Opinion ID: 1284976
Heading Depth: 2
Heading Rank: 1

Heading: Commercial property matter.

Text: According to the facts stated in the agreement, the seller and purchasers of certain commercial property sought respondent's assistance in transferring title of the property from seller to purchasers. The parties had been referred to respondent by a person associated with respondent's brother, a certified public accountant. Respondent agreed to discuss the matter with the parties if terms of purchase were agreed upon. The parties negotiated between themselves regarding the terms of the transaction and, after reaching agreement, contacted respondent to complete the transaction. Respondent was retained to represent all parties to the transaction. Respondent acknowledges that he did not make proper disclosure to the parties of the risks of joint representation and did not obtain informed waivers from the parties for joint representation. One of the reasons for the delay in agreement regarding the terms of the transaction was that purchasers had been unable to obtain independent financing. The parties had agreed that seller would finance the sale, with an assumption, via wraparound mortgage, by the purchasers of the existing Small Business Administration (SBA) mortgage. Respondent maintains he had only a short period of time in which to complete the transaction because seller was subject to a family court order which required her to have her former spouse released from the SBA mortgage by a certain date or face financial consequences in family court. Respondent wrote a letter to the SBA advising of the contemplated transaction and requesting relevant information to complete the wrap-around mortgage. Three days later, on the final date the transaction could be completed without violating the family court order, the parties gathered at respondent's office to complete the transaction. During that meeting, respondent received a telephone call from the SBA informing him that a wrap-around mortgage would not be permitted, and that the sale of the property, as agreed upon by the parties, would result in the mortgage being accelerated against seller and her husband. Respondent advised the parties of the position taken by the SBA and proposed restructuring the transaction as a Lease Agreement and Option to Purchase (LAOP). Seller agreed with the proposal but insisted that the transaction be completed that day. The parties returned to respondent's office that afternoon and executed the documents necessary to finalize the transaction. After the closing of the transaction, respondent completed the release of seller's husband from the SBA loan. Some of the funds paid by purchasers at the time of the closing were paid in cash. Respondent properly accounted for the cash as part of the transaction; however, respondent acknowledges that he failed to file the required reporting forms with the Internal Revenue Service. Shortly after the transaction was completed, disputes arose between seller and purchasers regarding the transaction. The parties resolved most of the disputes between themselves without respondent's assistance. Respondent initially tried to work with the parties as an intermediary to resolve a dispute that arose when purchasers failed to make timely payments to seller. Respondent acknowledges that he was prohibited from representing either party when the disputes arose, and that he should not have become involved in the parties' disputes in any way. Respondent also acknowledges that he had a conflict of interest in representing both parties in connection with the disputes that arose and that he did not obtain informed waivers from the clients before proceeding. As a result of the disputes between the parties, purchasers refused to make payments directly to seller and established a practice of delivering payments to respondent's office for transmission to seller. Respondent allowed this practice to continue and became a de facto escrow agent for some payments. Most payments delivered to respondent were checks made out to seller, but purchasers did, on occasion, deliver cash to respondent's office for payments to seller. Respondent did not maintain records in sufficient detail to provide an accounting of the payments delivered by purchasers to respondent's office for payment to seller. When initially asked to do so, respondent was unable to provide an accurate accounting of funds received by him on seller's behalf. However, respondent was later able to reconstruct an accurate accounting of funds received and disbursed by him. The parties later retained separate counsel and litigation proceeded between them. The civil action was resolved in favor of seller. [1] It was discovered during this litigation that one purchaser had signed the name of the other purchaser to certain documents related to the LAOP, although the purchaser whose name was forged was present at the time the documents were signed, and respondent had notarized the signature. [2] Respondent believed at the time he notarized the document that the signature was authentic. However, respondent acknowledges that he failed to exercise due care to insure that the signature was actually that of the purchaser whose name was signed. Following the transaction, respondent paid a broker's fee to the person who brokered the transaction between seller and purchaser. Respondent maintains payment of the fee was verbally authorized by seller. Seller, however, asserted she had not approved the payment. Respondent's file contains no documentation authorizing the disbursement.