Court Opinion

ID: 4024712
Source: CourtListenerOpinion
Date Created: 2016-08-15 21:29:28.07181+00
Date Added: 2024-06-11T14:04:26.173990
License: Public Domain

Electronically Filed
                                                     Supreme Court
                                                     SCAD-16-0000037
                                                     21-APR-2016
                                                     01:21 PM

                         SCAD-16-0000037

          IN THE SUPREME COURT OF THE STATE OF HAWAI#I

                 OFFICE OF DISCIPLINARY COUNSEL,
                           Petitioner,

                               vs.

                       LANCE CASTROVERDE,
                           Respondent.

                       ORIGINAL PROCEEDING
                   (ODC CASE NO. 14-003-9146)

                       ORDER OF DISBARMENT
   (By: Recktenwald, C.J., Nakayama, Pollack, and Wilson, JJ.,
    and Intermediate Court of Appeals Associate Judge Ginoza,
                in place of McKenna, J., recused)

          Upon consideration of the January 21, 2016 report

submitted to this court by the Disciplinary Board of the Supreme

Court of the State of Hawai#i and the record, we find and

conclude, by clear and convincing evidence, that the record

supports the Board’s Findings of Fact, with the exception that we

find a portion of the Board’s Finding of Fact No. 17 is clearly

erroneous, insofar as a review of the record demonstrates

Respondent Lance Castroverde included the notation “CFT Loan” on

the relevant checks, not “ACFT Loan” as found by the Board.    See
Dockets 1:12, 3:298, 302, 306-07, 309, 311, 327, 329, 336-37,

343-44, 347, 368, 371.

          We conclude by clear and convincing evidence that

Respondent Castroverde violated the following provisions of the

Hawai#i Rules of Professional Conduct (HRPC) (1994) through the

following conduct:

          Respondent Castroverde engaged in prohibited conflicts

of interest with multiple clients, representing three separate

violations of HRPC Rule 1.7(a), by representing both the sellers

and the buyers of the home at 722 Lalani Circle, in Wailuku,

Maui, including by drafting and overseeing the execution of the

Agreement of Sale, where the interests of the parties were

directly adverse to each other and it was not reasonable for

Respondent Castroverde to believe the representation of each

party would not adversely affect his relationship with the other

party and where, even if such a belief were reasonable, he did

not obtain the consent of the parties after consultation; again

by engaging in the same conduct in drafting and executing the

“Collection Agreement and Holding Agreement for Agreement of

Sale” (hereinafter, the “Collection and Holding Agreement”); and

again by overseeing the administration of the Collection and

Holding agreement.

          We conclude Respondent Castroverde violated HRPC Rule

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1.7(b) by representing the sellers and the buyers as a result of

an introduction by the Principal at TLI, a mortgage broker, when

it was unreasonable to believe the representations would not be

adversely affected by Respondent Castroverde’s pre-existing

relationship with, and responsibilities to, the Principal of TLI,

who was Respondent Castroverde’s client and with whom Respondent

Castroverde was involved in the personal lending of funds, and

where Respondent Castroverde did not obtain the consent of the

sellers or the buyers after consultation, even if it had been

reasonable to believe there would be no adverse effect.

          We conclude Respondent Castroverde misappropriated

client funds, in violation of HRPC Rule 1.15(c), by removing from

his client trust account, between November 30, 2007 and December

18, 2007, at least $6,258.91 of the buyers’ funds to which he was

not entitled, removing between December 18, 2007 and January 25,

2008 at least $12,912.91 of the buyers’ funds to which he was not

entitled, removing from his client trust account, by a December

3, 2007 check, the “base collection fee portion of the Initial

Reserve” (being account fees for 12 months, at $104.17 per month)

and the “account costs portion of the Initial Reserve” (being

account costs for 12 months, of $5.00 per month), in violation of

the aforementioned Collection and Holding Agreement, which

required those funds to be held in trust as a reserve.

          We conclude Respondent Castroverde violated HRPC Rule

                                3
1.5(a) by charging an unreasonable fee as follows:    Pursuant to

HRS § 449-3 (1996), Respondent Castroverde, as an attorney, was

exempt from the regulation of escrow deposits if he did not

charge an escrow fee.    However, we find Respondent Castroverde

did charge an escrow fee, as the buyers paid Respondent

Castroverde $10,625.00 to arrange the transaction and escrow, and

paid monthly charges of $104.17 and $5.00 to administer the

escrow.   By charging said fee, Respondent Castroverde was

obligated to comply with the requirements of HRS Ch. 449 and, as

he did not comply with those requirements and therefore could not

justify the escrow fees he charged, those fees were unreasonable,

in violation of HRPC Rule 1.5(a).

            In the Collection and Holding Agreement, Respondent

Castroverde agreed to provide both parties periodic reports when

appropriate, including an annual report, but did not, and,

therefore, did not timely render accounts to any of the parties

concerning the funds held in trust, in escrow, in violation of

HRPC Rule 1.15(f)(3).

            Respondent Castroverde did not record the Agreement of

Sale with the Bureau of Conveyances, which was necessary to

protect the rights and interests of the buyers, conduct which we

conclude rises to the level of incompetence, in violation of HRPC

Rule 1.1.

            In addition, we conclude Respondent Castroverde’s

                                  4
failure to record the Agreement of Sale with the Bureau of

Conveyances assisted his client in successfully obtaining,

through the Principal at TLI, a mortgage on the property under

false pretenses, in violation of HRPC Rules 1.2(d) and 8.4(c),

and that Respondent Castroverde failed to otherwise disclose the

Agreement of Sale to the new mortgagee, thereby violating HRPC

Rule 4.1(b).   We note Respondent Castroverde specifically

referenced the potential for said mortgage in the Agreement of

Sale which he drafted for the parties.

           As required by the Collection and Holding Agreement,

Respondent Castroverde provided the sellers with interest

payments from funds paid by the buyers to Respondent Castroverde,

but Respondent Castroverde’s checks to the sellers characterized

the funds as interest on a loan from a Castroverde Family Trust,

a false notation requested by the sellers in order to meet income

requirements to obtain a loan concerning other property in

Wailuku.   By placing the false notations on the checks provided

by him to the sellers, Respondent Castroverde violated HRPC Rules

1.2(d) and 8.4(c).

           With regard to a loan from the sellers to Respondent

Castroverde of the $50,000.00 down payment held in Respondent

Castroverde’s client trust account, Respondent Castroverde

violated HRPC Rule 1.8(a) by engaging in a business transaction

with the sellers where the transaction and terms on which

                                 5
Respondent Castroverde acquired an interest were not fair or

reasonable to the sellers, where the loan was made without giving

the sellers a reasonable opportunity to seek the advice of

independent counsel regarding the transaction, and where

Respondent Castroverde did not obtain from his clients, the

sellers, written consent to the inherent conflicts.

           By misappropriating all but, at most, $5.17 of the

$50,000.00 for his use and benefit, Castroverde violated HRPC

Rule 1.15(c).

           With regard to a separate $61,000.00 loan made by one

of the sellers to Respondent Castroverde, Respondent Castroverde

violated HRPC Rule 1.8(a) by entering into the $61,000.00 loan

transaction with his client, the seller, where the transaction

and its terms were not fair and reasonable to the seller, where

Respondent Castroverde did not fully disclose in writing to the

client the transaction or its terms, and did not provide the

client with a reasonable opportunity to consult independent

counsel concerning the transaction.

           By misappropriating all but, at most, $5.17 of the

borrowed $61,000.00, Respondent Castroverde violated HRPC Rule

1.15(c).

           Finally, with regard to the documents requested by the

Office of Disciplinary Counsel (ODC) in its investigation of the

above conduct, and not subsequently provided by Respondent

                                 6
Castroverde, we conclude that Respondent Castroverde violated

HRPC Rules 8.1(b) and 8.4(d) by failing to provide upon request

(1) a copy of the Castroverde Family Trust, (2) checks from a

Castroverde Family Trust account and related deposit slips which

demonstrate transfers from the trust to Respondent Castroverde’s

client trust account were made to pay the interest on the two

loans discussed above, (3) subsidiary ledgers for client funds

during the relevant period, and (4) quarterly lists of all client

funds held in trust, the grand total of which agreed with the

reconciled balance of Respondent Castroverde’s client trust

account.

           We conclude that, by failing to maintain subsidiary

ledgers for client funds for six years after the employment to

which they related, Respondent Castroverde violated HRPC Rule

1.15(g)(2) and that, by failing to maintain for six years after

the representation to which they related the quarterly listings

of his client trust accounts, the grand total of which agreed

with his reconciled client trust account, Respondent Castroverde

violated HRPC Rule 1.15(g)(9).

           We adopt the Board’s recommended aggravating and

mitigating factors with two exceptions.   We find Respondent

Castroverde had substantial experience in the practice of law,

acted with a dishonest or selfish motive, in a pattern of

misconduct in which he committed multiple offenses.   He engaged

                                 7
in bad faith obstruction of the disciplinary process by avoiding

service of process, refused to acknowledge the wrongful nature of

his conduct, and is indifferent to making restitution.       However,

insofar as this court has found violations of HRPC Rules 8.1(b)

and 8.4(d), we decline to adopt ABA Standard 9.22(e) in

aggravation and, insofar as ODC did not successfully establish,

clearly and convincingly, that Respondent Castroverde knew the

falsity of the promises made to provide documentation at the time

he made the relevant statements, we decline to adopt ABA Standard

9.22(f) in aggravation.

          We concur with the Board that Respondent Castroverde’s

conduct was knowing and intentional and, under Standard 4.11 of

the American Bar Association’s Standards for Lawyer Discipline,

his conduct warrants disbarment.       We adopt the conditions

recommended by the Board to be placed upon any future

reinstatement sought by Respondent Castroverde.       Therefore,

          IT IS HEREBY ORDERED that Respondent Lance Castroverde

is disbarred from the practice of law in this jurisdiction,

effective 30 days after the date of entry of this order, pursuant

to Rule 2.16(c) of the Rules of the Supreme Court of the State of

Hawai#i (RSCH).

          IT IS FURTHER ORDERED that Respondent Castroverde

shall, in accordance with RSCH Rule 2.16(d), file with this court

within 10 days after the effective date of his disbarment, an

                                   8
affidavit showing compliance with RSCH Rule 2.16(d) and this

order.

          IT IS FURTHER ORDERED that, as a condition of any

future reinstatement of his license to practice law in this

jurisdiction, in addition to any other requirement imposed by

RSCH Rule 2.17, Respondent Castroverde shall repay all

misappropriated funds as detailed in the Findings of Fact and

Conclusions of Law in this matter, shall complete training in the

proper handling of client funds as set forth in the Hawai#i Rules

of Professional Conduct and the Hawai#i Rules Governing Trust

Accounting, shall take and pass the Hawai#i bar examination, and

shall submit proof of the foregoing appended to any petition for

reinstatement.

          IT IS FINALLY ORDERED that Respondent Castroverde shall

pay all costs of these proceedings as approved upon the timely

submission of a bill of costs and an opportunity to respond

thereto, as prescribed by RSCH Rule 2.3(c).

          DATED: Honolulu, Hawai#i, April 21, 2016.

                                    /s/ Mark E. Recktenwald

                                    /s/ Paula A. Nakayama

                                    /s/ Richard W. Pollack

                                    /s/ Michael D. Wilson

                                    /s/ Lisa M. Ginoza

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