Opinion
No. 91-1767
Submitted January 8, 1992 —
Decided April 15, 1992.
ON CERTIFIED REPORT by the Board of Commissioners on Grievances and Discipline of the Supreme Court, No. 90-44.
Relator, Columbus Bar Association, filed a complaint against respondent, Charles W. Ewing, charging him with violating DR 5-101(A) (accepting employment, without client's informed consent, where attorney's interests may affect professional judgment), and 5-105(A) and (B) (accepting or continuing employment where the employment may affect professional judgment on behalf of another client).
The complaint arose from Ewing's simultaneous representation of Gary and Elizabeth DePugh, Dr. John L. Terry, Carmel Farms, and Phoenix Financial, Inc. Gary and Elizabeth DePugh were farmers; in 1986, they found themselves in financial trouble and consulted Ewing. In 1987, the DePughs retained Ewing to represent them in a Chapter 12 bankruptcy proceeding. On December 31, 1987, Ewing filed the DePughs's bankruptcy petition in the United States Bankruptcy Court for the Southern District of Ohio.
After the petition was filed, the DePughs were unable to finance the day-to-day operation of their farm. Ewing informed them that he had a friend and client, Dr. Terry, who authorized Ewing to make investments with and/or loans to people in financial need. The funds were to be provided by Carmel Farms, a corporation owned by Terry and represented by Ewing.
One of the DePughs's creditors was Bank One of Columbus, N.A., which held a security interest in the mobile home the DePughs lived in. The DePughs owed Bank One over $40,000. In May 1988, Ewing negotiated a settlement with Bank One on the DePughs's behalf. Under the terms of the settlement, the DePughs could discharge their debt by paying $15,000 over seven years, interest-free, on condition that the bankruptcy case not be dismissed; alternatively, they could pay a $10,000 lump sum by June 30, 1988.
The DePughs apparently found the first option undesirable but could not pay the $10,000 lump sum. Without consulting the DePughs in advance, Ewing paid the $10,000. Terry provided the money through Phoenix Financial, Inc., which he owned and which Ewing also represented.
The DePughs subsequently gave their approval of Ewing's act. However, they were not told to whom they owed the $10,000 or on what terms to repay it. They asked Ewing several times how much the payments were going to be, but he did not tell them until December 1988. Nor was there any discussion between the DePughs and Ewing, Terry, or Phoenix as to whether Phoenix would be assigned Bank One's secured interest in the mobile home.
In December, Ewing finally informed the DePughs that they could repay the loan over seven years by paying $196.77 per month, a total of $16,528.68, to Phoenix. However, the terms of repayment were never embodied in a note. After making five payments, the DePughs refused to make further payments until they received "paperwork" concerning the loan ( e.g., a note).
Ewing also negotiated a settlement on the DePughs's behalf with the Farmers Home Administration ("FmHA"), another creditor in the Chapter 12 proceeding. FmHA held a security interest in the DePughs's farm equipment. The settlement provided that the DePughs would liquidate certain items of that equipment and pay FmHA $34,000 amortized over thirty years at nine percent interest. However, the DePughs were unable to finance the purchase of the equipment. Ewing therefore offered to have Carmel Farms buy it.
Subsequently, some of the equipment was moved to farms controlled by or associated with Carmel Farms. Significant repairs were made on some of the equipment. These matters were accomplished at Ewing's direction; Carmel Farms paid for the repairs.
At all times relevant to this matter, Ewing represented not only the DePughs, but also Terry, Carmel Farms, and Phoenix. Moreover, Ewing had blanket authority to invest the funds of Terry, Carmel Farms and Phoenix, and act as he deemed in their best interest.
Ewing also had an undisclosed financial interest in Carmel Farms and Phoenix. The parties have stipulated that Ewing, having performed uncompensated work for Carmel Farms, expected to share in the net proceeds from the sale of Carmel Farms's assets. They further stipulate: "Transfer of the read and/or personal property of the DePughs to Terry, Carmel Farms, and/or Phoenix could have resulted in some future personal financial benefit to Respondent [Ewing] since Respondent expected to share in any net proceeds after disposition of the assets of Carmel Farms and Phoenix." Although the DePughs knew that Ewing represented Terry, Carmel Farms, and Phoenix, Ewing never told them of his financial interest in Carmel Farms and Phoenix.
The DePughs's Chapter 12 plan coordinator, Emory Miller, testified that he told the DePughs he believed Ewing was an owner of Carmel Farms. However, he was not certain that the DePughs understood that; indeed, Miller admitted that he himself did not actually know whether Ewing was an owner.
On June 22, 1989, Ewing wrote the DePughs a letter ending his attorney-client relationship with them and advising them to seek other counsel. He enclosed a security agreement and bill of sale for the equipment purchased by Carmel Farms and a cognovit demand note to Phoenix for the balance of the indebtedness on the equipment.
Ewing's letter also discussed the transaction involving the mobile home. Ewing stated:
"As you know[,] one of my other clients has advanced money to acquire the position of Bank One or G.T.S. Investments. The effect of this transaction allows the investor to assume the position of G.T.S. Investments as it was at the time of the assignment of the lien on the house and the note. That balance was at least $41,605.78 with interest at 17.182%.
"You have been making payments on a schedule that is acceptable on the home. * * *"
Two pages later, Ewing wrote that the enclosed documents "do not seriously change your position whether you sign them or not, because of the assignment of G.T.S. Investments's position * * *." On reading this letter, the DePughs believed that Ewing was claiming they owed Phoenix the $41,605.78 balance referred to in the letter.
After a hearing, a panel of the Board of Commissioners on Grievances and Discipline ("board") found that Ewing's conduct violated DR 5-105(B), but not 5-101(A) or 5-105(A). The panel found that Ewing's independent professional judgment was likely to be adversely affected when Carmel Farms obtained an interest in the DePughs's farm equipment. Ewing allowed the DePughs to transfer possession to him, as Carmel Farms's agent, without taking steps, such as the signing of a note, bill of sale, and UCC financing statement, to protect the DePughs's interest in the equipment.
The panel further found that Ewing's judgment was likely to have been adversely affected in December 1988 when he told the DePughs to pay Phoenix $196.77 per month on the $10,000 loan on the mobile home. The panel noted that Ewing was representing the lender and borrower in the same loan transaction. He did not protect the DePughs by having a loan agreement put in writing, and he left an unsettled issue as to whether Phoenix would receive Bank One's security interest in the mobile home.
The panel recommended that Ewing be suspended for six months, with the execution of this discipline to be suspended on condition that Ewing not be found in violation of any Disciplinary Rule for three years. The board concurred in the panel's findings and recommendation.
Vorys, Sater, Seymour Pease, Reginald W. Jackson, Ronald L. Redmon and Bruce A. Campbell, for relator.
Charles W. Ewing, pro se.
We concur in the findings and recommendation of the board. Charles W. Ewing is hereby suspended from the practice of law in Ohio for six months. We suspend the execution of this discipline on condition that Ewing not be found in violation of any Disciplinary Rule for three years. Costs taxed to respondent.
Judgment accordingly.
MOYER, C.J., SWEENEY, HOLMES, DOUGLAS, WRIGHT, H. BROWN and RESNICK, JJ., concur.