Opinion ID: 1304457
Heading Depth: 3
Heading Rank: 2

Heading: Loan Matters

Text: In September of 1983, Martinez established Money Finders, Inc., a loan brokerage business. The business ceased operations in October of 1984, and made only one loan during its entire existencea loan utilizing funds obtained from Bohlmann. In mid-June of 1984, three and one-half months after Bohlmann retained Martinez on the insurance matter, she received copies of documents reflecting the dissolution of her marriage. Concerned about the dissolution, and apparently not having been represented by counsel in the proceedings, Bohlmann called Martinez, and he went to her home to review the papers. He also reviewed her will. Approximately one week later, Martinez contacted Bohlmann and asked if he could borrow some money from her so that Money Finders, Inc. could make a loan to a prospective customer. At the time, Bohlmann's total assets consisted of approximately $20,000 in certificates of deposit in addition to her residence, which she owned free and clear of encumbrances. She refused the request for a loan. Later in June, Martinez called Bohlmann to invite her to ride along with him on a brief business trip to Greeley. She accepted the invitation. During the course of the day, the subject of a loan was discussed again. Martinez said that a friend of his, Mark Patterson, needed $20,000 to pay his employees. Patterson was a plumbing contractor and although he currently was without adequate cash, he supposedly was to receive over $31,000 for work on a plumbing contract sometime around July 6th. The payment was to be in the form of a joint payee check payable to Patterson and his supplier and was to be in an amount more than $31,000 in excess of the amount owed by Patterson to the supplier. Martinez told Bohlmann that if she loaned the money to Patterson through Money Finders, Inc., she would be repaid in full in two weeks and would receive an additional $2,000. Based on Martinez's promise of returning her money, and her trust in him as an attorney, she agreed to make the loan. Martinez never discussed the possibility of a conflict of interest arising between them, nor did he encourage her to obtain the advice of independent counsel with respect to the loan. He did not provide her any information about the financial condition of Money Finders, Inc. or his own financial condition, which rendered his personal guarantee worthless, nor did he tell her that three banks had declined to make such a loan to Patterson. The next morning, June 29th, Martinez and Patterson went to Bohlmann's home and waited there while she traveled to the bank to obtain a loan. Using her certificates of deposit as collateral, she signed a promissory note for $21,825 and received a cashier's check in the amount of $20,000 [2] made payable to the order of Martinez. Patterson executed a note in the amount of $22,000 payable on July 6, 1984, to Money Finders, Inc. Martinez, as president of Money Finders, Inc., assigned the note to Bohlmann and also guaranteed payment of the note individually. In addition, Patterson signed a statement on June 29th agreeing to pay the interest that Bohlmann would incur on the $20,000 she had borrowed. In order to show Bohlmann how the loan would be repaid, Martinez provided her with a summary of the prospective payments to be received by Patterson on the plumbing contract, the amounts to be used to pay the supplier, and the balance remaining for use in paying the loan made with Bohlmann's funds. Martinez and Patterson signed a letter to the supplier directing the supplier, upon receipt of the check in payment for Patterson's work on the plumbing contract, to issue its check for the balance of the monies due Patterson after deducting the amount of Patterson's account with the supplier. Martinez and Patterson returned to Colorado Springs with the $20,000, deposited $2,000 into Martinez's bank account, obtained four cashier's checks totaling $9,800 made payable to companies controlled by Patterson, paid a $12 fee for the cashier's checks, and took the remainder of the money in cash, $7,688 for Pattersonostensibly to be used to meet Patterson's payroll and $500 for Martinez. Patterson eventually did receive payment from his supplier, but the payment was in the amount of $12,555 rather than the $31,000 he had said was owed to him. It can be inferred that after receiving Bohlmann's money, Patterson continued to order supplies from his supplier, thereby increasing the balance of his account and decreasing the amount of the proceeds to be received by Patterson from the plumbing contract payment. The check he received was made payable to both Money Finders, Inc. and Patterson's business. Patterson forged an endorsement for Money Finders, Inc. and absconded with the $12,555. Subsequent to July 6, 1984, Bohlmann made several calls to Martinez in an effort to recover her money. On one of the rare occasions that she was able to reach Martinez, he advised her that if she could wait, she would be paid an extra $1,000. Bohlmann eventually retained another attorney to help her recover her money from Martinez, as well as to pursue her claim against the insurance company. Bohlmann terminated the services of the other lawyer on August 29, 1984, because she could no longer afford to pay him. In September of 1984, Martinez took Bohlmann to a meeting with an attorney who represented the bank that had paid the $12,555 check bearing the forged endorsement. Nothing came of the meeting, and no claim against the bank was ever made on Bohlmann's behalf. In October, Martinez issued two $1,000 checks to Bohlmann from the Money Finders, Inc. account, both of which were ultimately dishonored. Thereafter, Martinez provided a cashier's check in the amount of $1,350 to Bohlmann, which was the full extent of his reimbursement to her. Bohlmann retained an attorney on a contingent fee basis in January of 1985 and filed a complaint against Martinez seeking recovery of the moneys she had loaned. No answer was filed, and as a result, Bohlmann obtained entry of a clerk's default against Martinez on or about October 25, 1985. The record does not reflect that any further action has been taken concerning this litigation. The hearing board concluded that Martinez encouraged Bohlmann to enter into a business transaction with him in which the two had differing interests, that Martinez failed to disclose relevant facts and that Bohlmann clearly and reasonably expected Martinez to exercise his professional judgment for her protection, and that he failed her. The hearing board concluded that Martinez grossly neglected Bohlmann's interests in this matter.