Opinion ID: 2330334
Heading Depth: 1
Heading Rank: 7

Heading: Landers Loan

Text: Beginning in 2003, Respondent periodically performed legal work on behalf of Kenneth C. Landers Jr. (Landers), who had retired relatively early as the owner and president of a pet food processing business. As part of this work, Respondent updated Landers's estate planning documents in early 2008. Respondent and Landers did not have a social relationship. In April 2008, Respondent told Landers he had an opportunity to purchase a law firm from a retiring lawyer andknowing Landers had previously made loans to friends and family membersasked for a loan of $90,000.00. [32] According to Respondent, he told Landers he needed capital to support his current firm before he could purchase the new firm. Landers, however, testified that Respondent did not mention financial difficulties at his current firm. Instead, Landers recalled Respondent saying he would use the loan for a promising opportunity to buy another firm. Landers's testimony suggested that he was particularly interested in helping Respondent in this venture because Landers himself had benefited from similar opportunities earlier in his own career. Landers agreed to Respondent's proposal and wrote him a check for $90,000.00. The opportunity to which Respondent ostensibly referred involved one of his prior employers, Walter Hopp, Esq. (Hopp). Hopp called Respondent in October 2007 to follow up on two or three previous conversations about Respondent's interest in purchasing Hopp's Longmont firm upon Hopp's retirement. During their October 2007 discussion, Hopp did not mention a purchase price for the firm. Hopp formed the impression that Respondent preferred to remain in Broomfield and was not serious about buying the firm, and Respondent and Hopp never again discussed the possibility. After Landers agreed to the proposed loan, Respondent drafted and signed a promissory note dated April 3, 2008. [33] As reflected in the note, Respondent agreed to pay Landers interest at the rate of ten percent per year and to make three payments of $33,000.00 each on July 15, 2008, October 15, 2008, and January 15, 2009. [34] Respondent and Landers did not discuss or arrange for security on the loan. Further, Respondent did not recommend that Landers solicit independent advice concerning the loan, nor did Respondent obtain Landers's written consent to the terms of the transaction [35] or disclose his existing debtsand Landers never requested any such information. Respondent made two payments to Landers totaling approximately $3,000.00 and then stopped repaying the debt. In an August 2009 email, Respondent explained that he needed to file for bankruptcy but remained committed to repaying Landers. [36] As noted above, it has already been established that Respondent failed to abide by Colo. RPC 1.8(a) (2008) in the loan transaction with Landers. [37] The People also charge that Respondent violated Colo. RPC 8.4(c) by falsely representing to Landers that he would use the loan for a business investment rather than to cover his current expenses and debts. The Hearing Board agrees with the People that Respondent violated Colo. RPC 8.4(c) by misrepresenting his intended use of the loan to Landers. We do not doubt that Respondent characterized his loan request partly in terms of supporting his current firm and that he hoped in some time to buy another firm. But Landers's clear recollection of Respondent's comments regarding the law firm purchase opportunity persuades us that Respondent framed this opportunity as an imminent prospect for which he sought the loan, at least in part. That representation was not fully honest; six months had passed since Respondent had spoken to Hopp, that discussion had only been phrased in general terms, and Respondent in fact needed to repay the Lindseys and Cook and to keep his current firm afloat before he could realistically consider purchasing another firm. Indeed, Landers was not a friend of Respondent's who was likely to have extricated him from a precarious financial situation, so Respondent had a strong incentive to downplay his financial difficulties and convince Landers that the loan was a worthy investment opportunity in order to maximize the chances that Landers would advance the loan. In fact, Landers testified that he probably would not have agreed to the loan had he understood Respondent's level of indebtedness and the remote possibility Respondent would buy another law firm. Accordingly, we find that Respondent misrepresented material facts to Landers in violation of Colo. RPC 8.4(c).