ALAN WEATHERFORD COURTNEY v. CLIENT SECURITY FUND COMMISSION (2011)

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

Plaintiff and appellant Alan Weatherford Courtney (Courtney) appeals a judgment denying his petition for writ of mandate.  (Code Civ. Proc., § 1094.5.)

Courtney was an attorney licensed to practice law in California.¹  He was convicted of grand theft and elder abuse on charges brought against him for his conduct toward his former clients, Rexford Phillips and Diane M. Phillips (sometimes collectively referred to as Phillips).²  The Client Security Fund Commission of the State Bar of California (Commission) awarded Phillips $50,000 in compensation.³

We conclude the trial court properly denied Courtney's petition for writ of mandate.   The judgment is affirmed.

FACTUAL AND PROCEDURAL BACKGROUND4

1. Pertinent facts leading up to Courtney's criminal conviction.

Rexford Phillips was 79 years old.   He and his wife owned a home in Solvang.   The home was subject to a homestead declaration filed by Phillips and his wife.

In 1998, Phillips was sued for fraud by Gary Dalluge.   In 1998, Phillips and his wife transferred their home to the Phillips Family Limited Partnership (PFLP).

In 2001, Dalluge obtained a judgment of $1.5 million against Phillips.   Phillips retained Courtney to represent him during judgment collection proceedings.

Courtney recommended that the Phillipses assign their interest in PFLP to a company Courtney owned, called Knightsbridge Partners, Inc. The Phillipses agreed, believing the transfer would protect their home against Dalluge's judgment.   Courtney prepared the documents.

In preparing Phillips for a debtor's examination, Courtney advised Phillips not to say anything about Courtney's ownership of Knightsbridge.   He repeated this advice on a number of occasions.   When asked about Knightsbridge at a 2002 debtor's examination, Phillips said he met a “Harry” or “Larry” from Knightsbridge in Nevada.   Phillips again lied about meeting “Harry” or “Larry” at the preliminary hearing in the criminal case.   Phillips explained that he lied because Courtney advised him not to disclose that Courtney owned Knightsbridge.

Eventually, the Phillipses' home was sold in execution on the judgment.   Prior to the sale, Courtney wrote to the sheriff's department instructing it to forward the $125,000 homestead money to Courtney's office, payable to Courtney in trust for the Phillipses.   Phillips did not authorize Courtney to write the letter.   Phillips believed the homestead money would be sent to him.

Phillips waited for approximately 30 days after the sale before calling Courtney.   When Phillips called to inquire about the homestead money, Courtney said he knew nothing about it, and did not care because he was no longer Phillips's attorney.

Phillips asked Attorney Mark Wietstock to find out what happened to the money.   Wietstock contacted Courtney who confirmed that he had the money.   Courtney told Wietstock that the money had been transferred from his client trust account to Knightsbridge at Phillips's request.   Courtney told Wietstock that Knightsbridge was an entity under the exclusive control of Phillips.

When Phillips learned that the money had been sent to Knightsbridge, he realized that Courtney had taken the money.   Phillips contacted the sheriff's department and spoke with Deputy William Honeycutt.   Honeycutt asked Courtney about the money.   Courtney told him that after deducting $11,000 in attorney fees, and depositing $10,000 into escrow at Phillips's request, he disbursed the rest to Knightsbridge as requested by Phillips.   Courtney told Honeycutt that Phillips is the general partner in Knightsbridge, and that Courtney had nothing to do with the company.   Records showed the escrow to which Courtney referred was for the purchase of a property by Courtney and his wife.   Later, Courtney told Honeycutt that he wrote 11 checks to Knightsbridge from his client trust account.   Phillips picked up the checks.   The checks cleared his trust account, but he did not know who cashed them.

Bank records showed $125,000 deposited in a Knightsbridge account, less $11,000 posted to Courtney's business account.   Courtney was listed on the account as president of Knightsbridge.

William Shea, special agent with the California Franchise Tax Board, testified Courtney used the funds in the Knightsbridge account to pay for his personal expenses, including a swimming pool, paying off his credit cards, and funding personal investment accounts.

2. Criminal proceedings.

A jury found Courtney guilty of two counts of theft from an elder or dependent adult (Pen.Code, § 368, subd. (d)), one count of forgery (Pen.Code, § 470, subd. (a)), and four counts of filing a false tax return (Rev. & Tax.Code, § 19705, subd. (a)).  The jury also found true that the theft counts each involved over $100,000.  (Pen.Code, § 1203.045, subd. (a).)  The trial court imposed a total sentence of five years four months in prison.

Courtney appealed.   He asserted prosecutorial misconduct, ineffective assistance of counsel, erroneous admission of evidence, and insufficiency of the evidence.

The criminal appeal was resolved while the instant appeal was in the briefing stage.   In an unpublished opinion issued April 21, 2011, Division Six rejected Courtney's contentions and affirmed the criminal conviction.   The California Supreme Court denied Courtney's petition for review and the remittitur issued August 8, 2011.   Thus, the criminal appellate proceeding is now final.

3. Phillips's application to the Fund.

During the pendency of the criminal proceedings, Phillips requested reimbursement from the Fund in the amount of $125,000.

On February 19, 2009, the Commission issued a tentative decision awarding Phillips the then maximum reimbursable amount of $50,000.   The tentative decision included the following findings of fact:  “2. Due to Applicants' age, they were entitled to a $125,000.00 homestead exemption.   The funds, which were on deposit with the Santa Barbara County Sheriff, were released to [Courtney] at his request. [¶] 3. [Courtney] failed to release these funds to Applicants and failed to properly account for the funds. [¶] 4. On or about October 16, 2008, [Courtney] was convicted of grand theft and elder abuse on charges brought against him for his conduct toward Applicants.”

Courtney, the respondent in that proceeding, objected to the tentative decision and requested an oral hearing.

On April 23, 2009, the Commission denied Courtney's request for an oral hearing, stating Courtney “has not asserted any new facts, or information which gives rise to the need for an oral hearing.   The Commission is not persuaded that an oral hearing would bring forth any new information that would convince it to change its decision.”   The Commission incorporated by reference the findings of fact and conclusions of law set forth in its tentative decision and directed that Phillips be reimbursed the then maximum amount of $50,000 from the Fund.

On May 15, 2009, the State Bar paid $50,000 to Phillips.

4. Superior court proceedings.

On June 4, 2009, Courtney filed a petition for writ of administrative mandamus seeking to overturn the Commission's decision awarding compensation to Phillips, and an order relieving Courtney of the obligation to pay any amount to the Commission.

Courtney contended the Commission's findings were contrary to the weight of the evidence.   Courtney emphasized his conviction was not yet final because his appeal was still pending, and the Commission should not have awarded payment in any amount until the final resolution of the criminal appeal.   Courtney further argued the Commission's denial of an oral hearing was an abuse of discretion.

In opposition, the State Bar asserted Courtney enjoyed due process during the Fund application process, and the Commission was not obligated to await the conclusion of the criminal matter because Client Security Fund proceedings are fundamentally different as they are not subject to the rules of evidence and have a lesser burden of proof.   Further, the Rule of Procedure for Client Security Fund matters provide that an oral hearing is not mandated and will be held only “if the Commission concludes that such hearing is reasonably necessary to permit an appropriate decision to be made on the application.”   (Rules of Procedure, Client Security Fund Matters, rule 15(b).)

On March 2, 2010, the matter came on for hearing.   The trial court denied Courtney's petition for writ of mandate with prejudice.

Courtney filed a timely notice of appeal from the judgment.

CONTENTIONS

Courtney contends he was not required to prove the existence of a protectable interest as a precondition to judicial review of the Commission's final decision, and judicial review is required due to the Commission's noncompliance with its rules.   Courtney asserts the administrative record “fails to show any misappropriation of funds by [him].”

DISCUSSION

1. Division Six's affirmance of Courtney's criminal conviction conclusively establishes his theft of Phillips's funds;  therefore, Courtney cannot show a prejudicial abuse of discretion by the trial court in its denial of mandamus relief.

Courtney's criminal conviction was affirmed during the pendency of the instant appeal.   Before addressing Courtney's contentions in this appeal, we first must determine whether it is proper to consider the finality of his criminal conviction in deciding this appeal.

“It is an elementary rule of appellate procedure that, when reviewing the correctness of a trial court's judgment, an appellate court will consider only matters which were part of the record at the time the judgment was entered.   [Citation.]  This rule preserves an orderly system of appellate procedure by preventing litigants from circumventing the normal sequence of litigation.   However, the rule is somewhat flexible;  courts have not hesitated to consider postjudgment events when legislative changes have occurred subsequent to a judgment [citations] or when subsequent events have caused issues to become moot [citation] ).”  (Reserve Insurance Co. v. Pisciotta (1982) 30 Cal.3d 800, 813, italics added;  see generally, 9 Witkin, Cal. Procedure (5 th ed.   2008) Appeal, § 337 et seq., p. 387 et seq.)

In the instant appeal, Courtney disputes the sufficiency of the evidence that he misappropriated Phillips's funds.   He asserts he had a protectable interest in the Commission's decision and was entitled to judicial review.   For these reasons, Courtney maintains the trial court erred in denying mandamus relief.

The finality of Courtney's criminal conviction moots Courtney's contentions in the instant appeal.   Division Six's affirmance of Courtney's criminal conviction eviscerates Courtney's arguments herein.   With the criminal conviction now final, it is conclusively established that Courtney stole Phillips's funds.

As for Courtney's contention he was entitled to an oral hearing before the Commission, such a hearing would have been an exercise in futility.   The disposition of the criminal appeal is conclusive on the issue of Courtney's misappropriation of Phillips's funds.   Therefore, Courtney would be incapable of making an evidentiary showing in an oral hearing before the Commission to controvert his theft of Phillips's funds.

In sum, given Division Six's affirmance of Courtney's criminal conviction, Courtney cannot show a prejudicial abuse of discretion by the trial court in its denial of mandamus relief.

DISPOSITION

The judgment is affirmed.   Respondent shall recover costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

We concur:

FOOTNOTES

FN1. Courtney's current status is “not eligible to practice law.”  (SBN 93703, www.calbar.ca.gov.).  FN1. Courtney's current status is “not eligible to practice law.”  (SBN 93703, www.calbar.ca.gov.)

FN2. Diane Phillips died subsequent to the theft.   The application to the Client Security Fund (Fund) was submitted by her husband, Rexford Phillips, on behalf of them both..  FN2. Diane Phillips died subsequent to the theft.   The application to the Client Security Fund (Fund) was submitted by her husband, Rexford Phillips, on behalf of them both.

FN3. Courtney asserts he is aggrieved by the award because the $50,000 was added to his bar dues for payment..  FN3. Courtney asserts he is aggrieved by the award because the $50,000 was added to his bar dues for payment.

FN4. This factual summary is based in part on People v.. Courtney (April 21, 2011, B213837), an unpublished decision by Division Six affirming Courtney's criminal conviction.   The decision is citable pursuant to California Rules of Court, rule 8.1115(b)..  FN4. This factual summary is based in part on People v.. Courtney (April 21, 2011, B213837), an unpublished decision by Division Six affirming Courtney's criminal conviction.   The decision is citable pursuant to California Rules of Court, rule 8.1115(b).

CROSKEY, J. KITCHING, J.