Conduct of Drake, In re

• Decision Date: 23 March 1982
• Docket Number: No. 79-74,79-74
• Parties: In re Complaint as to the CONDUCT OF Dale R. DRAKE, Accused. OSB; SC 28166.
• Court: Oregon Supreme Court

Page 296

642 P.2d 296

292 Or. 704

In re Complaint as to the CONDUCT OF Dale R. DRAKE, Accused.

OSB No. 79-74; SC 28166.

Supreme Court of Oregon, In Banc.

Argued and Submitted Feb. 9, 1982.

Decided March 23, 1982.

Asa L. Lewelling, Salem, argued the cause and filed a brief for accused

Glen D. Baisinger, Lebanon, argued the cause for the Oregon State Bar. With him on the brief was Daniel A. Post, Albany.

PER CURIAM.

This case is before us upon a recommendation of the Disciplinary Review Board that the accused attorney, Dale R. Drake, be suspended from the practice of law for three years and thereafter until such time as he makes application for reinstatement upon a showing that he is fit to practice law. We decide the facts upon the record made before the Trial Board. In re Robertson, 290 Or. 639, 642, 624 P.2d 603 (1981). ORS 9.535(3).

On December 5, 1980, the Oregon State Bar filed a multiple count complaint against Drake. The first count alleged that Drake, on or about June 19, 1976,

" * * * borrowed the sum of $10,000.00 from his client, Merrill H. Gallagher. The Accused represented to Mr. Gallagher that the funds were being borrowed on behalf of another client of the Accused for ninety days. The Accused did not, at any time, disclose to his client the extent to which he was personally involved in the above transaction, nor did the Accused advise his client to seek independent counsel."

The second count contained this allegation:

"The Accused, Dale R. Drake, did not repay the loan within ninety days. On June 22, 1977, the Accused sent a letter to his client enclosing a check for $2,500.00 interest and a statement to the effect that the Accused had another client who needed money for an additional ninety days at the same rate of interest. The client went to the office of the Accused and told him he was not interested in making any further loans; he was told that the money had already been loaned out by then. On August 23, 1977, the client received a Promissory Note for $10,000.00, with principal and interest due and payable on demand. The client, Mr. Gallagher, made several demands after June 22, 1977, but only received $1,000.00 on September 21, 1978, $5,000.00 on October 16, 1978, $1,000.00 on February 14, 1979, and $1,500.00 on September 24, 1979. Throughout this period of time, the Accused repeatedly promised the client that the funds would be repaid in full within a short period of time."

The Bar claims that the foregoing conduct of the accused was in violation of the following Disciplinary Rules:

DR 1-102:

"(A) A lawyer shall not:

"(4) Engage in conduct involving dishonesty, fraud, deceit, or misrepresentation."

DR 5-101:

"(A) Except with the consent of his client after full disclosure, a lawyer shall not accept employment if the exercise of his professional judgment on behalf of his client will be or reasonably may be affected by his own financial, business, property, or personal interests."

DR 5-104:

"(A) A lawyer shall not enter into a business transaction with a client if they have differing interests therein and if the client expects the lawyer to exercise his professional judgment therein for the protection of the client, unless the client has consented after full disclosure."

DR 9-102:

"(B) A lawyer shall:

"(4) Promptly pay or deliver to the client as requested by a client the funds, securities, or other properties in the possession of the lawyer which the client is entitled to receive."

Drake filed an answer admitting that he received $10,000 from Gallagher on or about June 19, 1976; that he did not advise Gallagher to seek independent counsel; that he gave his promissory note to Gallagher on August 23, 1977; and that payments on the note had been made. Otherwise, he denied the allegations of the complaint.

FACTS ADDUCED AT THE HEARING

At a hearing before a Trial Board, ORS 9.525, evidence was produced as follows:

In 1976, Merrill Gallagher, a retired iron worker living in Salem, was 62 years old. With his wife, he owned his home; a cabin at Detroit; a lot, tavern, mobile home and five-bedroom home in Blue River, Oregon; and he had about $18,000 in the bank.

Prior to June of 1976, Drake had represented members of the Gallagher family, and had represented Mr. and Mrs. Gallagher in litigation involving the tavern in Blue River. The tavern had been purchased in 1973 or 1974. Drake testified that the plaintiff in the tavern litigation was a sign company, and that the defendants were the original owners of the tavern, who tendered the defense to the Gallaghers, who accepted the defense. Drake testified that Gallaghers " * * * were in effect defendants in the suit." The sign company suit was dismissed on May 3, 1976.

Prior to June 3, 1976, Gallagher would come by from time to time and inquire as to the status of the litigation. Gallagher testified that he also consulted Drake about the possibility of getting a divorce.

On June 3, 1976, Gallagher went to Drake's office " * * * checking on some business, some other business." Gallagher told Drake that he was dissatisfied with the interest rate that he was receiving on the money deposited in the bank. Drake asked Gallagher if Gallagher had " * * * ever loaned out any money on real estate * * *." Gallagher testified that Drake told him that " * * * he had this customer, or this party, who was interested in $10,000 for 90 days' use of the money." Drake told Gallagher that this third person was "trustworthy," and that the loan would be repaid in 90 days at 25 percent interest. Gallagher agreed to loan the money, went to the bank and got a cashier's check for $10,000 made payable to Dale Drake. Gallagher testified that Drake "was going to give me a deed, or note, rather." Drake testified that, at or near the time of the delivery of the money to him, he prepared a promissory note for his (Drake's) signature, to evidence the loan. Drake testified that although he intended to deliver the note to Gallagher, because of oversight the note was never delivered to Gallagher.

The cashier's check which Gallagher obtained on June 3, 1976, bears the endorsement of Dale R. Drake. The back of the check also bears a stamp dated June 4, 1976, of the Bank of California, Portland. Drake at no time offered any evidence apart from his testimony to show that all or any part of the money had been delivered by him to any other person.

Drake testified that the money was in turn lent to a client named Dave Waldner. " * * * I had a client who was a young whirlwind. He was involved in two or three businesses. He was involved mainly in the car business. He was building some spec houses."

"Q What did you do when the cashier's check was delivered to you?

"A Well, I executed it, or signed it on the back, and I think it was delivered by my secretary to Mr. Waldner, or she may have-I recall something about something due, or a payment at U. S. National Bank, and she may have gone to U. S. National and gotten two cashier's checks and given one for U. S. National and one for Mr. Waldner. I don't recall."

After the loan was made in June, 1976, in August, 1976, Drake undertook to represent Gallagher in Gallagher's divorce case. The tavern litigation had concluded no earlier than May of 1976. Drake continued to represent Gallagher in several other legal matters in 1977, 1978, 1979, and 1980.

The loan was not repaid within 90 days. One year later, on June 14, 1977, Drake wrote Gallagher as follows:

"Enclosed please find interest payments on your note. ¹ )

"If you desire to continue drawing the same interest, I have another situation where the people will pay the same "Call at your earliest convenience if you have any questions."

amount of interest. I believe that it is a very good situation for you since it is approximately 18% higher that (sic) the banks.

Promptly after receipt of the letter, Gallagher went to Drake's office and told Drake that he did not want to re-loan the money. According to Gallagher, Drake told him that he " * * * had already loaned the money out." Gallagher testified that Drake told him that he (Drake) had already loaned the money to some lumber brokers, at the same rate of interest, 25 percent.

At about this time, Drake delivered to Gallagher a promissory note dated June 15, 1977, in the amount of $10,000, which provided for payment on demand with interest at the rate of 25 percent per annum from June 15, 1977, signed by Dale R. Drake. Full payment of this note has not been made.

FINDINGS AND RECOMMENDATION OF TRIAL BOARD

After the hearing on May 14, 1981, on June 12, 1981, the Trial Board rendered a decision in which they made specific findings as follows:

1. That an attorney-client relationship existed between Drake and Gallagher " * * * for a considerable time before and after the alleged loan."

2. That " * * * the testimony of the accused is not credible * * *."

3. That the accused " * * * failed to advise the client to seek other counsel, to make a full disclosure of the person to whom and purpose for which the loan was to be made, and of the illegality and consequences of lending at an usurious rate of interest. * * * " That the accused had failed to keep a proper account of the sums received from Gallagher and had failed to return the money to Gallagher upon request.

The Trial Board concluded that Drake violated DR 5-101(A), DR 5-104(A), DR 1-102(A)(4), DR 5-105, DR 9-102(A) and DR 9-102(B)(3) (sic DR 9-102(B)(4) ) ² and recommended that he be disbarred. ³

FINDINGS AND OPINION OF THE DISCIPLINARY REVIEW BOARD

This matter was thereafter considered by the Disciplinary Review Board pursuant to ORS 9.535(1) and (2). On September 12, 1981, the Disciplinary Review Board issued a decision in which they concurred with the findings that the accused had violated DR 5-101(A), DR 5-104(A) and DR 1-102(A)(4). They found the accused not guilty of violating DR 9-102(B)(4). They recommended a three-year suspension.

SUPREME COURT ...