Los Angeles, in pro. per.

F. LaMar Forshee and Herbert M. Rosenthal, San Francisco, for respondent.

PER CURIAM.

This is a proceeding to review a recommendation of the State Bar of California that Louis Most be suspended from the practice of the law for three years, with actual suspension during the first two years, and that he be placed on probation for the entire three-year period.--

The findings of the State Bar disciplinary board, made after extensive hearings conducted by a local disciplinary committee, were as follows: Petitioner was admitted to practice in 1934. He was also a licensed insurance adjuster and operated a business under the name of Associated Fire Adjusters (hereinafter called Associated) in addition to his law practice. David Merl suffered a fire loss in his retail shoe store in Oxnard on May 19, 1962, and his accountant recommended that Merl employ petitioner to prosecute his claim against the insurance companies covering the loss because petitioner was licensed both as an attorney and as an adjuster. On June 9, petitioner and Merl entered into a written contract on a printed form furnished by petitioner. The agreement provided that Merl employed Associated as a fire adjuster for a 'fee of ten per cent (10%) of the amount paid or agreed to be paid by the insurance carriers in settlement of the loss and expenses.' ¹

Merl was insured against fire loss by three separate carriers. Utah Home Fire Insurance Company (hereinafter called Utah) insured his inventory for $40,000, Royal Exchange Insurance Company (hereinafter called Royal) carried insurance of $2,500 on his store fixtures, and Lloyds of London (hereinafter called Lloyds) insured him for $5,400 against the interruption of his business. The carriers suspected Merl of arson and refused to indemnify him for the losses suffered, and on November 9, 1962, petitioner filed an action on behalf of Merl against the carriers.

Merl was unable to pay his creditors after the fire. He requested petitioner to attempt to placate them pending settlement, and petitioner dealt with the creditors both before and after suit was filed. Merl owed Samuels Shoe Company $3,079.40, and on January 29, 1963, he assigned the proceeds of any future settlement from Utah to Samuels in the amount necessary to satisfy its claim. The written assignment gave petitioner a power of attorney to endorse drafts and checks on behalf of Merl to the extent necessary to effectuate the assignment.

Eventually the pending litigation was settled by Merl and the carriers, and on May 20, 1963, he executed releases of his claims against them upon the payment of $32,000 by Utah, $2,000 by Royal and $2,000 by Lloyds. In addition, the settlement provided that Merl could retain $9,000 received from the sale of salvaged inventory which previously had been claimed by the carriers.

Petitioner maintained two trustee accounts; one in his capacity as an attorney and another in the name of Associated. In June 1963 he received two checks for $2,000 each, payable to Merl and to petitioner as his attorney, in settlement of the claims against Royal and Lloyds. He failed to promptly report the receipt of the check covering the Royal settlement to Merl and held it without his knowledge and consent until July 22, 1963. He deposited the Lloyds check in his attorney's trustee account without the knowledge, consent, authority or endorsement of Merl, and did not send him a check for the amount of the Lloyds settlement until August 1963.

On June 19, 1963, petitioner received a check for $30,538.18 from Utah in favor of 'David Merl and Louis Most as his attorney.' ² He endorsed the check, signing Merl's name in disguised handwriting, for the admitted purpose of deceiving the drawer and drawee to believe that Merl had endorsed it. The receipt of this check was not promptly reported to Merl. Petitioner deposited it in his Associated trustee account and withdrew all the funds from that account by October 4, 1963, except $317.48. The only amount paid out on Merl's behalf was a check for $3,079.40 to Samuels Shoe Company, pursuant to the assignment. Prior to the deposit of the Utah check the balance in the trustee account was $9.13. The board concluded that petitioner had misappropriated for his own use $23,550.43 belonging to Merl. ³

At the hearing it was shown that two creditors of Merl, Pierre Shoes, Inc. (hereinafter called Pierre) and Portage Shoe Manufacturing Company (hereinafter called Portage) attempted to secure payment of Merl's debts out of the proceeds of the insurance settlement. They both contacted petitioner after he received the check from Utah, requesting the payment of their claims but petitioner did not inform them that the settlement funds had been received. He failed to answer a letter from Pierre asking the amount of the settlement and when payment of its claim might be expected. In August 1963 Portage contacted petitioner twice regarding payment of its bill and petitioner finally replied on August 12, stating that the claim would be paid by his office and that Portage would be hearing from him shortly. However, no payment was sent.

Merl testified that he telephoned petitioner constantly between June and October 1963 regarding the whereabouts of the settlement money, that petitioner told him he had not received it yet, and that 'it takes 120 days.' Petitioner contradicted this assertion, stating that he had told Merl on or before July 9 that all the settlement funds had been received.

Jack Berkowitz, Merl's general attorney, testified that Merl asked him several times during the summer why the insurance companies had not yet sent the money and on each occasion Berkowitz reassured him, stating that there was nothing to worry about. On October 4, at Mrs. Merl's insistence, Berkowitz telephoned representatives of the insurance companies and was told that payment had been made to petitioner the previous June. Berkowitz telephoned petitioner, and a meeting was arranged for October 7.

Berkowitz, the Merls, and petitioner met in Berkowitz's office on that day, and petitioner submitted a statement of account showing that he owed Merl only $10,791.90. This statement indicated that he was claiming a total of $4,500 in fees, representing 10 percent of the $36,000 settlement and the $9,000 retained by Merl as proceeds from the salvage of the inventory. Petitioner also deducted from the amount owing to Merl the payment made to Samuels Shoe Company pursuant to the assignment and purported payments to Pierre, Portage, and Merl's accountant. Merl pointed out, however, that neither Portage nor Pierre had been paid and that he had paid the accountant himself. According to Berkowitz and Merl, petitioner indicated that he had $12,000 in his trustee accounts and would pay this sum to Merl by cashier's check the next day. He also consented in writing to pay a total of $32,159.18 to the Merls by October 10 and to leave to their discretion whether he would be paid the 10 percent fee previously agreed upon. At the time of the conference petitioner had $317.48 in the Associated trustee account and $1,352.39 in his attorney's trustee account.

On October 8 petitioner borrowed $4,500 from a bank, deposited the loan proceeds in his Associated account, and gave the Merls a check for $4,000 drawn on that account. On the same day he wrote Berkowitz stating that if the Merls insisted, he would pay the $32,159.18 agreed upon in the previous day's conference but that, according to a revised accounting statement which he enclosed, he should pay only $23,787.24. ⁴

Another meeting was held on October 9 at which petitioner, Merl, and the latter's wife and son were present. At that time petitioner paid Merl $1,000. Petitioner testified that Merl demanded exemplary damages of $50,000 or $55,000 and threatened that he would report petitioner to the police if he did not pay it. Merl denied this and testified that petitioner voluntarily offered to pay damages of $55,000 in addition to the $32,159.18 previously agreed upon. At Merl's insistence, they telephoned Berkowitz and told him that they were discussing a settlement in the vicinity of $50,000. Berkowitz informed them that if this sum was agreeable to Merl and petitioner it was all right insofar as he was concerned but he advised Merl to obtain a note signed by petitioner and his wife for the amount of the settlement. Petitioner delivered to Merl a note for $55,000, which with the $32,159.18 previously agreed upon, amounted to a total of over $87,000 in damages.

Petitioner paid $7,316.20 to Pierre on October 23. Thus, the total amount of restitution paid to Merl and his creditors was $12,316.20. Merl filed a civil action against petitioner on October 18 in an attempt to recover the balance due him, claiming $18,858.78 in compensatory damages and $100,000 in exemplary damages. Judgment in the civil action was in favor of Merl and an appeal by petitioner is pending. ⁵

At the hearings before the disciplinary committee petitioner attempted to explain his withdrawals from the Associated account. He claimed that he believed he was entitled to $15,000 in attorney's fees and that he attempted to approximate this sum in the amounts he removed from the account from time to time.

A dispute existed between petitioner and Merl as to whether the 10 percent contingent fee agreed upon between them was to include legal services. Merl testified that at the time the agreement was consummated petitioner had represented that the fee wound cover all necessary legal services, in addition to fire adjusting services, but petitioner denied that legal fees were discussed at the time the contract was signed. He claimed that he was entitled to additional...