Committee on Professional Ethics and Conduct of The Iowa State Bar Ass'n v. Postma, 88-695

• Decision Date: 19 October 1988
• Docket Number: No. 88-695,88-695
• Citation: 430 N.W.2d 387
• Parties: COMMITTEE ON PROFESSIONAL ETHICS AND CONDUCT OF THE IOWA STATE BAR ASSOCIATION, Appellant, v. Harold O. POSTMA, Appellee.
• Court: Iowa Supreme Court

Page 387

430 N.W.2d 387

COMMITTEE ON PROFESSIONAL ETHICS AND CONDUCT OF THE IOWA STATE BAR ASSOCIATION, Appellant, v. Harold O. POSTMA, Appellee.

No. 88-695.

Supreme Court of Iowa.

Oct. 19, 1988.

Rehearing Denied Nov. 18, 1988.

James E. Gritzner and Eric P. Sloter of Nyemaster, Goode, McLaughlin, Emery & O'Brien, P.C., Des Moines, for appellant.

Charles L. Corbett of Corbett, Anderson, Corbett & Daniels, Sioux City, for appellee.

Considered en banc.

HARRIS, Justice.

This disciplinary proceeding against Postma, the respondent attorney, resulted from transactions in a business corporation in which he had a personal interest. The commission for the most part rejected the committee's charges but did recommend a reprimand. We granted the committee's request to appeal. Upon our de novo review we find serious breaches of professional ethics which demand a suspension.

It is of course incumbent upon the committee to establish the violation by clear and convincing evidence. Committee on Professional Ethics & Conduct v. Piazza, 405 N.W.2d 820, 821 (Iowa 1987). Some of the facts here and most of the inferences to be derived from them are hotly disputed. On our de novo review we are convinced of the following.

Postma became licensed in 1976 and has since been in general practice. A small portion of his practice, two to four percent, has been devoted to corporate matters. He served as county attorney from 1980 through 1982.

As county attorney Postma conducted an investigation into two Omaha businessmen who were operating what was thought to be a fraudulent insurance scheme. A key person in the investigation was Dave VanderWel who, with his father, invested and lost heavily in the scheme. Postma considered VanderWel to be a victim of the scheme and called him as a witness before the grand jury.

In the years which followed Postma performed legal services for VanderWel. Six separate matters were involved from 1981 through 1984. Although VanderWel found no occasion to seek legal services in 1985 or 1986 he continued to regard Postma as his attorney.

Postma also became professionally acquainted with Roger Lukken. Lukken was in charge of operations for Silak, Inc., a chemical packaging business at Alton, Iowa. From 1984 through early September 1985 Postma served as attorney for Silak. In March or April 1986 Lukken was discharged by Silak and he thereafter retained Postma to help prepare a small claims action for past wages. Silak counterclaimed and Postma appeared on behalf of Lukken.

After Lukken was discharged by Silak he was approached by Farnum Companies, an Arizona packaging customer of Silak. Farnum inquired where its products might be packaged. The inquiries sparked Lukken's interest in opening a new chemical packaging company and he promptly suggested to Postma that they undertake the business as co-owners.

Postma visited with VanderWel and interested him in joining the plan. Although VanderWel had no previous chemical packaging experience he came from a family with a strong financial reputation and, with his father, owned a building which could be used for the new business under a favorable lease.

It was agreed that Postma, Lukken, and VanderWel were to have equal ownership interests in the new company. Each of the three was also to have a specific responsibility with the new company: Postma was to provide legal services; Lukken was to handle operations and production; VanderWel was to handle public relations and loan or grant applications. Lukken and VanderWel were to draw annual salaries of $20,000 each and Postma was to be paid legal fees for corporate work.

Corporation papers were however not drawn according to plan. Postma drew all incorporation documents (the new company was called Consolidated Processing, Inc.) and they were completely silent of any control or even involvement by Postma or Lukken. Only VanderWel and his wife were identified as officers or shareholders. VanderWel was also named on the banking resolution with a local bank as treasurer and sole person with authority over corporate bank accounts.

Postma first confronted this inconsistency by suggesting a timeworn excuse. He said his secretary erred in following his instructions and he failed to note her mistake. On occasion this all too familiar explanation may be valid but it is one which experienced lawyers and judges view with unbounded skepticism, and never with admiration. In the present case it stretches credulity beyond the breaking point to suppose that Postma's secretary would inadvertently omit him and Lukken from equal ownership in the corporation.

As Postma's testimony developed at the hearing the explanation shifted but did not improve. He explained that he had been a controversial public figure as county attorney, did not wish to subject himself to publicity, and wished to remain anonymous. He believed it would be in the corporation's best interests if his and Lukken's interests were unknown. A much more plausible explanation for the so-called error is the one suggested by the committee: Postma was unwilling to document his involvement in a conflict of interests. We reject Postma's claim that his secretary made a "mistake" in the corporation documents. It is clear they were deliberately drawn to leave him anonymous although the record does not reveal whether this was done for reasons suggested by the committee or those suggested by Postma.

There is also a factual dispute on whether Postma continued to represent the interests of VanderWel and Lukken (as well as his own) when he undertook to serve as attorney for the corporation. Postma insists he explained to both VanderWel and Lukken (during one preliminary conversation when the three were together) that he would be counsel only for the corporation and would not act to protect the interests of the three parties. VanderWel contradicted Postma's version, stating Postma never suggested he could not serve VanderWel in this matter as he had in others. We find Lukken's testimony on the question inconclusive. His recollection emphasized only Postma's statement that he would be counsel for the corporation; it was devoid of any clear statement Postma would not continue to represent the interests of VanderWel.

We conclude that, when the joint business venture was undertaken, Postma took no steps to notify VanderWel that their professional relationship was being discontinued and that VanderWel should seek other counsel. We find that VanderWel had every reason to, and did, consider Postma to be his personal attorney and that Postma was aware of VanderWel's belief.

After an auspicious beginning ¹ Postma and Lukken found it in their interests to rid the corporation of VanderWel. Postma drafted a resignation and stock transfer for VanderWel's signature. VanderWel went to Postma's law office expecting to sign routine corporation documents and was instead presented with the papers which would have severed his connection with the corporation.

Thus confronted, VanderWel discussed the situation with Postma, including the possibility of accepting a cash amount for his interests. VanderWel did not sign but did make one or two additional trips to Postma's office to discuss the value of his interests.

VanderWel thereafter obtained other counsel, Richard Zito, who, being presented with the corporation papers, noted they accorded VanderWel and his wife sole authority over all corporation affairs. Zito then undertook a strategy to exploit this authority. He wrote to Postma, notifying him that his position as corporation attorney was terminated and demanding surrender of corporation records and materials.

Postma did not respond to this notice. He reacted by causing corporation records to reflect that, three days later, Lukken was nominated as shareholder and elected to all corporation offices. No written notice of this meeting was prepared; the VanderWels received none and did not appear. ²

The parties then began a struggle for control of $90,000 of corporate funds which were deposited in the Alton Savings Bank. Postma and Lukken opened an account in a Sioux City bank. It was closed by the bank when the bank learned an irregularity was involved. Another attempt to withdraw the funds from the Alton bank was thwarted by a bank officer who also noted the irregularities in the corporation records.

The following day an account was opened in a third bank but problems remained about getting access to the $90,000 still deposited in the Alton Savings Bank. To meet these problems Postma set up two more shareholders' meetings, this time with notice to the VanderWels. ³ On Zito's advice the VanderWels did not attend the meetings. Zito pointed out that only they had authority to call such a meeting and Zito feared their attendance might give it some semblance of validity.

Perhaps the most serious charge against Postma has to do with the manner in which he thereafter responded to Zito's strategy. It is scarcely necessary to point out that we are not concerned here with the merits of the controversy between Postma and VanderWel. ⁴ Our inquiry into Postma's professional conduct at this point focuses only on how Postma set about to prevail in that controversy.

Zito, on behalf of VanderWel, offered to enter into an arrangement for joint control of corporate funds. He had no wish to impede the progress of corporate business; indeed that would have not been in his client's interest. But this was not acceptable to Postma. On the basis of corporate minutes recorded in connection with the controverted meetings Postma tried unsuccessfully to persuade the Alton bank to transfer the funds. The bank indicated it would refuse to do so without a court order. Postma then brought an action in federal court to compel the transfer. ⁵ This action was dismissed by the federal court upon a finding it lacked jurisdiction.

Two days after the federal suit was dismissed Postma went to Judge Richard Branco of the Iowa...