Opinion ID: 1945777
Heading Depth: 1
Heading Rank: 4

Heading: borrowing money from clients

Text: The Bar Association charged and the Commissioner found five disciplinary violations in respondent's borrowing money from clients. [8] In each instance he either was representing the client or had just previously concluded some legal matter. In each of the five instances, except the Gorges incident, wherein the Committee did not charge defendant with violating DR5-104(A), the Commissioner found a violation of DR5-104(A) for Nader's having borrowed money from a client. With respect to this same conduct (borrowing) the Commissioner also found that Nader violated DR1-102(A)(1) (A lawyer shall not violate a disciplinary rule), DR1-102(A)(4) (which prohibits a lawyer's engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation), and DR1-102(A)(6) (engaging in conduct which adversely reflects on his fitness to practice law). Because of Nader's financial problems he found it necessary to borrow money from his clients. In each instance Nader would appeal to the sympathy of a client to obtain a loan. For instance, in borrowing money from A.E. Johnson, he told Mr. Johnson that he needed a loan to send his daughter on a trip. On another occasion he borrowed money from Mr. Johnson telling him that he needed money to buy his wife a television set. To induce Margaret Pursley to loan him money he relied on family illness. Both Mrs. Pursley and Mr. Johnson testified that Mr. Nader was crying at the time he sought the loans. When borrowing money from Shirley Lawson, Mr. Nader used a death in his family as the reason for the loans. As for repayment, Nader promised his clients that their loan would be repaid in a short time. For example, the loan by Shirley Lawson was to be repaid in fifteen days. For the $2,800.00 borrowed from Haughton Wood Company over a three week period, he gave Haughton Wood Company a check dated twenty-five days after the last advance. The $1,500.00 he borrowed from Steve Johnson on December 22, 1982, he agreed to pay back five days later, on December 27th. The money he borrowed from A.E. Johnson on December 20, 1982 and December 21, 1982 he promised repayment six days later, by December 27, 1982. The Commissioner found, and the record supports the conclusion, that in each instance there was no reasonable possibility of Nader's repayment as promised. For borrowing this money Nader was charged with violating DR5-104(A) which provides: A lawyer shall not enter into a business transaction with a client if they have differing interests therein and if the client expects the lawyer to exercise his professional judgment therein for the protection of the client, unless the client has consented after full disclosure. There are no Louisiana cases dealing with loans from clients as violations of DR5-104(A). The Bar Association has cited several cases and relies principally on In Re Conduct of Montgomery, 292 Or. 796, 643 P.2d 338 (1982). In that case a lawyer borrowed $20,000.00 from the two principal executives of a corporate client, a corporation not in the business generally of lending money, and furnished the client a promissory note which contained provision for a usurious rate of 20% interest, in circumstances in which he knew, or should have known, that the principal and interest would not be collectible. That case is distinguishable from the one under consideration. Nonetheless, Montgomery is enlightening. The identical disciplinary provision, DR5-104(A) [9] was at issue in that case. The Oregon Supreme Court pointed out that DR5-104 contains four separate elements: 1) A lawyer shall not enter into a business transaction with a client if 2) they have differing interests therein and if 3) the client expects the lawyer to exercise his professional judgment therein for the protection of the client unless 4) the client has consented after full disclosure. The Court noted that the first three clauses list requirements which all must be met before there is a violation of the Disciplinary Rule. The fourth clause, if the client consents after full disclosure, permits a transaction even though the first three elements are present. The Oregon Supreme Court concluded that a loan from a client is a business transaction and that the lawyer and client indeed did have different interests in the transaction, one as a lender and one as a borrower. And they concluded that the client in that case did indeed expect the lawyer to exercise his professional judgment for the protection of the client, not as relates to the creditworthiness of the borrower, i.e., the financial ability of the borrower to repay the loan and/or whether some security should be given, nor even relative to whether interest, and at what rate, should be charged. But they did find that the lender was relying upon Montgomery's exercise of professional judgment at least to the extent that a) the loan was to be valid and legally enforceable, and b) that the documents prepared by him were to be in proper form and evidence a legally enforceable obligation. Having found the three listed requirements in the Disciplinary Regulations, they went on to find in the case there under consideration that the client had not consented after full disclosure. As we view the case before us, Nader and his clients clearly had differing interests. And while not entirely clear, it might be concluded that he and his clients entered a business transaction. The third requirement, that the client expect the lawyer to exercise his professional judgment therein for the protection of the client, is a bit more difficult. After a review of the facts, it is not at all clear that this third requirement was met. The circumstances surrounding the loans differed from the circumstances in the Montgomery case discussed above. Here, Nader made a pitiful plea seeking a loan for personal reasons and the clients loaned money with no more than an oral promise of repayment (in all but one instance). It is difficult to conclude that in this situation, where Nader was tearfully making a desperate plea for a personal loan, these clients were expecting him to exercise his professional judgment. It could possibly be argued that the unsophisticated client/lenders might have relied on him for their protection in some particulars, such as by signing a promissory note calling for some interest return. But this is not clear from the record, nor is it even a clearly reasonable inference from the facts. We need not, however, in this case decide whether Nader violated DR5-104(A), entering a business transaction with a client, for the reason that the Commissioner was clearly correct in determining that such conduct was a violation of DR1-102(A)(4), engaging in conduct involving misrepresentation, and DR1-102(A)(6), engaging in conduct which adversely reflects on fitness to practice law; and for the further reason that these latter violations, coupled with the other professional misconduct discussed in this opinion, sufficiently support our determination herein that respondent should be disbarred. In each instance the borrowing of money from a client was premised at least upon Nader's misrepresentation, when he led the client to believe he could, and would, repay the loan within very short time frames. Faced with his compelling need to bring home $2,500.00 each week and his scant legal income, Nader had no realistic expectation of repaying any of these clients within the periods in which he promised to do so. Furthermore this misrepresentation constitutes conduct that adversely reflects on defendant's fitness to practice law. DR1-102(A)(6). For these reasons we agree with the Commissioner's findings with respect to the five instances concerning borrowing money from clients, that respondent was guilty at the least of violating DR5-102(A)(4) and DR1-102(A)(6).