Opinion ID: 1454365
Heading Depth: 1
Heading Rank: 6

Heading: third through twenty-fifth causes of complaint

Text: In these causes the Bar alleged that Griffith violated former rules DR 1-102(A)(2), (4) and (6), supra, and former rules DR 5-101(A), DR 5-104(A), DR 5-105(A), (B), (C) and (D), all supra because of the following conduct: That between 1978 and 1982, the shareholders of First Northwest, with the full knowledge and participation of Griffith, obtained 23 loans from Columbia Pacific for the benefit and use of First Northwest. (Eight of the loans were obtained by Griffith and were set out as causes of complaint 3 through 10. The balance of causes 11 through 25 were loans obtained by Brookens and Hardy.) The shareholders did not disclose to Columbia Pacific that First Northwest was the true beneficiary and the actual borrower of the loans. As a result, Columbia Pacific exceeded its loan limits in making the loans. Griffith knowingly engaged in or failed to exercise reasonable care to prevent Wolf, First Northwest and its shareholders from engaging in the conduct and therefore violated former DR 1-102(A)(2), (4) and (6). The Bar further alleged: That Columbia Pacific relied upon Griffith's law firm for professional advice in regard to the above-described loans. The exercise of Griffith's professional judgment as a member of the law firm on behalf of Columbia Pacific may have been affected by Griffith's financial, business, property or personal interests. The interests of Griffith in obtaining the loans for the benefit of First Northwest differed from the interests of Columbia Pacific. The exercise of Griffith's independent professional judgment as a member of the law firm was adversely affected by the firm's representation of First Northwest. It was not obvious that the law firm could adequately represent both clients. Griffith did not make the required ethical disclosures to or obtain the informed consent of Columbia Pacific. Because of the above-described conduct, Griffith violated former DR 5-101(A), and former DR 5-105(A), (B), (C) and (D). Griffith answered these causes by admitting that money was borrowed from Columbia Pacific, but denying the balance of the allegations. The Trial Panel found that Griffith was not guilty of these causes of complaint. It held that the loans were made on the dates and the amounts alleged in the amended complaint, but that each of the borrowers considered their respective loans to be personal obligations, and not obligations of First Northwest. The bank officer who made the loans relied upon the financial position and statements of each individual borrower and knew that, in most instances, the money would be used in the First Northwest mortgage business. The Trial Panel concluded that Columbia Pacific's lending limit for First Northwest was not exceeded by the loans. The Trial Panel also found that Columbia Pacific did not rely upon the law firm's professional judgment in regard to the loans. Griffith did not tell the bank president that there was a potential conflict of interest with respect to the loans, but the bank president testified it was obvious to him that if a legal problem had developed in regard to the loans, he would have been required to find different lawyers. In this court the Bar argues that Griffith engaged in dishonest conduct by participating in a funding scheme which provided First Northwest with $950,000 more of Columbia Pacific's money than it was legally entitled to borrow. It points out that Columbia Pacific had a single borrower lending limit of $400,000 for unsecured loans and that ORS 708.305(3) provides: Obligations negotiated in another name for the benefit of any person shall be included in the obligations of the person benefited. The Bar claims that Griffith was serving as a mere conduit for loans from the bank to First Northwest when additional borrowing by First Northwest was prohibited by law. From our own de novo review of the record we agree with the findings of the Trial Panel and the Bar's arguments fall in the face of those findings. The loans in question were made upon the personal financial statements of Griffith, Brookens, and Hardy. In the event of default the bank could look only to those individuals and not to First Northwest for payment. The bank was not misled. In this court the Bar does not renew or press its claim that Griffith was guilty of violating former rules DR 5-101(A), DR 5-104(A) and DR 5-105(A), (B), (C) and (D). We find Griffith not guilty of the 3rd through the 25th causes of complaint.