Case Title: In re Brown

Citation: 

Docket Number: S43511

State: oregon

Court: Oregon Supreme Court

Date: 1998-03-26T00:00:00Z

Document:
IN THE SUPREME COURT OF THE SATE OF OREGON

In Re:

Complaint as to the Conduct of

MILTON O. BROWN,

	Accused.

(OSB 92-28; SC S43511)

	On review of the decision of a trial panel of the
Disciplinary Board.

	Argued and submitted September 8, 1997.

	Charles R. Markley, of Greene & Markley, P.C., Portland,
argued the cause and filed the briefs for the accused.

	Mary A. Cooper, Assistant Disciplinary Counsel, Lake Oswego,
argued the cause and filed the brief for the Oregon State Bar.

	Before Carson, Chief Justice, and Gillette, Van Hoomissen,
Durham, and Kulongoski, Justices.*

	PER CURIAM

	The accused is disbarred.

	*Fadeley, J., retired January 31, 1998, and did not
participate in this decision; Graber, J., did not participate in
the consideration or decision of this case.

		PER CURIAM

		In this lawyer disciplinary proceeding, the accused was
charged with violating various provisions of the Code of
Professional Responsibility in the course of his real estate
dealings with a long-time business associate.  A trial panel of
the Disciplinary Board found that the accused had violated four
disciplinary rules -- DR 1-102(A)(3)(1) (conduct involving
dishonesty, fraud, deceit, or misrepresentation); DR 7-101(A)(3)
(intentionally prejudicing client in course of professional
relationship); DR 5-104(A) (business transaction with client
having differing interests); and DR 5-101(A)(1) (accepting
employment when lawyer's interests may impair professional
judgment).  The trial panel concluded that disbarment was the
appropriate sanction.  Pursuant to BR 10.1, that decision is
subject to automatic review by this court.(2)  After considering
the record and the parties' arguments, we conclude that the
accused violated all four of the rules that are at issue.  We
further conclude that disbarment is the appropriate sanction.  

		We find that the following facts have been proved by
clear and convincing evidence:(3)

		The accused joined the Oregon State Bar in 1956.  In
the mid-1960s, the accused met Ray Kittleson, a real estate
investor and developer.  Soon afterward, Kittleson and the
accused began to invest in real estate projects together.  Over
the next 20 years, Kittleson and the accused were partners --
usually equal partners -- in some 55 real estate ventures.  In
those ventures, the two men typically played different roles: 
The accused would obtain financing, negotiate and structure the
purchases, and perform other necessary legal work, while
Kittleson would identify the investment opportunity, plan
development strategies, and manage day-to-day operations.  	

		In addition to his ventures with the accused, Kittleson 
was involved in business dealings in which the accused had no
interest.  Kittleson generally had other lawyers handle the legal
aspects of his individual business dealings, while relying on the
accused to handle legal matters that arose in the course of his
joint ventures with the accused.  However, on at least a few
occasions, the accused acted as Kittleson's lawyer with respect
to the latter's personal and individual business dealings.        

		In 1983, Kittleson became interested in acquiring the
Totem Pole Shopping Center in Vancouver, Washington.  Kittleson
had some initial discussions with the owners (with whom he was
personally acquainted) and, at some point, asked the accused to
review some documents in connection with those negotiations. 
When the accused indicated that he wanted to be part of the
transaction, Kittleson readily agreed, and the accused took over
the negotiations.  

		The accused had a particular interest in the
acquisition of the Totem Pole Shopping Center that went beyond
simply developing the property:  He hoped to structure the
purchase so that he could claim stepped-up depreciation on the
entire property on his own taxes.  Sometime before closing, the
accused identified section 338 of the Internal Revenue Code as a
general mechanism for accomplishing that goal.  

		It is clear from the record that the accused discussed
his interest in taking stepped-up depreciation on the Totem Pole
Shopping Center with Kittleson and Kittleson's wife, Patti (who
was also at least nominally a part of the transaction), at some
point before the closing and that the Kittlesons expressed no
objections.(4)   However, it also is clear that, throughout the
rather extended negotiations, the Kittlesons understood that, no
matter how the accused structured the transaction, they would
acquire half of the property, as they had in prior ventures with
the accused.   		

		The Totem Pole Shopping Center was owned by the Hazel
Dell Development Corporation (Hazel Dell), whose stock was
entirely owned by a single family  -- the Potters.  Before
closing with the Potters, the accused activated a Washington
corporation -- Kittleson Development Company (KDC) -- for the
purpose of acquiring Hazel Dell stock.  The accused prepared
corporate documents for KDC that named Ray Kittleson as the sole
incorporator and member of the Board of Directors.  Also before
closing, the accused had Kittleson open a book for subscription
of KDC shares -- without having Kittleson issue any of the 100
authorized shares.  After setting up the corporation in the
foregoing manner, the accused kept the subscription book, along
with all the other KDC corporate documents, at his own office.

		At closing, the purchase had been structured as
follows:  After KDC acquired a few shares of Hazel Dell common
stock, Hazel Dell would redeem the remaining common and preferred
stock from the Potter family -- leaving KDC as the sole
shareholder in Hazel Dell.  The total purchase price would be
$3.2 million, with Hazel Dell paying the Potters a $250,000 down
payment at closing along with a signed promissory note for the
balance.(5)  The accused would loan the purchasers (KDC, Hazel Dell
and, ultimately, the Kittlesons) $480,000 to cover the promissory
note and the Totem Pole Shopping Center's initial operating
expenses.  In return for that loan, the Kittlesons would sign a
demand promissory note payable to the accused in 90 days.

		The transaction closed on October 1, 1984.  Before that
date, the accused did not provide the Kittlesons with
documentation or describe to them the specifics of the
transaction.  In fact, when Kittleson asked for specifics, the
accused put him off, claiming that the details had not been
ironed out.  At the closing, while the Kittlesons were engaged in
signing papers relating to the Totem Pole Shopping Center
purchase, the accused presented the $480,000 promissory note,
payable to himself, for their signature.  When the Kittlesons
read the note, they were surprised that they were being asked to
sign for the full $480,000.  They had assumed that they would be
equal partners with the accused in the transaction and would be
responsible for only half of the loan amount.  They also knew, as
did the accused, that they had insufficient assets to repay the
loan and that the only other means of repayment -- cash flow from
the Totem Pole Shopping Center project -- would not be
sufficient.  Initially, they refused to sign.

		In the face of the Kittlesons' refusal, the accused
became angry and verbally abusive.  He pointed out that KDC was
wholly owned by the Kittlesons and that the note was the only
evidence that he, too, owned an interest in the Totem Pole
Shopping Center project.  He assured them that he only wanted the
signed note to protect himself.  Ray Kittleson finally agreed to
sign the note, after crossing out the provision that made the
entire $480,000 payable in 90 days.  He did so with the apparent
understanding that the accused had no intention of demanding
repayment in 90 days or of acquiring full ownership of the
shopping center if the Kittlesons failed to pay.  Patti Kittleson
refused to sign.

		After the closing and the foregoing dispute, Kittleson
and the accused jointly managed the Totem Pole Shopping Center
according to their usual arrangement:  Kittleson handled day-to-day operations, Patti Kittleson acted as bookkeeper, and the
accused handled legal and financial matters.  Ray Kittleson
initially received no compensation for his work.  Later --
sometime in 1985 -- Kittleson began to draw $1,500 a month from
revenues generated by a different property for managing all his
joint property with the accused.  It appears that he did so
because, at that time, he had no other source of income.(6)  

		Beginning in November 1984, and continuing throughout
much of 1985, Patti Kittleson regularly wrote checks to the
accused from Totem Pole Shopping Center revenue to cover the
interest on the $480,000 loan.  However, the Kittlesons made no
effort to repay the loan principal.  Consequently, at least as
far as the accused was concerned, the Kittlesons were in default
as of December 1, 1984.  However, the Kittlesons did not
understand at that time that they were in default.  

  		The accused contends that he notified the Kittlesons of
the fact that they were in default in late December 1984.  He
contends, in particular, that he drafted a letter to Alan
Anderson, who did accounting work for joint projects of the
accused and the Kittlesons, on December 27, 1984, to inform
Anderson that the Kittlesons had defaulted and that, as a result,
a corporation wholly owned by the accused (MOB Investments) had
acquired KDC's Hazel Dell stock.  The accused contends that he
mailed the letter to Anderson on or around the time it was
drafted and that a copy was also sent to the Kittlesons.  

		Anderson acknowledged receiving the letter, but
believed that he received it long after the December 1994 date --
in March 1995 at the earliest.  Similarly, Ray Kittleson 
acknowledged that he saw the letter at some later point, but
denied receiving it in December 1994.  The Kittlesons contend, in
fact, that the accused gave them no indication, until long after
the fact, that they were in default or that Hazel Dell had passed
out of their hands.

		In March 1985, the accused wrote to the IRS that MOB
Investments had acquired and dissolved Hazel Dell and was
electing to take stepped-up depreciation on Totem Pole Shopping
Center.  In July, 1985, the accused had Anderson file a corporate
income tax return for Hazel Dell that also indicated that Hazel
Dell had been dissolved into MOB Investments.  

		All the foregoing took place without the Kittlesons'
knowledge or consent.  In fact, the Kittlesons continued to act
throughout this period as if they had a proprietary interest in
the property.  Ray Kittleson continued to devote most of his time
to managing day-to-day operations, taking no compensation for his
services.  Patti Kittleson continued to act as bookkeeper.  Both
Kittlesons continued to do business in the name of Hazel Dell and
held themselves out as officers of that entity.  Meanwhile, the
accused did nothing to disabuse them of their apparent belief in
the continuing existence of Hazel Dell.

		Sometime during the summer of 1985, the accused
prepared and presented to Ray Kittleson certain papers that
purported to document, after the fact, the Kittlesons' loan
default and the subsequent acquisition of Hazel Dell by MOB
Investments.  The accused asked the Kittlesons to sign the
papers.  They refused and later sought legal advice regarding
their rights in the Totem Pole Shopping Center transaction from
Wyse, a lawyer who previously had performed estate planning for
the Kittlesons.  

		In December 1985, Wyse wrote a letter to the accused on
behalf of the Kittlesons proposing a new partnership structure
for the Totem Pole Shopping Center investment.  The proposed
structure would allow the accused to claim the depreciation on
Totem Pole Shopping Center but, at the same time, give the
Kittlesons an equal share in its ownership.  When the accused
rejected the proposal, Wyse informed the accused that the
Kittlesons wished to end their business relationship with the
accused.       

		Before the parties began their partnership dissolution
negotiations, the accused took various steps to document his
ownership of the Totem Pole Shopping Center.  First, he prepared
and recorded a trust deed on the Totem Pole Shopping Center,
naming MOB Investments as the beneficiary.  Later, the accused
issued all the stock in KDC, which previously had been authorized
but never issued, to himself.  He recorded the transaction in an
undated document that indicates that the stock was issued "as of
October 1, 1984."  In another backdated document, the accused
purported to record a stockholders meeting "effective as of the
1st day of October, 1984" in which the accused and two of his
employees were elected as KDC directors.  Other documents reflect
backdated bylaws and a "Special Meeting of Stockholders," in
which the KDC Board voted to sell KDC's and Hazel Dell's stock to
MOB Investments "as of January 2, 1985."  Finally, in October
1986, the accused sent a letter to the Washington Secretary of
State dissolving Hazel Dell "as of January 2, 1985."

		Throughout much of that period, the Kittlesons
continued to believe that they retained a 50 percent interest in
the Totem Pole Shopping Center property.  They were unaware of
the trust deed or that the accused had issued the KDC stock. 
They had read the documents that the accused had asked them to
sign, but viewed that event as an unsuccessful attempt to cheat
them out of their rightful share of the investment.  It was not
until sometime in 1986, when the parties were negotiating the
partnership dissolution, that the Kittlesons were informed that
they no longer held any proprietary interest in Totem Pole
Shopping Center.  Multiple litigation ensued, and the parties
eventually reached a settlement in 1989. 

		The foregoing events first came to the attention of the
Bar in 1990, when Roger Weidner, a former member of the Bar,
submitted a complaint against the accused.  The majority of the
Weidner complaint dealt with a different matter -- the accused's
allegedly unlawful acquisition of certain assets from the estate
of his former law partner, Donald Kettleberg.  However, the
complaint also included an allegation that the accused had
engaged in dishonesty in connection with the Totem Pole Shopping
Center venture.

		In early 1991, the Bar prepared a complaint summary
(which included a description of the Totem Pole Shopping Center
allegation) and referred the matter to the State Professional
Responsibility Board (SPRB).  The SPRB, in turn, referred the
matter to the Multnomah County Local Professional Responsibility
Committee (LPRC).  During the LPRC's investigation, the
investigating lawyer received a letter from Ray Kittleson
alleging various wrongdoings on the part of the accused,
including allegations about the Totem Pole Shopping Center
venture.  The investigating lawyer immediately transmitted that
letter to the Bar disciplinary counsel, explaining that its
contents "relate to matters other than the Kettleberg estate and
therefore are beyond the scope of my investigation."

		The Bar treated the Kittleson letter as a separate
complaint against the accused, and wrote to the accused asking
for a response.  Ultimately, the Bar assigned a new case number
to the Kittleson complaint and referred that matter separately to
the LPRC for investigation.  

		In the meantime, the LPRC had reported back to the Bar
regarding its investigation into the Weidner complaint.  On the
basis of that report, Bar disciplinary counsel recommended that
the SPRC dismiss the complaint in its entirety.  Of particular
relevance here, counsel's memorandum to the SPRC stated:

	"As for the conflict of interest arising out of
Mr. Brown's relationship with Raymond J. Kittleson, I
recommend that the Board dismiss this charge also.  Mr.
Kittleson has filed a separate complaint which is
currently in the preliminary stages [of] investigation. 
I feel that with Mr. Kittleson cooperating, the
investigation will be more thorough and our conclusions
more realistic."

On August 7, 1991, the Bar informed Weidner, the complainant,
that the SPRC had reviewed a report on the matter raised by the
complaint and found no violation of the Code of Professional
Responsibility.           

		The Kittleson complaint remained in the hands of the
LPRC, which investigated throughout 1992 and early 1993.  In
March 1993, after receiving the LPRC's report, the Bar informed
the accused that it would institute a formal disciplinary
proceeding against him based on the Kittleson complaint.  The Bar
filed a formal complaint against the accused later, in 1994,
alleging violations of DR 1-102(A)(3), DR 7-101(A)(3), DR 7-102(A)(7), DR 5-104(A) and DR 5-101(A).  The accused denied the
alleged violations and also raised affirmative defenses based on
laches, res judicata, and a Board of Governors policy that
essentially codifies the principle of res judicata -- BOG Policy
No. 9.301(D).  A hearing was held before a trial panel.  The
trial panel rejected the accused's affirmative defenses.  As
noted, the trial panel then found the accused guilty of four of
the alleged violations and recommended disbarment. 

		Before we address the particular charges, it is
appropriate to consider the matters raised by the accused as
affirmative defenses.  If applicable, those defenses -- laches,
res judicata, and BOG 9.301(D) -- would preclude the Bar from
prosecuting most, if not all, of the violations charged.  The
accused now appears to accept the trial panel's decision that his
laches defense is inapplicable.  He does not assign error to that
ruling or otherwise argue the point to this court.  We therefore
concentrate on the defenses that the accused continues to assert. 

		Although those defenses nominally are two separate
defenses, they are almost identical in substance.  BOG 9.301(D)
essentially codifies the principle of res judicata for purposes
of bar disciplinary proceedings.  It provides:

	"Dismissal by the State Professional
Responsibility Board of a complaint or allegation of
misconduct against a lawyer shall not preclude
reconsideration or further proceedings on such
complaint or allegation if evidence not available or
submitted at the time of such dismissal justifies, in
the judgment of not less than a majority of the SPRB,
such reconsideration or further proceedings."

The accused argues that BOG 9.301(D) precludes the Bar from
proceeding in the present case, because (1) the Weidner complaint
contained an almost identical allegation pertaining to the Totem
Pole Shopping Center transaction, (2) all the evidence that is
being marshaled in the present proceeding was available at the
time of the Weidner complaint, and (3) the Weidner complaint was
dismissed without reservation.

		The trial panel concluded that the BOG policy was
inapplicable, because the Kittleson/Totem Pole Shopping Center
allegation was never investigated or dismissed as part of the
Weidner complaint.  We agree with that conclusion.  In that
regard, the facts speak for themselves.  Once Kittleson submitted
his own complaint to the Bar, the inquiry into the Totem Pole
Shopping Center transaction took on a life of its own.  Rather
than incorporating Kittleson's letter into his own examination of
the Weidner complaint, the LPRC investigator forwarded the letter
to the Bar, noting that it was outside the scope of his
investigation.  Based on that letter, the Bar opened a separate
file on the Totem Pole Shopping Center transaction and eventually
referred the matter to the LPRC as a separate complaint. 
Ultimately, when the Bar recommended dismissal of the Weidner
complaint, it was with the understanding that the Kittleson/Totem
Pole Shopping Center matter was being pursued separately.  

		The accused suggests that those facts are of little
consequence in view of the fact that the SPRB dismissed the
Weidner claim, along with its allegation about the Totem Pole
Shopping Center "without reservation."  He asserts:

	"There is nothing in the record to indicate the
SPRB intended to collect more evidence and pursue the
claims against Brown as part of another later claim. 
Although disciplinary counsel's report to the SPRB
mentioned that a separate complaint was in the
preliminary stages of investigation, there is no
evidence in the record that the SPRB did anything but
dismiss the claim without reservation."  (Emphasis in
original.)

However, there also is no evidence in the record that the SPRB
dismissal was "without reservation."  The only evidence that
pertains directly to the SPRB's dismissal of the Weidner
complaint is a letter to Weidner explaining that the SPRB had
reviewed a report on the "matter" (singular) that Weidner had
brought to the Bar's attention and had found no violation of the
Code of Professional Responsibility.  That letter does not
suggest anything about the particular terms of the dismissal,
much less that the dismissal was without reservation.  In fact,
if there is any evidence that speaks to that question, it is that
the SPRB dismissed the Weidner complaint after being informed
that the Totem Pole Shopping Center matter was under separate
investigation.  

		Finally, it is important to note that, at roughly the
time of the dismissal of the Weidner complaint, the Bar and the
accused were communicating back and forth about the Kittleson
letter as if that letter were a separate complaint.  Those
communications show that, whatever the SPRB might have expressed
in its letter to Mr. Weidner, the accused was well aware that the
dismissal of the Weidner complaint did not embrace the
Kittleson/Totem Pole Shopping Center transaction.    

		For the foregoing reasons, we agree with the trial
panel that the allegations of misconduct that pertained to the
Kittleson/Totem Pole Shopping Center matter were not part of the
Weidner complaint for purposes of the SPRB, and were not
dismissed when the SPRB dismissed that complaint.  Even if BOG
Policy No. 9.301(D) could be construed to operate in the manner
suggested in some circumstances -- a question we do not decide (7)
-- those circumstances are not present here.   

		The accused's res judicata argument fails.  Issue
preclusion requires, among other things, that the issue in two
separate proceedings be identical.  Nelson v. Emerald People's
Utility Dist., 318 Or 99, 104, 862 P2d 1293 (1993).  Claim
preclusion requires, among other things, that the second
proceeding be based on the same factual transaction that was at
issue in the first.  Van de Hey v. U.S. National Bank, 313 Or 86,
90-91, 829 P2d 695 (1992).  Because the Weidner complaint
investigation and dismissal did not embrace the Kittleson/Totem
Pole Shopping Center transaction, neither of those elements is
satisfied.     

		Having disposed of the accused's affirmative defenses,
we proceed to the charges.  The accused is charged, first, with 
violating DR 1-102(A)(3) by engaging in conduct involving fraud,
deceit, misrepresentation, or dishonesty.  Although all of the
members of the trial panel agreed that the accused had violated
that rule, they were divided with regard to whether his conduct
amounted to full-fledged fraud or mere dishonesty.  The majority
concluded that the accused had defrauded the Kittlesons -- that
his
  "structuring of the Totem Pole transaction so that his
company, [MOB Investments], could easily acquire the
entire interest in Totem Pole * * * and his then taking
the steps necessary to accomplish this purpose, without
the Kittlesons' knowledge or agreement, and while
making it appear superficially that the Kittlesons
would and did acquire an ownership interest in Totem
Pole, was deceitful."

One panel member concluded that, at the relevant time, the
accused had formed no clear idea about how he was going to
structure his individual transaction with the Kittlesons and,
therefore, at the relevant time, lacked the requisite intent to
defraud the Kittlesons.  However, that member did find, by clear
and convincing evidence, that Brown acted dishonestly in 
concealing vital information from the Kittlesons later, when he
had chosen a course of action.(8)

		In theory, if the accused's actions were dishonest, it
is irrelevant whether they also were fraudulent:  A lawyer can
violate DR 1-102(A)(3) by engaging in either kind of conduct. 
However, if the accused did violate the rule, it may be important
to place a specific name on the conduct, for purposes of
determining the appropriate sanction.  As such, we begin by
considering whether the accused's conduct amounted to fraud.  

		"Fraud" and "deceit," as those terms are used in DR 1-1-102(A)(3), are intended in their tortious sense.  In re
Hockett, 303 Or 150, 157-58, 734 P2d 877 (1987).  Generally, that
means showing that (1) the accused had falsely represented a
material fact; (2) the accused knew that the representation was
false; (3) the misrepresentation was made with the intent to
induce the recipient to act or refrain from acting; (4) the
recipient justifiably relied on the misrepresentation; and (5) 
the recipient was damaged by that reliance.  See Riley Hill
General Contractor v. Tandy Corp., 303 Or 390, 405-06, 737 P2d
595 (1987) (setting out elements of fraud).  To support an
allegation of fraud, the misrepresentation need not arise out of
an affirmative falsehood -- active concealment also can satisfy
that element.  In re Milton O. Brown, 255 Or 628, 634-35, 469 P2d
763 (1970).  Moreover (and of particular relevance here), when
the parties are in a fiduciary relationship, fraud may be
predicated on a simple failure to make a full and fair disclosure
of the relevant facts.  Starkweather v. Shaffer, 262 Or 198, 206
n 3, 497 P2d 358 (1972). 

		In this case, the Bar suggests, and we agree, that the
misrepresentation at issue is of the latter sort, that is, it
involves a fiduciary's failure to make a full and fair
disclosure.  At the outset, the accused was interested in
claiming full stepped-up depreciation on the Totem Pole Shopping
Center.  He knew, even before closing, that he could not obtain
that result unless he owned the Totem Pole Shopping Center in its
entirety.  In fact, the accused structured the Totem Pole
Shopping Center transaction to take full advantage of section 338
of the Internal Revenue Code:  The Kittlesons initially would
receive full ownership of the property but, within 90 days, would
forfeit ownership in favor of the accused.  

		That arrangement was a material fact in the Totem Pole
Shopping Center transaction, and a full and fair disclosure
necessarily would require some serious effort to give the
Kittlesons a clear understanding of the arrangement and its
consequences.  After considering the evidence in the record, we
are persuaded that the accused made no attempt to disclose the
consequences of the arrangement to the Kittlesons and, in fact,
took steps to keep them in the dark.  

		In reaching that conclusion, we necessarily accept the
testimony of the Kittlesons and reject that of the accused.  The
accused contends that the Kittlesons always knew about "the deal"
-- that he would acquire full ownership of the Totem Pole
Shopping Center property -- and that they agreed to the
arrangement because their only real interest was in the
"economics" of the Totem Pole Shopping Center transaction.  The
accused notes that Ray Kittleson was a person of considerable
business savvy and would not have entered into a transaction
without understanding the details.  He also notes that Kittleson
conceded that he was aware of the accused's interest in
depreciation and argues that Kittleson must have understood that,
to obtain stepped-up depreciation, the accused would have to
acquire full ownership of the Totem Pole Shopping Center. 
Finally, the accused suggests that the December 27, 1984 letter
to Anderson, which was purportedly copied to the Kittlesons, is
evidence that, at least as of December 1984, the Kittlesons
understood that, having defaulted on the promissory note, they
had forfeited their ownership interest in the Totem Pole Shopping
Center.    

		We are not persuaded by those arguments.  Obviously,
Ray Kittleson could have had a general understanding of the
requirements for depreciation and might still have believed that
the accused would arrange the transaction to preserve the
Kittlesons' ownership share.  In fact, we think it more than
likely that, after a 20-year relationship with the accused, they
would give the accused the benefit of any doubt that might arise
in that regard.  Finally, we are persuaded by Anderson's
testimony that he believed that he received the December 27,
1984, letter months after that date and by the fact that, as the
evidence shows, the accused often indulged in the practice of
post-dating documents and that the Kittlesons never saw the
December 27, 1984 letter until long after it purportedly was
sent. 

		The Kittlesons' testimony indicates that, while they
generally were aware that the accused was interested in claiming
full stepped-up depreciation, they never understood that the
accused had arranged to obtain full ownership of the Totem Pole
Shopping Center in order to accomplish that goal.  That testimony
is credible and it is borne out by a number of external
circumstances: (1) the fact (which was confirmed by Anderson, the
accountant) that the Kittlesons truly were shocked and dismayed
when they finally understood the consequences of the arrangement,
(2) the fact that there is no credible contemporaneous documents
that reflect the Kittlesons' agreement to the arrangement, (3)
the fact that the Kittlesons continued to hold themselves out as
owners of Hazel Dell long after that entity (according to the
accused) had been dissolved, (4) the fact that the Kittlesons
continued to work on the Totem Pole Shopping Center investment as
if they were full owners, (5) the fact that Patti Kittleson
continued to send interest payments on the $480,000 promissory
note long after the Kittlesons supposedly had defaulted on that
note, and (6) the fact that the arrangement held so little in the
way of advantage for the Kittlesons that it is unlikely that a
businessperson with Ray Kittleson's experience would have entered
into such an arrangement.(9)  To those objective facts we add the
important consideration that the trial panel, which saw and heard
the witnesses, believed the Kittlesons and did not believe the
accused.  We give weight to that assessment of credibility.  See,
e.g., In re Trukositz, 312 Or 621, 629, 825 P2d 1369 (1992)
(describing and illustrating court's practice of giving weight to
credibility determinations made in such cases).

		Ultimately, then, we find by clear and convincing
evidence that the accused failed to make a full and fair
disclosure to the Kittlesons with respect to his plan to obtain
full ownership of the Totem Pole Shopping Center property.  If
that failure occurred in the context of a fiduciary relationship,
the accused's material misrepresentation of fact constituted 
fraud.  We turn to the question whether such a relationship
existed. 

		The Bar contends that such a relationship did exist --
not only because the accused and Kittleson stood in a lawyer-client relationship, but also because they were joint venturers
in the Totem Pole Shopping Center project.  See, e.g., Starr v.
International Realty, 271 Or 396, 402-03, 533 P2d 165 (1975)
(describing fiduciary relationship between joint venturers).  The
accused denies a lawyer-client relationship and also contends
that, because the Bar did not plead or argue a joint-venturer
relationship before the trial panel, it cannot rely on that
relationship in this context.  Because we conclude that a lawyer-client relationship did exist between the accused and the
Kittlesons, we need not and do not consider the latter point.

		  The accused concedes that, to the extent that his
relationship with Kittleson can be characterized as a
partnership, he generally acted as legal counsel to the
partnership -- and did so in the Totem Pole Shopping Center
venture.  He argues, however, that his legal representation of
the partnership should not be confused with legal representation
of the Kittlesons as individuals.  In that regard, he notes that,
although the issue has never been decided in Oregon, the majority
rule among jurisdictions that have considered the issue is that
representation of a partnership is not, as a matter of law,
representation of any or all of the individual partners.  See
Ronald E. Mallen & Jeffrey M. Smith, 3 Legal Malpractice § 24.8
(4th ed 1996) (citing and comparing cases).

		We agree that the mere fact that a lawyer represents a
partnership does not ipso facto make that lawyer the legal
counsel to the individual members of the partnership or create a
fiduciary relationship that flows to those individuals.  On the
other hand, we are persuaded that, in some circumstances,
representation of the partnership will be a relevant
consideration in determining whether a lawyer-client relationship
exists.  That is particularly true when, as here, the partnership
is a small one and the partnership lawyer is himself a partner. 
In such circumstances, it may be reasonable for other partners to
assume that the lawyer's/partner's representation flows to them
as individuals.  

		In In re Weidner, 310 Or 757, 770, 801 P2d 828 (1990),
this court noted that a lawyer-client relationship may arise out
of a would-be client's reasonable belief that such a relationship
exists, if that belief is accompanied by evidence showing "that
the lawyer understood or should have understood that the
relationship existed, or acted as though the lawyer was providing
professional assistance or advice on behalf of the putative
client."  See also In re Bristow, 301 Or 194, 201-02, 721 P3d 437
(1986) (illustrating proposition).  

		Here, Ray Kittleson testified that, as far as he was
concerned, the accused was acting as his lawyer in the Totem Pole
Shopping Center transaction.  In view of the fact that the
accused routinely took care of all the legal aspects of the
partnership's activities, that he and the Kittlesons were the
sole venturers in the Totem Pole Shopping Center venture, that he
had, at times, represented the Kittlesons in individual matters,
and that the Kittlesons had relied on his legal expertise and
advice over the course of a long personal and business
relationship, that belief was reasonable.  Finally, even if the
accused did not intend to act as the Kittlesons' lawyer, he
should have been aware that, in the circumstances, his actions --
conducting the negotiations for purchase of the Totem Pole
Shopping Center, reviewing and drafting the legal documents
relating to the transaction, keeping the KDC corporate books, and
declining to discuss the details of the Totem Pole Shopping
Center transaction with the Kittlesons before closing (all in the
context of a partnership with them) would induce a reasonable
expectation on the Kittlesons' part that he was representing them
in the Totem Pole Shopping Center transaction.

		It appears, moreover, that that lawyer-client
relationship continued until the accused asked the Kittlesons to
sign backdated papers documenting the demise of Hazel Dell and
the change in ownership of the Totem Pole Shopping Center.  It
was not until that event that the Kittlesons recognized that the
accused might not be using his expertise in an even-handed manner
and that they should seek separate counsel.  

		The accused contends that the evidence does not support
such a conclusion, because Ray Kittleson was sophisticated in
real estate matters and did not rely on the accused's expertise
or advice.  He points out that Kittleson admitted to having used
other lawyers in the course of his business relationship with the
accused and that one of those lawyers even had advised Kittleson
specifically about his business relationship with the accused. 
The accused also argues that, regardless of what went on
beforehand, the blowup over the accused's demand that the
Kittlesons sign a $480,000 promissory note would have ended any
illusion on the Kittlesons' part that the accused was
representing their interests.

		We disagree with the assumptions that are implicit in
the accused's argument.  Lawyer-client relationships are not
exclusive, and the fact that the Kittlesons retained other
lawyers in their various business and personal dealings does not
preclude a lawyer-client relationship between the Kittlesons and
the accused.  Even the fact that Ray Kittleson had received
advice from another lawyer regarding the partnership does not
negate such a relationship -- particularly when (as Kittleson
described it) the advice was an unsolicited outgrowth of a matter
unrelated to the partnership and was never followed.(10)  Finally,
there is no reason to believe that the blowup over the promissory
note changed the relationship -- at least with respect to Ray
Kittleson.(11)  If anything, the fact that Ray Kittleson signed the
note, after the accused offered his assurances, suggests that
Kittleson continued to believe that the accused was acting in a
manner consistent with the Kittlesons' interests.

		Ultimately, we find by clear and convincing evidence
that the accused stood in a lawyer-client relationship -- a
fiduciary relationship -- with the Kittlesons.  With respect to
the Totem Pole Shopping Center venture, that relationship began
in 1983, when the accused took over the negotiations for the
purchase, and continued until mid-1985, when the Kittlesons
realized that the accused's interests in the Totem Pole Shopping
Center transaction might be adverse to theirs and sought separate
counsel.  Because of that relationship, the accused had a duty to
make full and fair disclosure to his clients, the Kittlesons.  He
flouted that duty when he failed to inform the Kittlesons about
the particulars of his plan to obtain full ownership of the Totem
Pole Shopping Center, thereby fulfilling the first element of a
claim of fraud -- that the accused misrepresented a material
fact.

		With respect to the requirement that the accused knew
that his representations were false, it is clear that the accused
fully understood that the Kittlesons expected a different
arrangement -- that they believed that the accused would
structure the transaction to provide them with at least a 50
percent ownership interest in the Totem Pole Shopping Center. 
The accused had to know that that always had been the arrangement
in the past and that, in the absence of some indication that he
intended to do otherwise, the Kittlesons would expect the same in
the Totem Pole Shopping Center venture.  If nothing else, the
fact that the Kittlesons objected to signing the promissory note
would have alerted the accused as to the nature of their
misunderstanding.  

		That brings us to the third element of a fraud claim --
the requirement that the misrepresentation be made with the
intent of inducing the hearer to act or refrain from acting in
some particular way.  As noted, the trial panel was divided on
the issue of whether that intent element had been proved by clear
and convincing evidence.  The majority concluded that the accused
had acted with the purpose of inducing the Kittlesons'
participation in the initial transaction and their continued
participation in managing the Totem Pole Shopping Center.  The
dissent concluded that the accused's actions before and at the
time of the closing with the Potters merely were designed to keep
his options open and that the accused had no clear intent to
misrepresent matters until after the damage had been done.  

		We agree with the trial panel majority that the accused
misrepresented the structure of the Totem Pole Shopping Center
transaction in order to induce reliance on the part of the
Kittlesons.  It is clear from the record that, throughout the
Totem Pole Shopping Center negotiations and thereafter, the
accused's primary goal was to obtain full ownership of the Totem
Pole Shopping Center for depreciation purposes.  It also is clear
that, to accomplish that goal, the Kittlesons had to be on board. 
The accused knew that the Kittlesons expected a 50 percent
ownership interest in the project (that is how previous ventures
with the accused had been structured) and that they probably
would not agree to the transaction if it did not involve an
ownership interest for them.  Yet, knowing all along that the
Kittlesons' nominal ownership interest in the Totem Pole Shopping
Center was illusory and fleeting, the accused nevertheless
allowed the Kittlesons to believe that they were getting what
they wanted out of the transaction.  He did so for the obvious
purpose of obtaining their participation. 

		In addition, we find clear and convincing evidence of
an intent to deceive based on the accused's assurances to the
Kittlesons, when they balked at signing the $480,000 promissory
note, that the only purpose of the note was to protect himself.(12) 
The only possible reason for offering such assurances under those
circumstances would be to induce the Kittlesons to sign.

		The final elements of a fraud claim, justifiable
reliance and damage, also are proved by clear and convincing
evidence.  There can be no question that the Kittlesons entered
into the Totem Pole Shopping Center transaction and, later,
continued to work on the venture, because they relied on the
accused's representation (or his failure to disabuse them of
their misunderstanding) that they were obtaining an ownership
interest in the property.  There also is no question that the
Kittlesons were damaged by that reliance.  They were denied any
meaningful interest in a business opportunity that they had
identified. 

		In summary, we find by clear and convincing evidence
that the accused engaged in conduct involving fraud.  In doing
so, the accused violated DR 1-102(A)(3).

		Having established a violation of that disciplinary
rule, we turn to the three rules that remain.  For the reasons
that follow, we agree with the trial panel that the accused
violated each of those rules in the course of the Totem Pole
Shopping Center venture.  

		We begin with DR 7-101(A)(3), which provides that,
except in circumstances that are inapplicable in the present
case, a lawyer shall not intentionally prejudice or damage the
lawyer's client in the course of the professional relationship. 
It already has been established that the accused was in a lawyer-client relationship with the Kittlesons with respect to the Totem
Pole Shopping Center venture.  We, therefore, are left to
consider whether there is clear and convincing evidence that the
accused intended to prejudice or damage the Kittlesons in the
course of that relationship.  

		There is.  The record shows that the accused
intentionally took steps to acquire full ownership of the Totem
Pole Shopping Center without disclosing his actions or intentions
to the Kittlesons.  In taking those actions, he necessarily
intended to deprive the Kittlesons of any ownership share in a
business opportunity that they initially had identified.  That
deprivation was contrary to the Kittlesons' clear expectations
and was, consequently, prejudicial.  In short, we find by clear
and convincing evidence that the accused violated DR 7-101(A)(3).

		The next rule that is at issue, DR 5-104(A), provides
that a lawyer 

"shall not enter into a business transaction with a
client if they have differing interests therein and if
the client expects the lawyer to exercise the lawyer's
professional judgment therein for the protection of the
client, unless the client has consented after full
disclosure."   

There is clear and convincing evidence that, in his Totem Pole
Shopping Center dealings, the accused also violated that rule. 
That the accused was acting as the Kittlesons' lawyer in the
Totem Pole Shopping Center matter is, at this point, a given. 
Our previous findings demonstrate, moreover, that the Kittlesons
expected the accused to exercise his professional judgment for
their protection or benefit and that the accused knew that he and
the Kittlesons had differing interests in the Totem Pole Shopping
Center transaction (the accused's interest in full ownership of
the Totem Pole Shopping Center for purposes of stepped-up
depreciation was clearly incompatible with the Kittlesons' desire
and expectation that they would share equally in ownership of the
Totem Pole Shopping Center and the income generated thereby). 

		The final disciplinary rule that is at issue in this
case also pertains to failure to obtain consent from a client
when there is a potential conflict of interest.  DR 5-101(A)(1)
provides that:

	"Except with the consent of his client after full
disclosure, 

	"(1) a lawyer shall not accept employment if the
exercise of his professional judgment on behalf of his
client will or reasonably may be affected by his own
financial, business, property, or personal interests."

Our analysis with respect to that rule is similar to our analysis
in regard to DR 5-104(A).  We find that the accused knew that he
had a business interest in the Totem Pole Shopping Center venture
that was different from, and adverse to, the Kittlesons'
interests.  We also find that he knew or should have known that
that interest was of a sort that was likely to affect his
professional judgment on the Kittlesons behalf.  In those
circumstances, the accused should not have negotiated the Totem
Pole Shopping Center purchase (or otherwise purported to
represent the Kittlesons' interests in the venture) without first
fully disclosing to the Kittlesons that his own interests might
affect his professional judgment.  In carrying on without
obtaining the Kittlesons' consent after full disclosure, the
accused violated DR 5-101(A)(1).

		We have concluded that the accused violated four
separate disciplinary rules in the course of his business
dealings with his clients, the Kittlesons.  In determining the
proper sanction for those violations, we look to the ABA Model
Standards for Imposing Lawyer Sanctions (1991) (amended 1992)
(the "ABA Standards") and our case law.  In re Jeffery, 321 Or
360, 374, 898 P2d 752 (1995).  The ABA Standards recommend
consideration of four factors: (1) the duty violated; (2) the
lawyer's mental state; (3) the potential or actual injury
resulting from the misconduct; and (4) any aggravating or
mitigating factors.  ABA Standard 3.0.

		By participating in the Totem Pole Shopping Center 
transaction in the manner described, the accused violated the
duty of candor that he owed to his clients, the Kittlesons.  He
also violated his duty, also owed to his clients, to avoid
conflicts of interest.  In doing so, he deprived his clients of
their expectation in a business opportunity and caused them to
waste almost two years operating and managing a project when that
project held no real advantage for them.  In short, the accused's
actions resulted in real harm to the Kittlesons, who were looking
to him as their lawyer to protect their interests.   

		With respect to his violation of DR 1-102(A)(3), the
accused's conduct was intentional -- he intentionally deceived
the Kittlesons in order to obtain a benefit to himself.  His
conduct with respect to DR 7-101(A)(3) also was intentional. 
With respect to the remaining violations, his conduct was
knowing.

		Under the ABA Standards, disbarment is the appropriate
sanction whenever a lawyer intentionally abuses the lawyer-client
relationship for his own benefit.  ABA Standard 4.61.  Thus,
without regard to mitigating or aggravating factors, the ABA
recommends disbarment when (1) a lawyer intentionally deceives a
client in order to benefit himself and the deception causes
serious or potentially serious injury to a client, ABA Standard
4.61; or (2) engages in representation of a client knowing that
his interests are adverse to the client's, if the lawyer causes
serious injury thereby and does so with the intent of benefiting
himself, ABA Standard 4.31.  Our case law is consistent with
those general themes.  See, e.g., In re Barber, 322 Or 194, 904
P2d 620 (1995) (lawyer who misrepresented his time and expenses
in a fee dispute was disbarred); In re Morin, 319 Or 547, 878 P2d
393 (1994) (lawyer disbarred for falsely notarizing will
signatures to increase profits).

		The trial panel found, and we agree, that there are no
mitigating factors in this case.  We also agree with at least
some of the aggravating factors that the trial panel identified.
In particular, we note that the accused never has acknowledged
the wrongful nature of his conduct, and that the accused has been
disciplined for ethical violations, also involving deceitful
conduct, in the past.  ABA Standards 9.22(a) and (g); Brown.

		In view of the seriousness of the violations at issue
in this case, the presence of aggravating factors, and the
absence of any mitigating factors, we conclude that the
appropriate remedy is disbarment.  

		The accused is disbarred.		

1. 	At the time of the complaint, the disciplinary rule
pertaining to conduct involving dishonesty, fraud, deceit, or
misrepresentation appeared at former DR 1-102(A)(4).  The
identical rule now appears at DR 1-102(A)(3) and, for the sake of
convenience, we designate it as such throughout this opinion.   

2. 	Under BR 10.1, a trial panel's decision to disbar an
accused or suspend an accused for a period of longer than 60 days
"shall be reviewed by the Supreme Court."

3. 	Our findings are based on the parties' factual
stipulation and on other evidence that was before the trial
panel.

4. 	At the time, the Kittlesons themselves had no
particular need for any depreciation that the property might
generate.

5. 	The promissory note was secured by a trust deed on the
shopping center and by the personal guarantees of the accused and
the Kittlesons. 

6. 	Patti Kittleson was paid for her work as a bookkeeper.

7. 	The trial panel found, and we agree, that it is
unnecessary in this context to decide whether BOG 9.301(D) could
serve as grounds for dismissal of a complaint at the hearing
stage.  

8. 	The trial panel majority also found that the accused
deceived his accountant and the Internal Revenue Service about
the nature and timing of his full ownership of the Totem Pole
Shopping Center.  With respect to that issue, the third member
concluded that there was no fraud, because the IRS had not lost
revenue or otherwise suffered damage as a result of the accused's
misrepresentation.  We do not consider the evidence regarding the
accused's purported deception of the IRS, because the evidence
that pertains directly to the Kittlesons is sufficient to
establish fraud.   

9. 	According to the accused, the transaction had economic
value to the Kittlesons because, in exchange for mere "sweat
equity," Kittleson obtained a share of any profits over the
payments on the master lease and an option to purchase a half
interest in the property at its depreciated value after it had
been paid off (or earlier, if both parties agreed).  The accused
concedes that there was a significant risk that the Kittlesons
would not be able to realize any gain through either of those
avenues but argues that, because Kittleson had no money invested
in the venture, the arrangement was ultimately to their
advantage.  That argument assumes, without justification, that
the Kittlesons placed little or no value on their own labor.  We
are not persuaded.   

10. 	Kittleson conceded that lawyer Wyse had advised him,
even before the Totem Pole Shopping Center transaction closed,
that he and the accused should have a written partnership
agreement.  Kittleson indicated, however, that he was consulting
Wyse about estate planning matters and that he never sought
advice about his relationship with the accused until much later.  

11. 	Patti Kittleson's testimony suggests that she may have
ceased to rely on the accused's professional advice at the time
of that incident.

12. 	In regard to those assurances, we find the following
testimony of Ray Kittleson to be credible:

	"Q:  When you signed that note out in the parking
lot on October 1st, 1984, did you have an understanding
that [a foreclosure] could result if you didn't pay it
in 90 days?  

	"A:  No.  The understanding was that he had to
have some indication in case we got killed that he had
an ownership in Totem Pole Plaza.  That was his
statement to us, I need to prove that I am the owner in
there, part owner."