Attorney Grievance v. Parker

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In the Circu it Court for A nne Aru ndel Cou nty Case No. C-2004-099310 IN THE COURT OF APPEALS OF MARYLAND Misc. Docket AG No. 26 September Term, 2004 ______________________________________ ATTORNEY GRIEVANCE COMMISSION OF MARYLAND v. VIRGIL DUANE PARKER ______________________________________ Bell, C.J. Raker Wilner Cathell Harrell Battaglia Greene, JJ. ______________________________________ Opinion by Wilner, J. ______________________________________ Filed: October 4, 2005 The Attorney Grievance Comm ission, throug h Bar C ounsel an d in conform ance with Maryland Rule 16-751, filed a Petition for Disciplinary or Remedial Action against respondent, Virgil Duane Parker, alleging violations of Maryland Rules of Professional Conduct (MRPC ) 1.4(b), 1.5(a) and (b), 1.7(b), 1.8(a), and 8.4(b), (c), and (d ). We referred the petition to Jud ge Mich ael Loney, of the Circ uit Court fo r Anne A rundel Co unty, to conduct a hearing and submit to this Court his proposed findings of fact and conclusions of law. Judge Loney conducted a hearing and, on March 2, 2005, submitted his findings and conclusions. He concluded that respondent had violated MRPC 1.5(a) and 1.8(a)(2), made no finding as to MRPC 1.7, and concluded that respondent had not violated the other MRPC provisions alleged by B ar Coun sel. Bar Co unsel exce pts to Judge Loney s failu re to find violations of MRPC 1.4(b), 1.8(a)(1), 1.7(b), and 8.4(c) and (d). Respondent excepts to the judge s finding of a v iolation of MR PC 1.8(a)(2). BACKGROUND Respondent was adm itted to the M aryland Bar in 1985 an d to the Te nnessee B ar in 1993. He is presently on a voluntary inactive status in Tennessee, where he now resides. Prior to moving to Tennessee, he practiced law and operated a real estate brokerag e firm in Easton, Maryland. For a time, he served as counsel to the town Planning and Zoning Commission and handled real estate and contract matters for the Commission. He was regarded by colleagues who testifie d in his favor as being v ery organized, having a good knowledge about his ca ses, and b eing a N ervous N ellie when it came to doing things the right w ay. Commencing in 1993, respondent provided a variety of legal services to Reverend and Mrs. G. Dav id McPe ake, an elde rly couple who, at the time, lived in Cambridge. The matter before us concerns his represen tation of the McP eakes in connection w ith the sale of a farm owned by them in Jackso n, Ten nessee . Respondent bega n advising the McP eakes w ith respect to the matter in June, 1993. Indeed, that was the initial purpose of his representation. His written agreement with them was to charge $100 an hour for his services, and he billed them at that rate in June, 1993 and in June through December of 1998. There were no billings between June, 1993 and June, 1998, because there was little or no activity regarding the farm. In Octob er, 1998, w hen effo rts to sell the farm recommenced, the McPeakes, upon respondent s suggestion, entered into a management contract with First American National Bank in Tennessee to manage the property until sold. Under that agreement, which respondent had, in part, negotiated with the bank, the bank was entitled to a fee of 5% of the gross sale price of the property. At about that same time, according to respondent, he and the McPeakes orally agreed that, in place of his hourly charges, he, too, would receive a fee equivalent to a 5% commission on the sale of the property. Notwithstanding that oral modification, respondent continued to bill the McPeakes on an hourly basis for legal services -2- through April, 2002.1 He explained that the arrangement somehow reverted to hourly billing after July, 1999. The farm, consisting of between 70 and 1 00 acres o f basically raw land, was s old in three parc els the f irst in July, 1999, for $325,000; a second in January, 2001, for $311,125; and the third in January, 2002, for $325,000. All commissions or fees based on the total sales price were paid when the first parcel was sold in July, 1999. The Department of Housing and Urban Development (HUD) Settlement Sheet for that sale shows, as a Settlemen t Charge to the Seller, $48,056 paid to the bank. That charge represents 5% of the aggregate $961,125 purchase price for all three pa rcels. Nothing is shown on the settlem ent sheet as b eing paid to respondent. Nonetheless, on July 7, 1999, McPeake sent respondent a check for $49,477, representing an equal 5% commission on the entire $961,125 plus $1,420.75 in travel expenses charged b y responden t. The HU D Settlem ent Sheets for the sales of the other two parcels sho w no co mmission s or fees pa id to either the b ank or to res ponden t. After the sale of the first parcel, respondent and the McPeakes discussed the prospect of the McP eakes lend ing $70,00 0 to respon dent, to help fina nce the pu rchase of p roperty in 1 In June, 1993, respondent billed the McPeakes $485, including $350 for the preparation of a contract of sale. No charges were made afterward until May, 1998, when he charged $595 for various meeting and teleconference calls relating to the sale of the farm. In June, 1998, he billed at least $437 for similar services; in October, 1998, he billed $376 ; in Novem ber, he billed $ 96; and in D ecembe r, another $5 2.50. In A ugust, 1999, after the sale of the first parcel, he billed $428 for conference calls and meetings relating to the s ale of the fa rm; in Ap ril, 2000, he b illed $1,172 ; for services rendered in Septemb er, 2001 an d January, 20 02, he billed $ 2,467 plus over $1,30 0 in expen ses. His last billing for services related to the sale was in April, 2002. -3- Tennessee, where respondent intended to relocate. The loan was to be secured by a mortgage on property in Talbot County, Maryland owned by respondent and his wife. Respondent suggested that McPeake speak with a mutual friend, Harold Robbins, who was the President of the Ba nk of th e Easte rn Sho re. Robbins was never made aware of the purpose or terms of the proposed loan, but he did attest to respondent s trustworthiness and advised the McPeakes about current interest rates. Respondent did not advise the McPeakes to seek indepe ndent le gal cou nsel reg arding the pro spectiv e loan. In October, 2000, the loan was made. Respondent borrowed $70,000 at 8% annual interest. Respondent prepared the mortgage intended to secure the loan. Although he was an experienc ed real estate attorney and knew that the prop erty was ow ned by hims elf and his wife, as tenants by the entireties, respondent neglected (1) to include in the mortgage a description of the property or even a reference to the liber and folio where the deed by which he and his wife obtained the property was recorded, or (2) to include his wife as a borrower or have her sign the mortgage.2 The mortgage thus provided no security at all for the loan. He gave the mortgage, in its defective form, to McPeake. It was never recorded. The mortgage, which presumably recited the terms of the loan, obligated respondent to repay the loan in equal monthly installments of $510.23, beginning November 2, 2000, and continuing until November 1, 2002, at which time the balance would be due. Respondent made none 2 Respondent s secretary later typed in a liber and folio reference on a copy of the mortgage , which w as presente d to Bar C ounsel, bu t the original tha t was give n to McPeake showed that reference as blank. -4- of the monthly payments. In January, 2002, following settlement on the final parcel, of the McPeake Tennessee farm respondent prepared a Statement of Mortgage showing a full discharge of the mortgage on the Talbot County property. The Statement showed payments as follows: Date of Loan: 10/02/00 $70,000 Payment applied to principal: 01/01/01 -$31,113 Payment applied to interest: 10/02/00 - 03/31/01 $ 2,400 Balance on Mortgage: 04/01/01 $38,887 Interest Accrued to 12/31/01 +$ 2,462 Balance Outstanding 12/31/01 $41,349 Payment applied to Principal: 12/31/01 -$32,500 Payment applied to Principal: 12/31/01 -$6,387 Payment applied to Interest: 12/31/01 $ 2,462 Interest paid on Loan: 12/31/01 $ 8,849 Balance on Mortgage: 12/31/01 0 None of those payments, of interest or principal, were made by respondent. The $31,113 and the $32,500 represented commission/fees of 10% on the purchase prices for the second and third parcels ($311,125 and $325,000, respectively) of the McPeakes farm and the other amou nts represen ted what re sponden t believed w ere legal fee s or expen ses in connection with other work done for the McPeakes. There is no explanation in the record of why respondent was entitled to anything mo re from the sale of the las t two parce ls, his having already received 5% o f the entire $961,125 purchase price and his having continued to bill the McPeakes at an hourly rate for services related to the sales, or why, if he was -5- entitled to any addition al percentag e fee base d on those sales, it would be 10% rather than 5%. Respon dent advise d the M cPeakes that the mo rtgage had been disch arged and sent a copy of t he State ment to their acc ountan t. Notwithstanding respondent s prior crediting of the $63,613 against his mortgage debt, in August, 2002 eight months later respondent requested and McPeake sent two checks to Parker Realty, respondent s real estate company, in the amounts of $31,113 and $32,500, respectively a total of $63,613. McPeake referred to the checks as Commissions paid on the respective sales prices. Respondent deposited the two checks. On the same day, he sent a check for $70,000 to McPeake, to memorialize the fact that he had paid the mortgage, and had the McPeakes sign a release of the mortgage, which was discuss ed in res ponde nt s testim ony but w hich w e cann ot locate in the rec ord. All of this began to unravel when respondent sent McPeake s accountant a copy of his Mortgage Statement showing an interest payment in 2001 of $8,849. The accountant included that amount as income on the McPeakes 2001 Federal Income Tax Return. The McPeakes daughter, knowing that her parents had not received such a payment, questioned the amount a nd consu lted counse l, who eve ntually filed suit against respondent and made a complaint to Bar Co unsel. At tha t point, respondent acknowledged that he was not entitled to the $63,613, and he repaid that amount to McPeake, from the Parker R ealty account, along with in terest on the $70 ,000 an d interes t on the $ 63,613 at the rate of 8% per ann um. -6- DISCUSSION In proceedin gs involvin g attorney discip line, this Cou rt has original a nd comp lete jurisdiction, and, although, in conformance with Maryland Rule 16-752, we traditionally refer petitions to a Circuit Court judge to convene a hearing and present to us proposed findings of fact and conclusions of law, we conduct an independent review of the record and draw our own c onclus ions. See Attorney G rievance Com m n v. Zuckerman, 386 Md. 341, 363, 872 A.2 d 693, 70 6 (2005). W e ordinarily acce pt the hearin g judge s f indings of fact unless we determine that they are clea rly errone ous. Attorney Grievance Comm n v. Gore, 380 Md. 455, 468, 845 A.2d 1204, 1211 (2004). As to conclusions of law whether provisions of MRPC were violated however , our consideratio n is essen tially de novo. Attorney Grievance Comm n v. Cherry-Mahoi, 388 Md. 124, 152, 879 A.2d 58, 76 (2005); Attorney Grievan ce Com m n v. M cLaugh lin, 372 Md. 467, 483, 813 A.2d 1145, 1160 (20 02). The first violation alleged by Bar Counsel was of MRPC 1.4(b), which requires that a lawyer explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation. Judge Loney, finding that the McPeakes were well-informed as to the nature of Respondent s representation and were also kept informed of the many profession al services Respondent performed, concluded that respondent had not vio lated that Rule. In his exception, Ba r Counsel notes respo ndent s failure to disclose that the supposed security on the $70,000 loan was a sham, that he was not entitled to the $63,613 that he effectively received twice, once by crediting it against the -7- mortgage debt and once by actually requesting, receiving, and depositing checks in that amount, and by the specious nature of his explanation for how the loan was repaid. We sustain that exception. The $70,000 loan was part and parcel of the representation. It wa s to b e sec ured by a valid mortgage on property owned by respondent and his wife, and the McPeakes obviously relied on respondent to assure that was done. Instead, respondent, an experienced real estate lawyer, prepared a mortgage that contained no d escr iptio n of the p rope rty, did not revea l his w ife a s a pa rty, and was not signed by his wife. The m ortgag e was a sham. N ot only was it substantively deficient, but it was never intended by respondent to be honored . None of the monthly payments were ever made; instead, from the beginning, he intended to repay the loan and attempted to repay the loan from commissions to which he had no entitlement and has since acknowledged he had no entitlement. That wa s unquestio nably a failure to explain a m atter to the exte nt reasonab ly necessary to allow the McPeakes to make an informed decision regarding the representation. The second violation charg ed by Bar C ounsel w as of M RPC 1 .5(a) and (b) . Rule 1.5(a) requires that a lawyer s fee be reasonable and sets forth various factors to be considered in determining reasonableness. Section (b) requires that, when a lawyer has not regularly represented a client, the basis or rate of the fee be communicated to the clien t, preferably in writing, before or within a reasonable time after commencing the represe ntation. Judge Loney found that respondent s taking of a fee in the amount of $49,477 the 5% commission on the sale of the three parcels was not unreasonable in light -8- of the complexities involved in the transaction. His acceptance of the $63,613 that he was not entitled to, however, did constitute a violation of MRPC 1.5(a). As to section (b), Judge Loney concluded that, because respondent had repres ented the M cPeakes for appro ximately five years before th e sale of the farm, he w as not requ ired to put the fee agreement in writing. Bar Counsel does not except to that finding, so we choose not to review it. We do note, however, that, although the sale of the farm in 1998 actually occurred five years after the representation commenced, and other work was done by respondent for the McPeakes during the interim, it was the sale of the farm that brought the McPeakes to respondent in 1993 and was the first matter he dealt with for them. The third charge by Bar Counsel was the violation of MRPC 1.7(b) which, in relevant part, precludes a lawyer from representing a client if the representatio n may be m aterially limited by the lawyer s own interests unless the lawyer reasonably believes that the representation will not be adversely affected and the clien t conse nts afte r consu ltation. That was coupled with a charged violation of MRPC 1.8(a), which prohibits a lawyer from entering into a finan cial or prope rty transaction w ith a client unless the transaction is fair and equitable to the client (1.8(a)(1)) and the client is advised to seek the advice of independent counsel in the transac tion and is giv en a reason able oppo rtunity to do so (1.8(a)(2)). Judge Loney found that respondent violated MRPC 1.8(a)(2) by failing to advise the McPeakes to seek independent counsel before entering into the loan transaction, but he made no finding with respect to MRPC 1.7(b). Respondent excepts to the finding of a violation of MRPC -9- 1.8(a)(2) and Bar Counsel excepts to the lack of a finding that MRPC 1.7(b) and 1.8(a)(1) were violated. Responden t s exception has no merit whatever. He argues that respondent did suggest that the McPeakes consult their mutual friend, who was president of the Bank of the E astern Shore, and that sufficed to satisfy the Rule. The Rule, he urges, does not require that the independent counsel be a lawyer; a banker will do. That is not the case. We need not consider here whether, in situations where n on-legal ad vice wou ld be impo rtant to assure that the client can m ake an inf ormed d ecision rega rding the pr oposed tra nsaction, the Rule may require a lawyer to sug gest that the clie nt consult so meone c apable of giving that advice an accountant, an insurance professional, for example. Unquestionably, the Rule requires, at a minimum, that the lawyer suggest seeking independent legal ad vice from a lawyer. 3 That was especially critical in this case. A competent independent lawyer would never have permitted the transaction to proceed as it did, with an ineffective, unrecorded mortgage that failed to provide the promised security for the loan. As to the MRPC 1.7(b) violation, Bar Counsel argues that respondent s receipt of the $63,613, to which he was not entitled, amounte d to his placing his in terest above that of his clients and that [a]ny consultation that the client received from the Respondent could not have been effective. It is not clear, however, that there were any consultations of note after 3 That requirement is now explicit. In the revised MRPC that we adopted effective July 1, 2005, Rule 1.8(a)(2) specifies that the client be advised in writing of the desirability of see king the ad vice of in depende nt legal counsel. (Emph asis added). -10- respondent received the two checks in August, 2002. If this were the only charged violation or if it were important to the outcome of this matter, we would address it in greater detail. In the circu mstanc e, we sh all overr ule the e xceptio n. Bar Counse l s exception to the failure to find a violation of MRPC 1.8(a)(1) is sustained. The transaction was grossly unfair to the McPeakes. The last set of charges made by Bar Counse l were the violation of M RPC 8.4(b), (c), and (d), w hich , resp ectiv ely, declare it to be miscond uct for a law yer to commit a criminal act that reflects adversely on the lawyer s honesty, trustworthiness or fitness as a lawyer in other respects, to engage in conduct involving dishonesty, fraud, deceit or misrep resenta tion, or to enga ge in cond uct that is prejudicial to the administration of justice. Judge Loney found no violation of those Rules. He treated the receipt of the $63,613 by respondent as simply a mistake that, when brought to respondent s attention, respondent immediately corrected by returning the sum with interest. Judge Loney was also impressed with the witnesses who testified as to respondent s good character. Bar Counsel has not challenged the finding under MRPC 8.4(b) but has excepted to Judge Lo ney s findings and conc lusions as the y relate to MRPC 8.4(c) and (d). Bar Counsel does not regard what occurred as simply a mistake. Nor do we. Whether or not the McPeakes might have been willing to lend respondent the $70,000 on an unsecured basis, as respondent suggested, that was not the arrangement to which they agreed. The loan was to be secure d by a mortga ge on pro perty owned by responde nt and his -11- wife as tenants b y the entireties. It cannot have been a mere mistake for respondent, an experienced real estate lawyer with his own brokerage firm, to prepare a mortgage that was wholly ineffective. It cannot have been a mere mistake for respondent, in January, 2002, to apply against the principal of the loan (and the ineffectual mortgage) the $63,613 to which he had absolutely no entitlement. Even if we accept that there was an oral modification of the fee arrangement that entitled respondent to the equivalent of a 5% commission on the sale price of the property, that amounted to only $48,056, which, together with his travel expenses, he received when the first parcel was sold. There was no basis upon which respondent, even mista kenly, could h ave believe d that he w as entitled to an additional $63,613, even once, much less twice. Had the McPeakes daughter not launched an investigation, leading to the discovery of what had occurred, respondent would have enriched himself, at his elderly clients expense, by at least $63,613. Whether that conduct constitutes a criminal act for purposes of MRPC 8.4(b) we need not decide here, as Bar Counsel has filed no exception to Judge Loney s ruling in that regard. It clearly constitutes a violation of 8.4(c) and (d), however, and, to that extent, we sustain Bar Counsel s exception. As we indicated in Attorney Grievance Comm n v. Culver, 381 Md. 241, 283-84, 849 A.2d 423, 448-49 (2004), the purpose of sanctioning a lawyer for violation of MRPC is to protect the p ublic, no t to punis h the attor ney, and the severity of the sa nction norm ally depends on the circumstances of each case the nature and effect of the violations. We recounted in Culver what we had said in Attorney Grievance Comm n v. Goldsborough, 330 -12- Md. 342, 364, 624 A.2d 503, 514 (1993), that [t]he attorney-client relationship is based on trust, with the clien t necessarily placing total trust in the attorney and the attorney pledging to act in the client s best interest. Culver, 381 Md. at 285, 849 A.2d at 449. It is clear from our analysis that respondent s conduct was laced with dishonesty and breach of trust. The on ly appropriate sa nction is disb arment. IT IS SO ORDERED. RESPONDENT SHALL PAY ALL COSTS AS TAXED BY THE CLERK OF THIS COURT, INCLUDING THE COSTS OF ALL TRANSCRIPTS, PURSUANT TO MARYLAND RULE 16-515(c), FOR WHICH SUM JUDGMENT IS ENTERED IN FAVOR OF THE ATTORNEY GRIEVANCE COMMISSION OF MARYLAND AGAINST VIRGIL DUANE PARKER. -13-