Iowa Supreme Court Attorney Disciplinary Bd. v. Nelsen

• Decision Date: 09 December 2011
• Docket Number: No. 11–0114.,11–0114.
• Citation: 807 N.W.2d 259
• Parties: IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD, Complainant, v. David M. NELSEN, Respondent.
• Court: Iowa Supreme Court

807 N.W.2d 259

IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD, Complainant,

v.David M. NELSEN, Respondent.

No. 11–0114.

Supreme Court of Iowa.

Dec. 9, 2011.

Charles L. Harrington and Wendell J. Harms, Des Moines, for complainant.

David M. Nelsen, Marana, AZ, pro se.

WIGGINS, Justice.

In this attorney disciplinary proceeding, the Iowa Supreme Court Attorney Disciplinary Board complains David M. Nelsen, an attorney licensed to practice law in the State of Iowa, violated numerous provisions of the Iowa Code of Professional Responsibility for Lawyers.¹ Nelsen has retired and his license is presently under suspension for his failure to pay fees and comply with the continuing legal education requirements.

The charges against Nelsen stem from Nelsen's representation of Hebel & Son Greenhouse, Inc. (Greenhouse) in 2004. In early 2004, Greenhouse went out of business when it owed the bank roughly $3.6 million. At the time, Greenhouse had over $337,000 in accounts receivable due and owing, and the bank demanded production of accounts receivable checks allegedly received by the corporation and deposited into a secret corporate bank account in Nevada.

The Grievance Commission of the Supreme Court of Iowa found that Nelsen violated numerous provisions of the Iowa Code of Professional Responsibility for Lawyers. Specifically, it found that Nelsen assisted Greenhouse's owners in diverting at least $141,335.34 of Greenhouse's accounts receivable from the control of the court-appointed receiver. The commission recommended that we suspend Nelsen's license for two years.

On our review, we find Nelsen aided and abetted his client in defrauding the bank and the receiver of the accounts receivable. Accordingly, we revoke Nelsen's license to practice law in this state.

I. Scope of Review.

We review attorney disciplinary proceedings de novo. Iowa Supreme Ct. Att'y Disciplinary Bd. v. Templeton, 784 N.W.2d 761, 763 (Iowa 2010). The Board must prove an attorney's ethical misconduct by a convincing preponderance of the evidence. Id. A convincing preponderance of the evidence is more than the preponderance standard required in the usual civil case, but less than proof beyond a reasonable doubt. Id. We respectfully consider, but are not bound by, the commission's findings of fact, conclusions of law, and disciplinary recommendations. Iowa Supreme Ct. Att'y Disciplinary Bd. v. Axt, 791 N.W.2d 98, 101 (Iowa 2010). Upon proof of misconduct, we may impose a greater or lesser sanction than that recommended by the commission. Id.

II. Background Facts and Proceedings.

On our de novo review, we find the following facts. Robert and Carole Hebel owned Greenhouse, a corporation with facilities in Nora Springs and Mason City. Greenhouse primarily wholesaled flowers and plants to various retail stores, such as Walmart, Sam's Club, and Hy-Vee. Greenhouse obtained construction loans, real estate loans, and operating loans from First Citizens National Bank. To secure payment of these loans, Greenhouse, Robert, and Carole signed and delivered security agreements covering all rights in the future to the payment of money, including payments arising out of accounts receivable.

After Robert was diagnosed with lung cancer, Robert and Carole moved to Nevada in 2001, leaving their son and daughter-in-law, Michael and Kristi Hebel, to run the business. Even though Robert lived in Nevada, both Kristi and Michael considered Robert to be the major day-to-day decision maker on all decisions involving accounts, contracts, and operations. Greenhouse began to have financial problems after Robert and Carole moved to Nevada. Nelsen acted as Greenhouse's attorney in connection with its financial problems involving First Citizens.

In late 2002, it became apparent to First Citizens that Greenhouse would be unable to pay off its 2001 operating note. First Citizens and Greenhouse entered into a forbearance agreement in March 2003, which allowed Greenhouse to continue operating. Nelsen took part in the negotiation of the forbearance agreement. In September or October, First Citizens realized Greenhouse would not meet its projections. In November, First Citizens notified Greenhouse that it would not advance operating capital for 2004.

In January 2004, Greenhouse owed First Citizens principal of about $3.6 million. On January 7, the bank's attorney, John Duffy, advised Nelsen in a letter that Greenhouse was in default on its March 2003 credit agreement with First Citizens. The letter indicated that First Citizens had made repeated requests for an itemization of Greenhouse's existing accounts receivable and that Greenhouse had not deposited proceeds of its accounts receivable into its account at the bank. Kristi prepared a summary of the outstanding accounts receivable and delivered it to Nelsen. Nelsen delivered the summary to First Citizens. At the time, Greenhouse had outstanding accounts receivable totaling $337,287.31.

Greenhouse ceased operations on January 9, 2004. That same day, Duffy wrote another letter to Nelsen requesting that Greenhouse deliver all existing accounts receivable, vendor agreements, and documents pertinent to an insurance claim to First Citizens. Shortly thereafter, First Citizens had Greenhouse's locks changed.

On January 12, Nelsen wrote a letter to Duffy listing certain requests the Hebels were making of First Citizens during the liquidation of Greenhouse. The letter also listed some of the accounts receivable owed to Greenhouse. Nelsen delivered the letter to the bank that day.

First Citizens delivered a letter in response on January 13. In the letter, First Citizens raised numerous questions regarding its collateral and the conversion of the collateral by Greenhouse.

On January 14, Nelsen responded to First Citizens' letter. In this letter, Nelsen acknowledged that First Citizens was not going to comply with the requests made in his January 12 letter. Because the parties could not reach a resolution, Nelsen wrote, “In fact, after today the money [received by Greenhouse] would have to be deposited in my trust account.” First Citizens relied on Nelsen's representation that he would deposit any accounts receivable he received into his trust account until the parties resolved the dispute.

Prior to this dispute, in late 2003 and early 2004, Kristi knew First Citizens expected the accounts receivable to be deposited into Greenhouse's account at First Citizens. Greenhouse's customers paid their invoices by sending checks to a post office box in Nora Springs. Although Kristi and Michael originally leased the post office box for their personal use, they later shared it with Greenhouse. Because the Nora Springs post office did not deliver mail to Greenhouse's physical address, all of Greenhouse's mail had to be retrieved from the post office box.

After Greenhouse closed, its customers continued to mail accounts receivable payments to the post office box. Kristi and Nelsen communicated about how to handle the corporate mail. For two to four weeks after Greenhouse went out of business, Kristi and Michael picked up the mail at the post office box. Kristi separated her personal mail, Michael's personal mail, and junk mail from the corporate mail. From her experience sorting the mail, Kristi could distinguish Greenhouse's mail from the other mail in the post office box. She did not open Greenhouse's mail. After Greenhouse closed, Kristi did not deliver any corporate mail directly to Robert, Carole, or First Citizens. Instead, Kristi put a rubber band around Greenhouse's mail, which included all accounts receivable payments mailed to the post office box, and delivered Greenhouse's mail to Nelsen.

On January 15, Nelsen wrote Duffy a letter stating that he had personally delivered checks totaling $23,463.77 to First Citizens. Nelsen delivered the checks in open envelopes.

On February 2, First Citizens filed and served Nelsen with a petition to foreclose the security interest, an application to take Kristi's deposition, a request for the production of documents, an order granting the application to take Kristi's deposition and shortening the time period for the production of documents, a subpoena duces tecum commanding Kristi to appear for a deposition and produce the requested documents, and an order appointing the vice president of First Citizens, John Bleakney, as the receiver.

The district court gave Bleakney the right to take control of all accounts receivable and company records. Bleakney also had the duty to see that Greenhouse's nursery products were maintained and subsequently sold and liquidated. The court also required Robert and Carole to furnish Bleakney with documents responsive to the request for production. Nelsen filed an interlocutory appeal with the supreme court on February 12 challenging the order appointing Bleakney as the receiver. First Citizens resisted, and we denied Nelsen's application.

The request for production included requests for invoices, vendor agreements, documents relating to Greenhouse's right to collect insurance proceeds, checks and cash collected by Greenhouse that were not deposited into Greenhouse's account at First Citizens, keys to the offices, insurance policies, computer passwords, and the company's books and records.

After Kristi did not appear for her February 11 deposition because of an illness, First Citizens filed a second application to take Kristi's deposition. The district court granted the application and, once again, ordered Kristi to appear for the deposition and bring documents responsive to the request for production. First Citizens served Nelsen with the second application to take Kristi's deposition, the order granting the second application, and the subpoena demanding that Kristi appear and produce documents.

On February 13, Kristi appeared for her deposition, but she did not bring any documents responsive to the request for production. Kristi testified that she did not have any of...