Case Number: 04PDJ089
THE PEOPLE OF THE STATE OF COLORADO,
WILEY T. LINVILLE.
April 27, 2005
REPORT, DECISION, AND ORDER IMPOSING SANCTIONS
On March 1, 2005, William R. Lucero, the Presiding Disciplinary Judge ("PDJ" or "the Court"), conducted a Sanctions Hearing pursuant to C.R.C.P. 251.18(d). James S. Sudler appeared on behalf of the Office of Attorney Regulation Counsel ("the People"). Wiley T. Linville ("Respondent") did not appear, nor did counsel appear on his behalf. The PDJ issues the following Report:
SANCTION IMPOSED: ATTORNEY DISBARRED
Disbarment is the presumed sanction when a lawyer acting in a fiduciary capacity converts money entrusted to him. Respondent, as a trustee, took $73,000 from a trust without the beneficiaries’ consent. When the beneficiaries discovered his actions, Respondent claimed that he had made a mistake. Later, when confronted with disciplinary action, he claimed that he had provided the trust with a promissory note before removing the funds. Respondent has no prior discipline and has completed restitution. Is disbarment nevertheless appropriate?
II.PROCEDURAL HISTORY AND BACKGROUND
On September 22, 2004, the People initiated this action by filing a Complaint against Respondent (attached as Exhibit A). The Complaint was served upon Respondent via certified mail on that day. On September 29, 2004, F. Michael Ludwig, attorney for Respondent, filed an Acceptance of Service on his behalf. However, according to the People, Mr. Ludwig withdrew from the representation. Therefore, on October 14, 2004, the People filed an Amended Citation. On October 26, 2004, the People filed proof of service pursuant to C.R.C.P. 251.32(b), showing re-service of the Amended Citation and Complaint via certified mail.
On November 10, 2004, after Respondent failed to answer the Complaint, the People filed a Motion for Default. On December 10, 2004, the PDJ granted the People’s Motion for Default on all claims. Upon entry of the default, all facts in the Complaint are deemed admitted and all rule violations in the Complaint are deemed established. People v. Richards, 748 P.2d 341 (Colo. 1987). Claim I involves Colo. RPC 8.4(c) (conduct involving dishonesty, fraud, deceit or misrepresentation), and Claim II involves Colo. RPC 1.7(b) (representing a client when the representation of that client may be materially limited by the lawyer’s own interests) and Colo. RPC 1.8(a) (entering into a business transaction with a client adverse to the client’s interests). However, at the Sanctions Hearing on March 1, 2005, the People moved to dismiss Claim II, a motion granted by the PDJ. Thus, the only issue to be decided is the appropriate sanction for Respondent’s violation of Colo. RPC 8.4(c).
While the People sent Respondent notice of the Sanctions Hearing, Respondent did not appear. The People presented no witnesses. The People introduced and the PDJ admitted three exhibits: 1) the Deputy Clerk of the Supreme Court’s certification of Respondent’s attorney registration status and listed addresses, 2) a photocopy of a promissory note executed by Respondent and dated June 5, 2003, and 3) a photocopy of a promissory note executed by Respondent and dated July 15, 2003.
The People seek disbarment. Upon consideration of the facts established by the entry of default, the exhibits offered and admitted, and the People’s argument for disbarment, and after weighing all the relevant factors, the PDJ finds that disbarment is the appropriate sanction.
III. FINDINGS OF FACT
Respondent has taken and subscribed the oath of admission, was admitted to the bar of this Court on May 16, 1990, and is registered upon the official records of this Court, registration number 19373. He is therefore subject to the jurisdiction of this Court in these disciplinary proceedings. Respondent’s registered business address is 400 S. Colorado Blvd., no. 510, Denver, CO 80246.
The factual background in this case is fully detailed in the admitted Complaint, which is hereby adopted and incorporated by reference.1 In summary, Respondent drafted a charitable trust ("the Trust") in 1996 for Paul and Mary Lillmars, a couple with whom he had an ongoing attorney-client relationship. During their lives, the Lillmars are the income beneficiaries of the Trust. Upon their deaths, the trust funds will go to charity.
Initially, the Trust held a piece of real estate. In June 2003, Respondent represented the Trust in selling the real estate for $317,000. At the closing, Respondent was named trustee of the Trust funds. As trustee, Respondent deposited all of the sale proceeds into an account ("the Trust Account"). One day later, Respondent began withdrawing funds for his own personal use. In total, Respondent withdrew about $73,000 in Trust funds for his own purposes, including his personal home mortgage, his firm’s operating account, his children’s trusts, and a large payment on a Mercedes.
On July 11, 2003, Respondent met with Mr. Lillmars, investment advisor Albert Woodward, and accountant Roseanne Masters to discuss the investment of $300,000 into a real estate investment trust. At the time of the meeting, the Trust had a balance of about $267,000. At this meeting Respondent, did not disclose either the Trust Account balance or that he had taken money from the Trust for his own use.
Even after the meeting at which Respondent did not discuss his withdrawal of Trust funds, Respondent continued to take large amounts from the Trust Account for his own benefit.2 On July 15, 2003, Respondent deposited about $58,000 back into the Trust Account. After that deposit, the Trust had sufficient funds to complete the planned investment, which was done the next day. Respondent, however, still owed about $15,000 plus interest as of July 16, 2003.
Ms. Masters, in preparation of the Trust’s taxes, discovered in March 2004 that Respondent had withdrawn substantial amounts of money from the Trust. In May 2004, Ms. Masters and the Lillmars’ son Greg Lillmars met with Respondent. Respondent said that he had made a mistake, and when he realized that he was using the wrong account, he replaced the money. At that time, Respondent wrote a post-dated check for $15,486.38, to complete restitution. This check cleared when presented.
Although he initially stated that his use of Trust funds was a mistake, Respondent stated that he had received a loan from the Trust in response to the People’s investigation. He produced a copy of an unsecured promissory note for $74,000, signed by himself and dated June 5, 2003. There is no provision for payment amounts and no due date for payment in full. Respondent told the People that he paid the $74,000 note in full on July 15, 2003, which he noted on its face. He claims he did so by depositing $58,000 into the Trust and executing a second promissory note for $15,000. With the exception of the dates and the amount, the second promissory is identical to the first. Respondent stated that before he took the money from the Trust, he had "outlined" that he would need about $74,000 in cash during a 45-day period. However, Respondent never discussed his personal use of Trust funds with anyone at the time he took the money.
These facts constitute a violation of Colo. RPC 8.4(c) (conduct involving dishonesty, fraud, deceit or misrepresentation), as Respondent converted Trust funds for his own personal use, and then concocted a story about a loan in order to conceal his conversion.
The ABA Standards for Imposing Lawyer Sanctions (1991 & Supp. 1992) ("ABA Standards") and Colorado Supreme Court case law are the authorities for selecting and imposing sanctions for lawyer misconduct. The appropriate sanction depends upon the facts and circumstances of each case.
Analysis Under the ABA Standards
Disbarment is generally appropriate "when a lawyer knowingly converts client property and causes injury or potential injury to a client," ABA Standard 4.11, or "when a lawyer engages in conduct involving dishonesty, fraud, deceit, or misrepresentation that seriously adversely reflects on the lawyer’s fitness to practice law," ABA Standard 5.11(b).3 Therefore, disbarment is the presumptive sanction for Respondent’s misconduct. However, before determining the appropriate sanction, ABA Standard 3.0 directs the PDJ to examine the following factors:
(1) the duty breached;
(2) the mental state of the lawyer;
(3) the injury or potential injury caused; and
(4) the aggravating and mitigating evidence.
A. DUTIES VIOLATED
First and foremost, Respondent violated his fiduciary duties as trustee, and thus violated his duties to both present and future beneficiaries of the Trust. As part of an ongoing attorney-client relationship, the Lillmars sought Respondent’s counsel in creating and managing the Trust. Respondent failed to act with integrity and abused his position when he treated Trust funds as though they were his own, and then attempted to conceal his wrongdoing from the Lillmars and the People. Because Respondent violated legal duties, he also breached his duty to the public and the legal profession. "Attorney misconduct perpetuates the public’s misperception of the legal profession and breaches the public and professional trust." In re DeRose, 55 P.3d 126, 131 (Colo. 2002) (paraphrasing In re Paulter, 47 P.3d 1175, 1178 (Colo. 2002)).
B. MENTAL STATE
Due to the fact that Respondent defaulted in this action, the Court is limited to the Complaint in determining Respondent’s state of mind. The Complaint supports a finding that Respondent knowingly converted client funds. According to the ABA Standards, "‘knowledge’ is the conscious awareness of the nature or attendant circumstances of the conduct but without the conscious objective or purpose to accomplish a particular result."4 Here, Respondent acted with the conscious purpose of taking trust money for his own benefit. As pleaded in the Complaint, Respondent had "outlined" his personal cash needs and took approximately that amount from the trust.
Although their testimony would have been helpful in determining the nature and extent of any injury, the Lillmars were not called as witnesses at the Sanctions Hearing. Therefore, the PDJ must rely solely on the facts in the Complaint. Respondent has made full restitution to the Lillmars.5 Nevertheless, the Complaint demonstrates a potential financial injury to them.6 In addition, the Lillmars were injured in an intangible way by the serious breach of integrity. Repayment of the money has ameliorated the monetary loss, but it cannot repair the loss of confidence in the profession and the legal system.
D. AGGRAVATING AND MITIGATING FACTORS
1. MATTERS IN AGGRAVATION, ABA Standard 9.2
Dishonest or Selfish Motive
Respondent acted dishonestly and with a selfish motive. The Complaint establishes that he misappropriated approximately $73,000 for his own benefit. Respondent used Trust money to pay for his own bills, including his house, his car, and his law firm. He even deposited money from the Lillmars’ Trust into his own children’s trust accounts. Although Respondent returned the funds, he did not make a payment until he was forced to so as a practical matter. Had Respondent not deposited $58,000 when he did, it would have been immediately apparent that he had converted Trust funds because of the planned $300,000 investment. When Ms. Masters discovered his actions, Respondent explained that he had mistakenly taken money out of the wrong account. Later, Respondent stated that he had received a loan from the Trust and presented the promissory notes. However, the Court finds the loan story to be untruthful for three reasons: 1) Respondent changed his original explanation that it was a mistake, 2) Respondent never discussed taking money out of the Trust for his own benefit at the time he took the money, and 3) the promissory notes themselves are suspect, as they are unsecured and do not contain a due date. Thus, Respondent attempted to conceal his wrongdoing, but his deception only exacerbated it.
Vulnerability of Victim
The People argue that Respondent’s actions are aggravated by the vulnerability of his victims. However, the People did not present any evidence (such as age, mental capacity, or poverty) that make the Lillmars particularly vulnerable. Nor did the People present any evidence on the future beneficiaries, the charities. As with every victim in this system, the Lillmars placed their trust in an attorney and relied on his counsel in managing their affairs. Respondent breached that trust. However, the Court cannot find, for the purposes of aggravating Respondent’s offense, that the Lillmars were vulnerable.
Deceptive Practices During the Disciplinary Process
Respondent presented two promissory notes to the People, claiming that these promissory notes prove the existence of a loan and disprove any intent to misappropriate money from the Trust. Respondent’s explanation regarding when and why he drafted the promissory notes defies reason and common sense. The clear and convincing evidence based upon facts in the Complaint and the promissory notes themselves is that Respondent never intended for anyone to find out that he took $73,000 from the Trust. When his actions were first discovered, he asserted that it had been a mistake, not that he had been given a loan. Absent some plausible explanation from Respondent, the Court is left with the inference that Respondent drafted and produced the promissory notes after the People’s investigation commenced.
Substantial Experience in the Law
Respondent has approximately 15 years of experience as a lawyer, and is (or should be) well aware of his ethical responsibilities and fiduciary duties. The extent of his experience makes Respondent’s breach of his responsibilities and duties even more egregious.
2. MATTERS IN MITIGATION, ABA Standard 9.3
Absence of a Prior Disciplinary Record
Respondent has no disciplinary history. He has been licensed in Colorado since May 16, 1990.
Timely Good Faith Effort to Make Restitution/
Rectify Consequences of Misconduct
Respondent returned all of the money he took from the Trust Account and did so before serious harm could occur, thus alleviating the injury and potential injury caused. Respondent must be given credit for completing restitution before the People initiated an investigation and filed formal charges. However, the Court must also consider that payment of restitution was motivated at least in part by Respondent’s effort to avoid detection, and not necessarily in a good faith effort to acknowledge his wrongdoing.
Analysis Under Case Law
Knowing conversion in the context of client money "consists simply of a lawyer taking a client’s money entrusted to him, knowing that it is the client’s money and knowing that the client has not authorized the taking." People v. Varallo, 913 P.2d 1, 11 (Colo. 1996) (quoting In re Noonan, 506 A.2d 722, 723 (N.J. 1986)). Neither the lawyer’s motive in taking the money, nor the lawyer’s intent regarding whether the deprivation is temporary or permanent, are relevant for disciplinary purposes. Id. at 10-11. In accepting disbarment for an attorney who converted funds while acting as conservator, the Colorado Supreme Court stated:
We have repeatedly held that a lawyer’s knowing misappropriation of funds, whether belonging to a client or third party, warrants disbarment except in the presence of extraordinary factors of mitigation . . . . The fact that the respondent has not been previously disciplined does not call for a lesser sanction . . . and the record before us presents no factors in mitigation.
People v. Dice, 947 P.2d 339, 340-341 (Colo.1997) (emphasis added) (citing, inter alia, People v. Motsenbocker, 926 P.2d 576, 577 (Colo. 1996) (lawyer disbarred for knowing misappropriation of bar association funds)).
Despite the presumption of disbarment in conversion cases, the Supreme Court has reminded disciplinary authorities not to overlook significant mitigating factors that may overcome the presumption. In the Matter of Fischer, 89 P.3d 817 (Colo. 2004). Thus, it is incumbent upon the PDJ to properly consider evidence in mitigation, and to recognize that each case presents unique facts and perhaps a different need for sanctions.
In Fischer, the Court disapproved disbarment. That case, however, did not involve taking trust money for personal use. Rather, the attorney had deviated from a separation agreement disbursement schedule without first obtaining court approval. Mitigating factors included the lack of an attempt to falsify, deceive or conceal the misconduct. In addition, the attorney accepted personal responsibility for all debts subject to the separation agreement and all additional expenses. Finally, the Court believed that, while the attorney admitted knowingly misappropriating third party funds, he thought he was simply attempting to overcome hurdles in liquidating assets and it had not occurred to him that he was violating a court order. Fisher is thus readily distinguishable from cases in which the attorney flagrantly abuses his duties by treating trust funds as his own. Id. at 821.
This is not a case in which Respondent acted negligently in handling the Trust. Rather, acting as trustee, he consciously used trust funds for his own purposes. Moreover, Respondent did not act openly, readily admit his misconduct, or express remorse. In fact, Respondent tried to conceal his wrongdoing by fabricating promissory notes in support of a purported loan.
Although Respondent failed to appear and present evidence in mitigation, Respondent has no prior discipline and he did complete restitution to the Trust. However, upon consideration of the fiduciary duties violated, the amount misappropriated (approximately $73,000), Respondent’s knowing mental state, his selfish motive, his dishonest attempts to conceal his actions, and his substantial experience in the practice of law, the PDJ finds that disbarment, and not suspension, is the appropriate discipline.
One of the primary goals of our disciplinary system is to protect the public from lawyers who pose a danger to them. The Lillmars entrusted funds to Respondent. Acting as trustee of those funds, Respondent knowingly converted them in order to pay for his own expenses. This raises a substantial question regarding the danger Respondent poses to the public in the practice of law. Respondent has shown a serious lack of integrity, and his misconduct adversely reflects on his fitness to practice law. The PDJ finds that a sanction short of disbarment would contravene the Court’s duty to protect the public.
It is therefore ORDERED:
WILEY TODD LINVILLE, attorney registration number 19373, is DISBARRED from the practice of law, effective thirty-one (31) days from the date of this Order, and his name shall be stricken from the list of attorneys licensed to practice law in the State of Colorado.
WILEY TODD LINVILLE is ORDERED to pay the costs of this proceeding; the People shall submit a Statement of Costs within fifteen (15) days of the date of this Order. Respondent shall have ten (10) days within which to respond.
1. The Complaint is attached to this Report as Exhibits A.
2. Respondent withdrew $20,900 of the $73,000 total on July 14, 2003.
3. Under ABA Standard 4.12 (Commentary), "[s]uspension should be reserved for lawyers who engage in misconduct that does not amount to misappropriation or conversion," such as commingling funds of failing to return funds promptly.
4. ABA Standards for Imposing Lawyer Sanctions III. Black Letter Rules: Definitions.
5. At the Sanctions Hearing, the People did mention lost interest in their argument for disbarment. However, the People did not present any evidence in this respect.
6. For example, if Respondent had not been able to return enough money in time, the Lillmars may not have been able to make the desired real estate investment.