ATTORNEY GRIEV. COMM'N OF MARYLAND v. Powell

KARWACKI, Judge. In a petition filed with this Court on March 4, 1991, the Attorney Grievance Commission charged Robert Dominick Powell, a member of the Bars of this State, New York, and the District of Columbia, with professional misconduct. The allegations of misconduct arose out of Powell’s representation of Emil P. Taxay, M.D., in a civil suit 1 relating to the dismissal of Dr. Taxay from the staff of the Jess Parrish Memorial Hospital in Titusville, Florida. For his conduct prior to January 1, 1987, 2 the petition alleged that Powell, in prosecuting the Taxay case, had violated Disciplinary Rules (DR) 2-106 and 5-103 by entering into an unreasonable and excessive fee agreement with his client.

In addition, for his conduct subsequent to January 1, 1987, the petition alleged that Powell had violated Rules 1.3, 1.4, ²⁷⁹ 1.5, 1.7(b), 1.8(a), 1.8(j), 1.15, 8.1(b), 8.4(c) of the Rules of Professional Conduct, Maryland Code (1989), §§ 10-302,10-304, 10-306 of the Business Occupations and Professions Article, and various rules under Subtitle BU of the Maryland Rules, which govern attorney trust accounts. On August 30, 1991, Bar Counsel filed an amendment to the petition that withdrew the charges that Powell violated Md.Bus.Occ.Code Ann. §§ 10-302, 10-304, 10-306, any rules under Subtitle BU, and the current version of Maryland Rule of Professional Conduct 1.15(a). 3 ²⁸⁰ On April 9, 1991, pursuant to Md.Rule BV9(b), we ordered that the charges be transmitted to Judge Lawrence H. Rushworth of the Circuit Court for Anne Arundel County. Following numerous procedural delays, 4 a hearing on the merits of the charges was conducted on November 6 and 7, 1991, on February 18 and 20, 1992, and concluded with closing arguments on March 26, 1992. Judge Rushworth’s findings of fact and conclusions of law along with a record of the proceedings were filed in this Court on May 11, 1992.

I. By written agreement, dated February 7, 1984, and executed February 9, 1984, Powell entered into a contingency fee agreement with Dr. Taxay to represent the physician in an action against the Jess Parrish Memorial Hospital because of his summary suspension as a member of the medical staff at the hospital. The record indicates that Powell was a close personal friend of both Dr. Taxay and his wife, Hester Taxay. The civil suit was expected to involve many complex issues and require extensive prepara ²⁸¹ tion, discovery, and travel. In fact, Powell filed an eighty-three page complaint against forty defendants in March, 1985, in the federal district court.

On January 23, 1987, Dr. Taxay died. Prior to his death, Dr. Taxay made it known to his wife and Powell that he wanted the civil suit to continue, and on March 19,1987, his wife, as personal representative of his estate, was substituted as a party-plaintiff for Dr. Taxay. Shortly thereafter, Mrs. Taxay wrote Powell in April, 1987, and again in June, 1987, stating that she had “lost the zest for pursuing” the civil suit and directing Powell to arrange for a settlement of the case. Powell told Mrs. Taxay that it would be ill-advised to simply dismiss the action, as that might leave both the estate and her open to a countersuit.

During the fall of 1987, Powell made arrangements for an aggregate settlement in the amount of $82,500.00, with four of the five groups of defendants contributing various amounts toward that total, in return for an order of dismissal with prejudice of the civil suit. 5 The settlement checks were received by Powell over a period of time. During the time in which he received settlement proceeds on behalf of the estate of Dr. Taxay and Mrs. Taxay, Powell maintained two bank accounts in connection with his law practice. A firm operating account was maintained at Sovran Bank, and a second account was maintained at Fund for Government Investors, Inc. Powell intended the Fund for Government Investors account to be the sole depository of settlement proceeds in the Taxay case. Powell received a total of nine settlement checks.

The first three checks that he received were deposited into the Sovran account, and the last six checks that he received were deposited into the Fund for Government Investors account. ²⁸² The first settlement check in the amount of $12,500.00 6 was deposited in Powell’s Sovran account on November 3, 1987. Two other checks, in the amount of $50,000.00 7 and 2,500.00 8 , were deposited in Powell’s Sovran account on November 4, 1987. The other six settlement checks received by Powell were deposited in the Fund for Government Investors account. On November 20, 1987, three of these six checks, each in the amount of $2,500.00 9 , were deposited in the Fund for Government Investors account.

Two of the remaining three checks, each in the amount of $2,500.00 10 , were deposited on December 21, 1987, in the Fund for Government Investors account. The remaining settlement check in the amount of $5,000.00 was deposited on December 28, 1987, in the Fund for Government Investors account. Prior to the initial two deposits into the Sovran account on November 3 and 4, 1987, of settlement proceeds totaling ²⁸³ $65,000.00, 11 it was undisputed that the Sovran account had a balance of $2,365.52. The Sovran account ending balance was $14,420.97 on November 30, 1987, $4,762.28 on December 31, 1987, and $2,619.51 on January 29, 1988.

Further, prior to the deposits into the Fund for Government Investors account on November 20, 1987, and December 21 and 28,1987, of the remaining $17,500 12 in settlement proceeds, it was undisputed that the Fund for Government Investors account had a balance of $110.76. The ending balance of the Fund for Government Investors account was $5,910.16 on December 31, 1987, $363.79 on January 31, 1988, and $64.28 on February 29, 1988. Following the dismissal with prejudice on March 17,1988, of the civil suit, there were numerous telephone conversations and letters written between Powell and Mrs. Taxay pertaining to disbursement of the settlement proceeds. A chronology of the correspondence is summarized as follows.

On March 23, 1988, there was a 25-minute telephone conversation during which Powell and Mrs. Taxay discussed the settlement of the case and the disbursement of the funds. Having not heard from Powell, Mrs. Taxay, in a letter to Powell dated July 17, 1988, referenced their telephone call of March 23, 1988, in which she was told that an accounting would be forthcoming, and requested both disbursement of her money and an accounting. In a handwritten letter dated August 16, 1988, 13 Powell replied and re ²⁸⁴ counted his financial, family, and health problems. In this letter, Powell referenced a letter, which contained an accounting and an unsigned promissory note, that was purportedly mailed to Mrs. Taxay on April 8, 1988, but was never received by her.

Powell, reiterating his letter of April 8, 1988, that was never received, requested that payment of the amount due Mrs. Taxay from the settlement proceeds be deferred for Powell’s use in the form of a personal loan. 14 Powell sent Mrs. Taxay another letter dated September 13,1988, and enclosed a copy of his letter dated April 8, 1988, a signed promissory note, which Mrs. Taxay, in a telephone conversation occurring sometime after August 16, 1988, and before September 13, 1988, had authorized him to sign, and an accounting of the settlement proceeds. 15 ²⁸⁵ In a letter dated September 18, 1988, Mrs. Taxay replied to Powell’s letter of September 13, 1988, and indicated that, according to the accounting he had sent, Powell had made a $400.00 error in the amount of the promissory note for the amount which she was entitled to receive from the settlement proceeds. Powell replied to this letter by letter dated November 1, 1988. In this letter, Powell recounted the health problems of his parents and enclosed a revised promissory note for the correct amount due Mrs. Taxay from the settlement proceeds. The principal of the promissory note was due on January 2,1989, together with interest accruing from March 1,1988, at the annual rate of 10%.

When nothing was paid to Mrs. Taxay during January 1989, she wrote two letters to Powell during February and March of 1989. Powell replied with a letter dated April 14, 1989, which recounted his continuing financial and family health problems, including the death of his only brother in April, 1989, and enclosed a check for the interest due on the promissory note. In a letter to Powell dated May 12, 1989, Mrs. Taxay indicated that Powell’s check had bounced due to insufficient funds. By letter dated May 17, 1989, Powell wrote to Mrs. Taxay that the check was drawn against uncollected funds, and he believed that the check would now be paid.

In this letter, Powell told Mrs. Taxay to redeposit the check, which she did. This time the check was honored. Having not heard from Powell since receipt of the letter dated May 17, 1989, Mrs. ²⁸⁶ Taxay wrote the Attorney Grievance Commission in mid-August 1989, and initiated the process which has culminated with this opinion. 16 II. After making his findings of fact, Judge Rushworth concluded that Bar Counsel had not proved by clear and convincing evidence that Powell had violated the following rules: DR 2-106, DR 5-103, or Rules 1.3, 1.4, 1.5, 1.7(b), 1.8(a), 1.8(j), 8.1(b), and 8.4(c).

Judge Rushworth did conclude that the current version of Rule 1.15(a) of the Rules of Professional Conduct, several BU Rules relating to attorney trust accounts, and §§ 10-302 and 10-306 of the Bus.Occ. Article had been violated. Both Bar Counsel and Powell filed exceptions to Judge Rushworth’s findings and conclusions. Bar Counsel excepts to Judge Rushworth’s conclusions that Rules 1.8(a), 8.1(b) and 8.4(c) were not violated. 17 Both Bar Counsel and Powell except to Judge Rushworth’s con ²⁸⁷ elusion that the current version of Rule 1.15(a), any Md. Rules from Subtitle BU, and Md.Bus.Occ.Code Ann. §§ 10-302 and 10-306 were violated. 18 Powell asserts that this error is “of such magnitude as to vitiate the judge’s conclusion of a violation.” Bar Counsel maintains, however, that a prior version of Md. Rule of Professional Conduct 1.15(a), which was substituted by Bar Counsel in the amended petition, was violated, notwithstanding Judge Rushworth’s erroneous conclusion based on the current version of that Rule.

We initially make several observations including the precept that this Court has original and complete jurisdiction over disciplinary proceedings. Attorney Griev. Comm’n v. Nothstein, 300 Md. 667, 687 , 480 A.2d 807, 817-18 (1984); Bar Ass’n v. Marshall, 269 Md. 510, 516 , 307 A.2d 677, 680-81 (1973); Md.Rule BV9(b). “As this is an original proceeding filed in this Court, we [make] an independent, detailed review of the complete record with particular reference to the evidence relating to the disputed factual finding.” Marshall, 269 Md. at 516 , 307 A.2d at 680-81 . See also Bar Ass’n v. Carruth, 271 Md. 720, 727 , 319 A.2d 532, 535 (1974).

Moreover, “the ultimate decision as to whether an attorney has or has not been guilty of misconduct is to be made by us____” Attorney Grievance Comm’n v. McBurney, 282 Md. 116, 122 , 383 A.2d 58, 61-62 (1978). In addition, Md.Rule BV10(d) requires Bar Counsel to prove by clear and convincing evidence the factual determinations essential to establishing its case against the attorney. Attorney Griev. Comm’n v. Bakas, 322 Md, 603, 606 589 A.2d 52, 53 (1991); Attorney Griev.

Comm’n v. Ezrin, 312 Md. 603, 608 , 541 A.2d 966, 968 (1988); Marshall, 269 Md. at 516 , 307 A.2d at 681 . The trial court’s findings of fact are prima facie correct and will not be disturbed unless clearly erroneous, giving due regard to the ²⁸⁸ trial court’s opportunity to assess the credibility of the witnesses. Attorney Griev. Comm’n v. Bakas, 323 Md. 395, 402 , 593 A.2d 1087, 1091 (1991); Marshall, 269 Md. at 516 , 307 A.2d at 680 .

On the other hand, an attorney in a disciplinary proceeding need only establish factual matters in defense of the attorney’s position by the preponderance of evidence, including whether mitigating circumstances existed at the time of the alleged misconduct. Bakas, 322 Md. at 606 , 589 A.2d at 53 . Inasmuch as Bar Counsel, by its amended petition, withdrew the charges that Powell violated Md.Bus.Occ.Code Ann. §§ 10-302, 10-304, 10-306, the rules under Subtitle BU and the current version of Rule 1.15(a), we sustain both parties exceptions to the trial court’s conclusions that Powell violated these particular statutes and rules. Nonetheless, having charged Powell in the amended petition with violating the version of Rule 1.15(a) which was in effect between January 1, 1987 and December 31, 1988, Bar Counsel maintains that Judge Rushworth's findings support a conclusion that Powell intentionally and knowingly misappropriated client funds for which disbarment is appropriate.

Powell concedes that his client’s funds were misappropriated, but that such misappropriation was not known to him and was unintentional due to the undiscovered mis-deposit by his office personnel of settlement checks into his Sovran account rather than into the Fund for Government Investors account. Powell explained his theory of the undiscovered misdeposit as follows: Powell claimed that all three checks, which were deposited in the Sovran account on November 3 and 4,1987 19 , were mis-deposited by his secretary, who at that time was a temporary employee hired from a temporary secretarial service agency. Powell claimed he filled out a deposit slip for the Fund for Government Investors for the $12,500.00 check drawn on Comstock’s account and gave it to his ²⁸⁹ secretary with instructions to deposit the check in that account. The undisputed evidence shows that this check was deposited in the Sovran account, the firm’s operating account, on November 3, 1987, by use of a deposit slip for the Sovran account.

Powell claimed that he failed to notice this mis-deposit for two reasons. First, he confused the name of the drawer, Comstock, with ComScope, another client of his at that time. Second, the letter, in which the check from Comstock was enclosed, referred to the check as being drawn on the Freemont Indemnity Company rather than Comstock. Powell similarly claimed his office personnel again mis-deposited the other two checks, totalling $52,500.00 in settlement proceeds, in the Sovran account on November 4, 1987.

Powell maintained that, shortly thereafter, he realized that $52,500.00 of the settlement proceeds were mis-deposited in the Sovran account. Powell then determined by rough calculation that the attorney fees and unpaid expenses far exceeded the mis-deposited $52,500.00. Also by rough calculation, Powell determined that Mrs. Taxay was due approximately $12,000.00 from the $82,500.00 settlement. 20 Powell, thereafter, deposited the remaining settlement checks in the Fund for Government Investors account on November 20,1987, and December 21 and 28, 1987. By the end of 1987, Powell believed he had placed $30,000.00 of the settlement proceeds in the Fund for Government Investors account.

Following the formal dismissal of the Taxay case on March 17, 1988, Powell and Mrs. Taxay discussed the dismissal of the case and distribution of the proceeds in a telephone conversation on March 23, 1988. Some two weeks later Powell mailed a letter dated April 8, 1988, ²⁹⁰ which enclosed an accounting, an expense itemization and an unsigned promissory note. This letter requested a loan from Mrs. Taxay of her share of the settlement proceeds and included the promissory note for her inspection. See footnote 14.

The promissory note was in the amount of $12,242.52 which Powell had calculated to be the amount owed to Mrs. Taxay. She never received this letter and in July, 1988, wrote to Powell requesting her money and an accounting. At the time he requested the loan from Mrs. Taxay in his letter dated April 8, 1988, Powell claimed he had no knowledge that the $12,500.00 was mis-deposited in the Sovran account. Further, Powell claimed that he had not received, or if received, had not reviewed any of the statements of the account from the Fund for Government Investors prior to seeking the loan from Mrs. Taxay.

Consequently, at the time he wrote the letter dated April 8,1988, Powell claimed to have no knowledge of the fact that he had already depleted that money. Bar Counsel claimed that the copy of the letter dated April 8, 1988, was prepared and mailed to Mrs. Taxay long after April 8, and was a sham to cover Powell’s defalcations. After several letters were exchanged between Powell and Mrs. Taxay during the summer of 1988, Powell claimed that Mrs. Taxay, in a telephone conversation occurring between August 16, 1988, and September 13, 1988, assented to lending her settlement proceeds to him. Whereupon, Powell mailed to Mrs. Taxay a letter dated September 13, 1988, and enclosed a copy of his letter of April 8, 1988, and the signed promissory note, which represented the loan.

Powell claimed that only after Mrs. Taxay assented to the loan and he sought to remove the $12,500.00 from the Fund for Government Investors account, did he realize that the funds had been misappropriated. Powell claimed he was shocked to realize at that time that the money was not in the Fund for Government Investors account. Powell then tried to rectify the misappropriation that occurred as a result of the undiscovered mis-deposit nearly one year earlier. After he ²⁹¹ became aware of the misappropriation, Powell established a separate account at Crestar Bank, and into which, he deposited $18,000.00 on October 27, 1988. 21 Powell claimed that he repaid Mrs. Taxay on September 25, 1989, not in response to Bar Counsel’s letter of August 28, 1989, which indicated that Mrs. Taxay had filed a complaint against him, but rather he repaid Mrs. Taxay on the day funds were made available to him from a loan approved in mid-September, 1989, by the Household Finance Corporation.

Powell suggests that the misappropriation was the result of negligently supervising his office personnel similar to that found in Attorney Griev. Comm’n v. Dacy, 313 Md. 1 , 542 A.2d 841 (1988) and Attorney Griev. Comm’n v. Goldberg, 292 Md. 650 , 441 A.2d 338 (1982), for which a reprimand or a short suspension is all that is required. Bar Counsel views Powell’s conduct in a very different light.

Bar Counsel claims that Powell failed to deposit Mrs. Taxay’s funds in a separate account in violation of Rule 1.15(a). Bar Counsel claims that Powell then misappropriated Mrs. Taxay’s share of the settlement proceeds, by dissipating all of the settlement funds by February, 1988, in violation of Rule 1.15. Bar Counsel claims that Powell then engaged in a sham transaction, by requesting a loan from Mrs. Taxay of her share of the settlement proceeds after knowingly misappropriating the funds, in violation of Rule 8.4(c). Bar Counsel asserts that Powell’s conduct is similar to that found in Attorney Griev.

Comm’n v. Boehm, 293 Md. 476 , 446 A.2d 52 (1982) and Attorney Griev. Comm’n v. Pattison, 292 Md. 599 , 441 A.2d 328 (1982) for which disbarment is appropriate. We do not agree with either Bar Counsel’s or Powell’s characterization of the misappropriation. ²⁹² As this Court has stated all too often, “[misappropriation of funds by an attorney involves moral turpitude; it . is an act infected with deceit and dishonesty and will result in disbarment in the absence of compelling extenuating circumstances justifying a lesser sanction.” Attorney Griev. Comm’n v. Ezrin, 312 Md. 603, 608-09 , 541 A.2d 966, 969 (1988).

See also Attorney Griev. Comm’n v. Lazerow, 320 Md. 507 , 578 A.2d 779 (1990); Attorney Griev. Comm’n v. Boehm, 293 Md. 476 , 446 A.2d 52 (1982); Attorney Griev. Comm’n v. Pattison, 292 Md. 599 , 441 A.2d 328 (1982); Attorney Griev.

Comm’n v. Burka, 292 Md. 221 , 438 A.2d 514 (1981); Attorney Griev. Comm’n v. McBurney, 282 Md. 116 , 383 A.2d 58 (1974); Bar Ass’n v. Marshall, 269 Md. 510 , 307 A.2d 677 (1973). Judge Rushworth made a finding that is dispositive of Bar Counsel’s characterization of the misappropriation, unless of course, it is clearly erroneous. Judge Rushworth expressly found that “[although there was ample evidence of disorganization and inefficiency in his practice, there was no clear and convincing evidence of ‘dishonesty, fraud, deceit, or misrepresentation’ on the part of Powell in dealings with his client Hester Taxay.” This Court has often stated that “[i]t is elementary that a trier of fact may elect to pick and choose which evidence [or story] to rely upon.” Attorney Griev.

Comm’n v. Nothstein, 300 Md. 667, 684 , 480 A.2d 807, 816 (1984). It is clear that Judge Rushworth, by making this finding, believed Powell’s theory regarding the undiscovered mis-deposit. The record sufficiently supports this finding, and therefore, it is not clearly erroneous. Consequently, Bar Counsel’s exception to the trial court’s failure to find a violation of Rule 8.4(c) is overruled.

Although Powell did not intentionally misappropriate Mrs. Taxay’s funds, we do not accept Powell’s characterization of the misappropriation as being similar to that which occurred in Goldberg and Dacy, supra. In Goldberg , an attorney failed to adequately supervise his office manager, who negligently performed her duties. 292 Md. at 651-53, 441 A.2d at 339-40. As a result, the attorney’s escrow ²⁹³ account became overdrawn. 292 Md. at 656, 441 A.2d at 341. In Goldberg , the Court summarized the facts which led to the misappropriation: “There came a time while in the employment of Mr. Goldberg that [his office manager,] Mrs. Ofterdinger[,] failed to prepare the necessary pleadings, documents or papers required to be done.

As she got increasingly behind, she would remove the files and not calendar them, preventing the lack of progress on those files from coming to the attention of Mr. Goldberg. In order to cover her inactivity on these files, Mrs. Ofterdinger then started going through all of the office mail, removing any letters that had reference to the work that had not been done. She also removed any phone messages and intercepted calls to Mr. Goldberg. She made excuses or misrepresentations as to why the work had not been done in some instances and falsely represented that the work had been done in others.

Checks received from clients were not deposited in the appropriate account, and from the exhibits it would appear that unauthorized checks were drawn by Mrs. Ofterdinger for improper purposes. She further intercepted the letters from the Attorney Grievance Commission.” 292 Md. at 652, 441 A.2d at 339. In Dacy, supra, an attorney failed to properly instruct an employee on arrangements she was to make with a savings and loan association that the attorney represented in real estate settlement matters. 313 Md. at 2 , 542 A.2d at 841 . As a result, the employee set up a firm operating account through which monies destined for the attorney’s escrow account would pass.

Id. at 2-3 , 542 A.2d at 841-42 . A review of the record in this case demonstrates that Goldberg and Dacy are inapposite. In his deposition, Powell testified that he did not always receive his bank statements for the Sovran account and the Fund for Government Investors account. When questioned as to why he failed to discover the mis-deposit and lack of funds in the Fund for Government Investors account, Powell stated that he did ²⁹⁴ not check his bank statements; “[he simply] did not pay any attention to that account.” Powell testified that he maintained in his head what money was owed to Mrs. Taxay and where it was located.

In his deposition, Powell acknowledged he was wrong not to make sure the money was in the Fund for Government Investors account. At the hearing in front of the Inquiry Panel, Powell testified that he rarely is in his office and travels throughout the country on an average of two to three days a week. We find the following colloquy very instructive on characterizing Powell’s misappropriation: “[MR. POWELL]: So, when checks come in and things come into the office, no matter who they are from, I usually ask my secretary to deposit them.

Now, sometimes they put the damned things in the wrong accounts. “MR. MURPHY: Well, what did you then do at that time, what was your method for double-checking to make sure that checks of that nature were put into the right account? This is after the fact. “MR. POWELL: My secretary is required to give me the deposit slips and I would remove the money if it were in the wrong account and place it where it is supposed to be.

I don’t recall doing it in this case. “MR. MURPHY: But you’re saying that your practice at the time, in '87 and in ’88 and today and all the time in between, was to be very careful to make sure that your secretary put funds in the proper accounts? “MR. POWELL: No, I didn’t say that. What I would do is, I would give them instructions to put the money into specific accounts.

And I have to admit to you that I was not employing the brightest of all people during this period of time. “MR. MURPHY: And so, knowing that “MR. POWELL: Lots of time they would make mistakes and when I came back from wherever I was, I would go through my IN box and the deposit slips would be there and if I found that a deposit had been erroneously made, I would transfer the money.” ²⁹⁵ What distinguishes this case from Goldberg and Dacy , is that, unlike the attorneys in those cases, Powell was on notice as to the probability that Mrs. Taxay’s funds may be mis-deposited. We find Powell’s conduct similar to the attorneys’ conduct in Attorney Griev.

Comm’n v. Berger, 326 Md. 129 , 604 A.2d 58 (1992) and Attorney Griev. Comm’n v. Kramer, 325 Md. 39 , 599 A.2d 100 (1991). In both Berger and Kramer , neither attorney intentionally misappropriated client funds, but both attorneys were found to have been grossly negligent in misappropriating their clients’ funds. In Berger , the attorney failed to maintain individual client ledgers or even a general client ledger. 323 Md. 428, 431 , 593 A.2d 1103, 1105