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Matter of Youmans

Decided: May 18, 1990.

IN THE MATTER OF LOUIS B. YOUMANS, AN ATTORNEY AT LAW


On an order to show cause why respondent should not be disbarred or otherwise disciplined.

For suspension -- Chief Justice Wilentz and Justices Clifford, Handler, Pollock, O'Hern, Garibaldi, and Stein. Opposed -- None.

Per Curiam

This attorney-disciplinary proceeding arises out of two presentments filed by the District VII Ethics Committee (Ethics Committee) concerning six separate complaints lodged against respondent, Louis B. Youmans. Following a determination by the Ethics Committee, the Disciplinary Review Board (DRB or Board) concluded that respondent had engaged in unethical conduct. The Board unanimously recommended that respondent's license to practice law be suspended for a period of two years.

Pending final resolution of the matter, the Office of Attorney Ethics petitioned this Court for an order seeking temporary

suspension of respondent. That petition was prompted by respondent's failure to comply with various Fee Arbitration Committee determinations directing him to refund monies to clients, and by an intervening indictment charging Youmans with one count of conspiracy to commit theft by deception and five counts of bad-check offenses. We granted the order seeking temporary suspension.

Our independent review of the record leads us to conclude that respondent's ethical violations have been established by clear and convincing evidence. We further conclude that the period of suspension recommended by the Board appropriately reflects the seriousness of respondent's misconduct.

I.

Respondent was admitted to the bar of this State in 1977. In 1983, Mr. Youmans formed a professional corporation for the purpose of practicing law, in which he was the sole shareholder. By February of 1985, Youmans' law practice was beset with financial difficulties. On May 29, 1985, the corporation filed a voluntary petition for reorganization pursuant to Chapter 11 of the Federal Bankruptcy Act, 11 U.S.C.A. § 301 (1979). In January 1986, a trustee was appointed to take over the operation of the firm, and the Chapter 11 proceeding was converted to a Chapter 7 Bankruptcy, 11 U.S.C.A. § 1112 (1979). Thereafter, respondent began an unincorporated sole practice in Shrewsbury. Respondent later moved his office to Manasquan.

Respondent's financial problems led to the complaints filed against him by several clients and a former associate of the Youmans firm. The DRB reviewed the findings of the Ethics Committee, which were summarized in the following manner:

The Puckett Matter

In June, 1984, Respondent was engaged by Mrs. Patricia Puckett and her son, Andrew Marshall Puckett, to defend Mr. Puckett in connection with his indictment on criminal charges. The bills for respondent's services were paid by

Mrs. Puckett, and the representation continued until terminated by her by letter of January 28, 1986, subsequent to the filing of the grievance in this matter.

In August of 1985, Respondent told Mrs. Puckett that his firm (a professional corporation) was experiencing financial problems because, although the firm had plenty of receivables, clients were not paying bills in a timely fashion.

In August, September and October, 1985, Respondent and Mrs. Puckett frequently discussed both her son's case and the firm's finances. Mrs. Puckett told Respondent that her son John had $35,000 in savings, and the possibility of respondent's firm borrowing this sum was discussed.

In or about November, 1985, Respondent advised Mrs. Puckett of an immediate cash-flow problem which might cause his firm to be unable to meet its payroll. Mrs. Puckett volunteered to loan respondent $2,500 at no interest for two or three weeks.

Respondent accepted Mrs. Puckett's offer of a loan, which was repaid about four weeks later.

On December 2, 1985, Respondent called Mrs. Puckett and said that his firm needed funds because of a $10,000 'bank error'. In fact, the problem was a difference between respondent's projection of the firm's bank balance and the reality, due to some client checks which were returned for non-sufficient funds. Respondent told Mrs. Puckett that money was needed to pay a malpractice insurance premium, without which the firm could not continue in practice. He solicited Mrs. Puckett's help.

Mrs. Puckett told Respondent that her son John (aged 18) might be able to loan money to the firm. She made a point of the fact that other loans made by John had not been repaid, and that she wanted to be certain that did not happen again. Respondent assured Mrs. Puckett that any loan from John to his firm would be repaid. Mrs. Puckett thereupon spoke to John and arranged for him to loan $5,000 to respondent's firm.

On December 3, 1985, Mrs. Puckett brought a check for $5,000 to respondent's office. She again requested assurances that her son John would be repaid, which respondent gave. He executed a note on behalf of his firm, promising to repay the $5,000 together with 25% interest on December 24, 1985.

On May 29, 1985, Respondent's firm had filed a petition pursuant to Chapter 11 of the Federal Bankruptcy Act. At the time of the loans made by Mrs. Puckett and her son, the firm was operating as a debtor-in-possession. Loans made to the debtor-in-possession, if it could not successfully reorganize under Chapter 11, would be subordinated to the claims of the firm's secured creditors.

At no time prior to December 3, 1985 did Respondent mention the word "bankruptcy" to any member of the Puckett family. Although Respondent claims to have discussed the Chapter 11 proceeding with Mrs. Puckett, by his own admission he did not mention 'bankruptcy' because he 'doesn't consider a Chapter 11 a bankruptcy.' By Respondent's further admission, he did not explain to Mrs. Puckett the effect on her son's loan if the Chapter 11 proceeding was converted to a Chapter 7 proceeding, which was done at the Trustee's direction on or about January 21, 1986 . . . .

Respondent traded on Mrs. Puckett's lack of legal and financial sophistication, her concern for the continued representation of her son Andrew Marshall in the criminal proceeding against him, and her trust in the confidential relationship to Respondent, in obtaining the $5,000 loan from John Puckett at a time when, to respondent's knowledge, his firm's ability to repay the loan was seriously in doubt.

Mrs. Puckett went to see Respondent on December 24[sic], 1985, at which time he advised her that there were no funds available to repay the $5,000 loan.

On or about Thursday, January 2, 1986, in response to her repeated inquiries, Respondent gave Mrs. Puckett a check drawn on the firm's account in the amount of $5,141.17, to repay the loan from her son John. Respondent asked Mrs. Puckett to hold the check until the following Monday. On Monday, January 6, he called Mrs. Puckett to ask that she further delay depositing the check, but Mrs. Puckett had already gone to the bank and done so.

By notice of January 8, 1986, the bank returned Respondent's firm's check for non-sufficient funds.

At the time of giving Mrs. Puckett this check, Respondent had substantial doubts that there would be sufficient funds to cover it.

When Mrs. Puckett advised Respondent that the check had been returned, he admitted the firm had no funds to cover it. Later, he suggested to Mrs. Puckett that John Puckett file a claim with the Bankruptcy Court.

After Mrs. Puckett filed an ethics grievance, Respondent repaid the $5,000 loan, with interest, from personal funds ...


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