Brown, In re

• Decision Date: 24 March 1977
• Parties: In re Complaint as to the conduct of Gene L. BROWN, accused.
• Court: Oregon Supreme Court

Page 884

559 P.2d 884

277 Or. 121

In re Complaint as to the conduct of Gene L. BROWN, accused.

Supreme Court of Oregon.

Argued and Submitted Oct. 5, 1976.

Decided Feb. 3, 1977.

Rehearing Denied March 24, 1977. See 561 P.2d 1030.

Donald H. Coulter, Grants Pass, argued the cause and filed briefs for accused. With him on the briefs were Myrick, Coulter, Seagraves & Nealy, Grants Pass.

Ervin B. Hogan, Medford, argued the cause for the Oregon State Bar. With him on the brief were A. E. Piazza, Medford, and Tom B. Hebert, Portland.

Before DENECKE, C.J., and HOLMAN, TONGUE, HOWELL, BRYSON and SLOPER, JJ.

PER CURIAM.

In this disciplinary proceeding the Oregon State Bar (Bar) charged the accused with nine separate violations of unprofessional conduct and a tenth composite charge that if the accused were applying for admission to the Bar his application would be denied.

The Trial Board of the Bar held a four-day hearing and on October 17, 1975, issued an extensive memorandum opinion, findings of fact, and recommendation.

The Trial Board found the accused guilty of a part of each of the fourth, fifth, sixth and eighth charges of unprofessional conduct and not guilty of the remaining charges. The Trial Board recommended discipline in the form of a public reprimand.

The Board of Review, which had recently been organized pursuant to Oregon Laws 1975, ch. 641 (ORS 9.535), 'elected not to make specific findings.' On April 21, 1976, the Review Board concurred in the Trial Board's findings of guilt and also found the accused guilty of 'all' charges in the complaint. However, it concurred with 'the conclusions reached by the Trial Committee and its recommendation' that the accused 'be administered a public reprimand by the Supreme Court of the State of Oregon.'

The complaint of the Bar charges that the accused's conduct violated DR5--101, Refusing Employment When the Interests of the Lawyer May Impair His Independent Professional Judgment; DR5--104(A) of the Code of Professional Responsibility of the Oregon State Bar, Limiting Business Relations With a Client; and DR1--102(A)(4), Engaging in Conduct Involving Misrepresentation and in Borrowing Money from Clients.

All of the Bar's allegations of unprofessional conduct against the accused arose out of the business relationship of the accused attorney, Brown, with a client, Carl Jacobson, and with the personal representatives of the estate of Jacobson after his death on October 10, 1968. Prior to 1963 the accused had been the attorney for Jacobson and the two men had been social friends and each had borrowed money from the other. In March, 1963, the accused attorney and Jacobson, an experienced and knowledgeable lumberman and businessman, formed a partnership for the purpose of acquiring, managing, and disposing of cut-off timberlands in Josephine County.

The partnership agreement was not reduced to writing, but the evidence shows that Jacobson was to advance the necessary funds to purchase the land and the accused would furnish required administrative and legal services. Before profits were paid to the partners, Jacobson was to recover the money he advanced plus interest thereon at 10 percent per annum. Thereafter they were equal partners.

Jacobson advanced a total of approximately $33,000, and deed to the land was in the name of accused and Jacobson as grantees.

From the inception, E. T. O'Connor, a certified public accountant who had previously been the accountant and tax adviser to Mr. Jacobson, was chosen as the accountant and tax adviser for the partnership business. He set up the books and necessary records for the partnership and kept possession of them. The accused had the company's check book.

In 1964 the partnership sustained a taxable loss and O'Connor made two adjustments of $1,000 each on the partnership records, showing a transfer of $2,000 to the capital credit of accused. O'Connor made this transfer on his own to preserve the tax benefit and the transfer was recorded on the partnership tax returns and records. The original purpose of the partnership was to buy and sell the property at a profit. However, the land did not sell and by 1966 the partnership harvested timber through gyppo loggers. Because of this operation, the partners agreed to incorporate as Jake Land Co. The accused, Brown, prepared the articles, bylaws, and stock issue. Each partner owned 50 shares of common stock, and the timberland was conveyed to the corporation. The same financial arrangement was continued as agreed in the partnership and neither stockholder was to receive any profit until Jacobson had recovered his original investment. The bylaws provided, in effect, that neither party would sell his stock and the surviving stockholder had a right to acquire the stock at 'book value.' The evidence indicates that both parties agreed to this arrangement and executed the necessary papers.

On about February 15, 1968, the accused and Jacobson agreed that the $3,000 balance of a $10,000 promissory note given by the accused to Jacobson in September, 1965, would be assumed and paid by Jake Land Co. The effect of this transaction was a gift to the accused by Jacobson of $1,500 to $3,000, depending upon future profit or loss of the corporation, as each party owned one-half of the common stock. The evidence shows that this transaction was related to the accountant, O'Connor, and that O'Connor discussed it with Jacobson, who approved the transaction and authorized O'Connor to show the transaction on the books. O'Connor admitted that through his fault he did not make the required entries on the corporation's books.

The evidence shows that the accused and Jacobson were congenial in their partnership and corporate business relationships and that all financial and accounting information was available from O'Connor.

Mr. Jacobson died October 10, 1968. The accused had drafted his will, naming First National Bank of Oregon (Bank) as executor. The trust office of the bank's Medford Main Branch retained the accused as its attorney to probate the Jacobson will. Brown made a full disclosure to the employees of the Trust Department of the Bank concerning the business relationships of Brown and the deceased Jacobson, including the $3,000 balance on the $10,000 note, which is in evidence.

The widow and son of Mr. Jacobson were not satisfied with the probating of the estate and employed their own attorney, William F. Johnson. Mr. Johnson questioned the corporate affairs and charged conflict of interest on the part of accused. Mr. Johnson was given access to all of the records of the corporation and discussed the matters with O'Connor, the certified public accountant. Following this difficulty, the accused resigned as attorney for the executor (Bank) on December 23, 1970. The Bank retained Carl M. Brophy to serve as its attorney. The Bank desired a complete cash liquidation of the corporation, in which the accused owned 50 percent of the stock which was declined by the accused for business reasons. The Bank, through its attorney, indicated it would bring litigation against the accused, and the accused employed Mr. Donald H. Coulter as his attorney.

After the Bank secured its own appraisement of the corporation's timberlands, the Bank wrote accused's attorney and offered to sell the Jacobson 50 percent interest in the corporation to the accused. The parties and their counsel negotiated. The Bank wanted $46,000 for its 50 percent share of the stock; the accused offered $36,000. The parties reached the figure of $41,000 as the agreed price for the 50 percent interest in the corporation's stock. My Brophy, on behalf of the Bank, prepared the papers to complete the sale and each party, by the terms of the agreement, released the other for all past events and actions. The accused made the payment to the Bank in full.

During the negotiations and purchased by the accused of the stock, he contacted Mountain Fir Lumber Company to see if it was interested in purchasing a portion of the corporation's land, from which he could raise the money to purchase the stock from the Bank. Through this contact the accused arranged to sell 960 acres from the total 1,500 acres of the cut-over timberland at $100 per acre. The accused did not disclose his arrangement with Mountain Fir to the Bank or its attorney. When the deeds and documents were recorded in the county records the Bank learned of the accused's transaction with Mountain Fir, and the Bank asserted a claim against the accused and the corporation because of the accused's failure to make the disclosure prior to the time he purchased from the executor. Both parties threatened litigation.

In July, 1971, he accused and the corporation filed a declaratory judgment proceeding against the Bank, as executor, to determine the validity of the 1971 agreement and compromise whereby the accused purchased the estate's 50 percent interest in the corporation. The Bank counterclaimed for compensatory and punitive damages, based on the fiduciary duty of accused as an attorney. The Bank's counterclaim was tried to a jury in July, 1971. During trial the court indicated his thoughts to the respective attorneys and the case was compromised and settled. The transcript of that trial is part of the evidence in this disciplinary proceeding.

Subsequently, as a result of the letter of complaint by the son and one of the heirs of the deceased Mr. Jacobson, this proceeding was instituted on September 6, 1973.

We agree with the Trial Board's memorandum opinion and findings of fact. The numerous charges in the Bar's complaint are founded in a violation of the Oregon Bar's Code of Professional Responsibility, as heretofore enumerated. The Bar's fourth and fifth causes of complaint charged that the accused 'failed to require or urge the said Carl Jacobson to receive or procure independent advice' as to: (a) the execution of the corporate bylaws prepared by accused which included a...