An ex-nun whose husband’s business went bankrupt did not collude with a lawyer to hide money from creditors. An Ohio appeals court ruled that now the woman can pursue her malpractice case against the lawyer who depleted more than $300,000 from her account around the time he began suffering from dementia.

The Eighth District Court of Appeals last week reversed a ruling from a Cuyahoga County Common Court accusing 79-year-old Catherine Downie-Gombach of “unclean hands” and barring her from suing the now-deceased attorney for malpractice and breach of fiduciary duty.

Gombach served as a nun for 32 years before leaving the order and working as a teacher and associate pastor. She married Anton Downie-Gombach in 1996. He was the sole owner of Champion Welding Products, and he managed all of the couple’s finances.

In March 2006, he died suddenly, and Gombach recalled noticing that in the months leading up to his death, he was receiving certified mail notices and her credit card purchases were being declined. At the time of his death, creditors were actively pursuing Champion Welding and the Gombachs. She received $504,900 in life insurance checks from Anton’s death. At a meeting with lawyers representing his estate and Champion Welding, she was told to get separate counsel and was introduced to Charles R. Laurie.

Gombach met with Laurie to discuss if there was a way to protect the life insurance proceeds while the creditors were pursuing payment. Laurie suggested depositing the checks into his Interest on Lawyers’ Trust Account (IOLTA), and to direct all creditors to him.

Creditors foreclosed on Gombach’s home and rental properties and repossessed her automobiles. She moved in with her sister and brother-in-law and she lived on proceeds from her husband’s Social Security and regular payments Laurie sent to her brothers-in-law who cashed the checks from the IOLTA accounts and gave Gombach cash.

She received regular accounting of the fund until December 2008, which showed there was $485,000 in it. Although she didn’t get regular updates on the account after that, she received $58,000 for living expenses through the checks sent to her brothers-in-law. When she tried to contact Laurie in 2012, his business phone was disconnected. She was able to locate an attorney representing Laurie who told her Laurie had been suffering from dementia, had relinquished his law license, and was placed under legal guardianship for incompetence. He confirmed all the money in Laurie’s IOLTA account was gone. Laurie died in February 2015.

Gombach sued Laurie and American General Insurance, his malpractice insurer, in 2012 but the trial was delayed by Laurie’s bankruptcy case until 2013. Gombach was the sole witness in the trial and testified that she assumed Laurie was protecting the funds and paying the creditors. She told the court she was relying on Laurie’s professional advice and not attempting to violate the law or collude with him in hiding funds from creditors. She admitted to allowing her husband to sign her name on loan documents and signing an affidavit prepared by Laurie for a creditor that failed to indicate the insurance proceeds were in his IOLTA account.

The trial court found that Gombach proved the necessary points to conclude Laurie committed malpractice. However, the judge found Gombach and Laurie had “unclean hands” and were equally at fault in trying to hide money from the creditors, and did not award Gombach any money. She appealed to the Eighth District.

Writing for the court, Judge Anita Laster Mays wrote that the theory of unclean hands applies when the person suing tried to deceive or defraud the person being sued. She also noted that the equal fault doctrine only applies if both are equally at fault, and does not have to be applied if two parties are working together but one is clearly more at fault than the other.

Judge Laster Mays found Laurie was engaged in illegal and unethical acts for depleting Gombach’s funds while keeping them in his account and that he may have used the money to his benefit while Gombach lost everything.

“Laurie was not damaged by the misappropriation of Gombach’s funds. Gombach was,” she wrote.

For Gombach to be barred by the unclean hands theory, Judge Laster Mays indicated the court must have found that she participated in an illegal act. But the evidence only indicates that Gombach had no intent to do anything illegal and just relied on Laurie’s advice. She also found that as an attorney, Laurie had an increased obligation to follow the law and nothing Gombach did was equally as illegal as Laurie, meaning the theory cannot be used to prevent her from suing for malpractice.

“The illegal act we will not facilitate is the theft of client funds in this case,” Judge Laster Mays wrote.

The case was remanded to the trial court to determine the amount of misappropriated funds that needs to be returned to Gombach.

Judges Larry A. Jones Sr. and Kathleen Ann Keough concurred in the decision.

Downie-Gombach v. Laurie, 2015-Ohio-3584
http://www.supremecourt.ohio.gov/rod/docs/pdf/8/2015/2015-Ohio-3584.pdf
Appeal from: Cuyahoga County Common Pleas Court
Judgment Appealed From Is: Reversed
Date of Judgment Entry on Appeal: September 3, 2015

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