ATTORNEY GRIEV. COMM'N OF MARYLAND v. Berger

⁴²⁹ RODOWSKY, Judge. Stephen L. Berger (Berger), a member of the bar of this Court, conducts a plaintiffs’ personal injury practice. In June 1984 Mrs. Nancy A. Bart retained Berger, and ultimately complained against him to Bar Counsel. The complaint reached the level of public charges which we referred for hearing to Judge Ellen M. Heller of the Circuit Court for Baltimore City.

Judge Heller found that Berger had violated the Maryland Lawyers’ Rules of Professional Conduct: Rule 1.15, by mismanaging his escrow account; Rule 1.3, by failing to act diligently in the matter; and Rule 1.4, by failing promptly to reply to the client’s reasonable requests for information. Berger does not except to these findings. Judge Heller further concluded that, “[notwithstanding these findings, the Court does not find that Mr. Berger’s actions were taken with the intent to deceive or fraudulently deprive or misrepresent any client in any matter.” Bar Counsel excepts, contending that Judge Heller should have found that Berger “knowingly misappropriated to his own use a substantial portion of Mrs. Bart’s funds____” Bar Counsel’s case rested on the bank statements of Berger’s escrow account and on copies of the cancelled checks for that account, particularly for the period following Berger’s receipt of Mrs. Bart’s funds in August 1988 to the disbursement to her in February 1989. Because Bar Counsel knew only the amount of money which Berger held in trust for the complainant, Bar Counsel’s case consisted of demonstrating that, in early November 1988, the escrow account was far below that minimum required balance.

Judge Heller found that the November 1988 shortage was due to negligence. Certain primary fact-findings underlie that conclusion. Judge Heller said: “It is significant that it was Mr. Berger who discovered the shortfall on November 10, 1988 and made efforts on his own part to bring the account into balance. The account was brought into balance by December, 1988, prior to Mrs. Bart’s filing her complaint with the Com ⁴³⁰ mission.

Indeed, the account was brought into balance prior to Mr. Berger being notified by Mrs. Bart’s attorney ... that she should receive the net proceeds of the settlement in February, 1989.” As we shall demonstrate, the significant ultimate fact-finding concerning Berger’s state of mind was substantially predicated on a finding of primary fact which is erroneous. Because of that error, we shall remand for reconsideration. Berger represented Mrs. Bart and her then husband, Alan Bart, concerning their claims arising out of a June 1984 accident in which Mrs. Bart suffered bodily injuries. There is a written fee agreement, signed by Mrs. Bart, providing for a fee of one-third of any and all sums received.

Berger filed suit in February 1987, claiming, inter alia, for loss of consortium. The case was settled in June 1988 for $29,000 which was paid by an insurer’s draft dated July 13, payable to Mr. and Mrs. Bart and to Berger, as their attorney. By this time the Barts had separated, had individual counsel, and were seeking a divorce. The Barts, through their respective counsel, and Berger agreed that Berger would hold their funds in his escrow account pending agreement on disposition of the net proceeds.

Berger deposited the draft on August 1 to his escrow account. Berger did not take his agreed fee from the recovery when it was received. That was not his practice. Even if he had rendered an accounting and made a distribution to the Barts upon receipt of the recovery, he would not have drawn a check to himself on his escrow account for the entire fee to which he was entitled.

Rather, it was Berger’s practice to leave earned fees in the escrow account and to draw against those fees in increments, typically of $1,000 or $2,000. 1 For example, through the month of August 1988, Berger withdrew $15,250 from his escrow account by eight ⁴³¹ checks ranging in amount from $1,000 to $3,000. Only one of these eight checks bears a notation identifying the matter where the funds were earned. If Berger maintained individual client ledgers for the Barts’ account, or generally, they are not in evidence. The only evidence of any accounting “control” is Berger’s testimony that he kept at his desk a tally sheet on which he recorded the fees earned that were in the escrow account.

From these he subtracted the incremental withdrawals as made. He said that this system seemed feasible because only three or four cases would be in settlement at any one time. Berger testified that he discontinued this practice on the advice of his present counsel whom Berger engaged after Mrs. Bart complained to Bar Counsel in early May of 1989. Berger testified that he had thrown away the tally sheet which reflected his withdrawals from escrow against his fee on the Barts’ matter.

Any tally sheet which Berger might have been using in May 1989, at the time Bar Counsel notified Berger of the complaint, was no longer available to be introduced in evidence in this case as illustrative of the practice. Berger’s position is that he took the fee on the Bart matter in the form of six checks drawn on his escrow account between September 1 and October 5, 1988. Five of the checks were written in September and total $8,100. The cancelled checks do not identify their purpose on their face.

Only two other checks were drawn on the escrow account payable to Berger during September 1988. These totaled $4,166. Berger maintained only one escrow account. By the end of September he had made no disbursements out of the Barts’ recovery other than for fee.

If the Barts were Berger’s only clients, Berger’s escrow account at the end of September should have contained at least $20,900 ($29,000 less fee to that date of $8,100). On September 80 the escrow account balance was $14,838.48. ⁴³² On October 5 Berger withdrew $2,500 from escrow which he identifies as the balance of the fee on the Barts’ case. Berger made no other disbursements chargeable against the Barts’ recovery in October. On October 31 his escrow balance should have been at least $18,400 ($29,000 less total fee of $10,600).

On October 31 his escrow account balance was $13,670.31. On November 2 Berger drew on the escrow account a check to himself for $2,000 which cleared on November 3. On November 4 he drew on the escrow account a check to himself for $1,800 which cleared on November 7. On November 7 he drew on the escrow account a check to himself for $2,200 which cleared that day.

At the close of business on November 7, 1988, the balance in Berger’s escrow account was $6,422.36, as compared to the $18,400 which, under Berger’s reckoning of his fee, he should have had in escrow for the Barts’ case alone. On November 10 Berger made one disbursement chargeable to the Barts, an item of $70 for a medical bill paid to Dr. Robbins. During this period Berger also settled a case for clients named Diener for $85,000 on which his fee was as much as $25,000. The $85,000 was deposited to the escrow on November 18, and the November ending balance of the account was $100,708.52.

On December 8, 1988, Berger disbursed $193.60 from escrow to Dr. Friedler on behalf of the Barts. Berger’s December ending balance in the escrow account was $76,-808.54. Berger testified that he had not been reconciling to bank statements on the escrow account, but that even he was surprised when he saw “at a later point in time” how low the escrow account balance had fallen in early November. Direct examination by Bar Counsel of Berger as an adverse witness then proceeded as follows: “Q When did you see that account balance? ⁴³³ “A I noticed before the end of that year that the account was off.

Obviously, there had been errors made in dealing with the account. “At that time, I rectified the errors by reviewing the account ledgers and making sure the account was brought up to par by maintaining the appropriate account balances. “THE COURT: When did you make these corrections, Mr. Berger? “THE WITNESS: Before the end of the year, Your Honor. “THE COURT: Before the end of 1988. On your own, you are saying? “THE WITNESS: Yes, absolutely. “BY [BAR COUNSEL]: “Q What did you do exactly? “A I had a number of cases that I had settled, and I realized that I had inappropriately and incorrectly deducted funds from the escrow account which I thought I was entitled to those fees. “By the end of the year—and I believe it was the end of November or beginning of December—I had maintained sufficient funds in the escrow account by withdrawing less fee [amounts] than I was entitled to.” Later in the examination, Bar Counsel was inquiring about a case where Berger said he had inadvertently taken his fee twice, and, on discovering the error, restored the excess to escrow. “Q Now, in that case you did not ... actually balance the escrow account to a T at that time, at the end of 1988, correct? “A The escrow account was in order. “Q What do you mean by ‘in order’? “A It was balanced. The funds that I was supposed to be holding were accounted for.” By check dated January 4, 1989, which cleared the escrow account on January 19, Berger disbursed $60,000 to the ⁴³⁴ Dieners. Berger wrote a check to himself on the escrow account for $2,000 on January 20 which cleared the account that day.

Another check, of illegible date and payable to Berger in the amount of $3,000, cleared the escrow account on January 25, 1989. At the close of business on January 25, 1989, the balance in the escrow account was $14,954.66. By Berger’s reckoning the amount which should have been in the. escrow account for the Barts alone was at that time $18,136.40 ($29,000 - [$10,600 (legal fee) + $263.60 (medical expenses)]). By February 1989 Mr. and Mrs. Bart had agreed that all of the net recovery in the accident case would be paid to her.

During divorce negotiations, in a letter of October 5, 1988, to the Barts and their respective counsel, Berger