Johnson, Matter of
| Decision Date | 19 March 1992 |
| Docket Number | No. 8824,8824 |
| Citation | 826 P.2d 186,118 Wn.2d 693 |
| Court | Washington Supreme Court |
| Parties | In The Matter of the Disciplinary Proceedings Against Ivan D. JOHNSON, An Attorney at Law. |
Kurt M. Bulmer, Seattle, for respondent lawyer.
This disciplinary matter comes to the court on the appeal of attorney Ivan D. Johnson who was admitted to practice law in the State of Washington in 1979. It concerns the proper sanction to be imposed where an attorney has engaged in business transactions with clients without making adequate written disclosures.
In 1980, Richard Hackler, then age 22, became permanently disabled as a result of an automobile accident and his parents became his full-time caregivers. In 1983, Richard received a settlement of the claim arising out of the accident.
Richard's father, Archie Hackler, was appointed Richard's limited guardian and managed Richard's estate under superior court oversight. As of 1983, Richard's parents, Archie and Erica Hackler, were compensated a set amount each month from the guardianship estate for their full-time care of Richard. These matters were handled by attorneys other than appellant Johnson.
In 1984, attorney Ivan D. Johnson began representing Archie Hackler in various matters, and by spring of 1985, Mr. Johnson represented Archie Hackler in guardianship matters relating to Richard's trust estate.
In June 1985, attorney Johnson asked Ron Hackler, Archie and Erica Hackler's other adult son, to loan him $10,000. Ron Hackler declined but asked his father to loan the money to Mr. Johnson. The Hackler marital community loaned Mr. Johnson $10,000 in June of 1985. Johnson prepared a promissory note secured by a deed of trust on the Johnson residence.
The initial draft of the promissory note reflected an interest rate of 18 percent, but Mr. Archie Hackler reduced the rate to 15 percent. These documents were not reviewed by an independent attorney.
The hearing officer found that attorney Johnson did not disclose his assets, liabilities, income or the existence of tax liens; neither did he provide a financial statement, appraisal of collateral or title report on the security. Apparently, Mr. Hackler was not reluctant to make the loan and asked few questions about it.
During 1985, Mr. Hackler met frequently with attorney Johnson to discuss means to earn a more favorable rate of interest on Richard's trust assets. Attorney Johnson made the following suggestions. The Richard Hackler trust would loan $60,000 to Archie Hackler by prepaying a part of the caregivers' allowance. This $60,000 loan would then be repaid to the trust each month by the trust's withholding a portion of the caregivers' allowance payable to the Hacklers. The Hacklers would pay the trust 13 percent interest and would secure the loan with a deed of trust on a piece of real estate owned by the Hacklers. The plan was that the $60,000 prepayment could then be invested by the Hacklers to obtain a more favorable rate of interest but with more risk than ordinarily allowed by court approved plans.
Immediately after the court's approval of the loan/prepayment to Mr. Hackler, attorney Johnson asked his client Mr. Hackler for a $60,000 personal loan to be secured by another deed of trust on the Johnson residence.
There was conflicting testimony at the disciplinary hearing regarding the timing of attorney Johnson's request for the second loan from the Hacklers.
However, the hearing officer concluded that bar disciplinary counsel had not proved that Mr. Johnson submitted pleadings to the Superior Court for approval of the care prepayment plan with the anticipated purpose of himself borrowing the money from Mr. Hackler.
The hearing officer found that Mr. Hackler is a reasonably prudent investor and had he known that attorney Johnson's Attorney Johnson orally told Mr. Hackler that his home was worth $125,000. This appears to have been fairly accurate, however, no title report, appraisal, or financial statement was provided to the Hacklers. Mr. Hackler ultimately declined to loan attorney Johnson the requested $60,000, but in November 1985 did loan him $20,000.
purpose in borrowing the money was to pay overdue employee and income taxes, pay off an encumbrance on his home and reduce credit card obligations incurred to run his law practice, he would not have made the loan.
Mr. Hackler testified that he knew Mr. Johnson was hard pressed financially and that he desperately needed a $20,000 loan, and further, that he knew at the time he made the loan it was a risky one. He was also aware that Mr. Johnson was unable to repay the first loan on its original due date. The hearing officer found that attorney Johnson did not advise Mr. Hackler to seek separate counsel though Mr. Hackler had an opportunity to do so.
Attorney Johnson gave Hackler a $20,000 promissory note (13 percent interest per annum) and a deed of trust on his home. The Johnsons also gave the Hacklers a new promissory note for $10,700 (15 percent interest per annum) as a replacement note for the earlier $10,000 note which would have matured in December 1985.
In the spring of 1986, attorney Johnson informed Mr. Hackler he was going to file bankruptcy but that Mr. Hackler would still be repaid. Attorney Johnson filed Chapter 11 (reorganization) bankruptcy proceedings in May 1986. Mr. Hackler testified that he first learned of Johnson's extensive debts, tax liabilities and of a second mortgage on the Johnson residence from the bankruptcy schedules. In the bankruptcy, Mr. Johnson reaffirmed his debt to the Hacklers and in the reorganization plan agreed to pay them according to the contract terms.
Mr. Hackler invested the remaining $40,000 of care prepayment funds for a short time and subsequently repaid the entire loan to Richard's trust estate. Although attorney Johnson agreed in his Chapter 11 bankruptcy plan to repay Based on the above described conduct, the bar association filed a complaint against attorney Johnson alleging the following seven counts of misconduct.
the Hacklers according to the contract terms, only two payments totaling approximately $5,500 had been made by him at the time of the disciplinary hearing. Mr. Johnson did, however, represent to this court at oral argument that payments have been made to the Hacklers during 1991 and that payments will continue to be made on a monthly basis pursuant to an agreement between Mr. Johnson and the Hacklers
Count 1--alleging a violation of CPR DR 5-104(A) 1 in requesting a loan (June 1985) from a client without written complete disclosure.
Count 2--alleging violation of RPC 1.8 relating to doing business with a client and RPC 8.4(c) prohibiting misrepresentation in obtaining the loan of $20,000 (November 1985) without complete written financial statements which would have disclosed a precarious financial status and without written appraisal and title report on the security.
Count 3--alleging violation of RPC 8.4(c) prohibiting misrepresentation in representing that the security for the November 1985 loan would be in second lien position when the property was already subject to two security interests.
Count 4--alleging violation of RPC 3.3(f) requiring full disclosure of material facts to a tribunal in an ex parte proceeding and RPC 1.7(b) prohibiting representation of a client when limited by the lawyer's interest. This count also alleged violation of RPC 8.4(d) prohibiting conduct prejudicial to the administration of justice by submitting the prepayment plan to the Superior Court with the anticipated purpose of funding a loan to the lawyer without disclosure to the court of the true nature of the transaction.
Count 5--alleging violation of RPC 1.7(b) relating to the conflict by acting as attorney for Mr. Hackler and preparing loan documents without a written waiver of conflict.
Count 6--alleging violation of RPC 1.1 in failing to provide competent representation in preparing security for loans.
Count 7--alleging Johnson's conduct violated RLD 1.1(p) demonstrating unfitness to practice law.
The hearing officer concluded that the bar association had proved the following charges.
Count 1 (failing to give adequate written disclosures when entering into the spring 1985 $10,000 loan transaction in violation of CPR DR 5-104(A)). 2
Count 2 (failing to give adequate disclosures so as to amount to misrepresentation in entering the November 1985 $20,000 loan transaction in violation of RPC 1.8(a) and RPC 8.4(c)). 3
Count 5 (failing to disclose a conflict of interest in preparing loan documents in violation of RPC 1.7(b)). 4
The hearing officer imposed two reprimands and a censure for the misconduct and ordered Mr. Johnson to pay restitution to the Hacklers.
The hearing officer found that bar disciplinary counsel did not sustain the burden of proof on counts 3, 4, 6 and 7. Bar disciplinary counsel appealed a number of the hearing officer's findings and conclusions and the sanction imposed by the hearing officer to the 12-member Disciplinary Board (Board).
The Board declined to make any changes to the hearing officer's findings and conclusions. However, the Board did by a 7-to-5 vote impose a 6-month suspension and delete the order of restitution. Five members of the Board dissented and recommended a 60-day suspension.
Bar disciplinary counsel does not argue that we should alter the findings of fact, but argues that the findings and conclusions made by the hearing officer and affirmed by the Board warrant a disciplinary sanction of substantial suspension.
One basic issue is here presented.
What is the proper sanction for an attorney who twice borrows money from clients without providing the clients with full written disclosure of the attorney's precarious financial situation?
CONCLUSION. Considering the nature of the misconduct, the lawyer's mental...
To continue reading
Request your trial
-
Disciplinary Proceeding Against Heard, In re, 12272
... ... James Heard negotiated a settlement on behalf of his client during the handling of a personal injury matter. He evaluated the case at more than $150,000, and retained the only cash in the settlement--$50,000 in insurance proceeds. However, much of the ... Those findings are verities on appeal. In re Disciplinary Proceeding Against Johnson, 118 Wash.2d 693, 701, 826 P.2d 186 (1992) ... While we generally adopt the Board's sanction recommendation, we are not bound by ... ...
-
In re Blanchard
... 144 P.3d 286 ... In re the Matter of the DISCIPLINARY PROCEEDING AGAINST Stephen B. BLANCHARD, Bar No. 12294, an Attorney at Law ... No. 200,316-8 ... Supreme Court of ... Natalea Skvir, Washington State Bar Association, Seattle, WA, for Respondent ... J.M. JOHNSON, J ... ¶ 1 Stephen Blanchard appeals the Washington State Bar Association (WSBA) Disciplinary Board's (the Board) recommendation ... ...
-
In re Disciplinary Proceeding Against Vanderbeek
... 101 P.3d 88 153 Wash.2d 64 In the Matter of the DISCIPLINARY PROCEEDING AGAINST Diane L. VANDERBEEK, Attorney at Law ... No. 11884-1 ... Supreme Court of Washington, En Banc ... Therefore, I dissent ... JOHNSON and MADSEN, JJ., concur ... -------- Notes: 1. John VanDerbeek has a J.D. degree but never ... ...
-
LK Operating, LLC v. Collection Grp., LLC
... ... This opinion addresses whether the proceedings below complied with due process requirements; whether, as a matter of law, the joint venture proposal was entered by an attorney in violation of one or both of former RPCs 1.7 (1995) and 1.8(a) (2000); and, if so, ... Stewart, 159 Wash.2d 736, 745, 153 P.3d 186 (2007) (quoting In re Disciplinary Proceeding Against Johnson, 118 Wash.2d 693, 704, 826 P.2d 186 (1992)). “A lawyer must prove strict compliance with the safeguards of RPC 1.8(a).” Id. ¶ ... ...