North Carolina State Bar v. Talford

• Court: North Carolina Court of Appeals
• Writing for the Court: BIGGS.
• Citation: North Carolina State Bar v. Talford, 556 S.E.2d 344, 147 NC App. 581 (N.C. App. 2001)
• Decision Date: 18 December 2001
• Docket Number: No. COA00-952.,COA00-952.
• Parties: The NORTH CAROLINA STATE BAR v. Robert M. TALFORD, Attorney.

556 S.E.2d 344

147 NC App. 581

The NORTH CAROLINA STATE BAR v. Robert M. TALFORD, Attorney.

No. COA00-952.

Court of Appeals of North Carolina.

December 18, 2001.

Clayton W. Davidson, III and Carolin Bakewell, Raleigh, for plaintiff-appellee.

Irving Joyner, Durham, for defendant-appellant.

BIGGS, Judge.

Robert M. Talford (defendant) appeals from an order entered by the Disciplinary Hearing Commission of the North Carolina State Bar (DHC) disbarring him from the practice of law. We affirm in part, and reverse and remand in part.

Defendant practiced law for over twenty years in the Charlotte area, having received a license to practice in 1976. His practice focused primarily on the representation of plaintiffs who filed claims for disability settlements such as workers' compensation, social security disability, and medical claims arising from accidents. Defendant operated his practice from a small house in Charlotte, and had no permanent employees. He had maintained a trust account since 1978. In 1998, the North Carolina State Bar (State Bar) audited defendant's trust account, and discovered discrepancies and irregularities in his bookkeeping practices.

On 19 October 1999 the State Bar filed a complaint against defendant, alleging the following misconduct:

1. That defendant failed to reconcile his trust account at least quarterly;

2. That defendant failed to maintain adequate records to determine whose funds were deposited into the account;

3. That defendant commingled his own funds with client funds;

4. That defendant was paying office expenses and personal expenses from the trust account in order to avoid having the funds seized by the Internal Revenue Service;

5. That defendant appropriated to his own use funds received in a fiduciary capacity, thus committing a criminal act reflecting adversely on his honesty, trustworthiness, and fitness as a lawyer;

6. That defendant entered into an unfair business transaction with a client;

7. That defendant engaged in willful attempts to evade or defeat payment of federal taxes, behavior involving dishonesty, fraud, deceit, or misrepresentation;

8. That defendant overpaid himself attorney's fees;

9. That defendant disbursed payment of client settlements before the settlement checks were received;

10. That defendant failed to pay certain of his clients' medical fees in a timely manner;

11. That defendant appropriated client funds to his own use; and

12. That defendant was grossly negligent in the management of his trust account, and benefitted from his own gross negligence.

At a hearing before the DHC on 25 February 2000, Edward White (White), an investigator with the State Bar, testified concerning his investigation of defendant's record keeping and accounting habits. White testified about defendant's business records in relation to some ten to fifteen clients. This evidence established that defendant had not maintained a financial ledger or other written record of his income and expenses, and had not reconciled his trust account on a quarterly basis, as required by North Carolina Revised Rules of Professional Conduct 1.15-1 and 1.15-2. White began his audit with defendant's records for 1994, at which time defendant's trust account balance was approximately $37,000. Defendant's records did not document the source of all of this money, nor whether any of this amount was owed to someone else. White termed this money "unidentified funds."

Defendant testified that none of his clients had ever claimed any of the "unidentified" funds in his trust account, that all his clients had been paid what was due to them, and that he had never misappropriated any client's funds. He contended that it was necessary to have some of his own money in the trust account to avoid bank charges, and prevent any checks from being returned for insufficient funds. Defendant acknowledged failing to regularly reconcile his trust account, but testified that he kept a sufficient "visual reconciliation" to make this unnecessary. Defendant also conceded that he did not maintain a ledger or other written records for his trust account. He offered explanations for some of the bookkeeping discrepancies, but was unable to account for many of them.

The State Bar did not present evidence that any client or creditor had complained to the State Bar about defendant, nor that any client had failed to receive monies owed to him.

The DHC issued an order on 14 March 2000. Of the allegations in the complaint summarized above, the DHC dismissed numbers four, five, six, and seven, finding that they were not proven by clear, cogent, and convincing evidence. The allegations dismissed were those that alleged misappropriation of client funds; commission of criminal acts; conduct involving dishonesty, fraud, deceit, or misrepresentation; involvement in an unfair business transaction; and attempted evasion of federal income tax liability.

The DHC made extensive findings of fact regarding defendant's representation of twelve of his prior clients. The DHC's findings of fact were similar for each of these clients, and may be generally summarized as follows:

1. In 1994, defendant had approximately $37,000 in his trust account, for which he could identify neither the source nor the appropriate disposition of the money. These unidentified funds were never escheated to the State.

2. Defendant had on several occasions written checks attributable to expenses for a case prior to depositing a settlement check in the case, or for cases in which he never received a settlement check.

3. Defendant had on several occasions written checks attributable to his fees in a case, in excess of the amount that could be documented as owing to him for the settlement.

4. Defendant had several times been very dilatory in paying medical providers, on occasion delaying over a year after receipt of a settlement check in the case.

5. Defendant had on several occasions failed to deposit a settlement check into his trust account.

6. Defendant had written checks from the trust account attributable to a case in which he had been hired to perform legal research and writing, and for which no settlement check would be received.

The DHC also found that defendant generally had been grossly negligent in the management of his trust account and had benefitted from his own gross negligence. The DHC concluded that defendant's acts and omissions were in violation of the Rules of Professional Conduct in that he:

(1) failed to maintain proper trust account records in violation of N.C. Revised Rules of Professional Conduct 1.15-1 and 1.15-2 (and superceded Rules 10.1 and 10.2); and

(2) failed to preserve funds in a fiduciary capacity, failed to deposit trust funds into trust account when received, failed to properly disburse funds, failed to reconcile his trust account at least quarterly, and commingled client and personal funds, in violation of N.C. Revised Rules of Professional Conduct 1.15-1 and 1.15-2 (and superceded Rules 10.1 and 10.2).

The DHC further concluded that the defendant's "acts and omissions set forth herein were grossly negligent and committed in reckless disregard of his obligations under the [Rules of Professional Conduct.]"

In the dispositional part of its order, the DHC found several factors that aggravated defendant's violation of the Rules of Professional Conduct, including: (1) a pattern of misconduct, (2) the commission of multiple offenses, (3) a refusal to acknowledge the wrongfulness of his actions, (4) substantial experience in the practice of law, and (5) defendant's apparent indifference to determining the ownership of the "unidentified" funds and making any restitution that was owed. The DHC found as a mitigating factor that the defendant had no previous disciplinary record. The DHC concluded that the aggravating factors outweighed the mitigating factor, and ordered the defendant disbarred. From this order, defendant appeals.

I.

We first review the law generally applicable to an appeal from a DHC order. The State Bar's discipline of attorneys is governed by N.C.G.S. § 84-28, which authorizes the State Bar to impose sanctions on attorneys who have engaged in acts constituting "misconduct." The statute defines misconduct to include (1) conviction of offenses showing professional unfitness, (2) violation of the N.C. Rules of Professional Conduct, and (3) misrepresentation or evasion in response to a State Bar inquiry or complaint.

The standard of proof in disciplinary and disbarment proceedings is clear, cogent, and convincing evidence. 27 NCAC 1.0114(u). See In re Palmer, 296 N.C. 638, 252 S.E.2d 784 (1979) (adopting standard); N.C. State Bar v. Beaman, 100 N.C.App. 677, 398 S.E.2d 68 (1990). "Clear, cogent, and convincing" is an evidentiary standard that is stricter than "preponderance of the evidence," although not as high as the criminal burden of proof, "beyond a reasonable doubt." In re Montgomery, 311 N.C. 101, 316 S.E.2d 246 (1984). "Clear, cogent, and convincing" evidence is "evidence which should fully convince." Williams v. Building and Loan Assn., 207 N.C. 362, 177 S.E. 176 (1934).

In the present case, discipline was based upon the State Bar's finding that defendant had violated certain Rules of Professional Conduct. A finding of misconduct allows the DHC to impose sanctions, which include admonition, private reprimand, public censure, suspension of law license, or disbarment.

Appellate review of State Bar orders is authorized under N.C.G.S. § 84-28(h) which provides that:

There shall be an appeal of right from any final order imposing admonition, reprimand, censure, suspension, stayed suspension, or disbarment upon an attorney.... Review by the appellate division shall be upon matters of law or legal inference. The procedures governing any appeal shall be as provided by statute or court rule for appeals in civil cases....

Appeal is thus allowed "on matters of law and legal inference," which is the generally...