Kentucky Bar Ass'n v. Heavrin

PER CURIAM. In this disciplinary proceeding the Kentucky Bar Association charged Donald M. Heavrin, a Louisville attorney and a member of the Kentucky Bar Association, with seven counts of unethical conduct calculated to bring the bench and bar of Kentucky into disrepute. A trial committee consisting of three members filed an opinion with one member of the committee filing a dissenting opinion recommending that the Board of Governors dismiss the charges because Heavrin alleged the Kentucky Bar Association had not proceeded properly under the provisions of former RAP 3.160.1 On July 16, 1977, the Board of Governors sent the case back to the trial committee to make recommendations on the merits. Then on January 2, 1978, the trial committee recommended dismissal of all charges by unanimous vote. Subsequently on March 18, 1978, the Board of Governors, after full consideration, voted on the issue of guilt or innocence. Ten members of the Board found Heavrin guilty on Counts IV through VII and recommended that he be suspended from the practice of law in this Commonwealth for a period of two years. It was further recommended by the Board of Governors that Heavrin pay the costs of these proceedings. One member found him not guilty. Thereafter Heavrin filed in this court a notice for review and brief. This court has reviewed the record including the proceedings of the Jefferson Circuit Court entitled “Citizens Fidelity Bank and Trust Co. v. Donald M. Heavrin,” No. 176498, which by stipulation the parties made a part of this record all of the testi [917] mony and proceedings of the Jefferson Circuit Court.2 In order to place the issues in proper perspective, this court is of the view that the findings of fact and conclusions by the Board of Governors very aptly cuts through the voluminous and prolix testimony presented before the trial committee including the evidence presented in Civil Action No. 176498 styled “Citizens Fidelity Bank and Trust Co. v. Donald M. Heavrin.”3 The finding of facts and conclusions of the Board of Governors are as follows: PACTS “The facts of the case are drawn from the proceedings of the Jefferson Circuit Court, entitled “Citizens Fidelity Bank and Trust Company v. Donald M. Heavrin, No. 176498”. By stipulation, the parties made a part of this record all of the testimony and proceedings of the Jefferson Circuit Court. Sometime in March, 1972, Heavrin was employed and undertook to represent James F. Donoghoe, a former member of the association, on a charge of uttering a worthless check in the amount of $3,000.00. It appears that Donoghoe had some bizarre arrangement with certain clients in Pennsylvania to use $42,500.00 of a settlement he had made for them in a personal injury case. Donoghoe was to use the $42,500.00 in a real estate deal upon the payment of 9% interest to the client, subject to the right of the client to call upon Donoghoe from time to time for payment. The $3,000.00 which gave rise to the prosecution represented a check by Donoghoe to these clients which bounced. A Warrant was issued for Donoghoe’s arrest and an arrangement was made with the County Attorney’s office, whereby Donoghoe paid the $3,000.00 bad check and the case was continued by the County Attorney’s office until payment in full was made to the client. Sometime during the course of his representation of Donoghoe Respondent learned that Donoghoe was being threatened with further criminal prosecution and disciplinary action before the Bar Association if the full amount of the unpaid balance was not immediately paid. The Respondent testifies that he informed Donoghoe that he must make restitution to these clients before the charges would be dismissed. The Respondent on one occasion engaged in a heated telephone conversation with one of the Pennsylvania clients in which the Respondent was informed that prosecution would ensue unless the money was paid. The Respondent testifies that he felt Do-noghoe was being taken advantage of, therefore, he made arrangements to loan Donoghoe the money and the criminal prosecution subsequently abated. The Respondent admits he did not have the money to loan, however, he undertook to raise the money and this is where the problems began to arise in this case. The Respondent had previously represented one Norman Bodenbender and borrowed money from him personally on other occasions. It appears that Mr. Bodenbender was a person of some means but secreted the full extent of his assets. The Respondent called Bodenbender and asked for the loan and Bodenbender questioned the purpose of the loan. At this point the Respondent felt his duty to his client (Donoghoe) prevented him from disclosing the purpose was really to bail out a recalcitrant lawyer so he told Bodenbender it was for a real estate deal.4 The conversation culminated in a loan to [918] the Respondent by Bodenbender in the amount of $32,500.00 some two days later. During the conversation and prior to his getting the money from Bodenbender, the Respondent admits that he was becoming suspicious of Donoghoe’s actions5 but in spite of his suspicions, he still felt that he could help him out of these difficulties and they discussed the matter of security for the loan from Respondent to Donoghoe. Respondent states he was impressed with Donoghoe’s apparent affluence (airplanes, boats, cars, diamonds) and it was arranged that Donoghoe would sell to the Respondent some jewelry worth from $100,000.00 to $200,000.00 for $44,000.00, with an option in Donoghoe to repurchase the jewelry within thirty days at the principal amount plus 9% interest. A document to this effect was drawn up between Donoghoe and the Respondent. With the $32,000.00 ($32,500.00) loan from Bodenbender, the Respondent paid $10,-000.00 to Fidelity Finance Corporation to pay off a loan to Donoghoe and get a release of the jewelry they were holding as collateral. The remainder of the loan was used to keep Mr. Donoghoe’s Pennsylvania clients from filing complaints with the Bar Association. To further carry out the plant, (sic) the Respondent borrowed $10,-000.00 from his father. The Respondent took possession of the jewelry in question and took it to a jewelry dealer for safekeeping, intent upon returning and claiming the jewelry at the end of thirty days in the event Donoghoe did not come up with the money. On June 12, 1972, Donoghoe came into possession of a check in the amount of $105,000.00 in settlement of a claim. The check had a number of payees on it, including a lawyer by the name of Haddad in Miami, Florida (no relation to Frank Had-dad). Donoghoe tried to cash the check at Liberty National Bank. The bank was somewhat suspicious of Donoghoe because of indications he had previously kited checks between banks in Louisville and Mr. Netherton from Liberty told Donoghoe to have the check certified. In the meantime, Mr. Haddad of Florida called Netherton concerning a bad check of Donoghoe’s and Netherton mentioned the $105,000.00 check which had Haddad’s name on it and Haddad said he hadn’t endorsed it. Donoghoe flew to Chicago and had the check certified and when Donoghoe presented the check again, Netherton wouldn’t cash the check because of his conversation with Haddad concerning a possible forgery. After the second refusal by Liberty to cash the check, Donoghoe consulted with the Respondent who proceeded to assist him in cashing the check. Donoghoe and the Respondent went to the Liberty National Bank and attempted to cash the check and were refused, whereupon Heavrin became incensed, quoted some law about the UCC to the officer of the bank, and indicated he would take it to his bank at Citizens who would cash it. Mr. Netherton of Liberty, having friends in the banking fraternity, attempted to call a friend at Citizens to warn him about the endorsement on the check, but was unable to reach him until Monday, June 19, 1972, at which time he alerted a Mr. Maple at Citizens of possible forged endorsements. On June 15, 1972, Donoghoe gave a check for $49,000.00 to the Respondent to repay the loan the Respondent had made to Dono-ghoe, together with his fee. Within thirty minutes after the Respondent received the check from Donoghoe and deposited it to his account, Donoghoe called him and informed him that the check for $49,000.00 was no good because his wife had paid a series of large bills. Mr. Heavrin then wrote a check on his own account to Dono-ghoe in the amount of $49,000.00 which he admittedly did not have in his account. On Friday, June 16,1972, the Respondent presented the $105,000.00 check to Mrs. [919] Maureen Colley (sic) at the Citizens Bank and Mrs. Colley’s (sic) testimony is that Heavrin represented to her that he knew personally each person had endorsed the check. Heavrin denies this6 and, in fact, there is some controversy whether Heavrin endorsed the check in the presence of Mrs. Colley (sic) or had already endorsed it prior to presenting it to her. In any event, there was some controversy prior to the cashing of the check but after consultation with bank officials, and the check bearing certification, the Citizens Fidelity cashed the check; whereupon, the Respondent put $45,000.00 in his attorney account, $49,000.00 in his personal account, and took $11,000.00 in cash which he turned over to Donoghoe. On June 16,1972, the Respondent wrote a check payable to cash for $35,000.00 on his Attorney at Law Account and later deposited the same in his Escrow Account at the Bank of Louisville. On the same day he drew a check to Donoghoe in the amount of $48,958.00 on his personal account, and further on June 19, 1972, he certified a $10,-000.00 check on his Attorney at Law Account making it payable to himself, which was then placed in his Escrow Account with the Bank of Louisville. On June 17, 1972, he deposited the $35,-000.00 in his Escrow Account and made disbursements in the following sums: $57.00 to Dennis O’Connor $5,489.50 to Thomas B. Robertson, Sr. $569.50 to James F. Donoghoe $24,884.00 to Norman Bodenbender $2500.00 to Don N. Heavrin $1500.00 to Don N. Heavrin. A further recitation of facts is unnecessary, however, we deem it appropriate to note that eventually it was found the endorsement on the checks were either wholly or partially forged, and litigation arose between the Citizens Fidelity Bank and all parties, including the Respondent, Heavrin, to establish liability for the forged endorsements. The Judgment of the Jefferson Circuit Court found the Respondent, Heavrin, liable for $11,000.00 which the Bank turned over to him in cash personally and which he later gave to Donoghoe. QUESTIONS PRESENTED 1. Does the Conduct of Heavrin With Respect to His Dealings With Donoghoe Constitute Unethical and Unprofessional Conduct Calculated to Bring the Bench and Bar of Kentucky Into Disrepute? 2. Is the Bar Association Barred From Bringing These Disciplinary Proceedings on the Grounds That the Decision of the Jefferson Circuit Court in the Civil Action is Res Judicata? FINDINGS On June 23, 1977, the Trial Committee duly appointed herein, filed a Trial Committee opinion, one member of the committee filing a dissenting opinion, recommending that the Board of Governors dismiss the charges because Respondent alleged the Bar Association had not proceeded properly under the provisions of former RAP 3.160. On July 16, 1977, the Board of Governors entered the following order: ‘Motion adopted by the Board of Governors referring the disciplinary matter concerning Donald M. Heavrin back to the Trial Committee with the direction that the Trial Committee file on or before September 9,1977, a report in compliance with RAP 3.360. The report may still include a recommendation to dismiss for procedural defects.’ The Board feels the Respondent’s conduct with respect’ to cashing the $105,000.00 check was in direct contravention of DR 1-102(A)(4). Further, the Board finds a violation of DR 9-102(A) relative to the separation of funds. No amount of check [920] manipulating by the Respondent as went on in this case can be justified under the circumstances which are evident when the entire facts are documented. It is tragic the manipulations of the Respondent caused the financial losses documented in this sordid affair. The Board further finds the conduct of the Respondent constituted a reckless disregard for the rights of the payees on the checks in question and is a violation not only of Canon 9 of the Code of Ethics in regard to Trust Funds, but also DR 1 — 102. The Board cannot accept the Respondent’s explanation of his conduct, especially in view of the uncontroverted testimony that prior to his entering into this sordid check cashing affair, he was suspicious of Donoghoe’s conduct. No attorney owes the duty to a client to enter into a course of action destined to lead to the bilking of innocent parties of their money. Once having entered into this course of conduct the Respondent then devoted most of his energy to the protection of his own financial interests and not to the protection of the parties rightfully entitled to the funds. The Respondent’s contention that disciplinary action in this case is barred under the doctrine of Res Judicata is not valid. Res Judicata prevents a retrial of a matter which has been decided on the merits, 9 ALR 3rd 210, See. 2(B). This matter has further been decided by the Court of Appeals in the case of Ratterman v. Stapleton, Ky., 371 S.W.2d 939 (1963). “The Board differs with the Trial Committee in that a majority of the Board feels the conduct of the Respondent as set out above constituted conduct calculated to bring the bench and bar of Kentucky into disrepute7 for the foregoing reasons.” This court has reviewed the record and a majority of the members are of the opinion that the record adequately supports the conclusions of the Board of Governors of the Kentucky Bar Association8 that Heav-rin is guilty of unprofessional conduct of sufficiently serious nature to warrant that he be suspended from the practice of law in this Commonwealth for a period of two years. The Board of Governors found that Heavrin had violated Canon 1 of the Code of Professional Responsibility which provides that a lawyer should assist in maintaining the integrity and competence of the legal profession. It found also that Heav-rin violated Disciplinary Rule 1-102(A)(4) which states that a lawyer shall not engage in conduct involving dishonesty, fraud, deceit or misrepresentation. The Board found also that Heavrin violated Canon 9 of the Code of Professional Responsibility which provides that a lawyer should avoid even the appearance of professional impropriety. It is the view of the majority of the members of this court that Heavrin was more interested in protecting his interests than that of his client and that he knew at all times what he was doing. It is also the view of the majority of the members of this court that Heavrin was not a “lamb led to the slaughter” by the artful cunning of a skilled con man, James F. Donoghoe, a former member of the Kentucky Bar Association who has previously been permanently disbarred. It is therefore ordered that Donald M. Heavrin is hereby suspended from the practice of law in the courts of this Commonwealth for a period of two years and it is ordered that he pay the costs of these proceedings. All concur except PALMORE, C. J., and CLAYTON, J., who dissent. Footnotes [1] “The Initiation of Disciplinary Cases (a) Any complaint against an attorney for unprofessional conduct shall be filed with the Director who shall promptly notify the attorney by certified mail of the complaint and inform him that he has 15 days to acknowledge receipt of the complaint or respond to the merits.” Amended Oct. 14, 1977, effective Jan. 1, 1978. (No substantial change in this section.) [2] One volume consisting of the original record, eight volumes of depositions, and three volumes of evidence. [3] The trial court absolved Heavrin of liability except for $11,000.00 he received when the $105,000.00 check was presented to Citizens for deposit. This was before Maureen Collie, who authorized the transaction, knew anything concerning the questionable endorsements. [4] In lawyer’s language this is a misrepresentation. In Layman’s language this is a lie. [5] This was prior to June 15, 1972. [6] The majority of the court believes Ms. Collie. [7] This is a standard which is neither vague nor ambiguous. See Nicholson v. Judicial Retirement and Removal Commission, Ky., 562 S.W.2d 306, Part I (1978). [8] This is a civil not a criminal proceeding. Proof by a preponderance of the evidence is all that is required. Louisville Bar Ass’n v. Hubbard, 282 Ky. 734, 139 S.W.2d 773 (1940); Commonwealth v. Richie, 114 Ky. 366, 70 S.W. 1054 (1902); see also Kentucky Bar Ass’n v. Franklin, Ky., 534 S.W.2d 459 (1976).