Title: Matter of Evans

State: arizona

Issuer: Arizona Supreme Court

Document:

113 Ariz. 458 (1976) 556 P.2d 792 In the Matter of a Member of the State Bar of Arizona, Jack E. EVANS, Respondent. No. SB-89. Supreme Court of Arizona, In Banc. October 22, 1976. Kaplan, Kaplan, Jacobowitz & Hendricks, by Henry Jacobowitz, Phoenix, for State Bar of Arizona. Burch, Cracchiolo, Levie, Guyer & Weyl, by Frank Haze Burch, Phoenix, for respondent. *459 CAMERON, Chief Justice. This matter is before the court on the objections of the respondent, Jack E. Evans, to the findings and recommendations of the Board of Governors of the State Bar of Arizona that the respondent be censured. We must answer two questions on appeal: The facts in the instant case are sharply contested by the respondent Jack E. Evans and the complainants, Earl Weaver and Joseph Volk. We have the duty to make an independent determination of the facts from the record. In re Johnson, 106 Ariz. 73, 471 P.2d 269 (1970). We find the facts necessary for a determination of this matter to be as follows. Respondent, for several years prior to 1972, had represented the Landmark Manufacturing Company, Inc., and its stockholders, Mr. and Mrs. Ernest Siegfried. In the spring of 1972, the Siegfrieds entered into negotiations with the complainants, Earl Weaver and Joseph Volk to participate in the development of a mobile home park. At this time, Weaver and Volk made available to Mr. Siegfried various items of a financial and confidential nature which were to be used by Siegfried in making his decision whether to participate. After reviewing this information and meeting Weaver and Volk personally, respondent advised the Siegfrieds that it was unwise to enter into the venture. After further negotiations, however, it was agreed that Siegfried and Landmark would provide Weaver and Volk with mobile homes to be manufactured by Landmark. Landmark was to carve out and reserve a portion of its mobile home production for the proposed development. At Siegfried's suggestion, the parties met with the respondent in respondent's office to discuss the contract to be drawn between the two. In discussing the legal status of Weaver and Volk, it became the opinion of respondent that the alleged limited partnership of Weaver and Volk did not conform to the Uniform Limited Partnership Act and that something would have to be done before a contract could be signed. Weaver asked respondent to form the corporation and respondent suggested Weaver and Volk should seek further counsel in connection with this legal work. As Weaver testified on examination by bar counsel: And Mr. Siegfried also testified as to the meeting: Respondent Evans and his firm prepared articles of incorporation for Weaver and Volk, and did some negotiating concerning financing on their behalf with a bank in Wisconsin. The respondent did not bill Weaver and Volk for the drafting of the agreement, but did bill them for incorporating and other matters not connected with the drafting and signing of the agreement. The last work the respondent performed for Weaver and Volk occurred in September of 1972. In December of 1972, a dispute arose concerning the performance under the contract and the respondent brought suit against the corporation and Weaver and Volk on behalf of his client, Landmark, and the Siegfrieds. After the attorney for Weaver and Volk indicated he intended to call the respondent as a material witness, respondent withdrew from the suit and the matter was turned over to another attorney though respondent did, by mutual consent, attend one conference on behalf of the parties to the agreement in trying to settle a dispute with some third parties. Weaver and Volk wrote to the State Bar of Arizona complaining of respondent's alleged conflict of interest and misuse of confidential information obtained by the respondent as a result of respondent's representation. Hearing was held by the Local Administrative Committee. Neither the Committee nor the Board of Governors found that there was a misuse of confidential information and a reading of the transcript compels us to agree. The record also supports the conclusion that the respondent properly notified Weaver and Volk early in the stages of the negotiations that respondent represented the Siegfrieds and Landmark, and that further respondent never billed Weaver and Volk for any work done in the preparation of the agreement. Though the respondent was careful not to treat Weaver and Volk as clients in the preparation of the agreement, it is clear that Weaver and Volk were otherwise clients of respondent for other matters and it is not unreasonable that Weaver and Volk considered themselves respondent's clients for all purposes. The Local Administrative Committee agreed that Weaver and Volk were clients at the time of the agreement and found that respondent violated Canon 5 and DR No. 5-105(A) by suing "one client on behalf of another client based upon an Agreement he prepared for both of them," and that the respondent be formally censured. The Board of Governors reviewed the recommendations of the Local Administrative Committee and found that: They also recommended censure. Respondent objected and the matter was brought to this court. *461 WERE RESPONDENT'S ACTIONS IMPROPER? Canon 5 of the Code of Professional Responsibility states, "A lawyer should exercise independent professional judgment on behalf of a client." Disciplinary Rule 5-105(A), (B), and (C) of the Code of Professional Responsibility, Rule 29(a) of the Rules of the Supreme Court, 17A A.R.S., reads as follows: There is no doubt that an attorney who prepares an agreement for one party and then sues on behalf of another party attacking the validity of that agreement is guilty of unprofessional conduct. Cord v. Smith, 338 F.2d 516 (9th Cir.1964). There is respectable authority, however, that an attorney may represent two clients in the preparation of an agreement and then sue one of the parties to the agreement for failure to abide by the terms of that agreement. In Petty v. Superior Court, 116 Cal. App. 2d 20, 253 P.2d 28 (1953), for example, the attorney prepared an agreement between Neaves and Gibson on behalf of both parties. He billed them both for the preparation of the documents and later represented Neaves against Gibson in a suit upon the agreement. The court stated: As indicated by the language in Petty, supra, some courts hold that the determination as to whether an attorney may sue a former client hinges on the question of confidentiality. If the attorney received confidential information he may not use it to sue his former client. If he received no confidential information he may sue his former client. Our Court of Appeals has stated: We are not, however, convinced that this is the better rule. Canon 9 of the Code of Professional Responsibility states a lawyer should avoid even the appearance of professional impropriety. The problem here is not that respondent intended improper conduct or that he failed to properly notify the complainants of his loyalty to his clients, prior and superior, the Siegfrieds and Landmark. He had no such intention and he did properly notify the complainants of his loyalties. Respondent, however, by representing the complainants on other matters at the time of his drafting of the agreement, created the appearance that he was, in fact, representing the complainants at the same time, and it is not surprising that complainants believed he was their attorney at the time the agreement was being drawn. In order to avoid the appearance of impropriety, the matter should not rest upon the question of receipt of confidential information alone: An attorney's loyalty to his client is not just a casual obligation to be turned on or off as the dictates of the moment indicate or particular employment may demand. We do not say that an attorney may never sue an ex-client on behalf of another client, but we do think, considering all the circumstances present in the instant case and the short period of time between representation and suit, that the conduct of respondent was professionally improper. SHOULD RESPONDENT BE CENSURED? We do not believe, however, that respondent should be censured. There was a respectable division of authority which was recognized by the Board of Governors in this matter which will allow an attorney to *463 prepare documents for both parties and then sue one of the parties to enforce the contract: Since we have not specifically spoken on this issue and there is nothing in the Canons directly on point from the Arizona Advisory Committee to guide respondent, he should not be required to follow existing case law from other jurisdictions at his peril. We do not believe, therefore, that respondent should be censured. So ordered. STRUCKMEYER, V.C.J., and HAYS and J. MERCER JOHNSON, Retired Justice, concurring. NOTE: Justices WILLIAM A. HOLOHAN and FRANK X. GORDON, Jr., did not participate in the determination of this matter and retired Justice J. MERCER JOHNSON sat in their stead.