State ex rel. Nebraska State Bar Ass'n v. Thor, 89-830

• Decision Date: 05 April 1991
• Docket Number: No. 89-830,89-830
• Citation: 237 Neb. 734,467 N.W.2d 666
• Parties: STATE of Nebraska ex rel. NEBRASKA STATE BAR ASSOCIATION, Relator, v. John M. THOR, Respondent.
• Court: Nebraska Supreme Court

Page 666

467 N.W.2d 666

237 Neb. 734

STATE of Nebraska ex rel. NEBRASKA STATE BAR ASSOCIATION, Relator, v. John M. THOR, Respondent.

No. 89-830.

Supreme Court of Nebraska.

April 5, 1991.

Syllabus by the Court

1. Disciplinary Proceedings: Appeal and Error. A proceeding to discipline an attorney is a trial de novo on the record, in which the Supreme Court reaches a conclusion independent of the findings of the referee, provided, where credible evidence is in conflict on a material issue of fact, the Supreme Court considers and may give weight to the fact that the referee heard and observed the witnesses and accepted one version of the facts rather than another.

2. Disciplinary Proceedings: Proof: Appeal and Error. In its de novo review of the record in a disciplinary proceeding against an attorney, and to sustain a particular complaint against an attorney, the Supreme Court must find that the complaint has been established by clear and convincing evidence.

3. Disciplinary Proceedings. The basic issues in a disciplinary proceeding against an attorney are whether discipline should be imposed and, if so, the type of discipline appropriate under the circumstances.

4. Disciplinary Proceedings: Attorneys at Law. The general purpose of the Nebraska Code of Professional Responsibility is to encourage and develop the conscience and ethics of lawyers in their professional and private lives so that the institution of the law merits and receives the respect and trust of the public.

5. Disciplinary Proceedings: Attorneys at Law. When an attorney takes an oath and receives a license to practice law, the attorney swears that established standards of professional ethics will be observed and, further, submits to the implied understandings that the attorney's conduct will be proper and that the attorney will abstain from practices that discredit the attorney, the courts, and the profession.

6. Disciplinary Proceedings: Presumptions. There is a presumption of the attorney's innocence in a disciplinary proceeding.

7. Disciplinary Proceedings. The purpose of a disciplinary proceeding is not so much to punish an attorney as it is to determine, in the public interest, whether the attorney should be permitted to continue to practice law.

8. Disciplinary Proceedings. Violation of a disciplinary rule concerning the practice of law is a ground for discipline.

9. Disciplinary Proceedings: Attorney and Client: Conflict of Interest: Proof. To establish that a lawyer has violated Canon 5, DR 5-104, of the Code of Professional Responsibility, limiting business relations with a client, it is necessary to show (1) that the attorney and client had differing interests in the transaction, (2) that the client expected the lawyer to exercise his professional judgment for the protection of the client, and (3) that the client consented to the transaction without full disclosure.

10. Disciplinary Proceedings: Attorney and Client. An attorney representing a client must not knowingly do anything which is inconsistent with the terms of his employment or contrary to the best interests of his or her client.

11. Bankruptcy: Property: Abandonment. After abandonment of a property by the trustee in bankruptcy, the bankrupt holds title in the same manner as if title had never been in the trustee.

12. Disciplinary Proceedings: Attorney and Client: Conflict of Interest. An attorney may not represent adverse parties with conflicting interests except by express consent of all concerned, given after a full disclosure of all the facts.

13. Fraud: Intent. Fraud may consist of the omission or concealment of a material fact if accompanied by the intent to deceive under circumstances which create the opportunity and duty to speak.

14. Disciplinary Proceedings. In determining the appropriate discipline, consideration is given to the nature of the offense, the need for deterring others, the maintenance of the reputation of the bar as a whole, the protection of the public, the attitude of the offender generally, and his or her present or future fitness to continue in the practice of law.

Paul Schumacher, Columbus, for relator.

David A. Domina, of Domina & Copple, P.C., Norfolk, for respondent.

HASTINGS, C.J., and BOSLAUGH, CAPORALE, SHANAHAN, GRANT, and FAHRNBRUCH, JJ.

HASTINGS, Chief Justice.

This is an original action brought by the Counsel for Discipline against a member of the Nebraska State Bar Association, John M. Thor, respondent. The respondent has been charged with violating Canon 1, DR 1-102, and Canon 5, DR 5-103 and DR 5-104, of the Code of Professional Responsibility.

The referee, Noyes W. Rogers, determined that the respondent had violated DR 1-102. The referee further concluded that the respondent had not violated DR 5-103 and DR 5-104. The referee recommended a suspension from the practice of law for 30 days. Both the relator and the respondent filed exceptions with this court.

A proceeding to discipline an attorney is a trial de novo on the record, in which the Supreme Court reaches a conclusion independent of the findings of the referee, provided, where credible evidence is in conflict on a material issue of fact, the Supreme Court considers and may give weight to the fact that the referee heard and observed the witnesses and accepted one version of the facts rather than another. State ex rel. NSBA v. Douglas, 227 Neb. 1, 416 N.W.2d 515 (1987), cert. denied 488 U.S. 802, 109 S.Ct. 31, 102 L.Ed.2d 10 (1988); State ex rel. NSBA v. Rhodes, 234 Neb. 799, 453 N.W.2d 73 (1990); State ex rel. NSBA v. Kirshen, 232 Neb. 445, 441 N.W.2d 161 (1989). "In its de novo review of the record in a disciplinary proceeding against an attorney, and to sustain a particular complaint against an attorney, the Supreme Court must find that the complaint has been established by clear and convincing evidence." Douglas, supra 227 Neb. at 8, 416 N.W.2d at 521; Rhodes, supra; Kirshen, supra.

Amended formal charges were filed against the respondent in this court on August 9, 1989, alleging that the respondent had violated DR 1-102(A)(1), (4), (5), and (6); DR 5-103(A)(1) and (2); and DR 5-104(A). Respondent was also charged with violating Neb.Rev.Stat. § 7-104 (Reissue 1987).

The referee appointed by this court, Rogers, held a formal hearing on the amended formal charges on February 26, 1990, and filed his report with this court on July 20, 1990. The referee found that the respondent had violated DR 1-102(A)(4). The referee also found that the relator had not proven violations of DR 5-103 and DR 5-104 by clear and convincing evidence. The referee recommended that respondent be suspended from the practice of law for 30 days. The respondent has filed exceptions to the report of the referee, and the matter is now before this court for review.

The respondent was admitted to the practice of law in 1973. Since his admission to the bar, the respondent has engaged in the general practice of law in the Wisner, Nebraska, area. Five character witnesses, three attorneys and two laypersons, testified on behalf of the respondent at the hearing. These witnesses testified that the respondent was an honest man and a very capable attorney. Furthermore, over 50 attorneys wrote letters in support of Thor, stating generally that Thor is an honest and capable attorney.

The allegations in the amended formal charges center on a transaction for the purchase of 151 acres of real estate by respondent from his clients, Marilyn and Leon Rathke.

In early 1986, Thor was retained by the Rathkes, who were experiencing financial difficulty. The Rathkes had defaulted on a loan and mortgage held by Prudential Insurance Company (Prudential). During the time respondent represented the Rathkes in connection with the Prudential matter, the respondent expressed some interest in the land mortgaged to Prudential, but he did not purchase the land. The land was deeded over to Prudential in lieu of foreclosure and deficiency judgment. This transaction is not the subject of the complaint.

In early 1987, the First National Bank of Beemer, Nebraska, informed Mr. Rathke that it would no longer give him an operating loan, which he needed to continue farming. Mr. Rathke sought Thor's assistance in dealing with the Beemer Bank. At this same time the Rathkes were indebted to The Federal Land Bank and Farmers Home Administration (FmHA). The Rathkes' indebtedness was far in excess of the value of their assets and was secured by mortgages on the real estate and security interests in the personal property.

The Rathkes' financial situation made it obvious that bankruptcy was the only solution. The only consideration was whether to choose chapter 7 bankruptcy, liquidation, or chapter 12 bankruptcy, farm reorganization. The alternative chosen would affect their future tremendously because it would decide if the Rathkes would ever farm again.

The respondent explained both a chapter 7 and a chapter 12 bankruptcy to the Rathkes. The respondent advised Mr. Rathke that in a Chapter 7 bankruptcy, a homestead exemption of $10,000 is available. The respondent further informed Mr. Rathke that annuities could be purchased which would be exempt in a chapter 7 bankruptcy.

Chapter 12 bankruptcy was a relatively new form of bankruptcy geared toward the family farmer. See 11 U.S.C. ch. 12 (1988). A chapter 12 bankruptcy involves reorganization. The financially distressed farmers could purchase back their assets from the secured creditors at the assets' fair market value; however, the farmers needed to have an operating plan confirmed which illustrated that they would have adequate cash-flow to service the debt at the fair market value. Thus, the basic question in utilizing a chapter 12 bankruptcy was whether the farming operations could produce a sufficient cash-flow to meet operating expenses and to make the necessary payments on the debt at the fair market value of the secured assets.

Chapter 12 bankruptcy had only...