This is an attorney disciplinary case in which the Nebraska State Bar Association (NSBA), relator, seeks to discipline Jeffrey S. Flores, respondent.
The Committee on Inquiry of the Third Disciplinary District filed formal charges against Flores pursuant to Neb. Ct. R. of Discipline 10 (rev.2001). In count I, Flores was charged with violation of Canon 1, DR 1-102(A)(1), (3), (4), and (6) of the Code of Professional Responsibility in connection with an alleged failure to apply pension benefits belonging to Edith Erling to her nursing home care bills during an 11-month period. In count II, Flores was charged with violating DR 1-102(A)(1), (3), (4), and (6) with respect to an alleged failure to relinquish certain personal property of Erling to the personal representative of her estate. In count III, Flores was charged with violating DR 1-102(A)(1) and (6) for failing to ensure that Erling's personal funds remained sufficient to fund the type of funeral she desired. The provisions at issue provide:
In his answer to the formal charges, Flores denied the factual allegations and specifically denied that he breached any provision of the code.
At Flores' request, the matter was submitted to a referee pursuant to Neb.Ct.R. of Discipline 10(J). The referee conducted a formal evidentiary hearing at which Flores was present and represented by counsel. At the conclusion of the hearing, counsel for Flores moved to dismiss counts II and III of the formal charges and, therefore, only count I was submitted to the referee. The referee made the following factual findings with respect to count I:
Flores was admitted to the practice of law in the State of Nebraska on September 22, 1980. He was engaged in private practice in Hooper and Scribner, Nebraska with the law firm of Hurt & Gallant [sic] from September, 1980
It was stipulated that if Thomsen was called to testify as a live witness at the hearing, he would state that he perceived Erling was competent and knew, understood and intended the nature and effect of her acts when she executed her
Flores acknowledged that from 1990 until the death of Erling (December 11, 1997) he expended more funds than he contributed to Erling's accounts. However, between 1993 and the end of 1995 he contributed about $9,000.00 more to the joint account than was taken out. This will be further explained infra and is detailed in Exhibit 54.
Flores acknowledged that it was his understanding that both the monthly social security payment ($1,001.00) and the monthly pension ($502.28) were to be applied to Erling's care at Arbor Manor. He later testified that he didn't believe
Flores acknowledged having the April 6, 1996 phone conversation with Schneider and agreed with Schneider's account of the conversation to the extent that they discussed the money owed Arbor Manor and the need to take care of it. However, he disagreed as to what he told Schneider about getting in contact with the bank. It was Flores' testimony he told Schneider he would contact the
I believe and find, clearly and convincingly, that Flores truly cared for Erling and her well-being and that she felt the same toward him. With or without the POA, Flores would have done all that
The referee concluded that the NSBA had proved by clear and convincing evidence that Flores violated DR 1-102(A)(1), (4), and (6), as well as the attorney's oath of office. The referee determined that Flores did not violate DR 1-102(A)(3). The referee recommended that Flores be suspended from the practice of law for 3 years.
II. ASSIGNMENTS OF ERROR
In his timely exceptions to the referee's report and in his brief to this court, Flores asserts the referee erred in (1) finding there was "`approximately $50,000 in available cash from and after 1990'" available to Flores from assets formerly owned solely by Erling but to which she added Flores as a joint owner, (2) finding Flores relied upon or utilized his authority as Erling's power of attorney in assisting her to obtain medicaid assistance from the Nebraska Department of Social Services in February 1993, (3) finding Flores "knew" he had an affirmative duty to make monthly payments for Erling's benefit to Arbor Manor nursing home from a bank account titled jointly to Flores and Erling, (4) finding Flores' unexercised authority as Erling's power of attorney created an affirmative duty for Flores to ensure that Erling's nursing home bills were paid from the joint checking account, (5) finding Flores "`appeared to recognize and accept the fact'" that Erling's pension benefits deposited in the joint account "`rightly belonged to Arbor Manor,'"(6) finding Flores' actions regarding distribution of the funds in the joint account were "`a matter of Flores retaking what he wrongfully felt was rightfully his,'" (7) finding Flores violated any provision of the Code of Professional Responsibility, (8) finding Flores is subject to discipline for actions which were not criminal or illegal and were not taken within the scope of an attorney-client relationship, and (9) finding Flores should be disciplined and recommending that he be suspended from the practice of law for a period of 3 years.
III. STANDARD OF REVIEW
A proceeding to discipline an attorney is a trial de novo on the record, in which the Nebraska Supreme Court reaches a conclusion independent of the findings of the referee; provided, however, that where the credible evidence is in conflict on a material issue of fact, the court considers and may give weight to the fact that the referee heard and observed the witnesses and accepted one version of the facts rather than another. State ex rel. NSBA v. Mefferd, 258 Neb. 616, 604 N.W.2d 839 (2000); State ex rel. NSBA v. Miller, 258 Neb. 181, 602 N.W.2d 486 (1999). Disciplinary charges against an attorney must be established by clear and convincing evidence. State ex rel. NSBA v. Mefferd, supra.
For analytical purposes, we have summarized Flores' nine assignments of error into three: (1) the referee erred in finding the factual allegations were proved by clear and convincing evidence, (2) the referee erred in concluding Flores is subject to discipline for actions which were neither criminal nor illegal and were not within the
1. CLEAR AND CONVINCING EVIDENCE TO SUPPORT FACTUAL FINDINGS
(a) Finding That There Was $50,000 in Assets Available to Flores From and After 1990
The referee found that there was $50,000 in Erling's assets available to Flores from and after 1990. Flores argues that the evidence of Erling's assets was "limited and controverted," brief for appellant at 17, and that thus this finding was not based upon clear and convincing evidence. Flores testified that Erling showed him four certificates of deposit in early 1990, which he assumed to be in "fairly even denominations" of $10,000 each. He also testified that Erling owned a car in 1990, which was subsequently sold for $10,000. In contrast, the parties stipulated that Erling owned certificates of deposit with an approximate value of $25,000. There is thus some dispute in the record regarding the total sum of Erling's assets. Upon our de novo review, we find that the record clearly and convincingly establishes that Erling's assets totaled $35,000 in 1990, consisting of $25,000 in certificates of deposit and $10,000 from the sale of her car. We note, however, that this finding is not critical to our resolution of this appeal.
(b) Finding That Flores Utilized Power of Attorney in Obtaining Medicaid Benefits on Behalf of Erling
The referee specifically found that Flores relied upon the power of attorney, at least in part, in seeking medicaid benefits on behalf of Erling. Flores asserts the evidence in the record does not support this finding. The application for medicaid benefits submitted on behalf of Erling is signed "E. Edith Erling by Jeff Flores" and dated "02/16/93." In response to specific questions included in the application, Flores is identified as an individual acting under the power of attorney for Erling. The "For Office Use Only" portion of the application notes that "Identity" was established by "Insurance card" and "POA [power of attorney] papers." Moreover, on direct examination during the hearing before the referee, Flores admitted that he filled out the application form and further testified as follows:
We conclude that there is clear and convincing evidence that Flores relied upon the power of attorney, at least in part, in seeking the medicaid benefits to be used for Erling's care at Arbor Manor and that thus the referee's finding is supported by the record.
(c) Finding That Flores "Knew" He Had Duty to Make Payments to Arbor Manor From Joint Checking Account
The referee found that Flores clearly knew he had a duty to pay the pension benefits to Arbor Manor. Flores argues that the notice of medicaid award, exhibit 51, directed only that $1,429.28 from sources other than medicaid be paid to the nursing home for Erling's care. The notice did not dictate the source or sources from which this amount must be paid. He thus contends that the record does not establish that he "knew" the pension benefits were to be paid to the nursing home.
Schneider testified that Flores acknowledged his understanding that the pension benefits were to be paid to the nursing home. According to Schneider's testimony,
(d) Finding That Flores' Unexercised Authority as Power of Attorney Created Duty to Pay Nursing Home Bills From Joint Checking Account
This assignment of error is not argued in Flores' brief to this court. Errors that are assigned but not argued will not be addressed by an appellate court. Bowers v. Dougherty, 260 Neb. 74, 615 N.W.2d 449 (2000). Moreover, as noted above, Flores acknowledged in his own testimony that he did in fact exercise his authority as Erling's power of attorney in applying for the medicaid benefits, and thus this assignment of error is without merit.
(e) Finding Pension Benefits "Rightly Belonged" to Arbor Manor
Flores challenges the referee's "legal conclusion" that the pension benefits "rightly belonged" to Arbor Manor. He argues that while Arbor Manor was an unsecured creditor of Erling, he too was merely an unsecured creditor by virtue of the funds he advanced to help pay her health care bills. This argument ignores Flores' fiduciary relationship with Erling arising from his use of the power of attorney to obtain medicaid benefits for her care at Arbor Manor. Flores acted as Erling's agent in paying the monthly proceeds from her pension to Arbor Manor under the terms of the medicaid benefit award, for which he had applied on her behalf. As her agent, he was prohibited from profiting from the transaction or from having a personal stake in the transaction that was in conflict with Erling's interest. See Fletcher v. Mathew, 233 Neb. 853, 448 N.W.2d 576 (1989). Flores knew that Erling's medicaid benefits were conditioned upon $1,429.28 being paid to Arbor Manor each month, an amount representing the approximate total of her Social Security and monthly pension benefits. Flores paid the sums due to Arbor Manor for a period of 3 years and at all times knew the payments were to be made to Arbor Manor. Thus, there is clear and convincing evidence that at least $1,429.28 of the Social Security and pension benefits received by Erling each month "rightfully belonged" to Arbor Manor.
(f) Finding That Flores' Actions Were "Matter of Flores Retaking What He Wrongfully Felt Was Rightfully His"
With respect to this assignment of error, Flores argues that he committed no ethical impropriety in applying the pension funds to the repayment of Erling's debt to him due to his voluntary payment of certain of her medical bills. He also argues that the record does not establish that he utilized the power of attorney in applying for Erling's medicaid benefits. Because we have considered and determined that the record does establish that he did utilize the power of attorney in applying for the medicaid benefits, we need not readdress this issue. The issue of the ethical propriety of his conduct will be addressed below.
We conclude, based upon our de novo review of the record, that the evidence clearly and convincingly establishes that Flores relied upon the power of attorney at least in part in applying for Erling's medicaid benefits. We further conclude that Flores knew the $502.28 monthly pension benefits were to be paid to Arbor Manor and that he failed to do so during the 11 month time period at issue.
2. IS THIS CONDUCT SUBJECT TO DISCIPLINE?
Flores argues that even if his conduct was based in part upon the exercise of the power of attorney, such conduct cannot subject him to discipline under the code because the conduct did not occur within the scope of an attorney-client relationship and was neither criminal nor illegal in nature. The referee specifically found that the conduct at issue did not occur during the course of an attorney-client relationship. The referee did determine, however, that the conduct related, at least in part, to Flores' role as Erling's attorney in fact based upon the power of attorney. The issue presented is whether Flores' actions in these circumstances subject him to discipline.
A power of attorney authorizes another to act as one's agent. Cheloha v. Cheloha, 255 Neb. 32, 582 N.W.2d 291 (1998). Generally, an agent is required to act solely for the benefit of his or her principal in all matters connected with the agency and adhere faithfully to the instructions of the principal. Id. An agent and principal are in a fiduciary relationship such that the agent has an obligation to refrain from doing any harmful act to the principal. Id. An agent is prohibited from profiting from the agency relationship to the detriment of the principal. Id.
In the instant case, Flores has established that he paid certain of Erling's medical bills from his own funds and intended to be reimbursed for his expenditures. He contends that he therefore was entitled to repay himself by utilizing the monthly pension benefits, which were paid into an account on which he was a joint owner. However, Flores' status as an unsecured creditor cannot and does not diminish his role as Erling's agent pursuant to the power of attorney. Once he utilized the power of attorney in seeking medicaid benefits for Erling, he was acting as her fiduciary with regard to those benefits and the conditions upon which they were awarded. Flores' decision to apply Erling's pension benefits to her "debt" to him rather than to her account at Arbor Manor enabled him to benefit from the agency relationship, in direct violation of his fiduciary duty. See Cheloha v. Cheloha, supra. In addition, his decision to discontinue paying the pension moneys to Arbor Manor, with full knowledge that the medicaid award was premised upon the payment of those sums to Arbor Manor for Erling's care, was an act that subjected Erling to potential harm, either in the form of eviction from the nursing home or discontinuation of medicaid benefits. The record therefore establishes that Flores' conduct violated his fiduciary duty to Erling.
Our prior case law has not limited conduct subject to discipline to that which occurs within the scope of an attorney-client relationship. See, State ex rel. NSBA v. Douglas, 227 Neb. 1, 416 N.W.2d 515 (1987); State ex rel. Nebraska State Bar Assn. v. McConnell, 210 Neb. 98, 313 N.W.2d 241 (1981). See, also, Neb. Ct. R. of Discipline 3(B) (rev. 1996), stating that acts or omissions which violate the Code of Professional Responsibility "shall be grounds for discipline whether the act or omission occurred in the course of an attorney-client relationship or otherwise." While Flores was not convicted of a crime and there is no showing that his conduct was illegal, we find that his violation of a fiduciary duty nevertheless subjects him to discipline under the code.
The evidence reflects that between 1993 and 1996, the sum of the deposits Flores made into the joint account and the bills he paid for Erling from his own funds exceeded his withdrawals from the account by $3,696.40. Thus, this is not a case of theft or misappropriation of client funds, and we conclude that there is no clear and convincing evidence that Flores engaged in conduct involving moral turpitude, dishonesty, fraud, deceit, or misrepresentation. We therefore find no violation of DR 1-102(A)(3) or (4).
EC 5-3 provides in part:
As noted, Flores' decision to use Erling's pension benefits to reimburse himself instead of making her required payments to Arbor Manor subjected Erling to potential if not actual harm. Although this conduct did not occur in the context of an attorney-client relationship, it nevertheless reflects adversely upon Flores' fitness to practice law because it calls into question his ability to subordinate his personal interests in order to exercise independent judgment on behalf of a client. Accordingly, there is a violation of DR 1-102(A)(6) which warrants discipline.
3. DISCIPLINE TO BE IMPOSED
To determine whether and to what extent discipline should be imposed in a lawyer discipline proceeding, this court considers the following factors: (1) the nature of the offense, (2) the need for deterring others, (3) the maintenance of the reputation of the bar as a whole, (4) the protection of the public, (5) the attitude of the offender generally, and (6) the offender's present or future fitness to continue in the practice of law. State ex rel. NSBA v. Rothery, 260 Neb. 762, 619 N.W.2d 590 (2000); State ex rel. NSBA v. Howze, 260 Neb. 547, 618 N.W.2d 663 (2000). For the purpose of determining the proper discipline, we consider the respondent's acts both underlying the events of the case and throughout the disciplinary proceeding. State ex rel. NSBA v. Jensen, 260 Neb. 803, 619 N.W.2d 840 (2000). The determination of an appropriate penalty to be imposed on an attorney also requires consideration of any mitigating factors. State ex rel. NSBA v. Freese, 259 Neb. 530, 611 N.W.2d 80 (2000). Each attorney discipline case must be evaluated individually in light of its particular facts and circumstances. State ex rel. NSBA v. Jensen, supra. In addition, the propriety of a sanction must be considered with reference to the sanctions imposed in prior
The record supports the referee's finding that the relationship between Erling and Flores was genuinely based upon mutual friendship of substantial duration. This relationship should be considered in determining Flores' discipline. See State ex rel. NSBA v. Gilroy, 240 Neb. 578, 483 N.W.2d 135 (1992). In addition, we consider the facts that Flores' conduct was not unlawful and did not subject Erling to actual loss or harm. Further, the record reflects that Flores was generally cooperative and forthcoming in his dealings with the Counsel for Discipline in these proceedings, and he has had no prior disciplinary violations.
In several cases involving a lawyer's conduct occurring outside the attorney-client relationship which did not constitute a misappropriation of funds, we have imposed a 6 month license suspension. See, State ex rel. NSBA v. Schleich, 254 Neb. 872, 580 N.W.2d 108 (1998) (respondent installed listening device on wife's telephone, unrelated to attorney-client relationship); State ex rel. NSBA v. Caskey, 251 Neb. 882, 560 N.W.2d 414 (1997) (respondent knowingly failed to pay corporate payroll taxes over period of months, unrelated to attorney-client relationship); State ex rel. Nebraska State Bar Assn. v. Butterfield, 169 Neb. 119, 98 N.W.2d 714 (1959) (respondent, acting as notary public, falsely certified that his cousin personally acknowledged execution of deed). We conclude that a 6-month suspension is the appropriate disciplinary sanction in the present case.
We note that Flores' license to practice law is currently under nondisciplinary suspension for nonpayment of annual dues and assessments. Under article III, paragraph 5, of the Rules Creating, Controlling, and Regulating Nebraska State Bar Association adopted by this court, "[w]henever a member suspended for nonpayment of dues and/or assessments shall make payment of all arrears, and shall satisfy the Supreme Court of his or her qualification to then return to the active practice of law, such member shall be entitled to reinstatement upon request." In order that it have meaning, the 6-month disciplinary suspension which we impose herein will be added to Flores' current nondisciplinary suspension. Flores will therefore not be eligible for reinstatement until 6 months after he has paid all delinquent dues and assessments, submitted proof of compliance with Neb. Ct. R. of Discipline 16 (rev.2001), and paid the costs of this proceeding which are hereby taxed to him.
For the reasons stated, we find in our de novo review that Flores should be suspended from the practice of law for a period of 6 months immediately following the date when he becomes otherwise eligible for reinstatement from his current nondisciplinary suspension for nonpayment of dues and assessments.
JUDGMENT OF SUSPENSION.
MILLER-LERMAN, J., not participating.