In Re Smith

134 P.2d 956, 171 Or. 151, 1943 Ore. LEXIS 35

• Court: Oregon Supreme Court
• Decided: January 13, 1943
• Status: Published

Opinions

LUSK, J.

This is a disbarment proceeding growing ont of charges of unprofessional conduct filed by the Oregon State Bar against the petitioner, Guy O. Smith, an attorney of this court with offices in Salem, Marion County, Oregon. The charges are based upon the alleged conversion by Smith of a client’s money.

The evidence discloses the following facts: In the month of December, 1936, Smith was employed by John B. Hudson, an Indian living at Grande Ronde, Oregon, to enforce collection of a promissory note for $290, executed in Hudson’s favor by T. W. Bemish and R. B. Murray. Smith brought action on the note in the Circuit Court for Marion County, the defendants defaulted, and on January 9,1937, a judgment was entered against them for the principal sum of the note, together with interest, costs, and attorney’s fees. On July 14, 1937, Smith wrote to Hudson that Donald Young, an attorney representing Bemish, had offered to pay the sum of $250 in settlement of the claim against Bemish, the judgment still to stand against Murray, and asked for Hudson’s instructions. Hudson, through his daughter, authorized the proposed settlement, but, for some reason not explained by the record, Young, on August 27, 1937, paid Smith $325 in full settlement of the judgment. The payment was made by the check of Donald Young, Trustee, which Smith endorsed and turned over to his stenographer, Miss Grace Miller, to cash. The cheek was paid by the bank on which it was drawn on August 27, 1937, and bears the endorsement of Miss Miller as well as that of Smith. On the same day Smith executed and filed with the county clerk of Marion County a document acknowledging full satisfaction of the judgment.

Instead of remitting to his client Smith kept the proceeds of the cheek. Nearly three months later, on November 19,1937, he paid $30 to Hudson’s daughter. The record is obscure as to where or under what circumstances this payment was made. Thereafter, over a period of more than two years, Smith represented to Hudson from time to time, both in writing and by word of mouth, that he had been unable to collect the judgment notwithstanding the strenuous efforts he was making to that end. The writings consist of nineteen letters and one postcard, the first dated November 23, 1937, and the last December 9, 1939. The burden of these communications, which we deem it unnecessary to set out in extenso, was that Smith was expecting payment of the judgment from some third person, at first not named, but who later on was identified as ‘ ‘ Swartz ’ ’ and still later as “Mrs. Paign”, that these individuals had been garnisheed and were making repeated promises to pay the judgment out of the proceeds of the sale of some hops, and as often failing to make good. On March 4, 1938, Smith wrote Hudson: “I have finally been able to get $25.00 on your garnishee”, and enclosed a check for that amount, and on October 29, 1938, he made a remittance for a like amount saying, “I am sure that another payment will be made in the next two weeks, and I hope that we can get it all in a short time.” Prior to this, apparently on January 27, 1938, Smith paid Hudson $10 in currency, and, on that occasion, according to the latter’s uncontradicted testimony, told Hudson about a man who was to pay the judgment when he sold the hops, and when Hudson asked for the address of this man Smith said, “No, he is in the hospital and ain’t allowed no visitors, but the hop buyers are in town and will buy the hops and next week I will send you the money. ’ ’ The only other remittances made by Smith were $15 on November 18, 1939, and $10 on December 19, 1939, which he wrote, in letters of those dates, that he was ‘ ‘ advancing” to Hudson. At the time Hudson discovered the facts Smith had paid him $115 of the $325 which Smith received from Young.

On December 29,1939, Jack Anderson, an agent in the United States Indian Service, accompanied by Hudson and at the latter’s request, interviewed Smith in his office regarding the matter, and was informed by Smith that he had been unable to collect the judgment; that Mrs. Esther Paine owed Bemish, one of the makers of the note to Hudson, the sum of approximately $150; that he had commenced garnishment proceedings against Mrs. Paine, and had hopes of collecting from her when some hops were sold in which Mrs. Paine had an interest. He gave Anderson Mrs. Paine’s address in Salem. Anderson asked leave to see the note — -which was not surrendered at the time the judgment was paid — but Smith told him that the note was at his home, explaining that his wife did the bookkeeping for him, and further said that he was not able to state how much had been paid on the note. Anderson then went to the courthouse, examined the files in the case of Hudson v. Bemish, and discovered the satisfaction of judgment which Smith had executed. Later on the same day Smith reached Anderson by phone in the district attorney’s office and told Anderson that on going through his files he had found that the suit had been settled. On the next day Smith went with his wife to Grande Ronde and paid Hudson $208.93, the balance due on the moneys paid to Smith by Young. The check was drawn by Mrs. Smith, who signed it “Friede M. Oehler, Special”.

It appears from Smith’s testimony that shortly after Anderson and Hudson left his office he went to the clerk’s office to file some papers, and while there observed the file in the case of Hudson v. Bemish lying on the counter, examined the papers therein, and came upon the satisfaction of the judgment.

Confronted with evidence of the foregoing facts at the hearing, Smith’s defense was in substance that he forgot that Young had paid him and forgot that he had executed a satisfaction of the judgment, and actually believed that Mrs. Esther Paine was indebted to Bemish and Murray, and that he had instituted garnishment proceedings against her, and was expecting, as he had assured Hudson, to collect the amount of the judgment from her.

It is established as a fact that Mrs. Paine, a sister of Ralph Schwartz — evidently the “Swartz” referred to in one of Smith’s letters — did owe the sum of $190, not to Bemish and Murray, but to Smith, to whom she had given her promissory note. Smith had never instituted a garnishment proceeding against her or Schwartz. But it is his testimony that, in some unaccountable fashion, he got Mrs. Paine’s indebtedness to himself mixed up with the Hudson case, and thought that when he was pressing her for payment or receiving from her a payment on account, he was acting, not for himself or to collect his own debt, but for Hudson in the collection of moneys owing by Mrs. Paine to one of Hudson’s debtors. He seeks to support this story by the fact that on two or three occasions, when he collected small sums from Mrs. Paine, he remitted like amounts to Hudson; and he swore that he lost the note Mrs. Paine gave him and forgot that she was indebted to him.

Smith testified that his office copy of the satisfaction of judgment, as he subsequently discovered, was inadvertently placed in a file of miscellaneous papers instead of in the file in the ease of Hudson v. Bemish. He admitted having told Anderson that the BemishMurray note was at his home, but swore that he found it later in an envelope folded up in the file in his office.

Asked by his counsel to explain what became of the $350 which Young paid him, Smith testified that he had “made every effort possible to try to locate where this money went, and haven’t the slightest idea”, and, further, “It is my idea that I must have used it, knowing that I had the money and thinking I would go home and tell my wife and she would send the money from our other funds, and I never told her.”

Smith had no bank account, but kept his own money and that of his clients in an account in the maiden name of his wife, with the word “Special” added. It was his custom, he testified, to turn over moneys which he received to his wife, who deposited them in this account and was the only person authorized to draw checks against it. Before their marriage she had worked in his office and continued thereafter to act as his bookkeeper. He concedes that the $325 he collected from Young was not delivered to Mrs. Smith, and it does not appear that any of the payments he made to Hudson prior to the last one were made with checks drawn by her.

Some point is made in the brief on behalf of Smith that he received the money in payment of the judgment only “constructively”, apparently because no one testified directly that the proceeds of Young’s check, after it was cashed by Miss Miller, were delivered to Smith. To this it need only be said that the sworn answer filed by Smith in these proceedings admits the allegation in the complaint of the Oregon State Bar that he received from Donald A. Young, Trustee, the sum of $325 in full settlement of the judgment; that Smith, in his testi inony above quoted, virtually admitted that he received the money though unable to explain how he had disposed of it; and that he was at pains to absolve Miss Miller, the only other person concerned in the handling of the check, from any suspicion or imputation of wrongdoing.

The complaint contains three charges — first, that Smith failed, neglected and refused to advise Hudson that the sum of $325 had been collected for Hudson and the judgment satisfied, and knowingly, wilfully, falsely, and corruptly represented to Hudson that he had been unable to collect the money; second, that Smith wilfully, unlawfully, and feloniously converted to his own use and benefit said sum of $325 or so much thereof as was not represented by a reasonable attorney’s fee; and, third, that Smith’s conduct was unethical and unlawful and in violation of the statutes of the state of Oregon and the rules of professional conduct of the Oregon State Bar, and constitute such conduct that if the said Smith were now applying for admission to the Bar his application should be denied.

Both the trial committee and the Board of Governors of the Oregon State Bar found the accused guilty of all the charges, and we are of the opinion that their findings are amply supported by the evidence.

None but the most gullible, we think, Avould SAvalloAv Smith’s story. Nine able and experienced krwyers — the three members of the trial committee who saw him on the witness stand and heard him testify, and six members of the Board of Governors who reviewed the case —rejected it, and so do we. The strange mental blackout Avhich he claims to have experienced involved forgetfulness not only of the payment of $325 by Young and his execution of a satisfaction of the Hudson judgment, but of Mrs. Paine’s indebtedness to himself as well. Should he remember any of these facts his story could not hang together, and on top of this it became necessary to invent a garnishment proceeding which never had any existence save in his own imagination. It became expedient for him, also, to misplace or lose all documents which might have jogged his erring memory during the period of two years or more which elapsed before his defalcation was brought to light, and so, according to his testimony, his office copy of the satisfaction of the judgment got into the wrong file, he was unable to find Hudson’s note from Bemish and Murray, and lost the note which Mrs. Paine gave him. For some unexplained reason, in this instance he departed from his usual business practice and did not turn over the Young check or its proceeds to his wife, and there is no evidence that any of the payments he made to Hudson prior to the last were made with cheeks drawn on his wife’s bank account. Manifestly he withheld from Mrs. Smith knowledge of this transaction.

We see no reason for laboring the matter further or referring to other facts in the evidence which accentuate the improbabilities inherent in Smith’s attempted defense. The only possible conclusion is that he wilfully converted his client’s money, wilfully deceived his client over a period of more than two years, and at the last, when called to account by the Oregon State Bar, sought in his sworn testimony to exculpate himself by an obvious fabrication.

It remains to determine the penalty. The Board of Governors has recommended that the accused be suspended from the practice of law for two years. It is our opinion that he is guilty of unprofessional conduct which, in view of all the relevant facts, warrants his disbarment. We have come to this conclusion after giving dne consideration to the fact of full reparation, to the evidence regarding the accused’s reputation and many years of practice at the Bar, and to the recommendation of the Board of Governors. The evidence would have supported a verdict of guilty of embezzlement. The numerous letters to Hudson were obviously written for the purpose of forestalling an investigation; and there can be no doubt that the accused finally paid Hudson what was due him only under compulsion of the fear of the consequences induced by his knowledge that his wrongdoing had been discovered. We think that reparation under those circumstances should not weigh very heavily in his favor. Some of the evidence of good reputation which he produced creates a doubt upon that subject, while his invention of a defense to the charges and his attempt to establish it by sworn testimony, in violation of his oath as a witness and as an attorney of this court, aggravates the offense and strongly suggests that whatever of good reputation he may have enjoyed was not earned.

The recommendation of the Board of Governors is entitled to much weight. But we should bear in mind that, while theirs is the power of recommendation, ours is the duty of judgment. We cannot evade the ultimate responsibility in a case of this character, of rendering a decision which will tend to the preservation of the high standards of honorable conduct which we profess. If the courts balance those standards too lightly in the scales against the plea for indulgence of a lawyer’s offense, they and the profession run the risk of justly forfeiting the respect and confidence of the public.

The obligation of a' lawyer to his client, the courts, and the public is no ordinary one, but demands honor the most punctilious in the discharge of all his professional duties. During recent years both Bar associations and the courts have become increasingly aware of their duty, not only to deny the high privilege of ministering at the altar of justice to applicants who are unable to demonstrate that they possess the requisite qualifications of character, but, as well, to withdraw that privilege from those who, having been granted it, prove themselves unworthy of their trust. In neither case is the court’s office that of punishment. In both it is vindication of ethical standards and protection of the legal profession and the public.

We think it unnecessary to cite authority for the propriety of a judgment of disbarment under the facts of the instant case, but if it were, reference to the recent decision by a unanimous court in the case of In re Schmalz, 169 Or. 518, 129 P. (2d) 825, should suffice.

It is the judgment of the court that the petitioner be disbarred from the practice of law in this state.

Belt and Kelly, JJ.,

deeming themselves disqualified, did not participate in the consideration or decision of this case.