Conduct of Thorp, In re, OSB
| Decision Date | 27 March 1984 |
| Docket Number | No. OSB,OSB |
| Parties | In re Complaint as to the CONDUCT OF Laurence E. THORP, Accused. 81-86; SC 29566. |
| Court | Oregon Supreme Court |
Ralph F. Cobb, Eugene, argued the cause and filed the brief for accused. With him on the brief was Luvaas, Cobb, Richards & Fraser, P.C., Eugene.
John R. Teising, Eugene, argued the cause and filed the brief for the Oregon State Bar. With him on the brief was Hutchinson, Harrell, Cox, Teising & Anderson, P.C., Eugene.
The Oregon State Bar filed a complaint against Laurence E. Thorp accusing him of unethical conduct in three separate causes. It alleged that Thorp had violated the Disciplinary Rules of the Oregon State Bar in matters concerning Richard E. Miles, a former client.
The Bar's complaint is dated September 2, 1982. The three member Trial Board found Thorp not guilty of each cause of complaint and recommended to this court that each cause be dismissed. On April 22, 1983, the seven member Disciplinary Review Board concurred in the findings and conclusions of the Trial Board and also recommended that all three charges be dismissed. We find Thorp guilty of one cause and not guilty of the two remaining causes of complaint.
Oral arguments were made before this court on December 6, 1983. Substantial changes were made in the laws relating to the discipline of attorneys by Chapter 618, Oregon Laws 1983. However, that chapter provides that any proceedings pending under the former statutes on January 1, 1984 shall be completed as provided in the former statutes. 1
Under former ORS 9.535(3), after the Disciplinary Review Board files its decision and recommendation, this court may adopt, modify, or reject the same and make an appropriate order. 2 We make our own independent review of the evidence. 3 In re Thomas, 294 Or. 505, 521, 659 P.2d 960 (1983). The proceedings are neither criminal or civil, but sui generis. Former ORS 9.535(6). 4 The accused is entitled to the presumption that he is innocent of the charges. In re Galton, 289 Or. 565, 579, 615 P.2d 317 (1980). The charges must be proved by clear and convincing evidence. In re Chambers, 292 Or. 670, 672, 642 P.2d 286 (1982).
Thorp commenced practicing law in 1970. Thorp's contact with Miles as a client and former client spanned the period from early 1974 to July, 1980. The three causes of complaint involve separate and distinct matters and have no relationship to each other except that the chief actors are Thorp and Miles. For the sake of keeping the events in a chronological order, we will consider the causes in a different sequence from that set out by the Bar in its complaint. We will refer to the separate causes of complaint as: "Tri-Penta loan to Miles," "Jack Lively versus Miles," and "Hiatt cross-claim against Miles."
TRI-PENTA LOAN TO MILES (Oregon State Bar's Third Cause)
In early 1974, Jack Lively, Thorp's senior law partner, introduced Thorp to Richard E. Miles. Between that time and June, 1976, Thorp developed a lawyer-client relationship with Miles and his corporation, Miles-Hiatt Investments, Inc.
Miles was the majority stockholder and the active manager of Miles-Hiatt Investments, Inc. The corporation was involved in developing apartment houses, shopping centers and warehouses costing millions of dollars. Miles employed Ron Peery, a former banker with 18 years experience, to assist with the financial affairs of the corporation. Miles normally handled complex financial transactions himself without consulting his lawyer. On various occasions he had prepared legal documents himself.
In June, 1976, the corporation needed a short term loan of $40,000. Thorp was a partner in Tri-Penta, an eight member partnership that was primarily interested in investing in real estate. Peery approached another partner of Tri-Penta about obtaining the loan. Miles contacted Thorp for the same reason. Miles offered to pay 40 percent per annum interest. Thorp told Miles he could not participate in the negotiations for the loan with Tri-Penta because of his conflict of interest. He also told Miles that the loan would have to exceed $50,000 to keep it from violating the usury laws in effect at that time.
On June 4, 1976, Miles-Hiatt Investment, Inc. executed and delivered to Tri-Penta its promissory note in the amount of $50,100 "Due in no less than 30 days nor more than 120 days" with interest at the rate of 40% per annum. The note was secured by a second mortgage on the Miles' residence. The documents were prepared by either Miles or Peery. 5
The promissory note was not paid when due. It was renewed, but the interest rate was not lowered. Sometime after the note was reduced by $20,000, it was delivered to a different attorney for collection. Apparently, some years later after Miles and Thorp had a disagreement over a different matter, Miles made a complaint to the Oregon State Bar.
The Bar in its formal complaint accused Thorp of violating the following Disciplinary Rules:
The Trial Board found that Thorp was not guilty of this cause of complaint and recommended that we dismiss it. In reaching that conclusion it found "the client did not rely upon" Thorp for any legal advice in connection with the transaction. The Trial Board added that "it might have been preferable for the accused to advise his client to seek independent legal advice after explaining * * * the conflict of interest."
The Oregon State Bar in its brief in this court in connection with this cause has set out the following assignment of error:
The Trial Board and the Review Board erred in failing to conclude that Mr. Miles did rely on the Accused for professional advice during the length of the loan transaction in the Tri-Penta matter and, therefore, should have been advised to seek separate counsel."
The Trial Board's finding and the Bar's assignment of error as to whether Miles relied upon Thorp's professional advice is keyed to that part of DR 5-104(A) which provides "and if a client expects the lawyer to exercise his professional judgment therein for the protection of the client." See, In re Montgomery, 292 Or. 796, 643 P.2d 338 (1982); In re Drake, 292 Or. 704, 642 P.2d 296 (1982). 6
The separate question of whether Thorp should have advised Miles to seek independent counsel is not directly provided for in DR 5-104(A), but results from this court's opinion in the case of In re Bartlett, 283 Or. 487, 496-97, 584 P.2d 296 (1978):
(Emphasis in original.)
This cause of complaint boils down to a question of fact: did Miles rely on Thorp for professional advice?
The adjective most used by the witnesses to describe Miles' business knowledge was "sophisticated." Ron Peery, the former banker, testified: "I don't know that I ever met a person more knowledgeable with a knack for understanding business * * *." A Certified Public Accountant described Miles "as a very active investor, dealer, almost a wheeler-dealer in real estate, sophisticated." Gene Hiatt, who had been in business with Miles, said in effect that Miles was very sophisticated in business transactions and that Miles had been Chairman of Board of Pioneer Title. A real estate agent, formerly employed by Miles-Hiatt Investment, Inc., described Miles as extremely sophisticated and very knowledgeable in business matters. The manager of a financial institution testified that she had done business with Miles for a period of 15 years and that "he was quite sophisticated and his knowledge was quite good."
It is undisputed that when Miles first approached Thorp about obtaining a loan from Tri-Penta, Thorp informed him of the conflict in interest. Miles frankly admitted this. Even so, the Oregon State Bar contends that during the life of the loan, Miles expected Thorp to: (1) notify him of any error in the security instrument; (2) advise him of any information potentially harmful to his financial interests; (3) advise him of any changes in the law that would affect his position; and (4) continue to look out for his interests.
The record does not support the Bar's contentions. The testimony by Miles on cross-examination is interesting:
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