Attorney Grievance Commission v. Zdravkovich

HARRELL, Judge. I. Respondent, Dushan S. Zdravkovich, 1 was admitted to the Maryland Bar on 1 November 1981. The Attorney Grievance Commission (“the Commission” or “Petitioner”), acting through Bar Counsel, filed a petition for disciplinary action against Respondent on 8 August 2002 after learning that he allowed his escrow account balance to drop below the value of the funds he had received and placed in trust in the account. The Commission alleged that Zdravkovich violated Maryland Rules of Professional Conduct (MRPC) 1.4, 2 1.15, 8.1, 8.4(b), 8.4(c), and 8.4(d), as well as Maryland Code (1989, 2000 Repl.Vol), § 10-306 of the Business Occupations and Professions Article, and Maryland Rule 16-607. 3 Judge Michael E. ⁶⁸⁵ Loney of the Circuit Court for Anne Arundel County, to whom we assigned this matter for hearing, made the following relevant findings of fact and conclusions of law (footnote renumbered): Findings of Fact and Conclusions of Law “Although Respondent was accused of violations of the Rules of Professional Conduct arising out of a Complaint filed by Milton E. Siegert, Jr., no evidence was presented by Petitioner in that regard.

However, the evidence presented indicates that during the investigation of the Siegert Complaint, Bar counsel learned as a result of examination of Respondent’s subpoenaed bank records, of Respondent’s apparent misappropriation of funds held by him on behalf of Charles Hunter, III. Petitioner requested Respondent to provide bank records regarding funds deposited by Hunter, but Respondent failed to respond. Thereafter, Petitioner subpoenaed the bank records. Since no complaint had been made by Hunter, but rather Hunter had been contacted by Petitioner in the course of a related investigation — Respondent moved to dismiss the Petition, which was held under advisement. “The facts of the Hunter problem arise out of a very routine occurrence.

On October 28, 1999, Hunter went to the Harley Davidson of Annapolis motorcycle dealership to take delivery of a new 2000 concord purple Harley Davidson FXDWG Wide Glide motorcycle, which he had ordered in July 1999. Hunter was prepared to pay the anticipated balance of the sales price in cash. Hunter indicated that he was an Oregon resident and that he should not pay Maryland sales tax. However, he declined to permit the sales personnel to photocopy his Oregon driver’s license and the dealership refused to sell the motorcycle to him.

Hunter protested loudly, refused to leave, and was arrested for trespassing after police were called. Such was the state of affairs when Hunter contacted Respondent — the employer of Hunter’s girlfriend — for professional representation. ⁶⁸⁶ “After an initial consultation, it was agreed that Respondent would represent Hunter. The focus was on three matters. First, Respondent would defend Hunter on the criminal trespass charges in the District Court of Maryland.

Second, Respondent would attempt to persuade the Harley Davidson dealership to complete the transaction and sell the motorcycle to Hunter and/or would file suit against the dealership for specific performance. Third, if successful in the defense of the criminal case, Respondent would file suit on behalf of Hunter against the Harley Davidson dealership for malicious prosecution. No written fee agreement was prepared. However, Respondent followed up with a letter on November 5, 1999, which outlined the strategy and anticipated fee.

In brief, Respondent stated that he agreed to represent Hunter for fixed fees of $1,500.00 in the criminal matter, $3,500.00 in the specific performance case, and $5,000.00 for the malicious prosecution case. No specifics were discussed and no agreement was made with regard to payment of costs. Hunter never signed the letter or any other fee agreement. However, at that time, Hunter paid $1,500.00 to Respondent for representation in the criminal case and $15,552.00 (which represented Hunter’s assertion of the balance of the price of the motorcycle), which was deposited in Respondent’s Attorney Trust Account. “Respondent immediately took action on behalf of Hunter.

He entered his appearance in the criminal case and communicated with the Harley Davidson dealership through counsel in an effort to complete the transaction and offered to pay the $15,552.00 which was represented to be in his escrow account. Thereafter, he promptly filed suit for specific performance on November 30, 1999, paid the filing costs, and continued negotiations on behalf of Hunter. Respondent did not keep time records or otherwise document the sequence of his representation of Hunter. The efforts to negotiate the purchase were not successful and eventually Respondent petitioned the [Circuit Court for Anne Arundel County] to deposit Hunter’s $15,552.00 with the Clerk of Court (which was denied).

Respondent later refunded the ⁶⁸⁷ $15,552.00 to Hunter. Thus, he never received a fee for services rendered in the specific performance case or for costs advanced by him. Respondent represented Hunter in the criminal trial before the District Court, which resulted in a probation before judgment being entered, which was accepted by Hunter. [4] “In the course of its examination of Respondent’s trust account records regarding the Siegert Complaint, Petitioner observed the deposit of $15,552.00 which was made on November 6,1999. It was apparent that almost immediately thereafter the balance in the trust account was reduced substantially below the amount which had been deposited by Hunter.

It was apparent that Respondent had invaded the account and that $9,292.11 may have been misappropriated. Subsequently, deposits were made to the account as a result of a check from Respondent’s son in the amount of $8,000.00 on April 1,2000 and from Respondent’s operating account in the amount of $1,400.00 on April 13, 2000. A check for $15,552.00 was disbursed to Hunter on April 12, 2000. See Exhibits 15 and 22. “In this case, no complaint was made by a victim to the Attorney Grievance Commission.

The investigation of Respondent with regard to Hunter came about because Petitioner was in the process of investigating a prior complaint from Siegert and bank escrow records indicated a large deposit — later determined to be that from Hunter — and an apparent immediate diminishment of those funds. For that reason, Respondent argues that the matter should be dismissed as to him. Rule 16-704(b) provides that Bar counsel shall “investigate all matters involving possible misconduct called to his attention whether by complaint or otherwise.” Under the Rule, Bar counsel had the authority to investigate possible misconduct from whatever source and had the duty to do so when confronted with an apparent violation of ⁶⁸⁸ the Rules of Professional Conduct while in the process of investigating another complaint against the same attorney. “Respondent did not adequately explain the terms of the fee arrangement to his client and did not prepare a written fee agreement, which contributed to the eventual breakdown of confidence in Respondent by his client and the eventual termination of the attorney/client relationship. That is regrettable because Respondent did perform professional services for Hunter.

He expended time and effort in the representation of Hunter in the criminal matter, which resulted in a disposition of probation before judgment, which was accepted by Hunter. The fee of $1,500.00 for representation in the criminal matter was reasonable, was agreed to by the client, and was earned by Respondent. Respondent also used his efforts to attempt to accomplish the purchase of the motorcycle on behalf of Hunter although he was not successful in persuading the dealership to complete the transaction. It is evident that the behavior of Hunter at the dealership and the manner of negotiation persuaded the dealership not to change its mind in its decision not to do business with Hunter.

In addition, Respondent was diligent in promptly filing suit for specific performance on behalf of Hunter. The complaint was filed promptly and capably. Hunter was competently represented by Respondent in the matter. In hindsight, it is clear that Respondent did not adequately communicate with Hunter to explain the cause of action available to him and to discuss reasonable expectations.

Thus, it was in March 2000 that Hunter terminated Respondent’s representation of him notwithstanding the fact that Respondent had provided professional services to Hunter, had expended costs on his behalf, and had not been paid for his representation in the civil matter. In short, after five months, Hunter was dissatisfied because he had not yet won and fired his attorney. His expectations were not reasonable. “From the evidence, the Court concludes that the parties agreed to a fee of $1,500.00 for representation in the criminal case and that Hunter’s $15,552.00 would be placed in ⁶⁸⁹ Respondent’s trust account to be used to complete the purchase of the motorcycle. The $15,522.00 was intended solely for that purpose.

It was offered to the Harley Davidson dealership and subsequently Respondent offered to pay it into Court. Notwithstanding the fact that the $15,522.00 was to be used for that purpose, Respondent’s bank records show that the funds were improperly diminished and were not available when offered by Respondent on behalf of his client to the dealership and to the Court. “It is, based upon the facts set forth above, the conclusion of this Court that the Respondent violated the following Rules of Professional Conduct: “Rule 8.1 Bar Admission and Disciplinary Matters “An applicant for admission or reinstatement to the bar, or a lawyer in connection with a bar admission application or in connection with a disciplinary matter, shall not: “(b) fail to disclose a fact necessary to correct a misapprehension known by the person to have arisen in the matter, or knowingly fail to respond to a lawful demand for information from an admissions or disciplinary authority, except that this Rule does not require disclosure of information otherwise protected by Rule 1.6. “When Respondent came under suspicion in the course of the Siegert investigation, Bar counsel requested him to provide [ ] information regarding the trust account. Respondent did not respond. He did nothing.

As a result, Bar counsel issued an appropriate subpoena to Respondent’s bank and completed the investigation by acquiring records of the account, which indicated an invasion of Hunter’s escrowed funds (Exhibit 15). Respondent now argues that he refused because Hunter had not filed a complaint. “Rule 8.1(b) provides an exception to that rule where disclosure of information is otherwise protected by Rule 1.6: Confidentiality of information. “Rule 1.6(b) ⁶⁹⁰ “(b) A lawyer may reveal such information to the extent the lawyer reasonably believes necessary: “(3) to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, or to establish a defense to a criminal charge, civil claim, or disciplinary complaint against the lawyer based upon conduct in which the client was involved or to respond to allegations in any proceedings concerning the lawyer’s representation of the client. “At the December 17, 2003 evidentiary hearing, Charles Hunter, III testified he was not waiving his attorney-client privilege. No evidence was presented that justified a basis for refusing to provide the requested information based on Rule 1.6. Therefore, the Court ruled that Respondent’s testimony regarding the Hunter matter would not violate the attorney-client privilege. “The Court finds by clear and convincing evidence that Respondent violated Maryland Rule of Professional Conduct 8.1(b) by knowingly failing to respond to a lawful demand for information from a disciplinary authority.

The Court further finds that it was appropriate for Bar counsel to investigate under such circumstances — when presented with an apparent violation of professional conduct while in the process of investigating a complaint by another client of the same attorney. To have done otherwise would have been to ignore an apparent violation. “Rule 1.15 Safekeeping Property “(a) A lawyer shall hold property of clients or third persons that is in a lawyer’s possession in connection with a representation separate from the lawyer’s own property. Funds shall be kept in a separate account maintained pursuant to [Title 16, Chapter 600] of the Maryland Rules. Other property shall be identified as such and appropriately safeguarded.

Complete records of such account funds and of other property shall be kept by the lawyer and shall be preserved for a period of five years after termination of the representation. ⁶⁹¹ “(b) Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person. Except as stated in this Rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive and, upon request by the client or third person, shall promptly render a full accounting regarding such property. “8.4 Misconduct “It is professional misconduct for a lawyer to: “(b) commit a criminal act that reflects adversely on the lawyer’s honesty, trustworthiness or fitness as a lawyer in other respects; “(c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation; “(d) engage in conduct that is prejudicial to the administration of justice; “The Respondent also violated the following section of the Business Occupations and Professions Article: “ § 10-306 [of the Business Occupations and Professions Article] Misuse of Trust Money “A lawyer may not use trust money for any purpose other than the purpose for which the trust money is entrusted to the lawyer. “The Respondent also violated the following Maryland Rule: “Rule 16-607 Commingling of Funds “(a) General Prohibition “An attorney or law firm may deposit in an attorney trust account only those funds required to be deposited in that account by Rule 16-604 or permitted to be deposited by section b of this Rule. “(b) Exceptions. “1. An attorney or law firm shall either (A) deposit into an attorney trust account funds to pay any fees, service ⁶⁹² charges, or minimum balance required by the financial institution to open or maintain the account, including those fees that cannot be charged against interest due to the Maryland Legal Services Corporation Fund pursuant to Rule 16-610 b 1(D), or (B) enter into an agreement with the financial institution to have any fees or charges deducted from an operating account maintained by the attorney or law firm. The attorney or law firm may deposit into an attorney trust account any funds expected to be advanced on behalf of a client and expected to be reimbursed to the attorney by the client. “2.

An attorney or law firm may deposit into an attorney trust account funds belonging in part to a client and in part presently or potentially to the attorney or law firm. The portion belonging to the attorney or law firm shall be withdrawn promptly when the attorney or law firm becomes entitled to the funds, but any portion disputed by the client shall remain in the account until the dispute is resolved. “3. Funds of a client or beneficial owner may be pooled and commingled in an attorney trust account with the funds held for other clients or beneficial owners. “The trust account records are persuasive and clearly show what happened to the Hunter funds. Very soon after they were deposited in Respondent’s trust account, disbursements were made from the account on other unrelated matters, which caused the balance to be reduced to $6,259.89.

Thus, when Respondent wrote to the Harley Davidson dealership on behalf of Hunter and offered to pay $15,552.00 for the motorcycle, Respondent did not have that amount in his escrow account. Likewise, when he petitioned the Court to deposit the funds on behalf of Hunter, he did not have them in his account. When things turned sour between Respondent and Hunter, Respondent obtained funds from his son ($8,000.00) and deposited $1,400.00 of personal funds, which enabled him to refund the escrowed funds to Hunter. ⁶⁹³ “Respondent now argues that he made a mistake when he inadvertently overpaid on a claim from the trust account to Erma Assberry, Esq. ($1,000.00) on behalf of another client.

More importantly, he now contends that he had authority from Hunter to withdraw the funds to pay fees owed to him for professional services rendered on behalf of Hunter whenever Respondent believed that they were due and owing. According to Respondent, he could draw from Hunter’s $15,552.00 escrow funds whenever he wanted because of the fee agreement that he had with Hunter. Hunter unequivocally denies and disputes any such agreement or authorization. He confirms and the Court finds that the $15,552.00 was to be used solely for the purchase of the motorcycle.

As indicated above, no such agreement was reduced to writing or adequately agreed to by Respondent and Hunter. It was the duty and responsibility of Respondent to clearly articulate the fee arrangement with his client and to insure that it was agreed to an understood by both parties. He failed to do so and failed to keep separate the funds of himself and his client. Thus, Respondent invaded the escrowed funds of his client and used them for purposes other than the client’s. “The Court finds by clear and convincing evidence that Respondent violated the Maryland Rules of Professional Conduct. 1.15(a), (b), 8.4(b), (c), (d), Md.Code Ann., Bus.

Occ. & Prof. § 10-306 and Rule 16-607.” II. The Court of Appeals exercises original jurisdiction over attorney discipline proceedings. Attorney Griev. Comm’n v. Stolarz, 379 Md. 387, 397 , 842 A.2d 42, 47 (2004). “We conduct an independent review of the record, accepting the hearing judge’s findings of fact unless clearly erroneous.

We will not disturb the factual findings of the hearing judge if they are based on clear and convincing ⁶⁹⁴ evidence. Our review of the hearing judge’s conclusions of law is de novo. “Maryland Rule 16-757(b) [5] requires the Commission to prove the averments of the complaint by clear and convincing evidence. Respondent must only establish an affirmative defense or a matter of mitigation or extenuation by a preponderance of the evidence. Maryland Rule 16-759 requires this Court, when exceptions to the hearing judge’s findings are taken properly, to determine whether the findings of fact have been proven by the requisite standards of proof set out in Rule 16-757(b). [6] “The hearing judge as the trier of fact may elect to pick and choose which evidence to rely upon.

Deference to the hearing judge’s factual findings is paid by us, in part, because the fact finder is in the best position to assess first hand a witness’s credibility.” Stolarz, 379 Md. at 397-98 , 842 A.2d at 47-48 (citations omitted and footnotes re-numbered).

III

The Commission filed no exceptions to the hearing judge’s findings and conclusions. Respondent filed eight exceptions: ⁶⁹⁵ Exceptions One through Four Respondent’s first four exceptions 7 each challenge the hearing judge’s finding that Respondent “invaded the account and that $9,292.11 may have been misappropriated.” While we agree that Respondent’s intentional misappropriation of the specific amount of $9,292.11 is not supported by clear and convincing evidence, we do find that the hearing judge had before him enough evidence to find, by a clear and convincing standard, that Respondent intentionally misappropriated most of that amount. The hearing judge had sufficient evidence before him to conclude that the $15,552.00 remained Hunter’s property, to be held in trust by Respondent, until it was repaid by Respondent. 8 Hunter testified that the $15,552.00 he gave to Respon ⁶⁹⁶ dent by check was intended to serve as the purchase price for the motorcycle, should Respondent be successful in his negotiations with the Harley Davidson dealership or in petitioning to place those funds in escrow with the Circuit Court for Anne Arundel County in the specific performance action. The hearing judge was not convinced by any of the scant evidence Respondent presented that this understanding was altered at any time or that the money was meant originally to be used for some other purpose.

Generally we defer to the hearing judge on questions of witness credibility. We see no reason to do otherwise here. Given the finding that the $15,552.00 remained Hunter’s property until it was returned to him, Respondent’s escrow account bank records serve as prima facie evidence of misappropriation. Attorney Griev.

Comm’n v. Glenn, 341 Md. 448, 472 , 671 A.2d 463, 475 (1996) (“The mere fact that the balance in an attorney trust account falls below the total amounts held in trust supports a prima facie finding of violation of the rule.”). Those records indicate that the escrow account balance dropped to $6,259.89 just prior to Respondent returning Hunter’s money to him, and that Respondent replaced the missing $9,292.11 by depositing a check for $8,000 from his son and another for $1,400 from his operating account. Respondent did not provide a satisfactory explanation for why his escrow account balance fell below the level of the funds that were to be held in trust. The balance in Respondent’s escrow account, which was $5,500.08 just before Respondent deposited Hunter’s $15,552.00 check on 6 November 1999, initially dropped to $14,552.08 on 12 November 1999 when Respondent disbursed $6,500 to Erma Assbury.

Respondent testified that he made a $1,000 mistake by that disbursement; rather, he owed her only $5,500 on an