Attorney Grievance Commission v. Spery

RAKER, Judge. The Attorney Grievance Commission, acting through Bar Counsel, filed a petition with this Court for disciplinary action against Robert M. Spery, respondent, alleging violations of the ⁵⁶³ Maryland Rules of Professional Conduct (hereinafter “MRPC”). The Commission charged respondent with violating MRPC 8.4(c) (Misconduct). 1 We referred the matter to Judge Donald F. Johnson of the Circuit Court for Dorchester County to make findings of fact and proposed conclusions of law. Following an evidentiary hearing, Judge Johnson concluded that respondent violated Rule 8.4(c).

I. Judge Johnson made the following Findings of Fact and Conclusions of Law: Findings of Fact “Before this Court is the Petition for Disciplinary Action, filed by the Attorney Grievance Commission of Maryland, by Melvin Hirshman, Bar Counsel, and James P. Botluk, Assistant Bar Counsel, hereinafter ‘Petitioners.’ Petitioners allege that Robert M. Spery, Esquire, hereinafter ‘Respondent,’ violated Rule 8.4(c) of the Maryland Rules of Professional Conduct in the course of Respondent’s management of a partnership. Petitioners allege that the Respondent misappropriated partnership funds by writing partnership checks payable to himself in a total amount of approximately $47,000.00. The Respondent argues that he merely took the money as a loan, and never borrowed more than his partnership interest. An evidentiary hearing was held on the 12th day of June, 2002. “In December of 1982, the Respondent, together with Eugene A. Walsh, Esquire and Arthur D. Webster, Esquire, collectively, the ‘Partners,’ purchased the building located at 110 Baptist Street, Salisbury, Maryland, under the form of a partnership, known as the ‘Baptist Street Associates,’ with each Partner owning a one-third interest.

Formal partner ⁵⁶⁴ ship articles were never drawn up. The Partners used this building as the office of their law firm, Webster, Walsh, & Spery. “Sometime in 1984, the Partners ceased practicing law together and decided to maintain 110 Baptist Street as a rental property. Mr. Webster managed the partnership books until early in 1993 at which time the Respondent became the managing partner. Shortly before the Respondent became the managing partner a new tenant was acquired requiring renovations to the building.

The Partners elected to refinance the building in order to obtain the money for the renovations. The building was appraised at approximately $192,000.00 and refinanced for approximately $155,000.00. The renovations were completed for approximately $25,000.00 and each partner received approximately $29,000.00 for his share of the accumulated equity in the partnership. Inquiry Panel Hearing, T. 17-20. “As managing partner, the Respondent’s duties included collecting rent, completing repairs, paying taxes, paying for insurance, and making payments on the mortgage.

The Respondent furnished copies of partnership tax returns to the other partners. The other partners became concerned about how the partnership was being managed after the Vice President and Loan Officer of Peninsula Bank notified them, in the spring of 1999, that loan payments were late. Mr. Walsh obtained a loan history from the bank and discovered that approximately twenty-seven of the last thirty-six payments had been late and that late fees had been incurred. Mr. Walsh and Mr. Webster were also concerned about the excessive repairs and a note that had been appearing on the partnership tax returns. 1 They called a partnership meeting in April of 1999 to discuss these matters with the Respondent. ⁵⁶⁵ “At the meeting the Respondent did not reveal that he was, as he now alleges, borrowing from his partnership interest.

Instead, the Respondent apologized for the late payments and represented that he had not been attentive to the mortgage. The Respondent also represented that the other partners owed him thousands of dollars for repairs that the Respondent had paid for with his own money. The Respondent offered to sell his interest in the partnership for $20,000.00. The other partners agreed to consider this offer but first requested that the Respondent prepare an invoice for his out-of-pocket expenses and deliver the partnership books to the other partners to study. “The Respondent never completed an invoice and did not deliver the books to the other partners until late in September 1999, after Mr. Webster had made numerous phone calls and sent letters to the Respondent.

When the books were finally delivered, the Respondent explained that he had lost four or five years worth of records. Mr. Webster then obtained from Peninsula Bank, at a cost of approximately $1,000.00, copies of the missing bank statements, deposit slips, and returned checks that had been preserved by the bank on microfilm. “Upon review of the documents, Mr. Webster discovered that the Respondent had written numerous checks payable to himself. Mr. Webster calculated that the Respondent had taken from the partnership in the course of five years, without authorization, the amount of $47,821.16. Mr. Webster discovered that, at times, the partnership account lacked sufficient funds to make the mortgage payment.

Mr. Webster also discovered that the Respondent periodically placed money back into the account. After the April 1999 meeting the Respondent deposited approximately $34,000.00 into the account. 2 ⁵⁶⁶ “The checkbook entries turned over by the Respondent reflect that the Respondent reported these disbursements as payments to ‘RMS’ for ‘various,’ ‘maintenance various,’ and some bear no explanation at all. On some of the check stubs the entries have been erased or written over. Plaintiffs Exhibit No. 3. “Sometime in 2000, the Partners reached an agreement by which the Respondent agreed to sign over his one-third interest in the building to Mr. Walsh and Mr. Webster and pay them a sum of $45,000.00.

This amount was to be paid in nine equal payments of $5,000.00, payable every three months beginning March 31, 2000. In exchange, Mr. Webster and Mr. Walsh agreed ‘that so long as the terms of this agreement are fulfilled on a timely basis, that neither of us will discuss our relationship with you regarding this building with any other person.’ Letter of January 23, 2000 (Inquiry Panel Hearing, Exhibit BC 8). The Respondent explained that he agreed to this arrangement because he ‘didn’t want to end up on the front page of The Daily Times’ Inquiry Panel Hearing, T. 153. “The Respondent made three of the scheduled payments, however the third payment was late. 3 Before the third payment had been received, Mr. Walsh reported the Respondent to the Attorney Grievance Commission by letter dated January 9, 2001. Mr. Walsh decided to report the Respondent because he could no longer endure the ‘sleepless nights’ and ‘waking in a cold sweat.’ December 26, 2000, letter authorized by Eugene A. Walsh to Arthur D. Webster (Inquiry Panel Hearing, Exhibit Resp 2).

Mr. Walsh explained that his decision was also based on the Respondent’s threat to ‘take [Mr. Walsh and Mr. Webster] down too.’ Inquiry Panel Hearing, T. 112. “The Respondent admits to taking the money but argues that he never took ‘more from the partnership capital than ⁵⁶⁷ what the value of his one-third interest would have been.’ Evidentiary Hearing, T. 12. The Respondent reported the money on his personal tax returns as income. In light of the Respondent’s misrepresentations at the partnership meeting in April 1999 and his attempts to conceal his actions, considering the misappropriations to be loans would not be an accurate characterization. The Respondent converted partnership money to his own use without authorization and without disclosure to the other partners. 4 The Respondent made ambiguous entries in the partnership books, misrepresented his conduct to the other partners, and attempted to conceal his actions.

The Respondent has demonstrated a lack of probity, integrity and straightforwardness in conduct. The Court finds by clear and convincing evidence that the Respondent has engaged in dishonest conduct in violation of Rule 8.4(c) of the Maryland Rules of Professional Conduct. “The Respondent argues that he only borrowed the money and ‘replaced far more money than he ever took, not only initially but by submitting to ... blackmail or extortion by Webster and Walsh.’ Evidentiary Hearing, T. 15. Although the subsequent conduct of the other partners may be equally deplorable, their conduct is not a defense to the Respondent’s own dishonesty.” II. Neither party has taken exceptions to the hearing judge’s findings of facts or conclusions of law.

Consequently, the only issue in this proceeding is the appropriate sanction to be imposed. Bar Counsel recommends disbarment; Respondent recommends a reprimand. 11,2] The primary purpose in imposing discipline on an attorney for violation of the Rules of Professional Conduct is ⁵⁶⁸ not to punish the lawyer but rather to protect the public and the public’s confidence in the legal profession. Attorney Grievance Comm’n v. Powell, 369 Md. 462, 473 , 800 A.2d 782, 789 (2002). Disciplinary proceedings also are aimed at deterring other lawyers from engaging in similar conduct.

Id. Misappropriation, by an attorney, of funds entrusted to his or her care is an act infected with deceit and dishonesty and, in the absence of compelling extenuating circumstances justifying a lesser sanction, will result in disbarment. Attorney Grievance Comm’n v. Culver, 371 Md. 265 , 808 A.2d 1251 (2002); Attorney Grievance Comm’n v. Sullivan, 369 Md. 650, 655-56 , 801 A.2d 1077, 1080 (2002); Attorney Grievance Comm’n v. Vlahos, 369 Md. 183, 186 , 798 A.2d 555, 557 (2002); Powell, 369 Md. at 475 , 800 A.2d at 789 ; Attorney Grievance Comm’n v. Vanderlinde, 364 Md. 376, 410 , 773 A.2d 463, 483 (2001); Attorney Grievance Comm’n v. Sabghir, 350 Md. 67, 84 , 710 A.2d 926, 934 (1998); Attorney Grievance Comm’n v. Ezrin, 312 Md. 603, 608-09 , 541 A.2d 966, 969 (1988); Attorney Grievance Comm’n v. Nothstein, 300 Md. 667, 687-88 , 480 A.2d 807, 818 (1984); Attorney Grievance Comm’n v. Silk, 279 Md. 345, 347 , 369 A.2d 70, 71 (1977). In cases warranting disbarment, such as those involving intentional dishonesty, fraud, misappropriation and the like, we will not accept