FOR THE RESPONDENT FOR THE INDIANA SUPREME COURT
James H. Kelly Donald R. Lundberg,
Taylor Law Office David B. Hughes, Staff Attorney
4318 E. 10th Street 115 West Washington Street, Suite 1165
Indianapolis, IN 46201 Indianapolis, IN 46204
SUPREME COURT OF INDIANA ______________________________________________________________
IN THE MATTER OF ) ) Case No. 49S00-9708-DI-443 PATRICK R. TAYLOR ) __________________________________________________________________DISCIPLINARY ACTION
At the respondents request, the client on March 12, 1990, executed a promissory
note in favor of, and prepared by, the respondent in the sum of
$9,196.00. That figure represented the balance of her attorney fees after the
former husbands payment of $3,500. The note provided for interest at 12
percent annually, attorney fees and costs of collection. It also provided that
all sums were due without relief from valuation and appraisement laws.
The respondent also requested the client execute an Assignment of Installment Contract for the Sale of Real Estate in his favor. The assignment provided that the client assigns all her right, Title and interest in the (marital residence) as security for a certain promissory note entered into on the 12th day of March, 1990. At that time, using the homes appraised value, the client had about $17,000 of equity in the home. See footnote The respondent did not advise the client to seek the advice of independent counsel with respect to the transfer. He also did not disclose to the client the terms of the note and assignment transaction or obtain the clients written consent to those terms.
On April 25, 1990, the respondent obtained the clients signature on a quitclaim deed he had prepared transferring all of her interest in the marital home to him. Again, the respondent did not advise the client to consult independent counsel, failed to disclose the terms of the transaction to her in writing, and failed to obtain the clients written consent. Six months later, the respondent sold the property to a third party for $25,000 and did not return any portion of that amount to the client.
In his Petitions for Review, the respondent argues that his failure to provide interim billing to the client was not misconduct. He testified that the client and he regularly discussed the escalating fees and that he was not obligated to provide interim billing, in part because the client had no means to pay the bill. While interim billing may not per se be required during every representation, the respondents failure to do so in this case amounted to a lack of adequate communication with his client, as required by the Rules of Professional Conduct, given the amount by which the respondents actual fees exceeded his initial projections, the clients expectation that she would not have any out-of-pocket legal expenses, and the presence of only two significant assets in the marital estate, neither of which was liquid. Failure to keep a client apprised of escalating fees may constitute a violation of Prof.Cond.R. 1.4. See, e.g., Matter of Grimm, 674 N.E.2d 551 (Ind. 1996) (attorney violated Prof.Cond.R. 1.4(a) when he represented that attorney fees were taken care of after the first invoice but submitted a substantial bill for legal services at conclusion of representation). The clients inability to pay the fees was a reason to provide interim billing, not a justification for avoiding them; the importance of limiting her legal fees and the likelihood that the cost of attorney services would impact strategic decisions regarding the representation would have increased as the attorney bills mounted. Accordingly, we find that the respondent violated Ind.Professional Conduct Rule 1.4(a) by failing to provide notice or information to the client of her escalating legal bills. See footnote As a consequence of that omission, the respondent failed to keep the client adequately informed about the status of her case to the extent reasonably necessary to permit her to make informed decisions regarding the representation, in violation of Prof.Cond.R. 1.4(b).See footnote
We further find that the respondent violated Prof.Cond.R. 1.8(a) by knowingly entering into business transactions with the client without taking steps to ensure that the transactions were fair and reasonable to the client. Specifically, the respondent acquired an interest in the clients property adverse to the client without disclosing the terms of those transactions in writing, advising or allowing the client to seek independent counsel, or obtaining the clients written consent, all in violation of Prof.Cond.R. 1.8(a).See footnote The respondent contends that Prof.Cond.R. 1.8(a) does not apply, as he and the client were merely settling their accounts in an appropriate manner. The respondent is incorrect. Prof.Cond.R. 1.8(a) expressly governs transactions where the attorney knowingly acquires an ownership, possessory, security or other pecuniary interest adverse to the client. By obtaining a security interest in, and then ownership of, the clients home, the respondent knowingly acquired a pecuniary interest adverse to the client within the meaning of Prof.Cond.R. 1.8(a). See, e.g., Matter of Davis, 740 N.E.2d 855 (Ind. 2001) (1.8(a) violation where, at attorneys suggestion, client transferred her interest in home and other property to attorney without being advised of adverse consequences or to seek independent counsel). In fact, Prof.Cond.R. 1.8(a) is specifically designed to protect clients against the very abuse which occurred here. The Rules of Professional Conduct place restrictions on business transactions between lawyers and their clients based on an assumption that the lawyer in such dealings will generally possess, for various reasons, an unfair advantage in bargaining position. Matter of Horine, 661 N.E.2d 1206 (Ind. 1996). In this case, the respondent managed to persuade the client to transfer property in which she had equity of at least $17,000 to satisfy a debt of $9,200.
The respondent argues that the transfer of the property was not fair or reasonable to him, not the client. He asserts he ultimately lost money on the transaction, given the time, money and materials he invested in rehabilitating and selling the property. The evidence is undisputed that the client owed $3,200 on the property at the time of the transfer and that the respondent paid that debt in full before selling the property. The respondents tax returns showed he invested an additional $4,000 in the property before selling it for $25,000. That left him with a net profit on the property of at least $17,800 almost double what the client owed him in legal fees. Even if the ultimate selling price of the property is disregarded and only the lowest appraised value of the property ($20,600) at the time of the transfer to the client is considered, it is clear the respondent unduly profited from the transaction by accepting property with a net worth of $17,400 (appraised value of $20,600 minus the $3,200 owed by the client on the property) to pay a $9,000 legal bill. Thus, we find that the respondents transaction with his client divested her of much more than she owed him.
Given our finding of misconduct, we must determine an appropriate sanction. In doing so, we consider the misconduct, the respondents state of mind underlying the misconduct, the duty of this court to preserve the integrity of the profession, the risk to the public in allowing the respondent to continue in practice, and any mitigating or aggravating factors. Matter of Mears, 723 N.E.2d 873 (Ind. 2000).
The respondent took advantage of his client for personal gain, billing her nearly five times the amount he estimated the representation would cost, failing to advise her of the mounting legal fee, and then ultimately obtaining her residence in satisfaction of his fee. The respondent unfairly took advantage of his superior bargaining position to the significant detriment of his client. In the end, his unemployed and disabled client lost her only significant asset to satisfy an attorneys bill she did not believe she would ever have to pay. See footnote
We note as aggravating circumstances the respondents significant disciplinary history and his failure to acknowledge any wrongdoing. See Matter of Taylor, 293 N.E.2d 779 (Ind. 1979) (respondent suspended for not less than two years for suborning perjury); Matter of Taylor, 525 N.E.2d 286 (Ind. 1988) (public reprimand for failing to return case file materials to client); Matter of Taylor, 693 N.E.2d 526 (Ind. 1998) (120-day suspension for advising stepmother to waive her right to elect to take against the respondents fathers will, which left everything to the respondent and his brother). The misconduct which led to the respondents suspension in 1998 is remarkably similar to this matter the respondent provided legal advice in an improper manner to the detriment of the person he advised and for his own pecuniary gain. The respondents continuing disregard for the ethical strictures placed on attorneys renders him a risk to the public and justifies a significant period of suspension.
It is, therefore, ordered that the respondent is hereby suspended from the practice of law in Indiana for at least 24 months, beginning March 12, 2001. At the conclusion of that period, he may not be reinstated to the practice of law except upon a successful petition pursuant to Ind. Admission and Discipline Rule 23(4).
The Clerk of this Court is directed to provide notice of this order in accordance with Admis.Disc.R. 23(3)(d) and to provide the Clerk of the United States Court of Appeals for the Seventh Circuit, the Clerk of each of the United States District Courts in this state, and the Clerk of each of the United States Bankruptcy Courts in this state with the last known address of the respondent as reflected in the records of the Clerk.
Costs of this proceeding are assessed against the respondent.
A lawyer shall explain a matter to the extent reasonably necessary to
permit the client to make informed decisions regarding the respresentation.
A lawyer shall not enter into a business transaction with a client or
acquire an ownership, possessory, security or other pecuniary interest adverse
to a client unless:
the transaction and terms on which the lawyer acquires
the interest are fair and reasonable to the client and are
fully disclosed and transmitted in writing to the client
in a manner which can be reasonably understood by
the client is given a reasonable opportunity to seek the
advice of independent counsel in the transaction;
the client consents in writing thereto.
The respondent argues that the clients signature on the agreement constitutes her written
consent within the meaning of Prof.Cond.R. 1.8(a). That rule contemplates the written
consent of the client to the transaction after full disclosure. The clients
signature on documents on documents transferring property to the clients attorney cannot be
considered written consent under Prof.Cond.R. 1.8(a) where the client has not been informed
of the implications or terms of the transaction as required by that rule.
Indeed, the client testified that she would never have entered into the transactions
at issue in this case if she had known that the respondent intended
to retain all profits from the sale of her home. She testified
that at the time she signed the documents at issue, she believed she
was agreeing to the sale of the property by the respondent and the
payment of any profit to her, after subtraction of the attorney fees obligation.
Hearing Transcript, p. 54. Prof.Cond.R. 1.8(a) is specifically designed to protect
against such misunderstandings by requiring full, written disclosure of the terms of the
transaction and the clients consent thereto.