Attorney Grievance Commission v. McClain

BELL, C.J. The Attorney Grievance Commission of Maryland, the petitioner, by Bar Counsel, acting at the direction of the Review Board, see Maryland Rule 16-709, 1 filed a Petition For Disci ¹⁹⁹ plinary Action against Charles E. McClain, Sr., the respondent, charging him with misconduct, consisting of violations of various Maryland Rules, including the Maryland Rules of Professional Conduct, as adopted by Maryland Rule 16-812, governing attorney trust accounts, and a section of the Business Occupations and Professions Article. The petitioner alleged that the respondent violated Rules 1.1, Competence, 2 1.15, Safekeeping Property, 3 16-606, Name and Designation of ²⁰⁰ Account, 4 and 16-607, Commingling of Funds, 5 and Maryland ²⁰¹ Code (1989, 2000 Replacement Volume) § 10-303 of the Business Occupations and Professions Article. 6 We referred the case to the Honorable James J. Lombardi, Jr., of the Circuit Court for Prince George’s County, for hearing. See 16-711.a. 7 Following the hearing, the hearing court made findings of fact, as follows: “On October 28, 1998, McClain filed an action for foreclosure on behalf of his clients, Harry and Janet Stello (the Stellos), in the Circuit Court for Anne Arundel County. McClain was the substitute trustee on a Deed of Trust from Manuel Nelson and Delama Nelson to the Stellos.

The property was described in the Deed of Trust as ‘Lot No. One (1) in the subdivision known as “The Harry E. Stello Property, Montevideo Road.” ’ ” “McClain prepared a foreclosure notice citing the above property description and the house address as ’2076 Montevideo Road, Jessup, Maryland.’ The sale was set for May 27, 1999. Among other things, the terms of the sale required a deposit of $5,000.00 and the balance of the purchase price to be paid within ten days after the final ratification of the sale.” “McClain hired John Cassidy (‘Cassidy’) as an auctioneer for the sale. On the day of the sale one of the potential bidders, James Wilson, was uncertain as to the precise location of the property and whether there were any subordinate liens. McClain did not conduct a title examination prior to the sale.

McClain, Cassidy and Wilson went to the county land records office to determine which parcel was ²⁰² being sold and conduct a brief title search. Cassidy found a title searcher whom he knew and she assisted them in doing a cursory examination of the land records. That search revealed that there were two houses on the property described in the legal description on the foreclosure notice; namely, 2076 and 2076A Montevideo Road. Accordingly, the correct property address was the one named in the foreclosure notice but the legal description had changed.

That search did not turn up a number of IRS liens in excess of $70,000. The sale took place and the successful bidders were James and Edward Wilson (the Wilsons) doing business as Creek Properties L.L.C. The Wilsons gave McClain a certified check in the amount of $10,000 that was $5,000 over the required deposit. On June 1, 1999 McClain deposited this check in his escrow account at Suburban Bank and returned $5,000 immediately to the Wilsons as it was in excess of the required deposit. McClain’s checking account at Suburban Bank was titled ‘C.E. McClain Sr. & Associates LLC.’ His checks were titled the same way with the addition of ‘Escrow Account’ under his, name.

His deposit slips were not printed with any name other than Suburban Bank. Also, on June 1, 1999 McClain wrote himself a check in the amount of $1900. His bank statements showed that the ending balance in his account in April 1999 was $1952.32 and in May $1604.33. He testified he did not reconcile his bank statements.” “After the sale the Wilsons determined through a more complete title search that there were junior lienholders on the property (the IRS liens and a second deed of trust).

Wilson asked McClain to produce evidence that notice of the sale had been given to them. McClain could not do so because he did not learn about them prior to the sale. On or about August 10, the Wilsons requested a refund of their $5,000 deposit. McClain did not respond to this request until September 7 when he tendered a check in the amount of $5,000 from his escrow account.

McClain’s check was returned by Suburban Bank for insufficient funds and the Wilsons so notified McClain. On or about September 17, ²⁰³ McClain purchased a certified check for $4,600 and wrote a personal check for $400 and sent the two checks to the Wilsons. McClain’s personal check in the amount of $400 was returned for insufficient funds. Thereafter McClain purchased a money order in the amount of $400 to satisfy his obligation to the Wilsons.

When McClain wrote himself the check in the amount of $1,900.00, he felt that he was entitled to it as his “guess” of one-half of the trustee’s commission. He said he relied on the Deed of Trust provision that if the property ‘shall be advertised for sale ... and not sold, the trustee or trustees acting shall be entitled to one-half the commission above provided’. However, during his testimony before the Inquiry Panel he said that he paid himself $1,900 because he had left over funds in his escrow account that belonged to him prior to the foreclosure deposit. During his trial testimony on re-cross-examination he offered a third explanation; namely, that he took the $1900 because he thought the sale would ‘go through.’ ” “When the sale failed the Stellos contacted Carlton Green, Esq.

(“Green”) to represent their interests. In August of 1999 Green asked McClain for information about the sale. Green ascertained that IRS had never been notified so its lien could be subordinated to the bid at the foreclosure sale. Green also learned from the Wilsons that two of McClain’s escrow checks had been returned for insufficient funds and felt that it was his duty under Section 8.3 of the Code of Professional Conduct to notify Bar Counsel.

Later through Green’s efforts the Stellos and Wilson agreed to purchase the Stellos’ interest in the Deed of Trust for approximately $64,000. Subsequently, the Wilsons instituted their own successful foreclosure proceedings against this property.” On these findings, the hearing court concluded 8 that the ²⁰⁴ respondent violated Rules 1.15.a. 9 and 16-606, but did not ²⁰⁵ violate Rules 1.1, 1.15.b., and 16-607. 10 It explained each conclusion, in turn. With respect to the Rule 16-606 violation, the failure to designate clearly his escrow account with his name or the name of his law firm and to indicate on his checks or deposit slips that he was an attorney was, to the hearing court, “clear non-compliance” with the Rule. It noted in that regard, “[i]t is true that the account was an escrow account but as Suburban Bank concluded, there was no way to know by looking at the account that it was an attorney’s account as distinguished from any other business or personal account.” Explaining its conclusion that the respondent violated Rule 1.15, the hearing court, said: “Whether McClain withdrew $1,900 because he thought he had sufficient monies from prior fees that he had not withdrawn or whether he thought he was entitled to $1,900 trustee’s commission, he violated Rule 1.15 of the Rules of Professional Conduct by failing to hold Wilsons’ entire deposit in his trust account.

Under his prior fee theory he was still $300 short and used part of the funds of a third party for his own use. Under his trust commission theory these funds still belonged to the Wilsons to be held in trust for the Stellos until released by the Stellos. The court finds this is the most serious charge against McClain. Not only did he violate Rule 1.15, but he has cast grave doubt on his credibility.

His conflicting explanations, under oath, are not like allowable alternative defenses in a civil complaint. His own explanations undermine his argument that his violation was unintentional. While the court might find his explanation plausible under his prior fee theory, once McClain abandoned that explanation in lieu of his trust commission ²⁰⁶ theory he succeeded only in raising a question of his trustworthiness. “The court cannot say under a clear and convincing standard that McClain’s violation was willful or that it was consciously done for an unlawful purpose. However the court does find that McClain’s protestations of mere negligence are implausible.” Turning to the Rules violations charged, but not found, the hearing court was equally forthcoming.

It did not find a violation of Rule 16-607 due to.a lack of “clear and convincing evidence that [the respondent] allowed prior fees to remain in his trust account for any appreciable length of time.” Furthermore, the hearing court pointed out that, “$1,600 of the $1,900 was clearly not from the deposit and could very well have been from funds belonging to [the respondent] alone. In any event there was no clear and convincing evidence as to how long the prior fees were in his account or that he did not withdraw them within a reasonable time as the commingling rule provides.” As indicated, the hearing court did not find that the respondent was incompetent. While it did find that the respondent made some mistakes in conducting the foreclosure sale, respondent “failed to do some things a more experienced foreclosure attorney would have done,” it was not convinced that they rose to the level of incompetence. The hearing court explained: “[T]here is no rule in Maryland that requires foreclosure proceedings to be conducted only by attorneys who specialize in that field.

As the testimony indicated, it is common for many attorneys to make the same mistakes with IRS that McClain made. Regrettably, they may not be familiar with IRS’s twenty-five day lien notice provision. The AGC’s expert witness testified that he has made the same mistakes that McClain made and that he had to learn the hard way. The notice of the foreclosure proceeding turned out to be correct.

There is no requirement that the attorney handling a foreclosure sale (other than a tax sale foreclosure 2 ) ²⁰⁷ must order a title search prior to the sale. There is also no requirement that a lawyer must consult GORDON ON FORECLOSURES no matter how prudent this might be. Rule 1.1 of the Rules of Professional Conduct provides that ‘[C]ompetent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation”. A lawyer need not necessarily have special training to handle legal problems of a type with which the lawyer is unfamiliar.

McClain had conducted four or five prior foreclosures without incident. The court cannot say that the AGC has presented clear and convincing evidence that McCain was incompetent under these circumstances to trigger the sanctions of Rule 1.1 in light of the testimony of the AGC’s own expert witnesses.” The petitioner excepted to the hearing court’s failure to conclude that the petitioner presented clear and convincing evidence that the respondent was incompetent pursuant to Rule 1.1. Noting that its expert witness on foreclosure, whose credentials the hearing court did not question, testified that the respondent was incompetent, and submitting, relying on Attorney Griev. Comm’n v. Brown, 308 Md. 219, 232 , 517 A.2d 1111, 1117 (1986), that “[tjrivial errors which, when viewed individually, would not sustain a finding of incompetent representation, can constitute incompetence when viewed collectively or cumulatively,” and that “[tjhe numerous errors made by the respondent combined with his failure to take any action to salvage the situation collectively constitute incompetence in violation of MRPC 1.1,” the petitioner argues that the hearing court’s finding to the contrary was clearly erroneous.

Indeed, it suggests that the finding “appears to be based primarily on the fact that the expert witness testified that he had made the same mistakes as Respondent.” Detailing the mistakes that the respondent made and reminding us that the expert testified that in his opinion the respondent did not exercise the legal knowledge, skill, thoroughness and preparation that was ²⁰⁸ reasonably necessary to represent his clients, it concludes that it “presented unrebutted clear and convincing evidence” of the respondent’s incompetence and, thus, violation of Rule 1.1. The appropriate sanction, the petitioner recommends, is an indefinite suspension with the right to apply for readmission after one year. In support, the petitioner relies on all of the violations found as well as the violation of Rule 1.1, which it contends the hearing court should have found. It contends, however, that the respondent’s violation of Rule 1.15, “his failure to safeguard the bidder’s deposit and his use of part of the funds for his own purposes is the most serious violation and alone warrants the proposed sanction.” In addition, although it recognizes that the hearing court did not find that the violation was consciously done or done for an unlawful purpose, the petitioner finds it significant that the hearing court “did find that the Respondent’s protestations of mere negligence were implausible and that the Respondent’s testimony at trial, which conflicted with his sworn testimony at the Inquiry Panel hearing, raised questions of his credibility and undermined Respondent’s argument that his violation was unintentional.” The petitioner equates this case to Attorney Griev.

Comm’n v. Berger; 326 Md. 129 , 604 A.2d 58 (1992), in which the sanction it recommends was imposed. The respondent also filed an exception and offered a recommendation as to the appropriate sanction. His exception was premised on the hearing court’s finding as to the Rule 1.15 violation being based on paragraph (c) of that Rule. Conceding that the escrow account into which he placed the foreclosure deposit was not designated as an attorney trust account or an attorney escrow account, but pointing out that when this deficiency was brought to his attention, he immediately corrected it and, in fact, completed a course entitled “Escrow Account Management,” the respondent maintains that the only necessary, and therefore appropriate, sanction is a reprimand.

We shall overrule the exceptions filed by both the petitioner and the respondent. To be sustained, the findings of fact of a hearing court must be supported by clear and ²⁰⁹ convincing evidence. Rule 16-759.b.2.B. Thus, exceptions can be sustained only if, upon an independent review of the record, we conclude that the hearing court’s findings are not supported by clear and convincing evidence. Attorney Griev.

Comm’n v. Sheinbein, 372 Md. 224, 241 , 812 A.2d 981, 990 (2002) (“A hearing court’s findings of fact are “prima facie correct and will not [be] disturbed] unless they are shown to be clearly erroneous.” ”); Attorney Griev. Comm’n v. Goldsborough, 330 Md. 342, 347 , 624 A.2d 503, 505 (1993); Attorney Griev. Comm’n v. Kemp, 335 Md. 1, 9 , 641 A.2d 510, 514 (1994); Attorney Griev. Comm’n v. Rohrback, 323 Md. 79, 93-94 , 591 A.2d 488, 495 (1991); Attorney Griev.

Comm’n v. Kerpelman, 288 Md. 341, 375 , 420 A.2d 940, 956 (1980), cert, denied, 450 U.S. 970 , 101 S.Ct. 1492 , 67 L.Ed.2d 621 (1981). Taking the respondent’s first, we note that the hearing court did not specifically identify the paragraph of Rule 1.15 it found that the respondent violated. To be sure, it expressly found no violation of the record retention provision of Rule 1.15, but it also found that the Rule was violated because the respondent did not hold the entirety of the deposit on the foreclosure sale in his trust account. Rule 1.15.C. does require that, during the course of representation, a lawyer in possession of property in which the lawyer and another person claims an interest, must keep the property separate until there is an accounting and severance and, thus, may apply to this situation.

On the other hand, while Rule 1.15.a contains the record retention provision, which the hearing court expressly found had not been violated, it also provides that “[a] lawyer shall hold property of clients or third parties that is in a lawyer’s possession in connection with a representation separate from the lawyer’s own property,” in an account maintained pursuant to Title 16, Chapter 600 of the Maryland Rules, Attorney Trust Accounts. The respondent states in his exceptions that he withdrew the $1900 from the escrow account because he believed it was the amount of the “fee he was entitled to under the terms of the Deed of Trust.” The hearing court’s finding took account ²¹⁰ of that theory as well as the alternative one, that the respondent thought he had sufficient funds from prior fees that he had not taken. That finding is not clearly erroneous. The petitioner’s quarrel with the hearing court’s findings on incompetence in its analysis, its emphasis on an aspect of the expert witness’s testimony, rather than the totality of it.

It believes, as it argues, that the hearing court focused too much on that portion of the expert’s testimony acknowledging that he had made the same mistakes over the course of the expert’s career and the absence of a procedural rule requiring an attorney handling a foreclosure sale to order a title search prior to the sale, and not enough, indeed, failed to consider, the totality of the respondent’s conduct and its effect and the facts and circumstances of the case. The petitioner questions, in short, a factual finding by the hearing court, which not only heard, but also was able to observe the demeanor of the witnesses whose testimony it credited. Attorney Griev. Comm’n v. Awuah, 346 Md. 420, 433 , 697 A.2d 446, 453 (1997).

To be sure, the hearing court was free to adopt the analysis that the petitioner offers as the proper one. It was not required to do so, however. The hearing court could have, as it did,