Statewide Grievance Committee v. Botwick, 14507

• Decision Date: 06 July 1993
• Docket Number: No. 14507,14507
• Citation: 226 Conn. 299,627 A.2d 901
• Court: Connecticut Supreme Court
• Parties: STATEWIDE GRIEVANCE COMMITTEE v. Edward J. BOTWICK.

Page 901

627 A.2d 901

226 Conn. 299

STATEWIDE GRIEVANCE COMMITTEE v. Edward J. BOTWICK.

No. 14507.

Supreme Court of Connecticut.

Argued Jan. 6, 1993.

Decided July 6, 1993.

Max F. Brunswick, New Haven, for appellant (defendant).

Darlene Frances Reynolds, for appellee (plaintiff).

Before PETERS, C.J., and CALLAHAN, BORDEN, NORCOTT and KATZ, JJ.

NORCOTT, Justice.

The principal issue in this appeal is whether the defendant was denied due process of law by having been suspended from the practice of law for a violation of the rules of Professional Conduct that was not specifically alleged in a grievance committee's presentment. The defendant, Edward J. Botwick, an attorney at law, appeals ¹ from the judgment of the trial court after presentment by the plaintiff, the Statewide Grievance Committee, wherein the trial court found that the defendant had violated rules 8.4(c) ² and 1.8(a) ³ of the Rules of Professional Conduct. ⁴ The trial court ordered that, as to the violation of rule 8.4(c), the defendant be suspended from the practice of law for one year and, as to the violation of rule 1.8(a), the defendant be reprimanded.

The defendant claims that the trial court improperly: (1) denied him his right to procedural due process by finding that he had violated rule 8.4(c) on facts that had not been alleged in the presentment; and (2) found that he had entered into a business transaction with a client in violation of rule 1.8. We reverse the judgment of the trial court with respect to the first issue and affirm the judgment with respect to the second issue.

The following facts are pertinent to our resolution of the defendant's claims. Before June 30, 1989, John Horvat was the mortgagor of real property located in Branford, and the complainant, Vito DiLustro, was the mortgagee. The defendant was the complainant's attorney. When Horvat decided to sell the property and pay off the mortgage, his attorney, Steven P. Hanchuruck, attempted to contact the complainant, who was in Italy at the time, to determine a figure to pay off the mortgage. Hanchuruck instead spoke with the complainant's son, John DiLustro, who referred Hanchuruck to the defendant. Initially, the two attorneys, because of a misunderstanding, failed to agree on the correct payoff figure. Shortly thereafter, however, the defendant called Hanchuruck and they agreed that $94,365.59 was the correct amount.

The closing occurred on June 30, 1989, while the complainant was still in Italy. Hanchuruck forwarded the defendant a check for $94,365.59 in full payment of the mortgage made out to "Edward Botwick, Trustee." In a letter accompanying the check, Hanchuruck asked the defendant to send him a release of the mortgage "as soon as you are able." The defendant wrote back to Hanchuruck, acknowledging receipt of the check and agreeing to hold it in escrow pending the complainant's execution of the release.

Shortly after the closing, the defendant invested most of the mortgage payoff funds in four second mortgages through M.M.M. Mortgage Company, a shell company that the defendant had formed for the purpose of investing clients' funds in second mortgages. The complainant, who was expected to return from Italy in August, did not return until October, 1989. On November 10, 1989, the complainant went to the defendant's office, where he executed the mortgage release and received interest checks and the trust instruments for three of the second mortgages. ⁵ Although the complainant then left with the checks and the trust instruments, he came back approximately one hour later, demanding return of the release and giving back the checks and trust instruments. The defendant returned the release to the complainant.

The record at trial includes markedly divergent testimony concerning the interaction between the defendant and the complainant regarding the closing and the handling of the mortgage proceeds. The complainant testified that, before the closing, he had not spoken to the defendant about the closing or the payoff. He testified that he had spoken only to his son about the closing and understood that his son would receive the mortgage payoff and would put it in the complainant's checking account. The complainant also testified that the defendant had not been authorized to act on his behalf in connection with the closing, and that he had not authorized him to invest the payoff proceeds. He further testified that the first time he had learned that the defendant had the mortgage payoff funds was in August, 1989, that he had been surprised that the defendant had the money, that he had told the defendant that he would need it right away when he returned from Italy, and that he had not authorized the defendant to invest the funds.

The defendant testified, to the contrary, that a week before the closing, he had received a phone call from the complainant in which the defendant confirmed the payoff figure Hanchuruck had given him. The defendant testified that during this conversation, he and the complainant had discussed investing the payoff proceeds. When the defendant explained that he could invest the proceeds through his mortgage company and receive a rate of interest between 12 percent and 17 percent, the complainant enthusiastically approved. The defendant testified that he had explained the details of the mortgage arrangement to the complainant and that he had understood that the complainant would not need the money immediately upon his return from Italy.

The plaintiff filed this presentment of attorney misconduct with the Superior Court, alleging that the defendant had been guilty of misconduct in his dealings with the complainant. The complainant claims that the defendant had misappropriated the mortgage payoff funds without the complainant's knowledge or authorization by investing them through the defendant's own mortgage company. ⁶ The presentment's sole reference to any contact between the defendant and Hanchuruck is contained in paragraph 6, which alleged that Hanchuruck had delivered the check to the defendant, as trustee, to pay off the mortgage. The presentment made no reference to an escrow agreement between Hanchuruck and the defendant.

After an evidentiary hearing on the presentment, the trial court found that there was clear and convincing evidence that the defendant had acted as the complainant's attorney in connection with the closing. The court stated that "[i]t necessarily follows that [the defendant] owed a duty to Attorney Hanchuruck to observe the conditions under which he accepted the payoff funds." The court concluded that investment of these funds, with or without the complainant's permission, was not a proper escrow arrangement. The court then concluded that the defendant, having agreed to hold the funds in escrow and then having failed to do so, had violated rule 8.4(c) of the Rules of Professional Conduct. For this violation, the court ordered that the defendant be suspended from the practice of law for one year. With respect to the defendant's allegedly improper business relationship with the complainant, the court found a violation of rule 1.8(a) because of the absence of a written agreement manifesting the complainant's consent to a business transaction with the defendant. For this violation, the defendant was reprimanded.

I

The defendant first claims that the trial court deprived him of his right to procedural due process ⁷ by suspending him from practice on the basis of a violation not alleged in the presentment. Specifically, the defendant argues that because he did not have notice of an alleged violation of the escrow agreement with Hanchuruck, it was improper for the court to find a violation of rule 8.4(c) on this ground. We agree.

The following additional facts are relevant. The words "escrow" or "escrow agreement" do not appear anywhere in the presentment. The only reference in the presentment to Hanchuruck alleged that he had given the defendant a check to pay off the mortgage. At trial, little evidence was offered concerning the escrow agreement between Hanchuruck and the defendant. During the plaintiff's case-in-chief, the only mention of the escrow agreement was on cross-examination of Hanchuruck, who testified that such an agreement had not been specifically stated but had "probably" been implied. On cross-examination and redirect examination of the defendant during the defendant's case-in-chief, the defendant was asked whether he had been obligated to hold the funds in escrow and whether his investment of them had been a proper escrow arrangement. ⁸ The defendant indicated that he considered the investment of the funds to be a proper escrow arrangement. Hanchuruck was then recalled during the defendant's case-in-chief and testified that he did not have the legal expertise to form an opinion as to whether the investment of the funds was a proper escrow arrangement, but that he understood that the funds would not be released to the complainant as long as the defendant held the trust agreements. On the basis of this testimony, the plaintiff alleged for the first time in its posttrial brief to the court that a violation of rule 8.4(c) had occurred because of an improper escrow arrangement, and it was as to that arrangement that the only violation of rule 8.4(c) was found by the trial court.

We begin our analysis with a review of the legal principles that govern attorney disciplinary proceedings. In part because such actions are "adversary proceedings of a quasi-criminal nature"; In re Ruffalo, 390 U.S. 544, 551, 88 S.Ct. 1222, 1226, 20 L.Ed.2d 117, reh. denied, 391 U.S. 961, 88 S.Ct. 1833, 20 L.Ed.2d 874, modified on other grounds, 392 U.S. 919, 88 S.Ct. 2257, 20 L.Ed.2d 1380 (1968); attorneys subject to disciplinary proceedings are entitled to due process of law. See Spevack v. Klein, 385 U.S. 511, 514-16, 87 S.Ct. 625, 627-29, 17 L.Ed.2d 574 (1967). A license to practice law is a property interest that...