STATE EX REL. OKLAHOMA BAR ASS'N v. CUMMINGS

OPALA, Justice.

In this disciplinary proceeding against a lawyer, the issues to be decided are: (1) Can an "attorney's retaining lien" be impressed on property which has been entrusted to a lawyer for a specific purpose? and (2) Is a one-year suspension with imposition of costs an excessive sanction for Respondent's breach of professional discipline? We answer both questions in the negative.

The Oklahoma Bar Association [Bar] charged Audrey Cummings [Cummings or Respondent], a licensed lawyer, with one count of professional misconduct. The Bar and Cummings stipulated to some facts in contest. After a disciplinary hearing, a panel of the Professional Responsibility Tribunal [PRT] made findings of fact and conclusions of law together with a recommendation for discipline. The PRT concluded that once Cummings learned that she had improperly deposited client's money in her operating account held by her in trust, she had an obligation to return the funds to the client as she had no right to assert in them an attorney's line. The PRT recommended that Cummings be suspended from the practice of law for one year and pay the costs of this proceeding.

FACTS

On April 6, 1990, Donna W. Aaron [Aaron] retained Respondent's firm, Cummings and Associates, to defend her against the paternal grandparents' quest for visitation and paid the firm a $600 attorney's fee.1 Four days later, Respondent and a male associate with the firm met with Aaron and agreed also to represent her in a suit to terminate her ex-husband's parental rights. Aaron paid Respondent's law firm $600 for these services and $72 for a filing fee.2

The associate, who was handling the two cases, told Aaron that depositions had been scheduled in the grandparents' visitation suit and that $500 was needed to pay the court reporter. On June 7, 1990, the day the depositions were originally set, Aaron delivered a check for $500 to a secretary at Respondent's firm. The deposition hearing did not take place that day because the grandparents' motion for relief had been stricken from the docket. The grandparents eventually abandoned the quest for visitation and the depositions, no longer needed, were never rescheduled. Respondent deposited the $500 check to cover deposition expense in her operating account on June 15, 1990.

Sometime in December 1990 or January 1991, the associate informed Aaron there was nothing further they could do for her in the parental termination suit. He also told her that the grandparents had withdrawn their motion for visitation relief and did not intend to pursue the matter. In January 1991 Aaron asked the associate to return the $500 given for deposition expense. He explained that he could not determine if a refund was due until a final bill was computed. After making several phone calls in an attempt to secure the refund, Aaron filed a grievance with the Bar on January 17, 1991.

According to the associate, a bill had been prepared on January 17, 1991, charging a balance due of $105.50.3 While computing the bill, the associate discovered that the $500 check for the depositions had been deposited in the operating instead of the trust account. Sometime in January or February 1991 he informed Respondent of this development and told her that Aaron requested this amount to be returned. Respondent refused. She asserted a common-law lien upon the money, which she believed could be applied to the payment of the total bill in both of Aaron's cases.4 Respondent allegedly based her views on a conversation with a lawyer in the General Counsel's office, although she could not identify the person with whom she had spoken.

In January 1992, one year after the grievance, Respondent and her associate contacted Aaron in an attempt to work out their differences. Respondent agreed to return the $500 if Aaron would write the Bar a letter explaining that their financial differences had been resolved and that she no longer wished to pursue the grievance. Aaron wrote the letter on January 30, 1992, the day she received the check.

The Bar filed a formal complaint against Respondent on March 27, 1992. The PRT found that Respondent's conduct violated Rule 1.4(b),5 Rules Governing Disciplinary Proceedings, and Rule 1.15(a) and (b),6 Oklahoma Rules of Professional Conduct, and that discipline should be enhanced because of two prior disciplinary actions taken against Cummings.

I

THE RECORD BEFORE THE COURT IS COMPLETE FOR A DE NOVO CONSIDERATION OF ALL FACTS RELEVANT TO THIS PROCEEDING

The Oklahoma Supreme Court has exclusive original jurisdiction over the Bar disciplinary proceedings.7 The court's review is by de novo consideration of the case.8 Neither the trial authority's findings nor its assessments with respect to the weight or credibility of the evidence can bind this court.9 In a de novo consideration, in which the court exercises its constitutionally invested, nondelegable power to regulate both the practice of law and the legal practitioners,10 a full-scale exploration of all relevant facts is mandatory.11

The court's task cannot be discharged unless the PRT panel submits for a de novo examination of all material issues a complete record of the proceedings.12 Our responsibility is to ensure that the record is sufficient for a thorough inquiry into essential facts and for crafting the appropriate discipline13 — one that would avoid the vice of visiting disparate treatment on the respondent-lawyer.14

We hold the record is adequate for our de novo consideration of Respondent's offending past conduct.

II

RESPONDENT'S RETAINING LIEN CLAIM

A.

Oklahoma law recognizes two types of lien by which a lawyer may secure payment for services: (1) a statutory charging lien15 and (2) a common-law general possessory or retaining lien.16 Different transactions or events trigger the application of these two distinct liens. The charging lien, recognized at common law, has been codified in 5 O.S. 1991 § 6.17 A lawyer can assert a § 6 charging lien only when he (or she) has commenced an action on behalf of a client or filed an answer containing a counterclaim, and endorsed on the pleading a notice of a lien claim,18 Either event will allow a charging lien to attach to the ultimate verdict, report, decision, finding or judgment that is entered in a client's action or counterclaim.19 The charging lien may be actively enforced and does not rest upon mere possession.20 Proceeds are also subject to the lien.21 Because Respondent neither initiated an action for Aaron nor filed a counterclaim, with an appropriate endorsement of lien claim notice, she does not meet the controlling criterion for establishing a statutory charging lien.

The common-law possessory or retaining lien,22 on the other hand, has not been adopted by statute. A lawyer may assert a retaining lien against a client's property only when: (1) properly chargeable fees are owing and due and (2) the lawyer is in possession of property not otherwise designated for a "specific purpose".23 A common-law retaining lien cannot be actively enforced by foreclosure.24 It is but a lawyer's claim to retain a client's papers, money or property in his (or her) possession until the fee is satisfied.25 A lawyer validly exercising this ancient retention power may not transform the possessory claim to an independent benefit in advance of some agreement with the client.26

Rule 1.4(b) limits the availability of property for attachment of a retaining lien.27 The rule clearly does not permit a lawyer to take money or property entrusted to him for a "specific purpose" and apply it to the attorney's fee claim.28 But any money or property otherwise coming into a lawyer's hands and upon which a valid attorney's lien has been impressed is free from this restriction.29 The Bar charged Cummings with taking funds entrusted to her for a specific purpose and with applying them toward a claimed fee in violation of Rule 1.4(b).30

Respondent asserts that she had impressed a common-law attorney's retaining lien upon the $500 when the special purpose for which the money was held had ceased to exist. This occurred, she urges, when the grandparents abandoned their quest for visitation. At this point, Respondent argues, she no longer owed a Rule 1.4(b) duty. For the assertion of an attorney's lien Respondent argues she relied in good faith upon Republic Underwriters Ins. Co. v. Duncan.31

The Bar counters that Republic Underwriters does not support Respondent's position. Its argument is threefold. Firstly, the $500 is not subject to an attorney's lien because Respondent acquired the money for a specific purpose. Secondly, Respondent's actions do not reflect she asserted a lien. Rather, she appropriated the money without Aaron's approval or knowledge, without a court order and previous notice to Aaron that additional monies were owed. Lastly, the Bar contends that even if a retaining lien had attached, the deposit of those funds in Respondent's operating account would constitute a release of possession which operated to destroy the lien.

Respondent's claim that she was entitled to the $500 because the "special purpose" — the taking of a deposition — no longer existed is without merit. It matters not that the "special purpose" comes to an end while the funds are in a lawyer's hands. It is enough that the money was originally designated for a "specific purpose". When entrusted with money for a specific purpose a lawyer must not allow his claimed fee for services rendered to conflict with his duties as a fiduciary.32 Respondent admits that (a) Aaron gave her the $500 for deposition expense, (b) she refused to return it to Aaron after depositing the check in her operating account and (c) Aaron had not agreed to let her use the funds for fee payment. Even though Respondent eventually returned the $500, the restitution of these funds one year after the grievance had been filed is not the delivery of a client's money "upon demand" within the meaning of Rule 1.4(b).33 We hold that the Respondent used Aaron's funds for an unauthorized purpose in violation of the cited rule.

B.

The PRT made several findings which dealt with the legitimacy of Respondent's retaining-lien defense and the Bar's effort to discredit her quest for exoneration on the ground that she was asserting a valid claim to the money placed in her operating account.

The PRT concluded that Respondent's reliance on Republic Underwriters34 in her post-hearing brief asserting an attorney's lien was both legally unfounded and factually fabricated, and that her citation to the case was misleading to the panel. The PRT based this conclusion on Respondent's testimony that she impressed the lien after allegedly talking to an unnamed, unknown lawyer in the General Counsel's office who had advised her that she had a right in the money left for deposition expense.

The PRT found (a) that at the time Respondent claimed to have asserted an attorney's lien, she was not even aware of Rule 1.4(b);35 and (b) that neither Respondent nor anyone acting in her behalf (1) had researched whether she had the right to assert a common-law retaining lien or (2) had determined the proper procedure for imposing a lien. The PRT concluded that the parties' post-hearing briefs clearly indicate that she did not even follow the procedure suggested in Republic Underwriters to preserve an attorney's common-law retaining lien.36

The PRT also found that (a) Respondent appeared to have created the entries on the January 17, 1991 bill so that Aaron would own a balance and (b) not all of the entries appear to correspond to work actually performed. According to Aaron, she never received the bill and saw it for the first time when the Bar sent her Respondent's answer to the grievance, with a copy of the bill appended to that instrument. Aaron disagreed with the amount of time charged for several items on the bill and with the necessity of certain research. Respondent testified that the information was taken off the firm's ledger book and that her only involvement with the case was the typing of an application for a victim's protection order. She stated that the bill would have been typed and mailed in accordance with her regular office procedures.

We believe, as did the PRT, that Respondent's frivolous attempt to assert a retaining lien in Aaron's $500 left for deposition expense was simply a sham. Her conduct is reprehensible. It warrants imposition of discipline.

III

MISHANDLING OF FUNDS

The Bar has charged Respondent with improperly managing the funds entrusted to her in violation of Rules 1.4(b)37 and 1.15(a) and (b).38 We employ three different culpability standards when evaluating mishandling of funds:39 (1) commingling;40 (2) simple conversion;41 and (3) misappropriation, i.e., "theft by conversion or otherwise."42 The degree of culpability ascends from the first to the last.43 Each offending level must be proved by clear and convincing evidence.44 The PRT found Respondent guilty of commingling and conversion.

Commingling occurs when the client's funds are combined with the attorney's personal funds.45 Complete separation of a client's money from that of the lawyer is the only way in which proper accounting can be maintained.46

Cummings admits that on July 15, 1990 she placed the $500 check in her operating account,47 but asserts that she did not become aware that the check was for deposition expense rather than an attorney's fee until January or February of 1991. Even if we assume that Cummings first learned of this transaction in January 1991, she allowed the money to remain48 in the operating account until January 1992 and is hence guilty of commingling. It is no excuse that the deposit of funds in the operating account may have been occasioned by inaction or neglect of Respondent's secretarial staff in failing to indicate at the time of the check's receipt that it was for costs. A lawyer who is responsible for work done or entrusted to lay personnel in her employment, must supervise staff work and stand responsible for its product.49

The second level of culpability is simple conversion. Rule 1.4(b) reveals that simple conversion occurs when a lawyer applies a client's money to a purpose other than that for which it was entrusted to her.50 Cummings has steadfastly maintained that she retained the $500 because she was entitled to a common-law retaining lien against those funds. According to Respondent, she had waited a year after the grievance to repay the $500 because she did not know until she had a conversation with the General Counsel in January 1992 that she could contact a complaining witness. Even then, she paid back the $500, Cummings stated, not because she thought she owed it, but in a "good faith effort to resolve the dispute" and because she became aware that the Bar took the position she was not legally entitled to the deposition expense. She characterized the controversy as primarily a "fee dispute". Cummings was in her associate's office when he talked to Aaron by phone in January 1992 to make arrangement for the money's return. He posed this question to Aaron: "[I]f we give you your $500 back and you're happy, will you write a letter saying that." Aaron agreed. The PRT found that Respondent's action in conditioning the return of the trust monies upon withdrawal of the client's complaint was knowingly perpetrated in an attempt to affect the outcome of the General Counsel's investigation and was "prejudicial to the administration of justice."

Even though the purpose for which the funds were given had ceased to exist, Cummings as trustee of those monies should have either returned or transferred them to her trust account until the dispute was resolved. By applying the $500 — clearly intended to pay deposition expenses — toward a claimed fee, Cummings is guilty of simple conversion.51 Nonevidence is present here to support the notion that Cummings, through deceit or fraud, intended to deprive Aaron of the $500. Respondent could not hence be found guilty of having misappropriated the money.

IV

DISCIPLINE TO BE IMPOSED

The PRT has recommended that Cummings be suspended from the practice of law for one year and pay all costs in this proceeding. Respondent asserts that the facts do not warrant this severe a sanction. Rather, she would have us impose practice under supervision for ninety days. A less severe discipline would be more appropriate, she urges, because this area of lawyer's conduct is not clear and the Bar has failed to prove a willful or grossly negligent violation.

Our responsibility in every disciplinary proceeding is not to punish offensive conduct but rather to inquire into a lawyer's continued fitness with a view towards safeguarding the interests of the public, the courts and those of the legal profession.52 Disciplinary sanctions not only serve to deter an offending lawyer from committing similar future acts, but also operate as a restraining influence upon others.53 The discipline we impose today is designed to maintain these policy goals.54

Recently, in State ex rel. Okl. Bar Ass'n v. Johnston,55 which came to the court on the parties' stipulation of facts, conclusions of law, mitigating factors and recommendation for discipline, we imposed a four-month suspension. There, the respondent was found guilty, in a single count, of commingling and conversion of a client's funds, making a false statement to the trial judge, failing to give competent representation, failing to act promptly and failing to communicate with his client. Unlike in the present case, the Johnston respondent had not been previously disciplined.

Cummings is charged with commingling and conversion of funds by impermissibly taking money entrusted for a specific purpose and applying it toward a claimed fee. The Bar offered evidence that Respondent has twice before been disciplined — once in 1987 by a private reprimand before the Professional Responsibility Commission for improper advertising and solicitation and another time in 1991 by public censure administered by this court in three separate cases56 for (1) incompetency and charging an excessive fee, (2) charging an unreasonable attorney's fee and (3) failing to act with reasonable diligence and promptness in representing a client.

A lawyer's license is a certificate of professional fitness to deal with the public as a legal practitioner. Public confidence in the practitioner is essential to the proper functioning of the profession. A lawyer's continuing pattern of misconduct adversely reflects on the entire Bar and exhibits a lack of commitment to the clients, to the courts and to other members of the Bar. While Cummings' post-grievance return of commingled funds resulted in no detriment to the client, her actions nonetheless call for discipline. The PRT's recommendation that Cummings be suspended from the practice of law for a one-year period and pay the costs is approved. Within thirty days of the date of this opinion, Cummings shall pay the costs in this proceeding in the sum of $1,378.84. Prompt payment is a precondition for Respondent's reinstatement.

Respondent stands suspended from the practice of law for a period of one year from the day this opinion becomes final; costs shall be promptly paid in full as a precondition for her reinstatement.

All Justices concur.