Johnstone v. State Bar of California

THE COURT. Petitioner, a member in good standing of the State Bar since his admission in 1952, was charged with violating his oath and duties as an attorney (Bus. & Prof. Code, §§ 6103, 6067 and 60684, wilful violation of rule 9, Rules of Professional Conduct of the State Bar of California (commingling of funds), and with the commission of acts involving moral turpitude and dishonesty (Bus. & Prof. Code, § 6106). Following hearings before and recommendations by a local administrative committee the Board of Governors of the State Bar found that petitioner wilfully mishandled certain funds received and held by him in trust, and recommended that he be suspended from the practice of law for a period of three months.

Prior to March 1963 petitioner represented Mr. John Ensey in an action for personal injuries arising out of an industrial accident. Mr. Ensey had collected workmen’s [155]compensation benefits from the Industrial Indemnity Company during the period of his disability, and that company became entitled to a lien in the amount of $4,945.57 against any recovery which might be effected by petitioner in the personal injury action. (Lab. Code, §§ 3850 et seq.) Petitioner eventually negotiated a $3,000 compromise settlement to be paid by the tortfeasor, and the Industrial Indemnity Company agreed that it would release and discharge its lien in exchange for $1,000 of the funds so recovered.

On or about March 6, 1963, petitioner received a draft in the agreed amount of $3,000, which draft was made payable to himself, Ensey and the Industrial Indemnity Company. He obtained the endorsements of Ensey and the authorized representative of the Industrial Indemnity Company, and deposited the draft in his trust account. At the time of the hearing herein petitioner had failed to pay to Industrial Indemnity Company any part of its $1,000 share. In October 1963, however, a check in the amount of $1,000 had been drawn by petitioner on his trust account in favor of and delivered to the Industrial Indemnity Company, but upon presentation had been dishonored for lack of sufficient funds.

The Board of Governors made determinations generally consistent with the foregoing account, specifically finding that prior to compromising the personal injury action petitioner “did agree to pay and did represent that he would pay Industrial Indemnity Company $1,000 out of the sum of $3,000 . . . and Industrial Indemnity Company did, in exchange therefor, agree to compromise and discharge its lien and claim for said sum of $1,000’’; that petitioner “did receive, deposit in his trust account, and hold said funds, to the extent of $1,000 thereof, in trust for Industrial Indemnity Company and [petitioner], as trustee, was obligated to pay $1,000 out of said $3,000, received in settlement, to Industrial Indemnity Company ’ ’; that petitioner ‘ ‘ did thereafter wrongfully and wilfully refuse and fail to pay said $1,000, which he had received as trustee, to Industrial Indemnity Company.’’ The board further determined that there was no attorney-client relationship between petitioner and the Industrial Indemnity Company.