Opinion
No. 86-17
Decided December 24, 1986.
Attorneys at law — Misconduct — Indefinite suspension — Business transaction with client where interests differ — Concealment of information from probate court.
ON CERTIFIED REPORT by the Board of Commissioners on Grievances and Discipline of the Bar.
After a private hearing, a panel of the board of commissioners submitted the following facts, findings and recommendation to the board for disciplinary action:
Respondent, Michael E. Dillon, was admitted to the practice of law in 1976, and he thereafter practiced law in Findlay, Ohio. A majority of his practice was probate.
In December 1977, respondent prepared a power of attorney for Daniel A. Krischbaum, a client whom the respondent had not previously known. Respondent was introduced to Krischbaum by Nelson H. Riker, an officer of Community Federal Savings and Loan of Findlay. Krischbaum was known to Riker in that the former was a depositor at Community Federal Savings and Loan. The power of attorney drawn by respondent conferred on Riker a blanket authority to conduct Krischbaum's financial affairs. The power of attorney was prepared using paper stock engraved with the name of respondent's law firm.
At the time Krischbaum executed the power of attorney, he had just been placed in a rest home. Krischbaum had farmed all his life with his wife, who was also a resident of the rest home. The Krischbaums had no issue of the marriage. The major asset of the Krischbaums was a farm that had a value of approximately $200,000.
In 1978, Mrs. Krischbaum died and the farm was sold in connection with the administration of her estate. The sale proceeds of approximately $200,000 were placed in the Community Federal Savings and Loan Association as a passbook deposit with interest at the rate of five and one-half percent.
In early 1980, respondent had an opportunity to purchase a building in Findlay that was suitable for a law office. Respondent inquired of Riker concerning loan possibilities for such purchase. Riker offered respondent a loan from Krischbaum's account and processed the loan acting under his authority granted by the 1977 power of attorney. A note was executed by the respondent payable in twenty years at twelve percent interest. The note was held by Riker. The note was not secured by any mortgage. Respondent claims that Krischbaum approved the loan and subsequently suggested that respondent need not make payments under the terms of the note. In January 1981, respondent stopped making payments under the terms of the note.
In May 1981, respondent prepared a will for Krischbaum. Item II of the Krischbaum will leaves the residue of the Krischbaum estate after payment of debts and expenses to Riker and the respondent equally. Riker was named as the executor of the estate.
Riker loaned to himself, using Krischbaum funds on deposit in the passbook savings account, a total of $19,000 evidenced by ten separate promissory notes bearing interest at the rate of six percent per annum. On May 5, 1983, respondent obtained an additional $5,000 loan from Krischbaum's funds through Riker, who exercised his authority under the 1977 power of attorney. The loan was evidenced by a promissory note bearing interest at the rate of five and one-half percent. All of the notes evidencing these debts were held by Riker.
On January 9, 1985, Krischbaum died testate by virtue of the will prepared by respondent. On January 22, 1985, respondent, as attorney for Riker, the named executor in the will, filed an application to administer the Krischbaum estate. Respondent claims that he presented the application to Riker for his signature on January 22, 1985. According to the respondent, he asked Riker to look it over and then asked him whether Riker owed the estate anything, and Riker, according to the respondent, replied that he did but at that time he did not know how much. Notwithstanding this discussion, the respondent filed an application which included the following:
"Applicant owes the estate ..... O"
Respondent explained that he elected to go ahead and file the application with the understanding that he and Riker would file an amended application at a later date after Riker was able to locate the notes and produce additional information to the respondent.
Both the respondent and Riker signed the application. The total estate value was estimated at $277,000. Riker was appointed the fiduciary in Krischbaum's estate.
It was stipulated that Krischbaum's nephews contacted a Findlay law firm on March 6, 1985 concerning the estate of their late uncle. In April 1985, Thomas Kemp, an attorney representing the Krischbaum nephews, met with respondent. During the meeting, respondent failed to disclose to Kemp Riker's $19,000 loan from the Krischbaum funds or his own loans totaling $85,000 from Krischbaum funds.
Attorney Steven A. Roepke, representing the Krischbaum nephews, met with Riker on May 1, 1985. Riker failed to disclose his indebtedness to the Krischbaum estate during the course of his meeting with Roepke. On May 20, 1985, counsel for Krischbaum's nephews filed a complaint contesting the validity of Krischbaum's will in the Probate Court of Hancock County.
Coincidentally, on May 20, 1985, shortly after the nephews' complaint was filed, respondent caused to be filed an amended application for authority to administer the Krischbaum estate. In the amended application, respondent disclosed publicly for the first time that Riker owed the estate $20,000. Respondent also caused to be filed on May 20, 1985, an inventory. Item No. 6 in the inventory listed as an asset "miscellaneous notes, personal property and effects of $104,000.00." Within this asset description, but not specifically identified, was the respondent's indebtedness to the Krischbaum estate in the approximate amount of $85,000.
On May 23, 1985, counsel for Krischbaum's nephews filed exceptions to the inventory, wherein counsel requested a hearing to determine with particularity the nature of the assets described in Item 6 as miscellaneous notes, personal property and effects.
On July 1, 1985, the probate court commenced a hearing on the nephew's exceptions to the inventory. Also on July 1, 1985, respondent caused to be filed a "second amended schedule of assets" in which respondent detailed Item 6 of the assets and specifically enumerated his note in the amount of $80,000 and his note in the amount of $5,000 as assets of the estate.
After the hearing had been concluded, the probate court judge ordered Riker removed as fiduciary. The court made a further ruling concerning compensation for Riker's services to date saying that "the Court would entertain compensation upon application, so I don't sustain that branch of the motion." Judge Davis testified at the hearing before the board that his order included compensation for the fiduciary's attorney and further stated that it was his clear intent that no one was to take "a nickel without making application to the Court."
On July 12, 1985, a journal entry was placed of record removing Riker as executor of the Krischbaum estate. The entry bears the respondent's signature as co-counsel for the executor. On July 15, 1985, respondent directed Riker, as executor, to prepare three Krischbaum estate checks to pay the respondent's law firm the sum of $17,577.63 as attorney fees, to pay the law firm that was co-counsel with the respondent the sum of $3,368.50 as attorney fees, and to pay Riker himself an executor's commission of $11,546.58. Respondent's law firm's check was endorsed by the respondent and deposited in the firm's account on July 17, 1985.
Respondent's evidence before the board consisted of his own testimony that Krischbaum had "consented" to the loans, but the respondent conceded that there is no letter, memo, or other contemporaneously made document which corroborates the decedent's knowledge of the transaction, let alone his consent. Because the transactions were consummated by Riker using the power of attorney, there was no document bearing Krischbaum's signature which supported his knowledge that his passbook savings were being loaned to Riker and the respondent.
During the testimony of the respondent before the board, and throughout his post-hearing brief, respondent maintained that his conduct was subject to "full disclosure" to Krischbaum, and supported by Krischbaum's "consent." Respondent admits to making a mistake. Respondent suggests that Riker is "slippery" and that Riker intended to commit fraud on the court. Respondent claims that his instructions to Riker to prepare the estate checks for payment of attorney fees, after Riker had been removed as a fiduciary, should be excused because the probate court judge's order was "not clear."
The board found that respondent's attempts to explain his conduct based upon claims of full disclosure, consent, mistake, fraud by others, and ambiguous court orders, "simply do * * * not wash. The facts as found by the hearing panel do not support such claims, and the board concludes that respondent's lack of credibility reduces the evidentiary worth of the proffered explanations."
Relator submitted to the board that based upon such facts the respondent had violated DR 5-101(A), by accepting employment when the exercise of his professional judgment on behalf of his client was affected by his own financial, business and property interests. Also, relator argued that respondent violated DR-5-104(A), by entering into an $80,000 loan with his client's agent based upon a power of attorney that respondent prepared, which debt is evidenced by a note payable over twenty years in monthly installments which installments stopped in January 1981. Such a loan constitutes a business transaction with a client in which the respondent had differing interests from the client, and the client expected the respondent to exercise his professional judgment for the protection of the client, and there is no credible evidence that the client consented to the relationship after full disclosure.
Relator also argued that respondent violated DR 7-101(A)(3) because respondent concealed from the probate court his knowledge that Riker was indebted to Krischbaum's estate at the time he filed the application to administer the Krischbaum estate on behalf of Riker. Respondent concealed and knowingly failed to disclose that which he was required by law to reveal.
Further, relator argued that respondent violated DR 1-102(A)(4), in that the respondent deceived the court concerning the indebtedness of Riker, as well as the respondent's own indebtedness to the estate by failing to disclose Riker's indebtedness and by concealing his own indebtedness within a "miscellaneous" assets category in probate court filings. While the deceit was subsequently corrected, it is important to note that the corrective action was taken only after opposing counsel had made an appearance on behalf of Krischbaum's nephews.
Relator also argued that the respondent violated DR 1-102(A)(5), in that he advised Riker to issue estate checks for attorney fees and fiduciary compensation at a time subsequent to the fiduciary's removal by the probate court, an action which evidences conduct prejudicial to the administration of justice. Relator further states that respondent violated DR 1-102(A)(6), in that the respondent acknowledged the "great sensitivity" of his relationship with the elderly, widowed, rest home resident, a childless farmer, but took no special measures to assure that no criticism would be generated by his admittedly perilous conduct. Such knowing disregard adversely reflects on his fitness to practice law.
The relator recommended permanent disbarment. The board, after a hearing, found that respondent had violated all the Disciplinary Rules set forth herein and recommended his indefinite suspension.
Angelo J. Gagliardo, disciplinary counsel, and Mark H. Aultman, for relator.
Stanley D. Ross, for respondent.
Upon a full review of this matter, this court finds that the respondent has violated DR 5-101(A), 5-104(A), 7-102(A)(3), 1-102(A)(4), 1-102(A)(5) and 1-102(A)(6). Whereupon, this court accepts the recommendation of the board of commissioners, and hereby orders that respondent be indefinitely suspended from the practice of law in the state of Ohio. The court further orders that the costs of these proceedings be taxed to respondent.
Judgment accordingly.
CELEBREZZE, C.J., SWEENEY, LOCHER, HOLMES, C. BROWN, DOUGLAS and WRIGHT, JJ., concur.