Wilkinson, Matter of

• Decision Date: 30 October 1987
• Docket Number: No. 60383,60383
• Citation: 744 P.2d 1214,242 Kan. 133
• Parties: In the Matter of John E. WILKINSON, Respondent.
• Court: Kansas Supreme Court

Page 1214

744 P.2d 1214

242 Kan. 133

In the Matter of John E. WILKINSON, Respondent.

No. 60383.

Supreme Court of Kansas.

Oct. 30, 1987.

Syllabus by the Court

1. A client's ultimate reimbursement for attorney wrongdoing does not excuse professional misconduct.

2. Findings by the Board for Discipline of Attorneys that a respondent violated the Code of Professional Conduct must be supported by clear and convincing evidence.

3. An attorney obtaining an unsecured loan from a client at a lower than commercial rate of interest without the client receiving the benefit of independent legal advice is in violation of DR 7-101(A)(3) (235 Kan. cxlvii).

4. An attorney violates DR 1-102(A)(4) (235 Kan. cxxxvii) by representing himself as personally responsible for the repayment of a debt while actually ensuring that he will not be held personally responsible for it.

5. An attorney violates DR 9-102 (235 Kan. cliv) by commingling and converting funds acquired through an attorney-client relationship.

6. An attorney who fails to record a mortgage which protects the interest of a client over his own interests violates DR 6-101(A)(3) (235 Kan. cxlvii).

7. The duty of good faith to a client extends as long as the influence created by the attorney-client relationship endures.

8. An attorney violates DR 5-101(A) (235 Kan. cxlv) by representing clients' interests which conflict with his own interests unless his clients have specifically given their informed consent to such representation.

9. An attorney violates DR 5-105(A), (B), (C), and (E) (235 Kan. cxlvi) by representing conflicting claims to a fund not large enough to satisfy all of the claims.

10. Although this court is the sole arbiter of the discipline to be imposed for violations of the Code, it considers the Disciplinary Board's recommendations with deference.

Barton Brown, of Wallace, Saunders, Austin, Brown and Enochs, Chartered, of Overland Park, argued the cause and was on the brief, for respondent.

Bruce E. Miller, Disciplinary Adm'r, argued the cause and was on the brief, for petitioner.

PER CURIAM:

The Kansas Board for Discipline of Attorneys filed a report on a complaint against John E. Wilkinson, attorney respondent, on January 12, 1987. Respondent was found to have committed six violations of Supreme Court Rule 225. 235 Kan. cxxxvii. The Board recommended discipline in the form of suspension as prescribed by Supreme Court Rule 203(a)(2). 235 Kan. cxxiv. Respondent filed exceptions to the Board's report and the matter is before this court for review.

The facts from which these disciplinary complaints arose are as follows. Respondent John E. Wilkinson is a Kansas lawyer admitted to practice in the state in 1958. Dr. Glenn Bair, a Topeka physician, was a client of Wilkinson's from 1977 until June of 1983. Dr. Bair referred a patient, Dennis Williamson, to Wilkinson for legal services; then Williamson referred a friend of his, Gerald Monhollen, to Wilkinson for legal advice. Respondent's handling of the legal matters of these three clients is the basis of the six ethical violations found by the Board.

Dennis Williamson, a high school dropout, lost his right leg and two fingers on a construction job in August 1979. In 1980, he went to Dr. Bair to obtain medication for his pain, and Dr. Bair recommended he see John Wilkinson about filing suit for his injuries. Williamson did so, and a settlement for a total of $715,000 was obtained in August of 1981. Williamson received $502,000 after legal fees. That same day, Williamson loaned Respondent $100,000.

Respondent was president and sole stockholder in B-K of Kansas, Inc., which owned and operated three Burger Kings in Topeka. Respondent had explained to Williamson he would lose his three Burger King franchises if he could not come up with the money to install drive-through facilities. On the other hand, he told Williamson, he believed the existence of such facilities would increase business by 40-50%. He accepted Williamson's loan of $100,000 at 5% interest, explaining he would then be able to help Williamson with future legal advice at no charge. He issued a promissory note from B-K, Inc., to Williamson. The note was unsecured and Respondent did not personally guarantee the loan.

At the time, a commercial loan of $100,000 to Respondent would have required security and the interest rate would have been around 18%. Respondent was unable to obtain a commercial loan.

During the corporation's fiscal year ending August 31, 1981, B-K, Inc., showed a loss of $339,113 and had a cumulative stockholder's deficit of $593,805. Respondent had earlier contemplated bankruptcy.

Except for a payment of $1700 in October of 1982, Respondent made no payments of interest or principal to Williamson during 1981 or 1982.

In January of 1983, B-K, Inc., through Respondent as president, executed to Williamson another unsecured promissory note, to replace the previous note, in the amount of $100,000 at 12% interest per annum payable monthly. Some payments were made, but B-K ultimately defaulted and filed bankruptcy. Williamson was ultimately paid the amount of the note from Respondent's malpractice insurance carrier.

Respondent argues there is no evidence he intentionally did anything to damage Williamson. He contends the Board should have made findings of fact on certain testimony which supports his assertion of lack of intention to damage Williamson:

1. Respondent believed, at the time of the loan, that he would be able to pay back the loan. He did not know Burger King had decided to recapture his franchises.

2. Williamson was fully aware of the problems Respondent was having with the franchise before he consented to give the loan.

3. Respondent replaced the 5% note with a note paying 12% in January of 1983 (Respondent does not mention the replacement was at Williamson's request because he was not receiving regular repayment).

Respondent did in fact do some other legal work for Williamson without billing him. However, he subtracted interest payments for this work in an amount possibly greater than he would have regularly charged.

Respondent also urges this court to consider that Williamson has been made whole by Respondent's malpractice carrier. A client's ultimate reimbursement for attorney wrongdoing does not excuse professional misconduct. See State v. Callahan, 232 Kan. 136, 652 P.2d 708 (1982). The respondent in Callahan argued he should not be disciplined for violation of disciplinary rules because there was a possibility his client could recover payments due him by filing suit. This court held eventual recovery is not a defense to a professional violation. 232 Kan. at 141-42, 652 P.2d 708.

The first issue is whether clear and convincing evidence supports the factual findings of the Board which underlie its conclusion Respondent violated DR 7-101(A)(3) (235 Kan. cxlvii) by negotiating a loan on unconscionable terms out of Williamson's settlement without Williamson having received independent legal advice.

DR 7-101(A)(3) forbids a lawyer from intentionally prejudicing or damaging his client during the course of their professional relationship.

Respondent intentionally let Williamson risk losing a substantial amount of money. He also intentionally caused Williamson to lose a substantial amount of interest on that money. We hold there is clear and convincing evidence Respondent intentionally damaged his client in violation of DR 7-101(A)(3).

The second issue stems from the same facts and is whether clear and convincing evidence supports the factual findings of the hearing panel that Respondent violated DR 1-102(A)(4) (235 Kan. cxxxvii) by misrepresenting to Williamson he was personally responsible for payment of the $100,000 debt.

DR 1-102(A)(4) prohibits conduct "involving dishonesty, fraud, deceit, or misrepresentation." Williamson testified he understood Respondent was personally obligated to pay off the loan. The Board found Williamson to have "a strong interest in supporting some of the contentions made by the Disciplinary Administrator" because of the then pending malpractice suit against Respondent.

Respondent argues Williamson's testimony is not sufficient to meet the clear and convincing standard required for the imposition of discipline. He argues the Board found only that Williamson did not know Respondent was not personally responsible for the loan. Respondent contends this finding of fact will not support a conclusion that he represented to Williamson he was personally liable.

Even were we to find the evidence not clear and convincing Respondent represented he was personally responsible on the note, the Disciplinary Administrator contends the Code was still violated. Respondent maintains he intended to be responsible for the note, but the evidence shows he made certain he was not in fact personally responsible for it. The Board found this action, when Respondent knew B-K, Inc. was near bankruptcy, to be a violation of professional ethics. The Administrator also claims Respondent violated his oath not to deny the rights of any person for lucre. Supreme Court Rule 702(i), 235 Kan. clxxxiii.

Whether or not Respondent specifically promised Williamson he was personally responsible for the debt, his statements throughout the transaction justified Williamson's belief Respondent would hold himself personally responsible. The contrast between Respondent's words and his actions in making certain he was not in fact personally responsible shows an intent to misrepresent the facts to Williamson. We hold Respondent violated DR 1-102(A)(4).

The next issue involves a loan of $500 from Williamson to his friend, Gerald Monhollon. When Monhollon was later injured in an accident, Williamson referred him to Respondent. It was agreed Respondent would pay Williamson the $500 owed him from the proceeds of the lawsuit he filed on Monhollon's behalf. In November of 1983, Respondent took the $500 for Williamson...