A TTORNEY FOR THE R ESPONDENT

Julia Blackwell Gelinas Amy S. Wilson Indianapolis, Indiana A TTORNEYS FOR THE I NDIANA S UPREME C OURT D ISCIPL I NARY C OMMISSION Donald R. Lundberg, Executive Secretary Laura Iosue , Staff Attorney Indianapolis, Indiana

________ _____________________________________________________________________



# In the 

# Indiana Supreme Court

_________________________________ No. 49S00

- 0808

- DI

- 468

I N THE M ATTER OF :

J EFFREY S. R ASLEY , Respondent.

_______________________________ __ No. 49S00

- 0808

- DI

- 467

I N THE M ATTER OF :

D AVID M. W OOD , Respondent.

_________________________________

Attorney Discipline Action Hearing Officer Robyn L. Moberly

_________________________________

December 11 , 200 9

Per Curiam.
Thi s matter is before the Court on the report of the hearing officer appointed by this Court to hear evidence on the Indiana Supreme Court Disciplinary Commission's Verified Co mplaint s for Disciplinary Action against Respondent Jeffrey S. Rasley (" Rasley ) an d Respondent
David M. Wood ("Wood")
, and on the post

- hearing briefing by the pa rties. Rasley 's 1979 admi s-2

sion and Wood's 1995 admission to this state's bar subject them to this Court's disciplinary juri sdiction. See I ND

. C ONST

. art. 7, § 4.

We find th at Respondent Rasley engaged in attorney misconduct by r epresenting a client when the representation was materially limited by his own self

- interest in violation of Profe ssional Conduct Rule 1.7

. For t his misconduct, we suspend Rasley from the practice of law in
this state for 120 days without automatic rei n statement.

We find that Respondent Wood engaged in attorney misconduct by r epresenting a client when the representation wa s directly adverse to another client , i.e., Rasley , in violation of Pr ofessiona l Conduct Rule 1.7

. For this misconduct, suspend Wood from the practice of law in this state for 30 days with automatic rei n statement.

Background

“Seller” was in the business of rehabilitating and selling distressed real estate. In 2002,
Seller wanted to sell several of his properties, including one located on South Evison Street in Indianapolis (the "Property"). A third party brought "Buyer" to Seller, and Seller sold the Property and several others to him by separate land sale contracts. Seller gav e control of the Property to Buyer, who collected the rent from the tenants. Seller was required to continue making payments on his own first mortgage and needed Buyer's contract payments to do so. The parties' goal was for Buyer to secure permanent fina ncing and pay off the balance of the Property
land sale contract.

To make improvements to the Property, Buyer borrowed $11,500 from Respondent Rasley ("the Loan"). The same third party that brought Buyer and Seller together made the
connection with Rasley. The Loan was evidenced by a two

- month note ("Note") calling for repayment of $12,266.71, signed by Buyer, which was to be secured by a second mortgage on the Property. Because Seller was the title holder, he had to give his permission for Buyer t o use the Property as collateral for the Loan. To do this, Seller signed a “Mortgage” on June 25,
2002

— the same date the Note was executed. The hearing officer found Seller believed he was3

simply giving permission for the Property to be used as collatera l. T he Mortgage stated
, however, that the mortgagor (i.e., Seller) and Buyer were to "pay all indebtedness secured by this mortgage" in the event of default by Buyer.

Buyer fell behind on his payments both to Seller and to Rasley. On November 5, 2 003, at Rasley's instruction, his law partner, Respondent Wood, sent a letter informing Buyer and Seller
that Rasley was declaring the Loan and Mortgage in default, and that he would proceed with foreclosure if they did not cure the default. On November 1 7, 2003, Rasley sent a letter to Seller and to Buyer informing them that Wood would not file a foreclosure action on Rasley's behalf so long as the monthly interest payment (about $383) on the Note was paid to him. Knowing that Buyer had no means to pay R asley, Seller interpreted this letter as demanding interest payments from him personally. Based on Rasley’s letters to him, Seller believed that he was liable on the Loan. Wood and Rasley also believed Seller was liable on the Loan by virtue of the Mortg age.

Up to this point, no attorney

- client relationship existed between Seller and either Rasley
or Wood. Seller approached Wood about hiring Respondents' firm ("Firm") to represent him in his dispute with Buyer concerning the Property and the other p roperties Buyer was buying from
Seller on contract. Seller believed it would be advantageous to hire the Firm rather than different counsel because Rasley would bear some of the litigation expenses (i.e., the expense of asserting Rasley's claim against Bu yer and foreclosing on the Property) and Rasley would refrain from asserting his claim against Seller while seeking a global resolution.

On November 25, 2003, Seller and Rasley conferred by phone. Rasley testified that the first topic of conversation w as "how to resolve any issues between [Seller] and me as to our conflicting interests in [the Property]." They agreed Seller would assume Buyer's obligation to Rasley , continue making interest payments, and pay the principal when the Property was sold.
R asley and Seller agreed that they would jointly sue Buyer if necessary
, with the Firm as counsel for both Seller and Rasley. Rasley did not advise Seller of any alternative courses of action or potential defenses Seller might have against Rasley's claim. Neither Rasley nor Wood advised Seller that he may wish to consult independent counsel.4

After unsuccessful settlement negotiations, Seller and Rasley filed suit against Buyer on December 12, 2003. Seller and Rasley later met with Buyer to discuss settli ng the case. At that time, Rasley asked Seller to sign a document entitled “Assumption of Liabilities
, ” which would explicitly obligate Seller to assume Buyer’s debt to Rasley. Seller did not sign the document.
On several subsequent occasions, Rasley or Wood asked Seller to sign this document, and Seller
declined. On January 31, 2004, while still represented by Respondents and on their advice, Seller signed a settlement agreement under which he regained his properties from Buyer, he assumed liability fo r Buyer’s debt to Rasley, and Buyer was released from his liability to Rasley. Rasley's release of Buyer's liability to him was needed for Buyer to agree to the global settlement. Seller testified that if he had thought that he was not already liable on Buyer’s debt to Rasley, he would not have agreed to assume it.

On February 17, 2004, Rasley sent Seller a letter asking him to sign the previously requested acknowledgment of "the priority of my lien on the [Property]" and pay the Firm's bill
for attorn ey fees. The letter stated that if Seller did not comply by February 25, 2004, Rasley would file suit against Seller the next day. Seller did not comply. On February 26, 2004, Rasley and the Firm filed suit against Seller. Seller ultimately agreed to s ettle the case by paying Rasley $15,600.

Discussion

Professional Conduct Rule 1.7

. Professional Conduct Rule 1.7, as effect ive at the time at the time of the alleged misconduct
, provided : (a) A lawyer shall not represent a client if the representation of that client will be directly adverse to another client , unless:
(1) the lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and
(2) each client consents after consultation.
(b) A lawyer sha ll not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests , unless:5 (1) the lawyer reasonably believes the representati on will not be adversely affected; and
(2) the clie nt consents after consultation. . . .

Prof. Cond. R. 1.7 (2003) 1 (emphasis added).

Rasley is charged with violation of Rule 1.7(b) (2003) based on his representation of
Seller . Wood is charged with violating Rule 1.7(a) (2003) for his representation of both Rasley
and Seller

.

Rasley 's adverse interest to Seller

. A chief point of contention in this case is whether Seller was liable to Rasley on the Note prior to his explicit assumption of the lia bility as part of the global settlement. Respondents seem to believe there would be no disqualifying conflict of interest if only Seller had confirmed that he did not dispute his pre

- existing personal liability on Buyer's debt to Rasley. However, even if this obligation were undisputed, Rasley and Seller
would still ha ve adverse interests as creditor and debtor. "The debtor

- lender relationship is always potentially, and often inherently, adversary in nature." Matter of Burns , 516 N.E.2d 35, 36 (Ind. 198 7). Moreover, even if the Mortgage did not make Seller personally liable for Buyer's debt to Rasley, Rasley indisputably held a mortgage lien on Seller's property , which secur ed the
Note. Thus, Respondents' representation of Seller had the clear potentia l of being adversely affected by Rasley's claims against Seller and/or his property

. Had Seller been represented by independent counsel during attempts to reach a global settlement, his counsel would have been free to negotiate for maximum concessions fro m Rasley to get it accomplished. Rasley apparently gave up some of his rights under the Note as part of the settlement, but his self

interest would have tended to motivate him to give up as little as necessary to get the deal done. Moreover, Seller's rep eated refusal to sign an express assumption of Buyer's liability should have alerted Rasley and Wood that there was an unresolved conflict of interest between Rasley and
Seller.

1 This rule was amended and its parts restructured ef fective January 1, 2005. The rule as in effect at the time of the alleged misconduct will be indicated by (2003), and the rule as currently effective will be i ndicated by (current).6

Even if Respondents could have reasonably believed their representation of Seller would not be adversely affected by Rasley's interest, the representation would have be en proper only if Seller "consent[ed] after consultation." Prof. Cond. R. 1.7(a)(2) and (b)(2) (2003). Rule 1.7 now requires written "informed consent," Prof. Co nd. R. 1.7(b)(4) (current)
, which is defined as "the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the propo sed course of conduct." Prof. Cond. R. 1.0(e) (current) . Although this requirement was not in effect at the time of the alleged misconduct, then

- existing case law provided the following guidance : Consent after full disclosure necessitates the disclosure of the existence of a conflict, the nature of the conflict, advisement that the exercise of the lawyer's independent professional judgment could be affected by the lawyer's own interests, and an insistence that the client seek independent legal counsel.

Matter of Smith , 572 N.E.2d 1280, 1284 (Ind. 1991) (construing former Disciplinary Rules 5

- 101(A) (acceptance of employment) and 5

- 104(A) (entering into business transaction with client)). 2 We conclude that Rasley's consultation with Seller was not ade quate to satisfy Rule 1.7 (2003)

.

Because Rasley 's representation of Seller could have been materially limited by the his
own interests , we conclude that Rasley violated Rule 1.7(b) (2003) . Because Rasley and Seller
had directly adverse interests , we conclude that Wood 's representation of both violated Rules 1.7(a) (2003)

. 3

Discipline

. B oth Respondents lack insight into their misconduct and have expressed no

remorse for it. T his may be due in part from the lack of focus by all involved on the i nherent

2 Although Rule 1.7 (current) does not explicitly require an attorney w ith a conflict of interest to advise a client to seek independent legal counsel, the requirement that the attorney explain alternatives to the client, see Prof. Cond. R. 1.0(e) (current), suggests that the attorney should at least advise the client of the option of consulting independent counsel. We note that the rule concerning entering into a business transaction with a client explicitly requires that the client be given a reasonable opportunity to seek the advice of independent counsel in the transactio n. See Prof. Cond. R. 1.8(a) (cu r rent).

3 The Commission also charged Wood with violating Professional Conduct Rules 1.9(a) and 1.10(a) . We conclude these charges are not supported by clear and convincing evidence. See Admis. Disc. R. 23(14)(h).7

conflict of interest arising from Rasley 's claim against Seller and his property, which existed
whether or not Seller dispute d the claim

. Respondents did not intentionally harm Seller and worked diligently t o achieve what he indicated he wanted mo st

— to regain control over his properties from Buyer as soon as possible. N either Respondent has any disciplinary history, and Rasley has an extensive history of legal, church, and community service. Under these circumstances, we conclude that Rasley shou ld be suspended from practice for 120 days without automatic reinstatement, and that Wood should be suspended from practice for 30 days with
automatic reinstatement because of his lesser role in the misconduct and his junior position to Rasley in experienc e and within the Firm

.

Conclusion

The Court concludes that Respondent Rasley's representation of Seller violated Rule 1.7(b) (2003)

. For this professional misconduct, the Court suspends Respondent Rasley from the practice of law in this state for a period of at least 120 days, without automatic reinstatement, beginning January 22 , 20 10

. Respondent shall not undertake any new legal
matters between service of this opinion and the effective date of the suspension, and Respondent
shall fulfill all the d uties of a suspended attorney under Admission and Discipline Rule 23(26).
At the conclusion of the minimum period of suspension , Respondent Rasley may petition this Court for reinstatement to the practice of law in this state, provided Respondent pays the costs of this proceeding, fulfills the duties of a suspended attorney, and satisfies the requirements for reinstatement of Admission and Discipline Rule 23(4).

The Court concludes that Respondent Wood 's representation of both Rasley and Seller
violate d Rules 1.7(a) (2003)

. For this professional misconduct, the Court suspends Respondent Wood from the practice of law for a period of 30 days, beginning January 22 , 20 10

. Respondent shall not undertake any new legal matters between service of this order a nd the effective date of the suspension, and Respondent shall fulfill all the duties of a suspended attorney under Admission and Discipline Rule 23(26). At the conclusion of the period of suspension, provided there are no other suspensions then in effect, Respondent Wood shall be8

automatically reinstated to the practice of law, subject to the conditions of Admission and Discipline Rule 23(4)(c ).

The costs of this proceeding are assessed against Respondent s . The hearing officer appointed in this case is discharged.

The Clerk of this Court is directed to give notice of this opinion to the hearing officer, to the parties or their respective attorneys, and to all other entities entitled to notice under Admission and Discipline Rule 23(3)(d). The Clerk is further directed to post this opinion to the Court's website, and Thomson Reuters is directed to publish a copy of this opinion in the bound
volumes of this Court's decisions.

All Justices concur.