Summary
In Columbus Bar Association v. Ramey, 32 Ohio St.2d 91, 290 N.E.2d 831 (1972), the Supreme Court of Ohio determined that an attorney's conduct in preparing a trust and will, through which he stood to inherit all the testatrix's property, violated Ethical Consideration 5-5. The Ohio court found the circumstances to be the opposite from those which would fall into the category of the exceptional circumstances provided in EC 5-5.
Summary of this case from Disciplinary Board v. AmundsonOpinion
No. 72-2
Decided December 6, 1972.
Attorneys at law — Misconduct — Public reprimand — Acts warranting — Conflicting interest.
ON CERTIFIED REPORT by the Board of Commissioners on Grievances and Discipline.
Relator, the Columbus Bar Association, instituted this proceeding before the Board of Commissioners on Grievances and Discipline, charging respondent, Attorney Lawrence R. Ramey, with the following counts: (1) Violation of Canons of Professional Ethics No. 6 and No. 11; and (2) violation of Disciplinary Rules 1-102, 5-101 (A), and 9-102(B) (4) of the Code of Professional Responsibility.
"It is the duty of a lawyer at the time of retainer to disclose to the client all the circumstances of his relations to the parties, and any interest in or connection with the controversy, which might influence the client in the selection of counsel.
"It is unprofessional to represent conflicting interests, except by express consent of all concerned given after a full disclosure of the facts. Within the meaning of this canon, a lawyer represents conflicting interests when, in behalf of one client, it is his duty to contend for that which duty to another client requires him to oppose.
"The obligation to represent the client with undivided fidelity and not to divulge his secrets or confidences forbids also the subsequent acceptance of retainers or employment from others in matters adversely affecting any interest of the client with respect to which confidence has been reposed."
"The lawyer should refrain from any action whereby for his personal benefit or gain he abuses or takes advantage of the confidence reposed in him by his client."
"(A) A lawyer shall not:
"(1) Violate a Disciplinary Rule.
"* * *
"(4) Engage in conduct involving dishonesty, fraud, deceit, or misrepresentation.
"* * *
"(6) Engage in any other conduct that adversely reflects on his fitness to practice law."
"Except with the consent of his client after full disclosure, a lawyer shall not accept employment if the exercise of his professional judgment on behalf of his client will be or reasonably may be affected by his own financial, business, property, or personal interests."
"(B) A lawyer shall:
"* * *
"(4) Promptly pay or deliver to the client as requested by a client the funds, securities, or other properties in the possession of the lawyer which the client is entitled to receive."
Both counts arise out of respondent's representation of Miss Leoti Vernon Sheppard, an elderly spinster, formerly of Columbus, Ohio, who has resided in Arkansas since 1955. In substance, Count I charges respondent with taking advantage for his personal benefit of the confidence reposed in him by his client, and placing himself in a position of conflicting interest; Count II charges a refusal to deliver to his client certain securities she had placed in his trust.
Respondent first met Miss Sheppard in 1964 when he witnessed her will. The late Attorney Ray Poppleton had managed Miss Sheppard's financial affairs since 1955, when he obtained her release from the Columbus State Hospital. When Poppleton's health began failing in 1966, he referred Miss Sheppard to respondent. The sum of $17,174.05 was turned over to respondent by Poppleton. At Miss Sheppard's request, $16,000 was invested in savings bonds, the remainder being placed in a checking account, all in the name of Leoti V. Sheppard. Respondent maintained possession of the bonds for Miss Sheppard.
During the spring of 1966, respondent advised Miss Sheppard of Poppleton's death, and that he still had possession of her bonds and will. He corresponded with her again on September 25, 1968, when he notified her that he still had her bonds, and asked that she write him. No reply was received. However, on June 20, 1969, Miss Sheppard appeared, unannounced, at respondent's office in Columbus. She advised respondent that she needed to move from her motel in Arkansas and that she needed additional money for living expenses.
Her original intention was to take at least some of her money back with her, but she expressed fear that her money might be taken from her if she took it to Arkansas. She also expressed fear of being recommitted to the State Hospital. Respondent testified that Miss Sheppard was trembling as she told him of her fears and problems and that he spent several hours that afternoon trying to quiet her nerves.
Upon examining her savings bonds, which had increased in value to about $18,000, respondent found that they could not be cashed until August 25, 1969. Miss Sheppard did not wish to take the bonds with her, nor did she wish to return to Columbus in August to cash them. Respondent thereupon suggested that the bonds be placed in a trust and that he, as trustee, would handle her funds for her. He was to cash the bonds on August 25, 1969, invest the money in a different bond which would yield $75 interest monthly, and see that the interest would be deposited in Miss Sheppard's checking account each month.
Late that same Friday afternoon, the subject of Miss Sheppard's will came up. She stated that she would like to have her will changed, since many of the current beneficiaries were deceased. Respondent testified that it was her desire to leave everything to him; that he told her that wasn't necessary, but that he saw no reason to argue with her. He agreed to write a new will for her naming himself as the sole legatee, and instructed her to return to his office at 11:00 the next morning to examine both instruments.
The next morning, respondent prepared the new will, wherein he was named as sole beneficiary "in recognition of services rendered to me [Miss Sheppard] in my lifetime * * *." He also prepared a trust agreement, captioned "Irrevocable Trust Agreement," which agreement provided that the trust was irrevocable. Miss Sheppard was grantor therein, and respondent the trustee.
The dispositive portions of the trust agreement provided that during the life of the grantor the net income was to be paid to the grantor, and that "the trustee may distribute such portions of the principal to the grantor as the trustee shall determine to be necessary in its absolute and uncontrolled discretion * * *."
Upon the death of the grantor, the balance remaining in the trust, after caring for pets and covering other expenses, was to "* * * pass to the legatee named in the will executed simultaneously with this agreement." (Emphasis added.)
The res of the trust listed the savings certificates and real estate owned by Miss Sheppard. The real estate, however, was never transferred to the trustee.
On Saturday, June 21, 1969, Miss Sheppard returned to respondent's office. After Miss Sheppard had read the trust agreement and the will, both instruments were executed. The record indicates that Miss Sheppard was aware of respondent's position as remainderman under the trust and sole legatee under the will.
Although the language of the trust agreement indicated that it was irrevocable, respondent testified that he advised Miss Sheppard, and believed, that she could cancel the trust at any time she wanted, and that she could make a new will at her desire. The record is devoid of any indication that respondent advised Miss Sheppard that at least his consent would be necessary before she could dissolve the trust, or that the creation of a new will probably would not change his status as a remainderman of the trust.
Miss Sheppard departed Columbus that afternoon. Shortly after returning to Arkansas she contacted an attorney in Texarkana concerning the provisions of the trust and the will. As she did not have copies of either with her, that attorney advised her that she should get copies and contact an attorney closer to her home.
On August 8, 1969, she contacted Attorney Dawson concerning the matter. She had written respondent on July 18, 1969, requesting copies of the documents, and they were mailed to her by respondent in a letter dated August 19, 1969. In that letter, respondent stated that he would come to see her sometime, and on August 28, 1969, he again wrote advising her that the bonds had been cashed and redeposited in accordance with her wishes and that he would let her know when he could come to see her. Respondent had no further communications with Miss Sheppard until December 1970.
Miss Sheppard returned to Dawson's office on September 4, 1969, with the documents. She continued to see Dawson almost monthly until May 1970, at which time she finally agreed to let him contact respondent. The reason for the delay was purportedly that she feared respondent would have her recommitted.
On May 12, 1970, Dawson wrote respondent, advised him that Miss Sheppard was living in poverty, and inquired as to whether her money could be turned over to her, or an annuity purchased. Respondent replied by phone on May 14, 1970, at which time her needs were discussed. Dawson testified that respondent stated he would come to Arkansas to look into her needs. Respondent denies this, testifying that Dawson was to look after her and notify him of her needs.
No further correspondence occurred until Dawson again wrote respondent on July 22, 1970. This letter reviewed the previous correspondence, expressed renewed concern, and requested to hear from respondent concerning his intentions. Respondent replied by phone on July 27, 1970. Miss Sheppard's needs were again discussed, and the record indicates that respondent intended to travel to Arkansas soon. The record indicates further that respondent checked the balance in Miss Sheppard's checking account at that time, and found her to have $669.23 available.
No further word having been received, Dawson wrote again on October 30, 1970, making a formal demand that all funds be returned with a complete accounting. He also advised respondent that a new will had been prepared for Miss Sheppard on May 21, 1970. No response was received.
On December 10, 1970, Dawson made a final demand for Miss Sheppard's funds, enclosing a copy of a petition for declaratory judgment which he intended to file in federal court in Arkansas if respondent refused to comply. Upon receipt, respondent phoned Miss Sheppard at the Quail Motel, but she refused to discuss anything on the phone at that time and advised him to contact the law firm the next day. Respondent called the firm the next day and spoke with the senior partner. He advised him that if the allegations of fraud were deleted from the petition, he would not contest the action to terminate the trust. The senior partner refused to amend.
At that time, respondent was acting on the advice of Attorney Summer of Columbus that the trust was irrevocable and that the money could not be turned over absent court approval.
The petition for declaratory judgment was filed in the Federal District Court on December 17, 1970, and respondent entered his appearance by mail, tendering a full accounting. Respondent denied the allegations of fraud and asked to be relieved of his responsibility as trustee. Summary judgment was awarded Miss Sheppard by entry filed February 17, 1971, and the trust and will of June 21, 1969, were revoked, cancelled and held for naught. No specific finding was made as to the allegations of fraud and undue influence.
The board's finding as to Count I was that respondent was guilty of more than exercising poor judgment; that he had taken advantage of the situation; and therefore he had violated Canons 6 and 11 of the Canons of Professional Ethics. As to Count II, the board found that respondent had never received formal notice that Dawson was acting in Miss Sheppard's behalf; that regular monthly deposits were made in Miss Sheppard's checking account; that Dawson had apparently wanted all the trust funds paid over to his client; that Miss Sheppard had several hundred dollars in her checking account at the times she was reported to have been in need; that respondent was acting under the advice of Attorney Summer that he had no authority to turn over the trust funds, absent an order of a court of competent jurisdiction; that a complete accounting was made by respondent; and that there was substantial performance by respondent of his duties as trustee.
Counsel for relator requested that appropriate disciplinary action be taken, while counsel for respondent urged the dismissal of both charges.
The board dismissed Count II, but recommended that respondent be administered a public reprimand as to Count I pursuant to Section (6)(c) of Rule XVIII of the Rules of Practice of this court.
Mr. William L. Clark, Mr. Lee C. Mittman and Mr. Richard V. Patchen, for relator.
Messrs. Vorys, Sater, Seymour Pease, Mr. John C. Elam and Mr. Michael G. Long, for respondent.
In view of the conflicting testimony and the circumstances surrounding this disciplinary proceeding, we find it necessary to examine the entire record of this case. Having done so, we approve the findings and recommendations of the board both as to Count I and Count II.
Addressing ourselves first to Count II, we agree with the board's findings that respondent's conduct constituted substantial compliance with his duties as trustee. Although the record evidences a possible lack of interest by respondent in inquiring as to the well-being of Miss Sheppard, such conduct, by itself, does not violate the terms of the trust agreement nor the Code of Professional Responsibility.
Although a trustee does not have the duty to constantly inquire into the living conditions of his charge, he should initiate independent affirmative action under circumstances such as existed herein. Respondent was aware of Miss Sheppard's mental state, as evidenced by her many expressed fears. He had accepted the responsibility of controlling her funds, at his sole discretion, yet he failed to contact her to inquire as to her well-being even after being notified by Attorney Dawson that she was still living at the same place that she had previously expressed a desire to leave, and that she was living in a state of near-poverty.
Respondent was never formally notified that Attorney Dawson was representing Miss Sheppard, and he had no authority to turn over any funds under the circumstances presented. A complete and accurate accounting was made, the trust and will were declared void, and there is no evidence that respondent misused the trust funds. Accordingly, Count II is dismissed.
Respondent's conduct in preparing a trust and will, through which he stood to inherit all of Miss Sheppard's estate, presents a different problem. Clearly, such conduct would be violative of Ohio's present Code of Professional Responsibility, EC 5-5 providing that "other than in exceptional circumstances, a lawyer should insist that an instrument in which his client desires to name him beneficially, be prepared by another lawyer selected by the client." The circumstances herein are antipode from those which would fall into the category of the exceptional circumstances provided for above.
Upon examination of the record, we find that respondent's conduct as to the trust agreement and will of July 21, 1969, did not comport with the more general but nevertheless high standards of conduct required by then existing Canons 6 and 11. By respondent's own testimony, Miss Sheppard is pictured as a distressed, confused woman, living in fear of being recommitted to a state institution and trusting few, if any, people. Her relationship with respondent arose from respondent's prior association with Poppleton, a man whom she had trusted explicitly and who had secured her release from a state institution. She had seen respondent on only one prior occasion, and had not established such a relationship with him as would cause one to expect her to designate him as remainderman of her entire estate. It should also be noted that respondent was paid for all his services, including those of June 20 and June 21; that the trust provided for reasonable compensation to the trustee; and that no additional uncompensated services were formally contemplated by the parties.
Although we are cognizant of the fact that the subject of a new will did not arise until late Friday, June 20, 1969, and that Miss Sheppard had expressed a desire to leave Columbus on Saturday afternoon, resulting in a hurried preparation, we do not deem this to justify respondent's conduct. Reasonable prudence, under those circumstances, requires an attorney to exercise the utmost care in safeguarding his client's interest.
By the nature of the trust agreement and will, executed simultaneously, respondent placed himself in a position of conflicting interest. As trustee, he had sole discretion as to any depletions from the principal in the trust, and, as the beneficiary of the trust, any depletion of the trust principal would have reduced the sum which he stood to receive at her death.
We cannot condone respondent's conduct in categorically advising Miss Sheppard that the trust could be changed at her desire. Despite respondent's claim that he believed the trust to be revocable, and, without reaching a final conclusion as to the revocability of the trust agreement; it must be noted that the instrument itself contains terms of irrevocability; thus, at least inviting litigation as to the issue of revocability.
Although respondent properly advised Miss Sheppard that she could execute a new will at any time, the record is devoid of any explanation provided her as to whether a subsequent will would affect his status as the beneficiary of the trust res. Noting again that we do not make, and need not make, any specific finding as to the effect that execution of a subsequent will would have ultimately had on respondent's status under the trust, we cannot condone his conduct in failing to point out to his client the fact that the specific language of the trust designated him as the remainderman beneficiary (he being "the legatee named in the will executed simultaneously" with the trust) with the literal language of the trust instrument purporting to make such trust, including such designation as remainderman beneficiary, irrevocable.
Assuming, as contended by respondent, that the "law of trusts" provides for revocability by the unilateral act of the settlor in all cases where the settlor is also the beneficiary, one could not reasonably expect that a lay person in the position of Miss Sheppard would so conclude where the instrument itself contains specific language to the contrary. If all parties intended and understood the trust to be revocable, the use of words of irrevocability therein, without specific discussion as to their presence with the client, necessarily creates the potentiality of conflicting interest.
Here the settlor was not the beneficiary in the sense of being the only beneficiary, but instead was a beneficiary.
That Miss Sheppard was not entirely satisfied with the instruments or with her knowledge thereof, is evidenced by the fact that she contacted two attorneys in Arkansas very shortly after executing the instruments in respondent's office. An analysis of the record indicates that Miss Sheppard's fears, including her fear of being recommitted, clouded her understanding of the effect of the instruments, both at the time of the execution and afterward, and that respondent was fully aware of such mental state.
The conduct evidenced by this record indicates the creation of a conflict of interest and a failure to fully disclose the potential legal significance of the instruments prepared, and thus constitutes conduct contrary to the standards of conduct prescribed by Canons 6 and 11 of the Canons of Professional Ethics.
The Board of Commissioners on Grievances and Discipline having recommended that respondent be given a public reprimand, and this court having found sufficient evidence in the record to support such recommendation, we hold that respondent should be, and hereby is, publicly reprimanded for such misconduct.
Judgment accordingly.
O'NEILL, C.J., SCHNEIDER, STERN and LEACH, JJ., concur.