State ex rel. Nebraska State Bar Ass'n v. Malcom

• Citation: 252 Neb. 263,561 N.W.2d 237
• Decision Date: 04 April 1997
• Docket Number: No. S-96-489,S-96-489
• Parties: STATE of Nebraska EX REL. NEBRASKA STATE BAR ASSOCIATION, Relator, V. Terrence D. MALCOM, Respondent.
• Court: Supreme Court of Nebraska

Page 237

561 N.W.2d 237

252 Neb. 263

STATE of Nebraska EX REL. NEBRASKA STATE BAR ASSOCIATION, Relator,

V.

Terrence D. MALCOM, Respondent.

No. S-96-489.

Supreme Court of Nebraska.

April 4, 1997.

Syllabus by the Court

1. Disciplinary Proceedings: Appeal and Error. A proceeding to discipline an attorney is a trial de novo on the record, in which the Nebraska Supreme Court reaches a conclusion independent of the findings of the referee; provided, however, that where the credible evidence is in conflict on a material issue of fact, the court considers and may give weight to the fact that the referee heard and observed the witnesses and accepted one version of the facts rather than another.

2. Disciplinary Proceedings: Words and Phrases. Misappropriation is defined as any unauthorized use of client funds, including not only stealing, but also any other unauthorized temporary use by the attorney for personal purposes, whether or not the attorney derives any personal gain or benefit therefrom.

3. Disciplinary Proceedings: Proof. In order to sustain a complaint in a lawyer discipline proceeding, the Nebraska Supreme Court must find the complaint to be established by clear and convincing evidence.

4. Disciplinary Proceedings. To determine whether and to what extent discipline should be imposed in a lawyer discipline proceeding, the Nebraska Supreme Court considers the following factors: (1) the nature of the offense, (2) the need for deterring others, (3) the maintenance of the reputation of the bar as a whole, (4) the protection of the public, (5) the attitude of the offender generally, and (6) the offender's present or future fitness to continue in the practice of law.

5. Disciplinary Proceedings. Absent mitigating circumstances, the appropriate discipline in cases of misappropriation or commingling of client funds is disbarment.

6. Disciplinary Proceedings: Intent. Misappropriation caused by serious, inexcusable violation of a duty to oversee entrusted funds is deemed willful, even in the absence of improper intent or deliberate wrongdoing.

7. Disciplinary Proceedings. The fact that no client suffered any financial loss does not excuse the misappropriation of client funds and does not provide a reason for imposing a less severe sanction.

8. Disciplinary Proceedings: Presumptions. Mitigating factors will overcome the presumption of disbarment in misappropriation and commingling cases only if they are extraordinary and, when aggravating circumstances are present, substantially outweigh as well those aggravating circumstances.

9. Disciplinary Proceedings. A lawyer's poor accounting procedures and sloppy office management are not excuses or mitigating circumstances in reference to commingled funds.

10. Disciplinary Proceedings. Multiple acts of attorney misconduct are deserving Robert B. Creager, of Anderson, Creager & Wittstruck, P.C., Lincoln, for respondent.

of more serious sanctions and are distinguishable from isolated incidents.

Dennis G. Carlson, Counsel for Discipline, Lincoln, for relator.

WHITE, C.J., CAPORALE, CONNOLLY, and GERRARD, JJ., and ENSZ and BLUE, District Judges, Retired.

PER CURIAM.

This is an attorney discipline case in which the relator, Nebraska State Bar Association (NSBA), seeks to disbar the respondent, Terrence D. Malcom, on the basis that he violated those sections of the Nebraska Code of Professional Responsibility pertinent to the maintenance of trust funds, specifically Canon 1, DR 1-102, and Canon 9, DR 9-102. The referee's report recommends disbarment of Malcom. Malcom takes exception to this recommendation, arguing that the evidence was insufficient to show a disciplinary rule violation and that the referee's recommendation of disbarment was excessive.

BACKGROUND

Malcom was admitted to the Nebraska bar in 1974. During the dates at issue, Malcom practiced law in McCook, Nebraska, with the Colfer firm, where he was also a partner. The Colfer firm maintained one trust account at the McCook National Bank. Malcom opened two additional trust accounts at AmFirst Bank and First National Bank, both in McCook. Malcom stated that he opened these additional accounts because he and/or his firm provided legal services to each of the banks and a member of the firm was on the board of directors of each of the banks. These accounts were used only by Malcom because he was the only one permitted to draw funds from the accounts.

Malcom did not reconcile the accounts on a regular basis. Malcom received monthly statements from both additional accounts but did not notice a negative balance. On October 22, 1995, the NSBA, by and through its Committee on Inquiry of the Sixth Disciplinary District, recommended filing formal charges against Malcom.

Formal charges were filed against Malcom on May 9, 1996. Count I: Between March and June 1989, Malcom placed client funds in his attorney trust account at First National and failed to maintain a balance in the account equal to or greater than those client funds. Specifically, on March 30, $14,756.47 from the Ruth D. Masters estate was deposited in the First National trust account, but on June 2 and 5, the First National trust account had a negative balance. On July 31, Malcom issued five distribution checks out of the First National trust account totaling $9,535.11. These checks related to the Masters estate. Payment on these checks was possible due to the deposit of funds unrelated to the Masters estate.

Count II: Malcom represented Dr. James S. Carson and served as the personal representative for the Charles A. Barber estate. Dr. Carson settled his case with the Federal Deposit Insurance Corporation by agreeing to pay $130,000 to Grand Ho, Inc. Grand Ho, by agreement, would then pay $130,000 to the Federal Deposit Insurance Corporation. On March 18, 1991, Malcom issued a check in the amount of $130,373.47 payable to the "Malcom Trust Acct." out of the Barber estate checking account. This check was then deposited on March 18 into Malcom's trust account at AmFirst. At the time of said deposit, the trust account balance was $916.91. On March 26, Malcom wrote check No. 1334 out of the AmFirst trust account payable to AmFirst in the amount of $120,000, with the notation "Grand Ho, Inc. wire" on the memo portion of the check. The deposit from the Barber estate made it possible for the Grand Ho wire to be honored.

On May 17, 1991, Malcom issued check No. 1384 in the amount of $10,000 payable to AmFirst out of his AmFirst trust account. This memo portion stated "Grand-Ho." This count alleged that Malcom could not make a reasonable explanation as to why funds paid to him for his representation of the Barber estate were used to pay the Carson settlement.

Count III: Malcom represented Howard B. and Charlotte A. Wyss, husband and wife, regarding a real estate purchase. The Wysses were to pay $53,000 for the real estate, paying $1,000 as earnest money and $52,000 on closing. On June 11, 1991, the Wysses' earnest money of $1,000 was deposited into Malcom's AmFirst trust account. On June 28, the AmFirst trust account had a balance of $760.48; however, no funds related to the Wysses' transaction had been paid from the account. On or about July 30, the Wysses gave Malcom $52,000 for the real estate purchase. On July 30, a $52,000 deposit was made into Malcom's AmFirst trust account, with a notation on the deposit slip which read "H. Wyss." At the time of deposit, the AmFirst trust account balance was $1,196.72. No additional deposits were made into this account until August 5. On July 30 and 31, Malcom issued three checks totaling $34,031.94 out of his AmFirst trust account. Two of the checks were payable to Malcom and totaled $12,847. The other check was payable to the "Charles A. Barber Trust" in the amount of $21,184.94. On September 17, the AmFirst account balance was $942.50, even though no funds had been paid out of the account for the Wysses transaction. On December 17, Malcom issued four checks out of his AmFirst trust account to the sellers of the real estate purchased by the Wysses totaling $51,932.51. This count alleges that without deposits to the account unrelated to the Wysses transaction, there would have been insufficient funds to cover these checks.

Count IV: Malcom represented Audrey Jean Allen with regard to the sale of certain real estate to Larry and Shirley Brooks. Pursuant to a written installment sale agreement, the Brookses were to pay annual payments in the amount of $24,102.64 to Allen. On December 16, 1991, a deposit was made into Malcom's AmFirst trust account in the amount of $24,102.64, with the notation "Jean Allen--Larry Brooks" on the deposit slip. On December 19, Malcom's trust account balance was $23,384.08, even though no funds related to the "Jean Allen--Larry Brooks" transaction had been paid out of the account. On December 23, Malcom issued a check in the amount of $24,102.64 to Allen, with the note "Larry Brooks Contract" in the memo portion of the check.

Count V: On December 27, 1991, a deposit was made into the AmFirst trust account in the amount of $65,000, with the notation "Logan--Messinger Gateway" on the deposit slip. On December 31, the account balance was $54,053.44, and on January 2, 1992, the account balance was $244.64, even though no funds related to the "Logan--Messinger Gateway" transaction had been paid out of the account. On January 28, Malcom issued two checks out of the AmFirst account for the "Logan--Messinger Gateway" transaction. The two checks, one payable to McCook National in the amount of $28,212.50 and one to the Farmers Home Administration in the amount of $36,787.50, would not have been payable without deposits unrelated to the "Logan--Messinger Gateway" transaction.

Count VI: On January 30, 1992, Malcom deposited client funds in the amount of $65,000 into the AmFirst trust account, with the note "Barber Trust--FNB Trust" on the deposit slip. On January 31, the account...