S056480, Opinion — In re Peterson

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Argued and submitted November 2, 2009, accused suspended from practice of law
for period of 60 days, commencing 60 days from date of decision May 27, 2010

In re Complaint as to the Conduct of
THOMAS J. PETERSON,
Accused.
(OSB Case No. 06-109; SC S056480)
232 P3d 940

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In re Peterson

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CJS, Attorney and Client § 80.

# En Banc

On review of the decision of a trial panel of the Disciplinary
Board.

Thomas J. Peterson, Eugene, argued the cause and sub-
mitted the brief in propria persona.

Jeffrey D. Sapiro, Disciplinary Counsel, Oregon State
Bar, Tigard, argued the cause and filed the brief for the
Oregon State Bar.

# PER CURIAM

The accused is suspended from the practice of law for a
period of 60 days, commencing 60 days from the date of this
decision.

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# PER CURIAM

In this lawyer disciplinary proceeding, the Oregon
State Bar (Bar) charged the accused with violating three pro-
visions of the Oregon Rules of Professional Conduct (RPC):
RPC 1.15-1(a) (requiring lawyer to account for client funds
and to deposit and maintain client funds in trust), RPC 1.15-
1(c) (requiring lawyer to withdraw client money only as fees
are earned or expenses incurred), and RPC 8.4(a)(3) (prohib-
iting conduct involving dishonesty, fraud, deceit, or misrep-
resentation). A trial panel of the Disciplinary Board con-
cluded that the accused had violated the rules as alleged. As
a sanction, a majority of the trial panel disbarred the
accused. A dissenting member of the trial panel would have
suspended the accused for one year and required a two-year
period of probation thereafter.

The accused sought review pursuant to ORS 9.536(1)
and Bar Rule of Procedure (BR) 10.1. Pursuant to ORS
9.536(2) and BR 10.6, this court reviews a decision of the trial
panel de novo. On de novo review, the Bar has the burden of
establishing the accused's misconduct by clear and convinc-
ing evidence. BR 5.2. Clear and convincing evidence is evi-
dence establishing that the truth of facts asserted is highly
probable. In re Johnson, 300 Or 52, 55, 707 P2d 573 (1985).

On review, we conclude that the accused violated
RPC 1.15-1(a) and RPC 1.15-1(c) as alleged by the Bar. We
suspend the accused from the practice of law for 60 days.

# I. FACTUAL BACKGROUND

The accused, a sole practitioner in Eugene, has prac-
ticed law in Oregon since 1976 and has no prior disciplinary
history. His practice consists primarily of domestic relations
and real estate work, some of which is contract work per-
formed for other lawyers. Prior to the Bar's investigation, the
accused, who does his own bookkeeping, kept "very spotty
records" and did not maintain individual client ledgers.
Although the accused did not have very many client trust
accounts, he testified that he would put client money that
was to be held in trust into a lawyer trust account.

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The majority of the violations alleged by the Bar
stem from the handling of a $2,000 check from the accused's
clients, Frances and Emmet Thomas, that was made pay-
able to "Thomas Peterson, Lawyer Trust Account." The
Thomases, a retired couple, had become involved in a bound-
ary dispute with their neighbors, the Heneghans. The
Heneghans and the Thomases owned adjoining five-acre
parcels and the Thomases had been concerned that the
Heneghans were encroaching onto their property. On March 17,
2005, the Thomases contracted with surveyor Dave Wellman
to locate the boundary line between the two properties.
The survey revealed that a driveway recently built by the
Heneghans was actually located on the Thomases' property.

The Thomases then asked Eugene lawyer Laura
Parrish, who had assisted them with a prior probate matter,
to help them resolve the boundary dispute. Parrish, in turn,
contacted the accused, who previously had worked for her on
a contract basis and who she knew had experience with real
estate issues. There was no written retainer agreement
between Parrish and the accused or between the accused and
the Thomases. From March 2005 until May 2006, the
accused submitted regular bills for his services to Parrish. He
billed his work at his contract rate of $70 per hour. Parrish
paid the accused out of her office account and then billed the
Thomases directly for the accused's services.

The accused took the lead role in working with the
Thomases. In September 2005, the Thomases and the
Heneghans tentatively agreed to settle their dispute by
exchanging equal portions of their five-acre parcels. On
September 27, 2005, the accused, the Thomases, and
Wellman, met at the Thomases' home to discuss how the
Thomases wanted to proceed with the property line adjust-
ment. On October 5, 2005, the Thomases authorized
Wellman to go forward with the next round of survey work.

Wellman estimated that his fee for the property line
adjustment work would be $2,000. Although the Heneghans
and the Thomases had agreed to split payment of Wellman's
fee, the Thomases, Parrish, and the accused shared a concern
that the Heneghans might not pay their share.

On October 2 or 3, 2005, the accused called the
Thomases, expressed a concern about the Heneghans not

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paying their half of Wellman's fee, and stated that, if the
Thomases put some money towards Wellman's services, he
would try to have the Heneghan's attorney, Kate Thompson,
put a like amount in reserve. On October 3, 2005, Frances
Thomas wrote a check for $2,000 payable to "Thomas Peterson,
Lawyer Trust Account." The check contained the notation
"Land survey." All parties agree that $1,000 of the money
represented payment in full of the accused's fee in perform-
ing documentation work to finalize the settlement and that
the accused would use the other $1,000 to pay the Thomases'
share of Wellman's fee once Wellman completed his work and
submitted his bill. However, no contemporaneous writing
memorialized the purpose of the payment.

On October 6, 2005, the accused deposited the
$2,000 check into his trust account. The next day, the accused
wrote a check for himself against his trust account in the sum
of $2,000 and deposited that check into his personal checking
account.

At that time, the accused was experiencing financial
difficulties. He had filed for bankruptcy on June 30, 2005, to
prevent foreclosure on his home. Because he had failed to
make the August and September payments on the bankruptcy
plan, the bankruptcy court had issued a September 23,
2005, order that required that the plan payments be brought
current by October 6, 2005. On October 6, 2005, the accused
mailed the bankruptcy trustee a personal check for the
August and September payments, totaling $3,870.1 Without
the $2,000 from the Thomases, the accused would have had
insufficient funds in his checking account to timely make the
$3,870 payment.2

The Thomases' dispute with the Heneghans did not
resolve quickly, and Wellman's fee rose to a greater amount
than anticipated. After several disagreements between the
Heneghans and the Thomases as to the location of the new

1 Because the bankruptcy trustee did not accept personal checks, the trustee
requested dismissal of the accused's bankruptcy petition. The trustee later with-
drew that motion once the accused made payment via a cashier's check.

2 The accused testified that his wife was paid on October 20, and that he could
have made arrangements with the bankruptcy trustee to postpone the due date of
the $3,870 payment until that time. The Bar responds that the accused's explana-
tion is implausible, noting that the accused needed the funds from his wife's pay-
check to make the next payment on the bankruptcy plan.

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boundary line, Wellman submitted his bill for $4,690 on June 6,
2006. On June 19, 2006, the accused sent Wellman the
Thomases' share of his fee, which he paid by a $1,345 check
from the Thomases and a $1,000 check from his trust
account.

Because the accused believed that his trust account
contained $505, he deposited $500 from his personal account
into his trust account to cover the check that he issued to
Wellman. However, because the accused had withdrawn
$100 from the account on June 9, his $500 deposit only raised
the trust account balance to $905. Thus, when Wellman
cashed the $1,000 check on July 3, it resulted in a $95 over-
draft charge on the accused's trust account. The bank hon-
ored the check but notified the Bar of the overdraft. That
overdraft notice triggered the Bar's investigation of the
accused.

Although the accused submitted his final bill
through Parrish's office in May 2006, he continued to perform
documentation work on the Thomas matter until June 2007.
The documentation work included drafting a property line
adjustment, a septic line easement, and a trust deed modifi-
cation for the Heneghan's property, as well as working with
the title company to obtain title insurance for the Thomases'
property. The accused did not submit any further bills to the
Thomases for that work except for a final bill for $174.66 for
out-of-pocket costs advanced.

Throughout the Bar's investigation, the accused has
acknowledged that he did not keep proper trust account
records or otherwise follow proper bookkeeping procedures.
In the accused's first letter to the Bar, he apologized and
explained that he had made a mistake in calculating the bal-
ance in his trust account because he "improperly withdrew"
$100 from the account on June 9. In the accused's second let-
ter to the Bar, he explained his role in the Thomas matter in
more detail, stating:

"[A]fter discussing the matter with Ms. Parrish and
Mr. and Mrs. Thomas, it was decided that Mr. and Mrs.
Thomas would deposit $2,000 with me, so that I could tell
the Heneghan attorney, Kate Thompson, that I had
received money for the surveyor and that I assumed that

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she would also receive money for the surveyor. Mr. and
Mrs. Thomas and I agreed that $1,000 of the sum would go
to Mr. Wellman, and $1,000 would go to payment of my
attorney fees. I received the $2,000 on October 6, 2006,
called Ms. Thompson that day and stated that I had
received money for the surveyor and that I assumed she
would do the same. I then transferred the $2,000 into my
personal account. I did so without confirming the arrange-
ment in writing with Mr. and Mrs. Thomas, and admit that
I am at fault for not having done so."

In his third letter, the accused responded to a question from
the Bar investigator as to why he had removed the $1,000
intended to pay for Wellman's services:

"I admit that I should not have removed the $1,000 that
was to be paid to Mr. Wellman, and am at fault for having
done so. In addition, I should have returned $1,000, instead
of $500, to the trust account to pay Mr. Wellman. My ration-
ale was that I had earned the remaining $500 from [another
client] but had not yet withdrawn those funds from the
trust account. I admit that I did not follow proper bookkeep-
ing procedures and am at fault for not having done so."

In his fourth letter to the Bar, the accused further responded
to questions regarding the withdrawal of the $1,000 ear-
marked to as future payment for Wellman services:

"I did not have a pressing need for the money at the time I
removed the $1,000 from the Thomas trust account fund
that was to be paid to the surveyor. * * * In any event, I can-
not justify the withdrawal, and any excuse I would attempt
to make would sound forced and hollow. What I did was
wrong."

On November 8, 2006, the Bar filed a complaint
against the accused; the Bar filed an amended complaint on
March 20, 2007. On April 2, 2007, the accused filed an
answer to the amended complaint. The accused attached to
his answer an affidavit dated January 18, 2007, prepared by
his lawyer and signed by the Thomases ("the Thomas affida-
vit"). In part, the Thomas affidavit states:

"On October 6, 2005, we paid $2,000 to Tom Peterson.
$1,000 was a flat fee, fully earned at the time of receipt,
paid to Mr. Peterson, in advance, for consultation with
Lane County, preparation and filing of documents and

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follow-up matters needed to consummate the settlement.
Mr. Peterson also agree[d] to assume responsibility for pay-
ing, when billed, the sum of $1,000 to Mr. Wellman, the sur-
veyor. We agreed to pay the remainder of our share of the
survey cost.

"We expected Mr. Peterson to negotiate our check and
use the funds as he chose. We claimed no ownership inter-
est in any of the money once it was paid to Mr. Peterson.

"We understand that Mr. Peterson disbursed to himself
the sum of $2,000 shortly after receipt of our $2,000 check
and then later paid $1,000 to Mr. Wellman on or about
June 19, 2006. This is what we expected him to do. He made
these disbursements with our knowledge, consent, permis-
sion and approval.

"We didn't ask or expect Mr. Peterson to retain any of
the money in his trust account. The entire sum was his,
subject only to his agreement to pay Mr. Wellman $1,000 at
some later date when Mr. Wellman sent a bill for his
services."

The Thomas affidavit is consistent with the
accused's testimony at trial. At various points during the
hearing and a prehearing deposition, the accused has
referred to his obligation to pay Wellman as an "agreement to
assume responsibility" of paying Wellman, a "legal obliga-
tion," a "moral, if not legal, obligation," and a "contractual
obligation." At a prehearing deposition and at the hearing,
the accused claimed that he had discussed his agreement
with the Thomases to obligate himself to pay $1,000 of
Wellman's fee with Laura Parrish and Dave Wellman. How-
ever, at the hearing, neither Laura Parrish, Dave Wellman,
nor Frances Thomas recalled being told of such an
agreement.

Also at the hearing, Frances Thomas testified
regarding the accuracy of the affidavit. She first testified that
she did not remember anything about Peterson's fee being
nonrefundable and fully earned upon receipt. She also testi-
fied that the statement that the accused could use the money
"as he chose" was not entirely accurate, because she and her
husband only had granted "him permission to use it for Dave
Wellman and to tidy the loose ends." She further testified
that, at the time, she did not really know how the $1,000 for

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Wellman would be handled in the interim but that, in retro-
spect, now that she had talked with the Bar's investigator
and understood the purpose of a lawyer trust account, it
appeared as though the $1,000 should have been kept in the
trust account. Finally, Mrs. Thomas also testified that she
was pleased with the accused's work and that he earned the
money that he had been paid.

# II. DISCUSSION

The trial panel first found that the accused had vio-
lated RPC 1.15-1(a) by failing to keep proper records of client
funds between September 2005 and July 2006. In part, RPC
1.15-1(a) requires that a lawyer keep "[c]omplete records" of
funds held in a lawyer's trust account for clients or third per-
sons. The accused has acknowledged that, prior to the Bar's
investigation, he kept very poor records, failed to maintain
individual client ledgers, and failed to reconcile his monthly
trust account statements. On review, the accused concedes
that he violated the recordkeeping requirements of RPC 1.15-
1(a). We accept that concession.

The trial panel also found that the accused's October
2005 withdrawal of the $2,000 violated RPC 1.15-1(a) and
RPC 1.15-1(c). In part, RPC 1.15-1(a) requires that

"[a] lawyer shall hold property of clients or third persons
that is in a lawyer's possession separate from the lawyer's
own property. Funds, including advances for costs and
expenses and other funds held for another, shall be kept in
a separate 'Lawyer Trust Account' * * *. "

## RPC 1.15-1(c) requires that

"[a] lawyer shall deposit into a lawyer trust account legal
fees and expenses that have been paid in advance, to be
withdrawn by the lawyer only as fees are earned or
expenses incurred."

On review, the accused appears to contest those violations,
admitting only that he violated RPC 1.15-1(c) insofar as it
would require a written agreement on the facts of this case.

We begin by determining to whom the $2,000
belonged on October 7, 2005, when the accused withdrew the
money from his lawyer trust account and deposited it into his

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personal account. The Bar argues that $1,000 represented an
advance payment of the accused's future attorney fees and
thus remained client property until the accused performed
the documentation work to earn his fees. The Bar contends
that the remaining $1,000 represented "anticipated expenses
for the surveyor paid by the Thomases in advance." The
accused, relying on the affidavit, contends that the entire
$2,000 sum was his property, subject only to his agreement
with the Thomases that he would pay the surveyor.

Even assuming that the Thomases and Peterson had
an oral agreement that the entire $2,000 sum represented a
fully nonrefundable retainer earned on receipt, "an oral
agreement does not provide a sufficient basis for a lawyer to
treat a client's funds as if they were his or her own." In re
Fadeley, 342 Or 403, 409-10, 153 P3d 682 (2007) (lawyer vio-
lated former DR 9-101(A) by depositing client funds into per-
sonal checking account rather than lawyer trust account). In
the absence of a written fee agreement that expressly desig-
nates a fee as a nonrefundable retainer earned upon receipt,
funds paid from a client to a lawyer remain subject to trust
account rules regarding funds held for another. In re Biggs,
318 Or 281, 293, 864 P2d 1310 (1994) (applying former DR 9-
101(A)); see also In re Balocca, 342 Or 279, 288-89, 151 P3d
154 (2007) (following Biggs). Applying Fadeley, Biggs, and
Balocca, we conclude that the accused violated RPC 1.15-1(a)
and (c) when he removed the $2,000 from his lawyer trust
account and deposited it into his personal checking account.

Our final inquiry focuses on whether the accused's
handling of the $2,000 also violates RPC 8.4(a)(3), as alleged
by the Bar. RPC 8.4(a)(3) provides:

"It is professional misconduct for a lawyer to:

***** *

"(3) engage in conduct involving dishonesty, fraud,
deceit or misrepresentation that reflects adversely on the
lawyer's fitness to practice law."

Under this court's case law, "dishonesty includes theft or
knowing conversion of client property, such as client funds."
In re Eakin, 334 Or 238, 248, 48 P3d 147 (2002).

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To determine whether an accused lawyer engaged in
conduct involving dishonesty by conversion, we apply the
two-step analysis from In re Martin, 328 Or 177, 184, 970 P2d
638 (1998). We first consider whether the accused's conduct
"amounted to conversion." If so, we next evaluate whether
the accused exhibited the requisite intent such that the con-
version constituted "conduct involving dishonesty."3

An individual commits the act of conversion when,
without the legal right to do so, he or she exercises " 'domin-
ion or control over a chattel which so seriously interferes with
the right of another to control it that the actor may justly be
required to pay the other the full value of the chattel.'" Id.
(quoting definition found in Restatement (Second) of Torts
§ 222A (1965)).

Because an actor who mistakenly believes that his or
her conduct is legal still can commit conversion, not all con-
versions implicate the prohibition in RPC 8.4(a)(3) against
"conduct involving dishonesty." Id. at 184-85. Acts of conver-
sion that are "intentional or knowing" violate RPC 8.4(a)(3);
acts that are "merely negligent, unknowing or innocent" do
not. Id. at 186. Stated differently, the Bar must prove, by
clear and convincing evidence, that the accused either
(1) intended to convert property, or (2) knew "that his conduct
was culpable in some respect." In re Skagen, 342 Or 183, 203,
149 P3d 1171 (2006) (evaluating the mental state required
for "conduct involving dishonesty" under former DR 1-
102(A)(3)).

As discussed above, there was no written agreement
between the accused and the Thomases that authorized the
accused to withdraw or spend the $2,000. The affidavit
signed by the Thomases is not the equivalent of a contempo-
raneously signed written fee agreement. The conduct in
question, however, is not in dispute: the accused withdrew

3 The analysis from In re Martin was developed for substantially identical
former DR 1-102(A)(3), which provided that "[i]t is professional misconduct for a
lawyer to: * * * (3) Engage in conduct involving dishonesty, fraud, deceit or misrep-
resentation." We consider the analysis in Martin equally applicable to alleged vio-
lations of RPC 8.4(a)(3).

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$2,000 from his trust account, deposited the funds in his per-
sonal account, and used the funds for his own personal pur-
poses. That conduct could constitute conversion. We need not
decide that issue, however, because, as we shall explain, we
conclude that the Bar has failed to prove that the accused's
state of mind was a culpable one.

The Bar points to a number of circumstances sur-
rounding the accused's withdrawal of the $2,000 that the Bar
contends demonstrate that his conduct was culpable rather
than innocent. The Bar begins with the circumstances sur-
rounding the accused's request for the $2,000, namely that:
(1) prior to October 2005, the accused only had billed the
Thomases indirectly through Parrish, (2) the accused did not
list the $2,000 as a credit on his November billing statement
to Parrish or tell her about the payment, and (3) because the
Thomases were current on their payments to Parrish, the
accused had no reason to ask for the money except to satisfy
his own financial needs.

In addition, the Bar contends that the accused's han-
dling of the $2,000 indirectly demonstrates his knowledge
that the money did not belong to him. The Bar argues that
the accused's initial deposit of the $2,000 into his trust
account reflects his knowledge that the $2,000 was client
property that should remain in trust. See In re Hedges, 313
Or 618, 623, 836 P2d 119 (1992) (money paid by client to law-
yer remained client funds in the absence of a contrary written
agreement when the accused had deposited money in trust
account and admitted that, if the money had been a non-
refundable fixed fee, he would have deposited it in his office
account). The Bar also points out that the accused issued the
check used to pay Wellman $1,000 from his trust account.

Next, the Bar points to the accused's correspondence
during the Bar's investigation. The Bar explains that the
accused did not assert the explanation that the entire $2,000
was a flat fee earned upon receipt in his correspondence with
the Bar. The Bar also notes that, in his correspondence with
the Bar, the accused admitted that he "should not have"
withdrawn the $1,000 to be paid to the surveyor and that
such action "was wrong."

Finally, the Bar contends that the accused has been
dishonest and, accordingly, his explanations are not entitled

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to any weight. The Bar argues that the accused lied in a dep-
osition by stating that he did not have any pressing need for
money in October 2005. Moreover, the Bar notes, although
the accused testified that he had personally obligated himself
to pay Wellman and discussed that obligation with Parrish,
the Thomases, and Wellman, none of those persons corrobo-
rated that story.

The accused makes several points in response to the
Bar's characterization of the evidence. As to the timing of his
request, the accused responds that, in October 2005, the set-
tlement and survey were both moving forward, and that the
request was made in response to the shared concern that the
Heneghans would not pay their share of the surveyor's bill.
He also argues that the payment was sought because the
matter was moving forward such that he had transitioned
from the initial phase of his work (billed through Laura
Parrish at a rate of $70 per hour) to the documentation phase
(billed through the $1,000 flat fee payment). With regard to
his correspondence with the Bar, the accused responds that
his statements were focused on his failure to memorialize the
agreement in writing and thus do not properly support the
conclusion that he was admitting to a knowing or intentional
conversion of client funds. With regard to his financial cir-
cumstances, the accused contends that he did not need the
Thomas payment to make his bankruptcy payments because
his wife was paid on October 20 and he could have obtained
an extension of time from the trustee until that date. Finally,
the accused responds that, as he testified at trial, the reason
he paid the surveyor from his trust account was because he
did not have a business account and he wanted the payment
to look professional.

We find it helpful to consider the $1,000 intended for
the accused's services separately from the $1,000 intended
for payment to Wellman. With regard to the $1,000 ear-
marked as payment for the accused's services, we find that
the Bar failed to prove by clear and convincing evidence that
the accused acted with culpable intent. Below, we discuss
three sets of facts that could lead to objectively reasonable
inferences that the accused intentionally or knowingly con-
verted the funds and explain why those facts, taken in light of
the circumstances of the case, are insufficient to meet the
standard of clear and convincing evidence.

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First, the accused directed Frances Thomas to make
the $2,000 check payable to his lawyer trust account and
then deposited the check into his trust account. That fact sug-
gests that the accused may have known that the $1,000 in
attorney fees belonged in trust because the accused testified
that, when he had client money that belonged in trust, his
practice was to deposit that money into a trust account. How-
ever, it is also undisputed that, in October 2005, the accused
was using poor bookkeeping and trust account practices.
Thus, the deposit of the funds into his trust account does not,
standing alone, prove by clear and convincing evidence that
the accused knowingly misappropriated funds in this case.
See In re Wyllie, 331 Or 606, 621, 19 P3d 338 (2001) (Bar's
argument that, because the accused generally lacked appro-
priate procedures for handling client funds, the accused
knowingly misappropriated client funds "proves too much").

Second, the accused never noted a credit on his bill-
ing to Laura Parrish that reflected the $2,000 payment
received from the Thomases. However, by October 2005, the
accused had taken the lead on the Thomas matter and
Parrish was no longer directly involved. Parrish testified
that, although she was not aware of the agreement between
the accused and the Thomases, she would not have objected.
Moreover, although the accused submitted his last billing
statement to Parrish on May 31, 2006, he continued to per-
form documentation work on the Thomas matter until June
2007 without submitting any further billing, except a final
bill for costs advanced.

Third, when the accused approached the Thomases
and requested the $2,000, it was the first time that he had
directly contacted the Thomases regarding billing or fees.
One plausible explanation for the accused's request is that he
was seeking funds to make the back payments on his bank-
ruptcy plan to avoid dismissal. But, an at least equally plau-
sible explanation is that the timing of the request corre-
sponded with the negotiation of a tentative settlement
agreement and the beginning of the surveyor's work on the
property line adjustment. We are unpersuaded that the Bar
proved by clear and convincing evidence that the accused had
no legitimate reason to ask for the $2,000 advance payment.
See In re Claussen, 331 Or 252, 267, 14 P3d 586 (2000) ("The

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facts are capable of supporting either party's view, but the
evidence in the record does not permit us to infer that the
alleged violations are 'highly probable.'").

Taken together, the above-described evidence cer-
tainly raises the question whether the accused knew that the
$1,000 was client funds and not available for disbursement
until all work was performed. However, this court's standard
of review of clear and convincing evidence "demands more
than merely a suspicion that a particular fact is true." In re
Albrecht, 333 Or 520, 539, 42 P3d 887 (2002). We find that
the Bar did not prove that the accused violated RPC 8.4(a)(3)
in his handling of the $1,000 that had been earmarked as
payment for his attorney fees.

We turn to the $1,000 that the clients had advanced
for payment of the surveyor. The accused has consistently
acknowledged that he received the $1,000 from the
Thomases for the purpose of paying the surveyor, Wellman.
The question, however, is whether the accused knew that his
withdrawal and application of the $1,000 was inconsistent
with the authority that the clients had given him.

The Bar stresses that the $1,000 in question was
meant solely to compensate Wellman, not the accused. The
Bar also points out that the accused, in correspondence with
the Bar, acknowledged that he "should not have" withdrawn
the $1,000 and that that action "was wrong."

As we have already discussed, the accused's
acknowledgements that, viewed in retrospect, his conduct
was improper in some ways are not specific enough to serve
as admissions that he committed a conversion of client funds.
However, the lack of specificity in his statements is not the
most serious evidentiary problem that we detect in this
record.

We find that the accused did believe that he had a
binding obligation to the client to pay the surveyor, and that
he always intended to act consistently with that obligation,
as he understood it. The parties differ sharply, however, in
their portrayals of the evidence of the authority that the
accused received from the Thomases regarding the money in
question. The Bar relies on the testimony of Frances Thomas,

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summarized above, that the money was for Wellman's bill
and that she had realized, after speaking with the Bar's
investigator, that the accused should have kept the money in
the trust account. The Bar also criticizes the accused's credi-
bility and points out that Parrish, Wellman, and Frances
Thomas could not recall being told of the agreement that the
accused described.

According to the accused, his withdrawal of the
$1,000 was consistent with his understanding with the
Thomases and, therefore, he was not acting dishonestly in
making the withdrawal. The affidavit signed by the
Thomases explicitly corroborates the accused's explanation
of his authority regarding the $1,000.4 Even if we disregard
the accused's testimony about his authority, as the Bar urges,
there remains a significant evidentiary conflict about what
the accused was authorized to do with the money that he
received from the Thomases. The fact that Frances Thomas
later acquired a different understanding of the Bar's rules
pertaining to trust accounts from the Bar's investigator does
not alter the affidavit's portrayal of the accused's authority
on October 7, 2005. The Bar focuses on the fact that Frances
Thomas expressed embarrassment for signing the affidavit
"without really studying it." However, she also testified that
she read the affidavit, without time constraint, before she

4 To repeat, the Thomases swore that the following facts were true in their
affidavit:

"Mr. Peterson also agree[d] to assume responsibility for paying when billed,
the sum of $1,000 to Mr. Wellman, the surveyor. We agreed to pay the remain-
der of our share of the survey cost.

"We expected Mr. Peterson to negotiate our check and use the funds as he
chose. We claimed no ownership interest in any of the money once it was paid
to Mr. Peterson.

"We understand that Mr. Peterson disbursed to himself the sum of $2,000
shortly after receipt of our $2,000 check and then later paid $1,000 to Mr. Wellman
on or about June 19, 2006. This is what we expected him to do. He made these
disbursements with our knowledge, consent, permission and approval.

"We didn't ask or expect Mr. Peterson to retain any of the money in his
trust account. The entire sum was his, subject only to his agreement to pay
Mr. Wellman $1,000 at some later date when Mr. Wellman sent a bill for his
services."

At the trial panel hearing, Frances Thomas gave testimony in response to
questions about the foregoing affidavit. Neither party called Emmet Thomas as a
witness at the hearing.

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signed it in her home. Those differing accounts contribute to
our conclusion that the evidence is in conflict regarding the
authority delegated to the accused. Even if the court could
view Frances Thomas' testimony as expressing second
thoughts about the accuracy of the affidavit, she did not repu-
diate the affidavit and said nothing to indicate that Emmet
Thomas disavowed his statements in the affidavit. Addition-
ally, as the accused points out, it is uncontradicted that the
Thomases were pleased with the accused's services and that
he timely paid Wellman's bill upon receipt.

As noted, the Bar bears the burden to prove, by clear
and convincing evidence, that the accused had a culpable
state of mind and, thus, acted dishonestly when he withdrew
the funds from his trust account and applied them to his own
purposes.5 Even if we disregard the accused's testimony
entirely, the evidentiary conflict to which we have adverted
causes us to be unpersuaded, by clear and convincing evi-
dence, that the accused intentionally or knowingly withdrew
and applied the $1,000 in violation of his authority. We must
resolve the resulting evidentiary question against the party
who bears the burden of proof on the question. Consequently,
we conclude that the Bar has not proven the charge of con-
version involving dishonesty, in violation of RPC 8.4(a)(3),
regarding the $1,000 payment for the surveyor's services.

# III. SANCTION

Having found that the accused violated RPC 1.15-1(a)
and RPC 1.15-1(c), we next determine the appropriate sanc-
tion. This court has recognized that the purpose of lawyer dis-
cipline is not retribution but rather to "protect the public and
the administration of justice from lawyers who have not dis-
charged, will not discharge, or are unlikely to properly dis-
charge their professional duties to clients, the public, the
legal system, and the legal profession." American Bar
Association's Standards for Imposing Lawyer Sanctions 1.1

5 Indeed, intent is the distinguishing characteristic between failure to main-
tain client funds in a trust account under RPC 1.15-1(a) and conversion involving
dishonesty under RPC 8.4(a)(3). See In re Phelps, 306 Or 508, 512, 760 P2d 1331
(1988) (Under former disciplinary rules, "[a] lawyer may remove money from a
trust account * * * before intentionally appropriating that money for the lawyer's
own purposes * * * but removal of money from a trust account does not necessarily
constitute an intentional misappropriation.").

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(1991) (amended 1992) (ABA Standards); see In re Paulson,
346 Or 676, 712, 216 P3d 859 (2009), adh'd to as modified on
recons, 347 Or 529, 225 P3d 41 (2010) (The purpose of lawyer
discipline is not to punish a lawyer who has failed to follow
the rules of professional conduct.). To determine the appro-
priate sanction, we follow a three-step analytical framework.
First, "we determine an initial presumptive sanction based
on (1) the ethical duty violated; (2) the lawyer's mental state;
and (3) the actual or potential injury caused" by the lawyer's
conduct. Paulson, 346 Or at 712 (citation omitted). Second,
we adjust the presumptive sanction based on the presence of
aggravating or mitigating circumstances. Id. Third and
finally, we consider whether that adjusted sanction is consis-
tent with Oregon case law. Id.

## A. Preliminary analysis

In violating RPC 1.15-1(a) and RPC 1.15-1(c), the
accused has violated his duty to his clients to deal properly
with client property and avoid potential injury to the clients'
interests. ABA Standard 4.12. Those violations also violate
the accused's duty to the public to avoid conduct that reflects
adversely on his fitness to practice law. ABA Standard 5.14.

The ABA Standards describe three types of culpable
mental states: intent, knowledge, and negligence. A lawyer
acts intentionally when the lawyer acts with "the conscious
objective or purpose to accomplish a particular result." ABA
Standards at 7. A lawyer acts knowingly when the lawyer
acts with "conscious awareness of the nature or attendant
circumstances of the conduct but without the conscious objec-
tive or purpose to accomplish a particular result." Id. In turn,
a lawyer acts negligently when the lawyer deviates from the
standard of care that a reasonable lawyer would exercise in
the situation by failing to heed a substantial risk that circum-
stances exist or that a result will follow. Id. We find that the
accused acted negligently when he committed the trust
account violations. From his lengthy experience in the prac-
tice of law, the accused knew or should have known that his
handling of his trust account funds was improper.

An injury to a client's interests can be actual or
potential. Here, we find that the accused caused potential
economic injury to his clients because his poor accounting

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methods jeopardized the security of trust account deposits.
By failing to maintain his trust accounts in accordance with
legal requirements, the accused also caused actual harm to
the legal profession. In cases involving a failure to observe
trust account requirements, "[s]uspension is generally appro-
priate when a lawyer knows or should know that he is deal-
ing improperly with client property and causes injury or
potential injury to a client." ABA Standard 4.12. In this case,
the presumptive sanction is a suspension.

## B. Aggravating and mitigating circumstances

We next turn to a consideration of aggravating and
mitigating circumstances. We find two aggravating circum-
stances. First, the accused committed multiple offenses in
this case. ABA Standard 9.22(d). Second, having practiced
law in Oregon since 1976, the accused has substantial expe-
rience in the practice of law. ABA Standard 9.22(i).

Two mitigating circumstances also are present. The
accused lacks any prior disciplinary record. ABA Standard
9.32(a). The accused also appears to have an excellent repu-
tation in the community. ABA Standard 9.32(g).

## C. Oregon case law

We turn to a consideration of whether the presump-
tive sanction is consistent with Oregon case law. Four recent
cases are pertinent to this discussion.

In Fadeley, the accused lawyer had no written fee
agreement with his client. He received a $10,000 deposit
from the client and deposited it in his personal checking
account. The lawyer and client disagreed about whether the
money constituted, as the lawyer claimed, a fee fully earned
on receipt. The Bar alleged four violations: (1) failure to
deposit client funds in a trust account, DR 9-101(A); (2) fail-
ure to render an accounting, DR 9-101(C)(3); (3) charging or
collecting a clearly excessive fee, DR 2-106(A); and (4) failure
to promptly refund an unearned fee, DR 2-110(A)(3). The
court in Fadeley found that the lawyer committed the viola-
tions with a mental state of negligence; it also found that the
aggravating circumstances outweighed the mitigating cir-
cumstances. The court imposed a 30-day suspension.

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In Eakin, the accused lawyer and the client agreed
on a flat fee of $3,500 to pay for services and a trust account
deposit by the client of $3,000 to pay for costs. The lawyer
mishandled the client trust account by reimbursing herself
$850 for an expense that she did not incur, thus paying her-
self more than she was entitled to receive. The court sus-
tained charges against the lawyer under DR 9-101(A), (C)(3),
and (C)(4), all of which obligate a lawyer to properly admin-
ister client funds in a trust account. The court determined
that the sole aggravating circumstance, substantial experi-
ence in the practice of law, outweighed the two mitigating cir-
cumstances present. The court found that the lawyer should
have known that she was mishandling her trust account. The
court ordered a suspension of 60 days.

In Balocca, the accused lawyer produced no written
agreement regarding fees with the client. The lawyer
received the client's partial payment toward fees and costs,
but he did not deposit the funds into a trust account. The
court sustained charges of improper trust account adminis-
tration under DR 9-101(A) and DR 9-101(C), as well as a
charge under DR 2-106(A) for charging or collecting an exces-
sive fee. The court determined that the accused lawyer knew
or should have known that his handling of client funds was
improper, and that there were four aggravating circum-
stances and no mitigating circumstances. The court imposed
a suspension of 90 days.

Finally, in Wyllie, the accused lawyer had no written
fee agreement with the client. He collected $750 from the cli-
ent and deposited the money in a personal account, claiming
that he had earned that amount. The court sustained charges
that the lawyer had failed to deposit and maintain client
funds in a trust account, as well as other charges that the
lawyer charged or collected an excessive fee, DR 2-106(A), DR
9-101(A); and had a conflict of interest. The court found that
the lawyer's mental state for the trust account violations was
negligence under DR 5-105(E), and that there were several
aggravating circumstances but no mitigating circumstances.
The court imposed a sanction of a four-month suspension.

Our review of the foregoing Oregon cases, and oth-
ers, leads us to conclude that the presumptive sanction that

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we identified earlier, a suspension, is the appropriate sanc-
tion in this case. In determining the length of the suspension,
we draw particular attention, as did the court in Eakin, to the
accused's substantial experience in the practice of law. The
failure of a lawyer with substantial experience to carry out
fully the responsibilities imposed by RPC 1.15-1(a) and RPC
1.15-1(c) for the protection of client funds in a lawyer trust
account is a serious deviation from the legal profession's
ethics. Under the circumstances shown here, that aggravat-
ing circumstance outweighs his unblemished prior discipli-
nary record and good reputation in the community. The Bar's
proved charges require that the accused be suspended for
60 days.

The accused is suspended from the practice of law for
a period of 60 days, commencing 60 days from the date of this
decision.