IN THE MATTER OF DISCIPLINARY PROCEEDINGS AGAINST WIDULE

• Decision Date: 08 May 2003
• Docket Number: No. 01-2157-D.,01-2157-D.
• Citation: 261 Wis.2d 45,660 N.W.2d 686,2003 WI 34
• Parties: IN THE MATTER OF DISCIPLINARY PROCEEDINGS AGAINST John C. WIDULE, Attorney at Law: OFFICE OF LAWYER REGULATION, Complainant-Respondent, v. John C. WIDULE, Respondent-Appellant.
• Court: Wisconsin Supreme Court

261 Wis.2d 45

2003 WI 34

660 N.W.2d 686

IN THE MATTER OF DISCIPLINARY PROCEEDINGS AGAINST John C. WIDULE, Attorney at Law:

OFFICE OF LAWYER REGULATION, Complainant-Respondent, v. John C. WIDULE, Respondent-Appellant.

No. 01-2157-D.

Supreme Court of Wisconsin.

Oral argument March 6, 2003.

Decided May 8, 2003.

For the respondent-appellant there were briefs by John C. Widule, Elm Grove, and oral argument by John C. Widule.

For the complainant-respondent there was a brief by Robert G. Krohn and Roethe, Krohn, Pope, McCarthy & Haas, LLP, Edgerton, and oral argument by Robert G. Krohn.

¶ 1. PER CURIAM.

Attorney John C. Widule has appealed from the referee's findings of fact and conclusions of law entered after a public hearing following the filing of the Office of Lawyer Regulation's (OLR) complaint on August 10, 2001, alleging that Widule had committed four acts of professional misconduct:¹

Count 1: Widule had knowingly advanced a factual position without a basis for doing so that was not frivolous in violation of SCR 20:3.1(a)(2).²

Count 2: Widule took action on behalf of a client when it was obvious that such action would serve merely to harass or maliciously injure another, in violation of SCR 20:3.1(a)(3).³

Count 3: Widule had a conflict of interest in simultaneously representing two clients and himself in violation of SCR 20:1.7(b).⁴

Count 4: Widule failed to provide competent representation in violation of SCR 20:1.1,⁵ by failing to research issues and to thoroughly investigate the documentary and factual premises of the lawsuit he had commenced.

¶ 2. The referee appointed to hear this matter, Attorney Charles J. Herro, found that Widule had committed the misconduct alleged in Counts 1, 3 and 4—i.e., that Widule had pursued a frivolous action, had a conflict of interest, and had failed to provide competent representation. The referee, however, absolved Widule of having acted maliciously. Referee Herro recommended that Widule, who was admitted to practice law in this state in 1982 and who has never before been the subject of a disciplinary proceeding, be suspended from the practice of law for a period of three months.

¶ 3. On this appeal Widule challenges each of the referee's findings and conclusions of misconduct; he also appeals from the referee's recommendation that his license to practice law be suspended for a period of three months. In essence, Widule maintains that there is no clear and satisfactory evidence to support the referee's conclusion that Widule had violated the three supreme court rules as alleged.

¶ 4. We determine that the referee's findings of fact and conclusions of law are supported by the satisfactory and convincing evidence presented at the hearing held in this disciplinary proceeding. We further determine that Widule's misconduct warrants a suspension of his license to practice law in this state for six months; in addition, we direct, as the referee recommended, that Widule pay to the OLR all the costs connected with this disciplinary proceeding and appeal.

¶ 5. The events giving rise to these misconduct counts against Widule stem from his representation of Tim Ormson, d/b/a Ormson Financial Services (OFS). In December 1992 Northern Plastics Inc. was in default on obligations it owed to the Royal Bank of Elroy which held a general business security agreement on the assets and a first mortgage on the company's real property. The president of Northern Plastics, Larry Ormson, Tim Ormson's brother, negotiated a sale of the assets of the company to Royal Plastics, Inc., whose director and major shareholder was David Grams. The sale proposal contemplated that Northern Plastics would voluntarily surrender its assets to Royal Bank in lieu of foreclosure, and that those assets would then be distributed at the closing to individuals and entities who claimed security interests in those assets.

¶ 6. Tim Ormson, who claimed to hold a security interest in the assets of Northern Plastics, was given notice of his brother's company's planned voluntary surrender of assets. Dona Merg, the attorney representing the bank, sent notice of the closing to Tim Ormson including a termination statement on which Tim Ormson was to indicate the amount of money he would accept in settlement of OFS's interest in Northern Plastics' assets which were to be distributed at the scheduled closing on December 18, 1992. Tim Ormson did not attend that closing at which the assets of the plastics company were settled and allocated; instead, Tim's brother, Larry Ormson, appeared on Tim's behalf asserting that he had Tim's authority to do so. Larry Ormson brought with him the termination statement Tim had signed in blank; that termination statement identified no dollar amount that OFS would accept in settlement. At that closing Larry Ormson agreed to accept on behalf of his brother Tim and OFS, the amount of $44,000; that amount was then inserted in the space that had been left blank on the settlement form. A check in that amount was subsequently mailed to Tim Ormson and he later cashed that check on behalf of OFS.

¶ 7. On December 15, 1994, Widule filed a complaint in the Dane County Circuit Court on behalf of his client, Tim Ormson, against Attorney Dona Merg and the Royal Bank of Elroy. That complaint asserted that Tim Ormson held a valid security interest in the assets of Northern Plastics and that the defendants had unlawfully defeated that interest at the settlement closing held on December 18, 1992. The complaint prepared by Widule asserted four causes of action on behalf of his client, Tim Ormson, including: unjust enrichment, conversion, breach of fiduciary duty by trustee, and uniform commercial code violations. Specifically, the complaint alleged that Tim Ormson, d/b/a OFS, had a valid security interest in the assets of Northern Plastics and that Tim Ormson had executed a satisfaction of his interest in blank in order to allow the closing to proceed. The complaint further alleged that Dona Merg, as the attorney for Royal Bank, and the bank, had caused Tim Ormson to terminate his security interest and satisfy a mortgage held on the assets and real property of Northern Plastics for an amount substantially less than Tim Ormson's claimed value of that security interest. According to the complaint the actual value of Tim Ormson's interest in the assets of Northern Plastics ranged from $185,000 to $245,000; the complaint further alleged that Dona Merg had agreed to hold in trust, for Tim Ormson, the settlement satisfaction. The complaint also alleged that Dona Merg had improperly allocated from the plastics company assets only $44,000 to OFS and had assigned to Tim Ormson a second mortgage on Larry Ormson's home. Although this complaint was premised on the existence of a promissory note and security agreement, no promissory note or any other documentation were attached to the complaint to support Tim Ormson's claim that he had a valid security interest in the assets of Northern Plastics in excess of the $44,000 he had already been paid.

¶ 8. On January 23, 1995, Merg and the bank served Interrogatories asking Widule and Tim Ormson to produce documents or to identify any verbal communications to support the claim that Tim Ormson, d/b/a OFS, was entitled to at least a $185,000 settlement payout from Northern Plastics' assets. The defendants also sought documents that would establish any indebtedness by Northern Plastics, Inc., to Tim Ormson or OFS including such things as security agreements, original notes, etc. Widule, on behalf of Tim Ormson, declined to produce any documents, asserting that many of the requested documents were already in the possession of Merg or the bank.

¶ 9. The defendants filed a motion pursuant to Wis. Stat. § 804.01(3)(a)(2) (1995-96)⁶ seeking a protective order precluding Widule and Tim Ormson from initiating any discovery until Tim produced written evidence confirming that he held any secured interest in the assets of Northern Plastics, Inc., which had not been paid or satisfied as a result of the closing on the voluntary transfer of assets held on December 18, 1992. At the March 9, 1995, hearing on that motion for a protective order, Widule, on behalf of Tim Ormson, submitted an affidavit from one Paul Martin; in that affidavit, Martin averred that Dona Merg had telephoned him and asked him to retrieve OFS's file from his employer, Royal Plastics, the entity that had purchased Northern Plastics, Inc.'s assets. According to Martin's affidavit, Merg asked him to forward that file to her, and he did so. Based on that Widule argued that Tim Ormson could not produce evidence of any promissory notes or securities agreements because they were in that OFS file that Merg had already obtained from Martin.

¶ 10. Martin's affidavit was countered by an affidavit from Dona Merg in which she averred that she had never seen or possessed any promissory notes to OFS or security agreements involving OFS.

¶ 11. At the conclusion of the March 9, 1995, hearing the Dane County Circuit Court granted the defendants' motion for a protective order precluding Tim Ormson from initiating or conducting any discovery until he produced proof satisfactory to the court of the existence of a valid and properly perfected security interest in favor of OFS in Northern Plastics assets that would support his claim that OFS was entitled to more than the $44,000 OFS had already received following the December 18, 1992, closing.

¶ 12. By affidavit dated March 17, 1995, submitted in support of a motion asking the circuit court to reconsider its March 9, 1995, protective order, Tim Ormson averred that shortly after the circuit court hearing he had found the original business note and security agreement with Northern Plastics which established the value of his security interest greatly in excess of the $44,000 payout he had received. According to Tim Ormson those documents had been located behind a file cabinet in...