Opinion ID: 1201746
Heading Depth: 2
Heading Rank: 3

Heading: violations found by the committee

Text: The committee found that Frost had committed acts of misconduct in connection with Counts I through III and IX of the ten-count petition. For convenience, we first summarize the acts of alleged misconduct, then set out the committee's findings. Count I  Frost should have declined to act as counsel in the non-judicial foreclosure because the exercise of his independent professional judgment on behalf of the beneficiaries possibly could be affected by his own financial interest in the property and because Frost did not make a full disclosure of the potential for conflict. This violated DR 5-105(A). Count II  When George Jr. claimed to be the owner of the note and deed of trust free of any claim by Alta, an irreconcilable conflict was created which required Frost to resign as attorney for the beneficiaries in the non-judicial foreclosure and in their efforts to sell the property. Frost's failure to resign violated DR 5-105(B). Count III  Frost did not make a full disclosure of the differing interests of the beneficiaries, including his own interest as a beneficiary, at the outset of his employment as counsel in the foreclosure, and developed an irreconcilable conflict once George Jr. expressed his independent claim which required Frost to withdraw. This violated DR 5-104(a). Count IX  Frost's letter of February 26, 1988, to George Sr.'s attorney, Michael Lindeman, stating that if a counterclaim or claim was asserted against Frost then all attorney/client privileges would be waived, was a use of a client confidence or secret for the advantage of Frost, in violation of DR 4-101(B)(3). The findings of the committee which the committee cited in support of the above conclusions are as follows: 11. [Applicable to Count III] On or before April 17, 1987, George Barth, Sr. and Alta retained Frost to commence and complete a non-judicial foreclosure of the second deed of trust. This relationship was confirmed in a letter to George, Sr. from Frost dated April 17, 1987 (Exhibit 20) wherein Frost advises that he will bring the foreclosure action on behalf of Alta and Frost and Grashin, and will evenly split the legal costs and legal fees with you. Although this letter does reference the fact that Frost will be pursuing the action in part on his own behalf, Frost never made full disclosure of the possibility that his personal, business interest might diverge from that of George, Sr. or Alta, that such divergence might affect Frost's professional judgment on behalf of George, Sr. or Alta, and that the consent after disclosure of George, Sr. and Alta was therefore required before Frost could proceed. Frost was negligent in failing to realize at the outset that his personal interest in the foreclosure required such complete disclosure to and the informed consent of his client. Frost negligently concluded that because the foreclosure would extinguish Gaylen's interest in the property and permit it to be sold by the note holders, foreclosure was in the interest of all. Frost negligently failed to realize that the foreclosure might affect persons with recorded interests in the property like Frost differently than those with unrecorded claims to the property like Alta or George, Sr. George, Sr. was billed by Frost for one-half of the attorney's fees incurred in the foreclosure proceeding from April through the end of December, 1987. George, Sr. was, in Frost's words, the driving force behind the foreclosure. George, Sr. was not a mere guarantor of payment of the attorney's fees incurred in the foreclosure. ... . 14. [Applicable to Count III] On or before June 5, 1987, Frost formed an attorney-client relationship with Thomas R. Barth whereby Frost was to undertake the non-judicial foreclosure of the Hanson Acres property, make efforts to negotiate a sale of the property, and negotiate with SeaFirst for extension of time for payment under the note held by the State of Alaska which was secured by the property. Prior to that date he had consulted with Thomas' counsel, Roger DuBrock regarding such representation. On June 5, 1987, he met with Thomas who signed the substitution of trustee, the beneficiaries' affidavit, and a consent to representation appended to a letter to him dated May 27, 1987, from Frost (Exhibit 26). On or before August 14, 1987, Frost entered into an attorney-client relationship with George, Jr. for the same purposes. As discussed infra, George, Jr. had by that time received an assignment of Diane's interest in the Gaylen note and deed of trust. George, Jr. executed the same documents as Thomas on August 14, 1987. On or about August 18, 1987, Frost entered into an attorney-client relationship with John R. Barth for the same purposes as described above for the relationship with Thomas and George, Jr. John, through his attorney-in-fact Gerald Barth, executed the same documents as Thomas and George, Jr. on that date. The dates next to the signatures of Thomas and John on the consent form (Exhibit 26, page 4) are in Frost's handwriting and do not establish the date that they signed that document. 15. [Applicable to Counts I and II] Though Frost's letter of May 27, 1987 (Exhibit 26) sets forth some facts concerning his own interest and the interest of Thomas, George, Jr., and John, Frost never made full disclosure of the possibility that his personal, business interest might diverge from that of Thomas, George, Jr. and John, that such divergence might affect Frost's professional judgment on behalf of Thomas, George, Jr., and John, and that the consent after disclosure of Thomas, George, Jr., and John, was therefore required before Frost could proceed. Frost was negligent in failing to realize at the outset that his personal interest in the foreclosure and attempts to sell the property required disclosure to and consent of these clients. Frost also never made full disclosure of the potential for conflict between George, Sr., Alta, Thomas, George, Jr., John, and Frost, as multiple clients, that such multiple interests might affect Frost's professional judgment on behalf of each of those persons, and that the consent after disclosure of each of those persons was therefore required before Frost could proceed. Frost was negligent in failing to realize at the outset that these multiple interests, particularly those of the non-record claimants of an interest in the property and those of the record owners of interest in the property, might conflict and diverge and that therefore disclosure to and consent of all of his clients was required. In fact, the interests did subsequently conflict and diverge. ... . 18. [Applicable to Counts II and III] At least one month prior to December 10, 1987, George, Jr. called Frost to tell him that he, George, Jr., considered his interest in the note and deed of trust to be his own property free of any claim by Alta or George, Sr. George, Jr. advised Frost that he had received the interest in payment of a debt by his father to him arising from another transaction. Frost considered at some length the conflict presented by this claim of George, Jr. 19. [Applicable to Count II] The assertion of this claim by George, Jr. created an irreconcilable conflict which required Frost to withdraw from the attorney-client relationship he had formed with George, Sr., Alta, Thomas, John, and George, Jr. involving the foreclosure of the property, effort to sell the property, and effort to procure extensions on the note and deed of trust from SeaFirst. George, Jr.'s interest was to proceed with the foreclosure which would result in title to the property vesting in George, Jr. in part. This would give him control along with Thomas, John, and Frost, of the property thereby facilitating its sale and rental in accordance with terms to his liking. George, Sr.'s interest was to immediately commence suit against George, Jr. seeking to establish that George, Jr. held his interest in some way for George, Sr. and to immediately record a lis pendens in connection with such suit. Such action was required by George, Sr. in order to avoid superior positions arising in third parties to whom George, Jr. might sell and convey his interest in the note and deed of trust and to prevent the record owners from arguing that he waived his claim by allowing the foreclosure to proceed with his knowledge and without objection to title vesting in George, Jr. The lis pendens was further necessary to insure that any sale of the property by the record owners after foreclosure would not vest title in a bona fide purchaser for value who would have a superior claim to the property to George, Sr. While George, Sr.'s interest may ultimately have been to consent to the foreclosure or sale of the property, a complex tactical evaluation by an independent lawyer for George, Sr. was required before his cooperation in these two matters could safely be said to be in George, Sr.'s interest. 20. [Applicable to Count III] The claim of George, Jr. also resulted in an irreconcilable conflict between Frost's personal, business interest and those of his client George, Sr. Frost's interests, as a record owner, were similar to those of George, Jr.'s and were in conflict with those of his client, George, Sr., for the same reasons outlined above. 21. [Applicable to Counts II and III] Frost did not withdraw from the representation of any of his clients in the foreclosure matter. Frost did not disclose to the trustee that a dispute as to the ownership of the beneficial interest in the deed of trust had arisen. The foreclosure sale was held on December 10, 1987 and Land Title Company executed and recorded on December 21, 1987 a trustee's deed to the property prepared by Frost (Exhibit 42) which vested the fee simple title to the property in Frost, Thomas, John, and George, Jr. ... . 23. [Applicable to Counts II and III] According to Mr. Frost's billings (Exhibit J, page 24), Frost dictated a letter to George, Sr. on December 10, 1987, and a letter dated December 15, 1987 (Exhibit 40) was received in evidence. Frost has described this document as a CYA letter and given its date, it is the best evidence of Frost's actions in the foreclosure matter in the latter part of 1987. Though the letter discusses a very demanding call from George Barth, Jr. in which George, Jr. claimed the deed of trust as his own property, the letter does not state that this problem had been discussed with George, Sr. at any time previously and in particular does not assert that the subject was discussed at a meeting between George, Sr. and Frost which both George, Sr. and Frost's billings indicate occurred on December 4, 1987. Moreover, despite being written the day of the foreclosure and dated five days thereafter, the letter does not disclose that the foreclosure sale has occurred and does not state that a copy of the proposed trustee's deed was enclosed. The letter inferentially suggests that the sale has not occurred since it refers to the continuing negotiability of the note, beneficial holders of an interest in the deed of trust, and the difficulty, in the present tense, of handling the foreclosure. Finally, the explanatory letter to the Association dated July 29, 1988 (Exhibit 74, p. 5 second paragraph) suggests that the letter of December 15, 1987 advises that the named beneficiaries will be the named owners on the trustee's deed when in fact the letter does not even reference the trustee's deed. Given the proximity of the preparation and date of the December 15th letter to the date of the foreclosure sale, Frost's failure to disclose that the foreclosure sale had occurred can only have been intentional. The letter evidences an intent to create the appearance of timely and full disclosure of the claim of George, Jr., the conflict which arose from that claim, and the need for George, Sr. to have separate counsel while at the same time not disclosing information about the conclusion of the foreclosure sale and the pending execution of the trustee's deed by the title company. Despite the conflict in the testimony between George, Sr. and Frost, there is therefore clear and convincing evidence that Frost knew of the conflict presented by the claim of George, Jr., knowingly did not disclose that conflict to George, Sr. in a timely enough manner to allow George, Sr. to block completion of the foreclosure sale if he so desired, and knowingly failed to withdraw from representation of any of the parties in the foreclosure. These actions were taken with the intent to assist Frost and the record owners of the note and deed of trust in becoming vested in title to the property by virtue of the trustee's deed. ... . 25. [Applicable to Counts II and III] Sometime in January of 1988, George, Sr. discussed the claim of George, Jr. with Frost who refused to proceed against George, Jr. George, Sr. retained Michael Lindeman who immediately filed a complaint on his behalf against George, Jr. and recorded a lis pendens against the property. (Exhibit 47.) Frost, meanwhile, continued to represent Thomas, John, George, Jr., and himself in efforts to find a purchaser for the property and to obtain a conditional use permit from the Municipality of Anchorage. ... . 27. [Applicable to Count IX] On February 26, 1988, Frost wrote to Lindeman (Exhibit 53) discussing Frost's efforts to sell the property and requesting that George, Sr. release his lis pendens under certain conditions proposed by Frost. That letter contains the following paragraph: If we fail in this endeavor, the closing will not take place. If the closing does not take place, SeaFirst has advised me that it will bringing [sic] a judicial foreclosure action against Peter Barth, John Barth, Tom Barth and Virginia Gaylen. Alta Corporation should reconsider its trust relationship with Peter Barth when risking this eventuality with the lis pendens. Of course, if the closing does not occur I fully intend to bring legal action against George Barth, Sr. on behalf of Frost and Grashin, if not the other owners, for all losses arising from the failure of the transaction to close as a result of George Barth, Sr.'s or Alta's actions. If a counterclaim is asserted or any claim is asserted against me personally, you are fully aware that that waives all attorney/client privileges and this matter could become messy and ugly. I have insurance to cover my legal fees and expenses and I can assure you that the litigation will not be pleasant for anyone. I hope this does not become necessary. [emphasis added.] Frost expected that a copy of this letter would be provided to George, Sr. or that its substance would be conveyed by Lindeman to George, Sr. Frost concedes that the third to the last sentence is inaccurate because only confidences pertaining to the particular matter on which the lawyer is being sued would be permitted to be revealed by the lawyer in defense of himself. Frost knew that George, Sr. would probably react emotionally to the underlined statements in this letter (as in fact he did). Frost knowingly used confidences of his client, George, Sr., to the disadvantage of George, Sr. with the intent of discouraging George, Sr. from bringing claims against Frost and encouraging him to cooperate in the sale of the property as proposed by Frost.