Attorney Grievance Commission v. Bailey

Smith, J., delivered the opinion of the Court. Because Kenneth Andrew Bailey apparently learned nothing from our decision in Attorney Griev. Comm’n v. Bailey, 286 Md. 630 , 408 A.2d 1330 (1979), we shall now impose the ultimate sanction of disbarment. 1 We have here two petitions for disciplinary action filed against Bailey by Bar Counsel, acting on behalf of the Attorney Grievance Commission of Maryland. ⁵²⁸ I No. 14 concerns a series of actions arising from employment which originated prior to our decision in the earlier case, although some of the activity concerning which complaint is made occurred after Bailey’s reinstatement. Pursuant to Maryland Rule BV9, we designated the Honorable Robert J. Woods of the Seventh Judicial Circuit to hear the charges.

Judge Woods has filed a report with us in which, among other things, he has found that Bailey placed $1,000 in cash in a book for safekeeping. This was money belonging to Bailey’s client, entrusted to him to cover costs of printing a brief and the like. Obviously, it should have been deposited in an escrow account in a bank. Both the Attorney Grievance Commission and Bailey excepted to the trial judge’s findings of fact and conclusions of law.

Generally, we find the exceptions of the Commission to be well taken and those of Bailey to be without merit. We shall, however, enter into no discussion of those because Bailey’s ultimate fate is sealed by his actions in No. 23. II In No. 23 Bar Counsel, pursuant to Maryland Rule BV16, requested that we suspend Bailey from the practice of law by virtue of his conviction on November 30, 1981, of violating Maryland Code (1957, 1981 Repl. Vol.) Art. 10, § 44, relative to escrow funds of attorneys. 2 ⁵²⁹ Bailey’s conviction was under a three count information filed by the State’s Attorney for St. Mary’s County.

The first two counts charged that he stole money from two different clients in an amount greater than $300. He entered a guilty plea to the third count which concerned Art. 10, § 44. Bailey was sentenced to incarceration for five years. His sentence was suspended and he was placed on supervised probation for five years subject to a number of conditions.

On January 4, 1982, we directed that Bailey be suspended immediately from the practice of law. Bar Counsel, acting on behalf of the Attorney Grievance Commission, then filed a petition with us seeking disciplinary action against Bailey upon the basis of this conviction. He alleged violation of Disciplinary Rules 1-102(A); 6-101(A)(l) and (3); 7-10KAX2) and (3); 7-102(AX3), (4), (5), (6), and (8); and 9-102(A) and (B). 3 Pursuant to Rule BV9, we ⁵³⁰ designated the Honorable Perry G. Bowen, Jr., of the Seventh Judicial Circuit to hear the charges. ⁵³¹ Judge Bowen has made a comprehensive report to us. His findings of fact state: "During the month of October 1981, Bailey undertook in his capacity as an attorney-at-law to act as settlement attorney in a real estate transaction in St. Mary’s County, Maryland in which Jane D. Y. Miller was to sell to Richard Glenn Olson and Janet Lee Olson, Lot Eighteen Section A of Town Creek Subdivision for a total price including costs of Sixty Thousand Two Hundred Ninety-two Dollars and Ninety Cents.

On October 7, 1981, Bailey received a check drawn to his order in the amount of Fourteen Thousand Two Hundred Ten Dollars and Nineteen Cents. This check represented all of the cash involved in the settlement because the remainder of the consideration consisted of the unpaid balances of first and second mortgages which were assumed by the purchasers. Promptly after October 7, 1981, Bailey was to do the following with respect to the disbursement of the funds represented by this check. 1. Pay the recording costs, transfer tax and documentary stamps in the amount of $697.90 2.

Pay to Colonial Mortgage for an assumption fee 75.00 3. Pay to Pioneer National Title Insurance Company for premium 207.00 ⁵³² 4. Pay to Jane D. Y. Miller (Seller) 902.27 5. Pay to Maryland National B ank the balance of its existing second mortgage 11,997.52 "These disbursements plus his fee of One Hundred Seventy-five Dollars and the costs of the Title abstract of One Hundred Thirty-eight Dollars which Bailey claimed at sentencing in the criminal case he had paid before settlement made up the entire amount represented by the check.

"At the settlement on October 7, 1981, Bailey advised the parties thereto that he would pay the expanses of the settlement the very next day and showed one of the parties checks he had already prepared for this purpose. "On October 8th Bailey having endorsed the settlement check attempted to cash it at the First National Bank of St. Mary’s in Leonardtown. He was informed that he could deposit the check into his account but that it would have to clear before he could write checks against it. Bailey thereupon took back the check and went to the Cedar Point Federal Credit Union in Lexington Park, Maryland upon which it was drawn, presented it and obtained in exchange for it a check in the same amount drawn by the Credit Union to his order.

With the Cedar Point Credit Union’s check Bailey returned to the First National Bank of St. Mary’s in Leonard-town. There he deposited into his escrow account $11,500.00; into the account of his wife Joan D. Bailey $1,500.00; into the account of Mike Heimer a golf professional $1,000.00 and took the remaining $210.19 in cash. At the time he deposited the $11,500.00 in his escrow account it was overdrawn in the amount of $27.01. Subsequently Bailey drew three checks to himself against the $11,500.00 in his escrow account totalling Three Thousand Six Hundred Dollars.

On or about October 9, 1981 First National Bank of St. Mary’s took funds in the amount of $4,054.90 from Bailey’s ⁵³³ escrow account to apply to debts Bailey owed the bank which had nothing to do with the settlement which generated the $11,500.00 deposit. The deposit to the account of Michael Heimer was applied by him at Bailey’s direction to Club dues, golf club repairs, golf cart rental, other personal property and tax thereon. None of these disbursements were related to the proper disbursements that Bailey was obligated to make and none of them were authorized by any of the parties to the settlement. On October 23, 1981 Bailey replaced the funds represented by the settlement check with $210.19 from his account at First National Bank of St. Mary’s and $14,000.00 from the proceeds of a loan by that Bank to Term Serve, Incorporated, a Corporation owned by his relatives.

On November 30, 1981, Bailey pleaded guilty in Criminal No. 4792 in the Circuit Court for St. Mary’s County to violation of Article 10 Section 44 of the Annotated Code of Maryland by using funds with which he was entrusted for a purpose other than the purpose for which the funds were entrusted to him. The same day he was sentenced to the jurisdiction of the Division of Corrections for five years, the sentence to incarceration was suspended and he was placed on probation for five years. A special condition of his probation was that he would not practice law for five years from January 31, 1982.” Judge Bowen’s conclusions of law include: "Bailey’s conduct in not paying promptly the unpaid balance of the mortgage which should have been paid and released as part of this transaction and his failure to record promptly the instruments constituting the transaction was conduct which violated [DR 6-101 (A)] (1) in that he attempted to handle a matter that he knew or should have known he was not competent to handle, without ⁵³⁴ associating with him a lawyer who was competent to handle it. This is more especially so if the record of Bailey in a previous matter in which the facts are very similar is considered.

This member of the Court heard the testimony in that case and a part of the disposition of those charges was that Bailey must practice this type of law under supervision.[ 4 ] "This Court concludes that the evidence discloses deliberate design not neglect and therefore fails to establish a violation of Subsection (3) 'Neglect of a legal matter entrusted to him.’ "Disciplinary Rule 7 - 101 'Representing a Client Zealously’ "Bailey’s actions in not recording the instruments constituting the real estate transaction and in not paying the balance of an existing mortgage with the funds entrusted to him for that purpose violated Subsection (A) (2) and (3) of this Rule in that (2) He failed to carry out a contract of employment entered into with a client for professional services and (3) Prejudiced and damaged his client during the course of the professional relationship by exposing his clients to the accumulation of additional interest on the existing mortgage and to the possibility of loss or damage by intervening claims against the sellers. "Disciplinary Rule 7 - 102 'Representing a Client Within the Bounds of the Law’ "Bailey’s conduct in stating that he was going to disburse the funds generated by this transaction the next day, his immediate and deliberate taking of a substantial part of the money for his own use and his use of prepared checks to mislead the ⁵³⁵ parties to the transaction violated Subsections (3), (5) and (8) of this Rule in that (3) He concealed and knowingly failed to disclose a fact that he was required by law to reveal, that is, his intention not to complete this transaction as he was required to do. (5) He knowingly made a false statement of fact that he was going to use his prepared checks to disburse the settlement funds the next day and (8) He knowingly engaged in other illegal conduct by stealing a substantial part of the settlement funds. "Disciplinary Rule 9 - 102 'Preserving Identity of Funds and Property of a Client.’ "Bailey’s conduct in depositing $1,500.00 into his wife’s account and $1,000.00 into the account of the golf professional Heimer to be